STATE OF HAWAII
BOARD OF EDUCATION
HUMAN RESOURCES COMMITTEE

MINUTES
Queen Liliuokalani Building
1390 Miller Street, Room 404
Honolulu, Hawaii 96813
Thursday, April 18, 2019

PRESENT:
Brian De Lima, Esq., Committee Chairperson
Dwight Takeno, Committee Vice Chairperson
Patricia Bergin
Nolan Kawano
Kili Namau‘u
Catherine Payne
Kenneth Uemura
Bruce Voss, Esq.

EXCUSED:
Margaret Cox

ALSO PRESENT:
Christina Kishimoto, Superintendent
Amy Kunz, Assistant Superintendent and Chief Financial Officer, Office of Fiscal Services
Cynthia Covell, Assistant Superintendent, Office of Talent Management
Merlene Akau, Director, Personnel Assistance Branch
Aizen Mineshima, Personnel Program Manager, Workers’ Compensation Unit
Victor Casados, Personnel Specialist, Workers’ Compensation and Employee Benefits Section
Alison Kunishige, Executive Director
Kenyon Tam, Board Analyst
Regina Pascua, Board Private Secretary
Irina Dana, Secretary


I. Call to Order

The Human Resources Committee (“Committee”) meeting was called to order by Committee Chairperson Brian De Lima at 9:30 a.m.


II. Public testimony on Human Resources Committee (“Committee”) agenda items

Committee Chairperson De Lima called for public testimony. There was no public testimony at this time.


III. Approval of Meeting Minutes of February 21, 2019

ACTION: Motion to approve the Human Resources Committee Meeting minutes of February 21, 2019 and the Human Resources Committee Meeting Executive Session minutes of February 21, 2019 (Voss/Uemura). The motion carried unanimously with all members present voting aye.


IV. Discussion Items

Cynthia Covell, Assistant Superintendent, Office of Talent Management, introduced Merlene Akau, Director, Personnel Assistance Branch; Victor Casados, Personnel Specialist, Workers’ Compensation and Employee Benefits Section; and Aizen Mineshima, Personnel Program Manager, Workers’ Compensation Unit.

Covell stated that the purpose of the workers’ compensation program is to provide employees who suffer an industrial injury or illness with medical care, wage loss replacement, and permanent disability benefits. She noted that laws related to workers’ compensation protect the Department of Education (“Department”) in addition to protecting employees. Covell highlighted that the State of Hawaii established workers’ compensation laws in 1915 prior to the federal government putting laws in place. She detailed that the Department of Human Resources Development previously managed the program and moved it to the Department in the mid-1990s. She stated that the Office of Talent Management administers the program and noted that it is part of the Department’s talent management strategy to attract and retain a diverse workforce.

Covell stated that the workers’ compensation program evaluates benefit eligibility, processes medical and disability benefits, coordinates return to work, and provides representation at administrative hearings. She detailed that workers’ compensation covers Department employees, volunteers, and students in specific work-based learning programs. The program covers industrial injuries caused by an accident arising out of and in the course of employment and diseases caused by or resulting from the nature of employment. Covell detailed that individuals who are eligible most frequently access medical care and wage replacement benefits. She highlighted that some individuals participate in return-to-work priority programs. A smaller number of individuals access vocational rehabilitation, disfigurement, or death benefits.

Covell reviewed the claims handling process. She detailed that the Workers’ Compensation Unit evaluates claims and either accepts or denies claims. If the Workers’ Compensation Unit denies a claim, the individual could appeal to the Department of Labor and Industrial Relations (“DLIR”). If individuals do not agree with the DLIR decision, they could appeal to the Labor Appeals Board and go to trial. Covell noted that an average of ten employees go to trial each year. She noted that the Department of the Attorney General represents the Department during trial.

Covell reviewed the Department’s funding and expenditures. She stated that initial general budget allocations for workers’ compensation have been $8.5 million for the last three years, and the Department typically expends between $12 to $15 million on claims. She detailed that reasons for high expenditures include increasing medical care costs, claims, and pharmaceutical costs. Covell noted that the Office of Fiscal Services (“OFS”) helps to reallocate funds from within the Department’s budget to cover shortfalls and noted that OFS has reallocated from surpluses and unemployment insurance in the past. Covell stated that the Legislature did not approve budget increase requests for workers’ compensation last year. The Department requested $3.4 million this year to cover shortfalls, and the Legislature approved $2 million. Covell stated that the Workers’ Compensation Unit typically runs out of funding in March, which can cause lapses in payments to medical providers and constituents.

Covell reviewed workers’ compensation claims volume data and detailed that the Department sometimes manages lifetime claims or multiple claims made by a single individual. She stated that the Department’s goal is to close as many claims as possible and detailed that the Department normally opens 700 to 800 claims per year. Covell stated that the Department has opened 540 claims thus far in School Year (“SY”) 2018-2019. She highlighted that the Department’s current goals are to process new claims more efficiently, pay providers, and close backlogged managed claims.

Covell reviewed the Department’s improvements and challenges. She highlighted that an increase in positions and reorganization has resulted in improved efficiency. Covell detailed that the Department reorganized the Workers’ Compensation Unit by separating the unit into two, assigning supervisors, and improving processes for case assignment. She highlighted that the Department contracted a technology program that is useful for claim management because it provides better visibility, data, and analytic capability. Covell stated that the Department has significantly reduced overtime hours and costs from 1,269 hours in FY 2016-2017 to 300 hours in FY 2018-2019. She stated that the Department would need to improve its claim submission and processing timeline. She detailed the current submission process at the school level and explained that the process does not meet time requirements and causes delinquency. Covell stated that the Department would need to improve training and processing, and it is reviewing ways to do so at the different levels. She noted that $2 million in extra funding would significantly help to improve training and processes. She stated that the Department offers online training, which might not be enough, especially for complicated claims.

Committee Member Kenneth Uemura asked about the Department’s funding, expenditures, and shortfalls. Akau explained that the Department’s expenditures are full expenditures. Amy Kunz, Assistant Superintendent and Chief Financial Officer, Office of Fiscal Services, explained that the Department has used $1 million in excess funds in unemployment claims to cover shortfalls in workers’ compensation. Committee Member Uemura commented that the Department accrues $10 million and payments cost $9 million. Kunz detailed that the Department’s cost for unemployment insurance is lower than what the Department outlined in the budget. She stated that the Department transfers these excess funds to workers’ compensation and uses salary savings from within EDN 100 to cover workers’ compensation balances.

Committee Member Uemura asked about the Department’s expectations regarding shortfalls. Covell stated that the Department needs an addition $1 million to cover workers’ compensation through the end of the year. Committee Member Uemura commented that the Department needs an additional $2 million because the Legislature only approved $3 million out of the Department’s $5 million request. He stated that he wants the Department to ensure that it is not significantly affecting programs by reallocating funds. Kunz confirmed that there is no impact to other programs. Committee Member Uemura asked the Department to report on reallocations to cover shortfalls in a future presentation.

Committee Member Uemura asked about workers’ compensation reports. Covell stated that the workers’ compensation program is audited by an outside auditor, and the Internal Audit Office (“IA”) would report on those results in 2021. Committee Member Uemura stated that he would like a report separate from IA’s report that would focus on the overall program, including where funding comes from and how the Department covers shortfalls. Covell explained that the Workers’ Compensation Unit is self-funded and self-insured and noted that the Department reallocates funding from the separate funding category of unemployment insurance to cover shortfalls.

Committee Member Uemura asked about improvements as a result of increases in staff positions. Covell explained that the Department is in the process of developing key metrics it could review. The Department’s first priority is to process backlogged claims. Covell highlighted that an increase in positions has led to higher morale, lower turnover rates, closer supervision, and streamlined processes. She highlighted that the Department has decreased processing time to 60 days or below, which is what is required by law.

Committee Member Uemura asked about costs at the different claims handling process levels, including appeal levels. Covell stated that 80 claims were disputed to DLIR, and four claims were disputed to the Labor Appeals Board in the last year. Committee Member Uemura asked about the cost of these claims at both levels and commented that the Department cannot know whether it improved if it does not know dollar amounts. Akau explained that the Department does not differentiate the levels at which it pays claims and does not track spending for claims at the different levels.

Committee Member Uemura asked if the Workers’ Compensation Unit’s total budget would be higher than $12.5 million due to unresolved cases. Akau explained that workers’ compensation claims costs are part of the total expenditure amount and reiterated that while the Department tracks totals, it does not track spending at different appeals levels.

Committee Member Uemura commented that the Workers’ Compensation Unit operates on a cash basis rather than on an accrual basis. Covell explained that there are reserves for cases that the Department is managing, but the Department cannot forecast settlement costs. Committee Member Nolan Kawano commented that the Workers’ Compensation Unit operates on a cash basis as well as an accrual basis, but the budget in the Department’s report is on a cash basis. Committee Member Uemura stated that he would like to know the Department’s exposure.

Committee Vice Chairperson Dwight Takeno commented that the Workers’ Compensation Unit sets reserves aside over the life of the claim but also has contracts and reports this information, which is the information to which Committee Member Uemura is alluding. Committee Vice Chairperson Takeno asked about the Department’s total or potential exposure, liability, estimated costs, and accrued costs. Covell stated that IA includes this information in its report.

Committee Member Bruce Voss stated that he understands management difficulties and staffing challenges but expressed concern over claims closed data. He asked when the Department expects this data to improve. Covell stated that the Department’s priority for SY 2019-2020 is to close one claim for every claim it opens. She noted that the Department is unable to close some claims due to medical reasons. Committee Member Voss stated that the Department closed half the number of claims than it opened in the last fiscal year with no material difference in staff and asked when this would improve. Akau stated that the Department is making claims closure a priority and is hoping that data improves in the following school year. She highlighted that the Department has filled all open positions in the Workers’ Compensation Unit and provided employees with additional training in the past year. The focus moving forward is for the Department to close claims at a higher rate. Covell noted that some individuals file multiple claims. Committee Member Voss stated that the Department is not answering his questions and asked when data for closed claims would improve. Covell stated that the Department plans to improve this year and anticipates a lower number of open claims at its next presentation to the Committee.

Committee Member Voss asked about the percentage of claims that the Department denies. Covell stated that she would need to get back to him on this, but the Department typically receives 700 to 800 claims per year of which 10% are typically disputed. Mineshima stated that the Department disputed 86 claims in SY 2017-2019 and 26 claims thus far in SY 2018-2019.

Committee Member Voss commented that thorough, diligent, and complete investigations are necessary to control budget expenses. He asked how the Department ensures that it is paying for legitimate claims. Covell explained that claims adjusters scrutinize claims. She detailed that recent law changes resulted in the Department having to meet a higher threshold to deny, which has made scrutiny difficult. Covell detailed that the Department includes scrutiny, threshold requirements, and criteria in trainings.

Committee Member Catherine Payne asked if the Department shares information with supervisors regarding how to minimize claims within the workplace. Covell stated that the Workers’ Compensation Unit works with the Office of School Facilities and Support Services (“OSFSS”) on safety and prevention. She highlighted that modernized technology helps to categorize claims and share information. Covell detailed that workplace safety programs help to reduce the number of claims as well.

Committee Chairperson De Lima stated that the Committee agendized this presentation because the Committee wanted to understand why the Department reallocates funding each year to cover shortfalls for workers’ compensation. He noted Kunz’s earlier comments regarding reallocations and stated that he was unaware that the Department reallocates salary savings from EDN 100, which includes funds for Weighted Student Formula (“WSF”). He asked if the Department reallocates WSF funds to cover workers’ compensation shortfalls. Kunz explained that the Department’s reallocates funds from programs within EDN 100 that schools have not received. Committee Chairperson De Lima stated that the Department should include this information in reports to the Finance and Infrastructure Committee.

Committee Chairperson De Lima asked about costs and savings for unemployment insurance. Kunz detailed that the Department’s budget for unemployment is $2.2 million, but the Department only pays $1.1 million due to current unemployment rates. Committee Chairperson De Lima asked if the Department requests amounts it knows it does not need. Kunz confirmed that the Department does not request amounts it does not need and explained how the Legislature allocates funding for these programs.

Committee Chairperson De Lima stated that there is a disconnect between the Department and the Legislature and noted that the Legislature might not allocate funds because the Legislature assumes that the Department is able to reallocate funds and use salary savings to cover shortfalls. He stated that the Legislature needed to understand the Department’s budget and program costs. Kunz explained that the Legislature allocated $2 million of the Department’s $3.4 million request to cover workers’ compensation shortfalls.

Committee Chairperson De Lima stated that the Department needed to review how it manages and administers workers’ compensation. He emphasized that the Department needed to review its infrastructure and determine how to pay and process claims in a timely manner. Committee Chairperson De Lima stated that the Committee is interested in a presentation that focuses on how the Department plans to reduce the number of claims and return employees to work, training, and classifications of employees filing claims. He stated that the Legislature might provide more funding if the Department were to present information regarding how it improved programs and infrastructure and addressed problems. Committee Chairperson De Lima highlighted the importance of laws that protect employees and emphasized the importance of the Department having empathy for injured employees while simultaneously investigating fraud. He stated that he would like the Department to present on the nature of claims, nature of injuries, safety programs, and plans to mitigate claims at a future Committee meeting.

Committee Vice Chairperson Takeno asked about the Department’s managed claims and whether the Department simply needs to process some of those claims to close them. Covell confirmed that this is correct and stated that the Department plans to process and close some of the claims that have not seen any activity. Committee Vice Chairperson Takeno stated that the Department could focus on moving claims that it already determined it needed to close. Covell confirmed that the Department could do so but noted that the Department is unable to close all claims because some individuals are receiving lifetime disability benefits. Committee Vice Chairperson Takeno noted that he is not referring to medical maintenance and stated that the Department could potentially close a number of claims that resulted in no treatment and have had no activity.

Covell requested the opportunity to provide more information in a future presentation. She emphasized that the Department’s priority is to process and close claims in a timely manner and provide accurate numbers.

Committee Vice Chairperson Takeno asked the Department to include information regarding safety and return-to-work programs in a future presentation. He asked the Department to include information regarding objectives and potential cost reductions as a result of improved safety programs. Covell stated that the Department could provide this information in a future presentation. She noted that OSFSS assists with return-to-work and safety prevention programs because many injuries occur within OSFSS branches. Akau added that the Workers’ Compensation Unit provides OSFSS with data to assist them in reducing employee injuries and workers’ compensation costs.

Committee Vice Chairperson Takeno asked about return-to-work programs. Akau explained that return-to-work programs help to find placement and suitability and detailed the return-to-work process, including medical documentation requirements and meetings. She emphasized that the Workers’ Compensation Unit does not administer return-to-work programs.

Committee Vice Chairperson Takeno asked about the outcomes of appealed claims. Akau detailed that 86 claims were appealed to DLIR and some were settled. Committee Vice Chairperson Takeno asked about the Department’s reports on denied claims. Akau detailed that the Department settled ten claims out of 86 but stated that she does not know specifics.

Committee Vice Chairperson Takeno asked about the cases where the Department prevailed. Mineshema detailed that the Department prevailed on 33% of denials and 15 out of 76 hearings in SY 2017-2018.

Committee Member Kawano stated that he would like to receive a presentation regarding workplace injury prevention and return-to-work programs. He stated that he would also like more specific information regarding additional funding for workers’ compensation, such as whether the Department reallocated funding from specific EDNs or received funding from the Legislature.


V. Adjournment

Committee Chairperson De Lima adjourned the meeting at 10:21 a.m.