January 2009 Archives

January 29, 2009

 

Clyde Stroman, 53, of Elmira, NY, worked as a youth aide at the MacCormick Secure Center in Brooktondale, NY. He worked with some pretty tough kids. While restraining a "client" back in August 2008, Stroman injured his right eye. If you were his supervisor, filling out the incident report, you should write: "Injury to right eye." Sounds obvious, of course. If you were in a hurry, as I suspect his supervisor might have been, you might just write: "Injury to eye."

The actual injury was minor. Stroman did not miss any time from work.

Sometime after the incident, Stroman had a complete eye exam. The ophthamologist found an old injury in his left eye. Stroman apparently decided to work the system: according to investigators, he attempted to convince the New York State Insurance Fund and his employer that the initial treating doctor’s reports identified the wrong eye as being injured. He gave a detailed, sworn written statement to that effect. (I'm guessing that the accident investigation form - if any - did not specify which eye was injured.)

As a result of this eye "switcheroo," Stroman received $2,860 in workers comp benefits. Investigators estimated the potential future value of his claim to be more than $118,000. (The injury to the left eye must have been fairly severe, with some permanent loss of vision.) Unfortunately for Stroman, his ruse did not work. Investigators determined that the original injury to his right eye was minor, while the serious injury to his left eye was not work related. Stroman was arrested on January 8 and charged with falsifying business records and violating the Workers’ Compensation Law.

A Lesson in Documentation
Only time - and a trial - will determine whether Stroman is guilty. The important lesson here lies in the area of post-injury management, in those critical moments immediately following an injury. When supervisors fill out their first reports, they should carefully note not just the body part involved, but which body part. For injuries involving fingers or toes, for example, supervisors should specify which digits are involved. In this particular case, noting that the incident involved Stroman's right eye might have saved everyone a lot of trouble (including, perhaps, Stroman himself). These details might seem trivial at the time, especially in the context of rushing someone off to treatment. Nonetheless, a few moments of careful documentation often prove critical in the weeks and months following an accident, long after the initial (and often traumatic) details have been forgotten.

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January 28, 2009

 

Our friend David Williams is the host of this week's Cavalcade of Risk at Health Business Blog - check it out. And while visiting David's neighborhood, you might want to read an interesting recent guest post by Dr. Michael Ozner about The Great American Heart Hoax: Economic and Political Implications.

Florida - After enjoying a multi-year run of declining workers' comp rates since the 2003 reform, Florida is scheduled for a 6.4% workers compensation rate increase effective April 1. Post-reform, rates have dropped by more than 60%, but storm clouds loom since the November Supreme Court struck down a cap on attorney fees in Murray v. Mariners Health/ACE USA. This is less than the NCCI recommendation of 8.9%. NCCI estimates that the court decision will result in an increase in overall system costs of 18.6%. (PDF)

Black lung - The Pump Handle recently featured a reprint of an article by Carol Bass that asks the question Why is black lung back? The rate of black lung has doubled among U.S. coal miners in recent years and researchers are looking at various questions: After decades of steady decline, why has black lung disease made a comeback? Why is it progressing faster and striking younger miners - those who have spent less time on the job, and who never worked in the bad old days before the federal law took effect? And why is the spike limited to a few geographic hot spots? There are several theories posed, but no answers.

Iowa - Add Iowa to the ranks of states that are cracking down on the misclassification of independent contractors - see a report on recent Findings and Recommendations (PDF). In the last six or seven years, various states have stepped up efforts to crack down on this fraudulent practice; the Executive Summary of this report offers a brief synopsis of why this type of misclassification is so damaging to the state, to the competitive environment, and to the workers. Note that on page 11-12, the report summarizes other state initiatives to crackdown on this problem.

Market is hardening - the Fourth Quarter RIMS survey shows signs that the soft market is losing steam and prices for commercial insurance should begin increasing by the fourth quarter of 2009 or the first quarter of 2010.

Unusual job hazard of the week - Mail carries in Rockport MA have had to take unusual measures to defend themselves against a rather unusual work safety challenge that has succeeded in halting the mail where rain, snow, and sleet have failed: aggressive and hostile turkeys. Mail carriers are advised to carry umbrellas and open them when being charged by the birds. The theory is that this faux dominance demonstration might fool the turkeys into thinking they have met a bigger, more dominant turkey.

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January 26, 2009

 

Ed Abney is 53 year old tool-and-die worker with Parkinson's disease. For over 20 years, he was literally up to his elbows in drums of the powerful solvent, trichloroethylene (TCE). He worked for the now defunct Dresser Industries in Kentucky. As we read in Felicity Barringer's excellent article in the New York Times, Abney's illness was probably caused by work, but in the world of workers comp, "probable" does not meet the standard for compensability. Even with compelling research by the University of Kentucky suggesting that exposure to TCE increases the risk for Parkinson's, Abner is unable to access workers comp benefits.

The Kentucky study focused on Ed and his co-workers at Dresser. Researchers sent surveys to 134 former employees; 65 responded. The research found 27 workers with Parkinson's symptoms or with impaired motor skills. That's 42 percent of respondants and 20 percent of the total surveyed. Statistically significant, to be sure. Nonetheless, the medical researchers were unwilling and unable to certify that the onset of Parkinson's was caused by workplace hazards.

As Dr. Don Gash, one of the researchers, put it: "Was it the [TCE]? It could have been. But it could have been other things, too," including a genetic predisposition to the disease. Unfortunately for Abney and thousands of workers like him, the world of workers comp operates on a rather simplistic model of cause and effect: if you can prove that the injury or illness is work related, it is compensable. In cases of occupational disease, there is almost always grounds for doubt. You simply cannot prove definitively that chemical exposure caused the illness - even though there is compelling anecdotal evidence that it did.

Fighting Fire with Politics
Which leads us back to the world of firefighters. As we discussed in a June 2008 posting , 40 states have created a presumption of compensability for heart disease and cancers occurring in firefighters. Like Ed Abney, firefighters are exposed to cancer causing substances in the performance of their work. But unlike Abney, firefighters are much more likely to receive disability benefits based upon this exposure. There is little if any burden of proof on the firefighter to demonstrate that the illness is work-related.

Where firefighters get the benefit of the doubt, ordinary workers just get the doubt. Ed Abney and thousands of other industrial workers suffering from debilitating and often fatal occupational illnesses face virtually insurmountable obstacles in collecting workers comp. As Dwight Lovan, Kentucky's commissioner of workers comp, puts it: "We are dependent upon the scientific and medical communities for the element of causality." Well, yes and no. Ultimately, compensability is a political issue: state legislatures have blown open the causality issue for firefighters. They could do the same for ordinary workers, but in all likelihood, they will not. Everyone supports public safety, but when it comes to the ordinary Joes and Josephines, Eds and Ednas, who do their jobs and come home reeking of toxic solvents, sympathy quickly evaporates under the guise of keeping employer costs to a minimum. In their struggles to treat their illnesses and support their families, these plain folks from Main Street are pretty much on their own.

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January 22, 2009

 

Fun! Jaan Sidorov has posted a fun and creative Post Inaugural Health Wonk Review Celebration Event at Disease Management Care Blog, where he adds a little music to the wonkery. It's a fun edition, but with lots of substance, too.

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January 21, 2009

 

Ah, we remember the good old days just a few short years ago when the insurance blog landscape was barren and lonely. Now, we are delighted to see a profusion of insurance related blogs, with new entries cropping up every month. Here are a few recent discoveries that we've found noteworthy.

MEMIC Safety Blog by Paul Caret focuses on safety and prevention - just as the name would suggest. We liked his recent post on Machine Guards and the Cost of Cutting Corners. Also see The ABCD’s of Fire Extinguishers.

The Medical Quack is an entertaining blog that might be likened to a medical "cabinet of curiosities." Blogger Barbara Duck (thus the genesis of the blog name) offers an interesting grab bag of medical news that is part serious, part silly, with a penchant for technology. See Twitter Surgery - In the Operating Room.

Our client partner, Renaissance Group, has introduced a new Consumer Insurance Blog which is designed to provide news, videos, information, and tips for consumers on a variety of topics, such as renter's insurance, identity theft, and auto insurance.

Gregory's Business Insurance Blog by Gregory Boop is part of the about.com's family of informational sites. Gregory's posts are informed by his experience as a business trial lawyer, authorized OSHA trainer, and consultant to businesses on risk management.

LexisNexis Workers Compensation Law Blog is an index of blog posts from attorneys on a variety of workers' comp related topics.

Colorado Workers Comp Blog by plaintiff attorney Richard E. Falcone brings a perspective on issues particular to the Colorado workers comp system.

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January 20, 2009

 

When a flock of geese flew into two engines of US Airways Flight 1549 last Friday, pilot Chesley Sullenberger was confronted with a set of circumstances he had never seen before. Sure, the flight simulators may have thrown a similar scenario at him, but this was real: he had a plane loaded with 155 passengers and a crew of six. The engines had just failed. He was piloting the plane in one of the most densely populated places on earth. He had to figure out where and how to put the plane down and he had just a few moments to make a decision. That's pressure in real time.

They're calling Sullenberger's actions the "Miracle off 47th Street." He somehow managed to land the plane in the chilly but not quite frozen Hudson River. The passengers donned their personal flotation devices (which I always thought so ridiculous when demonstrated by the flight attendants before take off) and safely exited the plane. Many huddled on the wings of the floating aircraft (the fuel is lighter than water, thereby helping the plane to float). Nearby boats plucked the passengers off, one at a time. There were minor injuries, but no fatalities. Sullenberger made one last tour of the aircraft, to make sure everyone had gotten off safely, before leaving the plane himself.

We all marvel at the calm skill shown by Sullenberger. One moment he was a pilot among thousands of pilots who do their jobs anonymously every day. The next he is a hero. To this point, Sullenberger had not agreed to perform any interviews. He canceled a scheduled appearance on the Today show. Good for him. This should not be about the public's relentless appetite for the story behind the story. Ultimately, it is about someone who simply did his job under very trying circumstances. He may not have "expected the unexpected," but he surely was able to handle it.

Hemingway wrote that "courage is grace under pressure." Sullenberger has become an instant icon for such courage and grace. I suspect that the passengers on Flight 1549 will say quiet prayer each morning for the rest of their lives, thanking their lucky stars for having Chesley Sullenberger in the cockpit on that fateful day.

Footnote: Perhaps the title of this entry led readers to believe that the Insider was about to pontificate on our about-to-be inaugurated president, Barack Obama, who in his own way has demonstrated, at least on the campaign trail, considerable grace under pressure. We strive for non-partisanship, of course, but in this case we do hope that America's new leader will perform his onerous duties with Sullenbergeresque efficiency.


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January 15, 2009

 

Now that Robert Aurbach's compelling discussion of bankruptcy has concluded, we thought readers might enjoy a quick look at an issue that none of us can do anything about: drunken workers in Peru.

Peru's top court has ruled that workers cannot be fired simply for being drunk on the job. The case was brought by Pablo Cayo, a janitor for the city of Chorrillos, who was fired for being intoxicated at work.

The court determined that the firing was excessive: yes, Cayo was drunk, but as Justice Fernando Calle put it, "he did not offend or hurt anybody." In other words, he was a pleasant drunk.

Calle went on to say that the court would not revise its decision, despite complaints from the government.

What is most surprising about this decision is the implications for safety: not just Cayo's, but other employees and members of the public who might come into contact with the intoxicated worker. Cayo might not be much of a risk while pushing a broom, but surely his ability to perform the full range of his job duties safely is severely compromised by his intoxication.

Here in the States, active drug/alcohol use is not protected. Under OSHA's General Duty clause, employers are expected to take immediate action when a worker is intoxicated: they are required to eliminate the risk of harm to the employee and to others. (See a related Insider story here.) In most cases, this means sending the employee home - providing transportation if needed. (You do not - repeat, do not - allow an intoxicated employee to drive him or herself home!)

While recovering alcoholics/addicts are protected by the Americans with Disabilities Act, active drug/alcohol use is not considered a disability. Most employers would be within their rights to terminate any employee who is found to be intoxicated while at work. Under some circumstances, employers might be expected to guide the employee toward a treatment program, but in general we have zero tolerance for being drunk at work.

The high court in Peru appears to be breathing that thin Peruvian air. This is the kind of decision that drives managers crazy. As Celso Becerra, chief administrator for Chorrillos, put it: "We've fired four workers for showing up drunk, and two of them were drivers. How can we allow a drunk to work who might run somebody over?" Normally, I might say "Tell it to the judge." But in this case, they have to take their complaints somewhere else.

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January 14, 2009

 

Part three of a three-part guest post series on bankruptcy and workers compensation by Robert Aurbach, CEO of Uncommon Approach..
Part 1: Bankruptcy and Workers' Compensation: Broken Promises, Broken Lives
Part 2: Reducing the Conflict Between Bankruptcy and Workers' Compensation

Three changes are proposed to the Federal Bankruptcy Code:

  • changing the accrual of workers' compensation claims for bankruptcy purposes
  • allowing them to be adjudicated in the applicable administrative court without delay
  • giving the payment of post-petition medical and indemnity benefits administrative priority for payment during the course of the bankruptcy

While these won't fix every possible problem, they solve the most prominent incompatibilities between two regulatory systems while preserving the essential integrity of both.

What the Proposed Amendment Doesn’t Do
First of all, these changes only affect the self-insured or illegally uninsured employer. Since commercially insured claims continue to be paid by the insurer while the insured company is in bankruptcy, there should be no need for extra protection for such claims.

Second, the pre-petition claims of the workers are still treated like all other claims. This is not likely to be a significant issue in most cases. Regulators will hear quite quickly if the self-insured employer stops paying claims, and the usual response is to revoke the self-insured status and force the company into purchasing commercial insurance ― usually at a premium from the state assigned risk pool. Since this places additional economic stress on the self-insured company, the behavior is avoided. Self-insurers rarely are as much as one week behind in their benefit payments when they file for bankruptcy. In any event, a fix that included pre-petition arrearages in post-petition claims would fly in the face of the most basic bankruptcy philosophy and likely create opposition to the proposal. Since the worker's position is still improved from what it would be under current law, that battle is left for another day.

Most importantly, the protection package fails if the self-insured employer decides, or is forced, to liquidate, instead of merely reorganizing. If that happens, the affairs of the company are concluded in an orderly way, and the assets are distributed as determined in the Bankruptcy Code ― and workers' compensation claimants are still general unsecured creditors (the lowest priority classification). Why not give them a higher priority? The establishment of preferences for various kinds of secured claims is a sacred cow that will not be disturbed without opposition, and other claimants can be expected to seek preference for their claims as well. So what good is done under the proposal if the company eventually liquidates? During the administration of the bankruptcy estate in Chapter 11 reorganization (which is where almost all large company bankruptcies start out) the post-petition part of the claim continues to be paid. Medical treatment is not delayed, indemnity benefits are paid in a timely manner and the claim is adjudicated in the normal way. This administrative pay down will, in turn, reduce the ultimate drain on the security held by the self-insurance regulator, reducing or eliminating the ultimate call on the self-insurance guaranty fund (if any) and increasing the chances that the worker will get all the benefits that the law promised.

Who Benefits?
Self-insured employers benefit. Employers are generally amenable to this proposal because they do not, as a group, appreciate the idea that one of them would walk away from workers injured in their service. Moreover, since they are the contributors to funding self-insurance guaranty funds, where such funds exist, and they are the ones compelled to place security to cover liability exposures under the current law, they have an economic stake in ensuring that all self-insured employers do the right thing by their workers. If the probability of a call on security (or a guaranty fund) is diminished, there is no need to tie up business capital funding it to ultimate reserves. That’s why the National Council of Self-Insurers recently ratified their prior endorsement of this proposal.

The state benefits by avoiding the political cost of having administered a program that left workers uncompensated. It avoids the complication of the sometimes-inconsistent positions taken by state agencies in Bankruptcy Court in their efforts to collect obligations such as back taxes and environmental cleanup from the company. The state also avoids the drain caused by disabled workers ending up on public assistance rolls in the state. The proposal was endorsed by the Western Governor’s Association, the National Association of Attorneys General, and the International Association of Industrial Accident Boards and Commissions, (workers’ compensation regulators) in 2004.

And Joe benefits. He may lose most of the two weeks of indemnity payments that he was owed when his Company went down, but his "post-petition" payments were restarted in time for him to keep his house. His medical dispute is resolved through a local "mediation" proceeding instead of a formal trial in another state in front of a bankruptcy judge who doesn't know his state’s workers' compensation law. He receives the reasonable and appropriate medical care promised by law without delay caused by the bankruptcy. The long-term medical benefits for his permanent injury should continue to be available as promised in the law ― his "post-petition" claims will not be discharged by a reorganization plan if the Company successfully reorganizes, and the pay down of his total claim will help security and guaranty funds held by the state stretch to cover him if the Company ultimately folds. Hopefully, when he is able, there's a job for him to return to.

This proposal goes a long way to eliminating the clash between the incompatible policies of bankruptcy and workers' compensation, without disrupting the foundations of either system. The language is ready for Congress to consider. Perhaps it’s time for Mark Twain’s advice: "Always do right. It’ll gratify some people, and astound the rest."

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January 13, 2009

 

Part two of a three-part guest post series on bankruptcy and workers compensation by Robert Aurbach, CEO of Uncommon Approach.

The last posting introduced Joe, the injured employee of a self-insured employer, and discussed the ways the workers' compensation system failed him when the employer filed for Federal Bankruptcy protection. It's important to understand the reasons why this happens to understand the current proposal for fixing the problem.

How the Law Victimizes Joe
First, it's important to understand that Federal Bankruptcy law pre-empts any state law that conflicts with it. This makes the power of state regulators attempting to preserve the benefits of injured workers under state law extremely limited. In this context, it is necessary to understand that the Bankruptcy Code treats workers' compensation claims as having fully accrued on the date of injury ― that is to say that the claim is treated as being fully defined the day it happens. Several things happen as a result. Workers' compensation claims are then separated into "pre-petition" and "post-petition" claims, and the two groups are handled completely differently. Pre-petition claims are thrown into the bankruptcy proceedings, frozen for an indefinite time and then, when the bankruptcy proceedings are over, completely "discharged" by whatever distribution the Bankruptcy Court approves. Joe's claim accrued before bankruptcy petition was filed and that's why his benefits were frozen, his medical dispute "stayed" and his case delayed while the rest of the complicated bankruptcy case played out in front of a court in a distant city.

On the other hand, workers' compensation claims that arise during the bankruptcy case do not face any of those disabilities. Thus, the date on which two similarly situated coworkers are disabled is critical to the determination of the way the current Bankruptcy Code will treat their claims, despite the fact that the states have promised all workers mandated to participate in the system that they will be treated the same, and the fact that both employees may be left with life-long injuries or illnesses.

Another factor affects Joe's claim. When a Petition for protection is filed in Bankruptcy Court, it issues an "automatic stay" that freezes every other court proceeding, no matter where located, in which the debtor company is involved. This means that Joe can't use state dispute resolution mechanisms, unless and until the Bankruptcy Court issues an order allowing it. This forces him to appear in front of a strange court, often in a distant city, with specialized rules and lawyer admission requirements, in front of a judge who is likely to be unfamiliar with state workers' compensation law.

A Surgical Solution
The solution for this grim, and plausible scenario is simple and causes minimal disruption of the overall bankruptcy scheme. The most important change is to redefine when the workers' compensation claim accrues. By making each wage or medical benefit accrue when it is due and payable in the normal course of workers' compensation claims administration, the claimant will only have those benefits that are already delinquent at the time the bankruptcy petition is filed be caught up in the bankruptcy system. As new medical and indemnity benefits become due, they will arise "post-petition" and avoid both the court's freeze and the wiping out of debts at the end of the case (assuming the debtor successfully reorganizes), because they will have the status of "new" debts, as they are accrued. This treatment is also consistent with the current treatment of medical and disability plan payments for ill, injured and disabled workers that were not hurt on the job.

In addition, explicit treatment of workers' compensation benefits accruing postpetition as "administrative" expenses of the debtor during bankruptcy will ensure that they are paid during the case.

Finally, adjudication of determinations relating to such benefits should be exempted from the "automatic stay" so that they can be adjudicated as usual, avoiding the economic burden for the employee to appear in the bankruptcy court, while allowing for the agency and court with the specialized expertise under applicable state law to do its job.

By these small, surgical changes, the harsh and inequitable effects of bankruptcy on these involuntary workers' compensation debtors can be avoided, and the need for more intrusive and burdensome regulatory oversight and security requirements to offset or forestall the effects of bankruptcy can be lessened.

The Effect of the Proposed Changes
Under the new proposed law, any of Joe's unpaid benefits at the time the bankruptcy is filed will be thrown into the bankruptcy proceedings. But as soon as the bankruptcy is filed, his benefits can start again. The local administrative authority will decide the medical dispute in his claim, and he will not need a lawyer admitted to bankruptcy court to get the treatment he needs to return to work. Assuming that the company successfully reorganizes, any long-term medical benefit eligibility that he may get from permanent injury will be preserved. The state's promise to Joe is fulfilled ― and the Company doesn't have the option of walking away from its injured workers as if they were standard commercial debts.

The final chapter: Security deposits, guaranty funds and what the proposed solution doesn't fix.

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January 12, 2009

 

With the difficult economy, the issue of "what happens to a workers' comp claim in the event of a bankruptcy" is on the minds of many of our readers. We’ve addressed the issue of bankruptcy in the past. Today, we are pleased to introduce a more detailed three-part guest post series on bankruptcy and workers compensation by Robert Aurbach, CEO of Uncommon Approach. Robert is former General Counsel for the N.M. Workers’ Compensation Administration and personally been involved in the evaluation and redesign of five separate workers' compensation programs. He has served as editor of the International Association of Industrial Accident Boards and Commissions (IAIABC) Journal since 2003. He is an expert on various issues that involve the intersection of workers' compensation and other programs, such as bankruptcy, tribal sovereignty and PEO-leasing arrangements.

Joe worked for Chryslord Moters, a large manufacturing concern with billions in assets and locations in many states. He never concerned himself with workers' compensation, and was unaware that his Company was self insured for workers' compensation in the state where he lived and worked. When he was injured on the assembly line, he set about the job of getting better and getting back to work, as his family could ill-afford the loss of his income in the midst of a full blown recession. When the Company sought Chapter 11 bankruptcy protection, Joe still wasn't particularly concerned, due to the assurances that had been provided to the active employees. But then the Company cut off his benefit payments, so he had no wage replacement income, and his minor dispute over the reasonableness and necessity of a medical treatment proposed by his doctor was taken off the administrative agency's hearing docket due to an "automatic stay" issued by the Bankruptcy Court. When he called to try to resolve these issues, he was told that he needed to file a claim in a Bankruptcy Court half way across the country, in front of a judge that had no idea what the law of workers' compensation was in his state. When he asked how long it would take to resolve the problems, he was told that it would likely be at least a year. Upon checking with a lawyer, he also was told that his claim would be paid only if there was money left after paying all the vendors, suppliers, utilities and others who had voluntarily entered into business relations with the company. If there was no money left, or only enough to pay pennies on the dollar, he had no other recourse against his employer. Moreover, his lawyer informed him, his claim would be considered resolved by the bankruptcy proceedings, and that no medical expenses after the bankruptcy case was done would be paid by the Company.

What About Recourse to a Guaranty Fund?
There are various forms of security used to prevent injury to employees of self-insured employers from being uncompensated. The state administrative agency usually demands a security deposit from the self-insurer, based on the size of the liability exposure. Unfortunately, these deposits are often inadequate, due to understated reserves, and may be tied up in court proceedings on their own, depending on the form of the security. State property/casualty insurance guaranty funds do not apply to the debts of self-insurers, but some states have separate guaranty funds for the self-insured employers. Unfortunately, those funds usually contain a small fraction of the total potential liability, and could be easily drained by prior calls on those resources. The promise of the workers' compensation system to Joe ― medical care and indemnity benefits to allow him to heal and return to work ― is more wishful thinking than a guaranty when his employer seeks bankruptcy protection.

Systems in Conflict
Bankruptcy is a system designed to give a "fresh start" to businesses and individuals who are in debt and cannot survive economically without intervention. Debts are collected and assets are divided and distributed at the end of the process in what is intended to be an equitable manner. The law freezes all claims during this process, to allow the presiding court an opportunity to get control and a global picture of the debtor's situation. At the end of the court administration period (which is of indefinite length), either the debtor ceases to exist, and its assets are distributed, or the emerging debtor, after negotiated resolution of past debts, is permanently absolved of all debts that arose before the process. The principals of equitable distribution are based on a commercial model where (presumably equally sophisticated) creditors have chosen to do business with the debtor before the bankruptcy and either have or have not availed themselves of certain legal protections for their transactions.

Workers' Compensation is based on an entirely different set of premises. The state demands that businesses and workers participate in the system, and in return guaranties that the worker will get certain benefits, and guaranties the employer that there will be no other kind of recovery against it for the injury.

Why Isn't the Worker Protected?
As demonstrated above, the interplay between the two systems can seriously compound the workers' injury. When the employer has a commercial insurance policy for workers' compensation, the policy pays independent of the policyholder's economic condition. But when the employer is illegally uninsured, or legally self-insured, the effect of bankruptcy can be devastating and unavoidable under current law. Medical treatment necessary for recovery is often withheld when the health care provider becomes informed that they will not be paid at all or will only be paid as a general unsecured creditor in a bankruptcy proceeding. Wage replacement for the worker during the period in which he or she is unable to work is cut off by automatic order of the bankruptcy court, causing immediate and substantial economic hardship. The delay in benefit provision can be years in length and can be adjudicated in a court in a remote state, where the worker is effectively cut off from representation by the very economic hardship that the court proceeding created. Moreover, when the bankruptcy court finally adjudicates the worker's claim, the distribution scheme places the injured worker in the lowest priority level for distribution of assets.

Joe never volunteered to be a creditor to the Company and he is the least able to protect himself in the process, yet the current Bankruptcy Code treats him as the least "worthy" creditor.

Next time: what can be done to fix this conflict between systems.

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January 9, 2009

 

This year's first edition of Health Wonk Review is posted at The Health Care Blog. Host Brian Klepper has done an excellent job culling out what he describes as "... the far-ranging insights, jabs, diatribes, rants and enthusiasms of this edition of Health Wonk Review, which features analysis and exegesis as entertainment." Because HWR took a brief hiatus over the holiday, this issue is even newsier and meatier than the norm, so some good Friday reading.

And for another way to spend your Friday afternoon, we note that Ma-based plaintiff attorney Alan S. Pierce of Legal Talk Network has produced an interesting podcast on cardiac injury claims which features Dr. Julian Aroesty, a cardiologist from Beth Israel Deaconess Medical Center. The discussion centers on causation, liability for the employer in workers compensation, and subsequent work restrictions for return to work. Heart attacks are one of those tricky areas of workers compensation that may or or may not be compensable depending on circumstances. Because of the gray areas, it is an issue that frequently results in litigation. In listening to Dr. Aroesty, it certainly brings to mind the interplay between general health and wellness and the relationship to work-related injuries. Dr. Aroesty states that many patients have symptoms of heart disease before an event occurs but often don't recognize them as such because the symptoms don't take the form of sharp pains. It would seem that providing basic health information related to common high-risk health conditions such as heart disease, obesity and diabetes would be in the best interests of employers to maintain a productive, healthy work force and to reduce the risk for potential workers comp and disability claims.

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January 6, 2009

 

We have been following the developments in West Virginia, where a once monopolistic state for workers comp insurance has been transformed into a competitive market. The well-designed transition began in 2006 with the creation of BrickStreet Mutual Insurance Company, which for a couple of years offered the only available insurance to employers. Last year other carriers entered the state; Bricksteet, faced with competition and a reduction in market share, had to lay off some staff. Now they are shedding some bad risks.

Gary Burton, BrickStreet's President, announced that the carrier is dumping about 1,000 risks, most of which will end up in the state's new assigned risk pool. These accounts sport combined ratios (losses compared to premiums) in excess of 200 percent. Burton mentioned one with a whopping ratio of 14,000 percent: akin to $140,000 in losses for $1,000 in premium. From an underwriting perspective, those numbers might have been acceptable for a subprime mortgage, but they don't work very well for conventional insurance.

West Virginia's new assigned risk pool will be managed by NCCI, a natural choice as they already administer pools in 20+ states. The servicing carriers are Travelers, Liberty Mutual and American Mining. Employers unable to secure coverage in the open market are likely to pay significantly higher premiums in the pool.

Thus far, West Virginia's transition to a competitive market seems to be going smoothly. The pain has been distributed across the board: to a population of workers that had long viewed comp as an entitlement, to employers in favored industries who long benefitted from suppressed rates for coverage and to some of the former state employees who ran the old, rather bloated system. No one would describe the new approach to workers comp as perfect, but the competitive market appears to offer a reasonable balance between the often conflicting interests of workers and employers. The creation of an assigned risk pool for poorly performing employers is simply one more necessary step in the eternal search for an effective and equitable system.


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January 5, 2009

 

Happy new year to all our readers! While we were taking a short holiday break, Louise at Colorado Health Insurance Insider was toiling away to produce a special New Year’s Eve Cavalcade Of Risk. There's some good reading there, it's good way to ease your way back into some of the health care issues that lie before us in the coming year.

Here are a few other news stories that crossed our radar:
Insurance and the economy: market will harden - a recent report by Advisen LTD. alerts commercial insurance buyers that rates in all lines should be expected to rise in the fourth quarter of 2009 or first quarter of 2010, and the hard market is likely to last "longer than normal." The report states that workers compensation premiums may begin rising as early as midyear in 2009. Underwriting losses and poor investment returns are putting pressure on rates: "In the current economic environment, where credit markets are essentially frozen, capital to create new insurance and reinsurance capacity may be in short supply." Another recent report by Willis Re concludes that reinsurance pricing is likely to rise as capital becomes scarce. And A.M. Best has recently stated that the U.S. property-casualty industry has posted its first year-end underwriting loss since 2005, with a combined ratio of 105.4% for the first nine months of 2008, as compared to 92.2% in the prior year.

WC crystal ball - our friend Joe Paduda offers his 2009 predictions for workers comp managed care - well worth checking out. He follows with an in-depth post on why big comp networks won't do the smart thing.

CT coverage verification - The Connecticut Workers' Compensation Commission has created a new online service that will enable a workers comp verification to learn if a business operating in the state has coverage. Direct link to the service: CT coverage verification service.

Work fatalities - while most of us celebrated with family over the holidays, many families grieved the loss of workers who died on the job. The Weekly Toll tells the story of those losses. If you haven't visited in awhile, stop by to see the new design. It's a grim and very personal reminder of how important it is that we all stay committed to workplace safety as a top priority for the new year, something that may be increasingly hard as training and safety budgets get squeezed in this difficult economy.

Cool tool - Google's has a new, free 411 service that is fast and easy to use. Dial 1-800-GOOG-411 from any phone. State what you're looking for and GOOG-411 will connect you with the business you choose. If you are calling from a mobile device, the service can even send you a text message with more details and a map. Simply say "Text message" or "Map it." Learn more at Goog411. Thanks to Jann from Standard Publishing for this great tip.

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