September 2007 Archives

September 27, 2007


The stalemate in Congress over legislation dealing with illegal immigration has given rise to action at the local - very local - level. A few communities with large immigrant populations have passed ordinances that try to make it difficult for undocumented immigrants to settle. These ordinances are bumping up against the federal courts, where immigrant advocates have aggressively challenged their legality. The issue is one of jurisdiction: immigration is clearly a federal issue. But the feds are paralyzed. They cannot agree on anything. Does that open the door for local action? Apparently not.

Hazelton is set in the foothills of the Pocono Mountains of Pennsylvania, 80 miles northwest of Philadelphia. It's a small, struggling town that became a magnet for illegal immigrants. Led by recently-elected Mayor Louis Barletta, Hazelton was the first local community to take action against illegal immigrants, barring them not just from renting, but from purchasing just about anything. Here's the ACLU's summary of the ordinance:

Under the ordinance, landlords and business owners would have been obliged to confirm that tenants and customers are legal residents before providing them with any service, even something as simple as selling them a soft drink. The ordinance defines certain persons as “illegal aliens” using a definition so broad that it actually includes lawful residents and naturalized citizens. There is no provision for training business owners and landlords how to decipher complex immigration papers.
Enforcement of the ordinance, approved July 13, was slated to begin on September 11. Under the ordinance, property owners were subject to fines of more than $1,000 a day for renting to individuals classified as “illegal aliens,” and business owners could be fined and have their operating licenses suspended for hiring “illegal aliens” either knowingly or unknowingly. In addition, businesses would be barred from selling merchandise to “illegal aliens,” including basic necessities such as food.

Federal Judge James Munley put a stop to this ordinance back in July, prior to implementation. He wrote that illegal immigrants had the same civil rights as legal immigrants and citizens. "Hazelton, in its zeal to control the presence of a group of people deemed undesirable, violated the rights of such people, as well as others in the community."

It would have been interesting (and tragic) to watch a community try to implement this type of ordinance. How would you enforce it? You walk into a building to rent an apartment. If you "look" native born, you have no problem. If you speak with an accent or "look foreign," you have to provide proof of citizenship. Gee, that's reasonable, isn't it? In the meantime, have a look at Hazelton's website. It opens with a letter from the Mayor: "Dear friend," he writes, "Let me begin by saying welcome." Yeah, right.

Rethinking Down by the Riverside
Last year, Riverside NJ, a town of 8,000 residents, enacted legislation penalizing anyone who employed or rented to an illegal immigrant. Within months, most of the hundreds of illegal immigrants left the community. The ordinance really worked. Unfortunately for Riverside, the downtown is now boarded up. The economy has ground to a halt. And the town finds itself with mounting legal bills due to lawsuits challenging the law. The legal battle has forced the town to delay road projects and the repair the town hall.

Former Mayor Charles Hilton, a supporter of the ordinance, acknowledges that the business district is now "fairly vacant." "But it's not legitimate businesses that are gone, it's all the ones that were supporting the illegal immigrants, or, as I like to call them, the criminal aliens." In other words, legitimate businesses who catered to undocumented customers became illegitimate in the process. This is more than a slippery slope: it's a steep chute to a very dark place indeed.

The immigration problem can only be solved at the federal level, even though a solution appears well beyond reach at this time. Local communities may be tempted to seize the initiative and solve the problem in their own ways, but these efforts are doomed to fail. They are as just and equitable as a lynch mob. It wasn't (and isn't) fair when local communities routinely discriminated against people of color. It is not fair for communities to try to figure out who is in the country legally and who is not. We have a big problem for sure, but there are no solutions at the local level.

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September 26, 2007


The good news is there are new technologies that hold the promise of ending fraudulent or inappropriate disability and workers' compensation claims. The bad news is that you'll need to get in the business of harvesting and tracking your employee's DNA to get there, venturing into relatively uncharted legal waters. Workforce Management and BBC both discuss the new technologies in DNA Technology May Curb Bogus Disability Claims and DNA test hope over damages claims. According to the Workforce article:

Developed by the Cytokine Institute, a research and consulting firm affiliated with the University of Illinois College of Medicine at Chicago, the technology uses DNA to determine a link between exposure to a toxin and a serious illness. It does so by identifying a toxin's unique DNA signature on a person's affected cells.

The technology, launched in June, has already been used in two dozen civil lawsuits between workers and insurance companies to verify the connection between exposure to toxins and a serious illness, says CEO Bruce Gillis, a doctor specializing in medical toxicology.

"It will get rid of all the nuisance and frivolous lawsuits once and for all," Gillis says.

In addition to the application for illnesses and exposures to toxins, testing may also be able to tell if an injury has even occurred. The Workforce article also discusses technology that can measure cytokines or small proteins in a person's cells, which elevate when an injury occurs. Cytokines can be measured as a before and after baseline to verify that an injury has occurred.

Exercise caution when jumping in the gene pool
Before you get too excited, you might check in with your lawyers, many of whom are likely to advise caution due to potential problems with privacy and discrimination issues. While there are no federal prohibitions against genetic testing, at least 30 states have laws that may say otherwise. HR Hero sheds light on the status of federal legislation putting limits on genetic testing in Lifeguard on duty: Congress patrols the gene pool, excerpted from Arizona Employment Law Letter. While many of the legal prohibitions deal with matters related to hiring discrimination and insurance denial rather than work injuries, attorneys advise a conservative approach in matters dealing with employees' genetic information.

Genetic testing is already a hot button employment issue. Its application to workers' compensation and other disability matters is an issue that bears watching. For a handy reference guide, the National Conference of State Legislatures offers a chart on State Genetics Employment Laws.

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September 25, 2007


The Property Casualty Insurers Association of America has issued a bulletin to its members, announcing the deferment of the onerous new comp coverage requirements in NY (see our recent blog here). At this point it appears that carriers do not have to specifically name New York on any policy where an employee from out of state might possibly do business in the state. That's good news.

Or is it? Here is the actual language of the "deferment" posted by the NY Workers Comp board:

The 2007 Workers' Compensation Reform Legislation includes coverage requirements for out-of-state employers with employees working in NYS. The Workers' Compensation Board is currently reviewing this provision, along with the comments and concerns of its stakeholders, and seeking appropriate assistance to develop the rules implementing the section of the new law.

This web site will be updated with the implementation rules as soon as they are promulgated.

Perhaps it is my training as an English major, but I cannot find any specific deferment of the law in this passage. To be sure, they are "reviewing" the statute and "seeking assistance" in developing rules. But nowhere does the posting say that implementation of the statute has been postponed. Perhaps the board does not have the authority to issue such a deferment. Carriers apparently don't have to worry about being held accountable to the new statute at this time. But the statute is still on the books and technically is still in effect. The WCB has stated verbally that they will not enforce the law, but when it came time to put pen to paper (or finger to keyboard), they balked. Does it matter? Let's hope not.

Meanwhile, we reiterate the Insider's position: this particular part of NY reform does not need rules for implementation. It needs to be tossed out. We'll keep you posted.

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September 24, 2007


Gilbert Dube was a mechanic with a chronic back problem. He was working for National Fiber Technology LLC in Lawrence, MA, when he re-injured his back on November 7, 2001. He tried to return to work on a light-duty basis a couple of weeks later, but his employer informed him that there was no light duty available. (Red flag number one.) On December 4, he was terminated. (Red flag number 2.) On December 18, less than six weeks after the injury, Dube committed suicide. His widow filed for workers comp death and burial benefits. She prevailed at the industrial accident board. The carrier appealed, but three justices of the appeals court (McCarthy, Horan and Fabricant) found in her favor as well.

The insurer tried to argue that the termination - not the injury itself - was the cause of the suicide. Because bona fide personnel actions are usually not grounds for filing a claim, they sought a reversal. The justices concluded that the injury and termination were inextricably connected. And further, the statute prohibits claims that link a personnel action to a disability - - death is not a disability. The justices go all the way back to Chief Justice Rugg, writing in 1915, just four years after the workers comp law was passed in Massachusetts:

The single inquiry is whether in truth it did arise of out of and in the course of employment. If death ensues, it is immaterial whether that was the reasonable and likely consequence or not; the only question is whether in fact death "results from the injury.

Unanswered Questions
The Insider is left to puzzle over some issues that were glossed over in the ruling. First, why did National Fiber Technology not have any light duty? They make wigs and costumes, primarily those involving fake fur. (If you're casting a Sasquatch or a gorilla in your next play, give these folks a call. Here is a link to some samples of their work.) At least some of the work - lifting and arranging fake hair! - would be very light duty indeed.

Then there is the mystery of the quick termination. Dube was injured on November 7 and terminated barely 4 weeks later, on December 4. What was the hurry? The quick trigger on termination surely raises the specter of discrimination based upon a work-related disability. Even if the employer could not accommodate Dube (they didn't appear to try), they could have kept him on the roster, pending a more complete recovery. That would not have cost them anything and it would have provided Dube with some motivation during his recovery.

In this particular situation, everyone loses. The unfortunate Mr. Dube, first loses his job and then, confronted with the possible end of his career as a mechanic, takes his own life. His employer terminates in haste and repents at leisure. The carrier pays for the burial and provides ongoing support to the widow. In most instances, suicide is a private matter that falls outside the scope of employment. In this sad situation, suicide and employment are joined forever.

This case has important implications for MA employers. The court is saying that any suicide stemming from a work-related injury defaults to compensability under comp. The fact that a personnel action was involved is not a viable defense. The burden of proof falls to the employer and the carrier to show that the suicide was not work related. With this ruling in hand, that will be a very difficult standard to meet.

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September 21, 2007


Our friend Joe Paduda has a most excellent edition of Health Wonk Review posted at Managed Care Matters, overflowing with good Friday reading. Go see for yourself why HWR is gaining a reputation as a gathering of some of the smartest minds in the online health policy world. Don't miss Joe's post, where he takes on the you'll-die-before-you-get-your-MRI in Canada meme. Among other good material, there are many posts on reform-related issues, including several items on Hillary Clinton's health care plan, several posts from physicians and a few new contributors, including a blog by the editors of the Canadian National Review of Medicine. And don't miss this handy resource, which looks so great, we have to post it here too: 100 Web resources for Medical Professionals.

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September 20, 2007


We have a fight brewing over the Terrorism Risk Insurance Revision and Extension Act (TRIEA), which the House just voted to extend for 15 years. We live in unusual times when the white knight for the insurance industry is Barney Frank and the opponent is George Bush.

The House measure not only extended the bill, but also strengthened it:

"It would add group life insurance to the lines of insurance covered by the program, and it would cover terrorist attacks by Americans as well as by foreigners. It would also require commercial property and casualty insurance policies to cover losses from terrorist attacks involving nuclear, biological, chemical or radiological attacks. Typically such policies now exclude that coverage."

According to other news reports, it would also kick in at $50 million, rather than the current $100 million.

Many in the insurance industry think that such a measure is vital to ensure industry solvency in the event of large-scale terror, particularly in workers comp. In other lines of insurance, carriers can price for the coverage or can simply refuse to extend coverage, but because workers compensation is statutory, these mechanisms aren't available.

This is likely to produce pushback from the White House - it's anticipated that the president will veto the measure, viewing it as an unacceptable expansion to a program that was intended as temporary. The White House issued a statement saying that the most efficient method for providing terrorism coverage will come from the private sector. In response, bill sponsor Barney Frank said, "There are in our midst people who believe in the free market so firmly that they believe in it the way other people believe in unicorns."

Get out the popcorn, this could be an interesting contest. It may be a nail-biter, too, since the current law is set to expire at the end of the year and workers comp is heading into its heavy renewal season.

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September 19, 2007


When you have a problem, you pass a law to fix it. That's the theory, anyway. Sometimes, the legislative solution creates big, new problems. Take New York - please! In trying to solve the very real issue of rampant under-insurance and premium avoidance in the construction industry, the state has crafted an innovative solution. But the solution creates very big problems, indeed.

Under the revised comp statute, all out of state employers doing work in New York are required to carry a full, statutory NY state workers comp policy. New York must be listed specifically on the information page of the policy. The standard "other states" coverage (item C) is not considered adequate proof of coverage.

This may sound innocuous, but it's not. First, consider the problem in defining what "working in New York" means. The term is not defined by statute, but has evolved under case law. Coverage may be required for anyone coming into the state while "in the course and scope" of employment: this would include sales and delivery people, construction workers in for a day or a week, possibly even business travelers attending a trade show.

Once you figure out who's working, you're stuck with the issue of proving coverage. For carriers licensed to write insurance in New York, it's a bureaucratic nightmare, but feasible. You re-issue the policy, naming New York on the information page. But when do you do this? When is the proof of coverage required? Do you have to document coverage even when the New York exposure is miniscule or can you retrofit coverage after an injury occurs?

And what about insurance carriers who are not licensed in New York? These carriers cannot list New York on the information page, because they cannot write policies in the Empire state. So they are either forced to secure a license (how long will it take and how much will it cost?) or decline covering out-of-state employees working in New York. If they forego the licensing process, they may have to cut a check to the NY State Fund to cover payrolls for work performed in New York, at the current NY rates. Yikes! (Given the fear and uncertainty that this new requirement has already raised, there are agents for NY licensed carriers visiting neighboring states, trying to poach business from agents who lack a NY licensed carrier.)

By now you're probably thinking that NY will work out the kinks before the new law goes into effect. Technically, the law already is in effect - it began on September 9, 2007. Of course, no one can figure out how to go about implementing it. Last week the Workers Comp Board held a conference call for interested parties. Boy, where there ever interested parties - from as far away as California. Unlicensed carriers raised the specter of a lengthy and expensive licensing process in NY. Agents asked about their own exposure in trying to keep insureds informed of their obligations under the new law. To all the many valid questions, the Board responded with a resounding "We have no idea what to tell you...We have to work it out with the governor's staff and the Division of Insurance."

According to the Independent Insurance Agents of NY (IIABNY), the Board is "reviewing" the requirements. Implementation of the new law is "on hold." The Insider humbly suggests that the Board and the Governor kick this one back to the legislature. The new requirements are fatally flawed and no amount of tinkering can fix the situation. The problem of premium avoidance in construction is legitimate. This particular remedy, however, creates chaos within the insurance industry. After all, you don't cure a headache with Actiq or Oxycontin, do you? (Then again, this is workers comp ...)

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September 18, 2007

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September 17, 2007


birthday cake Today marks the fourth anniversary of Workers' Comp Insider. Since the Insider was the first insurance blog, and by extension the first workers' comp blog, in the nation, I thought that perhaps a moment of reflection might be in order. Jon gave his thoughts on "why we blog" a few days ago, but I wanted to share my thoughts on the matter.

In July, 2003, Julie Ferguson, who knows more about blogs than any three people I know, came into my office and said, "Tom, I think Lynch Ryan should create a weblog."

Up until that time, it seemed to me that two kinds of people had blogs, rabidly radical political reporters who posted five or six times a day whenever anyone in Washington sneezed, and teenagers who wanted the world to know what they ate for breakfast. So, when Julie proposed that we join the crowd all I could say was, "Why on earth would we want to do that?" Thus began my education. Over the next few days Julie persuaded me that this was a natural for Lynch Ryan, because we had always been innovators and path-finding pioneers. Blazing the trail of insurance blogging would continue that tradition. Plus, fostering open communication between employer, employee, physician and insurer has always been one of our core missions. A blog would be the perfect medium to take that communication to an even higher level.

We went to see Chris Miller, our Internet technology guru, from Artefact Design in Worcester, MA. We said, "Chris, how’d you like to build a blog?" I think, initially, he wanted to run away, because Chris is a corporate technology specialist, and at the time there were no corporate blogs – anywhere. But, after thinking about it for a bit, he said, "Sure, why not."

Julie discovered that inexpensive software was available to build the blog, so we anted up the licensing fee and went to work. It was Julie, too, who came up with the name, "Workers Comp Insider." I thought it was a bit long, but, once again, she convinced me, and on 17 September 2003, the Insider was born.

That first entry arrived with a whimper, not a bang. The topic was October Events, and it was about eight lines long. Not particularly auspicious for the first insurance blog entry in America, but, then again, neither was "Watson, come here. I need you," another communications first.

We didn’t start to count readers until February 2004. That month, we had about 75 readers per entry, and most of those were family and friends. It’s since grown to closer to 20,000 and seems to keep growing a little bit nearly every month.

The entries have changed, too. We discovered that we had quite the writer in Jon Coppelman, our resident Ivy Leaguer (Columbia, in case you were wondering). Jon is the one who set the tone for entries that more closely resemble thoughtful, well-sourced op-eds with a tiny hint of attitude. His informed and colorful posts have developed quite a following.

Since that first entry in 2003, there have been more than 800 others spanning 15 categories. Julie has created and refined our endless sidebar, and it’s become the best workers' compensation reference library in the world. Along the way, we've met and come to know and respect many others who've joined the workers comp blogosphere. For instance, Jordan Barab, at Confined Space, who showed us what passion for safety really is; Joe Paduda, at Managed Care Matters, who brilliantly bridges the workers' comp and health care fields; and Peter Rousmaniere's Working Immigrants, a blog that covers an important and timely topic. We're also proud to have played a role in helping to create and support Health Wonk Review, the premier health policy carnival or "aggregator." And, similarly, we're proud of our affiliation with Cavalcade of Risk. These carnivals help to foster community and promote our industry.

Early on, we decided not to allow advertising on the Insider. We wanted to keep it pure, the message focused. Every once in a while, we reconsider that (Google calls every month, or so), but, so far, we've held firm.

So, four years in, we think we've created something good, something valuable, something that helps and supports the larger community. We thank you, our readers, for your loyalty as well as your comments (yes, even when you disagree with us – we believe that if we can't defend our position, we don't deserve to hold it). But, most of all, we thank you for your constant encouragement over these last four years. You make us want to make the Insider ever better, the best that it can be. I promise we’ll keep trying to do that.

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September 14, 2007


Here's an update on a case we recently blogged. Edgar Velasquez worked for Billy G's Tree Service in Rhode Island. He sliced open his face with a chain saw (ouch!). When he tried to file for workers comp benefits, his employer fired him. Edgar was an undocumented worker. The employer did not carry workers comp insurance.

On August 2, 2006, Edgar went to the Garrahy Courthouse in Providence for a hearing on his comp claim. He was met outside by immigration agents, accompanied by Billy Gorman, his former boss. As he watched the agents take Edgar away, Gorman was heard to say "Adios, Edgar." Edgar was deported to Mexico later that month. (Gee, I wonder who dropped a dime...)

Edgar, who lives in a remote mountain village in the state of Chiapas, has not received any further medical treatment for his injury. The scar on his face is still infected. Ho, Hum. Another immigrant worker screwed by an unscrupulous employer. End of story? Not quite.

Billy Gorman has a few legal problems of his own. He is being sued by the state for running a business without the requisite workers comp insurance. And Rhode Islanders, who recognize a serious injustice when they see it, are raising money to return Edgar to this country - so he can pursue his comp claim, among other possible legal remedies against Gorman.

Ah, but how will Edgar get back into the country, when he was here illegally at the time of the injury? Germann Murguia, the Mexican consul general in Boston, says they are trying to bring Edgar back through a humanitarian visa. "This is up to the American authorities, but we are trying to do as much as possible. He deserves compensation."

I wonder if Billy has a call into his congressman, expressing his moral outrage that Edgar might be allowed back in. "He never should have been here in the first place!"

Gorman's lawyer, Michael St. Pierre, reports that Gorman has no assets to satisfy the claim, which exceeds $70,000 in medical bills alone. St. Pierre also says that Edgar may not have met the definition of "employee." I guess he must have been an independent contractor.

Here's hoping that Edgar finds his way back to America for a brief and legal visit. He needs some medical attention for his injury. And he deserves the opportunity to watch them put the cuffs on his former boss and to say, with all due sincerity, "Adios, Billy."

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September 12, 2007


As we approach the fourth anniversary of the Workers Comp Insider (September 17, 2003), it's a good time to step back and ask a fundamental question: Why are we doing this? Four years ago Tom, Julie and I observed that there were a lot of bloggers tackling a lot of issues, but they mostly involved isolated individuals pursuing a particular passion. Businesses in general seemed disinterested and our particular focus, the insurance industry, was totally missing in action from the blogsphere.

As a company specializing in designing and fine tuning loss control and risk management programs for employers and insurers, Lynch Ryan saw an opportunity. With its infinite, instantaneous reach, the web offered a virtual forum for exploring the many ramifications of workers comp. As consultants, we wanted to create a meaningful and objective means of communicating issues related to the key comp constituencies:
- helping employers minimize the cost of risk, while still managing their injured employees
- supporting insurance companies in risk selection and in the education of policy holders
- guiding injured employees back to gainful employment
- facilitating medical provider interaction with injured employees, their employers and insurers (and helping them survive increasingly stingy payment schemes)
- guiding states through the complex task of legislative reform, where they must balance the needs of injured employees, employers, insurers and medical providers, without allowing the cost of insurance to drive business out of state
- alerting workers' comp professionals and risk managers to issues of compelling interest which they might not otherwise encounter

Fertile Ground
Over our four years as bloggers, we have examined managed care, coverage for independent contractors, the practices (good, bad and indifferent) of insurance carriers, the impact of designer drugs on the cost of insurance. We have discussed fraud in Ohio, legislative reform in dozens of states, the use (and abuse) of temporary modified duty, myriad safety issues - cell phone use while driving, heat in the summer, cold in the winter. We have highlighted the aging American workforce and the implications for workers comp in the years ahead. We have explored the profound implications for the comp system of the millions of workers lacking health insurance, along with the nation's dilemma dealing with 12 million undocumented workers. And that's just a hint of the fertile ground we have plowed, up to five times a week, for over 200 weeks. Dull it isn't!

We also have created and refined a website that makes accessing web resources as easy as possible, linking our readers to business, risk management and health-related resources. In addition, you can use our robust search engine to explore nearly 800 blog entries by content area. All modesty aside, we think that the Insider has become the best workers comp reference library on the net.

How are We Doing?
We think it's working pretty well. We have as many as 20,000 hits a month, with several thousands of loyal readers and hundreds of casual visitors seeking inforation on a specific issue. Readership has increased steadily from month to month. We are approaching our goal of becoming the "go to" site for workers comp issues.

And, although Google and others call several times a month, we don't allow advertising, except for a small banner that links to LynchRyan, our parent company.

All of which leads to a very fundamental question for any business: is it worth the effort? Is this free service in any way profitable? That's not an easy question to answer - and in some respects, it's the wrong question. But in the interests of full disclosure and the candor to which we are committed, yes, we have established long term and meaningful relationships with a number of insurance companies and employers who found us through the blog. The considerable effort easily pays for itself.

But even if the blog were a "loss leader" we would probably continue the effort. We are filling a definite need on the web, providing a balanced and objective view of risk management and risk transfer issues, with a special focus on workers comp. Our goal is to provide our readers with a reliable, well written and entertaining news source that reflects our abiding passion and our many years in the field. And whatever you think of the Insider, you'll have to agree on one thing: the price is right.

Your comments are always welcome.

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September 12, 2007


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

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September 11, 2007


That reverberant thud we hear coming out of Albany, NY, is the sound of the other shoe landing. And it's dropped straight on top of the New York Compensation Insurance Rating Board (CIRB).

In early March of this year, New York Governor Eliot Spitzer signed into law a major and much needed workers' compensation legislative reform. In February we had discussed New York's urgent need for reform, and, immediately following the Governor's signing, we analyzed New York's reform measure.

There's no need to rehash the reform here, except to say that the Insider was generally quite supportive of it. We were happy that a number of our suggestions wound up in the reform. However, two sections of the new law carried huge implications and consequences for the Property and Casualty (P & C) insurance industry in New York, and each took dead aim at the future of the CIRB. A reading of these sections suggested that the CIRB's future may actually be behind it.

The first of the two sections required that the Superintendent of Insurance report on the performance of the CIRB to the Governor, the Speaker of the Assembly and the Majority Leader of the Senate by 1 September 2007.

"Such report shall address, among other matters the Superintendent may deem relevant to the compensation insurance rating board including: (1) the manner in which the insurance compensation rating board has performed those tasks delegated to it by statute or regulation; (2) whether any of those tasks would more appropriately be performed by any other entity, including any governmental agency; and (3) the rate-making process for workers' compensation."

Then Section 2313, subparagraph S, contained these two gems:
"The workers' compensation rating board of New York... shall mean the compensation insurance rating board until February first, 2008, and thereafter such entity as is designated by law."

" rate service organization may file rates, rating plans or other statistical information for workers' compensation insurance after February first, 2008."

Well, here we are in September and Superintendent Eric Dinallo has issued a whomping, 56-page report (PDF) that, while not killing the CIRB, certainly eviscerates it.

The Current System - Nearly Everywhere
In 39 states, the National Council on Compensation Insurance (NCCI) gathers loss and premium data, calculates experience modifications, and files rate proposals on behalf of the P & C industry. A few states, such as Massachusetts, Michigan, Pennsylvania and New York, have independent Bureaus that do the same thing. These Bureaus are funded by the insurance carriers doing business in the states and are governed by committees elected by those insurers. The Bureaus gather and analyze loss data, both current and historic, and file rate proposals with their respective insurance commissioners. Actuaries from both sides testify at public hearings, after which insurance commissioners render decisions about the appropriateness of what the insurers want and establish new rates, which can be higher, lower or, occasionally, exactly what was proposed. Theoretically, this is a system with built in checks and balances where math and science should rule, and it is the way New York's workers' compensation system operated until the recent reform.

The Dinallo Report
Superintendent Dinallo proposes scrapping this concept in New York in two ways, one of which we think is fine, the other we find fraught with danger.

First, the Superintendent proposes, quite rightly, we believe, to move to a loss cost system, where insurers, based on their own experience, would file loss cost multipliers that would be applied to the classification rates established by the Superintendent. This would introduce a competitive system already in place in all NCCI states. He proposes that the CIRB continue to gather loss data and calculate mods, because, first, it's been doing it for more than 90 years and he thinks by now they have the hang of it; and, second, because between now and the sunset date of February 1, 2008 (just a little more than 4 months), there isn't enough time to bring a new Rate Service Organization (RSO) on line. In short, Dinallo says New York's stuck with the CIRB at least, in his words, "for the short term."

Second, Superintendent Dinallo wants to take over the CIRB's governing committee. This, in my view, is the biggie. Dinallo recommends that the governing committee be reconstituted to include representatives from labor, employers, the State Insurance Fund, and the Insurance Department. Yes, insurers would be on the committee, too, but they would be in the minority. Further, the Superintendent would require that the carriers continue to fund the CIRB, even though they would have little or no control over it. Sort of like the Russian model of requiring the condemned man to pay for the bullets.

Potential Adverse Consequences
This second proposal would eliminate the checks and balances from the system. Further, it could also eliminate actuarial science. New York could wind up with rates being determined by committee, and a politically charged one, at that. Finally, one last elimination might occur: insurers, themselves, who, after attending (in small numbers) that first committee meeting may decide to hop the next train out of town. After all, what member of the reconstituted committee, except for insurers, would ever want to see a rate increase?

In this affair the CIRB has not covered itself with glory. It has shown itself to be politically deficient, and its public relations efforts have been woeful. It has allowed itself and, by extension, the insurance industry, to be maneuvered into playing the role of the villain in this melodrama, and it is now squarely in the cross hairs. Nonetheless, even Superintendent Dinallo grudgingly admits that his every-three-year reviews show that the Board is performing satisfactorily. We believe that the prudent course is for New York to let insurers govern their own Board and to require the Superintendent of Insurance to continue to oversee performance.

We urge that Governor Spitzer and Superintendent Dinallo assure that the New York workers' compensation playing field remains level and the goalposts where they are.

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September 7, 2007


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

Wilbert Radel Forbes, his brother Ernest Forbes, James Duncan, Ronnie Duncan, and William Dobson traveled together in a van to a logging site in Halifax County. The men were members of a logging crew scheduled to work that day. During the drive to the logging site, defendant and his brother began arguing because Ernest did not stop at a convenience store where the crew usually stopped.

Upon arriving at the logging site, Ernest got out of the van and walked away, and defendant got out, punched Ronnie Duncan in the side and said “watch this.” Duncan then testified that defendant told his brother “if you can do so much without me on Saturdays go grease the loader and change the oil.” Ernest stopped, turned around and said to defendant, “why do you f--- with me so much.” Ernest then started back towards defendant, and the two began pushing and shoving. Duncan then got in between the two men and separated them, and Ernest told defendant “if I had any knife I would cut your m --- f--- throat.” Duncan testified that Ernest did not have a knife at the time.

Duncan then testified that defendant pulled out a gun, pointed it at Ernest and said to Duncan, “you don't believe I'll blow his m --- f--- brains out?” Duncan told defendant to “stop playing,” but defendant pulled the hammer back, said to Ernest “I'll blow your m --- f ---,” and pulled the trigger. Ernest died from a gunshot wound to the head.

Ernie's widow filed a claim for workers comp benefits, which were awarded under the theory that the death was work related, because Wilbert ordered his brother to "grease the loader and change the oil." His brother responded in anger, the fight erupted and Ernie ends up dead. It's work related because the argument stemmed from work - even though work had very little to do with the brothers's deteriorating relationship.

Lessons for Management?
You have to wonder how much of the animosity between the Forbes brothers was revealed prior to the fatal encounter. Logging is a tough, high risk occupation, usually taking place in remote areas. The employer, Goodson Logging, would have been better off firing one (or both) of the brothers for what we can assume were long-standing problems in dealing with each other.

Cynics might assume that Wilbert filed a comp claim for post-traumatic stress syndrome. After all, he did lose a brother in this terrible incident. Well, you cannot collect comp while in prison, and Wilbert is currently doing life without parole. He appealed his sentence, claiming the whole thing was an accident. It might have been a compensable incident, but the appeals court determined that it was no accident. Wilbert acted wilfully and is paying the consequences. As far as the comp benefits going to Ernie's widow, this is one family quarrel where the employer is stuck with the bill.

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September 6, 2007


Health Wonk Review day - Brian Klepper hosts a great issue of Health Wonk Review at The Doctor Weighs In. He offers very readable and interesting summary of 15 posts culled from the health policy blogosphere. Check it out! And as usual, the host blog -- which features physicians offering perspectives on fat, fitness, health, and longevity -- is worth a bit of your time, as well.

Double health wonkery today - Due to an administrative snafu, HWR is also posted at The Doctor Is In. Many of this week's submissions were mistakenly funneled there, a confusion between The Doctor Is In and The Doctor Weighs In. Dr. Bob, the host at at the former, is not a regular HWR participant, but he kindly jumped in to the fray when he started getting submissions. Many thanks to him for taking the initiative. It was happy mix-up, because his blog has provided lots of interesting reads on a variety of subjects in and out of the health care realm. Plus, he has some pictures that will cheer your day.

Worker safety - In honor of Labor Day earlier this week, The House Education and Labor Committee put together a map depicting approximately 10% of deaths that occurred in U.S. workplaces during 2007. Committee Chair Rep. George Miller (D-CA) suggests a redoubling of efforts to improve worker safety.

West Virginia gearing up for privatization - Insurance Journal reports that at least nine major insurers are waiting in the wings to provide workers’ comp coverage in formerly private West Virginia. Right now, BrickStreet Mutual Insurance Co. is the state's sole provider (previously discussed) but that changes in July 2008, when the market for covering private employers opens up, as per the state's 2005 reform dictate.

Guestworker program abuse - The Institute for Southern Studies brings a disturbing report of modern-day slavery on the Gulf Coast involving migrant workers employed in the post-Katrina clean-up through the federal H2B guestworker visa program. The allegations involve welders and pipefitters from Veracruz, Mexico, who allege incidents of abuse, unsafe work conditions, being held against their will in trailers without food until they were able to escape, and then being forced by police to return to the same abusive employer. Other similar reports of abuse have surfaced with the guestworker program, leading to the question of whether such programs are subject to exploitation by unscrupulous employers.

Legal cases
The Maine Supreme Judicial Court recently ruled that an employer may offset workers comp by disability payments. In Jeanne Nichios v. S.D. Warren/Sappi et al, the Court ruled that the employer may use a group life and disability plan payment to an injured worker to offset its workers' compensation benefit payment. The employee had argued that because the disability payment was made under a group life policy, it was not subject to state law governing coordination of benefits.

In July, the Delaware State Supreme Court ruled that a worker hurt in horseplay might be able to sue. A few of Stephen Grabowski Jr.'s co-workers thought it would be amusing to overpower him and tie him up in duct tape. He suffered back and knee injuries that required surgery, and was also treated for post-traumatic stress. While injuries that occur in the course of horseplay are generally not compensable, Grabowski was awarded benefits as a "non-particpating victim," and therefore barred from bringing a negligence claim against his coworkers. Grabowski argued that because his injury occurred outside the scope of his normal job duties, the workers' compensation law would not bar a tort claim . The Supreme Court returned the case to the trial judge to analyze the issue of whether horseplay is outside course and scope of the job, and if so, Grabowskie may be able to sue. The Supreme Court opinion can be found here.

Pharmaceutical PR - Richard Smith, former editor of BMJ, raises the issue of whether medical journals have become an extension of the marketing arm of pharmaceutical companies. He contends that advertising is the least part of the problem; rather, it is the coverage of clinical trials which rarely produce results that are unfavorable to the sponsoring organization. He suggests that peer review is not enough, journals should critique the trials that they publish.

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September 5, 2007


work comp stamp
Many of us are familiar with the Insurance Library, a Boston area institution that has been an important insurance resource for consumers and professionals alike for more than a century. But did you know there was such a thing as the online Museum of Insurance? We certainly didn't, but we chanced upon it in one of our recent Google searches. It's one of those strange little nooks that you find on the Internet, a repository of insurance ephemera ranging from calendars and postcards to policies, stock certificates, and receipts. The earliest of these documents dates back to the early 1800s. We were disappointed that there were no workers' compensation documents among the mix. Of course, in days of yore, it would have been "workmans' compensation," a term you still hear bandied about now and then. We did our own search on workers compensation and found a commemorative workmens' compensation stamp that was issued in 1961, one stamp in a folio of four. Here's a picture of President Kennedy and Vice President Johnson walking to the introduction ceremony for the stamp.

Perhaps some large insurers have some workers' comp ephemera that they would like to donate to the cause.

Interesting as we find some of these documents, we're just as happy that this is a virtual museum. Frankly, it sounds like something that would be a side stop in the Griswold family's vacation itinerary. But as long as we're reflecting on the history of the insurance industry, at the Early Office Museum you can compare your work environment with those of some of your professional forbearers.

Insurance ephemera is a pretty thin category on E-Bay. If you are looking for the perfect gift for National Boss Day come this Oct 16, or just for your favorite insurance geek, you may find something interesting under insurance and banking advertising collectibles.

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September 4, 2007


What better way to herald the end of summer by returning to the issue that just won't go away: workers comp coverage for sole proprietors and independent contractors. Massachusetts has just taken an extraordinary step that provides a strong incentive for sole proprietors to "opt in" to the comp system.

Under the old rules, any sole proprietor seeking comp coverage was assumed to make the state average weekly wage (SAWW). In MA, that is a whopping $52,000 per year. While MA enjoys some of the lowest rates for comp coverage in the nation, that high wage base drives up the cost of comp:
- for a $5.00 rate, the annual premium would be $2,600
- for a $10.00 rate, the annual premium would be $5,200

Those can be tough numbers for a lone craftsman trying to operate his/her own business. Especially when you consider that the weighted average median wage of all sole proprietors in the state is only $35,843. The result, of course, was that most sole proprietors gave up the notion of participating in the comp system. The coverage was way too expensive. They opted out in droves.

Recognizing the powerful disincentives to select coverage, the MA Workers Compensation Rating and Inspection Bureau decided to make the coverage more affordable. They have dropped the wage base by 30 per cent, to 70 per cent of the state AWW, effective August 1, 2007. Now, when a sole proprietor chooses to be covered, the premium is based upon an annual wage of just $36,400. This means that the cost of coverage is suddenly pretty reasonable:
- for a $5.00 rate, the comp coverage costs $1,820
- for a $10.00 rate, the coverage costs $3,640

A Comp Bargain
For marginal sole proprietors, with annual billings below the $36,400 level, there is still a strong incentive to opt out of the system. However, for the many skilled tradesmen who routinely bill well above the $36,400 level, workers comp has suddenly become a bargain. A skilled mason or carpenter might bill upwards of $75,000 or more per year. Nonetheless, the cost of comp coverage will be based upon a much lower wage level. In effect, well established sole proprietors now enjoy comp rates that might be 50 per cent or more lower than the rate for competitors with employees working in the same trade.

Which leads to one more very important consideration for general contractors in MA: in the construction field, sole proprietors are a common sight. We have blogged about the MA crack down to push coverage deep into the subcontractor and sub-subcontractor levels. (See just a couple of our prior blogs here & here.) At premium audit, if a GC shows a certificate of insurance from a sole proprietor sub who has "opted out" of coverage, the cost of that coverage is added to the GC's payroll for premium calculation. Now GCs have a very compelling argument to encourage their sole proprietor contractors to opt in for coverage: "Don't wait for me to charge back the cost of comp. Take advantage of the suppressed rates and choose coverage on your own. You benefit from a lower rate and you have the advantage of knowing the cost of coverage up front." For sole proprietors who routinely have billings above the $36,400 level, this is truly a no brainer.

It will be interesting to see if other states follow the MA lead in this important policy area. Surrounding states use a very high wage standard for calculating sole proprietor premiums: in Connecticut, $56,200. In New Hampshire, $58,100. When you factor in the very high rates for comp in these states, the cost of insurance for sole proprietors is truly prohibitive. That's no welcome mat. It's a kick in the butt toward the door.

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