Friday, August 3, 2012

Brokers and Reform - Forcing a Conversation on Relevancy?

Insurance brokers aren't typically associated with being behind legislative attempts to change substantive workers' compensation laws.

So imagine the surprise when I read that a broker backed interest group is seeking new legislation in California to constrict benefits to injured workers claiming cumulative trauma (CT) and psyche injuries, and taking on chiropractors and "AGO" (Almaraz/Guzman & Ogilvie - a pair of court opinions that critics say detrimentally eroded objective disability ratings contrary to the intent of the 2004 reforms implementing the AMA Guides 5th).

Jamie Reid, a broker at the Michael Ehrenfield Co. Insurance Agents & Brokers firm in San Diego County, together with broker Gabe Erle, last year started Workers’ Compensation Fraud Fighters.

They are seeking laws that would:
  • Determine an objective disability rating system for cumulative trauma.
  • Eliminate the ability for injured workers to file psychological claims or other stress claims.
  • Prohibit chiropractors from serving as medical evaluators and eliminate the requirement that a medical provider network include chiropractors.
  • Restore the objectivity in disability rating that has been eroded by the Almaraz/Guzman and Ogilvie court decisions. 
At least according to the news, this group doesn't appear to have much support, having obtained only about 95 signatures on their petition to Assembly Insurance Committee Chairman Jose Solorio, D-Santa Ana, to institute changes to achieve the group's stated objectives.

The group uses the same tired arguments for "reform" that have been tirelessly used in the past and which just don't hold water: employer flight, carrier contraction, increasing costs.

Reid said Nevada and other states have been targeting California business owners using workers’ compensation costs as one of the reasons to relocate.

Nevada has always targeted California businesses with a more favorable tax situation, cheaper real estate, and cheaper labor. Nevada would LOVE California businesses to come rescue the worst unemployment rate in the nation - but let's face it, that AIN'T happening.

The insurance market is hardening - that is no surprise. Reid says the market has already hardened. I don't think so. Yes, rates are going up, and carriers are being more selective in their risks, but there are only a few that seek double digit increases and they are small carriers with very little market share. The big market share is relatively stable - it is still a competitive market.

The experience modification standards are changing, but that is an attribute of the Workers' Compensation Insurance Rating Bureau (WCIRB) fixing a system that hasn't changed in many years and didn't reflect economic growth and other changes.

And of course costs are increasing - they always increase. That's called inflation. It is a normal fact of financial life. Where they increase, how much they increase, and what stimulates the increase are more what the issues and debate should be about.

Why does there need to be a different rating system for CT claims? That makes no sense. On one hand this group wants consistency in ratings, and on the other they want a different standard for CT claims - completely illogical.

Labor Code 3208.3 was put into law in the late 1990s to curb psyche claim abuse - mainly targeted at psyche "mills" that used the lax standard of "injury" to generate profits for reporting and treatment for mental issues that the general population would not consider injurious.

Chiropractors were targeted with limitations on the quantity of treatments they could provide without further authorization to curb the endless cycle of lifetime care some would prescribe that would go beyond generally accepted recommendations.

"Objectivity" in the medical-legal sense is a subjective term - even the authors of the AMA Guides essentially admit that there is no way to objectify every element of impairment and converting impairment to disability is still fraught with subjective determinations.

So I am perplexed at what this group is really trying to accomplish, and why it is coming from insurance brokers - a group of insurance professionals that are more concerned generally with the underwriting process rather than the claims process.

Jesse Ceniceros, president of Voters Injured at Work, opined to WorkCompCentral that he thought that this latest maneuver was just changing the topic of conversation - a distraction to the present undercurrent of reform talks going on at the highest levels of the Brown Administration.

Ceniceros said injured workers won’t allow a repeat of 2004 and would consider a ballot initiative in 2013 “to eliminate work comp as we know it” if the reform proposal doesn’t provide fair and adequate benefits for injured workers.

“If the injured worker can’t be protected by these laws, what we need to do is eliminate (comp) and start over again,” he said. “If it can’t be reformed properly, we need to eliminate it altogether.”

Now THAT would be disruptive to the economy!


  1. David - We applaud your efforts to raise awareness on work comp issues. We believe we are on the same side regarding the importance to keep work comp cost under control in California. However, many points you illustrate need clarification. It seems that your conclusions have been drawn based on a short conversation we had with one of your reporters who published a supportive article about our participation in advocating for a better CA work comp system.

    To clarify, we are not a "broker backed interest group." We (Jamie Reid and Gabe Erle) are commercial insurance brokers who operate workcompfraudfighters dot com. Our clients are medium sized enterprises mostly in the state of California who experience a variety of work comp issues and challenges. We feel that it is critical that California passes reform limiting exposure to our clients via their insurers and self insured employers. It of course is not just a concern for employers as jobs are at stake.

    The premise of your blog said you were ‘perplexed’ that some brokers were taking up the cause. Why? It would seem to us that the more people responsibly raising awareness, the better. Our opinion is that this is a necessary step in restoring a more favorable economy in CA. A reformed work comp system benefits workers, employers and us. If our clients have to leave California or close their doors due to the costs that is not good for anyone. Why do you have a perception that brokers "are more concerned generally with the underwriting process rather than the claims process." We play an integral part in helping our clients manage the claims process. As brokers, we see ourselves on the front line as we receive feedback directly from clients. We should work hand in hand on this effort raising awareness.

  2. You responded to us that "Nevada would LOVE California businesses to come rescue the worst unemployment rate in the nation - but let's face it, that AIN'T happening. " We used Nevada as an example of a state who targets California business and it may be naïve to say that business won’t leave California for Nevada because of their unemployment rate. I think we have the same mission to make California a more favorable place to do business by keeping work comp costs down. Prior to 2004 reforms, we did see clients leave California for states such as Nevada and work comp costs was cited as one of the major factors. Of course Nevada is not able to relocate businesses who compete locally in California and have no prospect of moving. However, companies who compete regionally, nationally or internationally have increased pressure to keep costs low and work comp is a significant line item on many business' p&l. Last time we checked, California was in the top 5 most expensive s work comp states. The fact is every job lost, adds to the burden California must overcome as a state.

    In your blog you said,"And of course costs are increasing - they always increase. That's called inflation. It is a normal fact of financial life." Our clients understand inflation, however they would not agree that double digit increases in 1 year in their work comp costs is considered inflation. Do you believe there is a correlation to the dramatic decreases in carrier rates post reform and the increasing cost of policies since that reform has been eroded? I think California employers would laugh at us if we said everything always goes up double digits….it’s inflation.

    You mentioned in your blog you did not agree with us that the insurance market has already hardened and "there are only a few that seek double digit increase and they are small carriers with very little market share. The big market share is relatively stable-it is still a competitive market." The mid-year base rates have increased double digits by most of the major carriers not just little ones as was asserted. For example in alphabetical order; CompWest went up 21.7%, Everest National 12.9%, Farmers 12.3%, ICW 15.8%, Hartford 15.4%, Liberty Mutual 9.6%, Markel 10.2%,Travelers 16.1%, Seabright 18.8% and Tower 27.3%, Zurich 15.1%. This represents a large part of the market share.

    It is also important to understand that the base rates filed by insurance companies are just one factor they use to manipulate "net rates." Carriers are beginning to remove credits or discounts from their policies thus influencing the cost of policies proportionately more than that directly influenced from base rate change. We just delivered a quote to a grocery store with 100 employees, virtually no claims in the past five years. The best option showed "net rates" increased by 30% and they received quotes from 3 independent agents and a direct writing carrier totaling 15 in all. This is not just inflation.

  3. It appears that our point regarding CT was misunderstood. We have not suggested a separate rating system just communicated the angst employers are experiencing. CT is being used increasingly on post term claims and as you suggest it is difficult to objectively rate. We have seen these CT claims used as a way for employees to take advantage of the system causing a lot of frustrations from employers. This topic could be an entire debate on its own merit. We tend to agree with Stu Baron's position regarding tightening up the definition of CT.

    Regarding Psych claims, do you really feel Labor Code 3208.3 has addressed the current abuses with regard to psych claims? We do not think Employers would agree.

    With regard to Chiropractors, much of the concern stems from qualifications to act as the primary treating physician and/or adequate knowledge to perform duties of a QME. Additionally with regards to Chiropractors, we will provide a disclaimer that the following comment is subjective, but it is something that comes from the experience of managing claims for a dynamic supply of businesses with a wide variety of demographics....More often than not when an employee litigates either post termination or as a "fall off" (as we call it when an employee remains employed but quits attending work and ceases communication with the employer) there is an unusual relationship that often exists between a chiropractor and the applicant attorney. We do agree that the solution is not a simple one, but it needs discussion....not to be simply dismissed and categorized as " the same tired arguments for "reform" that have been tirelessly used in the past."

    We appreciate your work in creating this forum so that these conversations may be had. We follow and respect the work that Work Comp Central publishes and look forward to following your endeavors in the future. Mr. Jones has our contact information so please feel free to reach out if you would like to discuss further. Thanks so much.

    Jamie Reid & Gabe Erle,
    Concerned Insurance Brokers

  4. Thanks Jamie and Gabe. You folks do make good points and I welcome and fully appreciate the dialogue because I think that everyone should get as much opinion as possible. So while we may not agree on everything, it does appear that we agree on some things, and more importantly I can see that we agree that everyone should be as informed as possible and debate the points. Intelligent dialogue hopefully produces better results! So thank you both for taking the time to contribute your opinions. I think people appreciate this.