Archive for August, 2005

A Beautiful Mind Heads to Prison

Thursday, August 11th, 2005

There are many demanding activities in life that come with a wide margin of error — parenting, for example. For most of us, a few moments of inattention at work will not result in any serious consequences (as long as we are not performing brain surgery, or installing steel beams 30 stories off the ground). But one of the least forgiving activities in our busy lives is driving. Here, a moment of inattention (an animated conversation on a cell phone) can be disastrous. The risks of driving, considerable at any time, are magnified a thousand fold when people drive under the influence of alcohol.
We have blogged a number of driving catastrophes, where highly successful and productive individuals have ruined their lives (and the lives of others) by driving drunk. Now, in an article by Steve Chawkins in the Los Angeles Times, we read of a Nobel laureate in physics, John Robert Schrieffer, who faces prison time for slamming into a van at more than 100 mph last year, killing one passenger and injuring seven others in Santa Maria, Calif.
Schrieffer won the Nobel Prize in 1972 when he was just 26, for a theory he helped formulate that explained superconductivity

Jockeying for a Safer Workplace

Wednesday, August 10th, 2005

You may think your job has some hazards, but I would guess these risks pale beside the dangers of riding a thoroughbred horse. We all think of jockeys as the vertically challenged masters of very impressive creatures, which indeed they are. An average thoroughbred weighs about 1,100 pounds. The jockey trying to control him is not allowed to tip the scales in the buff above 111 pounds.
Jockeys have been trying to improve their working conditions since the 1940s, when a few riders led by the legendary Eddie Arcaro and Jonny Longden met in secret to develop a strategy. Their clandestine efforts led to the formation of the Jockey’s Guild — for an extensive and fascinating history, check out their website. You will learn that the legendary Bill Shoemaker retired in 1990, only to suffer a terrible auto accident in 1991, which left him paralyzed. The cause of the accident? Reaching for his cell phone!
The fate of jockeys is a state by state issue. New York seems to have led the way, creating a special fund to cover work-related injuries for jockeys racing at New York tracks. It’s funded by a small flat fee ($420 a year paid by owners and trainers), a stall fee, and a percentage of winner’s purses capped at $2,000. New Jersey, Maryland and California have followed suit, addressing not only workers comp coverage, but safety related issues as well. The Guild fought for and achieved a universal safety standard that requires helmets and padded vests for jockeys.
If you think that the legendary horse racing state of Kentucky is in the vanguard of protecting jockeys, think again. The Blue Grass state has yet to solve the problem of comp coverage for jockeys. The Jockeys want owners and racetracks to foot the bill for expanded workers

Insurance industry scandal watch

Tuesday, August 9th, 2005

Joe Paduda has been doing so much heavy lifting in his diligent tracking of the many investigations into insurance wrongdoing that we are thinking he may need to change his blog name to “Scandal Central.” It’s almost like one of those whack-a-mole carnival games – new developments seem to keep popping to the surface daily.
Today, Joe reports on a guilty plea filed by an underwriter from a Liberty Mutual subsidiary who was submitting unattractive bids to Marsh McLennan. This enabled the broker to steer clients to insurers with the best commissions.
Yesterday, Joe reported on similar charges being levied against Arthur Gallagher & Co, the offshoot of a probe into practices involving several large public entities, an investigation that Florida’s Attorney General says may involve bid rigging. This follows on the heels of other Florida problems that surfaced in Broward County involving Gallagher Bassett and Corvel.*
Last Friday, Joe blogged about 14 insurance execs from Marsh, AIG, and Zurich who pled guilty to various charges in the Spitzer investigations.
He’s also recently updated the Ohio coingate developments, a many-headed hydra of scandal that is now ensnaring Governor Taft. Some other problems have been bubbling to the surface with the Ohio Bureau of Workers Compensation, too, in the form of unusual markups paid to servicing hospitals.
A collective black eye
Whether we want to or not, all of us who work in the industry have front row seats to these sorry spectacles since they involve some of the industry “leaders.” As an industry, we will be years restoring good faith with clients. And though I have no sympathy for the malefactors, I do feel badly for some of the decent, conscientious workers in the scandal-riddled firms. If things follow the patterns of other recent corporate scandals, a few bigwigs may or may not be called to account, but the real price may well be paid by the hundreds, if not thousands, of honest workers when the inevitable job reductions and reorganizations ensue.
Many of these firms were the trusted vendors that employers turned to as stewards of their loss experience and as watchdogs for fraud. Ironically, while the back door was being guarded by pit-bulls to prevent a few wayward employees from making off with the piggy bank, the front door was wide open so the serious thieves could saunter off with the safe.
The bottom line: caveat emptor
We’ve long been proponents of the idea that employers need to be active, savvy buyers and managers of their workers comp programs, but never more so than now. For most employers, workers comp is not simply a matter of dollars and cents (although that is reason enough to pay attention), it is also a matter of employee relations and reputation management. When hiring vendors to assist in these matters, we’ve always encouraged employers to buy for quality, not for price, but the fact that these scandals are tarnishing some of the “quality” names in our industry says that employer scrutiny doesn’t reach deep enough. And, for the most part, we aren’t talking about the mom and pop employer here – many of the employers who were gouged are large corporations with legions of lawyers and accountants. It sure looks like it’s time for buyers to step up due diligence in the “trusted vendor” selection process.
*edited on 8/10. The second news item dealt with Gallagher Bassett, not Arthur Gallager & Co.

Workers Comp and The Health Insurance Void

Monday, August 8th, 2005

Our co-blogger (is that the term of art?) Julie Ferguson mentions the latest Robert Wood Johnson Foundation report (PDF) on the status of the uninsured in America. We suspect that there is a strong correlation between the costs of workers compensation and the prevalence in the workforce of workers who lack health insurance. The latest study shows that at least two of the really high cost states for comp, Texas and Florida, also have far above average percentages of workers who lack health insurance (26% and 20% respectively).
The Obvious
The report finds that adults who lack health care coverage are more likely to not see a doctor when needed due to cost than adults with coverage. I’m not looking for an “amen!” here — a simple “duh!” will suffice. It seems pretty clear that adults without health insurance will postpone treatment as long as they can. They will try to ignore symptoms. Perhaps most important, they are unlikely to work with a doctor to develop a concrete strategy to enhance their own health over time. Faced with the same problems we all face — depression, bone loss, sleep disorders, etc., — they are far more likely to muddle their way through rather than pay a doctor’s examination fee out of pocket. Until they drag themselves into an emergency room, the benefits of modern medicine and pharmacology are simply beyond their reach.
The report goes on to say that adults who lack health care coverage are more likely to report poor or fair health than adults with coverage. Here the percentages are a bit surprising: 20.4 per cent of the uninsured report fair to poor health, compared to 11.7 per cent for the insured. I would have expected the pessimism among the uninsured to be higher. It’s a tribute to their determination and optimism that 80% of the uninsured think they are in good health.
Workers Comp Implications
As health costs go up, more and more employers are pulling out of the system. The expense is just too great. Or they ask employees to pick up more of the burden — not just in the premiums, but in the co-pays for office visits and medications. By contrast, workers comp benefits stand out like the proverbial sore thumb. No premiums for the employee. No co-pays and no deductibles, ever. On top of that, employees can collect indemnity benefits for time away from work. It’s a good deal, and it looks better every day as the cost of conventional health insurance shoots upward.
Here’s one more point of convergence between rising health care costs and workers comp. Regardless of the optimism demonstrated by the uninsured in this report, workers lacking health insurance are more at risk for poor health. In avoiding the health care system, in ignoring symptoms, they are at constant risk for deteriorating health. They bring these problems to work, where they are at higher risk for injury because their non work-related symptoms are not being addressed. Here we have a prescription for trouble that is all too common in the American workplace. Until we solve the health coverage conundrum, there is the distinct possibility that, by default, workers comp will end up footing the bill for the unaddressed health problems of the uninsured.

Tools & tips: e-mods, fleet control, HR, and more

Saturday, August 6th, 2005

Today, a smorgasbord – the weekend is a good time to clean my bookmark file of a variety of tips and tools that I’ve been collecting:
Experience Modification FactorsUnderstanding the Workers Compensation Modification Factor is a good 3-page overview of the factors that drive an e-mod. Also of note, Top Ten Ways to Reduce a Mod – the most frequent reader responses to a survey conducted by Specific Software Solutions.
Fleet Control – The LWCC (the Louisiana Workers Compensation Corporation) notes that vehicle accidents are the state’s leading cause of workplace fatalities – this is acutally pretty much true regardless of geography. The folks at LWCC have compiled a useful sheet of Fleet Control Tips designed to help employers reduce risk.
HR Weblogs – We’ve unearthed a few notable HR weblogs to add to our sidebar. HR’s Brand New Experience by Regina Miller explores the relationship of HR practices and branding. We’re interested in this topic because we believe the way that employers treat employees has an enormous impact on how the company is perceived in the marketplace. This blog is part of the BNet family of business weblogs which also include our friend, Anita Campbell. And we

Independent Contractors: The Solution is a Problem

Thursday, August 4th, 2005

The Insider is intrigued with the issue of independent contractors. Some might say we are obsessed. Truth is, in the ever changing world of business, with conventional definitions being challenged every day, yesterday’s straight-forward distinction has become today’s ambiguity.
Take the case of Michael Rowe, outlined by Andi Esposito in the Worcester Telegram and Gazette (PDF file — and in the interests of full disclosure, the Insider is quoted in this piece). An entrepreneur, Rowe started his business, Claims Outsource, Inc., to help insurance companies handle over-flow claims. He secured the services of 50 independent contractors who, working from home on their own schedules, handled claims passed from the insurer, to Rowe, to the contractor. Rowe thought it was a good solution to an old problem. Unfortunately, he ran into a new solution to another problem, which resulted in the abrupt demise of his business.
When work slowed down, one of Rowe’s “independents” filed for unemployment insurance. At the hearing, Rowe asserted that all the claims handlers were truly independent. But the examiner determined that the attorney general’s new criteria for independence were not met. So Rowe was slammed with a retroactive bill for $56,000 for unemployment insurance. Stunned and defiant, he shut the business down.
Thus far, Rowe’s only problem is unemployment insurance. I wonder what will happen if one of his contractors decides to file a workers compensation claim for an “on the job” injury. Then he will be faced with an additional bureaucratic nightmare, this time involving failure to cover “employees” for work-related injuries.
Nationwide Problem
The tightening of criteria for independence is well-motivated. States are tired of footing the bill for injured subcontractors at construction sites, where no one seems to work for anyone else, but the house gets built nonetheless. In trying to force insurance and benefit coverage deeper into the construction world, Massachusetts has cast a very wide net that is pulling in entrepreneurs like Rowe, who is not really trying to deceive anyone. Rather, he is pursuing a flexible business model that just happened to run into a buzzsaw on the compliance side.
Neighboring state Rhode Island has tried to solve the subcontractor dilemma in a different way. They require “independent contractors” to sign a form self-certifying that they are indeed independent. I thought that sounded like a good approach, until I heard from an investigator in Tennessee, which has a similar program. According to the investigator, general contractors abuse the system by forcing their subs to sign the documents, even though they are not truly independent. Every solution, it seems, triggers unintended consequences.
The beleaguered Mr. Rowe points angrily to FedEx drivers, who are classified as ‘Independent contractors.” If his handful of at-home claims consultants are employees, then FedEx drivers are employees, too. He is right, of course, but it’s an argument that won’t solve his problem. A little guy facing enormous financial liabilities, he’s already thrown in the towel. The big guys such as FedEx have plenty of legal clout. They are prepared to fight the battle one court room at a time, and then appeal and appeal, all the while delaying any ultimate losses while they pursue their merry — and profitable — ways.

BP: Still Not Safe!

Tuesday, August 2nd, 2005

We recently gave BP credit for exercising some prudent damage control following the major explosion in March that killed 15 people and injured hundreds in Texas City. But when companies are forced to go into damage control mode with any frequency, it cannot bode well for their stability — or for the safety of their workers. We read in the County News of Galveston TX (the oldest newspaper in that state and worth perusing in and of itself) that the BP plant experienced yet another explosion on July 28. This time, fortunately, no one was hurt.
Wrong Pipe
Members of BP

The Costco story: good employers get good results

Monday, August 1st, 2005

Early in my working life, I was employed for a local plastics manufacturer. Among my responsibilities, I was charged with the happy task of planning an annual recognition dinner for longterm employees. It was a big event because we had many 15-, 20-, and 25-year veterans in the work force. Sadly, the concept of longterm employment seems almost quaint today, but at that time, it was held in high regard by both employers and employees alike.
The employment landscape has changed considerably over the last two decades. By and large, neither employers nor employees seem to have much loyalty to each other today. The influence of Wall Street has been corrosive. With companies facing intense pressure to maximize each quarter’s results, many have found that mass layoffs and outsourcings have met with approbation in the form of a few penny gain in stock price. This tendency to immediate gratification has had other negative consequences on the business climate, as well. It appears that at least a few business executives may have sufficient time to meditate on these matters from the privacy of their jail cells.
Breaking away from the herd
It’s a breath of fresh air to read a business success story about Costco, a retail company that is bucking this trend, and its forward-thinking CEO, Jim Sinegal. In a New York Times article entitled How Costco Became the Anti-Wal-Mart, Steven Greenhouse reports on how the company