Court Opinion

ID: 6782933
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:58:16.04915+00
Date Added: 2024-06-11T16:02:53.826868
License: Public Domain

Alice Robie Resnick, J.,
dissenting. The majority finds the historical and dedicated purpose of the State Insurance Fund (“SIF”) too “narrow” and “cramped” for its liking. Consequently, the majority approves the diversion of $140 million per year for administrative fees and performance bonuses to organizational claims managers from a trust fund that was established for injured workers. The SIF is the tangible representation of the essential compensation bargain that forms the workers’ compensation system. It is constitutionally conceived, statutorily established, and judicially recognized as a trust fund for the benefit of injured Ohio workers and their dependents. Its quintessential purpose is to accumulate and reserve a sufficiently large sum of money to pay compensation and benefits to employees who suffer injury and disease, and to the dependents of employees who suffer death, in the course of their employment. After today, however, the premium contributions that compose the SIF can be used generally for all “purposes which relate to or are incidental to workers’ compensation,” or “to fund an integral component of the workers’ compensation scheme,” and specifically “for the payment of administrative and performance incentive fees * * * to managed care organizations.” Semantics aside, the majority has just changed the nature of the SIF in order to permit the Bureau of Workers’ Compensation (“bureau”) to tap its resources to pay administrative costs. I must dissent.
Section 35, Article II of the Ohio Constitution provides:
“For the purpose of providing compensation to workmen and their dependents, for death, injuries or occupational disease, occasioned in the course of such workmen’s employment, laws may be passed establishing a state fund to be *295created by compulsory contribution thereto by employers, and administered by the state, determining the terms and conditions upon which payment shall be made therefrom. * * * Laws may be passed establishing a board which may be empowered to classify all occupations, according to their degree of hazard, to fix rates of contribution to such fund according to such classification, and to collect, administer and distribute such fund, and to determine all rights of claimants thereto.” (Emphasis added.) See, also, R.C. 4123.29(A)(2), 4123.30, and 4123.46.
The SIF and the net premiums contributed thereto constitute a trust fund to be used solely for the payment of compensation and benefits to injured workers and their dependents. See State ex rel. Williams v. Indus. Comm. (1927), 116 Ohio St. 45, 55, 156 N.E. 101, 104. See, also, R.C. 4123.29(A)(2), 4123.30, and 4123.46. “The Legislature throughout the legislation on this subject has studiously recognized this [constitutional] limitation, and it will be found in all the sections pertaining to the distribution of the fund that distribution is in fact limited to ‘injured employe[e]s or to the dependents of such employe[e]s as may be killed.’ ” State ex rel. Crawford v. Indus. Comm. (1924), 110 Ohio St. 271, 277, 143 N.E. 574, 576, quoting several former sections of the General Code.
In Corrugated Container Co. v. Dickerson (1960), 171 Ohio St. 289, 291, 13 O.O.2d 337, 338, 170 N.E.2d 255, 257, we specifically held that “[n]o part of the State Insurance Fund, a trust fund for the benefit of employers and employees, may be used for administrative purposes except as provided in Section 4123.342, Revised Code.” R.C. 4123.342(A) provides that administrative costs are defrayed by a separate administrative assessment against amenable employers within certain designated classes, and R.C. 4123.341 defines “administrative costs” as “those costs and expenses that are incident to the discharge of the duties and performance of the activities of the industrial commission, the oversight commission, and the bureau under Chapters 4121. and 4123. of the Revised Code.”
It cannot be any clearer that the SIF, in its essential form and character, is a trust fund created by premium contributions that are set aside for and disbursed to employees who suffer loss on account of injury, disease, or death occasioned in the course of employment, and that it is not to be used for administrative purposes.
Nevertheless, the majority views this basic principle as a “narrow” or “cramped” interpretation of the fund’s permissible uses, and argues:
“First, though Ohio Adm.Code 4123-6-13(B) provides for payment of an ‘administrative fee,’ this fee is expressly intended to compensate the MCOs for the ‘medical management * * * services’ that they provide. (Emphasis added.) Id. The medical-management and cost-containment services performed by MCOs under the HPP [health partnership program] differ from ‘the duties and * * * activities of * * * the bureau’ for which an administrative cost and expense *296assessment is made under R.C. 4123.341. Compare R.C. 4121.44 and 4121.441 (outlining duties of MCOs under the HPP) with R.C. 4121.121 (outlining duties of the bureau and administrator).” (Ellipses sic.)
Nothing could be further from the truth. In the first place, Ohio Adm.Code 4123-6-13(B) actually provides that “[t]he bureau shall pay an MCO an administrative fee for its medical management and administrative services.” (Emphasis added.)
Second, the administrative duties and activities of the bureau most certainly include medical-management and cost-containment services as set forth in R.C. 4121.121(B)(16) and (17). Indeed, Ohio Adm.Code 4123-6-44 amplifies R.C. 4121.121, 4121.44, and 4121.441 by providing that fees and methods of payment for practitioner services will be established in conjunction with “the bureau’s medical management and cost containment division.” (Emphasis added.)
Third, the medical-management services provided by MCOs are just that, management services. They are not medical services. Medical services are provided by health care providers. A health care provider is “[a] physician or practitioner * * * or other legal entity licensed * * * and approved by the bureau, to provide particular medical services or supplies, including, but not limited to: a hospital, qualified rehabilitation provider, pharmacist, or durable medical equipment supplier.” Ohio Adm.Code 4123-6-01(G). “[A] managed care organization is not a health care provider.” (Emphasis added.) Ohio Adm.Code 4123-6-01(C).
Fourth, the HPP, by definition and design, is “[t]he bureau of workers’ compensation’s comprehensive managed care program.” (Emphasis added.) Ohio Adm.Code 4123-6-01(A). Moreover, R.C. 4121.44(B)(3) provides that the bureau “[m]ay integrate the certified vendors with bureau staff and existing bureau services for purposes of operation and training to allow the bureau to assume operation of the health partnership program at the conclusion of the certification periods.” (Emphasis added.) See, also, R.C. 4121.44(G).
It is eminently clear that the majority’s attempt to distinguish the services of MCOs from the duties and activities of the bureau creates a false dichotomy. Whether administered internally by the bureau or externally through contracts with private vendors, the HPP is essentially an administrative mechanism for medical management and cost containment. The services performed thereunder by MCOs are precisely the duties and activities of the bureau for which a separate administrative cost assessment is required under R.C. 4123.341.
The majority’s second argument is that R.C. 4123.30 expressly authorizes, or at least does not prohibit, the use of SIF contributions to pay the administrative fees of MCOs. According to the majority, the development of treatment guidelines and individual treatment plans by MCOs constitutes “medical * * * recom*297mendations and determinations” for which R.C. 4123.30 permits payment from the SIF.
To put it mildly, this argument stretches the meaning of “medical * * * recommendations and determinations” under R.C. 4123.30 considerably beyond its contextual parameters. The authorized SIF expenditures enumerated in R.C. 4123.30 are bounded by language establishing the SIF as a trust fund for the payment of compensation and benefits to employees and their dependents who suffer loss on account of a compensable injury, disease, or death. The payment of a basic administrative and performance incentive fee equal to five percent of all SIF premiums contributed by each covered employer is neither “compensation” nor “benefit,” and has nothing to do with a statute that provides for loss-replacement expenditures to injured workers. The development of treatment guidelines and plans by MCOs may be administratively necessary to facilitate the process of medical management and cost containment, but it is not medically necessary for the diagnosis or treatment of injury or disease, and certainly does not constitute a compensable loss to employees. Ohio Adm.Code 4123-6-043(B) provides that “[t]he MCO, in conjunction with the employer, employee, attending physician, and the bureau claims personnel assigned to the claim, shall seek a course of medical or rehabilitative treatment that promotes a safe return to work.” If we follow the majority’s reasoning, then the employer, employee, and the bureau’s claims personnel could all be paid an administrative fee from the SIF for their “recommendations and determinations” in developing treatment plans for injured workers. These guidelines and plans are administrative, not medical, recommendations and determinations. The administrative fee paid to MCOs under Ohio Adm.Code 4123-6-13(B) is still an administrative fee, and it can no more be wedged into the meaning of “medical * * * recommendations and determinations” under R.C. 4123.30 then it can be forced out of the definition of “administrative costs” under R.C. 4123.341.
In its third argument, the majority relies on Thompson v. Indus. Comm. (1982), 1 Ohio St.3d 244, 248, 1 OBR 265, 268-269, 438 N.E.2d 1167, 1170, for the proposition that not every dollar of the SIF must be used as a direct disability compensation payment to claimants. The majority points out that certain provisions in R.C. Chapter 4123 expressly authorize SIF expenditures for “the creation of a surplus fund, set-asides for actuarial audits, costs for depositions and copies, and payments to medical specialists in certain occupational disease cases.” According to the majority, the medical-management services performed by MCOs under the HPP are simply a generalized development of earlier instances of utilization review by outside entities and are particularly comparable to those services provided by independent medical specialists under R.C. 4123.68(V), (W), and (Y). Thus, the majority concludes, “[i]t was reasonable for the BWC to conclude that the General Assembly provided it with the same *298authority to compensate MCOs for medical-utilization services under the HPP as the BWC had historically exercised to compensate outside vendors for similar services.”
It is true, of course, that SIF disbursements do not always take the form of direct compensation payments to injured workers. But this does not mean that the SIF may be used to fund the administrative machinery of the workers’ compensation system. Constitutional limitations aside, the fact that certain provisions in R.C. Chapter 4123 expressly authorize SIF disbursements for specific items of cost associated with the bringing of a claim or the upkeep of the fund does not endow the bureau with such broad authority that it can use SIF assets to finance an entire administrative program created under R.C. Chapter 4121.
In creating the HPP, the General Assembly conferred no authority to compensate MCOs out of the SIF. Contrary to the majority’s assertions, this lack of authority does not translate into a “legislative gap” to be filled by the bureau. “Except for amounts earmarked for safety and hygiene, actuarial audits, specified costs and fees, and reinsurance premiums, the State Insurance Fund is a trust fund maintained for the benefit of employees and employers as a source of payment of compensation and benefits; it has no other purpose.” Fulton, Ohio Workers’ Compensation Law (2 Ed.1998) 378, Section 14.1. Moreover, when the General Assembly established the HPP as part of Am.Sub.H.B. No. 107, it also amended R.C. 4123.30 by removing an obsolete trust-fund exception for amounts set aside “for fees and costs authorized by section 4123.51 of the Revised Code,” which had been repealed effective October 5, 1955. 145 Ohio Laws, Part II, 3115; 126 Ohio Laws 1015. Yet the General Assembly did not, in amended R.C. 4123.30 or elsewhere, purport to provide any authority for using SIF assets to defray the operating costs of the HPP. Thus, the court of appeals correctly found that “[Backing any clear legislative authorization, [the bureau was] without the authority to authorize these payments from [the] SIF.”
In any event, the “utilization review” services performed by MCOs, like their other “medical management” services, are administrative in nature. R.C. 4121.441(A)(5) requires the administrator to adopt rules for the HPP that include “[a]dequate methods of * * * utilization review * * * to prevent, and provide sanctions for, inappropriate, excessive or not medically necessary treatment.” Ohio Adm.Code 4123-6-01(U) defines “utilization review” as “[t]he assessment of an employee’s medical care by the MCO. This assessment typically considers medical necessity, the appropriateness of the place of care, level of care, and the duration, frequency or quality of services provided in relation to the allowed condition being treated.” This is precisely the kind of review that the Workers’ Compensation Act historically required the commission and bureau to perform as *299part of their administrative duties. See State ex rel. Nutt v. Cincinnati (1994), 70 Ohio St.3d 594, 639 N.E.2d 1196; State ex rel. Breno v. Indus. Comm. (1973), 34 Ohio St.2d 227, 63 O.O.2d 378, 298 N.E.2d 150; State ex rel. Campbell v. Indus. Comm. (1971), 28 Ohio St.2d 154, 57 O.O.2d 397, 277 N.E.2d 219.
In particular, the utilization review services performed by MCOs are not comparable to the medical examinations and recommendations rendered by qualified medical specialists under R.C. 4123.68(V), (W), and (Y). MCOs conduct no x-ray, autopsy or other clinical examinations or tests, make no diagnostic or clinical findings, and perform no physical examinations of claimants. Instead, like the bureau, MCOs are authorized to obtain independent medical examinations to help resolve medical-management and treatment disputes. See Ohio Adm.Code 4123-6-043(G). Their utilization review has no actual medical component, and the fee paid by the bureau for these services constitutes an administrative cost for which a separate administrative assessment is required under R.C. 4123.341.
Moreover, there is no statutory exception that authorizes the use of SIF proceeds for purposes of “medical utilization services,” and the isolated provisions in R.C. Chapter 4123 upon which the majority relies do not cohere to allow for one to be judicially created. The costs of physician depositions (R.C. 4123.512[D]) and independent medical examinations (R.C. 4123.68[V], [W], and [Y]) are part of the expenses of a claim, while actuarial audits (R.C. 4123.30 and 4123.47[A]) and the creation of a Surplus Fund (R.C. 4123.34[B]), which is actually part of the SIF, State ex rel. First Natl. Supermarkets, Inc. v. Indus. Comm. (1994), 70 Ohio St.3d 582, 584, 639 N.E.2d 1185, 1188, are directly necessary to guarantee the solvency and fiscal integrity of the SIF. These provisions, which are quite specific in scope and purpose, simply do not conjoin to allow $140 million a year to be taken from the SIF to pay for the administrative apparatus of medical management and cost containment.
Finally, the majority finds that “the use of SIF proceeds for these purposes does not violate Section 35, Article II of the Ohio Constitution.” The majority’s supporting rationale for this finding has three components. First, the majority suggests that the constitutional question presented in this case can be disposed of under the authority of our syllabus in State ex rel. Haylett v. Ohio Bur. of Workers’ Comp. (1999), 87 Ohio St.3d 325, 720 N.E.2d 901, where we held that “[t]he managed care organization program enacted in R.C. 4121.44 and 4121.441 does not violate Section 35, Article II of the Ohio Constitution.” Although the issue of using SIF assets to fund the MCO program was never raised, discussed, decided, or even mentioned in Haylett, the majority insinuates that our holding in Haylett was “broad enough to encompass the specific constitutional claim asserted here.”
*300Aside from the obvious fact that the only Section 35, Article II issues addressed in Haylett were whether the MCO program constitutes an attempt to privatize the state’s workers’ compensation system and whether it causes delays and hardships that violate Section 35, the problem with the majority’s argument is that the specific constitutional claim asserted in the present case has nothing to do with the constitutionality of the MCO program. Any decision in this case invalidating the bureau’s present method of funding the MCO program would have no impact whatsoever on our decision in Haylett or the constitutionality of the MCO program. It would simply force the bureau to pay MCOs their administrative fee from an account that is not held in trust for the payment of compensation and benefits to injured workers and their dependents.
In the second part of its constitutional analysis, the majority interprets Corrugated Container as holding only that SIF proceeds cannot be transferred to the general revenue fund because such a transfer “creates a risk that the proceeds will be applied to purposes wholly unrelated to the workers’ compensation system.” However, our decision in Corrugated Container leaves no room for such an interpretation.
Corrugated Container involved a challenge to certain provisions in the General Appropriation Act of 1959, which required that the SIF reimburse the General Fund for all amounts appropriated for administrative costs of the commission, and a commission resolution effectuating those provisions. Since former R.C. 4123.341 and 4123.342 had previously authorized the commission to collect only two-thirds of that amount from employers, the remaining one-third would have to come from money collected to pay awards of compensation. Our concern in Corrugated Container was that the SIF was being used to pay the administrative costs of the commission, and nothing in the opinion suggests that the court had any concern whatsoever with the funds being used for any purpose unrelated to the workers’ compensation system. Our holding is quite clear that “[n]o part of the State Insurance Fund, a trust fu/nd for the benefit of employers and employees, may be used for administrative purposes except as provided in Section 1123.312, Revised Code, and the Industrial Commission was without authority to adopt its resolution attempting to transfer money from the State Insurance Fund to the general fund in accordance with the appropriation act.” (Emphasis added.) Id., 171 Ohio St. at 291, 13 O.O.2d at 338, 170 N.E.2d at 257.
In its third constitutional argument, the majority reasons:
“In Thompson, this court expressly approved the use of SIF proceeds to fund an integral component of the workers’ compensation scheme. With its interpretation of Ohio Adm.Code 4123-6-13, the BWC simply seeks to apply SIF proceeds to fund what this court has already described as an ‘integral part’ of the HPP — the medical-management services performed by the MCOs. Haylett, 87 *301Ohio St.3d at 326, 720 N.E.2d at 903. As the trial court noted in this case, ‘it is uncontroverted that the SIF funds at issue are being used in the HPP for purposes which relate to or are incidental to workers’ compensation.’ ”
In Thompson, we held that “[t]he transfer of State Insurance Fund investment income to the Disabled Workers’ Relief Fund, pursuant to R.C. 4123.411, violates neither Section 35, Article II, nor Section 28, Article II of the Ohio Constitution.” Id., 1 Ohio St.3d 244,1 OBR 265, 438 N.E.2d 1167, at the syllabus.
The Disabled Workers’ Relief Fund (“DWRF”) was created in 1953 as a subsidy to certain recipients of workers’ compensation. 125 Ohio Laws 506. “The creation of this subsidy was based upon the recognition that a large number of permanently and totally disabled claimants were receiving low levels of compensation, because benefits payable in a compensation claim are limited to those in effect at the time of injury, and inflation tended to victimize the recipients of such continuing benefits.” Fulton, Ohio Workers’ Compensation Law, supra, at 318, Section 10.6.
R.C. 4123.412 creates the DWRF “[f]or the relief of persons who are permanently and totally disabled as the result of injury or disease sustained in the course of their employment and who are receiving workers’ compensation which is payable to them by virtue of and under the laws of this state in amounts, the total of which, when combined with disability benefits received pursuant to the Social Security Act is less than three hundred forty-two dollars per month adjusted annually.” These are also the eligibility requirements for a participant in the DWRF. R.C. 4123.413.
The DWRF is obviously designed to pay supplemental benefits to a designated group of injured workers. “The recipients of the DWRF subsidy, namely those permanently and totally disabled employees who have previously been awarded workers’ compensation, are clearly members of this designated group.” Thompson, supra, 1 Ohio St.3d at 247, 1 OBR at 268, 438 N.E.2d at 1169. Thus, the DWRF is entirely consistent with the constitutionally enumerated purpose of the SIF to provide compensation to workers who are injured in the course of their employment.
As we explained in Thompson:
“The General Assembly is afforded substantial discretion to implement a comprehensive workers’ compensation program and it is not the function of the judiciary to question the wisdom of the General Assembly’s exercise of its permissive powers under Section 35, Article II, so long as these powers are used in furtherance of the constitutionally enumerated purpose. The DWRF subsidy received by eligible permanently and totally disabled workers infuses Section 35, Article II with a meaningfulness that is fully consistent with the goals that prompted the people of Ohio to approve Section 35, Article II in the first place. *302Indeed, to hold otherwise and declare the DWRF program as presently funded and administered unconstitutional makes a cruel mockery of the laudable purpose that the constitutional provision was designed to serve.” Id., 1 Ohio St.3d at 249, 1 OBR at 269, 438 N.E.2d at 1171.
Gallon & Takacs Co., L.P.A., Theodore A. Bowman, Jack Gallon and John M. Roca, for appellees.
Accordingly, we agreed with the commission in Thompson that “the transfer of SIF investment funds to the DWRF is qualitatively different from the diversion of SIF funds proscribed in Corrugated Container. The DWRF is an integral component of Ohio’s comprehensive workers’ compensation program and, therefore, the use of SIF investment income to fund the DWRF does not contravene the principle enunciated in Corrugated Container.” Id. at 247, 1 OBR at 267, 438 N.E.2d at 1169.
The obvious distinction between Corrugated Container and Thompson lies in the qualitative difference between using SIF funds to pay for administrative costs and using SIF funds to provide compensation to workers who are injured in the course of their employment. It is in this sense that we considered the DWRF to be an integral component of the workers’ compensation program in Thompson. It can hardly be considered the intent of this single sentence in Thompson to change the nature of the SIF from a trust fund for the payment of compensation and benefits to injured workers to an all-purpose fund that can be used to pay the operating expenses of any constituent part of the entire workers’ compensation system.
The same qualitative difference between administrative costs and workers’ compensation that led us to distinguish Corrugated Container in Thompson should now compel us to distinguish Thompson. While the medical-management services of the MCOs may be an “ ‘integral part’ of the HPP,” the HPP is qualitatively different from the DWRF. The DWRF program is established to pay supplemental compensation to injured workers; the HPP has no compensation component. Thus, the use of SIF contributions to fund the HPP contravenes the principle enunciated in Corrugated Container.
For all of the foregoing reasons, the bureau acted without statutory or constitutional authority in diverting SIF contributions to pay administrative and performance incentive fees to MCOs under the HPP, and the judgment of the court of appeals should be affirmed.
Douglas and F.E. Sweeney, JJ., concur in the foregoing dissenting opinion.
Betty D. Montgomery, Attorney General; Schottenstein, Zox & Dunn, L.P.A., Kris M. Dawley and Russell J. Kutell, for appellants James Conrad and the Ohio Bureau of Workers’ Compensation.
Zeiger & Carpenter, John W. Zeiger, Marion H. Little, Jr., and Ronald E. Laymon, urging reversal for amicus curiae MCO League of Ohio.
Stewart Jaffy & Assoc. Co., L.P.A., Stewart R. Jaffy and Marc J. Jaffy, urging affirmance for amicus curiae Ohio AFL-CIO.