Author: WorkCompAcademy

The WCIRB has released an update to its Analysis of Changes in Indemnity Claim Frequency report which was originally published in 2012 and last updated in December 2013. In prior reports, WCIRB researchers explored potential causes for the increases in claim frequency in California that have persisted since 2010 and that differ from the claim frequency experience of other states. Prior frequency reports have identified a number of factors influencing claim frequency including increases in cumulative injury claims, increases in smaller non-cumulative injury claims that may have been reported as medical-only in the past, increases in the proportion of indemnity claims relative to total claims, and increases in late-reported indemnity claims and the proportion of medical-only claims that later transition to indemnity.

In this latest update, WCIRB researchers studied the influencing factors driving recent claim frequency based on the most up-to-date data available. The WCIRB’s principal findings include:

1) Unlike in most other states over the last several years, California indemnity claim frequency has continued to increase as WCIRB data currently indicates increases of 3.2%, 3.9% and 0.9% in 2012, 2013, and 2014, respectively.
2) The number of late reported indemnity claims continues to increase, whereas the percentage of medical only claims reported after 18 months has generally remained stable since 2007.
3) The level of cumulative injury claims has continued to increase. Approximately 13% of indemnity claims are estimated to involve a cumulative injury in 2013 compared to approximately 8% in the 2005 to 2007 period.
4) The growth in cumulative injury claims beginning in 2009 has been concentrated in claims involving more serious injuries and multiple injured body parts. Both the proportion of cumulative injury claims involving indemnity benefits and the proportion involving injuries to multiple body parts have increased significantly since 2010.
5) Based on WCIRB surveys of cumulative injury claims, both the proportion of cumulative injury claims involving multiple insurers and the proportion involving attorney representation has increased in recent years. In addition, approximately two-thirds of surveyed claims were initially denied in part or in whole by the insurer and approximately 40% of claims, despite long-standing statutory limitation on the compensability of post-termination claims, were reported post-termination.
6) Shifts to a less hazardous composition of industries in California (“industrial mix”) have historically driven claim frequency downward. The recent economic recovery in higher hazard industries such as construction and manufacturing has had the opposite impact. In 2013, rather than dampening claim frequency, shifting industrial mix is increasing claim frequency by approximately 1%.
7) The 2010 increase in frequency was greatest in industries that were most impacted by the recession (e.g. construction and real estate). Since 2010, relativities for higher-frequency industries such as agriculture, construction, and entertainment have increased while those for the lower-frequency industries such as real estate, professional services, and finance have declined.
8) The 2010 indemnity claim frequency increase was generally experienced across all California regions. Since that time, the increases have been concentrated in the Los Angeles area. Indemnity claim frequency increased an estimated 9% in the Los Angeles Basin region from 2010 to 2013 while, similar to the pattern shown in many other states, other California regions showed modest declines. By comparison, indemnity claim frequency in the Bay Area declined by 7% over the same period. The Los Angeles area also has experienced significantly higher numbers of cumulative injury claims and claims involving multiple body parts than other regions of California.
9) As the economy recovers, newer workers enter the system and are often more likely to be injured on the job than more experienced workers. The proportion of injured workers with less than 2 years of experience at their current job has grown by 8% from 2010 to 2014, suggesting the economic recovery is a significant driver of recent claim frequency increases.

The full Analysis of Changes in Indemnity Claim Frequency – January 2015 Update Report is available in the Research and Analysis section of the WCIRB website.

The world’s biggest drugmakers face a new reality when it comes to U.S. pricing for their products as insurers use aggressive tactics to extract steep price discounts, even for the newest medications says an article in Reuters Health. Big Pharma executives acknowledged the depth of change this week during public presentations and interviews with Reuters at the J.P. Morgan Healthcare conference in San Francisco. Drugmakers have long relied on their ability to charge whatever they deemed appropriate in the U.S., the world’s most expensive healthcare system.

Industry advocates have defended those U.S. prices in the past as a way to recoup the billions of dollars spent on experimental drugs that fail and to offset discounts offered overseas. “There has definitely been increased price competition … if a product is viewed as a commodity,” Derica Rice, chief financial officer at Eli Lilly and Co, said in an interview. “Our goal is clinical differentiation.”

Pascal Soriot, chief executive of AstraZeneca Plc warned investors that the pressure exerted by health insurers has expanded from medicines used to treat common maladies to the specialized fields, like cancer, where drugmakers have been able to charge their highest prices. “Payers will try to leverage their strengths to try and get pricing concessions because those agents are very expensive,” Soriot said.

Many say the tide shifted with a campaign by insurers and pharmacy benefits companies against Gilead Sciences Inc’s $84,000 hepatitis C treatment Sovaldi. The drug represented the first effective cure for hepatitis C and quickly raked in billions of dollars in sales within its first few months on the market in 2014. Sovaldi’s cost is based on a 12-week treatment regime and amounts to $1,000 a pill. By contrast, the treatment costs about $57,000 in the U.K As soon as U.S. regulators approved Sovaldi’s competitor, a treatment from AbbVie Inc last month, the country’s largest pharmacy benefits manager Express Scripts Co dropped reimbursement for the Gilead drug. Express Scripts said it had received a substantial discount from AbbVie, a departure from industry practice of pricing new competing drugs close to the incumbent for as long as possible. It didn’t say how much the discount was. Express Scripts said this week it sought similar opportunities for discounts in new cancer medications, and was looking closely at a new class of cholesterol-fighting drugs aimed at millions of patients who can’t tolerate or get enough benefit from widely-used statins. Amgen Inc and Regeneron Pharmaceuticals Inc are two of the companies racing to bring the new cholesterol treatments, which target a protein called PCSK9, to market. “It’s not a worry. It’s a reality that we will deal with,” Regeneron CEO Len Schleifer said of Express Scripts’ goals. “I think there will be fair pricing and healthy competition in the marketplace.”

When pressed on how they could counter the growing pressure from insurers, large drugmakers say they are relying on strategies long employed in the marketplace, focusing research on diseases that don’t have adequate treatments and finding ways to differentiate their products from competitors in terms of effectiveness and convenience. But some industry experts believe they will have to become far more selective even when entering a new treatment area. The hepatitis C example shows how insurers have been able to play just two competitors off one another to wrest a discount.

Gilead Chief Operating Officer John Milligan said that in recent weeks, more health plans are asking the company to drop its hepatitis C drug price more in line with AbbVie in order to keep both drugs on their reimbursement lists. “Payers are starting to move beyond hand-wringing to real action,” said Glen Giovannetti, head of global life sciences at Ernst & Young. “We are starting to see (pharmaceutical) companies deciding which therapeutic options they want to compete in.”

Nils Behnke, a partner with Bain and Co’s global healthcare and strategy practices, noted that even for the most new promising classes of medications, there are often three or four companies pursuing similar development programs. “Companies that were heavily into specialty indications thought they were immune, but it is now clear that they are not,” he said

Merck and Co CEO Kenneth Frazier acknowledged that U.S. prices for diabetes drugs remain under pressure. “We need to identify a value proposition … show that over time we can reduce costs,” he said in an interview.

Smaller biotech Isis Pharmaceuticals Inc said it is already taking into account potential competition when deciding which research programs to pursue. CEO Stanley Crooke said the company abandoned its PCSK9 program when it became clear the drug would reach the market only after several others. “We are working on diseases for which there are no real treatments — Parkinson’s, Alzheimer’s, ALS,” said George Scangos, CEO at Biogen-Idec. “In the future, we will see more correlation between value that drugs deliver and the way they are reimbursed.”

Floyd, Skeren and Kelly is pleased to announce our 2015 Northern California Employment Law Conference, set for January 30, 2015 at the Hilton Garden Inn, 1800 Powell Street Emeryville. We will feature as our Keynote Speaker Dale Brodsky, Esq., Councilmember of the California Fair Employment and Housing Council.

The Conference will cover important workplace topics related to the Interactive Process, Disability Leave, Pregnancy Leave, the Affordable Care Act, Workers’ Compensation and the crossover issues related to the Fair Employment Act, and much more. Some of the topics covered are:

1) Understanding the Numerous, and Often Overlapping, California Leave Laws
2) An Overview of Proposed Regulatory Changes to the California Family Rights Act
3) Guidance on Preventing a Straightforward Workers’ Compensation Case from Turning Into a FEHA Nightmare
4) Mastering the Complexities of Pregnancy Leave: How Much Time is Required by Law and Why it Could be More Than 7 Months
5) An Affordable Care Act Update for Employers: What Changed as of January 1, 2015, Employer Responsibilities
6) Overview of New California Employment Laws in Effect as of January 2015
7) Reduce Work Comp Costs: Avoid Seven Common Mistakes

This conference will include helpful information for employers, supervisors, managers, claims adjusters, risk managers, attorneys and any other professional associated with human resources and employment law. For more information and to register visit us at: FSK HR TRAINING.

This program, has been approved for 7 (HR (General)) recertification credit hours toward PHR, SPHR and GPHR recertification through the HR Certification Institute. We will release the program number the day of the training in your materials, please be sure to note the program ID number on your recertification application form. For more information about certification or recertification, please visit the HR Certification Institute website at www.hrci.org

A federal bankruptcy judge ruled this week that a worker who used his workers compensation settlement and Medicare set-aside account funds to buy real estate and a new truck will not have to include those items as assets under his Chapter 7 bankruptcy proceedings.

According to the story in Business Insurance, Jesus Arellano, 44, broke his hip while working for an unidentified employer in 2010. Court filings in his case filed in the U.S. Bankruptcy Court in Wilkes-Barre, Pennsylvania allege that he settled a workers comp claim related to the injury for $225,000 in workers comp benefits, as well as $72,742 placed into a Medicare set-aside account for future medical treatment.

The federal Medicare Secondary Payer Act requires self-insured employers and insurers to act as primary payers for workers comp and liability claims involving Medicare beneficiaries. U.S. Centers for Medicare and Medicaid Services advises workers comp payers to set up Medicare set-aside accounts to pay for future medical costs for a beneficiary’s injury, but beneficiaries aren’t required to use the funds for their health care.

After receiving the settlement and Medicare set-aside funds in January 2012, Mr. Arellano allegedly used the money to buy a 2005 Ford F-150 truck and two properties in York, Pennsylvania, court records show. Mr. Arellano later sold one of the properties to his brother under an installment payment agreement, under which his brother is slated to pay $1,200 a month until June 2020.

Mr. Arellano filed for Chapter 7 bankruptcy protection in March 2014, but asked for the truck, the two properties and remaining money from his workers comp settlement to be exempted from bankruptcy proceedings. He did not disclose in court filings the installment agreement between him and his brother for one of the properties, nor the fact that he is receiving income from that agreement. The trustee in Mr. Arellano’s bankruptcy case objected to Mr. Arellano’s exemption request, contending in court filings that bankruptcy laws did not allow Mr. Arellano to exempt property that was the proceeds of a workers comp claim.

However, Mr. Arellano countered in part that the exemption should be allowed under bankruptcy law because the property and related workers comp payments represented “a payment in compensation of loss of future earnings” that is used to reasonably support Mr. Arellano and his dependents, filings show.

On Monday, federal bankruptcy court Judge Mary D. France agreed with Mr. Arellano and found that his properties and workers comp settlement funds should be exempted from bankruptcy proceedings. In her ruling, Judge France said the workers comp settlement funds are reasonably necessary to support Mr. Arellano’s family.

That finding was based in part on the fact that Mr. Arellano is now unemployed, that his wife ‘has a low-wage job at a fast-food restaurant” and that two of their three children are under the age of 18. Additionally, the judge said that while interest that Mr. Arellano’s brother is paying on one of the properties could be considered income, it is “sufficiently modest as to have a negligible impact” on Mr. Arellano’s bankruptcy case.

Mr. Arellano “purchased a modest home for his family and a 2005 truck,” the ruling reads. “The second parcel of real property purchased with the proceeds of his workers’ compensation settlement was acquired as an investment. With the payments made by his brother on the installment agreement, (Mr. Arellano) has monthly disposable income of $705……”

Judge France also found that Mr. Arellano’s Medicare set-aside fund should not be included in bankruptcy proceedings because it was slated for Mr. Arellano’s medical expenses – even though he didn’t use it for that purpose – and is “not property of the bankruptcy estate.

“Because I find that the (Medicare set-aside) payment was to be held in trust for the benefit of providers of medical services related to (Mr. Arellano’s) workers’ compensation claim, I find that the (set aside) is not property of Debtor’s bankruptcy estate and, as such, may not be administered by the Trustee for the benefit of creditors,” the decision reads.

Arrow Recycling Solutions, Inc., and Arrow Environmental Solutions, Inc is a metal recycler. Just before its workers’ compensation insurance coverage was due to expire Arrow provided payroll information to Patriot Risk and Insurance Services, Inc, an insurance broker,.for the purpose of obtaining a proposal for a replacement policy. Patriot replied with a Producer’s Quote and the estimated “annual pay-in amount” was $232,094. Arrow executed a Request to Bind this policy, and later received a policy and related profit sharing agreements with the insuring entities.

Arrow alleges in a civil complaint it later filed against the carriers and broker that despite a “very good claims history,” the actual pay-in amount billed for the first year was approximately $490,000, which exceeded the estimated annual pay-in amount of $232,094. Arrow alleges that the reason for this discrepancy was that the Billing Terms “contained mathematical falsehoods” involving the misclassification of payroll amounts from higher premium classifications to lower premium classifications. Arrow alleges that it would not have purchased the workers’ compensation insurance if it had known of this inaccuracy.

However the the “Request to Bind” document signed by Arrow included an arbitration provision . The words “Initial Here” appeared under a box next to the arbitration provision. That box was empty and contained no initials in the copy of the Request to Bind attached to the complaint. Later Arrow received as part of its policy package a Reinsurance Participation Agreement (RPA). Paragraph 13 of the RPA included an arbitration provision.

The defendants filed a motion to compel arbitration and stay the trial court proceedings. They argued that all of the counts alleged against them were within the scope of the arbitration agreement in the RPA. Alternatively, they argued that any claims not covered by the arbitration agreement in the RPA were within the scope of the arbitration agreement in the Request to Bind. They also argued that Patriot had agreed to participate in any court ordered arbitration and that the fact that Patriot was not a party to the arbitration agreements did not preclude arbitration. The trial court denied the motion to compel arbitration and the defendants appealed. The Court of Appeal affirmed the denial of the motion in the unpublished case Arrow Recycling Solutions v. Applied Underwriters.

A party moving to compel arbitration bears the burden of proving by a preponderance of evidence the existence of an arbitration agreement.. An officer of Arrow stated in his declaration that the box next to the arbitration provision in the Request to Bind that he signed was left blank and did not contain his initials. His assistant Patti declared that she sent the signed Request to Bind to Patriot and that neither the initials nor the word “none” was present on the document that she provided. Defendants claim the document they received had the box checked, but the officer claimed that the handwriting was not his and the defendant’s copy was initialed by someone else.

The defendants as the parties moving to compel arbitration had the burden of producing evidence sufficient to establish the existence of an arbitration agreement in the Request to Bind, such as evidence that Patriot initialed the Request to Bind as Arrow’s agent. The defendants failed to present such evidence. The Court of Appeal concluded that the declarations of Arrow’s officers and his assistant constitute substantial evidence supporting the implied finding that Arrow never agreed to the arbitration provision in the Request to Bind and that, therefore, there was no such arbitration agreement.