Weblog roundup: AIG, FMLA, CA, OH, employment law issues & more
AIG Probe - Business Insurance reports that New York officials are appointing an outside consultant to audit insurance premiums at American International Group Inc. because workers compensation premiums were improperly booked for more than a decade, according to a Spitzer spokesperson. Law Professors Peter Henning and Ellen Podgor discuss this in greater detail in Ignoring Legal Advice at AIG on their intriguing White Collar Crime Prof Blog. Thanks to Doug Simpson of Unintended Consequences for the pointer.
California watch - Employers' Attorney Criticizes Cuts In Workers' Comp Benefits. An article in Adjuster.com states "In a surprising critique, a former president of an attorneys' group that represents employers and insurers says benefits for disabled workers have been slashed to "socially unacceptable" levels under Gov. Arnold Schwarzenegger."
New business blog - BusinessWeek Online has launched its own blog, Blogspotting, where the worlds of business, media and blogs collide - we'll add this to the sidebar. Thanks to B. Janell Garnier at Benefits Blog for the pointer.
Safety pays in Ohio - Employers that actively participate in the BWC's safety council program from July 1, 2005 through June 30, 2006 will receive a 4 percent one-time workers’ compensation premium discount. Thanks to KivaCom for the pointer.
P&C Results - Joe Paduda has a good post on Property and Casualty 2004 results - trends show that premium rates are likely to decline and price competition to increase.
Worker Memorial Day follow-up - Jordan Barab offers a summary of the day’s news coverage.
Family Medical Leave Act - Michael Fox at Jotting By an Employer's Lawyer covers a recent court judgment upholding the dismissal of a suit by an employee who was fired after an FMLA leave. The court held that the application of the "as the crow flies" FMLA provision - or the 75 mile rule - was valid. "Under the FMLA, if there are less than 50 employees within 75 miles of your worksite, even though you meet all other conditions, you are not eligible for FMLA leave."
Skin Deep - So Much for That Merit Raise: The Link between Wages and Appearance. Related - Appearance-based lawsuits are on the rise. (Thanks to Martin Grace of RiskProf for the pointer.)
Good entrepreneurial blog - If you've never visited Dane Carlson's Business Opportunities Weblog, take a few minutes to check out. The topic is entrepreneurship and small business - and although not usually directly related to workers comp or insurance, it's one of my favorite regular reads. Another favorite: Anita Campbell's Small Business Trends.
Employment Law - George Lenid of the always excellent George's Employment Blawg releases the greatest hits - the seven most popular posts on his blog so far this year.
Roofing Contractors and comp - Read Cary Duke's article on Roofing Contractors, Workers' Compensation Insurance and Profits. Duke blogs at The Comp Expert.
E-mail as a safety hazard? - Apparently, while we’ve been catching up on our e-mails, we might as well have been smoking pot. According to a study conducted by King's College, London University with 1,100 people, e-mail is a threat to your IQ. "The average IQ loss was measured at 10 points, more than double the four point mean fall found in studies of cannabis users." Via Rob at Business Pundit.
Today is Worker Memorial Day 2005
According to the BLS, there were 5,559 workplace deaths due to traumatic injuries in 2003, a slight increase from the number of deaths in 2002, when 5,534 workplace deaths were reported. The AFL-CIO released its 14th annual death on the job report. Access the full 154-page report -- Death on the Job, The Toll of Neglect (PDF) -- or read Jordan Barab's excellent summary of report "highlights". Also, visit rawblogXport for some links to various labor sites commemorating Worker Memorial Day 2005.
It would be good to see a larger focus on this topic in the media, but in doing a Google search we were disappointed to find little on the topic. We found an article noting that Wyoming has the dubious distinction of the most work fatalities, with a rate of 13.9 deaths per 100,000 workers vs. the national average of 4 deaths per 100,000 workers, and one other article about the death rate for Hispanics on job climbing in Colorado. I guess everyone is busy with the Michael Jackson trial. I wonder how many deaths the media could help prevent if only a small fraction of the attention that was devoted to the Terry Schiavo case could be devoted to this important issue?
It's also disappointing that little progress had been made in legislation to prosecute serial killers - those employers that willingly and knowingly flout basic OSHA safety standards resulting in repeated worker fatalities. Immigrant workers are particularly at risk of losing their lives on the job.
The best thing we can all do to commemorate the 5,559 people who died on the job is to redouble our commitment to work safety and injury prevention. I've worked with conscientious employers who have experienced a work death - the horror of such an event and the lasting trauma on the families, on other workers, and on managers and supervisors can't be adequately conveyed. Employers, this is a truly terrible lesson you do not want to learn the hard way - don't let a preventable work death happen on your watch.
Here are related posts that we've made since last year's event.
Hispanic Fatalities on the job: the Tip of the Iceberg
Three construction workers die every day in the U.S.
Workplace deaths increased in 2003
Felony for willful safety violations - legislation gaining traction?
Florida shuts down uninsured employer after two worker deaths
Workplace "freak accidents" as a media myth
Dyang at Work, Part 1 and Part 2
Wrongful Death Accountability Act.
Note to FedEx: Beware of Massachusetts!
We have been tracking the fortunes of FedEx, the ubiquitous delivery service that relies on the services of 17,000 "independent contractors" to deliver the goods. They tout their entrepreneurial strategy as a legitimate alternative to traditional employment. Indeed, when you put UPS and FedEx side by side (which Braun Consulting has done here), you are confronted with two polar views of the delivery business. UPS expects to build loyalty and commitment by hiring their drivers as employees and providing full benefits. Their drivers are union members with annual salaries capping out around $70,000. On the other hand, FedEx depends upon the energy and initiative of "independent contractors" to perform very similar work. These "independents" receive no benefits and must provide their own trucks. However, with prime delivery routes they might pull down as much as $100,000 per year.
"Independent Contractors" in Massachusetts
FedEx managers would do well to read the Massachusetts's Attorney General's advisory on independent contractors (see our February 28, 2005 blog). FedEx lost their case for independence in California and they appear doomed to a similar fate in Massachusetts. The AG's advisory on Independent Contractors states that in order for a contractor to be independent, they must be "free from the control and direction" of the general contractor. With FedEx providing uniforms, logos and delivery routes, it will be difficult to demonstrate true independence on the part of the drivers. Even more compelling, FedEx must prove that the work performed by the independent contractor drivers is different from that performed by the general contractor. Given that FedEx's only business is delivery and the "independent contractors" are delivering the goods, there is simply no way they can get past this one.
FedEx is upfront and proud of its strategy. Theirs is an "in your face" defiance of traditional views on independent contractors. They have undoubtedly set aside a huge stash for legal fees to fight a state by state war of attrition. We are humbly suggesting that the reserve a goodly portion of those legal funds for the Bay State. Indeed, a court loss in Massachusetts opens the door to all kinds of employment law violations, up to and including large fines and even jail terms.
Meanwhile, the AG's ruling on independent contractors has come under new scrutiny for its unintended consequences. If you follow the language of the advisory, you find that part-time bookkeepers, attorneys, auditors, health care professionals and the like may fall under the definition of employees, and thus may be able to sue their clients for violations of a variety of employment related laws. Far fetched? Perhaps. But I have a vision of court documents winging their way through the streets of Metro Boston, many of them delivered with timeliness and aplomb by the uniformed and "independent" drivers of the FedEx corporation.
Business blogs - do they work?
If you are reading this post, you are among the 27% of Americans who read blogs...that means you are a relatively early adapter. If you are reading this over an RSS feed or a service like Bloglines, NewsGator or My Yahoo, you can count yourself among the ranks of the geek elite ;-)
According to Business Week, there are now more than 9 million blogs, with 40,000 new ones popping up each day. Yikes. In an article entitled Blogs Will Change Your Business, BusinessWeek Online discusses how blogs are migrating from the personal and hobbyist realm to the business arena. The article is interesting and informative in so far as it goes, but I was hoping it might focus on some real world examples of small businesses that are actually using blogs.
Needless to say, we are a strong proponent of business blogging, but with some caveats - it would be our hope that blogs can help to create a more authentic dialogue with business customers and the general public, not simply be another advertising channel. No one is interested in reading more sales brochures disguised as dialogue.
I'm a bit of a Web obsessive so I've been reading and following blogs almost since they first came on the scene in the late '90s - even before they were called blogs. I first followed a few favorite tech, art, and general interest blogs, and now I have several hundred favorites I visit with varying regularity. Even though blogs were assumed to be personal in nature almost by definition, I thought they could and should play a role in business communication, too. They afford an unfiltered way to communicate with various constituencies. But the trick for business blogging would be to achieve authenticity - and since most companies are only accustomed to speaking to constituents through the filters of advertising and PR, achieving authenticity is a distinct challenge.
Why we blog
Two years ago, a few of us began talking about a blog for Lynch Ryan. We thought it would be a great vehicle for helping our client employers to learn how to manage their workers comp programs more effectively. The Lynch Ryan philosophy is one based on the idea that workers comp is essentially a human issue and a management issue rather than one of merely dollars and cents. We believe that when it comes to comp, treating workers fairly is not only the right thing to do, but it is actually the least costly thing to do. Hundreds of conscientious employers that we've worked with over the years have demonstrated that point. We believe that one of the failures of the system has been that many employers lack an understanding of what comp is, and all too often, simply outsource it to insurers. Unless an employer is knowledgeable and fully engaged, the end results are likely to be disappointing.
So we thought a blog would be a good forum for interacting with our constituencies. We decided we would post workers comp news and use the news items as a springboard for us to provide further information and discussion. We'd also be able to highlight and filter some of the great free resources available on the Web. While our intent was not to use the blog as a sales channel, we hoped that if we did a good enough job demonstrating expertise and delineating our philosophy, new business might be a byproduct.
Early on in our posting, we became mindful that we actually weren't just speaking to employers but to all other participants in the system too - injured employees, physicians, regulators, insurers, unions, attorneys, and many others. We saw this as a great opportunity because it's no secret that part of the frustration bedeviling workers comp is that the various parties involved the system aren't communicating effectively with each other. There are a lot of misunderstandings, misperceptions, and mistaken assumptions about what comp is and what it isn't. We hoped that by providing information, we might shed some light on the matter.
So 20 months into our endeavor, what's the verdict? Has it been beneficial from a business viewpoint? We would answer a resounding yes. We are rather awed that for such a narrow niche topic, about 300 of you visit the site each day. We are honored to have earned kind words from such disparate sources as safety advocate Jordan Barab and industry trade publication Business Insurance, and to be read by labor unions and employment lawyers alike. We've had enough positive client feedback to know that our goal of being a useful educational resource is being met, at least in part. Also, blogging keeps us on top of our game - we have to stay up on the news, and because our posts are public and open to comment, we also have to go the extra yard to ensure accuracy. By visiting other bloggers who post on related topics, we are exposed to different ideas and perspectives. Also, we learn what's on our readers' minds: we see which search terms brought you here, and what information you are looking for when you search our site. This feedback loop helps us to better understand and address your concerns, or at least we hope so.
The debits? We don't see any, really. Well OK, maybe the spam. We had hoped we could spark more dialogue from readers through comments on posts, but a relentless flood of comment spam from unsavory hucksters forces us to shut down comments after a few days, if not sooner.
So far, we have found business blogging to be a viable and worthwhile endeavor. Our advice to others considering the leap would be this: you are a topic expert in your field of business. Speak on your area of expertise, speak often, and speak authentically. Smaller businesses might be better poised to achieve this authenticity than a larger business. Giant behemoths with investors and large legal departments may find this “unfiltered” medium a challenge.
Really, we should be asking you, our readers, what the verdict is. Does business blogging work from your perspective? Is it different from "just another website"? What would make it better or more useful to you? We'd love to hear from you, both on the general topic and on Workers Comp Insider - but your challenge in commenting will be to beat the spammers!
RIMS report: notes from Philly
I spent last week at the annual Risk & Insurance Management Society annual meeting in Philadelphia last week. This is one of the single largest events in the property and casualty industry, attracting thousands of attendees and exhibitors. A quick snapshot of the show reflects an industry in turmoil. When I reflect the first RIMS I attended in Orlando more than a decade ago, the changes are boggling. Industry giants from those days have disappeared, victims of consolidations or outright insolvencies; new, less-familiar players have emerged. It's a challenging environment for risk managers. This year, in the wake of the Spitzer investigations shaking the broker world, the buzzword at the show was transparency and all the talk was about ethics and open customer communications. RIMS leadership called for members to take responsibility in the issue of disclosure.
The Terrorism Risk and Insurance Act was also of some concern. TRIA renewal was much on the minds of attendees and the subject of several sessions.
Rising workers comp severity trends and high medical costs were another issue of great concern. While frequency is down, the cost of claims keep increasing, largely driven by skyrocketing medical expenses. This concern was in evidence by the plethora of medical specialty services that dominated the exhibitor hall. Our friend and fellow blogger Joe Paduda reports on the trend to medical risk management, with particular observations on Pharmacy Benefit Managers (PBMs).
The annual benchmark survey of risk managers produced for the Risk and Insurance Management Society by Advisen was just released, and shows that the property casualty market softened in 2004, although the high cost of WC and professional liability kept overall risk cost 3% higher than the prior year. For more information, read Michael Bradford's report of the survey in Business Insurance.
Congratulations are in order. We were very pleased to open our mailbox last week to see that James D. Hinton of HCA, Inc. was gracing the front cover of the pre-RIMS Business Insurance issue. Jim was named 2005 risk manager of the year in the publication's annual award. Some of us at Lynch Ryan remember working with Jim in the early 90s when he was implementing workers comp programs at Humana - he was very progressive and ahead of the curve back then, so we are pleased to see him getting some well-deserved recognition.
And more kudos - Susan Meltzer, assistant vice president, risk management for Sun Life Financial in Toronto won the Goodell Award, the highest award that RIMS bestows. Congratulations are also in order for Ellen Vinck, vice president of risk management, benefits and safety for CA-based U.S. Marine Repair Inc. who begins her tenure as new President of RIMS. On a personal note, it was nice to see so many prominent women rising in the ranks of an industry that has been largely male-dominated until the last decade – go, women in insurance!
People are looking to next years show in Hawaii with mixed reactions. While most people love the location in theory, some larger exhibitors are concerned about both the travel expense and the increased travel time that the event will require. It’s anyone’s guess whether the allure of the location or tight purse strings will rule. You can get a 10 percent discount over and above the earlybird discount by registering before May 1, 2005.
Thoughts on Eating and Dying
We try to keep up with the latest advice on staying healthy. It isn't easy. Have you revised your personal food pyramid, based upon the new government guidelines? In addition to the complex new charts, the government has provided a printable worksheet for tracking your daily progress. You get to grade yourself on how well you ate on a given day: great. So-so. Not-so great. I would have added at least one more category here: "don't even ask." I wonder how I am supposed to distinguish between a "so so" and a "not so great" day. Clearly, a pig out is "not so great." But if I order stir-fried tofu along with my spare ribs and General Gau's chicken, am I allowed an upgrade to "so so"?
As if the intricacies of the new pyramid are not enough, we now have the Journal of the American Medical Association warning us about being too skinny. (OK, I'm not really worried about this one.) In their study of mortality for the year 2000, they found that skinny people and obese people were both at higher risk for dying. They seem to recommend that the best way to assure longevity (or at least for surviving the year) is to get slightly overweight. So perhaps we'd best ratchet up our food pyramid to ensure a few extra calories.
When it comes to calorie counting, I've always had trouble figuring out just how much the recommended 8 ounces of grain is, or the 3 cups of vegetables and 2 cups of fruit. How many cups is a banana? Do you have to mash the banana into a measuring cup to come up with an accurate count? Whenever I think this way, I start to worry. And when I worry, I really need a few chips and salsa to calm me down.
By now, you are probably wondering what all this has to do with workers compensation. All of us, every worker in the country, implement a de facto food pyramid every day. We make myriad decisions that impact our health and well-being. Workers who consistently eat in the "great" category are probably at lower risk for certain kinds of injuries. (Of course, if they are self-righteous about it, they might not be much fun as coworkers.) Our physical well-being directly impacts our ability to do our jobs safely and our ability to respond to sudden hazards. Now if we could only figure out exactly what we are supposed to eat and how much we're supposed to weigh!
Terminations: Seating the 800 Pound Gorilla
In working with thousands of employers across the country, one of the refrains we have heard all too often after a lost time injury is: "I was planning to fire him, but I never got around to it." We advise our clients to terminate employees who are not working out before they get hurt. After an injury, workers are protected by workers compensation statutes which presume that any termination is simply retaliation based upon the injury. Workers compensation is not a good way to end the employment relationship.
But how do you terminate people? Termination is full of risk. It's not easy. It's not comfortable. Indeed, it is tempting to overlook poor performance, in the vain hope that the problem will go away. All too often, the problem simply migrates to a company's comp loss run.
Michael Fitzgibbon, an attorney based in Toronto, has put together an interesting blog on safe termination. He raises a number of compelling issues that are worthy of attention, especially for smaller employers who lack a dedicated human resource department to handle such issues. Here is an abbreviated version of Fitzgibbon's pointers:
1. You can't eliminate risk you can only manage it - you cannot eliminate the risk that an employee will sue. All you can do is position the company in the best light in the event that the employee does sue.
2. It is personal - While the termination should not be personal for the manager, don't ever think that it's not personal for the employee - it is.
3. It is emotional - Never lose sight of the fact that deep and strong emotions are at play here. A termination always affects people, even when you suspect that the employee knows its coming.
4. Never lose sight of the fact that you have initial control - In most cases, and while it may sometimes feel otherwise, the employer is in control of the pre-termination process.
5. Use employment contracts or letters of offer - Many employers wish they had these carefully drafted and properly entered into employment contracts in place when the point of termination comes and they hear the bad news about how much, at common law, they will likely be required to pay the employee.
6. Do your homework - If there is something to investigate, do so, thoroughly and completely. Document your investigation through careful notes (dated, signed etc...). Keep the notes and other file material in a safe and secure location and preserve the evidence. If you're going to terminate for just cause, then make sure you have the goods.
7. Get advice - This may seem self-serving (as Fitzgibbons is an attorney) but it's generally better to be proactive and get some legal advice before carrying out the termination. It's generally easier to place the pieces on the board than to pick them up off the floor.
8. Prepare, prepare prepare - here's a partial list of things to think about (by no means is this complete):
* Try to get into the head of the employee - who is this person? what's he/she going to be concerned about? how can we best deal with this individual? Resist the cookie-cutter, one size fits all termination approach.
* Assuming you're terminating without cause, and are providing a severance package, what will that package be?
* If you're terminating for just cause, how much detail should you provide the employee? Have you done your homework?
* In most cases, a termination letter should be prepared and available at the termination meeting along with all other documents (i.e. a release) that the employer will require the employee to sign. Give the employee reasonable time to obtain legal advice.
* Who will attend the termination meeting? Who will do the talking?
* Be sensitive to issues of location (you want a private location) and timing (you want to carry out the termination at a time when the office is quiet). In short you want to avoid the employee having to take the long-walk through the office past co-workers and customers carrying a box of personal belongings.
* What day of the week? There's no rule here, but Friday terminations should be avoided, if possible, because the employee will not be able to get legal advice over the weekend and will turn to anyone with an opinion (typically family who will supply well meaning, though possibly less than qualified, "legal" advice with the effect that, come Monday, the employee will be all fired up and itching for a fight).
* Does the day on which you are intending to carry out the termination have any significance for the employee (i.e. it's his/her birthday)? If so, think of another day.
9. Don't let the meeting get out of hand - Be firmly and politely decisive. Once the business has committed to terminate, the sole purpose of the meeting is to carry out that decision. Keep the discussion focused.
10. Terminate the employee as if he/she was your best friend -
11. Don't say or do anything that you wouldn't want to have published in your local paper -
12. Eat crow while it's young and tender - Translation: be fair and reasonable (that's not the same, by the way, as writing a blank cheque to the employee).
For a little more detail, visit Fitzgibbon's weblog. In the meantime, this might be a good time to review your team roster. Make sure you want these people with you and they want to be with you. When the employment relationship is not working out, it's best for all parties to end it. As Fitzgibbon's blog points out, how you end it will go a long way to determine whether the termination is truly the end, or just the beginning of a litigation nightmare.
"Exclusive Remedy" - Bends but does not Break
"Exclusive remedy" lies at the heart of workers compensation. In exchange for the protection of workers compensation benefits, employees give up their right to any other remedy for workplace injury. This generally works out pretty well for both parties, but as with so many issues, the action at the margins is intense.
There are two areas where challenges to exclusive remedy tend to emerge: where injuries are deemed to be intentional - especially where the employer ignored explicit warnings or even crossed over into criminal negligence; and where workers compensation appears to be an inadequate remedy. In an article posted by NCCI and authored by attorney Charles Tenser (Acrobat Reader required), the exclusive remedy concept is shown to have bent, but it has not broken.
"Intentional Injuries" and Substantial Certainty
Tenser points out that many states allow employees to sue employers when the injuries are determined to be intentional. Of course, it's usually pretty difficult to prove intention. No matter how egregious or careless an employer might be, it's not easy to reach a standard that looks for proof of intention. As a result, attorneys are looking at the concept of "substantial certainty." In other words, while the employer might not have intended to cause the injury, under the specific circumstances there was a substantial certainty that an injury would occur.
Tenser cites a Louisiana case, Reeves v. Structural Preservation Systems, in which an employee was asked to move, by hand, an extremely heavy sandblasting pot. This despite the fact that the pot bore an OSHA sticker that it should not be moved by hand. The court concluded that "believing someone may, or even probably will, eventually get hurt if a workplace practice is continued does not rise to the level of an intentional act, but instead falls within the range of negligent acts that are covered by workers compensation."
In New Jersey, in at least one instance the courts have gone the other way. In Laidlow v. Hariton Machinery, the employer removed a safety guard from a machine, knowing that it was likely to result in injuries. In addition, the employer deliberately and systematically deceived safety inspectors into believing that the guard was in place. The subsequent injury to an employee was the result of an "intentional wrong" which superceded the "exclusive remedy" provision of the workers compensation statute. (Indeed, based on this brief summary of the facts, the employer should be subject to tort liability.)
It's interesting to note that the door in New Jersey does not appear to be wide open to exclusive remedy exceptions. In Fisher v. Sears Roebuck, the court dismissed a suit brought on behalf of a security guard who was killed during a robbery in a parking lot while transporting cash receipts. The court held that the dangers faced by security guards did not amount to a "substantial certainty" that injury would occur. The dangers, in other words, are simply inherent in the job.
While courts have generally resisted the temptation to undermine "exclusive remedy," they are at times receptive to the idea that if workplace injuries do not fall under workers compensation, some other remedy must be available. Tenser cites a case in Oregon, where the court held that the exclusive remedy provision of the workers comp law violated the state's constitutional guarantee of a remedy where it required a claimant to show that his employment was a "major contributing cause" of his occupational disease rather than simply a "contributing cause." In other words, in falling short of the standard for comp, the employee had no recourse of any kind, which the courts found in violation of the state's constitution. The Oregon legislature subsequently established procedures for allowing a negligence action against employers after potential comp remedies have been exhausted.
When employers act egregiously and without regard for the safety of their workers, it is indeed tempting to open the doors to tort liability. In the New Jersey case discussed above, the door opened, just as it should have. But for the most part, the exclusive remedy provisions of comp statutes have proven their worth over time. In the great trade off at the heart of comp, employees give up their right to sue employers, in exchange for the relative certainty of indemnity and medical benefits. It is by no means a perfect system. There are employees who take advantage of it, just as there are too many employers who ignore safety standards, putting their employees at risk. For the most part the system accomplishes what it is supposed to do: helping injured workers provide for their families as they recover from work-related injuries. We should think long and hard before changing the rules to encourage a fault-driven system governing disability in the workplace.
Noteworthy: Workers Memorial Day April 28 2005
Every year health and safety activists and unions around the globe set aside a day to remember the thousands of workers who are killed an injured on the job each year. Jordan Barab, a fellow blogger and a tireless and impassioned advocate of worker safety, suggests that the day should a time to "recharge our batteries" and rededicate our commitment to worker safety. He points us to some resources for April 28. If you have any doubt about the importance of such a day, just read through one of his chilling reports of the weekly toll.
We suggest that it might be a good day for risk managers and employers everywhere to conduct an audit of their own record and practices. Safety should be an ongoing concern every day in every work place - but perhaps this would be a fitting day for employers to take an inventory - what better way to remember to those who died on the job?
Maximizing recovery: Second injury funds
One of the nooks and crannies of workers comp that often gets short shrift is the issue of recovery. Many employers and insurers can recoup claim expenditures through second injury funds or subrogation, for example. Since this is a large area, today we'll briefly discuss second injury funds, and return to subrogation at another juncture.
Second injury funds were designed to encourage employers to hire employees with disabilities and pre-existing conditions by offering a mechanism for cost relief should the employee experience an injury that aggravates the existing condition. In recent years, many states have eliminated these funds, but they still exist in about half the states. In most instances, these funds are financed by assessments on insurers and employers.
For a primer on second injury funds see Second Injury Funds: Still a Valuable Cost Containment Tool (PDF) by Mark Nevils of Insurance Recovery Group (IRG). This article describes the various types of state funds, and the way they work.
IRG makes the case that there is as much as $1 billion in untapped potential, and that failure to recognize and pursue these opportunities can be costly since qualified claims are usually longterm in nature, often over $100,000.
"Each year, an estimated $800 million is paid out on second-injury-fund claims, with an estimated $100 million added annually in new claims. In addition, we estimate that there is a "clean up" potential of $1 billion nationally, most of which resides in key jurisdictions such as Alaska, Georgia, Louisiana, Massachusetts, Nevada, New Hampshire, New York, South Carolina, and Washington D.C."
To learn more about this untapped potential, see IRGs articles Second Injury Funds: Maximizing Your Recovery Results (PDF) by Fred Uehlein and Dorothy Linsner and Closing the Recovery Gap (PDF) by David Jollin and Fred Uehlein.
We're all traveling over the next week or so - some of us will be at RIMS - so blogging may be light. While we're gone, we will be turning comments off - we are being bedeviled by comment spam and won't be here as frequently to weed the garden. We should be back to regular posting the week of the 25th.
Docs and Jocks: Exclusive Remedy for a Pro Football Player
I set out this morning to blog the general status of "exclusive remedy" in the workers comp system, but I've been distracted by a specific case which involves an injury to a professional athlete. I will return to the more general ramifications of "exclusive remedy" in a few days.
Greg Lotysz was a lineman for the New York Jets. In July of 2000 he sustained an injury to the anterior ligament of his left knee while blocking another player during pre-season practice . Pursuant to his NFL Player contract and the players's Collective Bargaining Agreement, he received care from the Jets' Medical Department. Lotysz underwent surgery and post-surgery rehabilitation under the care of the Jets' physicians. A post-surgical infection resulted in permanent damage to his knee, which in turn brought a premature end to his football career.
No Malpractice Here
Lotysz tried to sue the team doctors for $10 million in damages, but in December of 2002 an appeals court in New York ruled against him. The court found that the doctors were employees of the Jets, that their medical services were made available to plaintiff as a consequence of his employment and that their services were not available to members of the general public. In other words, the court viewed the team doctors as co-workers of the same employer, so tort liability was not available as a remedy. You cannot sue your employer and you cannot sue co-workers for work-related injuries. Comp was the "exclusive remedy" for the injured player. It's interesting to note that the unions for all the major pro-sports leagues (NFL, NBA, NHL and MLB) filed a friends-of-the-court brief in Lotysz's behalf, arguing that team doctors are actually independent contractors. (You can view a detailed case study of Lotysz's story here.)
The fact that Lotysz's claim falls under the workers compensation system is not all bad. While he cannot sue the doctors for malpractice, he is eligible for indemnity benefits (admittedly chump change compared to a professional lineman's salary) and for lifetime medical benefits for any treatments related to the injury (given the apparent permanency of his disability, this could turn out to be a significant benefit).
It is important to note that hospitals and similar medical facilities that treat both the public and their own employees may not find the courts so receptive to the "exclusive remedy" approach. For the most part, when hospitals treat their own employees for work related injuries, they become a third party vendor. If employees are unhappy with the treatment, they usually have the option of pursuing tort remedies. The main difference, I would guess, is that the hospitals routinely treat the public, while the "team doctors" have a more limited practice.
Docs and Jocks
The Lotysz opinion is binding only in New York. It's possible that under similar circumstances other states will conclude that team doctors are indeed third parties and thus liable to lawsuits for malpractice. In the world of professional athletics, the medical profession is intricately involved in what from time to time may be ambiguous circumstances. With such enormous sums of money at stake, owners may pressure doctors to rush star athletes back onto the field. Permanent damage may result. Under these circumstances the player will certainly want to pursue a tort remedy. Whether this option is available to the athlete remains a state by state situation.
New tools and weblogs for our resource sidebar
Today, we have an array of new widgets and reference materials to add to the "Cool Tools" section of our sidebar, along with a few new weblog discoveries to add to our ever-growing list.
Want to know what the cost of a poor hiring choice is? Compute the cost of a bad hire or calculate the cost of turnover - it generally makes good economic sense to invest in and keep your current work force happy.
The U.S. Small Business Administration bills itself as the voice for small business in the federal government, as well as the source for small business statistics. If you are curious about statistics related to the size of firms, or how many nonemployer businesses there are, this site offers some good research data.
Among its many fine resources, the Insurance Information Institute offers a comprehensive Glossary of Insurance Terms.
Actuarial News by Tom Troceen is a stylish weblog that is "a resource for both aspiring students and seasoned actuaries as a place to gather information on current events that affect how we do business and where we are headed."
Medlogs is a medical news and weblog aggregator that displays headlines and excerpts from than 80 blogs by docs and medical professionals. Great source.
Construction Law Blog by Dave Seitter is "dedicated to the explanation and clarification of the often complex legal issues involved in the day-to-day operation of a construction related business."
Unintended Consequences is Doug Simpson's weblog of "research on the collision of law, networks and disruptive technologies."
When Disability Pays
Perhaps the most fundamental condundrum of workers compensation (and other forms of disability insurance) is this: when a worker is paid for being sick, there is a strong disincentive for getting well. Employers and insurers have long been frustrated by this problem. Attorneys have long viewed it as a business opportunity. And now the doctors are beginning to confront this profound fault line in the world of medicine.
In an article by E. J. Mundel at drkoop.com, a "meta-analysis" of 211 research studies from across the globe reveals that indemnity (lost wage) payments have a strong influence on medical outcomes. (The full article, available only to subscribers, is in the April 6 issue of the Journal of the American Medical Association.) In all but one of the studies, workers receiving financial compensation for work-related injuries were almost four times more likely to have poorer long-term medical outcomes than uncompensated workers.
"Essentially, the worker is getting paid for being sick, and it's hard for anyone who's being paid to get sick to get well," said Dr. Robert H. Haralson, immediate past president of the American Academy of Disability Evaluating Physicians, and the current executive director for medical affairs at the American Academy of Orthopaedic Surgeons.
According to Haralson, who was not involved in the study, this phenomenon "has been known for years" among orthopedic surgeons treating such common, tough-to-diagnose workplace problems as back pain or carpal tunnel syndrome.
"It's very frustrating" for doctors," he said. It's very frustrating for employers and their insurance carriers, I would add.
It's no surprise that attorney involvement has an adverse effect on medical outcomes. "If a lawyer is involved, it's five times as expensive as if a lawyer is not involved," noted Dr. Edward Bernacki, director of occupational medicine at Johns Hopkins University School of Medicine, and past president of the American College of Occupational and Environmental Medicine. While the workers might experience some ambivalence about getting better, there is less ambivalence for the attorney: it's in his or her financial interest to present the medical aspects of the disability in the most negative possible light. The better the employee feels, the less money is in it for the attorney. If the employee fully recovers, the attorney is out of a job!
Doctors are catching on to the need for a quick return to work. Dr. Haralson says that the most common problem in these situations is back pain, and "there's good evidence that what you ought to do with back pain is head back to work within a couple of days -- even if you continue to have some pain."
Back at work, the injured workers should initially avoid tasks that might exacerbate symptoms. (We call this "temporary modified duty.") The important thing, according to Haralson, is to keep injured workers from what he called the "disability cascade."
We are in total agreement with Dr. Haralson's comments. Indeed, they provide a concise restatement of the defining principles of a well-structured return-to-work program. We also agree with him that few workers plan out a disability path for themselves. "It's not that the patient lays awake at night thinking "OK, I'm going to go fool the doctor tomorrow,'" he said. "It's much more complicated, it's more of a natural human phenomenon." Whatï¿½s so natural? When you are paid for not working, your subconscious may have difficulty generating the motivation to get back to work.
We are not suggesting that there is no role in the system for attorneys. Indeed, when employers and carriers deny legitimate claims, attorneys are essential. We are also not implying that indemnity payments are not needed or that injuries never require time away from work. But we do believe that the main cost driver in the workers compensation system is delayed recovery and medically unnecessary time away from work. That's why we urge employers to move aggressively in the first hours and days following an injury: support the worker, secure first class medical treatment, and get the worker back to the workplace as quickly as possible. When a worker is away from the workplace, being paid not to work, there is a powerful risk of a bad outcome for everyone.
NCCI 2005 Issues Report - a look back, a look ahead
Every spring, NCCI publishes a series of reports that paint a portrait of the workers compensation industry's health. These include an annual "Issues Report," followed later by a "State of the Line" report. For those of us who work in the industry, these reports offer a quick look of where we've been and provide a cookie trail for where we are likely headed. They are mandatory reading for industry insiders, but they are not just for insurance wonks. If there's one drum we continually like to beat here at Workers Comp Insider, it's that the more employers understand about the insurance industry, the better prepared they can be to weather any market vagaries.
The 2005 Issues Report has been released, and in his Annual Snapshot (PDF), executive director Stephen Klingel paints a good news/bad news scenario of a market in transition. Some of his observations include:
Insurer reserve deficiencies were reduced by approximately $5 billion dollars. Although improved, reserve deficiencies are still a problem. In workers comp, losses have the famous "long tail" - that is, they play out over years. Insurers set aside reserves for the estimated cost of the claim. If they don't set aside adequate reserves, when it's time to pay the piper, insurer insolvencies occur and havoc ensues. Insurer insolvencies still loom as a potential problem.
Medical costs - particularly prescription drug costs - are still galloping away. Wage replacement was always the largest share of lost time claim cost, but now medical costs represent 55% of the cost, on average. In some states - AL, AZ, IN, KY, TX, and WI - the cost approaches 70%.
Frequency continues to decline. That's good news. It means that employers are doing a better job in the area of safety. NCCI reports "significant declines occurred in fatal, permanent total, and permanent partial claim frequency." But on the flip side of the coin, severity is increasing. That means that the medical costs and/or the duration of claims are rising. Not so good.
Terrorism Risk Insurance Act (TRIA) uncertainty looms. The uncertainty about whether Congress will extend TRIA casts a pall over the industry. The clock is ticking, it is due to expire at the end of the year. TRIA provides a federal backstop or safety net for insurers in the event of any catastrophic events. Because workers comp is mandatory coverage, it is a line of insurance that is particularly exposed - insurers can't exclude terrorism coverage when issuing policies.
The residual market is stabilizing. The residual market is sometimes called the assigned risk pool, or more familiarly, "the pool" or "the market of last resort," while the rest of the market is known as the voluntary market. If you are an employer, you might get thrown in the pool for any of a number of reasons: your loss experience may be terrible or you may simply be in a high-risk industry. For one reason or another, no one wants to write your policy. NCCI reports that the residual market now represents about 13% of the total premiums, up from about 10.7% in 2003. However, the rate of growth for the residual market appears to be appears to be slowing.
NCCI’s “State of the Line” Report should be released soon. Like the tulips, it usually surfaces sometime around early May at the NCCI annual meeting. We'll keep you posted.
Workers without Health Insurance
As the costs of health insurance rise, the number of people who cannot afford it rise, too. An article in the Los Angeles Times (registration required) addresses the issue of people spending more of their income on health insurance, to the point where they can no longer afford coverage. Working families are devoting as much as 25% of their income for health insurance, forcing them to reduce other expenditures drastically. Of course, this is not a new issue. We blogged it back on March 9, 2004.
"More people are nearing a tipping point," says Mark Goldberg, senior vice president for policy at the National Coalition on Health Care, an organization of businesses, provider groups and pension funds that advocates for affordable healthcare. "Eventually, something has to give."
Like the house-rich, cash-poor who stretch their finances to pay for housing, those who are barely holding on to their coverage are increasingly known as the "insured poor." Eventually, many probably will lose the battle, joining the 45 million Americans without medical coverage.
The Times article points out that more employers also are capping the amount they spend on health costs, meaning they're no longer increasing what they contribute to an employee's plan. So as premiums rise, employees are on the hook for paying for them, which in effect is a cut in pay by the amount of the increase. In addition, as premiums climb higher and higher, a small but growing number of companies, mostly smaller firms, have started dropping employee health insurance altogether.
The Kaiser Foundation estimates that in 2001 about 15% of the workforce lacked health coverage. In Florida, the figure appears to be 20%. While a number of states have gotten involved to the point of providing coverage for minors, the needs of adults have not really hit the radar screen.
Implications for Workers Compensation
It’s not hard to see that a lack of health insurance coverage might impact workers compensation. Uninsured workers are much less likely to practice preventive health care (annual check ups, etc). As a result, they are at higher risk in the workplace for aggravation of their non work-related conditions. Their basic health may deteriorate due to untreated illness. Indeed, some untreated conditions will impact their ability to perform their jobs safely.
The Kaiser report reveals that among the employed who lack a high school diploma, 40% lack health coverage. That is special cause for concern, as research shows an increasing correlation between a lack of education and prolonged disability under workers compensation. To a large degree, the higher comp costs are probably the result of a lack of transferable skills. But the absence of health coverage may also be a hidden factor: among less educated workers, when there is only one insurance option, there may be inevitable cost shifting into workers comp (which is, of course, available to virtually all employees).
It’s hardly a good strategy to put workers in the debilitating situation of proving their conditions are work related (and thereby collecting both medical and indemnity benefits) or, in the absence of such proof, trying to pay their own way through the medical system (doomed from the start).
The Kaiser study shows that 25% of the self-employed lack health care coverage. It’s interesting to note that independent contractors – by definition, self-employed – are thus more likely to lack both health insurance and workers compensation coverage. This despite the fact that they often are involved in high risk work such as the construction trades. (We blogged the conundrum of independent contractors back in March of this year.)
The lack of health insurance for so many Americans is a crisis -- a relatively quiet crisis at this point, considering the scale of the problem. But as the issue bleeds more and more into the middle class, and as the impact on workers compensation costs becomes more pronounced, the crisis should become more visible. Eventually, our politicians might be ready to frame a coherent discussion of a real problem: reliable and affordable health care for all Americans. But I'm not exactly holding my breath.
The worst jobs in history
Some point to the medieval guilds as the origin of workers comp; others see the emergence of workers comp as a response to the industrial revolution when dangerous factory jobs grew more prevalent. But the truth is, hard working laborers have been battling dangerous and unpleasant work conditions from time immemorial. The Worst Jobs in History is a journey through 2,000 years of British history and the worst jobs of each era. It is an alternately amusing and horrifying look back at the types of jobs our forebears held, and a description of the work conditions they faced. So if you ever wondered what it would be like to be a Medieval fuller or leech collector, a Tudor woad dyer or groom of the stool, a Stuart nit-picker or plague burier, or a Victorian rat catcher - now's your chance to find out. You can even take a skills assessment quiz to see which jobs might be best suit you. Jobs for women were relatively scarce - so if I had a career, it is likely I might have been a wise woman or a fish wife … lovely!
The site is an offshoot of a popular series that ran on British TV, and it makes for an amusing look back. But the harsh reality behind the history is indeed grim. Unfortunately, you don’t have to look to Anglo-Saxon or medieval days to find such terrible work conditions -- many horrifyingly dangerous conditions still exist today right in our own backyards.