Archive for May, 2013

New York Self Insurance: Chicken Stew

Tuesday, May 28th, 2013

The folks at Murray Bresky Consultants are just trying to scratch out a living by raising chickens – not just any chickens, but free range chickens that are “happy and healthy.” Their signature breed is “fed an all-natural and all-vegetable diet that, combined with plenty of exercise, makes our birds the leanest on the market. The leisurely lifestyle eliminates the need for antibiotics to prevent diseases commonly found in chickens as a result of stress and confined living conditions. Minimally processed, without the use of preservatives or other artificial ingredients, Murray’s Certified Humane Chicken is truly all chicken.”
Unfortunately for the company, they secured workers comp insurance through New York Compensation Managers (NYCM), the now defunct operator of a dozen self-insurance groups in New York. NYCM claimed to offer favorable rates, strict underwriting standards and exemplary claims services. They ended up with egg on their face with their inadequate rates, suspect underwriting and rampant under-reserving of claims. In retrospect, the operation ran around like a chicken with its head cut off. By the time the problems emerged (in 2006), it was too late to shake a feather and correct the problems.
Following the SIG’s failure, Murray Bresky Associates was hit with a $1.2 million assessment to make up their share of the SIG’s deficit. That ain’t chicken feed.
A Game of Chicken
Murray Bresky is not chickening out of a fight. Indeed, the chickens have come home to roost in the form of a lawsuit filed against NYCM and its board of trustees. The lawsuit seeks to recover the $1.2 million and then some, alleging breach of contract and breach of fiduciary duty. The case worked its way up to the NY Supreme Court, Appellate Division, where the motion by the defendents to dismiss the lawsuit was, for the most part, dismissed.
Now the defendents are walking on egg shells, facing the prospect of personal liability for the failures of the SIG. Where they once feathered their nests with the proceeds of the operation, their financial security has flown the coop. This is a legal mess perhaps best described by the late Lyndon Baines Johnson: “Boys, I may not know much, but I know chicken poop from chicken salad.”
Roles and Irresponsibilities
One of the former trustees of the SIG is squawking that he was not aware that he was, in fact, a trustee. He may have signed off on a few trustee documents, he may have performed some of the functions of a trustee, but he insists that he had no memory of being appointed. He insisted that he was not a bad egg and claimed that he had no place in the pecking order. The court, however, ruled otherwise.
As the saying goes, you have to break eggs to make an omelette. Quite a few more eggs will be broken before this particular concoction is served up. Hard-boiled attorneys will parse the details to figure out who, if anyone, owes Murray Bresky Consultants and exactly how much they owe.
Pecking Orders
The courts now rule the roost. They have upheld Murray Bresky’s right to sue, with the exception of some actions that are time-barred. There may well be a sunny side up in the chicken company’s quest for justice. We look forward to the final resolution of this stew, the chicken scratch of a judge’s signature that will put a final number on the liability of an insurance operation that flaps my wattles (ie., annoys me).
Here’s a little unsolicited advice to Murray Bresky Consultants: don’t count your chickens before they hatch. This one has a long way to go before the company can feather its nest with the proceeds of a complex litigation. In the meantime, their free range chickens have the run of the coop, enjoying their cage-free, stress-free lives right up to the very end. Bon appetite!

Firefighter safety: tactics over traditions to reduce fatalities

Tuesday, May 28th, 2013

Preliminary reports for 2012 show that there were 82 firefighter fatalities, the fourth consecutive year in which fatalities were 91 or under, in contrast with the decade prior when fatalities were all in triple digits. And in one of those years, 2007, 9 firefighter deaths occurred on June 18 in a warehouse in Charleston, South Carolina.
The National Fallen Firefighters Foundation has recently released a documentary on that fire, which looks at the dramatic changes made in the operations of Charleston’s Fire Department following those deaths.

It’s good to hear the courage of this department at looking at and embracing the changes that needed to be made to heighten firefighter safety. Related to the idea of challenging traditional ways of doing things to improve safety, read how flashover research could change the future of firefighting tactics. A recent series of tests were conducted Spartanburg, SC to study various suppression methods for ventilating and isolating fires to prevent — or at least delay — flashover. The research shows that by “listening to the fires,” certain traditional firefighting tactics have come under scrutiny. In addition to homes being constructed closer together, they include more plastic and chemical elements, allowing fires to spread more rapidly. On the other hand, advances in windows and doors help to create ventilation-limited fires. This may mean more water on the fire sooner and waiting to open doors or windows to enter the building until a strategy is deployed. Even the old shibboleth about not using water on smoke is coming under scrutiny.
Article author Shane Ray says:

“Experienced company officers and instructors should examine the latest research, textbooks, and NIOSH firefighter-fatality and near-miss reports. Does the fire service operate and function the way it does — especially on single-family, detached dwellings — because it produces the best outcomes or because of anecdotal procedures and processes from the past? Fire officers can make a difference by improving tactical decision-making and training new firefighters and upcoming fire officers to think about their actions based on the knowledge they have, not just the skills and abilities. Ask the tough questions and embrace the answers.”

More resources on firefighter safety:
Everyone Goes Home
Fire Chief – Health & Safety

Health Wonkery, Nightclub Fire Fine, Don’t Fry Day, Manufacturing Trends & More

Thursday, May 23rd, 2013

Health Wonkery – At Wright on Health, Brad Wright has posted the Sardonic Edition of Health Wonk Review. He takes a bit of a tongue in cheek approach to the seriousness of our usual wonkery. Harumph, harumph. Check it out.
Station Nightclub Fire Fine in Dispute – Michael and Jeffrey Derderian, owners of the Station Nightclub, are protesting a $1 million fine levied for not having workers’ comp coverage. A 2003 fire at the Warwick, RI nightclub resulted in the deaths of 100 people, including four employees. They claim that they did not know they needed to cover part-time employees and are asking for a review by the state’s Supreme Court. The Providence Journal reports that the Department of Labor and Training is unsympathetic – according to DLT lawyer Bernard P. Healy: “The Derderians, he says, have benefited by the almost nine-year delay in finalizing the $1.066-million penalty since interest hasn’t been accruing. If the brothers had made efforts to compensate “their employees so grievously harmed,” the penalty most probably would have been entirely suspended, he says.”
Don’t Fry Friday – May 24 – Jon Gelman tells us that workers need to be aware that skin cancer is the most common cancer and they need to take preventative action to protect themselves from the sun’s rays. The EPA, CDC, FDA, National Council on Skin Cancer Prevention have declared May 24 as Don’t Fry Friday and offer sun safety tips. Also see Safety Daily Advisor: Skin-Deep Training to Prevent Skin Cancer from the Sun
The future of manufacturing – Joe Paduda posts Where’s manufacturing going – and why should you care? He says you should care because “manufacturing jobs drive workers comp premium.” He reports on a recent talk at the NCCI Issues Conference which predicted the growth of manufacturing in the US. Related: see our December post: Insourcing: A positive trend for U.S. manufacturing and Joe’s post Manufacturing’s coming back.
Different perspectives – At WorkCompEdge Blog, Kory Wells posts Employers and the Work Comp Industry: Failure to Communicate?. She reports on the disconnect between the industry insiders and employers as evidenced in Zywave’s 2013 P&C Workers’ Compensation & Safety Survey with over 3,100 participants. Topics that are heavily covered in workers comp media and widely under discussion by work comp professionals aren’t as high on employers’ radar. Only 28% of employers say they are very or somewhat concerned about opioid issue and only 36% of employers report being very or somewhat concerned about comorbidity issues such as obesity and diabetes complicating recoveries. And although 42% of survey participants were very or somewhat concerned about this year’s change in the experience rating formula, only 15% of employers say they know the value of their company’s loss-free rating, or minimum mod. This raises the issue: are we in the industry communicating enough with employers?
Rocket Science & Workers Comp – fresh from the NCCI Issues Conference, Dave DePaolo opines on all the moving parts that keep the workers’ compensation system working as well as it does in his post It’s Not Rocket Science, But Close – a thoughtful and interesting look at the industry. Some commenters pushed back on his reference to a front end and a back end, and he clarified in another post, Workers’ Compensation Finance 101: “The point that I was making is that there are two distinct processes involved in the worker’s compensation game that are extraordinarily complex and require a good degree of coordination, forecasting and soothsaying in order to operate reasonably efficiently. / Another point that I was making is that workers’ compensation is a cash flow system. By this I mean that money comes into the system through employer assessments; and money flows out of the system by benefit distribution.”
Opioids – Michael Gavin at Evidence Based posts that abuse-deterrent opioids are a great solution but the wrong problem. He says, “The problem as we see it is lack of medical necessity. In most cases, it doesn’t matter if the patient’s opioid is abuse-deterrent or not. If it’s medically unnecessary, if it’s leading to loss of function, if it’s leading to dependence and addiction… it needs to go away. The doctor will be better educated. The patient will get better. The cost of care will go down. Everyone wins. Abuse deterrent technology is great, but if we focus on technology over medical necessity, we will have missed the mark and the crisis will continue.”
Foreshadowing ACA? – At Employee Benefit Adviser, Gillian Roberts reports on recent study released by PricewaterhouseCoopers that shows that employer health coverage actually increased from the time the health care law took effect in Massachusetts seven years ago. In Deconstructing Mass. employer health insurance increase, she notes that while this is not a true indicator of what will happen with the Affordable Care Act, industry insiders say it could point to some overall trends. She reports: “Between 1999 and 2011, PwC’s report says “employer coverage in Massachusetts rose from 70.8% in 2006 to 72.1% in 2011. Nationally, during the same period, employer coverage fell from 68.2% to 58.3%.” PwC’s report also says that qualitative evidence, interviews with HR executives at companies in the state, show that more employees were interested in coverage. The results were of course that 98% of the state became coverage by health insurance.”
Still a problem – While black lung may sound like a disease from a bygone era, that is unfortunately not the case. At Coal Tattoo, Ken Ward Jr. reports that autopsies confirm black lung at Upper Big Branch – it remains a serious concern in today’s coalfields.
Other noteworthy news

Workers Compensation Looking Up?

Monday, May 20th, 2013

Dennis Mealy, chief actuary for NCCI, has issued his state of the line report on workers compensation. There’s a lot of good news for insurers, along with a few little red flags that might well morph into big banners of bad news. Mealy’s presentation will soon be available as a webinar at the NCCI site, but for the moment, let’s glean the essence from his Powerpoint presentation.
There’s a lot of positive news (with apologies to those who are not up to speed in insurance jargon). Premium is up by $3.3B, about 9 percent in all. The all-important combined ratio has dropped from 115 to 109 (projected). Given suppressed interest rates, 109 is still high, but it puts profitability within reach. The calendar year loss ratio has dropped from the unacceptable – 70.8 percent – to 66 percent. Pre-tax operational gains are plus 5 percent.
There is (mostly) good news in the loss area: frequency of lost-time claims is down an average of five per cent across all sectors. Indemnity claim costs are up just slightly, as are severity costs. Even in assigned risk pools – insurers of last resort – results have improved, with combined ratios down to 112 percent, compared to 117 in the two prior years.
At the same time – and directly related to the improving results – discounting of premiums has diminished from -7.6 percent to a projected level of -4.5 percent. [Perhaps even the sceptical rate setters in Massachusetts will begin to see the relationship between (slightly) higher rates and a healthy market. If they continue their intransigence on rate increases, the Massachusetts miracle will soon collapse in a heap.]
Who Pays?
In all success stories – however modest – there are winners and losers. In workers comp, the winners are employers with low losses; the losers tend to be those with relatively high losses. NCCI has upped the ante by changing the way experience mods are calculated.
Beginning in January and rolling throughout this year, NCCI is implementing a new mod calculation, raising the split point of primary losses from $5,000 to $10,000. (See Tom Lynch’s detailed explanation beginning here.) For many experience rated risks, the change has been positive. Despite paying slightly higher rates in many states, the cost of insurance has remained stable or even dropped. Here is NCCI’s summary of the new rating plan impact:

– 12 percent of risks see premiums decreasing by 5 to 15 percent
– 76 percent see plus or minus changes within 5 percent
– 11.3 percent see increases in the 5 to 15 percent range
– less than 1 percent see increases above 15 percent (these are the folks who have been calling…)

The Big (Cloudy?) Picture
Mealy’s presentation offers a good news/bad news overview of workers comp. On the plus side, we have seen a slight increase in premiums, a reduction in frequency, stable severity and a good capital position for the industry in general.
On the negative side, the slow pace of economic recovery is troubling, as is the structural unemployment that threatens the livelihoods of aging, middle class workers. Underwriting is confronted with unprecedented instability in predicting risk: today’s low loss company might well be tomorrow’s catastrophe. Low interest rates impede profitability. Alternative markets – the new opt-out law in Oklahoma being a prime example – threaten to drain good risks from the market and leave higher risks in conventional coverage. Finally, it is too soon to know the impact of health care reform, though in the long run, it seems likely that virtually universal health care should reduce cost-shifting into workers comp.
Perhaps we should add the impact of global warming to the negative side. As storms increase in magnitude, the risks to those who are working when storms hit also increase exponentially.
As the Chinese curse would have it, we live in “interesting times.” For the moment, from the rather narrow perspective of the workers compensation market, things look cautiously and incrementally better. But as they say in New England, if you don’t like the weather, just wait a minute. It was clear and warm a few moments ago. Suddenly, the wind picks up, the wind chills and the rain comes pouring down. Like a harried underwriter, we struggle to find shelter in the unexpected storm.

Risk, Austerity, ACA, Women in Manufacturing, Terrorism & other news of note

Wednesday, May 15th, 2013

Our New Zealand blogger pal Russell Hutchinson lends a global perspective to this week’s Cavalcade of Risk #183 – check it out!

Austerity’s impact on public health
– over at Managed Care Matters, Joe Paduda looks at the impact that financial austerity measures in Greece and Iceland have had on public health, suicide rates, hospital admissions, and other measures of morbidity and mortality.
Implementing Health Reform: Employer Coverage Option Notices – At Health Affairs Blog, Timothy Jost posts about recently released guidance from the Department of Labor’s Employee Benefits Security Administration regarding notices that employers must give to employees concerning their coverage options under the Affordable Care Act. He notes that “Employers must provide the notice if they are subject to the FLSA. The FLSA applies generally to employers who employ one or more employees and have a volume of at least $500,000 in annual business. It also applies to specific listed types of employers. Employers must provide the notice to each employee, including part time employees. ”
Are Women Really Making It? – an article by Rachel Bennett Steury in Industry Week looks at the status of women in manufacturing and the picture is not good: “Certainly the past decade has revealed a decline in manufacturing employment for everyone but women bore the brunt of job loss in three of the four highest paying manufacturing sectors. According to a recent report by the National Women’s Law Center (NWLC), women’s employment in chemicals, petroleum & coal products, and computer & electronics products manufacturing decreased while men’s employment increased.”
Marsh Report Shows Continued Demand for Terrorism Coverage – the current Terrorism Risk Insurance Act (TRIA) is scheduled to expire December 31, 2014. Is this backstop still needed? In Risk Management Monitor, Nathan Bacchus looks at a recent Marsh Report that offers some interesting stats about how prevalence of terrorism coverage by industry sectors and geographic regions. “The take-up rates are highest among companies with total insured value (TIV) over $500 million, but even those companies with less than $100 million in TIV obtained terrorism insurance at a 59% rate in 2012.” Meanwhile, many Boston merchants are hoping the recent Marathon bombing won’t be labeled as terrorism : “Illogical as that may seem, such a declaration might be the only way these businesses — many of which did not have specific coverage for terrorism — can get reimbursed for their losses by their insurance companies.”
Extraterrestrial workplaces – And from one of the coolest workplaces ever, International Space Station commander Chris Hadfield offers us a musical interlude. Congratulations to Chris & his crew from the on a successful return to earth – but not without first addressing some safety maintenance issues.

Short Takes

Finally, we can’t resist sharing a video of this incredible and bizarre weather-related oddity that recently occurred in Minnesota. It’s doubtful that many homes are insured against “ice tsunamis.”

Health Wonk Review and other occupational news of note

Thursday, May 9th, 2013

Joe Paduda has a not-to-be-missed robust edition of Health Wonk Review posted at Managed Care Matters. It covers health care cost trends, reform implementation, motivations and more. Get your biweekly dose of health wonkery from the best in the blogosphere to stay current on the trends.
And in other news …
Texas tragedy & insurance matters
Dallas News reporters Doug Swanson and Reese Dunklin report that West Fertilizer was insured for only $1 million in liability. The explosion killed 15, injured several hundred, and caused an estimated $100 million in property losses. According to state insurance authorities, fertilizer facilities are not required to have liability insurance that would compensate for damage they might cause. The article includes this observation: “A million dollars is a pathetic amount for this type of dangerous activity,” lawyer Randy C. Roberts said. “If you want to drive a truck down the interstate, you’ve got to have $750,000 in coverage, even if you’re just carrying eggs,” Roberts said. “But if you want to put this ammonium nitrate into this town next to that school and that nursing home and those houses, you’re not required to carry insurance.”
According to Property Casualty360‘s Arthur Postal, workers comp for the deceased first responders and injured city workers will be covered by the state’s Large Loss Fund. The only West Fertilizer employee involved was a first responder killed in the blast who was covered by the fund — the company itself has an “alternative benefit plan” since workers comp is not mandatory in Texas — an issue that raises more questions. See Postal’s related article: The Assault on State-Regulated Workers’ Comp, which talks about Texas, Ohio, New York and Oklahoma.

Boston Marathon Bombing
Surgeon-journalist Atul Gawande has a must-read insider’s account in The New Yorker, which explains Why Boston’s Hospitals Were Ready to cope with the emergencies created by the Boston Marathon bombing.
Here’s to the Nurses
While on the topic of excellent medical care, it’s a good time to note that this is National Nurses Week. It runs through May 12, which is the birthday of Florence Nightingale, widely recognized as the founder of modern nursing. One of the key issues facing nursing — and one that has an impact on patient safety, too, is staffing levels. See: Nurses Fighting State By State For Minimum Staffing Laws.
State of the Unions
Differences between union and nonunion compensation, 2001-2011 (PDF) – BLS reports: “Union workers continue to receive higher wages than nonunion workers and have greater access to most employer-sponsored employee benefits; during the 2001-2011 period, the differences between union and non-union benefit cost levels appear to have widened.”
Cool Tool
The National Conference of State Legislatures offers a Workers Compensation — Enacted Legislation Database
Worker Memorial Day Followup
Compliance and Safety Blog featured an excellent roundup of links, tributes, historical information, and the 1994 Documentary by Robert Cotter that tells the story of the Hamlet fire in the Imperial Chicken Plant that killed 25 workers, with the story told From The Eyes Of The Survivors. This was an egregious incident – 19 of the deceased workers were mothers with young children. The plant owner locked the emergency exit to prevent theft.
Belated Risk Roundup
While yours truly was off on vacation last week, the risk bloggers weren’t: Here’s last week’s roundup: Cavalcade of Risk #182, posted by Jeff Root of Rootfin, A Texas resident who passed through West, TX within 15 hours of the blast.
Belated Kudos
Hats off to Michael Fitzgibbon, Ontario labor and employment attorney, on his 10 year blogging anniversary at Thoughts from a Management Lawyer – it was a lonely landscape for business bloggers back then, as we well know. He was one of the early links in our sidebar, and is still there today. He names a few other early pioneers in his post.
Other noteworthy news

Annals of Claims Management: Full Catastrophe Denial

Tuesday, May 7th, 2013

In the Insider’s decade of exploring workers comp, we have encountered many unusual instances of compensability, legitimate claim denials and outright fraud. But rarely have we found cases where a claims administrator, in this case, a TPA, simply refuses to pay for medically necessary treatment. The saga of the late Charles Romano reminds us that the great bargain of workers comp is not just between employers and their workers; it includes the good faith effort of claims adjusters to carry out the letter – and spirit – of the law.
Charles Romano worked as a stocker for Ralph’s Grocery Company, a California-based operation that is part of the Kroger chain. It is worth noting from the outset that Kroger is self-insured for comp, with Sedgwick serving as the TPA. As a stocker, Romano presumably did a lot of lifting and reaching. He suffered a work related injury involving his shoulder and back in August of 2003.
A Solution Worse than the Problem
After conservative treatment failed to resolve the problem, he underwent surgery in December 2003. What had seemed like a relatively simple solution to a shoulder problem quickly descended into a grave, life-threatening situation: Romano contracted a MRSA infection following the surgery, which led directly to total paralysis. He suffered renal failure and several heart attacks, which were related to the MRSA infection. After enduring inadequate medical treatment directly related to the TPA’s denial of treatment, Romano died in May 2008.
Nearly three years after the initial surgery, a workers comp administrative law judge (WCJ) ordered that the TPA pay for all the medical expenses related to the infection. Without consulting with medical professionals, the TPA unilaterally refused all payments – totalling, by this time, hundreds of thousands of dollars. The TPA appealed the adverse ruling.
In February 2012, a workers comp administrative law judge imposed penalties for delay of treatment in eleven specific instances, finding that the TPA “failed in its statutory duty to provide medical care, egregious behavior which increased the suffering of a horrifically ill individual.” He imposed the maximum $10,000 fine for each denial of treatment.
Unappealing Appeal
The TPA appealed the penalties for delayed treatment. In what surely qualifies as a new definition of chutzpah, the TPA contended that penalties were not appropriate, among other reasons, because the claimant had died. Well, duh, the routine denial of treatment throughout the course of the illness was a significant factor in the death. Romano simply did not receive medically necessary treatments to address his formidable medical conditions.
NOTE: The penalties, even when maxed out at $10,000 per incident, is dwarfed by the suffering inflicted upon Romano.
The Workers Comp Appeals Board upheld the penalties [For a link to a PDF of the lengthy ruling, Google “Charles Romano Trust vs. Kroger Company]:

The WCJ’s Report makes it clear that he imposed the harshest penalties possible under section 5814 because of defendant’s extensive history of delay in the provision of medical treatment; the effects of those delays on a paralyzed, catastrophically ill employee; the lengths of the various delays; and defendant’s repeated failure to act when the delays were brought to its attention.

Lest the ruling be considered in any respect ambiguous, the court went on to say: “We have rarely encountered a case in which a defendant has exhibited such blithe disregard for its legal and ethical obligation to provide medical care to a critically injured worker.”
Risk Transfer, Risk Retention
It is tempting to conclude that the TPA’s actions were related to their customer’s risk assumption – otherwise known as self insurance. It is one thing to purchase insurance (risk transfer) and have the insurance company assume liability for a catastrophic loss. It is quite another for a self-insured company to absorb a loss of this magnitude on its own. (Presumably Kroger had some form of stop loss in place.) Despite the multiple findings of compensability, despite the judicial determination that the horrendous MRSA infection was indeed work related, the TPA persisted in denying treatments and rejecting payments, long after Romano’s untimely death.
As Mark Twain famously noted, “denial is not just a river in Egypt.” It’s also a poor strategy for managing claims. In his last years, the unfortunate Charles Romano certainly had to confront health issues beyond anyone’s worst nightmare; denial for him was not an option. For reasons that remain unclear, when it came to paying for Romano’s extensive and expensive care, the TPA chose a path of full catastrophe denial .
In the findings of the court, this denial was in itself an unmitigated disaster for the acutely vulnerable Romano, accelerating his precipitous decline and death. In the interests of saving their client some serious bucks, the TPA dug in its heels and refused to accept the compensability of a claim that had been adjudicated as compensable. In doing so, they violated the spirit and letter of the workers comp contract and earned themselves, in this particular instance at least, a place on the Insider’s Management Wall of Shame.