One of the hot topics in dispute resolution before the Industrial Injury Department these days is reparation. Restoration is an attempt by an insurance carrier to recover overpaid benefits from a claimant by reducing the claimant’s future benefits by a specified percentage until all overpaid benefits have been recovered. For years it was a matter of fairness and the department decided on repayment based on equity. The airline’s ability to recover overpaid benefits has been significantly reduced and where this is possible the extent of the reduction in benefits may not be conditional on fairness or equity.
THAT’S NOT FAIR!
Redress is now governed by rule 128.1(e). This rule went into effect on May 16, 2002. The claimants did not immediately rush to accept the lucky breaks allowed under the rule, and it was not until nearly two years later that the rule began to be included with any significance in the repayment discussions, according to the Appellate Body. This is partly due to the lack of cases brought up on the subject. Even since 2004, when the Appellate Body issued a “significant” decision on the matter, claimants have not aggressively pursued the use of the rule to their advantage. This rule and the decisions interpreting it are now becoming common knowledge and cases involving repayment are becoming more frequent.
Rule 128.1(e) severely limits a carrier’s ability to recover overpaid benefits. It has been designed to limit repayment only to situations where the overpayment is the result of a miscalculation or change in average weekly wages (APDs 033358-S and 060318). In principle, there must be a legal regulation for the reclaim of overpaid services that allows such a reclaim. In APD 060318, the panel referenced provisions such as Texas Labor Codes 415.008 (relating to fraudulent receipt of benefits), 408.003 (relating to reimbursement of benefit payments from an employer), and 410.209 (allowing for reimbursement of payments from subsequent indemnity funds for payments made within a department). changed or repealed order) as a legal regulation that could enable a reclaim of services. But these cases are rare.
The results of rule 128.1(e) can be quite harsh and unfair, and certainly can be without regard to equity. The only “significant” decision on this matter is Appeals Committee (APD) decision 033358-S. The overpayment in this case resulted from a change in the average weekly wage when the carrier received the DWC-3 wage statement. It was not received until the entitlement had progressed halfway through the payment of Impairment Income Benefits (IIBs) based on a 15 percent impairment assessment. The airline then suspended IIBs to make up their overpayment based on the number of weeks owed Temporary Income Benefits (TIBs) and the number of weeks IIBs would be owed, and multiplying that number of weeks by the benefit rate due, which amount of benefits to which the claimant was entitled had already been paid. The panel found this logic “nonsensical”.
The argument that a claimant is paid a certain amount of benefit based on the benefit rate and the number of weeks owed is very logical. For example, a claimant with a $250.00 TIB rate who misses ten weeks of work and has a 5 percent impairment should receive a total of $6,250.00 ($2,500.00 in TIBs + $3,750.00 in IIBs) in worker’s compensation benefits. That makes sense and is easy to calculate. But what if a change in average weekly wage results in a $200.00 benefit rate and ten weeks of IIB have already been paid? This means that the carrier paid a total of $5,000.00 under the previous rate and the claimant should only receive a total of $5,000.00 in compensation and still have five weeks of IIBs to pay. The panel determined that the claimant has a legal right to the remaining weeks of IIB, noting that “the amount of repayment is a factor in determining the amount of benefits paid to an claimant, not the amount of repayment made by a predetermined amount of total benefits.” This means that a beneficiary may receive more compensation than the calculation of the benefit rate multiplied by the weeks owed would result because the beneficiary has a legal claim as a result of the impairment for a period of time If the beneficiary has a five percent impairment, they are entitled to benefits for fifteen weeks from the date of maximum medical improvement.Any adjustment made to the calculation of the benefits owed that precludes an income benefit for that statutory entitlement period is in breach contrary to the first part of rule 128.1(e).
This does not mean that an adjustment will not be made to allow the carrier to offset any overpayment resulting from a change in average weekly wage from future benefits. Rule 128.1(e)(2) determines the amount of redress allowed. If the applicant’s benefits are reduced to pay attorneys’ fees or to recoup a department-approved benefit advance, the airline may recover the overpayment at a rate of ten percent. If the claimant’s benefits are not reduced to pay attorneys’ fees or an advance, Carrier may issue a twenty-five percent refund.
In APD033358-S discussed above, the carrier established that it had paid all the services owed according to the calculation of the rate of benefits multiplied by the weeks owed. She then suspended benefits to recoup the overpayment. Essentially, it chose itself to make a 100% refund. The Appellate Body found this to be inconsistent with the rule. The rule allows only either a 10 percent benefit reduction or a 25 percent benefit reduction, depending on the circumstances. The regulation does not permit a 100% reduction in benefits. That panel ordered a 10 percent cut in benefits because the plaintiff’s benefits to pay attorneys’ fees were reduced.
OR IS IT?
The problem with the result in APD 033358-S is that the carrier has not made use of the safeguards offered in rule 128.1(e)(2)(c). The final section of the rule is a return to stock analysis. It allows reimbursement at a rate higher than that permitted in rule 128.1(e)(2)(A) or (B) if the carrier makes a written agreement with the applicant or, if that is not possible, the department requests one approve a higher repayment rate. The rule specifically states that the primary factor the department should use in determining the payback rate is the likelihood of recovering all overpayment! It provides that “the rate of interest should be fixed so that it is probable that the entire overpayment can be recovered”. The rule further states that the department should also consider the cause of the overpayment and the financial hardship that the claimant may experience. This is stock analysis.
The bottom line here is that if the overpayment is due to a change in average weekly wages, there is definitely a way to recoup that overpayment, which the carrier can have the department approve, but they must charge a rate set by the will share instead of setting the rate yourself. Failure to request a rate from the department will result in the standard refund rates of rule 128.1(e)(2)(A) and (B).
There are procedural questions that remain unanswered by the Rule and the Appeals Committee. How does a carrier request a refund rate that is higher than standard rates? A quick look at the department’s website shows that there is no form that can be submitted for such a purpose. Does the time of the request matter? Do the default rates apply until the date the carrier requests a refund rate change from the department, similar to a contribution case? Who in the department decides the amount of allowable repayment before a performance review conference or hearing in a contested case? Does the carrier have to show that it has obtained the claimant’s consent as a condition precedent to the department’s approval of a change in the rate of reimbursement?
There are no answers to these questions, which will certainly be dealt with in court in good time. It appears the airline must try to reach an agreement with the plaintiff before requesting a change in reimbursement rates from the department. An application must then be made to the Division to approve a redemption rate based on Rule 128.1(e)(2)(C) shares. At that point, the airline would be protected by the rule and could, in any subsequent dispute resolution process, seek a repayment rate higher than default rates based on equity and fairness.
CONCLUSION
The carrier’s ability to recoup an overpayment of indemnity from future indemnity has been severely restricted by Rule 128.1(e). The Appellate Body found that in order for an airline to be able to recover overpaid benefits, there must be a statutory provision permitting reclaim. Rule 128.1(e) only allows a refund if the overpayment results from a change in average weekly wages. If this occurs, standard reimbursement rates are ten percent or twenty-five percent, depending on the circumstances. If the carrier wishes to recover the overpayment at a rate higher than the standard rates, it must request that the claimant agree to a higher rate. If the applicant does not agree to a higher rate of reimbursement, the carrier must request that the department approve a higher rate on the basis of the equity of Rule 128.1(e)(2)(C). If the carrier fails to address this request to the department, he will be limited to the standard phrases of rule 128.1(e)(2)(A) and (B).
Thanks to Matthew B Lewis | #Texas #Workers #Compensation #Recoupment #Overpaid #Benefits #Injured #workers #benefit