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WCIRB Reports Declining Premiums, Increasing Loss Ratio

The WCIRB published its Quarterly Experience Report as of March 31, 2020.

Written premium for 2019 is 7% below that for 2018 and 12% below the peak in 2016. And premium continues decline in 2020. Written premium for the first quarter of 2020 is 5% below that for the first quarter of 2019.

With the COVID-19 pandemic-related economic slowdown, the WCIRB expects employer payroll and insurer premium to decline sharply for the remainder of 2020 compared to 2019.

And rates have declined as well. The average charged rate for the first quarter of 2020 is 7% below that for 2019 and 39% below the peak in 2014. The January 1, 2020 approved advisory pure premium rates are on average 47% below those for January 1, 2015.

And the loss ratio is increasing. The projected loss ratio for 2019 is 5 points above that for 2018, primarily driven by lower premium rates. These ultimate projections as of March 31, 2020 are generally consistent with those as of recent prior quarters as the trends in downward loss development have moderated through March31, 2020.

Loss development for the remainder of 2020 will likely by impacted by the pandemic and stay-at-home orders.

The projected combined ratio for 2019 is 8 points higher than 2018 and 16 points higher than the low point in 2016 as premium levels have dropped while claim frequency and severity increased moderately.

Despite the recent increase, combined ratios for 2013 through 2019 are below 100% and are the lowest since the 2003 through 2007 period.

The COVID-19 crisis is likely to significantly reduce premium levels in 2020 and may increase overall costs leading to further increases in the combined ratio.

There is however some good news. Indemnity claims have settled quicker over the last several years, largely driven by SB 863 and SB1160 reforms. The ratio for 2019 is consistent with 2018, suggesting claim settlement rates may be plateauing.

Claim activity is expected to slow down in the second quarter of 2020 as a result of the COVID-19 crisis. Indemnity claim frequency increased by 11% from 2009 to 2014, but decreased by 9% from 2014 to 2018. Indemnity claim frequency increased modestly in 2019. Data through the first quarter of 2020 shows relatively flat frequency.

The impact of the COVID-19 crisis on overall 2020 claim frequency is not yet clear. Although many claims arising from exposure to the virus continue to be filed, the slowdown in economic activity is expected to reduce claim filings.

Walgreens and VillageMD to Open Primary Care Centers in 700 Stores

One would think, in these days of COVID-19, that America’s doctors and patients are as reliant on our hospitals as they’ve ever been, and that they’re going to stay that way. Guess again.

Today, even as the health care system and the economy face strains from the coronavirus and its complications, scores of doctors and patients are avoiding large bureaucratic hospitals and instead flocking toward leaner and meaner models of health care.

Professional providers of all types — from surgeons to drugstore owners — are focusing on innovation. Even better, they’re now treating patients as consumers who value quality care at reasonable prices they can know in advance.

Walgreens and VillageMD, for instance, have partnered to open primary-care centers in 500 to 700 drugstores over a five-year period. These centers will provide annual check-ups, walk-in appointments, and many other services. Physician-led teams of four people will treat up to 120 patients per day at these mostly 3,300-square-foot locations.

This model is the latest iteration of a trend called decentralized care, in which patients obtain treatment through telehealth services and outpatient surgery centers and clinics — rather than by visiting hospitals.

For two decades, the late Harvard Business professor Clayton Christensen predicted that decentralization in health care would follow other industries on this path, such as travel, retail, and financial services. It was only a matter of time, said Christensen, before health care innovators improved access to services and reduced costs.

Two key factors are driving this emerging trend, as a recent Healthline.com article pointed out: 1) urgent-care clinics and expanded pharmacy services are improving the efficiency of health care delivery; and 2) more people, especially older adults, are receiving care at home.

Americans who support this free-market health trend share some of the top reasons for its popularity, including convenience and price transparency.

The media has been reporting on the trend, too. Yahoo Finance, for example, ran a piece this summer about the expected growth of urgent-care centers over the next five years.

Legislature Passes Retroactive COVID-19 Rebuttable Presumption

California lawmakers on Monday wrapped up a legislative session largely defined by the pandemic. The bills will next head to Gov. Newsom, who will have until Sept. 30 to sign or veto the measures.

Late Monday night, the Legislature passed SB 1159 which would make it easier for police, firefighters and other essential employees who contract COVID-19 on the job to be covered under the state’s workers’ compensation program by establishing a disputable presumption of compensability.

It was declared an “urgency” measure, which means if signed by the Governor, the law will take effect immediately, instead of on January 1. Additionally, the statute “applies to all pending matters except as otherwise specified, including, but not limited to, pending claims relying on Executive Order N-62-20.”

Also going to the Governor is Assembly Bill 3216, a proposal pushed by unions that would create significant labor protections for hotel, janitorial, airport, event center and building maintenance workers. The bill requires employers in those industries to first rehire workers they laid off during a state of emergency, including in cases in which a new owner takes over a business.

The Legislature also passed a budget trailer bill, first made public Friday, that would require food-sector companies, healthcare providers and emergency responders with more than 500 employees to provide two weeks of supplemental paid sick leave for full-time workers who are unable to work after being exposed to the coronavirus or contracting COVID-19. AB 1867, which expires Dec. 31, is similar to an executive order Newsom signed earlier this year.

The Legislature also approved AB 276, which would raise the amount Californians can borrow penalty-free from their employer-sponsored retirement accounts to $100,000 from $50,000 if they have been financially impacted by the pandemic.

Another proposal approved by the Legislature, AB 2537, would require general acute care hospitals to stockpile three months of protective equipment supplies by April 1 or face a fine of up to $25,000.

AB 2043 would require the state’s Division of Occupational Safety and Health to compile and publicly report investigations into agricultural workplace conditions related to COVID-19, as well as illnesses from the virus.

Lawmakers approved SB 275 which calls for the state to build a supply of medical equipment. Hospitals and other healthcare employers would be required to assemble a 45-day supply by June 1, 2023.  .

Summary Judgment in Power Press Case Reversed

Marivel Santos was employed by Crenshaw Manufacturing, Inc. in January 2017 as a machine operator. She was instructed by her supervisor, Jose Flores, to operate a material-forming machine utilizing a die without any protective guards or cages.

Ordinarily, Santos would have had to use both hands to operate the machine. This time, however, Flores instructed her to operate it “from the side using a bypass button.” Using the machine in this manner allowed Santos to operate the machine with her right hand, leaving her left hand free to reach into the machine to “press down the part” being cut.

On January 12, 2017, Santos was operating the machine in this fashion when her left hand was crushed underneath the die, mutilating and severely injuring it. She filed a workers’ compensation claim against Crenshaw.

She also filed a civil action for a sole cause of action against Crenshaw for violation of Labor Code 4558, which allows an action against the employer where the injury is caused by the removal of, or knowing failure to install, a point of operation guard on a power press, known as the “power press” exception to the exclusive remedy of worker’s compensation.

The machine in this case was an A3 gap frame press, manufactured in or around 1937 by Niagara Machine & Tool Works. Crenshaw purchased two Niagara A3 gap frame presses, along with other equipment, in late 2013 as part of an asset purchase from another business.

Crenshaw filed a motion for summary judgment, asserting Santos failed to meet the requirements of the power press exception, and argued that Niagara had never designed, provided, installed, or specified any particular guard or barrier to be used with the machine in any given context.

The trial court granted summary judgment in favor of the employer. However the Court of Appeal reversed in the unpublished case of Santos v Crenshaw Manufacturing.

A provision in section 4558 provides that “No liability shall arise under [section 4558] absent proof that the manufacturer designed, installed, required, or otherwise provided by specification for the attachment of the guards and conveyed knowledge of the same to the employer. Proof of conveyance of this information to the employer by the manufacturer may come from any source.”

Crenshaw argues that section 4558 requires a manufacturer to convey specific  information – in other words, to identify a particular point of operation guard.

However, the Court of Appeal noted that the case law has only established that a high degree of specificity in the manufacturer’s safety directives will suffice under section 4558. But not what is the lowest degree of specificity that would suffice?

When a defendant moves for summary judgment, ‘its declarations and evidence must either establish a complete defense to plaintiff’s action or demonstrate the absence of an essential element of plaintiff’s case. Here this standard was not met, and the summary judgment was reversed.

August 24, 2020 – News Podcast


Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Uber and Lyft Avoid Shutdown With Last Minute Stay. Teva Pharmaceuticals Kickback Case Settled for $3.5M. National Law Review Highlights COVID Litigation Risk. OC Comp Attorney Arrested for Investment Fraud Scheme. Trump Signs Safeguarding America’s First Responders Act of 2020. Mostly Positive News for California COVID-19 Developments. 31,612 California COVID Comp Claims – So Far! Proposed Law Targets Garment Industry Wage Theft. Duke University Studies COVID Mask Effectiveness. 3.8 Billion Views of Misleading Health Info on Facebook.

California State IT “Litany” of Failures Include EDD

A report published by Politico claims that the pandemic has revealed new failings in the rickety technology that underpins public services in California, most recently leading Gov. Gavin Newsom to trumpet an erroneous decline in coronavirus infections.

The Silicon Valley state’s woes reflect a larger problem in public-sector technology that has plagued governments for years – but are coming to the fore during the nation’s coronavirus crisis.

Florida’s unemployment claims website, built by Deloitte, has faltered so badly this year that Gov. Ron DeSantis called it a “jalopy.” Other states, such as Wisconsin and New Jersey, are likewise struggling to keep pace with claims in part because they say their systems rely on decades-old programming language.

Almost every month we are briefed on yet another incredible IT failure in state government,” said California Assemblyman David Chiu, a San Francisco Democrat. “The challenge that state government has with technology has been going on for years, if not decades.”

On top of California’s backlog of nearly 1 million unemployment claims, the state has experienced longstanding issues at the Department of Motor Vehicles – whose offices only began accepting credit card payments last year.

California’s IT problems stem in part from chronic underinvestment in new technology and mismanagement of the money it has put into upgrades. Paradoxically, California’s state services also suffer from the wealth of technological know-how in their own backyard.

The pandemic has forced various state systems into overdrive. None has been tested like the Employment Development Department, which is buckling under a tenfold increase in people filing for unemployment and having to send checks to 4.4 million residents – more than 1 in 5 workers statewide.

71 state lawmakers said in a letter to Newsom last week. The letter pointed out a litany of failures at the EDD, including taking up to six weeks to return customer service phone calls; not providing translation of documents into languages other than English; and not allowing applicants to edit their applications once submitted or upload verification documents.

A more systemic problem, lawmakers said, is the state’s overreliance on contractors who routinely come in tens of millions of dollars over budget and years behind schedule.

A billion-dollar project by Accenture to revamp the state’s accounting, budgeting and procurement systems, called Fi$Cal, has been underway for the past 15 years; it was originally envisioned to take six years and cost $138 million. Last year, Newsom increased its budget by $150 million while at the same time narrowing its scope.

EDD’s latest modernization plan has been underway since 2016 and isn’t scheduled to finish until 2027. A previous attempt by EDD’s longtime contractor, Deloitte, in 2010 ended up costing twice the original estimate and “never solved basic problems,” the lawmakers said in their letter.

Deloitte has received at least $259 million to do work on EDD’s IT system over the years, including at least two no-bid contracts during this pandemic,” they wrote. “It’s clear that despite all of the money Deloitte has been paid, it has not successfully resolved EDD’s IT challenges or modernized its system.”

Deloitte did not respond to a request for comment this week.

CEO of Fresno Rehab Group Home Convicted for Fake Bills

46 year old Orlando Gillam, of Fresno, pleaded guilty to mail fraud in connection with false claims he submitted to public and private health insurers. He was indicted by a grand jury in April 2019.

According to court documents, Gillam is the founder and CEO of Dunamis Inc. Group Home, a nonprofit that provided services that included alcohol and drug treatment and counseling.

Between January 2016 and January 2018, Gillam falsely billed insurers hundreds of thousands of dollars for alcohol and drug treatment and counseling, mental health treatment, and group and individual psychotherapy purportedly rendered to multiple individuals.

Those individuals did not receive the services billed, and several of them were not Dunamis clients at all.

The conviction is yet another example of how California has become the “Rehab Riviera” of fraudulent treatment centers that seek to exploit California-specific regulations and sometimes-lax oversight in an attempt to cash in on the lucrative industry, despite the potential danger for those the industry is supposed to help.

In California, even someone convicted of fraud or drug dealing or medical malpractice can make money in rehab, often through the vertical integration of insurance payments for urine testing.

Orange County Register investigative journalists found this to be the case in their published expose of the industry some time ago.

This case is the product of an investigation by the Federal Bureau of Investigation, the Office of Personnel Management Office of Inspector General, and the U.S. Treasury Inspector General for Tax Administration. Assistant U.S. Attorney Vincente A. Tennerelli is prosecuting the case.

Gillam is scheduled to be sentenced on Nov. 20. He faces a maximum statutory penalty of 20 years in prison and a $$250,000 fine.

Ascertaining the “Date of Injury” in a CT Case Matters

Discovering the “date of injury” in a continuous trauma claim is both significant, and sometimes complicated.

It is significant since the carrier for the one year prior to the “date of injury” might not be the carrier on the last date of employment. So just using the last date of employment as the date of injury might not involve the correct carriers. Benefit rates increase on January 1 of each year. Thus the date of injury might effect the rate of benefits to be paid. And finally, the statute of limitations defense is based upon the date of injury, and the date the Application for Adjudication was filed.

A recent panel decision makes the determination of date of injury less complicated since it clarifies existing law on how to determine the date of injury in a continuous trauma claim.

Imelda Sosa submitted a claim form to her employer on June 3, 2011 for a specific injury “From shoulder to neck-sometimes whole arm.” On July 7, 2011, Sosa’s primary treating physician took applicant off work for a single day on June 13, 2011 and a single day on July 7, 2011.

After a period of medical treatment, Sosa filed an Application for Adjudication of Claim on November 7, 2012.

At trial, the parties stipulated that Sosa sustained an industrial injury during the period April 8, 1997 through December 10, 2012. However, the parties also submitted the issue of “date of injury” at trial.

The School District contended that applicant did not sustain compensable temporary disability in 2011 because applicant was paid industrial accident leave under the Education Code for a single day’s absence and would not have been entitled to temporary disability under Labor Code section 4652.

The workers’ compensation administrative law judge found that Sosa sustained a cumulative trauma injury through June 13, 2011. Reconsideration was denied in the panel decision of Sosa v Brawley Union High School District.

Labor Code section 3208.1 provides that a cumulative industrial injury occurs whenever the repetitive physically traumatic activities of an employee’s occupation cause any disability or a need for medical treatment.

Pursuant to section 5500.5, liability for an injured worker’s cumulative injury is limited to those employers who employed the employee during a period of one year immediately preceding the date of injury, as determined pursuant to Labor Code section 5412, or the last date on which the employee was employed in an occupation exposing her to the hazards of the cumulative injury, whichever occurs first. (Lab. Code, § 5500.S(a).)

The date of injury for an industrial cumulative trauma injury is defined by Labor Code section 5412, as follows: “The date of injury in cases of occupational diseases or cumulative injuries is that date upon which the employee first suffered disability therefrom and either knew, or in the exercise of reasonable diligence should have known, that such disability was caused by his present or prior employment.”

As used in Labor Code section 5412, “disability” means either compensable temporary disability or permanent disability. (Chavira v. Worker’s Comp. Appeals Bd. (1991) 235 Cal.App.3d 463 [56 Cal.Comp.Cases 631]; State Compensation Insurance Fund v. Workers’ Comp. Appeals Bd. (Rodarte) (2004) 119 Cal.App.4th 998 [69 Cal.Comp.Cases 579].)

Here, applicant had knowledge of an industrial injury and suffered disability as a result of the injury on June 13, 2011. Accordingly, the WCJ correctly determined applicant’s date of injury.

Couple Injured While Assisting Sheriff Limited to Workers’ Comp

A Trinity County deputy sheriff phoned citizens James and Norma Gund – who do not work for the County – and asked them to go check on a neighbor who had called 911 for help likely related to inclement weather.

The Gunds unwittingly walked into a murder scene and were savagely attacked by the man who apparently had just murdered the neighbor and her boyfriend. The assailant fled.

The Gunds sued the County of Trinity and the deputy – Corporal Ron Whitman – for negligence and misrepresentation, alleging defendants created a special relationship with the Gunds and owed them a duty of care, which defendants breached by representing that the 911 call was likely weather-related and “probably no big deal” and by withholding information known to defendants suggesting a crime in progress – i.e., that the caller had whispered “help me,” that the California Highway Patrol dispatcher refrained from calling back when the call was disconnected out of concern the caller was in danger, and that no one answered when the county dispatcher called.

Trinity County filed a motion for summary judgment on the ground that Grund’s exclusive remedy was workers’ compensation. The trial court adopted the defense theory and entered summary judgment and the Gunds appealed. In 2018, the Court of Appeal affirmed the judgment in a published case.

The California Supreme Court ordered review on the court’s own motion, to decide the scope of workers’ compensation coverage available to the plaintiffs in this situation, as the availability of such coverage would constrain them in seeking other redress for their injuries.

This month the California Supreme Court published its review of the case, and agreed with both the trial court and the Court of Appeal in the case of Gund v County of Trinity.

“We entrust to police officers the enormous responsibility of ensuring public safety with integrity and appropriate restraint, a mission they sometimes pursue by requesting help from the very public they’re sworn to protect.”

When members of the public engage in ‘active law enforcement service’ at a peace officer’s request, California law treats those members of the public as employees eligible for workers’ compensation benefits. (Lab. Code, § 3366, subd. (a).)”

“While this allows such individuals to receive compensation for their injuries without regard to fault, it comes with a catch: Workers’ compensation then becomes an individual’s exclusive remedy for those injuries under state law.

So. Cal. Compounder Sentenced for Kickbacks in $62M Fraud

A San Gabriel Valley man was sentenced to 34 months in federal prison for fraudulently submitting more than $62 million in claims to the military’s TRICARE health care benefit program for bogus compounded medications prescriptions largely generated by the payment of large referral fees to marketers.

James Chen, 51, of Monterey Park, was sentenced by United States District Judge David O. Carter, who also ordered Chen to pay $28,283,844 in restitution. Chen pleaded guilty in June 2017 to one count of health care fraud.

Chen owned Clevis Management, Inc., a Commerce-based company that did business under the name Haeoyou Pharmacy (HY). HY hired marketers to obtain prescriptions for medications that were billed to TRICARE, a health care benefit program for military members and their families. HY also operated “Healtharchy.com,” a “telemedicine” website through which individuals could seek prescriptions for medications without being examined by a physician.

Under Chen’s supervision, HY paid referral fees to outside businesses, including Mission Viejo-based Trestles RX LLC and Trestles Pain Management Specialists LLC, and to his own in-house marketers to obtain compounded medications prescriptions. The referral fees constituted more than 50 percent of the net reimbursements that HY received from TRICARE.

(As an interesting sidenote, it is worthy of note that in 2015, Mesa Pharmacy – a major lien claimant for compounded medications in California workers’ compensation cases, filed a Superior Court action against Trestles Pain Specialists LLC, John Garbino, David Fish, and Raymond Riley alleging that Trestles Pain Specialists had contracted to provide marketing services of its compounded medications to doctors.)

Chen knew that none of the prescriptions arose from a bona-fide physician-patient relationship, as required by TRICARE rules. Chen also knew that a substantial number of the prescriptions were sent to HY from marketers, not physicians, though the claim forms falsely indicated otherwise. HY never attempted to collect copayments from patients, who were selected at random and denied ever seeking the compounded medications, which were of questionable medical value. All the medications were for generic pain, scarring, stretch marks, erectile dysfunction, or “metabolic general wellness” (vitamins), according to court documents.

During 2013, Chen submitted zero claims to TRICARE for reimbursement for filling compounded medication prescriptions. In Decembr 2014, his company submitted 31 such claims to TRICARE for $81,401. During the first five months of 2015, HY submitted 2,798 such claims to TRICARE seeking a total of $62,654,938.

The claims HY submitted to TRICARE for each compounded medication prescription were astronomical compared to previous claims that HY typically submitted for reimbursement. A claim to TRICARE for a single compounded medication prescription caused TRICARE to pay HY $194,707.

Chen and his co-schemers targeted TRICARE because few, if any, insurance carriers at the time would honor reimbursement claims for similar prescriptions.

This matter was investigated by the Defense Criminal Investigative Service; the FBI; Amtrak’s Office of Inspector General; IRS Criminal Investigation, the Office of Personnel Management’s Office of Inspector General; the U.S. Department of Health and Human Services – Office of Inspector General; the U.S. Department of Labor, Employee Benefits Security Administration; and the California Department of Insurance.

This case was prosecuted by Assistant United States Attorney Mark Aveis of the Major Frauds Section.