the Interim Joint Committee on Labor and Industry


Minutes of the<MeetNo1> 3rd Meeting

of the 2008 Interim


<MeetMDY1> September 9, 2008


The<MeetNo2> 3rd meeting of the Interim Joint Committee on Labor and Industry was held on<Day> Tuesday,<MeetMDY2> September 9, 2008, at<MeetTime> 2:30 PM Central Time, in<Room> Room A of the Convention Center at Kentucky Dam Village State Resort Park. Representative Mary Lou Marzian, Presiding Chair, called the meeting to order, and the committee assistant called the roll.


Present were:


Members:<Members> Senator Alice Forgy Kerr, Co-Chair; Senators Julie Denton, Denise Harper Angel, Jerry P. Rhoads, Richie Sanders, Jr., and Ken Winters; Representative Mary Lou Marzian, Co-Chair; Representatives John A. Arnold Jr., Will Coursey, Myron Dossett, C. B. Embry Jr., Bill Farmer, Charlie Hoffman, Dennis Horlander, Joni L. Jenkins, Rick G. Nelson, Tom Riner, and Brent Yonts.


Guests:  Dwight Lovan, Commissioner, Department of Workers’ Claims; Donna Terry, Chief Administrative Law Judge, Department of Workers’ Claims; John Gardner, Workers’ Compensation Board; Judy Lawrence; Lucretia Johnson, Department of Workers’ Claims; Tom Grace; Jerry Coomes; Representative Fred Nesler; Rusty Cress; Tyler Campbell, KY Chamber of Commerce; Ronnie L. Boggs; Ched Jennings; Bruce Roberts; Leroy Meadon; Don Sammons; Scott Miller; David Hall; Donna Brown; Bob McWilliams; Laurent Rawlings; Brenda Herndon; Anton Cunningham; J.R. Wilhite, KY Education Cabinet; Richard P. Mullins, Ky. Education Association; Owen C. Tucker; Lori Torres; and Richard Meyer.


LRC Staff:  Linda Bussell, Melvin LeCompte, Adanna Hydes, and Betsy Bailey.


Rep. Mary Lou Marzian welcomed members and guests and expressed the committee’s appreciation to those who facilitated the meeting during the Labor-Management Conference at Kentucky Dam Village State Resort Park. Rep. Marzian recognized legislators and other officials in the audience, including: House Speaker Jody Richards, Rep. Darryl Owens, Rep. Jon Will Stacy, Rep. Fred Nesler, and Secretary J.R. Gray and Deputy Secretary Mark Brown of the Labor Cabinet. She recognized and congratulated Ray Crider who was recently appointed to the Unemployment Insurance Commission, and recognized members of the Labor-Management Conference Board. Sen. Alice Forgy-Kerr also expressed appreciation to those who facilitated the committee meeting during the conference.


Rep. Marzian introduced Dwight Lovan, Commissioner of the Department of Workers’ Claims, and Donna Terry, Chief Administrative Law Judge for the Department of Workers’ Claims.  She called on Commissioner Lovan to update the committee on the feasibility of adopting the sixth edition of the American Medical Association (AMA) “Guides to the Evaluation of Permanent Impairment” for Workers’ Compensation as required by SB 199.   


Commissioner Lovan addressed the committee on the requirements of SB 199, which was signed by the Governor as an emergency act in early April of 2008. The bill required the commissioner to direct a study on the feasibility and advisability of adopting the sixth edition of the AMA Guides to the Evaluation of Permanent Impairment, or retaining usage of the fifth edition of the Guides.  In conducting the study, SB 199 required the commissioner to seek input from groups representing labor, industry, commerce, and the medical and legal professions.  Commissioner Lovan said that he has met with an informal study group involving representatives from each of the categories and information developed by this group was presented at the June meeting of the Interim Joint Committee on Labor and Industry. The purpose of the presentation at this meeting was to further update the committee, as the final report is due to the Legislative Research Commission by January 5, 2009.  Commissioner Lovan said the sixth edition will likely go into effect on the regular effective date for bills passed during the 2009 General Assembly, unless findings prove earlier adoption would materially enhance the welfare of Kentucky’s workers.


Commissioner Lovan explained the rating system currently used by the Department of Workers’ Claims to assess permanent partial disability and permanent total disability. The permanent impairment rating means the percentage of whole body impairment caused by the injury or occupational disease as determined by the AMA Guides.  The permanent disability rating means the permanent impairment rating selected by an administrative law judge times the factor set forth in the table that appears at KRS 342.730(1)(b).  Commissioner Lovan said that Chief Administrative Law Judge Donna Terry would further explain the math used to determine the weekly payment to individuals with permanent total and permanent partial disabilities.


Commissioner Lovan said that depending upon the impairment rating assigned, a statutory factor is multiplied by the rating.  For example, an impairment rating of 10% under the AMA Guides would result in a disability rating of 8.5%, because the impairment rating (10%) would be multiplied by the statutory factor (.85) to determine the disability rating. He presented a table of impairment ratings under the AMA Guides and the corresponding factors or multipliers set forth in KRS 342.730. 


Judge Terry explained that the job of the administrative law judge is to apply the statutory benefit scheme to determine disability benefits.  She explained that there are three types of disability benefits: 

1. Temporary Total Disability Benefits (TTD)

a.      Awarded during a period of recovery from an injury or surgery.

b.      Appropriate for so long as worker has not reached maximum medical improvement (MMI) and is unable to return to his customary employment.

c.      Calculated at 2/3 of worker’s average weekly wage (subject to the statutory state maximum TTD (cap of $670.02 for 2008).

d.      Example: Average Weekly Wage = $600, TTD = $400 per week.


2. Permanent Total Disability (PTD) Benefits

a.      Awarded to a worker who has a permanent impairment rating under the AMA Guides and has a complete and permanent inability to perform any type of work.

b.      Administrative Law Judge will consider workers’ age, education level, medical restrictions, and prior work experience.

c.      Calculated using 2/3 of workers’ average weekly wage (subject to statutory maximum cap of $670.02 for 2008).

d.      Payable until worker qualifies for old-age Social Security benefits.


3. Permanent Partial Disability (PPD) Benefits

a.      Based upon a permanent disability rating calculated by multiplying a permanent impairment rating under the AMA Guides by a statutory grid factor contained in KRS 342.730.

b.      Calculated at 2/3 of workers’ average weekly wage (subject to statutory state maximum PPD cap of $502.51 per week for 2008).

c.      Payable for 425 weeks; if disability rating is over 50%, award is for 520 weeks.

d.      Example: Average Weekly Wage = $600, AMA Guides impairment rating 10%. Permanent disability rating = 8.5% (10% x .85 factor). $400 (2/3 of $600) x 8.5% = $34 per week.


Judge Terry said that PPD benefits will be most affected by the adoption of the sixth edition of the AMA Guides. She explained that for PPD benefits only, there are “multipliers” available. A worker who does not retain the physical capacity to perform the type of work performed on the date of injury receives three times (3x) the basic weekly benefit. A worker who returns to work post-injury at the same average weekly wage, but who subsequently earns less is entitled to 2x the basic weekly benefit during any period of lesser earnings. The 2x benefit applies regardless of the reason for the cessation of earning the same wage level and whether the reduction is temporary or permanent. She further explained that age and education are factors in the disability benefit determination. If a worker lacks the physical capacity to return to the same type of work, he or she may be entitled to additional benefits based upon advancing age or limited education.


Commissioner Lovan presented some preliminary comparisons of impairment ratings under the fifth and sixth editions of the AMA Guides. He focused on impairment ratings for the upper and lower extremities and the spine, which account for approximately 70% of Kentucky’s workers compensation claims. The most significant preliminary differences in impairment ratings appear to involve the lower extremities, especially for total knee, hip, and ankle replacements, and there are major differences relating to cervical and lumbar fusions.


The sixth edition contains impairment ratings for some conditions, such as those relating to psychiatric disorders and pain that do not exist in the fifth. The sixth edition also contains a significant change in the methodology used by physicians to determine impairment ratings.


Commissioner Lovan explained that Kentucky is not unique in not immediately adopting the sixth edition of the AMA Guides. Several states do not specify a particular edition, several states have state specific impairment recommendations, and the majority of states are currently using the fifth or fourth editions. New Hampshire, Vermont, Tennessee, and New Mexico have delayed adoption of the sixth edition, but Alaska has officially adopted it.


Rep. Marzian thanked Commissioner Lovan and Judge Terry for their presentations and asked why there are such radical differences in the impairment ratings between the fifth and sixth editions and if the AMA had provided any explanation for the differences.


Commissioner Lovan responded that, based on information he has gathered from physicians, the sixth edition’s ratings are based more on physical results from treatments rather than specific medical procedures. The other rationale provided was that the fifth edition’s impairment ratings were too high.


Sen. Rhoads asked if the system of rating impairment could be described as a “one-size fits all” approach.  Commissioner Lovan agreed that was a fair statement. Impairment rating does not take into consideration the worker’s occupation. Sen. Rhoads asked if the disparity in ratings between the fifth and the sixth editions regarding cervical and lumbar fusions would result in a further disparity in the final analysis when applying the multipliers. Commissioner Lovan agreed that it would.


Sen. Harper Angel asked why Tennessee initially adopted the sixth edition, but later returned to the use of the fifth. Commissioner Lovan explained that the Tennessee statute put the sixth edition into effect before adequate copies of that edition were distributed. Tennessee’s Attorney General issued an opinion stating that it was unconstitutional to use the latest edition available rather than a specific edition.


Rep. Farmer asked if the National Council on Compensation Insurance (NCCI) used the fifth or sixth edition when it made the recommendation to lower workers’ compensation rates. Commissioner Lovan said that the recent NCCI loss cost filing that recommended a decrease was based upon the fifth edition.


Rep. Marzian announced that pending LRC approval, the October meeting of the Interim Committee on Labor and Industry will be held October 23rd in Lexington jointly with the Interim Joint Committee on Economic Development and Tourism. There being no further business, the meeting was adjourned.