Free 2007 annual report (2).mdi - Arizona


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2007 ANNUAL REPORT
THE INDUSTRIAL COMMISSION OF ARIZONA

Chairman Brian C. Delfs Vice Chairman Joe Gosiger Commissioner Louis W. Lujano, Sr. Commissioner Marcia Weeks Commissioner John A. McCarthy, Jr. Larry Etchechury, Director

TABLE OF CONTENTS

INTRODUCTION .......................................................................................................................... 1

LABOR DEPARTMENT ................................................................................................................ 2

CLAIMS DIVISION ....................................................................................................................... 3

ADMINISTRATIVE LAW JUDGE DIVISION (ALJ) ................................................................... 4

ARIZONA DIVISION OF OCCUPATIONAL SAFETY AND HEALTH (ADOSH) .................... 6

SPECIAL FUND ............................................................................................................................ 8

LEGAL DIVISION.............................................................................................................................10

DIVISION OF ADMINISTRATION ........................................................................................... 11

CURRENT EVENTS ................................................................................................................... 13

CHARTS............................................................................................................................................ 14

INTRODUCTION The Industrial Commission of Arizona (ICA) is a regulatory agency that was created in 1925 as a result of legislation implementing the constitutional provisions establishing a workers' compensation system. From 1925 to 1969, the wo rkers' compensation system consisted of the State Compensation Fund, which was then a part of the Industrial Commission, and self-insured employers which generally were the mining and the railroad companies. In 1969 the workers' compensation system was reorganized and expanded to include privat e insurance companies. The State Compensation Fund was split off from the Industrial Commission and established as a separate agency responsible for providing workers' compensation insurance coverage. The Industrial Commission retained its responsibility as the file of record and its regulatory authority over the processing of workers' compensation claims. Since that time, the role of the Industrial Commission has been expanded to cover other labor related issues such as occupational safety and health, youth employment laws, resolution of wage related disputes, minimum wage, vocational rehabilitation, workers' compensation coverage for claimants of uninsured employers, insolvent insurance carriers and self-insured employers. The policy setting body for the ICA is a five member Commission whose members are appointed by the Governor and confirmed by the Senate to staggered five year terms. The Commission oversees an Agency with approximately 322 employees and an operational budget of approximately $20.1 million. As a non-general fund agency, the Industrial Commission is funded by an annual tax on workers' compensation premiums that cannot exceed 3%. The tax rate for 2006 was 3% and remained the same for 2007.

The mission statement of the Industrial Commission is to efficiently administer and effectively enforce all applicable laws and regulations not specifically delegated to others, relative to the protection of life, health, safety and welfare of employees within the State. Its purpose and objectives are accomplished through seven major divisions which are set out separately in this document.

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LABOR DEPARTMENT Randall Maruca, Director The Labor Department is a Department that has had a dramatic change in responsibilities over the years. For example, in the 1930's, it was responsible for establishing minimum wages, hours of operations for the railroads, and later enforced the payment of appropriate wages on public works projects within the state. Today, the Labor Department essentially conducts 100% of its activities in four specific areas: youth employment law enforcement, minimum wage law enforcement, resolutions of disputes involving wages, and regulating private employment agencies that charge fees to applicants (these include placement agencies, career counseling firms, modeling and talent firms and sitting services).
YOUTH EMPLOYMENT LAW ENFORCEMENT

RESOLUTION OF WAGE DISPUTES

When a wage owed to an employee is no more than $2,500 and the accrual of those unpaid wages do not exceed one year, then an employee may file a wage claim with the State Labor Department or with the Small Claims Court. Upon receipt of a claim, the Labor Department will notify the employer of the claim and investigate the allegations. The Labor Department will provide a written determination which can be appealed to Superior Court. An employer who does not comply with a Final Order within ten days after the Order becomes final is liable to pay the employee treble the amount of the unpaid wages found to be owed. While every effort is made to resolve the dispute, in some cases there is insufficient information to make a determination. In those cases, a claimant has the right to file a civil action in Justice or Small Claims Court.
FY05 FY06 FY07

Arizona's youth employment laws, which establish the hours a youth can work and prohibit occupations in which they can be employed, are very similar to those on the federal level. The Labor Department utilizes information gathered from the ICA's Claims Division to review and investigate workers' compensation claims involving minors, receives and investigates information from other governmental organizations and complaints filed by the public.
FY05 FY06 FY07

Number of Wage Claims Filed / Investigated

2904

2864

2943

MINIMUM WAGE LAW ENFORCEMENT

Number of Injury Reports Involving Minors and Complaints Received Number of Youth Employees Violations Confirmed

1060

1200

1238

58

52

65

Arizona employers are required to pay employees no less than the minimum wage. Any person may file an administrative complaint with the State Labor Department if they are not receiving the minimum wage or have been retaliated against for asserting any claim or right under the Minimum Wage Act. Upon receipt of an alleged violation, the Department will notify the concerned employer and investigate the allegations. Civil penalties can be assessed for violations of the Act. Upon determination that wages or penalties are due and unpaid to the employee, the Department may obtain judgement and execution, garnishment, attachments,

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or other remedies for collection. The Labor Department will provide a written determination, which can be appealed to the Administrative Law Judge Division of the Commission. The Department may mediate and conciliate any dispute between the parties.
FY07 Number of Minimum Wage Inquiries Number of Minimum Wage Complaints Filed Complaints Resolved Violations Issued Average Months to Complete Investigation On-site Audits and Reviews Completed 1786 21 5 12 1.6 8

CLAIMS DIVISION Noreen Thorsen, Manager Unlike the other Divisions, the historical role of the Claims Division has remained unchanged. Since 1925, the Claims Division has been the file of record for approximately 6 million workers' compensation claims files. Claims are received by the Claims Division from attending physicians and injured workers. The Claims Division, in turn, notifies the appropriate insurance carrier/third party processing agent or self-insured employer so that they can appropriately process the claim. The historical number of claims processed in the last three years are as follows:
FY05 FY06 FY07

LICENSED & REGULATED AGENCIES

Under Arizona law, private employment agencies that charge a fee to an applicant are licensed and regulated by the Labor Department.The Industrial Commission's Employment Advisory Council and the Labor Department investigate the background of each firm applying for a license. Based on their investigation, they recommend approval or denial of a license to the Commission. The Industrial Commission administratively approves or denies the license. An appeal of that administrative decision is made before the five member Commission through an administrative hearing. The Commission's decision is appealable to the Superior Court. Number of Licensed Agencies
FY05 Career Counseling Firms Model & Talent Agencies General Agencies Sitter Agencies Domestic Help Agencies 25 27 3 2 1 FY06 24 23 2 1 1 FY07 27 26 4 2 1

Number of Claims Processed

139121

131904

121699

In addition to being a file of record, we now have 40 million stored documents on our optical disc system. The Claims Division is responsible for ensuring that the 550 insurance carriers/third party processors and 125 self-insured employers process workers' compensation claims in accordance with existing statutes and rules. The Claims Division, in addition to answering approximately 150,000 telephone inquiries per year, is responsible for processing approximately 6,000 documents per day and making in excess of 31,000 determinations annually that are subject to judicial review. Some of those determinations involve a variety of issues such as allegations of bad faith, awards for facial scaring and loss of teeth, approvals or denials of requests to leave the state, approvals or denials of requests to change physicians, etc. A historical perspective for some of tho se determinations are as follows:

Total

59

52

60

3

AVERAGE MONTHLY WAGE AWARDS

The Claims Division establishes the average monthly wage for claimants who have been injured in excess of seven days. The number of wage awards for the last three fiscal years are as follows:
FY05 FY06 FY07

ADMINISTRATIVE LAW JUDGE DIVISION (ALJ) Harriet Turney, Chief Judge The ALJ Division conducts administrative hearings as authorized under the Arizona Workers' Compensation Act and the Occupational Health and Safety Act (OSHA). It also has jurisdiction to hear disputes arising in youth employment and, since January 2007, minimum wage cases. The mission of the division is to resolve all disputes coming before it efficiently and equitably. Most of the cases referred to the division are in the area of workers' compensation. In the most recent year for which statistics are available (FY 2007), 6809 workers' compensation claims were referred to the ALJ Division for hearing. It received 58 OSHA cases. Workers compensation cases are referred to the ALJ Division from the Claims Division when an interested party (claimant, employer, insurance carrier or Special Fund) requests a hearing on a disputed issue arising in the administration of a claim. Issues include the compensability of the claim, entitlement to continuing or additional benefits, and loss of earning capacity. Since issues can arise throughout the lifetime of an injured worker, some claims are referred to the ALJ Division more than once. For example, a claim that is initially litigated on compensability may return to the ALJ Division on a dispute over continuing benefits. A claimant may seek to reopen a claim, years after it has been closed for benefits, based on a new, additional or previously undiscovered condition related to the industrial injury. OSHA cases are referred to the ALJ Division from the Arizona Department of Occupational Safety and Health (ADOSH). Disputes arise when a citation has been issued and the employer protests the action taken by ADOSH. The ALJ division employs 17 ALJs in Phoenix and four in Tucson. All the ALJs have are active

Number of Wage Awards

16749

14184

18451

LOSS OF EARNING CAPACITY AWARDS

The Claims Division is responsible for determining the "loss of earning capacity" (LEC) for claimants who have incurred a permanent impairment that results in an unscheduled injury. The number of "LEC" awards for the past three fiscal years are as follows:
FY05 FY06 FY07

Number of LEC Awards

3763

2385

2410

The Commission's ability to effectively monitor claims activity and process the large volume of data has been due in large part to the Commission's computer system. In 1991 the Claims Division became the first state workers' compensation program to utilize optical disk technology and go to a paperless system. This technology, which is used in conjunction with new computer software, allows for greater productivity and instant access to claims information. With this system, more than one person can access a file at the same time, and telephone inquiries can be answered immediately. Based upon the ICA's Claims Division's success, a number of other states have adopted this technology.

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members of the State Bar of Arizona, with a minimum of five years' experience in workers' compensation, labor and employment, or a related field. Each ALJ is supported by a legal secretary, who serves as a judicial assistant with responsibility for the administration of the judge's docket. The legal secretaries and division clerks also provide information and assistance to parties, attorneys and members of the public. Once a case is referred to the division, it is assigned to an ALJ who schedules it for hearing, usually within 60-90 days. Most of the hearings are set in Phoenix or Tucson. The others (approximately 7%) are scheduled elsewhere around the state in such locales as Flagstaff, Prescott, Lake Havasu, Kingman, Yuma, Lakeside-Pinetop, Show Low, Payson, Globe, Casa Grande, Bisbee, Sierra Vista, and Nogales. Prior to the hearing, the parties engage in discovery, such as depositions (oral examination of individuals who have information relevant to the issues), and the exchange of interrogatories (written questions). The claimant may be sent for one or more independent medical examinations scheduled by the employer and/or carrier and the parties file and exchange medical documents. Workers' compensation cases usually require more than one hearing to obtain all necessary evidence. The claimant and non-expert witnesses, if any, testify at the first or "initial" hearing. Subsequent hearings, known as "further hearings," are scheduled for medical experts and, where the issue is loss of earning capacity, labor market consultants. The limited availability of medical experts can cause delay in scheduling further hearings. It can take several weeks to several months for further hearings to be completed. The ALJ sits as the trier of fact in workers' compensation cases, similar to a jury in a civil case. Once the hearings have been completed and any posthearing memoranda filed, the presiding ALJ issues a written decision upon hearing that contains findings, legal analysis, and conclusions. A party disagreeing with the ALJ's decision may file a request for review that is considered by the ALJ who issues the decision

upon hearing. Upon receipt of legal memoranda from the parties, the ALJ issues a written decision upon review that may affirm, reverse, modify and/or supplement the decision upon hearing. If a party disagrees with the decision upon hearing, the party may file a petition for special action with the Arizona Court of Appeals within thirty days. The parties are given an opportunity to file briefs, and occasionally are allowed to participate in oral argument. The Court of Appeals issues either a memorandum decision or an opinion affirming or setting aside the decision of the ALJ. Further review is discretionary with the Arizona Supreme Court. OSHA hearings follow their own procedural rules. They are usually completed in one session. The ALJ issues a written decision at the conclusion of the hearing process. A dissatisfied party may request review of the ALJ's decision, but instead of being reviewed by the ALJ who heard the case, the review is conducted by a Review Board. Further review is with the Arizona Court of Appeals, as with workers' compensation cases. The ALJ Division continues to offer mediation in both workers' compensation and OSHA cases. Mediation affords an alternative to the formal hearing process. The parties must agree to mediation and it is generally available only when all parties are represented by counsel. An ALJ, who is not assigned to hear the case, acts as a third party neutral. The role of the mediator is to facilitate communication between the parties and help them work toward a negotiated resolution of their dispute. Mediation is a confidential process. If a dispute is resolved through mediation, the parties execute a settlement agreement that is reviewed and approved by the presiding ALJ. If the dispute is not resolved, the case is returned to the hearing process and nothing revealed in the mediation process is disclosed, without permission, to the presiding ALJ. Any notes or memoranda presented to the mediating ALJ are destroyed and the presiding ALJ renders a decision based solely on the record and evidence presented at the

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hearing. Mediation has been shown to be effective in crafting solutions that might not otherwise be possible in the formal hearing process. The parties who have utilized mediation have expressed a high level of satisfaction with the process. Mediation is offered to all employers in OSHA cases, but OSHA cases often settle even before mediation can be scheduled. Workers' compensation cases with multiple issues, such as home health care, transportation, and housing, have been successfully and creatively resolved through mediation. Timely resolution of all cases continues to be a top priority for the ALJ Division. Early prehearing conferences are convened to advise unrepresented parties of their rights and responsibilities or at the request of the parties. These conferences often have the salutary effect of encouraging communication between the parties, which can result in the narrowing of issues and earlier settlement. The division is focused on prompt scheduling of initial and further hearings, and closer scrutiny of requests for continuances to avoid undue delay. The ALJs have reduced their backlog and are issuing their decisions within 30-60 days of submission date. Most further hearings for experts are conducted telephonically to expedite scheduling, often cutting weeks off the process. Waiver of live medical testimony and greater reliance on written reports in some cases has eliminated or reduced the need for further hearings. The ALJ Division monitors the satisfaction level of its customers through a survey process. The anonymous process measures the public's general satisfaction with the administrative hearing process. The division has consistently exceeded 3.5 on a 5-point scale.
FY05 Cases Referred to the Division Hearings Conducted Average Length of Time to Resolve a Case (Days) 8080 FY06 6842 FY07 6809

ARIZONA DIVISION OF OCCUPATIONAL SAFETY AND HEALTH Darin Perkins, Director In 1974 Govenor Jack Williams asserted Arizona's right, under the Federal Occupational Safety and Health Act, to retain jurisdiction over occupational safety and health issues within our state, excluding mining operations, Indian reservations and federal employees. This jurisdiction encompasses approximately 2.8 million employees working in 144,000 public and private establishments. In accordance with the Federal Occupational Safety and Health Act, the Arizona Division of Occupational Safety and Health (ADOSH) operates under an approved plan with the U. S. Department of Labor. In 1985 the U. S. Department of Labor designated (ADOSH) as being one of only 26 states and territories that have programs that are "as effective" as Federal OSHA. Given the large scope of responsibility, ADOSH focuses its efforts in four specific areas: compliance, consultation, elevators and boilers.
COMPLIANCE

6598

5542

5226

118.5

118

113

ADOSH's compliance activities consist of conducting unannounced inspections of workplaces throughout Arizona to determine whether employers are complying with the Occupational Safety and Health Act and standards. Inspections may be the result of (1) a work related accident, (2) a complaint, (3) a referral, (4) planned inspection, or (5) a follow-up to ensure that previously cited serious, repeat or willful violations have been corrected. Inspections involving work related accidents are generally serious in nature involving multiple injuries or a fatality. A complaint inspection generally is the result of a serious safety/ health allegation or a nonresponse to a written inquiry sent to an employer by ADOSH. A referral generally

6

comes from another government source such as Department of Economic Security's Farmworker Outreach Program, Department of Health Services, Police and Fire Departments. Planned or scheduled inspections are those directed at those employers in high-hazard industries or who have a large number of workers' compensation claims, or higher than average injury and illness rates. ADOSH is the only state or Federal OSHA program in the country that has an independent body, (the Commission) that is separate from the OSHA program, that reviews the appropriateness of ADOSH's penalty proposals and either approves, modifies or disapproves the issuance of penalties for violations of Arizona's Occupational Safety and Health Act. Every Thursday at a public meeting before the Commissioners, a representative from ADOSH presents a prima facie case to the Commissioners as to why a penalty should be assessed. The Commission, as a body, reviews the proposal and either approves, modifies or disapproves the proposed penalties based upon the facts presented. All penalties assessed and collected go directly to the State General Fund.
FY05 Serious Willful and Repeat Violations Total Penalties Assessed 1028 FY06 989 FY07 865

CONSULTATION AND TRAINING

ADOSH's consultation activities consist of providing free consultative assistance to employers who are requesting assistance in coming into compliance with existing occupational safety and health standards. At the request of an employer, a consultation evaluation may involve an individual operation or an entire workplace. No citations or penalties are issued to employers utilizing consultation services as long as the employer corrects the apparent hazards which are noted as written recommendations in a letter to the employer. Free training programs are also provided by ADOSH to business organizations, labor organizations and individual employers upon request. A film library is also available to individual employers who may wish to check-out films to supplement their own safety and health programs.
FY05 # of Hazards Found During Consultations # of Training Programs # of Employees Trained # of Employers Trained 2492 FY06 2036 FY07 2745

390

377

317

1.82

1.3

1.97

6034

6619

5841

* in millions

It is important to note that not all violations or inspections result in penalties. In fact, the majority of violations are other than serious and carry no penalty. In addition, for a significant number of inspections we find no violations and determine that the employer is "in compliance" with the Arizona Occupational Safety and Health Act.
FY05 FY06 FY07 Nonserious Violations

2844

1696

1799

BOILERS AND ELEVATORS

2356

2792

2426

In Compliance % Rate

41.1%

37.1%

37%

Unlike the Arizona Occupational Safety and Health Act, the Boiler and Elevator program is equipment oriented, and not based upon employee exposure. As a result, cease and desist orders are utilized without monetary penalties. Once violations are corrected, certificates of operation are issued allowing the employer to utilize the boiler, elevator or escalator. 7

In the Boiler and Elevator statutes, political subdivisions are allowed to retain jurisdiction if they provide a comparable program. The City of Phoenix has retained jurisdiction over elevators within its boundaries. No other political subdivision has retained jurisdiction for boilers or elevators.
FY05 FY06 FY07 Boilers Inspected 2762 1982 1869

The financial integrity of the Special Fund is overseen by a legislatively created Investment Committee. This Investment Committee consists of a representative from the insurance industry, a representative of the investment industry, a representative of the self insured employers, the Chairman and Director of the Industrial Commission. The Special Fund has $430 million in assets which is comprised of the Industrial Commission offices at 800 W. Washington, Phoenix and 2675 E. Broadway, Tucson, and a mix of bonds, stocks and cash. The Special Fund's investment portfolio consists of 43% bonds, 43% stocks,14% cash and short-term investments. The Special Fund's rate of return over the past five years has ranged from 7.5% for FY03, 10.4% for FY04, 7.4% for FY05, 3.5% for FY06 and 18.2% for FY07. The annual rate of return for the last ten years of this investment program has been 8.5%.

Deficiencies Noted

484

148

167

FY05

FY06

FY07

Elev ators Inspected

4580

4289

4504

Deficiencies Noted

1494

1593

2047

SPECIAL FUND David Sosa, Special Fund Monitor

The Special Fund is a "trust fund" that was The funding source of the Special Fund has legislatively created in 1969 for the express purpose of providing workers' compensation benefits in the changed dramatically over the years. Originally there were two funding sources: the amount unexpended following areas: from a fixed 3% Admin Fund tax on workers' providing benefits for uninsured claimants, compensation premiums and an additional discretionary workers' compensation Special Fund premium tax of continuing workers' compensation benefits 2%. The source of funds is based upon the Special for claimants of insolvent carriers and bankrupt self-insured employers, Fund's investment income and a Special Fund discretionary tax of 2.5% which was 0% from calendar partial coverage of workers' compensation year 1992 through calendar year 2003. The benefits for second injury claims, Commission reviews the tax rate each year and has set the tax rate at 1.5% for calendar year 2008. vocational rehabilitation benefits, Effective August 12, 2005 any unexpended Admin continuing medical benefits for pre 1973 Fund tax may be transferred to the Special Fund when workers' compensation claimants. the Special Fund is not actuarially sound. Functionally, the responsibilities of the Special Fund have historically been relatively stable. The only significant changes that have occurred dealt with the financing of the Special Fund and the creation of an oversight Investment Committee in 1984. The Special Fund net asset balance deficit of $109.7 million that was reported last year (because of insolvencies) has been reduced to approximately $38 million. With the large decline in the Special Fund deficit during state fiscal year 2006/2007, the Com-

8

mission approved a reduction of 40 percent in the Special Fund premium tax rate from a maximum of two and one-half percent in calendar year 2007 to one and one-half percent for calendar year 2008. Some examples of operational statistics and their financial impact are as follows:
UNINSURED CLAIMS

& SELF-INSURED CO. TOTAL OF ALL CLAIMS

18.4 million 251.1 million

VOCATIONAL REHABILITATION

The Special Fund is responsible for providing benefits to injured workers whose employers are violating the law and not providing workers' compensation insurance (no-insurance claims). The historical number of no-insurance awards issued are as follows:

A workers' compensation claimant who as a result of the worker's injury has incurred a permanent impairment that prevents that worker from returning to the worker's date of injury employment and who also has a loss of earning capacity may be eligible for vocational rehabilitation benefits. In 1988 the Commission enhanced its existing vocational rehabilitation efforts by establishing a specific program for injured workers with scheduled injuries. The historical numbers of vocational rehabilitation awards issued are as follows:
FY05 FY06 FY07

FY05

FY06

FY07

No Insurance Awards Issued

3281

2744

3265

INSOLVENT INSURANCE CARRIERS

The Special Fund is responsible for continuing workers' compensation benefits for those claimants insured by insolvent insurance carriers and bankrupt self-insured employers. The estimated reserves for those claims are as follows: The ten largest carriers
FREMONT COMPANIES LEGION INS CO. RELIANCE INSURANCE GREAT STATES INS. PAULA INS. CO. MISSION INSURANCE CO. WESTERN EMPLOYERS INC. SUPERIOR NATIONAL HIH AMERICA HOME INS. CO. ALL OTHER INS. CARRIERS 124.3 million 21.5 million 20.0 million 15.1 million 14.6 million 12.3 million 11.2 million 7.7 million 3.2 million 2.8 million

# of Rehabilitation Awards Issued

150

151

133

Our rehabilitation program is focused on providing vocational retraining that will result in meaningful employment. This training includes a variety of college courses to supplement prior education, on the job training where the special fund will pay 50% of the salary during training as long as there is a commitment to hire the trainee, and a variety of vocational programs including: bilingual tractortrailer operator, equine instructor, forensics, mortuary science, computer-aided drafting, and pharmacy technicians. For those that are eligible for vocational rehabilitation but are lacking skills to enter a program, the Special Fund offers foundational training in math, reading, and English (ESL) .

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Provides legal advice to the five member Commission and Division Managers. Represents the agency in personnel matters. Assists Division Managers in the promulgation of rules Ensures that Arizona's employers are providing workers' compensation insurance coverage for their employees. Initiates subrogation of third party no-insurance claims. Operates a program for processing and collection of delinquent accounts.

LEGAL DIVISION Laura McGrory, Chief Counsel



The Industrial Commission has always had its own legal representation, separate from the Attorney General's Office. In its early years, the Legal Division functioned in a dual role as both hearing officers and legal counsel. With the creation of the Administrative Law Judge Division in 1969, the responsibilities changed and remain the same today. The Legal Division represents the Industrial Commission in the majority of legal matters affecting the Agency. The major responsibilities of the Division are as follows:






A historical perspective of some of the activities of the Legal Division are as follows:
FY05 FY06 FY07

Represents the Special Fund in actual/ potential litigation involving most activities of the Special Fund, i.e. uninsured workers'compensation claims, second injury claims, supportive care, and, on occasion, claims involving insolvent carriers/bankrupt self-insured employers.

Hearings/Legal Proceedings Involving Special Fund and ADOSH

452

405

405

INSURANCE COVERAGE



Represents the Arizona Division of Occupational Safety and Health in actual/potential litigation regarding the enforcement of the Arizona Occupational Safety and Health Act. Represents the Labor Division in the enforcement of youth employment matters and wage claim appeals and the regulation of employment agents under the Labor Department's jurisdiction.

The Legal Division is notified through a variety of sources of those employers who are violating Arizona law by not providing workers' compensation coverage for their employees. The Legal Division investigates each referral and ensures that insurance is obtained.
FY05 FY06 FY07



Insurance Referrals

1708

1721

2626

10

COLLECTIONS

The Legal Division is notified when monies owed as a result of Arizona Division of Occupational Safety and Health citations or uninsured workers' compensation claims are delinquent. The collection of delinquent accounts is either addressed in-house or with outside collection counsel.
FY05 FY06 FY07

Collection Files Opened

413

347

427

4. Purchasing 5. Facilities Management 6. Workers' Compensation Statistical Reporting 7. Ombudsman's Office for Workers' Compensation 8. Printing and Mailing Services 9. Personnel Services 10. Processing & Evaluation of Applications for Self-Insured Employers 11. Federal Grant Administration 12. Special Fund Asset Administration 13. Administration of Assessment on Workforce Compensation Premiums Written.

Delinquent Collection Accounts to Outside Counsel

154

149

176

ACCOUNTING SERVICES Gary Norem, Chief Financial Officer

The Legal Division is also involved in a variety of miscellaneous legal matters, e.g. ADOSH discrimination cases, Superior Court injunctive activities, attorney fee petitions and certifications of records to the Court of Appeals.

In addition to payment of operational claims and purchase orders, the Division is responsible for prompt payment of monthly or semi-monthly payment of compensation and medical benefits provided to those injured workers receiving benefits under the Special Fund. The Division pays compensation within two days and medical and other service providers are paid within thirty days from receipt of billing. A historical perspective of the number of warrants is provided:

DIVISION OF ADMINISTRATION

The Division of Administration was created to provide support services necessary to ensure the efficient and effective operation of the Industrial Commission. The Division provides the following services:
Checks Issued

FY05

FY06

FY07

17500

19411

20253

1. Budgeting 2. Accounting 3. Data Processing

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The other Division services provided by Accounting are budgeting; administration of the self insured employers program; administration of federal grants; Special Fund asset administration; and the administration of the assessments on workers' compensation premiums written. The self insurance program has over 100 companies and organizations participating in it annually. Accounting is responsible for processing premium assessment payments and returns from all the self insured companies and organizations and another 500 insurance companies that are authorized to write workers' compensation policies in Arizona.

DATA PROCESSING Star Heilman, Manager

In 1991 the Industrial Commission's Claims Division became the first state workers' compensation system in the country to utilize optical disk imaging. The system works in conjunction with a large sophisticated data software program that has provided the agency the mechanism for an agency wide claims system. The Commission's Data Processing Section has converted all existing systems to an agency wide PC based UNIX system utilizing HP servers that will utilize the optical disk imaging technology, and will begin the process of integrating the ALJ, Special Fund and Legal systems into the optical disk imaging system. We are continuing to develop an employer master file to be shared by all Divisions of the agency. This system will contain current information on Arizona employers including address, workers' compensation insurance coverage, number of employees and other data needed to assist the agency tracking Arizona employers. Also, we are in the process of rewriting the Claims Data Base System for processing of claims and the Hearing Data Base for processing of workers compensation hearings.

OMBUDSMAN
Mary Green, Manager

In 1988 the Industrial Commission's Ombudsman's Office was created by statute to provide assistance to injured workers in resolving difficulties encountered during the processing of their workers' compensation claims. The Ombudsman's Office intercedes on behalf of an injured worker to ensure that the worker receives benefits to which the worker is entitled under the law. Personnel in the Ombudsman's Office do not provide legal advice nor do they participate in legal proceedings. A historical perspective of the number of claimants that have received assistance are listed as follows:

FY05

FY06

FY07

Number of Claimants Assisted

3080

2852

2493

12

Current Events

This year has been an eventful one. As in the past we continued to focus on resolving issues that have impacted our Special Fund, dealt with issues that are impacting the workers compensation system and dealing with new issues as they arise. Over the last several years we have reported the negative consequences caused by insurance company insolvencies and its negative impact on the fiscal health of the Special Fund. As a matter of background, the Special Fund is a trust fund and a guarantee fund that has a number of statutorily prescribed functions. During the early period of this decade the Special Fund went from a surplus of approximately $80 million to a deficit that was more than $190 million. Accordingly, the Industrial Commission was required to raise the assessment from 0% to its statutory maximum of 2 %. Since that time the Industrial Commission and the Special Fund Investment Committee have been successful in reducing the deficit to approximately $38 million. This year, in recognition of that decrease in the deficit, the Industrial Commission reduced the assessment by 1%. We will continue to monitor the deficit and if things progress as we hope they will we may be revisiting the assessment issue again next year. Last year we reported our concern regarding the benefit levels within the workers compensation

system and the fact that those benefit levels have not been adjusted since 1999. Fortunately, the legislature with the help and assistance of labor and employer community were able to craft a benefit law that addresses that longstanding concern. Maximum benefits will be increased over the next couple of years and will ultimately be indexed to a statewide wage index. We will continue to work with all of the various interests to deal legislatively with workers compensation issues as they arise. We are continually working to improve our operational efficiencies and internal processes. We are continuing to work on a number of internal systems to improve operational capabilities such as our claims and our accounts payable and receivable systems. It is hoped that when these systems are in place, our capabilities will be expanded and our operational efficiencies will be increased. This year we spent considerable amount of time and resources on implementing the new State's Minimum Wage Initiative (law). In an effort to minimize the impact we trained a number of personnel within the Industrial Commission who had the responsibility of putting on training forums in all parts of the state. This training coupled with use of our website (ica.state.az.us) as a primary information resource together with the help and assistance of a number of private employer organizations resulted in the law being implemented without significant confusion or major disruptions in employer operations.

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CHARTS

14

CHART 1. TAXABLE WORKERS COMPENSATION PREMIUMS REPORTED (IN MILLIONS) ON A CALENDAR YEAR BASIS* (2000 - 2006) $1200 $1000 $800 $600 $400 $200 $0 2000
YEAR 2000 2001 2002 2003 2004 2005 2006

2001

2002

2003

2004
SELF-INSURED EMPLOYERS 96 117 131 160 181 229 227

2005

2006
TOTAL 463 542 571 672 724 844 946

INSURANCE CARRIERS 367 425 440 512 543 615 719

INSURANCE CARRIERS SELF-INSURED EMPLOYERS TOTAL *PREMIUMS WRITTEN LESS RETURNED PREMIUMS, DIVIDENDS, CANCELLED PREMIUMS

15

CHART 2.DIRECT LOSSES PAID (IN MILLIONS) ON A CALENDAR YEAR BASIS. (2001 - 2006)

600 500 400 300 200 100 0 2001 2002 2003 2004 2005 2006

INSURANCE CARRIERS

SELF-INSURED EMPLOYERS

TOTAL

YEAR

INSURANCE CARRIERS

SELF-INSURED EMPLOYERS

TOTAL

2001 2002 2003 2004 2005 2006

285 328 346 367 369 424

77 75 85 100 112 100

362 403 431 467 481 524

16

CHART 3. TOTAL COMPENSATION CLAIMS FILED WITH THE INDUSTRIAL COMMISSION (FY2001-2007)

Thousands 160 140 120 100 80 60 40 20 0 2001 2002 2003 2004 2005 2006 2007

153.937 148.326 137.099 135.645 139.121 132.904 121.699

17

CHART 4. TOTAL TIME LOST CLAIMS FILED WITH THE INDUSTRIAL COMMISSION (2000-2006) (CALENDAR YEAR)

25 20 15 10 5 0 2000 2001
YEAR 2000 2001 2002 2003 2004 2005 2006

2002

2003

2004

2005
TOTAL TIME LOST CLAIMS 19752 19095 17298 16109 15902 14294 15796

2006

18

CHART 5. LOST WORKDAY CLAIMS 2001-2006 by MAJOR INDUSTRY DIVISION
Thousands 4

3

2

1

2001 2002 2003 2004 2005 2006

0
y de n ct io in in an c ic es tr rin io de rt at tu Tr a es ra rv lT ,F or ru ac ur M Se on st an uf sa an s et la ss N on -c po le ai ns ifi ab le n g g e

ho le

ul tu

Tr

M

ic

W

A

gr

Major Industry Division
Agriculture, Forestry Mining Construction Manufacturing Transportation Wholesale Trade Retail Trade Finance, Insurance Services Non-classifiable

2001
583 146 2969 1396 1501 808 2669 338 3722 251

2002
606 132 2767 1226 1483 695 2660 345 3619 117

Fi n

an

2003
488 107 2491 1142 1481 610 2467 318 3162 83

ce ,I

re

C

R

2004
533 141 2569 1243 1502 687 2608 291 3218 86

2005
443 154 2657 1123 1395 639 2370 279 2928 81

2006
464 152 2866 1101 1472 714 2503 251 2896 111

INCLUDES ALL PRIVATE SECTOR LOST WORKDAY CLAIMS THAT WERE RECEIVED DURING CALENDAR YEARS 2001, 2002, 2003, 2004, 2005 and 2006.

19

CHART 6. LOST WORKDAY CLAIMS 2001-2006 by NATURE

6 5 4 3 2 1 0
ur ns s tu re s ur ns om e iti s ns ns ns s ai ns ,s tra in tu si o at io ur ie tio on tb m ic al b ra Fr ac in j dr Am pu t ls yn ce on ea la H se s, c tip Te le nd O th e r

2001 2002 2003 2004 2005 2006

ut s,

he

Sp r

M ul

Br ui

NATURE
Sprains, strains Fractures Cuts, lacerations Bruises, contusions Heat burns Chemical burns Amputations Multiple injuries Carpal tunnel syndrome Tendonitis Other

2001
4934 1398 1212 889 161 30 143 831 157 91 4531

2002
4795 1413 1072 795 162 34 110 708 139 46 4379

2003
4335 1187 1013 833 143 27 141 677 80 28 3887

C

ar

pa

lt un

C

C

ne

2004
4519 1324 1123 871 149 35 128 782 128 29 4094

2005
4366 1346 1107 775 123 28 138 680 83 25 2786

2006
4460 1443 1084 875 120 30 119 538 57 27 3200

INCLUDES ALL PRIVATE SECTOR LOST WORKDAY CLAIMS THAT WERE RECEIVED DURING CALENDAR YEARS 2001, 2002, 2003,2004, 2005 AND 2006.

20

CHART 7. LOST WORKDAY CLAIMS 2001-2006 by PART OF BODY

7 6 5 4 3 2 1 0
ec k ac k d e M ul ti A O th er K ne e t ris H ea W N B nk l pl e

2001 2002 2003 2004 2005 2006

PART OF BODY
Head Neck Back Wrist Ankle Knee Multiple Other

2001
597 196 2825 756 574 1552 1482 6405

2002
617 197 2603 681 598 1575 1232 6150

2003
439 168 2388 607 560 1319 1165 5705

2004
533 172 2280 611 523 1453 1423 6187

2005
564 143 2004 530 547 1334 1211 5752

2006
430 172 2038 553 587 1379 1077 6255

INCLUDES ALL PRIVATE SECTOR LOST WORKDAY CLAIMS THAT WERE RECEIVED DURING CALENDAR YEARS 2001, 2002, 2003, 2004, 2005 AND 2006.

21

CHART 8. LOST WORKDAY CLAIMS 2001-2006 by EVENT OR EXPOSURE

5 4 3 2 1 0
tio n ev el le ve nc es ot io en ts rip xp lo sio ob j ac s, t we rl re xe r cid m su bs ta tw ith sa m Sl ip ive O ve ac lo s, e io le nt e O th er s ec t ns n l ts

2001 2002 2003 2004 2005 2006

et it

ns po rta

Co nt

Fa

ha rm

to

EVENT OR EXPOSURE
Contact with object Fall to lower level Fall to same level Slips, trips Overexertion Repetitive motion Exposed to harmful substances Transportation accidents Fires, explosions Assaults, violent acts Other

2001
3395 1321 1987 285 3951 556 271 729 50 226 1616

2002
3368 1123 1928 283 3939 407 261 673 56 253 1362

Ex po s

ed

Tr a

2003
3071 1151 1719 184 3573 342 229 652 49 238 1143

As s

2004
3343 1308 1927 143 3535 442 248 750 56 218 1212

au lts ,v

ac

Fa ll t

ll t

fu l

tio n

o

o

Re p

Fi re

2005
3197 1214 1976 52 3146 315 187 618 43 246 1081

2006
3140 1373 1975 37 3188 282 213 671 27 248 1391

INCLUDES ALL PRIVATE SECTOR LOST WORKDAY CLAIMS THAT WERE RECEIVED DURING CALENDAR YEARS 2001, 2002, 2003,2004, 2005 AND 2006.

22

CHART 9. LOST WORKDAY CLAIMS 2001-2006 by SOURCE

4

3

2

1

2001 2002 2003 2004 2005 2006

0
le s es ia ls er ol s s ai ne ce al hin hic ur ct to An Co lP re M Ha ,F Su ro M Al lO er im r fa du ixt nd ac Ve nt at th s er y rs s & Fl oo r, G

&

i ca

r ts

Pl an

rn

em

Ch

Fu

Pa

ls,

i ca

Ch

em

SOURCE
Chemicals, Chemical Products Containers Furniture, Fixtures Machinery Parts & Materials Persons, Plants & Animals Floor, Ground Surfaces Handtools Vehicles All Other

2001
94 1739 459 977 1653 2991 3597 876 1207 795

2002
86 1807 452 912 1491 2718 3327 867 1204 789

Pe

rs

on

s,

2003
72 1635 412 807 1399 2366 3097 766 1135 662

ro

un

itu

ts

d

2004
100 1599 400 840 1549 2430 3505 854 1247 658

2005
69 1419 380 845 1413 2068 3454 772 1053 602

2006
75 1554 319 843 1400 2249 3566 776 1149 614

INCLUDES ALL PRIVATE SECTOR LOST WORKDAY CLAIMS THAT WERE RECEIVED DURING CALENDAR YEARS 2001, 2002, 2003,2004, 2005 AND 2006.

23

CHART 10. LOST WORKDAY CLAIMS 2001-2006 by OCCUPATION

6 5 4 3 2 1 0
ice s al in g le af or io n Sa rv Cr ish at ss Se ca fe ,F n, tio ab r ic l, O th er s t s

2001 2002 2003 2004 2005 2006

ro

ni

ry

,P

ch

uc

re

ia l

Te

od

Fo

er

Pr

g,

ag

n

an

isi o

in

rm

M

Fa

OCCUPATION
Managerial, Professional Technical, Sales Service Farming, Forestry, Fishing Precision Production, Craft Operators, Fabricators Others

2001
935 2090 2053 609 3504 5011 185

2002
896 1924 2066 629 3503 4535 100

Pr

ec

2003
786 1772 1863 504 3110 4158 158

O

pe

ra

to

rs

,F

st

2004
792 1688 1815 552 3514 4583 238

2005
739 1566 1713 482 3196 4122 257

2006
695 1674 1666 496 3300 4527 187

INCLUDES ALL PRIVATE SECTOR LOST WORKDAY CLAIMS THAT WERE RECEIVED DURING CALENDAR YEARS 2001, 2002, 2003,2004, 2005 AND 2006.

24

CHART 11. LOST WORKDAY CLAIMS 2001-2006 by AGE

5

4

3

2

2001 2002 2003 2004 2005 2006

1

0
24 44 64 19 34 54 de to un 20 16 35 to 55 25 45 an an 65 d d ov to to to to er r

AGE
15 and under 16 to 19 20 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 and over

15

2001
7 433 1419 3603 4056 3062 1421 317

2002
9 384 1357 3220 3925 2987 1380 341

2003
1 315 1189 2918 3464 2799 1331 281

2004
3 360 1255 3053 3534 3023 1577 323

2005
4 342 1216 2706 3142 2855 1441 313

2006
1 387 1336 2781 3085 3027 1546 343

INCLUDES ALL PRIVATE SECTOR LOST WORKDAY CLAIMS THAT WERE RECEIVED DURING CALENDAR YEARS 2001, 2003, 2004, 2005 AND 2006.

25

CHART 12. DISTRIBUTION OF FATAL OCCUPATIONAL INJURIES BY EVENT OR EXPOSURE ARIZONA, 2001 - 2005
35 30 25 20 15 10 5 0
lls es id Fa nt je nt de m Ob ci Ho by In In ci de ic Ot he ct s s r

2001 2002 2003 2004 2005

wa

ck

ru

gh

St

EVENT
Highway Incidents Homicides Struck by Object Falls Aircraft Incidents Other

Hi

2001
20 19 11 9 4 25

2002
26 18 6 10 9 21

Ai

rc

ra

ft

y

2003
24 6 7 10 5 28

2004
25 11 5 9 13 21

2005
33 14 12 9 0 31

SOURCE: CENSUS OF FATAL OCCUPATIONAL INJURIES, INDUSTRIAL COMMISSION OF ARIZONA

26

CHART 13. DISTRIBUTION OF FATAL OCCUPATIONAL INJURIES BY AGE ARIZONA, 2001 - 2005
35 30 25 20 15 10 5 0
4 4 4 4 -3 de -4 -5 -6 un 25 35 45 55 an an d d ov er r

2001 2002 2003 2004 2005

AGE
24 and under 25 - 34 35 - 44 45 - 54 55 - 64 65 and over

24

2001
10 22 22 16 11 6

2002
5 26 27 31 8 4

2003
6 17 27 14 12 3

65

2004
5 24 17 16 15 5

2005
9 18 25 27 13 4

SOURCE: CENSUS OF FATAL OCCUPATIONAL INJURIES, INDUSTRIAL COMMISSION OF ARIZONA

27

CHART 14. ARIZONA WC RATES
10 8.4

5 2.4 0.06 0

-3.1 -5 -7 -7.8 -10 -4.3

-15 -15.4

-20 1999

2000

2001

2002

2003

2004

2005

2006

Workers Compensation Variables

SOURCE: Na ti onal Counc il on Com pens a tion Ins u ranc e , Inc .

28