Archive for March, 2007

DWT/Driving While Texting: An Idea Whose Time has Went

Friday, March 16th, 2007

As if we don’t have enough distractions as we hurtle ourselves from Point A to Point B in four ton vehicles, we read that DWT – driving while texting – has become an issue of sufficient magnitude to warrant legislative intervention. Lawmakers in Washington state have moved to establish stiff fines for this absurdly dangerous practice. You can make a case that a vehicle can be operated safely while the driver talks on a cell phone – preferably with a head piece – but no case can be made for safe driving while the operator’s eyes are actually focused on the mobile device. Texting, like alcohol, does not go with driving.
Dying to Text
Which brings us to the sorry tale of Lucas Rolin. Lucas may be the first person in this country to die while texting. State troopers believe that he lost control of his pick up truck while trying to send a message. It was the last thing he ever did. A memorial established by family and friends can be found here. In England, we read about Marni Triggs, of Rousham Road in Tackley, who died after her Peugeot 205 swerved into the path of a truck. The coroner mentioned evidence that Miss Triggs’ phone had been receiving and sending text messages just before the crash.
As with a number of other safety issues, the UK is ahead of us on this particular unsafe practice. Drivers caught texting are subject to $100 fines plus 3 points on the driving record. In South Wales, it’s far more severe. You can be fined a whopping $1,800 for texting while driving. That’s a lot of money for a little (and presumably trivial) message.
A Criminal and Negligent Act?
Here’s the part that should get the attention of every employer with employees on the road. Police in England will routinely obtain mobile phone records of drivers involved in serious or fatal road accidents. The use of a phone during an accident may be regarded by the courts as an aggravating factor in the same way as drunk driving. It may result in jail time for the employee. And employers may pay through the legal theory of negligent entrustment: by allowing employees to text while driving, the employer made the accident possible. UK employers have been advised to prohibit cell phone talk for employees who are on the road. That’s an extreme measure and one that might seem impractical, but there’s no denying the potential exposure.
For employers who have already gone to the trouble of issuing policies on cell phone use while driving, a modification of the policy is in order, explicitly prohibiting the sending of text messages while driving. That may seem like something from “Department of Duh,” but given that written policies are a key part of the discovery process in determining negligence, the language is now needed. Be forewarned.

Cavalcade of Risk #21

Thursday, March 15th, 2007

Rita Schwab of MSSPNexus hosts the latest version of Cavalcade of Risk – it looks to be the biggest issue ever. I haven’t gotten all the way through it yet, I am hung up on the first two articles that focus on the risks for corporate bloggers!
After you’re done digesting Cavalcade postings, you might want to poke around a bit on MSSPNexus, a blog directed at medical Staff Service Professionals. Just in case you are as unfamiliar with that term as I was, here’s a description of the the role that MSSPs play in health care and here’s a another post where Rita adds more information about the MSSP role. While MSSPs may not have a prominent public profile, they are vital members of any health care team.

Hank in the Tank

Tuesday, March 13th, 2007

Let’s sidestep for a moment the momentous reforms in New York’s workers comp system, and focus instead on some big names in the Big Apple. When Elliott Spitzer began running for governor, he had a long list of people who would never vote for him. AGs make a lot of enemies. At the top of the list, perhaps, was Maurice “Hank” Greenberg, whose long tenure at AIG came to an abrupt end after some spade work by Spitzer and his staff. To add insult to family injury, Greenberg’s son was ousted from Marsh & McLennon after a similar investigation. We can assume that the Greenberg’s money was on “anyone but Elliott.”
Having just conquered the comp demons, Spitzer now finds himself going after another behemoth: New York’s bloated, expensive, and all-too-often incompetent hospital system. Spitzer wrote a letter to hundreds of hospital trustees arguing that “New York’s health care system is broken” and that “New Yorkers pay far too much and get far too little in return” for health care. (Read the letter here.)
If Spitzer ever meets with the hospital folks for a friendly chat, he might well find himself with his favorite beverage in the Greenberg Pavilion of the Cornell-Weill Medical Center on Manhattan’s East Side. That’s “Weill” as in Sandy Weill, another of Spitzer’s targets and “Greenberg” as in Hank Greenberg himself. Greenberg father and son are trustees of New York-Presbyterian Hospital, and one can only imagine their response upon receiving a letter from Mr. Spitzer, in which the governor asks them to “join me as a partner.” I wouldn’t drink anything from that glass, Elliott!
In the Tank
Since his forced retirement from AIG, Hank has not “gone gentle into that good night.” That’s hardly his style. Greenberg continues to churn out positive PR, as should any member in good standing of the Forbes billionaires. In a fascinating article in the Boston Globe by Peter J. Howe, we read that Greenberg engaged the services of an academic spin-control company called eSapience, one of whose senior executives is Richard Schmalensee, the dean of MIT’s prestigious Sloan School of Management. Alas, eSapience finds itself having to sue Hank for failure to pay a two million dollar bill. Chump change for Hank, perhaps, but he probably didn’t get where he is by paying all of his bills.
The suit, filed in US District Court in Boston, exposes the inner workings of academic public relations. It isn’t pretty. Schmalensee charges up to $1,000 an hour to meet with industry leaders at New York power lunches. He and eSapience executives even set up a new think tank, the Barbon Institute, specifically to provide an objective-sounding and credible platform for Greenberg to give the keynote address – at the St. Regis, no less. (Gee, they could have called it the Barbery Institute, in honor of the infamous pirates, or perhaps the Bourbon Institute, in honor of the social drinking that’s built into the eSapience tab.)
The website for the Barbon Institute has disappeared, but a related link reveals the subject matter of the custom-built platform for Greenberg: September 15, 2006, Barbon Institute, The Role of Insurance and Management of Risk in the 21st Century, New York, NY. That’s a bit global for the typical academic, but a softball down the middle for Greenberg.
Academic Integrity…For a Price
On its website, eSapience describes itself as not merely a public relations firm, but “a new media and research entity that shapes the debate on issues that intersect law, economics, and policy” through “a global network of academics and other public intellectuals.” In other words, their contribution to spin control is adding an academic veneer. They make you look good by packaging you and your issue in an academic robe. Yecch!
The lawsuit reveals some spicy details of their work with Greenberg. eSapience was trying to line up a New York Times journalist who might be inclined to write an article “sympathetically portraying ” Greenberg’s side of his legal battle with Spitzer. No such article was ever published – I guess Judith Miller was tied up with other issues. Nonetheless, it’s inspiring to know that the effort was made.
eSapience ran up bills approaching $1 million a month. The hefty charges “reflected the level of detail, sophistication, and status necessary to present Greenberg in the best light and to assure the presence and participation of key intellectual and public figures” at the events where he was invited. When you cut through the academic jargon, they’re basically saying that Greenberg had a rotten image, so they had to grease a lot of palms to make him look good. Nice job, fellas. Now all you have to do is figure out how to collect your fees.
So here we have the best minds in academia against the street smart, tough-as-nails Greenberg. Maybe they should bring in an arbitrator and find a quiet corner of the Greenberg Pavilion to work out their differences. No matter where they do the talking, and as much as I respect the brilliant professors, my money is on Greenberg.

News roundup: Drugs, teens, transportation, police fatalities, Iraq contractor fatalities

Tuesday, March 13th, 2007

Cool tools: Drug Digest – We’ll be adding Drug Digest to our sidebar’s Cool Tools. The site bills itself as “the most comprehensive source of noncommercial, evidence-based, consumer-oriented drug information on the Internet.” It’s designed as a consumer information tool to provide reference materials on drugs, vitamins, breakthrough medical research, and state-of-the-art disease management. It includes a variety of useful tools, including an drug interactions database for checking potentially harmful drug interactions, a tool for checking side effects, and a generic equivalence tool for finding out if a less expensive generic version of a drug is available. It’s worth a bookmark!
Survey: employers shirking teen safetyOccupational Hazards reports on a survey in the March 1 issue of Pediatrics on the dangers in teen jobs. The survey queried 928 teenage workers, finding that many are exposed to a variety of risks, and that many employers are in violation of child labor laws. Further, about one-third of the participating teens reported that they had not received any safety training. According to an abstract of survey results:

“Thirty-seven percent of those under age 16 reported working after 7 PM on a school night, indicating employer violation of federal law. Teens typically perform multiple kinds of tasks in a given job. Higher proportions of females than males are involved in cash handling (84% vs 61%), whereas males are more likely than females to be involved in physically challenging tasks, such as lifting heavy objects (57% vs 22%) or working at heights (35% vs 17%). Despite federal regulations prohibiting teens under 18 from using certain types of dangerous equipment (eg, slicers, dough mixers, box crushers, paper balers) or serving or selling alcohol in places where it is consumed, 52% of males and 43% of females reported having performed prohibited task.”

How safe are your favorite kids on their new jobs?
Employers: Ten Tips to Keep Teen Workers Safe
The moral mandate of protecting young workers
ASSE focuses on transportation safety – According to the American Society of Safety Engineers (ASSE), transportation incidents continue to be the number one cause of on-the-job deaths each year in the U.S. In 2004, 2,460 work fatalities were transportation-related, with 1,374 being roadway related. To highlight this important issue, ASSE has issued a special newsletter focusing on traffic safety with information compiled by ASSE’s Transportation Practice Specialty. Lost of good resources – here’s a sampling of the articles:
Effective Driver Training Programs: Your Ticket to Cost Savings & Effective Risk Management
Shop Safety Checklist for Vehicle Maintenance Facilities
Safe Vehicle Operations Programs
Police fatalities – In 2006, there were 151 federal, state and local law enforcement officers killed in the line of duty.Traffic-related incidents were the leading cause of death (73), followed by shootings (54). California had the most fatalities with 17, followed by Virginia with 10, New York and Texas which both lost nine, and Florida and Illinois with eight each.
Contractor deaths in Iraq top 750 – In January, we wrote about workers compensation and independent contractors in Iraq. We’ve just found another article shedding further light on private contractor deaths and casualties. (L.A. Times – free registration is required). According to the article:

Nearly 125,000 contractors are now at work in Iraq supporting roughly 135,000 troops, according to the most recent military figures. The ratio is far higher than for any previous U.S. conflict, military analysts say.

More than 750 contractors have been killed in Iraq, according to Department of Labor statistics, and almost 8,000 injured. The figures include Americans, Iraqis and other nationalities employed under U.S. government contracts.

Lessening the risks of sedentary workHR Web Cafe offers an overview of trends in non-traditional seating arrangements as an antidote to sedentary jobs and to lessen the risks of deep-vein thrombosis – ranging from exercise ball “chairs,” standing desks, and treadmill desks.

Workers’ compensation reform in a New York minute

Monday, March 12th, 2007

Well, that didn’t take long. Only 19 days ago we wrote about the profound need for top to bottom reform of New York’s worker’ compensation statute, arguing that the election of Governor Eliot Spitzer provided the best opportunity in more than a decade to accomplish meaningful reform in the state that needed it the most.
Lo and behold, if a legislative bullet train didn’t roar through Albany almost immediately. On March 6, the New York Assembly and Senate unanimously passed identical bills, whisked them through conference, beamed them up through first, second and third readings, and delivered them to Governor Spitzer for signature on March 8. If anyone can tell me of a piece of serious legislation that moved faster and with a better result through a legislature anywhere in America, I’d love to hear of it. It’s as if the Governor waved some Harry Potter wand and dragons died and mountains moved. We should credit Speaker of the Assembly Sheldon Silver and Senate Majority Leader Joseph Bruno for bringing News York’s Business Council and AFL-CIO to the table for a lesson in the fine art of political compromise.
The reform is broad-based and deep. It ratchets up the penalties for employer premium fraud, an allegedly humongous problem, the scope of which has only recently been exposed, and with which the insurance industry takes great issue. (PDF) For the first time, it establishes medical, as well as pharmaceutical, fee schedules that should be very helpful in the future.
What the reform adds to New York’s workers’ compensation statute is worthy and needed, but even more impressive is what the reform kicks to the side of the road.
Gone is New York’s “till the day you die” permanent partial disability, replaced by a disability ranking system that, depending on the level of disability, can last up to ten years. However, there’s a section that allows for conversion to “total industrial disability” in “extreme hardship” when an injured worker is more than 80% disabled. Not exactly what labor and claimants’ attorneys wanted, but certainly as good as they were going to get.
Gone is the paltry maximum weekly temporary total disability payment of $400, replaced by a maximum rate to be phased in over three years, which will equal two-thirds of the average weekly wage in the state, indexed annually. This is still relatively low; I would have argued for the maximum rate to be exactly equal to the average weekly wage in the state. The result achieved, nonetheless, demonstrates the power of the compromise.
Gone is the Special Disability Fund (which, everywhere else in America is called the second injury fund), as of July 1, 2007, just three and a half months from now. Workers may not submit claims for injuries that happen after that date and cannot submit claims for any injuries that happened prior to that date after July 1, 2010. These funds are considered anachronisms by many policy makers, having come into being to assist wounded World War II veterans whose wounds might have made them prone to re-injury when they returned to the work force. Subsequently, they were viewed as employer incentives to hire previously injured workers.
Gone also, if I read the legislation correctly, appears to be the New York Compensation Insurance Rating Board (NYCIRB). Acting as Bureaus do in other states, such as Michigan, Pennsylvania, Massachusetts, etc., the NYCIRB is the insurer-funded organization that collects data, files for rate changes, and represents the insurance industry in workers’ compensation matters in New York. Someone very powerful seems to have it in for Monty Almer, president of the board, and his actuaries and data collectors. The legislation mentions the NYCIRB in two key places, among others. First, the new law gives this charge to the Superintendent of Insurance:

“The Superintendent shall report to the governor, the speaker of the assembly and the majority leader of the senate on or before September first, 2007, on the compensation insurance rating board on matters related to the compensation insurance rating board. Such report shall address, among other matters the Superintendent may deem relevant to the compensation insurance rating board including: (1) the manner in which the insurance compensation rating board has performed those tasks delegated to it by statute or regulation; (2) whether any of those tasks would more appropriately be performed by any other entity, including any governmental agency; and (3) the rate-making process for workers’ compensation.”

Second, in Section 2313, a new subparagraph(s) is added, a poison pill if ever there was one. Apparently regardless of whatever the Superintendent’s “report” says, the new subparagraph(s) clearly states that the NYCIRB can no longer file rates after February 1, 2008, five months after what can only be considered its performance report is delivered:

“The workers’ compensation rating board of New York… shall mean the compensation insurance rating board until February first, 2008, and thereafter such entity as is designated by law.”

“…no rate service organization may file rates, rating plans or other statistical information for workers’ compensation insurance after February first, 2008.”

Ouch! When these passages first appeared in the draft legislation on March 2, 2007, Mr. Almer and the NYCIRB issued a “bulletin” (PDF) reminding insurers, legislators and anyone else who might be listening that the NYCIRB is “a non-profit, unincorporated association of insurance carriers” funded by those carriers to represent their interests in the rate-making process. Neither Mr. Almer nor his bulletin appears to have had the necessary mojo to persuade the legislators to remove the offending passages. One has to wonder how New York’s P&C industry is going to file its rates with the Superintendent of Insurance if the new law says it’s illegal for it to do so. Just who does the governor and legislature think is going to represent the insurance industry? Some “governmental agency,” as is hinted by the legislation?
We should congratulate the groups that came together so quickly to create and put in place this reform legislation. In most cases, it seems an admirable compromise. Folks at the NYCIRB might be excused for thinking otherwise, of course, but you have to hand it to New York politicians. When they take out the long knives, they’re not afraid to use them.
This all bears continued scrutiny.

Get your wonk on

Friday, March 9th, 2007

Grab a coffee and sit yourself down for a spell. Hot off the presses, the 27th edition of Health Wonk Review. This week, it’s hosted by Joe Paduda at Managed Care Matters, capo di tutti capi when it comes to health wonkery.
When you have had your fill of wonkery, mosey on over to check out a few other posts on Joe’s blog. Lately, drugs have been on his mind – probably because he has been putting the finishing touches on his upcoming 4th annual prescription drug management in workers comp. And after attending the recent Pharmacy Benefit Management Institute annual meeting in Arizona, he started wondering how drugs make it on to formularies. He also offers a few fun facts about workers comp drugs, as well as some thoughts on the primary cost drivers.
And while on the topic of health wonkery, we’d like to draw your attention to Health Care Policy and Marketplace Review, which bills itself as “a review of the latest developments in federal health policy and marketplace activities in the health care financing business.” The blog is authored by Bob Laszewski, who Joe Paduda calls “the smartest man in health care policy,” an epithet that his resume would bear out. Check out his recent series of posts on Massachusetts health reform plan and the potential chilling effect it could have on other reform efforts. If you’d like to keep up with his future postings, we’ve added Bob’s blog to our blogroll (say that ten times fast)!

Thar She Blows: Humanitarian Concerns in New Bedford Raids

Wednesday, March 7th, 2007

When the Department of Defense completed its elaborate procurement process for military vests and backpacks, they selected Michael Bianco, Inc. of New Bedford MA. It’s pretty safe to assume that Bianco was the low bidder. They certainly should have been. After all, most of their workforce was comprised of illegal immigrants. Fearing exposure, the workers tolerated sweatshop conditions. Bianco’s low bid was made possible by its severely deflated labor costs.
Yesterday, the plant was raided by immigration officers and police, who rounded up 350 workers (70 per cent of the total workforce). The scene was chaotic: police guarded exits while other officers grabbed fleeing workers and shouted at them to lie on the ground. Several officers drew handguns. Workers trying to exit the building were confronted with bone chilling temperatures…and more police.
Francesco Insolia, the owner of Bianco, was also arrested, along with three of his managers. They also busted Luis Torres, who worked in a music store across the street from the factory and apparently provided fake IDs to some of the workers.
Today we read that as many as 100 children were left stranded after their parents were caught in the round up. One local official calls it an “humanitarian crisis.”
Victimized Victims
Affidavits allege that Insolia preferred to hire illegal immigrants because they were desperate for jobs and willing to put up with atrocious working conditions. He even helped them secure forged identity papers, referring them to vendors who would produce the documents for about $120. As for the working conditions, workers were routinely denied overtime pay, docked 15 minutes for every minute late and fined for talking on the job or spending more than two minutes in the plant’s “squalid” rest rooms. Sure, but at least the vests and backpacks were made in America!
Ironically, the 11 month investigation began with a tip from a disgruntled employee, who was angry that the company had told workers they could leave the building when an immigration raid was taking place at a nearby factory. Hiring illegal workers was clearly a core element of Bianco’s business strategy.
The sporadic raids that round up illegal immigrants are not a serious attempt to tackle the problem. As we’ve pointed out in previous blogs, with approximately 12 million undocumented workers in the country, 350 workers in New Bedford doesn’t even qualify as a drop in the bucket. The raids offer nothing more than symbolism: at last we are “doing something” about the problem.
It is ironic, of course, that poor working conditions become part of the story. Sub-standard conditions? What a shock! We are so concerned about these poor, exploited workers, we’re going to arrest them in one terrifying swoop, clap on the cuffs and, eventually, deport them.
These raids are not motived by humanitarian concerns. This is the politics of immigration, pure and simple. Of course the working conditions are poor. Of course the wages are illegally low. That’s the whole point of illegal workers: they are cheaper than home-grown American labor.
New Bedford’s Whaling Industry
While processing the undocumented workers, I hope the immigration officials take a few moments to visit New Bedford’s lovely whaling museum, operated as a government service. The exhibits are quite compelling. I remember in particular the replica of a whaling boat, where youngsters could squeeze themselves into the tiny spaces allotted to the crew for sleeping. The quarters were located right below the area where barrels of whale oil were stored, so sleeping sailors were often awakened by oil leaking on their heads. Yuk! Intolerable working conditions from another generation altogether. It’s a good thing that those days of exploited labor are so far behind us, isn’t it?

Will Comp Reform Cross the Delaware?

Tuesday, March 6th, 2007

Workers Compensation in Delaware is expensive. According to the Oregon rankings, Delaware has moved from the seventh highest cost state in 2005 to number three in 2006. With reforms well under way in the second highest cost state of California, the only obstacle between Delaware and a (dubious) number one ranking is Alaska. Oh well, they’re almost # 1! You won’t find the state’s chamber of commerce touting this particular distinction.
A glance at the rates for some basic occupations underlines the state’s problem: Carpentry – shop only (class # 2892) runs $17.44 per $100 of payroll, the highest rate in the nation. Machine shop (3632) is $9.11, compared to $3.67 in neighboring Maryland. (Where would you choose to operate your machine shop?) Even the penny ante class of office and clerical (8810) runs $0.89, nearly the triple the rate in Maryland and over five times the Massachusett’s rate of $0.16. These costs add up, minute by minute, day by day, as employers struggle to do business in Delaware.
Courting Disaster?
Before we analyze the macro conditions that have led to this crisis in Delaware, let’s take a quick look at a recent state supreme court case that illustrates one of the problems, the absence of managed care. Shirley Smith worked in the shipping department of James Thompson & Co. She injured her back in August of 2002. Suffering from a herniated disc, she declined surgery and treated conservatively while collecting temporary total benefits.
In September of 2004, she told her doctor that she needed money, so he released her for light duty. She worked for one month at a new employer and was then laid off. In January of 2005, she asked her doctor for support in applying for Medicaid and food stamps, so the doctor totally disabled her for six to twelve months (even though there was no change in her medical condition). At the same time, Smith petitioned for resumption of her indemnity benefits under workers comp. She lost at the hearing level and at the appeals court. The Delaware Supreme Court, however, found in her favor.
In other words: in January of 2005 Smith was capable of light duty. Nonethless, her doctor totally disabled her (apparently to help her secure benefits of one kind or another). There were no objective medical findings to back up the doctor’s recommendations. Here is how the doctor explained his actions:

I believe she is capable of modified duty work. But since we were approaching the case in a different way all together that we wanted to get a surgical opinion, I wanted her to be off of work so she could address her scenario. If surgery is not an option, I would have her go back to work.

If you can figure out what this grammatically challenged doctor is trying to say, good for you. (Every once in a while I like to address my own scenario, but it’s usually at my own expense.) The state supreme court ruled that despite the absence of objective medical findings, the simple fact that the doctor put her out of work – and did so in what the court calls “good faith” – is in itself grounds for reinstating the comp benefits.
Which brings us back to the place we began: Delaware is a very expensive state for workers compensation.
Needed Reforms
Delaware needs to revise its workers comp statute. And no, we do not recommend the Missouri model, which simply clobbers injured workers at every turn. Prudent reform is balanced and fair, exacting some price from all the parties involved and relentlessly focused on the goal of keeping people productive.
In abbreviated form, here is what Delaware needs to do:
1. Implement a managed care program, with some modest control of the treatment path in the hands of insurers and employers.
2. Implement rate setting, so that health providers are reimbursed at reasonable (as opposed to “usual and customary”) rates.
3. Open the door to independent medical exams (which would have been extremely useful in the Smith case). Currently, for reasons I could not determine, you can be fined $500 every time you refer to an “independent medical exam” in a medical document.(Section 2343 of the comp statute)
4. Incentivize return-to-work programs. Set the expectation for all employers that they work with injured workers and their doctors to return employees to productive employment as soon as possible.
5. Revise the time table for compensability. Currently, injuries are compensable after the third lost day (a quick trigger, but acceptable). However, the benefits are retroactive to the first lost day once day seven is reached. This is the quickest compensability trigger of its kind in the country and inevitably fosters a “disability” culture. Retroactivity should occur only after two or even three full weeks of disability.
Delaware’s Low Point
As Delaware approaches the top of the list for workers comp costs, the pressure for reform will build. Let’s hope they do it the right way. Delaware is no ordinary state. According to Wikipedia, they used to be noted for having the nation’s lowest high point: that is, their highest elevation was lower than that of any other state. Alas, they have fallen to number two in this regard, to Florida, which claimed the number one spot when its highest point fell into a sinkhole below the 442 feet elevation.
Well, number one is not necessarily where you want to be, especially when it comes to the absence of elevations – and the cost of workers compensation.

Massachusetts: Once more into the rate filing breach

Monday, March 5th, 2007

In what continues to be perhaps the nation’s biggest workers’ compensation turnaround success story, the Massachusetts Workers’ Compensation Rating and Inspection Bureau (WCRIB) on Friday filed a proposed average rate decrease of 13.4% to become effective 1 September 2007. If the state’s newly appointed insurance Commissioner, former Superior Court Justice Nonnie Burns, approves the filing, rates in Massachusetts would be 64% lower than they were in 1991, when the Massachusetts workers’ comp law was reformed, and nearly 70% lower than the high water mark of 1994.
Many other states have reformed their laws and achieved lower rates, but what is remarkable about Massachusetts is that while it has become one of the lowest cost states in America for employers, it continues to rank among the top 5 in terms of benefits awarded to injured workers. A very neat trick, indeed. (See our prior discussion of the rankings).
There are a number of reasons for this success; four stand out.

  • The 1991 reform lowered the temporary total disability payout from 66 2/3% of the injured worker’s wage to 60%. Concomitantly, the law tied the maximum weekly payment to the annual inflationary growth rate of wages in the state. Now, in 2007, that maximum is more than $1 thousand. This was a monumental compromise by business and labor.
  • The reform law established a medical fee schedule that was the lowest in the nation. Initially tied to Medicaid rates, the schedule now is about 80% of what Medicare reimburses, which many health care providers claim is ridiculously low. While surgeons and other Massachusetts medical specialists no longer accept these rates and will only ply their trades after negotiating higher payments with insurers and employers, primary care, as well as emergency care, physicians continue to work under the depressed rates. While this has been profitable for employers and insurers, it is a pressure cooker on the workers’ compensation stove, and the pressure is building.
  • The reform law significantly updated the state’s antediluvian Department of Industrial Accidents (DIA). Process was streamlined, the administrative law judge corps expanded, attorney involvement and fees reduced, staff professionalism augmented and a fraud unit created. It has taken time, and many still complain that things take too long to get done, but it seems indisputable that the DIA’s performance is considerably improved.
  • Employers got religion. At the time of reform and on a per capita basis, Massachusetts had the largest assigned risk pool in the nation. Fully 65% of all premium and 85% of all employers were pool-bound. The state’s premium was just about $2 billion. In a leap of faith, the WCRIB, on behalf of the insurance industry and with the approval of the Commissioner of Insurance, created the Qualified Loss Management Program. The QLMP functioned as a kind of tuition reimbursement program for employers by which they received premium credits of up to 15% in return for engaging qualified consultants to help them prevent, minimize and manage worker injuries. The program was a Lynch Ryan proposal and, if you’ll pardon an immodest moment, a huge success. Loss ratios declined precipitously, the pool drained, employers saw steep declines in rates and the P&C industry became profitable once again in Massachusetts.

A few dark clouds looming
Despite all the good news, the outlook isn’t totally bright. There are two dark clouds on the Massachusetts workers’ compensation horizon.
First, there is the little matter of AIG, which, at 30% market share, is the state’s largest workers’ compensation insurer. That would be fine if only AIG’s statistical data were reliable. But it wasn’t in the 2005 rate filing and, consequently had to be excluded from the filing. Now, history repeats itself and, once again, AIG’s data has been deemed unreliable and is excluded from the present filing. This is a large embarrassment for the WCRIB. Bureau leadership would have much preferred to delay the filing to devote more time to the AIG problem, but by law there must be a filing every two years. But I know for a fact that the Bureau did all in its power to work with AIG to get reliable data. It didn’t happen, and more’s the pity, because this opens the door to disputes in the rate hearing process. One would be pardoned for asking at this point, “What in the world’s going on with AIG?”
As if that weren’t enough, during the rate filing of 2003, Massachusetts Attorney General, Tom Reilly, decided to enter the fray. At that time, the WCRIB filed for an increase in rates of 8.6%, the Division of Insurance’s State Rating Bureau countered by filing for a decrease of nearly 10%. For Reilly, that wasn’t good enough. His office filed for a decrease of a whopping 21.4% (see my analysis of that rate dispute). Now, AIG’s exclusion provides the springboard for similar dueling filings. We shall wait to see if Massachusetts’ newly elected AG, Martha Coakley, is more temperate than her predecessor.
Notwithstanding the clouds, the workers’ compensation picture in the bay state is pretty rosy. As we enter the rate hearing process, it will be interesting to see if it stays that way.

Cavalcade of Risk #20

Thursday, March 1st, 2007

A fresh edition of Cavalcade of Risk is posted at Renthusiast. The current edition includes a variety of risk-related posts broken into a few major categories: Investor & Economic Risk, Political & Regulatory Risk, and Personal & Professional Risk.
Renthusiast is a blog about the business of real estate, featuring the inside skinny on some celebrated real estate deals, among other things. If you’re in the market for a luxury jumbo jet, Renthusiast has you covered.