Wednesday, April 17, 2013, 10:40 PM - Understanding the CA WC systemLong term unemployment is one of the curses of the workers' compensation system.
Anyone deeply involved in the system has seen how long term disability affects individuals and their families.
Economic research now shows that long term unemployment makes it less likely that a worker will be hired. In a way that's not surprising, as most of us realize that it's easier to get a job if you have a job.
These sorts of issues are studied by economists, some of whom study Beveridge curves, an index that correlates job openings with unemployment. The classic relationship is an axis where when unemployment increases, job openings decrease.
But recent research by economists Rand Gayhad and William Dickens of Northeastern University in Boston show that workers out of work for more than 6 months have a very different pattern on the Beveridge curve.
As summarized by Matthew O'Brien in an excellent piece in The Atlantic titled "The Terrifying Reality of Long-Term Unemployment":
"Employers prefer applicants who haven't been out of work for very long, applicants who have industry experience, and applicants who haven't moved between jobs that much. But how long you've been out of work trumps those other factors."
Callback rates are significantly lower for workers unemployed for more than 6 months.
O'Brien's article documents that long term unemployment is more of a handicap in finding employment than "work churn", i.e. where a worker has switched jobs frequently.
O'Brien says that:
"Long-term unemployment is a terrifying trap. Once you've been out of work for six months, there's little you can do to find work. Employers put you at the back of the jobs line, regardless of how strong the rest of your resume is. After all, they usually don't even look at it."
In an era when many economists believe that high unemployment is structural and not merely cyclical, long term unemployment constitutes a great challenge.
With the demise of vocational rehabilitation, California's workers' comp system provides little assistance to the long-term unemployed.
It's little wonder that workers choose to hire attorneys, fighting for any scrap they can.
Here is a basic introduction to Beveridge Curves:
This is the link to The Atlantic article:
http://www.theatlantic.com/business/arc ... nt/274957/
And here is an interesting piece by Thomas Edsall in The New York Times,
"Are the Good Jobs Gone?":
http://opinionator.blogs.nytimes.com/20 ... s-gone/?hp
Saturday, April 13, 2013, 06:50 PM - Understanding the CA WC systemHow are California's workers' comp insurers doing?
That's a subject addressed by an April 12, 2013 report of the Workers Compensation Insurance Rating Bureau of California , known as the WCIRB (see link to the report below).
One of the functions of the WCIRB is to collect information on insurer experience which then is published and forms a basis for rate recommendations to Insurance Commissioner Dave Jones. The Commissioner then sets advisory rates but not actual rates.
What follows are some interesting figures pulled from the WCIRB study (which includes some projections reflecting the impact of the 2012 SB 863 reform):
- PREMIUM IS UP, WAY UP
Comp premium collected from employers is up, way up. In fact 2012 premium was 42% more than 2009 and 16% more than 2011. This reflects some improvement in the California economy.
Still, "written premium" is way down from a 2004 high ($12.5 billion in 2012 vs. $23.5 billion in 2004). 2012 premium was only slightly higher than 2001 premium.
-AVERAGE RATES ARE STILL WAY DOWN FROM PRE-SB 899 LEVELS
Average charged rates are still 59% below average charged rates in 2003, though they have increased 24% since 2009. The WCIRB says that average charged rates (excluding certain credits and policyholder dividends) was $2.60 per $100 of payroll for policies written in the last half of 2012. Compare this to $6.29 per $100 of payroll in the latter half of 2003.
Whatever the reasons that led to high workers' comp costs in 2002 and 2003 (and there were many factors), those costs have come down substantially. For example, here are the industry average charged rate per $100 of payroll for the last 5 years:
-2007 (1st half): $2.75
-2007 (2nd half): $2.30
-2012 (1st half) $2.48
-2012 (2nd half) $2.60
-CARRIER LOSS RATIOS HAVE IMPROVED
Carrier loss ratios have improved. For example, the "combined ratio" and expenses for 2012 is projected to be 127%, way down from ratios seen in the years before the millennium (188% in 1999 for example) and down from 137% in 2010 and 136% in 2011.
Insurers make money on invested premiums, so a "combined ratio" of losses in excess of 100% of premium does not mean that they are losing money. And in any event, current "combined ratios" are far from levels which would show that the industry is in a new era of crisis.
-THE NUMBER OF CLAIMS HAS CLIMBED BUT IS STILL DOWN FROM HISTORIC LEVELS
Claim "frequency" statistics measure the number of claims. While those have increased slightly over the last few years, the WCIRB noted that those were 30% below the levels of claims before the reforms under Gray Davis and Arnold Schwarzenegger. Claim frequency rose only 2.7% in 2012
-MEDICAL COSTS MAY BE LEVELING OFF
According to the WCIRB, the projected average medical cost (including medical cost containment costs) of a 2012 indemnity claim is slightly below that of the prior year. For 2012 the projected ultimate medical per indemnity claim (excluding medical cost containment expenses) is $39,619 versus $40,055 for 2011. When medical cost containment expenses are factored in, costs still are projected to drop for 2012 accident year claims versus 2011 accident year claims.
-INDEMNITY COSTS APPEAR TO BE FLAT
Indemnity per indemnity claim costs have basically been flat for the past 4 accident years. Here are those figures:
-ALAE COSTS CONTINUE TO RISE
While medical costs appear to have dipped, the WCIRB notes that projected ALAE costs are slightly higher than for 2011 and "approximately 95% higher than the average ALAR severity for 2005." ALAE costs were $5,977 per indemnity claim in 2004. For 2012 accident year claims those costs have risen to $11,756 per claim.
Just what are these ALAE costs that have risen? ALAE includes the costs associated with handling claims that can be directly allocated to a particular claim. ULAE includes the costs associated with handling claims that cannot be directly allocated to a particular claim.
A 2008 WCIRB report noted that:
"Unlike losses, calendar year ALAE and ULAE incurred amounts have not declined subsequent to reform. As a result, both have increased significantly as a percentage of calendar year losses."
The April 2013 WCIRB report explains that:
"Beginning with claims incurred on policies incepting on or after July 1, 2010, the cost of medical cost containment programs (MCCP) is reported to the WCIRB as allocated loss adjustment expense (ALAE) rather than as medical loss."
In a 2012 rate filing the WCIRB claimed that the growth in allocated loss adjustment expenses (ALAE) were "largely the result of an increased volume of liens and increases in litigation related to permanent disability claims".
Those lien and litigation "friction costs" were targeted in the 2012 SB 863 reforms, of course.
However, the April 2013 WCIRB report fails to acknowledge that SB 863 did not target the medical cost containment program costs (i.e. the MCCP costs), as utilization review procedures and MPN procedures were left relatively unscathed by SB 863. While those programs may have helped control medical costs, they have also become cost drivers in their own right. Morevover, the recent WCIRB report does not analyze whether the new IMR scheme administered by Maximus will further drive the MCCP cost curve upwards.
The WCIRB Report on December 31, 2012 Insurer Experience can be found here:
http://www.wcirb.com/sites/default/file ... ns_exp.pdf
The WCIRB's 2008 report on loss adjustment expense trends can be found here:
http://www.wcirb.com/sites/default/file ... t_2008.pdf
The WCIRB's "Report on 2011 California Workers' Compensation Losses and Expenses" can be found here:
http://www.wcirb.com/sites/default/file ... penses.pdf
Stay tuned. In coming posts I will be commenting on two legislative proposals, AB 1309 (Perea) and AB 1138 (Chau).
Friday, April 5, 2013, 06:32 PM - Understanding the CA WC systemPay up.
We want to see your money on the barrellhead.
In life one of the big things is just "showing up". Now it turns out that's not enough. If you are a lien claimant you really do have to "pay up".
No more showing up at conferences without proof of your payment of an activation fee.
That's the message delivered by the WCAB in a significant panel decision, Eliezer Figueroa V. B.C. Doering. According to the WCAB website:
"The Appeals Board panel held that, where a lien claim falls within the lien activation fee requirements of Labor Code section 4903.06: (1) the lien activation fee must be paid prior to the commencement of a lien conference, which is the time that the conference is scheduled to begin, not the time when the case is actually called; (2) if the lien claimant fails to pay the lien activation fee prior to the commencement of a lien conference and/or fails to provide proof of payment at the conference, its lien must be dismissed with prejudice; (3) a breach of a defendant’s duty to serve required documents or to engage in settlement negotiations does not excuse a lien claimant’s obligation to pay the lien activation fee; and (4) a notice of intention is not required prior to dismissing a lien with prejudice for failure to pay the lien activation fee or failure to present proof of payment of the lien activation fee at a lien conference."
The WCAB panel (composed of Commissioners Lowe, Caplane and Brass) summarized the facts in the Figueroa case as follows:
"On April 15, 2011, the WCJ filed a Findings, Award & Order, awarding
benefits. On July 30, 2012, a lien claimant, not Orthomed, filed a Declaration of Readiness to Proceed (DOR) requesting a lien conference.
The lien conference was set for January 9, 2013, at 8:30 a.m. Orthomed did not appear at the conference. Because Orthomed did not submit proof of prior timely payment of the lien activation fee, and because the WCJ reviewed the record and determined that the lien activation fee had not in fact been paid, the WCJ dismissed Orthomed’s lien with prejudice, without first issuing a notice of intention."
The decision does not discuss whether the lien claimant claimed a basis for its non-appearance at the conference or whether it claimed a lack of notice.
Instead, the decision tells us that:
"On reconsideration, Orthomed contends that the activation fee is not payable where defendant has not served supporting documents, thus depriving lien claimant of the opportunity to resolve the lien.Orthomed also contends that “the new lien regulations lacks [sic] latitude in allowing certain circumstances that are not just black and white.” Orthomed does not claim on reconsideration that it paid the lien activation fee."
Interestingly, the WCAB decision includes the following analysis:
"We interpret the payment “at the lien conference” language of section 4903.06(a)(4) and the payment “prior to appearing at a lien conference” language of emergency Rule 10208(a) to mean that a lien activation fee must be paid prior to the commencement of a lien conference, which is the time that the conference is scheduled to begin, not the time when the case is actually called. Any payment made after the noticed hearing time is not timely. Therefore, the lien of Orthomed was correctly dismissed with prejudice."
The message to lien claimants is clear: showing up is not enough. You must also pay up.
Of course, showing up is good, too.
And by the way, don't expect to pay at 9:30 when your case is called by the judge. The notice of conference said 8;30, so you'd better pay your activation fee before then.
The April 5, 2013 significant panel decision decision in Eliezer Figueroa v. B.C. Doering can be found here:
Wednesday, April 3, 2013, 05:22 AM - Understanding the CA WC systemWorkerscompzone is traveling.
But today, sitting in Taipei , swilling espresso while watching koi swim lazily as some terrible singer down the hall belts out a karaoke tune, I noted a most thought provoking blog piece by Workcompcentral.com publisher David DePaolo.
DePaolo's piece relates two anecdotal scenarios, one in which an adjuster delayed resolution of a case by ignoring the determination of a QME and one where treatment of a burn patient was delayed.
Then DePaolo incorporates arguments made by "employer consultant" Bill Cobb.
I'm not familiar with Cobb, but Cobb makes an interesting argument comparing the magnitude of unpaid compensation due California workers with the miniscule percentage of claims actually audited.
The bottom line is that it might pay great dividends to increase the number of audits.
Cobb argues that increased audits could be funded by a small premium surcharge. Further, he argues that increased audits would lead to reduced violations and eventually to less litigation.
Here is a link to the post:
http://daviddepaolo.blogspot.tw/2013/04 ... paint.html
Stay tuned. In coming days I'll be commenting on a bill that would require employers to post the names of covered employees.
Wednesday, March 13, 2013, 10:35 PM - Understanding the CA WC systemFor several years now I've served as a reviewer for LexisNexis California WCAB Noteworthy Panel Decisions Reporter.
Teams of reviewers look at batches of decisions by the California Workers' Comp Appeals Board, evaluating which decisions are significant enough to publish.
It's been eye opening to see how many of the decisions by the WCAB involve appeals filed by lien claimants.
What becomes obvious after looking at many of those decisions is that the WCAB has had it with lien claimants who don't follow the rules, who misstate the facts in filing appeals, and who pursue lien claims without introducing sufficient evidence that would support their claims. In many cases the WCAB commissioners appear frustrated with the poor efforts by lien representatives-or with outright skulldugggery by those lien reps.
It will not get easier for lien claimants.
SB 863 tightened up the law in many ways.
Doctors who treat on a lien where the worker seeks to "escape the MPN" will find that resolution of MPN issues now take priority.
Independent Medical Review and Independent Bill Review create tracks for dispute resolution, and lien disputes may be reduced as a result.
And now the WCAB had unveiled its proposed revised rules. Those rules will affect lien claimants, limiting access to WCAB resolution where the dispute belongs in IMR or IBR or where the lien claimant has not paid required lien filing fees.
Lien claimants who don't study these regs carefully are going to have big problems trying to collect.
Here is a link to the text of the proposed regs and the "statement of reasons", which I'd recommend as an excellent place to start for anyone who wants to follow the proposed rules and the background for the changes:
Workers' comp stakeholders who have concerns about the regs still have time for comment. Here is the WCAB notice of an April 16 hearing and the attendant comment period:
"The Workers’ Compensation Appeals Board (WCAB) has issued a notice of public hearing regarding proposed amendments to its Rules of Practice and Procedure (Rules). The public hearing is scheduled for 10 a.m. Tuesday, April 16 in the Santa Barbara Room, Basement Level, of the Hiram Johnson State Office Building, 455 Golden Gate Ave., San Francisco, CA 94102. Members of the public may also submit written comment on the proposed Rules amendments until 5 p.m. that day."
The online notice of the proposed regs also says that "Comments may be submitted by e-mail to WCABRules@dir.ca.gov or they may be mailed to:
Workers’ Compensation Appeals Board
Attention: Annette Gabrielli, Regulations Coordinator
P.O. Box 429459
San Francisco CA 94142-9459"