Tuesday, May 15, 2012, 08:51 AM - Political developmentsThe California Department of Insurance will be holding a hearing today in San Francisco on the WCIRB mid year filing requesting a hike in the advisory workers' comp rate.
THe insurance market is not required to follow WCIRB recommendations or the rate finding of CDI. Rates continue to be far, far below the levels that were reached in before the 2003/2004 reforms.
Still, with the economy in a slow-mo recovery phase, Insurance Commissioner Jones is likely to look carefully at the request for any hike in the advisory rate. Prior Insurance Commissioner Poizner repeatedly swatted down requests for hikes in the "pure premium" rate.
What do the applicant attorneys think about the request?
Here is a statement addressed to Chris Citko of CDI from Brad Chalk, CAAA President (prepared with the help of Mark Gerlach, an insurance expert who consults for CAAA):
"Dear Mr. Citko,
The California Applicants’ Attorneys Association recommends disapproval of the pure premium rate filing submitted by the Workers’ Compensation Insurance Rating Bureau on April 12, 2012. The filing not only ignores the decision made by the Bureau’s Governing Committee just 6 months ago to refrain from filing mid-year rate changes absent "extraordinary circumstances," but it also fails to comply with the directive from Commissioner Jones to include disaggregated medical cost containment data.
With regard to the justification for a mid-year filing, we see no conditions that could be considered "extraordinary circumstances." Nor does the filing identify any "extraordinary circumstances" that would justify this proposal. The Executive Summary of the filing does state that the "system’s underlying costs have continued to deteriorate," but that hardly qualifies as an "extraordinary circumstance." And in any case, several charts in the Executive Summary show just the opposite – that cost pressures are abating.
For example, Chart 1 displays the estimated ultimate indemnity + medical + ALAE cost per claim over the period 2005 through 2013. This graph shows increases between 2005 and 2009, but little or no change from 2009 through 2011 (2012 and 2013 are disregarded as these figures are only projections based on the WCIRB’s inaccurate trend estimates). Charts displaying medical costs per indemnity claim, Chart 8, and indemnity costs per indemnity claim, Chart 9, show the same pattern – increases between 2005 and 2009, then leveling off between 2009 to 2011.
The projected ultimate on-level severity trends for both medical and indemnity benefits also follow this pattern (pages A:B-25 and A:B-26). The projected on-level severity for both medical and indemnity increased between 2005 and 2009, decreased in 2010, and then increased a minuscule 0.3% in 2011. In view of the sharp decrease in the on-level severity trend over the past two years, we recommend that the selected severity trends of 3% for indemnity and 7% for medical be rejected. These selected trends are not based on any actuarial computation, but were arbitrarily selected without any statistical justification. Reducing these trend factors to reflect the current experience will eliminate most or all of the indicated change in the pure premium advisory rates..
With regard to cost containment data, Commissioner Jones’ Decision and Order for the January 1, 2012 Pure Premium Rates included the following directive to the WCIRB – "With this order I am directing the WCIRB to include disaggregated medical cost containment expenses of insurers and an analysis of that data in its next filing."
The WCIRB may contend that this directive was intended to apply to the next "annual" filing, and not to a mid-year filing. That argument misses the point. As explained by Commissioner Jones, reviewing this cost containment data is one part of analyzing the efficiency of insurers. Calendar year data from the WCIRB and limited transactional data from the CWCI both show that cost containment expenses are the fastest growing "medical" cost. In order to accurately identify the real cost drivers in the system, it is important that the WCIRB comply with the Commissioner’s directive.
In analyzing the efficiency of insurers, it is also important to look at the sharp growth in allocated loss adjustment expenses. Chart 10 shows that the average allocated loss adjustment expense per indemnity claim has nearly doubled since 2005. As we said in our comments regarding the January 1, 2012 Pure Premium Rate filing, the causes of this increase may be beyond the scope of this pure premium rate hearing. However, loss adjustment expenses have become a major cost driver in the system, and we recommend that the Commissioner direct the WCIRB to provide more detailed data on these expenses, as well as an analysis of that data, in its next filing.
Thank you for the opportunity to comment on this rate proposal.
S. Bradley Chalk, President
California Applicants’ Attorneys Association"
The hearing will be held at the CDI at 45 Fremont Street, 22nd Floor, starting at 1 p.m. today.
Sunday, May 13, 2012, 03:39 PM - Medical treatment under WCDo ambulatory surgery center owners do more surgery? If so, is that bad?
What are the implications for workers' comp?
On an anecdotal level, I recently had minor hand surgery at an ASC. The facility was incredibly efficient, with far less bureaucracy than I had experienced with even more minor procedures in a hospital setting.
In looking at the list of the doctors who own the facility and who practice there, I noted that many of the top orthopedic surgeons in the area were participants. Many of these are docs whose integrity and clinical judgment I greatly respect.
But a recently released study by the Workers' Compensation Research Institute of Cambridge, Mass. attempts to document a pattern of increased surgical utilization by owners of the centers.
Time will tell whether the statistical research done by WCRI on these issues holds up. The data studied was from Florida during 1997 to 2004, focusing on arthroscopies and carpal tunnel surgeries.
The study begins by noting that:
"Some studies have found that surgeon owners of ASCs perform more surgeries than surgeons who are not owners (e.g., Mitchell, 2010; Hollingsworth et al., 2010; Gabel et al., 2008; Lynk and Longley, 2002). These studies raise a concern about potential conflicts of interest that may influence treatment decisions and be inconsistent with high priority national goals of containing the rising costs of medical care while maintaining quality care."
The study, by Christine A. Yee points out that:
"In 2011, legislation was passed in California prohibiting doctors who own many kinds of medical businesses from referring their workers’ compensation patients to those businesses, or from using products from those businesses in their practices.2 This law, effective January 1, 2012, requires physicians who own these types of businesses, including ASCs, to inform insurers of their ownership. However, the law allows physician owners of ASCs to send patients to their own ASC for surgery, with payor preauthorization. Previously, California allowed self-referrals to ASCs, yet prohibited self-referrals to other types of entities."
Why do owned of ASCs do more surgery? There appears to be a recruitment effect, so that doctors who do lots of surgeries tend to buy into ASCs. Also, the study finds that surgeons can do more surgeries in ASCs, which are more efficient. Another reason claimed by the study are financial incentives. Yee claims that:
"They increased their surgery volumes by 14 to 22 percent due to the financial incentives, or 15 to 25 surgeries per year for the average surgeon who became an owner—compared with the number of surgeries that each of these surgeons performed prior to becoming an owner. This effect explained 14 to 21 surgeries in the difference in surgeries performed per year between owners and non-owners, or 18 to 33 percent."
Another factor was improvement in medical technology.
The WCRI charges that ASCs have tended to increase workers' comp volume:
"Relative to the types of patients they would have treated had they not been owners, ASCs provided more surgeries to patients covered by workers’ compensation, commercial indemnity insurance, and Medicare. These payors were higher-paying insurers at the time of the data. Due to owner financial incentives, the average surgeon increased the number of workers’ compensation patients by 17 to 23 percent and the number of patients with commercial indemnity insurance by 20 to 51 percent. Surgeons did not increase the number of patients covered by Medicaid and certain health maintenance organization (HMO) plans."
It is important to note that the WCRI study does not claim that the surgeries that were done were not necessary or that the surgeries had bad outcomes.
Specifically, the study says"
"This study did not address whether any of the additional surgeries (due to financial incentives, increased capacity from expanding one’s network, or ASC efficiency gains) were necessary or not. We also did not address whether they were cost-effective or not. If medically necessary and cost-effective, then increasing surgeon ownership would have improved access to surgical care for those who previously did not have access, in particular, those covered by workers’ compensation, commercial indemnity insurance, and Medicare. If the surgeries were not all necessary, then increasing surgeon ownership would be a cost driver and merit increased regulatory attention. This question deserves additional research using data on patient outcomes."
The WCRI study makes various general recommendations for payers and policymakers but notes that ASCs have many advantages, including costs.
Concluding, the WCRI study notes that:
"We speculate that physician ownership and the role of ASCs will become a bigger issue for injured workers and workers’ compensation payors in the next decade. The use of ASCs for orthopedic services and pain management services is growing rapidly (Koenig et al., 2009). ASCs may become as dominant a setting for services treating musculoskeletal and nervous system conditions as they are for eye surgery and gastroenterology today. Management companies of ASCs indicate orthopedics as the most desirable medical specialty in which to do business (Fields, 2011). Since many injured workers today are treated with these types of services, we may expect the issue regarding physician ownership of ASCs to receive more attention by regulators that oversee workers’ compensation systems in the future.
The efficacy of current policies intended to counteract adverse effects of physician ownership has not been determined. The optimal policy would curtail any adverse effects, while encouraging medical innovation focused on producing high quality and cost-effective care."
Wonks out there may want to download the study, which is chock full of data and graphs. (available for a fee) off of the WCRI website:
http://www.wcrinet.org/studies/public/b ... urgery.pdf
Sunday, May 13, 2012, 03:09 PM - Political developmentsEvery good play has its scenic backdrop.
Shakespeare's Hamlet had its Elsinore Castle in Denmark. South Pacific had its Bali Ha'i.
So it will be this year with California workers' comp, which will be on the table as the legislature struggles with deficits spinning out of control.
By the time you read this there will be few who haven't heard about California's $16 billion deficit .
A sour economy continues to result in poor revenue collection, pushing some hard choices to the fore.
How workers' comp will fare in budget revisions isn't yet known. Despite the fact that the system is supposedly user funded, that has not always spared the system from cuts. Under Schwarzenegger, judges and staff were furloughed, cutting hours and pay.
The choices ahead are grim, even if one of the proposed tax initiatives
(Munger or Brown) passes.
Civil courts are likely to see more cuts, putting the civil justice system in danger.
The pressure on workers' comp funding is likely to be extreme.
For a good assessment of some of the tough choices facing the Governor and legislature, I recommend this piece by John Myers, "Bigger deficit, bigger budget fight ahead":
http://www.news10.net/capitol/article/1 ... on-deficit
Tuesday, May 8, 2012, 09:29 PM - Understanding the CA WC systemCalifornia's workers comp market is becoming less concentrated, with 25 insurer groups having at least a 1% market share.
That's according to data compiled by the National Association of Insurance Commissioners and the California Department of Insurance.
According to a bulletin from the California Workers' Comp Institute, workers' comp premiums have grown to $7.8 billion after reaching a nadir of $6.9 billion in 2009.
CWCI attributes the reductions from a 2004 high of $16.1 billion in written premium (net of deductible credits) to "high unemployment, payroll reductions and job shifts during the recession, legislative reforms, falling claim frequency, and a soft market that kept premium rates low despite rising claim severity".
SCIF continues to have the highest premium volume, though its market share continues to be far less than it was 10 years ago. SCIF actually continued to lose market share in 2011, down to 12.9% in 2011 from 16% in 2010.
SCIF's shrinking role has been a painful experience from much of its longterm workforce, including its legal staff.
Market share gains were posted in 2011 by Hartford, Travelers, Fairfax (which acquired Zenith), Berkshire Hathaway, Liberty Mutual, Employers Holdings Groups, Zurich and Everest.
AIG (now Chartis) was an exception, shrinking a small amount.
Still, with so many carriers in the California workers' comp market, even substantial increases in premium (comparing 2011 to 2010) written by these carriers did not translate into large market share increases. For example, Hartford premium jumped 38% but its market share only inched up from 6.4% in 2010 to 8% of the 2011 California market.
Overall, this appears to be good news. A wide number of companies appear to continue to be interested in participating in the California workers' comp market.
We're not seeing an exodus of carriers. And the top 10 carriers are mostly national insurance companies (except SCIF).
Sunday, May 6, 2012, 10:21 PM - Understanding the CA WC systemShould judges be free to mine information on social media sites that pertain to claimants?
In an era when so much personal information may be found on the internet, is it appropriate for judges to do internet research about the parties appearing in their courtrooms?
I'm not aware of any instances in which this issue has arisen in California's workers' comp system, but it is likely to be coming.
Some claims adjusters and defense attorneys now check social media sites to see if they can uncover applicant activities that are inconsistent with what is reported by doctors or the claimant.
Last year a prominent defense attorney wrote a piece entitled "I Spy for Free". He noted that much can be gleaned now from Facebook and other sites.
Stuff that in the past investigators would have had to dig up now appears "in plain view" in some cases.
But is it appropriate for judges to go outside the scope of the evidence presented in the case?
This is an issue which has been raised now in connection with Social Security hearings held by federal administrative law judges who hear Social Security Disability and SSI cases for the Office of Disability Adjudication and Review.
An article in The Washington Times by Stephen Dinan notes that:
"The Social Security Administration last month told its disability-claims judges they are no longer to seek out information from websites when deciding cases — taking away a tool some of those judges say would help in uncovering fraud."
"Agency officials said reviewers can’t trust information posted online, and also said the mere act of typing in queries could compromise protected private information, so they shouldn’t try to access anything."
"Social Security’s ban covers all Internet sites, including social media such as Facebook."
"But Sen. Tom Coburn, Oklahoma Republican and a top taxpayer watchdog, said avoiding the Internet means giving up a valuable anti-fraud weapon — one that he said even federal courts have relied upon in some disability cases."
Apparently Social Security is taking the position that use of internet "information" is better left to fraud investigations of the Inspector General.
Efforts by ALJs to do investigations outside the courtroom can become a slippery slope. Perhaps judges should be allowed to look at internet material that is brought to their attention by a source.
Note that's different than the judge initiating his or her own searches.
Of course, Social Security is not adversarial, and there is no defense attorney at SSD/SSI hearings to represent the government's interest.
But to give the trier of fact wide-ranging investigatory license may start to confuse the role of the judge.
That's especially true in workers' comp, where employers and carriers are represented by attorneys who are capable of pointing out damning evidence.
The comp system should follow Social Security on this one.