A few days ago I wrote about the increasing power, reach and control of the federal government and the rising fear of federalization of workers' compensation.
Two stories this morning in WorkCompCentral reiterate those concerns.
The first and most alarming development is the federal Financial Stability Oversight Council’s (FSOC) decision to designate American International Group and Prudential Financial as significantly important financial institutions (SIFI) under the Dodd-Frank Act, meaning the government believes they could pose a risk to the broader financial system.
AIG and Prudential are among the largest insurance companies in the United States based on assets.
Under rules set up by Dodd-Frank, a SIFI designation enables the Federal Reserve Board to require increased levels of capital and supervision. When a company receives such a designation it is given 30 days to challenge the designation and request a hearing. Barring a challenge, FSOC has 40 days from the date of its designation to undertake a second vote to finalize its decision.
AIG's chief executive, Robert Benmosche, told shareholders that because of the 2008 federal bailout of the company that the government has since learned a lot about the business and that this designation should not extend pro forma to other insurance companies.
According to rating agency Fitch, AIG and Prudential can expect higher capital standards and increased costs upon their SIFI designation, although the positive credit aspects of higher capital requirements are likely to be offset by competitive pressures from non-SIFI insurers.
The other development is that the National Institute for Occupational Safety and Health (NIOSH) on Tuesday launched a new virtual center focused on workers' compensation with the mission of matching federal injury and safety data with statistics kept by state regulatory agencies and the National Council on Compensation Insurance.
The purpose is to help NIOSH scientists come up with ways to prevent workplace injuries.
Steve Wurzelbacher, director of the new Center for Workers' Compensation Studies, told WorkCompCentral in an interview Tuesday that the program was launched in partnership with the Ohio Bureau of Workers' Compensation (BWC), the National Council on Compensation Insurance (NCCI) and the International Association of Industrial Accident Boards and Commissions (IAIABC).
"The idea is not to duplicate the research that NCCI is doing, but to apply data, such as that gathered by the Bureau of Labor Statistics for the North American Industrial Classification System, to workers' compensation data across a wide range of industries," Wurzelbacher said.
Some say that this new agency will help the workers' compensation industry better understand, prevent and regulate underreporting of injuries or claims.
For instance, OSHA reported in November 2011 that about half of the 350 workplaces it inspected for record-keeping violations as part of a pilot emphasis program launched in 2009 were found to be underreporting injuries and illnesses. How those are defined (either injuries/illnesses, or underreporting) I don't know, but this statistic seems questionable to me and we all know Mark Twain's take on statistics.
According to the center's website, research will cover jobs in construction, health care, manufacturing, public safety, maintenance, transportation, warehousing, the wholesale and retail trade and the service industry.
This past decade and a half is witnessing a huge expansion of the federal government - from oversight of our travel, communication, finances, housing, medicine and now even workers' compensation.
I'm not comfortable with this growing concentration of power. While AIG (and other institutions) were not allowed an organic demise which may have prevented even more financial pain in the country, the creation of laws intended to prevent another financial industry led recession inevitably have gone too far.
Much like regulation of travel and the Department of Homeland Security - I'm sure the extra 280,000 jobs created by this massive bureaucracy helped temper the unemployment numbers, the huge cost to American taxpayers for questionable security has to be examined.
We don't know what the cost of federal health care mandates will be, but if we just look at other federal programs we can assume it will be significant.
I have no hope that the federal government's push into regulating the insurance industry, or expanding its oversight of workers' compensation will save anyone any money. Just look at the intrusion of the Centers for Medicare and Medicaid into personal injury and workers' compensation settlements - more time, more money and an unproven net benefit to society.
I often get asked to speak or comment on trends in the workers' compensation industry. This is one trend I'm not happy about.