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Category: Daily News

New Medical-Legal Fee Schedule Predicted to Cost $270M

A review of information by Business Insurance predicts that the new medical-legal fee Schedule changes could increase costs by as much as $270M.

The modifications to the medical-legal fee schedule are predicted to increase fees for such reviews by 22%, according to the WCIRB.

Modifications to E&M services reimbursements, which account for about 15.9% of overall medical costs in the California workers comp system, including self-insureds, could have an estimated system impact of $170 million, WCIRB analysts said. The change to medical-legal review reimbursements, which comprise about 6.5% of overall medical costs, could have an estimated $100 million system impact.

While the E&M system increases stem mainly from changes in procedure codes, about 11% of the potential price increase in medical-legal reviews comes from a record review reimbursement overhaul that has many defense attorneys concerned.

The prior schedule, which had been in place since 2006, had paid QMEs an hourly fee. The new schedule, introduced by the California Division of Workers Compensation in February, will pay QMEs a flat fee of $2,015 for a comprehensive case review plus an additional $3 per page for any records in excess of 200 pages.

Often medical records contain duplicative and irrelevant material which applicant and defense attorneys may not necessarily exclude from the materials sent to the evaluator, thus driving up the costs. Additionally, both sides may send the QME the same records which are included in the page count.

“Taking all of this together, this is not particularly good news for the California workers compensation system, and it’s coming just as the small businesses and the economy overall are trying to recover from COVID,” said Robert Hartwig, clinical associate professor and director of the Risk and Uncertainty Management Center at the University of South Carolina in Columbia.

WCIRB Quarterly Report Mostly Good News Despite Pandemic

The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) has released its Quarterly Experience Report, an update on California statewide insurer experience valued as of December 31, 2020.

Highlights of the report include:

– – California written premium for 2020 is 13 percent below that for 2019 and is the lowest since 2012.
– – The average charged rate for 2020 is 9 percent below that for 2019 and 40 percent below the peak in 2014.
– – Excluding COVID-19 claims, the projected combined ratio for 2020 is 96% which is more comparable to the 2019 ratio.
– – Indemnity claim frequency for Accident Year 2020, excluding COVID-19 claims, is almost 6 percent below 2019.
– – Indemnity claims had been settling quicker through 2019, largely driven by the reforms of SB 863 and SB 1160.
– – Projected indemnity severity for 2020 excluding COVID-19 claims is 9% higher than 2019. This estimate is preliminary as it is primarily based on temporary disability (TD) benefits paid on 2020 claims.
– – Medical severities have been relatively flat since 2016.
– – Average Medical Cost Containment Program (MCCP) costs have generally declined in the last several years as average medical costs have moderated.
– – Medical service costs per claim decreased by 26% from 2012 through 2019, driven by decreases in the number of transactions per claim.
– – Overall medical service costs per claim in the first half of 2020 are flat. However, costs per claim increased modestly in early 2020 but declined after the onset of the pandemic.
– – Pharmaceutical costs per claim decreased by 84% from 2012 through 2019.
– – Projected total statewide ultimate losses for 2004 through 2020 evaluations are below the amounts reported by insurers.

The full report is available in the Research section of the WCIRB website

California Black Market Drugs Sold to Prescription Drug Customers

29 year old Hakob Kojoyan, who lived in Northridge, was sentenced to 33 months in prison and ordered to forfeit his Palm Springs house for participating in a scheme involving the unlicensed wholesale distribution of prescription drugs.

Kojoyan admitted that he engaged in a scheme to distribute illegally obtained prescription drugs to unsuspecting purchasers. In his plea agreement, Kojoyan stated that he and his associates used a Pennsylvania company, Mainspring Distribution LLC, to pose as legitimate prescription drug wholesalers.

They then obtained prescription drugs from unlicensed, black market sources in California. They sold the drugs through Mainspring to unknowing wholesale customers, falsely representing that the drugs were legitimately sourced from licensed suppliers.

Kojoyan and his co-defendants avoided dealing in generic drugs and instead specialized in expensive name-brand prescription drugs used to treat HIV, such as Atripla. Kojoyan himself also supplied prescription drugs for such resale, though he had no license to do so.

Congress mandated prescription drug wholesalers provide their customers with detailed information about the drugs they sell, including a transaction history tracing the drugs back to their licensed manufacturer. The government asserted Kojoyan and his co-conspirators knew about these federal regulations designed to protect vulnerable patients, and they worked diligently to evade them.

They stole the identity of a licensed prescription drug company supplier in California and prepared paperwork falsely suggesting their drugs came from that supplier. The government described how they further mimicked the appearance of a legitimate supply chain by opening bank accounts in names misleadingly similar to the licensed supplier and routing the proceeds of their fraudulent sales through the accounts.

The government further asserted that bank accounts under the control of Kojoyan received approximately $2.2 million from Mainspring-associated accounts, much of which was laundered and distributed to co-conspirators. Kojoyan’s earnings were invested into a house in Palm Springs, which the Court ordered forfeited to the government.

This case is being prosecuted by the Corporate Fraud Strike Force of the United States Attorney’s Office. The prosecution is the result of an investigation by the Federal Bureau of Investigation.

Alabama Becomes the 37th Medical Marijuana State

Alabama is now the 37th state to legalize medical marijuana, after Gov. Kay Ivey signed the bill Monday.

The bill, Senate Bill 46, sets up a system to regulate medical marijuana from the cultivation of the plants, to processing and testing the products, to selling them in dispensaries.

Under the legislation, patients would have to be diagnosed with one of about 20 conditions, including autism, cancer, HIV/AIDS, anxiety, depression, sleep disorders, post-traumatic stress disorder and intractable pain, among others.

The bill also prohibits raw cannabis, smoking, vaping and candy or baked good products. Patients would instead be allowed to purchase capsules, lozenges, oils, suppositories and topical patches.

Doctors will be able to recommend medical cannabis for patients who will receive medical cannabis cards to buy tablets, capsules, gel cubes and other forms of medical cannabis products.

State Senator Melson, an anesthesiologist and medical researcher, first offered the bill in 2019. That led to establishment of an 18 member Medical Cannabis Study Commission that held public hearings and recommended the legislation.

Based on the presentations and discussions, the Study Commission found that, although some medical study results are inconclusive and some results are mixed, there is strong scientific evidence that both hemp and marijuana contain compounds that provide significant relief for symptoms of certain specified medical conditions.

There was some dissent on the commission. Twelve of the 18 members voted in favor of recommending medical marijuana. Three voted against it and three abstained.

Officials have said it will be more than a year before medical marijuana products are available in Alabama. It will be a fully intrastate system. The new law creates the Alabama Medical Cannabis Commission, which will issue licenses to cultivators, processors, transporters, testing laboratories, and dispensaries.

The Alabama Department of Agriculture and Industries will regulate the cultivators.

The bill says the commission must set up the rules to implement the program and allow people to begin applying for licenses by Sept. 1, 2022.

9th Circuit Affirms $25M Roundup Pesticide Award in California Case

Many California agricultural workers have been exposed to a pesticide known as Roundup, and some of them may develop cancers. These cancer cases can then become continuous trauma claims under workers’ compensation law.

Thousands of Roundup tort cases are pending in civil courts in several states. A favorable outcome will likely support subrogation in the decades ahead for these claims.

Monsanto Company manufactures Roundup, a pesticide with the active ingredient glyphosate. Since 2015, thousands of cancer victims have sued Monsanto in state and federal court, alleging that Roundup caused their non-Hodgkin’s lymphoma. This appeal arises out of the first bellwether trial for the federal cases consolidated in a multidistrict litigation.

The jury returned a verdict in favor of plaintiff Edwin Hardeman, awarding him $5,267,634.10 in compensatory damages and $75 million in punitive damages. The district court reduced the jury’s punitive damages award to $20 million.

Monsanto appealed, arguing the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”) preempts Hardeman’s failure-to-warn claims; the district court made a series of evidentiary and jury instruction errors; the district court erred in denying judgment as a matter of law; and the punitive damages award violates California law and the Due Process Clause.

Hardeman cross-appeals, arguing the jury’s $75 million punitive damages award was constitutional.

The Ninth Circuit Court of Appeals affirmed the district court in the published case of Edwin Hardeman v Monsanto Company.

The 74 page opinion held that:

(1) Hardeman’s state failure-to-warn claims are not preempted by FIFRA;
(2) the district court ultimately applied the correct standard from Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and did not abuse its discretion in admitting Hardeman’s expert testimony;
(3) the district court did not abuse its discretion in admitting the International Agency for Research on Cancer’s classification of glyphosate as probably carcinogenic and three regulatory rejections of that classification but excluding evidence from other regulatory bodies;
(4) the district court’s jury instruction on causation, though erroneous, was harmless;
(5) Monsanto was properly denied judgment as a matter of law because evidence shows the carcinogenic risk of glyphosate was knowable at the time of Hardeman’s exposure; and
(6) evidence supports a punitive damages award, punitive damages were properly reduced, and the reduced award – while close to the outer limits – is constitutional.

This is the second loss on appeal for Bayer AG, which acquired the agrochemical company in a multibillion-dollar merger in 2018.

In July 2020, a California appellate court upheld a jury’s verdict that Roundup caused another Bay Area man’s cancer and awarding him $289 million.

A third jury verdict is still on appeal in California’s First Appellate District.

However, other trial courts disagreed, such as in the case of Carson v. Monsanto Co., which is pending in the 11th Circuit Court of Appeals. Unlike other cases alleging Roundup caused plaintiffs to develop non-Hodgkin’s lymphoma, Carson’s lawsuit alleges Roundup caused his malignant fibrous histiocytoma. FIFRA preemption was the pivotal issue in the case.

If the 11th Circuit affirms the preemption, it will create a circuit split, which opens the door for the Supreme Court to weigh in on the issue.

If the company wins preemption and wins at the Supreme Court, the victories could adversely effect the many thousands of cases still pending.

Flooring Co. Owners Face $3.8M Premium Fraud Charges

Two Sacramento-area businessmen have been charged in connection with a $3.8 million workers’ compensation fraud scheme, according to the California Department of Insurance.

Ryan Black, 45, formerly of Fair Oaks, and Curtis Davis, 53, of Penryn, were both charged with three felony counts of workers’ compensation fraud after allegedly underreporting payroll and employees by more than $30 million to illegally save on workers’ compensation insurance premiums, resulting in an approximate loss of $3,840,956 to three insurance companies.

Black and Davis were owners of Apex Industry Solutions Inc. (Apex), a flooring installation company located in Sacramento.

In October 2017, Apex’s insurance carrier at the time discovered that two individuals working for Apex were performing floor installations without a license and were receiving 1099 forms as independent contractors instead of W-2 forms as employees. However, Black identified the two workers, along with two additional workers, as employees of Apex.

The California Department of Insurance launched an investigation after receiving a report of suspected fraud from Apex’s insurance carrier in April 2018. The investigation revealed Black had a large number of flooring installation employees, and had reported minimal to no flooring installation payroll to the carrier.

The investigation also found Black and Davis conspired to underreport payroll to two additional insurance companies who had been their previous carriers. Over the span of five years, from 2013 through 2018, the underreported payroll totaled approximately $30 million, which resulted in an approximate loss of $3,840,956 to three insurance companies.

Black was arraigned on Wednesday, May 12, 2021 and Davis was arraigned on May 5, 2021. This case is being prosecuted by the Sacramento County District Attorney’s Office.

New CDC Relaxed Mask Mandate Frustrates and Confuses Employers

The CDC posted an update suggesting that fully vaccinated people no longer need to wear a mask or physically distance in any setting, except where required by federal, state, local, tribal, or territorial laws, rules, and regulations, including local business and workplace guidance

The CDC update also indicates that that fully vaccinated people can refrain from testing following a known exposure unless they are residents or employees of a correctional or detention facility or a homeless shelter

Gov. Gavin Newsom suggested in a TV interview Tuesday that California will do away with its mask mandate in favor of “recommendations” around June 15, the state’s target date for ending COVID-19 restrictions on businesses.

In a video clip posted to Twitter, Fox 11 Los Angeles anchor Elex Michaelson asked the governor: “Are we looking at masks after June 15?” Newsom’s response: “No. Only in those settings that are indoor. Only in those massively large settings, where people – from around the world, not just around the country – are convening, and where people are mixing in real dense spaces. He later is said to have walked back this position.

However, a report in Business Insurance says that employers are frustrated and confused by conflicting instructions from other sources.

The Occupational Safety and Health Administration guidelines that lean on U.S. Centers for Disease Control and Prevention guidance still call for indoor mask-wearing, and OSHA is getting ready to release a national emergency temporary standard that experts say could echo the guidelines already in place and come with fines for noncomplying employers.

Another issue is employees who don’t understand why the rules remain when they have been vaccinated, said Erik Eisenmann, Milwaukee-based partner and chair of the labor and employment group at Husch Blackwell LLP, who noted that questions around worker safety protocols and vaccinations are among the most common.

“Those employees protesting (masks) are only going to get louder,” he adds.

Todd B. Logsdon, Louisville, Kentucky-based partner and co-chair of the workplace safety practice group at Fisher & Phillips LLP, said the issue has led to frustration, especially for employers that operate in multiple states.

Some states have completely lifted all restrictions and other states still have a fair amount of their restrictions in place,” he said, adding that the conflicting messages are leading to morale issues among employees.

Eric Conn, Washington-based founding partner of Conn Maciel Carey LLP, said employers have reported that “the single greatest compliance challenge they have faced during this pandemic has been trying to comply with the impossible patchwork of competing and contradicting mandates from local and state health departments, governors’ executive orders, state (occupational safety and health) plan emergency temporary standards, and so on.”

CWCI Analysis Critical of SB 335 Shortened Denial Time

A proposed new law in California, Senate Bill 335, seeks to compress the time for investigating a reported occupational injury or illness from 90 days to 45 days while increasing the employer’s liability for medical treatment benefits during the investigation period from $10,000 to $17,000.

Regarding penalties,S B 335 proposes a return to pre-reform penalties that allowed non-discretionary, uncapped, and compounded penalties. Under these old rules, penalty amounts were tied to the entire amount of a particular benefit that had been paid out. In mature cases with large medical treatment and/or indemnity costs, 10 percent of the specie of benefit could reach tens of thousands of dollars for a single penalty.

The CWCI just prepared and published a comprehensive analysis of this proposed law. It concluded that it is unlikely that claims adjusters can unilaterally expedite the investigation process without unintended consequences.

Claims investigation is a complex process requiring documentation from multiple sources, few of which are within the control of the claims adjuster.

Claims adjusters can only begin an investigation upon notification of a claimed injury from an injured worker, their employer, or attorney. The number of days between the date of injury and the employer’s notification can be influenced by several factors, including the type of injury or illness, employee’s occupation, when and where the injury occurred, and whether or not there were witnesses.

One of the more significant confounding factors that can delay timely reporting is California’s relatively unique high rate of cumulative trauma claims, which are estimated to account for up to one out of every six indemnity claims..

The analysis of the data by CWCI authors shows that at 90 days following employer notification, more than 97 percent of all reported claims have a compensability decision, but at 45 days, only 85.2 percent of all claims have been accepted or rejected, a relative difference of 13 percent.

The analysis also shows that at 45 days, 63 percent of claims that are ultimately denied remain under investigation. Among the claims that are ultimately denied, 54 percent receive medical treatment within the 90-day investigation period, while 28 percent receive medical treatment within the first 45 days of the investigation.

Following the employer’s notification of an injury, the average cost of medical treatment reached $735 at 45 days and $1,372 at 90 days. In 1.4 percent of these claims the $10,000 limit is met or exceeded during the 90-day investigation period, while in 0.6 percent of the claims the $10,000 limit is met or exceeded within 45 days.

For claims that are ultimately denied, medical treatment during the 90-day investigation period averaged $734, with only 1.0 percent of the denied claims involving medical treatment costs greater than $6,500, and 0.5 percent of the denied claims reaching or exceeding the $10,000 limit.

Decreasing the investigation period to 45 days would actually reduce access to medical treatment and would likely increase the number of provisional denials.

WCIRB Publishes September 1, 2021 Experience Modification Estimator

The Workers’ Compensation Insurance Rating Bureau of California has released its September 1, 2021 Experience Modification Estimator for insurers, agents and brokers to help policyholders understand how payroll and claims experience will affect the computation of their September 1, 2021 and later experience modification (X-Mod).

To use the WCIRB September 1, 2021 Experience Modification Estimator, free of charge, click on the following link: September 1, 2021 Experience Modification Estimator.

By entering policyholder-specific payroll, classification and claims information into the Estimator, users can obtain an estimated X-Mod using approved September 1, 2021 California Workers’ Compensation Experience Rating Plan -1995 values (including expected loss rates, D-Ratios and primary thresholds that vary by employer size).

The Estimator’s spreadsheet format makes it easy for users to view and simply copy and paste data into the application and then view, print or save detailed estimated X-Mod information based on that data.

The September 1, 2021 Estimator was updated with the approved experience rating values after the Insurance Commissioner issued a Decision on the WCIRB’s September 1, 2021 Regulatory Filing and is available in the Learning Center of wcirb.com.

The Estimator is for informational purposes only, and results are approximations based on the information entered. The Estimator does not produce WCIRB-published X-Mods. For more information and helpful tips on how to use the Estimator, go to the WCIRB Experience Modification Estimators page.

Laguna Hills Assisted Living Facility Pays $159K For Wage Theft

Cornerstone Care Inc. operates as Cornerstone Homes at three south Orange County locations in Laguna Hills. The assisted living facilities provide comprehensive services, short- and long-term care, hospice care and other services.

A U.S. Department of Labor Wage and Hour Division investigation found Cornerstone Care violated the Fair Labor Standards Act as follows:

– – Charged workers for meals that they failed to provide.
– – Made payroll deductions for lodging but provided none. Instead, workers slept in facilities’ kitchens and living rooms.
– – Failed to pay workers for time spent in mandatory trainings on their days off.
– – Failed to record or pay for time employees worked during interrupted breaks.

The employer’s actions led to FLSA overtime violations, and to the department’s recovery of $158,854 in back wages for 13 employees.

“These essential workers deserve to be paid all the wages they have legally earned,” said Wage and Hour Division District Director Eric Murray in Phoenix.

“The U.S. Department of Labor is committed to preventing employers from short-changing workers or making illegal payroll deductions, and gaining an unfair competitive advantage over those employers who play by the rules. We invite employers to call us with questions and speak confidentially to a trained professional about their compliance responsibilities.”

For more information about the FLSA and other laws enforced by the division, contact its toll-free helpline at 866-4US-WAGE (487-9243). Learn more about the Wage and Hour Division, including a search tool to use if you think you may be owed back wages collected by the division.