Archive for September, 2007

Why We Blog

Wednesday, September 12th, 2007

As we approach the fourth anniversary of the Workers Comp Insider (September 17, 2003), it’s a good time to step back and ask a fundamental question: Why are we doing this? Four years ago Tom, Julie and I observed that there were a lot of bloggers tackling a lot of issues, but they mostly involved isolated individuals pursuing a particular passion. Businesses in general seemed disinterested and our particular focus, the insurance industry, was totally missing in action from the blogsphere.
As a company specializing in designing and fine tuning loss control and risk management programs for employers and insurers, Lynch Ryan saw an opportunity. With its infinite, instantaneous reach, the web offered a virtual forum for exploring the many ramifications of workers comp. As consultants, we wanted to create a meaningful and objective means of communicating issues related to the key comp constituencies:
– helping employers minimize the cost of risk, while still managing their injured employees
– supporting insurance companies in risk selection and in the education of policy holders
– guiding injured employees back to gainful employment
– facilitating medical provider interaction with injured employees, their employers and insurers (and helping them survive increasingly stingy payment schemes)
– guiding states through the complex task of legislative reform, where they must balance the needs of injured employees, employers, insurers and medical providers, without allowing the cost of insurance to drive business out of state
– alerting workers’ comp professionals and risk managers to issues of compelling interest which they might not otherwise encounter
Fertile Ground
Over our four years as bloggers, we have examined managed care, coverage for independent contractors, the practices (good, bad and indifferent) of insurance carriers, the impact of designer drugs on the cost of insurance. We have discussed fraud in Ohio, legislative reform in dozens of states, the use (and abuse) of temporary modified duty, myriad safety issues – cell phone use while driving, heat in the summer, cold in the winter. We have highlighted the aging American workforce and the implications for workers comp in the years ahead. We have explored the profound implications for the comp system of the millions of workers lacking health insurance, along with the nation’s dilemma dealing with 12 million undocumented workers. And that’s just a hint of the fertile ground we have plowed, up to five times a week, for over 200 weeks. Dull it isn’t!
We also have created and refined a website that makes accessing web resources as easy as possible, linking our readers to business, risk management and health-related resources. In addition, you can use our robust search engine to explore nearly 800 blog entries by content area. All modesty aside, we think that the Insider has become the best workers comp reference library on the net.
How are We Doing?
We think it’s working pretty well. We have as many as 20,000 hits a month, with several thousands of loyal readers and hundreds of casual visitors seeking inforation on a specific issue. Readership has increased steadily from month to month. We are approaching our goal of becoming the “go to” site for workers comp issues.
And, although Google and others call several times a month, we don’t allow advertising, except for a small banner that links to LynchRyan, our parent company.
All of which leads to a very fundamental question for any business: is it worth the effort? Is this free service in any way profitable? That’s not an easy question to answer – and in some respects, it’s the wrong question. But in the interests of full disclosure and the candor to which we are committed, yes, we have established long term and meaningful relationships with a number of insurance companies and employers who found us through the blog. The considerable effort easily pays for itself.
But even if the blog were a “loss leader” we would probably continue the effort. We are filling a definite need on the web, providing a balanced and objective view of risk management and risk transfer issues, with a special focus on workers comp. Our goal is to provide our readers with a reliable, well written and entertaining news source that reflects our abiding passion and our many years in the field. And whatever you think of the Insider, you’ll have to agree on one thing: the price is right.
Your comments are always welcome.

Cavalcade of Risk #34 is ready for your perusal

Wednesday, September 12th, 2007

David Williams has a great edition of Cavalcade of Risk posted at Health Business Blog – more than 20 choice links summarized with concise, witty commentary. We particularly enjoyed his “pariah”s corner.” David’s one of the health care blogging luminaries, a mainstay in the Cavalcade and Heath Wonk Review. If you haven’t seen his newer adjunct blog, MedTripInfo, you might check it out. The focus of that blog is what has come to be known as “medical tourism” – and if you aren’t yet cued in to what this emerging issue is all about, then David’s blog is a good place to start.

New York Update: CIRB Kicked to the Curb?

Tuesday, September 11th, 2007

That reverberant thud we hear coming out of Albany, NY, is the sound of the other shoe landing. And it’s dropped straight on top of the New York Compensation Insurance Rating Board (CIRB).
In early March of this year, New York Governor Eliot Spitzer signed into law a major and much needed workers’ compensation legislative reform. In February we had discussed New York’s urgent need for reform, and, immediately following the Governor’s signing, we analyzed New York’s reform measure.
There’s no need to rehash the reform here, except to say that the Insider was generally quite supportive of it. We were happy that a number of our suggestions wound up in the reform. However, two sections of the new law carried huge implications and consequences for the Property and Casualty (P & C) insurance industry in New York, and each took dead aim at the future of the CIRB. A reading of these sections suggested that the CIRB’s future may actually be behind it.
The first of the two sections required that the Superintendent of Insurance report on the performance of the CIRB to the Governor, the Speaker of the Assembly and the Majority Leader of the Senate by 1 September 2007.

“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.”

Then Section 2313, subparagraph S, contained these two gems:

“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.”

Well, here we are in September and Superintendent Eric Dinallo has issued a whomping, 56-page report (PDF) that, while not killing the CIRB, certainly eviscerates it.
The Current System – Nearly Everywhere
In 39 states, the National Council on Compensation Insurance (NCCI) gathers loss and premium data, calculates experience modifications, and files rate proposals on behalf of the P & C industry. A few states, such as Massachusetts, Michigan, Pennsylvania and New York, have independent Bureaus that do the same thing. These Bureaus are funded by the insurance carriers doing business in the states and are governed by committees elected by those insurers. The Bureaus gather and analyze loss data, both current and historic, and file rate proposals with their respective insurance commissioners. Actuaries from both sides testify at public hearings, after which insurance commissioners render decisions about the appropriateness of what the insurers want and establish new rates, which can be higher, lower or, occasionally, exactly what was proposed. Theoretically, this is a system with built in checks and balances where math and science should rule, and it is the way New York’s workers’ compensation system operated until the recent reform.
The Dinallo Report
Superintendent Dinallo proposes scrapping this concept in New York in two ways, one of which we think is fine, the other we find fraught with danger.
First, the Superintendent proposes, quite rightly, we believe, to move to a loss cost system, where insurers, based on their own experience, would file loss cost multipliers that would be applied to the classification rates established by the Superintendent. This would introduce a competitive system already in place in all NCCI states. He proposes that the CIRB continue to gather loss data and calculate mods, because, first, it’s been doing it for more than 90 years and he thinks by now they have the hang of it; and, second, because between now and the sunset date of February 1, 2008 (just a little more than 4 months), there isn’t enough time to bring a new Rate Service Organization (RSO) on line. In short, Dinallo says New York’s stuck with the CIRB at least, in his words, “for the short term.”
Second, Superintendent Dinallo wants to take over the CIRB’s governing committee. This, in my view, is the biggie. Dinallo recommends that the governing committee be reconstituted to include representatives from labor, employers, the State Insurance Fund, and the Insurance Department. Yes, insurers would be on the committee, too, but they would be in the minority. Further, the Superintendent would require that the carriers continue to fund the CIRB, even though they would have little or no control over it. Sort of like the Russian model of requiring the condemned man to pay for the bullets.
Potential Adverse Consequences
This second proposal would eliminate the checks and balances from the system. Further, it could also eliminate actuarial science. New York could wind up with rates being determined by committee, and a politically charged one, at that. Finally, one last elimination might occur: insurers, themselves, who, after attending (in small numbers) that first committee meeting may decide to hop the next train out of town. After all, what member of the reconstituted committee, except for insurers, would ever want to see a rate increase?
In this affair the CIRB has not covered itself with glory. It has shown itself to be politically deficient, and its public relations efforts have been woeful. It has allowed itself and, by extension, the insurance industry, to be maneuvered into playing the role of the villain in this melodrama, and it is now squarely in the cross hairs. Nonetheless, even Superintendent Dinallo grudgingly admits that his every-three-year reviews show that the Board is performing satisfactorily. We believe that the prudent course is for New York to let insurers govern their own Board and to require the Superintendent of Insurance to continue to oversee performance.
We urge that Governor Spitzer and Superintendent Dinallo assure that the New York workers’ compensation playing field remains level and the goalposts where they are.

Oh, Brother: A Compensable Fratricide

Friday, September 7th, 2007

This is a tale out of the North Carolina woods, concerning the Forbes brothers, Ernie and Wilbert. Here’s a legal account of what took place on September 26, 2000:

Wilbert Radel Forbes, his brother Ernest Forbes, James Duncan, Ronnie Duncan, and William Dobson traveled together in a van to a logging site in Halifax County. The men were members of a logging crew scheduled to work that day. During the drive to the logging site, defendant and his brother began arguing because Ernest did not stop at a convenience store where the crew usually stopped.
Upon arriving at the logging site, Ernest got out of the van and walked away, and defendant got out, punched Ronnie Duncan in the side and said “watch this.” Duncan then testified that defendant told his brother “if you can do so much without me on Saturdays go grease the loader and change the oil.” Ernest stopped, turned around and said to defendant, “why do you f— with me so much.” Ernest then started back towards defendant, and the two began pushing and shoving. Duncan then got in between the two men and separated them, and Ernest told defendant “if I had any knife I would cut your m — f— throat.” Duncan testified that Ernest did not have a knife at the time.
Duncan then testified that defendant pulled out a gun, pointed it at Ernest and said to Duncan, “you don’t believe I’ll blow his m — f— brains out?” Duncan told defendant to “stop playing,” but defendant pulled the hammer back, said to Ernest “I’ll blow your m — f —,” and pulled the trigger. Ernest died from a gunshot wound to the head.

Ernie’s widow filed a claim for workers comp benefits, which were awarded under the theory that the death was work related, because Wilbert ordered his brother to “grease the loader and change the oil.” His brother responded in anger, the fight erupted and Ernie ends up dead. It’s work related because the argument stemmed from work – even though work had very little to do with the brothers’s deteriorating relationship.
Lessons for Management?
You have to wonder how much of the animosity between the Forbes brothers was revealed prior to the fatal encounter. Logging is a tough, high risk occupation, usually taking place in remote areas. The employer, Goodson Logging, would have been better off firing one (or both) of the brothers for what we can assume were long-standing problems in dealing with each other.
Cynics might assume that Wilbert filed a comp claim for post-traumatic stress syndrome. After all, he did lose a brother in this terrible incident. Well, you cannot collect comp while in prison, and Wilbert is currently doing life without parole. He appealed his sentence, claiming the whole thing was an accident. It might have been a compensable incident, but the appeals court determined that it was no accident. Wilbert acted wilfully and is paying the consequences. As far as the comp benefits going to Ernie’s widow, this is one family quarrel where the employer is stuck with the bill.

News roundup: HWR, WV, safety, guestworker abuse, case law, and Rx PR

Thursday, September 6th, 2007

Health Wonk Review day – Brian Klepper hosts a great issue of Health Wonk Review at The Doctor Weighs In. He offers very readable and interesting summary of 15 posts culled from the health policy blogosphere. Check it out! And as usual, the host blog — which features physicians offering perspectives on fat, fitness, health, and longevity — is worth a bit of your time, as well.
Double health wonkery today – Due to an administrative snafu, HWR is also posted at The Doctor Is In. Many of this week’s submissions were mistakenly funneled there, a confusion between The Doctor Is In and The Doctor Weighs In. Dr. Bob, the host at at the former, is not a regular HWR participant, but he kindly jumped in to the fray when he started getting submissions. Many thanks to him for taking the initiative. It was happy mix-up, because his blog has provided lots of interesting reads on a variety of subjects in and out of the health care realm. Plus, he has some pictures that will cheer your day.
Worker safety – In honor of Labor Day earlier this week, The House Education and Labor Committee put together a map depicting approximately 10% of deaths that occurred in U.S. workplaces during 2007. Committee Chair Rep. George Miller (D-CA) suggests a redoubling of efforts to improve worker safety.
West Virginia gearing up for privatizationInsurance Journal reports that at least nine major insurers are waiting in the wings to provide workers’ comp coverage in formerly private West Virginia. Right now, BrickStreet Mutual Insurance Co. is the state’s sole provider (previously discussed) but that changes in July 2008, when the market for covering private employers opens up, as per the state’s 2005 reform dictate.
Guestworker program abuse – The Institute for Southern Studies brings a disturbing report of modern-day slavery on the Gulf Coast involving migrant workers employed in the post-Katrina clean-up through the federal H2B guestworker visa program. The allegations involve welders and pipefitters from Veracruz, Mexico, who allege incidents of abuse, unsafe work conditions, being held against their will in trailers without food until they were able to escape, and then being forced by police to return to the same abusive employer. Other similar reports of abuse have surfaced with the guestworker program, leading to the question of whether such programs are subject to exploitation by unscrupulous employers.
Legal cases
The Maine Supreme Judicial Court recently ruled that an employer may offset workers comp by disability payments. In Jeanne Nichios v. S.D. Warren/Sappi et al, the Court ruled that the employer may use a group life and disability plan payment to an injured worker to offset its workers’ compensation benefit payment. The employee had argued that because the disability payment was made under a group life policy, it was not subject to state law governing coordination of benefits.
In July, the Delaware State Supreme Court ruled that a worker hurt in horseplay might be able to sue. A few of Stephen Grabowski Jr.’s co-workers thought it would be amusing to overpower him and tie him up in duct tape. He suffered back and knee injuries that required surgery, and was also treated for post-traumatic stress. While injuries that occur in the course of horseplay are generally not compensable, Grabowski was awarded benefits as a “non-particpating victim,” and therefore barred from bringing a negligence claim against his coworkers. Grabowski argued that because his injury occurred outside the scope of his normal job duties, the workers’ compensation law would not bar a tort claim . The Supreme Court returned the case to the trial judge to analyze the issue of whether horseplay is outside course and scope of the job, and if so, Grabowskie may be able to sue. The Supreme Court opinion can be found here.
Pharmaceutical PR – Richard Smith, former editor of BMJ, raises the issue of whether medical journals have become an extension of the marketing arm of pharmaceutical companies. He contends that advertising is the least part of the problem; rather, it is the coverage of clinical trials which rarely produce results that are unfavorable to the sponsoring organization. He suggests that peer review is not enough, journals should critique the trials that they publish.

Insurance ephemera at the Museum of Insurance

Wednesday, September 5th, 2007

work comp stamp
Many of us are familiar with the Insurance Library, a Boston area institution that has been an important insurance resource for consumers and professionals alike for more than a century. But did you know there was such a thing as the online Museum of Insurance? We certainly didn’t, but we chanced upon it in one of our recent Google searches. It’s one of those strange little nooks that you find on the Internet, a repository of insurance ephemera ranging from calendars and postcards to policies, stock certificates, and receipts. The earliest of these documents dates back to the early 1800s. We were disappointed that there were no workers’ compensation documents among the mix. Of course, in days of yore, it would have been “workmans’ compensation,” a term you still hear bandied about now and then. We did our own search on workers compensation and found a commemorative workmens’ compensation stamp that was issued in 1961, one stamp in a folio of four. Here’s a picture of President Kennedy and Vice President Johnson walking to the introduction ceremony for the stamp.
Perhaps some large insurers have some workers’ comp ephemera that they would like to donate to the cause.
Interesting as we find some of these documents, we’re just as happy that this is a virtual museum. Frankly, it sounds like something that would be a side stop in the Griswold family’s vacation itinerary. But as long as we’re reflecting on the history of the insurance industry, at the Early Office Museum you can compare your work environment with those of some of your professional forbearers.
Insurance ephemera is a pretty thin category on E-Bay. If you are looking for the perfect gift for National Boss Day come this Oct 16, or just for your favorite insurance geek, you may find something interesting under insurance and banking advertising collectibles.

Sole Proprietors: A Comp Welcome Mat in Massachusetts

Tuesday, September 4th, 2007

What better way to herald the end of summer by returning to the issue that just won’t go away: workers comp coverage for sole proprietors and independent contractors. Massachusetts has just taken an extraordinary step that provides a strong incentive for sole proprietors to “opt in” to the comp system.
Under the old rules, any sole proprietor seeking comp coverage was assumed to make the state average weekly wage (SAWW). In MA, that is a whopping $52,000 per year. While MA enjoys some of the lowest rates for comp coverage in the nation, that high wage base drives up the cost of comp:
– for a $5.00 rate, the annual premium would be $2,600
– for a $10.00 rate, the annual premium would be $5,200
Those can be tough numbers for a lone craftsman trying to operate his/her own business. Especially when you consider that the weighted average median wage of all sole proprietors in the state is only $35,843. The result, of course, was that most sole proprietors gave up the notion of participating in the comp system. The coverage was way too expensive. They opted out in droves.
Recognizing the powerful disincentives to select coverage, the MA Workers Compensation Rating and Inspection Bureau decided to make the coverage more affordable. They have dropped the wage base by 30 per cent, to 70 per cent of the state AWW, effective August 1, 2007. Now, when a sole proprietor chooses to be covered, the premium is based upon an annual wage of just $36,400. This means that the cost of coverage is suddenly pretty reasonable:
– for a $5.00 rate, the comp coverage costs $1,820
– for a $10.00 rate, the coverage costs $3,640
A Comp Bargain
For marginal sole proprietors, with annual billings below the $36,400 level, there is still a strong incentive to opt out of the system. However, for the many skilled tradesmen who routinely bill well above the $36,400 level, workers comp has suddenly become a bargain. A skilled mason or carpenter might bill upwards of $75,000 or more per year. Nonetheless, the cost of comp coverage will be based upon a much lower wage level. In effect, well established sole proprietors now enjoy comp rates that might be 50 per cent or more lower than the rate for competitors with employees working in the same trade.
Which leads to one more very important consideration for general contractors in MA: in the construction field, sole proprietors are a common sight. We have blogged about the MA crack down to push coverage deep into the subcontractor and sub-subcontractor levels. (See just a couple of our prior blogs here & here.) At premium audit, if a GC shows a certificate of insurance from a sole proprietor sub who has “opted out” of coverage, the cost of that coverage is added to the GC’s payroll for premium calculation. Now GCs have a very compelling argument to encourage their sole proprietor contractors to opt in for coverage: “Don’t wait for me to charge back the cost of comp. Take advantage of the suppressed rates and choose coverage on your own. You benefit from a lower rate and you have the advantage of knowing the cost of coverage up front.” For sole proprietors who routinely have billings above the $36,400 level, this is truly a no brainer.
It will be interesting to see if other states follow the MA lead in this important policy area. Surrounding states use a very high wage standard for calculating sole proprietor premiums: in Connecticut, $56,200. In New Hampshire, $58,100. When you factor in the very high rates for comp in these states, the cost of insurance for sole proprietors is truly prohibitive. That’s no welcome mat. It’s a kick in the butt toward the door.