Wednesday, February 29, 2012

Zurich, CDI and Arbitration Agreements - What's the Big Deal?

It's no secret that insurance companies don't really like doing business in California. The burdensome regulatory environment, liberal judges and juries, complex laws, high tax structure - each of these plays against doing business in The Golden State.

But the eighth largest economy in the world, comprising 13% of the entire country's gross domestic product, is a very tempting piece of candy, with about $7 billion in available gross written premium workers' compensation insurance market (about 20% of the entire nation's available market).

Insurance is all about risk management, which includes controlling the market insurance is being written in. If one can control who says what and where about disputes, then there is better risk management control.

It's all about how one goes about doing this though, and states have laws that require certain actions be performed in the name of risk management, in particular in a regulated market, like work comp.

One of those laws, intended to protect the less sophisticated of insurance product customers, requires that the California Department of Insurance (CDI) get a copy of all pieces of paper purporting to bind the work comp insurance customer to certain practices and requirements.

The reason CDI has regulations in place like that (one of those regulatory schemes that make California such a burden on business - by the way, I'm being sarcastic here) is because the insurance contract is a complex document filled with legal mumbo jumbo that would put to sleep even the most astute and interested student of insurance contract study.

A simple business owner isn't going to take the time to read everything, if anything at all.

And the typical business owner, even if the time is taken to read the entire insurance contract, isn't going to understand or appreciate the implications of certain clauses, like how, when and under what laws disputes are going to be resolved.

The HBO movie which I had earlier written about, Hot Coffee, highlights four elements that corporate America uses to eviscerate the Seventh Amendment to the United States Constitution - the right to have disputes heard and resolved in a civil court of law. One of those elements is the use of arbitration to remove the right of the plaintiff to have his or her day in court.

So it comes as no surprise that the CDI has brought action against Zurich American Insurance Co. and Zurich Insurance Co. of Illinois, saying they are improperly using large-deductible workers’ compensation agreements that have not been approved for use in California, and which specifically direct the use of arbitration in Illinois for policy disputes, and specifically direct the use of New York law in the resolution of those disputes even though the contract is executed in California by a California business affecting the rights and obligations of parties in California.

I have nothing against Illinois, or New York for that matter. I like Chicago. Great people, wonderful architecture and New York has some of the best food in the world.

But if I'm from California with a California dispute, I want my fellow Californian's interpreting California law to resolve that dispute. I don't know many people in Illinois. I don't know New York laws. And I certainly don't like that my fate would be decided by a single person with no appeal available.

Now, in Zurich's defense, at issue are contracts with large loss deductibles, which means that the businesses covered by such contracts are pretty big businesses probably with dedicated risk management departments employing dozens of legal minds. These guys knew what they were buying and liked the pricing, which Zurich could do if it kept things out of the expensive and unpredictable California litigation environment.

That would be fine - but Zurich failed to have the contracts approved by CDI. What was it hiding? Why was Zurich afraid to have those contracts reviewed by CDI?

So, bully for CDI in taking Zurich to task for, CDI alleges, trying to scam the insurance purchasing public by including contractual documents mandating arbitration in Illinois using New York law for California workers' compensation policy disputes.

Zurich doesn't have to write workers' compensation business in California if it doesn't like the laws or the jurisdiction. But I can see why it likes the business.

According to CDI records, the Zurich Insurance Group was the second-largest carrier in California at the end of 2010, with $611 million in written premiums and 8.6% of market. The largest workers' comp carrier, State Compensation Insurance Fund, had a 16% market share.

Steve McKay, media and public relations director for Zurich, said in an email to WorkCompCentral that the carrier is “currently reviewing the enforcement action and will look to resolve with the department any concerns contained therein.”

Where? In Illinois? With New York law?

The insurance industry makes a big deal out of claimant fraud, even though statistics reflect that only about 1% of all claims have any fraud component. Carriers also make a big deal about employer fraud, which IS a big deal because the numbers are so much greater. Carriers don't like to point fingers at themselves though for obvious reasons even though history is replete with bad actors hiding behind insurance licenses involving big money.

Zurich's actions border on the fraudulent. It knew what it was doing and that it was against California law.

Since May 2003, Zurich initiated large-deductible agreements by issuing a policy and large-deductible endorsement attachment that were both filed with the Rating Bureau and approved by the insurance commissioner. But, CDI says, Zurich would enter into a “separate agreement” that is not part of the filed policy or endorsement, calling for arbitration in Illinois using New York law.

The separate agreements were never filed with the Rating Bureau or CDI as “a knowing and/or intentional practice that was undertaken for the purpose of avoiding review,” the CDI complaint says. Additionally, Zurich was notified of the filing requirement in 2011, but “continued to fail and refuse to file” the separate agreement with the Rating Bureau and the Insurance Department.

And in August 2011, Justice Eileen Bransten of the Supreme Court of the State of New York refused to enforce an arbitration clause included in a policy written by Chartis subsidiary National Union Fire Insurance Co. of Pittsburgh covering Southern California staffing agency Source One Staffing. Bransten said the arbitration agreement was not filed with the California Insurance Department, and forcing arbitration would "invalidate, impair or supercede" California's Insurance Code in violation of the McCarren-Ferguson Act of 1945.

I'm sure Zurich brass weighed the consequences - that's good risk management - and the consequences weren't so terrible. After all, will CDI really revoke Zurich's license to do business in the state and remove over $600 million in coverage?

And the worst that could happen is that a dispute ends up back in a California court - and what the heck, a couple of years of litigation just to get to a ruling that arbitration is not enforceable is good litigation practice management when resources are disproportionately in favor of a large insurance company.

But really, what am I complaining about? Zurich got caught. CDI will have a word with them, probably pay a small fine, and then go on with business as usual until the next time some ingenious, albeit legally questionable, risk management technique is introduced and implemented.

Tuesday, February 28, 2012

Workplace Bullying Legislation - Really??

I'm going to Hawaii next week, ostensibly for a vacation, but perhaps there's purpose to my visit outside of rest, relaxation and surfing in eighty degree water.

A bill has been introduced into the Hawaii Senate making "workplace bullying" by public employees a safety violation and making aggrieved employees eligible for workers’ compensation benefits tied to emotional distress.

SB 2487, would give public employees who are victims of abusive conduct a course of action for emotional distress against another employee who is claimed to have made the abusive conduct. The employer would be “vicariously liable” for the acts of the bullying employee and subject to a penalty of up to $25,000.
Additionally, the bill would give abused workers the right to sue for emotional distress an employer whose workplace is an abusive work environment or who directly commits abusive conduct.

An employee would also be allowed to accept workers’ compensation benefits for emotional distress rather than bringing a legal action against the employer or co-worker.

The legislation would create affirmative defenses for businesses in situations where the employer exercised reasonable care to prevent and correct the abusive conduct or the complaint is based upon an employment decision, such as termination or demotion due to an employee’s poor performance.

The bill would require any complaint be filed within three years.

The bills are all based on language provided to lawmakers from the Workplace Bullying Institute in Washington state.

"Abusive conduct" is defined in the Hawaii bill as:

(1) Conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive, and unrelated to an employer's legitimate business interests;

(2) Subjection of an employee by the employee's employer to an abusive work environment; or

(3) Retaliation in any manner against an employee because the employee:

(A) Opposed any unlawful safety violation under this part; or

(B) Made a charge, testified, assisted, or participated in any manner in an investigation or proceeding under this part, including but not limited to internal proceedings, arbitration or mediation proceedings, and legal actions.

Abusive conduct may include but is not limited to repeated infliction of verbal abuse, such as the use of derogatory remarks, insults, and epithets; verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating; the gratuitous sabotage or undermining of a person's work performance; or interference with subsequent work opportunities by defamatory evaluation. A single act normally may constitute abusive conduct if the act is especially severe and egregious; provided that the severity, nature, and frequency of any conduct objected to shall be considered in determining whether acts constitute abusive conduct.

Similar bills were introduced in Utah and Washington this year, but both measures are dead.

Anti-bullying measures were also introduced this year in Connecticut, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New York, Vermont, Wisconsin and West Virginia.

The Institute is working to line up sponsors to introduce similar legislation in California in 2013.

I'm going to call it like I see it - Really??? Do we really need this legislation?

This is the kind of law that fosters needless litigation, increases public employer costs tremendously, and in my personal opinion, has no real purpose other than to fatten the wallets of those providing services focused on this alleged problem (of which I have my doubts).

Indeed, the Institute's website makes it very clear that they are in a business to provide goods and services based on the perceived risk or actual experience of workplace bullying with coaching for individuals and organizations, books, DVDs, training, public appearances, etc:

"WBI is the first and only U.S. organization dedicated to the eradication of workplace bullying that combines help for individuals, research, books, public education, training for professionals-unions-employers, legislative advocacy, and consulting solutions for organizations. The Drs. Gary & Ruth Namie, Founders".

The Institute supports its cause with "research" - a couple of highly subjective surveys based upon the "repeated mistreatment: sabotage by others that prevented work from getting done, verbal abuse, threatening conduct, intimidation, & humiliation".

Honestly - that sounds like every employment environment I have ever witnessed. This is such a highly subjective standard there can be no qualitative basis for comparison in one case to the other.

Are there bad apples out there in the public sector work place? Sure. And they are dealt with like any other bad apple presently - with employment based discipline.

But this type of law creates new causes of action and/or or exceptions outside of workers' compensation jurisdiction and is the type of law that is the proverbial slippery slope, and before we know it the private sector will likewise be subject to such regulation.

Not only is this kind of law a slippery slope into an unknown abyss of moral regulation, but to define any act as workplace bullying requires a finding of fact, which means extensive, expensive, lengthy litigation that can ultimately serve only to further demoralize the work force.

To those states that are seriously considering this sort of legislation - get serious. There are more imperative issues out there that require debate.

Monday, February 27, 2012

A Bankruptcy Court Flirts With Dangerous Precedent

A very interesting legal fight is going on in Maine involving the bankruptcy of a self-insured employer.

The case is In re Irving Tanning Co. et al, No. 10-11757-LHK.

At issue is an attack on bankruptcy subject, Prime Tanning-Hartland's, set aside reserves for future claims.

The bankruptcy trustee wants to liquidate the reserves except for the amount that has been estimated as necessary to fulfill the outstanding claims obligations.

Those opposed to the plan (the Maine superintendent of insurance, the Maine Self-Insurance Guarantee Association, the Missouri Department of Labor and Industrial Relations and the Missouri Private Sector Individual Self-Insurers Guaranty Corp. have filed objections to the reorganization plan; Prime Tanning-Hartland had operations in both Maine and Missouri) say the move is unprecedented and threatens a precedent where self-insured reserve accounts may be fodder for future liquidations.

Apparently, according to the International Association of Industrial Accident Boards and Commissions (IAIABC), there is much more in the reserve account than the face value of the outstanding claims.

The liquidation plan proposes that the bankruptcy court estimate the total amount of Prime's present and future workers' compensation liabilities and then release any amount of security determined to be in excess of this estimate to Prime for payment to its creditors.

Objectors to the plan have some valid concern.

As we know because of our connection to the industry, it is very difficult to estimate the future liability of long tail claims, in particular those with outstanding future medical for catastrophic injuries.

Greg Krohm, a consultant for and former executive director of the IAIABC, pointed out that if the court's estimate under the proposed plan is too low, injured workers will be "left holding the bag." IAIABC's report notes, "adverse surprises are common in workers' compensation," since claims are "exposed to substantial swings in cost due to medical treatments, costs of care, and claimant life expectancies…"

I think worse, however, is that if this court action is allowed to proceed the availability of bonds to secure such reserves will either become uneconomical or unavailable.

Surety bonds are absolutely necessary for smooth insurance financial transactions in the self-insured industry. Bond-makers will not look at the self-insured risk as acceptable if there is the threat that, should an employer file bankruptcy, its surety bonds will be looked upon as the first line of guarantee for injured worker claims.

What's more - this is a federal attack on the sole province of state jurisdiction.

Prime's lead attorney, Robert J. Keach of Bernstein, Shur, Sawyer & Nelson in Maine, dismisses the alarms and told WorkCompCentral that all claims "will be fully adjudicated and liquidated at the state level," and the bankruptcy court is being asked to "set aside enough money in excess of any conceivable amount to pay those claims."

Keach related that Prime was willing to "take the claims at face-value," and have the court base its estimate on the amounts the injured workers and their attorneys have demanded. "One would assume they erred on the high side," he said.

We have all seen civil attorneys flounder in workers' compensation proceedings to the point of malpractice. I have no reason to believe that a bankruptcy court judge or trustee would fare any better.

The court in this case is tinkering with dangerous precedent.

Friday, February 24, 2012

OK Legislator Gets A Taste of Comp - Will This Influence His Vote?

I know that those of us in the trenches of workers' compensation all have one common, secret, fantasy: that legislators spend some time in the system so they can really find out what it is all about, how it works and what the consequences are.

Fantasy comes true in Oklahoma.

Oklahoma state representative Mike Christian, R-Oklahoma City, is seeking benefits for injuries to his neck and back that he says were suffered in a traffic accident nearly three years ago.

Christian contends he was "on duty" at the time of the accident because he was driving from his "duty station" (his district in south Oklahoma City) to a committee meeting at the Capitol. Christian says legislators are eligible for reimbursement for their mileage traveling to the Capitol.

He apparently met opposition on his claim for benefits from Oklahoma CompSource. And he accuses people in the legislature of trying to influence the judge on his case because of votes he cast in the past that were in opposition to House Speaker Kris Steele, R-Shawnee.

Christian wants the judge in his case, Judge Bob Lake Grove, to require House of Representatives workers to answer - under oath - whether they tried to intimidate workers' compensation judges and influence the outcome on his case.

Christian is represented by attorney Richard Bell.

Bell said he wanted to question Ashley Kemp, Amy Alden and John Estus under oath. Kemp is the general counsel for the House of Representatives, Alden is the House's former general counsel and Estus is press secretary to Steele.

Bell also is asking that Toye Venable, a claims adjuster for CompSource Oklahoma, be required to give a deposition. "I think it's relevant if there has been a concerted effort to involve the press to intimidate the courts," Bell told the Oklahoma City Oklahoman, reported Wednesday.

Attorneys representing Estus, Kemp and Venable objected to Bell's efforts to subpoena them, calling the subpoenas "burdensome, oppressive, vague, overbroad" and "not relevant to the subject matter in the pending action."

Grove told Bell he was not aware of any effort to intimidate him, and ordered Bell and attorneys for the House to go back to mediation and attempt to resolve the dispute over Christian's workers' compensation case.

Grove said he would not rule on a request by attorneys representing the House of Representatives to void subpoenas issued by Bell unless mediation efforts fail.

The Oklahoma legislature is currently considering legislation that would make it only the second state to make workers' compensation optional, like neighboring Texas, albeit with a mandatory ERISA plan.

How do you think Christian will vote should this legislation get passed into the full House for a vote?

Thursday, February 23, 2012

Are Liens the "Problem", or DWC's Problems Underscored by Liens?

A recurring theme in California workers' compensation "reform" discussions of late is the issue of liens.

For those of you who do not work in the California system, the state has a rather unique process where by service reimbursement claims, or other claims such as for child support or living expenses, can be protected by the filing of a lien against the injured worker's litigation case.

Technically under the law it is a "lien against compensation" but this term has been loosely interpreted to give lien claimants an autonomous right to seek collection independent of what is actually paid to the injured worker.

The Division of Workers' Compensation (DWC) has declared that liens are a significant source of system inefficiency and is in the process of making changes to deal with them.

But there are many unanswered questions and conclusions being made at the DWC level that do not follow logic, and consequently I fear the implementation of rules, regulations or system changes that have not been thought out and may result in unintended consequences.

According to the Commission on Health and Safety and Workers' Compensation (CHSWC), the number of liens being filed into the system in 2003 totaled 598,000. In 2004 a $100 filing fee on liens was credited with reducing that number to 224,205.

But because the DWC was not set up to be a collection agency enforcement of the filing fee itself became an administrative burden, leading to repeal of the fee in 2006.

Now, according to CHSWC, liens being filed has increased to 517,722 in 2011.

But didn't DWC just spend $60 million on a computer system to make filing of forms, including liens, more efficient? If the Electronic Adjudication Management System (EAMS) is really working on the public end, then just FILING of liens should not impose any additional pressure on the system.

Theoretically, lien claimants should be using EAMS to file their liens into the system, and there should really be no additional burden on the DWC...

Unless EAMS isn't doing the job efficiently - perhaps the issue is that too many liens are being filed on Optical Character Recognition (OCR) forms, which require an inordinate amount of clerical time to input, rather than lien claimants getting the data into the computer system themselves.

OCR forms increase clerical burden because EAMS has a poor scanning station workflow and the equipment installed in the District Offices doesn't work as intended. It just takes too long to get a lien package through the scan station because there is always something wrong with a form or business rule – the data entry constraints are too tight and clerks have to essentially retype all of the data manually into the system.

This could explain the administration's frustration with liens, because otherwise who cares what is FILED? Filing does not take up DWC resources, unless filing requires an inordinate amount of interaction by DWC clerical staff. Admitting to this problem, however, would be a source of embarrassment for the administration.

DWC also complains that liens are taking up court time that should otherwise be devoted to adjudicating injured worker's claims to benefits, citing in particular statistics pointing to the problem being uniquely Southern California based.

What's wrong with this picture is that it doesn't make any sense. Southern California is subject to the same rules and regulations as Northern California, but the north doesn't have a "lien problem" like the south does.

Why is this? Has anyone stopped to understand how one part of the state can have a singular issue that is not experienced in the other part of the state? If a situation is unique to one geographical zone, does it make any sense to subject the entire state to rules or regulations to correct that problem?

I have had this anomaly explained to me that the "culture" in Southern California is different than in the north. I'm not sure what this means. Are judges less tolerant of aberrant behavior in the north than the south (in which case it seems that JUDICIAL reform is needed)? Are there more lien based service providers in the south than the north (which doesn't make sense either because there are more judicial resources in the south which, theoretically, means there should not be a significant difference in the ratio of lien claims to judges)?

Additionally, on page 9 of the CHSWC Lien Report it states that in Los Angeles, the busiest Board in the state for liens, there are 144 Lien Trials set per MONTH. That equates to 6.5 per day if using a 22 working day calendar.

Of those 6.5 per day, it says that 35% are settled, not taking the Judge's time, so that makes 4.22 Lien Trials set per day. (Maybe the Judge's take Friday's off, but everybody else works 5 days per week, so I don’t accept Fridays off). Four lien trials per day is not a HUGE lien problem in the biggest District Office in the state with by far and away the most judges. While many more lien ISSUES appear at the LA office on a daily basis, these are not taking up the Judge or courtroom time, because the parties are simply using this location as a mandatory settlement area.

Liens are not “consuming 35% of the court’s calendar” as the CHSWC Lien Report states on page 1. If liens really are taking up 35% of the court’s calendar then the court has a CALENDARING problem, and not a LIEN problem. They need to manage their calendar and courtrooms more efficiently in light of how liens are actually used in the system, which would be an EASY fix and require no legislation or regulation changes (or public hearings).

Here's another thought - the reason the massive volume of liens are FILED in the first place is because it is the ONLY way a lien claimant can get noticed of hearings, get service of settlement documents, legally get information on a case, and have any kind of threat with the insurance carrier or third party administrator to ultimately get paid.

Finally, DWC has been on an austerity budget the past few years, with a hiring freeze while judges and other staff members were leaving the agency for greener pastures. So while lien filings, and presumably the amount of lien hearings, were still below 2003 levels the amount of adjudicatory resources available to deal with the volume decreased ... a lot.

DWC is now on a hiring spree - how will these additional resources impact the burden on District Offices?

DWC is taking "reform" issues on the road in April. Included in these issues is what to do about the lien "problem". I suggest that CHSWC and DWC answer some of the questions raised in this editorial before seeking solutions.

Wednesday, February 22, 2012

Just One Day, It's Evident Change is in the Air

Spring is around the corner and change is in the air.

My general rule is that workers' compensation "reform" occurs about every seven to ten years, and looking at this morning's WorkCompCentral headlines would confirm that generality.

Wisconsin leads the headlines with an "agreed bill" sailing through the state Senate with provisions to increase permanent disability benefits -- with the cost potentially offset by changing a formula to reduce medical bills.

Senate Bill 409 by Sen. Van Wanggaard, R-Racine, now goes to the House of Representatives, where the agreed bill has been introduced as Assembly Bill 499 by Rep. Joan Ballweg, R-Markesan. The Senate approved the bill 33 to 0.

In California the state Department of Industrial Relations, the parent agency of the Division of Workers' Compensation, will hold six, four-hour public forums throughout the state between April 10 and April 30. Forums will be held in Fresno, La Mesa, Los Angeles, Oakland, West Sacramento and San Bernardino.

The department said it is seeking comments on medical provider networks, utilization review, improving return-to-work, increasing permanent disability benefits, reducing the burdens of liens and unnecessary litigation, appropriate use of opiates and other medical care. The administration says that the information gathered will be analyzed and used to determine how the administration will proceed with reform proposals.

The forums combined with a report just released by the California Workers' Compensation Institute concluding that back injuries without spinal cord involvement account for one out of six claims in the California workers' compensation system, and one in four benefit dollars paid, will undoubtedly fuel some upcoming change proposals in the state.

In Kansas the Committee on Commerce and Economic Development of the Kansas House of Representatives has introduced legislation that would amend procedures for requesting a change of administrative law judges in workers' compensation cases and that would shift responsibility for the workplace health and safety program for state workers.

House Bill 2558 also alters when the time limitations commence on a claim by applying the same rule to all claims so that no time limitations may commence under the Act until the employer has filed a report with the director, after the employee has given notice to the employer.

The Maine Labor, Commerce, Research and Economic Development Committee held its first hearing of 2012 on a proposed committee version of Legislative Document 1571, which would cap benefits for injuries involving permanent partial disability, change the method of selecting members of the Maine Workers' Compensation Board and increase maximum weekly benefits.

And don't forget that Oklahoma is running along with major proposed changes including a provision that allows employers to opt out of workers' compensation.

All this in just one day. 2012 is going to be a very active "reform" year.

Tuesday, February 21, 2012

MD's IWIF - Proposed Raid Wrong, Prompts Privatization Effort Again

An interesting development is going on in Maryland with that state's carrier of last resort.

For the second time in two years the Injured Workers' Insurance Fund (IWIF) is seeking privatization, but it is not full privatization in the traditional sense, and the reason is not to expand operations, like what is being sought by Pinnacol Assurance in Colorado.

IWIF seeks protection from governmental raids to its surplus.

Gov. Martin O'Malley's proposed Budget Reconciliation and Financing Act of 2012 would transfer $50 million from IWIF to the Maryland General Fund.

A bill converting IWIF to a different entity cleared the Maryland Senate in 2010 but died in the state House. That year the House also rejected O'Malley's bid to transfer $20 million of IWIF's money to Maryland's general fund.

Lawmakers allied with the carrier filed bills earlier this month in both the Maryland House and Senate to create a new entity named the Chesapeake Employer's' Insurance Co., effective March 1, 2013.

House Bill 1017 and its companion, Senate Bill 745, were filed by Maryland Delegate Dereck E. Davis, D-Baltimore, and Senate Finance Committee Chairman Thomas "Mac" Middleton, D-Waldorf.

Under the legislation, the Towson, Md.-based workers' compensation carrier would continue to serve as the state's carrier of last resort and would be run by a board composed of nine members appointed by Maryland's governor – as it is now.

But, for the first time the new company would be subject to rate-making by the Maryland Insurance Administration and would be required to join the National Council on Compensation Insurance (NCCI), which recommends loss costs in Maryland. The carrier now sets its own rates and does not report its loss and premium data to NCCI.

This is significant because IWIF currently writes about 21% of the market.

According to its 2010 annual report, IWIF reported reserves for unpaid loss and loss adjustment expenses of $1.31 billion and net earned premium of $168.9 million for the year.

But the issue of who owns the "excess profits" of IWIF is going to be a battle and points to state government's general lack of regard for the protections a well funded and stable insurance company, state fund or not, provide to the business market place.

Maryland Attorney General Douglas Gansler concluded in a letter to IWIF last March 14 that all funds in excess of the surplus and reserves required by state insurance law would be the property of the state.

He said state law already empowers the General Assembly to take control of IWIF funds in the event of a termination, which I assume includes privatization.

"IWIF was not created as a mutual insurance company. Nor is there any indication in its enabling law that its assets belong to its current policyholders," Gansler said.

"To the extent that IWIF has assets in excess of the reserves and surplus required by the Insurance Article, upon IWIF’s termination, those assets would belong to the State, which created IWIF," he concluded.

So I take it that if IWIF does privatize there will be a big fight in the state of that $168.9 million.

And despite the state's budget woes, any raid on an insurance company assets is wrong. Even if the money legally belongs to the state, taking from surplus may inhibit the good performance of IWIF in the future - we have all seen the consequences of short sighted budgetary mismanagement by state legislators over the long term way too often.

My advise to Maryland - leave IWIF alone if you want business in your state to continue in a stabilized, economically advantageous manner. Remove that money if you want to jeopardize all of the small businesses that make the economy run.

Friday, February 17, 2012

NJ Case Unique in Judge Admonishment

It's not often that one sees a workers' compensation judge taken to task by higher authorities, so this New Jersey case reported in this morning's edition of WorkCompCentral really stands out.

The injured worker (IW) had sought penalties and attorney fees after successfully proving that her employer failed to make timely temporary disability benefits in accordance with a workers' compensation award. In 2010, the appellate court ruled that an attorney fee award was mandatory, and that the judge of compensation was not limited to the statutory formula governing fee awards, implying that the injured worker's attorney would likely be entitled to a larger-than-usual fee.

The judge of compensation then issued an order that adhered to the statutory formula for workers' compensation awards, resulting in an attorney fee award of $247.05. The judge of compensation wrote that the appellate court had not addressed how he might award a different attorney fee, and that an enhanced fee was not justified.

On a second appeal the appellate court commented that perhaps the judge of compensation misinterpreted the opinion, and did not follow directions. The appeals court remanded the case back to the judge a second time, with instructions to consider the hours expended, the average hourly rate, the success achieved, and the risk of nonpayment.

On remand the judge awarded $217.05 in additional attorney fees. This resulted in a total attorney fee award of $464.10. This was again appealed.

This time the appellate court was not so kind.

"The latest order entered by the judge of compensation ignores the clear mandate of our initial published opinion and our Nov. 5, 2010 summary disposition order," the court wrote. "In the latter order, we observed that the judge of compensation misinterpreted our original opinion. We will assume the judge of compensation also misinterpreted our Nov. 5, 2010, summary disposition order because the alternative interpretation of the judge's actions -- willful defiance of our mandate -- is completely unacceptable behavior."

The appellate court invoked its original jurisdiction, and ordered the attorney fee award.

The appellate court examined the hours expended, the customary hourly rate, the result achieved, and the risk of nonpayment. After examining the record, the appellate court made an award for 14.17 attorney hours at the rate of $250 an hour, and 2.5 paralegal hours at the rate of $100 an hour. This resulted in a total award of $3,792.

This interesting little examination in judicial administration can be found in the case of Qureshi v. Cintas Corp., No. A-2703-10T2, 2/15/12.workers compensation, work comp, injured worker

Thursday, February 16, 2012

IA Case, Independent Exams, and Single Source

An argument I hear all of the time against a single source medical treatment system is that general health doesn't deal with return to work or indemnity issues, and is only concerned with making the patient feel better.

A recent Iowa case seems to refute this argument.

In Westling v. Hormel Foods Corp., No. 10-0795, 2/10/12, Donald Westling, a Hormel Foods Corp. employee, experienced a sharp pain in his right shoulder while removing casings from meat products with a "strip-out machine." The injury occurred on Jan. 5, 2006.

Westling felt a burning sensation and could not lift his arms above his head. He continued to feel pain while he worked.

On Feb. 16, 2006, Westling consulted with Dr. Ryan Thoreson, who diagnosed his injury as a rotator cuff strain. Physical therapy did not relieve his pain, and Westling saw an orthopedic surgeon, Dr. Philip Deffer. Deffer examined an MRI, and suspected that Westling had a partial rotator cuff tear.

Dr. Jason C. Hough performed surgery on Westling's right shoulder and discovered fraying along his labrum, as well as a bone spur. Hough did not discover a rotator cuff tear, but did remove the frayed labrum and freed the bone spur.

Westling reported a week later that he was "doing quite well," and Hough allowed Westling to return to full duty work in September 2006. Westling stated that while his condition had significantly improved, he still felt a burning sensation and pain when he extended his right arm over his head.

Hough wrote a letter to Hormel stating that the surgery did not cause Westling to have a permanent impairment. Westling voluntarily retired on Nov. 24, 2006 and then spent time between Iowa and Florida.

Later Westling sought permanent disability benefits and was denied. Westling sought judicial review of that decision.

Dr. Mary Shook performed an independent medical examination upon Westling's request, and Shook determined that he had a 2% whole person impairment rating for the right shoulder and a 3% whole person impairment rating for the left shoulder. She attributed both impairments to arthritis, and not to his work activities.

Westling's appeals were denied all the way to the state Supreme Court, which concluded:

"Westling's arguments on appeal fail for two reasons," the court wrote. "First, the record did not conclusively establish that the shoulder surgery caused permanent physical impairment. The evidence on this issue was mixed. Although the surgeon's surgical note provides evidence that structures in Westling's shoulder were removed and permanently altered, this evidence did not stand alone. The record also contains the surgeon's opinion that Westling did not suffer any permanent physical impairment because of the surgery and the opinion of the physician who performed the independent medical examination who opined Westling did not suffer any permanent impairment because of overuse while working for Hormel."

Secondly, even if Westling showed that he did suffer permanent impairment, he did not prove that his work caused that impairment, the court said.

Yes, treatment was provided on an industrial basis. But the determination of impairment was made independently.

What's even more interesting to me is that the industrial doctor cleared Westling to return to work. Westling's tolerance for work though seems to have been compromised, likely because he was at retirement age and Florida is warmer than Iowa most of the year.

Granted, in this case the physicians did not have to deal with return to work issues because the claimant retired. Regardless, Iowa, along most states, has in place a method for dealing with such issues that can be employed regardless of what treatment system is utilized. That method is called "medical-legal".workers compensation, work comp, injured worker

Wednesday, February 15, 2012

FL Case Demonstrates Importance of Medical Evidence

Workers' compensation, it has been said, is an indemnity benefit delivery system with a medical component.

I've always had difficulty with that statement and have been of the opinion that it is the reverse that is true - that workers' compensation is a medical delivery system with an indemnity component.

The reason for my opinion is because the first thing that happens to invoke the jurisdiction of workers' compensation is either an injury or disease, both medical issues instituting the delivery of medical care. In addition the cost of medical is the single biggest cost component in work comp systems.

The import of the medical component is further solidified by the simple fact that the indemnity component can not live without a medical opinion - it is a physician's statement as to disability that precipitates the payment, or cessation, of indemnity.

This point was made abundantly clear by a recent Florida case where the First District Court of Appeals (1st DCA), which hears all workers' compensation appeals in the state, ruled that a letter memorializing an alleged conference with a doctor was not medical evidence thus necessitating reliance on the only medical evidence on record, thereby mandating temporary total disability indemnity benefits.

In Urquiza v. Don Greene Poultry et al., No. 1D11-3300, 02/14/2012, published, Urquiza sustained a work-related injury on July 7, 2009, while employed by Don Greene Poultry. As a result of his compensable physical injuries, he began experiencing psychiatric difficulties, and his employer's insurance carrier authorized psychiatric treatment through Compass Health Systems.

The first doctor who treated Urquiza opined that Urquiza was not in a condition to return to work, and after the doctor left Compass Health's employ in 2010, a second doctor who took over the treatment of Urquiza agreed with the first doctor’s opinion.

A claims adjuster assigned to Urquiza's case testified that she never received any medical records from Compass Health changing Urquiza's no-work status, but the insurance carrier reclassified him as only partially disabled as of Sept. 15, 2010, based on an alleged conference with the first Compass Health doctor.

The discussion from this conference was memorialized in a letter from the carrier's insurance company to the doctor and signed by the doctor.

Urquiza objected to the admission of this letter at trial, contending it was not authenticated and it was impermissible hearsay. The Judge of Compensation Claims (JCC) sustained his objection, but, apparently based on the suggestion in the letter that Urquiza could return to work part-time, engaged in an analysis of his credibility as to whether he had been informed that he could re-enter the workforce.

Based on this analysis, the JCC concluded Urquiza was not credible and denied his request for total disability benefits for September through Nov. 23, 2010.

On appeal the 1st DCA said that because the letter was not medical evidence, and the issue of disability must be made on the basis of medical evidence. The only medical evidence consisted of the opinion testimony from the second Compass Health doctor to treat Urquiza, which was that he remained totally disabled from the time of her first assessment.

"Thus, the record is devoid of medical evidence to support the suggestion that … claimant was sufficiently improved psychiatrically to return to any sort of work, or that he was advised of the same," the 1st DCA reasoned.

The lesson for all in claims - you must have admissible medical evidence to support your claims management decisions.workers compensation, work comp, injured worker

Tuesday, February 14, 2012

WCAB Appointment a Start at Economic Confidence

California Governor Jerry Brown showed the workers' compensation community a little love yesterday in advance of Valentine's Day by appointing a new commissioner to the Workers' Compensation Appeals Board (WCAB).

In a press release from the Governor's office naming appointments to about a dozen different boards and commissions, it was announced that Marguerite Sweeney of Redding, an applicant attorney for 33 years, will fill one of the three vacant commissioner positions.

In addition to the commissioner appointment, the Division of Workers' Compensation (DWC) has been aggressively hiring judges, bolstering the ranks of adjudicators that had been getting thinned out for a couple of years, ostensibly due to state budget woes even though DWC is separately funded from insurance premium taxes and takes no money from the General Fund.

(I had been told that DWC's austerity existence was because the Brown Administration did not want any agency to appear as though it was doing better than some other agency while the state tackled its lack of money.)

Brown had said earlier that he wasn't inclined to deal with any workers' compensation legislation, at least until the house's finances were in order. That the Brown Administration is paying attention to workers' compensation from an administrative standpoint is great news for the industry, and the economy of California (if not the rest of the country).

Workers' compensation is a king pin for the economy, providing stability in the work force and protections for employers and employees that are necessary to stay competitive. And a stable California economy is critical to the rest of the nation.

In order for workers' compensation to function properly there must be an efficient, well staffed, adjudicatory body to air disputes, clarify the law, and process litigated claims as quickly as humanly possible.

The back log of litigation at the District Offices, and at the WCAB, has grown tremendously despite a drop in the litigation rate because of the dearth of workers' compensation judges (WCJs) and shortage on the WCAB.

This backlog does a disservice to employers because claims do not get resolved and closed timely, which inflames the experience modification factor to employer policies, adding an unnecessary inflation to the premium cost.

And workers with claims in litigation are likewise harmed when their cases can't get heard, or are delayed due to lack of staffing, protracting the case and delaying the delivery of benefits if due and closure for the worker.

There is still plenty to do, however. Two positions remain unfilled at the WCAB level, and while there are still WCJ spots to fill, clerical positions also need to be hired.

I type (and talk) all the time about the value in workers' compensation, and how we as an industry need to embrace providing value in our work.

Likewise, the Brown Administration should continue to look at the value of workers' compensation to the economy. Proper functioning of the workers' compensation system is necessary for the economic recovery of California and the rest of the nation.

I urge the Brown Administration to continue its work on the economy by completing the task of filling the open positions on the WCAB, and let the DWC complete its mission by ensuring it is fully staffed.

Part of all economic activity is directly tied to confidence. The people must be confident that there is a dollar to earn, a dollar to save, a dollar to spend. Economic confidence is a top down equation - the leadership must be confident in order for the people to feel confident.

Making key appointments is a big part of top down confidence leadership.

Mr. Brown, we appreciate your Valentine's Day greeting. Now show us your love the rest of the year by making the WCAB whole again.workers compensation, work comp, injured worker

Monday, February 13, 2012

Causation and Return to Work - Hypocrisy

Causation is a funny concept in workers' compensation. In most situations it is not complex. If you're at work and you suffer an injury then you're covered by workers' compensation.

But what if the reason you got hurt at work was because of some other condition? What if you had a seizure at work, unrelated to any hazardous exposure, fell over and hit your head causing a skull fracture?

That case already occurred in California and the Supreme Court, in a deeply divided opinion, ruled that the injury and its attendant consequences were AOE/COE and covered by workers' compensation.

The Gideon case (1953 - before I was born!!), as it is known, is being challenged by a new case with surprisingly similar facts, which makes Gideon ripe for review.

Pablo Orrala, a baker for Harris Ranch's steakhouse, suffered an unexplained (or idiopathic) seizure at about 4 a.m., while he was preparing baked goods at the restaurant. Orrala fell to the ground and his head struck the floor, causing a severe skull fracture.

The Workers' Compensation Appeals Board followed the Gideon ruling and found the injury compensable.

The employer lost on appeal to the 5th Circuit and has asked the Supreme Court to revisit the Gideon rationale in light of the fact, cited by the employer, that 22 other cases have adopted the dissent in the Gideon case and would find Orrala's injury not compensable.

Obviously this could be argued both ways, which is why the Supreme Court's Gideon decision was split 5-4. Intellectually it is a tough call and as a consequence comes down to what the policy of the state is.

So what is the policy of the state? If we follow modern politics there is clear dispute as to how far entitlement programs go. What is the purpose of workers' compensation? What is the purpose of the health care system in general? Why have any program of disability indemnity? And what about return to work, productive employment forces, competition in the marketplace and social order?

All good questions but it all comes down to this: What do the PEOPLE want their state to be?

We in the workers' compensation industry all allegedly subscribe to one over-arching goal - return to work. We all have been preaching the mantra that return to work is best for the employee, and best for the people because it takes the injured off the public dole and puts them into production adding to the economy and creating prosperity.

Isn't it ironic then that Orrala, a 20 year employee of Harris Ranch, now permanent and stationary with a 32% permanent disability rating and ready to return to work, has been refused employment according to his attorney?

In my view this should not even be a debate. To me the fact that there is even an issue of causation smacks of hypocrisy. In this case, it seems, return to work is just hyperbole - a convenient phrase to utter when one doesn't have to actually act with good intent and face the reality of either taking back a loyal employee willing to provide continued production, or place that worker on the public system for the rest of us to take care of.

Yeah, the old phrase "business is business" compels decisions that may be void of compassion.

Would the outcome be different if workers' compensation wasn't a separate system from all of the other medical treatment and disability programs out there? In other words, would the result be different if this were subject to a single source medical system?

If Orrala's attorney's opinion is correct, that the real reason Harris Ranch has challenged the decision is to avoid a $300,000 medical lien filed by the hospital that treated Orrala, then the argument for single source medical, and disassociating the medical component from the indemnity/RTW component in work comp, takes on even greater validity.

I have heard many arguments that the reason we can not have a single source medical treatment system is because the target outcomes of general health and workers' compensation are different - because general health is only concerned with getting the medical condition right, and workers' compensation is concerned with returning the injured back to work.

Doesn't seem to me that, at least in this case, there is any difference at all.

Causation is a funny thing - when it is illogically argued to suit one's singular purpose.workers compensation, work comp, injured worker

Friday, February 10, 2012

Would You Get Married to Avoid a Deposition? A Case Study...

The rules of evidence are mysterious to most workers' compensation practitioners. The closest most come to evidentiary issues in litigated work comp cases is whether a medical report is "substantial evidence" but very rarely does a lawyer have to worry about moving an item into evidence at hearing, or worry about an evidentiary objection other than relevancy.

A recent California case reminds us, though, that the rules of evidence DO apply to workers' compensation cases, and those rules can be exploited just like any other hard and fast rule.

In Mota v. Cast Aluminum & Brass Corp. et al., No. A134157, 02/02/2012, the "spousal privilege" was deftly applied by the injured worker to prevent the defense from obtaining the deposition of a percipient witness, the claimant's girlfriend-soon-to-be-wife.

I'm sure, if you're a fan of business education, that you're familiar with the concept of just-in-time manufacturing, where processes are managed tightly to produce the most efficient manufacturing model possible. The Mota case is about just-in-time marriage.

On April 3, 2007, Ricardo Mota was caught in a conveyor belt while working for Cast Aluminum & Brass Corp., which had workers' compensation coverage from Zenith Insurance Co. He suffered multiple crush injuries to his head, neck, shoulders, low back, and right upper extremity.

Mota claimed that he began suffering from psychiatric problems and depression as a result of his physical injuries, but Cast and Zenith contended his cognitive dysfunction was caused by his past abuse of illegal drugs.

The trial judge noted that Mota freely admitted his history of narcotics use and related incarcerations in his deposition. But he said he did not remember when this occurred, and suggested that his "wife," identified as Angel P. Dodge, would know. Mota later clarified that he and Dodge were not legally married.

The defense sought to depose Dodge, but Mota's attorney objected, based on the marital privilege - even though Mota and Dodge were not married at that time.

At a hearing last September, the judge ruled that the privilege could not be raised "unless a marriage certificate can be produced before the deposition...set on Oct. 20, 2011..." If Mota produced such a certificate before that date, the judge said, a protective order was "prospectively granted" so the deposition would not proceed.

One day before the deadline, at 4:31 p.m., the defense counsel received a copy of a marriage license and certificate of marriage for the union of Mota and Dodge, dated a week prior.

The trial judge acknowledged exceptions "hav(ing) to do with causes of action between spouses," in the spousal privilege, but said there were none applicable to the case where marriage was secured just prior to scheduled testimony.

The Workers' Compensation Appeals Board rejected the defense request for reconsideration, and the 1st District Court of Appeal denied review.

This is one of those frustrating kinds of cases that, as a defendant, I would hate to see in my inventory. Five years into this case and still seeking discovery over a psyche issue. My guess, and I don't know the parties nor have I seen the case file, is that Zenith is probably correct - there is underlying psychopathology interfering with either recovery, return to work, or inflating disability.

On the other hand, perhaps it is better to admit to the psyche component and provide treatment - if it is not going to be abused by the injured worker's providers just to increase billings.

And there's the rub. Often I think it is appropriate to just provide psychological or psychiatric services to deal with non-industrial comorbidity in order to get a better outcome on the admitted industrial components of a case.

But where's the line? Is it when the payor (employer/carrier) has trust in the providers that they are doing right for the injured worker? And then how do you gain the cooperation of the injured worker, represented by counsel, and thus in an adversarial position distrustful of anything the insurance company wants to do or authorizes?

I admit that this case is a rock and a hard place for the carrier. And I also have to admire the ingenuity, and chutzpah of the injured worker and his "wife" to actually pull it off.

Mazel tov.workers compensation, work comp, injured worker

Thursday, February 9, 2012

AZ Debate on Guidelines: It's All About Big Medicine

Arizona is going through the treatment guideline debate, and experiencing the influence that Big Medicine can have on politics that can cause illogical policy creation.

The Arizona House Banking and Insurance Committee on Monday heard more than three hours of testimony on three bills, one of which would create a presumption of correctness for national evidence-based treatment guidelines. That bill was deferred for further research and to address concerns that were expressed during the hearing.

The guidelines debate is all about the state creating its own set of guidelines, as if people in Arizona have different biology than people in California, New York or Texas.

House Bill 2365 would give the Arizona Industrial Commission until July 1, 2014, to develop evidence-based treatment guidelines. If the commission is not able to produce guidelines by that date, the bill would mandate that either American College of Occupational and Environmental Medicine's (ACOEM) Practice Guidelines or the Work Loss Data Institute's Official Disability Guidelines (ODG) are presumed correct for the extent and scope of treatment.

Objection came vociferously from Medtronic.

Marybeth Thorsgaard, senior director of public relations and communications for Medtronic, told WorkCompCentral on Wednesday that the device manufacturer is opposed to the bill because using only ACOEM guidelines will limit the ability of injured workers to access widely-accepted medical treatments.

"ACOEM guidelines reflect the very conservative world view of one professional society, considered expert in most areas and therapies reviewed," she said. "This conservative philosophy is reflected in numerous therapies not allowed by the guideline -- therapies that are widely accepted, evidence-supported treatments, procedures, tests or therapies that are currently covered under Medicare, Medicaid, most commercial policies, the Department of Defense Veterans Affairs -- creating a two-tiered system for workers' compensation patients."

And, I might note, therapies in which Medtronic has considerable business interests.

Thorsgaard said lawmakers in Arizona should follow a trend seen in other states, such as Colorado, Montana, Delaware and Wisconsin, by tweaking the guidelines, using input from providers. She said guidelines for treating back injuries should have input from back specialists in Arizona. Pain treatment guidelines should be based on input from pain specialists in the state.

Is that because back and pain specialists in Arizona know more than doctors in the other 49 states? Or because the population of Arizona is unique?

Thorsgaard said Medtronic would remove its opposition to the bill if the amendment removed the default to ACOEM or the Work Loss Data Institute.

Medtronic makes implantable surgical hardware. Traded on the New York Stock Exchange (symbol MDT), and last year sold almost $15 Billion in goods.

"We would have no objection to a bill that established an independent medical panel to create an Arizona-specific guideline with no default to a national guideline," she said. "This would give Arizona providers input into their own guideline and give specialists the ability to provide expertise in specific areas under review."

And would give lobbyists an ability to influence state regulators to ensure Big Medicine is included in treatment guides. Divide and conquer is long been a successful business practice where an industry has 50 or more different regulators.workers compensation, work comp, injured worker

Wednesday, February 8, 2012

TX Case Shows How Insurance Business Creates Bad Public Perception

For an employer (or its insurance companies) the only thing worse than an employee filing a workers' compensation claim, is getting sued in civil court by a worker.

It never ceases to amaze me how employers (and in actuality we know it is the employer's insurance companies) try to shift the buck to fit the needs.

And yet, time and time again, we see efforts by employer insurance companies to claim that either a workers' compensation case should be a civil matter (i.e. claiming that the injured person was an employee) or that it should be a workers' compensation matter (i.e. claiming that the injured person was NOT an employee) - and all of this points to the insanity of our current insurance climate and how the industry creates a negative image for itself on a case by case basis.

In Texas the 14th District Court of Appeals ruled that the parents of a Texas welder who was fatally electrocuted on his second day of work can proceed with their negligence claims against the machine shop that hired him.

Yes, the employer claimed that the welder was an employee, when the facts set forth in the court's opinion are pretty clear that the employer considered the welder to be an independent contractor, with very few facts pointing to an employment relationship.

In Raynor et al. v. Moores Machine Shop, No. 14-10-01242-CV, 02/07/2012, Joseph Raynor died while welding on the premises of Moores Machine Shop in July 2007.

His parents sued Moores for negligence in connection with his death. Moores moved for summary judgment, asserting, in part, that the suit was barred by exclusive remedy because Raynor was its employee.

Moores' primary business was machining oilfield tools, which generally did not involve welding. Moores did not require Raynor to complete an application or drug test before beginning work, which it demanded of its other 50-plus employees, and it allowed Raynor to leave work after only four hours on his first day so that he could go to a job interview.

While Moores undisputedly provided Raynor with the tools and materials to do the welding job, Raynor was left alone at the job site to do the work in the manner of his choosing.

Moores also did not withhold any taxes from Raynor's check or pay Social Security.

The court concluded there were sufficient issues of material fact so as to preclude summary judgment against the exclusive remedy of workers' compensation, allowing the case to proceed to trial in the civil arena.

In the meantime, the family of Raynor has to continue re-living the grief of his death - and I'm sure it was a gruesome death as many electrocutions are - an extended period of time, rather than getting the comfort of closure of either a case settlement or quick trial. Note, Raynor's death was in 2007, and the case is not even close to getting to a trial 5 years later.

And, I'm sure the employer (or its insurance providers) have calculated that if successful in an exclusive remedy argument that the statute of limitations for a workers' compensation claim has long since lapsed, thus a Catch-22 for Raynor's family.

But, this is a matter of business, not philanthropy. The business of insurance involves the management of risk, and part of the management of risk is shifting the burden of responsibility if possible.

My liberal side though says that, in particular with situations such as the Raynor case, the business of insurance needs to be tempered with compassion for humanity.

Shifting the burden of responsibility is part of the equation factoring the general public's negative perceptions of the insurance industry. (See for example

I am sure there are cases out there where compassion did trump business. Perhaps some good news once in a while, demonstrating compassion for humanity over the raw business of risk management, would go a long ways towards changing the public perception of insurance.workers compensation, work comp, injured worker 
Of course, no sooner had I posted this editorial then I read this story: - the flip side of the business of risk management. I have a tough time with this pilot's claim...

Tuesday, February 7, 2012

Rx for Drug Problem: FL and CO Examples

Florida's crackdown on "pill mills", HB 7095, signed into law June 3, 2011, banning physicians from dispensing drugs on Schedules II and III of the DEA's controlled substances list, is being credited by state lawmakers with drastically reducing the purchase of the painkiller by physicians last year and reducing its overall purchase by pharmacies by 14%.

According to a report issued last week by the U.S. Drug Enforcement Administration (DEA), the number of doctors appearing on its national list of the top 100 U.S. physicians ranked by the volume of oxycodone they purchase dropped from 90 in 2010 to only 13 in 2011.

The 2011 list of oxycodone-purchasing doctors, published through the agency's Automation of Reports and Consolidated Orders System (ARCOS), showed 21 doctors listed in the top 100 now practice in Georgia, and another 11 practice in Tennessee.

The DEA said monthly purchases of oxycodone by Florida pharmacies increased slightly during January, February and March of 2011, while HB 7095 was being debated, and then began to drop significantly.

In addition to banning doctors from dispensing drugs on Schedules II and III of the DEA's controlled substances list, except as samples and during periods following surgeries, HB 7095 required doctors to resell their remaining inventories to wholesalers or turn them over to the Florida Department of Law Enforcement.

The law also required the Florida Department of Health to launch the state prescription drug-monitoring program (PDMP) last fall.

Pharmacies are required to supply the PDMP database with the names and other information of all persons receiving controlled substances, the dates the drugs were purchased, the quantities purchased, and information on prescribing physicians.

Georgia, Kentucky and Tennessee seem to be absorbing the business that has left Florida, according to the DEA report, demonstrating the difficulty of containing prescription drug dispensation issues within state borders.

In the meantime, Colorado is jumping on the bandwagon with new medical treatment guidelines for chronic pain and complex regional pain syndrome that include a threshold above which physicians should closely monitor opioid prescriptions and a dosage that should not be exceeded.

The updated guidelines, which take effect on Feb. 14, recommend providers screen injured workers for a history of substance abuse problems and obtain a consultation from a pain specialist before starting treatment with opioids. Providers should also have a patient sign a treatment contract indicating knowledge about the risks of addiction and that results of mandatory urine tests can be made available to employers.

Colorado's guidelines have similarity to Washington's move on prescription drugs, setting 120 milligrams of morphine equivalents per day as a dosage threshold.

The American Journal of Industrial Medicine in December said that dosage amounts in Washington, which peaked at 144.7 mg per day in 2002 had dropped to 113 mg in the third quarter of 2009 and 105 mg by the end of 2010. The study also found the number of opioid-related deaths among injured workers dropped 57.1% from a 15-year high of 35 in 2009 to 15 in 2010.

Each of these state moves is encouraging, but really are only band-aids attempting to quell symptoms rather than treat the underlying problem. I've said it before, "follow the money." There are forces at work behind prescription drug black marketing that are bigger than guidelines and physician bans, which is why the DEA found migration in such business to other states when Florida made it harder to sell.workers compensation, work comp, injured worker 

Monday, February 6, 2012

Opinions Differ on Effectiveness of AB 378 Limiting Physician Self-Referral

There's a new fight brewing in California and I suspect it will provide good entertainment, and an abject lesson in legislative drafting, to workers' compensation observers.

The fight is about physician self-referral of pharmacy goods.

Assembly Bill 378, which took effect Jan. 1, adds to the California Labor Code prohibitions against physicians referring patients to pharmacy goods when the physician has a financial incentive for making the referral.

Proponents claim the new law applies to physician-owned companies that supply spinal and orthopedic implants to workers' compensation patients and that a physician who has an ownership interest in a company that provides durable medical equipment would not be able to use devices supplied by that company on an injured worker.

But others claim that the new law doesn't limit their ability to use their own products in treating injured workers.

Brad Tully, a partner at Hooper Lundy & Bookman in Los Angeles, told WorkCompCentral that the legislative history of AB 378 shows lawmakers were focused on overpriced medical foods or compound drugs, and weren't thinking about physician-owned distributors. He agrees the law, through its definition of pharmacy goods does prohibit self-referral for implants, but doesn't think it applies to the standard business model used by physician-owned companies.

It all hinges on the definition of "referral," which is not defined by statute.

Tully said the California Attorney General in 1982 said to refer means "to send or direct for treatment, aid, information or decision" and a referral is "the process of directing… a patient… to an appropriate specialist or agency for definitive treatment."

Tully said AB 378 wouldn't apply to physician companies under the Attorney General's definitions.

"A referral is a recommendation to a patient that they go someplace to obtain something," Tully said. "It's like a physician choosing what suture to use. He's buying an office supply. That is not a referral of the suture company to the patient."

The insurance industry doesn't buy this argument.

Mark Sektnan, president of the Association of California Insurance Companies, told WorkCompCentral News that physician-owned distributors raise the question of whether a doctor has an incentive to use products that aren't medically necessary, and the purpose of AB 378 was to make sure doctors weren't recommending products for financial gain.

"Physician-owned distributorships should be covered," he said. "If they're not, we need to look at how they can be."

Lach Taylor, a consultant to the Commission on Health and Safety and Workers' Compensation, told WorkCompCentral News that the Labor Code says a carrier doesn't have to pay for a device if the provider has a financial interest, so it could come to a point where a bill is submitted and an insurer refuses to pay.

If a lien is filed, a judge will have to decide on how to interpret AB 378, Taylor said. Until a court interprets the law, Taylor said he doesn't anticipate any subsequent legislation to address physician-owned distributors.

And that, my friends, is how legislative "intent" gets interpreted as THE law.workers compensation, work comp, injured worker 

Friday, February 3, 2012

LA Case an Example of Causation vs. Presumption - Causation Wins

Causation is an interesting legal topic, in particular in the world of workers' compensation, because it is a fuzzy, gray area that is based on fictional borders for the purpose of defining liability.

Doctors, engineers, and others who assess causation from a more scientific view point, often have difficulty with legal causation - the logic associated with interpreting facts in accordance with the law sometimes takes twists and turns that aren't within a well defined formula.

Causation is a basic legal concept that is taught early in law school. The old "but for" argument is tirelessly used in the causation analysis: John Doe would not have suffered his injury but for the fact that he was on the job regardless of any other circumstance.

Such it is with the recently decided Louisiana case of Stenson v. Pat's of Henderson Seafood, No. 11-1148, 02/01/2012.

Deloris K. Stenson was employed as a server at Pat's of Henderson Seafood restaurant. On July 8, 2008, while working a lunch shift, she fell over a box of potatoes and broke her wrist.

Stenson went straight to the hospital after the accident, and pursuant to company policy, underwent a drug test. She tested positive for marijuana and Xanax.

Her employer and its insurer paid Stenson's hospital bill but refused to pay any other benefits due to the positive drug test.

The parties did not dispute that Stenson's injury had arisen out of her employment, but the restaurant and its insurer contended Stenson was not entitled to benefits because of the presence of Xanax and marijuana in her system at the time of the accident.

A workers' compensation judge, however, determined that the drugs were not a contributing cause to Stenson's fall because Stenson had a valid prescription for the drug to treat a preexisting back condition and had performed her job all morning without complaints from the customers or any other staff members, and that she had smoked marijuana four days prior to the accident.

The Third Circuit Court of Appeals explained "the fact that a drug is prescribed to claimant does not preclude (it) from consideration in determining whether the claimant was intoxicated at the time of the accident," and that "a claimant can be found to be intoxicated by a drug for which he or she has a valid prescription."

But the Court of Appeals also ruled that while the law presumed Stenson to have been intoxicated and it was her burden to prove she was not, she overcame the presumption with her work on the day of the accident and the remoteness in time between marijuana consumption and the accident.

Which is why I am not a big proponent of presumptions, particularly in statutory schemes like workers' compensation - presumptions in my opinion tend to promote needless litigation. The question the courts really were asking in this case was, "would Stenson have been injured but for falling over a box of potatoes at work."

The answer to the court was "no". This would have been the same result without the presumption.workers compensation, work comp, injured worker 

Thursday, February 2, 2012

Withdrawn Utah Bill Makes Case for Single Source

Yesterday I posted about Oklahoma taking the risk of exploring (again) a single source medical payment system.

Today in WorkCompCentral is a news story about why a single source system makes sense.

Utah State Sen. Karen Mayne, D-West Valley City, withdrew Senate Bill 130, which would have required a private health insurer to pay hospital and doctor bills when a workers' compensation carrier is disputing a claim and has not made payments within 46 days of an employee reporting a work injury. The bill would require the health insurer to reimburse services at the rate set in the Utah Medical Fee Guidelines and seek reimbursement from the workers' compensation carrier if the claim is determined to be work-related.

Mayne dropped the bill from consideration after it met stiff opposition from Republican lawmakers, but is assembling a working group to draft a similar bill for 2013.

Mayne testified before the Senate Workforce Services and Community and Economic Development Committee that some health insurers refuse to pay for medical treatment when there is a potential workers' compensation claim. Insurers continue to deny payment during the appeal process, forcing injured workers to pay for treatment out of their own pockets.

"There are all kinds of issues with bill paying," she said. "These injured workers, for no fault of their own, are losing everything because there's no money coming in."

Maine and Oregon are two states that already have similar laws.

In Maine a health insurer is required to pay medical bills when the denial of a workers' compensation claim is being appealed.

In Oregon, a claim that is denied and on appeal must be processed by a health insurance company if a claimant has coverage. If there is a balance remaining, the health care provider can bill the workers' compensation carrier, which must pay up to the fee schedule.

Casey Hill, director of government relations for the Utah Medical Association, testified in support of the bill, saying doctors are now in an uncomfortable position of having to tell injured workers that they can't provide service because they don't know if they'll get paid.

Richard Burke, an attorney with the Utah Association for Justice, testified before the committee that, "The real issue here is where there are two policies and one will pay eventually, who should bear the brunt of the delay? Should it be the injured worker who has to wait years for the claim to be adjudicated, or should one (carrier) pay and then get reimbursed if it wasn't their responsibility?"

Kelly Atkinson, executive director of the Utah Health Insurance Association, said in testimony opposed to the proposition that health insurers would have to recalculate premiums to factor in possible payment for workers' compensation claims.

If that's the only argument against Mayne's proposal, it's a weak one. It seems to me, with all the computing power available to Big Insurance, that recalculating premiums is not that big of a deal.

Mayne was granted permission from the committee to form a working group of stakeholders that would report back to the committee twice during the interim and try to reach a consensus on legislation that would be introduced in the 2013 legislative session.

Meanwhile, in another publication, Dr. Rob Stone makes a compelling argument for a single source medical payment system, stating, "the insurance industry is the single greatest barrier to achieving an efficient and affordable system to cover all Americans".

Mayne's legislation (and the laws in Maine and Oregon) would be unnecessary if a single source system were in place, but there are huge obstacles in the way of such a system. Dr. Stone says the biggest obstacle is the health insurance industry itself.

I've heard all the arguments in the past about why Americans can't have a single source system. Perhaps from a present day practical standpoint those arguments have merit. Dismantling the present private health insurance system would disrupt tens of billions of dollars.

But, as Dr. Stone puts it, "There is no business case, no health care case, no moral case to support their ongoing existence. They make their profits by avoiding taking care of sick people — by refusing to issue policies, canceling policies, or denying payment."workers compensation, work comp, injured worker 

Wednesday, February 1, 2012

OK Explores Single Payer - Is Non-Subscription the Key to Success?

It's been a while since we heard anything on the single source for medical payment front - the last being a nascent effort in New Jersey to fold medical treatment under the general health umbrella.

But Oklahoma, not a state one would generally associate with progressivism, is taking the lead in social experimentation. Not only is the state exploring an optional work comp plan for employers with 50 or more workers, but legislation has been introduced to authorize a three-year pilot program to provide "24-hour health care coverage" for employees by combining group health care with workers’ compensation.

Senate Bill 1510 by Sen. Eddie Fields, R-Wynona, would allow an employer who provides health insurance coverage to employees to contract with a licensed health care service plan as “the exclusive medical, surgical and hospital treatment for occupational and non-occupational injuries and illnesses” incurred by employees.

The plan would have to provide all job-related medical treatment without any deductibles, co-payments or share of premium being paid by employees. Employees of an employer participating in the pilot program would be restricted to choosing a doctor in the health care service plan.

The legislation has many opponents and this is Field's third attempt at moving forward with a single payer plan.

Jim Curry, president and secretary-treasurer of the Oklahoma AFL-CIO, told WorkCompCentral he doesn’t expect the latest proposal to create a 24-hour care program to have any more success than previous attempts.

Jennifer Monies, communications director for the Oklahoma State Chamber, reported to WorkCompCentral that the Chamber was reviewing the legislation but had not taken any position on it yet.

Among the issues inhibiting a single payer concept are that health care and workers' compensation plans involve different types of health care providers, that workers' compensation is intended to cover only occupational injuries and diseases, and that medical treatment under workers' compensation continues until the injury or illness is resolved.

Vermont last year passed legislation to examine combining comp with general health care. New Jersey legislation to explore the issue never moved very far. In the past California, Florida, and Georgia have also attempted to move forward with some single payer proposals, but none have found favor in the state legislatures.

I honestly don't give Oklahoma much more of a chance except that in conjunction with Field's proposal is the state's review of an optional system where larger employers can opt out of workers' compensation by offering comprehensive medical and disability plans under ERISA.

Probably the single biggest obstacle to implementing a single payer system are the requirements in ERISA - negotiating around this Federal law with state legislation ultimately kills these state attempts.

But if Oklahoma employers can opt out of workers' compensation, this may provide the incentive to create an optional single payer system as well. "Obama-Care" contains provisions for states to get ERISA exemptions if a single payer system is adopted.

Perhaps Oklahoma won't get a single source medical payment plan this legislative session, but I think the trend towards attempting such plans is picking up pace. I've opined before that moving towards a single source system in any state is a 10 to 20 year process - it's complex and there are many conflicting issues to resolve - but the perceived benefits of lower costs and higher quality care are very intoxicating.workers compensation, work comp, injured worker