Tuesday, September 30, 2014

Procedural or Substantive?

When a new law passes there are always issues concerning whether the law also applies to cases that are pending. If the new law doesn't specifically say it does apply to pending cases, then whether it does depends on whether the provisions are jurisdictional/procedural or substantive.

In general, substantive law prescribes duties and rights, and procedural law concerns the means and methods to apply and enforce those duties and rights.

New legislation may not deprive one of the remedies afforded by the existing cause of action. Thus, a substantive amendment will not apply to a statutory cause that accrued before the amendment’s effective date.

In workers' compensation, substantive law is generally controlled by the date of injury pled or discovered. But in the instance of a lien claimant, for instance, the applicable date may be the date services were provided since a lien claimant has separate status from, though dependent on, the injured worker.

If the law is procedural, then it's another story and the law will apply to an existing dispute.

So it's interesting that a medical billing dispute that existed prior to the passage of California's SB 863 will be heard by the 4th District Court of Appeal to determine if it belongs in Independent Bill Review rather than subject to a trial judge's award.

The parties in CIGA v. WCAB (Elite Surgical Care Centers) will present oral argument to a 4th DCA panel at 9 a.m. on Nov. 12 as to whether the changes made by SB 863 in the resolution of billing disputes apply - i.e. whether such disputes go to IBR or not.

Are those changes procedural, simply changing the means and methods to apply in the resolution of the dispute?
"Hmmm ... procedural or substantive?"
Or does SBR arise to a substantive change that involves the duties and rights of the parties?

Elite Surgical Centers and two other commonly managed ambulatory surgical centers collectively filed several thousand liens based on services they provided to injured workers in the years leading up to the passage of SB 863.

Several of these liens were consolidated in 2009 and a Workers' Compensation Judge issued findings as to the reasonable fee the providers could collect on epidural injections against eight insurance carriers.

The carriers sought reconsideration, which the WCAB denied last October. The carriers then petitioned for judicial review in December, and the 4th DCA granted review of the case in April.

The California Workers' Compensation Institute has filed an amicus brief in support of CIGA and the California Society of Industrial Medicine & Surgery has filed an amicus brief in support of the WCAB.

My prediction is that the 4th DCA will find that the matter is procedural, and will invalidate the WCJ's award, simply based on the fact that the court has an interest in the dispute.

Of course that's no reason to think the court will rule that way. But that's where I'm putting my money.


In the meantime there are less than 2 weeks to make your nominations for the Comp Laude Awards - categories include injured worker, employer, and all the usual industry positions. Nominations close 10/12, and winners will be announced at the WorkCompCentral Comp Laude Gala on 12/06.

Monday, September 29, 2014

What's Wrong Becomes Right

The top headline in the Sunday Edition of the Los Angeles Times was about ... you guessed it ... workers' compensation.

Nothing is going to be good about work comp if it is the top story on the top day in one of the largest metropolitan newspapers in the country.

Entitled, "L.A. pays millions as police and firefighter injury claims rise," the story points out the dramatic rise in claims in the past five years, with 19% of police and firefighters taking at least one injury leave last year.

In comparison, the city and county of San Francisco rate was 13%, Long Beach was 12% and San Diego was 10%.

The LA Times article cites the a dramatic rise in costs, both direct and collateral. With budget cuts the police don't replace an officer out on leave which means a district might not get patrolled, or response times may suffer.

According to the story, L.A. police and firefighters on injury leave collected $197 million in salary from 2009 through 2013 and $131 million was spent on medical care, disability payments and related expenses.

The fire department spent an extra $19 million a year covering injured leave positions. The police department doesn't bother to fill positions left unattended, so each absent officer represents "one shift that doesn't get filled, one neighborhood that doesn't get patrolled," Cmdr. Andrew Smith, the department spokesman, is quoted as saying.

As one might suspect, a disproportionate number of claims are attributable to a small share of the workforce, and the story provides a couple of anecdotes as examples - a firefighter who has been out of work for an extended duration, on multiple occasions, with otherwise seemingly minor injuries or disabilities; or the firefighter who was caught competing in mixed martial arts while allegedly disabled.

The law was set up to encourage people to work in first responder positions by ensuring that full salary and benefits would continue if injured in the line of duty.

And as what happens with laws established with good intent, those with lower scruples and standards take advantage of it.

Efforts at prosecuting fraud don't work because it is so difficult to convict a person where so much of a claim is subjective. And most firefighters and police officers are protected by unions which adds an additional layer of complexity.

There are all sorts of explanations offered by the experts, but the best explanation got the least amount of ink: the work place culture fosters this environment - as employees see their colleagues take more and longer leaves, they do the same.

"I would say, without any ill-intent, it just becomes a practice," David Luther, interim general manager of the city's Personnel Department, told the Times. "It becomes somewhat automatic."

A sort of cyclone of attitude sucks up people that are otherwise of fine moral character; what's wrong becomes right just by sheer volume.

This is a bigger problem than me and my blog, certainly. But I've always thought that there are more "good" people in the work place than "bad" people - much more - and the way to combat certain issues is to use those good people more effectively. 

So it seems to me that the police and firefighters just don't do a good job at policing themselves - that the fear and intimidation of peer pressure is on the wrong side of the curve, and that if fellow officers and firefighters were called upon to pass judgment on whether a claim passes the "sniff test" there would be much fewer questionable claims and lower costs.

I know, I'm talking a utopian system where employees are essentially jurors to their colleagues' claims, but I'm quite certain that if such a system existed there would be much tighter compliance and respect for the law and the system set up to support it.

At least with the cases highlighted by the Times, officers and firefighters could certainly (assuming no union rules to the contrary) be required to "report" to the job, then assigned to the break room or other neutral space to "recover." My guess is that being off work will lose its appeal real quick if one cannot spend time as pleased.

Friday, September 26, 2014

The Workplace & Diabetes

A couple of recent studies tying type 2 diabetes to the work place seem to me to add fuel to the universal medical provision argument.

A German study of more than 5,300 working adults found that high levels of workplace stress can lead directly to an occurrence of type 2 diabetes.

The study comes from the Institute of Epidemiology in Munich. It followed workers ages 29 to 66, measuring their levels of stress and correlating it to their health.

The conclusion was that those under high work place stress are 45 percent more likely to develop type 2 diabetes regardless of whether one is overweight or not.

Related disorders include stroke, heart disease and blindness.

The Institute reportedly followed the subjects for 13 years. During that time, almost 300 of those in the study developed type 2 diabetes despite the fact that they all been healthy at the start of the study.

The increase in risk in work-related stress was identified independently of classic risk factors such as obesity, age or gender.

Researcher Professor Karl-Heinz Ladwig told the British publication Daily Mail: “According to our data, roughly one in five people in employment is affected by high levels of stress at work. We don't mean normal job stress but rather the situation in which the individuals concerned rate the demands made upon them as very high and at the same time have little scope for maneuver or decision-making.”

The findings were published by the journal Psychosomatic Medicine.

Yesterday the LA Times published a story about another study that found a link between long work hours, low pay and diabetes, but there is inadequate explanation for why.

The study was made available online Thursday by the journal Lancet Diabetes and Endocrinology.

The team of researchers scoured the medical literature and found reliable data on 222,120 adults from the United States, Europe, Australia and Japan, where up to 68% of them worked “long hours” (generally defined as more than 55 hours per week).

A total of 4,963 of these men and women were diagnosed with Type 2 diabetes during the time they were tracked. There was a small link to "long hours" - about 7 percent.

More interesting was the link to socio-economic status: of those with low incomes, working long hours was associated with a 26% increased risk of developing diabetes after adjusting for other demographic factors.

In a commentary that accompanies the study, a pair of Harvard researchers wrote that it’s too early to rule out the idea that “working long hours per se is toxic.”
Bowzer stress and diabetes?!!

According to the American Diabetes Association's website, 23.6 million Americans have diabetes, constituting 7.8% of the population. Of that 23.6 million, 5.7 million have not been diagnosed yet. 

That's a big potential work comp claims population...

Workers' compensation for the most part covers industrially related (not necessarily caused) disease - if there is some work place exposure to elements that may cause or contribute to disease then there generally is workers' compensation liability.

This is a paradox that is as old as workers' compensation - the causation question.

For instance, many states have either limitations or complete dissociation of mental disease from work comp coverage - presumably because outside influences are too difficult to control and business doesn't believe it should be responsible for someone's mental health.

On the other side are exposures that generally are highly correlated to industrial settings - mesothelioma as a consequence of asbestos is an example (and was the subject of independent compensation systems).

In the middle, and it's a big middle, are these fuzzy exposures like diabetes and work place stress.

One man's stress is another man's stimulation. The degree to which a person can tolerate stress, or long work hours, is highly subjective and dependent upon a person's "pain tolerance."

Which is why workers' compensation laws are to be liberally construed in favor of the injured worker.

The purpose of that rule of construction is because this big fuzzy middle area can't be well defined and in order to make good on the promise of expeditiousness workers' compensation is supposed to do away with as much controversy and dispute as possible.

Over 100 years of workers' compensation legal interpretation by the courts should have taught us that, for the most part, disputes on causation when there is a scintilla of evidence of industrial exposure are going to be resolved in favor of the worker.

Will work comp systems see an increase in diabetes related claims as a consequence of these recent studies? I don't know - maybe.

I did a search on WorkCompCentral for "stress diabetes" and the results demonstrate the contentiousness of such claims.

I think the bigger lesson is that workers' compensation systems seem archaically anachronistic - for the most part workers' compensation has not evolved, and the issue of causation, essentially a dispute regarding liability, is a precursor to the provision of medical treatment.

This gets in the way of one of the primary missions of workers' compensation - to expeditiously provide medical treatment.

As long as there is a legal requirement on causation (AOE/COE) there will be disputes, which delays treatment, increases costs (exponentially by the way - just look at attorneys fees inflation) and destroys lives.

And really the only way out of this conundrum is to simply get rid of the causation requirement, which is basically to envelope employer paid medical treatment into a universal program regardless of causation, leaving the indemnity part of the equation for argument.

I know that prospect doesn't sit well with many, particularly more conservative thinkers. I get that. But at some point someone pays, directly or indirectly, for the health of the population.

Thursday, September 25, 2014

Profit At The Expense of Industry

The friction between social mission and business mission that workers' compensation represents goes much deeper than the conflict an insurance company or third party administrator faces when pressured for profits.

Much deeper.

Many of you, I'm sure, know of or have at least heard of the hedge fund industry.

In summary, hedge funds seek businesses in which there is an opportunity, at least perceived, to flip ownership stakes for short term profit. Usually this is done on borrowed money. And usually this activity occurs in low glamour, off-the-radar industries, like workers' compensation.

I get telephone inquiries all of the time from research groups seeking information about work comp on behalf of some investor. Usually these inquiries are in the medical supply side of the industry, and occasionally some other sector.

These investment groups have a single, very powerful, mission - short term profit.

Some might call it greed, but I think that's too powerful given that avidity underlies capitalism.

Still, when capitalism is not tempered with transparency then misguided rapacity damages companies and industries.

Copperfield Research, an otherwise anonymous entity, posted a 32-page report online on the stock market analysis website SeekingAlpha accusing professional employer organization Barrett Business Services, aka BBSI, of violating generally accepted accounting principles, under-reserving and overstating its income, warning investors that the self-insured entity should be viewed as an insurance company that is undercapitalized.

Bowzer smells something wrong...
When the report issued BBSI's stock, which is publicly traded, tumbled. The stock price of BBSI opened at $57.29 on Sept. 16, the day the report was issued. It ended at $48.69, and as of market close on Wednesday the price stood at $40.44 – a decline of 29.4% since the Copperfield report came out.

The problem with the Copperfield report is that it is anonymous and, based on research by WorkCompCentral, appears to be tied to a short-selling investment group that has used "research" reports in the past in attempts to manipulate the stock market, and in the workers' compensation space no less.

Copperfield, which publishes anonymously on SeekingAlpha and the document-hosting website Scribd, issued a similar report about the risk management firm CorVel in 2012. The report accused CorVel of operating a “quasi-black market” preferred provider organization and said the company was “generating financial results that would appear to defy the laws of business.”

CorVel's stock was not as dramatically affected as BBSI's and has since generally recovered.

The Wall Street Journal posted an article exploring the idea that the research group was involved in “short selling” after Copperfield issued a negative report about MagicJack, an alternative phone service company.

Meanwhile, the California Office of Self Insurance Plans, which lists Barrett on its roster of private self-insured entities in the state, has no record of issuing a disciplinary or corrective action against the company, Department of Industrial Relations spokesperson Peter Melton told WorkCompCentral.

Barrett posted net income of $7.3 million in its second-quarter financial earnings report. That represents an increase of 24% from the second quarter of 2013.

All of which is to say that you can't believe everything you read, you must be skeptical whenever money is involved, and that the financial underpinnings of workers' compensation, like any other financial product, are highly susceptible to manipulation by people whose business mission clearly overrides their social conscience.


Postscript - many thanks to Mike Gavin, president of Prium, Inc., and formerly in the private equity industry for correcting my errors and my confusion between private equity and hedge funds.

Wednesday, September 24, 2014

IMR: Trust the Instruments

An interesting thing happened at the Independent Medical Review dance - an EMPLOYER appealed a decision approving an injured workers treatment request.

The last statistics from the California Division of Workers' Compensation reflect that 16% of all Utilization Review decisions are overturned in the IMR process.

From what can be seen, when that happens the claims payer simply (and from what I'm told generally quite promptly since the law provide 5 days to get it done) approves and pays for the treatment.

But perhaps in the first instance since SB 863 was signed into law and the IMR process was initiated an employer appealed a decision...

And of course lost.

It's only a trial level opinion, and since IMR can't get past the trial level unless there is some proof of fraud, a reviewer's conflict of interest or a bias on the basis of race, national origin, ethnic group identification, religion, age, sex, sexual orientation, color or disability, an IMR decision is binding.

And even if an IMR decision does get thrown out by a judge for one of the reasons of defect, the case just goes back into the IMR process - sort of like a guinea pig wheel: just round and round it goes until the rodent gets off.

An appeal can also be based on "a plainly erroneous express or implied finding of fact," and this has been the basis for most of the IMR challenges to date according to reports in WorkCompCentral.

Indeed, this was the grounds cited by the City of Sacramento in challenging the IMR decision to authorize an H-Wave machine for Kirk Crump. The H-Wave is a device that provides a therapeutic form of electrical muscle stimulation and was prescribed from Crump for his chronic shoulder pain from an industrial injury.

The city had argued that there was no evidence that Crump was able to reduce his medication use because of the H-Wave device, so the IMR reviewer had plainly erred in finding this to be a reason to authorize payment for the device.

However, the Workers' Compensation Judge to whom the appeal made its way found that this fact was noted in the progress report from Crump's treating doctor. Thus, the judge concluded in his Sept. 15 order, there was no plain error in the IMR decision.

Of course the debate among litigants in the system is mixed.

Some argue that it's frightening that even when 84% of UR denials are upheld by IMR that employers want to close the gap even further.

Others say that even though the decision was adverse to the employer, it's still another decision where IMR can't be challenged, further cementing the permanent nature of the process.

Still others say that this is just an aberration, that "even a blind squirrel sometimes finds a nut."
Trust your instruments - what are they saying?

Really, all this demonstrates is that IMR is still maturing, that users and participants in the system are still adjusting to it, and that even self insured employers need to get used to the idea that they will have to provide treatment they might find ineffectual, inappropriate, or for which they simply don't want to pay for.

In law we tend to talk in terms of "rights" and "liabilities." For instance, many of us may think that we have a right to drive a car on public roads. But we don't - we have only a license, and that privilege, that license, can be revoked by the state at any time.

Likewise in workers' compensation, that law, SB 863, is changing our expectations. We thought we had a "right" to unchallenged, unlimited goods and services under the guise of medical treatment, or that our "liability" to provide treatment would be severely constricted.

Both sides have lessons to learn.

Here's the deal - the system is what it is. We have a law that is on the books. A big segment of the workers' compensation population don't like that law. Another segment of the population does like that law.

It's a harsh law, no doubt. It's a law that changes the dynamics of a long standing cultural premise of workers' compensation - that a person can get whatever medical treatment they desire with no consequence or proof of efficacy.

That cultural premise developed over a period of one hundred years, so it's something that is going to take time to adjust. Expectations don't quickly align with reality in any human endeavor.

It's sort of like flying an airplane when something wrong happens - there is a huge moment of disbelief where the mind says that something is different and that the gauges and numbers aren't adding up like they're supposed to.

That moment of disbelief is distracting - bad things can happen in a moment. It takes training and discipline to cut through the "noise," figure out what all of that information is saying, and take the appropriate action to avoid disaster.

It should not be surprising that an employer appealed an IMR decision favorable to the injured worker, and it should not be surprising that such an appeal failed. IMR hasn't been around long enough for people to "trust the instrument."

The law is decidedly pro-employer in that the logical flow provides for appeals by the injured worker and not really the employer: Labor Code Section 4610.6 requires the employer to authorize a disputed treatment within five days of an IMR determination upholding the request.

But what I want to know is, if the employer failed that 5-day mandate, does it get penalized? That's the follow-on story...

To read the briefing in the case and see the ALJ's order, click here.

Tuesday, September 23, 2014

The Tail

"Workers’ compensation is a really expensive way to sell health insurance,” Frank Neuhauser, a researcher with the University of California, Berkeley, who regularly performs research on California's workers' compensation system told WorkCompCentral.

He was responding to questions about a report recently from the National Academy of Social Insurance that demonstrates just how important the state is to the national work comp market.

Injured workers in California received nearly 20% of the $181.4 billion in medical and indemnity benefits paid by state and federal workers’ compensation programs between 2010 and 2012.

In looking at the NASI numbers, the California Workers’ Compensation Institute noted that the $11.5 billion paid in medical and indemnity benefits in California was “by far the highest in the nation, exceeding the combined total of New York, Pennsylvania and Florida, which ranked second, third and fourth among all states.”

The total amount paid by all states and the District of Columbia in 2012 was $58.1 billion. Adding the compensation paid to federal employers and to miners filing federal black lung claims, the total payout for all U.S. comp systems totaled $61.9 billion in 2012.

The $11.5 billion paid in California accounted for 19.8% of benefits paid by state systems in 2012, and 18.6% of all benefits paid, including federal compensation programs. New York accounted for 8.7% of all benefits paid in 2012, Pennsylvania accounted for 4.7% and Florida accounted for 4.6%.

According to the data analysis, medical and indemnity payments in California grew by 20.2% between 2010 and 2012, surpassed only by North Dakota (31.4%) and Maine (21.7%).

California was third among the Top 10 states in terms of the growth rate for total benefits paid over this period. New York was first at 16.8% and Texas was second at 14%.
The national average was 5.8%.

At a conference several months ago, Department of Industrial Relations chief, Christine Baker, responded to an audience member's argument that injured workers weren't getting medical treatment by citing a statistic confirming that billions of dollars are being spent on medical care and the NASI data confirms her contention.
Bowzer gets wagged by his tail.

Medical benefit payments increased 27.1% in California from $5.2 billion in 2010 to $6.6 billion in 2012. This was the third largest in the nation.

North Dakota saw medical benefits increase 32.2% to $90.9 million from $68.7 million, and New York came in second, with medical payments increasing 7.5% to $1.8 billion from $1.7 billion.

Of course this data doesn't tell us that the money actually gets to the injured worker in terms of care or towards positive outcomes - it simply means that money is being spent. The efficiency of those dollars is not measured or analyzed.

Which is why Neuhauser was so circumspect in his poignant observation.

For every $100 of covered wages, California paid $1.38 in benefits, ranking No. 7 in 2012, according to the NASI data. The top six were West Virginia at $1.81, Montana at $1.67, Washington at $1.63, Alaska at $1.61, Oklahoma at $1.52 and Maine at $1.43. The national average excluding federal programs was 95 cents per $100 of covered wages.

In yesterday's post, "Quick Read," a chart shows that California is sixth in terms of overall claim costs (inclusive of medical only and indemnity claims) at just over $17,000. New York was by far the most costly at over $27,000.

The cost to employers in California is $1.85 per $100 in covered wages, according to NASI, making it the fourth most expensive state.

Alaska at $2.74, Montana at $2.49 and Oklahoma at $2.22 topped California in terms of employer expense. The national average cost was $1.29 per $100 of payroll.

But, the NASI data indicates that 74.6% of employer premium dollars are being directed to injured workers in the way of indemnity benefits or medical care, compared to a national average of 73.6% of premium dollars being directed to injured workers, which means that while California is expensive, its administrative costs are similar to other states.

Of course the data can be sliced and diced in several different ways, leading to different results, but all basically forming the same conclusion - that workers' compensation delivery of medical benefits is very expensive.

As noted by Neuhauser, group health sees 12 cents to 13 cents of every dollar going to administrative costs and profit. Workers’ compensation pays about 14% of premium dollars just on medical cost-containment programs such as bill review.

“We’re paying more for medical cost containment in workers’ compensation than group health pays for everything they do,” he said.

California is the tail that wags the dog.


Monday, September 22, 2014

Quick Read

The shortest blog post I have ever done - self explanatory...

Since I saved you so much time this morning by not having to read a few hundred words of text, take the time NOW to nominate either an injured worker, employer or industry professional for a Comp Laude Award. Nominations close October 12. Go to https://ww3.workcompcentral.com/events/nominations. Awards will be presented December 6 at the Los Angeles Sheraton LAX Gateway Hotel.

Friday, September 19, 2014

Texas Pressure

I usually attend the annual Insurance Council of Texas' Workers' Compensation Conference, which was held yesterday in Texas. I'm participating in my nephew's wedding this weekend, complicating the travel, so I elected to stay in California.

But Texas-based WorkCompCentral reporter Joey Berlin did attend, and filed a report indicating that there was quite a bit of speculation that the Texas legislature just might look at making workers' compensation mandatory for the construction industry.

Construction work has always been a greater risk than most other occupations. The work is arduous, more often than not performed by low-wage immigrant labor lacking resources, education or nerve to seek appropriate (or any) remedy when injured on the job.

And for the most part the majority of construction "companies" are solo contractors without the assets to make pursing legal action worthwhile.

The construction industry in Texas is estimated to employ about a million people and generate about $54 billion in economic activity. About half of those workers are undocumented, doing the hard labor that doesn't require a license.

Texas construction kills more workers than any other industry, and more than in any other state - 493 in 2013 (though the ratio of workers killed per employed capita is greater, significantly, in North Dakota).
Screen shot from Gov. Perry's website.

"Charity care" from taxpayers, is how longtime Texas AFL/CIO legal director Rick Levy described how the injured, uninsured get along in Texas, the implication being that the cost is shifted to government programs in some fashion or another.

Levy has been pushing for mandatory coverage as long as I have followed the Texas workers' compensation industry.

Sam McMurray, probably one of the most knowledgeable people in the Texas work comp system, seems to think that the issue of compulsory comp in some economic sectors, such as construction, may be ripe for legislative review.

There's always a magic number that gets political attention. Big round numbers make good bullet points and focus attention on a problem.

In Texas, that big round number seems to be 500,000 to 600,000 - that the estimate of workers in Texas with absolutely no work injury protection whatsoever.

“And at some point, the politics are going to change,” Levy is reported to have said.

Could it be that the one state that has resisted compulsory workers' compensation since its inception, and has fostered alternative work injury protection schemes into other states, may soon mandate the construction industry to provide coverage?

According to Berlin's report, larger construction companies are calling for it because the small contractors are beating them on price since they don't provide protection to their workers, and also cheat on payroll as well.

Workers' compensation is a matter of politics - enough noise is made in the right places to the right people and things happen.

“That’s a number that’s hard to justify,” McMurry said about the large number of uncovered workers. “So I would expect the Legislature to try to address that in some way. It won’t be mandatory comp, not even for the construction industry. But at the very least, I expect to see more mandatory reporting for nonsubscribers, and perhaps an attempt – it’s probably premature this session – but an attempt to provide (some type of mandatory) coverage.”

"Texas is a land of ongoing success and endless opportunity; Texans aren't too shy about telling people about it, either," Governor Rick Perry says on his website. "It's not bragging if it's true, however, and the Lone Star State’s winning mix of low taxes, reasonable regulatory structure, fair court system and world-class workforce has been paying dividends in terms of press recognition, economic rankings and, most importantly, good jobs for hard-working Texans."

I think that statement needs to be read with a bit of circumspection in light of the alarming message about the construction industry. While McMurray could be right that compulsory comp will not be on the agenda this legislative session, it seems to me that momentum is building - which is ironic given the Lone Star State's proud independence.

Thursday, September 18, 2014

Perils of Non-Subscription

Though a lot of us have been crowing about the benefits of good non-subscriber plans, they are not without risk to the employer, some of the same issues with fair treatment and delivery of benefits still apply as in standard workers' compensation cases.

A Texas employer discovered that tough reality when the 5th District Court of Appeals at Dallas determined that the employer's alternative benefit plan wrongfully terminated its payments to a seriously injured worker less than three months after his near-fatal fall.

In B & S Welding Work Related Injury Plan v. Oliva-Barron, No. 05-13-00394-CV, Juan Pedro Oliva-Barron began working as welder for B & S in 2007, sustaining an injury in June 2009.

B&S is a Texas non-subscriber that provides its employees with a welfare benefit plan governed by and construed in accordance with the provisions of the Employee Retirement Income Security Act.

This plan paid benefits to Oliva-Barron after he had fallen from a height of more than 15 feet while working at a job site in Oklahoma City, landing in a sitting position on hardened concrete.

Oliva-Barron suffered compression fractures in his thoracic spine, as well as injuries to his wrists and right arm.

The B & S Injury Plan paid for Oliva-Barron's emergency care in Oklahoma, and for his housing and food. It also covered the cost of transportation to his home in Dallas, and for his surgery and rehabilitation.

The plan also began conducting video surveillance on Oliva-Barron.

Video showed Oliva-Barron driving a car, climbing stairs without apparent difficulty, carrying his walker and his wheelchair, pushing a child's stroller and maneuvering a shopping cart laden with groceries one-handed, while using his cell phone.

Meanwhile, Oliva-Barron had grown dissatisfied with his treating physician, complaining that he had to wait four to five hours before seeing the doctor at every appointment.

Oliva-Barron consulted an attorney in July 2009 to see about getting a new authorized treating doctor.

Just one week later, an attorney for the plan met with Oliva-Barron at the Belmont Hotel in Dallas. Oliva-Barron brought his wife to the meeting, but did not have an attorney with him.

The plan's attorney had made arrangements for Burl and Jo Anne Malicoat, the owners of B & S Welding, to be present, and a translator, since neither Oliva-Barron nor his wife could speak English.

The attorney for the plan presented Oliva-Barron with a document, written in English, that promised payment of $5,000 in exchange for a release of all of his claims against the plan and B & S. Oliva-Barron claimed he was told "things would change" if he didn't sign the form.

Oliva-Barron refused to sign the document, so the plan allegedly decreased his salary continuation benefits by 30%, without explanation and terminated his transportation services for doctor appointments.

On Sept. 18, 2009, attorney Jason January sent a letter to the plan informing it that Oliva-Barron had retained his services. That same day (11 weeks after Oliva-Barron's fall) the plan filed a lawsuit against both Oliva-Barron and his wife, accusing them of fraud, conspiracy to commit fraud and unjust enrichment.

The plan averred that Oliva-Barron had "grossly exaggerate(d)" his "purported need for medical benefits" and had "attempted to continue and increase those benefits" even though they were "no longer justified or necessary."

Even though the plan had paid no benefits to Oliva-Barron's wife, the plan contended that she had been "complicit" in assisting him "in exaggerating and creating alleged maladies and in obtaining benefits from the plan to which he is not entitled given his actual medical condition."

Nearly two weeks after the suit was filed, the plan served a notice of adverse benefit determination on Oliva-Barron and his attorney.

Oliva-Barron counterclaimed against the plan, seeking unpaid medical and indemnity benefits.

The plan sought dismissal of the counterclaims, asserting that it provided an administrative means for Oliva-Barron to appeal an adverse benefit decision and he had not exhausted this process.

Judge Ken Molberg of the 95th Judicial District Court in Dallas ruled that there was no need for Oliva-Barron to exhaust his administrative remedies.

In light of the "baseless hostility" exhibited by the plan towards Oliva-Barron, Molberg reasoned that any administrative appeal for the denial of benefits would have been futile.

Molberg then dismissed the plan's fraud claims and awarded Oliva-Barron $52,247 for unpaid medical care, $82,880 in unpaid indemnity and $177,784 in attorney fees.

The plan appealed, arguing that a trial judge shouldn't be able to "second-guess a plan administrator’s discretion when objectively verifiable facts support a reasonable basis for terminating plan benefits."

Based on a 2013 decision from the U.S. 5th Circuit Court of Appeals titled Truitt v. Unum Life Insurance Co. of America, the plan argued that ERISA plan administrators can make a benefits decision based on any "relevant information," which includes video surveillance, even in the face of conflicting evidence.

The plan also relied heavily on Truitt for the principle that it had no duty to undertake any investigation before making a benefits decision.

On appeal, the 5th District said there was no reasonable basis for the plan's benefit decision with regard to Oliva-Barron.

In Truitt, the court pointed out, there was no dispute that there was substantial evidence to support the plan administrator's decision to deny benefits. This decision also came after four years of investigation and administrative review.

By contrast, the court said, the B&S plan terminated benefits and filed suit for fraud less than three months after Oliva-Barron was injured and provided him no opportunity for administrative review.

While there may be no duty to reasonably investigate on the part of the plan, the court said, there still must be some "rational connection between the known facts and the decision or between the found facts and the evidence" to support the termination of benefits.

The 5th District said that in this case it was undisputed that Oliva-Barron had gotten hurt, and that his accident easily could have been fatal. It was also undisputed that he needed medical treatment and rehabilitation, including a back brace and a walker.

The record also indicated that all of Oliva-Barron's doctors – including his authorized treating physician – didn't expect him to be able to return to work for four to six months after his accident, and that he was progressing as expected after his injury and surgery.

None of the medical records reflect any misrepresentation by Oliva-Barron as to his physical condition, the court added.

As Oliva-Barron also was still undergoing treatment, and the estimated time for his recovery had not yet elapsed by the time the plan cut off his benefits, the court said the plan's actions were "arbitrary and capricious."

The court also said it felt there was sufficient evidence to uphold the trial judge's finding that an administrative appeal of the plan's decision would have been futile under the circumstances.

The 5th District reduced the damages award because Oliva-Barron failed to show evidence in the record as to the amounts expended for Oliva-Barron's treatment after the plan terminated his benefits, so the judgment in favor of Oliva-Barron had to be reduced to $14,102.02, to cover only his unpaid indemnity benefits and attorney fees.

The lesson? A) don't believe everything you see on video; B) ensure that mono-lingual claimants are presented documents in their native language; C) when an employer's attorney meets with a claimant, ensure that the claimant is also represented...

Oh, and when a claimant, make sure you have all of your evidence in the record to support your damages claim.

Wednesday, September 17, 2014

Walking A Highline

The tension between social responsibility and financial gain that is the workers' compensation insurance industry is reflected in the latest California Workers' Compensation Insurance Rating Bureau's data report.

Lower frequency and continued premium growth is making the business in California more attractive to carriers seeking to profit from underwriting the system.

Carriers are projected to write $16.1 billion in premium in 2014, WCIRB Vice President and Actuary Tony Milano said during a webinar yesterday, and have already recorded $8.2 billion through the first six months of the year.

The projected total written premium for calendar year 2014 would be 8.7% more than the $14.8 billion reported for 2013 and would mark the fifth consecutive year that premium has increased.

Written premium in 2013 was 68.2% higher than the $8.8 billion reported in 2009, while the projected $16.1 billion for the current year would be 83% more than what carriers wrote in 2009.

Some of this premium growth is due to the improved labor market which would boost payroll based premium, but it's more a reflection of the insurance industry's willingness to charge more to make up for paltry investment returns as earlier bonds and other financial instruments come due, and get replaced by current low interest rate backed portfolios.

According to the WCIRB, through the first six months of the year, carriers on average charged $2.96 per $100 of payroll, 3.9% more than the $2.85 they charged last year. The average rates charged in the first two quarters of 2014 is 41% higher than the average $2.10 charged in 2009.

Ultimate losses and allocated loss-adjustment expenses are projected to be $12.7 billion for accident year 2013. In the first quarter insurer experience report, the WCIRB was projecting ultimate losses and ALAE for 2013 of $13.1 billion.
It's a balancing act... we're in this together.

This is leading the bureau to lower its projected losses and costs for accident years going back to 2009 by $500 million. The WCIRB reduced projected ultimate costs for accident years 2009 through 2011 by $100 million each, and reduced its projection for accident year 2012 to $12 billion from $12.2 billion.

Claims are cheaper too.

The projected ultimate total loss and ALAE per indemnity claim dropped to $86,845 in accident year 2013 from $87,232 in 2012. It is the first decrease in ultimate claim costs since 2005.

While the WCIRB, and nearly every other insurance company in nearly every state, decries combined ratios in excess of 100 - meaning that more money goes out the door in claims than is taken in through premium - that obfuscates the financial picture.

The combined ratio is a cash basis measurement, but most all other measures of the insurance business are accrual basis.

There's good reason for that: cash in today does not pay for claims today. Cash in today buys investments, the returns of which will partially be used to pay for claims tomorrow, the balance of which will represent profit (after some deduction for operational expenses).

So while the projected combined ratio for 2013 is 109%, down from 114% in the previous year and the lowest ratio since 2008, and is higher than the national average of 101% for 2013 (National Council on Compensation Insurance estimate), this is simply a reflection of better profitability.

Workers' compensation insurance is not designed to generate an underwriting profit, which would be reflected by a combined ratio of less than 100. It was designed as an investment platform that also generates social value.

For every claim that is measured, and for all of the numbers that are analyzed, by the insurance industry, at the end of the day there are employers paying for the system, and there are injured workers that are supposed to be the beneficiaries of the system

A healthy insurance market is necessary to support a good portion of the workers' compensation system because that is how most businesses secure their obligation to provide compensation.

But if my premium, as an employer, continues to go up, regardless of causation, then another reformation will be forthcoming. Employers give money to politicians...

And don't forget about the injured worker. We continue to see both anecdotal and evidentiary reports of failures to deliver both timely and adequate medical treatment and indemnity benefits. I can't say that this part of the equation has improved, other than the statutorily based increase in disability indemnity weekly benefits.

Florida's Chief Workers' Compensation Judge, David Langham, said in his blog the other day, "all workers' compensation cases, involves real people, important issues, critical points of law and construction."

It's good that the insurance industry is seeing a better overall picture than what was previously expected.

But without employers willing to pay for securing their obligations, and without injured workers getting their legally entitled benefits in a socially acceptable manner and time frame, the industry fails to meet its mission and whether or not it's healthy is no longer important.

It's a tricky balancing act. The insurance industry can't be smug - we're all in this together.

Tuesday, September 16, 2014

Monopoly Part Deux

Yesterday was an exploration on monopolies and workers' compensation - it was my conclusion that competition is what makes workers' compensation inefficient.

Many have taken exception to that statement, understandably, because it defies conventional wisdom.

After all, we would think that competition would compel companies and people to be MORE efficient because if they are not then someone else will come in with a better mouse trap and do the job cheaper, faster, better.

But that's not how workers' compensation is, in large part because workers' compensation itself is not a market based system - it is a REGULATED market, which means that governmental interference with the market is necessary because system stakeholders - employers and employees - are compelled to participate.

Workers' compensation was established in the first place as a monopoly system, meaning the state was the monopoly and dictated the terms of engagement. The state creates as level a playing field as can possibly be created, and thereafter its job is then to enforce the rules of play.

When we disrupt the state's role, when we remove the monopoly power of the state, the playing field gets distorted because players with unequal strengths (in this instance, money) enter the game. When unequal powers are introduced inefficiency occurs because of misallocation of capital and resources.
The state's monopoly fostered innovation.

In California this happened starting in 1993, when Open Rating became the law.

Prior to OR, the Department of Insurance dictated a minimum rate structure. Workers' compensation insurance companies could charge more than the minimum rate, but could not charge less.

The reason for this rule was brilliant forethought by the people that created the system. Their initial reasoning was that in order for the market to be stable there must be a secure capital system, meaning that there would always be money available to meet the risk.

The less obvious role of the minimum rate rule was that it forced insurance companies to compete on service levels because pricing, if a company was efficient in and of itself, was a commodity; if everyone is forced to charge the same price then the buyer needs some other distinction in order to make a purchase decision.

Workers' compensation is a service pure and simple. There are no widgets to sell (except perhaps durable medical equipment, and that is something that is not core to the system). The only way for an insurance company under the minimum rate law to distinguish itself is to provide service levels over and above the next guy who happens to be charging the same price for that service.

When the minimum rate law ruled the insurance landscape there were oodles more (I think upwards of nearly 350+) insurance companies JUST WRITING COMP. They weren't very big insurance companies but they were all specialty carriers that knew their risk industries intimately, and they offered INNOVATIVE  services in claims management that were designed to get people back to work as soon as possible.

Because the ONLY way to save an employer money was to ensure that it's experience modification factor (x-mod) was low.

And the only way to get a low x-mod was by getting benefits initiated and delivered quickly, timely and efficiently to minimize the impact of a claim; the longer a claim stays open the more expensive it is, a fact that is immutable.

Sometimes there were failures in the delivery of services, of course. Nothing can be 100%.

And of course rates rose for various reasons, but overall the rise of rates was relatively benign - there were no huge spikes or rises, nor were there any huge declines. Rate inflation existed, but it was relatively smooth and predictable.

Most businesses don't care too much about rate inflation so long as it can be predicted and modeled into a company's products and services. Disruption occurs when the unexpected happens and rates deviate from the pricing model causing an expense item that wasn't accounted for, which can affect profits (which was part of the Grand Bargain in the first place, smoothing the disruption of a potentially disastrous jury verdict).

When OR came along innovation died because carriers competed on price only. Workers' compensation became a price-dictated commodity. Employers didn't understand the value of specialty services, or the impact of those services on their x-mod, and the ultimate affect was that pricing competition put insurance companies out of business, there became less choice in the market, and worse, less expertise for any given risk model and less service.

That's when wild fluctuations started to occur in the market as capital fled.

Because when an insurance company competes on price, that means that expenses become acutely more important. Trimming expenses means trimming service levels since payroll is by far the single largest fungible expense item.

Trimming service happens at the claims management level since it is reactionary: the level of service necessary to manage a claim isn't known until that claim arrives, and even then it's a guess as to severity.

In the end employers actually have less choice - competition actually destroyed competition! Business shock reverberated through California as employers saw premium increases of over 50% in a single year, destroying any plans and models that relied on stable pricing.

Worse, competition destroyed innovation. No longer was there a reason for an insurance company to specialize in Central Valley cotton crops, or East Los Angeles body shops, etc. There was no reason for a carrier to truly understand an industry, understand intimately the particular risks, or understand operational challenges, because what mattered to the business owner was the price of a policy.

The value of innovative claims management was lost on the business owner or financial officer until a claim came through the mail, and by then it's too late.

I'm not saying that all innovation died with OR, because there are still some players doing good things. But the pace of innovation, the creativity in the insurance market, slowed considerably.

All of the small specialty carriers have left the state or just called it a day.

And the market became much, much more volatile ... and expensive at the premium level, which is what really counts for employers.

So with the minimum rate floor, insurance carriers provided good value. They helped businesses grow, and helped injured workers get on with their lives.

California needs to return to the monopoly of dictating minimum rates.

Monday, September 15, 2014

Work Comp and Monopoly Profits

In our Blogger's Panel at the California Workers' Compensation and Risk Conference in Dana Point, CA last week we were asked about whether the Grand Bargain was still relevant.

The panel was commenced on September 11, 2014, 13 years to the date after that fateful day in New York City that changed the face of American history, and that of the world, forever.

What arose out of that day affected not only airline travel, our sense of security and safety, but also workers' compensation.

Because the people at work on that day in the Twin Towers, and the people that rushed to rescue them, were treated differently than the people that were responsible for building the Twin Towers, cleaning up the site for reconstruction and erecting the memorial.

The people directly affected by 09/11 got special treatment. Workers' compensation wasn't good enough for those injured or dead. For whatever reason, Congress and the political powers that oversaw New York's workers' compensation programs determined that the thousands of people and their families deserved more than what their system provided.
Pepperdine University's annual 09/11 flag display.

Perhaps this was just one step along the 100 plus year history of workers' compensation that the previously negotiated Grand Bargain may no longer represent sufficient compensation.

Earlier this year, a Florida trial judge wrote a scathingly long opinion in a case of limited legal affect declaring that state's workers' compensation as unconstitutional because it no longer represented a fair and equitable bargain.

I've written before about the conflict between the social mission of workers' compensation and the business mission - the inherent friction is what creates, in my mind, inefficiencies because people just get confused on what they are supposed to do.

There are some in our community who argue that the only thing that matters is that the employer get good value for the insurance they purchase.

There are others that say that the injured worker is the only one that matters because the safety net of work comp was established for those people.

There are plenty amongst us that say neither part of the deal is working any longer, that government hasn't done a good job of ensuring the viability and ongoing relevancy of workers' compensation.

And there are plenty who make convincing arguments that without all of the vendors to the system, the doctors, the lawyers, the brokers and agents, risk professionals, interpreters, pharmacies, etc., that there would be no system.

Without the big interaction of everyone "on the team" workers' compensation simply would not function. The people that are charged with providing goods and services to make workers' compensation system function won't do so unless there is an upside - and that upside is profit.

Though workers' compensation is a compulsory (for the most part) revenue redistribution system, it takes businesses, clusters of people with a mission of making money, to make it function. Because work comp is compelled by the state, i.e. businesses must have coverage and workers must accept the benefits, we tend to think of it as a monopoly held by the state.

The state seems to hold the power over what does and doesn't happen with work comp. Sometimes there are challenges as to the state's power (witness Judge Cueto in Florida) and sometimes the state itself challenges it's own powers (e.g. California's huge reform, SB 863).

But maybe we are looking at this incorrectly.

What may be the issue is that workers' compensation is NOT a monopoly.

You may take issue with this statement but I was moved to this thought as I read the Wall Street Journal yesterday.

In business, money is either an important thing or it is everything, writes Peter Theil, PayPal co-founder and overall wealth dude, in a Wall Street Journal opinion Sunday.

He opines that there is only one thing can allow a business to transcend the daily brute struggle for survival and that is monopoly profits.

Theil uses the term "monopoly" a bit liberally - his use is not in the pure, complete, domination sense of the word, but in the sense that a business gets so big that there generally can not be any true competition in very tight, albeit vertically deep, niches.

He uses Google as an example of a company with monopoly powers. Think of search and you think of Google. Google dominates web based advertising and though it has a multitude of other products and services, most of which don't make any money, the company is fabulously successful in monetizing Internet search by selling advertising.

Google figured out how to make money out of very small advertising transactions, millions of transactions that are enabled through mass distribution. Most people and businesses don't have a lot of money for advertising in the traditional sense - magazine, television and radio advertising is very expensive.

Google figured that the cost of distribution of ads on the Internet, when personalized through search algorithms, could be arbitraged in a huge way, so an ad that could have cost thousands of dollars in the traditional advertising model only costs a few pennies in the Google model.

But if you look at Google from the bigger picture - that of the advertising world, it represents just pennies on the dollar in terms of the global advertising market.

Yet, Google transformed the Internet, transformed our lives, and I argue has transformed the global society, and the company and its shareholders, have made spectacular profits - what Theil calls "monopoly profits.

Theil ponders:

"So a monopoly is good for everyone on the inside, but what about everyone on the outside? Do outsize profits come at the expense of the rest of society? Actually, yes: Profits come out of customers' wallets, and monopolies deserve their bad reputation—but only in a world where nothing changes.


"But the world we live in is dynamic: We can invent new and better things. Creative monopolists give customers more choices by adding entirely new categories of abundance to the world. Creative monopolies aren't just good for the rest of society; they're powerful engines for making it better.


"But the history of progress is a history of better monopoly businesses replacing incumbents. Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and finance the ambitious research projects that firms locked in competition can't dream of."

And I think that Theil describes the present state of workers' compensation eloquently, "If your industry is in a competitive equilibrium, the death of your business won't matter to the world; some other undifferentiated competitor will always be ready to take your place."

That's what happens in workers' compensation insurance. The death of a company, or several companies as was the case in the late 1990s and early 2000s, affected rates and premiums for a short while because of the dearth of capital, but ultimately the system continued functioning. Folks weren't happy, but it didn't collapse either.

What Theil argues, if applied to the workers' compensation industry, is that it hasn't evolved; that there isn't any "monopoly profits" to be derived because the system itself stifles innovation. There won't be any huge improvement to workers' compensation in any respect unless someone can see, and realize, excess profit by doing something different.

Is this just to say that work comp "is what it is" and won't be any better no matter what we do? I don't think so.

But I do think that without profits for the companies and people that provide service and goods to the industry there would be no work comp - whether it's doctors, carriers, TPAs, etc.

The government's job under the present workers' compensation model is to regulate all those vendors to ensure a fair playing field, to make sure no one takes excessive profits, that no one be taken advantage of.

Maybe government is doing too good of a job - maybe government needs to focus on those who take, but don't give back.

In Theil's model, the monopoly is rewarded because it returns so much more in value to society and the economy. In workers' compensation there isn't any great reward in returning value, so that just isn't done.

Remember, for some businesses money is either an important thing, or it is everything...

Is workers' compensation still relevant? Yes, I believe it is. But I also believe that 100 years of competition has stifled innovation.

Friday, September 12, 2014

Protect The Brand

The conversation is changing about SB 863, California Department of Industrial Relations chief Christine Baker advised yesterday at the California Workers' Compensation and Risk Conference in Dana Point, CA.

Baker immediately followed former basketball star, James Worthy, who delivered the motivational keynote speech about teamwork.

Both were serendipitously thematic.

I expected Baker to be sanguine about the state of work comp in the post SB 863 world, and largely she was. But the tone was different 18 months after that landmark reform bill became law.

As one person in the audience pointed out in a question to her, she said that 16% of Independent Medical Review requests reversed the utilization review denials, rather that stating that IMR upheld 84% of UR decisions.

"That's a lot of care that should have been approved," she said.

When SB 863 came out the conversation was about fraud and abuse - those were the driving issues that fostered the law.

Now, Baker said, the issue is delivering appropriate medical care timely and efficiently.

"How do we bring back the humanity in the system," she counseled the audience.

And though I doubt it was intended, Baker's comments seemed perfectly orchestrated to follow Worthy's speech, as she said it will take dedicated teamwork among all system participants to make that happen.

COMMITMENT to the PHILOSOPHY that has been given to you even though you don't understand it, was the first element to successful teamwork, Worthy said.

Next, you must be a really good LISTENER to understand what is really going on and what is really necessary to be a part of success.

TRUST the team, said Worthy - you may be a star, but without the team you can't succeed.

A platform is given to you, and it is YOUR OBLIGATION to give back to that platform, he said, and understand what YOUR ROLE is on the team.

The Circle of Communication is what Worthy and his teammates on the Lakers used when egos and money got in the way of a followup championship after the first National Basketball Association title. Only the players were allowed into the Circle, but EVERY player was expected to be there, and EVERY player was required to speak up and use the 2 minutes allotted.


What happened in the Circle was that the players with the least star power, the ones that basically warmed the bench, and who hardly ever saw any game time, had the most poignant comments and observations - not out of bitterness or disappointment, but because they had the time to observe, listen and understand what was going on without the cloud of stardom obfuscating the picture.

In California work comp we don't commit, we don't listen, we don't trust. People in the various service segments don't understand their roles and fail to give back to the platform.

Most of all, there is no single Circle of Communication. Each of the segments has their conferences, has their LinkedIn pages, has their podium. None of them, however, talk to the other players, at least not without interruption.

So I asked Baker, since she is the team leader, what is the philosophy that we need to commit to, and she replied without any hesitation that it is to deliver quality medical treatment to the injured worker and provide resources as quickly as possible to allow that person, that HUMAN, to return to as normal a life, and work, as possible.

Here's the deal, as Worthy pointed out: WE have to protect the brand because the brand is bigger than any one of us.

That brand is workers' compensation. It is the reason we are here, have jobs, have security.

The brand of workers' compensation is to deliver quality medical treatment to the injured worker and provide resources as quickly as possible to allow that person to return to as normal a life, and work, as possible.

I've written in the past that we have an identity crisis. Workers' compensation has a negative image, even though it is our job to DO GOOD. Why? Because we, collectively, don't commit to the philosophy.

It certainly is a challenge.

In the past I have questioned the relevancy of workers' compensation in the modern economy and society.

It is.

We just need to understand our roles, how we fit into the picture and give back to the platform.

Thursday, September 11, 2014

Start With The End

California workers' compensation suffers from hearing loss.

The noise is incredible. Insured employer groups are unhappy that rates are still going up despite "reform." Injured workers are shouting about inability to get treatment timely. Attorneys are yelling at each other, and the tumult of doctors running out of the system because they can't get paid is getting louder.

Service vendors are screaming for payment, insurance companies squawk about ratios, third party administrators raise clamor about margins, and the government sighs in despair trying to keep everything in order.

Despite the wailing and commotion, nobody is talking to each other. Expectations are distorted. Experiences aren't shared.

And everyone complains while trying to protect their turf. Self-insured or high retention employers seem to have the only positive reflections because of the direct control they have over their experiences.

At the California Workers' Compensation and Risk Conference in Dana Point, CA yesterday, I realized that while everyone is shouting at each other and tossing blame around, no one is actually listening.

Sure, people "hear" what is going on. There seems to be agreement that California just can't get workers' compensation right and that it is too complex, too lethargic, too unresponsive, too expensive...
Self explanatory...

And everyone has their "fix" which gets reflected in some reform measure and then fine tuned along the way with court decision alterations and legislative tweaking.

Missing is the harmony.

One of the sessions I had the opportunity to attend was, "Navigating Through the New Penalty Landscape."

In that session Dawn Watkins, Director Integrated Disability Management for the Los Angeles Unified School District, made an insightful observation: expectations are not in sync with the relatively new limitations in work comp.

Physicians haven't adjusted to the fact that not every "prescription" ordered is going to be authorized or provided. Injured workers don't understand that work comp isn't a free-for-all. Employers aren't getting that just because "reform" happens that their premiums are not going down. Vendors don't realize that it's not business as usual.

Watkins, I think, raised a very poignant example - employers/carriers need to "listen" to applicant attorneys. Employers don't need to agree with what the attorneys say, or want, but the applicant attorneys "see the wrong things that we do" and if time is taken to understand what fostered the litigation, corrective steps can be taken.

I saw Bill Zachry, VP Risk Safeway, Inc. and his omnipresent single lens reflex camera around the exhibit floor. Zachry has a very interesting take on conferences. He looks around to see which industry sector is exhibiting the most because that indicates where the most money is going.

Years ago chiropractic groups dominated the exhibit halls. Now it seems defense firms are most prevalent.

In it all, there is a communication going on: sectors through their exhibitions are telling Zachry where focus needs to be in order to bring some sense to this affair we call workers' compensation.

Workers' compensation has evolved into a system of mistrust. The whirlwind of noise occurs because no one trusts another, even if they are supposed to be on the same team.

And each special interest group exacerbates the mistrust by communicating only amongst themselves. There are separate conferences and conventions for applicant attorneys, employers, brokers, doctors, defense attorneys, etc. In each of these the chorus sings the same out-of-tune song - the "other side" is to blame.

Perhaps we need to take a break from workers' compensation for a short time and breath a little. Perhaps some meditation is in order so that we can focus on what we really need to do.

Watkins, referencing the initiation of a claim, said, "we need to start with the end in mind."

That is where the conversation needs to commence. The "problem" with the California workers' compensation system is that we can't seem to agree on what that end is.

Wednesday, September 10, 2014

North Dakota is No Different

This morning's top headline in WorkCompCentral News is about a report that concluded 75% of all of North Dakota's Independent Medical Examinations were resolved against claimants.

North Dakota is a monopolistic state meaning the state is not only the overseer of its workers' compensation system, it is also the insurance company and the claim administrator.

The report, "Performance Evaluation of North Dakota Workforce Safety and Insurance," prepared by third party administrator, Sedgwick CMS' Risk Management Services division, more alarmingly found that Workforce Safety and Insurance, North Dakota's state fund, has made no effort since 2010 to find IMEs within the state’s borders.

I find this "more alarming" because North Dakota isn't exactly a high volume workers' compensation claim state. According to the study, WSI engaged in 90 independent medical evaluations in 2013, up from 53 in 2011.

As a result, none of the evaluations for the state’s claimants between 2011 and 2013 were performed by North Dakota doctors. Instead, Evalumed performed 61% of the evaluations and Examworks conducted 34%.

"This is not atypical in the industry," the report concludes, "but what is atypical is that no providers are retained in‐state."

The remaining 5% of IMEs not sent to one of the contract organizations went to out-of-state physicians. Though 65% of claimants lived in North Dakota at the time of examination, only about 16% of all of the exams were performed in-state. The rest requiring paid travel − mostly to Minnesota.

What is interesting is that claims examiners in North Dakota (remember they all work for a single entity) cite nearly identical complaints about claim processing (in this case relative to IME assignments) as claims people do in many other jurisdictions: too much paper work, too much unnecessary details, requiring too much time away from other tasks.

"[Claims staff's] impression is that that the process of setting up the IME is time consuming administratively, that it creates a large charge to the employer, and that it takes the claimant away from work ‐ often out of state because of the state’s rural base and the lack of North Dakota physicians qualified and available to perform these specialty examinations," the report noted. "They also commented that the IME process extends the time to obtain issue resolution; however, they don’t see any other way of meeting their legislated responsibility. WSI claims staff also felt that they were sending more claims through the IME process since the prior performance audit [conducted by Sedgwick in 2010], primarily because of the new legislated requirement to obtain 'objective medical evidence'."

I'm sure that these issues result in another complaint that seems more common than not: IMEs weren't getting all of the documents and information to form a truly informed, truly independent, professional opinion.

In some cases, the company found that evaluators didn’t include patient work history, chiropractic treatment or lab results in their reports.

“Absent the review of all the records, the IME’s ability to adequately report is lacking, and may indeed impact the decision made for or against the claimant,” the Sedgwick review says.

It's easy to say that the North Dakota report isn't that relevant to the rest of us - after all we're talking about a state with just over 700,000 residents.

But regardless of monopoly or open competition, the pressures are the same as in any other state: limited resources drive system performance.

And what I mean by that is legislated requirements often don't align with operational realities.

Workers' compensation is always a constrained by how much employers are willing to contribute - normally defined in monetary terms. It's a pie. Too often lawmakers, with little to no understanding of what service tool to use, create operational hurdles that leave bigger crumbs in the tin than expected.

North Dakota has the lowest employer rates in the United States by a long shot, at only $1.01 per $100 of payroll. This has some legislators and observers calling for a little more money going into the system to resolve some of these problems.

Sen. George Sinner (D-Fargo), who sits on the Workers’ Compensation Review Committee, said in the WorkCompCentral story that the state needs to try harder to improve the IME process for employees.

“I think with the money our employers are saving we can make this process better for the injured worker,” Sinner said.

The Sedgwick report has many recommendations specific to North Dakota's system. The overall sentiment is applicable to nearly all state systems though: simplify processes and make better use of available resources.

Tuesday, September 9, 2014

Get On Your Bike and Ride

Yesterday, after posting about mental health and its importance to the overall workers' compensation claims process I went for my morning bicycle ride.

Those of you who know me, or who have followed me for a while, know that I'm obsessed with cycling. I don't "follow" the sport like most sports aficionados because I can't sit long enough to "watch" anything, but I like to ride.

I have always been that way - I'm one of those "doers" - and I've been "doing" pretty much anything related to 2 wheels since I could ride without training wheels.

That also means that I have had more experience with the downside of two wheels than most people - aka crashing, or at least falling.

That's just a part of life on two wheels; eventually you WILL go down. Hopefully it is not that traumatic of an event, but it is a fall, and it does hurt.

I'm also fortunate (or maybe not) to have a very high tolerance for pain. Pain doesn't affect me as much as most people. Yep, things still hurt when I'm stupid and fall off my bicycle, but for the most part I just pick myself up, utter a few curse words, try to wipe up the blood as well as possible, and carry on.

Sometimes, like when I ended up in intensive care for a week due to a host of serious internal injuries after a particularly bad get-off, I endure a bit more pain than normal. In those situations it's just my body telling me that, yep, it really IS bad this time! I was thankful for the Demerol drip that time...

But for the  most part injuries are just part of my life. Which means pain is also just a part of my life.
Bowzer crashed into a wall, but dealt with the pain.

My wife can't tolerate any pain. She is a s frail a flower as I know. She complains of the slightest discomfort. Any minor bruise, burn or laceration causes her great irritation and misery.

The sight of blood terrifies my wife and she goes into shock - like the time I was riding "trials" on the rock jetty in front of my house on my mountain bike a few years back. I missed a step and got gored in the leg by a piece of rebar. Blood was spurting everywhere and of course I knew I needed stitches (and a tetanus shot), but my wife was so overwhelmed by the sight of blood that she couldn't drive me to the emergency room - she had to sit shot gun while I operated the throttle and brake with my left foot.

What is it that makes some people so resilient and able to deal with adversity, pain and suffering only to come back better, stronger and ready to take on more?

And others who can't tolerate nearly any pain or get set back by seemingly minor issues?

I was reminded of this yesterday after, serendipitously, posting about mental health. Took a little spill on my bicycle after only about seven or eight miles of what I had planned to be about a fifty mile ride.

The worst part is that I wasn't even going fast, which made me mad - there's nothing worse than an active person sustaining injuries in a relatively non-active way...

After picking myself up off the pavement I assessed my injuries: blood gushing from my right hand, blood all over my left calf and thigh, left shoulder abraded but thankfully no damage to the new cycling jersey I was wearing.

I hosed myself off with the water bottle, cursed a whole bunch for being stupid, saw that blood was spurting out everywhere ... and got on and rode to complete that fifty miles.

The injuries sort of hurt - I mean, lacerations, abrasions and contusions eventually induce some pain. But what I noticed most is that the cut on my right thumb wouldn't stop ejecting blood and that damned red stuff was getting all over everything.

To my compulsive way of thinking this was a huge inconvenience. I had a mission - complete my ride! But blood was getting in the way of that mission.

I was reminded of the time I went windsurfing in some big surf before work one day, ended up "biting" the sail boom on my first tack out through the waves and spit out my broken front tooth. Most rational people would call it a day, head back to shore and get an emergency dental appointment.

Not me! No sirree ... give up premium wave sailing just because of a broken tooth, cut lip, and enough blood to attract an entire school of sharks?!

And so it was with my thumb ... what do I have on me that I could tourniquet that thumb so I can complete my ride? Sunglass bag in my pocket! Wrapped it up, tied it up, thumb throbbed and wasn't much good for griping the handlebars, but I could still ride.

In the good old days when I was less tolerant of others I could not understand why some injured workers couldn't just wrap it up and still ride. I didn't have any compassion for those people who were unable to overcome a little pain and discomfort.

I've matured now, and understand that a lot of people can't tolerate pain like I can. And that's just part of the mental profile of being human - the variance in which we perceive and deal with pain is huge.

This is what makes the issue of "pain" in workers' compensation so controversial. Some people, like me, have something going on either psychiatrically, or psychologically, or both, that minimizes the perception of pain. To those of us, pain is an inconvenience but we adapt.

There are others, like my wife, who perceive pain in a much different way and for whom pain is a major concern, interferes with nearly all daily living activity, and which has no place in life.

In workers' compensation schemes we try to account for pain. There are pain scales. Some doctors specialize in treating pain. Impairment tries to adjust for pain.

For some people accounting for pain is over-compensation. For many others there isn't any adequate compensation.

In the civil world a jury awards money based on "pain and suffering." It's up to a dozen people of the community, with their collective experience, judgement and knowledge, to determine if someone is really experiencing pain and what that pain is "worth."

In workers' compensation we have disability guidelines and statutory schedules that tell us what an impairment is worth, and sometimes there is a factor to adjust for pain perception.

We know now that prescribing certain medications, e.g. opioids, is more risky and has worse effects on the pain patient than the pain itself.

And there will always be injured workers for whom the remedy is inadequate. There is no adequate answer for them, unfortunately, other than perhaps providing as much emotional and psychological support as possible to assist those persons in dealing with pain.

Mental health treatment is as much a part of workers' compensation as physical health treatment.

As for me, I'm going on my bike ride now.