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Sweeping Changes to Kentucky Workers' Compensation Act

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Client Alert
April 30, 2018

The 2018 General Assembly of Kentucky’s legislature ushered in the most sweeping changes to the Workers’ Compensation Act since 1996.  These changes substantially impact workers’ compensation benefits, including indemnity, medical, and retraining benefits. 

One of the more notable amendments addresses the impact of the 2017 Supreme Court decision in Parker v. Webster County Coal, by providing for a termination of income benefits at age 70, or four years from the date of injury, whichever is later.  This is certainly not the only significant change, however.  

House Bill 2 goes into effect July 14, 2018.  Here are the highlights:

Section 1 amends KRS 342.020.  Subsections (2) and (3) shorten the time period for which medical expenses will be owed by the employer in most cases.  If there is a permanent total disability award, or if there has been an amputation for which prosthetics are required, the obligation for medicals shall continue for the period of disability.  The bill adds a partial amputation to the injuries for which lifetime medicals would apply and adds amputation of a hand to the list of body parts for which amputation would result in lifetime medical expenses.

For all other injuries, the obligation of the employer to pay medical expenses would end 780 weeks (15 years) from the date of injury or last exposure.  There is a provision allowing the Plaintiff to apply for additional medical benefits prior to the expiration of the 780 weeks.  If the ALJ determines ongoing treatment is reasonable, necessary and related, medical benefits would then be awarded for duration of disability (lifetime).

In addition, the legislation sets parameters for urine drug screens based upon the Kentucky Board of Medical Licensure recommendations.  Currently, there are no specific guidelines regarding drug screens in Chapter 342 and disputes are resolved on a case by case basis by an ALJ based upon evidence filed in the case.  This provision provides guidance and uniformity.  Frequency is determined by whether the patient is low risk (1 per year), moderate risk (2 per year) or high risk (4 per year).  It allows employers to request additional urine drug screens above the limits set forth.

Section 2 mandates that the Commissioner develop or adopt evidence-based treatment guidelines, including chronic pain management and opioid use, by December 31, 2019.  The requirement for the Commissioner to develop practice parameters is already in the statute.  This change simply mandates it be done by a certain date and that it deal with chronic pain treatment and opioid use.

In addition, a pharmaceutical formulary is required to be adopted by December 31, 2018.

Section 3 amends KRS 342.040 to indicate that interest on past due amounts would not accrue if the delay in payment of benefits was caused by the employee.  

Section 4 amends KRS 342.125 to clarify that the four year reopening window begins after the original order granting benefits, and a subsequent order does not extend the time to reopen or restart the four year period (as Kentucky courts had interpreted the prior reopening statute).

Section 5 amends KRS 342.185 with respect to cumulative trauma claims, by merging the notice and statute of limitations provisions, and establishing a statute of repose.  Notice must now be given and the Form 101 must be filed within two years from the date the employee is told by a physician the cumulative trauma is work-related.  The cumulative trauma claim can be filed no later than five years after the last work exposure to the cumulative trauma. 

Section 6 amends KRS 342.265 to allow a 0.5% higher discount rate for employers to settle claims in a lump sum with weekly payments under $40. 

Section 7 amends KRS 342.270 to require the Commissioner of the Department of Workers’ Claims to amend existing regulations within 120 days of the effective date of the Act.

Section 8 amends the provision dealing with university evaluations to mandate that the Commissioner contract with B readers who are pulmonary specialists to perform occupational disease evaluations.   

Section 9 amends KRS 342.316, which contains the procedures for handling occupational disease claims. The Commissioner would refer a claimant to a B-reader who is board-certified in pulmonary medicine upon the filing of a claim.

A provision is added that benefits shall be suspended if an injured worker does not cooperate with or gives poor effort on a breathing test. 

The Commissioner is required annually to audit the B-readers performing examinations and remove any physicians who consistently render untimely reports or fail to render findings in conformity with other doctors over 50% of the time.

The evaluation shall be paid for by the employer or carrier; however, if the employee alleges a pulmonary dysfunction and has not filed the required spirometric evidence, the employee shall pay 50% of the cost of the evaluation.

If complicated CWP is found, the employee will be referred to the same facility for a CT scan.

Also, 12 types of cancers (bladder, brain, colon, non-Hodgkins lymphoma, kidney, liver, lymphatic, prostate, testicular, skin, cervical, and breast) were added to the provision that provides for a 20-year statute of limitations.

Section 10 amends KRS 342.320 to change the calculation of attorney fees.  Plaintiffs’ attorneys will now receive a fee equal to 20% of the first $25,000 of the award; 15% of the next $25,000; and 10% of the remainder of the award.  Attorney fees for representing both employees and employers is now capped at $18,000. 

Section 11 amends KRS 342.610 to create a presumption that where an injured worker has voluntarily introduced an illegal, nonprescribed substance or a prescribed substance in excess of prescribed amounts “into his or her body detected in the blood, as measured by a scientifically reliable test,” that could cause a disturbance of mental or physical capacities, the substance was the cause of injury and compensation shall not apply.The provision as written does not appear to apply to alcohol, which would not be considered an illegal, nonprescribed substance or a prescribed substance.  We do not interpret this to elimination alcohol intoxication as a defense, particularly since the intoxication defense historically has been successful almost exclusively in cases involving alcohol.  Rather, we interpret this merely as tightening the standard for proving intoxication by illegal drugs and prescription medications.

Section 12 deals with third party subrogation by amending KRS 342.700. It limits the reduction in subrogation to the employer’s pro-rata share of the employee’s legal fees and expenses. In other words, the employer is responsible only for legal fees and expenses calculated as a percentage of damages that duplicate workers’ compensation benefits paid and payable, not as a percentage of total damages or damages that do not duplicate workers’ compensation benefits.

Section 13 amends KRS 342.730.  It raises the cap on the compensable rate used for calculating benefits (front end of the calculation) and on the weekly benefit itself (back end of the calculation).  Currently, the cap on the compensable rate is 2/3 of the employee's AWW, but not more than 100% of the state AWW for total disability benefits or 75% of the state AWW for PPD benefits. HB 2 raises the front end cap to 2/3 of the employee’s AWW, but not more than 110% of the state AWW for total disability benefits or 82.5% of the state AWW for PPD benefits. 

Currently, the cap on weekly benefits is 99% of 2/3 of the employee’s AWW but not more than 75% of the state AWW for PPD, except for benefits calculated under (c)1, which are capped at 100% of the state AWW. HB 2 raises the cap to 99% of 2/3 of the employee’s AWW but not more than 82.5% of the state AWW for PPD, except for benefits calculated under (c)1, which are capped at 110% of the state AWW.

In addition, a change to the date of termination of benefits was made.  The new language states that income benefits terminate at age 70 or four years after the date of injury, whichever is later.

Also, employers can now claim an offset against TTD for after tax wages paid to an employee while working on light duty or in an alternative job position.

Section 14 amends the hearing loss statute to indicate that the responsible employer is the one for which the employee was exposed to hazardous noise for at least one year.

Section 15 amends KRS 342.732 to make changes to the retraining provisions related to coal miners.  It mandates that the employee notify the employer within 30 days of an intent to retrain and sets other parameters for retraining, including that training must be initiated within one year of the final order of the ALJ.  Also, employers must create an online portal through which an employee can select a retraining facility. 

Section 17 amends KRS 342.794 regarding the "B" reader program.  It requires that “B” readers also be board certified pulmonary specialists.

Section 20 addresses the prospective versus retroactive application of certain provisions, as follows:

Section 1 (Medical Benefits), Section 3 (interest on TTD), and Section 12 (Subrogation) apply to any claim arising from a DOI occurring on or after effective date of Act.

Section 2 (Medical Fee Schedule/UR), Section 4 (Reopening), Section 5 (Cumulative Trauma), and subsection (7) of Section 13 (TTD offset for light duty wages) are designated remedial and shall apply to all claims regardless of DOI (provided that, as applied to a fully adjudicated claim, it shall not reduce income benefits or limit duration of medicals).

Subsection (4) of Section 13 (termination of income benefits at age 70/four years from DOI) is designated to have prospective and retroactive application to all claims with DOI on or after 12/12/96 and which have not been fully/finally adjudicated, or are in the appellate process, or for which time to file an appeal has not lapsed, as of the effective date of Act.

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To a large extent, the provisions of House Bill 2 are nothing more than a legislative correction of judicial decisions rendered over the last 22 years that undermined some of the sensible, cost-saving measures implemented with the 1996 amendments and intended to reduce the burden of workers’ compensation benefits on Kentucky employers.  Overall, the Act should prove favorable for business in Kentucky. 

If you have any questions regarding these changes, our Kentucky workers’ compensation team is available to assist.