Tuesday, July 15, 2008, 09:58 PM - Political developmentsThink the big multinational insurers writing California workers' comp are immune from the current credit meltdown?
Look at today's news about AIG. The insurer may be facing a $7 billion loss this quarter. Potential writedowns over the next several quarters may equal $20 billion, according to a recently released analysis quoted on Bloomberg.com today. See it here:
http://www.bloomberg.com/apps/news?pid= ... refer=home
That's some real money. AIG's stock fell by 8.5% today.
The losses aren't in workers' comp. Indeed, if anything, California comp profits have been an element buoying the company during its recent
But these sorts of results show how some carriers in the California comp
market have tied their fortunes to the tiger's tail of arcane debt instruments. The collapse of these houses of cards threatens to swamp our whole financial system.
In our economy there has been a disturbing trend toward off the books transactions. Look at this item regarding concerns re $1.1 trillion of Citicorp off the books assets(Citicorp is parent of Travelers Insurance):
http://www.bloomberg.com/apps/news?pid= ... refer=home
Banks-particularly regional banks-may be the next dominoes to fall.
How strong some of the large insurers are remains to be seen.
Don't forget that debt rating agencies essentially "enabled" some pretty risky practices in debt-credit swaps. We really don't know the extent to which some of the large insurers have exposure in the current economic meltdown, and it's not clear that insurers have come clean.
It's an issue I'll continue to follow.
Forgive the judge, the doctor, the attorney, or the disabled worker who can't get too excited about AIG or Travelers losing that utilization review dispute about the injured worker's gym membership request.
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Friday, July 11, 2008, 12:11 AM - Political developmentsThe universe's background noise is cosmic background radiation. It's a measurable phenomenon-and a component of the "Big Bang" theory of how it all got started (hold it there: don't go asking me to answer the question "why is there not nothing"; that's beyond the scope of this blog).
Some theoretical physicists and cosmologists speculate about the existence of superstrings, cosmic tubes of energy, perhaps left over from the universe's early days. Some have theorized that the superstrings-if they exist- may oscillate, forming background gravitational waves.
I know, I know. This is too much to contemplate right now.String theory? You're really just wondering if you'd look good in that string bikini or how much it will cost to fill your gas tank or whether there's any decent gelato to be had on a hot summer evening or whether Fannie Mae and Freddie Mac will survive without a transfusion of federal taxpayer bailout cash, or whether Sy Hersh may be right and before year's end Israel will attack Iran with tacit U.S. support before Iran's nuclear program achieves success.
I'll soon be doing my list of the top 10 developments in California for the first half of 2008. But I'm thinking background noise tonight. Background noise, workers comp style......Developments in labor law, employment law, and in the economy that is the backdrop for workers' comp.
Here's a list of some of items that recently caught my eye:
-The U.S. National Institute for Occupational Safety and Health released figures showing that while workplace fatalities decreased for most groups, they rose for Hispanics. Many were doing high risk jobs.
The link to a Forbes Magazine piece on the study is here:
http://www.forbes.com/forbeslife/health ... 16264.html
-A June 2008 Wall Street Journal article revealed that many corporate CEOs have arranged for "golden coffins". What? Think lavish death payouts in the event they die in office. In some instances the "golden coffin" is over $100 million. The link:
http://online.wsj.com/article/SB1213059 ... s_page_one
-different countries have different approaches to health. In Japan, there's now a mandatory national waist-measuring law. The goal?
Controlling costs and promoting better health. The link:
http://www.sfgate.com/cgi-bin/article.c ... amp;type=p
-labor had a setback in the U.S. Supreme Court as the court struck down a California law (enacted in 2000 under Gray Davis) making it illegal for companies receiving $10k or more in state contracts from using such funds to campaign against labor organizing drives. The link:
http://www.sfgate.com/cgi-bin/article.c ... amp;type=p
-in another U.S. Supreme Court case, employees won a victory over employers in an age discrimination case. The case, Meacham vs. Knolls,
puts the burden on employers defending against age discrimination claims to show that the layoff was based on reasonable factors other than age. The case is found here:
http://www.supremecourtus.gov/opinions/ ... 6-1505.pdf
-a Los Angeles Times article noted that the trend has been for employers to cut sick leave benefits, reducing the allowable days or lumping the days with vacation benefits. Now, some cities and states are
considering legislation to expand paid sick leave (this includes California, where AB 2716 is pending in the legislature). Here's the LA Times piece by Shari Roan:
http://www.latimes.com/features/health/ ... 6224.story
-again, from the L.A. Times, a story on how employers use federal ERISA law as a shield against lawsuits challenging denials of health, life, retirement and disability benefits. The piece, by Mark Sherman, is here:
http://www.latimes.com/business/la-fi-e ... 3711.story
-and a good piece by Victoria Colliver in the San Francisco Chronicle about treatment denials by group health carriers:
http://www.sfgate.com/cgi-bin/article.c ... &type=
-employers looking for ways to compress workweeks, allowing workers to work four ten hour days rather than five eight hour days, allowing workers to save gas and commuting time:
http://signonsandiego.printthis.clickab ... tnerID=616
-and on Arnold Schwarzenegger: is the Governor facing "donor fatigue"?:
That's some background noise to chew on for those of us who deal with employers and workers in the the comp system each day.
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Sunday, July 6, 2008, 08:08 PM - Medical treatment under WCDouble dipping.
That can be good or bad.
One of my favorite things is being on a summer car trip, rolling into a small town just about anywhere (what a peculiarly American, 20th century endeavor!), finding a Tastee Freez or Dairy Queen. Going for a cone of soft ice cream, asking for a double dip.
Less appealing are the double dippers at a party. Perhaps you remember the famous Seinfeld episode. George Costanza is caught re-dipping a chip into the dip after he has already taken a bite. Timothy objected, noting that it was like George was putting his "whole mouth in the dip". Defiant, George proclaimed "You dip the way you want to dip, I'll dip the way I want to dip".
What a jerk. Few of us want to kiss everyone we meet at the party food table.
Legally speaking, double dipping isn't usually favored.
They're on the losing end of "Sandhagen".
The California Supreme Court has finally issued its opinion in State Compensstion Insurance Fund v. WCAB and Brice Sandhagen. The issue there was whether SCIF was legally entitled to double dip.
Where SCIF had available to it the utilization review process ("UR"), could SCIF use the Labor Code 4062 process instead (or in addition to) the UR process where it wanted to object to a medical treatment recommendation? To have allowed this would have meant that SCIF was entitled to double dip.
No, the California Supremes said. SCIF's process for objecting to a medical treatment recommendation was under Labor Code 4610, not under the QME dispute resolution process of Labor Code 4062. In so holding, the court noted that 4610 is a statutory scheme requiring employers to conduct utilization review when resolving requests for medical treatment where they choose to modify, delay or deny treatment.
In Sandhagen, SCIF did use the UR process, but not within the statutory timeframe. The court noted that Labor Code 4610 requires treatment decisions in a timely fashion, "not to exceed five working days from the receipt of information reasonably necessary to make the determination, and in no event more than 14 days from the date of the request for treatment" (with additional timeframes under limited circumstances).
Had SCIF prevailed, insurers would have been empowered to stall treatment requests in many cases. Even if it blew the UR timeframes (or even if its own UR reviewer approved the treatment), the insurer would have been able to object, forcing the worker to go through a lengthy QME process (requesting a QME, selecting a QME, waiting for the QME exam date, waiting for the QME report, and perhaps waiting for supplemental QME reports, a deposition of the QME, yada yada, yada).
That's why Sandhagen is an important victory for workers.
Kudos to Maugerite Sweeney of Redding, whose compassionate career on behalf of disabled workers now features a victory on their behalf at the California Supreme Court.
(you can subscribe to the blog by clicking on the RSS button on the lower right column under most recent entries; in a post this week I'll be looking at the Top 10 Events in California Workers Comp for the 1st Half of 2008)
Monday, June 30, 2008, 10:10 PM - Political developmentsI've been in Monterey over the weekend, attending the summer Applicants Attorneys convention.
Some selective snippets......
The overall theme? "Practical solutions for a broken system".
Brad Chalk, Judge Colleen Casey, Dirk Stemerman & Dr. Michael Klassen: the AMA Guides are only that...they are guides. Evaluating "whole person impairment" require integration of ALL medical relevant information in a case, not just mindless application of tables and charts.
Barry Hinden and Richard Wooley: Medicare doesn't cover many items and Medicare has a donut hole. The mantra? When settling a case for a worker who is eligible for Medicare, it's not just the PD plus the value of a MSA. The Medicare "donut hole", premiums for Medicare Part D and non-Medicare covered expenses are significant factors to be considered in settlements.
Assemblyman Joe Coto: growing up as a copper miner's son, recalls hearing the whistle that indicated an emergency in the mine. Sometimes that was a signal that a work tragedy had occurred. That formed his life long advocacy for working people.
Chalk, Stemerman & Casey: Under the AMA Guidelines, grip strength may be rated under Section 16.8 if an examiner believes that a claimant's loss of strength has not been adequately assessed by other methods in the Guides. Assessment by a physician may be followed by the judge despite the opinion of the DEU rater.
Richard Jacobsmeyer, Jeff Greenberg & Julius Young: workers with disability ratings from 70% to 100 % (for post 1/1/03 injuries) will qualify for cost of living adjustments to payments, resulting in large awards for the limited class of cases who qualify for the benefits. Arguments were advanced that the COLA computation commences upon either date of injury, permanent and stationary date, or date of commencement of life pension. Settling COLA cases needs to be done with creativity, given the high likelihood of Social Security Disability and LTD offsets.
Art Johnson: subsequent injuries cases are important, particularly given recent apportionment decisions. Lawyers need to familiarize themselves with the SIF. There are significant client benefits available from the SIF.
Learn how to line up your case to meet the SIF thresholds. Educate and cultivate doctors who can address those unique issues.
Colleen Casey: Work all 4 corners of the guides to document all the problems the worker is having. LeBoeuf is back.
Todd McFarren: Physicians not only may, but must exercise their clinical judgment in performing impairment evaluations....Where the generic impairment rating does not accurately reflect the impairment, a physician may use the direct ADL method or analogize to a more accurate table.
Art Johnson: in some cases the attorney may choose to attempt to rebut not the AMA rating but rather the "Combined Value Chart". Vocational evidence may show that the compressive effect of the Combined Values Chart is inappropriate and that multiple impairments combine to increase disability in an additive or synergistic fashion.
Coto: every member of the California Assembly's legislative caucus may sign a letter criticizing the small proposed PD increase recently floated by Schawarzenegger's appointee Carrie Nevans.
Jim Butler: "honor dies where interest lies"; the applicant's bar enjoys being David, fighting Goliath.
Scott Wechsler, Esq: You can "turn bad to good". Where there are injuries to employees of unlicensed contractors, homeowners may have liability. Uninsured employers are subject to civil suit with presumptions of negligence and no offset for comparative negligence or negligence of a co-employee. The Uninsured Employers Benefits Trust Fund may slap liens on uninsured employers.
Skip Tescher and Mark Gearhart: Constitutional challenges are difficult, given the tendency of the California courts to credit the legislature with "plenary powers" over comp legislation. The attack on the 24-visit chiropractic cap was valiant but perhaps ill-conceived.
Art Johnson: using Labor Code 4662, it will be easier to prove permanent and total disability by analogy to enumerated conditions in 4662 than it will be to prove higher disability by using "diminished future earning capacity" to rebut the PD rating schedule. 4662 states that "....in all other cases, permanent total disability shall be determined in accordance with the fact". 4662 invites attorneys to present testimony on factual disputes over whether the worker has permanent total disability.
Assembly candidate Bill Monning: in a couple years we'll no longer have a celebrity governor who "lulled people into voting against their own economic interest".
Richie Ross: Democrats have a good shot at taking a couple of California assembly districts currently controlled by Republicans, including districts in San Diego (AD 78th), the Coachella Valley (AD 80th), the San Francisco area's East Bay and the 10th AD east of Sacramento and Stockton.
Julius Young: the recently released WCIRB report on 2007 comp results shows that applicant attorney fees were half of defense attorney fees and that fees for insurance brokers were equal to applicant and defense attorney fees combined.
Richard Jacobsmeyer: given the significance of state average weekly wage adjustments in some cases, determining earnings will be critical.
Attorneys may have more issues under the Thrifty Drug case regarding
the impact of promised future wage increases on earning capacity and TD rates.
Many themes I'll be covering in future posts. Stay tuned.
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Sunday, June 22, 2008, 11:03 AM - Understanding the CA WC systemIt's a lazy summer day. In much of the state Californians are starting their
Today, I'll be looking at the latest comp numbers.
Many industries are having to rethink their business plans as energy, ocean and rail freight, airfares and commodity prices rocket skyward.
Could the concept of travel return to the way it was in the 1920's and 1930's, where only the well-heeled did the grand tour? The far-flung sprawling suburb with its big-box retailers is not looking like a good model for the future. A further climb in the price per barrel of oil-toward $200 or $225 per barrel could put whole sectors of the economy "under water", including the cheap-import driven Costcos and Wal-Marts.
But for comp insurers in the California market, it's still "laizzez le bon
That's the gist of the WCIRB report released on Friday summarizing 2007 results for California workers comp carriers (I've included a link to the WCIRB report at the bottom of this post; for a basic summary, I'd suggest you focus on Exhibit 18.1 to the WCIRB report).
The following are my observations on figures in the report:
Carriers continue to enjoy historically low loss ratios. Total losses (which include the costs of medical treatment for injured workers as well as indemnity payments to injured workers) were at $6.995 billion, 52.8% of
The costs of administering/adjusting those claims (known as allocated and unallocated loss expense) was $1.811 billion, or 13.7% of premiums collected. Thus, the cost of administering the claims was about 26% of the benefits (medical and worker payments) distributed through the system.
But when you add in other expenses, the ratio of benefits to payments looks much worse.
Commissions and broker fees were 7.1% of premiums at $942 million (higher than the $607 million paid to defense attorneys and $306 million paid to applicant attorneys). The categories "other acquisition expenses" and "general expenses" and "premium and other taxes" came in for 2007 at $445 million, $695 million, and $352 million respectively.
Keep in mind that these carrier overhead expenses were IN ADDITION
to the allocated and unallocated loss adjustment expenses which amounted to $1.811 billion.
So lets's do the math.
All of this insurer overhead and broker commissions totaled $4.245
billion. If you divide total losses of $6.995 billion (medical treatment costs and payments to workers) by $4.245 billion (the insurer overhead and broker commissions) you find that the cost of middlemen/overhead was 60% of the benefits paid to or on behalf of injured workers.
Yes, premiums have come down (that's good for employers). Premium
(before "premium credits") was down in 2006 to $13.2 billion from $17.1 billion in 2006.
What's going on here? As the system has shrunk, the ratio of system costs to benefits paid out is increasing. And so a mandated social welfare program ends up having unacceptably high administration costs relative to benefits paid out.
Solutions? Raising worker permanent disability payouts? Capping broker fees for placing comp coverage? Very aggressively pursuing the huge amount of uninsured employers who don't pay premium (many of who hire illegals and/or fail to comply with other labor standards requirements)? A unitary comp system, with one payor (like Nevada)?
Memo to the folks at CHSWC: what's your position on these numbers?
Is it acceptable to have system costs so high relative to benefits paid out? Let's have a public debate about the numbers.
Here is the link to the WCIRB report. To get to Exhibit 18.1, scroll down a bit):
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