The California Division of Workers' Compensation (DWC) no longer has a lien problem, at least that is how I interpreted the Administrative Director's (AD) announcement at the California Applicant Attorneys Association Summer Conference in San Francisco on Friday.
Just two weeks ago Department of Industrial Relations Director (DIR), Christine Baker, told an audience at the annual meeting of the Workers' Compensation Insurance Rating Bureau in Napa, CA, that there was a backlog of 800,000 liens waiting to be scanned into the Electronic Adjudication Management System (EAMS).
“When you think of the 500,000 liens coming into our offices (annually), plus 800,000 in boxes, plus the litigation over all that, that alone is a huge amount of money,” Baker said.
AD Rosa Moran said some liens at the DWC's Oakland headquarters still need to be entered into EAMS, but the district offices are "caught up" and that "we've fixed that problem."
Moran credited the hard work of the college students and staff who run the DWC's "lien lab" for processing this paperwork and bringing the backlog down.
I have to admit to skepticism.
According to the California Committee on Health, Safety and Workers' Compensation (CHSWC) "Lien Report" issued in January of 2011: “Electronically filed liens require no clerical time at the District Office, but the office cannot keep up with the paper-filed liens. Processing paper liens into EAMS requires an estimated ten minutes of staff time per document.”
If OCR scanning every lien takes 600 seconds (10 minutes) from start to finish, including time to review the OCR data and complete the intake process, that is 480,000,000 seconds. There are 86,400 seconds in one 24-hour day, therefore if one scanner ran 24x7 and never stopped it would take that scanner 5,555.56 days to complete the entire backlog.
Now use your favorite math equation to divide 5,555.56 24-hour work days into the time period in which the DWC claims to have eliminated the backlog.
From the date of Baker's statement at the WCIRB meeting to the date of Moran's announcement at CAAA is 15 days.
If Moran's statement is correct, the DWC eliminated the backlog in 15 days, therefore 5,555.56/15 = 370 OCR scanners running 24x7, staffed by DWC personnel 24x7, to eliminate the OCR backlog.
A little bird told me that in fact the directive is that all liens have to be scanned by the 13th of July; that the process is that the 425 boxes of liens have been shipped to the non-back logged boards and EVERY employee has a box to get resolved. Each lien is to be checked against the case official address record. If the lien claim is not on the record, the the lien is scanned into EAMS. If the lien is already of record (meaning on the official address record), the lien is thrown away.
Let's assume then that half of all of the liens in those 425 boxes are already on the official address record, and that the time period is actually 28 days (15 days from Baker's statement at WCIRB to July 13) - that means that 2,777.78/28 = 99.21 days of college students and DWC staff working 24 hours a day to eliminate the entire backlog.
If the work day is only 8 hours, then 99.21 needs to be multiplied by 3 - or a total of 297.63 days.
And that doesn't include clerk time necessary to discriminate between liens that are on the official address record versus those that are not.
And that doesn't count the estimated 500,000 liens coming into the system annually.
There may be some different data concerning the quantity of liens, the amount of people working the problem or the amount of scanning equipment the DWC has available, but no matter how one tweaks the math I just can't make these numbers reconcile.
Basically, I don't believe the administration.
Maybe miracles do happen. I just don't believe in them.
Monday, July 2, 2012
Friday, June 29, 2012
Supreme Court and the Relevancy of Work Comp
Thursday's US Supreme Court ruling in National Federation of Independent Business, et al vs. Sebelius, etc. et al, had most workers' compensation observers opining about the impact of mandated health insurance on the cost of workers' compensation.
Yet, when I read the news and the opinion itself, in particular after having just written about the insane financial failure of the present workers' compensation system in California, my immediate thought was that we are one more step closer to declaring workers' compensation in its present form redundant, unnecessary, illogical and administratively, financially and socially irrelevant.
In our present iteration, workers' compensation, regardless of all its faults and costs, remains a very necessary element of a modern economy - all modern economies, and growing economies like China, recognize the need for protection of the work force that is responsible for creating national abundance. It is what defines a responsible society.
Workers' compensation has two basic elements - providing medical treatment to cure and relieve a person from the effects of an industrial injury, and to provide indemnity for inability to work while being cured and to offset the permanent effects of an injury on future income.
While there are limitations on employer participation in the Affordable Care Act, mostly related to the size of an employer's work force, and an individual requirement to have insurance, I suspect that a majority of people that do work are now going to be covered for medical care.
In that sense, then, what is the logic behind maintaining a medical component in workers' compensation? Why does there have to be any "cost shifting" at all?
Critics to this line of thinking say that general health care and industrial medicine are distinctly different because workers' compensation has in place the indemnity component, so physicians need to address medical issues differently, taking into account whether an injured worker can return to work, the nature and extent of any potential disability and the myriad of various reporting points in the monitoring of a worker's medical condition.
All of those arguments have one fundamental flaw - they all assume that a physician who is treating an injured worker must know all about impairment and disability.
That of course is nonsense. Most systems recognize a specific type of physician - those that have been trained to evaluate impairments and render opinions on disability. They are called Qualified Medical Evaluators, or Independent Medical Evaluators, etc. Disputes or concerns about impairment and disability are dealt with by those experts.
Treating physicians treat. Evaluating physicians evaluate. That is no different than what occurs under our current system. Some physicians do both, and quite often those physicians get one or the other incorrect.
And study after study has demonstrated that tying indemnity to medical status only increases disability - there is a reward system in place that unintentionally creates a more disabled work force.
If all of the work force has medical coverage then why go through machinations and discriminating maneuvers to determine through "causation" standards as to whether a worker should get treated via the workers' compensation system or the general health system?
Doing so just defies logic.
I can certainly support such activity when it comes to the indemnity component - put money on the table and people inherently try to find a way to put some of that in their own pockets.
But doing so for medical treatment lacks human compassion and social responsibility.
The US Supreme Court's action on Thursday isn't going to change things overnight. It should, however, further provoke the debate about the relevancy of workers' compensation in its present form.
Yet, when I read the news and the opinion itself, in particular after having just written about the insane financial failure of the present workers' compensation system in California, my immediate thought was that we are one more step closer to declaring workers' compensation in its present form redundant, unnecessary, illogical and administratively, financially and socially irrelevant.
In our present iteration, workers' compensation, regardless of all its faults and costs, remains a very necessary element of a modern economy - all modern economies, and growing economies like China, recognize the need for protection of the work force that is responsible for creating national abundance. It is what defines a responsible society.
Workers' compensation has two basic elements - providing medical treatment to cure and relieve a person from the effects of an industrial injury, and to provide indemnity for inability to work while being cured and to offset the permanent effects of an injury on future income.
While there are limitations on employer participation in the Affordable Care Act, mostly related to the size of an employer's work force, and an individual requirement to have insurance, I suspect that a majority of people that do work are now going to be covered for medical care.
In that sense, then, what is the logic behind maintaining a medical component in workers' compensation? Why does there have to be any "cost shifting" at all?
Critics to this line of thinking say that general health care and industrial medicine are distinctly different because workers' compensation has in place the indemnity component, so physicians need to address medical issues differently, taking into account whether an injured worker can return to work, the nature and extent of any potential disability and the myriad of various reporting points in the monitoring of a worker's medical condition.
All of those arguments have one fundamental flaw - they all assume that a physician who is treating an injured worker must know all about impairment and disability.
That of course is nonsense. Most systems recognize a specific type of physician - those that have been trained to evaluate impairments and render opinions on disability. They are called Qualified Medical Evaluators, or Independent Medical Evaluators, etc. Disputes or concerns about impairment and disability are dealt with by those experts.
Treating physicians treat. Evaluating physicians evaluate. That is no different than what occurs under our current system. Some physicians do both, and quite often those physicians get one or the other incorrect.
And study after study has demonstrated that tying indemnity to medical status only increases disability - there is a reward system in place that unintentionally creates a more disabled work force.
If all of the work force has medical coverage then why go through machinations and discriminating maneuvers to determine through "causation" standards as to whether a worker should get treated via the workers' compensation system or the general health system?
Doing so just defies logic.
I can certainly support such activity when it comes to the indemnity component - put money on the table and people inherently try to find a way to put some of that in their own pockets.
But doing so for medical treatment lacks human compassion and social responsibility.
The US Supreme Court's action on Thursday isn't going to change things overnight. It should, however, further provoke the debate about the relevancy of workers' compensation in its present form.
Thursday, June 28, 2012
Do I Look Stupid to You? Didn't Think So...
The California Workers' Compensation Insurance Rating Bureau (WCIRB) released on Tuesday its Report on 2011 California Workers' Compensation Losses and Expenses.
Paid gross premium (no adjustment for reinsurance, dividends, experience, etc.) by carriers in the Golden State totaled about $10.4 billion in 2011.
Compare that $10.4 billion taken in with what was paid out: $3 billion for indemnity; $2.6 billion was for "incurred loss adjustment expenses" ("the full cost to insurers of administering, adjudicating and settling claims" which include defense attorney fees) and about $4 billion was for medical treatment (deducting $311 million for medical cost containment and $174 million in medical-legal expenses from the total of $4.4 billion in total medical losses paid).
Defense attorneys took out $715 million, or about a quarter, of all loss adjustment money.
Applicant attorneys took out about $387 million from indemnity leaving only about $2.6 billion in actual money going to the injured worker.
Here's a nice little table that summarizes attorney fees:
My friend and risk management consultant, Bill Cobb, made these nice graphs which depict the attorney fee comparison:
The WCIRB report finds that total paid losses in 2011 were $7.5 billion. This includes all insurer losses paid and insurer loss reserve changes that occurred during 2011, regardless of when the accidents occurred or to which policies these losses belonged.
In other words, out of $7.5 billion in expenses, $1.1 billion went to lawyers.
I'm not saying that lawyers are not needed, nor that they are an unnecessary expense - I'm just pointing out a disparity in allocation of benefits...
Speaking of disparities, Medical cost containment has doubled since 2005. $0.4 billion went to cost containment services, leaving about $7 billion for injured workers to cover their medical and indemnity.
The WCIRB report goes on to state that "In total, California insurers have incurred about $5.0 billion in expenses in 2011, or 48% of 2011 earned premium. (For comparison purposes, in 2010, incurred loss adjustment expenses were 20% of earned premium, including $610 million in defense expenses, resulting in total expenses incurred of 43% of earned premium.)"
Does this sound like a reasonable return on investment?
And the Brown Administration is bent on saving "costs" in the system to increase permanent disability indemnity benefits by going after lien claims and copy services?
To quote my sister-in-law when confronted by a child street vendor in Cabo San Lucas during a family vacation a couple years ago asking an inflated price for some trinkets, "Look at me ... do I look stupid to you? Do I?".
Paid gross premium (no adjustment for reinsurance, dividends, experience, etc.) by carriers in the Golden State totaled about $10.4 billion in 2011.
Compare that $10.4 billion taken in with what was paid out: $3 billion for indemnity; $2.6 billion was for "incurred loss adjustment expenses" ("the full cost to insurers of administering, adjudicating and settling claims" which include defense attorney fees) and about $4 billion was for medical treatment (deducting $311 million for medical cost containment and $174 million in medical-legal expenses from the total of $4.4 billion in total medical losses paid).
Defense attorneys took out $715 million, or about a quarter, of all loss adjustment money.
Applicant attorneys took out about $387 million from indemnity leaving only about $2.6 billion in actual money going to the injured worker.
Here's a nice little table that summarizes attorney fees:
Year
|
Defense
|
Applicant
|
Totals
|
Pct. Total
|
||||
2010
|
$ 610
|
$ 350
|
$ 960
|
64%
|
||||
2011
|
$ 715
|
$ 387
|
$ 1,102
|
65%
|
||||
Increase
|
17%
|
11%
|
15%
|
|||||
My friend and risk management consultant, Bill Cobb, made these nice graphs which depict the attorney fee comparison:
The WCIRB report finds that total paid losses in 2011 were $7.5 billion. This includes all insurer losses paid and insurer loss reserve changes that occurred during 2011, regardless of when the accidents occurred or to which policies these losses belonged.
In other words, out of $7.5 billion in expenses, $1.1 billion went to lawyers.
I'm not saying that lawyers are not needed, nor that they are an unnecessary expense - I'm just pointing out a disparity in allocation of benefits...
Speaking of disparities, Medical cost containment has doubled since 2005. $0.4 billion went to cost containment services, leaving about $7 billion for injured workers to cover their medical and indemnity.
The WCIRB report goes on to state that "In total, California insurers have incurred about $5.0 billion in expenses in 2011, or 48% of 2011 earned premium. (For comparison purposes, in 2010, incurred loss adjustment expenses were 20% of earned premium, including $610 million in defense expenses, resulting in total expenses incurred of 43% of earned premium.)"
Let me summarize: carriers took in about $10.4 billion in 2011. Carriers sent $4 billion to medical vendors, and $2.7 billion to injured worker pockets. $1.1 billion went to attorneys. It cost carriers $5 billion to engage in this activity.
To put it more directly, carriers spent $5 billion in 2011 to administer $6.7 billion in benefits that inured to the injured worker.
To put it more directly, carriers spent $5 billion in 2011 to administer $6.7 billion in benefits that inured to the injured worker.
Does this sound like a reasonable return on investment?
And the Brown Administration is bent on saving "costs" in the system to increase permanent disability indemnity benefits by going after lien claims and copy services?
To quote my sister-in-law when confronted by a child street vendor in Cabo San Lucas during a family vacation a couple years ago asking an inflated price for some trinkets, "Look at me ... do I look stupid to you? Do I?".
Didn't think so...
Wednesday, June 27, 2012
Carrier Gets Lesson When TD is NOT TD
Occasionally you will see me rant here over what I consider illogical claims handling decisions. This is one of those rants where a case went all the way to an appellate court over $64.71 - and of course the carrier lost.
The case is Meeks Building Center et al. v. WCAB (Najjar), No. C065944, 06/26/2012, published.
Salem Najjar sustained a cumulative injury to his low back, neck and left shoulder in June 2007, while he was employed as a paint sales associate at Meeks Building Center. Najjar continued to work unrestricted at his usual job activities despite his injury.
The carrier, Zurich American Insurance Co., asked Najjar to undergo a qualified medical evaluation with Dr. Anthony Bellomo on Sept. 11, 2007. Zurich paid Najjar $64.71 to reimburse him for wages he lost to attend this evaluation, in accordance with Labor Code Section 4600(e)(1).
4600(e)(1) states:
When at the request of the employer, the employer's insurer, the administrative director, the appeals board, or a workers' compensation administrative law judge, the employee submits to examination by a physician, he or she shall be entitled to receive, in addition to all other benefits herein provided, all reasonable expenses of transportation, meals, and lodging incident to reporting for the examination, together with one day of temporary disability indemnity for each day of wages lost in submitting to the examination.
In March 2009, Najjar began collecting temporary disability benefits. Zurich stopped making these payments in September 2009, based on the 104-week limitation period in Section 4656(c)(1).
4656(c)(1) states:
Aggregate disability payments for a single injury occurring on or after April 19, 2004, causing temporary disability shall not extend for more than 104 compensable weeks within a period of two years from the date of commencement of temporary disability payment.
Zurich argued that the 104-week period began in September 2007, when it paid Najjar the $64.71 for going to the medical evaluation.
A workers' compensation administrative law judge actually agreed with Zurich (kudos to the defense attorney arguing before the WCJ), and Najjar petitioned for reconsideration.
The Workers' Compensation Appeals Board ruled that the payment mandated by Section 4600(e)(1) was not a payment of temporary disability within the meaning of Section 4656(c)(1) and did not begin the 104-week limitation period.
The 3rd District Court of Appeal upheld the WCAB's ruling, noting what I thought was obvious - there is a distinct difference between the underlying purpose of 4600 and 4656. 4600 is all about medical examinations. 4656 is all about temporary disability.
A contrary conclusion, the court said, "would seriously disadvantage a worker in a case such as this one, where the injured worker continues to work through injury and does not suffer an incapacity to work until much later in the process." It would also "permit the employer or insurer to artificially trigger the cap period on temporary disability benefits by setting a medical-legal evaluation," which, the court surmised, "cannot have been the Legislature's purpose."
It was a good attempt by Zurich, but illogical nevertheless. Apparently relying on case law where a different result was obtained, Zurich failed to note a significant difference which was pointed out by the 3rd DCA.
In the two cases cited by Zurich (Mt. Diablo Unified School District v. WCAB and in Brooks v. WCAB), the court noted, the applicants were off work due to their injuries and receiving wage replacement benefits under the Government and Education Codes. Because these benefits served the same purpose as temporary disability benefits under the Labor Code, they were deemed to have triggered the 104-week limitation period of Section 4656(c)(1).
In the zeal to contain costs the carrier once again reinforces a negative public perception of insurance.
The case is Meeks Building Center et al. v. WCAB (Najjar), No. C065944, 06/26/2012, published.
Salem Najjar sustained a cumulative injury to his low back, neck and left shoulder in June 2007, while he was employed as a paint sales associate at Meeks Building Center. Najjar continued to work unrestricted at his usual job activities despite his injury.
The carrier, Zurich American Insurance Co., asked Najjar to undergo a qualified medical evaluation with Dr. Anthony Bellomo on Sept. 11, 2007. Zurich paid Najjar $64.71 to reimburse him for wages he lost to attend this evaluation, in accordance with Labor Code Section 4600(e)(1).
4600(e)(1) states:
When at the request of the employer, the employer's insurer, the administrative director, the appeals board, or a workers' compensation administrative law judge, the employee submits to examination by a physician, he or she shall be entitled to receive, in addition to all other benefits herein provided, all reasonable expenses of transportation, meals, and lodging incident to reporting for the examination, together with one day of temporary disability indemnity for each day of wages lost in submitting to the examination.
In March 2009, Najjar began collecting temporary disability benefits. Zurich stopped making these payments in September 2009, based on the 104-week limitation period in Section 4656(c)(1).
4656(c)(1) states:
Aggregate disability payments for a single injury occurring on or after April 19, 2004, causing temporary disability shall not extend for more than 104 compensable weeks within a period of two years from the date of commencement of temporary disability payment.
Zurich argued that the 104-week period began in September 2007, when it paid Najjar the $64.71 for going to the medical evaluation.
A workers' compensation administrative law judge actually agreed with Zurich (kudos to the defense attorney arguing before the WCJ), and Najjar petitioned for reconsideration.
The Workers' Compensation Appeals Board ruled that the payment mandated by Section 4600(e)(1) was not a payment of temporary disability within the meaning of Section 4656(c)(1) and did not begin the 104-week limitation period.
The 3rd District Court of Appeal upheld the WCAB's ruling, noting what I thought was obvious - there is a distinct difference between the underlying purpose of 4600 and 4656. 4600 is all about medical examinations. 4656 is all about temporary disability.
A contrary conclusion, the court said, "would seriously disadvantage a worker in a case such as this one, where the injured worker continues to work through injury and does not suffer an incapacity to work until much later in the process." It would also "permit the employer or insurer to artificially trigger the cap period on temporary disability benefits by setting a medical-legal evaluation," which, the court surmised, "cannot have been the Legislature's purpose."
It was a good attempt by Zurich, but illogical nevertheless. Apparently relying on case law where a different result was obtained, Zurich failed to note a significant difference which was pointed out by the 3rd DCA.
In the two cases cited by Zurich (Mt. Diablo Unified School District v. WCAB and in Brooks v. WCAB), the court noted, the applicants were off work due to their injuries and receiving wage replacement benefits under the Government and Education Codes. Because these benefits served the same purpose as temporary disability benefits under the Labor Code, they were deemed to have triggered the 104-week limitation period of Section 4656(c)(1).
In the zeal to contain costs the carrier once again reinforces a negative public perception of insurance.
Tuesday, June 26, 2012
SJDB Vouchers - More Savings for a PD Increase
When I first read that California Assemblyman Gil Cedillo's AB 1145 was still moving along through the legislative process, I was a bit astounded.
In my opinion the entire supplemental job-displacement voucher program is a complete failure that was a token thrown at the applicant community by the Schwarzenegger Administration to get concerned legislators to sign off on SB 899.
From a practical standpoint there was no way it was going to work.
Reports have since shown that to be true, with the benefit being provided too late in the game and in amounts insufficient to be meaningful for any job retraining.
Frankly, we'd be better off just giving everyone who gets hurt on the job a couple thousand bucks and just call it a day.
But now I understand the value behind AB 1145 and how it continues to rise like a phoenix nearly every legislative session - it is a proposed vehicle for "reform" later on down the road should the legislature ever get around to messing with workers' compensation.
(And I don't use the words "messing with" lightly.)
The measure contains the same language as AB 211, also by Cedillo, which Gov. Jerry Brown vetoed in October. It is also similar to Senate Bill 3, which was held in the Senate Appropriations Committee in 2010 and AB 1636, which Gov. Arnold Schwarzenegger vetoed in 2007.
AB 1145 has now been sent off to the Appropriations Committee where the bill sits in the suspense file awaiting fiscal analysis.
In my opinion the entire supplemental job-displacement voucher program is a complete failure that was a token thrown at the applicant community by the Schwarzenegger Administration to get concerned legislators to sign off on SB 899.
From a practical standpoint there was no way it was going to work.
Reports have since shown that to be true, with the benefit being provided too late in the game and in amounts insufficient to be meaningful for any job retraining.
Frankly, we'd be better off just giving everyone who gets hurt on the job a couple thousand bucks and just call it a day.
But now I understand the value behind AB 1145 and how it continues to rise like a phoenix nearly every legislative session - it is a proposed vehicle for "reform" later on down the road should the legislature ever get around to messing with workers' compensation.
(And I don't use the words "messing with" lightly.)
The measure contains the same language as AB 211, also by Cedillo, which Gov. Jerry Brown vetoed in October. It is also similar to Senate Bill 3, which was held in the Senate Appropriations Committee in 2010 and AB 1636, which Gov. Arnold Schwarzenegger vetoed in 2007.
AB 1145 has now been sent off to the Appropriations Committee where the bill sits in the suspense file awaiting fiscal analysis.
Bills are sent to the suspense file if they could have a fiscal impact of $50,000 or more on the General Fund or $150,000 or more on any other account or fund. A bill on the suspense file can only be moved by a vote of the committee.
But it seems that no one really knows the true value of these vouchers. The State Fund says they average $2,159. The Workers' Compensation Insurance Rating Bureau says the average is about $6,000 - at least according to an analysis by Bob Franzoia, a consultant to the Committee.
Mark Sektnan, president of the Association of California Insurance Companies, told WorkCompCentral that in the current system the voucher can be included as part of the terms of a compromise and release agreement, so the retraining benefit is essentially “just money on top.”
Which is why I say why not just cut the charade. Forget about the voucher. It's just another layer of administrative burden and expense. Just throw the money that would be used for vouchers into the general indemnity pot and increase the payouts overall.
Realistically I very much doubt many of these voucher dollars are actually used for retraining or education. I have not seen any studies to verify or refute that statement, but my nearly 30 years of experience in this industry tells me that I'm probably correct. So overall, the fiscal impact is minimal and likely not a real concern.
The political impact however carries much more value. We know that the Brown Administration is on a tear to build a reform measure and in order to get that accomplished before the end of this legislative session there needs to be a bill pending that can be amended and passed up to the governor's desk.
The value of AB 1145 lies in its pendency state.
Jesse Ceniceros, president of Voters Injured at Work, told WorkCompCentral that Cedillo has already offered AB 1145 as a vehicle for reform language.
The "reform" script has already been written: 1) increase in PD benefits; 2) constriction on lien claims; 3) copy service fee regulation. The only thing holding back amendment of AB 1145 is the exact production language of "reform".
Franzoia said in his analysis of AB 1145 that the “data necessary to determine whether eliminating the tiered rates and implementing one rate would increase or decrease annual costs” of the benefit for public or private workers “remains elusive.”
The data regarding liens and copy services is elusive too, but that doesn't stop the political bus. It's on a roll - we just don't know exactly where it's going to stop.
But it seems that no one really knows the true value of these vouchers. The State Fund says they average $2,159. The Workers' Compensation Insurance Rating Bureau says the average is about $6,000 - at least according to an analysis by Bob Franzoia, a consultant to the Committee.
Mark Sektnan, president of the Association of California Insurance Companies, told WorkCompCentral that in the current system the voucher can be included as part of the terms of a compromise and release agreement, so the retraining benefit is essentially “just money on top.”
Which is why I say why not just cut the charade. Forget about the voucher. It's just another layer of administrative burden and expense. Just throw the money that would be used for vouchers into the general indemnity pot and increase the payouts overall.
Realistically I very much doubt many of these voucher dollars are actually used for retraining or education. I have not seen any studies to verify or refute that statement, but my nearly 30 years of experience in this industry tells me that I'm probably correct. So overall, the fiscal impact is minimal and likely not a real concern.
The political impact however carries much more value. We know that the Brown Administration is on a tear to build a reform measure and in order to get that accomplished before the end of this legislative session there needs to be a bill pending that can be amended and passed up to the governor's desk.
The value of AB 1145 lies in its pendency state.
Jesse Ceniceros, president of Voters Injured at Work, told WorkCompCentral that Cedillo has already offered AB 1145 as a vehicle for reform language.
The "reform" script has already been written: 1) increase in PD benefits; 2) constriction on lien claims; 3) copy service fee regulation. The only thing holding back amendment of AB 1145 is the exact production language of "reform".
Franzoia said in his analysis of AB 1145 that the “data necessary to determine whether eliminating the tiered rates and implementing one rate would increase or decrease annual costs” of the benefit for public or private workers “remains elusive.”
The data regarding liens and copy services is elusive too, but that doesn't stop the political bus. It's on a roll - we just don't know exactly where it's going to stop.
So I say that "reform" proponents may as well include in the script eliminating vouchers and throwing that money into the PD pot as well. Liens, copy services and vouchers - should be enough there to justify an increase in indemnity.
Monday, June 25, 2012
Ruttiger Highlights Dispute Resolution in Comp
The issue of liability for bad faith claims management practices in Texas has been going back and forth for some time, with the latest salvo in favor of carriers when the Texas Supreme Court ruled against Timothy J. Ruttiger in favor of Texas Mutual on Friday.
This case has been followed closely by Texas workers' compensation professionals because of its far ranging implications, and the fact that it has yo-yo'd from side to side through the courts.
Ruttiger sued after he was denied workers’ compensation benefits for a hernia he claimed he suffered when lifting heavy objects at work. Texas Mutual decided to investigate the claim after Ruttiger's boss, who initially signed his claim, later told the insurer she had heard Ruttiger suffered the injury playing softball.
An adjuster denied the claim – allegedly without adequately investigating it.
Ruttiger was awarded damages by the trial court for bad faith practices. The appellate court affirmed the judgment, but the Supreme Court on Friday reversed the appeals court and rendered judgment that Ruttiger take nothing.
The court majority concluded that claims against workers’ compensation carriers for alleged unfair claim handling practices can’t be brought under the Insurance Code – and that legislative change to the workers’ compensation system in 1989 had eliminated the common law right to sue for bad faith.
This is the second time the parties have been to the Supreme Court. In August 2011, the Supreme Court reversed the appeals court decision and rendered judgment that Ruttiger take nothing on his Insurance Code and Texas Deceptive Trade Practices Act claims. But the court also remanded the plaintiff's common law good faith and fair dealing claims to the Houston Court of Appeals for further consideration.
Both sides requested a rehearing, suggesting the court consider more fully whether the 1989 overhaul of the workers' compensation system "eliminated the need for" a common law cause of action for breach of the duty of good faith and fair dealing.
The Court did - finding that the 1989 changes afforded much more administrative protection to injured workers than existed under prior law:
The Court makes note that the failure of a carrier to comply with the deadlines and reporting features found in the Workers' Compensation Act are not with out consequences, noting the various administrative penalties that attach and start accumulating with various claims administration failures:
Ruttiger's attorneys affirmed to WorkCompCentral that they are going to request another rehearing before the Supreme Court, but they did not provide any further comment beyond that. The fact that the Court was split so evenly in its decision (5 to 4) would give Ruttiger sufficient confidence to try one more time - just convincing one justice to change minds could mean that policing carrier claims behavior would inure to the benefit of the claimant rather than the state.
The dissent by Chief Justice Wallace Jefferson (joined by three other justices) said that because the Legislature has not made the Workers’ Compensation Act “exclusive with respect to extra-contractual claims, I would not eliminate Ruttiger’s claims and would affirm the appeals court's judgment.”
Jefferson states:
The Ruttiger case turns exclusively on state law but is interesting because it highlights the tension between injured workers and gatekeepers that is inherent in workers' compensation. While it is a benefit delivery system, with "rights" and "liabilities", dispute resolution is a key element and often times becomes more of the focus than the rectification of injury.
This case has been followed closely by Texas workers' compensation professionals because of its far ranging implications, and the fact that it has yo-yo'd from side to side through the courts.
Ruttiger sued after he was denied workers’ compensation benefits for a hernia he claimed he suffered when lifting heavy objects at work. Texas Mutual decided to investigate the claim after Ruttiger's boss, who initially signed his claim, later told the insurer she had heard Ruttiger suffered the injury playing softball.
An adjuster denied the claim – allegedly without adequately investigating it.
Ruttiger was awarded damages by the trial court for bad faith practices. The appellate court affirmed the judgment, but the Supreme Court on Friday reversed the appeals court and rendered judgment that Ruttiger take nothing.
The court majority concluded that claims against workers’ compensation carriers for alleged unfair claim handling practices can’t be brought under the Insurance Code – and that legislative change to the workers’ compensation system in 1989 had eliminated the common law right to sue for bad faith.
This is the second time the parties have been to the Supreme Court. In August 2011, the Supreme Court reversed the appeals court decision and rendered judgment that Ruttiger take nothing on his Insurance Code and Texas Deceptive Trade Practices Act claims. But the court also remanded the plaintiff's common law good faith and fair dealing claims to the Houston Court of Appeals for further consideration.
Both sides requested a rehearing, suggesting the court consider more fully whether the 1989 overhaul of the workers' compensation system "eliminated the need for" a common law cause of action for breach of the duty of good faith and fair dealing.
The Court did - finding that the 1989 changes afforded much more administrative protection to injured workers than existed under prior law:
The 1989 amendments and the current Act provide significantly more meaningful
proceedings at the administrative agency level so as to reduce the number and cost of judicial trials,
speed up the time for the entire dispute resolution process, and facilitate interlocutory payment of
benefits pending final resolution of disputes. To achieve these purposes the amended
Act contains detailed procedures and penalties for failures of the various interested parties to comply
with statutory and regulatory requirements.
The Court makes note that the failure of a carrier to comply with the deadlines and reporting features found in the Workers' Compensation Act are not with out consequences, noting the various administrative penalties that attach and start accumulating with various claims administration failures:
A carrier’s failure to comply with the Act’s requirements, deadlines, and procedures is not
without consequences. First, the Act specifies administrative violations both in particular sections
and in a general, catchall provision. For example, if a carrier fails to initiate compensation or notify
the WCD of its refusal to do so within fifteen days of receiving notice of injury, it is an
administrative violation subject to monetary penalties up to $25,000 per day. Id. §§ 409.021(e),
415.021. The Act also provides that a carrier or its representative commits an administrative
violation for any of twenty-two specified actions, including failing to process claims promptly and
in a reasonable and prudent manner, controverting a claim if the evidence clearly indicates liability,
and failing to comply with the Act. Id. § 415.002(11), (18), (22). If a carrier refuses or fails to
comply with an order of the WCD, either interlocutory or final, or a decision of the commissioner,
within twenty days of when the decision or order becomes final, it commits an administrative
violation. Id. § 410.208(e). Also, both the WCD and claimant are specifically authorized by the Act
to file suit to enforce the order and recover attorneys’ fees. Id. § 410.208(a)–(c). A claimant who
brings suit is entitled to recover 12% of the amount of benefits recovered in the judgment as a
penalty. Id. § 410.208(d).
Ruttiger's attorneys affirmed to WorkCompCentral that they are going to request another rehearing before the Supreme Court, but they did not provide any further comment beyond that. The fact that the Court was split so evenly in its decision (5 to 4) would give Ruttiger sufficient confidence to try one more time - just convincing one justice to change minds could mean that policing carrier claims behavior would inure to the benefit of the claimant rather than the state.
The dissent by Chief Justice Wallace Jefferson (joined by three other justices) said that because the Legislature has not made the Workers’ Compensation Act “exclusive with respect to extra-contractual claims, I would not eliminate Ruttiger’s claims and would affirm the appeals court's judgment.”
Jefferson states:
The exclusivity provision of the new Act provides that “[r]ecovery of workers’ compensation
benefits is the exclusive remedy of an employee covered by workers’ compensation insurance
coverage . . . against the employer . . . [for] a work-related injury sustained by the employee.” TEX.
LAB.CODE § 408.001 (emphasis added). This clause thus emphasizes two important aspects of the
old law: (1) it provides that workers’ compensation is exclusive only with respect to the employer,
and (2) it retains the distinction, important to our decisions in Aranda and Marshall, between a
“work-related injury” and an injury caused by a carrier’s misconduct. See id. A logical inference
from this provision, which bars claims against employers, isthat claims against carriers mayproceed.
Indeed, Aranda, analyzing the old Act’s exclusivity provision, recognized exactly this, holding that
the injury alleged in a common law suit is wholly separate, both conceptually and temporally, from
the job-related injury to which the exclusivity provision, and the workers’ compensation system as
a whole, applied. Aranda, 748 S.W.2d at 214 (“Injury from the carrier’s conduct arises out of the
contractual relationship between the carrier and the employee and is sustained after the job-related
injury.”).
The Ruttiger case turns exclusively on state law but is interesting because it highlights the tension between injured workers and gatekeepers that is inherent in workers' compensation. While it is a benefit delivery system, with "rights" and "liabilities", dispute resolution is a key element and often times becomes more of the focus than the rectification of injury.
Friday, June 22, 2012
CA State Fund: Good Business, Good for CA
The California State Compensation Insurance Fund is on a tear under new Chief Executive Officer, Tom Rowe, completely restructuring its business model becoming much more market competitive, and in my opinion serving its main customer base - the state's small businesses - much, much better.
Yesterday the State Fund announced a tiered rating structure for policies beginning or renewing on or after Sept. 1.
The new rating program will have three tiers, designated from best to worst as “A,” “B” and “C” that they believe will more closely reflect a particular business' experience and risk profile.
This will tremendously benefit California's small businesses, most of which must insure through the State Fund because their premium base is too small to interest private carriers. For small employers with no other option for coverage, State Fund’s tiered rating structure means they will not be subsidizing the risks of poorer performers through higher premiums.
Presently most State Fund policyholders don't pay enough in premiums to qualify for an experience modifier, and because State Fund currently has a narrow pricing range, based on an average of the policyholder’s risk profile and claims experience, employers who have fewer claims pay higher premiums to subsidize the costs associated with the policies of employers with poorer safety experiences.
Jennifer Vargen, senior vice president of marketing and communications for State Fund, says that some employers will see premium increases, and some will see decreases, but most won't be particularly affected - however those with poor risk records could be encourage under the new system to do more for safety. This makes it better for everyone.
And just Wednesday it was reported that insurance brokers will have to meet a premium threshold of $100,000 with the California State Compensation Insurance Fund to maintain a direct contract with the carrier. This will provide significant cost savings to the State Fund because it will make it easier to administer contracts and provide support services to producers, such as providing underwriting manuals or answering questions about policies.
The average policy size for the State Fund is only about $2,000. Requiring a minimum premium threshold means that smaller producers will either need to aggregate or refer their customer to State Fund's direct policy system.
In December, State Fund announced that it was reviewing requests for proposals to develop and manage a network of investigators. State Fund spokeswoman Gina Simons said in an email last year that the investigator network would “standardize the investigative work of outside vendors employed by State Fund, therefore increasing core effectiveness and efficiency.”
And the State Fund has been in the news these past 12 months with downsizing, shedding 1500 jobs, and shuttering excess real estate.
In 2010, State Fund allowed producers to take over its direct business through broker-of-record changes. State Fund also said it will allow brokers to issue proof-of-coverage certificates on their own.
All in all, State Fund's restructuring and change in operations is good for business, and good for California.
Yesterday the State Fund announced a tiered rating structure for policies beginning or renewing on or after Sept. 1.
The new rating program will have three tiers, designated from best to worst as “A,” “B” and “C” that they believe will more closely reflect a particular business' experience and risk profile.
This will tremendously benefit California's small businesses, most of which must insure through the State Fund because their premium base is too small to interest private carriers. For small employers with no other option for coverage, State Fund’s tiered rating structure means they will not be subsidizing the risks of poorer performers through higher premiums.
Presently most State Fund policyholders don't pay enough in premiums to qualify for an experience modifier, and because State Fund currently has a narrow pricing range, based on an average of the policyholder’s risk profile and claims experience, employers who have fewer claims pay higher premiums to subsidize the costs associated with the policies of employers with poorer safety experiences.
Jennifer Vargen, senior vice president of marketing and communications for State Fund, says that some employers will see premium increases, and some will see decreases, but most won't be particularly affected - however those with poor risk records could be encourage under the new system to do more for safety. This makes it better for everyone.
And just Wednesday it was reported that insurance brokers will have to meet a premium threshold of $100,000 with the California State Compensation Insurance Fund to maintain a direct contract with the carrier. This will provide significant cost savings to the State Fund because it will make it easier to administer contracts and provide support services to producers, such as providing underwriting manuals or answering questions about policies.
The average policy size for the State Fund is only about $2,000. Requiring a minimum premium threshold means that smaller producers will either need to aggregate or refer their customer to State Fund's direct policy system.
In December, State Fund announced that it was reviewing requests for proposals to develop and manage a network of investigators. State Fund spokeswoman Gina Simons said in an email last year that the investigator network would “standardize the investigative work of outside vendors employed by State Fund, therefore increasing core effectiveness and efficiency.”
And the State Fund has been in the news these past 12 months with downsizing, shedding 1500 jobs, and shuttering excess real estate.
In 2010, State Fund allowed producers to take over its direct business through broker-of-record changes. State Fund also said it will allow brokers to issue proof-of-coverage certificates on their own.
All in all, State Fund's restructuring and change in operations is good for business, and good for California.
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