Return To Trust

Even more so than most other systems or industries, trust is paramount to the credibility of workers' compensation.

There are so many different moving parts to workers' compensation - from funding to administration to execution, enforcement and delivery - the big circular revolution of the system from origination to repatriation back into the economy requires a high level of trust between a lot of parties with disparate interests to make it work.

Government plays a big part in the trust circle. Government sets the rules. Government is to enforce the rules, and make sure everyone plays fairly. And government has to be particularly careful about conflicts of interest, or appearances of impropriety, since it is in such a central, and powerful, position.

Trust in government can be shaken to the core when allegations of wrong doing are tossed around.

Part of the turmoil that has surrounded Oklahoma's two-year old reform law is due to lack of trust.

Not only did the state completely upend its workers' compensation system by moving to a fully administrative process, including for dispute resolution, but a new sector was carved out for employers wishing to provide an alternative to the system.

There are a couple of components that Oklahoma will need to move through as its new laws mature: allegations against the Department of Insurance that it "rubber stamps" alternative plans presented for approval with dubious analysis of equivalency to the state's work comp system; and allegations of inappropriate behavior by former executive director Rick Farmer.

Most recently, State Auditor and Inspector Gary Jones issued an audit report released Nov. 18 concluding the agency's “internal controls do not provide reasonable assurances that revenues, expenditures or inventory were accurately reported in the accounting records.”

Jones says this allowed for the potential for the misappropriation of funds, illegitimate claims for payment, fictitious payroll payments or improper changes, and the mislaying of inventory.

Current executive director Kim Bailey says, “There has been no evidence of misappropriation of funds at any time," and that “there have been no allegations of misappropriation of funds with payroll.”

Most of the problems with the internal controls cited by the state auditor related to the failure to segregate posts with the same person given the job of both approving and reviewing expenditures, Bailey told WorkCompCentral.

According to Jones' audit, there are problems over the primary self-insurers guaranty and the credit letter funds. The funds pay for loss of earnings and treatment when a self insured employer is unable to pay and must contain more than $1 million.

Through picking random samples, the agency “was not able to provide supporting documentation” in six out of 16 claims from the credit letter fund and in eight of 16 claims from the self-insurers guaranty fund.

Bailey said those issues have been addressed.

A recent lawsuit filed by former employees of the agency, whom Farmer laid off in July 2014, accuse him of religious discrimination among other indiscretions.

The plaintiffs allege Farmer hired 13 people, many of them members of the Church of Nazrene, following his appointment and that they were given higher salaries than existing employees, which the filing claims Farmer referred to as the “Nazarene bump.”

The four former employees had worked at the agency for between 10 and 20 years prior to their lay offs.

Also named in the suit are the commission, the Court of Existing Claims, and the present and former chairmen of the commission, Robert Gilliland and Troy Wilson.

The complaint alleges that a “lack of funding” was given as the reason the commission laid off 16 employees late last year. Farmer, however, hired approximately 13 new employees following the commission's creation on Feb. 1, 2014 (just over four months before the firings),” the complaint says.

None of the newly-hired employees were terminated as a result of this alleged lack of funding, the plaintiffs state.

The state Office of the Attorney General is defending the commission against the court.

There's an old saying: trust takes years to build, seconds to break and forever to repair. Bailey, the commission and the state of Oklahoma have a lot of work to do in the trust department now, making implementation of their reform even more difficult.

The distraction is unfortunate, but they'll get through it though because, "The people when rightly and fully trusted will return the trust." --Abraham Lincoln.

Just Wave Back

A simple wave from an airliner to a little boy may change that boy's life forever.

Reported out of an Albuquerque, New Mexico, news station, KRQE, is a heart warming tale of how a simple little act can make such a huge impression.

In July, 5 year old Hudson was at the airport with his grandfather, waving at planes as they taxied by. Hudson was getting discouraged because nobody was waving back.

Southwest Airlines pilot, Mike Hickey, noticed this as he was taxing his Boeing 737 to the runway, so he pulled a little closer than normal to the fence and he and his co-pilot opened the window and waved back.

Hickey told the station that he waved because he remembers being in Hudson’s shoes, waving at planes at Dallas Love Field when he was his age.

Trisha Hughes, Hudson’s mom, took a picture and posted it on Facebook with a thank you. Southwest saw it and decided to arrange a face-to-face meeting between the boy and the pilot.

Hudson says because of the wave, he now wants to be a pilot when he grows up. Hickey took Hudson into the cockpit of the 737 to show him "the office."

There are some professionals in the workers' compensation industry who "wave" to children every once in a while, and the impact on their lives is immeasurable.

I'm talking about the Kids' Chance charity.

You have likely heard of the organization. There is a national arm, and there are 29 state and regional divisions too.

Kids’ Chance mission is to provide need-based educational scholarships to the children of workers who have been fatally or seriously injured on the job. It's a simple mission, which is why it is so worthwhile.

And I believe that some of the scholarship recipients will find their way back into workers' compensation as professionals serving the industry. Some of this industry's top executives started their paths as injured workers so I have reason to believe that some of the Kids' Chance recipients will also find their "office" in our industry.

According to the Albuquerque news report, Hudson drew a picture of "the wave" and gave it to Hickey as a present at their meeting.

“It’s for my pilot,” Hudson said. “Because he waved at me and that was really polite.”

Waving back. It's a simple, polite, act that can change a person's life.

Professionalism = Attitude

After I landed Forty One Mike Sunday in Oxnard the other day and was off the active runway I switched to ground frequency per the controller's instructions.

"County hangars via Foxtrot," I repeated taxi instructions to Ground Control after clearance delivery.

Then Ground said something that caught me off guard and I didn't comprehend.

"Say again," I requested.

"Forty One Mike, we were just saying up here thank you for always being prepared, saying the right things on approach, advising about clearance through Camarillo Delta, weather information, status, and just being ready - you really make our jobs so much easier and pleasant."

Wow - I was completely shocked. I really do take pride in my airmanship, and in particular my aviation communication skills. Go up one day, particularly in congested airspace like Los Angeles or San Diego, and you will understand what I'm talking about - what with all the garble-mouthed, gobble-de-gook, unintelligible broadcasts over the radio frequencies... how ATC gets their jobs done and keeps airplanes from hitting each other or other hard things completely amazes me at times.

My ego was bursting with pride upon receiving that accolade. I'll try not to let it get to my head...

But the truth is that I try to be as professional as I can flying Forty One Mike, even though I'm not a professional pilot. To me, however, flying an airplane is very, very serious business with consequences I don't care to test - this means being as good as a professional if I can, and I try to be.

Piloting aircraft is wrought with hazard. Even professionals get into trouble.

But being a professional isn't the same as professionalism; "professional" is a designation, "professionalism" is an attitude.

Aviation accidents are generally arepreceded by a series of events, and all too often those series of events start with the professionalism of the pilot(s).

A few days ago a small plane crashed in the Santa Ynez Mountains. I'm familiar with the territory as I fly over it often. It is rugged, and unforgiving - there's no place to land if something goes wrong.

That small plane crash happened to involve some nefarious characters, as far as I'm concerned, and frankly their "professionalism" is something I would call into question.

One of the deceased was passenger, Birger Greg Bacino, 56, the former attorney for, and one of the owners of, Premier Medical Management Systems.

Bacino pleaded no contest in 2010 to illegally acquiring workers' compensation patients (i.e. "capping") for Premier and agreed in 2010 to pay $380,000 as part of that plea agreement for a similar felony charge for purchasing patient referrals.

Investigators said he and David Wayne Fish, president of Premier, purchased more than 16,000 patient referrals from Walker Advertising, an attorney television advertising service. Injured workers who called the advertising service were referred to doctors who had a business relationship with Premier. The company would handle billing and collection work and charge a fee of at least 50% of what they collected.

Bacino was ordered to pay $210,000 to the California Franchise Tax Board for unpaid taxes, $150,000 to the Department of Insurance's Fraud Unit, and $20,000 in court costs. Fish was ordered to pay $390,000 in unpaid taxes, $750,000 to cover the Insurance Department's expenses and $20,000 in court costs.

As part of the plea deal, Premier agreed to dismiss a consolidated case with more than 1,000 lien claims totaling $70 million.

The 58-year-old pilot was David Martz, who also died.

Marz was known in the aviation community as not having high regard for rules.

Martz has had his pilot's license suspended or revoked four times since 1986, according to the San Diego Union-Tribune. And in 2009, his license was revoked after he filmed a porn star performing oral sex on him while he flew a helicopter over San Diego.

The Santa Barbara Sheriff's Office said Bacino hired Martz to fly him to and from a business meeting in San Luis Obispo.

I hate reading about aviation accidents, but my guess is that this was no "accident" and in fact, rarely in aviation is there just an "accident."

Attitude is a sine qua non of professionalism. The attitude of these two unfortunate souls was evidenced by their earlier trials and tribulations, in workers' compensation and in aviation.

We'll have to wait for the report from the National Transportation Review Board before drawing conclusions, but my guess is that this was no accident, but rather simply the tragic conclusion to a lack of professionalism.

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.

Frictional Costs

Friction is the force resisting the relative motion of surfaces sliding against each other.

The byproduct of friction is thermal energy, and that can result in wear, which consequently may lead to performance degradation and/or damage to components.

It should be noted that friction is not a fundamental force - which means that it is reducible to more basic interactions.

We talk all the time about "friction" in workers' compensation, and generally I think most people tend to refer to various processes in workers' compensation as being friction.

There are processes that get in the way of the delivery of medical treatment - this is often deemed frictional.

There are processes that get in the way of paying bills that are seen as contributing friction to the system.

The government may introduce friction through various compliance programs.

Those are just examples. There are many other frictional details.

In workers' compensation we usually refer to friction in the delivery of benefits to the injured worker. These are costs that are not direct benefits to the injured worker.

Industry statistics reflect that the friction costs of work comp is at, or above, 40%.

An insurance company's frictional costs include adjusters, attorney fees, rent, overhead, etc. It includes external costs like broker’s commissions, marketing, fraud, etc.
In other words, it takes 40% of all costs to deliver benefits.

Compared to other delivery systems this is appalling.

Medicare claims a 3% delivery cost. Its worst detractors claim 8%. Even with $712 million in a single fraud bust Medicare's delivery costs are significantly lower than workers' compensation.

But we're just looking at direct frictional costs. Remember that friction is not a fundamental force, so it can be broken down into many other basic interactions, and there is another kind of frictional cost that is greater.

It is the Friction that arises from the inefficiencies of the system and that friction is the result of misdirected motivations unintentionally arising out of unchecked legal and regulatory mandates.

For instance, claims payers use Utilization Review and Independent Medical Review as a legal cudgel. No one can blame them, they are just doing what the system tells them they can and should do (e.g. in California UR is "mandatory"). Consequently medical providers don't want to do their job: Why spend two hours writing a ‘medical necessity’ report when they stand a poor chance of authorization? Even if they got authorization, the fee would be less than reasonable for keeping a medical practice open.

The first frictional cost places a direct burden on the employer and an indirect cost on the consumer. Imagine if that could be reeled in, and indeed these costs are under constant scrutiny.

But this first set of costs are a consequence of those motivations because to perform the operational duties of claims management according to the law there are adjusters, lawyers, executives, buildings, phones, paper, etc. - all first tier frictional costs.

The second tier of frictional cost has greater impact because it affects the bigger workers' compensation population: the injured worker and his or her employer. 

Delay and deny to an injured worker that needs knee surgery causes both financial and physical suffering. Even if the procedure is authorized six weeks later, imagine the physical and mental pain, and delayed recovery.

The employer suffers as well. It's no secret that the bulk of litigated claims is caused by poor claims handling, largely the product of poor communication. We know a litigated claim costs upwards of ten times the normal indemnity claim. Those costs are passed on to the employer in the form of a higher X-MOD which leads to higher premiums.

Very efficient claims payers have very little friction. Their coefficient of friction (if I had a mathematical brain I would have some cool algorithmic equation here) is very low, ergo their costs are very low, and their productivity is very high.

Poor claims systems have lots of heat. They get audited by the state. They face civil actions for bad faith. They have high employee turnover.

And they damage the basic components of the workers' compensation engine.

Friction is the greatest enemy of an efficient work comp system. Lubrication reduces friction. It must be applied liberally and early in the combustion cycle.

Marketing Value

My blog post, Poisoned Kool-Aid generated polarized, partisan sentiments.

There were two camps - those who were offended by the alleged behavior of the opt-out employer, ResCare, and opt-out fans who derided Bob Burke (Rachel Jenkins' attorney and Oklahoma state constitutional challenger) and/or said that the "facts aren't as alleged."

I even had a broker/consultant offer to sponsor me for a couple of days to talk to Texas and Oklahoma employers, and in particular their employees, about their opt-out experiences.

I said that there likely was another side to the story.

Everyone missed the point, though, and that is the case is a public relations mess, even if the facts as alleged are not accurate, because the rally cry of opt-out proponents has always been that its better for the injured worker.

Maybe it is, maybe it isn't. I don't have the data and the facts to either substantiate that claim or challenge it. Opt-out employers are notoriously secret about their programs, and since opt-out can not succinctly claim the exemption from the Health Insurance Portability and Privacy Act that workers' compensation enjoys, privacy is a concern to those employers notwithstanding any need to prove themselves.

I waffle on whether opt-out is good or bad. It grows out of business' desire to have more control over the money spent for work injury protection. But it also clearly divides Business and Labor because of that desire for control.

And the opt-out movement is spreading in the South, as forecast, with attempts in Tennessee (on the legislative back-burner now until next session) and South Carolina, in sights for 2016.

According to WorkCompCentral correspondent, Mike Whiteley, the Association for Responsible Alternatives to Workers' Compensation met in March with a group of South Carolina employers, Workers' Compensation Commission Chairman Scott Beck and commission Executive Director Gary Cannon to discuss opt-out legislation.

ARAWC is well funded, with sponsors such as Wal-Mart Stores, Nordstrom, Safeway, Lowe's, Macy's, Kohl's, Sysco Food Services and several insurance companies. The group has the connections to move rather aggressively in the Southern states.

ARAWC Communications Director Brent Buchanan told WorkCompCentral that a bill in South Carolina should be filed before lawmakers adjourn the 2015 session to be ready for 2016.

A big argument of opt-out opponents is that the bills that get proposed lack "transparency," apparently referring to an inability for state regulators to monitor and measure these systems.

Trey Gillespie, senior workers' compensation director for the Property Casualty Insurers Association of America, told WorkCompCentral that the organization opposes the Tennessee and other bills because they lack transparency and don't provide levels of worker protection provided by workers' compensation laws.

"These proposals follow the Texas model, which lacks the transparency," Gillespie said.

We can all go back and forth as to the relative merits of an opt-out system versus traditional workers' compensation, but that is all irrelevant.

The issue is not whether opt-out should or shouldn't be offered. The issue is that traditional workers' compensation is under attack, for many reasons, and this industry should be concerned.

Traditional workers' compensation is under attack for two very basic reasons, all of this own industry's making: it costs more than employers think it should, and those who are to be benefited by such systems don't get the protections needed.

Lest anyone think differently, that simply the message that the ProPublica series, the OSHA report, and several other major newspapers have been postulating.

In other words, workers' compensation has a tough time convincing its stakeholders, employers and their workers, that it has any value.

Value is a perception call - to the consumer value means that the service or product is worth the cost or expense.

To the bottom line consumers of workers' compensation, the cost of providing what the law says must be provided doesn't match expectations.

Opt-out has a big chance to change that equation, to prove value, to show that it can take care of injured workers much better than traditional systems at a lower cost to employers.

But sending a denial letter to an injured worker based on a timeliness technicality greatly challenges the credibility of opt-out in a very big way.

To win over Labor only two promises need to be kept: that timely, effective medical treatment be provided without delay or interference; and that sufficient money flow to the injured worker to meet bills while mending, and to provide some offset for loss of earnings where full recovery failed.

I don't think that those who represent working people really care that much about WHO directs medical care, so long as it is provided quickly, and the treatment is effective. The managed care model can work very well, but Payers need to get out of the way when a treatment plan doesn't meet their desires.

Work Injury Protection, my euphemism for anything that provides medical coverage and indemnity to those injured while working, can be provided in many different forms. Opt-out is not necessarily a bad thing; it is an option.

But to prove that it is not a bad option, it needs to show that it IS good, which means data, anecdotes, testimonials (and not just from employers and their brokers).

The mission is very simple - take care of the worker. Do that without the interference of every snake-oil salesperson that shows up along the benefit delivery trail with a "solution" for a problem that doesn't exist.

In work comp parlance, those "solutions" are called "friction points."

Want to reduce disputes? Stop disputing. Want to reduce indemnity severity? Provide more treatment faster. Want to reduce medical costs? Treat the doctors fairly without micro-management.

And close the claim without leaving unnecessarily high reserves on the books for treatment that will never be requested...

Sure, this is a Polly-Anna, simplistic view. There are many challenges and exceptions. But we don't use common sense anymore.

Opt-out will continue to be a threat to the traditional workers' compensation model. And the opt-out industry will expand, aggressively, to other states, particularly if it consents to inspection, measurement and management.

Don't think for a moment that proponents haven't learned a valuable marketing message in the ResCare/Jenkins debacle.

Assimilation Is Inevitable

The big focus at the California Workers' Compensation Institute's annual meeting yesterday in Oakland, CA was on medical treatment.

And not the cost of treatment, but what the lack of quality treatment is costing.

Dr. Gary Franklin, medical director for the Washington Department of Labor and Industries, challenged the audience of industry leaders to invest in quality medicine.

This also means providing treatment for psychosocial issues that would interfere with recovery or good outcomes.

Franklin said that he and his colleagues have developed a surprisingly accurate, but simple, six question survey that should be administered to an injured worker very early on in the treatment process to help identify whether there is an increased risk of prolonged disability.

The key then is to introduce appropriate treatment early in the game before disability progresses beyond the return point.

Bowzer Assimilated

People that are disabled for 3 months or more have a 50% chance of still being disabled at the one year mark post injury, and often long after that - thus early identification and intervention with all of the medical resources available should be implemented (within recommended guidelines, of course).

This includes providing psychological treatment, or better therapies to deal with chronic pain (which, Franklin noted, is defined as pain experience for 3 months or more - see the correlation to long term disability?).

And it's up to the administrators to take charge and provide this treatment - Franklin said most clinicians are not good at identifying patients who are at risk for long term disability.

Dr. David Deitz, former medical director for Liberty Mutual Insurance, echoed Franklin's presentation but put it into context with a comparison to general health, stating that without ensuring injured workers receive good quality care, there isn’t much more that can be done to reduce medical costs.

Both Franklin and Deitz advocate compensation for outcomes, rather than the present fee for service model currently employed in most work comp systems.

Deitz also demonstrated a general health provider that essentially advertises its outcomes via a web page. And the CWCI is releasing more tools to members and other researchers to use its vast repository of data to make more informed decisions about the who, what, when, where and how of treatment versus outcomes.

There are a couple of hurdles in this trend, some of them pretty big.

The biggest hurdle I see is the culture of workers' compensation. 100 years of doing things the same way over and over again is difficult to change. Everyone is in on it - providers, payers, patients, employers, the government - all of the players need to change their mindsets in order for such profound changes in the provision of medical care (not just to injured workers, but the overall health care delivery system) to actually work.

Transparency in outcomes is a tall order - we're talking about putting perhaps fragile egos onto the public stage; and there's the argument of privacy, and perhaps inappropriate discrimination.

Another large hurdle is education of the employee population, particularly before an injury occurs.

I'm not talking about telling an injured worker that there is no scientifically supported evidence that spinal fusion surgery is any more effective or efficient in dealing with back pain than physical therapy and exercise. There needs to be constant communication and education on the health treatment process - help identify issues early on, and then when an injury does occur (or is claimed) a constant flow of information about what will happen, when and by whom towards a certain expectation, must occur.

“Not only should we be focusing on quality from the perspective of whatever cost benefits we get, but without systematic health care improvement, we are not going to bend the cost curve at all,” Deitz said. “We are going to continue to spend money in increasingly inefficient ways and if we don’t focus on quality and outcomes, we’re lost.”

In the meantime, CWCI president Alex Swedlow in his opening presentation on the state of research at the Institute hinted at an upcoming report release expected mid-April that may challenge whether Medical Provider Networks are even working. A chart displayed to the audience suggests that the treatment model which existed in the early 1990s, the Preferred Provider Organization model, was not only less expensive than MPNs are now, but also returned better outcomes.

Peter Rousmaniere in his most recent white paper and four part web cast on Seismic Shifts argues that profound change is coming, and that industry people should be prepared to provide integrated benefits, not just workers' compensation. The good news is that the workers' compensation industry is already trained to provide medical care, return to work (or more broadly, return to lifestyle) services, and disability indemnity - expanding that expertise into a broader realm isn't that far of a stretch.

Some big health care companies are already trending towards that model.

The promise of workers' compensation when originally devised was prompt, efficient medical care in the event of a work injury. Today's promise should be prompt, efficient medical regardless of how an injury or illness occurs.

Workers' compensation medical treatment is a dribble in the overall healthcare equation (something like only two percent of the overall health care spend in this country). I still believe that assimilation is inevitable and I came away from CWCI even more convinced of this argument.

Bad Faith or Not?

Here's a sensitive question for the workers' compensation community that I'm sure will provoke passionate debate: should workers' compensation insurance companies and/or third party administrators be subject to civil "bad faith" lawsuits?

Or should a state's workers' compensation system remain an exclusive remedy, even if a claims payer intentionally commits egregious acts such as denying benefits that it knows are due in order to "facilitate" a settlement?

WorkCompCentral Legal Editor, Sherri Okamoto, reports that about half of the states have done away with any civil bad faith remedy either through legislative or judicial actions, and the other half of the nation retains that remedy.

The contrasts are stark.

Okamoto cites an Iowa jury award an earlier this month of $25 million in punitive damages, along with $284,000 in damages, payable by his former employer's workers' compensation carrier for its bad-faith handling of his claim. The offense was failure to pay permanent total disability benefits after a 2009 accident left the injured worker with catastrophic injuries.

Other states where there is no civil remedy rely on administrative penalties and administrative judicial enforcement, such as California, which has been criticized because those policies lack sufficient deterrence to bad behavior such as wrongfully denying medical care to the critically injured.

Bad Faith?

Okamoto notes that the states that do allow for civil remedies vary widely in the standards and definitions for reprehensible conduct.

Alaska and Arizona, for example, define "bad faith" as a refusal to pay a claim without any arguably reasonable basis. In contrast, Arkansas requires a showing of "affirmative misconduct" or “dishonest purpose” to avoid liability.

Colorado, Maine and Michigan make a carrier's failure to act in good faith a breach-of-contract claim. Hawaii and Mississippi make carrier misconduct redressable in tort.

Texas used to permit bad faith actions until the Supreme Court's decision in Texas Mutual Insurance Co. v. Ruttiger, which held there was no common-law bad-faith action in the Lone Star State for workers' compensation claims handling.

Likewise, two months after Ruttiger came out, though, the New Jersey Supreme Court held that the state's injured workers do not have a common-law right of action for pain and suffering caused by an insurer's administration of a workers' compensation claim in Stancil v. Ace USA.

Last week, the North Carolina Court of Appeals ruled that an injured worker cannot bring a tort action to recover damages from an insurance carrier for its alleged bad-faith claims handling.

The split surely raises the passions in people: civil remedies fly in the face of the concept of administrative expediency that underlies workers' compensation; yet, administrative enforcement needs sufficient "teeth" to encourage compliance and deter bad behavior.

What do you think?

**********************

At 8 a.m. this morning the pre-recorded introduction webinar to Peter Rousmaniere's ground breaking white paper, Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers’ Comp, will be broadcast on WorkCompCentral (click here to register to watch the introduction for free, or purchase one or all of the subsequent four parts of the series here, and click here to download the white paper).

Rousmaniere argues that the workers' compensation industry, despite rising costs, is actually shrinking. He explains why, and what industry executives and other professionals should be doing. If your job has anything to do with workers' compensation (and you wouldn't be reading this if it weren't) then you need to at least read the paper - better though, you need to "attend" the webinar series to get the most from Rousmaniere's work, including exclusive interviews with subject matter experts.

If this isn't convincing enough, read Tom Lynch's review of the paper and the series here.

Texas Audits

Texas looks good to the industry with low average combined ratios and good profitability.

That's not good for injured workers, though, if it comes at the expense of failing to provide mandated benefits.

The latest audit took only 64 cases to uncover $511,000 in underpayments of lifetime income and death benefit payments.

Workers’ Compensation Commissioner Ryan Brannan said in a press release that he is "concerned there may be other deserving claimants in the same situation. These results indicate that we need to continue these types of performance audits.”

I would be concerned too.

That's an average of nearly $8,000 per claim that wasn't paid. To the common working person at the lower end of the economic scale that's a significant amount of money.

Carriers selected for the audits were those for which the division either detected compliance issues, or carriers who were identified as poor performers in the Performance-Based Oversight program.

The division said in the release that the common compliance errors discovered during the performance audits included:

• Failure to pay 75% of the average weekly wage.
• Failure to obtain a complete wage statement from the employer.
• Failure to properly calculate Average Weekly Wages.
• Failure to include non-pecuniary wages in the AWW.

Trey Gillespie, senior workers’ compensation director for the Property Casualty Insurers Association of America, told WorkCompCentral that part of the issue may be in the fact that the wage statements submitted by employers covers only 13 weeks preceding injury or death and the AWW is calculated on that.

Bowzer is embarrassed and promises to do better.

And wage statements often only include wage benefits, without reporting the value of other benefits – which is also required as part of the calculation of the AWW.

But that explanation means only that carriers aren't doing a good job of ensuring accurate information from the employer - after all, part of the insurance premium that an employer pays is for the service of making sure that a claim is handled properly, which includes ensuring that the insured employer is passing along the right information.

John Pringle, an Austin attorney who does both claimant and defense work, seemed to agree, in his interview with reporter Joey Berlin, "what I see is adjusters will contact the employer, ask for a wage statement. And then when they get it, they’ll use it even though it may be obviously flawed on its face. They’ll still use it, because that’s what they got … until somebody makes an issue of it.”

Gillespie at least believes that scaring carriers into compliance is a good tactic:

“But it’s good to have these press releases and good to have these performance audits so that basically, insurance carriers, as they’re self-auditing themselves, are sure to have this on the checklist of things to look at.”

Texas Plan Based Audit

Texas does a lot of things differently, and certainly when it comes to work injury protection the state is alone in a number of areas.

Texas was one of the first to introduce an Independent Medical Review process to its system, an idea that was borrowed by California. Texas' IMR system differs from California's in significant respects such as appealability and the number of IMR vendors, so they aren't really comparable. And even though there is an appeal process, a Texas IMR is, from my understanding, very rarely appealed because the system is stable and Texas practitioners have learned that challenging IMR is essentially fruitless.

Though there may be other states with similar programs, another thing that Texas does that other states might look at is auditing of peer review medical reporting. These peer reviews are admissible in workers' compensation hearings.

According to the audit proposal:

"A peer reviewer is a health care provider who performs an administrative review at the insurance carrier’s request without a physical examination of the injured employee. The peer reviewer must not have any known conflicts of interest with the injured employee or the health care provider who has proposed or rendered any health care being reviewed."  

They are used for extent-of-injury and medical-necessity disputes and are to ensure that the medical evidence meets standards, and/or to provide a level of independence and credibility to the evidence presented in a case.

The division audits these medical-necessity dispute peer reviews, and is now proposing to audit extent-of-injury reviews.

The audits are "plan-based"; they're governed by the division’s Medical Quality Review Annual Audit Plan. That includes among its review categories, “insurance carriers/peer review doctors – potentially includes the quality of peer review reports and the appropriateness of actions taken based on peer review reports.”

Peer-review reports are performed by doctors selected by the division. Only peer review reports that are entered into a hearings proceeding are subject to an audit.

The plan-based audit draft for peer reviews lists four purposes:

• Promoting the delivery of quality health care in a cost-effective manner.
• Ensure that peer reviewers adhere to requirements when issuing peer review reports for extent-of-injury and/or medical-necessity issues.
• Ensure peer reviewers review and maintain records when performing peer review.
• Ensure that peer reviewers hold the appropriate credentials when performing a review.

Peer-review requirements are governed by Rule 180.28 in Title 28, part 2, subchapter B of the Texas Administrative Code, which were adopted as part of Texas' big reform nearly 10 years ago, HB 7.

The division, in its proposed Peer Review Plan-Based Audit rules, would resolve any conflicts between the Medical Quality Review Process and the plan-based audit in favor of the audit; i.e. the audit would trump the MQRP.

I find that provision odd - how can a physician in a peer review process rely on the MQRP then? - particularly since Division Medical Advisor David Davis said in a memo to system participants that the plan-based audit “sets the scope, methodology, selection criteria and program area responsibilities as laid out in the Medical Quality Review Process.”

But these new rules are open for discussion and are still pending final edit. System participants have until 5 p.m. (CST) on Nov. 4 to submit suggestions for the Plan-Based Audit to OMA@tdi.texas.gov.

Let the Man Do His Job

The political nature of workers' compensation is being played out in Iowa, a state that is used to being in the political spotlight during national election years as the first state to vote in presidential primaries since 1972.

Rates in Iowa have increased 17.3% during the course of the past 4 years and this has Republicans who back the governor on the offensive.

That averages out to 4.325% per year which is too much for Iowa Republicans to bear, so they are calling for the head of Commissioner Chris Godfrey.

Iowa state Sen. Jake Chapman, R-Adel, authored an editorial published by the Des Moines Register newspaper on Oct. 28 complaining that Godfrey was biased and too eager to award injured workers benefits.

This is part of a campaign by supporters of Republican Gov. Terry Branstad, who upon election called for the resignation of Godfrey.

Godfrey refused. He said that he was entitled to serve out the rest of his term, which ends in April 2015.

So the Governor took vengeance by slashing Godfrey's salary from the statutory maximum of $112,069 to the statutory minimum of $73,250.

The salary cut prompted Godfrey to file employment discrimination suits against Branstad that are now pending in both state and federal courts. The suits contend that Branstad discriminated against Godfrey because he is gay and affiliated with the Democratic Party.

Godfrey was first appointed into office by Democrat Gov. Tom Vilsack in 2006 and reappointed by Gov. Chet Culver in 2009.

In the meantime state Republicans have been aggressive towards Godfrey, stating that he hands out money.

Godfrey says he is simply following long standing case law that interprets the state's labor laws.

Iowa has held its ground against pressure to compete on workers' compensation laws against neighboring states for business.

Neighboring states have reformed their laws to reduce benefits by changing qualifying standards for benefits. So those states are held out as examples by Republicans against Godfrey and the state's system.

But Godfrey correctly notes that Iowa is one of only four states that don't have any medical fee controls in place, and says the statistics implicate the rising cost of medical benefits as the genesis for rate increases, not actual benefits paid on claims that have close fact patterns.

"I believe Iowa is one of only four states in the country that has no medical cost containment," he told WorkCompCentral. "We do not have a mechanism in our statute, we do not have a fee schedule, we don't have treatment guidelines. Many people would say that is a good thing, but I also say that makes it unlikely for us to enjoy the stability that we have had over the last 20-some years. Medical care costs are 61 cents out of every premium dollar, and if we do not control those medical costs, that is going to be pretty devastating."

Iowa hasn't made any radical changes to its system in 30 years, which likely contributes to the state's relative stability when compared to more active, reform-minded, states. Godfrey notes that rates, on an inflation adjusted basis, are the equivalent of what they were in 1994.

Certainly we can't say that what happens in Iowa workers' compensation is indicative of trends nationally like in national elections, but we can say that politics and workers' compensation generate muddy results. We see this time and time again.

Godfrey said Tuesday that some Republicans have been more vocal about their opposition to him in recent weeks because they fear that his lawsuits will go to trial. Maybe that's true.

In which case the right thing to do is to stop with this misguided political folderol, reinstate Godfrey's salary, and let the man do his job.

Medical Transparency: Resistance is Futile

John Green, one of the vlogbrothers, posted a video blog on YouTube that so far has racked up over 2 million views, entitled "Why Are American Health Care Costs So High?"

The bottom line take-away from this manic, though entertaining (and I assume accurate) review of the United States health care system is the reason why costs are so much higher in the US compared to the rest of the world is ...

Because they can...

John argues that there is no central pricing control like other countries, that consumers will pay whatever they are charged because, basically, they don't know any better, and there is no transparency in health care pricing.

Maybe that's true. I don't know, I'm no expert on health care costs, or health care for that matter - hell, I'm no expert on anything.

But it does make sense that health care pricing should be a factor in most medical care decision situations where there is time to make an informed judgment about a procedure - which is most of the time.

Some medical businesses are starting to advertise their prices and it's causing some debate in medical circles.

The Surgery Center of Oklahoma, owned by its roughly 40 surgeons and anesthesiologists, drew national interest and sparked a bidding war as several other medical facilities in Oklahoma posted their prices according to media reports.

Pricing transparency is gaining momentum.

North Carolina passed a law requiring hospitals to provide prices on 140 common medical procedures and services.

In May, the federal government published the billed charges – the equivalent of a hospital sticker price – for the 100 most-common inpatient procedures.

The debate goes beyond pricing and for workers' compensation medical issues price alone is meaningless without knowing the quality of the care provided, i.e. outcomes.

One assumption made by those engaged in the debate is that the patient would be concerned with this value analysis - and I think that's an erroneous assumption.

In workers' compensation most of the decision making is taken away from the patient/injured worker. Decisions are made for that person by the physicians, the insurance company/administrator, attorney (if involved), the state, etc. While the patient/injured worker may ultimately decide whether to undergo any particular procedure, the who, how, when and cost of undergoing the procedure(s) is made by others.

Still, in my mind there is no reason for the patient/injured worker not to know how much someone is charging for a service or product before buying. Nearly everything is subject to the shopper's discrimination when it comes to pricing.

But not medical care.

Even with fee schedules, capitations, and other artificial controls on prices we never really know what is being charged until the bill arrives, and in workers' compensation cases even that's not the end as the carrier/administrator may negotiate even further down which has the perverse effect of inflating the initial charge because the provider builds in the post-bill discount factor.

Does the ultimate consumer of services and goods, i.e. patient/injured worker, even care about pricing and quality?

Probably not about pricing - not his/her money.

I'm sure there's quite a bit of concern about quality though - after all it IS his/her body.

Educating the patient/injured worker about cost will make no immediate difference in workers' compensation cases - again, not his/her money. Educating about quality would likely make a difference, if the data were easily available and interpreted, and if there were choice in providers - which in most work comp systems with networks in place, there isn't.

And even then, the doctor/patient relationship may sway the patient/injured worker's decision.

It's a sticky issue, but I think in the grand scheme of things, whatever transparency is available is good for the ultimate health of the medical industry and workers' compensation.

One step at a time. As consumers get used to seeing pricing before making important procedure choices, the more that pricing will become a factor in choice.

And ultimately those competing on price are going to start publishing outcomes and other quality metrics and there will then be competition based on outcomes.

It's a cultural thing and culture is very difficult to change - it happens in small increments.

I'm glad that Surgery Center of Oklahoma and other similar health care businesses are being bold and are publishing fees. That's one small step towards a cultural revolution that will change health care and change workers' compensation.

So while the ultimate consumer may not care right now about price, transparency in pricing will eventually lead to more information about quality and outcomes - the evolution of market competition will cause this to happen.

This won't happen over night, and of course there will be resistance - but that's like trying to resist Borg assimilation: "resistance is futile."

On the Street Corner - Do You Need a Beer?

Yesterday I smelled a rat.

Bill Cobb, VP Business Development for CompMetrics, has helped ferret out that rat in a blog post he put together along with cool charts, graphs with numbers and things that help explain the madness of the California rate making process.

What Cobb's report tells us is why carriers still write business in California despite all of the "sky is falling" rhetoric year after year (or in this case, mid-year) - because they make money even if their expense ratios are deplorable and investment returns are pathetic for professional money management. More on that below.

I asked yesterday what the big deal was about cost containment expenses. To me that is an internal operational issue and should not be cause to raise rates and premiums on employers. If a carrier can not exercise the discipline to keep its costs under control then that is the carrier's problem - that's a cost of doing business.

Cobb confirms this. Note in his analysis that medical expenses have essentially remained flat since the last "reform". The big cost driver for carriers is how much they spend keeping those medical costs down.

Bill Mudge, president of the Workers' Compensation Insurance Rating Bureau (WCIRB) blamed some of the increases on the difficulty of establishing and maintaining medical provider networks. I don't buy that - MPNs have been around since 2004. Why all of a sudden are they costing more? The MPN industry in California is now mature with known entities and players.

Mudge also postulated that some of the cost increase could be blamed on an increase in continuous trauma (CT) claims - where are the statistics to support that? And why do CT claims cost more to cost-contain? Again, I don't buy that. This does not seem logical to me. CT claims have been around since the beginning of [workers' compensation] time.

The WCIRB seeks a rate increase on ESTIMATED increases in costs. Is this not a self-fulfilling prophecy?

I know that reserving requires a bit of art to perform properly and much of this art involves the skillful estimation of future expenses. But I'm wondering why projections of cost-containment services can't go DOWN.

I said yesterday that the numbers don't make sense to me, but that is not unusual because when it came to math I was not gifted with the right set of genes to develop those skills.

But even I can see when numbers don't appear to add up.

For instance, Cobb has a three great graphs demonstrating accident year increases in Estimated Ultimate Costs of an indemnity claim, increases in Indemnity Costs per indemnity claim and Allocated Loss Adjustment Expense Costs (ALAE) per indemnity claim.

In the first two instances it is absolutely clear that since 2008, after the system adjusted to the 2004 reforms, there essentially was stabilization in both medical costs and indemnity costs.

What continued to inflate, well past wage basis levels, is the ALAE costs, with a inflation rate of 11.9% per year. ALAE, as a percentage of combined costs, rose from 23% in 2004 to 46% in 2011.

Now as to those profits. According to Cobb's analysis, by the end of 30 years, due to the magic of modern day finance and the power of compound interest, carriers still put over thirty cents of every premium dollar in their pockets even after paying out 100% of claim costs. This can explain why Tokio Marine was interested in Delphi Financial and Delphi's workers' compensation holdings, including Advantage Insurance.

Compared to the average publicly traded company, workers' compensation insurance has a poor rate of return - but it's that long term cash flow that keeps the clocks ticking and why carriers won't flee California. The world's seventh largest economy just has too much available opportunity to abandon.

I don't have a problem with carriers making a profit - even an outsized profit (I'd invest!). Profitability of the line is necessary for carriers to participate and for a health distribution of the risk (we saw what happened when capacity dried up and the State Fund ended up with nearly half the market).

However, lack of transparency when the hand is out creates mistrust and uneasiness. Kind of like the homeless person on the street corner - are you going to give your money to the person whose sign says they can get a job, or the one that says "Let's be honest, I need a beer"?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TX Case Shows How Insurance Business Creates Bad Public Perception

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Shifting the burden of responsibility is part of the equation factoring the general public's negative perceptions of the insurance industry. (See for example http://www.insead.edu/facultyresearch/research/doc.cfm?did=2016.)

I am sure there are cases out there where compassion did trump business. Perhaps some good news once in a while, demonstrating compassion for humanity over the raw business of risk management, would go a long ways towards changing the public perception of insurance.workers compensation, work comp, injured worker 
Of course, no sooner had I posted this editorial then I read this story: http://www.avweb.com/eletter/archives/bizav/2124-full.html#206152 - the flip side of the business of risk management. I have a tough time with this pilot's claim...

Drugs, Whack-a-Mole and Transparency

While a National Conference of Insurance Legislators (NCOIL) committee will take "a hard look" at physician dispensing of repackaged drugs to injured workers when the organization meets in Biloxi, Miss., on Feb. 25, legislation placing limitations on restrictions on opioid prescriptions for injured workers could surface as stand-alone legislation or as part of a comprehensive bill to reform the workers' compensation system in California.

Problems associated with prescription drugs in health care, and in particular in workers' compensation, has grown to epic proportions, with many interest groups jumping in and sounding alarms about excess overdose death rates and out of control costs.

Mark Sektnan, president of the Association of California Insurance Companies (ACIC), said the increased awareness might be sufficient to attract the attention of lawmakers this year.

"Opiates are a growing concern and an issue in both workers' compensation and the prescription world," he told WorkCompCentral News. "The growing drum beat of opiate cases and stories seems to be getting to the level it needs to be to address this."

Jordan Estey, NCOIL director of legislative affairs and education, told WorkCompCentral that the committee is responding to a resolution passed at the organization's meeting last November in Santa Fe, N.M., instructing the panel to "investigate medical cost trends and related state cost-containment strategies, including state efforts on physician dispensing and drug repackaging."

NCOIL reports that "central to the issue are concerns that drugs are being repackaged using more expensive reimbursement codes than the originals - up to 300% more costly in some cases."

A number of states with some success stories are being highlighted in this national debate about prescription drugs.

Five medical boards and commissions in the state of Washington passed measures requiring a provider to perform a full assessment of a patient's health history and past treatment of pain when prescribing opioids. Doctors are required to prepare a treatment plan, and also seek a consultation for any prescription that exceeds the equivalent of a 120 mg dose of orally administered morphine per day. The Washington Department of Labor and Industries, which administers the state's monopoly workers' compensation system, is working on incorporating the new standards into its treatment guidelines.

Arizona Gov. Jan Brewer signed a bill on Feb. 29, 2011, requiring doctors to provide written justification in their reports when prescribing high dosages of painkillers or controlled-release drugs for acute pain. Additionally, a doctor must consult with the state's Controlled Substances Prescription Monitoring Program, a database of prescriptions created in 2008 to prevent patients from doctor shopping to obtain multiple prescriptions. A carrier is not required to pay for office visits if a physician fails to provide justification for a prescription or check with the drug-monitoring database.

In 2007, California approved capping the price of repackaged drugs based on the Medi-Cal schedule.

South Carolina approved price caps on repackaged drugs under a new pharmacy fee schedule in December, and Florida legislators have proposed legislation intended to curb the cost of such drugs.

But the way I see it, the bigger problem is that government's attempt at regulating this activity is like the carnival game, "Whack a Mole". Closing a loophole that allows providers to profit from one practice can lead to providers exploiting other profitable loopholes.

The bigger issue I think is that in workers' compensation and health care in general there is no transparency. The consumer of health care services and goods does not know what the cost of services or goods is, does not have statistical or empirical evidence of a provider's outcomes for comparison, nor does the consumer generally even care because the consumer (particularly in the case of workers' compensation) has no financial stake - "don't worry, it's covered by your insurance."

As a consequence there is no real market competition for medical services and goods at the consumer level. The health consumer counts on the government to regulate this activity, but as we have seen throughout the history of health care governmental regulation is in general too little too late - it takes a lot of momentum for the government to take action and by the time action is taken the profit incentive has shifted to another unforeseen medical component.

While the national debate should continue with conversations about regulating undesired behavior, the bigger conversation should be about how to bring transparency to the medical market. Good providers should see no problem with good, comparative, open-market competition. Those that desire to shelter activities for unreasonable motives will oppose efforts to institute true market reform.workers compensation, work comp, injured worker 

NFL Suits and Report Cards - Transparency the Issue

I said I was taking a vacation during the week between Christmas and New Years.

I lied.

Too much going on. Maybe I just won't be as consistent in my posting, but I found after reading the news this morning that I couldn't shut up.

Two things this morning have fired up my typing fingers: Another NFL lawsuit and the WLDI annual report cards.

NFL Suit

Twenty-five former football players sued the National Football League last week - players filed two lawsuits against the NFL, one in Georgia and one in Florida federal courts.


Baltimore Ravens running back Jamal Lewis and three other players filed the first suit in the U.S. District Court for the Northern District of Georgia last Wednesday, in a case titled Lewis v. NFL.  St. Louis Rams offensive lineman Kyle Turley and a group of 21 other players filed the second suit in the U.S. District Court for the Southern District of Florida on Thursday.


The two suits are the latest addition to a collection of four other concussion-related suits filed by players since last July. All of the actions allege that the league breached a duty to protect players from concussions that led to disabling brain injuries, such as chronic traumatic encephalopathy (CTE).

The suits allege the NFL's creation of the Mild Traumatic Brain Injury Committee (MTBI Committee) in 1994, which was created to research and resolve the impact of concussions in 1994. When the committee identified medical evidence suggesting that repeated concussions could result in tragic brain injuries, the NFL concealed it, the players' complaint contends. 

The suits are unique because they are filed against the league rather than the teams. The teams are the players' employers so there should not be exclusivity.

What's also interesting is that these suits potentially create a little bit of a conflict between the teams and the NFL because there is certainly big subrogation potential behind the players' suits. Will the workers' compensation insurance companies for the teams seek to recoup some of their expenditures by intervening in these suits? And if so, will team owners, who essentially are the owners of the NFL, seek to quash such litigation? Who REALLY controls the money in this circuitous examination of liability?

For work comp wonks, interesting just scratches the surface regarding the issues in these suits.

Report Cards

The Work Loss Data Institute published its 2012 State Report Cards for Workers' Comp. This report intends to show insurers, state agencies and employers which states are doing well in treating workers and getting them back to work.


I'll admit to being ignorant as to the methodology of the report and how "grades" are derived.


It is interesting to me because for the most part, workers' compensation medical care completely lacks transparency.


The WLDI report doesn't resolve this lack of transparency, and in fact I think highlights the fact that there is no way anyone other than within a single entity (and likely even that is doubtful) can compare health outcomes and costs from one provider to the next.


I bring this up because I just finished "The Company That Solved Health Care" by John Torinus.


Torinus argues that the health care industry doesn't want health outcomes from vendor to vendor to be known because that would create market competition. In health care, as in workers' compensation, the health care industry goes to great lengths to ensure that the care consumer (in workers' compensation its the injured worker) has no idea who does good work on a defined quantitative schedule of comparison and what the costs are. Consumers have been trained to just rely on what their doctor tells them and follow along like dogs. The medical industry has been successful in taking the consumerism out of health care, and that is what has driven health care costs to spiral far outside the rate of inflation, unchecked, and why it will continue to worsen.


Workers' compensation is no different, and in fact its worse - the consumer, injured worker, has absolutely no financial stake in the medical equation. There is no financial reason for the injured worker to seek comparison, nor is there any way for the injured worker to make comparison.

And, since the entire bill is paid for by a third party - the nasty, antagonistic insurance company - a natural conflict is created and the medical industry takes full advantage of this by ensuring that there is acrimony between the two. The injured worker is led to believe that the medical community is really the one on the side of him or her.

WLDI's report card is a step toward rating overall system efficiency, but what it really does in my mind is graphically explain that there is no transparency in workers' compensation medical care, nor will there ever be unless the carriers band together, aggregate their data, and take the BIG risk of publicly displaying and rewarding or punishing do-gooders and bad-actors.

Carriers will never do this - their argument is that there is too much liability involved and they will get their pants sued off by the medical industry. They are probably right, they will get their pants sued off.

But in reality, the carriers don't want to make this information public because that jeopardizes the built in premium increase system of the experience modification factor. There is a conflict of interests in the exposure of VALUE in the medical equation of workers' compensation by carriers.

You will see me rant on through out this coming year on this topic because it is one that I think needs to be examined more closely. We will never have true workers' compensation "reform" unless and until there is transparency in the medical side of the system.