Delaware struggles to realize workers comp reform

Virtually everybody involved in Delaware’s workers compensation system agrees the system is broken. The hard part is figuring out how to fix it.

Gov. Ruth Ann Minner tried unsuccessfully to ram a reform bill through the legislature last month before it adjourned on July 1. Now, Minner is hoping fellow Democrats who control the state Senate will take up an amended bill when the Senate reconvenes in August. It remains to be seen whether the Republican-led House will go along.

Rep. William Oberle Jr., R-Newark, head of the House labor committee, said he might draft alternative legislation.

In the meantime, roughly 18,000 employers in Delaware will continue to pay some of the highest workers compensation premiums in the nation, to the tune of about $175 million annually.

Alan Levin, chief executive officer of the Happy Harry’s regional drugstore chain, describes the current workers compensation system as “out of control.” Levin, chairman of the Delaware State Chamber of Commerce, noted that his company’s workers compensation premiums increased more than 14 percent in 2003-2004, while payroll increased only 4.4 percent. Premiums increased another 15 percent the following year, while his payroll increased less than 8 percent.

“I don’t think anybody is being well-served at this time,” said Levin, who along with other business leaders cites the lack of managed care and unregulated attorney fees for the high cost of the current system.

Jim Randall of Caldwell Staffing Services in Wilmington said his firm pays 84 cents per $100 of payroll for clerical workers in Delaware, compared to 53 cents in Pennsylvania and 49 cents in Maryland.

Such discrepancies can be found in other job classifications as well. Approved rates for restaurant workers in Delaware range from $3.90 to $10.35 per $100 of payroll, compared to $1.07 to $3.69 in Maryland. Employers can expect to pay between $9 and $23.92 per $100 of payroll to cover sheet metal workers in Delaware, more than the double the cost in Pennsyl-vania, where rates last year were between $3.19 and $11.21. The cost for road construction workers in Delaware ranges from $14.87 to $39.51. In New Jersey, it’s $4.66 to $9.06.

According to the industry’s Delaware Compen-sation Rating Bureau, rates in Delaware have increased by an average of about 4 percent annually over the past decade, while rates in Pennsylvania have dropped by about 4 percent. “The gap is getting wider,” said DCRB spokesman Bruce Decker.

A 2006 DCRB survey of rates for 30 job classifications in manufacturing, contracting and other industries shows Delaware with a combined average range of $2.23 to $5.91 per $100 of payroll, higher than Maryland, Pennsylvania, New Jersey, Virginia and West Virginia.

John Kirk III, administrator of the state office of workers compensation, cited two primary reasons for Delaware’s high premiums.

“First and foremost, we have no medical cost containment whatsoever,” Kirk said, adding that another culprit is the “friction costs” of litigating cases. “We have unregulated attorney fees,” he said.

According to Kirk, Delaware is the only state that has no cost-containment mechanism for treating patients. The system also has no standards of care and does not give employers a say in which doctors can treat injured workers.

Critics of the system also say attorney fees also have to be reigned in. “There’s a lot of money to be made on the current system,” said House Majority Leader Wayne Smith, R-Wilmington.

Lawyers say they support a reduction in workers compensation insurance rates, but not at the expense of workers’ benefits or their right to legal representation.

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