Archive for September, 2009

The AIG Saga, Revisited: Gang Wars in Three Piece Suits

Tuesday, September 29th, 2009

AIG may have lost a bit of its swagger – that’s what happens when your stock tanks and the government has to bail you out to the tune of $150 billion, give or take a few billion. But tough guys don’t dance, they fight back. AIG is suing NCCI and a host of major workers comp carriers (Travelers, The Hartford, Liberty Mutual, etc.) for under-reporting comp premiums and conspiring to harm AIG. That’s right. All those bullies have been picking on AIG.
AIG’s lawsuit is in direct response to an eerily similar suit filed by NCCI against AIG, accusing the staggering behemoth of under-reporting its share of premiums in nationwide assigned risk pools. This suit, filed in U. S. District Court, was dismissed by Judge Robert Gettlemen, who found that NCCI lacked legal standing to file it. The fallen banner has been quickly retrieved by Liberty Mutual, among others, who intend to refile the complaint. After all, it is AIG’s direct competitors who would have been harmed if, indeed, AIG under-reported premiums.
Badda Bing, Badda Boom
Which leads us to the not-so-lovely, two-can-tango result of AIG counter-suing, alleging a conspiracy to shift costs to AIG. “AIG’s complaint asserts that a number of its competitors under-reported their workers compensation premiums over many years and formed an illegal conspiracy to conceal that fact and to harm AIG,” said company spokesman Mark Herr.
It’s a shame that this colorful gang war has to play out in sedate courtrooms, with immaculately dressed lawyers mouthing lines better suited for Brando, Pacino and Cagney. After all, these are suits filed under anti-racketeering laws. It’s doubtful that the original crafters of the RICO legislation had insurance giants in mind when they fashioned this weapon to attack organized crime.
AIG stock is trading near $46, which sounds pretty good when compared to the under-a-dollar price of just a few weeks back. But appearances can be deceptive. To avoid the humiliation of trading as a penny stock, AIG did a reverse 20 for 1, carving each share into 20 pieces. For long-term shareholders, that $46 is really just two bucks and change. (Go ahead, shareholders, celebrate with a bottle of two buck chuck!)
“You gotta problem with that?” No, sir, no problem at all. I’m just walking down the street with my hands in my pockets, minding my own business. I’m not looking for trouble. What you folks do with all those premium dollars, all that TARP money, all those securitized loans, that’s your business. I wish you the best, I really do. And by the way, that’s a swell suit you’re wearing. A really nice fit. Would you mind my asking how much it cost…?

Imperial Sugar Refinery report: routine housekeeping might have prevented explosion

Tuesday, September 29th, 2009

A year and a half after the Imperial Sugar combustible dust explosion, the Chemical Safety Board (CSB) issued its final report on the explosion, which killed 14 workers and injured 36 others, leaving some with permanent, life-altering conditions. In short, the CSB found inadequate housekeeping and maintenance, largely preventable conditions. In addition, CSB found inadequate emergency evacuation plans. The linked article from WTOC-TV above has a summary with photos, as well as related stories. Or you can read the entire 89-page Investigation Report – Sugar Dust Explosion and Fire – Imperial Sugar Company (PDF).
The initial explosion occurred in a closed steel conveyor belt, triggering a series of secondary explosions and fireball eruptions throughout the buildings. The fatalities occurred in the secondary explosions.
Last year, OSHA proposed $8.7 million in fines on the company for more than 100 violations, fines that Imperial Sugar is currently battling in court.
As part of the report, the CSB recommended that OSHA establish mandatory standards for combustible dust. Critics say that this recommendation isn’t strong enough, and that OSHA’s current rule making process will take too long. They note that under a federal workplace safety law, OSHA can adopt an emergency temporary standard, which would circumvent the red tape to get something in place quickly.
A good source of information on combustible dust is the Combustable Dust Policy Institute blog. This blog states that although OSHA lists 30,000 facilities in its National Emphasis Program, there are actually more than 100,000 facilities at risk, which includes many national industries not listed in the Dust NEP. They track media accounts of combustible dust incidents, and found that last year, about 50% of the incidents occurred in national industries not referenced in the OSHA’s dust NEP. Another source of information that we turn to on combustible dust and other public health issues is the excellent blog, The Pump Handle, which provides informed commentary from experts.
For another perspective on the Imperial Sugar explosion, the Joseph M. Stiller Burn Center included Battling Big Burns: The Imperial Sugar Company Fire (PDF) in its summer 2008 newsletter. The article offers an overview of the complexity of issues involved in managing large disasters, including issues directly related to caring for critically burned patients.

Annals of Health: Why Smokers Cannot Quit

Monday, September 28th, 2009

In all of our discussions about controlling the cost of workers comp, we continually come up against two lifestyle issues that have a direct impact on costs: obesity and smoking. Let’s leave obesity for another day and focus on smoking.
According to a compelling article by Stephen Smith in the Boston Globe, 70 percent of smokers want to stop, but fewer than 10 percent will succeed each year. For non-smokers, this might appear to be a matter of will. But that is both condescending and a gross over-simplification.

Nicotine, the primary addictive agent in tobacco, steals into the brain, setting on fire circuitry that regulates our sense of pleasure [emphasis added]. At the same time, cigarettes acquire a sort of social permanence in smokers’ lives – a way to start the day, to end a meal, to celebrate good times, to muddle through bad times.

Smith uses a rather terrifying analogy to describe how nicotine enters the brain:

Smoking is a uniquely efficient manner of delivering an addictive substance to the brain. “That’s why crack cocaine is so much more addictive than regular cocaine,” said Dr. Nancy Rigotti, chief of Massachusetts General Hospital’s tobacco treatment center. “Cigarettes are kind of like the crack cocaine of nicotine.”

Inhaled nicotine from a cigarette arrives in the brain in 10 seconds. There, it attaches to an especially pivotal region of neurons, those cobweb-like structures that govern our physical and mental actions.

Nicotine, said Dr. Jonathan Winickoff, a tobacco control researcher at Mass. General, “stimulates the same area that get stimulated when you have a wonderful gourmet meal or when you have sexual intercourse. It lights up that part of the brain, which is the rewards center. It drives human behavior. It’s powerful stuff.”

Hmm. Similar to gourmet meals and love making. No wonder people have trouble walking away from the habit, despite the known and often dire consequences of continuing to smoke. It would take powerful medicine indeed to counteract nicotine’s overwhelming appeal.
If there is good news in all of this, it is that a combination of drug therapy and counseling increase the chances of success.

“The data are very clear that you can double your chances if you use a medication if it’s appropriate for you, and you can triple your chances if you use a medication and counseling,” said Thomas Glynn, director of cancer science and trends at the American Cancer Society.

The medicine cabinet now includes seven first-line treatments, anchored by five forms of nicotine replacement. Regardless of the delivery system, the goal is to stave off the withdrawal symptoms and cravings that bedevil so many people who want to quit.

Finally, perseverence is key. You just have to keep at it.

“It takes smokers seven to 11 quit attempts to quit for good,” said Lois Keithly, director of the Massachusetts Tobacco Control Program. “We need to get the message out that if you make a quit attempt and you relapse, you don’t give up.”

Smoking Out Smokers
It will be interesting to see if the nation’s pending experiment with universal health care attempts to tackle the issue of smoking. Will smokers be charged higher premiums? (With a significant portion of smokers qualifying for premium subsidies, such penalties may prove difficult to enforce.) Will the new insurance rules mandate coverage for smoke cessation programs, including the full range of pharmacology options plus counseling? On the one hand, the success rates are low, so smokers are likely to keep smoking; on the other hand, any and all successes project to future cost savings.
Let there be no doubt about how hard it is to give up cigarettes. After all, we have the image of our president: a self-possessed, calm and extremely bright (American born!) man sneaking out of the White House for secretive puffs. Good luck to him and to all smokers who strive valiantly to give up this nasty habit once and for all.

9-11 Workers Compensation – Report on 45,000 World Trade Center Cases

Friday, September 25th, 2009

In September, the New York State Workers’ Compensation Board released a 59-page report on World Trade Center Cases in the New York Workers’ Compensation System (PDF), along with a reminder that the clock is ticking for rescue and clean-up workers to register service. The registration deadline is September 11, 2010. Registering puts a stake in the ground to preserve the right to benefits should they be needed at a future time.
The data is a significant historical record and analysis of the largest single workers compensation event in insurance history. Report findings are limited to claims covered under the New York State Workers’ Compensation Law so do not include police, fire, or sanitation workers, federal employees, out-of-state employees, and people who were not working.
For a sample of the report, here is an executive summary of the 9-11 Workers Comp report taken from a press release issued with the study:

Among All Cases
The Board has 13,676 workers’ compensation cases resulting from the World Trade Center disaster. This study focuses on the 11,627 cases where there is comprehensive claim data. More than half the cases were for victims of the attacks, and about 40 percent were for rescue, recovery and clean-up workers. In 5,220 cases, the Board received an initial filing but no medical evidence supporting the claim, or the worker did not pursue the claim (by filing information or attending a hearing). The Board is actively contacting those workers, to determine why they did not pursue their claims. Carriers disputed 40 percent of World Trade Center cases, more than twice the rate of other claims. Three-quarters of all cases were filed before 2004. Only 4 percent of cases have open issues.
Death Cases
There are 2,064 death claims; 2,058 were for people killed in the attacks. The Board has just three death cases for rescue, recovery and clean-up workers. There were three other fatalities, as well. Fifty-two domestic partners of victims received a death benefit, under special provisions of a 2002 law.
Rescue, Recovery and Clean-up Cases
In 4,670 claims, rescue, recovery and clean-up workers received benefits. Nearly 90 percent of these cases are for respiratory system diseases. The Board has received 39,151 WTC-12 forms since 2006. On a WTC-12, the filer states he or she performed rescue, recovery and clean-up efforts for the World Trade Center, in an area south of Canal St.; at Fresh Kills Landfill; on the barges, the piers, and at the morgues. While not a claim, it preserves the right to future benefits, should one ever need them. Gov. Paterson signed legislation last year extending the deadline to Sept. 11, 2010, for World Trade Center workers and volunteers to file a WTC-12. Since beginning a national publicity campaign in June 2008, the rate of filings has increased more than tenfold.

This week’s assorted news briefs

Wednesday, September 23rd, 2009

Spotlight on Rating Agencies – Claire Wilkinson of Insurance Information Institute’s blog posts on a public hearing to be held by the National Association of Insurance Commissioners (NAIC) tomorrow.
Insurance Execs Not Confident of Underwriting Profit Over Next 3 Years – results of annual survey conducted by KPMG
Obese Workers’ Comp Claims Far Exceed Slimmer Employee Costs – report on NCCI study. Full NCCI study: Reserving in the Age of Obesity (PDF)
California insurance commissioner to fight sale of part of workers’ comp fund – Poizner seeking an injunction to prevent any sale of policies at $21-billion SCIF
Growing union clout – Comp Time discusses a new Chamber of Commerce report on the NLRB and unions
Governor’s Highway Safety Association’s Position on Distracted Driving
Some noteworthy Twitter feeds
You can find us on Twitter @workcompinsider. Here are a few more Twitter feeds we’ve found, both old friends and new:
@NIMHgov – National Institute of Mental Health
@hpandpsafety – Specialists in workplace safety with emphasis on maintaining OSHA compliance
@RenInsureInfo – consumer insurance info from Renaissance Alliance
@PAworkcomp – Workers’ Compensation defense attorney Todd C. Hough
@hrlawyer – Employment law attorney Diane Pfadenhauer
@OccHealthSafety – Occupational Health & Safety Magazine; Carla Saavedra, Jr. Web Editor
@MargueriteTort – SVP, Public Affairs for PCI (property Casualty Insurers Assoc of America)

Not-So-Good Housekeeping

Tuesday, September 22nd, 2009

Lucine Williams, 41, worked as a housekeeper for the Hyatt hotel chain in Boston for over 20 years. She earned $15.32 an hour, plus a fairly robust benefit package that included health, dental and a 401(k). That’s where Katie Johnson Chases’s story begins in the Boston Globe, but it hardly ends there.
Last month Ms. Williams and her co-workers were asked to train some new workers, who were going to fill in during vacations. It turns out that these trainees were employees of Hospitality Staffing Solutions, a Georgia-based company with offices proliferating across America.
At the end of August, Hyatt laid off Lucine and 100 other housekeeping employees. They were replaced by Hospitality employees, who make $8.00 an hour with no benefits. Heck, people complain about outsourcing jobs to the third world. Now you can bring third world jobs to your workplace!
A little number crunching reveals the potential profit margins. If we assume that the benefits once paid to housekeepers at the Hyatt added about 35 per cent to the payroll, the hourly cost of labor was over $20. Hospitality Staffing pays its workers $8.00 and limits benefits to what is required by law. On their website, they say they can save companies up to 12 percent on labor costs. If you subtract 12 percent from $20, Hospitality would bill Hyatt about $17.60 per hour. That might not sound like much, but multiply it every week by a payroll for 100 housekeepers and you are talking serious savings. How that savings relates to the lives of long-time, loyal workers is another question.
Outsourcing Poverty
Hospitality Staffing presents itself as a female owned company: Kathryne King is the “owner.” John King is the Chairman. All but one of the other senior staff are men. Their website features smiling, well dressed workers. One spokesperson for the company described the wages as “competitive.” Competitive with what?
It’s important to note that Hyatt’s major competitors in the Boston area, the Hilton and Marriott chains, are not planning on using this particular cost-saving measure. They prefer to cultivate a loyal and stable staff and pay them decent wages for physically demanding work. One wonders where Hospitality Staffing finds people desperate enough to work for low wages and no benefits who can still provide an acceptable level of service to the host company.
Paul Sacco, president of the Massachusetts Lodging Association, has no problem with Hyatt’s strategy. He points out that outsourcing has been going on for years at companies around the country. He says the move will save Hyatt money and will not affect the hotel guests. “If you stayed at the Hyatt last night and you bumped into the housekeeper, would you notice a difference?”
Excellent point, Paul. Guests at the Hyatt Harborside will still enjoy the amenities: the “celebrated architectural details such as an inlaid marble floor map, ornate dome ceiling and exterior lighthouse and beacon accents.” Guests are not likely to spend much time worrying about Lucine Williams, an out-of-work single mother, and her 13 year old asthmatic child. They will, however, be quick to complain if the bed is not well made, if the bathroom is not spotless and if there is no bed-time mint on the pillow.

Fresh Health Wonk Review and assorted news briefs from around the web

Thursday, September 17th, 2009

Hot of the presses, a freshly baked edition of Health Wonk Review posted by Rich Elmore of Healthcare Technology News. There’s some really good commentary by some really smart people – including reactions to Obama’s speech last week.
Getting results from managed care – Joe Paduda posts a list of questions for your work comp managed care vendors over at Managed Care Matters – an excellent prep list of key areas that you should be considering when vendors are up for review – or even when they’re not. These are important cost control issues to be monitoring on an ongoing basis.
Claimant experiences in Wisconsin and California – Peter Rousmaniere offers a comparison of workers comp claimant experience in Wisconsin and California in this month’s column in Risk & Insurance. This is based on the Workers Compensation Research Institute (WCRI) 11-state study of claimant experience with the workers’ compensation system which was released earlier this year.
Lack of RTW costs big bucks in L.A. – Roberto Ceniceros posts about the an egregious loophole in the Los Angeles workers comp system – “No wonder the county’s comp bill soared from $288 million last year to $407 million this year.” This might go a long way to explaining the disparity in state results that Rousmaniere discusses, above.
9-11 and workers comp – In commemorating the eight anniversary of 9/11, Tony Graffeo of offers a roundup of case law related to 9/11 claims. He notes that “… the 9/11 attacks brought on the largest single event ever to confront the workers’ compensation industry; one that in many ways nearly brought it to its knees.”
9/11 filing deadline: one year countdown – Laura Walter of EHS Today issues a reminder that time is running out for workers and volunteers who participated in rescue, cleanup or recovery operations following the attack on the World Trade Center to register with New York State’s Workers’ Compensation Board to preserve the right to file for 9/11-related workers’ compensation. The final deadline for filing is Sept. 11, 2010.
Pandemic and Workers Comp – attorney Jon Gelman posts about the urgent need for workers compensation pandemic planning, noting that the challenges facing the workers’ compensation system to deliver benefits as promised may be seriously burdened.
What are the odds…Death Risk Rankings is an interactive tool from CarnegieMellon that calculates your risk of dying in the next year and allows you to compare that risk to others in the world.
Short takes
Top 10 Workers Compensation Medicare Set Aside Errors and how to avoid them (PDF)
Masschusetts to set up a statewide electronic health information exchange
Can You Hear Me Now? Noise and Your Employees’ Hearing
Reducing fatalities: the little things really do matter

Annals of Dress Codes: With That Ring, I thee Fire!

Tuesday, September 15th, 2009

Hawwah Santiago was a “sandwich artist” at a Subway restaurant in New Smyrna Beach, Florida. She was fired after refusing to remove her nose ring while at work. Visible body piercings (other than earrings) violated the company dress code. Ms. Santiago sued, claiming that the nose ring was a practice of her Nuwaibian religion. The Nuwaibians, based in Eatonton GA, are a black supremacist cult with an elaborate set of beliefs, some of which require an inordinate degree of faith. Here is a very brief sample, courtesy of Wickipedia:

The Illuminati have nurtured a child, Satan’s son, who was born on 6 June 1966 at the Dakota House on 72nd Street in New York to Jacqueline Kennedy Onassis of the Rothschild/Kennedy families. The Pope was present at the birth and performed necromantic ceremonies. The child was raised by former U.S. president Richard Nixon and now lives in Belgium, where it is hooked up bodily to a computer called “The Beast 3M” or “3666. [Hmmm. Wonder what brand of virus control is used on the computer.]

There is an underground road connecting New York and London.

The issue here is not the quality of Santiago’s beliefs, but whether these beliefs entitle her to an exemption from company dress policy. The EEOC supported her charge of religious discrimination in the firing and brought suit against the employer. (While a government agency may not be in an ideal position to determine where religion ends and whackiness begins, the EEOC appears to have erred on the side of inclusiveness.)
A jury found that Ms. Santiago did not wear the nose ring because of a “sincerely held religious belief.” Not satisfied, the EEOC sought injunctive relief and punitive damages. But the court dismissed the case. Judge John Antoon II wrote: “The EEOC’s own publications acknowledge that some inquiry into the sincerity of an employee’s belief is appropriate. Otherwise, an employer would have to grant an accommodation any time an employee requested one.”
The leader of the Nuwaubians, Dwight York, currently rules his flock from a jail cell, where he resides under a sentence of more than 135 years for racketeering and child molestation (“suffer the children”?). Oh, ye of little faith! Someday in the not-too-distant future, York will begin his leisurely stroll through the underground road that runs from New York to London. Deep beneath the turbulent waters of the Atlantic Ocean, he will doubtless pause along the way for a delicious sub, lovingly prepared by a sandwich artist with dazzling piercings. When he emerges at last in London – near the lions guarding Nelson’s column, one assumes – the doubters will be vanquished and Nuwaibian claims for religious accommodation will finally be deemed credible.

Oklahoma: OK!

Monday, September 14th, 2009

The Insider just returned from a speaking engagement in Stillwater, Oklahoma. The occasion was the annual workers comp conference sponsored by the judiciary that manages comp in the state. I was invited by fellow blogger Judge Tom Leonard, whose blog provides valuable information to comp practitioners in the state.
As a relatively high-cost state, Oklahoma is experiencing rumblings in the state legislature to switch to an administrative – as opposed to judicial – system. In theory, this makes sense, as a formal judiciary with its due process rules can slow down the resolution of claims. But this is no simple problem, with no simple solutions. The first event at the conference featured a panel of legislators who were involved in crafting the systemic fix: in general, republicans were pushing for change, while democrats cautioned that the interests of injured workers may be compromised.
While the Insider does not take a formal position on the controversy, we did caution all parties to “beware the law of unintended consequences.” Every “fix” contains the seeds of both success and failure. The prudent legislator would do well to examine the problem from all sides and fashion a dispassionate solution – much as the talented and compassionate judges currently operating the Oklahoma system approach every claim.
Six Humongous Problems
The insider was invited to provide a national perspective on workers comp to the conference’s 400 participants. We focused on six looming crises facing comp across America. Here is a brief summary of our concerns:
1. The Original workers comp model is obsolete: Comp is nearing its 100th anniversary (New York 1911). The workplace at the beginning of the 20th century was very different from what confronts us today. Legislatures struggle to modify the initial legislation to keep pace with change.
2. The economic collapse is a game changer: The comfortable assumptions of financial planners (stocks rise inexorably over time) have disintegrated in the world-wide collapse that began just over a year ago. This collapse has implications for workers comp, with employment shakier than ever and the retirement plans of millions in tatters. Which leads to:
3. The Aging American workforce is going to get older: With baby boomers approaching retirement age, the workforce is already at its oldest. As retirement accounts sink with the economy, more and more workers are finding themselves in a bind. They do not have enough money to retire. These older workers bring skill and experience to the workplace, but their aging bodies are breaking down. The comp system is not built to handle workers in their late 60s and 70s who plan to keep on working. Will comp become the retirement plan of choice for workers with no other choices?
4. Undocumented workers are half in and half out: most states cover the medical costs and indemnity for injured, undocumented workers, but draw the line at vocational rehabilitation. By definition, these folks are not “available for work.” Will Congress create some form of amnesty, thereby opening the door to complete workers comp coverage for foreign workers?
5. Insurers are in big trouble: There may be low hanging fruit in the insurance world, but not in workers comp. There is a nation-wide suppression of rates, which is compounded, of course, by the idiocy of carriers who drop steep discounts on top of inadequate rates. Carriers may dream of a hardening market, but it never seems to arrive. Meanwhile, the bottom line continues to erode.
6. The federal government might mess everything up: The Medicare Secondary Payer program has invaded the settlement process for comp claims, creating chaos and uncertainty and increasing the costs. [Check out Judge Leonard’s blog for some excellent materials on the Secondary Payer program.] Now we have national health insurance on the immediate horizon. No, it’s not “death panels” or alleged coverage for undocumented workers that concern us. It’s the more basic issue of who will choose doctors, under what circumstances, and what impact this might have on workers comp.
We have covered all of these crises in the Insider and will continue to do so in the coming months. I’m not sure that the good folks in Oklahoma found much solace in the fact that their own little comp crisis is dwarfed by issues that transcend state lines. Meanwhile, I did learn a thing or two about Oklahoma. It all comes down to this: Sooners versus Cowboys. No, I’m not going to explain. You have to be there to really understand.

More on the work comp-financed weight loss surgery ruling

Friday, September 11th, 2009

Charles Wilson of AP has written an article about the Indiana court ruling which determined that Boston’s The Gourmet Pizza must pay for an employee’s weight loss surgery under workers comp. For the article, Wilson spoke with attorneys representing both sides of the issue, as well as our own Tom Lynch for the workers comp perspective.
The so-called “lifestyle illnesses” of obesity and diabetes pose complicated issues and challenges for employers:

“Both Lynch and Maltby said the issue won’t go away soon, in part because one-third of American adults are considered obese, with a body mass index of 30 or more. The index is based on height and weight. Last year, at least 220,000 obesity surgeries were done in the United States, says the American Society for Metabolic & Bariatric Surgery.
And Lynch said the ruling could have repercussions beyond obesity and weight-loss surgery.
“Who among us does not have some kind of situation that either now or in the future … could contribute to an injury?” he said. “This could be a big deal.”

See our original post: Compensible weight loss surgery? A new wrinkle in obesity.
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