December 2012 Archives

December 28, 2012

 

The following are the 20 posts with the most number of reader views in 2012. Some posts have racked up a goodly number of views since we began tracking. Although we began the blog in September 2003 (so we're embarking on our tenth year!), we didn't start tracking until March 2007. We've been visited 1,625,623 times since then.

You're fired! Should you terminate an employee who is on workers compensation?
Views in 2012: 8,783
All time views: 35,612

Carpal Tunnel Syndrome: Who Should Pay?
Views in 2012: 6,790
All time views: 25,001

Independent Contractor or Employee?
Views in 2012: 6,012
All time views: 27,190

Can You Terminate an Employee on Workers Comp?
Views in 2012: 4,346
All time views: 11,976

Heart attacks on the job: are they covered by workers compensation?
Views in 2012: 2,325
All time views: 7601

The Cost of Volunteers
Views in 2012: 1,637
All time views: 5,130

Exception to the "going and coming" rule: operating premises
Views in 2012: 1,425
All time views: 8,038

You think your job is tough?
Views in 2012: 1,351
All time views: 5,186

Experience Modification Alert: NCCI Changing the Rules
Views in 2012: 1,236
All time views: 2,110

OSHA: Is Your Safety Incentive Program an Act of Discrimination?
Views in 2012: 1,119
All time views: 1,119

1,093 / 1,093
NCCI Experience Mod Changes: The (Ominous) Future is Now
Views in 2012: 1,093
All time views: 1,093

Cool work safety tool from WorkSafeBC - "What's wrong with this photo?"
Views in 2012: 1,091
All time views: 2,254

The "here's a guy doing stupid things" safety photo genre
Views in 2012: 1,090
All time views: 1,948

Dangerous jobs: window washing at extreme heights
Views in 2012: 1079
All time views: 2,195

Predictive Modeling in Workers' Compensation
Views in 2012: 993
All time views: 993

The history of workers compensation
Views in 2012: 965
All time views: 12,077

Bankruptcy and Workers' Compensation: Broken Promises, Broken Lives
Views in 2012: 942
All time views: 4,133

Cavalcade of Risk #113 and a scary work scenario
Views in 2012: 939
All time views: 6,297


"What are my rights?" Employer frustration with workers comp

Views in 2012: 896
All time views: 3,643

Underwriting for Dummies?
Views in 2012: 856
All time views: 4,463

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December 28, 2012

 

Did you survive the holidays? You may have thought that your calorie count was your biggest worry, but actually the Mayan Apocalypse was looming. We dodged that bullet, but what's around the corner? Van Mayhall of Insurance Regulatory Law talks about assorted risky matters in Cavalcade of Risk: Surviving the Mayan Apocalypse Edition.

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December 26, 2012

 

As the New Year looms, the 100 year old workers compensation system continues its awkward foray into the 21st century, it encounters problems beyond its original design: the widespread availability of opioids, increasing sophistication in medical interventions, and an aging workforce. Today we examine a formerly inconceivable conundrum: can an 80 year old man be expected to return to work after an injury?

Kenneth Brunner graduated high school in 1949 and worked steadily all his life: From 1951 through 1993 he ran the family dairy farm with help from his wife, an accountant. Brunner raised crops; used a tractor, plow and other farm machines, kept track of feed and each animal's output. He took milk samples from each cow and sent them for analysis; after receiving reports, he adjusted feed for each animal to maximize output. He supervised two to three individuals on the farm.

From 1954 through 1984 he supplemented his farm income by driving a school bus - work which, in the view of the Ohio workers comp commission, required the ability to work independently and use judgment.

From 1968 through 2000 Brunner also was employed as an insurance adjuster. He estimated crop loss for an insurance company, a job that required using scales, taking samples and writing reports. In 1990, at age 58, he was certified for insurance sales.

In January 2011, at age 77, he was working in a maintenance job, when he tripped on a drain pipe and fell face first onto pavement. His injuries were severe:bilateral frontal bone fracture; fracture lateral wall right maxilla; fracture bilateral paranasal sinuses; closed fracture bilateral nasal bone; open wound of forehead; abrasion face; closed fracture C2 vertebra.

He received workers comp benefits. A couple of years into his recovery, he filed for permanent total benefits (PTD). Brunner was 80 years out and had had enough of working.

Brunner's treating doctor concluded that he would never work again:

This claimant has an injury that is permanent and for which there is no curative therapy. This claimant has progressively suffered loss of function and has had to endure progressively more pain. The exam above shows that there is so little functional capacity and that the claimant is so affected by his condition and its required care, that there is no capacity for sustained remunerative employment and that there is no reasonable employer that would ever hire the claimant expecting any work capacity.

Based on the examination above, review of documents, and based on sound medical reasoning I find that the allowed physical conditions, independently and by themselves, render the claimant permanently and totally disabled and unfit for all sustained remunerative employment.

Once a Worker, Always a Worker?
The Ohio workers comp commission reviewed Brunner's claim for PTD benefits. They took into account his age, as well as his resume in determining that he was still capable of working. While most of his living involved physical labor, throughout his working life Brunner had displayed skills that at least theoretically were transferable to sedentary work. As a result, they rejected Brunner's request for PTD benefits. The commission did not address the likelihood of anyone offering Brunner a sedentary job.

An appeals court upheld the denial of the claim, finding that the commission did not abuse its discretion: (1) in weighing Brunner's age in assessing the non-medical factors; and (2) in determining that Brunner has some transferable skills.

It appears that Brunner's longevity worked against him. He labored well into his 70s and displayed unusual fortitude in recovery from serious injuries. Because the premise of PTD payments is protection for disabled workers who are available for work but no longer able to do it, Brunner finds himself ineligible for benefits. In a supreme irony, his ability to work as an older worker precluded the conclusion that he was unable - even at 80 - to continue working.

Brunner's dilemma is by no means unique. As the workforce ages, as more and more workers continue labor late into their seventies and even 80s, a paradox emerges: the point where one is too old to work recedes into the haze of the future, leaving injured older workers in a gray zone where their permanent injuries may or may not be compensable and where their (theoretical) ability to work mitigates against their being paid not to work.

In the months and years ahead we will see more and more litigation involving the claims of "older" workers with ages far beyond what was contemplated in the original workers comp system. State by state, the system will have to respond, becoming the focal point of economic, social and even psychological forces that are far larger than workers, comp stakeholders and state policy makers combined. This is an evolving narrative of surpassing interest. Stay tuned.

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December 20, 2012

 

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via Sam Glynn

We are happy to be ho-ho-hosting this holiday edition of Health Wonk Review. Before we advance to this week's best of the best of the health policy blogosphere, we have a few administrative notes. The first is an urgent news alert we received yesterday concerning the big guy: Risk Managers Find Santa Exposed, Urge $1 Billion Coverage Plan. The second note of less urgency but some seasonal healthcare-related interest is a scholarly research report that appears in this month's British Medical Journal: Why Rudolph's Nose Is Red. We'll let you ponder these weighty matters and move on to submissions from our regulars. This week's entries appear in the order in which they were received.

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Via Nicolas Ménard

InsureBlog
In Unclear - Breathlessly Unclear - On the Concept, Mike Feehan ruthlessly fisks a recent LA Times article on California's Blue Cross proposed rate increases.

Managed Care Matters
Joe Paduda points to $200 billion in easy-to-make cuts in federal spending, which, for some reason, neither President Obama or Speaker Boehner seem willing to discuss.Since these cuts would get the two much closer to an agreement, and do so without cutting any benefits or raising any taxes, Joe asks -- what's the hold up?

Healthcare Economist
Jason Shafrin reviews how United Health evaluates physicians for its physician designation program: How do commercial insurers evaluate physician quality?

The Disease Management Care Blog
Jaan Sidorov tackles the inconvenient truths that will be confronting Obama in making good on his promise to address the horrific Newtown shooting. Rather than take gun control head on, Sidorov recommends doctors lead a national discussion on reconciling the privacy rights of persons with mental illness against the public interest in minimizing mass shootings, confront how the electronic health record could be used against gun owners and address a badly broken mental health care system.

Health Care Renewal
In Pfizer's 13th Legal Settlement - Will it be Enough to End the Impunity?, Roy Poses takes on Pfizer, noting the company has not suffered any significant negative consequences for any of its actions, despite its "amazing record of unethical behavior in the 21st century." This, despite a new calls to end to impunity in the wake of giant bank HSBC's alleged money laundering and transferring for drug cartels and sanctioned regimes.

The Hospitalist Leader
In his post "Less Than One Percent of Pain Sufferers Become Addicted", Bradley Flansbaum notes that the medical system teaches doctor not to fear narcotics when treating non-cancer pain but "Little did we know the wisdom had little basis in fact."

Health Business Blog
When hospitals buy physician offices they sometimes add a nasty surprise for patients: large facility fees to office visits. David Williams says that there's no real justification for such fees, but until now hospitals have gotten away with it. That's changing though as patients start to push back.

Colorado Health Insurance Insider
In her post What Should Health Insurance Cover?, Louise Norris says that health insurance is purchased to protect against the things we don't expect to happen and explains why, despite its high cost, deductibles and copays are still required.

Health Access California
Anthony Wright notes that the new federal guidance on Medicaid's ACA coverage expansion gives states like California and others the ability to move forward and take advantage of the huge new benefits and funding under Obamacare -- and quickly, given the ten short months to starting to enroll people in Medicaid.

HealthBeat
Maggie Mahar explores the concept of The Empowered Patient through the real-life experiences of Julia Hallisy, who has authored a book and started a nonprofit foundation to impart what every patient and every patient's advocate needs to know about staying safe in a hospital. Hallisy learned the hard way during her daughter's decade-long journey through the health care system and some of the San Francisco area's finest hospitals -- a journey that included medical errors, misdiagnoses, inexperienced medical providers, and more. Hallisy's daughter Kate died in 2000 at the age of 11.

Health Affairs Blog
In their post Out Of The Blocks: Meeting The Challenge Of Transforming Health Care, Don Berwick and Clifford Marks summarize recommendations and thoughts from health care leaders at the "Out Of The Blocks" Conference held two days after the election by the Institute for Healthcare Improvement. It brought more than 100 health care leaders together, including many of the nation's foremost health policy experts, such as Senators William Frist and Tom Daschle, as well as panelists from all corners of the health care world. The post explores and summarizes some of the recommendations that were collected in a 14-page report.

Health AGEnda
Chris Langston posts about a national survey showing that depression care is still lacking some ten years after IMPACT, a $10 million depression treatment project. Chris examines what the findings of the new poll mean, and what we need to do to improve mental health services for those most vulnerable.

HealthBlawg
It's a carnival within a carnival as David Harlow hosts the current edition of Health Care Social Media Review. David founded HCSM this year to "serve as a hub for posts from the best and the brightest health care social media writers, thinkers, users and proponents worldwide, to contribute to better understanding and adoption of social media in health care."

Innovative Health Media Blog
In Keeping it All Together: An Unexpected Benefit of Medicare's Annual Wellness Visit, Charles Smith shows how implementing simple modifications to daily procedures, such as Medicares new AWV, practices can improve patient care and save money. This not only increases patient satisfaction with the visit, but it may also help improve patients chances of staying healthy.

healthinsurance.org
Harold Pollack notes that with the Affordable Care Act's Medicaid expansion, the President and the governors need to get along. He thinks the governors will eventually embrace the Medicaid expansion and demonstrates why the economics are just too compelling to ignore. But states and the federal government must cooperate to solve a host of difficult implementation problems and glitches already-arising under ACA. He suggests that one vehicle of compromise and accommodation might be to work through both Democrats and Republicans in the National Governors' Association.

Workers' Comp Insider
In a recent post here on our blog, we posted Storm Clouds Ahead: Hackers, Healthcare Data & Medical ID Theft, citing recent cases of data hacking and the growing threat to consumers, employers, insurers and TPAs of data breaches and medical ID theft.

That's it for this edition! Our next edition will be hosted early in the new year - Brad Wright will host an edition on 1/3/13 at Wright on Health. Until then, wishing you all the best of the season!

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via Laura Gentry

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December 19, 2012

 

This is Part 2 in 5 part series on Experience Rating changes. See Part 1: The Experience Rating Process: Significant Changes Are Imminent. Parts 3 to 5 will be posted after the holidays.

When you report a claim to your insurance carrier where outside medical bills are involved, the insurer will estimate the ultimate cost of the claim. For medical-only claims, the estimate is small; for lost time claims, it might range anywhere from a few thousand to hundreds of thousands of dollars, depending upon the severity and duration of the injury.

Your company's claim losses are described in detail on a loss run, a written summary available through your agent or directly from your insurance company. The loss run lists what has already been paid plus what is projected for payment over the life of the claim. The projected, but as yet unpaid, amount is called the "reserve," because it's the amount set aside, or reserved, for future payments. The amount already paid plus the reserved amount is called the "total incurred amount."

Example: John Doe injured his back one year ago:

Paid at the time of the loss run: $ 45,600
Reserved for future payments: $ 60,000
Total Incurred amount: $105,600

Reserves are based on the insurance claim adjuster's investigation into the nature of the injury (diagnosis and prognosis) and the insurer's experience with similar cases. The total incurred amount is the insurer's best estimate of the ultimate cost of the claim: the expected payments for lost wages (indemnity), medical treatment, disability and nurse case management, rehabilitation, attorney fees and other related expenses over the duration of the claim.

The same injury to two workers might result in very different reserves. Among the factors included in setting reserves are:

  • Education level
  • Co-morbidities (medical problems which may impact recovery such as high blood pressure, diabetes, obesity, drug addiction, etc)
  • Age (younger workers generally heal faster than older workers)
  • Transferable skills (if unable to return to the original work, whether the injured worker has marketable skills)

The initial reserve is usually posted within 30 days. Once posted, reserves are periodically updated to reflect any changes in the course of the claim. The costs of a projected settlement are usually included in the reserve.

In terms of experience rating, whether a claim is medical-only or indemnity means a lot. Why? Because, with the exception of Massachusetts, medical only claims are discounted by 70% in the experience rating calculation (Massachusetts, a non-NCCI state with its own Rating Bureau, does not discount medical-only claims). However, once any indemnity payments are incurred, there is no discount for any medical costs already paid or projected to be paid, and the loss, up to its first $5,000 counts full value in experience rating. This first $5,000, the "split point," is called Primary Loss, and it, as well as Excess Loss, all dollars above $5,000, is the subject of our next post. In it we address the imminent and upward change in the split point.

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December 17, 2012

 

Here at the Insider we realize that we have readers from different areas of the insurance world, some directly related to workers' comp and others indirectly related. Some of our readers are risk managers at large Fortune numbered companies. Other readers are with agencies and brokerages, large and small. Still others work in various roles for insurers. Because in just a couple of weeks the insurance industry's experience rating system will undergo its first significant change since 1990, we've decided, beginning today, to present a 5-part series aimed at those readers for whom this change will have direct and immediate impact.

For some readers, what we'll be presenting will be old news. If you're in this group, this is the time to hit the "delete" key. Also, to be candid, the first, and possibly second, post may appear too basic for some, but we believe we have to prime the pump before we can draw the water. For everyone else, hang around; there might be something to learn. We're talking directly to middle and small market employers and the agents, brokers and consultants who serve them. Essentially, anyone affected by experience rating.

The goal: Reduce the cost of workers comp insurance
Other than reducing payroll, in most cases the only way for an insured employer to reduce its workers compensation premium is by reducing experience modification, which is the end result of the experience rating process. Experience rating is complex, but it contains elements responsive to strategic planning and employer control. That's why understanding experience rating is so important.

First, some basics. Coming up with an employer's workers comp premium is, essentially, a two-step process. The first step multiplies the employer's premium class rate by its payroll in hundred-dollar increments. That is: rate times each hundred dollars of payroll. This is called the "manual premium." In the second step the insurer multiplies the manual premium by the "experience modification factor," which is derived from a mathematical calculation that examines the employer's claim loss history over the most recent three-year period in relation to its industrial peers. The application of the "mod" will either raise or lower the manual premium, resulting in a competitive advantage or disadvantage. This is why keeping the mod low is so vital.

NOTE: For a comprehensive basic primer on experience rating, we recommend going to the source: The National Council on Compensation Insurance (NCCI) website provides a well-written document (PDF) that will walk you through the fundamentals of experience rating.

In the next four posts we offer the following:

  • First, a basic review of claim losses, the building blocks of experience rating

  • Second, an explanation of the difference between Primary and Excess Loss, as well as a description of the 2013 Split Point change

  • Third, a recommendation for dealing with Reserves

  • Fourth, a discussion of Expected Losses, Expected Loss Rates and a wrap-up.

Keep in mind that in experience rating, size matters. Large insureds with large premiums are expected to have higher losses than smaller insureds. Indeed, because their margin of error is smaller, companies with premiums in the $10,000 to $100,000 range can easily find themselves in a lot of trouble with just a few injuries.

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December 13, 2012

 

Unlike any other US state, Texas has never required its employers to buy or provide statutory workers' compensation. Texas employers who opt-out of this traditional form of injury benefit system are called non-subscribers. In 1993, 44% of Texas employers were non-subscribers, and they employed 20% of the employees in the state. By 2008, employer non-subscribers had shrunk to 33%, but their percentage of the state's total workers had grown to 25%. No one knows for sure, but estimates are that as many as 114,000 Texas employers have opted-out.

Until now, with the exception of two academic studies, one in 1996 examining lost injury days, the other, a 2010 survey of large, multi-state non-subscribers, no one has ever fully examined the Texas opt-out phenomenon. But, with the release today of the 87-page "Workers' Compensation Opt-Out: Can Privatization Work? The Texas Experience and the Oklahoma Proposal," that has changed.

Funded by the big TPA, Sedgwick CMS, published by the New Street Group and written by Primary Researcher Peter Rousmaniere and former Risk & Insurance editor and New Street Group founder Jack Roberts, this thorough, well-researched and entirely lucid analysis is certain to propel the opt-out debate now and in the foreseeable future.

In Texas, It's 1910 All Over Again
To get a grasp of the back-to-the-future Texas opt-out, think 1910, the year before states began enacting workers' compensation laws, the grand bargain in which employers promised to replace lost wages and cover medical costs due to injury and workers agreed not to sue employers when the workers were injured on the job.

Lots of employers buy workers' comp in Texas, but for those who don't it's 1910 all over again with virtually no state oversight. Let me be clear about that: In Texas, there is no requirement for non-subscribers to pay for work injuries in any way. There is one important difference, however. The Texas legislature has statutorily removed the three major defenses used by employers prior to workers' comp statutes being enacted to defend themselves against worker suits: contributory negligence, assumption of risk and the negligence of fellow employees. Also, without workers' comp, there can be no "exclusive remedy," and for non-subscribers there isn't. Large non-subscribers, such as Costco, have been very creative in dealing with that.

Rousmaniere and Roberts discovered that Texas opt-out was a bit of a carnival sideshow until ten to fifteen years ago when large employers like Costco, whose program they analyze in depth, cottoned on to the idea that they could provide a sleek, fast-moving, common-sensible injury benefit management system if they wove it into their ERISA plans. ERISA, the Employee Retirement Income Security Act, is a federal program which allows employers to design their own benefit systems, and substantially more than a cottage industry has evolved in Texas to help them do that for worker injuries. The operable phrase in that last sentence is "design their own."

Designing Their Own
Suppose someone, your boss for example, said to you, "There's no more workers' comp. Design me a plan that will provide our workers who get injured immediate medical care and wage replacement. Make worker participation mandatory. Keep the administration to nothing more than what is absolutely needed for it to run smoothly, and, before I forget, keep all the lawyers out of it."

What would you do? Well, large employers in Texas have had about fifteen years to think about that, and at least one of them, Costco, has created the ideal program I would design myself if I had a magic wand. I say "at least one," because Costco is the only employer Rousmaniere and Roberts point to, although they do report on interviews with many professionals involved in Texas opt-out. They also suggest that Costco is fairly typical of the large employer opt-out experience.

After much research and planning, Costco became a non-subscriber in 2007. At that time, the company operated 15 large warehouses throughout Texas, carried a payroll of $87 million and employed about 4,000 workers. Its loss costs had grown to around $150 per employee, or 97 cents per hundred dollars of payroll. In the four years following non-subscription, losses fell to 46 cents per hundred dollars of payroll, a decline of 52%, with high employee satisfaction for the system.

Here are the main points of Costco's worker injury benefit program, and remember, Costco was able to start with a blank piece of paper:

  • Work must be the "sole cause" of injury, not just a "contributory factor." More about this below.
  • Injuries "must" be reported by end of shift, but in no case later than 24 hours after happening. Failure to do this will negate any benefits. Workers who don't report in time are on their own; most use group health to cover medical costs, but, as one can imagine, a worker is more likely to win the Powerball than to not report within 24 hours.
  • Employees receive a taxable 80% of pre-injury wages with no waiting period. They're paid from day one.
  • Upon hiring, workers are required to accept binding arbitration for disputed claims, and Costco picks the arbitrators. If unsatisfied with the arbitrator's ruling, employees do have the option of bringing suit for employer negligence in civil court, but since 2007 only three such suits have been brought; two were settled modestly, and the third is pending
  • Chiropractic care is not allowed (Costco's analysis of its losses concluded that excessive chiropractic care was a major driver of loss costs and unnecessary for employee recovery)
  • There are no permanent partial disability awards
  • Wage and medical benefits end after 156 weeks, but, in rare cases, future medicals can be settled (Rousmaniere and Roberts don't address this, but I'm wondering about the degree to which CMS plans on extending its long, bony Medicare fingers into this pie)
  • Costco carefully picked an emergency care and specialist medical provider network comprised of highly reputable physicians, with as many as possible being board-certified occupational medical physicians. Costco routinely pays its providers full invoiced charges
  • If employees fail to follow through on medical recommendations or miss appointments for no good reason, benefits are terminated
  • For the rare event when injuries extend beyond 156 weeks, Costco has purchased insurance to cover the tail
  • Because any disputes go quickly to arbitration, attorney involvement is nearly non-existent

With loss costs reduced by 52% and employee satisfaction high, Costco obviously has a winning program. Costco has seamlessly woven injury benefits into its ERISA plan, blending them with its group health and short and long-term disability programs.

One thing that Costco wrestles with is co-morbidity. Imagine a Type-1 diabetic warehouse worker without safety shoes who drops some heavy object on his or her foot. Because of the diabetes, the foot is much more susceptible to infection, which actually happens. Then, because diabetes seriously inhibits healing, the infection worsens, and the foot is amputated. In statutory workers' comp, this would be covered, but what about at Costco. I asked Peter Rousmaniere about this. He wrote back:

"You are right, this would be excluded... With Obamacare assuring universal health coverage, the opt-out employer's message will be something like, "Don't expect indemnity payments for a work injury if there is a good chance that your personal health condition will contribute to it."

Rousmaniere admits that this "sounds draconian," but he believes that this issue, as well as what to do about degenerative conditions, such as what to do about the 55-year old wall board hanger whose rotator cuff finally gives out, will gradually self correct with help from the ADA as well as the Affordable Care Act. The jury on this is decidedly out. But, just for a moment, imagine that he's right. What we could be moving toward, after decades of failed experiments, is the first manageable and potentially successful version of 24-hour care.

The Other Side of the Coin
One thing is clear from the Rousmaniere and Roberts study: Costco and other large employers like Target and Safeway, two other non-subscribers, have the resources and core values necessary to provide compassionate care for injured workers while bringing them back to work as fast as medically possible in a businesslike way. But what about Kenny's CITGO, down the street on the corner with five employees, all of whom, including Kenny, live paycheck to paycheck? And Kenny is just as free to non-subscribe as Costco.

Kenny and others like him are the Third World of non-subscription. Operating with no regulatory or legal oversight by the state, he can do what he pleases or what he perceives he can afford, which is probably not much. If one of his workers is injured, and Kenny decides to offer nothing in the way of injury benefits, the worker is on his own. He can certainly sue Kenny for employer negligence, and Kenny won't have those three pre-workers' comp era defenses to rely on. However, no attorney is going to take the employee's case because Kenny won't have the resources to pay if he loses, which he probably would. But, to quote Rousmaniere and Roberts, "That is a hollow victory, indeed."

And on a grander scale, what about the large employer with significant resources, but who also may have more than a bit of malevolence in its DNA and wants to play schoolyard bully (see Massey Energy)? In an environment without one scintilla of regulation will the bully treat workers fairly?

The Oklahoma Proposal
After studying the lay of the land for the Texas opt-out and seeing where the Punji Pits are (see Kenny's CITGO and Massey Energy), Oklahoma legislators crafted a remarkable piece of opt-out legislation that narrowly lost 42 to 50 in the Oklahoma House of Representatives in late April, 2012.

The Oklahoma proposed legislation would have corrected many of the perceived flaws in the Texas opt-out system. For example, Oklahoma would require any employer choosing to opt-out to provide similar, in some cases better, benefits than the statutory system. Also, injury benefits would be required to be part of an ERISA-approved plan, although there is significant uncertainty if this provision would withstand a constitutionality challenge. Further, employers applying to opt-out would have to pay a fee of $1,500 annually to do so. This would more than likely eliminate the Kennys of the world, employers who just don't have the resources to "pay to play."

Rousmaniere and Roberts expect Oklahoma legislators to do some tinkering and re-file during 2013. They think there is a good chance that this time the legislation will pass. Whether Governor Mary Fallin, who campaigned on a platform of workers' comp reforms, will sign it is another matter.

Summary
This 87-page report is a Herculean effort, and, in my view, the worker's compensation insurance industry owes Rousmaniere and Roberts a huge debt for spending close to a year to produce it. Sedgwick should be commended for funding it. Perhaps we can forgive Rousmaniere for a bit of acquired bias, but he's seen, up close, what a conscientious, fair-minded employer can do if given the chance. I come away from his report finding myself agreeing with him as he wrote me the other day: "Every state should offer and every medium and large sized employer should consider opt -out." But to this I add, "With a healthy dose of regulatory and state oversight. Not everyone is Costco."

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December 12, 2012

 

Michael Stack and Rebecca Shafer make their debut in hosting Cavalcade of Risk, #172 at the Amaxx Work Comp blog. Check out this biweekly smorgasbord of risk!

And speaking of risk, here's a compilation of the Top 10 Forklift Accidents from the "what not to do" school of risk management.

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December 11, 2012

 

If you think you are having a bad day, consider the healthcare providers and patients of the Australian Miami Family Medical Center, all of whom have been locked out of medical records. Thousands of patient medical histories, prescriptions, lab test results and health records have been breached, hijacked and encrypted, and are being held for ransom by Russian hackers.

This is not an isolated incident by any means - earlier this year, a small Illinois medical practice was similarly breached with health records stolen, encrypted, for held for ransom. Extortionists also struck Express Scripts a few years ago, threatening exposure of more than 700,000 records.

Not all health data breaches are the result of hackers. In fact, hackers may be the tip of the iceberg. The less dramatic day-today threat of unsecured mobile devices, lost laptops, and disgruntled or dishonest employees likely represents the lion's share of the breaches -- at least at present. And such problems are hardly unique to healthcare - the issue of employees bringing mobile devices into the workplace is a common one, dubbed "bring your own device" or BYOD for short. Security experts quip that it stands for "bring your own danger."

Medical ID Theft
While ransom may not be a particularly successful criminal strategy, the real paydirt might be in medical identity theft. With the high cost of medical care and a proliferation of opioid abuse, medical IDs are increasingly valuable. Thieves can hijack medical identities and health data to file insurance claims or secure medical treatment, prescription drugs and even surgery. On a broader scale, operatives can use medical data to submit false bills to insurers. To add insult to injury, illegal medical transactions may unknowingly be added to patient records, making for inaccuracies and potentially dangerous situations.

People are aware that they could be a victim of financial fraud - medical fraud, not so much. A study by Nationwide Insurance revealed that most people are unaware of the risk of medical ID theft. While people are in the habit of checking financial accounts somewhat regularly, that is often not the case with medical records.

Expect growing risk for health data
Experts say that we can expect to see more healthcare breaches ahead - particularly as more records are digitized. A recently released study on patient data security by Poneman/ID Expert reports:

Ninety-four percent of healthcare organizations surveyed suffered at least one data breach; 45 percent of organizations experienced more than five data breaches during the past two years. Data breaches are an ongoing operational risk that could be costing the U.S. healthcare industry an average of $7 billion annually. A new finding indicates that 69 percent of organizations surveyed do not secure medical devices--such as mammogram imaging and insulin pumps--which hold patients' protected health information

The report paints a picture of an industry that is woefully unprepared to deal with the burgeoning threat. Most organizations surveyed said that they have insufficient resources to prevent and detect data breaches.

In health data breaches involving more than 500 people, HIPAA privacy regulations specify that, in addition to individual notifications, the incident must be reported and made public (See Breach Notification Rule). The US Department of Health & Human Services maintains a database of health data breaches affecting 500+ people - you can check to see if any of your providers are on the list. The Federal Trade Commission offers consumer advice on preventing or recovering from medical identity theft.

Besides individual consumers, employers, insurers and TPAs should be alert for health data fraud and should report any questionable activity. As entities with greater buying power than the average consumer, wholesale buyers can also help manage the risk by requiring adherence to security and privacy standards and having crisis plans in place as part of the RFP or buying process.

Rick Kam, president and co-founder of ID Experts, offers these security tips to healthcare organizations:

  • Operationalize pre-breach and post-breach processes, including incident assessment and incident response processes
  • Restructure the information security function to report directly to the board to symbolize commitment to data privacy and security
  • Conduct combined privacy and security compliance assessments annually
  • Update policies and procedures to include mobile devices and cloud
  • Ensure the Incident Response Plan (IRP) covers business associates, partners, cyber insurance


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December 6, 2012

 

Holiday Health Wonkery - Just a spoonful of latkes makes the medicine go down? Hank Stern hosts a Chanukah-themed Festival of Lights edition of Health Wonk Review at InsureBlog - it's fun, interesting, and contains substantial wonkery.

Claims Webinar - Mark Walls, who many of you may know from his LinkedIn Work Comp Analysis Group fame, is hosting a complimentary 90-minute webinar on Tuesday, December 11: Take your Workers' Compensation Claims Handling from Good to Great. Mark's been plying his profession for 22 years, so you can't get a better claims guide. Click through to see topics or to register.

Firefighter hazards - Stop, drop, and roll: workplace hazards of local government firefighters, 2009 (PDF) - "When compared with all workers, firefighters are injured in similar ways but at a much higher rate, with work-related injuries caused by "stress, exertion, and other medical-related issues" accounting for the largest number of deaths and with risks of fatal injuries 25.7 percent higher and nonfatal injuries and illnesses over two times greater." - BLS report by Gary M. Kurlick, economist in the Office of Compensation and Working Conditions, Division of Safety and Health Statistics, at the Bureau of Labor Statistics.

Chimp attack - Roberto Ceniceros of Business Insurance brings us the most recent development in the sad saga of the CT woman who was attacked by her employer's pet chimp: Woman disfigured in chimp attack settles with owner's estate for $4M. We've written about aspects of this horrific case in the past - see: the crazed chimp case, Exclusive Remedy" for Losing Your Face?, and (Uncompensable) Nightmare at Work.

Depression and Work Comp - Does your organization offer depression screening for injured workers? Risk Scenarios: Down for the Last Time offers case in which missed cues and poorly handled communication made a difficult workers' compensation case much more painful than it should have been.

Mind over Matter - Osteoarthritisis is "the most common joint disorder" and occurs "due to aging and wear and tear on a joint." Will arthroscopic surgery relieve related pain? Read about prior studies in Kneedless Surgery. For more debunking, see Gary Schwitzer's HealthNewsReview, which has a mission of "helping consumers critically analyze claims about health care interventions and by promoting the principles of shared decision-making reinforced by accurate, balanced and complete information about the tradeoffs involved in health care decisions." The site offers commentary, evaluations, and grading on health care journalism, advertising, marketing, public relations and other messages - a great consumer resource.

Fraud - Two pretty large cases of fraud hit our radar this week, proving that work comp fraud perpetrators can come in many flavors, even among those you pay to trust. On WorkCompWire, we learned about $2.7 million Florida fraud case involving a former correctional officer and at Managed Care Matters, Joe Paduda blogs that Pennsylvania County was defrauded by its risk manager to the tune of $490,000.

Telecommuting - In a recent Human Resource Executive, Carol Harnett makes the case that Telework is Good for Business, and she uses the experiences that many businesses had with Hurricane Sandy as examples. At LexisNexis, attorney John Stahl looks at work comp issues related to the mobile workforce and home-based employees.

Workplace Violence - The current issue of Risk Management Magazine has a Time Line of Workplace Homicides and at Risk Management Monitor, Ralph Metzner posts about preventing workplace violence.

News Briefs

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December 5, 2012

 

NCCI Holdings has issued a report on the impact of co-morbidities on workers comp claims. While there are few surprises, the research is able to point toward a handful of specific conditions that are most likely to drive up the cost of a claim: hypertension, drug abuse, chronic pulmonary problems and diabetes. The research also confirms a particular red flag that has frequently been the focus of this blog: the impact of the aging workforce on the costs of workers comp.

The overall scale of the co-morbidity problem is relatively modest: only 6.6 percent of claims involve workers with co-morbid conditions that directly impact their treatment; however, this reflects a nearly a three fold increase between 2000 and 2009. In those claims where co-morbidities are a factor, the cost of medical treatment is double that of less complicated claims. Co-morbidities begin to show up in workers in their mid-30s and rise with age. Workers with co-morbidities are more likely to work in contracting or manufacturing - as opposed to clerical/office and goods and services. Finally, injuries to workers with co-morbidities are more likely to involve lost time, transforming what might normally be a medical-only claim into one involving indemnity.

The majority of claimants with co-morbidity diagnoses are male: 65 percent of all claimants, 73 percent of claims involving drug abuse, 68 percent of claims involving diabetes and 67% of claims involving hypertension. This may also correlate to the fact that men are more likely to be involved in physically demanding jobs, where co-morbidities would have more of an impact on recovery.

American Health
The study notes that illness rates in the general population are increasing, especially in the areas of hypertension, obesity and diabetes. As the incidence rates increase in the general population, the workforce will mirror this growth. While workers with co-morbidities currently comprise only 6.6 percent of injured workers, we should expect to see a steady climb in that percentage over time..Amercian workers reflect American health.

It will be fascinating to track the impact of (virtually) universal healthcare - AKA Obamacare - on workers compensation. For starters, we can hope for earlier diagnosis and treatment of serious health problems. Where workers without health insurance were highly unlikely to undergo treatment for their non-work related conditions, insured workers may receive treatment. Where uninsured workers were only covered by workers comp - and then only for work-related injury and illness - insured workers will have access to preventive care all along. This might help to contain the growth of workers comp costs.

As always, medical treatment under workers comp represents just a miniscule portion (about 3 percent) of total medical costs in America. There is an elephant in the room and it isn't us. But what happens to that elephant will impact the unique, 100 year old public policy experiment that is workers comp. In this era of data mining, there will be much data to be mined.


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December 4, 2012

 

For decades now, it's been almost axiomatic: manufacturing is better offshored. Conventional wisdom, talking heads and campaigning politicians alike would have you believe American manufacturing is dead, killed off by greedy unions, high taxes, and an onerous regulatory climate. China, Taiwan, Mexico, and other emerging economies offered a seemingly ideal business climate without most of these pesky problems.

But not so fast. Paraphrasing the great Mark Twain, reports of manufacturing's death may be greatly exaggerated. Some manufacturers are questioning the wisdom the offshoring trend and, in a move that might be called "repatriation," some big name companies are re-establishing domestic operations here in the U.S. or simply making the strategic decision to keep operations here.

This month's Atlantic Magazine features a must-read article by Charles Fishman -- The Insourcing Boom -- which talks about how General Electric is moving much of its appliance-manufacturing operations back home to Appliance Park in Louisville, Kentucky.

In the late 1960s and early 1970s, Appliance Park was the quintessential American manufacturing operation, employing 23,000 at its peak in 1973. But after years of offshoring jobs, the site became a ghost town. In 2011, the Park's employee population was down to 1,863.

But this year, something interesting began happening. In February, the first new assembly line at Appliance Park in 55 years began making water heaters - a product line that had been previously made in China. A team of employees eliminated parts, reduced material cost by 25%, cut the work hours necessary to assemble the water heater from 10 hours in China to two hours in Louisville. It beat the "China price" price by nearly 20%. Plus, it greatly improved time to market - cutting factory to warehouse time literally from weeks to minutes.

Buoyed by this success, a second assembly line for high-tech refrigerators was launched about a month later. Plans are in the works to open a third building and a third line to produce dishwashers in early 2013. CEO Jeffrey Immelt, commenting in Harvard Business Review, said that outsourcing is "quickly becoming mostly outdated as a business model for GE Appliances."

Fishman cites Lou Lenzi, head of design for all GE appliances, in the following excerpt:


"What we had wrong was the idea that anybody can screw together a dishwasher," says Lenzi. "We thought, 'We'll do the engineering, we'll do the marketing, and the manufacturing becomes a black box.' But there is an inherent understanding that moves out when you move the manufacturing out. And you never get it back."

It happens slowly. When you first send the toaster or the water heater to an overseas factory, you know how it's made. You were just making it--yesterday, last month, last quarter. But as products change, as technologies evolve, as years pass, as you change factories to chase lower labor costs, the gap between the people imagining the products and the people making them becomes as wide as the Pacific.

What is only now dawning on the smart American companies, says Lenzi, is that when you outsource the making of the products, "your whole business goes with the outsourcing." Which raises a troubling but also thrilling prospect: the offshoring rush of the past decade or more--one of the signature economic events of our times--may have been a mistake.

GE is planning to bring about 75% of its $5 billion appliance business back to the U.S. And it is not alone - Fishman cites Whirlpool, Otis, and Wham-O as a few examples of other manufacturers that are bringing operations back from China and Mexico to Ohio, South Carolina, and California. There are other reports of this trend too. In Everything You Need to Know About Insourcing from the White House Blog, Matt Compton says that large manufacturers like Ford and Caterpillar have announced large investments in U.S. facilities - expansions that were previously aimed at facilities in Mexico, China, or Japan. The post names other examples of smaller manufacturers and even service centers that are reinvesting domestically. it also provides these statistics:
  • Business investment is up, growing by 18 percent since the end of 2009
  • We're exporting more goods and services to the rest of the world. As of October, American exports totaled $2 trillion -- an increase of almost 32 percent above the level in 2009
  • Perhaps most importantly, the manufacturing sector is recovering faster than the rest of the economy. Through the course of the past two years, the economy has added 334,000 manufacturing job, and that's the strongest two-year period of manufacturing growth since the 1990s.

Lisa Harrington also examines this trend in an article in Inbound Logisitics: Is U.S. Manufacturing Coming Back?. She cites further examples of work that was created in or brought back to the U.S. She explores some of the strategic decisions that need to be factored in to where production occurs. The article includes a checklist, Nine Steps to Choosing a Manufacturing Location from Stephen Rogers, author of The Supply Chain Advantage: How to Link Suppliers to Your Organization's Corporate Strategy.

The article notes that decisions about location must take a total cost perspective. Direct costs were often factored into decisions, while other factors may have been given little consideration. One example:

Labor cost savings are just one factor driving companies to reconsider manufacturing in the United States. To compete more effectively, a growing number of manufacturers are considering shifting operations closer to customers to provide better service, reduce total costs, and enable accelerated growth, according to a survey of 287 manufacturing companies, conducted by market research firm Accenture.

Companies are realizing that the physical location of supply and manufacturing operations can have a significant impact on overall competitiveness. An unbalanced network--where regional supply is physically separated from regional demand--makes it difficult for the organization to deliver on the very customer expectations that drive growth.

Not a return to the days of yore
Fishman notes that such "insourcing" will not suit all companies - basic work processes, such as mass market clothing manufacturers, will likely never return. Relocation in the U.S. seems to suit companies with high-tech and complex manufacturing process and products that require continuous innovation and improvements.

He cautions that American manufacturing will never return to its prior peak, and he describes various ways that things have changed: "Back in the '60s, Appliance Park was turning out 250,000 appliances a month. The assembly lines there today are turning out almost as many--with at most one-third of the workers." But he cites the "multiplier effect" that the presence of a large manufacturer can have. We saw the multiplier effect in action when the auto industry was in risk - it wasn't just the auto jobs that were threatened, but entire communities - including businesses as diverse as parts suppliers to luncheon delis.


Related
Manufacturing May Be Coming Back to the U.S., Long-Term - an article in Forbes by Robert McCutcheon, the U.S. industrial products leader of PwC.

The Reshoring Initiative - founded by Harry Moser in 2010, an industry-led effort to bring manufacturing jobs back to the United States. The initiative works with U.S. manufacturers to help them recognize their profit potential as well as the critical role they play in strengthening the economy by utilizing local sourcing and production.

M.I.T. Forum for Supply Chain Innovation -
a community of academics and industry members whose support allows Forum researchers to provide customer-focused solutions to design and manage the new supply chain.

Investing in America: Building an Economy That Lasts - White House report


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