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Insurers Protest Proposed CMS SMART Act Rule Extending Time Limits

A report by the Insurance Journal says that a rule proposed by the Centers for Medicare and Medicaid Services contradicts the intent of a recently passed law aimed at requiring CMS to tell insurers how much of a claims settlement involving federal health insurance recipients must be given to CMS. The regulatory process was mandated by passage in January, after years of effort, of the SMART Act, or The Strengthening Medicare and Repaying Taxpayers Act. It deals with mandates for providing timely information to CMS on settlements of lawsuits involving no-fault auto-insurance claims, workers’ compensation claims, and payments under liability insurance, such as auto accidents.

The interim final rule–which means it goes into effect immediately–more than doubles the statutory 120-day period CMS is given under the new law to provide to insurers the portion of the final settlement that insurers will have to give to CMS rather than the claimant. Under the interim final rule, CMS will be given 245 days to process claims submitted by the insurers and other third-party payers, as well as lawyers involved in settlements. The comment letters sent by insurers voiced concern that, contrary to the intent of the law, the proposal doesn’t reflect the fact that when a deal is reached, all parties have certainty within a reasonable period of time.

Among those submitting comment letters are the American Insurance Association, the Risk and Insurance Management Society (RIMS) and the Medicare Advocacy Recovery Coalition (MARC), which includes self-insured employers. RIMS members include a number of municipalities, public school systems, etc.

“In addition to conforming to the requirements of the SMART Act, the CMS proposal also must work within the context of how settlements actually occur, and should promote, rather than delay the settlement of claims. The potential that settling parties would have to wait over half a year to conclude their settlement because of a lengthy MSP process will lead many settlements to breakdown,” said John Phelps, RIMS president.

Michele L. Adams, chair of MARC said that the interim final rule designed to implement the SMART Act “is flawed” because it creates a settlement process that is in “direct contradiction to Congress’ clear instruction, exceeds and misconstrues the SMART Act, and fails to address needed regulatory issues,” “For all the reasons set forth above, the MARC Coalition urges CMS to withdraw the IFR and reissue a proposed rule upon which all stakeholders can comment,” .

The insurers and other interested parties are also concerned that CMS is presenting them with a fait accompli, meaning immediate implementation of the rule, rather than a full notice and comment process, interested parties including insurers, are saying in comment letters.

Headache Doctors Publish Treatment-to-Avoid Guidelines

Doctors who specialize in treating head pain, such as chronic migraines, are the latest to list the procedures and treatments they think have risks or costs that may outweigh the benefits to patients. To come up with the recommendations, Loder and her coauthors asked physician members of the American Headache Society (AHS) to identify tests and treatments they view as being used incorrectly or too often, and which methods of care had benefits too small to outweigh the risks.

According to the report in Reuters Health, the researchers evaluated more than 100 items suggested by AHS members, distilling the list down to five items based on current evidence.

The guidelines advise against imaging the brains of patients who get headaches that have not changed over time.

They also discourage the long-term use of over-the-counter pain pills to treat headaches, and recommend that physicians avoid using certain pain medications – opioids like oxycodone and drugs containing butalbital like Fioricet – for patients who get headaches often.

Finally, physicians should not perform computed tomography, or CT, on a patient with a headache when magnetic resonance imaging, or MRI, is available, except if it’s an emergency, the recommendations state.

The recommendations, Loder said, “are a nice distillation for patients when thinking about their care.” Patients and their families can use the guidelines to start a conversation with their doctor about the pros and cons of a given test or procedure.

“In addition to thinking about the good things that may come about from interventions, it’s also important to think about situations in which caution can be used,” Loder told Reuters Health.

Labor Code section 4600 provides that medical care provided in workers’ compensation cases conform to standards of evidence based medicine that is peer reviewed. While the DWC published Medical Treatment Utilization Schedule (MTUS) is presumed to be correct, it can be overcome by higher quality medical evidence. Thus, utilization review vendors may rely on better guidelines as they review requests for authorization for medical care.

Senator Calderon Points Fraud Finger at Senator Steinberg.

Lashing back at federal officials and Senate colleagues, state Sen. Ron Calderon charged in a federal lawsuit filed last week that authorities leaked an FBI affidavit against him after Calderon refused to participate in a sting operation targeting Senate President Pro Tem Darrell Steinberg and Sen. Kevin de Leon. The filing in Sacramento federal court urges a judge to hold the FBI and U.S. Attorney’s Office in Los Angeles in contempt, contending that last month’s release of a sealed FBI affidavit “has prejudiced any future grand jury proceeding and irreparably tainted any future court proceedings involving Senator Calderon.”

Calderon alleges in the complaint that he “was approached on six separate occasions by high level agents of the Federal Bureau of Investigation and on two occasions by the Assistant United States Attorney for the Central District of California Doug Miller demanding that Senator Calderon participate in a sting operation against Senate President pro Tern Darrel Steinberg. The FBI agents requested that Senator Calderon wear a wire and secretly record his conversations with Senator Steinberg and Senator Kevin de Leon. The FBI was specifically interested in Senator Steinberg’s financial activities with Michael Drobot, the former Chief Executive Officer of Pacific Hospital of Long Beach. Senator Calderon refused to continue participating in the FBI’s sting operation, and rejected their demands to secretly record conversations with Senator Steinberg and Senator de Leon. Senator Calderon, through the law office of Geragos and Geragos, APC, returned the wire equipment supplied by the FBI to the agents working for United States Attorney’s Office for the Central District of California.”

According to an article published by McClatchy News, Steinberg said Calderon’s filing “is pure fantasy.” De Leon declined to comment. His office has previously said he has been told he is not a target of the investigation. Mark Geragos, Calderon’s lawyer, said Steinberg’s move prompted the latest legal action.  Steinberg spokesman Rhys Williams said the Senate leader has been told he is not a subject of the investigation, Geragos said “we have indisputable proof that they were targeting Steinberg.”  Thom Mrozek, a spokesman for the U.S. Attorney’s Office in Los Angeles, declined to comment Wednesday evening.

Late last month, Al Jazeera America posted the FBI affidavit, which alleges that Calderon took $60,000 in bribes from an FBI agent posing as a film studio owner and $28,000 in bribes from Drobot. Drobot’s lawyer has called the allegations baseless. Calderon is quoted in that document as saying he was working with Steinberg on legislation to lower the threshold for film tax credits to $750,000 from $1 million. The affidavit also describes de Leon amending one workers’ compensation bill at Calderon’s request in a way that would have less impact on Drobot’s business at Pacific Hospital.

There have been calls for Calderon to resign by Assemblywoman Cristina Garcia, D-Bell Gardens, and other officials in Calderon’s east Los Angeles County district. Calderon issued a statement slamming Garcia for “assuming the role of judge and jury,” adding that his current problems could befall “anyone in public office.”

Intuit Enters Real-Time Workers’ Compensation Payroll Business

Intuit Inc. has signed a definitive agreement to acquire privately held Prestwick Services, a leader in payroll based billing and payment solutions for the workers’ compensation industry. Intuit Inc. creates business and financial management solutions that simplify the business for small businesses, consumers and accounting professionals. Its flagship products and services include QuickBooks®, Quicken® and TurboTax®

Traditional workers’ compensation plans involve large pre-payments based on estimates, with the potential for substantial extra payments at year-end audits. With the acquisition of Prestwick Services and its TRUPAY technology, Intuit will open the platform that enables workers’ compensation insurance premiums to be calculated in real-time, based on actual payroll, and will not require small business owners to switch insurance carriers or agents.

For a small business owner, pay-as-you-go workers’ compensation has several benefits. Premiums are calculated every pay period instead of estimated at the beginning of the year, so payments are adjusted as employee changes occur, virtually eliminating surprise payments at year end audits. Hefty lump sum pre-payments are avoided. And automatic collection of premiums means no extra legwork, fewer late payments and one less thing on the to-do list.

“This transaction furthers our commitment to helping small businesses manage every aspect of their business, so they can be free to focus on doing what they really love,” said Ginny Lee, senior vice president and general manager of Intuit’s Employee Management Solutions division. “We are very pleased to be adding a team that brings deep insurance industry experience as well as their robust TRUPAY technology platform. Together, we look forward to providing more benefits to our small businesses customers as we work to bring even more insurance carrier partners onto the platform.”

The integration of Prestwick Services means more than one million Intuit payroll customers will have access to flexible payment options from 15 top insurance carriers, without requiring a change to their existing agent-client relationships. When the transaction closes, Prestwick Services’ will become part of Intuit’s Employee Management Solutions Division. The transaction is expected to close during the second quarter of Intuit’s fiscal year 2014, which ends Jan. 31, and is subject to customary closing conditions.

Final SJDB Regulations Approved

The Office of Administrative Law (OAL) has approved the Division of Workers’ Compensation’s (DWC) final version of the Supplemental Job Displacement Benefit (SJDB) regulations. OAL approved the SJDB regulations on November 8. Two sections have been repealed (10133.51 and 10133.52, which required the Notice of Potential Right to SJDB Benefit), effective immediately. The modifications to the remaining sections are effective on January 1, 2014. The SJDB emergency regulations went into effect on January 1, 2013. The final version of the SJDB regulations includes the following changes from the emergency regulations.

  • Section 10118, the word “Inclusive” was added to the title to clarify the exact time period. “Retraining and Return to Work Unit” was deleted from the heading as that Unit no longer exists within the Division of Workers’ Compensation (DWC). DWC’s address was added for filing a Request for Dispute Resolution. On page 3, the case number field was deleted because case numbers may not be assigned at the time offers are made.
  • Section 10133.31, subdivision (f)(5) was amended to allow injured workers to submit a written invoice for computer equipment to be paid directly to the retailer. The claims administrator may also offer to provide the computer equipment directly to the employee. Subdivision (j) is amended to indicate that computer equipment must be provided to the employee within 45 days of receipt of the Request for Purchase of Computer Equipment.
  • Section 10133.32, the form has been stricken out in its entirety and a new version of the form takes its place. The content on the first two pages of the form were moved to allow for all fillable parts of the form to be on the second page so that the injured worker does not have to photocopy the first page with submission of the second page to the claims administrator. A separate Request for Purchase of Computer Equipment was added to the form. Injured workers can submit either a written bid from a computer retailer or receipts of purchase. Following the purchase, receipts for the computer equipment must be submitted to the claims administrator.
  • Section 10133.34, subdivision (b) was deleted so as not to be duplicative with Section 10133.31.
  • Section 10133.35, “Retraining and Return to Work Unit” was deleted from the heading as the unit no longer exists within DWC. DWC’s address was added for filing a Request for Dispute Resolution. The format of the proof of service was amended.
  • Section 10133.36, the form was amended to conform to the functional capacity assessment of the DWC Form PR-4 which primary treating physicians complete when declaring an injured worker permanent and stationary. A box was added to allow the physician to describe in what ways the impaired activities are limited.
  • Section 10133.53, “Retraining and Return to Work Unit” was deleted from the heading as that Unit no longer exists within DWC. The word “Inclusive” was added to the title to clarify the exact time period. DWC’s address was added for filing a Request for Dispute Resolution.
  • Section 10133.55, “Retraining and Return to Work Unit” was deleted from the heading as that Unit no longer exists within DWC. A reason for filing for dispute resolution on page 3 was clarified to encompass objections to job offers and a reason was deleted as the reimbursement program is no longer in existence. Instructions and a proof of service were added to the form.
  • Section 10133.57, “Retraining and Return to Work Unit” was deleted from the heading as that Unit no longer exists within DWC. An instruction was corrected on page 2 because not all Training Providers have approval numbers and expiration dates. DWC’s address was added for filing a Request for Dispute Resolution. Information about Information and Assistance was added to the form.
  • Section 10133.58, this section was amended to reflect changes to approval of eligible providers.
  • Section 10133.60, subdivision (a)(1) was amended to correctly state the requirements for offers of work set forth in section 10133.34.

SCIF Declares $100 Million Dividend

State Compensation Insurance Fund’s Board of Directors has approved a $100 million dividend to qualifying policyholders for the 2013 policy year. The dividend represents approximately 8.6 percent of policyholders’ 2012 estimated annual premium and demonstrates the effectiveness of the business improvements and operational efficiencies implemented by the organization.

“State Fund has made significant progress this year by improving efficiency and establishing a new rate structure to provide fairly-priced workers’ compensation insurance,” commented Larry Mulryan, Board Chair. “We are committed to being a competitive workers’ compensation insurance provider that brings value to California employers. Part of that value is the ability to return funds to our policyholders in the form of a dividend.”

This action brings total dividends declared since 2011 to $250 million. Since its inception State Fund has paid more than $5 billion in dividends to policyholders – a record unparalleled among all California workers’ compensation insurance carriers.

DWC Relents on Lien Activation Fee Collection

Angelotti Chiropractic, Mooney and Shamsbod Chiropractic, Christina-Arana and Associates, Joyce Altman Interpreters, Scandoc Imaging and Buena Vista Medical Services filed a lawsuit last July in the United States District Court contesting the constitutionality of certain provisions of SB 863, and seeking to avoid payment of millions of dollars in lien activation fees before the end of 2013. Last week a federal judge issued a preliminary injunction that restrains the DWC from imposing the activation fee not only on these named plaintiffs, but on all other lien claimants state wide.  The injunction will continue until further order of court or an order by a higher court as a result of a successful appeal. .

As a result of this inunction, the DWC has made this public announcement.

“In compliance with a ruling issued Tuesday by the U.S. District Court for the Central District of California in the matter of Angelotti Chiropractic, Inc., et al. v. Baker, et al., the Division of Workers’ Compensation will no longer collect lien activation fees as of November 19.

Lien claimants whose liens were subject to the activation fee requirement will not be required to pay the $100 fee in order to appear at a hearing or file a Declaration of Readiness to Proceed (DOR) regarding a lien.

DWC is reconfiguring its computer systems to facilitate the filing of DORs on lien claims. The fee for filing liens remains in effect. Only the lien activation fee is affected by U.S. Judge George H. Wu’s ruling.

Further updates on changes will be posted on the DWC SB 863 pages.”

State Fund CEO and CFO Abruptly Resign on Friday

At its meeting on Friday the State Fund Board of Directors announced that Tom Rowe, CEO and President and Dan Sevilla, CFO will resign from State Fund. The reason was not stated in the website announcement.

It was not immediately know why the men stepped down, and the announcement came as a surprise to some. “Certainly many people were surprised in the room when the board chair made that announcement,” said Jennifer Vargen, senior vice president of marketing and communications for State Fund, who was quoted in the Insurance Journal and was quick to point out the board was ‘very complimentary’ of both men as they made the announcement. Vargen couldn’t say why the decision was made, and she said the board hasn’t made that known. “No reason was given,” she said. Pressed about motives for the command change, Vargen replied: “These are voluntary resignations.” A call by the Insurance Journal seeking comment has been put into Lawrence Mulryan, the board chair. Rowe and Sevilla couldn’t immediately be reached for comment. Board members contacted for comment by the Insurance Journal were not saying much either. “I can’t really talk about it,” said Bill Zacrhy, vice president of risk management for the Safeway supermarket chain. Zacrhy indicated that personnel matters are not something he could speak about.

Several years ago, State Fund’s Board set the organization on a path to transform its operations by improving its transparency, accountability, efficiency, and productivity to ensure a stable and open workers’ compensation insurance market. “The executive team has done an outstanding job laying the foundation for State Fund’s future,” said Board Chair Larry Mulryan. “The Board thanks Tom for his vision and leadership and Dan for his outstanding fiscal stewardship. We will continue the transformational work that is well underway.”

Rowe and Sevilla will step away from overseeing day-to-day operations immediately but will remain available for advice and consultation until the end of the year. The Board will immediately begin a search for a new CEO and has named Carol Newman, State Fund’s General Counsel, as interim President effective immediately. Newman has been with State Fund since 2008 and has played an integral role in leading State Fund’s transformation. Carol has had a long career in insurance that spans over 30 years, affording her the opportunity to oversee a wide breadth of insurance operations including claims, broker/agency management, human resources and government and industry affairs.

The Board also announced that it has appointed Pete Guastamachio as interim CFO. Guastamachio joined State Fund in 2009 and is State Fund’s Chief Investment Officer. He has more than 30 years experience in the financial world having served as vice president-assistant portfolio manager for Bank of the West. He also served in a variety of positions with Argonaut Insurance.

“The executive team will remain focused on building a competitive company with a resourceful, creative workforce that provides fair prices and excellent service, and creates stability in the market,” said Newman. “Our financial position is outstanding. It’s going to take time to fully realize our vision, but it is clear we have made good progress. Most importantly, we, along with the employees of State Fund, are committed to getting it done.”

California Supreme Court Affirms Valdez Decision and Opens Pandora’s Box

The California Supreme Court agreed with the Court of Appeal, and upheld the admissibility of the reports of non-MPN physicians in support of an applicant’s claim in the controversial case of Elayne Valdez v WCAB, and Warehouse Demo Services.

After Elayne Valdez filed a claim for industrial injury, the employer admitted her claim to most of the alleged body parts injured and she was sent for medical treatment to the employer’s MPN, where she was seen by Dr. Nagamoto, who treated her from approximately October 9, 2009 to October 31, 2009. Applicant then began treating with Dr. Nario, a non-MPN physician, upon referral from her attorney.

The WCAB in a split en banc decision ruled that non MPN physician reports are not admissible when the employer has properly complied with MPN regulations. The WCAB reasoned that Labor Code 4616.6 provides: “No additional examinations shall be ordered by the appeals board and no other reports shall be admissible to resolve any controversy arising out of this article” and thus precludes the admissibility of non-MPN medical reports with respect to disputed treatment and diagnosis issues, i.e., “any controversy arising out of this article.”

The Court of Appeal reversed and remanded in an unpublished opinion. In ruling that non MPN reports are indeed admissible, the Court of Appeal reasoned that “It does not makes sense, however, to construe section 4616.6 as a general rule of exclusion, barring any use of medical reports other than those generated by MPN physicians. Section 4616.6 states nothing of the sort. If the Legislature intended to exclude all non-MPN medical reports, the Legislature could have said so; it did not.”

Before the decision by the California Supreme Court, recently enacted S.B. 863 partially addressed this outcome. Effective 1/1/2013 LC 4605 provides that “Any report prepared by consulting or attending physicians pursuant to this section shall not be the sole basis of an award of compensation. A qualified medical evaluator or authorized treating physician shall address any report procured pursuant to this section and shall indicate whether he or she agrees or disagrees with the findings or opinions stated in the report, and shall identify the bases for this opinion.”

The California Supreme Court decision is now the final word on this controversy. It concluded that the “Court of Appeal sensibly limited the scope of section 4616.6 to matters arising during the independent medical review process set out in article 2.3. Reading section 4616.6 broadly to apply to all compensation proceedings is a manifest distortion. As the Court of Appeal noted, the comprehensive medical evaluation process set out in section 4060 et seq. for the purpose of resolving disputes over compensability does not limit the admissibility of medical reports. Section 4062.3, subdivision (a) permits any party to provide the evaluator with ‘[m]edical and nonmedical records relevant to determination of the medical issue.’ Under section 4064, subdivision (d), ‘no party is prohibited from obtaining any medical evaluation or consultation at the party’s own expense,’ and ‘[a]ll comprehensive medical evaluations obtained by any party shall be admissible in any proceeding before the appeals board,’ except as provided in specified statutes. The Board is, in general, broadly authorized to consider ‘[r]eports of attending or examining physicians.’ (§ 5703, subd. (a).) These provisions do not suggest an overarching legislative intent to limit the Board’s consideration of medical evidence.”

It remains unclear how much of a Pandora’s box this case has opened. In 2004, as a result of SB 899, medical disputes moved to a resolution system requiring the selection of an evaluator off of a panel of three names provided by the DWC. Prior to the panel QME system, employers complained about the costs of duplicative, redundant and unnecessary medical legal evaluations which could easily reach over $10,000 per claim. The panel QME system reduced the number of medical legal evaluations and some of the gamesmanship that took place in the selection of evaluators.

A literal parsing of the Supreme Court’s language in Valdez may have opened the door for the return of the old – select who you want – QME evaluation system, or indeed even the use of non QMEs to evaluate a case whenever an attorney deems it expedient to do so. It is not clear if one side, or if both sides may do so, and it is unclear if done by an applicant, would the employer be required to pay for the evaluation as a medical legal charge even though the employer need not pay for out of network treatment.

It is unlikely that the applicant attorneys will not make as much use of the Valdez decision as possible.

Federal Judge to Sign Statewide Injunction Against Lien Activation Fee

Based upon stipulated language, federal judge Wu will issue a preliminary injunction ending the application of the new lien activation fee imposed by SB 863. The order applies to all lien holders, not just the few who were plaintiffs in the federal lawsuit filed last summer. The order reads

“1. Defendants are hereby enjoined and restrained from enforcing the lien activation fee provisions of SB 863, which are codified at Cal. Lab Code § 4903.06, against any workers’ compensation lien holder, including Plaintiffs. Specifically, Defendants shall not:
a. Subject any existing workers’ compensation lien holder to a lien activation fee pursuant to Cal. Lab. Code. § 4903.06(a).
b. Require or collect payment of any activation fee on any existing lien, electronically or otherwise, pursuant to Cal. Lab. Code §§ 4903.06(a)(1) and (a)(3).
c. Require any lien claimant to provide proof of payment of a lien activation fee with any declaration of readiness to proceed, pursuant to Cal. Lab. Code § 4903.06(a)(2).
d. Require any lien claimant to provide proof of payment of a lien activation fee at the time of any lien conference, pursuant to Cal. Lab. Code § 4903.06(a)(4).
e. Dismiss any lien for failure to pay an activation fee by the time of any lien conference, pursuant to Cal. Lab. Code § 4903.06(a)(4).
f. Dismiss any lien for which an activation fee has not been paid prior to January 1, 2014, pursuant to Cal. Lab. Code § 4903.06(a)(5).
g. Enforce any issued emergency regulations or any final regulation implementing any provision of Cal. Lab. Code § 4903.06.
h. Take any other action, whether or not listed above, intended to effectuate or enforce any provision of Cal. Lab. Code § 4903.06.
2. This injunction shall take effect seven days from the date of this order.
3. This injunction shall apply to all Defendants as well as any of Defendants’ officers, agents, servants, employees and attorneys. This injunction shall further apply to any other persons who are in active concert or participation with Defendants or Defendants’ officers, agents, servants, employees and attorneys. Fed. R. Civ. P. 65(d)(2).
4. The Court’s reasons for issuing this injunction are contained in a forthcoming opinion, as well in the transcripts of proceedings held on November 4 and 7, 2013. Fed. R. Civ. P. 65 (d)(1)(A).
5. This injunction shall be in effect until further order of the Court.”

The DIR may appeal this decision to the 9th Circuit Court of Appeals, and if unsuccessful to the U.S. Supreme Court. For some time, the 9th U.S. Circuit Court of Appeals has suffered a reputation as being the circuit most at odds with the U.S. Supreme Court. The San Francisco-based court has been perceived as the most liberal in the nation and has frequently been the most reversed among the circuit courts, with one term in the mid-1990s seeing 27 of its 28 decisions reversed or vacated by the high court.

The injunction in this case was based upon federal civil rights law contained in 42 U.S.C. § 1983. The Civil Rights Attorney’s Fees Awards Act of 1976 provides that one who prevails in a section 1983 action is entitled to recover attorneys’ fees. It is unclear if these lien claimants will claim, or recover attorney fees in addition to the injunction they have obtained. Typically the request for an attorney fee is made after the litigation has become final.

The workers’ compensation industry had hoped that hundreds of thousands of dormant liens – with no activation fees paid – would be deemed invalid as a matter of law on January 1, 2014. This would have cleared the system of a longstanding backlog. Unless the 9th Circuit Court of Appeals reverses the injunction, this hoped for outcome of SB. 863 legislation will not be the case this January.