Insurers and providers battle over work comp discounts at Supreme Court

By Steve Korris | Nov 16, 2010



NEW ORLEANS – Louisiana's Supreme Court must settle a fight between insurers and health care providers over tens of millions of dollars.

Providers say insurers improperly discounted payments on workers compensation claims, and insurers say providers improperly seek to escape contracts they signed.

In a test case the Justices heard on Oct. 19, Liberty Mutual Insurance challenges a ruling that it took discounts in violation of workers compensation law.

Workers compensation commissioner James Braddock awarded penalties and legal fees against Liberty Mutual, and Third Circuit appeals judges in Lake Charles affirmed him.

According to a brief from a friend of the court, Braddock awarded $8,500 in punitive damages on discounts of $181.50.

At oral argument, Liberty Mutual lawyer Judy Barrasso of New Orleans said workers' compensation law protects workers, not providers.

She said a contract from 2004 allowed discount rates in exchange for payment in 30 days, referrals for preferred providers, and other benefits.

Parties can agree to anything unless it violates law or public policy and providers agreed to accept 80 percent of a fee schedule as payment in full, Barrasso said.

Justice Greg Guidry asked if the plaintiff's president testified he got more business.

Barrasso said, "When you called Liberty Mutual, they would say, go here."

"It's not prohibited by workers' compensation law," she "It's encouraged by it because it lowers medical costs."

Barrasso said that even if the Justices disagreed, they shouldn't award penalties and fees.

In response, Bray Williams from Natchitoches said Agilus charged more than the maximum on the fee schedule in the workers' compensation statute.

Williams said it wasn't an absurd result because Agilus didn't seek more than the maximum.

He said Liberty Mutual reduced it to the maximum before taking a discount.

Justice Philip Ciaccio said, "You are saying the state can go into the price fixing business and tell you that you can charge this and nothing less."

"The act sets out the schedule and we have experienced parties," Ciaccio said. "That's not against law or public policy.

"I am at a loss to figure out what we are fighting over. The employer isn't complaining. He saves money."

Williams said the state is not involved in price fixing and the contract didn't speak to how much a provider could charge.

Ciaccio said nothing prevents a charge less than the reimbursement schedule.

Williams said, "This is not about charges. This is about reimbursement."

Ciaccio said, "Although I agreed to it, I'm just fooling. I really want the hundred even if I said 80."

Williams told the Justices that if they searched the workers' compensation act, they wouldn't find preferred provider organizations.

He said they relieve employers of liability in violation of the act.

Justice Bernette Johnson said, "Who is harmed here? The employee was treated."

Williams said the Third Circuit found discounts threatened the foundation of workers' compensation by making providers reluctant to participate.

He said discounts would lead to substandard care.

Justice John Weimer asked if the appellate court said he shouldn't have entered into the contract, and Williams said no.

Weimer asked if care would be inferior because he took less money, and Williams said something about being forced.

Justice Jeffrey Victory blurted, "Forced! You signed a contract."

Johnson said, "It sounds like the argument is disingenuous."

Guidry said, "You said several times, forced to do this."

Williams apologized.

Johnson repeated, "What is the harm?"

Williams said, "A lesser number of providers providing."

Johnson said, "That doesn't seem to be the case. They are lining up to accept 80 percent in order to get patients, aren't they?"

Johnson asked if he would keep the contract but not the 80 percent, and he said yes.

In rebuttal, Barrasso said, "There is no harm here."

She said there was no evidence that providers were less willing to
treat patients.

Insurers and providers join the battle as friends of the court, with the state leading the charge for employers.

John Quaglino of Metairie wrote that the state employs 105,000 persons and is defendant in 90 suits with estimated exposure of $1,210,000.

He wrote that the state discontinued 15 percent discounts due to litigation and pays more for care as a result.

For Louisiana Workers Compensation Corporation, Jeffrey Warrens of Baton Rouge warned of a crisis as dangerous as one that led to the creation of the corporation.

He wrote that rates rose more than 125 percent from 1986 to 1990.

But in the last five years, rates dropped more than 40

Warrens wrote that carriers returned but the ruling would reverse that trend.

He wrote that costs would increase without adding benefits or services.

For Sedgwick Claims Management Services, Quaglino estimated the number of pending claims at 10,000.

Quaglino estimated exposure of Sedgwick clients up to $3,250,000.

He wrote that insurers no longer contract for discounts, in order to avoid litigation.

He wrote that employers pay more due to the onslaught of litigation.

Kevin Cunningham of Baton Rouge wrote for American Insurance Association and Property Casualty Insurers Association that the Third Circuit decision puts Louisiana business at a disadvantage because other states don't prohibit discounts.

Roger Javier of New Orleans wrote for American Association of Independent Claims Professionals that the potential effect was staggering.

He wrote that at Braddock's rate, punitive damages would total $60 million.

He wrote that Liberty Mutual's conduct was laudable, not reprehensible.

Louisiana Association of Business and Industry also urged reversal of the Third Circuit.

Stephen Glusman of Baton Rouge wrote for a wide range of employers that Louisiana remains at a disadvantage as a result of the high cost of workers' compensation.

Catherine Gracia of New Orleans wrote for Entergy Services that the Court should enforce contracts between willing parties rather than rewrite them.

For General Motors, Quaglino estimated exposure at $1,120,000 in penalties and $700,000 in legal fees.

Hospitals and doctors expressed equal alarm at the prospect of victory for insurers.

For Louisiana State Medical Society, Amy Phillips of Baton Rouge wrote that injured workers lost options for quality care because some members ceased treating them.

For Louisiana Hospital Association, Clark Cosse of Baton Rouge wrote that discounts below the fee schedule were never contemplated.

The medical society, the hospital association, and Ochsner Health System called on legislators to write a new fee schedule.

For Ochsner, Cristina Wheat of New Orleans wrote that Liberty Mutual defeated the last legislative compromise.

Lamar Pugh of Shreveport wrote for Willis-Knighton Medical Center that some discounts were improper under contracts as well as law.

David Sherman of Metairie outdid him for East Jefferson General Hospital, branding the vast majority of discounts improper under contracts.

Terrebonne General Medical Center, Baton Rouge General Medical Center, and Musculoskeletal Institute of Louisiana predicted litigation would increase rather than decrease if the Justices approve preferred provider contracts.

Chiropractic Association of Louisiana, Louisiana Orthopaedic Association, and Christus Health Northern Louisiana also urged the Justices to affirm the Third Circuit.

Lafayette Consolidated Government adopted the position of other employers.

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Organizations in this Story

Lafayette Consolidated Government Louisiana Workers Compensation Corporation

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