Friday, June 29, 2012

Supreme Court and the Relevancy of Work Comp

Thursday's US Supreme Court ruling in National Federation of Independent Business, et al vs. Sebelius, etc. et al, had most workers' compensation observers opining about the impact of mandated health insurance on the cost of workers' compensation.

Yet, when I read the news and the opinion itself, in particular after having just written about the insane financial failure of the present workers' compensation system in California, my immediate thought was that we are one more step closer to declaring workers' compensation in its present form redundant, unnecessary, illogical and administratively, financially and socially irrelevant.

In our present iteration, workers' compensation, regardless of all its faults and costs, remains a very necessary element of a modern economy - all modern economies, and growing economies like China, recognize the need for protection of the work force that is responsible for creating national abundance. It is what defines a responsible society.

Workers' compensation has two basic elements - providing medical treatment to cure and relieve a person from the effects of an industrial injury, and to provide indemnity for inability to work while being cured and to offset the permanent effects of an injury on future income.

While there are limitations on employer participation in the Affordable Care Act, mostly related to the size of an employer's work force, and an individual requirement to have insurance, I suspect that a majority of people that do work are now going to be covered for medical care.

In that sense, then, what is the logic behind maintaining a medical component in workers' compensation? Why does there have to be any "cost shifting" at all?

Critics to this line of thinking say that general health care and industrial medicine are distinctly different because workers' compensation has in place the indemnity component, so physicians need to address medical issues differently, taking into account whether an injured worker can return to work, the nature and extent of any potential disability and the myriad of various reporting points in the monitoring of a worker's medical condition.

All of those arguments have one fundamental flaw - they all assume that a physician who is treating an injured worker must know all about impairment and disability.

That of course is nonsense. Most systems recognize a specific type of physician - those that have been trained to evaluate impairments and render opinions on disability. They are called Qualified Medical Evaluators, or Independent Medical Evaluators, etc. Disputes or concerns about impairment and disability are dealt with by those experts.

Treating physicians treat. Evaluating physicians evaluate. That is no different than what occurs under our current system. Some physicians do both, and quite often those physicians get one or the other incorrect.

And study after study has demonstrated that tying indemnity to medical status only increases disability - there is a reward system in place that unintentionally creates a more disabled work force.

If all of the work force has medical coverage then why go through machinations and discriminating maneuvers to determine through "causation" standards as to whether a worker should get treated via the workers' compensation system or the general health system?

Doing so just defies logic.

I can certainly support such activity when it comes to the indemnity component - put money on the table and people inherently try to find a way to put some of that in their own pockets.

But doing so for medical treatment lacks human compassion and social responsibility.

The US Supreme Court's action on Thursday isn't going to change things overnight. It should, however, further provoke the debate about the relevancy of workers' compensation in its present form.

Thursday, June 28, 2012

Do I Look Stupid to You? Didn't Think So...

The California Workers' Compensation Insurance Rating Bureau (WCIRB) released on Tuesday its Report on 2011 California Workers' Compensation Losses and Expenses.

Paid gross premium (no adjustment for reinsurance, dividends, experience, etc.) by carriers in the Golden State totaled about $10.4 billion in 2011.

Compare that $10.4 billion taken in with what was paid out: $3 billion for indemnity; $2.6 billion was for "incurred loss adjustment expenses" ("the full cost to insurers of administering, adjudicating and settling claims" which include defense attorney fees) and about $4 billion was for medical treatment (deducting $311 million for medical cost containment and $174 million in medical-legal expenses from the total of $4.4 billion in total medical losses paid).

Defense attorneys took out $715 million, or about a quarter, of all loss adjustment money.

Applicant attorneys took out about $387 million from indemnity leaving only about $2.6 billion in actual money going to the injured worker.

Here's a nice little table that summarizes attorney fees:

Pct. Total
$        610
 $        350
 $        960
$        715
 $        387
 $    1,102

My friend and risk management consultant, Bill Cobb, made these nice graphs which depict the attorney fee comparison:

The WCIRB report finds that total paid losses in 2011 were $7.5 billion. This includes all insurer losses paid and insurer loss reserve changes that occurred during 2011, regardless of when the accidents occurred or to which policies these losses belonged.

In other words, out of $7.5 billion in expenses, $1.1 billion went to lawyers.

I'm not saying that lawyers are not needed, nor that they are an unnecessary expense - I'm just pointing out a disparity in allocation of benefits...

Speaking of disparities, Medical cost containment has doubled since 2005. $0.4 billion went to cost containment services, leaving about $7 billion for injured workers to cover their medical and indemnity.

The WCIRB report goes on to state that "In total, California insurers have incurred about $5.0 billion in expenses in 2011, or 48% of 2011 earned premium. (For comparison purposes, in 2010, incurred loss adjustment expenses were 20% of earned premium, including $610 million in defense expenses, resulting in total expenses incurred of 43% of earned premium.)"

Let me summarize: carriers took in about $10.4 billion in 2011. Carriers sent $4 billion to medical vendors, and $2.7 billion to injured worker pockets. $1.1 billion went to attorneys. It cost carriers $5 billion to engage in this activity.

To put it more directly, carriers spent $5 billion in 2011 to administer $6.7 billion in benefits that inured to the injured worker.

Does this sound like a reasonable return on investment?

And the Brown Administration is bent on saving "costs" in the system to increase permanent disability indemnity benefits by going after lien claims and copy services?

To quote my sister-in-law when confronted by a child street vendor in Cabo San Lucas during a family vacation a couple years ago asking an inflated price for some trinkets, "Look at me ... do I look stupid to you? Do I?".

Didn't think so...

Wednesday, June 27, 2012

Carrier Gets Lesson When TD is NOT TD

Occasionally you will see me rant here over what I consider illogical claims handling decisions. This is one of those rants where a case went all the way to an appellate court over $64.71 - and of course the carrier lost.

The case is Meeks Building Center et al. v. WCAB (Najjar), No. C065944, 06/26/2012, published.

Salem Najjar sustained a cumulative injury to his low back, neck and left shoulder in June 2007, while he was employed as a paint sales associate at Meeks Building Center. Najjar continued to work unrestricted at his usual job activities despite his injury.

The carrier, Zurich American Insurance Co., asked Najjar to undergo a qualified medical evaluation with Dr. Anthony Bellomo on Sept. 11, 2007. Zurich paid Najjar $64.71 to reimburse him for wages he lost to attend this evaluation, in accordance with Labor Code Section 4600(e)(1).

4600(e)(1) states:

When at the request of the employer, the employer's insurer, the administrative director, the appeals board, or a workers' compensation administrative law judge, the employee submits to examination by a physician, he or she shall be entitled to receive, in addition to all other benefits herein provided, all reasonable expenses of transportation, meals, and lodging incident to reporting for the examination, together with one day of temporary disability indemnity for each day of wages lost in submitting to the examination.

In March 2009, Najjar began collecting temporary disability benefits. Zurich stopped making these payments in September 2009, based on the 104-week limitation period in Section 4656(c)(1).

4656(c)(1) states:

Aggregate disability payments for a single injury occurring on or after April 19, 2004, causing temporary disability shall not extend for more than 104 compensable weeks within a period of two years from the date of commencement of temporary disability payment.

Zurich argued that the 104-week period began in September 2007, when it paid Najjar the $64.71 for going to the medical evaluation.

A workers' compensation administrative law judge actually agreed with Zurich (kudos to the defense attorney arguing before the WCJ), and Najjar petitioned for reconsideration.

The Workers' Compensation Appeals Board ruled that the payment mandated by Section 4600(e)(1) was not a payment of temporary disability within the meaning of Section 4656(c)(1) and did not begin the 104-week limitation period.

The 3rd District Court of Appeal upheld the WCAB's ruling, noting what I thought was obvious - there is a distinct difference between the underlying purpose of 4600 and 4656. 4600 is all about medical examinations. 4656 is all about temporary disability.

A contrary conclusion, the court said, "would seriously disadvantage a worker in a case such as this one, where the injured worker continues to work through injury and does not suffer an incapacity to work until much later in the process." It would also "permit the employer or insurer to artificially trigger the cap period on temporary disability benefits by setting a medical-legal evaluation," which, the court surmised, "cannot have been the Legislature's purpose."

It was a good attempt by Zurich, but illogical nevertheless. Apparently relying on case law where a different result was obtained, Zurich failed to note a significant difference which was pointed out by the 3rd DCA.

In the two cases cited by Zurich (Mt. Diablo Unified School District v. WCAB and in Brooks v. WCAB), the court noted, the applicants were off work due to their injuries and receiving wage replacement benefits under the Government and Education Codes. Because these benefits served the same purpose as temporary disability benefits under the Labor Code, they were deemed to have triggered the 104-week limitation period of Section 4656(c)(1).

In the zeal to contain costs the carrier once again reinforces a negative public perception of insurance.

Tuesday, June 26, 2012

SJDB Vouchers - More Savings for a PD Increase

When I first read that California Assemblyman Gil Cedillo's AB 1145 was still moving along through the legislative process, I was a bit astounded.

In my opinion the entire supplemental job-displacement voucher program is a complete failure that was a token thrown at the applicant community by the Schwarzenegger Administration to get concerned legislators to sign off on SB 899.

From a practical standpoint there was no way it was going to work.

Reports have since shown that to be true, with the benefit being provided too late in the game and in amounts insufficient to be meaningful for any job retraining.

Frankly, we'd be better off just giving everyone who gets hurt on the job a couple thousand bucks and just call it a day.

But now I understand the value behind AB 1145 and how it continues to rise like a phoenix nearly every legislative session - it is a proposed vehicle for "reform" later on down the road should the legislature ever get around to messing with workers' compensation.

(And I don't use the words "messing with" lightly.)

The measure contains the same language as AB 211, also by Cedillo, which Gov. Jerry Brown vetoed in October. It is also similar to Senate Bill 3, which was held in the Senate Appropriations Committee in 2010 and AB 1636, which Gov. Arnold Schwarzenegger vetoed in 2007.

AB 1145 has now been sent off to the Appropriations Committee where the bill sits in the suspense file awaiting fiscal analysis.

Bills are sent to the suspense file if they could have a fiscal impact of $50,000 or more on the General Fund or $150,000 or more on any other account or fund. A bill on the suspense file can only be moved by a vote of the committee.

But it seems that no one really knows the true value of these vouchers. The State Fund says they average $2,159. The Workers' Compensation Insurance Rating Bureau says the average is about $6,000 - at least according to an analysis by Bob Franzoia, a consultant to the Committee.

Mark Sektnan, president of the Association of California Insurance Companies, told WorkCompCentral that in the current system the voucher can be included as part of the terms of a compromise and release agreement, so the retraining benefit is essentially “just money on top.”

Which is why I say why not just cut the charade. Forget about the voucher. It's just another layer of administrative burden and expense. Just throw the money that would be used for vouchers into the general indemnity pot and increase the payouts overall.

Realistically I very much doubt many of these voucher dollars are actually used for retraining or education. I have not seen any studies to verify or refute that statement, but my nearly 30 years of experience in this industry tells me that I'm probably correct. So overall, the fiscal impact is minimal and likely not a real concern.

The political impact however carries much more value. We know that the Brown Administration is on a tear to build a reform measure and in order to get that accomplished before the end of this legislative session there needs to be a bill pending that can be amended and passed up to the governor's desk.

The value of AB 1145 lies in its pendency state.

Jesse Ceniceros, president of Voters Injured at Work, told WorkCompCentral that Cedillo has already offered AB 1145 as a vehicle for reform language.

The "reform" script has already been written: 1) increase in PD benefits; 2) constriction on lien claims; 3) copy service fee regulation. The only thing holding back amendment of AB 1145 is the exact production language of "reform".

Franzoia said in his analysis of AB 1145 that the “data necessary to determine whether eliminating the tiered rates and implementing one rate would increase or decrease annual costs” of the benefit for public or private workers “remains elusive.”

The data regarding liens and copy services is elusive too, but that doesn't stop the political bus. It's on a roll - we just don't know exactly where it's going to stop. 

So I say that "reform" proponents may as well include in the script eliminating vouchers and throwing that money into the PD pot as well. Liens, copy services and vouchers - should be enough there to justify an increase in indemnity.

Monday, June 25, 2012

Ruttiger Highlights Dispute Resolution in Comp

The issue of liability for bad faith claims management practices in Texas has been going back and forth for some time, with the latest salvo in favor of carriers when the Texas Supreme Court ruled against Timothy J. Ruttiger in favor of Texas Mutual on Friday.

This case has been followed closely by Texas workers' compensation professionals because of its far ranging implications, and the fact that it has yo-yo'd from side to side through the courts.

Ruttiger sued after he was denied workers’ compensation benefits for a hernia he claimed he suffered when lifting heavy objects at work. Texas Mutual decided to investigate the claim after Ruttiger's boss, who initially signed his claim, later told the insurer she had heard Ruttiger suffered the injury playing softball.

An adjuster denied the claim – allegedly without adequately investigating it.

Ruttiger was awarded damages by the trial court for bad faith practices. The appellate court affirmed the judgment, but the Supreme Court on Friday reversed the appeals court and rendered judgment that Ruttiger take nothing.

The court majority concluded that claims against workers’ compensation carriers for alleged unfair claim handling practices can’t be brought under the Insurance Code – and that legislative change to the workers’ compensation system in 1989 had eliminated the common law right to sue for bad faith.

This is the second time the parties have been to the Supreme Court. In August 2011, the Supreme Court reversed the appeals court decision and rendered judgment that Ruttiger take nothing on his Insurance Code and Texas Deceptive Trade Practices Act claims. But the court also remanded the plaintiff's common law good faith and fair dealing claims to the Houston Court of Appeals for further consideration.

Both sides requested a rehearing, suggesting the court consider more fully whether the 1989 overhaul of the workers' compensation system "eliminated the need for" a common law cause of action for breach of the duty of good faith and fair dealing.

The Court did - finding that the 1989 changes afforded much more administrative protection to injured workers than existed under prior law:

The 1989 amendments and the current Act provide significantly more meaningful
proceedings at the administrative agency level so as to reduce the number and cost of judicial trials,
speed up the time for the entire dispute resolution process, and facilitate interlocutory payment of
benefits pending final resolution of disputes. To achieve these purposes the amended
Act contains detailed procedures and penalties for failures of the various interested parties to comply
with statutory and regulatory requirements.

The Court makes note that the failure of a carrier to comply with the deadlines and reporting features found in the Workers' Compensation Act are not with out consequences, noting the various administrative penalties that attach and start accumulating with various claims administration failures:

A carrier’s failure to comply with the Act’s requirements, deadlines, and procedures is not
without consequences. First, the Act specifies administrative violations both in particular sections
and in a general, catchall provision. For example, if a carrier fails to initiate compensation or notify
the WCD of its refusal to do so within fifteen days of receiving notice of injury, it is an
administrative violation subject to monetary penalties up to $25,000 per day. Id. §§ 409.021(e),
415.021. The Act also provides that a carrier or its representative commits an administrative
violation for any of twenty-two specified actions, including failing to process claims promptly and
in a reasonable and prudent manner, controverting a claim if the evidence clearly indicates liability, 
and failing to comply with the Act. Id. § 415.002(11), (18), (22). If a carrier refuses or fails to
comply with an order of the WCD, either interlocutory or final, or a decision of the commissioner,
within twenty days of when the decision or order becomes final, it commits an administrative
violation. Id. § 410.208(e). Also, both the WCD and claimant are specifically authorized by the Act
to file suit to enforce the order and recover attorneys’ fees. Id. § 410.208(a)–(c). A claimant who
brings suit is entitled to recover 12% of the amount of benefits recovered in the judgment as a
penalty. Id. § 410.208(d).

Ruttiger's attorneys affirmed to WorkCompCentral that they are going to request another rehearing before the Supreme Court, but they did not provide any further comment beyond that. The fact that the Court was split so evenly in its decision (5 to 4) would give Ruttiger sufficient confidence to try one more time - just convincing one justice to change minds could mean that policing carrier claims behavior would inure to the benefit of the claimant rather than the state.

The dissent by Chief Justice Wallace Jefferson (joined by three other justices) said that because the Legislature has not made the Workers’ Compensation Act “exclusive with respect to extra-contractual claims, I would not eliminate Ruttiger’s claims and would affirm the appeals court's judgment.”

Jefferson states:

The exclusivity provision of the new Act provides that “[r]ecovery of workers’ compensation
benefits is the exclusive remedy of an employee covered by workers’ compensation insurance
coverage . . . against the employer . . . [for] a work-related injury sustained by the employee.” TEX.
LAB.CODE § 408.001 (emphasis added). This clause thus emphasizes two important aspects of the
old law: (1) it provides that workers’ compensation is exclusive only with respect to the employer,
and (2) it retains the distinction, important to our decisions in Aranda and Marshall, between a
“work-related injury” and an injury caused by a carrier’s misconduct. See id. A logical inference
from this provision, which bars claims against employers, isthat claims against carriers mayproceed. 
Indeed, Aranda, analyzing the old Act’s exclusivity provision, recognized exactly this, holding that
the injury alleged in a common law suit is wholly separate, both conceptually and temporally, from
the job-related injury to which the exclusivity provision, and the workers’ compensation system as
a whole, applied. Aranda, 748 S.W.2d at 214 (“Injury from the carrier’s conduct arises out of the
contractual relationship between the carrier and the employee and is sustained after the job-related

The Ruttiger case turns exclusively on state law but is interesting because it highlights the tension between injured workers and gatekeepers that is inherent in workers' compensation. While it is a benefit delivery system, with "rights" and "liabilities", dispute resolution is a key element and often times becomes more of the focus than the rectification of injury.

Friday, June 22, 2012

CA State Fund: Good Business, Good for CA

The California State Compensation Insurance Fund is on a tear under new Chief Executive Officer, Tom Rowe, completely restructuring its business model becoming much more market competitive, and in my opinion serving its main customer base - the state's small businesses - much, much better.

Yesterday the State Fund announced a tiered rating structure for policies beginning or renewing on or after Sept. 1.

The new rating program will have three tiers, designated from best to worst as “A,” “B” and “C” that they believe will more closely reflect a particular business' experience and risk profile.

This will tremendously benefit California's small businesses, most of which must insure through the State Fund because their premium base is too small to interest private carriers. For small employers with no other option for coverage, State Fund’s tiered rating structure means they will not be subsidizing the risks of poorer performers through higher premiums.

Presently most State Fund policyholders don't pay enough in premiums to qualify for an experience modifier, and because State Fund currently has a narrow pricing range, based on an average of the policyholder’s risk profile and claims experience, employers who have fewer claims pay higher premiums to subsidize the costs associated with the policies of employers with poorer safety experiences.

Jennifer Vargen, senior vice president of marketing and communications for State Fund, says that some employers will see premium increases, and some will see decreases, but most won't be particularly affected - however those with poor risk records could be encourage under the new system to do more for safety. This makes it better for everyone.

And just Wednesday it was reported that insurance brokers will have to meet a premium threshold of $100,000 with the California State Compensation Insurance Fund to maintain a direct contract with the carrier. This will provide significant cost savings to the State Fund because it will make it easier to administer contracts and provide support services to producers, such as providing underwriting manuals or answering questions about policies.

The average policy size for the State Fund is only about $2,000. Requiring a minimum premium threshold means that smaller producers will either need to aggregate or refer their customer to State Fund's direct policy system.

In December, State Fund announced that it was reviewing requests for proposals to develop and manage a network of investigators. State Fund spokeswoman Gina Simons said in an email last year that the investigator network would “standardize the investigative work of outside vendors employed by State Fund, therefore increasing core effectiveness and efficiency.”

And the State Fund has been in the news these past 12 months with downsizing, shedding 1500 jobs, and shuttering excess real estate.

In 2010, State Fund allowed producers to take over its direct business through broker-of-record changes. State Fund also said it will allow brokers to issue proof-of-coverage certificates on their own.

All in all, State Fund's restructuring and change in operations is good for business, and good for California.

Thursday, June 21, 2012

IL Arbitrators In Crosshairs Again

Illinois has 11 arbitrators that are tasked with resolving disputes that arise in the state's workers' compensation system.

Over the past couple of years some arbitrators came under heat for conflict of interest and judicial misconduct: one who attempted to interfere with her own workers’ compensation claim and others who allegedly failed to adequately screen claims by state employees, in particular those of prison guards at the Menard Correctional Center. 

As a consequence, House Bill 1698, which took effect last year, terminated the appointments of all serving arbitrators on July 1, 2011. The legislation also provided that those serving would continue to serve until they were appointed to a new term or replaced.

Three new arbitrators were subsequently appointed: Gerald Granada, Oct. 14, 2011; Nancy Lindsay, Nov. 7, 2011; Brandon Zanotti, Feb. 6, 2012.

HB 1698 provided that in the future, arbitrators would be appointed initially by the governor, with the advice and consent of the Senate, rather than by the Workers' Compensation Commission.

However, the legislation provided that upon the expiration of an arbitrator’s term, the commission chairman “shall evaluate the performance of the arbitrator and may recommend that he or she be reappointed to a second or subsequent term by the full commission.”

Illinois Governor Pat Quinn now has on his desk HB 1084, by Rep. Michelle Mussman, D-Schaumburg. The bill deals with notes on legislative mandates affecting businesses, but was amended in the Senate to require that the governor reappoint arbitrators (with the advice and consent of the Senate) rather than by the commission.

The floor amendment was sponsored by Senate President John Cullerton, D-Chicago. The bill was passed, with the amendment, and sent to Gov. Pat Quinn (D) on June 15.

Quinn's Press Secretary, Annie Thompson, said in an email to WorkCompCentral that "we are aware of the legislation -- which seems to build on the success of the appoint(ment) process implemented last year -- and are reviewing (the bill). Having championed the workers’ compensation reforms, we are always open to finding ways to further increase transparency and oversight of the workers’ compensation process."

That sounds to me like the Governor is going to sign the bill.

It also sounds to me like a power grab for the Governor's office that doesn't belong there in the name of doing something about workers' compensation without really doing anything.

Illinois has been cleaning house, attempting to reel in its workers' compensation system. There were a series of "reform" bills over the past 24 months that made some radical changes to the system's culture, changes that many believe were not enough.

The legislation would change the process to require the chairman to recommend reappointments to the governor -- and make all appointments subject to Senate approval.

Illinois' workers' compensation dispute resolution system is small. There are only 11 arbitrators. While that makes the appointment process relatively manageable by the Governor's office, I think it also makes arbitrators vulnerable to political pressure and actually decreases transparency and accountability in my opinion.

Eugene Keefe, Chicago defense attorney with Keefe, Campbell and Associates, seems to agree, stating in his blog on Monday “we assume the supposed-reformer Governor may do what he always seems to do, fire a bunch of veteran administrators without any true reason other than to claim he is reforming something. He will then appoint and reappoint his trusted buddies to the positions for which they have little to no experience or background.”

Wednesday, June 20, 2012

Irrational Complexity to the Detriment of Stakeholders

Attorney Emily Spieler and retired Rutgers University professor John Burton had published in the American Journal of Industrial Medicine in January an article entitled, "The Lack of Correspondence Between Work-Related Disability and Receipt of Workers' Compensation Benefits," basically concluding that workers' compensation doesn't do its job anymore.

"Injured workers are facing complex systems that are not providing benefits for all work-related conditions," they said. "The current system is irrational, at best, and unjust at worst."

Burton is well known to the workers' compensation community, having taught about this social policy system for many years at Rutgers and having produced much of the nation's public policy research.

Spieler is probably less well known, but has impressive credentials starting with Dean at Northwestern School of Law.

Both have spent the majority of their professional lives providing research, insight, guidance and policy recommendations about workers' compensation.

Everyday I read about some complex issue in workers' compensation that, to the uninitiated, would seem like splitting hairs and would be technically irrational to the general population, providing ammunition to the author's conclusion of irrationality and unjustness.

For instance, in this morning's WorkCompCentral news there is a story about a Florida case from the First District Court of Appeals making a distinction between "essential" hypertension and "arterial" or "cardiovascular" hypertension relative to whether a police officer could claim a presumption of occupational causation.

Without professional guidance would the average police officer even know the difference, let alone know that there was a presumption of causation? I doubt it.

Spieler and Burton in the study suggest that additional protection for injured workers against retaliation for injury reporting and programs to reduce "stigma" associated with injury claims could help increase participation in workers' compensation systems by workers with industrial injuries who otherwise would seek treatment through other channels.

Another example was in this morning's news reporting a case where a UPS driver sustained a work injury and was released to work by his treating physician with various restrictions. According to the case history, his supervisor reacted angrily upon learning of the worker's injury and refused to honor his medical restrictions, and that the supervisor was overheard telling someone in the UPS human resources office that the worker was feigning his injury and making a false workers' compensation claim. The dispute escalated to the point where the worker made a Department of Fair Employment and Housing complaint, obtaining a "right to sue".

Every year I am tasked with lead editor of our California Flowchart. I started this project before I started WorkCompCentral. The original excuse was to promote my law practice but the reality was that it was just a challenge. My thought was that there WAS some logic and rationale behind the system's laws that could be followed making it more understandable. I estimate the original Flowchart took me about 6 months of part time editing, mostly between 2 and 5 in the morning every single day, to produce.

That Flowchart was significantly less complex than the present day Flowchart (sold out...):

2012 CA Flowchart

And the Flowchart still does not have everything there is to know about the path a claim can take in the California system - there are just too many variables introduced from one reform to the next.

Indeed, Spieler and Burton state that decades of state amendments to workers' compensation laws passed since the late 1980s have tightened rules and limited compensation for workers.

The primary focus of those reforms has "consistently been on costs to insurers and employers, rather than on adequacy of benefits to workers," according to Spieler and Burton, though some changes did include provisions some would consider protective for the employees.

The authors call the issue of causation "a key pivot point" to closing the gap between the numbers of work-related medical conditions and those addressed in workers' compensation systems.

"There is no reason to link access to adequate health care to the cause of a medical condition," the authors wrote. "We wonder whether it's appropriate to have a social insurance system that is linked to proof of causation at work, given that the effects of work disability affects workers equally, irrespective of the etiology of the disability."

I find this statement very interesting in light of the present challenge pending before the United States Supreme Court as to the Constitutionality of the Affordable Care Act, aka ObamaCare. A decision and opinion by the Court is anticipated to be released in the next couple of weeks. Certainly any decision about the Affordable Care Act is going to impact workers' compensation as a subset of general health care because if the individual health mandate is upheld it would seem that the need for a separate medical system, i.e. workers' compensation, would be reduced or completely nullified.

For decades legislators have debated about the costs of workers' compensation and in my opinion that debate is misdirected. The debate should be about stability and ensuring that the single greatest privately funded social benefit system in the world operates to ensure that all employees have access to adequate medical care and financial protection against a ruinous situation.

Spieler and Burton seem to agree but they don't have the argument quite right.

The questions and concerns of today that are forcing notable percentages of injured workers to seek treatment and help outside workers' compensation systems, they say, should be approached "with a human rights lens" that "thrusts the injured worker to the center of the debate and de-emphasizes the effects on employers or insurers."

Take "employers" out of the above sentence and then the statement is correct because ONLY workers and employers should be in the discussion about workers' compensation. Everyone else, including the insurers, are just profiteers. Maybe necessary profiteers, but profiteers nevertheless.

Tuesday, June 19, 2012

Response to Use a Bigger Hammer

Stephen Schneider, president of MedLegal Photocopy, replied to this morning's post, "If it Doesn't Fit, Use a Bigger Hammer", but it was too long for the comment section. Stephen granted permission to post this as a guest editorial in response:

Another important component of "the problem" is determining how many of the lien filings, both electronic and OCR, are truly unique. Part of the EAMS rules is that all liens be filed as an "original" lien. For whatever reason, EAMS Filers were told to file Amended liens as Original. So, even if the annual lien filings are 500k, nobody knows what percentage of those are unique filings.  

And maybe an even more important component of this "problem" is knowing how many of the liens filed (or backlogged) are already resolved. Lien Claimants file their lien to get notice of hearings, service of documents, and basically put their place-marker in the case as an interested party.  The vast majority of those liens are paid and settled without a lien hearing. There has been no pressure by the DWC on lien claimants to file a Notice withdrawing settled liens. In fact, we could expect such notices to be stockpiled along with the un-filed liens, because these would be a burden on the DWC staff to scan into EAMS. This wasn't a problem until the Administration started equating "liens filed" with "lien issues that need to be heard". In other words, the Administration is assuming that because 500k liens get filed each year, that same number of lien issues are marching their way towards a eventual DOR. I've yet to see a figure for the percentage of liens filed that turn into DORs, but my guess would be a very low percentage. 

So, we aren't sure what the flow of incoming lien filings are - because we haven't been scanning all of them into the EAMS system. We aren't sure how many haven't been filed because there is a discrepancy on the number of boxes left to be scanned, and how many liens on average are in those boxes. And once we get an accurate count of the un-scanned liens and come to a real figure of the inflow of liens for filing, we STILL don't know how many of these are actually unique liens, or how many self-resolve without using any of the resources of the DWC District Offices. 

I agree that it's difficult to tell at this point what problem the Administration is trying to solve. As you pointed out, if it's just the paper they are having trouble scanning, there are much less controversial and disruptive ways of solving that problem. If the Administration is trying to reduce the number of lien DORs and hearings, then the recent changes seem completely counterproductive. If the Administration is trying to save money for employers then - as you pointed out - we need to see more reliable data, and the dots connected for exactly how much might be saved.  

The blame for the "lien problem" in this state is usually placed squarely on the shoulders of the lien claimants. However, it should be obvious to everybody that the "problem", whatever that is, is caused by all parties involved. Certainly, there are "bad guys" among the lien claimants, but when the billing for a provider's services goes unpaid to a point where the Lien Claimant is now a party to the case, we have to consider the motives and action of the defendant as part of the "problem", and not focus entirely on the Lien Claimant. We have to consider the Judge's lack of attention to the lien when the case in chief was resolved.  We have to consider the defense attorney's motives for pushing that lien issue and even the applicant attorney's motives and actions for incurring the services in the first place. It's a complicated "problem", to be sure, but focussing all the friction on the lien and lien claimant's ability to file and collect unencumbered by filing fees, statute of limitations, and now DOR time limits should be considered carefully. These types of changes will only encourage the defendant and defense attorneys to delay and deny payment for otherwise valid liens in the hopes that the Lien Claimant screws up on one of these friction points. Such rules may make it easier for certain lien claims to be denied, but it also may cause a much larger number of liens to get caught in the "filter". It goes back to knowing how many liens resolve themselves now, without using DWC resources. If 90% of all liens resolve themselves now, but we introduce Regulations that encourage defendants to delay payment (in the hopes of tripping up the lien claimant on a technicality), we could in fact cause a much bigger problem than we started out with. 

To truly solve "the problem", I think the Administration should carefully collect reliable data, talk to all parties involved, define the problem(s), and THEN consider solutions. I don't feel like that is happening right now. 

Thanks for the editorial Dave.

If It Doesn't Fit, Use a Bigger Hammer

I said I was done with the lien issue in California.

Never say "done" I guess.

“Until we know the size of the problem, it’s difficult to come up with a solution that addresses the concerns in a more efficient way,” Carl Brakensiek, California Society of Industrial Medicine and Surgery (CSIMS) executive vice president, told WorkCompCentral. “It seems like what the WCAB did was come up with a blockbuster solution that could be enormous or could fizzle. It all depends on the size of the problem.”

Indeed, the size of the problem does not appear to be accurately understood.

My understanding is that there are 425 boxes of un-filed paper liens stockpiled and taking up department time and resources. The boxes depicted in the photo from that post are copy paper boxes. A box of copy paper, when packed by a machine with wrapping, contains 5000 sheets of paper.

If these boxes met those standards, that means 2,125,000 sheets of paper. The typical OCR lien package with a single page attachment supporting the lien (which used to be required under the "old" rules) is 8 pages (including separator sheets, cover sheet, 3-page lien form, proof of service, and invoices). That means about 265,625 un-filed liens IF these pieces of paper were packed by machine.

But the paper isn't packed by machines - people stuffed these boxes and people can't do the job as good as a machine with new, fresh paper. Some liens will have more pages, and some boxes will be packed more efficiently than others, so the number of pieces of paper in each box is probably quite a bit less than 5,000.

The Administration claims that there are close to half a million liens being filed each year -- in addition to a backlog of close to 1 million liens waiting to be scanned -- with an average value of $1,500 each.

“When you think of the 500,000 liens coming into our offices, plus 800,000 in boxes, plus the litigation over all that, that alone is a huge amount of money,” Department of Industrial Relations Director Christine Baker said in the story linked above.

Okay - so either the administration is overstating the "lien problem", someone can't count, or the "lien problem" isn't as advertised.

Shouldn’t the public get an accurate count of exactly how many boxes of un-filed liens are sitting around the state right now? We heard “close to a million” liens, but how do they know this when what they have to look at are only boxes?

All these lien rules and changes from the Administration is being done based on 500,000 liens incoming each year. But if there is only 425 boxes left un-scanned, then lien filings can’t possibly be that high.

The numbers don't add up, and I think the workers' compensation community deserves the real numbers since they are being burdened with new rules and regulations that are based on these "facts."

In the meantime lien claimants are lining up to file for hearings putting additional pressure on the District Offices. A sample review of hearing notices for "lien conferences" - the precursor to getting a lien trial - shows that dates are being set in Long Beach for MARCH 2013, in San Diego for JANUARY 2013, and in Van Nuys for DECEMBER 2012.

Dean Fryer, a spokesman for the Division of Workers’ Compensation, told WorkCompCentral that the administration anticipates an increase in the number of lien DORs being filed. The division is exploring “a multitude of possibilities” to “accommodate an increase and to ensure that lien claimants get their day in court.”

Possible solutions include expanding the calendar to allow for more lien conference settings and bringing in judges from Northern California to assist in the southern part of the state. The division is also considering a pro-tem calendar to address lien DORs and could hold “lien intensives where there would be a concentration of lien conferences for a few days,” Fryer said.

Listen - the administration is reacting to a problem it doesn't even understand, and is making things worse.

My grandfather back in his day was a Master Mechanic - that was when the trades meant something and people took pride in their trade. The key to being a good Master Mechanic is that only one problem is addressed at a time because of cascading effects of problem resolution - one needs to see what happens down the chain of events to see if the proposed resolution of a problem creates more problems than it resolves.

The original "lien problem" was the quantity of paper - at least that is what it started out as. But we don't even know just how big of a problem it is. And in the meantime we have a whole host of new problems being created by regulations that address more than the original problem.

My grandfather also facetiously said, "if it doesn't fit, use a bigger hammer."

Deal with one problem at a time. In this case, just deal with the paper. User a bigger hammer. Fit all that paper into the system. THEN determine the next problem.

In the meantime, the administration is back in defensive mode and reacting to an issue it doesn't even understand adequately.

If the problem is paper, then the administration needs to get rid of the paper.

If the goal is saving money - and it is, because the administration is tasked with ferreting out costs in the system to support an increase in permanent disability indemnity - then we should know EXACTLY how much we are saving.

We don't know, and we can't know, until there is an accurate quantification. This isn't difficult math. Someone just has to count.

Monday, June 18, 2012

Repetitive Trauma Must be Fun

Last week, the Florida 1st District Court of Appeal ruled that an office worker who asserted multiple claims for repetitive trauma to her wrists from typing did not have to show her condition had changed or worsened to open a new claim, because every new exposure counts as a new injury.

In Rose v. Geico et al., No. 1D11-4843, Rebecca Rose began working for Geico Corp. in 1998 as an underwriter. Her job duties included data-entry work using a computer keyboard. She began complaining of numbness and tingling in her hands.

In April 1999, her doctor diagnosed her with bilateral carpal tunnel syndrome. Eight years later, in October 2007, her doctor recommended surgery on Rose's right wrist.

Rose submitted a petition for benefits in August 2008, identifying her date of injury as April 1, 1999.

Geico and its insurance carrier denied her claim for the surgery, asserting the statute of limitations for her to file a claim based on the 1999 date of injury had elapsed.

Rose then filed a second petition for a repetitive trauma injury, allegedly beginning Sept. 16, 2008.

Geico also denied this petition, but a judge of compensation claims determined that Rose's repetitive trauma injury was compensable.

In December 2009, the 1st DCA reversed the judge's award of benefits saying the only medical evidence at the administrative proceedings was the testimony of Rose's doctor, who had last examined Rose a year before her alleged date of injury in 2008 and that she could not say whether Rose's continuing use of a keyboard was causing her symptoms to continue or worsen without conducting diagnostic testing.

The court said such testimony was insufficient to prove an industrial cause of Rose's condition.

Rose then filed another petition for benefits, listing Feb. 1, 2010, as the date of injury.

The Judge of Compensation Claims (JCC) noted that two doctors both diagnosed Rose with carpal tunnel syndrome. Both doctors stated they could not form an opinion as to whether her current symptoms were any different from her symptoms in 2007.

Although Rose had EMG studies done in 2002, 2003 and 2007, she underwent no additional testing after that, so there were "no objective findings that would support a change in condition since 2007," the JCC said.

Absent such evidence, the JCC concluded that Rose failed "to prove a new accident or injury or an aggravation or exacerbation of a pre-existing condition."

The 1st DCA on Wednesday said that the JCC applied an incorrect standard of proof on Rose.

"Section 440.09(1), Florida Statutes (2009), requires that causation be established by clear and convincing evidence in cases of repetitive exposure," the court explained in its per curiam decision. "Nothing in these requirements places a burden on a claimant to prove that the condition has changed or somehow worsened."

The fact that the doctors were not able to say that Rose's symptoms in 2010 were different from her symptoms in 2007 was "not dispositive," the court said, since repetitive trauma can be proven by demonstrating a series of occurrences, the cumulative effect of which is injury.

In this case, Rose's undisputed testimony was that she engaged in extensive typing on a daily basis for 13 years, and an independent medical examiner opined that this type of work was a major contributing cause of her carpal tunnel. Such evidence, the court concluded, was enough to satisfy Rose's burden to prove an injury and its occupational cause.

The WorkCompCentral story on the case this morning has the attorneys on both sides commenting on the legal effect of the decision - but what strikes me about this case is that Rose keeps on working a job that she says keeps on hurting her. I'm unclear on the psychology or motivation for this.

As I returned from my bicycle ride yesterday I ran into a neighbor and we briefly talked. He commented that he wished he could be as "in shape" as me but that it was too much work.

I said that it's not work if it's fun, and riding bicycles is about the most fun in the whole world! (Yeah, I have a little SpongBob in me...).

Cycling is repetitive trauma. Your legs go up and down to power the crank at an average of 90 revolutions per minute (at least that's the target RPM for cyclists my age - much more than that and you risk heart redlining, and less than that and the cardiovascular benefit deteriorates dramatically).

If you ride for 2 hours, then your legs go up and down 10,800 times. If you ride for 3.5 hours then that's 18,900 times.

There's a lot of repetitive trauma going on with the legs. Knees, ankles, quadriceps, calves ... And when I'm done with 50 or 70 miles I hurt. My legs are sore. I'm tired.

But I do it the next day. And the day after that. In fact I do it every day (except for days when I'm traveling and can't rent a bike - and the anxiety I experience due to my compulsiveness is probably a psychological injury in workers' comp terms!).

I put myself through repetitive trauma every day because it isn't work. It's fun.

So ostensibly I have to think that Rose is having fun at work, otherwise why would she continue to engage in repetitive trauma that she knows leads to pain?

I get the rationale for recognizing repetitive or cumulative trauma. I don't get the rationale for staying on the job for 13 years knowing the whole time, and making claim the whole time, that the job is injurious.

I guess it must be fun.

Friday, June 15, 2012

Reform is NOT About Costs; It is About Stability

Hints at what the agenda in California is going to look at were disclosed yesterday by California Department of Industrial Relations Director (DIR) Christine Baker during a discussion about reform expectations at the Workers’ Compensation Insurance Rating Bureau’s (WCIRB) annual conference in Napa.

“PD benefits need revision, liens are choking the system, the medical system has delays that may be tied to the (qualified medical evaluator) process, which is broken, the fee schedules are out-of-date, the work comp opioid use is outside the medical norms and the frictional costs are really absorbing much of the system,” Baker said. Baker also identified issues with the medical provider network (MPN), pointing to the proverbial unintended consequences that seem to arise whenever new rules or legislation are introduced.

In the case of MPNs, unintended consequences include the requirement of recertification of an MPN whenever there is a change in more than 10% of physician membership - ergo, MPNs just don't report changes because the hassle of recertification is worse than the penalty of not reporting.

In addition, Baker identified another big problem with MPNs: that 25% of physicians practice non-occupational medicine. Consequently there are a lot of doctors in the system who are not going to treat injured workers.

Liens of course were part of the conversation, and I will say that Baker's comments give me some optimism that the "lien problem" will be dealt with in an intelligent, effective manner.

Baker said liens are a reflection of a root cause of problematic cost drivers in the system. The best way to address liens is to fix the root causes, such as delays in medical treatment and appropriate care.

Anecdotally, I've heard complaints that since the new lien regulations were released, and with more "reform" pending, that carriers and third party administrators are processing much fewer liens and delaying payment on lien claimants' bills in anticipation of some magic words that will emanate from either Sacramento or Oakland that will somehow clean those accounts payables off the books.

I'd say that's a root cause, if that anecdote is accurate.

Christopher Citko, senior staff counsel for the Department of Insurance, I think made a very insightful comment.

“The difficulty in our system is that despite having a no-fault system, we are still attempting to create individualized remedies for injured workers and end up with some receiving less than they should and others receiving more,” Citko said. “That doesn’t make a fair and reasonable system, nor an efficient system.”

In other words, what Citko alludes to is that workers' compensation has evolved over the years into a complex, unpredictable system.

And I would argue that Citko's observation is more what the reform conversation should be about - stability and predictability should be the driving motivation of any reform talk.

Costs are not what the real issue is. Costs are simply a symptom. Costs will always go up. The issue is whether costs go up irrationally or unpredictably. 

The reason we have workers' compensation, in the grand scheme of things, is because neither business nor labor didn't like the unpredictability of tort law when a work injury occurred.

Baker has identified the right people in the dialogue, telling attendees at the WCIRB function that if Labor and Management work together it should be possible to increase benefits without passing on those costs to employers. 

She used the term "costs", but what I think what she is really saying is that if the two stakeholders come together stability can be restored so that business can plan more accurately, and workers can rest more peaceably.

Thursday, June 14, 2012

Chinese Work Comp Surprisingly Similar

Yesterday I posted on Facebook a link to a horrific photo in the Wall Street Journal of a Chinese construction worker getting steel bars cut from his body - the look on the faces of the people helping conveys the sheer terror of the situation.

The photo is here (I am unsure if this is subscription content, so it may not work):

I wondered if China had workers' compensation - turns out it does.

China passed a workers' compensation law that took effect January 2004. While workers' compensation is "voluntary" in China (until "ordered"), employers that do not subscribe to the insurance program are required to pay the same benefits available through the program.

Sort of like the Oklahoma non-subscription model that didn't pass this year with some key differences.

But China is different because such a large percentage of the population works for the government or the military. About half of the population is still agricultural.

China's work injury protection history follows a similar path to Western cultures that have workers' compensation systems and it is rooted (pun intended) in the transition from agricultural to industrial economies, and in China this means a transition from a command economy (where the government decides what is done, when, and with what resources) to a market economy.

It turns out that China, prior to its Cultural Revolution (between 1966 and 1976), had an employment insurance system which included work injuries. This system was interrupted by persecution of dissidents and the Cultural Revolution, and then beginning around 1978 the economic transition started.

This transition saw the migration of workers from agricultural regions to urban regions as the economy required more labor to build things, rather than feed themselves. At first these migrating agricultural workers were seen culturally as less than equal (sound familiar?) - they had low levels of training and skills, and consequently high rates of accidents and deaths on the job. These people were regarded as peasants and were not covered by insurance though arguably they were the most in need of some form of work injury protection.

While this migration pattern was going on there was also transition in State-owned Enterprises (SOE). Laws were changed as the economy moved from command to market based, and as a consequence SOEs had to compete on a cost basis with market based companies. This meant that savings were sought everywhere possible, and thus worker safety was secondary to company profit.

In 2004, with China's manufacturing economy rapidly growing, the government's Regulations on Work Injury Insurance became law. All employers are required to participate with insurance funded solely by employer premiums, which are generally less than 1% of payroll, with different rates based on classifications. Both injury and illness is covered and it is administered through the Work Injury Insurance Board affiliated with the Labor Department.

For employers that paid into the system as requested the insurance would pay for most compensation items such as medical expenses, lump sum indemnity, monthly pensions, survivor's benefits - there is no loss of earning compensation though - employers are required to maintain wages during the period of medical treatment. In addition an employer can not terminate an employee during the period of medical treatment and if an employment contract ends during that period the law requires its continuation until the end of the medical period.

For employer that did not pay into the system they would be "ordered" to do so - the penalty for failure to do so is that if a work injury occurred during the period of non-insurance the employer would be liable for all benefit just the same as though they were part of the system.

Benefits under the Chinese system are similar to Western systems, though probably with less subjectivity and more concrete divisions in levels of, for instance, permanent disability. Medical expenses are advanced by the employer or injured worker and then are reimbursed by work injury insurance. As mentioned above, wages are maintained so there is no lost earnings paid (thus no "temporary disability"). And permanent disability is paid via a lump sum system that is based on "degrees" of disability.

There is a bifurcated dispute resolution system in place depending upon whether the employer pays into the system or not. If the employer pays into the system then any dispute is between the injured worker and the Work Injury Insurance Board. If the employer is a non-subscriber then there are two systems: compensability is determined in an action by the injured worker to the Work Injury Insurance Board. But compensation matters are treated the same as labor disputes, with mediation, then labor arbitration, then litigation with review by a higher court.

And like counter parts in the West the system is subject to "reforms". And like in the West employers carry on about the cost and how it inhibits competition while Labor fights for fair treatment and working conditions.

There is one very big important difference from the Chinese model and the Western model that stems from how the different governments work: the Western model is a provincial level system - meaning that each state has its own system, and even different Federal risks have different systems (e.g. LSHW, DBA, etc.). But the Chinese system is national in scope - the provinces do not have separate systems. 

I have obviously glossed over the Chinese workers' compensation system, and certainly there are experts who probably should correct my many generalities here.

What I find of particular interest is that, even though it was established after almost 100 years after the Western model was established, how similar the system is with nearly the same types of benefits and detriments. 

It turns out that humans are all the same - regardless of whether we live in the East or the West, motivations, emotions, the process of life are no different.

What we have in the US may just turn out to be about as good as it can get. It may not be perfect, and there will always be disputes, but if the Chinese had 100 years to figure out something better you'd think they would - and it turns out they haven't...

A very good PowerPoint slide show on the Chinese workers' compensation system is available for download from the University of Ottawa's website.

Wednesday, June 13, 2012

SpongeBob Demonstrates the Emotion of Work Comp

"Aye, for a second there I thoughts I was gonna have to pay you workers' comp-er-sation," Mr. Crabbs said to SpongeBob after the square, overenthusiastic and irrepressibly happy cook at the Crabby Patty resolved his work injury.

"What's workers' comp-er-sation?" SpongeBob replied.

"You know - when you get paid for sitting at home!" Mr. Crabbs chortled when realizing that SpongeBob saved him a couple of dimes after Squidward tried to sequester him and keep SpongeBob from his beloved job due to the splinter in his finger.

SpongeBob's experience with the workers' compensation system in The Splinter probably isn't that far from the experience of many, and is representative of how the general population looks at the system.

In this episode the contagiously humorous sponge reports for work, enthusiastic to supply the population of Bikini Bottom with Crabby Patties all day long. In his excitement he accidentally lodges his spatula in the roof of the kitchen. After dislodging the spatula SpongeBob slips and gets a splinter in his thumb, which immediately swells and impairs his ability to cook.

Squidward tells SpongeBob that he can't work in that condition (Squidward has ulterior motives) which sends SpongeBob into deep depression. In an attempt to get back to work SpongeBob calls his friendly starfish, Patrick, who dons a smock and stethoscope, performs a medical examination of every body part other than the thumb with the splinter in it, then engages in medical treatment that causes more harm than remedy.

Ultimately Mr. Crabbs comes onto the scene, gets SpongeBob the medical treatment he needs (removes the splinter), restoring SpongeBob's ability to work and the summary of what workers' comp-er-sation is occurs.

Squidward liked the sound of getting paid to stay at home - "You mean I can get paid to stay at home?" he asks.

Mr. Crabbs affirms: "Yeah, what do you think comp-er-sation stands for?"

Whereupon Squidward beats himself in the head with a cash register and asks whether he can get his "comp-er-sation now."

Mr. Crabbs deflates Squidward's expectations by replying that his shift ended two minutes ago.

Is that any different than what Mark Knopfler describes in his hit song, "Industrial Disease?"

Doctor Parkinson declared "I'm not surprised to see you here. 
You've got smoker's cough from smoking, brewer's droop from drinking beer. 
I don't know how you came to get the Bette Davis knees, 
but worst of all young man you've got Industrial Disease"
He wrote me a prescription, he said "You are depressed,
but I'm glad you came to see me to get this off your chest.
Come back and see me later -- next patient please!
Send in another victim of Industrial Disease."

Workers' compensation generally represents just over 1% of payroll for most employers, yet has a huge emotional cost for both employers and employees.

Employers, particularly small businesses or small departments in large businesses, many times feel as though they have been betrayed when someone files a claim - as though they were being personally attacked by the employee and are going to be taken advantage of.

Employees seek help from all the wrong places and end up resenting the system or, for some Squidwards, try to take advantage of it.

In the end of the day though, for the vast majority of businesses, the cost of workers' compensation insurance is a small part of the overall expense, and probably (like my business) a small insurance expense compared to health, liability, property, directors & officers, errors & omissions, cyber-liability, and the host of all of the other insurance products I buy for the business.

And, dare I say, less than 1% of the working population will ever make a claim.

But workers' compensation carries with it a lot of emotion. Maybe because it is mandatory so employers and employees feel they have no control. After all, I don't (yet) have to buy health insurance for my employees. There is no law that requires me to purchase liability, property, directors & officers, errors & omissions, cyber-liability or any other insurance product.

But the government says I MUST carry work comp.

And if there is an injury the government says it MUST go through work comp.

Sometimes I wonder if the appeal of a non-subscription system, such as what was proposed for Oklahoma, is that it provides some relief from governmental intervention - freedom to design and implement something that is more within the control of those who are paying the bills and using the services.

Calls for reform are occurring across the nation, from California to New York, with impassioned arguments on behalf of business who say that costs are climbing out of control again and workers who say they have been cheated.

Emotions run high on these issues. You don't see impassioned pleas about the cost of property insurance, or directors & officer's coverage.

But because of its mandatory nature workers' compensation hits a raw nerve with everyone.

Perhaps what really needs to be reformed is the public perception of workers' compensation.

Kind of like a colonoscopy: everyone dreads turning 50 and going through the ordeal. And everyone finds out that its not as bad as it would seem.

Tuesday, June 12, 2012

9/11 Legacy Continues - It Is What It Is

I remember quite clearly the day that this country came under attack by box knife wielding terrorists commandeering airliners as kamikaze bombs into national landmarks. WorkCompCentral was only 9 months old, I had just moved the business out of my garage into a windowless hovel of an office above a fish restaurant (pew!) and I had terrible facial hair that made me look Middle Eastern.

I was driving to the office listening to Howard Stern describe the indescribable. I called one of my business partners and told him the world had just changed, and that I was going home instead of to the office.

Then I watched the television as the towers fell.

I didn't think about workers' compensation then, though obviously that line of insurance was impacted along with property, casualty, life, health and myriad other lines of financial protection.

I honestly didn't think much that day. The visions were haunting. The tenor of the nation was dramatically shaken.

And though life in the United States was about to get a whole lot different for most people, how much it would change was beyond anyone's comprehension.

Many people died on that day. Many more contracted illnesses and injuries that we're still counting.

The mastermind behind these crimes has been killed. Laws have passed and special funds established.

Through it all, continued research has shown that the aftermath of such destruction is much more wide-spread and involved than we all thought possible.

Which has led National Institute for Occupational Safety and Health (NIOSH) Director Dr. John Howard to propose a rule late Friday that would add more than 50 cancers to the list of diseases that are compensable under the James Zadroga 9/11 Health and Compensation Act of 2010.

In his 132-page notice of proposed rule-making, Howard cited a study by the New York City Fire Department (FDNY) released last fall that noted a 21% increase in the incidence of cancer among firefighters exposed to toxins during rescue and cleanup following the Sept. 11, 2001, attacks on the World Trade Center.

He noted that the statistics on cancers contracted by 9/11 responders and residents in the areas surrounding the World Trade Center still are being gathered. But, Howard said, he's seen sufficient evidence to include more than 50 cancers for monitoring and treatment by the World Trade Center Treatment Program and for compensation under the 9/11 Victim Compensation Fund (VCF).

"The administrator believes that it is plausible that the overall rate of cancer in FDNY firefighters may have increased following those firefighters' exposures to 9/11 agents ..." Howard said in the notice.

In his proposed rule, Howard endorsed all of the cancer recommendations made by the World Trade Center Health Program Scientific/Technical Advisory Committee (STAC) when it called upon Howard to add cancers to the Zadroga Act in April.

STAC grouped cancers into 14 major categories and cited a series of recent studies.

STAC reported that it "reviewed available information on cancer outcomes that may be associated with the exposures resulting from the Sept. 11, 2001, terrorist attacks and believes that exposures resulting from the collapse of the buildings and high-temperature fires are likely to increase the probability of developing some or all cancers."

STAC also warned that exposure data are "extremely limited."

Citing the FDNY study, Howard expressed doubts about whether cancer in some patients was specifically linked to the 9/11 attacks.

"The administrator believes that it is plausible that the overall rate of cancer cases in FDNY firefighters may have increased following those firefighters' exposures to 9/11 agents, but agrees with the authors of the (FDNY) study who noted there could be other explanations for the findings," he said.

The expense of treating all of these cancer cases is large to be sure, but not without estimates - up to $147.5 million between 2013 and 2016. Of course not all cancers are going to mature into diagnostic identity for years beyond 2016 so the ultimate cost can not be ascertained.

In the past I had been critical of the 9/11 funds because without the national shock factor of these attacks it is likely that those who were at work would only be entitled to workers' compensation benefits, and those who were not at work likely would get nothing other than what their private insurance may have provided (and certainly not life insurance with war time and terrorist exclusions applicable).

And why just 9/11? How come the nation didn't put together a special fund for victims and responders to Katrina? Would the same response occur if a massive earthquake struck San Francisco during business hours?

But I don't question the nation's response to 9/11 any longer. It is what it is. We move on.

Monday, June 11, 2012

FL Advance Statute Getting More Notice

Florida has an interesting issue going on that is frustrating the workers' compensation judiciary, but may not be that big of a deal in the grand scheme of things - still, the prospect of free money, or as Dire Straits penned in the 70's, "Money for Nothing," leaves a bad taste with many.

At issue is Florida Statute 440.20(12)(c)(2), which was interpreted by the state's 1st District Court of Appeals in 2010, requires payment of a requested advance of up to $2,000 to any employee in the state, from whomever they request it, as long the person seeking the advance has either not returned to the same or similar employment following an alleged injury or has suffered a substantial loss of earning capacity.

The statute specifically states:
"An advance payment of compensation not in excess of $2,000 may be ordered by any judge of compensation claims after giving the interested parties an opportunity for a hearing thereon pursuant to not less than 10 days' notice by mail, unless such notice is waived, and after giving due consideration to the interests of the person entitled thereto. When the parties have stipulated to an advance payment of compensation not in excess of $2,000, such advance may be approved by an order of a judge of compensation claims, with or without hearing, or informally by letter by any such judge of compensation claims, or by the department, if such advance is found to be for the best interests of the person entitled thereto."

The case interpreting 440.20(12)(c)(2) was Lopez v. Allied Aerofoam, No. 1D10-1444, 10/18/10.

In that case Rocio Lopez filed a workers' compensation claim for a repetitive trauma injury to her left shoulder, left arm and left hand. She alleged that the trauma occurred while welding foam pieces, and pressing the pieces together for her employer, Allied Aerofoam.

Lopez asked the judge of compensation claims for a statutory advance payment of compensation, seeking less than $2,000. The judge denied the request after determining that an advance could not be awarded in a contested case. Lopez appealed.

The 1st District Court of Appeal reversed stating that the section allows a judge of compensation claims to award an advance payment of benefits not larger than $2,000 if the claimant can show:
  • Failure to return to employment at the same rate of pay.
  • A substantial loss of earning capacity.
  • An actual or apparent physical impairment.
  • The judge must also consider the interests of the person who has requested the advance. 
  • The statute does not require a showing that the injured worker will actually receive any benefits in the future, and it does not limit the advances to cases where the claimant has established the compensability of the injury. 
For many years, the cash advance legislation was never really the subject of much litigation and wasn't often used. But after law changes in 2003 that made claimants responsible for paying for their own independent medical exams and experts, Florida workers' compensation judges say they're now seeing more advance requests. And the weaknesses in the law is becoming more apparent.

Deputy chief judge of the Florida Office of Judges of Workers' Compensation Claims David Langham told WorkCompCentral that the process now has become largely administrative for judges because the judge must only consider the "interests" of an entitled applicant and under the law the claimant only need show he would be "better off" with the money.

"Presumably most anyone would be," Langham wrote in an order approving the advance in a 2010 over-payment case where the claimant had already spent $77,800 on vehicles, a boat, a tractor and a horse, among other things.

The real problem is not the amount of money but who has to pay it and then recoup the advance from subsequent awards. But the sum is so small that it might cost more to litigate responsibility than to just accept payment as a cost of doing business. This contributes to the problem because as these payments become more administrative and employer/carriers just pay them, then payments end up outside of "the system" so they can not be tracked to see if there is a trend.

At least anecdotally these payments are on the rise. To what extent they contribute to the cost of indemnity is, apparently, unmeasured within the system. So it is either much ado about nothing, or points to a possible growing cost driver.

There's always something interesting going on in workers' compensation...

Friday, June 8, 2012

Medical Privacy Test in GA

A Georgia case highlights what I think is an interesting debate of medical privacy in the context of workers' compensation.

On Wednesday several amicus briefs were lodged with the Georgia Supreme Court on behalf of the Georgia Self-Insurer's Association, Georgia Manufacturer's Association and Georgia Poultry Federation urging the high court to reinstate a State Board of Workers' Compensation's decision which held that an injured worker could be forced to authorize her doctor to communicate with her employer regardless of whether the injured worker participated in the communication or not.

Georgia's Workers' Compensation Act requires a claimant to give the employer a release, directed to a particular provider, for "medical records and information" related to the claim, in furtherance of the system's overall goal of expediting the resolution of claims.

Last December, a four-judge majority of the state's appellate court concluded that this provision required an injured worker to waive her right to privacy in "tangible documentation" related to the medical condition forming the basis of her claim.

The amicus group say the State Board of Workers' Compensation had construed this language more liberally, and that the court "should have given them deference."

The 2011 case from which appeal to the Supreme Court was taken is McRae vs. Arby's Restaurant Group, A11A1021 (2011).

In the case Laura McRae suffered third-degree burns to her esophagus at work after mistakenly drinking lye that had been left in the break room in a cup similar to the one she had been using. Her employer, Arby's Restaurant Group, Inc., did not controvert McRae's workers' compensation claim and began paying income benefits in March 2006. McRae signed a Form WC 207, authorizing and consenting to the release of her medical information, which expired in 90 days, until any pending hearing, or until revoked in writing.

In September 2009, McRae's treating gastroenterologist prepared a medical narrative report in which the physician concluded that, despite exhaustive therapy, McRae had reached maximum medical improvement and had a 65 percent permanent body impairment. In October 2009 McRae requested a hearing on her claim for temporary total disability and permanent partial disability, which was initially set for October 20, 2009, then reset to December 17, 2009, and again to February 24, 2010.

After receiving the report, Arby's attorneys tried to schedule an ex parte consultation with the treating physician, but the physician declined to meet with them absent express permission from her patient. The attorneys then moved the ALJ to remove McRae's hearing from the calendar or issue an order authorizing the treating physician to talk to them outside the presence of McRae or her attorney. The ALJ ordered McRae to expressly authorize her physician to speak with counsel for her employer, and denied McRae's request for a certificate of immediate review by the Appellate Division. In denying the request, the ALJ concluded that McRae could informally contact the treating physician herself and inquire about any communications made between [the physician] and the Employer/Insurer.

McRae did not sign a release authorizing her treating physician to communicate with Arby's representatives without her presence, and the ALJ sanctioned her by removing her claim from the active hearing calendar until she did so. The Appellate Division of the Board affirmed, and McRae then sought judicial review in superior court, which likewise upheld the decision of the ALJ.

McRae appealed from the judgment of the superior court and argued that the Act does not compel her to authorize her treating physician to communicate ex parte with representatives of her employer, and that her right to medical privacy is protected by both Georgia law and the Privacy Rule of the Health Insurance Portability and Accountability Act ( HIPAA ).

The appellate court relied on a Georgia Supreme Court case, Baker v. Wellstar Health Sys., 288 Ga. 336, 338(2) (703 S.E.2d 601) (2010) which held that while a litigant waives her right to medical privacy to the extent that she places her medical condition at issue, as set forth in OCGA § 24 9 40(a), that waiver is limited to information related to the injury at issue in the litigation and any related medical history and that ex parte communications between a litigant's treating physician and opposing counsel should be limited.

Baker involved a medical malpractice case but the appellate court ruled that for ex parte communications purposes there is no difference with workers' compensation.

The court concluded: "Therefore, while the Act requires an employee to authorize her treating physician to release relevant medical records and information, it does not require an employee to authorize her treating physician to communicate ex parte with the employer's lawyers in order to continue receiving benefits. Giving the employer's counsel unbridled access to ex parte communications with an employee's treating physicians would create numerous potential dangers, as noted in Baker, among them the potential to influence the physician's testimony, to probe into irrelevant but highly prejudicial matters, and the disclosure of information never disclosed to the patient."

Medical privacy is indeed a "moving target" in workers' compensation proceedings because it is the employer and not the patient who has a financial interest in the outcome of the injured worker's health (in terms of payment obligation - yes, you could argue that the injured worker has a financial interest to the extent that they RECEIVE indemnity, but ultimately it is the employer who pays and whose premium for years is affected by that obligation).

But the employer should not be entitled to wholesale information about an injured workers' medical issues.

The McRae case really has a very narrow ruling: "because a claimant is not required by our Workers' Compensation Act to authorize her treating physician to talk to her employer's lawyer ex parte in exchange for receiving benefits for a compensable injury, and because a claimant retains a right to medical privacy as to matters unrelated to her claim, we reverse the superior court's order to the contrary."

I see this as consistent with the intent and merit of workers' compensation and medical privacy laws. And I don't see why any communication necessarily has to be ex parte. Perhaps it may be more convenient and efficient for an employer to do so, but the risk of disclosure of non-relevant information is too great, and the temptation of an employer to seek such information can cause an imbalance in ethical application.

The Georgia appellate court got this issue right.

Thursday, June 7, 2012

CT Case: Intoxication is NOT a Jurisdictional Issue

Uninsured employers will do almost anything to escape liability and penalties, and some of the stories are truly offensive to the conscience.

In Connecticut an uninsured employer in the landscaping business tried all the way up the appellate chain with various reasons why it could not provide benefits to an injured worker, and my guess spent more trying not to pay than if it had just provided benefits in the first place, regardless of insured status.

The case is Vidal Gamez-Reyes vs. Donald F. Biagi, Jr. et. al, (AC 33459) (Conn.App. 06/12/2012).

In July 2009 when landscaper Vidal Gamez injured his back after falling from the top rung of a ladder while trimming a tree for a business owned by Donald Biagi.

He was provided tools, work assignments and a vehicle under Biagi's company, but of course Gamez worked for cash, never received a W-2 or paid income taxes and Biagi didn't have workers' compensation insurance.

More than two hours after the fall and amid repeated requests from the injured worker, Biagi took Gamez to the hospital. There, Biagi denied the injured man was his employee and told hospital workers he had picked up Gamez on the street.

Gamez, meanwhile, was left with severe back injuries that required two surgeries to treat and left him unable to work since the accident.

Sticking to his argument that the lawn worker wasn't an employee, Biagi refused to pay Gamez's medical bills. And when both he and the Second Injury Fund appeared in the formal hearing before the Workers' Compensation Commission (WCC) a year later, the commission found the injury compensable and slapped Biagi with a sanction for frivolously contesting the claim.

At the hearing, medical evidence was admitted showing Gamez had an elevated blood-alcohol level when the accident occurred. But Biagi never brought forth a witness to interpret the results of the blood test and didn't attempt to show that alcohol caused or played a role in the ladder accident.

Biagi appealed the decision to the review board, arguing the workers' compensation commission had no jurisdiction over the decision and asked for a second hearing to determine if Gamez's blood-alcohol level was elevated. He also argued the commission should not have sanctioned him.

The board denied the request, saying intoxication is a defense for compensability but not for jurisdiction and that the employer had made a "tactical error" in not arguing the intoxication defense in his first hearing.

Biagi then went to the Connecticut Court of Appeals arguing that the WCC lacked subject matter jurisdiction because of a change in the law in 1993 and evidence that Gamez-Reyes was intoxicated. The Court of Appeals called this posturing, "novel."

"As a threshold matter, we address the defendant's subject matter jurisdiction argument. 'In speaking of a court in general, we have said . . . [j]urisdiction of the subject-matter is the power [of the court] to hear and determine cases of the general class to which the proceedings in question belong. . . . A court has subject matter jurisdiction if it has the authority to adjudicate a particular type of legal controversy. Such jurisdiction relates to the court's competency to exercise power, and not to the regularity of the court's exercise of that power. . . . This concept, however, is not limited to courts. Administrative agencies are tribunals of limited jurisdiction and their jurisdiction is dependent entirely upon the validity of the statutes vesting them with power and they cannot confer jurisdiction upon themselves.' (Citations omitted)."

Biagi relied on an earlier Connecticut Supreme Court case, Del Toro v. Stamford, 270 Conn. 532, 540--41, 853 A.2d 95 (2004), for his jurisdictional argument.

The Del Toro case involved a police officer with a claim of post-traumatic stress disorder after an on-duty shooting resulting in the death of a civilian. The court noted that the workers' compensation statute had previously allowed for compensation based on "mental or emotional impairments" such as the plaintiff's PTSD-based injury. The legislature, however, amended the statute in 1993 specifically to exclude such "mental or emotional impairment" injuries. After examining the statute as amended, the Supreme Court agreed with the defendants that the compensability of a type of injury implicates the "threshold question of whether an entire category of claims falls under the scope of the act."

Del Toro said, "It is important to note that the issue in the present case does not concern the compensability of an individual claim, in terms of a particular employer's liability to its employee on the merits of a specific claim. A broad casting of the term 'compensability' encompasses issues of causation, which clearly do not implicate the subject matter jurisdiction of the commissioner. . . . Rather, in the present case, we are concerned with the compensability of a type of injury and whether the act authorizes the commissioner to award benefits for that type of injury in the first instance."

The court in Gamez-Reyes said that the Del Toro case did nothing to erase the long held rule that intoxication is an affirmative defense for which the defense must present competent evidence.

"The defendant concedes that § 31-284 (a) provides that intoxication of the employee is an affirmative defense of the employer. Nothing in the 1993 amendments leads this court to believe that the legislature intended that the two statutes regarding intoxication in workers' compensation claims would provide for both a subject matter jurisdictional bar, placing the burden on the claimant to establish lack of intoxication, and an affirmative defense, requiring the employer to prove intoxication. Indeed, such a result would be absurd and unworkable."

"This is clearly a case of unreasonable contest," Robert Carter, the attorney for the plaintiff in the case, told WorkCompCentral in an interview. "The appeal was essentially frivolous. They should have just paid the guy."

I'd have to agree with Carter.