DePaolo's Work Comp World

Glad I Don't Have That Job

2013-06-18T04:49:00.001-07:00

The hornet's nest that was started with the $120 million excess disability fund created by SB 863 in California is finally starting to take shape, and as many figured, this last minute, ambiguous provision raises more questions than it satisfies.

SB 863 says eligibility to the fund is to be determined by the director of the Department of Industrial Relations and that any director determination shall be subject to review at the trial level of the Workers’ Compensation Appeals Board “upon the same grounds as prescribed for petitions for reconsideration.”

WorkCompCentral reported this morning that a budget trailer bill, AB 76, now awaiting Gov. Jerry Brown's signature, limits application of the fund to injuries on or after Jan. 1, 2013, allows for the carryover from one year to the next any unspent money in the account, but doesn't restrict that money to only financing the fund, doesn't dictate what happens when the fund goes short, and doesn't set up an allocation system to prevent first in line preferential treatment.

The fund measure is part of a much broader budget bill, affecting the Water Code, Public Utilities Code, Harbors and Navigation Code, as well as the Labor Code, setting up partisan political fighting.

AB 76 passed through the full Senate on Friday, 23-11 with all Republicans opposed. The Assembly then followed with a 53-25 vote, with Republicans opposing the measure again.

What's funny to me is that Republican leader Bob Huff of Diamond Bar told the Senate, “Colleagues, ask yourself how comfortable you are with a final product produced by three people in a closed room that neither you, nor your constituents have had a chance to review.”

I thought that's how most legislation goes through the legislature...

California's lawmakers have given the director of DIR an incredible amount of power, and responsibility, since neither SB 863 nor AB 76 give her much direction in terms of operating procedures and rules for the fund.

Employer advocates are concerned that the fund will be volatile, since there are no rules regarding excess monies or fiscal shortages.

Employee advocates worry that allocations can't be firmly projected setting up first come, first served disputes.

The arguments are uniquely aligned - the number of cases that will qualify for the fund from one year to the next is obviously not fixed and there is no way to predict exactly how many are to get how much year in and year out.

The DIR is currently waiting for a Rand Corp. wage-loss study before it sets the criteria for workers to receive payments from the fund. Assuming timely release of that report, DIR hopes to get draft regulations out by the end of summer.

The Rand researchers are smart people. It will be interesting to see how they put the numbers out there that will allow some sort of reasonable predictability to fund allocations, and to annual employer assessments.

Both sides are rightly concerned that fund monies will end up the fodder of future legislatures looking to plug budget gaps, and the director will not be able to override such legislative raids with her rules in such situations.

In the grand operational scheme of things, the fund doesn't represent a whole lot of money. But to injured workers with significant wage loss, the fund may make a huge difference.

The DIR, and in particular its leader, Christine Baker, have a very difficult, delicate task ahead. I expect the regulatory process enabling the $120 million excess disability fund to be particularly contentious.

Baker is a strong leader. Implementation of the fund is going to be a huge challenge.

And in all of the SB 863 drama, the how and what of such regulations will likely be the defining moment of Baker's career.

I'm glad I don't have that job.

We Can't Make the World Right But Can Do the Right Thing

2013-06-17T04:39:00.000-07:00

Yesterday was Father's Day. Most consider the day a tribute TO fathers. I prefer to celebrate with tributes FROM a father. That's how this Father's Day weekend played out for me.

I told my Dad, who will be 91 this year, is in excellent physical health, and is incredibly sharp of mind, a couple of years ago that when I grow up I want to be a philanthropist.

I still do. But I'm still growing up and philanthropy requires a certain status in life, and a certain level of financial success, both of which I have yet to attain, but the goal of being a philanthropist drives me every day.

So charity is as close as I can get at this stage in my life, in particular if it is to help children or animals.

So many children and so many animals are without - without good homes, without basic needs, without love or attention. Some have been through such difficult times and just need some generosity.

I was fortunate this past weekend to give a little back to this world that has been so kind to me by using the gifts of my success to transport a couple of children who had sustained burn injuries from Champ Camp to their homes using my airplane.

Champ Camp is a week-long, residential summer camp experience for child burn survivors ages 5-16. It's free to all burn survivors and the camp usually hosts about 130 children.

Arrisa and Daniel - my two Champ Camp passengers.

A lot of these kids don't have transportation to the camp, which is in Wonder Valley in Sanger, California (near Fresno), because they come from families without the means to get them there.

That is where Angel Flight West comes in.

Angel Flight West is a nonprofit, volunteer-driven organization that arranges free, non-emergency air travel for children and adults with serious medical conditions and other compelling needs.

Because of Angel Flight West, many kids that wouldn't get a break from their difficult daily lives would not be able to enjoy the camaraderie of other children with similar issues. Being with others that share the common thread of burn trauma is hugely restorative to these kids - it literally changes their outlooks on life because know that they are not alone.

It was a long day of flying. My assistant and I had to go from Oxnard, where my plane is hangared, to Fresno to pick up my passengers, then to San Diego's Montgomery Field, then back to Oxnard.

We covered just shy of 600 nautical miles on Saturday with about 4.5 hours of flight time, 3 take offs and, fortunately, 3 uneventful landings!

My passengers were delightful, very polite, and very appreciative. Both had obviously enjoyed their time at Champ Camp, coming back with various projects that they had completed at camp. And both had unbelievably bright outlooks on life despite the trauma of their injuries.

The boy passenger, interested in aviation (like a lot of 15 year old boys!) asked a couple of questions about my aircraft and he was completely non-plussed when I explained that it was, "a 1979 Beech Bonanza A-36 with a Continental IO-520 fuel injected 6 cylinder engine rated at 285 horsepower that had been rebuilt by Victor Aviation in Palo Alto, the same shop that builds all of NASA's piston aircraft engines...".

He liked that. It was factual and satisfied his curiosity.

The girl wasn't as interested in aviation, but she was curious why the passengers faced rearward. She was okay when I told her that we could put the seats facing forward but that would reduce the amount of room in the back of the plane.

When we dropped the boy off in San Diego, he said to the girl that he hoped to see her back at Champ Camp next summer. That touched me. Their only real connection was this Angel Flight, and their common injuries. Champ Camp gave both of them a bigger, brighter outlook on life.

Then that evening, just as I was about to serve up dinner, the doorbell rang. It was Ella and Eligh - a couple of the neighborhood kids. They are 8 and 6 years old respectively. I can't say that they come from the best family background...

They come over to visit us often. They like our great dane puppy, and are fascinated with our 26-toed cat, and of course are always more than happy to sample the fresh chocolate chip cookies my wife makes or help out with projects in the garage.

Both kids had obviously been crying. Their eyes were puffy and swollen from tears. I don't know what kind of trauma they were subject to, but I guess it doesn't really matter - they just needed a short period of stability and safety. And they also wanted some pasta...

So they shared the dinner table with my wife and I - a couple of unexpected, albeit delightful, guests who were so happy to sit at a family dinner table and share their days with some adults they trusted.

I'll be 54 this year. I often find myself a bit weepy with sentiment thinking about the plight of those who are put into difficult circumstances through no fault of their own.

I felt like a father on Father's Day because some children touched my heart. I honestly can say that there is no greater gift a father could experience.

The little world of workers' compensation has its own charity for children, Kids' Chance.

Kids' Chance creates and supports programs that provide educational opportunities and scholarships for the children of workers seriously injured or killed on the job.

We can't make the world "right," but as individuals we can all do right things for the world. If that guides us in our daily work, workers' compensation will achieve its original goals.

What Value In Progress Reports?

2013-06-14T04:35:00.002-07:00

Alex Swedlow, president of the California Workers' Compensation Institute, noted researcher and all around great guy, challenged me yesterday at the annual WCIRB meeting in San Francisco: What is the single medical billing procedure that is the most common in California's workers' compensation system?

Physical therapy? Nope.

Prescription drugs? Not close.

Laminectomy? Please...

How about progress reports?

Yep, progress reports.

And what is the most frustrating, and burdensome procedure for physicians in workers' compensation?

Progress reports (Alex didn't tell me that - I've garnered that from years of talking with physicians).

Why is the industry so focused on medical reporting, and in particular the ubiquitous progress report? Simply because it is mandated in the Labor Code and regulations.

Take a look at the Treating Physician's Progress Report, PR-2 - what do you see?

First off, a request for lots of unnecessary, redundant, and valueless information. For example, why, if we know the injured worker's name and claim number, do we need to know his address, date of injury, date of birth, occupation, phone number, etc.?

Why do we need to know all of the same information about the claims administrator? Who gets this report? The claims administrator - do you really think that the claims administrator doesn't know who he, she or it is?

And why is the employer's phone number required? The employer doesn't want to be bothered - this is a matter that's being handled by the claims administrator.

Note in the grey box at the top - the options for the reason for this report. The very first option is, "Periodic Report (required 45 days after last report)".

Talk about a cost driver! Why does the law mandate a report every 45 days regardless of status? What value is derived from this activity other than billing for an office visit and preparation of a report that calls for lots of redundant, time consuming, valueless information? Why must the patient information and claim administrator information be included every single time a progress report is submitted and what is so magical about 45 days?

The report then asks for subjective complaints, objective findings, diagnosis, and treatment plan - the use of additional pages in narrative format is encouraged.

What is the purpose of this form? What value is derived from mandating this reporting? The content of the form does not drive statistical understanding of cost drivers in workers' compensation because the data on the form doesn't go beyond the claims adjuster or, perhaps now, independent medical review.

Data on a claims progress is kept in other, more accessible, less burdensome and more easily understood format.

I think about when I was practicing workers' compensation law and rifling through files getting an understanding of a claim and the medical condition and history of an injured worker. I never, ever, paid much attention to the progress report because there simply wasn't any valuable information provided. The progress report did not help me manage the claim - in particular the mandatory 45 day reporting which basically was always a status quo report.

Everything in the progress report is transmitted to the claims administrator in different fashions via more efficient communication systems.

There is always much consternation about the cost of the medical component to workers' compensation. The negotiators of the latest California reform put a lot of effort into medical treatment controls and now we have independent medical review, bill review, limitations on treatment protocol, etc.

But no one has taken a look at the ponderous reporting requirements in workers' compensation and whether any of this mandatory report writing returns any value to the system.

I suspect that we'll see some research in the future on this cost aspect - but is that even necessary? Why not just tackle the issue now?

A lot of time is spent in the legislature about restricting continuous trauma claims from workers with minimal contact with the state, about funding prescription drug monitoring programs, and excess disability slush funds.

Not much time is spent looking at existing procedures and systems to question whether any of this is really necessary in order to administer claims and whether any of these activities returns value to the system.

Time to start...

Work Comp Is Like the Weather

2013-06-13T06:08:00.000-07:00

A friend of mine quipped the other day that workers' compensation is like the weather - everyone complains about it but no one does anything about it.

At dinner last night another workers' compensation acquaintance commented that workers' compensation is such a dysfunctional system that one really need not go far at all to find some element of abuse, failure or leakage.

Then this morning I read the latest edition of the Workers' Compensation Executive and the lead story that State Compensation Insurance Fund's downsizing was so dramatic that claims administration services incurred 300,000 penalties last year for a total of $21,858,570.

That's a lot of claims adjuster positions...

According to the story, most of the penalties were late payments to providers.

I hear and read complaints all of the time about late payments, and underpayments, to providers so this news is not surprising.

Worse is that there were 7,849 instances of penalties for failure to properly compensate injured workers, resulting in $1,989,629 in penalties last year.

The cycle continued into this year with the carrier reporting that for the first four months of 2013 it had incurred another 2,122 penalties for late payments to injured workers.

And those are only the ones that were caught or reported.

Observers note that the issue is the downsizing of the claims departments at SCIF. Last year the carrier famously announced a sharp consolidation of its offices, reduction in work force and liquidation of properties or termination of leases.

As a consequence the carrier, according to the report, has increased the work loads of remaining adjusters who are still tackling with computing systems that require more labor and effort beyond the adjusting of claims.

Unfortunately I don't see what SCIF is doing as anything that any other business in a similar situation wouldn't do. In grand truth, it makes better business sense to incur these penalties because it is cheaper than fully staffing across the state in multiple offices. It may not be in keeping with the carrier's mandate, but, as they say, "business is business."

The real shame is the complete ineffectiveness of the penalty system that has become the primary enforcement tool against carriers since Labor Code 5814 was eviscerated in 2004.

LC 5814 was gutted in response to the perception that applicant attorneys were using the section to unfairly, and unreasonably, gain profit against carriers for simple mistakes.

Before the section was amended the penalty enforcement section was interpreted as being applicable to every single instance of error, and thus there was the potential of a compounding effect on penalties. The complaint by the payer sector was that simple mistakes that would normally cost a dollar would get pumped up by the use of this section and cost five dollars, or more.

The legislature was persuaded that there was sufficient enforcement capabilities within the Division of Workers' Compensation Audit Unit to keep carriers on the straight and narrow.

But this has not turned out to be the case. The fact is that the Audit Unit itself is understaffed, and inadequately armed, to be of any threat to a payer.

I'm not saying that carriers see Audit Unit penalties as just a cost of doing business - but certainly the risk of an audit and penalty order isn't as threatening as a huge, compounding penalty under the pre-2004 section 5814.

The tendency in workers' compensation reform is to over-reform, to swing so far from the middle in a reaction to a perceived injustice that the exact opposite occurs.

Workers' compensation may be like the weather in that everyone complains about it. But unlike the weather, people have the power to do something about it.

Reform will cycle through again - this seems to be an immutable fact about workers' compensation. And in the next cycle you can bet that there will be a push to build stronger private-based penalties into the Labor Code.

Medical Board's Review of Review Physicians

2013-06-12T05:16:00.000-07:00

One of the big controversies that has surrounded utilization review (UR), and now independent medical review (IMR) is whether the physicians conducting these reviews were engaged in the "practice of medicine" and thus subject to review, and possible discipline, from the medical board in the state where the case originates.

At least in California, the Medical Board has recently opined that UR and by extension IMR is the practice of medicine subject to review by the board.

The California Medical Board has been under review by the legislature recently on allegations of lax enforcement against physicians.

As part of the review legislators specifically asked the board whether it felt it had powers over UR and IMR physicians.

As a consequence of a treating doctor's complaint to Assemblyman Henry Perea, D-Fresno, the legislator initiated an inquiry into the board's position on the issue.

After informal discussion failed, Perea sent a letter to Dr. Sharon Levine, president of the Medical Board at the time, asking whether the board considers UR the practice of medicine and how it arrived at its conclusion that it has no oversight of UR doctors.

The letter in addition asked whether contracts with insurance carriers, specifically in this case the State Compensation Insurance Fund's (State Fund) letter to its medical provider network physicians (MPN) requiring physicians to agree not to prescribe more than a 60-day supply of compound drugs or opioids without prior approval as a condition of enrolling in its network.

Medical board staff counsel issued an internal memo opining that historically the board did not investigate complaints that are “not based upon an attempt to leverage the outcome of a UR treatment decision or compensation claim, but rather to ascertain whether the standard of care is being followed.” The April 10 memo says the board classifies such complaints as “non-jurisdictional.”

The memo also details how the Labor Code trumps other law and that the Workers’ Compensation Appeals Board “has exclusive jurisdiction over any controversy relating to or arising out of the medical treatment of an injured employee.”

The Medical Board's response to Perea was that it considers utilization review to be practicing medicine and also states that it will “not automatically deem UR complaints non-jurisdictional” and that “a physician is not insulated from potential discipline from the board simply because he or she is under contract to a (workers’ compensation) insurer, private or otherwise.”

There is renewed interest in requiring UR and IMR physicians to be licensed in the state as a consequence because then the Medical Board would then have disciplinary jurisdiction over such physicians.

In 2011, Gov. Jerry Brown vetoed AB 584, which would have required work comp UR physicians to be licensed by the Medical Board of California.

This year, Sen. Jim Beall, D-Campbell, introduced SB 626, which included provisions requiring all doctors doing utilization review and independent medical review be licensed in California. Beall pulled his bill in April and plans to pursue it again in 2014.

But in the meantime, while the Medical Board undergoes its review, Sen. Curren D. Price, D-Los Angeles, who is chairman of the Senate Business, Professions and Economic Development Committee, has filed SB 304, a bill that would transfer medical board investigators to the state Department of Justice and give the department the authority to investigate and discipline doctors.

Price has been critical of the Medical Board's investigation, enforcement and discipline record.

The question is whether the Medical Board's current position, that it will investigate complaints that a utilization-review physician has fallen short of established standards of care, something it has previously not done, is in response only to attacks on its survival, or because the board truly feels it has a duty to the public to do so.

Either way, the board is in a tough position. It is basically admitting ipsa loquitur to a failure in the recognition of its duties in the past.

Sometimes workers' compensation drama occurs outside the direct workers' compensation world but can have far reaching impact. How the Medical Board review drama plays out will steer how the industry conducts UR and IMR going forward.

How A Federal Take Over Could Occur

2013-06-11T04:45:00.000-07:00

Last week I wrote about the expanding influence, and perhaps, jurisdiction of the federal government over our lives, and in particular (of course) workers' compensation.

Yesterday I argued that California Assembly Bill 1309 was bad law and should not get to the governor's desk.

The two may come together - when we look at the various legal and legislative/ regulatory actions going on regarding professional athlete injuries and the politics across the nation concerning the limitation of jurisdiction - we see argument why workers' compensation may need uniformity and consolidation; ergo, federal control.

I'm not saying I'm in favor of a federal take over of workers' compensation, but look at these facts and tell me whether or not, if you were a federal legislator, you would be inclined to mandate a federal system of workers' compensation, at least for professional sports that cross state lines whether via live participation or virtually via television or other media, and other migratory industries.

After arbitrator Michael H. Beck on Dec. 12 issued a decision saying football players signed contracts agreeing to file work comp claims in the state where the team was located, rejecting the player's arguments that the order violated a federal court ruling stating that there needs to be an opportunity to demonstrate where the injuries occurred, a federal judge has granted a hearing on a proposed order that would overturn Beck's decision.

In July, a federal judge in Philadelphia is expected to rule on whether former players can sue the National Football League about concussion-related injuries. An estimated 4,300 former players have filed lawsuits that have been consolidated in the U.S. District Court for Eastern Pennsylvania but the NFL seeks dismissal on the argument that the suits are preempted by the collective-bargaining agreement between the league and the NFL Players Association.

In April, Arizona Gov. Jan Brewer signed a bill similar to California's AB 1309 that prohibits people working for employers in the state from filing work comp claims for injuries sustained while working temporarily in another state.

Other states have also passed laws limiting the ability of professional sports athletes to seek redress in states other than that of the players' contractual domicile, most recently Florida and Tennessee.

Then on Thursday a district court judge in Washington, D.C., allowed Bryan Namoff, a former soccer player to proceed with a $12 million civil suit against his former team for medical negligence alleging his former team, D.C. United, allowed him to play too soon after a head injury.

Judge Natalia M. Combs Greene said D.C. United didn’t have insurance and wasn’t exempt from suit as a consequence.

“The liability of D.C. Soccer is clearly outside the coverage of the WCA,” she wrote. “D.C. Soccer failed to secure workmen’s compensation insurance coverage for Namoff and the WCA grants an employee the right to bring a case at law against an employer who fails to secure such coverage.”

Don't forget the disparity between state jurisdictions on how to handle the ongoing issue of opioids and other prescription drugs.

Some states have drug monitoring programs, others don't. Some states restrict drug repackaging, most others don't.

The migration of drugs across state lines occurs as soon as a neighboring state implements restrictions that impede the prescription, procurement, delivery or ingestion of drugs.

Where's the Food and Drug Administration in all of this?

And don't forget the financial impact of big insurance across state lines, in particular when an insurance company is "too big to fail" and the federal government is inclined to bail that company out, all while evidence mounts that there was surreptitious use of questionable financial instruments to avoid premium taxes and other state obligations.

Still to this day, there are fights between states regarding failed workers' compensation carriers - New York's Liquidation Bureau has filed a petition in New York Supreme Court seeking to be appointed ancillary receiver of Ullico Casualty Co. while in Illinois the Circuit Court of Cook County has refused to stay proceedings involving Ullico despite a Delaware court order to the contrary.

Fights between jurisdictions, big money on the line, worker rights over safety and benefits, inconsistency in awards or order enforcement, migratory claims and drugs - the list can go on why some federal lawmakers may want to carve out certain jobs and industries and make them subject solely to federal jurisdiction.

Combine the above with a federal agency examining workers' compensation across the nation, a federal insurance oversight office, and overall expansion of the federal government and it's not hard to see how a federal take over of at least a portion of state workers' compensation systems could occur.

I'm not saying this is inevitable, desirable or reprehensible. I'm just saying ...

AB 1309 Fails the Common Sense Test

2013-06-10T04:31:00.000-07:00

The California Society of Industrial Medicine and Surgery and the California Neurology Society have come out to formally oppose California Assembly Bill 1309.

AB 1309 is the professional sports athlete exclusion bill that would remove the ability of designated professional athletes in football, basketball, baseball and hockey from utilizing California's continuing trauma theory if the athlete can not prove sufficient contacts within the state, as prescribed by the bill.

The bill is promoted by Assembly Member Henry Perea (D-Fresno). Perea says the ability of professional athletes not based in California is a "loophole" in the state's workers' compensation laws. He is joined by Senator Ted W. Lieu (D-Torrance) as a principal co-author and Senator Mark Wyland (R-Escondido) who has also agreed to co-author the bill.

Perea says that AB 1309 "would set clear jurisdictional standards on claims from professional athletes and close the loophole that currently allows out-of-state players to file cumulative trauma claims in California, regardless of whether they played for a California team or ever actually entered a California field to play. It would also close the loophole that allows out-of-state athletes to place 100 percent of the cumulative trauma liability on California-based teams despite having played a minimal amount of time for that team – while playing for multiple non-California teams in subsequent years."

Perea says that the "loophole" fails the "common-sense test."

The irony is that AB 1309 itself fails the common-sense test.

First off, AB 1309 targets ONLY professional football players, hockey players, baseball players and basketball players. What about other professional athletes? How about motocross racers? What about jockeys? Why not professional cheerleaders? And why are the coaches, assistant coaches, managers and back office people still able to avail themselves of this "loophole"? All of these workers cross state lines and may file for benefits, including continuous trauma injuries, in California without restriction.

What is most despicable about this proposed law is that it is SO arbitrary and discriminatory.

The ONLY difference is that the pro athletes get REAL, life altering injuries - particularly football players that the NFL would just like to keep quiet so that this modern day version of the Roman gladiator entertainment factory remains anesthetically pleasing to the consumers so they will continue to purchase ridiculously priced tickets and support outsized television commercial contracts.

The single biggest threat to the NFL now is the growing recognition that the sport considerably shortens athletes' lives and contributes substantially to organic brain disease. Constant sustained head trauma is the single most life-altering injury these athletes face, and it is a tragedy that the NFL would like to keep away from the public the fact that so many end up with dementia, Alzheimers, Parkinson's and other serious maladies tied directly to continuously sustained brain trauma.

The argument for this ridiculous bill is that athletes rarely step into this state. That argument is absurd.

Every time a television broadcast of an NFL game occurs in California before MILLIONS of California based fans those athletes have stepped into this state.

Every time an NFL game is broadcast into the television sets of California fans to entertain the masses the NFL receives MILLIONS of dollars in television broadcast rights.

And the same can be said for every other state too.

The NFL has no problem taking revenue from broadcast rights where their employees are placed virtually into this state across millions of television sets, but apparently does not like to recognize the fact that the millions of dollars received in broadcast rights would not exist but for the fact that they are placing their athletes into California.

There is no difference between playing a game live or via television where the same net result is that millions of people contribute millions of dollars in revenue for that entertainment.

Forum conveniens is a long standing, time honored legal principal that should not be discounted. Just because California offers a legal remedy that other states don't recognize does not mean that it is out of line, out of touch, irresponsible, or wrong.

Just the opposite - California's long standing tradition of being non-traditional, thinking outside of the box, leading the way, has created the most resilient, most robust, most diverse economy of the United States and one of the most vigorous economies of the entire world.

Why would 38 million people live here otherwise, and why would California have the greatest concentration of wealth in the world? Because California does things differently and the state traditionally recognizes the contribution of working people regardless of their income, their status, their location, their domicile.

Perea says that "the bill would not limit the ability of professional athletes or any other worker to file for cumulative trauma benefits in their home state or principal state of employment."

Hey, that's a great argument ... NOT! Because no other state recognizes "cumulative trauma benefits" like California does; because no other state recognizes the contribution of PEOPLE, aka The Working Class to its economy (and yes, despite large salaries for very short careers, professional athletes are largely working people putting their bodies on the line for the entertainment of the masses).

If California politicians had ANY balls (and there aren't too many of them left in the legislature) then this state would set a precedence and tell the NFL, "No F*cking Legislation" that would alter this state's long standing tradition of recognizing that employers need to own up to their use of workers in hazardous occupations no matter where they live.

California's great economy is built on one simple fact: that as a world class economy we rely on the sweat equity of everyone that contributes.

When the NFL is in town (whether in person, on television or any other medium), the town spends. It's okay if the NFL and the other sports franchises return the favor. They can afford it. The workers' compensation obligation to California's workers is particularly acute when an employer takes so much money from willing consumers.

The NFL and other professional sports franchises owe it to their workers to protect them, regardless of their incomes, regardless of their status, regardless of their jobs.

To allow otherwise is an affront to the working people of this state.

Insurance and Deployment of Capital

2013-06-07T05:03:00.001-07:00

I get asked to talk about trends in workers' compensation all of the time. Usually what's on folk's minds is trends in claims and claims processing because most of the legislative and regulatory action concerns cost controls.

Sometimes, though, cost control legislation and regulation isn't the topic of the day when it comes to trends, because sometimes there are forces acting outside of the claims department that have trending influence on the industry.

One of these influences is the general economy and how it affects investments.

Workers' compensation, as I've said many times here and which will be familiar to regular readers, is a cash flow business. A dollar comes in the door from the employer and as it migrates its way through the system to the injured worker, parts of that dollar bill are trimmed off for various reasons.

Some of those reasons are to pay for administration, some of it is to pay taxes and government fees, some of it is to pay vendors for services or goods - in the end there are a few cents left over for investment.

When investment returns are low and the insuring entity (either insurance company be it private or state run, or self insured program) is not seeing the net gains reasonably necessary to keep people interested in the game, then more money needs to come in the door.

I know this is a very basic view of the workers' compensation financial game, but I think it fairly explains how this all works.

Some may take issue with whether this is efficient, whether the insuring entity seeks unreasonable or unfair gains on the investment money, and whether more should be diverted to the injured worker and/or returned to the employer.

I'm not raising any of those issues - it is what it is and in the grand scheme of life, motivating someone to risk capital in an insurance scheme means that there needs to be a return on that investment that motivates continuing investment.

And that is the system that has largely been in place for 100 years.

Workers' compensation insurance rates and pricing seems to trail the general economy by 18 to 24 months. This is not a hard and fast rule, it is just a general observation I have noted in my 30 years of participating in this industry.

Like the general 7 to 10 year cycle of the industry - it is just an immutable fact but something for which I lack either the knowledge or skill to define.

Regardless, if the trend in rates and premiums is any indication, then the overal U.S. economy is gaining strength.

Because the trend in rates and premiums is up. Not in dramatic fashion, but the days when an employer could open up the insurance bill and be pleasantly surprised by a discount from the previous year are over.

Like it or not, a big part of rate structure is dictated by Wall Street. Most of the big insurance companies are publicly traded corporations. Those that aren't public companies invest in Wall Street, albeit in the less volatile bond market.

Nevertheless, as the cash flows through the system, and makes its way to Wall Street, it's up to the financial wizards to make that cash work sufficiently to keep investors motivated.

The recession introduced a prolonged period of low interest rates. Low interest rates are really good for consumers - the drivers of the economy.

For example, I refinanced my house this past year (what a chore that was!) to get an interest rate that even my parents were jealous of, 2.85% - in 50 years mortgage rates have never been that low.

Contrast that with interest rate in my passbook savings account which has held steady at around 0.05%.

Nobody can make money on that interest rate. Current inflation, which is mild, is still around 3% - so every month I don't use that money to buy something I'm losing out to inflation. I save money by using debt, and lose money by saving - how perverse is that?

Most insurance type investments are in bonds. Bonds are safer, less volatile, and typically generate sufficient returns to satisfy the bean counters at the end of the day.

But bonds have life limits - essentially they are loans and the purchaser is buying the interest rate return on those loans modified by a risk factor of non or late payment over a set period of time which means the overall investment return is stable and reasonably reliable.

When the life of a bond extinguishes, then that investment must be replaced. Remember that my passbook savings rate of 0.05% can't keep up with inflation. So the insurance-based investor isn't going to keep much cash around because the losses are too great.

But the new bonds are reflecting these low interest rates too, because bonds have to compete with traditional debt financing (remember my mortgage, which is traditional debt, is 2.85%).

So the bonds that are being purchased to replace expiring bonds have significantly lower rates of return.

If the insuring/investing entity can not get an adequate return in bonds to keep investors settled, then other sources of money have to be found.

That's why rates and premiums have to go up, nationally.

This is essentially what experts at the Standard & Poor’s Annual Insurance Conference said this week.

S&P’s base-case forecast is for the 10-year Treasury bond (a popular investment vehicle for insurance) rate to remain low, but to increase to 2.1% in 2013 and 2.6% in 2014, from 1.8% in 2012. That's not a whole lot of return folks.

So the forecast is that rates will continue to increase, albeit modestly - we won't see any short term shocks. Cash needs to come into the system to make up for the low investment rates of today. At least the forecast is that there won't be any shocking increases. Mild increases are okay - people can manage that.

The bright side, if you're on Wall Street, is that insurance is a good investment. The big companies are behaving well financially with their own investment practices and claims (i.e. expenses) management.

Arun Kumar, a managing director of global credit research for J.P. Morgan, said at the conference that, from an investor point of view, the insurance industry is one of the best positioned in the fixed-income market.

“It is one of the better performing in terms of where the bond valuations are. Pricing is definitely positive for the sector, capital is at an all-time high, and if you look at credit ratings, notwithstanding a few names, most of them have been generally stable. Even AIG I think is stable at this point, and Hartford is getting there,” Kumar said.

A friend of mine explained this game very well:

"Insurance companies are not in the business of providing insurance – that is, collect premiums sufficient to pay for losses and costs, along with a reasonable profit. Hell, anyone can do that.

"Insurance companies are a vehicle for ‘deploying capital’. There are trillions of dollars circling the Globe, looking for a place to safely invest at the highest yield possible. There is no vehicle like work comp insurance that meets that need (Stocks, Bonds, and Mutual Funds are all ‘high risk’ investments with the potential for loss). It is regulated (forcing compliance on every employer in the United States). It guarantees a profit (return on investment) to those that participate."

Is there risk? Of course. Life itself is a risk. But if we put all of this together, the trend is that rates and premiums are going up modestly and the insurance industry, and in particular workers' compensation, is managing just fine.

How Far Will the Ripples Travel?

2013-06-06T04:58:00.000-07:00

One time, I figure it's an anomaly.

But twice. In the same state. Just weeks apart - something is going on.

I'm talking of course about Florida and the sudden penchant for that state's first court of review in workers' compensation cases, the 1st District Court of Appeals (1st DCA), to find various elements of Florida's workers' compensation laws violative that state's constitution.

First there was the Westphal case which found that the current time limitation on payment of temporary total disability indemnity created an unconstitutional situation for workers who had not reached maximum medical improvement by that time and thus could not be rated for permanent disability.

Now the 1st DCA has found in Jacobson v. Southeast Personnel Leasing Inc./Packard Claim Administration that a statute that prohibits workers' compensation claimants from hiring attorneys to represent them against motions to tax costs is unconstitutional.

There are going to be numerous news reports, prognostications, advise pieces and other musings about this precedential case so I won't go into the facts here (here's the opinion) - needless to say that the court's activity is noteworthy not just for finding statutes unconstitutional, but twice and in such short order.

The actual ruling in the Jacobson case is quite narrow and in the long run may actually benefit the Florida system by providing claimants with counsel in disputes over cost petitions by employer/carriers, which may in fact reduce the quantity of such litigation. Certainly the opinion that is being widely accepted is that the Jacobson case is not really going to be much of anything.

But to me, the real question is whether the court's willingness to review a constitutional challenge denotes an emerging trend.

State constitutions are, by nature, limited in application to the particular state for which the constitution was drafted, so making some grand pronouncement about a trend is not going to happen. There are too many variables from state to state to say that something is up on the constitutionality of laws in workers' compensation because work comp is a statutory creature - there are no "common law" elements that would trigger a United States Constitutional challenge.

But a court hearing and ruling on constitutional challenges on a particular topic within just weeks of each case challenge is very unique, and the 1st DCA has yet another constitutional challenge it will be hearing in Davis v. Nascar Holdings.

Davis had reached MMI for her physical injuries in March 2011, but she has not yet reached MMI for her psychological injuries. Her employer, however, stopped paying for her psychological care six months after she reached physical MMI, based on Section 440.093 which provides that a worker can receive indemnity benefits for a mental injury for only up to six months from the date the worker achieves MMI for the physical injury.

Davis is relying on the court's holding and the arguments in Westphal to make her case. Whether the 1st DCA finds in favor of Davis of course is subject to speculation, but it seems to me that the Westphal logic is applicable and that Davis has a good chance of prevailing given the 1st DCA's current track record.

Speculation in Florida is that claimant attorneys are attacking the 2002 reform law, SB 50A (which was implemented over the 2 year period from 2003 to 2004), in piece meal fashion by challenging the constitutionality of small parts of the law.

Get enough unconstitutional rulings against the law, the theory goes, and there is a real possibility that the Florida Supreme Court could eventually declare the entire act unconstitutional forcing a renegotiation of the grand bargain.

I don't know whether this is a viable strategy or even whether these rumors have an iota of validity - certainly though claimant representatives in other big states that have seen significant changes to their systems (e.g. California, New York, Illinois) are looking to the Sunshine State for inspiration and perhaps strategic education.

Westphal and Jacobson were heard and written by different panels of justices working in the 1st DCA. Westphal has been granted rehearing before the 1st DCA En Banc (meaning the entire court will weigh in on the issue), so the issue in Westphal is far from over. There is no indication that Jacobson will go any further.

But if you're a work comp wonk, what's going on in Florida is fascinating. California stirs things up in the legislative ring and 3500 miles away Florida is stirring things up in the judicial ring.

Is there a trend towards constitutional challenge to work comp reforms? Certainly it is too early to tell.

But one can't deny that these are indeed interesting times.

As Chief Workers' Compensation Judge, David Langham, in his blog on the subject has written, "The stone is in the pond, whether a pebble or boulder, how far the ripples travel, and their effect on the distant shores remains to be seen."

New Acronyms: FSOC, SIFI and CWCS

2013-06-05T04:29:00.001-07:00

A few days ago I wrote about the increasing power, reach and control of the federal government and the rising fear of federalization of workers' compensation.

Two stories this morning in WorkCompCentral reiterate those concerns.

The first and most alarming development is the federal Financial Stability Oversight Council’s (FSOC) decision to designate American International Group and Prudential Financial as significantly important financial institutions (SIFI) under the Dodd-Frank Act, meaning the government believes they could pose a risk to the broader financial system.

AIG and Prudential are among the largest insurance companies in the United States based on assets.

Under rules set up by Dodd-Frank, a SIFI designation enables the Federal Reserve Board to require increased levels of capital and supervision. When a company receives such a designation it is given 30 days to challenge the designation and request a hearing. Barring a challenge, FSOC has 40 days from the date of its designation to undertake a second vote to finalize its decision.

AIG's chief executive, Robert Benmosche, told shareholders that because of the 2008 federal bailout of the company that the government has since learned a lot about the business and that this designation should not extend pro forma to other insurance companies.

According to rating agency Fitch, AIG and Prudential can expect higher capital standards and increased costs upon their SIFI designation, although the positive credit aspects of higher capital requirements are likely to be offset by competitive pressures from non-SIFI insurers.

The other development is that the National Institute for Occupational Safety and Health (NIOSH) on Tuesday launched a new virtual center focused on workers' compensation with the mission of matching federal injury and safety data with statistics kept by state regulatory agencies and the National Council on Compensation Insurance.

The purpose is to help NIOSH scientists come up with ways to prevent workplace injuries.

Steve Wurzelbacher, director of the new Center for Workers' Compensation Studies, told WorkCompCentral in an interview Tuesday that the program was launched in partnership with the Ohio Bureau of Workers' Compensation (BWC), the National Council on Compensation Insurance (NCCI) and the International Association of Industrial Accident Boards and Commissions (IAIABC).

"The idea is not to duplicate the research that NCCI is doing, but to apply data, such as that gathered by the Bureau of Labor Statistics for the North American Industrial Classification System, to workers' compensation data across a wide range of industries," Wurzelbacher said.

Some say that this new agency will help the workers' compensation industry better understand, prevent and regulate underreporting of injuries or claims.

For instance, OSHA reported in November 2011 that about half of the 350 workplaces it inspected for record-keeping violations as part of a pilot emphasis program launched in 2009 were found to be underreporting injuries and illnesses. How those are defined (either injuries/illnesses, or underreporting) I don't know, but this statistic seems questionable to me and we all know Mark Twain's take on statistics.

According to the center's website, research will cover jobs in construction, health care, manufacturing, public safety, maintenance, transportation, warehousing, the wholesale and retail trade and the service industry.

This past decade and a half is witnessing a huge expansion of the federal government - from oversight of our travel, communication, finances, housing, medicine and now even workers' compensation.

I'm not comfortable with this growing concentration of power. While AIG (and other institutions) were not allowed an organic demise which may have prevented even more financial pain in the country, the creation of laws intended to prevent another financial industry led recession inevitably have gone too far.

Much like regulation of travel and the Department of Homeland Security - I'm sure the extra 280,000 jobs created by this massive bureaucracy helped temper the unemployment numbers, the huge cost to American taxpayers for questionable security has to be examined.

We don't know what the cost of federal health care mandates will be, but if we just look at other federal programs we can assume it will be significant.

I have no hope that the federal government's push into regulating the insurance industry, or expanding its oversight of workers' compensation will save anyone any money. Just look at the intrusion of the Centers for Medicare and Medicaid into personal injury and workers' compensation settlements - more time, more money and an unproven net benefit to society.

I often get asked to speak or comment on trends in the workers' compensation industry. This is one trend I'm not happy about.

Surprise! PEOs Not As Bad As Thought

2013-06-04T04:11:00.002-07:00

Gomer Pyle, the television character played by Jim Nabors on the Andy Griffith Show in the early 1960s catch phrase was, "surprise, surprise, surprise!"

The National Council on Compensation Insurance (NCCI) says just that, as its most recent report on the Professional Employer Organization (PEO) industry refutes the common perception that PEOs are a workers' compensation problem.

In fact, the NCCI report suggests that non-PEO employers might do better if they managed risks as well as PEOs do.

“The conventional but untested wisdom has been that PEOs are a problem,” NCCI Chief Economist Harry Shuford tells WorkCompCentral. “Our analysis suggests that this is not supported by the data.”

NCCI reviewed claim development for PEOs versus non-PEOs in 2004 to 2006 policy years, and found that, in the voluntary large-deductible coverage area, the reported number of claims for a group of policies issued in a given year increased by 2% for PEOs in a five-year time span, compared to 4% for non-PEOs.

The ultimate cost of claims for voluntary large-deductible accounts increased 27.8% for PEOs, compared to 41% for non-PEOs.

The purpose of the NCCI study was to counter arguments that it was misleading to compare PEOs with non-PEOs based on results reported early in the claims process because of complications associated with PEOs, such as their physical separation between the worksite where the worker was injured and the location of the PEO staff responsible for reporting claims.

In terms of statistical relevancy, Shuford said, “This means that the more developed estimates of claims experience for PEOs is even better relative to non-PEOs than indicated by the favorable initial results for PEOs.”

With regard to the collapse of PEO-focused carriers, Park Avenue Property & Casualty Insurance Co., Pegasus Insurance Co. and Southern Eagle Insurance Co., NCCI finds that the recession had more to do with these carrier's problems than writing PEO business.

“There was no discernible pattern that suggested that the key driver was dependence on PEOs for premium,” Shuford said.

Some challenge the reports findings because the PEO industry is dominated by several very large businesses - in fact the NCCI report acknowledges that 15 large PEOs comprise two-thirds of the market.

And the critics say that NCCI ignores one inalienable fact - that all three carriers were focused on PEOs.

"What are the facts of the three insolvencies?" Michael Schroeder, president of Ohio-based insurance manager Roundstone Management told WorkCompCentral. "That is far more important than comparisons of workers' compensation delivery strategies. I am pretty confident a PEO with unchecked access to a workers’ comp insurer can very quickly undermine the insurer’s solvency. I’ve seen it before."

Schroeder may be right - the glaring commonality between the three defunct insurance companies is the focused risk assumption on the PEO industry.

But when California had minimum rates and very specialized, highly focused risk based specialty carriers, the small insurance market thrived - these small carriers completely understood the market that had been underwriting and had exceptional claims management programs that kept reserve ratios adequate.

The NCCI study is not the end-all, be-all to the PEO controversy. But it is a start and does, in my opinion, reflect that there is a legitimate place in the employment market for PEO supplied workers and the coverage of this employment risk by the carrier community.

Again, it all comes down to understanding your market, taking the necessary precautions to minimize risk, and properly managing the risk when the inevitable claim occurs.

NE Case Devalues Human Life

2013-06-03T04:07:00.000-07:00

When workers' compensation acts to shield an employer from egregious conduct, then the premise of the system needs to be reconsidered.

In Nebraska, a worker was asphyxiated in a grain bin, 58 feet tall and was 21.5 feet across, after his supervisor asked him to go into a grain bin and shovel grain into the center of the bin's conical base to facilitate the removal of the grain.

The employer was slapped on the hands by OSHA for several safety violations including: no lifeline or any other equipment that could prevent the worker from being buried; keeping an auger running in the bin while the worker was within it; failure to maintain communication with the worker while he was within the bin (the supervisor walked away and didn't return until the worker was already dead).

For this, the Nebraska appellate court said ... "too bad worker's family, but Nebraska state law would rather reward employers for bad behavior than compensate families adequately for the loss of a bread-winner or penalize employers for knowing violation of simple, effective, safety parameters."

[The court didn't really say that - I put it in quotes for sarcasm.]

The court DID say that, "knowingly ordering employees to perform an extremely dangerous job, willfully failing to furnish a safe place to work, willfully violating a safety statute, or withholding information about worksite hazards, still falls short of the kind of actual intention to injure that robs the injury of accidental character."

The court went on to uphold the constitutional validity of the act, explaining that the Legislature had a rational basis for electing to differentiate between intentional tort victims who are employees and intentional tort victims who are not employees.

This is not the bargain that was negotiated 100 years ago.

I understand that "the law" is "the law" and that workers' compensation is an exclusive remedy. I get that.

At the same time there also must be an appropriate remedy when an employer willfully (as noted by the court) ignores basic safety practices and knowingly endangers its employees beyond an OSHA wrist slap.

Last week I wrote a column on personal responsibility.

Chuck Holliday wrote in response:

"If you want to talk about personal responsibility, let's talk about corporations taking personal responsibility for their actions. You seem to forget that in many states, the WC system is a 'bargain,' if you can call it that, in which the employee has given up the right to sue his or her employer in tort in return for a no-fault system. Many employees would gladly give up the pittance they receive in no-fault benefits for the ability to sue their employer for its negligence in creating and maintaining an unsafe work environment. [In this Nebraska case, I might add, knowingly and willfully - this was intentional behavior as noted by the court.]

"I think we could turn back the clock on the 'wussification' of America a lot if we required companies to take personal responsibility for their actions and bear the full cost for the injuries they cause. Let's get rid of arbitrary caps on damages, forced arbitration, and administrative appeals of WC decisions. Anyone familiar with WC has to agree that workers continue to get shafted more under each new edition of the AMA Guides. Every year the number of injuries that qualify as WC injuries decreases, which it sounds like the new edition of the DSM will do, too.

"The real 'wussification' of this country is the trend to protect 'persons' whose names end in 'inc' or 'LLC' from taking responsibility for their actions."

In particular with regard to this Nebraska appellate court opinion, I couldn't agree more with Mr. Holliday.

The workers' compensation system fails employees, and their families, when it (and weak OSHA penalties) allows an employer to get off cheap in the death of another human being.

Every insurance category denies coverage to the policy holder where the damage is caused intentionally by the beneficiary.

That this case is even considered "accidental" is not just a miscarriage of justice, but shows callous disregard for the value of human life.

To read the court's opinion in Estate of Teague v. Crossroads Cooperative Association, No. S-12-702, 05/31/2013, click here.

TX Innovates With Specialty Networks

2013-05-31T05:24:00.000-07:00

Some may dispute this, but Texas continues to be a leading innovator in workers' compensation concepts, and not just because it is the home of non-subscription.

Prior to September 1, 2005, before the Texas Workers' Compensation Commission (TWCC) became the Division of Workers' Compensation (DWC) and the agencies duties were reorganized under the Department of Insurance, Texas was fodder for derision and criticism over the management of its workers' compensation system.

Since reformation and reorganization in 2005, however, Texas has led the way in establishing one of the most robust workers' compensation insurance markets in the country, with profitable underwriting for carriers, and affordable coverage for employers.

Employers opting into the state's system, rather than providing alternative benefit plans or going completely bare, has been increasing and carrier participation in the system has also been increasing.

The process has not been without pain, for sure. Injured workers' benefits are not the most generous, and medical coverage issues in the vast rural areas of Texas remain. Many physician and other medial vendors still feel that the Texas system lacks fairness in reimbursement for services, but participation rates remain steady.

One of the innovations that Texas brought to the workers' compensation market was medical management networks, and idea that has spread across the country with variations, but with the essential features mirroring those pioneered in Texas.

Texas is innovating again with new laws that would further the ability to create provider networks that don't easily fit within the certified network system created in Texas.

The certified network system in Texas requires application, interview, review, certification, maintenance and all sorts of other mandates to ensure that the network is operating properly and providing services without discrimination, and to ensure that physicians are properly paid.

With certification, however, comes cost and for small providers of specialty services or equipment, joining a network was prohibitive.

Texas is on the verge, however, of creating a method for these small specialty providers to become sub-networks, and thus create the ability to join larger networks that are certified.

This should in theory increase business for the small providers, decrease costs for networks, and offer more choice to payers.

Texas state Sen. Leticia Van de Putte, D-San Antonio, had little trouble moving Senate Bill 1322 through the state Legislature during the legislative session that ended on Monday. The bill passed the Senate with a 30-0 vote and won House approval with a 145-3 vote. The bill is now on Gov. Rick Perry's desk for his veto or final approval.

SB 1322 will allow home health care services and durable medical equipment providers to voluntarily create informal "specialty" networks. Before this bill, the legal requirements made it too costly for home health care and DME providers to form "certified networks."

The benefit to these specialty providers is consolidation of resources and operations - in particular billing and collection functions.

In addition the bill will allow home health care and DME networks to contract with certified networks and payers directly, which should increase business volume, in exchange for the discounted rates that a network will command.

Smaller vendors, who might be overlooked by some of the large health care networks, will now have opportunities for business and informal specialty networks can also provide services to underserved, rural areas.

Nothing is perfect, and nothing is set in stone - I'm sure there are downsides to this development. It is an untested concept and the idea still needs to get to the regulatory stage, assuming Gov. Perry signs the bill.

Nevertheless, they do things different in Texas, and managing workers' compensation is one of them. We'll see in a few years whether this idea pans out as expected.

NY's Failure in Leadership

2013-05-30T04:31:00.000-07:00

Robert Beloten, chairman of the New York State Workers' Compensation Board (SWCB), issued a highly critical bulletin on the non-scheduled permanent partial disability (PPD-NSL) rating process Tuesday that blames carriers, claimants' attorneys and treating physicians for "bad faith" delays that slowed implementation of a key piece of the 2007 reforms signed into law by former Gov. Eliot Spitzer on March 13, 2007.

The bulletin notes that prior to 2007, PPD-NSL benefits were considered "lifetime" benefits. Approximately 8,700 injured workers were classified as having a PPD-NSL claim each year, the bulletin states, which accounted for approximately 40% of the lost wage benefits paid annually. The average time from date of injury to maximum medical improvement (MMI) was 4.8 years.

The Spitzer reforms of 2007 put caps on the PPD-NSL process and was expected to save about $1 billion per year - but this didn't happen.

While the SWCB took some time to introduce new guidelines for the determination of benefits (the 2012 NYS Guidelines for Determining Permanent Impairment and Loss of Wage Earning Capacity, aka 2012 Guidelines) along with a new process effective January 2012, SWCB is expressing its disappointment with the lethargy the industry in adopting and utilizing the 2012 Guidelines and processes.

Beloten says private insurance carriers are the worst because they lose control over the funding of the PPD-NSL benefit:

"Data shows that despite these efforts, carriers have not achieved the level of PPD-NSL classifications that were expected. As of March 13, 2013, only 2,062 claims with accident dates from March 13, 2007 – March 12, 2008 have been classified, compared to 6,102 claims from 2002 at the same five year point. Private carriers are slowest – perhaps deterred by the requirement to deposit the present value of the PPD-NSL benefits into the Aggregate Trust Fund (ATF) if they cannot settle the claim within six months of classification. While increased Section 32 settlements prior to classification may account for some of the reduction in classifications, it is not sufficient to account for all of it. The average time from accident to classification has been increasing steadily and is now 6.4 years."

Taking aim at physicians, Beloten's bulletin says:

"The classification process has been plagued by non-compliance and bad faith delays. Many providers fail to provide the required medical documentation using the Form C-4.3, even when specifically directed and despite the significant fee payable to the provider. In some cases, parties have delayed classification by falsely claiming that they are in settlement discussions or by disputing that the claimant has reached MMI many years after the injury. These claims are based on alleged new injuries or the possibility of surgery, when none exists. These tactics result in prolonged temporary disability and forestall the classification process and imposition of caps, thereby driving up the cost of workers' compensation for all employers and undermining the legislative bargain on the 2007 Reform."

And with respect to attorneys introducing new injury claims or other tactics designed to prolong TTD status, Beloten says, "These tactics result in prolonged temporary disability and forestall the classification process and imposition of caps, thereby driving up the cost of workers' compensation for all employers and undermining the legislative bargain on the 2007 reform."

Beloten didn't criticize his own board, however, for taking 5 years to figure things out - Spitzer signed the reform law in 2007, and SWCB didn't issue its new guides and procedures until 2011, effective January 2012. That is a shame, because if Beloten wants any credibility at all with the participants in the New York system he must also accept part of the blame for the system failing to respond to legislative mandate.

In response to these delays, SWCB has issued a new program to speed up the process of impairment ratings, including the creation of "specialized parts in each district to handle the classification of PPD-NSL claims."

But some think that this process may violate another part of New York law that requires judges to handle cases from cradle to grave - I don't see it that way because the bulletin makes it clear that this is a voluntary program for the parties.

While SWCB chastises doctors on reporting, doctors say that the form, C 4.3, is unreasonably complex and difficult to complete.

This is a problem that is common in workers' compensation system in the bigger states - the complexity of the forms that are required to be used by participants increases errors, decreases compliance, and generally makes a mess out of things, not to mention that complex forms just take more time to complete.

But let's get to the heart of the matter - leadership. Beloten's bulletin points to a significant problem: delays in resolving disputed claims on PPD-NSL claims increased, rather than decreased, following the Spitzer reforms and this has created additional burden and expense on the system.

While it may be true that SWCB "has diligently enforced the duration caps since their enactment" the fact remains that the Board did not act diligently in the balance of its obligations under the act, and failure to accept part of the blame in a public manner is a failure in leadership.

New rules, new guides, new forms, new processes - all are great. But if SWCB can not accept responsibility for taking so long to implement these actions, how can it, after only one year, blame others for non-compliance?

If SWCB wants to be taken seriously, it must also look at itself, accept that it failed in its primary responsibility of timely issuing guidelines and procedures, THEN lay the foundation for others to follow the path towards improvement.

The Board should not blame others for a failure in the system to correct a deeply ingrained culture where the leadership itself didn't change.

DSM-V and the Wussification of America

2013-05-29T04:54:00.002-07:00

A bit of a controversy is arising in psychiatric and psychological circles with the release of the 5th edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM-V).

Many workers' compensation systems rely on earlier editions of the DSM for diagnosis and medical legal reporting of industrial mental health issues in arriving at indemnity equations.

While much of the controversy over DSM-V is the elimination of the Global Assessment of Functioning scale (GAF) which some states, notably California, uses as part of the whole person impairment percentage for determining a permanent disability rating, the more problematic issue with DSM-V is that there are more diagnosable conditions with lower thresholds for meeting diagnostic criteria.

This is part of a wider problem that America faces - the disease-ification of our population; making mountains out of mole hills.

In other words, more people are now being diagnosed with some condition that in the past would not have been an issue.

I'm not sure why this has occurred - perhaps it is our legal system which tries to find ways to pay people for wrongs they have experienced; perhaps it is our insurance system that won't pay for services unless there is some diagnosis; perhaps it is because of our social benefits system (Social Security, etc.) that won't provide benefits unless a physician has made a certain diagnosis.

I don't know - but one thing is for certain, if we are to believe all of these guides and manuals directing the health care community, we are all a lot more sick than we used to be.

Maybe this is a big part of what is driving up medical costs. My psychiatrist brother-in-law quipped once that in medical school they teach that 3/4s of what is wrong with a person is in their heads...

The authors of DSM-V seem to have good intentions.

Dr. William Narrow, the research director of the DSM-V task force and a psychiatrist who works for the Arlington Va.-based American Psychiatric Association (APA), defended the new tome to WorkCompCentral, stating that the new manual moves away from the GAF because it was too easy to game.

Narrow said the APA put the World Health Organization Disability Assessment Schedule Version 2.0 (WHODAS ) in the DSM-V for review and consideration by the mental health community.

Narrow said he felt the WHODAS "does a better job of assessing disability" than the GAF and is "very reliable." The GAF, he explained, "is not a measure of disability" but rather a "measure of overall functioning" that "mixes disability and symptomatology" in a way that the WHODAS does not.

Fair enough, but this unilateral reconstruction of a tool does not take into account myriad and complex systems that already make use of the earlier model.

And while Narrow may be correct about gaming GAF, the fact is that GAF has been in use for many, many years and is a standard without too much objection by those who use it.

Changing standards without legal authority or precedence is not just expensive, it is time consuming and difficult to do because of competing interests and politics.

But, regardless of the elimination of GAF, the fact remains that, as Paul D. Godec of Kissinger & Fellman, a labor and employment attorney in Denver, remarked to WorkCompCentral, "virtually every one of us is going to have some diagnosable condition under the DSM-V."

The broadening of diagnostic criteria just adds to the wussification of America - the removal of personal responsibility in society.

Wussification starts at a young age, with such otherwise benign events as organized sports that recognize every child with an award even if they are a loser.

It continues into adulthood with no-fault systems, such as workers' compensation or divorce, where no one is accountable for their own behavior because they are going to be taken care of regardless of how or who caused an accident or situation.

It seems that nearly everywhere one turns there is no personal responsibility anymore - it's always someone else's fault, or no one's fault. Everyone's a victim...

Whether DSM-V may or may not have an impact directly on workers' compensation systems is irrelevant - DSM-V makes more people ill when they were previously considered to be normally functioning.

We don't need more ill people in this country. We need people that are strong, healthy, vibrant, productive AND WHO TAKE RESPONSIBILITY FOR THEMSELVES. We do this by not recognizing illness when there really isn't any.

Remember the best selling self-help book from the 70's, I'm OK, You're OK, by Thomas A Harris MD? The emphasis of the book is helping people understand how their life position affects their communications (transactions) and relationships.

There are four states according to Harris:

I'm Not OK, You're OK
I'm Not OK, You're Not OK
I'm OK, You're Not OK
I'm OK, You're OK

The most common is number one: As children we see that adults are large, strong and competent and that we are little, weak and often make mistakes, so we conclude I'm Not OK, You're OK.

DSM-V emphasizes that I'm not OK: I'm a wussy and a victim so take care of me...

We need medical manuals that emphasize number four, where people gain the maturity to engage in Adult to Adult dialogue and stop with the victimization mentality that has become so prevalent in American society.

Let's stop the wussification of America and refuse to recognize trite diagnosis that do nothing other than give physicians and other health care providers something new to put on their bills to insurance companies for reimbursement.

The Profile and Why Federalist Expansionism is Alarming

2013-05-28T04:12:00.003-07:00

“My dad fought a war so this can never happen in America. I will not dishonor my father’s memory by giving up what he fought for. No, sir. With all due respect, I will not consent to a search without a proper warrant.” - Larry Gaines, private pilot to a Customs and Border Protection (CBP) agent seeking an unlawful, warrantless search of Gaines' aircraft because his flight fit a "profile" of “from west to east, from California.”

Coming off the Memorial Day holiday weekend, where the nation pays tribute to those who have fallen in the name of our country, I'm struck by the perversity of our collective sentiments versus an incongruous police state that has been evolving since terrorism was declared a national threat.

If you follow any sort of politics at all outside the workers' compensation arena you might have noticed an alarming trend over the past decade - expansion of the federal government's willingness to disregard individual Constitutional rights and the use of its mighty resources to quell individual dissent.

This started with the creation, funding and expansion of the Department of Homeland Security (DHS) and its more familiar agency, the Transportation Security Agency (TSA). Despite billions of dollars in funding for personnel and fancy machines, there has not been a single case of terrorism that has been thwarted by this massive bureaucracy.

We get a false sense of security as backscatter machines prob our bodies with electrons and we take our shoes and belts off and remove lap top computers from brief cases - while questionable TSA employees rifle through our bags committing theft (and we all know that the few that were actually caught are only representative of a much bigger problem).

But we all accept TSA like apathetic sheep because the federal government said we have to in order to ensure orderly travel, despite the fact that there is not one scintilla of evidence that TSA has ever made travel safer. None.

Then we get to Larry Gaines. His plight is not unique at all now in the general aviation community. It seems that a couple times per month some completely law abiding private pilot is detained and essentially searched, without warrant, and without legal authority, in the name of terrorism, despite the fact that general aviation has never been identified as a credible terrorism threat - it's simply much, much easier to plant a bomb at the Boston Marathon than it is to learn how to fly a plane and rig it as an explosive device.

And, by the way, these reports of aircraft and pilot interceptions do not involve the ONLY governmental agency that has ANY authority whatsoever over an aircraft and its pilot - the Federal Aviation Administration (FAA). The FAA, from what I have read thus far, disassociates itself completely from the police activity of these rogue federal agencies.

The fact is that neither DHS, TSA, CBP or any local police agency has any authority WHATSOEVER to detain, search, investigate, confiscate, prosecute, etc. any violation of any aviation law or regulation - NONE. They can not conduct "ramp checks" (inspecting an aircraft on the ground as a matter of course); they can not confiscate pilot certificates; they can not search an aircraft or detain a pilot for anything that occurs in the air, or at an airport once past security fencing.

And yet that does not keep these entities from using their police authority to engage in these unlawful activities because they have money, ergo power, and will use that ostensible authority because they have the resources and know that in order for YOU to muster sufficient resources to protect your rights you need to spend a lot of money in a short period of time, and by then these autocrats have had their way - they've made their point.

Other recent, glaring, and despicable examples of the federal government's disdain for the People's Constitutional Rights are the Justice Department's recent actions against journalists - unprecedented, and unfounded activities that are designed for no purpose other than to stifle the ability of The Media to keep a check on government.

There is the warrant against Fox News reporter James Rosen where the Justice Department with the blessing of the Attorney General of the United States, Eric Holder, obtained his Google account emails in which he corresponded with a State Department analyst suspected of leaking classified information about North Korea. Rosen was doing his job - he did not violate any laws, he did not engage in illegal activity, he did not create a security threat or a breach of safety for the public.

Investigators routinely search the e-mails of suspected leakers, but Congress has forbidden search warrants for journalists’ work product materials unless the reporter committed a crime - and Rosen committed no crime. His activity is Constitutionally protected and this very same issue has come before the United States Supreme Court many times in the past and on each occasion the government has lost.

But because the government deemed Rosen's activity against its own interests - SECRECY - they have engaged in a tactic designed to quell his First Amendment right of freedom of the press and have used him as an example to make sure that other journalists don't start investigating things the government doesn't want you to know.

The federal government knows that they have resources, and that it takes lots of money to fight them.

And of course there is also the FBI's seizure of Associated Press reporter's phone records in the name of ferreting out who leaked information about a potential terrorist plot.

The issue isn't a direct threat to The Press - but the result has been to chill sources, and without sources news can not be responsibly reported.

So while The Press experiences some legal challenges, the practical effect is that people are no longer willing to talk to The Press for fear that the federal government is going to come after them by the flagrant disregard of the Constitutional rights of journalists.

What does this have to do with workers' compensation?

Maybe nothing. And, maybe - everything.

We're in our own little cocoon of the workers' compensation world. We fight about benefit rates, about reimbursement to vendors, about waiting periods and presumptions. We alter standards for causation, carve out separate rules for psychiatric issues, develop formulas for indemnity, research risk rates and actuarially determine which business classes deserve our underwriting attention.

But once the federal government encroaches on the rights of the people, and the rights of states to govern as they please, none of what we do in work comp will matter. States won't need to distinguish themselves, or build systems to fit their unique cultures, because the Feds will take over for us.

The increasing power of the federal government in all respects of our lives should be alarming to you. If you recall there have been attempts to expand the powers of the federal government in insurance regulation, there have been attempts to create a federal net for workers' compensation, and perhaps the most invasive federal involvement to present is the aggressiveness of the Centers for Medicare and Medicaid Services to go after Medicare funding from awards.

And don't forget that we now have federally mandated health insurance...

Is the federal government going to interfere with workers' compensation trends because they might fit the "profile" - going from west to east from California? It's been proposed before and if we don't keep a check on federal power then we may one day wake up to a rude, new, reality.

postscript: see this article on targeting general aviation and the growing police state by The Atlantic writer James Fallows: http://www.theatlantic.com/national/archive/2013/05/annals-of-the-security-state-even-more-airplane-stories/276239/.

Why I Don't Believe in Presumptions

2013-05-24T04:44:00.000-07:00

A recent Oregon case provides an interesting perspective on statutory presumptions, and is demonstrative of why I generally don't believe in these statutory creatures.

Alan Hull worked as a fire district chief for the Estacada Rural Fire District.

In June 2007, the Clackamas County Sheriff's Office informed him that it suspected one of his long-term employees had embezzled $1.9 million from the fire district during the course of several years. The sheriff's office asked him to go undercover and gather evidence against the employee.

Hull agreed to do so, and the employee was later arrested.

The embezzlement, however, became the subject of public concern and anger. Some members of the public demanded that Hull be removed from office.

He suffered a heart attack in October 2007, shortly after asking his wife if she had overheard a comment by a nearby individual about the embezzlement.

Hull filed a claim for benefits, contending his heart attack was the result of stress from his undercover work and the community anger directed at him.

An administrative law judge ruled that Hull was not entitled to benefit from the statutory "firefighter's presumption," which provides a rebuttable presumption that a firefighter's cardiovascular condition is a compensable occupational disease.

The judge reasoned that since Hull's heart attack was caused by his stress, his claim was for a "mental disorder" and not a cardiovascular condition. The judge then proceeded to apply the heightened standard of proof for the compensability of mental disorder claims and denied Hull's request for benefits.

After the Workers' Compensation Board reversed the Court of Appeals Court of Appeals said it read Oregon's statutory scheme as providing that when a cardiovascular disease is caused by a stress-related mental disorder, the firefighters' presumption does not apply.

Since it was undisputed that Hull's heart attack was caused by his work-related stress, his heart attack had to be treated as a mental disorder, the court said.

In my mind, and I'm no doctor obviously, stress from fighting fires and saving lives, dealing with death, doom and destruction on a regular basis is no different than stress from engaging in a job activity that is generally outside the scope of defined duties but nevertheless results in considerable damage to the heart.

I'm no expert on Oregon work comp law, but Hull's claim wasn't for psychiatric or psychological injury - it was specifically for a heart attack and the Workers' Compensation Board's decision was the correct application of the law.

The applicable statutory presumption, ORS 656.802(4) reads:

"Death, disability or impairment of health of firefighters of any political division who have completed five or more years of employment as firefighters, caused by any disease of the lungs or respiratory tract, hypertension or cardiovascular-renal disease, and resulting from their employment as firefighters is an occupational disease. Any condition or impairment of health arising under this subsection shall be presumed to result from a firefighters employment. However, any such firefighter must have taken a physical examination upon becoming a firefighter, or subsequently thereto, which failed to reveal any evidence of such condition or impairment of health which preexisted employment. Denial of a claim for any condition or impairment of health arising under this subsection must be on the basis of clear and convincing medical evidence that the cause of the condition or impairment is unrelated to the firefighters employment."

In comparison, the Court of Appeals found that Hull's myocardial infarction was a physical event that was the product of a mental disorder under 656.802(1)(b), and thus applied 656.802(3) dealing with "mental disorders":

Notwithstanding any other provision of this chapter, a mental disorder is not compensable under this chapter unless the worker establishes all of the following:

"(a)The employment conditions producing the mental disorder exist in a real and objective sense.

"(b)The employment conditions producing the mental disorder are conditions other than conditions generally inherent in every working situation or reasonable disciplinary, corrective or job performance evaluation actions by the employer, or cessation of employment or employment decisions attendant upon ordinary business or financial cycles.

"(c)There is a diagnosis of a mental or emotional disorder which is generally recognized in the medical or psychological community.

"(d)There is clear and convincing evidence that the mental disorder arose out of and in the course of employment."

The Court said that the mental disorder provision was an exception to the firefighter's presumption and said that the legislative history supported this interpretation.

Because there was no dispute factually that Hull's heart attack was either induced or aggravated by mental stress, the Court said the injury must be analyzed under the mental stress statute.

My suspicion is that had Hull and his attorney anticipated that stress would trump the heart attack presumption that the case would have been worked up differently and that there would not be case law on the issue.

This is one of the reasons why presumptions lead to increased litigation, perhaps unfair denial of benefits, and are just plain troublesome.

Had Hull known that his case would be analyzed as a mental case rather than a physical case he would have presented sufficient evidence that such was the case. Rather, Hull relied up on a presumption that turned out to be inapplicable.

But it makes no sense because it is undisputed that Hull's heart attack was cause by work issues!

Perhaps technically the Court of Appeals is correct, but in the application of this case the analysis is backwards. One way or another it is undisputed that Hull's heart attack was industrially caused but for an incorrect application of the evidence.

The case was remanded, presumably for further work up. In the meantime a firefighter who went above and beyond call of duty suffers not only indignity, but a real injury, real disability, and further delay.

And the employer may get to pass the buck onto other social systems for its ultimate responsibility.

AL Needs Comp Modernization

2013-05-23T04:35:00.000-07:00

An Alabama appellate court was pitched the troubling conundrum of who pays for an industrial injury pending a resolution of liability between two different employers - and whiffed.

Apparently there is no law in Alabama directing what would seem to be a relatively common problem.

In the meantime the injured worker ends up facing the same sort of delays one would have faced without workers' compensation in place.

In Office Max Inc. v. Academy, No. 2110861 and Office Max v. Richey, No. 2110862, 05/17/2013, Sandra Richey filed a civil suit against her employer, Office Max, alleging that she had suffered injuries to her knees in 2002 and to her shoulders in 2005, during the course of her employment.

On three occasions – in June 2008, March 2010 and July 2010 – Richey requested the issuance of orders directing Office Max to provide her with medical care from the treating physician it had authorized.

Trial judges granted each of her requests.

In arguments presented to the trial court at a hearing on Richey's second request, Office Max pointed out that Richey had left and taken a job with Academy Ltd. Office Max contended that this subsequent employment had caused or contributed to Richey's knee and shoulder problems and so Academy should be held liable for her benefits.

Office Max then filed a motion, which was granted, to implead Academy as a party (implead is simply adding another party to a civil case to adjudicate liability).

Academy moved for summary judgment in its favor on Office Max's claim that it should be liable for Richey's benefits, stating that any injuries Richey might have sustained in the scope of her employment with Academy were merely recurrences of injuries she had originally sustained in the course of her work for Office Max.

A trial judge granted Academy's motion and granted Richey's FOURTH (emphasis added) motion to compel Office Max to pay for additional medical care.

Office Max appealed both decisions and the appeals were consolidated by the Court of Civil Appeals.

The court found that summary judgment in favor of Academy was improper because even Ritchey's treating physician said that her employment with Academy may have contributed in some part to her condition.

Presiding Judge William Thompson in a concurring opinion agreed that the summary judgment had to be reversed, but he wanted to highlight the problem Richey was having in obtaining medical care.

"There needs to be a rule of law, preferably a statutory one, that enables an employee situated like the one in this case, where the injuries are compensable and there is a question only as to which employer is liable for the benefits, to obtain necessary medical treatment as expeditiously as possible while the two employers litigate who is ultimately responsible for payment of the medical benefits," he opined. "I encourage our legislature to amend the Workers' Compensation Act...and to grant a trial court, in cases involving disputes where two or more employers are potentially liable for benefits for one or more compensable injuries, the authority to order each employer to pay a proportionate share of the employee's medical expenses pending a final determination of liability or, especially in cases involving application of the 'last-injurious-exposure rule,' to order the employee's former employer to pay the medical expenses pending a final determination of liability."

Reform is in the air and a number of states have passed substantial changes to their systems this past legislative season.

Alabama's lawmakers can easily deal with this issue by allowing the injured worker to make an election and then let the employer/defendants battle out the liability apart from the injured worker's claim.

Workers' compensation is supposed to be about providing medical treatment and indemnity to injured workers efficiently, expeditiously and without question of negligence or liability. Failure to direct who pays for what in the pendancy of a dispute between employers obstructs this mandate.

The Timing of Pain & IMR

2013-05-22T04:51:00.000-07:00

Ezekiel J. Emanuel, an oncologist and former White House adviser, is a vice provost and professor at the University of Pennsylvania. He is a contributing opinion writer for The New York Times on a range of topics including health and health policy.

Earlier this month Emanuel opined that some interesting research on pain revealed that it's not the pain itself that is definitive of the perception of the quantity of pain experienced, but the timing of the pain.

More precisely, "the pain at the end — whether it is getting better or worse — plays a disproportionately large role in determining how we remember an experience."

I think this general statement on the perception of pain is also applicable to workers' compensation and the myriad of processes that have been devised over the years as systems go under constant "reform."

The past couple of days I briefed over the complex nature of workers' compensation and just how much coordination of disparate interests is necessary in order for the system to work.

But we always seem to go back to ground zero - that is the feeling and criticism that workers' compensation doesn't work very well for either the employer or the employee.

Is that always the case? Or is it just that the most recent pain is the pain we remember most?

There has been a lot of pain recently in workers' compensation. Pain that can not be numbed with opioids or narcotics. We've seen struggles with repackaged drugs and over-prescription. There have been issues with vendors seeking reimbursement, claimants being denied care and dying, employers facing tighter insurance markets, physicians facing pay cuts, carriers with poor investment opportunities - all sorts of pain in the work comp system.

Emanuel uses remodeling a house as a metaphor for understanding the pain perception studies reflecting accurately that remodeling, regardless of how well it goes during the process, never ENDS well because there are always some irritating, niggling problems that cast a shadow on the overall experience.

This is workers' compensation - the experience of going through the system is painful because there is always something at the end that imparts some discomfort to those involved.

A wave of states have passed reformation laws this past year - some, like California, were massive undertakings involving untested but optimistic programs.

One of the programs instituted in California is the Independent Medical Review (IMR) system - a program borrowed from Texas but with some interesting twists.

WorkCompCentral reviewed the published reports of the new IMR process, albeit an immature process with only 34 results published to date.

While there might be some alarm that nearly three out of four treatment requests that were denied by utilization review were also deemed medically unnecessary, what this means to me is that nearly one out of four treatment requests denied by UR were in fact deemed proper at the IMR level.

Reasons cited by reviewers in upholding treatment denials included a lack of documentation to justify a request, requests for treatments not supported by the Medical Treatment Utilization Schedule (MTUS) or any other peer-reviewed evidence-based treatment guideline or requests for treatments that guidelines say should be pursued only after attempting other therapies.

What is encouraging in these denials is that the IMR process is giving clear guidance to the medical community dealing with workers' compensation injuries that there needs to be some documented justification for the request. Speculation, tradition, or the "I'm the doctor" reason, no longer are sufficient.

Obviously one quarter of the requests were properly documented, were properly requested, and UR was found to be wrong.

And the parties didn't have to wait for a year to find out that UR was wrong - this is a huge boon to injured workers seeking treatment and should dramatically increase efficiencies.

Would IMR have helped Charles Romano get the treatment he needed instead of the delays and denials experienced that resulted in his death? Perhaps not, based on the facts in Romano and the apparent disregard for authority demonstrated by the Sedgwick claim examiner in the case.

But perhaps IMR would have helped avoid this disastrous case. We'll unfortunately never know.

IMR in California is contracted out to Maximus Federal Services, which has been providing similar services to the California Department of Health for some time (in addition to many other state and federal programs).

General health is different from workers' compensation - the laws are different, the variety of treatment is different, the operating environment is different, the exposure by the payer is different, and the market is huge (work comp is only 2% of the overall health market).

Nevertheless, comparison to Maximus' work in the general health field is compulsively inviting.

Data on the Department of Managed Health Care’s website shows that between 2007 and 2011, Maximus approved a group health plan’s decision to deny treatment in 44.2% of the 8,529 cases it reviewed. In 36.6% of cases, Maximus overturned the decision to deny a procedure or treatment, and in 19.2% of cases the group health plan agreed to approve the procedure before the IMR process was completed.

The sample of cases above is much, much larger than the 34 cases published in work comp IMRs so one can't draw any definitive conclusions in such a comparison at this time.

But it is important in my mind that Maximus, in the general health setting, overturned a carrier's denial in 1/3 of referred cases, and nearly 1/5 were approved before a Maximus opinion was rendered.

Maybe I'm just a glass-half-full kind of guy, but I find these statistics encouraging because they demonstrate neutrality and independence.

Or, perhaps what the statistics are saying is that there has been significant adjustment in the prescribing practices of physicians.

Because general health is far larger than workers' compensation and the fact that only 8,529 cases were reviewed over a period of 4 years indicates that the vast majority treatment requests don't generate controversy or dispute - if this translates to workers' compensation then the system will become much more efficient.

Our perception of pain is based on the timing of the experience - will IMR reduce our pain? Obviously it's too early to say yes or no in any definitive manner, but the early results are encouraging.

Workers' Compensation Finance 101

2013-05-21T04:56:00.002-07:00

I wrote yesterday about the "front end" of workers' compensation - bringing money in - and the "back end" of the system - paying money out.

Some challenged me that I had things backwards; that claims should be the front end because that is the ultimate focus of work comp.

Front end or back end - I don't really care which order you place the two. The point that I was making is that there are two distinct processes involved in the worker's compensation game that are extraordinarily complex and require a good degree of coordination, forecasting and soothsaying in order to operate reasonably efficiently.

Another point that I was making is that workers' compensation is a cash flow system.

By this I mean that money comes into the system through employer assessments; and money flows out of the system by benefit distribution.

Along the way all of us (i.e. those whose jobs are to perform some element of administration) take a little money out for our services and products.

Hopefully when all of the math is done, everyone along the path of the cash has received fair pay for their work and the net result is efficient use of a limited resource in a net sum zero game where no one takes an unfair advantage of the cash flow.

The reason workers' compensation administration is inexorably focused on costs is because it is an expense item on the balance sheet of the employer and each step of the way, from policy procurement and inception to benefit delivery, involves paying someone or for something to make the event happen and the system work.

Workers' compensation is never on the asset or income side of the balance sheet regardless of the value provided to either employer or employees. Much like an employer sponsored health or retirement plan, despite the obvious competitive advantage to the employer in attracting qualified employees, coverage is a cost. Except work comp is a mandatory cost.

The costs start at the very beginning of an employer's participation with obtaining insurance.

Employer seeks broker or agent for insurance needs, and of course one of those needs is the mandated coverage for employment related injury or illness claims. Brokers and agents don't work for free, so there is a fee attached to their service. Sometimes it is a commission, sometimes it is a flat procurement fee, sometimes it is a blend of the two - but regardless, a few cents out of every policy dollar is extracted immediately.

Cash then flows to the insurance company (or if the employer is self insured to the administration company or administrating department). The job at this juncture is to aggregate the employer's policy cash with cash from other sources (i.e. employers or is self-insured, departments) so that there is some investment leverage.

At this stage there are administration expenses - wages of insurance workers to handle paperwork, calculate risks, determine investment market status, gather statistics, provide telephone service, etc. A few more cents get extracted from the dollar to pay for these necessary elements, and a couple more cents are set aside to put into the investment kitty.

The investment portion of the workers' compensation cash flow is not without cost - there are brokerage fees, document administration fees, asset management fees, salaries, commissions and bonuses along the way.

Then a claim comes along. When this happens more than a few pennies are set aside. This is called reserves. The reserve pool consists of money that is to cover the various costs of administering the claim and to support the payment of benefits.

As the claim makes its way through the system little bits of that reserve pool are released back into the general economy in the form of indemnity and payment for medical services and products, and sometimes other ancillary services or products (such as rehabilitation).

Sometimes the flow of the claims dollar encounters some obstacles which diverts the flow - a Medicare issue or child support order. A few more pennies are shed from the dollar's migration through the system.

This is where a lot of the perceived friction in workers' compensation comes along and gets emotions a little more tested because the value does not appear to flow back to the employer or the injured worker. The dollar sheds like a dog in Spring and it sometimes is difficult to account for all of the hairs. Sometimes all we see is a big mess, and sometimes we are allergic to the material shed.

But probably (my guess) by the time the dollar gets to this stage it has already sloughed off at least half of its purchasing power, so things get a bit miserly at this stage.

Eventually the dollar makes its way out of the claims process. By this time many people have had their way with her. The dollar has been yanked through policy procurement commissions and fees, wended its way through the carrier management and administration process, diverted for investment, and filtered to pay for that claim.

If everything works right, there isn't much left over from that cash flow, and if there is then the employer gets the last penny or so in the form of a policy dividend.
And don't forget about taxes - the government has expenses in the administration of workers' compensation: insurance department salaries and costs to monitor carrier and self-insured behavior; dispute resolution system administration costs; research and public policy formulation; and of course the political costs too.

Taxes are extracted all along the cash flow, from policy surcharges to carrier fees and investment gains.

Sometimes there are elements extracting pennies during the dollar's flow through the system that are unreasonable, don't provide any return value or are simply stealing. When this happens there are other processes and services that extract a few pennies to pay for enforcement, with or without repatriation or collection.

Since no one likes to experience a pay cut, any time there is an attempt to reel in the cost of workers' compensation there is protest and/or rebellion from some interest group that is affected - but as you can see, there are many, many opportunities to save money as it goes down the work comp river of cash.

When all the math is done, if there is a deficit then the employer has to pay more for the same product than last year. And if there is a credit then presumably the employer pays less.

There are a lot of moving parts to workers' compensation, each with an attendant cost. Because it is so complex we can not, in general, deal with all of the costs of all of the parts at once so we pick and choose according to our understanding and how "soft" a particular cost element is.

So there you have it - Workers' Compensation Finance 101. This is why we need really smart people to run this thing!

It's Not Rocket Science, But Close

2013-05-20T04:22:00.000-07:00

After the NCCI Annual Issues Symposium (AIS) I received an email from Peter Rousmaniere, a noted columnist who covers the workers' compensation industry for Risk & Insurance Magazine.

Peter was at AIS and I was fortunate enough to share a couple moments with him, though not enough. I've always considered Peter's observations on workers' compensation to be sharp and insightful - considerate of the many interrelations necessary to make the system work.

In an email to me after AIS, Peter said: "I am repeatedly struck when I come to this conference how all consuming, for professionals in it, is the work behind the sustainability of insurance enterprises, which is such a hugely complex undertaking, which branches out into brokerages, the delivery of insurance throughout the complex economy, the demand that not a single claimant be left holding the bag (almost), and the recruitment of the next generation of leaders for the task."

Peter makes a very poignant observation.

Most of the time we deal in the claims environment. For instance, most "reform" legislation and regulation deals with benefit delivery, i.e. claims.

In claims we focus on the friction between the payer (be it insurance company, self-insured/administered employer or self-insured/third party administered employer) and the recipient (injured worker or vendor).

The claims process is complex and requires coordination of many moving parts to successfully accomplish the conflicting goal of resolving expenses and rendering medical services and indemnity to the claimant.

When done right we can say that the claims process has delivered value to all constituents, particularly if the process executes timely and efficiently.

Most of us lack much understanding of the complexity of gathering, maintaining, and protecting the resources that are necessary in order to meet the delivery promise of claims.

At AIS, as Peter observed, one comes to a much better understanding of what the "front end" (policy procurement) of workers' compensation requires in order for the "back end" (claims fulfillment) to meet obligations.

To say that the hugely complex process on the front end is tenuous and frail is accurate - there are so many moving parts to the front end of the insurable obligation that it is a wonder that the workers' compensation industry is able to stay right side up.

When working the front end, consideration needs to be taken of the general economy - and not the present general economy, but forecasts of economic trends overall, and within industries, and even within sub-industries.

Complete understanding of the market risk being undertaken is absolutely necessary - sort of a micro-risk analysis - because the ability to manage anything requires detailed knowledge of the subject.

Corollary to understanding the micro-risk is understanding the investment risk. Underwriting profits (premium minus claims) is virtually unheard of in workers' compensation. The lure of workers' compensation insurance business is cash flow to place into investments that theoretically will beat inflation and return a profit.

Typically insurance cash (gross premium less reserves and less operating expenses and losses) is placed into relatively safe, albeit benign, investments - bonds.

As we know, there are all sorts of different bonds with different maturities and different rates of return. Insurance financiers have their hands full now as older bonds that were purchased years ago with good yields (when inflation was relatively high compared to today's environment) are maturing and need to be replaced - but historically low interest rates don't give bond purchasers many options for returns.

So the long term portfolio of carriers is not going to generate the same returns as in years past, which puts pressure on rates and premiums in order to keep cash flow sufficient to meet the legal obligation of paying claims.

What a conflict of resources versus market acceptance to manage.

Then there is the risk management part of the front end - reinsurance.

Reinsurance is simply insurance for insurance - protecting the really big downside to prevent complete catastrophe. The reinsurance game is insurance on a much larger scale, involving much bigger money, much bigger investments and much bigger claims.

Reinsurance is that funny sort of dichotomy where insurance companies find themselves as insureds, paying premiums and making claims. The complex financial instruments that are used to manage this relationship can sometimes back fire (see Unicover) and then there is complete disaster because of cash flow impingement on insurance companies - and particularly in insurance, cash is king.

Then there's the whole cadre on the sales end of insurance - brokers and agents.

The complexity of the broker relationship in the industry is completely under valued and misunderstood; talk about potential conflicts of interest!

The broker's obligation is to place the employer with the most satisfactory insurance product available for the employer's particular risk. Most of the time this is dictated by cost, aka premium. Some of the time, though, this is dictated by service quality and risk management techniques and systems. Some of the time there simply isn't a market for an employer's risk. And some of the time brokers need to come up with creative, sophisticated contractual relationships in order to get the best value for an employer.

But the broker is paid in commissions - so there is this tension in the relationship that is dictated by the conflict in getting the best value for the employer versus the amount of money that a commission is going to generate off a particular policy.

Going to AIS is going to a different workers' compensation world - one where the language is different, and the concepts are complex and difficult. It is an objective world.

I look at the front end as the more objective side of the workers' compensation industry. The front end is highly consumed with lots of numbers because it is the numbers that ultimately drive the financial ability of the system to work. When it all is considered we're really just talking numbers on financial statements. There's not a whole lot of fuzziness when just numbers are involved.

I see the back end of the industry, claims, as largely subjective. We have numbers to track costs and efficiencies, but ultimately we're dealing with the feelings of the end-subjects of the claims processes - the injured worker and to some extent the employer. Because of the emotions that are part of claims there's quite a bit of fuzziness involved - it is much more subjective.

That workers' compensation even works is amazing and testament to social intelligence. I spend a lot of time in this blog criticizing "the system." But every once in a while it's good to pull back and take a look at everything that needs to come together in some coordinated fashion for the system to work.

Workers' compensation is amazingly complex and sophisticated which is why it is so hard for those not in the industry to understand it. It's not rocket science, but darn close.

And most of the time the system does work.

Boulders and Making A Life Better

2013-05-17T01:59:00.001-07:00

Bolders bring out the best in us, and boulders consequently bring out the best in life - our relationships with others.

That was the message that Aron Ralston delivered to an enraptured audience at NCCI's Annual Issues Symposium (AIS) yesterday.

Coincidentally I had read his book - Between a Rock and a Hard Place - several years ago on a transcontinental flight traveling to and from Florida for a conference (might have even been an NCCI conference).

Ralston is the outdoorsman who was hiking the Utah badlands when a rock slipped as he was climbing down into a crevasse and pinned his hand so he couldn't move - and after 6 days he cut his hand off to escape.

Wow - what a tremendously powerful speaker and story. It was one of the most awe-inspiring speeches I had ever heard: lively, engaging, dramatic, comical, with a powerful, powerful message that he dramatizes in the most extraordinary manner.

I started a standing ovation for him when he was done, I was so moved by his speech.

The boulder that had his hand pinned became his metaphor for obstacles in life.

His primary message - boulders, when confronted and dealt with directly, bring out the best of us and as a consequence, of life.

Everyone encounters boulders in life. Some are small, some are large. Some are personal, some are institutional.

The challenge in life is not to avoid boulders, because that is impossible, but to confront boulders directly and to deal with them. Only in taking on the boulders can we grow and appreciate what life truly is about, and thus appreciate and deal with our own limitations.

Survivalists are taught an acronym - S.T.O.P.: Stop (i.e. slow down, don't panic, so that you can...), Think (get a clear head, you have to be able to examine the...), Options (there are always options and some are better than others, but until you stop and think you can't see the options, and once you have identified the options you....), Plan (set up the plans to extricate one's self from the boulder that has you pinned).

The message - don't panic. Take the available time necessary to examine the situation so you can craft the best possible solution.

Sometimes that solution isn't very palatable, but it may be the only solution and so we need to plan the execution of that solution carefully and understand the consequences of our action.

In Ralston's case, his only solution was to cut off his arm. He faced smaller boulders though - his knife wasn't sharp so he had to stab with it. But then he encountered bone ... forgot about that detail ... so he had to use his body weight to leverage against the boulder to break the bones to finish cutting.

He improvised a tourniquet, and had the good fortune to time his exit just as a family of hikers was in the area and could summon help.

In the face of extreme adversity, Ralston came up with solutions that ultimately, with a little luck, saved his life.

Indeed, changed his life.

Ralston unwittingly made a direct correlation to the workers' compensation industry in his personal observation about our Purpose in Life: it is simply to enrich the lives of others to make their lives better.

So simple.

And when we get down to the very basics of workers' compensation, that is the fundamental purpose of our jobs - to enrich the lives of others to make their lives better.

This is the Zen of workers' compensation.

At the NCCI AIS there was plenty of actuarial talk, lots of numbers, statistics, data, big picture overview stuff that insurance wonks love to describe with big, confusing, multi-syllabic terms.

But what all of these numbers and statistics actually mean are the real world is the business side of making the lives of those who get into bad situations better.

Of course Ralston didn't know that his interpretation of the purpose in life was such a powerful metaphor for the workers' compensation industry. Ralston was talking about relationships and how, when he was recording what he thought would be his last words, his focus was on saying good bye to family and friends - the things that really matter in life and for which there is little appreciation until one faces death while still living.

I always learn a lot at the NCCI AIS every year. This year I learned much more than I usually do.

Today, forget about the costs, the utilization review or treatment guidelines. Forget about rates, premiums, fraud, opioids, liens.

Instead, make someone's life better. That is your job.

Who's To Blame?

2013-05-16T04:38:00.001-07:00

I've written about Derek Boogaard, chronic traumatic encephalopathy (CTE) and Toradol several times in the past in this blog. Boogaard is the National Hockey League player who died at age 28 in 2011 from a prescription drug overdose and the autopsy showed that he had CTE, which is a a degenerative brain disease seen in people with a history of multiple concussions.

The estate of Derek Boogaard on May 10 filed a wrongful death lawsuit against the NHL in the Circuit Court of Cook County, Ill. In addition to alleging that the league failed to warn Boogaard about the risks of concussions and the drug Toradol, the complaint also says the league failed to monitor the prescribing practices of team doctors in the dispensation of prescription pain killers.

This is a new twist to the professional athlete lawsuit trend and in particular those brought by National Football League players against the league seeking compensation for CTE and the mis/over-use of Toradol.

Boogard's estate alleges, essentially, medical malpractice at the direction of the NHL and the teams Boogaard played on.

Some of the allegations:

1. After fracturing his tooth during a fight in October 2008, Boogaard received 19 Vicodin prescriptions from nine different physicians, dentists, trainers or staff with the Minnesota Wild. According to the complaint, he received a total of 432 pills for the fractured tooth.

2. On April 14, 2009, Boogaard underwent nasal surgery and was prescribed 40 pills of oxycodone. On April 21, 2009, he had shoulder surgery and was prescribed an unknown number of oxycodone pills.

3. During the 2008-2009 season, Minnesota Wild team doctors wrote Boogaard more than 40 prescriptions for more than 1,000 narcotic painkillers, the complaint says.

4. Boogaard sought treatment for an opioid addiction in September 2009 at an inpatient facility in California and enrolled in the league’s mandatory substance abuse and behavioral health program and aftercare program. He was told to refrain from taking opioids in the future, and that he could be suspended or kicked out of the league if he relapsed.

5. In the summer of 2010, after he signed a contract with the New York Rangers, Boogaard started asking team trainers for Ambien and Vicodin. According to the complaint, while Boogaard was supposed to refrain from taking painkillers and Ambien under the league's substance abuse policy, New York Rangers doctors wrote him five prescriptions for hydrocodone and 12 prescriptions for Ambien or a generic equivalent.

6. Boogaard relapsed in 2011 and was placed in an inpatient facility in California after he showed up for practice so impaired that he could not stand up. While he was in treatment for the second time, Boogaard made plans to attend his sister's graduation from college.

While his doctor advised him not to attend and the league was aware of this, it did not provide Boogaard a chaperone or explain to him the risks of leaving the treatment facility in California, according to the complaint. Boogaard was released from the facility on May 12 and was found dead the next day. The cause of death was an accidental drug overdose.

Besides the jurisdictional challenges that the Boogaard case faces, the allegations of intentional delivery of narcotics not only plays off the current national consternation over opioid abuse and physician prescription, but I think gets to the very, very deep core of the entire opioid debate - and that is responsibility.

Obviously workers' compensation is supposed to be a "no fault" system - under the ideal operating environment, a worker who is injured gets medical treatment and some money regardless of who was ultimately responsible for the claim.

Tort litigation is all about blame, and pinning responsibility on someone other than the claimant.

One of the arguments we hear from those who have an addiction problem, particularly in litigation of course, is that the addict is not responsible for his or her fate - it was the physician, or the insurance company, or the employer, or the drug company, or the pharmacy, or the government who created this monster of a problem.

But it is never the addict's fault.

One of the first tenets in addiction therapy is the removal of blame in the addict's lexicon. Only when the addict does so and takes responsibility for his or her own self can there be any recovery. Until then, any type of therapy is useless.

Time after time, interview after interview, I have heard former addicts who have successfully beat their addictions repeat over and over again that there was no one to blame other than themselves for getting into trouble.

It is the ownership of the problem that is the core to a) recovery and b) successful long term sobriety.

The issue of who is to blame for opioid addiction and exploitation is a complex problem for sure and one that will torture the social, legal and medical systems for some time to come. It is not an issue that can be swept under the rug.

Certainly Boogaard, and those similarly situated, must share in the responsibility of getting into that situation in the first place. And just as certainly those who aided and abetted also share the blame.

One of the trend workshops at the NCCI Annual Issues Symposium that I am attending here in Orlando, FL deals, of course, with prescription drugs and NCCI's statistical research on the issue. I don't think anything surprising will be unveiled or that there will be any breakthrough information provided - we will get plenty of statistics and facts that will be scary for sure.

Regardless, I don't expect the statistics and research that will be presented today by NCCI Chief Economist Harry Shuford and Senior Actuary and Practice Leader Barry Lipton to provide any comfort or insight and certainly no direction on responsibility or correction.

Off To Florida For A Pulse Check

2013-05-15T04:13:00.000-07:00

I'm on my way to the National Council on Compensation Insurance's (NCCI) Annual Issues Symposium (AIS) in Orlando, FL.

The AIS is particularly interesting because it provides a national perspective on the health of the industry away from the outsized influence that California's mammoth system imparts. Because NCCI is the rate maker for the vast majority of this country's state systems, it has a broad collection of data to interpret and compare.

Just a few weeks ago NCCI issued its annual report. In summary, NCCI sees claims frequency and severity (i.e. the number of claims filed and the total cost of such claims) as moderating while the overall underwriting market is starting to harden. In general this is good news for insurance companies writing this line of business - less money going out, more money coming in...

In addition, noted insurance economist Robert Hartwig, PhD says in the report (and I'm sure will present at AIS) that while the economic recovery isn't robust, there is still a recovery and this means increased payrolls, ergo increased premiums, for carriers.

The payroll increases are not necessarily going to be the product of an increase in the number of people actually employed though. Hartwig is optimistic on employment figures but I didn't see him mention the large number of people that are no longer reflected in the government's unemployment statistics - the "lost unemployed" or those people who have been unemployed for so long that they will never return to the employment roles.

Indeed, recent anecdotal evidence published in business tomes reflect that, for example, while domestic manufacturing is on the increase in the United States, much of this production is due to technology gains and investments in robotics.

Even Hartwig notes that the Great Recession decimated the construction industry (which has a outsized influence on some states such as California, Florida and Nevada), which shed 2.3 million jobs - or one-third of the construction industry employment rolls - as a consequence of the recession. Though the construction industry is picking up steam, and is expected to continue to grow (albeit tepidly) for the next few years, there's a lot of jobs still on the side lines.

And Hartwig notes that the recovery is not treating all states the same. Nevada, California, Florida and a couple of other states are still in or very near double digit unemployment percentages, while North Dakota has almost no unemployment.

The bigger the state, and the more reliance to real estate for economic activity, the slower the recovery.

So basically, while the economy is recovering, it is still slow and not across the board in either job sectors or state lines.

But overall, the expectation if you're an insurance company is that the workers' compensation market is heading towards black ink, which is delightful news to underwriters and brokers.

That sentiment was apparently echoed at the 12th Annual JMP Securities Research Conference in San Francisco where the chief financial officers of Amerisafe and AmTrust both expressed that it was their belief that the trend is pointing to a hardening market.

Albeit, both of these companies do not represent the average workers' compensation insurance company - both are in niche markets.

Still, this means to me that employers in all of the states that have passed reform laws this past couple of years may not see all of the savings that were predicted.

Data from the Council of Insurance Agents and Brokers shows that in the first quarter of 2013 more than 80% of workers' comp policies had rate increases. In comparison, during the third quarter of 2010, more than 80% of work comp policies had no change or rate decreases

While the insurance market hardens, the big challenge for carriers is still getting a return on cash flow sufficient to keep investors satisfied.

Investment returns have been, and are staying, comparatively low, so the industry's underwriting profits will show a pretax loss of 1% for 2012 according to NCCI's report.

The common thinking is that in order to maintain a consistent return on equity, a 1% decline in the investment yield means companies need to improve their combined ratio by 5.7%. That's nearly impossible in the short term unless some law drastically slashes benefits (either medical or indemnity or both) - for example when SB 899 in California was passed, carrier combined ratios plummeted.

But these ratios increased rather quickly in California as SB 899 worked its way through the courts and the various parts of the workers' compensation machine refined their systems and operations to take advantage of new areas of vagaries and opportunities.

I interpret all of this to mean that employers in general will be seeing bigger premium bills, regardless of competition and reform, on a consistent basis for the next few years as the industry cycle continues to revolve.

One of the elements that keeps me interested in workers' compensation is this omnipresent tension between carriers, employers and workers. It's interesting to me going to different events and seeing how insurance executives, or business owners and risk managers, or injured worker's attorneys, or physicians all react to the same news in different ways.

Because if carriers can't make a reasonable profit on the workers' compensation line of insurance then they will get out of the market.

If premiums paid by employers get too high, then employers change their business models, get out of business or move somewhere else that is cheaper or isn't regulated (Bangladesh anyone?).

And if workers aren't protected and don't get the benefit of the "great bargain" then there are lawsuits, protests or other social unrest that will challenge society, or at least legislators.

This tension is what drives the continual cycle of reform, adjust, inflate, complain, and reform.

So off to Florida I go to take the pulse of the nation's workers' compensation insurance market and to see just where we are in the overall cycle of the industry - at least from the insurance company perspective.

Chasing the Herring

2013-05-14T04:21:00.000-07:00

Senate Bill 36 passed out of the California Senate Appropriations Committee on Monday.

The proposed law would require the California Department of Insurance (CDI) to publish on its website various financial information about workers' compensation carriers.

The bill was introduced by Assemblyman Ben Hueso, D-San Diego, who said in Senate testimony Monday that based on a recommendation Rand Corp. made in a 2009 report titled, “California’s Volatile Workers’ Compensation Insurance Market: Problems and Recommendations for Change.”

Rand at that time was responding to a request by the Commission on Health and Safety and Workers’ Compensation (CHSWC) pursuant to legislative request to determine the cause of carrier failures leading up to the meteoric rate increases in the early 2000s.

One recommendation was to post annual and quarterly financial statements on the Insurance Department website so more people can view the reports.

The problem as identified by Hueso and supporters is that carrier information, while publicly available, is not easily accessible or identifiable.

Carriers were against it because the bill is over-broad and discriminates against workers' compensation when the same sort of requirements aren't made on other lines of insurance.

Apparently those objections were quieted when Hueso amended the bill when it came out of the Senate Insurance Committee.

The bill would add section 901 to the Insurance Code, and as amended would read:

The department shall include on its Internet Web site a dedicated Internet Web page that includes workers' compensation data, statistics, and reports covering both insurers and self-insurers, including, but not limited to, claims loss data, expenses, and financial reports. The department shall only use data already collected by both the department and the Department of Industrial Relations. Nothing in this section shall be construed to authorize the release of information protected by other applicable law.

To implement the bill it will cost taxpayers somewhere between $65,000 to $128,000 in one time expenses and ongoing annual expenses of $24,000 to $40,000 - all depending on how the data is obtained and maintained.

That's not a whole lot of money in the grand scheme of things.

But that doesn't make the bill any more appealing.

When we really get down to it, this is much to do about nothing.

Having this financial data published so that it is more easily accessible isn't going to create any better oversight of the insurance industry because, bottom line, the public doesn't care and doesn't know how to read insurance financial statements.

There might be a few brokers and consultants that would benefit from easier access to this information, but there's not guarantee of that, and there's no guarantee that this information is going to create any better oversight or enforcement activity.

In addition, the CDI's job is to review company financials on a regular basis and call into question irregularities of other elements that set off alarms on a carrier's or self insured's health.

CDI had that power in the late 1990s and early 2000s, but that didn't provoke the agency into amelioratory action until it was too late and carrier carnage had been passed off on to policy holders, even while there were calls to action by industry experts as reinsurance treaties were passed up the food chain with ever lower strike points upon which primary carriers relied in underpricing their product.

Financial statements would not provide the insight into such activity, and in fact might even hide such activity because the cash position of carriers would actually look healthier than in practice and anticipated liabilities would be offset by reinsurance assets.

When the primary carriers that bought into this reinsurance scheme (see "Unicover Partners") they didn't think that reinsurers would deny their claims - it was the denial of reinsurance claims and attendant delay inherent in litigation of billions of dollars of liability that put these carriers out of business because cash flow was shut off.

Carrier information would have done nothing to prevent that crisis.

The effort to get SB 36 into law would be better put to use beefing up claims enforcement and oversight via either the Division of Workers' Compensation's Audit Unit or reinstating stronger penalties for private action against recalcitrant claims payers either ignoring their duties or willfully failing to adhere to the law.

We don't need information. We need enforcement action.