Posted: March, 2000; Updated: July, 2001
Use of State Workers' Compensation Fund to Pay MCOs' Fees Unconstitutional
Northwestern Ohio Building and Const. Trades Council v. Conrad (1/27/00), Franklin No. 98AP-1287.NOTE: In July, 2001, the Ohio Supreme Court reversed this Court of Appeals' decision.
Issue: Is the MCO system constitutional?
Background: The Northwestern Ohio Building. and Construction Trades Council (NOB&CTC) filed a declaratory judgment suit challenging the statutory sections R.C. 4121.44, .441, .442 and .443 on a claim that the sections violate Art. II Section 35 of the Ohio Constitution.
NOB&CTC is an employer for purposes of workers' compensation and pays premium to the state fund. Under rules issued by the BWC, each state fund employer is required to select an MCO or the BWC will appoint an MCO for the employer. The MCOs are paid a fee by BWC for medical management and administrative services. In addition, the MCO may be paid a performance incentive. The payments are made from employer premium payments.
The suit essentially challenged (1) the Health Partnership MCO process and (2) the use of premium contributions paid to the state insurance fund to pay fees to private managed care organizations.
Common Pleas granted summary judgment against NOB&CTC.
Decision: Court of Appeals affirms in part and reverses in part.
On the basis of the Ohio Supreme Court decision in State, ex rel. Haylett v. Ohio Bureau of Workers' Comp. (1999), 87 Ohio St.3d 325, it determines that the MCO program is not an improper delegation to a private entity in violation of Art. II Section 35. The Court of Appeals affirms summary judgment on this delegation issue.
However, Court of Appeals reverses on the issue of the use of premiums to pay private entities. Court reviews Corrugated Container v. Dickerson (1960), 17 Ohio St. 289 [payments from the State Insurance Fund could not be used to cover administrative costs.]
In Corrugated Container a challenge was made to transferring state fund monies to the state general revenue fund to reimburse the state of Ohio for the amounts appropriated for administrative costs of the Industrial Commission. The Ohio Supreme Court ruled the monies could not be used to reimburse the state for administrative costs.
Court says in the present case the MCOs are paid a set percentage of the employers' state insurance fund premiums for administrative costs. Court of Appeals says statutes do not authorize such use of the money from the state insurance fund. Court rules that payment of funds from the state insurance fund in the form of administrative fees and performance incentives violates Art. II, Section 35.
Court says the money can only be spent for purposes spelled out in Art. II, Section 35 (compensating injured workers and their dependents for injuries and illness arising out of their employment.)
Court of Appeals reverses Common Pleas on the issue of use of state insurance fund to pay administrative costs and grants judgment in favor of NOB&CTC on this issue.
This information was provided courtesy
of the Ohio
Workers'
Compensation Bulletin.