By: Whitney Lucas

This legislation, House Bill 2 (HB2) was signed into law by Governor Matt Bevin on March 30, 2018.  The bill amends multiple provisions of the Workers’ Compensation Act, KRS Chapter 342.  The effective date of the changes will be July 13, 2018, or 90 days after the end of the 2018 legislative session (which occurred on April 14, 2018).  It is still to be seen how the changes will be implemented and the retroactivity of certain provisions; however, in general it is anticipated that if a claim is still open and not final (i.e., either pre-litigation, still in litigation, or in appeals) as of July 13, 2018, some of the provisions of this bill may be applicable to that claim (for instance, the new age cutoff).  At the same time, we expect aspects of the new law and the application and retroactivity of same to be litigated in the appeals courts over the next couple of years.

These amendments are changes that we believe will be, overall, of benefit to employers and carriers and may result in less benefits over a period of time to employees.  The amendments also aimed to correct and/or codify some interpretations of the appeals courts over the years and recent determinations that greatly affected benefits.  The changes will hopefully enhance Kentucky’s business competitiveness by offering relief to small Kentucky businesses.   A brief review of the changes is summarized below:

KRS 342.020 (limitation of the payment of medical benefits)

KRS 342.020 deals with the payment of medical benefits to the injured employee, previously provided for the duration of their injury (usually until death).  The amendments to this provision now provide for benefits for the duration of disability for permanent total disability (PTD) cases and permanent partial disability (PPD) cases involving “amputation or partial amputation or an arm, hand, leg or foot, or the loss of hearing, or the enucleation of an eye or loss of teeth, or permanent total or permanent partial paralysis.”  In all other PPD claims, medical benefits will continue for 780 weeks from the date of injury of the date of last exposure.  The employee may apply for an extension of those benefits if they can establish that medical treatment beyond the 780 weeks is reasonably necessary and related to the work injury/occupational disease. The application for extension must be filed 75 days prior to the expiration of benefits and an ALJ will be tasked with making this determination, much like a medical fee dispute.

Additionally, KRS 342.020 (13) now provides for a limit on the amount of urine drug screens for which the employer or carrier is liable.  For low risk patients, one per year; for moderate risk patients, two per year; and for high risk patients, four per year.  However, for patients that exhibit aberrant behavior defined in (b) of this provision, the payment obligor may be responsible for UDS at every office visit.  The payment obligor may also request (and pay for) additional UDS that do not count towards the maximum.

KRS 342.035 (utilization review & treatment guidelines/pharmaceutical formulary)

This provision is amended to provide, specifically, that utilization review is not required, or may be waived, if the payment obligor agrees that the recommended medical procedure is medically necessary and appropriate or if the injured employee elects not to proceed with the recommended treatment.  While this certainly fixes the issues with the required language of the statute and regulation regarding the requirement of UR, this was likely the practice of most carriers already.

The provision is further amended to provide that the Commissioner develop and/or adopt evidence-based treatment guidelines for medical treatment, “including but not limited to chronic pain management treatment and opioid use.”  The Commissioner is also to develop or adopt a pharmaceutical formulary for medications prescribed for the cure and relief from the effects of a work-related injury or occupational disease.

KRS 342.040 (interest on TTD)

Interest on past-due TTD is not due if the ALJ determines that the delay in payment was caused by the employee.  Interest on past-due benefits changed in 2016 to 6% on past due amounts.  The penalty for an unreasonable delay or denial is 12%.

KRS 342.125 (reopening of claims)

In its prior state, KRS 342.125 was liberally construed to allow for a party to move to reopen a claim based upon the date of subsequent orders, which resulted in the opportunity for an employee to move to reopen a claim beyond four years after the original award or settlement.  The new legislation would corrects the prior liberal construction, now explicitly stating that a claim cannot be reopened “more than four (4) years following the date of the original award or original order granting or denying benefits, when such an award or order becomes final and nonappealable….”  The statute goes on to explicitly state that subsequent awards or order “shall not” be considered original orders and “shall not” extend the time to reopen a claim.

KRS 342.185 (statute of limitations of cumulative trauma claims)

The statute of limitations for cumulative trauma claims has been amended to provide that CT claims will be barred “unless notice of the cumulative trauma injury is given within two (2) years from the date the employee is told by a physician that the cumulative trauma is work-related,” and a claim application must be filed within that period.  Additionally, CT claims are “forever barred” if no claim is filed within five (5) years of the last injurious exposure to the CT.

KRS 342.265 (lump sum discounted settlements)

This provision, dealing with lump sum settlement awards and the discount factor, is now amended to provide that lump sum settlement of future periodic payments of $40.00 or less shall require a fixed discount rate based upon the ten (10) year United States Treasury Notes as of August 1 of the preceding year.

KRS 342.270 (university evaluations & “B” readers)

The provision now allows the Commissioner to contract with the University of Kentucky and University of Louisville, as well as “other physicians otherwise duly qualified as “B” readers who are licensed in the Commonwealth and are board-certified pulmonary specialists….”

KRS 342.320 (attorney fees)

For attorney-client contracts signed after the effective date of the new Act, the limit on attorney fees is increased to $18,000 and the calculation of those fees is altered.

KRS 342.610 (intoxication)

The provision(s) regarding injury of death of a claimant based on intoxication have been amended as well.  Subsection (3) now provides that no benefits are due “if the employee willfully intended to injury or kill himself, herself or another.”

Specifically regarding intoxication, if the employee voluntarily introduced “an illegal, nonprescribed substance…or a prescribed substance…in excess of prescribed amounts into his or her body detected in the blood…that could cause a disturbance of mental or physical capacities, it shall be presumed that the…substance…caused the injury, occupational disease, or death of the employee and liability for compensation shall not apply….”

KRS 342.700 (subrogation)

This amended provision provides some relief regarding subrogation claims, now providing that recovery in subrogation of indemnity and medical expenses paid to or on behalf of the employee, will not exceed the amount of indemnity and medical expenses paid and payable to or on behalf of the injured employee, “less a pro rate share of the employee’s legal fees and expenses.”

KRS 342.730 (maximum TTD/PTD/PPD; age cutoff; offsets for other income/benefits; TTD during light duty or alternative work)

The amendments to the Act now provide increased caps on the AWW and TTD/PTD/PPD amounts.  The TTD/PTD maximum will now be based on 110% of the state average weekly wage (previously, it was 100%).  The PPD maximum will now be 82.5% of the state average weekly wage (previously, 75%).

One of the hottest topics in KY workers’ compensation in recent months has been the SS cutoff provision and age limitation, which was found to be unconstitutional by the KY Supreme Court in Parker v. Webster County Coal, 529 S.W.3d 759 (Ky. 2017).  The final, amended provision (which differs from the version originally introduced by the House) now provides that all income benefits terminate for all employees at the age of 70, “or four (4) years after the employee’s injury or last exposure, whichever last occurs.  Note that benefits to spouses or dependents are also now limited to when the employee would have reached age 70, or four years after the date of injury or last exposure.

The offset for STD/LTD benefits in exclusively employer-funded plans now also includes an offset for exclusively employer-funded disability retirement plans AND salary continuation.  There is no requirement in the provision that salary continuation be in lieu of TTD, as the courts previously required.

TTD benefits paid or payable during a period the employee returns to light duty work or an alternative job position will be offset “by an amount equal to the employee’s gross income minus applicable taxes during the period of light-duty work or work in an alternative job position.

KRS 342.7305 (hearing loss)

Of hearing loss claims, the rebuttable presumption for the employer responsible for benefits is now the employer “with whom the employee was last injuriously exposed for hazardous noise for a minimum duration of one (1) year of employment.

Other changes were implemented to KRS 342.316 and KRS 342.732 (regarding pneumoconiosis claims). 

Should you have any questions about the application of these new provisions to any of your claims, please contact Chad Jackson or Whitney Lucas.