Archive for the ‘State News’ Category

WCRI: Day One, Part Two: The 1st Opt-Out Session

Thursday, March 10th, 2016

The afternoon of WCRI’s 2016 Annual Conference was devoted to Opt-Out. The first of two sessions was a Point-Counterpoint exercise. Trey Gillespie of the Property & Casualty Association of America led off. To Mr. Gillespie, with Opt-Out it’s 1910 all over again. He described Opt-Out in Texas and Oklahoma as allowing employers to deliver sub-standard care to injured workers without government oversight. Showing stark contrasts between what is allowed in Opt-Out and required in workers’ compensation, he suggested that employees were at the mercy of employers, which could sometimes be good and sometimes be bad. Opt-Out’s a kind of Employer Personal Responsibility Plan.

Bill Minick, of PartnerSource, followed with a presentation in favor of “Options to Workers’ Compensation.” Minick has been the loudest proponent and most significant advocate for Opt-Out. He and Opt-Out were the subject of a Propublica investigative journalism story late last year. He described Opt-out as a substantial improvement on a failed system and painted a picture of employers being able to provide better care for injured workers at less cost, because regulatory and bureaucratic requirements have been stripped out. Essentially, Minick claims that the workers’ compensation system makes employers go from Massachusetts to Rhode Island by way of Alex Swedlow’s California. He’d rather just drive the 30 miles down Route 95.

My basic problem with Opt-Out, wherever it is, is that some employers with resources and good intentions welcome the chance to design their own injury benefit plans that will provide benefits at least as good as traditional workers’ compensation at significantly less cost. This, in itself, is a good thing. Some large employers in Texas, such as Costco, seem to have done that. Trouble is, not every employer is Costco. As I wrote when I evaluated Opt-Out in 2014, I’m concerned about Kenny’s Citgo, down the street and around the corner, where Kenny and his five hourly workers labor without the benefits of a mandated workers’ compensation plan, because Kenny has Opted-Out. There are more Kenny’s than Costcos.

WCRI – Day One, Part One

Thursday, March 10th, 2016

Day One of the WCRI’s annual conference began with WCRI’s Chairman, Vincent Armentano, of The Travelers Companies, introducing new President and CEO John Ruser. He presented the first session (preliminary finding, subject to change) on the Impact of Fee Schedules on Case Shifting in Workers’ Compensation.

It should come as no surprise that there is substantial variation in fee schedules and prices across the states and that workers’ comp fee schedules and costs continue to be higher than group health costs, in some states significantly higher. Bottom line here: States where workers comp pays higher medical reimbursements have a much greater chance of a soft tissue injury being classified as work-related. Not so much for traumatic injuries, such as fractures. In otherwords, states that have higher reimbursement for workers’ comp than group health have greater incidence of cost shifting to worker’s comp. Follow the money.

Next up, Dr. Bogdan Savych on comparing worker outcomes across fifteen states. Interesting news: Between 9% and 19% (median is 14%) of injured workers “had no substantial return to work” (meaning returning to work for at least 30 days) three years post-injury. These, again, are preliminary findings and subject to change, but 14% is a huge number. This study, based on 6,000 injured worker interviews, raises many questions. For example, what role do differing state workers’ comp benefits play in this. Also, Savych divided the workers into six age cohorts. The older group had more injuries without substantial return to work. What role did their age play in that?

Alex Swedlow, President of the California Workers’ Compensation Institute, delivered a mesmerizing presentation on Independent Medical Review and Dispute Resolution in the state, which, if it were a country, would have the sixth highest GDP in the world. Not surprising, to quote Swedlow, “Size matters.” California’s been trying to control medical costs for decades, and it keeps trying. I can’t begin to cover the totality of  the Swedlow presentation, but here’s one takeaway: Ten percent  of California’s medical providers account for 85% of Independent Medical Review decisions. Again, follow the money.

Kudos And Thanks To Work Comp Central’s Greg Jones

Wednesday, December 9th, 2015

Work Comp Central’s Greg Jones has relentlessly followed and reported on the Michael Drobot case in Southern California, a case that fairly oozes greed and sleaze.

For the uninitiated, Michael Drobot’s Pacific Health Corporation owned two hospitals, Pacific Hospital of Long Beach and Tri-City Regional Medical Center in Hawaiian Gardens. For around 10 years, he paid kickbacks to a number of doctors for referring spinal fusion patients to Pacific Hospital of Long Beach for surgery. In February, 2014, Drobot pleaded guilty to making the kickbacks, which are illegal, and for charging California’s workers’ compensation system, the U.S. Department of Labor and about 150 workers’ compensation insurers somewhere in the vicinity of $500 million dollars for the surgeries over the ten year period. At that time, we wrote about this with Honor Sold, Trust Betrayed: Unbridled Greed in California.

Drobot is also charged with bribing state senator Ron Calderon for his help in easing one of the SB 863 requirements, which we don’t need to go into here. Calderon has pleaded not guilty, and that case is moving through the system.

Throughout this sordid business, Greg Jones has been there, providing a valuable service with his spot-on reporting, most recently last week with his story (subscription required) that a number of the doctors who took the kickbacks, at $15,000 a pop, also had filed “more than 15,000 liens with a total claimed value of $93.8 million.” To get that story, Jones had to wade through what must have been a steamer trunk full of documents.

Personally, I owe a debt of gratitude to Mr. Jones. He found two errors in my post of 30 November, Workers’ Comp Fraud: The Michael Drobot Case Grinds On. I had written that the kickback scheme involved both of the Drobot hospitals. That was wrong. They only happened at Pacific Hospital at Long Beach. Also, I had written that Drobot had pleaded guilty to bribing Calderon. He did not. He is charged with doing it, and both he and Calderon have pleaded not guilty. Before Work Comp Central ran my post, Greg found the errors and made edits to correct them, for which I am grateful.

The Drobot case is complicated and it represents the bottom of the workers’ compensation bird cage. However, the solid reporting of Greg Jones shines an arc light on the sorry mess and will help to improve the system so that in the future the Drobots of the world will think twice about this kind of criminality.

 

 

Workers’ Comp Fraud: The Drobot Case Grinds On

Monday, November 30th, 2015

In late February, 2014, we wrote about the sordid tale of corruption perpetrated in southern California by Michael Drobot and his gang of thieves. Honor Sold, Trust Betrayed: Unbridled Greed In California describes the astonishing criminality of a large group of highly placed people whose job it was to care for others.

This from our original post:

Suppose you’re a doctor in California with a patient who complains that his back hurts a lot. Suppose further that Michael Drobot, the owner of California’s Pacific Health Corporation, will give you $15,000 if you refer your patient to his Pacific Hospital of Long Beach for lumbar fusion surgery, which may or may not be warranted. And what if Drobot’s Pacific Hospital were hundreds of miles away and that other qualified hospitals that wouldn’t pay you a kickback were much closer. What would you do?

The answer? Many doctors took the money and delivered up their patients to the Drobot surgical mill. Drobot paid the doctors in this scheme somewhere between $25 and $50 million.

Drobot’s two hospitals, Pacific Hospital of Long Beach and Tri-City Regional Medical Center in Hawaiian Gardens, billed thousands of mostly spinal fusion surgeries to California’s workers’ compensation system, the U.S. Department of Labor and workers’ compensation insurers. Over an eight year period, the hospitals were paid more than $500 million.

Drobot pleaded guilty in early 2014 to paying the kickbacks. He also pleaded guilty to bribing state Senator Ron Calderon to the tune of $100,000 for massaging the SB 863 legislation so that the fraud could continue for all of 2013. After his indictment in February, 2014, Calderon pleaded not guilty.

The wheels if justice have ground slowly but exceedingly fine in the nearly two years since. Former U. S. Attorney Andre Birotte, Jr., now a U. S. District Judge in California’s Central District, passed the baton to his replacement U.S. Attorney Eileen M. Decker. Last week Decker announced that Drobot’s CFO, James L. Canedo, and Paul Richard Randall, a “health care marketing recruiter” (he recruited doctors to refer patients in return for the illegal kickbacks) pleaded guilty to fraud, money laundering, conspiracy and other crimes. Also, two orthopedic surgeons, Philip Sobol of Studio City and Mitchell Cohen of Irvine, and Alan Ivar, a Las Vegas chiropractor who used to live in Southern California, have agreed to plead guilty to conspiracy and other charges.

There will certainly be more to come in this tale of sleaze.

From a Lonely Gate at O’Hare Airport

Monday, November 2nd, 2015

No trip is ever totally smooth. To prove the point, a couple hundred of humanity’s weary children  and I now sit at O’Hare’s Gate B9 waiting for a pilot to fly us home to Boston. Seems that the pilot originally scheduled has gone AWOL. Whatever the reason, he’s not here, so United Airlines is scrounging around for a replacement. None of the passengers has volunteered.

The rest of the trip has been excellent. I’m returning from Boise, Idaho, where I was honored to deliver the keynote address at the Idaho Industrial Commission’s Annual Workers’ Compensation Conference.

Commission Executive Director Mindy Montgomery, conference organizer Dara Barney and the rest of the outstanding Commission staff did a wonderful job pulling together a highly informative and stimulating day for more than 300 of Idaho’s workers’ comp professionals, including attorneys, claims adjusters, medical providers, agents and brokers.

And before we go any further, I want to publicly acknowledge a debt I owe to the Commission’s Chair, R. D. Maynard, who is also the current President of the IAIABC. In his opening remarks he used a phrase I’ve never heard, but which I intend to steal for the rest of my life. The phrase? In describing a smart person, R. D. suggested she was “smarter than a treeful of owls.”

In my hour and a half presentation (yes, that’s a long one) I didn’t come close to R. D.’s bon mot, but I did discuss three big picture issues and their relationship to workers’ comp:

  1. Rapidly accelerating artificial intelligence
  2. The generational changing of the guard as Baby Boomers pass the torch to Millennials
  3. The New Normal Economy.

I asked the attendees to what degree they thought our industry has or has not kept pace with these transformational issues. I suggested strongly that it has not. By the end of the presentation, most seemed to agree. It’s almost as if for the industry it’s business as usual, but for the industry’s customers, the employers who pay the bills, it’s full speed ahead toward tomorrow.

In the possibly absurd leap of faith that our Jetway’s umbilical cord to O’Hare will be brief, in this post I’m only going to address Item #1, above, the rapidly accelerating development of artificial intelligence.

During the Great Recession that began in 2008, American business lost 16% of its workforce, which forced a major re-evaluation of how business is done. Sixty percent of the jobs that were lost were lost by the middle class, but, according to the Federal Reserve Bank of St. Louis, only 22% of those jobs came back, the other nearly 40% dropping into significantly lower paying jobs. Why? Well, one reason is that beginning in 2010, we saw The Rise of the Robots. Since then, there has been a nearly exponential growth in the deployment of industrial robots and the artificial intelligence that is more and more governing them. Employers are realizing that fewer and fewer humans are needed to make high-quality, reliable products. And robots don’t get hurt and enter the workers’ comp system. You certainly insure them, but not with workers’ comp.

Two examples:

  1. At an Ikea factory in Sweden, book case components are assembled, packaged, shrink-wrapped, palletized and made ready for distribution 24 hours a day without the touch of a human hand.
  2. Since defeating Ken Jennings on Jeopardy, IBM’s Watson has continued to learn at a faster and faster pace. Today, Watson seems more like a thinking person, whoops, excuse me, make that thinking machine, than most humans.

In Idaho, I challenged the attendees to ponder how long it would be before some forward thinking insurance hotshot cottons on to the idea that Watson might make a great claims adjuster. Think about it. Handling no more than 125 open claims today is pretty much considered  ideal. Watson could handle thousands – 24 hours a day.

I’m not suggesting that we are on the cusp of watching claims adjusters suddenly go the way of the Wooly Mammoth. No, there is a nuance to the claims process that human beings possess and robots, such as Watson, don’t — yet. But it seems inevitable to me that Watson and his brothers and sisters will continue to learn at an ever faster rate, to the point that they will, at some point in the not too distant future, acquire the nuance displayed by today’s best adjusters.

And what about the armies of highly-trained and, in some cases, highly-paid people populating the many pockets on the workers’ comp health care pool table?

The point is that big change is not coming; it’s here. So, the question becomes – What is the more than 100-year-old workers’ compensation industry doing about it? What is the plan?

Before wheels up (yup, we’re finally getting off the runway), I’d like to congratulate both Bob Wilson, of workerscompensation.com, and Mark Pew, of Prium, for their spellbinding (I’m not exaggerating) presentations at yesterday’s Idaho conference. It was a privilege to be on the same program with these workers’ compensation thought leaders.

I’ll post this sometime after getting safe and sound to Boston, “the home of the bean and the cod, where the Lodges talk only to Cabots, and the Cabots talk only to God.”

Employee Misclassification: The Beat Goes On And On And On And…

Wednesday, July 8th, 2015

Bill Clinton used to say that (fill in the blank) would last “until the last dog dies.” Well, friends, today’s topic is all about a dog that won’t die, absolutely refuses to die, will outlive us all, cannot be killed. You get the point.

Eleven years ago (I almost feel like writing “in a galaxy far away”), the Insider started to track the illegal practice of misclassifying employees. We found that, while it was almost ubiquitous in the construction industry, its tentacles reached into other industries as well. We saw it as widespread right in our backyard of Massachusetts. We found a 2005 paper addressing the issue in the Maine construction industry published by the Labor and Worklife Program, Harvard Law School and the Harvard School of Public Health. We conducted employer seminars on it in many states.

At the time, we thought it was a pretty egregious practice that would be hard for state Attorneys General to ignore, so it would probably get fixed lickety split. We were half right. It was egregious, and Ags from the majority of states published stern regulations, as did state Departments of Insurance. But “fixed?” Nope.

Then, in 2005, a national class-action lawsuit with hundreds of plaintiffs from 30 states was filed against FedEx Ground alleging that workers were misclassified as independent contractors. This was mother’s milk to us. We had our bogeyman, and his name was Fedex. Since then, we’ve written about this Dorian Grey issue ten times. Here’s an example from 2006

FedEx loses contractor battle in Mass – Last year, my colleague Jon Coppelman blogged that FedEx should beware of Massachusetts when calling drivers “independent contractors.” Last week, the Massachusetts Department of Workforce Development ruled that a FedEx ground driver was not an independent contractor, and was therefore illegally denied unemployment benefits. Of course, this opens a can of worms about the denial of other statutory benefits, like workers comp. This is not the end of the lawsuits by any means. FedEx faces ongoing challenges in multiple states. The moral of the story: if you work with independent contractors, be sure they meet state and federal criteria to qualify as such.

Fast forward to now. Specifically, to Wall Street Journal writer Laura Weber’s 30 June story “Bosses Reclassify Workers To Cut Costs.” Ms. Weber’s story manages to be both objective reporting and poignant at the same time. Here’s an exccerpt:

Employers have long shifted work from employees to independent contractors, often relabeling the workers and slightly altering the conditions of their work, court documents and settlements indicate. Now, businesses are turning to other kinds of employment relationships, such as setting up workers as franchisees or owners of limited liability companies, which helps to shield businesses from tax and labor statutes.

In response, some state and federal agencies are aggressively clamping down on such arrangements, passing local legislation, filing briefs in workers’ own lawsuits, and closely tracking the spread of what they see as questionable employment models.

All this is happening against the backdrop of a broader shifting of risk from employers to workers, who shoulder an increasing share of responsibility for everything from health-insurance premiums to retirement income to job security. Alleged misclassification of workers has been one of the primary battlegrounds of this shift, leading to high-profile lawsuits against Uber Technologies Inc. and FedEx Corp., among others. Both have recently lost or settled big cases. Uber is appealing one decision, and FedEx settled in California for $228 million but is continuing to challenge classification lawsuits in other states.

Today I’m an employee; tomorrow I’m an Independent Contractor; the next day a Franchisee, or, oh, I don’t know, CEO of my own one-person LLC. Not only will the dog not die, his bark is really loud.

Very smart people are cooking up these schemes. I ask you – Do you think they are:

  • Bettering the lives of America’s workers?
  • Enhancing American productivity?
  • Propelling more workers into the ranks of the dwindling middle class?
  • Growing shareholder value?

I’d like to know what you think. Write me at tomlynch@lynchryan.com.

WCRI, Inside Baseball in California, Patient Records in New Jersey and Who’s Managing What Care

Thursday, February 26th, 2015

The WCRI Annual Issues and Research Conference gets underway a week from today in Boston. The conference and Lynch Ryan are each in their 31st year, but, truth to tell, the first WCRI conference could have been held in a telephone booth (not The Tardis).

We wrote about this conference a couple of weeks ago, so no need to cover old ground. However, it is worthwhile to mention how valuable the conference has become. It’s a serious event attended by serious professionals. Sorry- not much partying. Las Vegas it aint. And this year its style is even more cramped what with more than eight feet of snow hanging around. But the walkway around the Charles is cleared, so you can bring your running shoes. I, on the other hand, coffee in hand, will be happy to wave goodbye to you as you head out the hotel door for that morning run. The older I get the more I subscribe to Winston Churhill’s view of exercise: he said he got enough of it carrying the coffins of his athletic friends.

Unfortunately, we just learned that the WCRI has “reluctantly” decided to cancel its Opt Out session, because “at least one of the presenters felt that the time allotted for the session was too short for the objectives to be well-met.” This is truly unfortunate given the momentum the Opt Out movement is gaining nationally. You would have thought the presenters could have raised this issue a lot earlier. Nonetheless, I’m sure there will be much opt out discussion among attendees outside of the sessions. WCRI is offering to refund registration money for those who choose to “opt out” of Boston due to the cancellation. Regardless, I hope to see you in Boston.

Inside Baseball In California
When looking for something a bit out of the ordinary, California workers’ comp never disappoints. Work Comp Central’s Greg Jones reports this morning that:

A Southern California applicants’ law firm claims in court filings that Knox Ricksen “hacked” the computer network of a vendor it uses to sign up new clients to gain access to an estimated 2,000 confidential and privileged documents.

In the suit, the plainiffs’ law firm, Reyes & Barsoum, says it has a vendor, HQ Sign-up Services Inc., whose job it is to “sign up” customers for the firm. The suit alleges that the defense law firm Knox Ricksen hacked HQ Sign-up, gaining access to claimant information which HQ Sign-up would forward to lawyers at Reyes & Barsoum. This would give Knox Ricksenan unfair and illegal advantage in the legal proceedings. People, I did not title this Inside Baseball for nothing!

This little dust-up shines a light on the dog-eat-dog adjuducative business that is California workers’ comp. It’s not pretty and it never has been. I wonder what opt out legislation would do for California?

Patient Records In New Jersey
Now we balance the cesspool into which California’s workers’ comp courtroom wars sometimes descend with workers’ comp law as it should be practiced. John Geaney, a man for whom I have great respect, is an executive committee member and shareholder with New Jersey’s Capehart Scatchard. John began publishing a client newsletter in 2001. A few years ago it morphed into a blog, which Lexis Nexus awards as one the nation’s Top 25 workers’ comp blogs. John’s blog should be required reading for all workers’ comp professionals in New Jersey. For that matter, it’s instructive wherever you are.
Today’s blog post concerns the right of injured workers to have access to their medical files. In my experience, there are some claims adjusters that resist this. However, doing so can worsen the situation and alienate the injured worker. Transparency is good for everyone. This blog post is well worth reading.

Who’s Managing What Care
In his Quick Tips blog post of today, Barry Thompson takes no prisoners as he derides what has become of “Managed Care,” which Barry has renamed “Manipulated Cost.” His is a tale told in anger, and he asks, “Where’s the outrage?” Good question. In the early 1990s, I gave a presentation at NCCI’s Annual Issues Conference and titled the presentation Managed Care: Who Manages, Who Cares? ‘Twas ever thus. It seems that the question is still begging for an answer.

And The Winner Is…..

Friday, October 10th, 2014

California! Again!
Early this week, Oregon’s Department of Consumer and Business Services published its biannual rankings of state workers’ comp costs (by the way, did you know that “biannual” means both twice a year and once every two years? English is a funny language). Kudos to Jay Dotter and Mike Manley for once again separating the wheat from the chaff.
Since 2006, we’ve written about Oregon’s rankings, as well as those of the actuarial consulting firm, Actuarial & Technical Solutions (ATS) and the National Foundation for Unemployment Compensation and Workers’ Compensation (UWC) headquartered in Washington, DC. If you’re so inclined, see our in depth 2006 report, our 2009 report highlighting Massachusetts and our 2010 report.
Following the Oregon release the blogosphere was quick to note that California, leapfrogging Connecticut and Alaska, had won the 2014 gold medal for most costly state in the nation. People, this was not a surprise.
We have been watching the Golden State’s periodic workers’ comp train wrecks since the late 1980s. Here’s how things usually go.
1. Costs go through the roof
2. Vested interests run around with their hair on fire
3. Legislature enacts reforms
4. Costs drop precipitously (everyone takes credit)
5. Lawyers figure out how to outflank the reforms
5. Costs go through the roof
6. Repeat the process
This has happened at least three times in the last 20 years, most notably during the administration of the Terminator, Arnold Schwarzenegger, when annual costs exceeded $29 billion dollars (you read that right). After reform, costs dropped to around $14 billion. Everyone declared victory and left the field until the sky fell again.
Alex Swedlow and the California Workers’ Compensation Institute have done a marvelous job tracking costs and, through solid research, shining a light on possible ways to lower costs going forward. Nonetheless, to say that California’s workers’ compensation costs are continually volatile seems indisputable.
A couple of other notes on the Oregon rankings:
1. Although lagging far behind California, Connecticut retains its place of honor at Number Two in the ranking. It’s costs are 155% of the median costs for all states and the District of Columbia;
2. In addition to Connecticut, it’s worth noting that four of the other six New England states, Vermont, Maine, New Hampshire and Rhode Island rank in the top 20;
3. And, you might ask, what about the sixth New England state, the Commonwealth of Massachusetts, the home of the bean and the cod. Well, it may be the proverbial broken record, but I’m proud to note that Massachusetts, our home state, at 48th most costly, holds the distinction (again) of being the least costly of any major manufacturing state. This has been the case for the last 15 years. Why other New England states, for that matter all other high cost states, don ‘t take a leaf from the Massachusetts book is beyond me.
I’m betting that California, the state, which, if it were a country would have the fifth highest GDP in the world, will continue its up and down roller coaster ride as time marches on. It’s just too big with too many highly entrenched vested interests to do otherwise.

Another Day, Another Battle in the War on Over-Prescribing Opiates

Friday, May 23rd, 2014

Fresh off Massachusetts Governor Deval Patrick’s donnybrook with Zogenix, maker of Zohydro ER, District Attorneys from Orange and Santa Clara Counties in California have filed a consumer protection lawsuit against five opioid manufacturers, charging they conducted a more than decade-long massive and deceptive marketing campaign to mislead doctors about the risks of long-term use of the drugs and to encourage their use for minor aches and pain.
The suit, filed in Superior Court by Orange County DA Tony Rackauckas and Santa Clara Counsel Orry P. Korb, names as defendants:

  • Purdue Pharma;
  • Teva Pharmaceutical Industries’ Cephalon, Inc. (Teva purchased Cephalon in a hostile takeover in 2011);
  • Janssen Pharmaceuticals (owned by Johnson & Johnson since 1961);
  • Endo Health Solutions; and,
  • Actavis
  • The 100-page suit paints an ugly picture of a huge conspiracy to co-opt “chronic pain advocacy and research groups” and charges that the five firms “directly and through their front organizations made and caused their misrepresentations to be made and broadly disseminated.” It names the American Pain Foundation, the American Academy of Pain Medicine and the American Geriatric Society as co-opt targets.
    The suit also names Key Opinion Leaders, KOLs, who the Defendants “rely on … to promote the use of opioids for the treatment of chronic pain.” These are doctors who are considered thought leaders in the management of pain and hold lofty positions at important medical institutions. The suit alleges that some of them have been promoting widespread use of opioids since the mid-1990s,
    I found fascinating one particular footnote, located on page 37 of the lawsuit. It reads:

    “Opioid makers were not the first to mask their deceptive marketing efforts in purported science. The tobacco industry also used key opinion leaders in its effort to persuade the public and regulators that tobacco use was not addictive or dangerous. For example, the tobacco companies funded a research program at Harvard and chose as its chief researcher a doctor who had expressed views in line with industry views. He was dropped when he criticized low-tar cigarettes as potentially more dangerous, and later described himself as a pawn in the industry’s campaign.”

    Hmmmm. Linking what the Counties allege is a more than decade-long opioid over-prescribing conspiracy to a proven decades long tobacco conspiracy. Now that’s brilliant.
    This could get very interesting.
    Note: Thanks to WorkCompCentral for alerting us to the lawsuit.

New York Workers Comp: Once More Unto The Breach

Thursday, May 22nd, 2014

Public Citizen, a national non-profit representing consumer interests on a broad range of issues, has just published a report entitled, Aim Higher: New York Should Reform Its Workers’ Compensation Laws To Reduce Injuries. The report focuses on New York’s Service Industry Sector, which, according to the U.S. Bureau of Labor Statistics (BLS), represents 91% of New York’s non-farm working jobs and 83% of all occupational injuries and illnesses.
Public Citizen suggests that OSHA is woefully under-serving New York’s Service Industry, given that sector’s over-representation in both population and occupational injuries and illnesses.
Public Citizen looked at New York for a number of reasons, one of which was its 2012 position in the Oregon Department of Business Insurance’s bi-annual rankings of the states – New York came in as the fifth most costly, even after all of the Spitzer reforms had settled in. We’ve written often about New York’s myriad problems and the efforts of the Workers’ Compensation Board to address them. And we’d be remiss if we didn’t mention that the recent revamping of New York’s Trust Fund Assessments, by far the largest in the country, will lower costs. However, it will take some time to make a significant dent there.
But the Public Citizen Report’s primary recommendation is that New York modify Labor Code Part 59: Workplace Safety Loss Prevention Program.
Part 59 requires that an employer with payroll greater than $800,000 and an Experience Modification Factor greater than 1.2 institute a formal safety program, the requirements of which are listed in Part 59. Public Citizen’s recommendation is that:

“New York state’s legislature should remove the threshold(s) for requiring a workplace safety plan to capture all employers in New York state.”


In otherwords, New York should mandate that all of its employers comply with the requirements of Part 59, which, in case it has slipped under your professional radar, is a safety inspection and remediation program. Its 19 pages of bureaucrat mumbo jumbo require that state-approved consultants inspect employers who exceed the threshold. Part 59 lists the requirements for employers, the duties of the consultants, their required qualifications and the costs the state imposes on them for certification ($1,000 per consultant if you’re a one or two person shop).
There. Now you don’t have to read it. You can thank me later.
Public Citizen’s Report is well-intentioned, but it misses the mark and is rather impractical. For example, in 2012 there were 592,148 workplaces in New York. Using OSHA inspection rates as a model, inspecting all of them in one year would require more than 12,000 consultant inspectors. Moreover, Public Citizen’s recommendation lacks any loss cost or injury reduction performance requirements.
Nonetheless, right about now you may be asking about New York employer compliance with Part 59 as it currently exists. Me, too. However, a call to the New York Department of Labor was not returned.
In November, 2012, we wrote about Part 59’s sister regulation, Part 60:, the New York Workplace Safety and Loss Prevention Incentive Program. If Part 59 is mumbo-jumbo, Part 60 is mumbo-jumbo written in Pig Latin. Like Part 59, it is totally process-driven. No performance requirements; no performance measurement. Just build a certified program, and good things will happen. As we wrote then, “The New York DOL doesn’t seem to care if the program reduces loss costs. All the DOL wants to know is: Have employers built their programs the way we told them to build them?”
Well, we said it then, and we’ll say it now: the most successful workers comp incentive program in history is the Massachusetts Qualified Loss Management Program (QLMP), instituted at the height of the worst workers compensation crisis ever – 1990 to 1993.
To describe how it works, here’s what we wrote in 2012:

Premium credits accrue to Loss Management Consulting Firms whose Massachusetts customers the WCRIB certifies have reduced their loss costs in the year following engaging a firm. The greater the loss cost reduction, the greater the credit, up to 15%, which is then passed on to the Loss Management Consulting Firm’s customers in the succeeding year. Lower loss costs mean lower premiums for employers. The Loss Management Consulting Firms have to requalify every year. So, if a Firm’s results slip, it will see its credit, and probably customer portfolio, reduced. In the QLMP, all of the incentives are lined up so that everyone is motivated towards reducing costs, while providing safe workplaces and high quality care for injured workers.

In the first year following QLMP approval, loss costs dropped more than 20% throughout the entire Massachusetts Residual Market. Our Lynch Ryan clients saw reductions of 49.6%.
After Massachusetts, we tested the QLMP in Missouri’s $145 million Assigned Risk Pool. Fifteen percent of the pool entered what we called the Missouri Injury Management Program (MIMP), while the remaining 85% of the Pool received normal Pool service.
After one year, the MIMP accounts had incurred loss ratios of 48% and paid loss ratios of 15%, while the non-Mimp group had incurred loss ratios of 90% and paid loss ratios of 25%.
Employer premiums go down, insurer residual market loads decline and consultants flourish – but only if the loss cost results of their employer clients remain stellar.
One would think that Chambers of Commerce and Business Councils everywhere would be clamoring for this type of program for their members, but such has not been the case. Perhaps we happy few who were present at the creation never publicized results well enough. You live and learn.
Regardless, if New York, or any other state, wants to really incentivize employers to reduce injuries and loss costs, it should consider adopting a version of the Massachusetts QLMP. The good people at the Massachusetts Workers Compensation Rating & Inspection Bureau would be happy to help, and so would I.
Note: Thanks to friend and colleague Peter Rousmaniere for sharing the Public Citizen report with us.