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 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 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’ 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. 1 LABOR DEPARTMENT Randall Maruca, Director 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. 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 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 Injury Reports Involving Minors and Complaints Received 1060 1200 1238 Number of Youth Employees Violations Confirmed 58 52 65 Number of Wage Claims Filed / Investigated FY05 FY06 FY07 2904 2864 2943 MINIMUM WAGE LAW ENFORCEMENT 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, 2 CLAIMS DIVISION Noreen Thorsen, Manager 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. 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: FY07 Number of Minimum Wage Inquiries 1786 Number of Minimum Wage Complaints Filed 21 Complaints Resolved 5 Violations Issued 12 Average Months to Complete Investigation On-site Audits and Reviews Completed 1.6 8 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 Claims Processed FY05 FY06 FY07 25 24 27 27 23 26 3 2 4 Sitter Agencies 2 1 2 Domestic Help Agencies 1 1 1 Total 59 52 60 FY06 FY07 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: Number of Licensed Agencies Career Counseling Firms Model & Talent Agencies General Agencies FY05 3 ADMINISTRATIVE LAW JUDGE DIVISION (ALJ) Harriet Turney, Chief Judge 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: Number of Wage Awards FY05 FY06 FY07 16749 14184 18451 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 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: Number of LEC Awards FY05 FY06 FY07 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. 4 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 5 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 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 FY06 FY07 Cases Referred to the Division 8080 6842 6809 Hearings Conducted 6598 5542 5226 Average Length of Time to Resolve a Case (Days) 118.5 118 113 6 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 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 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 FY06 FY07 Serious Willful and Repeat Violations 1028 989 865 Total Penalties Assessed 1.82 1.3 1.97 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 FY06 FY07 # of Hazards Found During Consultations 2492 2036 2745 # of Training Programs 390 377 317 # of Employees Trained 6034 6619 5841 # of Employers Trained 2844 1696 1799 * 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 2356 2792 2426 In Compliance % Rate 41.1% 37.1% 37% BOILERS AND ELEVATORS 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 Deficiencies Noted 484 148 167 FY05 FY06 FY07 Elevators Inspected 4580 4289 4504 Deficiencies Noted 1494 1593 2047 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%. 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 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: FY05 No Insurance Awards Issued 3281 FY06 2744 FY07 & SELF-INSURED CO. 18.4 million TOTAL OF ALL CLAIMS 251.1 million VOCATIONAL REHABILITATION 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 150 151 133 3265 INSOLVENT INSURANCE CARRIERS # of Rehabilitation Awards Issued 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 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) . 9 LEGAL DIVISION ♦ 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. 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. A historical perspective of some of the activities of the Legal Division are as follows: FY05 FY06 FY07 452 405 405 The major responsibilities of the Division are as follows: ♦ ♦ ♦ 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. Represents the Arizona Division of Occupational Safety and Health in actual/potential litigation regarding the enforcement of the Arizona Occupational Safety and Health Act. Hearings/Legal Proceedings Involving Special Fund and ADOSH INSURANCE COVERAGE 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. 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. Insurance Referrals 10 FY05 FY06 FY07 1708 1721 2626 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. 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 Delinquent Collection Accounts to Outside Counsel 154 149 176 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. DIVISION OF ADMINISTRATION ACCOUNTING SERVICES Gary Norem, Chief Financial Officer 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: 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 1. Budgeting 2. Accounting 3. Data Processing 11 FY05 FY06 FY07 17500 19411 20253 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. OMBUDSMAN Mary Green, Manager 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. 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: Number of Claimants Assisted FY05 FY06 FY07 3080 2852 2493 12 Current Events 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. 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 ½%. 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. 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. Last year we reported our concern regarding the benefit levels within the workers compensation 13 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 2001 2002 2003 2004 2005 2006 YEAR INSURANCE CARRIERS SELF-INSURED EMPLOYERS TOTAL 2000 2001 2002 2003 2004 2005 2006 367 425 440 512 543 615 719 96 117 131 160 181 229 227 463 542 571 672 724 844 946 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 285 77 362 2002 328 75 403 2003 346 85 431 2004 367 100 467 2005 369 112 481 2006 424 100 524 16 CHART 3. TOTAL COMPENSATION CLAIMS FILED WITH THE INDUSTRIAL COMMISSION (FY2001-2007) Thousands 160 153.937 148.326 140 137.099 135.645 139.121 132.904 121.699 120 100 80 60 40 20 0 2001 2002 2003 2004 2005 2006 2007 17 CHART 4. TOTAL TIME LOST CLAIMS FILED WITH THE INDUSTRIAL COMMISSION (2000-2006) (CALENDAR YEAR) 25 20 15 10 5 0 2000 2001 2002 2003 YEAR 2004 2005 TOTAL TIME LOST CLAIMS 2000 19752 2001 19095 2002 17298 2003 16109 2004 15902 2005 14294 2006 15796 18 2006 CHART 5. LOST WORKDAY CLAIMS 2001-2006 by MAJOR INDUSTRY DIVISION Thousands 4 3 2001 2002 2003 2004 2005 2006 2 1 le ab ic es ifi rv la ss -c ce ,I an Fi n N on ur ns ai et R Se an c e de lT Tr a ra de n W ho le sa po an s Tr le tu rt at rin io g n an uf M on st C ac ru ct io g in in M A gr ic ul tu re ,F or es tr y 0 Major Industry Division 2001 2002 2003 2004 2005 2006 Agriculture, Forestry 583 606 488 533 443 464 Mining 146 132 107 141 154 152 Construction 2969 2767 2491 2569 2657 2866 Manufacturing 1396 1226 1142 1243 1123 1101 Transportation 1501 1483 1481 1502 1395 1472 Wholesale Trade 808 695 610 687 639 714 Retail Trade 2669 2660 2467 2608 2370 2503 Finance, Insurance 338 345 318 291 279 251 Services 3722 3619 3162 3218 2928 2896 Non-classifiable 251 117 83 86 81 111 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 2001 2002 2003 2004 2005 2006 4 3 2 1 r th e O iti s on ne Te nd dr ls yn in j om e s ur ie ns le tip C ar pa lt un ur ns at io M ul he C Am pu t ur ns m ic al b tb ea H on Br ui ut s, se s, c la ce ra tu si o tio ns ns tu re s Fr ac C Sp r ai ns ,s tra in s 0 NATURE 2001 2002 2003 2004 2005 2006 Sprains, strains 4934 4795 4335 4519 4366 4460 Fractures 1398 1413 1187 1324 1346 1443 Cuts, lacerations Bruises, contusions Heat burns 1212 1072 1013 1123 1107 1084 889 795 833 871 775 875 161 162 143 149 123 120 Chemical burns 30 34 27 35 28 30 Amputations 143 110 141 128 138 119 Multiple injuries 831 708 677 782 680 538 Carpal tunnel syndrome 157 139 80 128 83 57 Tendonitis Other 91 46 28 29 25 27 4531 4379 3887 4094 2786 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 2001 2002 2003 2004 2005 2006 5 4 3 2 1 PART OF BODY O th er pl e M ul ti K ne e e A nk l t ris W B ac k ec k N H ea d 0 2001 2002 2003 2004 2005 2006 Head 597 617 439 533 564 430 Neck 196 197 168 172 143 172 Back 2825 2603 2388 2280 2004 2038 Wrist 756 681 607 611 530 553 Ankle 574 598 560 523 547 587 Knee 1552 1575 1319 1453 1334 1379 Multiple 1482 1232 1165 1423 1211 1077 Other 6405 6150 5705 6187 5752 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 2001 2002 2003 2004 2005 2006 4 3 2 1 th er O le nt ac ts ns io xp lo sio As s au lts ,v en ts s, e Fi re ac cid nc es su bs ta Tr a fu l ha rm to Ex po s ed ns po rta ive et it Re p Fa tio n ot io m re xe r s, t n tio n s l rip O ve o ll t Sl ip le ve sa m e we rl lo o Fa ll t Co nt ac tw ith ob j ec t ev el 0 EVENT OR EXPOSURE Contact with object Fall to lower level Fall to same level 2001 2002 2003 2004 2005 2006 3395 3368 3071 3343 3197 3140 1321 1123 1151 1308 1214 1373 1987 1928 1719 1927 1976 1975 Slips, trips 285 283 184 143 52 37 Overexertion 3951 3939 3573 3535 3146 3188 Repetitive motion Exposed to harmful substances Transportation accidents 556 407 342 442 315 282 271 261 229 248 187 213 729 673 652 750 618 671 Fires, explosions 50 56 49 56 43 27 226 253 238 218 246 248 1616 1362 1143 1212 1081 1391 Assaults, violent acts Other 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 2001 2002 2003 2004 2005 2006 3 2 1 Ve er th hic to nd Ha r fa Su un d Al lO le s s ol s ce al An 2003 2004 2005 2006 94 86 72 100 69 75 1739 1807 1635 1599 1419 1554 459 452 412 400 380 319 977 912 807 840 845 843 1653 1491 1399 1549 1413 1400 2991 2718 2366 2430 2068 2249 3597 3327 3097 3505 3454 3566 876 867 766 854 772 776 Vehicles 1207 1204 1135 1247 1053 1149 All Other 795 789 662 658 602 614 r, Ch em Pe Fl oo on rs ls, i ca G 2002 s, Pa ro Pl an r ts ts & & M ac at im er hin s ia ls y er es ,F re itu rn M ixt ur ai ne nt Co 2001 Ch Fu em i ca lP ro du ct s rs 0 SOURCE Chemicals, Chemical Products Containers Furniture, Fixtures Machinery Parts & Materials Persons, Plants & Animals Floor, Ground Surfaces Handtools 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 2001 2002 2003 2004 2005 2006 4 3 2 1 s er th O or at r ic ab ,F tio rs uc to od ra Pr pe n O isi o Pr Fa ec rm s t af Cr n, ish ,F ry st re Fo g, in ag an M OCCUPATION in g ice rv Se ni ch Te er ia l ,P ro fe ca l, ss Sa io n le al s 0 2001 2002 2003 2004 2005 2006 Managerial, Professional 935 896 786 792 739 695 Technical, Sales 2090 1924 1772 1688 1566 1674 Service 2053 2066 1863 1815 1713 1666 Farming, Forestry, Fishing 609 629 504 552 482 496 3504 3503 3110 3514 3196 3300 5011 4535 4158 4583 4122 4527 185 100 158 238 257 187 Precision Production, Craft Operators, Fabricators Others 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 2001 2002 2003 2004 2005 2006 3 2 1 ov d an 65 15 AGE er 64 55 to 45 35 to 54 44 to 34 to to 20 16 25 19 to r de un an d 24 0 2001 2002 2003 2004 2005 2006 7 9 1 3 4 1 16 to 19 433 384 315 360 342 387 20 to 24 1419 1357 1189 1255 1216 1336 25 to 34 3603 3220 2918 3053 2706 2781 35 to 44 4056 3925 3464 3534 3142 3085 45 to 54 3062 2987 2799 3023 2855 3027 55 to 64 1421 1380 1331 1577 1441 1546 65 and over 317 341 281 323 313 343 15 and under 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 2001 2002 2003 2004 2005 25 20 15 10 5 de he ci Ot nt s r lls Fa ct je ft In by ra ck rc ru Ai St gh Hi EVENT Ob id ic m Ho wa y In ci de nt s es 0 2001 2002 2003 2004 2005 Highway Incidents 20 26 24 25 33 Homicides 19 18 6 11 14 Struck by Object 11 6 7 5 12 Falls 9 10 10 9 9 Aircraft Incidents 4 9 5 13 0 Other 25 21 28 21 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 2001 2002 2003 2004 2005 25 20 15 10 5 ov an d 55 65 24 AGE er 4 -6 4 35 45 -4 -5 4 4 -3 25 an d un de r 0 2001 2002 2003 2004 2005 24 and under 10 5 6 5 9 25 - 34 22 26 17 24 18 35 - 44 22 27 27 17 25 45 - 54 16 31 14 16 27 55 - 64 11 8 12 15 13 65 and over 6 4 3 5 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 -4.3 -5 -7 -7.8 -10 -15 -15.4 -20 1999 2000 2001 2002 2003 2004 Workers Compensation Variables SOURCE: Na ti onal Counc il on Com pens a tion Ins u ranc e , Inc . 28 2005 2006