Lynch Ryan's weblog about workers' compensation, risk management, business insurance, workplace health & safety, occupational medicine, injured workers, insurance webtools & technology and related topics

May 31, 2005

Left and Right Converge on Health Care Coverage

We continue to track the national crisis in health care coverage. we've blogged it before and we'll blog it again. As of 2003 about 45 million Americans lacked health insurance. Of these, there are about 20 million American workers without health coverage, which comprises a seismic undercurrent in workers compensation. Health care coverage tends to follow income: the lower your income, the more likely you cannot afford health insurance. The Kaiser study, which we cited back on April 6, notes that 40% of the workers without health insurance have less than a high school diploma. Twenty two percent of the uninsured report their health as "fair or poor." In addition, about one third of uninsured workers rely on physical labor for their living. These three overlapping groups are at especially high risk for prolonged disability under workers comp. It's probably no coincidence that Texas, the state with the highest incidence (27%) of non-covered workers is also the state where workers with a low education are most likely to receive permanent disability payments.

A recent article in the Boston Globe (registration required) by Theo Emery of the AP notes that Massachusetts has joined the ranks of the states singling out large employers who fail to offer coverage to all their employees. The state pays more than $52 million a year to cover workers in a broad range of jobs, from universities and hospitals to the U.S. Postal service. Four employers -- Dunkin Donuts, Stop & Shop, Walmart and McDonald's - have more than 1,000 employees each who received public health benefits. Now there is talk of surcharging these and similarly situated employers. Any such surcharge would provide political fireworks indeed!

Coalition of the Stymied
So I was pleased to read Robert Pear's article in in the New York Times (registration required) that a group of 24 leaders representing health care, business and workers has been meeting quietly to hash out a concensus for providing coverage to the uninsured. The participants range from the liberal Families USA to the conservative Heritage Foundation, the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM). The group also includes the AARP, the A.F.L.-C.I.O. and the American Medical Association. I am encouraged that, first, they agreed that there is a major problem; second, that they can meet in a room together and just talk and listen to each other; and third, that despite their ideological differences, they might be able to agree on some solutions.

So far they are focusing on proposals to expand coverage to as many people as possible, as quickly as possible. They recognize that there are many reasons for people being uninsured, so rather than trying to come up with a "one size fits all" solution, they are exploring more flexible models.

Neil Trautwein, assistant VP for NAM, compares the talks to medieval alchemy, bringing together disparate and volatile ingredients: "It could produce some wondrous proposal, or could blow sky-high."

Thus far, here are some of the options they are exploring:
Tax credits to help parents provide insurance for children.
Deduction programs for employees whose employers do not offer health insurance; the employee contributions would be matched by other sources to provide coverage.
Tax credits to small businesses to help pay for insurance.
Expansion of Medicaid.
Federal grants to states to help them establish insurance purchasing pools.

Aggressive Timetable
The working group hopes to have a specific proposal by the end of the year. They have no illusions about the scale of this effort. As Stuart Butler of the Heritage Foundation says, "it's a coalition built of frustration. True believers on the left and the right have been stymied on this issue." Here's wishing them the best of luck in this essential endeavor. We'll keep you posted.

Posted by Jon Coppelman at 12:53 PM Link to, Comment (0), or E-mail this post
May 27, 2005

First Head Rolls in Ohio Coin Caper

Ok, that headline is not exactly our style, but the shenanigans at the Ohio Bureau of Workers Compensation seem to call for it. In our May 13 blog, we first mentioned the truly bizarre story unfolding in Ohio. The workers compensation bureau has invested $50 million in rare coins, working through Tom Noe, a man prominent in Republican fund raising circles. Indeed, Mr. Noe has been recognized by the Bush-Cheney campaign as a “Pioneer,” as he raised over $100,000 for the President’s re-election campaign.

Realm of the Coin
At this point, it appears that some of the coins purchased by the state fund are missing. Two of the most valuable, totaling a quarter of a million dollars, were "lost in the mail" according to Noe. An additional 119 coins were "misappropriated by an employee." The coins "went missing" back in 2003, but Noe neglected to tell anyone. The initial estimate for the missing coins was $400,000. Now, according to Noe's own attorney, the figure is somewhere between $10 and $12 million. (That's a negative return on investment of over 20%.) I'm tempted to say that the first estimate was "close enough for government work" but it wasn't and I won't.

There are further allegations reaching toward Ohio's corner office: Brian Hicks, a former chief of staff to Governor Taft, apparently enjoyed a cut-rate vacation at Mr. Noe's 3,600 square foot waterfront home in Florida. Hicks did pay Mr. Noe for the vacation -- somewhere between $300 to $500 for a five-night stay. Real estate agents estimate the true value of the rental runs closer to $3,000. (For details, see our May 13 blog.) Sounds as if they need to do a better job of teaching math in Ohio!

Latest Headlines
Today's blog brings you up to date in what is going to be an on-going saga. We read that the head of the comp bureau, James Conrad, has resigned. Other heads are likely to follow and Noe himself faces criminal charges. We find it ironic, indeed, that what may well turn out to be the biggest case of workers comp fraud in Ohio history does not involve phony injuries, crooked doctors, unscrupulous employers or attorneys. No, it appears at least on some level to involve the Workers Comp Bureau itself. For the taxpayers and employers of Ohio, with this flip of the coin it's "heads you lose, tails you lose."

Stay tuned for more details.

Posted by Jon Coppelman at 12:29 PM Link to, Comment (2), or E-mail this post
May 25, 2005

S. Carolina to bar workers comp for undocumented immigrants?

Apparently, at least a few legislators in South Carolina think that illegal immigrants should be barred from receiving workers comp benefits, and there is a bill to that effect under consideration in the statehouse:

"Thousands of undocumented workers in the Palmetto State could be denied workers' compensation coverage, including lost wages and medical bills stemming from work-related injuries, under a proposed bill in the Statehouse.
The bill was introduced earlier this year by two Upstate lawmakers and stalled in committee.
Supporters say illegal immigrants often commit fraud, such as fake Social Security and green cards, to obtain jobs and that should make them ineligible to collect benefits."

Now it may be sexy for lawmakers to jump on the "illegal immigrant" issue right now, but this is wrong-headed thinking that shows a fundamental lack of understanding about workers comp. For one thing, this proposal is bad for the employer. When workers are afforded the protection of workers comp, in all but extraordinary circumstances, they are then barred from suing their employer. Workers comp becomes the exclusive remedy for any on-the-job injuries. If you remove that protection from the worker, you are also removing the protection from the employer. If injured, these workers would be free to sue the employer (and under such circumstances, we would encourage them to do so!). Of course, we know that many undocumented workers would not have the resources or wherewithal to do this.

Secondly, not only would this measure do nothing to discourage undocumented immigrant workers, it would actually incent unscrupulous employers to increase the ranks of illegal immigrants. If an employer could hire undocumented workers, pay them less, assign them the most dangerous jobs, and then be absolved from any responsibility for a failure to protect them, it's highly unlikely that the ranks of illegal immigrant workers would diminish - slavery affords a good competitive edge! Relieving an employer of any financial accountability for work injuries that occur on their premises is a distinctly bad idea. If an employer is willing to accept the benefits of an undocumented worker's labor, why shouldn't the employer also bear the associated responsibilities?

Scapegoating a vulnerable population won't solve the problem
It's popular today to demonize "illegal immigrants" and to lay a lot of the blame for our national woes at their doorstep. Even the very term is loaded - we don't call the many employers that knowingly hire undocumented workers "illegal employers." Let's face it, whether they got here legally or snuck in under the wire, most immigrants are desperate to grab a piece of the American dream, just as your grandparents and mine were. Most are simply trying to eke out a living for their families, and taking great risks to do so. If the flood of immigrants is a problem that needs solving, this does nothing to solve it; such a measure would merely open the door to further abuse for an already exploited population.

There is little doubt that for Mexican and other Hispanic workers, exploitation is a fact of life today. Last year, a study by the Associated Press (AP) documented the plight of Mexican immigrant workers as a "worsening epidemic that is now claiming a victim a day." Mexican workers are about 80 percent more likely to die from a work injury than native-born workers, and more than twice as likely to die on the job as other immigrant workers. And South Carolina legislators take note: death rates are greatest in several Southern and Western states, where a Mexican worker is four times more likely to die than the average U.S.-born worker.

Most states provide coverage for undocumented workers
If excluding undocumented immigrants from coverage was a good idea, it is likely that more states might have jumped on the bandwagon by now, yet according to the National Employment Law Project, most states do afford coverage (pdf):

"The majority of the states' workers' compensation laws include aliens in the definition of covered employees. Entitlement to lost wages under state workers' compensation laws turns on state statutes and their definition of worker or employee. State courts in California, Colorado, Connecticut, Florida, Georgia, Iowa, Louisiana, Nevada, New Jersey, New York, Pennsylvania, and Texas have specifically held that undocumented workers are covered under their state workers' compensation laws."

" ... like Virginia, a number of other states also explicitly provide for workers' compensation benefits for "lawfully or unlawfully employed" employees. They are: Arizona, California, Colorado, Florida, Montana, North Carolina, South Carolina, and Utah. There is only one state, Wyoming, which has a statute specifically limiting coverage to documented aliens."

With any luck, this measure will simply get quietly tucked away in the "what were they thinking?" file. We hope that this legislation is little more than political grandstanding and wiser heads will prevail.

Here are some additional past posts related to this topic:
Hispanic Fatalities on the job: the Tip of the Iceberg
Modern day slavery
Compensation for an Mexican immigrant worker who dies on the job is roughly half what a Canadian immigrant would get.

Posted by Julie Ferguson at 5:54 PM Link to, Comment (0), or E-mail this post
May 24, 2005

A Few Thoughts on Comp Medical Networks

Workers comp is about injuries and injuries require medical attention. Our colleague Joe Paduda blogs the problem of finding good medical care under the comp system. Back in the 90's, there seemed to be a proliferation of occupation medical practices: from hospital based occ clinics to the "doc in a box" walk-in clinics, there were a lot of options for treating injured workers. These options have diminished dramatically over the past few years. Why? It's pretty simple: a combination of not enough volume (injury rates are declining) and suppressed rates of reimbursement (rate schedules for medical services under comp tend to be low). In addition, you need to consider the context: total health care in this country costs $1.4 trillion, while the comp portion of this is only $30 billion. Comp, in other words, is chump change in comparison to medical care in general.

Paduda's blog shows that the prevalent trend is away from networks specializing in work related injury and toward bringing injured workers into conventional health networks -- in other words, family practices. This is far from an ideal situation. Occupational medicine brings a unique and essential focus to work injury: the goal is always to keep people as productive as possible; to help them heal faster by returning them to work as soon as possible, often through the prudent use of temporary modified duty. I'm not sure that traditional family practices view injuries the same way. Family doctors are perhaps more sensitive to the pressures and issues outside of work. I suspect they are more inclined to give the injured work time away from work, especially when they know that any lost wages will be covered by indemnity payments. They are not used to communicating directly with their patient's employer. Indeed, if the patient doesn't like his or her job, the doctor may be inclined to separate the goal of getting the patient better from returning him or her to work.

Paduda highlights one exception to this trend: the recently announced merging of The Hartford's workers comp business with Aetna's workers comp specialty network, which is available in Pennsylvania, New Jersey, Connecticut, Texas and Virginia. Aetna's network includes 130,000 physicians, hospitals and other health care providers. Aetna, along with Corvel, HealthFirst, Concentra and Focus, and a few others, continue to offer occupational services for injured workers.

Preferred Provider Networks that Really Work
I have long been intrigued with the issue of medical care in the workers comp system. I'm not sure that anyone has got it quite right. In the ideal system, doctors explicitly buy into the notion that a rapid return to work is the optimum result. They are committed to a "sports medicine" approach. They limit office visits and therapy to what is truly needed. They prescribe the necessary medications, but are careful to use generics where appropriate (even though the patient doesn't really care, because there is no co-pay). These doctors are able to resist the raucous pitch of drug companies to experiment with off-line use of branded medications. And they communicate readily with their patients, the employer and the insurance carrier.

In exchange for all this good work, occupational doctors should be paid reasonable rates -- which in many states means paying well above scheduled rates. Too often, the established rates (and the rates within many of the formal medical provider networks) are ferociously suppressed, which can lead doctors to make up the difference by over-utilization; in other words, suppressed rates do not necessarily produce lower costs. In addition to paying occ docs above rate schedules, they should also be reimbursed for certain key activities that usually are provided for free -- such as filling out return-to-work status reports. If you don't pay for such reports, the message to the doctor is that the reports are not important. In the comp system, there is no more important communication than the doctor's take on medically necessary restrictions -- what the employee can and cannot do.

We recommend that employers with any significant volume of injuries develop a relationship with their local providers, whether or not they are in a formal provider network. Make sure that the provider understands your commitment to modified duty. And let your carrier or TPA know that you are not interested in saving a few pennies by forcing your medical provider into a punitive rate schedule. Rather, you want to pay a little extra, in order to secure the level and quality of service that ensures success in workers comp cost control.

Posted by Jon Coppelman at 12:34 PM Link to, Comment (1), or E-mail this post

Pre-existing conditions and second injuries

Over the weekend, one of our regular readers left a comment in another post asking for information about work injuries that are aggravated by a pre-existing condition. At one time, most state laws had Second or Subsequent Injury Funds (SIFs) that offered some measure of recovery to employers/insurers for injuries that were exacerbated by a pre-existing condition, whether that condition was due to a work-related injury or some other prior illness or condition. In workers comp, an employer's premium rates are based on past loss experience. A second injury can often result in a very expensive claim, so the inclination would be to avoid taking any chances by hiring someone with a pre-existing condition. The purpose of SIFs is to prevent discrimination of disabled employees in hiring. SIFs provide a measure of financial relief for employers, either by reimbursing insurers/employers directly, or by taking over benefit payments for the injured worker.

Since the 1990 enactment of the Americans with Disabilities Act (ADA), many feel these funds have outlived their purpose since the ADA affords job applicants protection from discrimination on the basis of health or disability issues. Because of this, many states have eliminated funds in recent years, but funds are still operational in about 20 states - check with your insurer, your agent, or your state workers comp authority to find out if your state has such a fund.

The way that funds operate varies from state to state. In most states that still have funds, an employer must be able to demonstrate that they knew about the pre-existing injury or condition prior to the second injury. That's the tricky part. ADA prohibits an employer from exploring past medical history in the hiring process, so any knowledge about pre-existing conditions must be gained after an employment offer and before a work injury. Sometimes, this can be done in post-hire medical exams or through conditional job offers contingent on medical exams, but this is another tricky area. The law firm of Wildman Harald offers an employer guidelines for complying with the ADA in the hiring process.

For more information, Mark Nevils of Insurance Recovery Group has an excellent primer on Second Injury Funds (pdf) that's worth a read for more details. And California employers take note - he also has an article on the new amendment to the California Workers Compensation Law (SB 899) dealing with apportionment of permanent disabilities (pdf). This amendment offers some loss mitigation opportunities for employers in the event of pre-existing conditions.

Posted by Julie Ferguson at 11:18 AM Link to, Comment (0), or E-mail this post
May 21, 2005

Weblog roundup: Fishing safety, hearing loss, BP disaster & more

Fishing Safety
Strategic HR Lawyer points us to Dangers of the Deep, an article in which Alex Markel of recounts the sad story of last December's sinking of the Northern Edge, a scallop boat fishing in the waters off Nantucket. Five fishermen drowned and one survived. The article discusses attempts to impose safety standards on the industry.

"Fishermen are a famously independent bunch, and they have long resisted the sort of safety regulations that are compulsory in other workplaces. Against their opposition, the first and only law aimed at improving the industry's safety record was passed by Congress in 1988. The Commercial Fishing Industry Vessel Safety Act requires boats to carry life rafts, survival suits, and emergency beacons in the event of an accident--steps that Coast Guard officials say have since helped lower the number of annual fatalities."

Carbon monoxide, noise tied to hearing loss
RawblogXport points us to a story in The Vancouver Sun that reports on a study showing that the presence of carbon monoxide can intensify hearing damage when coupled with high noise levels.

"They found that workers who were exposed to carbon monoxide and noise levels over 90 decibels (comparable to the noise produced by a chainsaw) displayed significantly poorer hearing thresholds at high frequencies than workers who were exposed to noise levels alone.

The reason, Leroux said, is that the human ear needs oxygen to translate sounds into electrical impulses, which are then transmitted to the brain. Cells in the blood carry the oxygen to the ears, and the louder the noise, the more oxygen is required.

But the presence of carbon monoxide, he said, results in decreased levels of oxygen, which means blood cells carrying oxygen to the ear have to work that much harder if the person is going to hear properly."

Failure to get to the root cause: BP blames employees for fatal blasts
Jordan Barab at Confined Space discusses the tendency to blame the worker for industrial accidents, as again evidenced in a recent interim report about the BP tragedy. He analyzes the BP report and recent news coverage of the report, pointing out that in this case as in most others, scapegoating doesn't get to the root cause of an accident, the one that will truly help to prevent future deaths.

"The fact is that human beings inevitably make errors and errors by operators must be expected. But rather than focusing on the operators who make the errors, effective accident analysis - analysis that actually wants to get to the root causes and effective solutions -- looks for the conditions which made the errors possible.

These errors can be rooted in poor design, gaps in supervision, undetected manufacturing defect or maintenance failures, unworkable procedures, shortfalls in training, less than adequate tools and equipment. In addition, these conditions can be present for many years before they combine to result in a tragic incident. In fact, BP made the point that they had been operating with questionable equipment for many years with no problem."

Jordan's post on the matter is well worth a read - as per his usual thorough style, he discusses the topic in depth as it relates to the BP incident and other work disasters, and he provides links to several other posts he's made on the same topic.

Belated congratulations to George and Michael at the ever-excellent George's Employment Blawg on passing the two year mark of blogging. They cover a fascinating and instructive array of legal and human resource issues ranging from tattoos in the workplace to employment at will. Here's to many more years ahead!

Other items of interest
Judge Robert Vondada of Pennsylvania Workers Compensation Journal posts on artificial spinal disks and a recent ruling about a claimant that prevailed in a case involving the costs of litigation.

Joe Paduda at Managed Care Matters discusses the worsening problems for AIG.

Posted by Julie Ferguson at 10:31 AM Link to, Comment (1), or E-mail this post
May 20, 2005

Today's Blue Plate Special: Crow with Texas Hot Sauce

Apologies are in order for yesterday's posting on U. S. District Court nominee Priscilla Owens. Or as politicians are prone to say: "Mistakes were made." I made them. I suppose I could have gotten it more wrong, but I surely didn't get much of the story right. My thanks to a fellow blogger at who understands the law a lot better than I do. Here is the complete Kiva comment, which should set the record straight:

Justice Raul A. Gonzalez, a very conservative Democrat, wrote the Read opinion. Justice Alberto R. Gonzalez, who is now U.S. AG, was not on the Court in 1998. It is confusing, I realize. The Texas Supreme Court has had only two Hispanic members, and both of them have been named Gonzalez.

In Read, the opinion by Justice Raul Gonzalez, was joined by 5 other members of the court. There were two dissents. One by Justice Hecht, whose opinion was that the court overreached because of the horrible facts of the case. Justice Hecht wrote:

The Court's solution is to limit its decision, as much as possible and well beyond what general principles will allow, to companies that require their products to be sold exclusively in customers' homes. A company that only allows its products to be sold in homes is unaffected, even if the risk to customers is the same. Today's "vacuum cleaner rule", carefully tailored and trimmed, is to apply in all cases exactly like this one, of which there appear to be none. In all other cases, the "taxicab rule" continues to apply, absent other sympathetic circumstances. Employing its chancery jurisdiction, the Court achieves a good result in this one case without adversely affecting the direct sales industry, the employment of independent contractors, or, it is hoped, anyone else at all. Today's decision is, to borrow Justice Roberts' metaphor, "a restricted railroad ticket, good for this day and train only."

The other dissent, by Justice Abbott, who is the current Texas Attorney General, concluded that the court sympathetically misapplied the facts of the case to settled law. Justice Abbott wrote:

I agree with the Court's analysis of Redinger v. Living, Inc., 689 S.W.2d 415, 418 (Tex.1985), that "a general contractor, like Kirby, has a duty to exercise reasonably the control it retains over the independent contractor's work." 990 S.W.2d at 735. I also agree with the Court's synopsis of Exxon Corp. v. Tidwell, 867 S.W.2d 19, 23 (Tex.1993), that in determining whether a duty exists in a retained-control case, the "focus is on whether [the] retained control was specifically related to [the] alleged injury." 990 S.W.2d at 736. I disagree with the Court's application of this law to the relevant facts of this case.

Justice Owens did not write an opinion in Read. She did, however, join in both dissents.

In my view, there is nothing remotely novel about the Read holding. The disagreement of the court centered on the application of awful facts to settled Texas law.

Moving Along
Thanks again to for straightening this out. Eating crow isn't half bad, as long as you bury it in the sauce...

Posted by Jon Coppelman at 2:58 PM Link to, Comment (0), or E-mail this post
May 19, 2005

FedEx and the Filibuster: The Future of Independent Contractors?

Perhaps you will think that the Insider is reaching a bit, when we state that the current judicial confirmation crisis in the U.S. Senate will eventually have a direct impact on the ultimate status of independent contractors in America, including the FedEx drivers that we have been following of late. Give us a moment to explain.

The first U. S. District judge up for confirmation is Priscilla Owens of Texas. She is widely viewed as ferociously pro-business. Her nomination is supported by the Justice Department and by a number of conservative groups. She is vehemently opposed by a long list of pro-consumer advocates, including People for the American Way.

In her years on the Texas Supreme Court, she has frequently dissented from the opinions of the majority -- a majority considered quite conservative in its own right. One of these dissents involved the status of an "independent contractor." The case is Dena Read v. the Kirby Vacuum Company. For political junkies, it's worth noting that the majority opinion was signed by then Chief Justice Raul A. Gonzalez, a former Bush staffer who is currently the U. S. Attorney General and rumored to be headed for the U.S. Supreme Court.

Here is the background: A customer who was raped by a door-to-door vacuum cleaner salesman brought a negligence action against the vacuum's manufacturer and the regional distributor, who operated as an independent contractor to the manufacturer. The trial court rendered judgment for the plaintiff for actual and punitive damages. The court of appeals affirmed the damages. The manufacturer then appealed to the Texas Supreme Court. The question presented to the Supreme Court was whether a company that markets and sells its products through independent contractor distributors and exercises control by requiring in-home demonstration and sales, owes a duty to act reasonably in the exercise of that control. In other words, does the manufacturer have to ensure that the independent sales force is qualified and appropriate to do the work? A majority of the court held that the company does owe such a duty. Accordingly, the court affirmed the lower court judgment.

Due Diligence in Hiring
In applying for employment to the regional distributor, Mickey Carter listed three references and three prior places of employment. Had the regional distributor checked these references, he would have found that women at Carter's previous places of employment had complained of Carter's sexually inappropriate behavior. The distributor would also have found that Carter had been arrested and received deferred adjudication on a charge of indecency with a child, and that one of the previous employer's records indicated that Carter had been fired because of that incident. Further, the regional distributor would have found that these records also contained witness statements, a confession, Carter's guilty plea, and the indictment charging him with the offense! Unfortunately, the regional distributor did not check any references; his defense, in part, was that Kirby, the manufacturer of the vacuum cleaners, didn't require him to check references for the independent sales force.

The court actually did not question Carter's status as an independent contractor, but stated that this status was no defense in this situation. The court found that Kirby required that its vacuum cleaners be marketed solely through in-home demonstration. It was Kirby's retention of control over this detail that gave rise to the duty to exercise that control reasonably. Even though Kirby's agreement with the distributors allowed them to independently hire a sales force, this did not excuse Kirby from the duty to act reasonably with regard to the qualifications of that salesforce. So the court found Kirby and the distributer negligent in not checking Carter's references.

To this point, it all sounds pretty reasonable. Indeed, the Texas Court references a similar case from North Dakota, where a Kirby "independent" salesman violently assaulted a customer (kind of makes you want to buy your vacuum in a store, doesn't it?). In direct response to this incident, Kirby put warnings in its training manuals of the need to do a "thorough criminal background check" on potential dealer candidates, had discourse with some distributors about the need to do reference checks, and instructed that if "red flags" come up in the process, the distributors should do further background checks. Alas, the changes in North Dakota never found their way into Texas.

Enter Owens
Priscilla Owens dissented from the Texas Supreme Court opinion. While details of her dissent are not available at the website, it appears that she considers the salesman a true independent contractor, so in her view the manufacturer bears no responsibility for his actions. Although the issue is not quite the same, I don't think that it's much of a stretch to project Owen's response to the FedEx business strategy. She appears unlikely to have any problem with their position that their drivers are "independent contractors."

So perhaps it is not far fetched to link the future of independent contractors -- and the FedEx business strategy -- with this week's senate floor drama. While you never know exactly how judges will rule, you can certainly get a sense from their prior opinions. Based upon the history, a Priscilla Owens on the bench may provide the kind of victory in the courts for FedEx that has proven elusive to date. We will keep you posted.

Posted by Jon Coppelman at 12:32 PM Link to, Comment (1), or E-mail this post
May 18, 2005

Negligent hiring: Any limits to employer liability?

We read in today's Boston Globe (registration required) that the family of Christa Worthington, a woman who was brutally murdered in her isolated Cape Cod home in 2002, has filed a $10 million wrongful death suit against her alleged killer and the trash-hauling company that employed him at the time of the slaying. We can assume that the alleged killer has no assets and that the employer carries liability insurance: one has deep pockets, one does not. At this point the employee, 33 year old Christopher McCowen, has been linked to the crime by DNA but has not yet been tried. The issue here is similar to our May 12 blog on an intoxicated employee who drove his car into another vehicle and wiped out a family. What did the employer know and when did they know it? In today's example, was the trash hauler negligent in hiring and retaining a man with a criminal history that includes burglary, grand theft, felony assault and threats to women?

Criminal Background Checks
Not every job requires a criminal background check. Where a company's employees routinely enter private homes (plumbers, electricians, painters, carpet installers), where there is contact with school children (bus drivers, school cafeteria workers, school volunteers), or where there is ongoing public contact (bus drivers, catering services), employers clearly have an obligation to ensure that they are hiring people who do not put their customers or the general public at risk. These employers generally request a criminal background check from a state authority. Of course, these checks usually only reveal convictions in that particular state. When criminals or predators move from state to state, they are much harder to track.

When you hire someone to haul garbage, is a criminal background check necessary? At first glance, this appears to stretch the concept of negligent hiring to the breaking point. Garbage haulers do not enter homes; they do not generally come into direct contact with the company's customers. What makes this case a bit different is the isolation of the victim's home -- she lived in a remote part of the Cape, far from any neighbors. But does this unusual circumstance require a higher level of diligence on the part of the employer? Does McCowen's history raise any red flags about his ability to perform this particular job without endangering others?

Chilling Effect
While the lawyers bringing this suit will have their day in court, I believe they are trying to cast too wide a net in this particular situation. I suppose on some level you could argue that virtually any job could require a background check. The public interest requires that we balance any concerns for public safety with the need to create meaningful employment opportunities for everyone, including those who have engaged in criminal activity in the past. If you categorically reject every job applicant with a criminal history, you virtually force these people to engage in new crimes. Your categorical ban has a chilling effect on their ability to earn a living. On the other hand, individuals with a history of criminal activity and violence do pose risks, and in some circumstances these risks are substantial.

What's an employer to do? We have often stated that managing a company is comparable to building a home on the San Andreas fault. The ground is always shifting and bad things can happen if you don't pay attention. Know your work. Know your people. Keep your eyes open. It sounds simple, but it isn't. In the world of business, one person's mistake becomes another's opportunity. Prudent managers try to keep these basics firmly and constantly in mind.

Posted by Jon Coppelman at 12:36 PM Link to, Comment (1), or E-mail this post
May 17, 2005

New York Rates: Follow the Bouncing Ball

New York is famous for being a high cost state for workers compensation. By any reasonable measure, New York falls within the top four states for high comp cost, sharing the dubious spotlight with California, Texas and Florida. With its unique paternalistic approach, the state requires multiple hearings during the course of a routine claim. While attorneys in most states earn their fees by negotiating lump sum settlements, in New York they just have to show up. And show up. And show up.

Trending Up
New York is a tough state for writing workers comp. They are in the midst of a struggle to establish new rates -- and unlike many states, this is not a question of how deep to cut current rates, but rather how steeply to raise them. The initial request from the New York Compensation Insurance Rating Board was designed to get everyone's attention: a whopping 29%. As that most quotable of New Yorkers, Yogi Berra, might say, "It's deja vue all over again." It's been over a decade since most states have seen a rate increase request of that magnitude. But that extravagent request was subsequently withdrawn by the board and replaced by a more modest -- but hardly less aggravating -- 9%. Wait a few days and it changes again. The most recent request on the table is for 16.1%.

Bouncing Ball
It's hard to follow the bouncing ball, but one thing is clear. Rates are likely to go up, because costs are out of control. New York's system, one of the first in the nation, still embodies the deeply adversarial divides of labor and management. It's a system full of friction and conflict. When the ball bounces in New York, it lands squarely on the heads of New York's employers, who pay the price for a dysfunctional system. Overall, New York ranks pretty low (45th) in general friendliness to small business. It will take political will and courage to turn this situation around. That's not exactly what we see on the immediate horizon. So for the time being, when it comes to rates for comp in New York, it's like the architecture in Manhattan: how high will they go and how fast?

Posted by Jon Coppelman at 4:42 PM Link to, Comment (2), or E-mail this post
May 16, 2005

Drug Prescription Hit Parade: Ka-Ching go the Strings...

Lately we've been thinking a lot about drugs. According to a study released by NCCI last year, prescriptions are taking an increasing portion of medical care in workers compensation: rising from about 6.7% of total costs in 1997 to 12.1% in 2002. The precentage today is probably higher than that.

So what? Is this really news? The LynchRyan focus is not so much on rising costs as on which costs are rising: in other words, which drugs are being prescribed under the workers compensation system and why.

Generic versus Brand Name
In the battle between generics and brand name drugs, brand names are winning out big time in workers comp. The NCCI study (going only through 2002) reveals that generics are prescribed 79% of the time. This sounds good -- where generic equivalents are available, they are prescribed a majority of the time. But let's look a little deeper. The study reveals that 56% of the time, there are no generic equivalents. In other words, over half the time doctors are prescribing brand name drugs, which are always more expensive. As a result, generic drugs comprise only 35% of written prescriptions. Beyond that, doctors are making some interesting choices in which drugs they prescribe. Take a look at NCCI's top 10 drugs by total paid:

First in line, Celebrex, an anti-inflammatory with no generic equivalent. It's advertised as an arthritis drug.
Second, Oxycontin, a painkiller originally developed for terminal cancer patients. (Some studies show still show Oxycontin as the #1 drug under workers comp.) Oxycontin's addictive potential and readily abusable state are well documented.
Third, Vioxx, another anti-inflammatory (recently removed from the market).
Fourth, Hydrocodone, another painkiller, and the first generic to make the list.
Fifth, Neurontin, prescribed for pain. This drug is specified for certain seizure disorders and for the pain of shingles. Why is it so popular for workers comp pain?
The top 10 list is rounded out by Ultram (a painkiller with a generic available); Carisprodol, a generic muscle relaxer; Cyclobenzaprine, another generic muscle relaxant; Soma, a brand name muscle relaxant; and Ambien, a brand name sedative.

I am tempted to ask, what's the problem with Soma's sales force? Why is their brand lagging behind the generic equivalents?

In general, pain killers comprise 55% of workers comp prescriptions. No surprise, given that pain is a major component in injuries. But why are doctors relying on brand names, when there are very powerful generic drugs available for pain? Why prescribe Oxycontin? Why is Neurontin so popular?

Is this what consumers want?
There is one major difference between prescriptions written for workers comp and those written under conventional health plans. When you fill a prescription under your health plan, you almost always are asked for a co-payment. The co-pay tends to be much higher for brand name drugs, which is an incentive for the consumer to choose a generic equivalent. But in workers comp, there is never a co-pay. Thus there is no incentive for the consumer to make do with a generic equivalent. Does this mean that consumers -- injured workers -- are driving up the costs of prescriptions by requesting brand name medications? It might be a factor, but I doubt that it's a major factor. The answers lie in the highly trained minds of the doctors. Just what are they thinking? What leads a doctor to prescribe a powerful and addictive drug, when a safer generic is readily available? What is the specific decision making process for a doctor when he or she takes out the little prescription pad?

This is a workers comp blog. We don't presume to have the answers to these compelling questions. We do try, however, to identify the key issues and this is indeed a big one. Prescription choices and costs are an important dimension of the workers comp world. The continuing popularity of the widely abused Oxycontin, the off-label use of branded drugs such as Neurontin, and the heavy reliance on branded anti-inflammatory drugs add up to big profits for the drug companies. But are they medically necessary? Are these drugs really what injured workers need to get better? Are doctors making the right choices for the right reasons? Only time -- and better data -- will tell. We will surely revisit this issue in future blogs.

Posted by Jon Coppelman at 2:32 PM Link to, Comment (2), or E-mail this post
May 13, 2005

Ohio's Great Workers Comp Coin Caper?

I used to think I worked in a fairly pedestrian little industry. At cocktail parties, the words "insurance" and "workers comp" were always good for a few yawns and glazed eyes. There wasn't much in the way of excitement - a little premium fraud here, a little claimant fraud there, and an occasional doctor mill busted...nothing too eye opening.

But today, I suddenly find myself in the thick of one of the most scandal-ridden industries going... first there was the Spitzer probe and the ignominious fall of the financial giants; and now, in a surprising follow-up, courtesy of Ohio, we have the great Comp Coin Caper of 2005.

Now if the linkage between 119 rare coins and workers comp isn't immediately apparent to you, you can be forgiven. It's a pretty twisted tale - I'll rely on the Toledo Blade’s article State decides to get rid of rare-coin investments to fill you in on most of the details:

"COLUMBUS - State officials yesterday said they are halting a controversial investment in two rare-coin funds controlled by Tom Noe, a prominent Toledo-area Republican fund-raiser and coin dealer. The Ohio Bureau of Workers' Compensation announced that it will dissolve the $50 million investment "over a reasonable period of time sufficient to protect the state's investment."

Now that seems like a bit of an unorthodox and risky investment for an injured worker trust fund to me -- but wait, there's more...

"The agency's decision was made a day after The Blade reported that two rare gold coins purchased for the state had probably been stolen. Mr. Noe had said the coins were "lost in the mail." He has told the bureau that an additional 119 coins owned by the state were "misappropriated" by a former employee."

This boggles. "Rare Coin Funds" sounded risky enough, but now we learn that this fund actually involved cold hard coins that were shipped in the mail. And two were lost and 119 misappropriated? Huh? But wait ...

"The Blade also reported Sunday that in the year since Mr. Noe learned the 121 rare coins were missing and possibly stolen in Colorado, he had not contacted law enforcement authorities. A bureau spokesman also said Ohio officials didn't learn until being informed by Blade reporters of the missing gold coins, two of the most valuable rare coins purchased for the state by an employee of Mr. Noe's at a cost of $250,000."

OK, now we are really in full-fledged bizarro land -- stolen rare coins and workers comp. What were state officials thinking???

"The Blade first reported April 3 that the bureau since 1998 had invested $50 million in rare coin funds that Mr. Noe controls, despite strong concerns raised by an auditor with the bureau about possible conflicts of interest and whether the state's millions were adequately protected."

OK, well at least the auditor was thinking. But if he (or she?) was against the investment, how did state funds ever get embroiled in such a specious scheme? Well I guess that’s what everyone’s wondering now.

This has moved from the BWC to the state’s cornermost office. And now it involves allegations of political cronyism, campaign donations, and the Governor and what he knew or didn’t know about trips to a Florida vacation home. Stay tuned.

When one of my colleagues wants to get to the root of things, he always says, “follow the money” -- I just never would have thought the trail would be in coins. You have to admit, this is pretty racy stuff for workers comp.

Posted by Julie Ferguson at 3:05 PM Link to, Comment (0), or E-mail this post
May 12, 2005

Intoxicated employee = Employer liability?

We have been tracking a tragic accident in Michigan that illustrates a very open-ended liability for employers. According to an article in the Detroit Free Press, Thomas Wellinger was a well-regarded employee of Unigraphic Solutions, a high tech company in Michigan. After his marriage failed last year, he apparently developed a drinking problem. On May 3, a little after 3 pm, he left work and drove his SUV at 70 miles per hour into a car driven by Judith Weinstein. The 49 year old mother and her two sons, Alexander, 12, and Samuel, 9, were killed instantly. Wellinger had a truly amazing blood alcohol level of 0.43 -- a clear indication that he routinely maintains a high level of alcohol in his system (his blood alcohol level would kill most of us outright). As is so often the case, Wellinger survived the crash, suffering a broken neck. He has been charged with vehicular homicide.

Here's the issue for his employer: how long have they known about Wellinger's drinking problem? What have they done about it? While Wellinger may not have the deep pockets to cover the inevitable liability for his negligence, his employer does have liability insurance. The burden of proof shifts now to the employer: they have to prove that their actions in controlling Wellinger were prudent and reasonable. It's worth noting that the employer intends to cooperate with the investigation, but their counsel has recommend that they repond only to a subpoena.

What did you know and when did you know it?
It appears that Wellinger may have spent a late night drinking at a local casino (note to attorneys: additional deep pockets here...) He showed up for work, then left the office early. Here's the crux of the Unigraphic's potential liability: Wellinger returned briefly to the office around 3 pm. Was anyone aware of his drunken state? (Even for a steady drinker like Wellinger, the 0.43 blood alcohol level must have been visibly evident.) And if the employer was aware of his acute intoxication, what if anything did they do about it?

The Free Press article quotes Bill Judge, a Chicago-area attorney who works with corporations to develop drug-prevention programs and policies dealing with substance-abusing workers. Judge states that although there is no Michigan law mandating that employers stop drunken employees from driving, they can face serious civil liability.

"You have to understand that once a worker shows up drunk, the employer must act ... he becomes the employer's responsibility.You put him in a cab, or you call the emergency contact person on his application and say come get him. If he decides he's going to drive anyway, you call the police."

While attorneys often obfuscate matters, Judge has nailed this one perfectly. If the employer is aware of the danger to the employee and others, action must be taken. You are not obligated to restrain someone (that's a police function), but you do need to ameliorate the risk. If the employee insists on driving away, call the police and give them a description of the vehicle.

Written Policies Are not Enough
The American Management Association estimates that over half of American companies have pre-employment drug and alcohol testing, but only 38 percent have post-hire testing programs. In any event, written policies are pretty useless if you don't walk the talk. When a volatile situation occurs -- when an employee shows up intoxicated -- the employer must take immediate action. Supervisors need training in what to do and how to do it. If you let an impaired employee drive off, you are endangering innocent people like the Weinsteins. If it can be proven that the employer was aware of the danger, our legal system will hold that employer accountable, even though the employee is no longer in the "course and scope" of employment.

Posted by Jon Coppelman at 11:21 AM Link to, Comment (4), or E-mail this post
May 11, 2005

Recognizing and preventing occupational disease

The Canadian Centre for Occupational Health and Safety (CCOHS) recently held a national forum on Recognizing and Preventing Occupational Disease. and as a part of that forum, delegates participated in workshops where they developed new strategies for dealing with occupational disease. The preliminary results of these forums are posted as survey recommendations under the following categories:

  • Infectious Diseases
  • Occupational Cancer
  • Respiratory Diseases
  • Stress
  • Workplace Musculoskeletal Disorders (WMSDs/RSI)
  • General Occupational Diseases

Through Friday, May 13, site visitors can take the survey, although Canadian data only will be used in final results. In addition to offering recommendations from the survey, the site affords access to many of the presentations on occupational disease that were made at the forum, either in PowerPoint or PDF formats. The CCOHS is an extensive resource that may be less familiar to U.S. readers. It offers many excellent health and safety resources in English, French, and Spanish. Although the Canadian comp system and regulatory matters are different in Canada than in the U.S., worker health and safety issues are universal.

Posted by Julie Ferguson at 7:39 AM Link to, Comment (0), or E-mail this post
May 9, 2005

Qualified interpreters can save lives

We've blogged before about language in the workplace, the impact that language has on safety, and the increased risk of death that non-English speaking immigrants face at work. We've also talked about the need for cultural competence in health care in the face of changing worker demographics.

In a post entitled People are dying because of their language, Jordan Barab at Confined Space carries a speech that Elisabeth Milos, an interpreter for injured workers, gave at a Workers Memorial Day rally at the state Capitol in Sacramento, California. It's well worth reading. The points that Milos makes are further bolstered by a recent New York Times article by Nina Bernstein entitled Language Barrier Called Health Hazard in E.R.

Both Milos and Bernstein point out the many problems with leaving translation up to family members or untrained persons. It is important to have a qualified interpreter when serious matter about health or safety must be conveyed. In What does an interpreter do?, the author discusses the role an interpreter can play and distinguishes interpretation from translation.

Employer Resources
How can an employer cope with the challenges that a diverse and multilingual work force poses? I once worked for a progressive manufacturer that offered English-as-a-second-language courses on site, and that regularly brought community interpreters in to acclimate new immigrant employees, such as Vietnamese and Hmong workers. Many immigrant groups have local cultural support centers, and they can be a good source for interpretation or translation.

One other alternative is for telephonic translation services via a three-way conference call. An advantage of such services is that they can be available on short notice, 24 hours a day, 7 days a week. We can't vouch for the quality of any of these services, but here are a few you might explore:
Certified Languages International
LLE Languge Services

Our legal system faces the need for interpreters on a daily basis, so their experience might be instructive. See the Court Interpretation Resource Guide (PDF), or the state links for court interpretation (PDF) which might provide a cookie trail to certified local resources.

If any of our readers have resources to suggest, I would welcome them. This is a topic of growing urgency.

Posted by Julie Ferguson at 12:54 PM Link to, Comment (0), or E-mail this post
May 8, 2005

What's your Mom worth?

Did you ever stop to think what a hard-working stay-at-home Mom should be earning if she were paid for her labors? did, and they tallied the regular pay and overtime to come up with a figure of $131,471. To arrive at that number, they looked at the various roles a Mom plays and the cost of those tasks if they were purchased on the open market. They took an average of seven job responsbibilites, from day-care teacher and cook to CEO and nurse, to arrive at a 40-hour base-pay of $43,461. Add another $88,009 for 60-hours of overtime and voila. But this doesn't factor in the 24-hour-a-day on-call nature of the work, either.

The market value of a stay-at-home Mom? $132,000, or thereabouts. The real value of a woman who raises seven kids with no pay? Priceless - thanks, Mom!

Posted by Julie Ferguson at 1:43 PM Link to, Comment (0), or E-mail this post
May 7, 2005

FedEx Drivers Head to Federal Courts: A Declaration of Dependence?

We have been focusing on the issue of independent contractors for some time now. As recently as April 27, we blogged that the FedEx strategy of hiring their drivers as "independent contractors" was not likely to prevail in Massachusetts, where the standards for establishing independence are very high indeed. Now Diane Lewis of the Boston Globe (registration required) reports that a handful of current and former FedEx drivers have gone one step further: they have filed a class action suit in Boston federal court on behalf of all 17,000 FedEx drivers across the country.

Lewis's article clarifies one of the mysteries of this arrangement: how do these "independent contractors" come up with the money for FedEx box trucks with company logos? The answer is that they lease them, presumably from a company that is "independent" of FedEx itself. The suit alleges that in addition to leasing the trucks, the independent contractors have to buy gas, uniforms, and equipment, thus netting much less than what they expected to make and less than what salaried drivers at rival UPS are paid. (In my April 27 blog, it appeared that FedEx drivers made more than UPS drivers.)

Federal Court versus State
I am a little disappointed that the case is bypassing the state courts. It's a slam dunk that FedEx would lose here in Massachusetts, but it would have been a great show. The fate of this case in federal court is perhaps less certain. By bringing the action in federal court, the plaintiffs have set their sites on a nation-wide action that challenges FedEx's core strategy across the country. This case is likely to end up at the US Supreme Court.

While I am all for innovation in management, I have a problem with the FedEx business strategy. By calling their drivers independent contractors, they break the natural bond between employer and employee. Independence is wonderful, but it must be true independence. FedEx drivers are caught in a nether world: they lack the job security and benefits of employees and also lack the true independence of entrepreneurs. By taking the company to court in Boston, the drivers are issuing a declaration of dependence in one of the home cities of American independence. It's the American way.

Posted by Jon Coppelman at 2:17 PM Link to, Comment (1), or E-mail this post
May 5, 2005

Course and Scope: A Case of Flag Waving

We stumbled upon a workers comp case in South Dakota illustrating one of the more interesting technicalities of workers comp: coverage begins when you are "working" -- but when are you working? There are times when injuries suffered while travelling to the job site are covered and situations when they are not. Because the vast majority of American workers do not have their own disability insurance, the determination of eligibility for comp is crucial. If you are "in the course and scope" of employment, your medical bills are paid and you receive a percentage of your average weekly wage during recovery. If you are not "working," you have to pay medical bills yourself, you owe co-pays on your prescription medications and you have no income during your disability.

Heading off to Work
The South Dakota case, outlined in the Rapid City Journal, involves a woman whose job involved flagging motorists on an interstate construction project. She reported to a quarry in Rapid City, where employees of Hills Materials traditionally assembled for the workday, and then drove 125 miles to a distant site where she was to flag motorists at the roadway construction site. She never made it to the site: she fell asleep while driving and crashed the car. The company, and its insurer, are fighting the claim all the way to the South Dakota Supreme Court. They argue that she was heading to work -- she was not yet at work -- when the accident occurred. They also brought up the issue of misconduct, as the employee may have been speeding, she fell asleep at the wheel and she was not wearing a seat belt. (Because workers comp is "no fault," the alleged misconduct is not relevant, unless it reaches the level of "willful intent.")

I was intrigued with the company's argument that allowing this claim would open the door to even more frivolous claims. Their lawyer queried: "If she fell in the shower, could she claim workers compensation for that? Or if she fell out of bed the night before when she was resting up for work? Where do you draw the line?"

I personally draw the line at sound legal reasoning, which appears to have been crossed, at least in this brief quote from the defense. In most states, the beginning of the workday would be the quarry. But even if the employee had headed off to the distant jobsite directly from home, the long journey would likely be part of her work day. The 125 miles is hardly a regular, well-established commute. The lower court judge has raised the right issues and to my mind reached the right conclusions. I suspect that the South Dakota Supreme Court will do the same.

Taking Care of Your Employees
In my semi-official grandstanding position as a workers comp blogger, I think it is unfortunate that the employer chose to fight this case. Their opposition sends the wrong message to all of their employees. They should have accepted the case, supported the employee during her recovery and welcomed her back as soon as possible. Given her job as a flag waver, they could probably accommodate her restrictions and bring her back on light duty. That would be far better strategy than dragging what appears to be a losing case through the courts.

Posted by Jon Coppelman at 2:51 PM Link to, Comment (0), or E-mail this post
May 4, 2005

Giving employees what they want

Many large companies that would do anything possible to outperform competitors may be overlooking a surefire path to success: having motivated, enthusiastic employees who are committed partners in achieving the company's goals. If you are a business owner or a manager, take the time to read this excellent interview with David Sirota, co-author of the book The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want - I'm pretty sure you'll be glad you did. The article is from the current edition of Knowledge@Wharton, an online resource from The Wharton School, University of Pennsylvania. (This is a great resource - free registration may be required.)

Sirota and his co-authors, Louis A. Mischkind and Michael Irwin Meltzer, have conducted more than 2.5 million employee surveys since 1994. Their research demonstrates that companies with high employee morale outperform companies with low employee morale. In a group of 28 companies employing 920,000 workers, the share price for the high morale companies increased by an average of 16%, versus about 3% for low-morale companies.

The authors reject the "get-tough" managerial tactics that were adopted widely in the last decade in an effort to increase share price and satisfy stakeholders. Rather, they favor a managerial approach that aligns company goals with the goals of its workers. Sirota describes the three basic goals of workers as:

  • Equity, or being treated fairly - fair pay, fair benefits, and security.
  • A sense of achievement - being proud of what you do and the company you do it for.
  • Camraderie - being part of a team effort, working well together.

Every tool a hammer
Sirota states that about 16% of the companies he deals with have a hostile work force. Often, this is the result of a reactive managerial style that we frequently encounter in companies that are suffering from high workers compensation losses. Sirota states:

About 5% of every workforce is allergic to work. These employees are shirkers. But managers in many companies, especially where there are large numbers of blue-collar workers or back-office operations such as call centers, treat the entire workforce as if it is the 5%. They set up rules and punitive measures for taking too long a rest break, etc. There is close supervision, so people who come in wanting to work, and hoping to take pride in their work, find themselves treated as if they are children or criminals.

Such a punitive style of management - treating everyone like the worst performing few - is a common reactive approach to the high costs of workers comp. We see this frequently. In frustration to one or several high-cost claims, some employers react by treating every comp claim as fraud, and treating all claimants in an adversarial manner. This serves to worsen any problems, creating a corrosive air of mistrust between managers and employees. It often becomes a type of self-fulfilling prophecy, even in instances when high comp costs are actually more the result of outside market forces or a fundamental lack of basic preventive of managerial measures.

A better way: employees as partners
Sirota discusses various managerial styles that have been in vogue over the last few decades, and presents an alternative that we ascribe to:

"First there is paternalism, where workers are treated as children. Then there is adversarial where workers are the enemy. Then there is transactional, where workers are like ciphers. Management does not know what they are like as individuals. The attitude is, 'We paid you, now we are even. We don't owe you anything.' That's where most companies have gone today. Loyalty is dead.

The fourth is what we have been talking about, which is the partnership organization. It does not mean that because I paid you, we are now even. You don't treat partners that way because you might need them to help you out sometime, and they might need you. It's more like a relationship between mature adults -- not like children or enemies, but allies."

We endorse this latter approach fully, and have seen it work well in those companies that embrace it as a model. The breakdown in employer-employee loyalty has been pervasive in recent years, resulting from massive and repeated layoffs, outsourcing, and other organizational measures that convey the underlying message that employees are a commodity. It may take years for employers to bridge the chasm that has been created and recreate a loyal work force, but the benefits are many for those few high-performing organizations that make the effort.

Posted by Julie Ferguson at 9:40 AM Link to, Comment (0), or E-mail this post
May 3, 2005

Risk Factor: new industry publication

Risk Factor is a monthly newsletter that made its debut at RIMS. Lori Widmer is a principal behind this new monthly publication - she's a savvy and experienced risk management editor, having worked wih and been published by some of the premier risk, workers comp, and HR industry publications. Learn more at the Risk Factor website, and read Lori's commentary on last month's RIMS conference. For a complimentary sample copy of Risk Factor, drop a note to

Posted by Julie Ferguson at 8:11 AM Link to, Comment (0), or E-mail this post
May 2, 2005

The Uninsured: Up Close and Personal

Our colleague Joe Paduda has done a great job of blogging the problem of the millions of Americans who lack health insurance. Over the past week, he has blogged good and not-so-good articles relating to this national crisis. The problem has many ramifications, one of which, Joe points out in today's blog, should be a business opportunity for health insurers who are looking for new markets. Unfortunately, insurers don't seem very focused on the issue.

We have blogged this problem a number of times ourselves, with particular reference to the implications for workers compensation. It's relatively simple: people who work might not have health insurance, but they do have a disability policy for work related injuries (workers compensation) that provides indemnity payments and full medical coverage, with no copays, no deductibles and no time limits. In order to be eligible for these benefits, they have to prove that their condition is work related.

Real Life Problem
Last week the problem of no health insurance came home as we sat down with an artisan contractor who had a problem with one of his employees. This valued worker has a pre-existing back problem, recently exacerbated by a bike riding accident on the weekend. The employer, a thoughtful and considerate man, placed the employee on light duty, which has continued for three weeks. The employee is loyal and reliable; he presents his physical problems as being unrelated to his job. Given his diminishing physical capacities, the employee is questioning whether he can do this type of work (painting) much longer.

LynchRyan, a claims adjuster and the employer met to review the situation. We agreed that it would be best to secure up-to-date medical information on the employee's condition. How serious is it? What are his restrictions and how long are they likely to continue? At first we thought we should refer the employee to an occupational doctor for a "fitness for duty exam." This would give us a line on current restrictions and a timeframe for returning to regular duty. The employer was willing to pay for this exam.

Here's where the absence of medical insurance came into play. What if the doctor wants to run some more tests? What if an MRI is needed? Who pays for that? At this point, this is not a work-related condition. It is not covered by workers compensation -- indeed, the employer is motivated to keep the situation off of his comp loss run.

After considering all the options, we came up with the following approach:
First, the employer will have an informal conversation with his employee as soon as possible, letting him know that the light duty cannot continue indefinitely. He will explore the employee's latest thinking about a change in career. If the employee is ready to move onto a different kind of work, the employer will provide a month’s severance and a letter of recommendation.

On the other hand, if the employee wants to continue painting, the owner will set up a physical exam at an occupational clinic, to determine whether the employee is capable of performing the essential functions of the job. If the physical indicates that further treatment or diagnostic testing is needed, or that the employee should probably give up painting, the employer will be confronted with a number of problemmatic decisions that will require consultation with a labor attorney. Given his own narrowing options, and despite his appreciation for his employer, the employee may feel compelled to seek the advice of an attorney and even to file a comp claim. The conundrum, pure and simple, is the lack of any medical insurance outside of the comp system.

Ironically, the employer wants to provide health insurance coverage for all of his employees, but he has to wait until his workers comp experience mod comes down. His premiums were inflated by a large back claim for an injury that was probably not work related. His insurance premiums are cutting deeply into available resources, so he cannot afford to provide his crew the relatively expensive benefit of health insurance.

Staying Power
The issue of health insurance is not going away any time soon. As Joe Paduda points out, it impacts the health and well-being of millions of American workers. It is probably no coincidence that in Texas, where over 30% of the workforce lacks health insurance, the cost for workers comp is very high, second only to California. The cross-over issues between health coverage and workers comp are wide-ranging and complex, as our little case study of just one well-intentioned employer makes abundantly clear.

Posted by Jon Coppelman at 12:21 PM Link to, Comment (0), or E-mail this post