Thought that California workers' comp rates were largely determined by claims costs?

If so, you are like most people. Year after year reports by the WCIRB (California Workers' Compensation Insurance Rating Bureau) precede California Department of Insurance rate hearings on insurance carrier rates.

Indeed, next Tuesday September 27 Insurance Commissioner Dave Jones will be holding hearings in San Francisco on the latest WCIRB filing. In a report released this week the WCIRB said that rates actually charged by insurers are up 3% in 2011, from $2.31 per $100 of payroll in 2010 to $2.37 per $100 of payroll in the first half of 2011.

No one would argue that claims costs are irrelevant to the rate equation.

But a new study highlights another important factor in workers' comp rates.

That factor is Wall Street.

The study, by UC Davis Professor of Public Health Sciences and UC Davis postdoctoral scholar Abhinav Bhushan (now at Mass General Hospital) is published in the September-October issue of Public Health Reports.

A UC Davis press release notes that:
"...the study shows that higher premiums are instead associated with decreases in the Dow Jones Industrial Average and interest rates on U.S. Treasury bonds."
“Insurance companies appear to have been setting premiums according to their returns on the stock and bond markets, not according to the number of claims they have,” said J. Paul Leigh, UC Davis Professor of Public Health Sciences and senior author of the study. “They invest because they need a financial cushion to pay for claims and, if they lose, raise premiums to recoup their losses.”
"Understanding workers’ compensation trends is important so policymakers can establish regulations that protect workers and contain costs, said Leigh, who noted that, in 2009, between 3 million and 4 million cases of job-related injury or illness were recorded and costs to employers were close to $74 billion."
"In conducting the study, Leigh and UC Davis postdoctoral scholar Abhinav Bhushan examined U.S. Bureau of Labor Statistics data on incidence rates for injuries and illnesses, along with data from the National Academy of Social Insurance on workers’ compensation costs (to employers) and benefits (to workers and medical providers) from 1973 through 2007. Beginning in 1992, the Bureau of Labor Statistics began identifying cases involving more than 30 days away from work, providing the study team with the opportunity to evaluate the impact of more severe work-related injuries and illnesses on premiums. That information was compared with Dow Jones Industrial Average indices and Treasury bond interest rates.
The researchers found that while premiums increased from 1992-2007, claims decreased 1 to 2 percent each year. Claims for serious illnesses and injuries varied, but decreased overall."
"The team also discovered that for the entire 35-year timeframe of the study, rising premium rates were closely linked with the Dow Jones Industrial Average or Treasury bonds. As either the Dow or interest rates on Treasury bonds fell, premiums rose, and vice versa."
“The association of premiums with the stock market and Treasury bonds was consistent and strong,” said Leigh. “Increasing premiums had nothing to do with the number of injured workers, who often are incorrectly blamed for increasing premiums for employers.”

The study was partly funded by the National Institute for Occupational Safety and Health.

As policymakers move forward, they would do well to remember that with rates it's not necessarily all about the benefits and the claims.

It's about Wall Street, too. Insurers invest premiums, so claims costs are but one component of the picture.

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

A récent Los Angeles Times article on prescription drug abuse is worth noting.

The article, "Drug Deaths Now Outnumber Traffic Fatalities in the U.S.", by Lisa Giron, Scott Glover and Doug Smith, is likely to add further weight to concerns about the expanded use of opioids in the workers' comp system.

The authors charge that:
"Public health experts have used the comparison to draw attention to the nation's growing prescription drug problem, which they characterize as an epidemic. This is the first time that drugs have accounted for more fatalities than traffic accidents since the government started tracking drug-induced deaths in 1979."

"Fueling the surge in deaths are prescription pain and anxiety drugs that are potent, highly addictive and especially dangerous when combined with one another or with other drugs or alcohol. Among the most commonly abused are OxyContin, Vicodin, Xanax and Soma. One relative newcomer to the scene is Fentanyl, a painkiller that comes in the form of patches and lollipops and is 100 times more powerful than morphine."

"Such drugs now cause more deaths than heroin and cocaine combined."
A link to the full article is at the bottom of this post.

Expanded use of opioids followed a paradigm change in the way pain was treated. Within the past several decades more aggressive pain treatment protocols have become popular.

Some pain meds that are often used for end stage cancer are used in the workers' comp system for orthopedic injuries.

After writing a post about this some months ago I received a handful of e-mails from injured workers concerned that I was criticizing them and the treatment that they say works for them. In response, I noted that I was not implying that their pain was not real or that the meds weren't indicated for their particular situation. Nor was I implying that they were abusing.

On the other hand, I noted that in the past I had had clients who overdosed and a client who was found to have been diverting narcotics for sale. So on an anecdotal level, I had some familiarity with concerns being raised by other journalists and researchers.

These issues are not confined to California. Florida's workers' compensation system has developed a reputation as a "pill mill".

Have medical treatment guidelines and limits on physical therapy actually encouraged doctors to default to a pharmaceutical approach faster? Are pain management doctors being chosen as primary treaters earlier in the process before other approaches are sorted out? What role do MPNs or attempts to escape from MPNs (especially in the Southlland) play in this?

Should California adopt a new algorithm that must be followed where doctors want to start workers on opioids? Should other controls be put in place? Should we make the process easier for doctors to get authorization for a detox program? Does in-office dispensing by physicians have a role in all of this, and how to control the "bad actors" without penalizing careful prescribers?

It's a complicated problem and at the moment I see little consensus on practical solutions. Although there is already research data from CWCI and CHSWC analysis data on medical treatment, moving forward with new regs or bill language to make some changes will not be easy.

Here is the L.A. Times article:
http://www.latimes.com/news/local/la-me ... full.story

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

Here is a link to an ear

America seems to be in the midst of a sea change about the concept of personal responsibility.

The latest reminder was the audience response to questions posed to Presidential candidate Ron Paul by moderator Wolf Blitzer at a recent GOP Presidential debate.

Should an uninsured 30 year old with a treatable condition who chose not to have health insurance die? Paul insisted that charity would step up to the plate, but some in the crowd cheered "let him die":
http://elections.americablog.com/2011/0 ... about-sick

In most liberal political philosophic traditions, the common good is best served by social services that fill the void even where individuals make poor choices by design or by default.

The unspoken truth to the Blitzer hypothetical was that as many as half of the population has no health insurance. This includes many who would like to have it but either can not qualify because of preexisting exclusions or who can not pay the premium.

It's not hard to imagine that many of those attending would have cheered
"let him die" even if he had been trying to get insurance.

We're in an era where the people who grabbed lifeboats from the Titanic feel very superior to those who who were not so agile or lucky.

Many of those in the lifeboats, of course, see a populace that is infantilized, expecting some drug to cure them or some program to address their needs. And many of those with chronic needs are seen as having contributed little to the public weal or as having weak ties to the labor market.

But here in the blog let's not get mired in the ongoing national debate about the role of government and the individual. I'm fond of musing about the interplay between larger political and societal trends and workers' comp, but lets' not get too far afield today.

Back to our workers' comp world.

In workers' comp benefits are guaranteed. An inept employee who heads right into a buzz saw will receive guaranteed benefits, including medical treatment, temporary disability monies and a financial settlement depending on the degree of the injury.

In our world employee fault is irrelevant. Co-factors such as smoking, dietary habits, obesity, and other co-existing health conditions may impact the worker's recovery and impact the eventual extent of disability.

There's increasing awareness that many of these problems can increase the cost of claims, affecting the cost of claims.

But there's little attention paid in workers' comp to the concept of personal responsibility.

If you're an attorney, getting a weight loss program for a client authorized is often a major fight. If a client is motivated and wants to go to a gym to get in shape, that's often seen as a personal choice rather than a medical necessity.

So the lines are blurred in workers' comp. What is personal responsibility?
And even if some of these things are personal responsibility, is it in the carriers' financial interest to help?

If you're interested in delving more into different viewpoints on the Ron Paul response to Blitzer, here are 2 different viewpoints:

First, New York Times columnist Paul Krugman:
http://www.nytimes.com/2011/09/16/opini ... o-die.html
Second, a response from a blog sympathetic to Ron Paul:
http://www.thelibertyvoice.com/media-as ... -target-rp

Stay tuned.

Julius Young
www.boxerlaw.com
www.workerscompzone.com

Governor Jerry Brown was quoted this week as saying "I'm going to veto a lot of bills over the next 30 days,"

"So I have to say to some, fasten your seat belt cause this is going to be a rough ride. They've given me 600 bills and there's not 600 problems that we need those solutions for," Brown said.

Will that include workers' comp bills?

Many of the bills headed to Brown's desk involve modest changes that would round off some of the sharp edges of the Schwarzenegger reform years. Brown may be loathe to cross labor and injured worker advocates who worked on the bills. And many of the bills appear to be good from a policy standpoint.

Further, if Brown does veto some or all of the bills, it's unlikely that doing so will give him any significant bargaining chips with a Republican legislative minority that has been almost totally uncooperative with his efforts on the states fiscal crisis to date.

On the other hand, Brown is nothing if not unpredictable. He is likely concerned about any possibility that workers' comp costs will spiral at a time when the economy is weak. He may be concerned about perceptions
about the comp system generally. Workers' comp was never a happy issue for Brown.

Workers' comp never surfaced as a significant issue in the race against Meg Whitman. Aside from some vague comments at occasional fundraisers, I'm not aware of any promises Brown made to any stakeholder groups on workers' comp.

That's what may make his action on the various bills interesting. If there are vetoes it may give us a sense of what Brown is prepared to do with comp overall...whether he is engaged or disengaged on the issues....whether he would encourage stakeholders to reach a more grand compromise on issues involving benefits and cost containment, etc.

I could be way off the mark, but I suspect we'll see a mixed result. Some signings and some vetoes. That's my sense of it.

Here is a link to a post by Wyatt Buchanan in the San Francisco Chronicle, discussing Brown's veto pen:
http://www.sfgate.com/cgi-bin/blogs/nov ... y_id=97554

Here is a link to a post from last week discussing some of the bills:
http://www.workerscompzone.com/index.ph ... 909-211653

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

Most folks are holding on to their wallet, hoping that the housing market does not crater further, taking more homes underwater.

And it's not comforting to see the bond market start to take down the Spanish and Italian economy along with French banks.

It's the world we live in.

Ah, to remember back to the time there was a just war. The War On Poverty.
Some of you may recall Michael Harrington's book, The Other America, written in 1962:
http://www3.niu.edu/~td0raf1/1960s/Othe ... xcerpt.htm

From statistics, it looks like we're devolving back to a land of more poverty.
It's sad, it's shameful, but it could get a lot worse than it is now.

Sabrina Tavernise reports in yesterday's New York Times that:
"Another 2.6 million people slipped into poverty in the United States last year, the Census Bureau reported Tuesday, and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the bureau has been publishing figures on it."

Here is a link to the poverty statistics on the Census Bureau website:
http://www.census.gov/hhes/www/poverty/poverty.html

Most everyone reading this blog-whether you are a workers' comp claimant or a workers' comp professional-is involved in a social safety net program, our workers' comp program. It's good to put our program in perspective as we see how the overall social safety net countrywide is doing.

Here is a link to the New York Times piece by Ms. Tavernise:
http://www.nytimes.com/2011/09/14/us/14 ... amp;st=cse

Stay tuned.

Julius Young
ww.workerscompzone.com
www.boxerlaw.com