Wednesday, June 18, 2014

The Mission and The Business

I've been involved in workers' compensation for 30 years now. You'd think by now I'd have things figured out, but I realize that I don't.

Because, as I assume most of us do, I confuse the mission of workers' compensation and the business of workers' compensation.

These are two different concepts and while they coexist, they are not synonymous and in fact are completely antithetical.

Which is why we have so much friction within workers' compensation.

The mission of workers' compensation is relatively simple - spread the risk of employment injury against a big pool of employers so that the few who do experience injury or death on the job can be reasonably taken care of.

It's a big job. In fact, I like to remind people that the United States workers' compensation system(s) is/are the largest privatized social benefit system(s) in the world.

But because people need to put food on their tables and roofs over their heads (okay, and maybe a nice car) they have to get paid to do the job of spreading the risk and taking care of the injured or the decedents.
If only we could trust each other...
That's why this is also an industry: the aggregate of technically productive enterprises in the particular field of workers' compensation (though some may argue that many are not "productive").

And there's the disconnect - the people that get paid to do the job of workers' compensation have an inherent conflict of interest because every dollar that goes to someone doing their job in the system is one dollar less that could otherwise go to the injured or decedent.

Or every dollar that goes to someone doing their job could be going to someone else that wants to do some other job in the industry.

Not that this is bad, but we tend to forget this. Workers' compensation's social mission conflicts with capitalism.

For instance, a regular reader of pretty much everything workers' compensation and friend of mine groused the other day that the insurance industry "lies" to the public when it talks about combined ratios and investment returns when rates are raised.

His objection is that the industry uses accrual accounting methods internally, but puts the facts out to the public in cash accounting rules, so that the public, not really knowing the difference, thinks that because the combined ratio is 113 (or whatever it might be) that the industry is losing thirteen cents on every dollar.

As my friend says, "they collect 100% of the premium in the first year; they pay out (on average) 14% of that premium in the first year, yet, they accrue 100% of 'projected' losses as actual losses that year."

And that's true, but it's not lying, and it's not even misstating the situation. It's no different than my friend charging $100 for every hour of his consulting expertise, except that he probably uses cash accounting in recognizing that $100.

The insurance industry has to use accrual accounting because income and expense to a carrier do not occur simultaneously. In other words, a dollar has to come in to the carrier before a dollar goes out - that time line can not be altered. When it is altered then the carrier goes out of business (which is what happened in the late 90s and early 2000s when so many primary carriers got suckered into the Unicover reinsurance scandal).

The objection my friend has, I think, is that insurance companies making money, or frankly anyone in this industry making money, is discordant with the mission.

The mission of workers' compensation is altruistic.

The business of workers' compensation is capitalistic.

When new legislation comes down the pipeline it is generally first examined for its capitalistic influence - generally how much it's going to cost in dollars.

There typically is very little discussion on the altruistic influence unless it is an increase in indemnity, and even then that's tied to the "cost" of providing that increase; i.e. no altruistic discussion in workers' compensation occurs without a capitalistic consequence review.

Often, though, a capitalistic discussion downplays, or ignores altogether, any altruistic consequence.

Which is why in Wisconsin the Green Bay Packers have successfully lobbied to have football classified as a "non-contact" sport so that rates are about 7 times lower than a "contact" sport, such as soccer.

Or why Alabama practitioners are surprised at a recent court ruling giving family members pay for taking care of a severely disabled injured worker at home.

It's why micro-management of sects within the industry typically back-fires (California's SB 863) unless a sect is just eliminated entirely (witness removal of vocational rehabilitation from the California system years ago).

Each and every one of us complains about someone else getting that dollar: could be a doctor complaining about an attorney, could be an attorney complaining about an insurance company, could be an interpreter complaining about a copy service, could be a bureaucrat complaining about ... every body!

But each and every one of us (and that includes me and the bureaucrat) makes a living off the system. Each and every one of us "sees" the mission of workers' compensation but must navigate the conflict that the business of workers' compensation imposes.

That's just the way it is.

Now, get back to work and do your job. You have a mission to fulfill.


  1. "Not that this is bad, but we tend to forget this. Workers' compensation's social mission conflicts with capitalism." So true.

  2. Nice piece David. I'm reminded of a comment Steve Peace (D-SD) made to me when running for CA Senate, "Workers' compensation is a microcosm of society. You have labor, management, doctors, lawyers, insurance, voc rehab counselors (back in the day). All of whom have competing and often conflicting interests." Made sense in 1992, makes sense today.

  3. David,

    Thank you for the thought-provoking piece, David. You reveal the tip of the iceberg regarding the internal conflicts in WC.

    Let me take exception with one statement and step away from the financial reporting concerns:

    "The mission of workers' compensation is altruistic."

    I'll argue that if altruism existed in the workplace, we in the WC world would be out of a job. Workers' Compensation was founded upon mistrust from the start and is fueled by the same, today.

    In my mind, the mission of the WC industry is to manage the financial costs of mistrust. Too often, our attempts at cost-controls increase mistrust and we do not serve either employee or employer very well. Unfortunately, we in the WC space often focus only on the financial controls and forget about the mistrust inherent in the system.

    The first half of my WC career, I focused on the more traditional loss control, claim cost strategies and was disappointed with the results. Eventually, I discovered the long lever for cost savings is found on the human side of WC.

    So, I think we must begin with the assumption that trust is broken and there is no altruism in WC unless we inject it...and there are precious few opportunities to do this post-claim. Ultimately, high workers' compensation costs are an indictment of an employer's senior leadership. Few in the WC industry are prepared to explain this to their clients or help their clients change their organizational dynamics.

    We, in the WC industry, are paid to reduce the penalty of mistrust for our clients. While it may sound cynical, we are not contributing to the 'social good' is we are not addressing mistrust. In fact, we are contributing to the toxicity of the WC system, most of the time. This may be the biggest lie we tell in WC...and we tell it to ourselves, first.

    I think this is why WC is confusing to so many.

    Thanks for your insights, David. I enjoy your writing.

    Benjamin Atkinson

    1. Thanks Benjamin. Identification of some of the more glaring problems that are increasing costs to corporate America, increasing profits to the Insurance Banksters, while increasing maiming, grief and death to injured workers is a good starting point.

      Anybody touched by workers comp knows it 'ain't broken' and that it is simply working as it is designed to. Only those profiting by the maiming and deaths of injured workers look the other way.

      If you hear of anybody willing to whistle blow and help injured workers organize into a class action, let us know. Perhaps you and David DePaolo can light the way? If not you, then who? If not now, then when??

      Yeah, we're dying out here, and it's ugly when an applicant attorney says things like, "Most all my clients lose their jobs, homes and ultimately their lives" .....

      Ought to be some law enforcement, huh? I told the adjuster in early 2012 in my case that my death certificate will have his name, and that of his ally, the defense attorney as primary cause of death

  4. David! Did you leave out the mission part about providing 'immediate, reasonable and appropriate medical care to injured workers' on purpose? Yikes! That says it all huh? 'Yeah, it's a billion dollar industry, lots of profit centers, and yeah, most of the injured workers get little to no medical care but the money keeps rolling in for everybody else, and the deaths of injured workers are factored in, we call it 'rated age' and we fudge a little, but we all have mortgage, car payments and other toy payments to make, so what if a few hourly workers are casualties.

    There are no consequences for lying, cheating, stealing and blatant fraud and bad faith, from clerks to doctors to lawyers to adjusters and worse.... Government agencies are funded to 'fight fraud' but their Officers seem to be following orders to LOOK THE OTHER WAY.

    #WorkComp seems to be a blantant violation of the 14th Amendment of the Constitution of the United States of America. Exempt,huh? Leave it to the lawyers, huh? Oh, below is comment submitted to CAAA for their upcoming convention...

    Love the airplane comments, even the ones in reference to when the Prez was out in Palm Desert again. Is your plane equipped with a geiger counter? In a future blog, perhaps you will share with us how the radiation levels are measurably higher since the #Fukushima triple nuclear meltdowns of 3.11.11? Tonnes of the 1,946 known lethal isotopes have been making the rounds around the planet ever since then; no efforts to contain the nuclear reactor meltdowns. Another bummer, huh?

    Do you take any special precautions, or do you just believe the Pro-Nuker Propaganda that there is "no immediate danger" from #Fukushima and that #SanOnofre is now a safe and closed nuclear waste facility? We have a saying in Social Media about #Fukushima... "TELL YOUR FRIENDS AND NEIGHBORS; YOUR GOVERNMENT ALREADY KNOWS"

  5. Oh look, another #CAAA California Applicant's California Applicants' Attorneys Association Conference coming up! Thanks David!
    #NAIDW might want to know about it also,huh?

    Here are some comments made on their JOIN OUR MAILING LIST and EDUCATION TOPIC SUGGESTION FORMS.....



    Do you have an Injured Worker category for membership and discounted fee for attendance at conferences?

    PAY INCREASE FOR APPLICANT ATTORNEYS? SIMPLE! That's something that might be politely correct enough for your members to take on? Why allow liens to attorneys who not only failed to properly represent, but caused egregious harm by their negligence and mal-practice? Makes no sense to a non-lawyer. Maybe have a committee meet and submit legislation. It could be an immediate pay-raise and incentive to over-worked, stressed out, burned out attorneys who displace their aggressions on injured workers.


  6. When #WCAB Information & Assistance refuses to provide accurate information to an injured worker without representation, an injured worker in pro-per is severely limited in efforts to obtain legitimate medical evaluations, ability to expose fraud, and most importantly, to get approvals for medically necessary treatments. The willfully deceptive directives cause even worse consequences.

    I have, for one, been waiting for MTUS/ACOEM/NIH recommended medically necessary for traumatic brain injury more than 888 days; DOI 1/9/12.

    Experiences with CAAA attorneys to date have been non-responsive or have been MOSTLY polite declines to represent...approximately 100 phone or face-to-face interviews have taken place.

    Over the course, 4 attorneys for periods ranging 30 days, 9 months, 3 months and 30 days were respectively dismissed due to incompatible goals and ethical violations.

    Some Super Lawyers interviewed and sadly advised that they wished they could say the experiences (of unapproved medical care and fraudulent doctor reports) was the exeception, rather than rule, in California Workers Comp.

    One such SuperLawyer, when advised of a pattern and practice of omission of hundreds of pages of medical records with clear intent to deny medical care, or, as they say, 'defend against providing medical care' --- indicated that the topic of FRAUD --- doctor, adjuster and lawyer fraud---had not been addressed since "law school". WCAB refuses to hear complaints about Fraud, meaning, I have joined the ranks of egregiously harmed victims of the CaliforniaWorkers Comp system.

    The Commissioner's office has some guy writing 'nasty letters' to injured workers advising not to 'waste time and money complaining to them' (even though the Judge refused to hear the complaints of Fraud, leading to more than 2 years of denied #TBI medical care) and offered no suggestions on where, then, to report FRAUD. The Office of the District Attorney also politely says the complaints have merit, but insufficient evidence at this time.

    Next round of fraud complaints is ongoing with Maximus and Corvel, and allegations of complicit fraud with intent to deny medical expand.... WILL YOU HAVE A PANEL TO DISCUSS FRAUD? HAVE YOU EVER HAD A PANEL OF INJURED WORKERS SPEAKING TO YOUR MEMBERS OF THE EGREGIOUS HARM THE FAILURES OF APPLICANT ATTORNEY CAUSE TO INJURED WORKERS?

    One Super Lawyer, having failed to ask if there had been prior representation, snarled and growled at the interview and muttered something about "the 2 attorney rule"....apparently a superstition that if more than one other attorney had been trusted and retained to properly represent an injured worker failed, due to the "15%" of any settlement to be shared rule, nobody wants to the risk.

    In follow up to your panels touching on Brain Injury, having a panel of Neuro-Optometrists as follow up may be in order. While medically necessary treatment in CA work-comp system requires an injured worker to self-procure or die, maybe your organization will take a hard look at the harsh realities of this billion dollar industry?

  7. David DePaolo's blog yesterday mentioned some of the problems, as he sees them, with Work Comp. I read it quickly, but I do recall he left out the part of the intention to comply with the CA Labor Codes to provide 'immediate, reasonable and appropriate medical treatment to an injured worker.' IT DOES NOT HAPPEN IN CALIFORNIA, OR ELSEWHERE IN THE USA.

    This comment will be added to David's public blog comments, since he mentioned your upcoming conference. BTW, I was able to attend the Exhibit Hall portion of the Rancho Mirage Winter CAAA Conference and met some wonderful people and helpful providers.

    Let's hope you open your conferences to Injured Workers, so at least we know not all providers are hell bent on maiming and killing us by fraudulent reports and other bad-faith actions by defense firms, apparently, with full knowledge of WCAB. As one I & A Officer advised, when asked about how to move the case to another Court, "We all know one another. We are a small group, and we all work together, and have for a long time." Well, isn't that telling! And no, I was not able to move my case, and my ADA accommodations requests have been violated repeatedly, and abusively.

    CAAA June 26-29, 2014 - RENO

    Have a successful conference, and please, help your members focus on more than making a fast buck by turning lots of files in a mill-type program. If the Defense attorneys are making all the big bucks, maybe #CAAA must help it's members re-strategize??

    One attorney, whose name was received from WCAB referral list, no longer an applicant attorney, but had gone to the DEFENSE side. When asked "WHY DID YOU GO TO THE DARK SIDE??" the response, after a pensive pause, was simply, "THAT'S WHERE THE MONEY IS."

    That pretty much sums it up, doesn't it? Ok. cc: David DePaolo blog and other social media places....WE ARE THE MEDIA NOW....WE DO NOT....FORGET.

    Thanks David! Carry on!

  8. (Please forgive the length of comments, Industrial Traumatic Brain Injury, untreated since 1/9/12, and fighting some formidable enemies attempting to get medically necessary treatment since then, and fighting all sorts of fraudsters. The ability to "be concise" was apparently 'conked out of my head" and they won't help me get the rest of my 'marbles back'..... Ought to be some WorkComp Law Enforcement, huh? Did I tell you they moved my case up to a Partner/Shareholder at that hot-shot law firm... in NoCAL... "Novato"..... Some friends say it is the "Chicago of the West Coast".... uh oh. Is there a WorkComp Victim Assistance and Relocation Plan??