Can O' Worms

As much as many like to denigrate the legal profession, attorneys are an important component to our society, in particular regarding the complex world of workers' compensation.

Sometimes lawyers are called upon to protect the legal interests of an injured worker, sometimes it's just to explain the process and answer questions about the law and regulations. Sometimes claimant lawyers can actually smooth the dispute by realigning the expectations of the injured worker.

And sometimes obtuse positions are taken that could be construed as against the interests of the injured worker.

Regardless, when one is hurting, in pain, and confused, dealing with the intricacies of workers' compensation is overwhelming, and legal representation can make a difference between a lifetime of impoverished living and return to normal lifestyle.

How to pay for that legal representation has been a vexing question from the very beginning.

The traditional mode is to base fees on the amount of recovery obtained on behalf of the client - a contingency fee.

Contingency fees have positive and negative attributes, of course, some of which are inconsistent and conflicting.

For instance, if the job of the attorney is to get as much money as possible for the client, then a contingency fee is highly motivating. But the inverse is that the goal in any medical care system is to return the injured to as good of relative health as pre-injury status, not a high level of disability.

And if a case doesn't appear to have an attendant high level of disability, ergo a small fee, then the injured worker may not find any representation - after all the business of law in most attorney practices still overrides charity. There are staff members to pay, electricity and phone bills, and rent...

Texas has a unique system for paying claimant attorneys. There is a maximum hourly rate on fees, a cap based on the value of recovery, and time spent on certain processes is regulated as well.

The hourly rate hasn't changed since 1991 and has been set at $150 per hour since then.

As far as I know, Texas has one of the lowest litigation rates of any workers' compensation system. Many that I have talked to have said this is because it is impossible to make a living representing injured workers based on the fee constrictions, so injured workers go without legal representation.

The Division of Workers' Compensation is now proposing an increase in the hourly rate to $200. While welcomed by the claimant bar, the proposed rate increase is criticized nonetheless as inadequate because it is still short of what it would be based on inflation.

That viewpoint, of course, is based on the assumption that back in 1991, $150 per hour was reasonable - it might not have been...

I'm an old guy, and one should not rely upon my memory, but in 1991 I recall my hourly defense rate was less than $100 per hour. And that was in metropolitan Los Angeles, which has, generally, a much high cost of living than in Texas. Based on the Bureau of Labor Statistics calculator, that rate would be $174.84 today.

That same calculator returns a value of $262 per hour, noted attorney John Pringle in written criticism about the proposed change to the TX DWC.

Nirvana for everyone except those in the business of law would be to devise a workers' compensation system devoid of dispute. That isn't going to happen, and in fact, we tend to do otherwise and introduce all sorts of procedural hurdles and qualifying rules that seem to provoke disputes.

I don't have a realistic solution. As long as someone has something that someone else wants, there's going to be disputes and rather than resolve those disputes via duels or fisticuffs society has declared it is more civil to air grievances before a tribunal with rules, regulations and ... lawyers.

Just like any dispute, there are going to be winners and losers. That's just the nature of conflict. The key is getting the equation right so that most of the time, most of the disputes get just representation for just results.

Most of the time.

It's the proverbial can of worms and complete satisfaction is unattainable, at least in the current configuration of workers' compensation.

Exceeding the Expectation

My new MacBook Air arrived yesterday to my surprise.

It wasn't supposed to be here until this afternoon.

Recall that on Thursday I decided to speed up my old computer with some coffee. Seeing that afternoon that recovery was futile I ordered up a "new" refurbished MacBook Air. Free delivery was estimated to occur March 22, but I could pay an extra $22 for "next day" delivery on 3/21.

I was already upset about frying the old box and having to purchase a replacement (let alone the hassle in moving all of my data over), and spending the extra money to guarantee a delivery date didn't sit well.

And it wasn't necessary: Apple made a reasonable promise and then exceeded my expectations based on that promise.

Getting the new MacBook Air yesterday meant I wasn't quite ready to set it up - I left my back up drive at home, our senior IT guy was working from home and meetings all day would not allow me to get up and running that day.

I just KNEW that moving to the new computer would be a long, painful process.

I opened up the machine, turned it on, went through a couple of steps to set up language and location, then used Apple's Migration Assistant to move from the old computer to the new one in about an hour and a half, without the necessity of monitoring...

All that anxiety wasn't necessary:  Apple made a reasonable promise and then exceeded my expectations based on that promise.

And the new computer is noticeably faster than the old one. The old box had a battery that was dying, using up valuable system resources to try and monitor the warn down lithium-ion. In addition the new machine has a slightly faster processor and more memory - I'm sure that contributes as well to the noticeable performance increase.

But not THAT much: Apple made a reasonable promise and then exceeded my expectations based on that promise.

In case you haven't noticed, there's a theme this morning: exceeding expectations.

How often can you look at workers' compensation and say we, as an industry (or even a company) exceed the expectations of employers and their covered workers?

We defend workers' compensation as a sacrosanct institution because its been around over 100 years and is a linchpin to a modern economy: spreading the risk of financial disaster and providing medical care to those in need.

But the industry is routinely chided, particularly of late, for failing to meet those basic expectations.

And, hypocritically enough, when alternatives are proposed the industry uses the same arguments that critics throw at work comp against those alternatives: non-covered injury types, exclusion of pre-existing conditions, limitations on physician choice, restrictions on medical care, inadequate indemnity, etc.

Indeed, if you ask nearly anyone that hasn't yet gone through the work comp gauntlet you'll find that expectations are exceedingly low. Mistrust, pervasive fraud, denied benefits - those are, unfortunately, the expectations that we've come to understand.

Expectations are actually easy to establish because the ones providing the service or product get to define what they are from the outset.

For instance, Apple told me to expect the computer on Tuesday, and I felt that was reasonable so I accepted it. Heck, if they told me I would get the box on Thursday I would have been happy.

In workers' compensation we don't often enough do a good job of setting expectations. Some of those expectations are dictated by law such as waiting periods, or timeliness of indemnity checks, or types of conditions covered.

Other expectations are of our own doing: initial contact, communications, delivery of service; we have control over setting those expectations.

And we have control over meeting or exceeding them too.

It's easy to pontificate about setting and exceeding expectations, but it's another thing to actually performing to those standards, and that takes discipline.

In the computing industry, discipline is dictated by competition. The Digital Age bar of expectation is now set so high because of competition that the customers of these products and services expect nearly instant gratification, even with hardware. In my case, Apple was able to do it by delivering a machine ahead of time and making the transition unbelievably simple and quick.

Stanford law professor Alison Morantz has studied Texas non-subscription for years. She just released a new paper, still undergoing the editorial process, which shows that, at least with her cohort, companies save a significant amount of money over Texas subscribers (and Texas is already a reasonably priced work comp state), and that these company workers seem to be better off (though she admits that more study is needed on outcomes).

The study is divisive of course. The old guard hasn't yet attacked the study per se - it's too fresh - but the same old arguments are used to deride opt-out in general. And opt-out proponents say, "I told you so."

Maybe it's all about expectations. Maybe those that participate in work comp have been so lax, so lacking in discipline, for so long, that work comp has deteriorated to meet those low levels of expectation, and when something comes along that exceeds that low bar we can't help but be critical and attack it.

Because someone else is doing something fresh, exciting, and perhaps way better than the stalwart.

Before you think I'm an opt-out proponent, I'm not. I frankly don't care how benefits are delivered, what mechanism is used for work injury protection, or why.

I only care that there is some system in place that is a reasonable cost to business, and provides some adequate measure of protection to workers.

It can't be all things to all people all the time. But a good work injury protection scheme can be most things to most people most of the time. It's a low expectation bar.

We just need to exceed it, whether by traditional comp, or an alternative protection system.

Keep It Simple

Boscoe is simple...

Workers' compensation is designed to benefit two opposite interests: the people that get hurt doing work and the people that pay for that work to get done.

While these two interests may seem inapposite, the reality is that both have very similar characteristics, namely both groups are highly diversified in terms of sophistication and education, and both groups have deep historical issues with mistrust of the other.

In the middle are the financial services that make the system of workers' compensation possible by providing the method for accumulating and distributing money.

Our stereotype of the employer is of sophistication, and of the worker naiveté. Of course, both applications are erroneous. The fact is that the vast majority of employers aren't sophisticated when it comes to workers' compensation, and many workers have education and knowledge, albeit when it comes to work comp there's a void.

Consequently the third spoke in the workers' compensation wheel of vested interests, government, requires communications to both employers and workers to be at a level where there isn't much dispute or question about what's being said.

Employer contracts, also generically known as insurance policies, must go through an administrative review process and approved by a state agency, typically a department of insurance, before they can be sold out on the insurance marketplace.

And notices or forms to workers about their claims likewise must meet certain understandability standards.

Two WorkCompCentral stories this morning highlight this dichotomy and the government's role as a communications arbiter.

In one, an employer represented by attorney Nicholas Roxborough, is asking the California Department of Insurance to make precedent an administrative law judge ruling, adopted by the CDI, invalidating a policy side agreement that would force policy holder Shasta Linen to arbitrate disputes with EquityComp administrator Applied Underwriters in the British Virgin Islands using Nebraska law. 

The ALJ ruling, adopted by the CDI, voided that provision because it wasn't filed with the Workers' Compensation Insurance Rating Bureau or the CDI as required by law. (Applied Underwriters, for the record, disputes this finding and says it is seeking appeal).

And in Texas that state's Division of Workers' Compensation apparently has seen too many forms and notices to injured workers that were either vague, or used incomprehensible technical terms (at least relative to workers), causing it to send a memo reminding insurance carriers and other interested parties about the importance of communicating clearly.

DWC says this type of communication to the insurance industry is routine - a reminder that they need to keep things simple for the consuming public.

The EquityComp plan was the subject of a patent application, which describes the mind-numbingly complex nature of the contract.

"Disclosed herein is a reinsurance-based approach to providing non-linear retrospective premium plans to insureds that may not have the option of such a plan directly," the patent application says. "It also has the surprising ability to enable non-linear plans while at the same time complying with state regulations."

I have no idea what any of that means. I can only imagine how complex the actual language of the policy reads.

The Texas DWC says examples of statements that don’t meet the requirement to clearly explain the basis of the denial or dispute to an injured worker include “under investigation,” “eligibility questioned” and “no medical evidence to support disability.” What they want communicated are the factual basis for denial or delay.

One of the hallmarks of education is an expansion of linguistic abilities - using strings of multisyllabic words in an effort to be precise. But often that is perceived as an obfuscation and magic cards trick to get away with something that otherwise would be objectionable if the reader knew what was actually being said.

Which is why the government has rules in place to keep a check on those with a skill in communication complexity and uses its enforcement power to reel in errant behavior.

Me? I just keep things simple. 

My wife chastised me the other day for my prolific use of a certain four letter word that is associated with carnal knowledge.

"The reason I use that word so much," I replied, "is because it's the only monosyllabic word I know."

Keep it simple and stay out of trouble...

Conflict of Laws

The current dispute between air ambulance companies and state workers' compensation system attempts to regulate their fees is an interesting study on how different laws, enacted at different times for different purposes, even within the same jurisdiction, can create conflicting interpretations.

In Texas the air ambulance dispute has been elevated to federal court.

The legal crux of this conflict of laws is whether the federal Airline Deregulation Act – which prohibits states from enforcing any law or regulation relating to an air carrier's price, route or service – preempts state law generated under authority of the federal McCarran–Ferguson Act.

In short, the McCarran–Ferguson Act gives states the authority to regulate the "business of insurance" without interference from the federal government, unless a federal law specifically provides otherwise.

The question then becomes whether workers' compensation is the "business of insurance" and what the intent behind the laws.

There's been some precedence at the state level.

Last October a federal trial judge in Florida found that the ADA barred a class-action suit over air ambulance service providers' billing and collection practices.

Two years ago California's 2nd District Court of Appeals declined to review a decision by the Workers' Compensation Appeals Board finding a state regulation setting the specific rates of reimbursement that a carrier must pay for air and ground ambulance services ran afoul of the ADA.

In Texas the issue has been brewing on a couple of fronts.

Last year an administrative law judge in the Texas State Office of Administrative Hearings found that state law was not pre-empted because of McCarran-Ferguson and ordered payment of air ambulance services at 149% of Medicare.

That decision has been appealed by both the air ambulance company, PHI Air Medical, and the insurance companies in the case to a state district court.

The other case, Air Evac vs. Texas State Department of Insurance, was filed last Thursday in the federal court in Austin, and seeks declaratory relief that state law is pre-empted and that the Department of Insurance, under which the Division of Workers' Compensation operates, can not regulate its fees.

The insurance companies argue the McCarran–Ferguson Act protects the Texas laws on air ambulance reimbursement from pre-emption by the ADA since the ADA "has nothing to do with insurance," because the ADA "was intended to address the commercial airline industry" and guarantee that a "competitive market" would set the rates for commercial air travel.

With air ambulance companies, the rational goes, there are no market forces, as there's no comparison shopping in an emergency situation because it is not commercial travel.

The flip side is that air ambulance companies have a lot of overhead costs in providing staffing and equipment around the clock, and also incur significant risk providing the service. In addition, they argue there is competition for customers with more than one provider in many geographic regions.

Finally, the air ambulance companies argue, workers' compensation is not the "business of insurance." Rather, it is a state program that happens to be funded, in part (don't forget about self-insurance, which is not insurance, and that in Texas workers' compensation is not compulsory) by insurance programs.

I can't predict how all of this will turn out. What I do know is that if I'm hurt and far, far away from medical services needed to save my life or limb, and the only option is an air ambulance, I don't care what it costs - get me to the doctor. If the courts rule that air ambulance services must abide by a state fee schedule, and that fee schedule is inadequate to the extent that the air transportation company is going to ask whether the matter is work comp before dispatch ... I may not make it to the doctor.

That's not tenable to me.

Paper Irrelevancy

On Friday I quoted blogger and principal of Health Strategy Associates, Joe Paduda, about physician's reticence to complete paperwork.

Paduda opined that physicians would be loath to move claims from general health to work comp because of the extra paper work, stating, "documentation that is perceived by physicians as irrelevant to patient care is the discontent of doctors - seems to me that's the definition of workers' comp."

The latest Texas biennial Performance Based Oversight (PBO) report seems to bear that out - that report showed an alarming minority, up to 25%, of workers' compensation treating physicians surveyed failed to complete or filed required work status reports timely or accurately.

Work status reports and back-to-work documentation are two of four categories under which doctors are assessed through the biennial PBO process for health care providers. Other categories are timeliness in filing medical evaluation forms and filing documents supporting their use of magnetic resonance imaging. Doctors file both forms with insurance carriers and the state Division of Workers' Compensation.

“The measurements that physicians perform the worst on are the administrative requirements of the DWC, rather than the clinical measurements, which physicians score quite well on,” Warren Cooper, the Texas Medical Association's director of health care delivery services, told WorkCompCentral.

83 health care providers were reviewed in the latest PBO report, published Monday, for the timeliness of their medical evaluation reports (DWC Form-069). 61 were high performers, 18 were average performers and four were poor performers.

High, average and poor are defined by regulation.

But, of the 124 health care providers reviewed for the completeness of the work status report (DWC Form-073), 55 were high performers, 38 were average performers and 31 had scores placing them in the poor-performer tier.

The DWC checked the records of those same 124 health care providers to see whether they had proper documentation of the reasons injured employees couldn't return to work.

Of those 124, 62 were high performers, 41 were average performers and 21 were poor performers.

Of the 33 health care providers reviewed for whether they had proper supporting documents for the usage of magnetic resonance imaging for spinal injuries less than 21 days after an injury occurred, 21 were high performers, eight were average performers and four were poor performers.

DWC says it deliberately expanded the number of physicians subject to audit from the last report, nearly doubling the number reviewed for for work-status forms.

To discourage further physician participation in workers' compensation cases, in addition to paperwork they don't want to complete, poor performers are subject to further review and potentially penalties.

I'm being sarcastic of course, and DWC has good intentions - like much in government oversight though, motivation is provided via punitive measures rather than positive incentives.

The other day the Workers' Compensation Research Institute sponsored a webinar debate between retiring president/CEO, Richard Victor, and Paduda - the theme was cost shifting from general health to workers' compensation.

Victor said their data showed it happening. Paduda challenged the premise and the data, and suggested that just as much shift to work comp was also occurring in the opposite direction, providing the quote at the top of this post.

Regardless, it seems to me that Texas would be a great place to do further research on this topic, starting with the physicians that were surveyed in this latest PBO to see how discouraging work comp paperwork, and subsequent discipline assuming poor ratings, motivated a shift to general health if the circumstances permitted.

Even better would be research on how government could meet its need for data while stimulating physicians to provide that information without resorting to de-motivating measures. It would start by formulating forms that physicians would perceive as adding to patient care, rather than the obviously current perception of irrelevancy.

Contrasting Fault and Value

A case out of Pennsylvania demonstrates that nobody wants to pay for an "injury", which is why there is "fault" in workers' compensation, even though it is supposed to be a no-fault, administrative system.

But a Texas case shows why workers' compensation is a huge bargain compared to the alternative - a jury verdict.

Jamie Gahring's had a history of back problems before he became a line cook at the Stoudt’s pub in Adamstown, stemming from a 1997 industrial injury while he was working for R & R Builders.

In October 2012, Stoudt’s upped Gahring's hours at work from 40-hours to 55 hours per week.

Gahring told his supervisor that the additional hours he was spending on his feet as a line cook at Stoudt’s Brewing Co. were “making his back worse.”

After a few weeks of this schedule, Gahring said, he started having back pain that grew progressively worse with time.

In November orthopedic surgeon Marc P. Oliveri performed a sacroiliac fusion on Gahring.

Dr. Oliveri released him to return to work in January 2013, but Stoudt’s was unable to accommodate Gahring's medical restrictions so they terminated him, and of course Gahring sought compensation.

Gahring filed a claim petition alleging R & R Builders, the 1997 injury, was responsible for the cost of his surgery and his wage-loss during his recovery.

R & R countered that Gahring's back condition was caused by his employment with the pub, and it filed a petition to join Stoudt's to the case.

At the hearing, Gahring testified that he had suffered from ongoing back pain since at least 2002, but it got worse when he started working longer hours at Stoudt's. The complaint to Gahring's supervisor at Stoudt's was corroborated.

The workers' compensation judge found Gahring's back problems were wholly attributable to his employment with Stoudt's, and dismissed Gahring's claim against R & R.

But, the WCJ determined that Gahring had not given Soudt's adequate notice of the claim in accordance with Section 311 of the Pennsylvania Workers' Compensation Act.

Up the appellate chain the case went.

The Commonwealth Court on Monday ruled that Gahring's statement that the additional hours he was spending on his feet as a line cook at Stoudt’s Brewing Co. were “making his back worse” was good enough to forewarn his employer that the aggravation of his pre-existing back problems was work-related, upholding the trial court's findings against the pub.

The case was Gahring v. WCAB (R & R Builders and Stoudt's Building Co.), No. 534 CD 2015.

In the meantime, a Texas jury schooled Tyson foods about being a non-subscriber by awarding an injured worker about $2.2 million.

Asa Ferrell claimed that he twice suffered injuries to his neck and shoulders when coworkers pulled overhead doors down onto him. Ferrell said he also severely injured his back when Tyson put him to work moving heavy boxes in a confined space that didn't allow him to use proper lifting techniques.

The jury found Tyson's negligence wasn't to blame for either of the door mishaps, but it said Tyson's negligence had led to Ferrell's back injury.

The jury awarded him $498,382 for his physical impairment from this injury plus $774,478 for his pain and suffering.

He also got $127,752 for his mental anguish and emotional distress, $358,600 for his medical expenses, and $505,936 for his lost earning capacity.

I'm sure Tyson no longer thinks workers' compensation lacks value. And the carrier for Stoudt's got a lesson in workers' compensation's no fault architecture.

So, while an employer may not be happy with the "liberal interpretation" of workers' compensation laws, including notice provisions, in favor of the injured worker, it still beats a civil jury verdict nearly any day.

Lessons learned: work comp DOES have value; and, pick your fights carefully...

Opt Out and ProPublica

It's easy to vilify Bill Minick and Mellisa Tonn.

The latest ProPublica story on work place injury systems, "Inside Corporate America’s Campaign to Ditch Workers’ Comp", paints Minick as a singular vigilante intent on destroying workers' compensation by taking Texas-style non-subscription to other states; plans that are crafted singularly by employers with the intent of sticking it to the injured worker to send more dollars to the corporate bottom line.

And Tonn, Minick's wife, represents a conflict of interest because she is the medical director overwhelmingly selected by PartnerSource clients to manage medical networks and doctor selections.

But like most everything in life, not only is there another side to the story, there are many complex permutations that need to be considered, and there's a big lesson too.

I've know Minick and Tonn for many years now. It's no secret that I'm a Pepperdine School of Law alumni (1984), and so is Minick (1985). We met about a year after I started WorkCompCentral. He had started PartnerSource a few years earlier. And I've known Tonn through various professional medical organizations, namely the American Academy of Orthopedic Surgeons (of which I'm a faculty member) and the American Academy of Disability Evaluating Physicians.

I've dined with both. I've attended social events with them. I've met their children.

They are good people. They believe that what they do is the right thing for America. Both believe that workers' compensation can be improved upon, and both believe that an employer option is the way to accomplish that goal.

“All you can do is pray that the Lord gives you a calling where you can really do good for society,” Minick is quoted at the end of the ProPublica piece. “That’s what gets me up every day, knowing that I’m getting better employee satisfaction and generating economic development. That’s as good as it gets.”

Minick is not bullshitting - he truly believes what he says, and that opt-out is, overall, better than workers' compensation for both employers and workers; and also for workers' compensation by providing competition.

Remember? This is America, a capitalistic economy where, in general, competition fosters better everything for everyone, at least academically.

Fundamentally, Minick and Tonn are of a Libertarian bend (I don't know their actual political affiliations); freedom of choice and relief from regulatory burden is a paramount belief. Less government, they believe, in both business and personal lives, is better and everyone should have greater responsibility for themselves. That's what drives their business philosophy, and opt-out itself.

The ProPublica article highlights a few vignettes of injured workers getting the raw end of the opt-out deal: denials based on unreasonable time limits for reporting, failure to provide sufficient medical care to remediate long term effects of injury, inadequate indemnity to stave off pauperism.

Certainly, though, these anecdotes are no different than what is experienced in full-fledged state workers' compensation systems. The earlier series by ProPublica highlighted the great disparity in benefits between states, and the hardships experienced by injured workers facing significant changes to their lives under the controls of workers' compensation systems. That series also used vignettes that the work comp industry labeled as unfair and unrepresentative.

But no one in workers' compensation denied that those case stories were real. Nor that they represented a problem. In fact, those honest with themselves acknowledged that these negative cases are all too common, and are a big problem. That series even led to an investigation of Traveler's by California officials.

Critics of the opt-out movement point to lack of transparency - information and data about what injured workers actually experience and receive in benefits is not easily obtained from opt-out employers.

Anecdotes indicate that the reality is different than Minick's ideal that such plans aren't better for the workers.

Both are fair criticisms. Frankly, there's nothing wrong with those realities being told either. Opt-out proponents need to know those stories. They need to "experience" life as an opt-out employee who's life is shattered because the plan doesn't take care of them, regardless of whether it's better or worse than standard work comp.

Remember my rant on experiential adjusting? Same holds true for anyone involved in the medical/disability management industry, whether it's work comp, opt-out, general health, private disability - whatever. If you don't know the result on a personal basis, you aren't learning and the perception is a callous disregard for the welfare of others.

In sort of a paternalistic way, opt-out plans heavy-handedly encourage return to work. The penalties to an employee for not getting back to work as early as possible can be significant.

This is by philosophical design - the overwhelming evidence is that work is good for people, and that being off of work for prolonged periods dramatically, and exponentially, increases the likelihood of long term disability.

But this heavy-handed approach doesn't work all the time, and unfairly penalizes those unable to overcome the additional obstacles that a work injury throws in the way of, perhaps, an already difficult life. When a work injury protection plan throws up additional obstacles, such as denial of care or refusal to accept based on timing, the penalty is amplified.

Just like work comp itself.

Employers tout great savings, and these are good for the board room and SEC reports to investors. Heartless corporate America is the perception though: At what cost to society? To individuals? To vendors? To employees? To shareholders?

The opt-out employer mindset is a less-is-best viewpoint. Get the government out of the equation; take more control over who provides what, and when; put incentives (positive and negative) in place to drive behavior towards the corporate ideal; eliminate waste, fraud and dependency.

There's a lot of appeal to the concept of the opt-out movement. I'm no fan of government and bureaucracy. I'd just as soon not have others tell me what to do, and how to do it (which is why I've never worked at a big company I guess).

But this Libertarianism assumes a high level of personal responsibility. The more freedom one is provided, the greater the requirement of accountability. Some are mature enough to accept this. Others are not. And this is on a both personal and corporate level; just how greedy can one get before society is offended?

The public's perception of corporate greed is particularly acute when times are tough, or when the media makes examples of outsized executive compensation compared to the toiling working class. Class stratification has become a big source of public discontent. This is a reality that can't be ignored.

The opt-out movement needs to come to terms with this reality. Indeed, ALL of the work injury protection industry needs to.

Oklahoma's 2-year old reform, that introduced opt-out to the state, says that employers' plans must meet the same minimum benefit requirements that the state work comp system provides.

What it doesn't require is that plans meet the same procedural protections - and that is a fault that the opt-out movement took advantage of, and which has provided many of the negative anecdotes the media has reported.

Having an employer appointed doctor determine medical and indemnity fate, only to be reviewed by an employer appointed binding arbitrator, is perceptually bad. There is no check and balance in that type of a system. There is no perceived fairness. It's stacked against the employee. The working class gets stiffed again...

I believe that opt-out can work. But ONLY if it is a fair, and BARGAINED-FOR exchange.

Remember the Grand Bargain? There WAS a bargain 100 years ago. First there was fighting, name calling, shouting, discord... and eventually compromise was reached. That compromise has been challenged over and over again and the first set of the ProPublica series simply pointed out that perhaps the bargaining in today's environment isn't balanced or fair.

What the ProPublica opt-out story really shows is that government not only got out of the way, but completely failed to protect the public; government assumed that plan promoters would do so.

That's unrealistic, myopic thinking. Everyone, and I really mean EVERYONE, at the end of the day given any set of circumstances, will first act in their own self interest. All others take a back seat until the individual's self interests are satisfied. In Oklahoma, government has failed to protect the public.

What is missing in the creation of opt-out plans is simply the lack of a bargain. There is no employee representation negotiating these plans. Government (at least in Oklahoma) is tasked with looking out for the workers' interests, but they don't BARGAIN for the deal - they only approve what is presented: an employer-centric system designed by employers for employers.

“We’re talking about reengineering one of the pillars of social justice that has not seen significant innovation in 100 years,” Minick said.

That's not a bad thing. Nearly everyone that I have come across in the past few years criticizes workers' compensation as too complex, and too costly for too little - i.e. not delivering the value that we expect. So opt-out should provide the remedy.

Should...

"But as Minick’s opt-out movement marches across the country," the ProPublica story reads, "there has been little scrutiny of what it means for workers." This is a nicely written sentence that is wrong on several fronts.

First, opt-out isn't marching across the country. Texas originated it. Oklahoma adopted it after several years of legislative wrangling. Tennessee and the Carolinas are targeted - this is not a movement that is marching. However, trust me, that all of the states are watching and learning to see what is good, and what is bad. Opt-out is disruptive, experimental. But it is not marching.

Second, while there has been little scrutiny of what it means for workers, whose responsibility is that? Current opt-out plans have the fox guarding the hen-house. And as I mentioned, all of those plans were unilaterally created with no worker representation at the deal table.

Government has failed miserably at providing scrutiny. But part of the failure is also Labor's fault. Unions are at an all time low with their constituencies - they are just as out of touch with the working class as the executives on the 99th floor.

The disintermediation of labor has been accelerated with the digital age - Labor has been greatly disrupted and can no longer advocate for the working class.

So who's going to do that? Government won't and Labor can't. 

The story behind the ProPublica opt-out article is that business is running amok, but this will, indeed, eventually back fire. History has taught us that.

ProPublica states, "And it’s Minick’s handiwork that allows Costco to pay only $15,000 to workers who lose a finger while its rival Walmart pays $25,000."

That's bullshit. Minick didn't do that, his clients did it. Minick facilitated the process, certainly, but he doesn't control Costco nor Walmart. What REALLY happened is that neither Costco's nor Walmart's risk management executives made any attempt to include their workforce into the development of their plans, and that's why they are so lopsided.

Business has taken advantage of Labor's weakness and has run amok.

Don't get the idea that I'm anti-ProPublica. In my mind they have done an outstanding job of bringing to America's attention the lack of real protection that people have when they get hurt on the job.

What the ProPublica articles on work comp, and now opt-out, are saying is, the Grand Bargain isn't grand anymore because there's no bargaining.

I firmly believe that this country's strong economic engine is due in part to the work injury protection systems that are in place. When done right the employer is protected, the employee is taken care of, the economy is stable, society benefits.

When it is singularly focused, though, such systems create mistrust. Business can not run on mistrust, and eventually a revolution will be fostered that will work against the near-sighted.

Here's the lesson - ANY work injury protection plan or system MUST be an employee benefit, like health care, a 401K, time off, dogs at the office and a well stocked break room.

But they're not. The laws have ensured that workers' compensation be regarded as a compulsory expense, not as an employee benefit.

Opt-out plans have taken the same approach because their singular focus is reducing expense. This does not tell employees they are valued - rather it tells them they are a cost, and worse, an expendable cost.

And this is where the opt-out movement, if it really wants to grow and prosper and, as Minick says, reengineer one of the pillars of social justice, can work, can make a difference, and can lead changes in the way we think of work injury protection systems.

Opt-out needs to start with the mindset that it is an employee benefit just as valuable to employees as any other employment benefit.

Work comp likely will never get to that level of beneficence because the laws have put a tourniquet on both business and labor. 

But opt-out can be an employment benefit, and should be.

Fundamentally, there's nothing wrong with opt-out. But how it's executed is another matter.

The Private Loss

The tune changes when different hats get worn.

"I now understand what they feel like," Jane Hays is quoted as saying in a Texas Tribune article the other day. "We just need to have a workers' comp system that is fair to the workers, the injured workers."

"In a case with serious and disputed legal issues," Randal Beach, Executive Director of Texas Political Subdivisions, a non-profit self-insurance pool administering workers' compensation benefits for local government entities rebutted to Bob Wilson, "the only prudent course of action is to seek a determination from the system set up for that purpose."

Beach refers to Hays' injuries - the 73 year old member of the Board of Trustees of TPS who sustained serious injuries in a car accident returning from a board meeting. The meeting occurred over the course of three days at The Woodlands. Her regular employer, the Temple Independent School District, marked the reason for her absence as "SCHBUSINESS (DIST)," or school business, in computer logs.

She was returning home after the board concluded its last meeting on Saturday, July 11, at around noon. The accident occurred at approximately 1:30 p.m.

The injuries to her right lower extremity required amputation. Hays still faces multiple other surgeries for her injuries.

Hays was highlighted in the Tribune because even though she is an "insider" her claim was denied on the grounds that it did not arise out of or in the course of employment. TPS is claiming the "going and coming" rule excludes coverage.

The "going and coming" rule says that workers' compensation is inapplicable for injuries or claims incurred during the commute to and from work.

TPS says it wants to take the "safe road" because they have an obligation to members, the public and TPS' insurers and reinsurers, to make sure the law is followed.

Hays was a volunteer Director of TPS and is not paid for the job. Instead they paid for her travel, her lodging at the meeting and her meals.

As explained by Beach, "For these meetings, the pool reimburses trustees' expenses, since they are not otherwise compensated for serving on the Board. For workers' comp purposes, the trustees are considered 'employees' of the pool when they are attending Board meetings. When they travel to Board meetings they are traveling to their 'place of work'. The pool does not direct the method, route or schedule of their travel or where else they go on their way to work or on their way home."

But expenses related to the "commute" are reimbursed by TPS as noted above, and TPS directs where the meetings are held (different resorts are chosen - the meetings are not held at "home office").

In other words, TPS essentially controlled the who, what, where and when of "the job."

And Hays, for her part, provided benefit and service to TPS.

But TPS' three legal opinions differed, according to Beach.

"All agreed that to overcome the 'coming and going rule as applied by Texas courts," Beach wrote Wilson, "the claimant would have to establish that the meeting from which she was traveling home was a 'special mission'. One opinion stated that it was a 'special mission' because the meeting was not held at the home office. Another opinion held that the fact that the Board had chosen to hold this meeting at another location did not convert it from a regular meeting to a 'special mission', and therefore the 'coming and going' rule excluded coverage. The third opinion stated that because there were novel issues involved, including statutory differences in the treatment of public and private employees, and legal questions distinguishable from prior case law, the case could go either way. They recommended following the process established by law to determine whether coverage exists."

That's the problem I have with this case - LAWYERS advised going to court, abdicating responsibility so no one person at TPS has to own up to questions by other board members, the public, or, gasp, the underwriting insurance carriers and reinsurers who may be asked to chip in - this is an expensive claim for crying out loud!

Lawyers advising to let the courts decide is like an orthopedic surgeon advising to have surgery - hello!

In a system that is allegedly "no fault" there seems to be enough fault being thrown around to make that a laughable description.

Wilson replied to Beach, "your comments leave me little solace or assurance that the spirit of the Grand Bargain is alive and well. The problem with workers’ comp today on a broader scale is that we are only concerned with doing what is legal, and not that which is simply right."

Beach essentially admits that denials are standard operating procedure for the pool, telling the Tribune, "I have to treat it like another claim. It doesn't matter how much I love Jane, and I do."

If Hays were Beach's mother, I'm sure the outcome would be quite different.

I try to paint workers' compensation as a social benefit.

But cases like this put too much cynicism in the way, because those who are tasked with paying see it as a private loss.

Fraud Hot and Sticky

Alaska weather.

We're having one of those searing Southern California heat waves that I remember from a child - just as school starts summer turns on and the misery of sitting in a class room, without air conditioning, just seemed at odds with starting school.

Particularly if summer was more overcast than sun at the beaches.

But the first week or two of September would always it seem be met with temperatures in the hundreds making learning difficult, particularly with the high humidity from sub-tropical air flow that contrasts with the normal rather arid Southern California environment.

What a contrast to the weather we experienced in Alaska. Temperatures were in the upper 50s during the day to mid-40s at night. We had one day of rain, and even then it was light - more of a rain forest mist than any deluges. It was humid, of course, but comfortable.

WorkCompCentral Marketing Director, Yvonne Guibert, just relocated from Florida to Southern California. She rented a condo on the beach near headquarters and of course beach living in Ventura County means no air conditioning, a detail for which she didn't have a contingency plan.

The stores were sold out of fans...

I met a lot of interesting characters in my trip to Alaska this past week. One lady, looking very independent and rather on the rough side, had grown up in Florida and lived there most of her 52 years.

She proudly told us how, one day, she just packed up and moved to Alaska 9 years ago.

That struck me as unique. Talk about environmental shock! She was nonplused. The heat and humidity of Southern Florida had worn on her, and culture was reflected in that environment: hot, humid, sticky.

She was more comfortable with the long summer days, and the long winter nights, of Alaska. The independence of Alaska culture appealed to her, and from my observation, she made a correct choice.

Besides, she quipped, the state of Alaska pays people to be there!

Texas has been under a heat wave of unprecedented duration it seems.

And Texans, like Alaskans, are a population that takes pride in their independence - doing things differently than everyone else according to their own sense of justice and code of responsibility. Remember, Texas was a republic long before it was a state.

So I'm not sure why the fact that Texas Mutual's direct access to law enforcement for workers' compensation fraud is such a big deal.

Texas Mutual was originated in 1991 as the Texas Workers' Compensation Insurance Fund.

The enabling legislation allowed the quasi-governmental carrier to contract directly with district attorneys throughout the state to prosecute fraud.

Since that time the company has funded the Travis County District Attorneys office with millions of dollars to pay for investigators, attorneys and prosecution costs in going after work comp fraud.

Texas Mutual Insurance Co. since 2001 has paid $4.7 million to the Travis County prosecutors' office to cover the monthly salary, benefits and expenses of two assistant district attorneys as well as support staff. (By comparison, California will direct $34.95 million to districts attorneys for the fiscal year ending in 2016 to investigate and prosecute work comp fraud.)

The contract, posted online by the Tribune and the American-Statesman, calls for the District Attorney's Office to investigate and prosecute alleged violations of the Texas Insurance Code "or other penal laws of the state relating to crimes committed against the company."

Some say this is a conflict of interests, because a) no other "private" carrier does so, and b) fraud prosecution gets lopsided against individuals making claims of injury or exaggerating their claims.

Others don't have a problem with the arrangement, since a) Texas Mutual is not really a private carrier (it's a hybrid like most state funds) and b) at least some fraud is being targeted and prosecuted.

Other states with work comp fraud prosecution funding systems pool money from policy assessments, and that money is divided up, usually based on some factor that puts heavy emphasis on the number of arrests and prosecutions.

Since the easiest fraud to investigate and prove is simple, injured worker fraud, usually for claiming a disability status in contrast to sworn testimony, the money invariably gets directed towards that type of fraud.

And the statistics bear that out: according to the Tribune and American-Statesman article, 80% of pending indictments reviewed this spring involved fraud allegedly committed by workers.

I'm not saying that's right or wrong - that's just the way it is.

But we all know there is fraud across the board in workers' compensation, from individuals claiming an injury that never happened, to white collar executives getting kick-backs for directing, and even promoting, business for various unnecessary services that inflate the cost of the system.

I'll never forget a meeting I had with an executive team from a system vendor several years ago where the CEO told me, "David, you and I know workers' compensation is a dirty business."

Needless to say, we didn't do any deals with that company.

The uproar in Texas over how fraud investigation and prosecution is paid for is misdirected. Like Alaska, if Texas wants to pay people "to be there" that's the state's discretion. It's in the law.

The focus should not be how it is paid for or by whom, but what is done with the money once in the district attorney's hands.

If workers' compensation is a "dirty business," then some funding needs to be directed to cleaning up that business as well.

That goes for all fraud funding in any state.

The topic of fraud is emotional. Fraud is also non-discriminatory.

It's a hot and sticky subject. The real issue is whether the store has enough fans to go around.

Opt In vs. Opt Out

The issue of alternatives to workers' compensation is volatile and emotional.

There are die-hard workers' compensation advocates and even if they disagree on whether workers' compensation is working or not, they do band together when arguing against opt-out proponents.

Those who pitch alternative benefit systems are vociferous in defending their ideals, saying the costs are lower to business, the results are better for employees, and they like that government largely stays out of the way.

I'm a firm believer in market economics. A free economy means that ultimately the consumer benefits because there's always someone around the corner that will provide goods or services better, faster and cheaper.

When "open rating" was first introduced in California around 1992 I bought in. It made sense to me that market competition would result in lower prices for insurance to the business consumer, rather than having the government dictate the least that could be charged (i.e. a floor).

What I didn't appreciate is that workers' compensation in California, nor most states, is NOT a free market; it is a captive market. The government says, with rare exception, that an employer must be covered for employment injury risk.

A free market would not impose that condition.

The only free workers' compensation market in the United States is Texas. Neither employer nor employee need "subscribe" to the system, and indeed, neither need to have any protection whatsoever, and can "go bare."

Even then, Texas had its share of problems controlling work injury issues. Until that state's historic reform in 2004, Texas employers suffered higher than average premiums for workers' compensation insurance. Bigger businesses could afford to put together alternative benefit plans, but small businesses with fewer resources weren't as able to adapt.

A few suffered the consequences...

The opt-out movement has been heating up with moves into Oklahoma and Tennessee, and it is being pitched at other states.

There are two issues that opt-out opponents really have to alternative systems: 1) disputes are governed by arbitration clauses and the employer controls that process, putting the employee at an unfair disadvantage; 2) when employment ends, so too does the employer's obligation to take care of the injured worker.

Neither of those are trivial, in my mind.

The employer for the most part has an unfair bargaining advantage over most workers - employer has the money, employee needs the money... And most employees don't think they'll ever get hurt at work. And even if they might appreciate the risk, they don't generally think of any protection in such an event.

Proponents say that opt-out plans are actually better for the employee because they eliminate a lot of the game playing, take lawyers out of the equation, and provide a better return-to-work result. That may be, but I don't know. I have never seen any study that supports those arguments. I have seen anecdotes, but nothing that has been academically reviewed.

The only research that I can recall that comes close to reviewing opt-out in Texas was by Stanford Law School professor Alison Morantz.

Her work, "Opting Out of Workers' Compensation in Texas: A Survey of Large, Multistate Nonsubscribers," found near universal praise by non-subscribing employers for Texas alternative plans because of the huge cost savings over traditional workers' compensation.

But unfortunately Morantz' survey did not delve into injured workers' opinions or experiences.

And I don't know of any studies that do so other than the Texas Department of Insurance surveys, which don't provide statistics on whether or not injured workers actually fare better (or worse) under opt-out than regular comp.

Here's what I DO know - any employer that doesn't have something in place to take care of workers hurt or killed on the job is not only risking itself, and its workers, but risking the entire community in which it does business. One need only look to West Texas, and the decimation to the local economy there following the explosion of a "bare" fertilizer plant a couple of years ago, to understand that some form of occupational injury protection is necessary for a vital economy.

Argue as we might about opt-out versus "traditional" workers' compensation, the fact is that we can all agree that the modern economy requires some form of work injury protection. We can debate all day long about its form (heck, we all seem to disagree even as to how work comp itself should operate!), but any notion that there need not be something in place is purely fodder, and the subject of Bangladeshi politics...

Rules of the Game

Texas basically started the medical provider network trend and there are many states that have modeled their systems, albeit with notable differences, on the Texas network style.

But a recent case out of the 5th District Court of Appeals in Texas may alarm physicians and other medical providers in networks, because in private contractual settings a doctor is not free to express his opinion, and certainly not in his chart notes, nor encourage patients to take legal action against the network or the underlying carrier.

Dr. John C. McConnell, is a board-certified orthopedic surgeon since 1987 who got his medical degree from the University of Texas Southwestern Medical School in Dallas, completed a residency in orthopedic surgery at the University of Tennessee and a fellowship at Tufts University of Medicine in Boston.

He thought he was advocating for his patients when he made deleterious notes in patient charts, stating in one that he believed Liberty Mutual Insurance Company was acting in bad faith, and that "inappropriate (`bad faith') denials on the part of work comp carriers in Texas are unfortunately endemic."

In another chart McConnell wrote that he believed that most carriers engage in a "3-D (delay/denial/dispute of care) business strategy," supported by the "opinions of a network of physicians from whom carriers can obtain whatever opinions they want.”

Liberty didn't like these comments so it told the network manager, Coventry Health (which is now part of Aetna) to terminate McConnell from its network.

After the termination McConnell sued on various legal theories, all based in tort but not in contract.

Likely that's because there was no actual breach of contract.

Regardless, the trial judge threw the case out.

And last week the 5th DCA upheld the trial judge.

The court said that generally, "conduct pursuant to a valid contract can not be said to be independently tortious or wrongful" and that the evidence showed "the conduct McConnell complains about was based on Coventry’s exercise of its legal rights under its contract with McConnell."

Liberty also "did exactly what its contract with Coventry allowed it to do," the court said, and McConnell had not properly presented a breach-of-contract claim to the trial judge.

Texas Department of Insurance, which governs the state's workers' compensation system, reports that physicians are vacating it.

In 2000, there were 17,318 doctors participating in the Texas system, representing about 57% of the physician population in the state. By 2013, according to the Department, the number of doctors in the comp system had dropped to 16,906 – even though the total number of doctors in the state had continued to rise at an average of 3% per year – leaving only 40% of the state's doctors were treating injured workers as of 2013.

Cases like McConnell's may explain this trend.

According to McConnell's appellate brief, in the two years before one of his patients sued Liberty Mutual for bad faith, Coventry received only one complaint concerning McConnell from all of its payers. But after the patient's bad-faith suit was filed, Coventry received 10 new complaints from Liberty in nine months.

What Liberty and Coventry were telling McConnell, and other physicians in its networks, is don't encourage patients to sue the carrier and its agents for bad faith (which has virtually no chance of success in Texas any longer anyhow).

And the message to McConnell's patients, and others similarly situated, is don't complain when someone else is paying your medical bill.

Until there's some legislative adjustment, those are the rules of the game.

Proof In The Penalty

Last week I wrote about the Texas Supreme Court closing the door on civil actions against workers' compensation insurance companies, giving them the same protection of exclusive remedy that their insureds' enjoy.

I said:

"Making the Texas Department of Insurance and Division of Workers' Compensation administrative penalty process the only remedy is the proverbial fox in the henhouse situation. Administrative penalties are a cost of doing business.

"Sure claims payers don't like administrative penalties, but nothing gets the attention of shareholders, Wall Street and the investment community like a nice big award of punitive damages - that's when behavior changes."

This morning, WorkCompCentral journalist Joey Berlin reported that Ace American Insurance Co. was fined $250,000 for for failure to timely pay benefits and other infractions related to the death claim of the widow of Wayne Davis who was killed in a 2012 traffic-accident while working as a sales, profit and operations coach for Burger King.

The case was highlighted in the Texas Tribune series last year called “Hurting for Work” about the industry - part of a growing string of negative press concerning the workers' compensation industry and the laws and regulations that govern it.

After Wayne Davis was killed in the crash, Ace American, Burger King’s insurer, denied and delayed death benefits, arguing that Davis was not in the course and scope of his employment at the time of the crash.

Davis was driving a Burger King vehicle to a company-related appointment, and his supervisor at the time believed he was “definitely in his workday,” according to the Tribune.

Crystal Davis defeated Ace in dispute-resolution proceedings and began receiving benefits, but Ace sued Davis and her two children, ages 6 and 2 at the time, to stop the payments, dropping the action less than a week after the Tribune series first featured the Davis story.

The division’s Feb. 18 enforcement order cited Ace for failing to timely pay death benefits and accrued interest on death benefit payments, failing to timely take action on a request for burial benefits, and failing to timely and accurately notify the division of actions taken on a claim.

$250,000 sanction included:

• A $100,000 administrative penalty.
• Required adoption of an enhanced compliance plan and a minimum investment of $50,000 to implement that plan.
• Establishment of a Texas branch of the charity Kids’ Chance, which provides scholarships to the children of injured workers, with an initial donation of $100,000.
• Participation in all division audits for a three-year period.

Ace Insurance 10 year stock price

This is all super-dee-duper, but is an ineffective solution in my mind.

I'm glad that Crystal Davis and her children are NOW, finally, getting benefits that they are statutorily entitled to, particularly when the EMPLOYER said Wayne Davis was working at the time.

But they were subjected to unnecessary, humiliating action by Ace, and while I don't know their financial condition, my bet is that they are one of the many "paycheck to paycheck" families where that bi-weekly benefit check is the difference poverty and turning on the heat in the winter.

Ace American is a multi-billion dollar company that publicly trades on the New York Stock Exchange that reported record operating income of $3.3 billion in 2014, up 4.7 % per share.

It's stock price has gone from $95 per share to a close of $110 yesterday, and a high of $115, over the past year. In 10 years the stock price has grown from about $45 per share.

It's a highly diversified insurance company, with international operations.

Trust me that this little administrative fine won't even make news up to the C-suite.

And it's nice that as part of their penalty the company gets a tax deduction.

As I said in my earlier piece about Texas' Supreme Court's ruling in In Re Crawford & Co. , don't get hurt in Texas.

And invest in Texas workers' compensation carriers and administrators.

The proof is in the penalty, and the stock price...

Non-Competitive Damages

If workers' compensation benefits were adequate to satisfy Nina Pham, would she still pursue a civil lawsuit against the parent company of her employer?

Pham was the first nurse infected with Ebola in the United States. She contracted the disease last fall while caring for the now-deceased Thomas Eric Duncan at Texas Health Presbyterian Hospital.

Texas Health Resources is the parent company of Texas Health Presbyterian.

Pham's suit alleges that THR exercises “an enormous amount of control” over the hospitals and physicians in its system with the goal of having uniformity in nursing.

It says that THR “controlled nursing at Presbyterian, thorough its corporate control of Presbyterian, and through shared decision making in each of the THR system hospitals that are required to report to THR’s Chief Nursing Executive and THR’s Nursing Executive Team.”

Nina Pham - photo ABC News

Pham's suit points to testimony that Dr. Daniel Varga, chief medical officer for Texas Health Resources, delivered last October before a federal subcommittee. Varga testified that last Aug. 1, leaders of Texas Health Resources sent an email that directed all hospitals to adhere to a specified “epidemiological emergency policy” on how to care for patients presenting Ebola-like symptoms.

Varga testified that Texas Health Resources circulated additional information later that day and again on Aug. 13. The company also communicated with the Dallas County Health and Human Services Department about preparations for Ebola in the months leading to Duncan’s admission, according to the suit.

The suit claims Varga also made “numerous” false statements to Congress, such as that the hospital staff was trained to manage Ebola.

“Nevertheless, it is clear from THR’s testimony and the press releases it has issued that THR was directing the Ebola preparedness for its hospitals,” the suit says. “Despite assuming that duty, THR wholly failed to ensure that appropriate policies, procedures, and equipment were in place.”

The Texas Department of Insurance’s online coverage verification database displays Trumbull Insurance Co. as the workers’ compensation coverage for both Texas Health Resources and Texas Health Presbyterian Hospital.

Pham's attorneys told WorkCompCentral that they exhaustively reviewed whether a suit against THR would be barred by the exclusive remedy of workers' compensation and they concluded that THR was not the employer.

I've seen the law go all over the place on this. I don't think this is a slam dunk. But some Texas experts did tell WorkCompCentral that because of the way the petition is plead that it stands a chance at least against early dismissal motions.

According to a one paragraph statement released in response to the lawsuit, THR says it had continued to support Pham both during and after she became ill, and that she’s still part of the hospital’s team.

“As distressing as the lawsuit is to us, we remain optimistic that we can resolve this matter with Nina,” the company says in the statement.

So, if workers' compensation benefits had been sufficient would Pham have sued THR?

Here's her plea for damages:

a. Physical pain and mental anguish sustained in the past;
b. Physical pain and mental anguish that, in reasonable probability, Nina will sustain in the future;
c. Physical impairment sustained in the past;
d. Physical impairment that, in reasonable probability, Nina will sustain in the future;
e. Loss of enjoyment of life sustained in the past;
f. Loss of enjoyment of life that, in reasonable probability, Nina will sustain in the future;
g. Medical care expenses sustained in the past;
h. Medical care expenses that, in reasonable probability, Nina will sustain in the future;
i. Loss of earning capacity that, in reasonable probability, Nina will sustain in the future;
j. Loss of reputation sustained in the past;
k. Loss of reputation that, in reasonable probability, Nina will sustain in the future;
l. Restitution damages for loss of value associated with her name, reputation and goodwill.

And of course the wild card, exemplary (punitive) damages.

Nope - workers' compensation can't compete with that. I think that answers my question.

Option Necrosis

Last week I published a couple of posts on bad faith lawsuits in workers' compensation - whether they belonged or not.

The first post was an overview of states that allowed civil claims against workers' compensation claims payers to correct against or punish for misbehavior where the administrative remedies either failed or were inadequate; versus those that didn't.

I asked for reader opinions and though a bit premature in publishing because I received even more responses, the vast majority (90+%) of you said that there was a place for "bad faith" lawsuits.

And those responses came from a wide range of professionals - attorneys, doctors, claims administrators, brokers and insurance executives.

The timing couldn't have been more surreptitious as the Texas Supreme Court weighed in with their opinion on Friday.



Texas' Supreme Court, in its Ruttiger case of 2012, eliminated the ability of workers to assert claims against comp carriers for breach of their common-law duty of good faith and fair dealing when adjusting claims, and eliminated liability under the Insurance Code for unfair claims-settlement practices or for failing to adopt reasonable standards for investigating claims.

That still left doors open for other legal theories ... or so folks thought.

Those doors have been closed for good now. Friday the Texas Supreme Court essentially granted workers' compensation claims payers the same exclusive remedy enjoyed by employers that are subscribers to the system; in Texas, workers' compensation carriers and administrators really do step into the shoes of the employer ...

In 1998, two massive explosions rocked the American Smelting and Refining Co. facility in Amarillo. These explosions blew molten metal and chemicals onto Glenn Johnson while he was operating a forklift.

Glenn sustained burns to almost 50% of his body. Doctors had to amputate his left arm, and he lost the use of his right arm and hand.

He was hospitalized for seven months, much of that time in intensive care, and required 24-hour nursing care after he got home.

The Old Republic Insurance Co. was the employer's carrier and it contracted with Crawford & Co. for claims administration.

From the start, the carrier and claims administrator allegedly "set out on a deliberate course of unfair and deceptive conduct," seeking to "delay and deny benefits" due to Glenn, in accordance with a self-described "battle plan," according to Glenn's civil complaint.

Johnson and his wife Natalie claimed that Old Republic and Crawford wrongfully denied Glenn mental health care, refused to purchase the home-gym equipment recommended by his doctor, failed to pay for prescription medicine and short-changed Natalie for her attendant care services to Glenn.

The Johnsons also say that Old Republic and Crawford paid investigators to follow them, who "intentionally manipulated" their findings to create "an aura of wrongdoing," which resulted in the arrests of Glenn and Natalie for workers' comp fraud in May 2004.

It took two years for the Johnsons to clear their names, and after prosecutors dropped the charges against them, they filed suit against Old Republic and Crawford, asserting claims for negligence, fraud, intentional misrepresentation, conspiracy, malicious prosecution, the intentional infliction of emotional distress, breach of contract, bad-faith and violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act.

Crawford moved for dismissal of the entire complaint, based on Ruttiger.

Potter County District Court Judge Douglas R. Woodburn agreed that Ruttiger barred the Johnsons from proceeding with their bad-faith and Insurance Code claims, but he set a trial date for their remaining causes of action.

Crawford then sought mandamus relief from the 7th District Court of Appeals, but it was denied last March.

The 7th DCA reasoned that the Texas Supreme Court's decision in Ruttiger "was concerned with determining whether the existence of a common law claim for the breach of the duty of good faith and fair dealing was inconsistent with the current legislative/administrative workers’ compensation scheme."

Since a malicious prosecution claim “does not serve to protect, secure or timely resolve disputes involving the availability of workers’ compensation benefits due a claimant,” the 7th DCA reasoned that Ruttiger wouldn't bar such a claim against a comp carrier.

However the Supreme Court took a different view and said Friday that questions on the applicability of the comp act "does not depend on the label of the cause of action asserted," nor "on the nature of the relief the claimant seeks."

The point of Ruttiger, the court said, is that the act "provides the exclusive process and remedies for claims arising out of a carrier’s investigation, handling, or settling of a claim for workers’ compensation benefits."

So there you have it - in Texas a workers' compensation claims payer, be it insurance company or third party administrator, really does acquire the same characteristics of exclusive remedy as its insured employer.

This is the best news of the century for the Texas insurance industry.

It's also the most frightful period of time for the working population in that state.

Making the Texas Department of Insurance and Division of Workers' Compensation administrative penalty process the only remedy is the proverbial fox in the henhouse situation. Administrative penalties are a cost of doing business. 

Sure claims payers don't like administrative penalties, but nothing gets the attention of shareholders, Wall Street and the investment community like a nice big award of punitive damages - that's when behavior changes.

And even if there were an increase in administrative penalties and the application of them, political pressure will starve DOI and DWC of enforcement funds.

What strikes me about this ruling is not the issue of penalties or injured workers' rights, or any of the other esoteric issues we usually argue about in the workers compensation industry.

The crux is that there is one participant in work comp that has no options: the injured worker.

The injured worker is forced to participate in the work comp system. There is no option.

Thus the injured worker is required to go through the provider network that the carrier or administrator put together. There is no option.

The claimant's medical must follow guidelines, and treatment requests must be reviewed. There is no option.

And now in Texas if a claimant has had wrong exacted upon him or her there is no avenue for relief, further cementing option necrosis for the injured worker.

There is no option.

In Texas, now Oklahoma and likely Tennessee, an employer can opt out of the workers' compensation system.

But employees don't have that choice.

Maybe that should change. I have some ideas that I'll pitch in a later post.

In the meantime, don't get hurt in Texas.

And invest in Texas workers' compensation carriers and administrators.