Category: Daily News

The OSIP summary of private self-insured data issued on July 1 offers a look at California’s private, self-insured claims experience for cases reported in 2018. The summary includes medical-only and indemnity claim counts, as well as the total paid and incurred losses on those claims through December 2018.

The new report summarizes the experience of private self-insured employers who covered 2.260 million employees last year. Wages and salaries for those private self-insured employees totaled $112.7 billion in 2018, or 9.1 percent more than the $103.3 billion noted for self-insured employees in the 2017 summary, according to CWCI.

Workers’ compensation claim frequency reported by private self-insured employers in California rose last year, as the incidence of both indemnity and medical-only claims rose from the 2017 levels, the California Workers’ Compensation Institute reported.

This is the second consecutive year frequency rose, according to the CWCI, which reviewed data released this month by the state Office of Self-Insurance Plans.

Private self-insured employers reported 83,873 claims in the initial reports for 2018, which is 4,218 more than in the 2017 first reports.

Private self-insured employers reported a total of $238.6 million in paid losses on 2018 claims through the end of the year, which was $19.9 million more than the comparable payout for 2017 claims, as total indemnity payments in the initial reports were $12.1 million higher and total medical payments were up by $7.8 million, according to CWCI.

The total incurred losses on these claims jumped to $659 million, up $28 million from the initial incurred reported for 2017 claims, as incurred indemnity increased by $14.1 million and incurred medical was up by $13.9 million. Since 2015 claim volume has been on the rise, with the latest count showing 83,873 claims in 2018, which is up 10.8 percent from a low in 2015, and that increase has become a key factor in driving up both total paid and total incurred losses over the past three years, according to CWCI.

New York Department of Financial Services (DFS) announced that the Department has fined Berkshire Hathaway owned Applied Underwriters $3 million for offering workers’ compensation insurance bundled with side agreements called “Reinsurance Participation Agreements,” which were not filed with or approved by the Department. Under these side agreements many employers, including small businesses, paid substantially more than what would have been paid under similar workers’ compensation plans.

Applied offered workers compensation insurance products from as early as January 2010, to late 2016, in New York under multiple names, including “SolutionOne” and “EquityComp.” The products included guaranteed-cost workers’ compensation policies issued by Applied subsidiary Continental Indemnity Company, on forms and rates approved by DFS along with a side agreement titled a “Reinsurance Participation Agreement” that employers were also required to enter into as part of the bundle. However, the side agreement, or RPA, was not filed with DFS, and as a result the RPA and the Program as a whole were not reviewed or approved by the Department.

Back in 2016 the California Department of Insurance announced its decision against a Berkshire Hathaway owned workers’ compensation insurer that it said used a complex insurance scheme involving EquityComp to circumvent regulatory review of its rates and policy terms to the disadvantage of small and medium sized businesses. At the time the companies involved also used side agreements that were not approved by the CDI.

DFS’s investigation found that the formula by which the RPAs calculated costs was complex and the way in which it was presented to employers was misleading. Under the formula, policy fees could rise rapidly with the first few claims to levels substantially higher than what would have been paid under a typical linear retrospective model. Many New York employers paid more for coverage than they would have paid under the workers’ compensation policies alone, with many paying significantly more.

The DFS investigation found that Applied’s offering was misleading in how it represented potential costs, required employers to wait three years, or in some cases up to seven years, for advertised “profit distributions” and often resulted in fees that were higher than the rates in the filed and approved insurance policy.

DFS’s Consent Order states that Applied has ceased offering the bundle in New York, will not offer any equivalent side agreements going forward, and will file any future products with the Department for approval. Additionally, Applied will not enforce any arbitration provisions under contracts agreed to in New York or with New York employers.

Berkshire Hathaway agreed this year to sell Applied Underwriters, to Bahamas-based United Insurance Co.,

An Ohio drug wholesale distributor and two former executives were charged with profiting from the U.S. opioid epidemic by selling millions of pills despite signs the addictive drugs were being misused.

Federal prosecutors in Cincinnati charged Miami-Luken Inc and four people with conspiring to distribute controlled substances in the second U.S. criminal case against a drug distributor over its role in a crisis that has killed hundreds of thousands of people.

The indictment charged the Springboro, Ohio-based company; Anthony Rattini, its former president; James Barlay, Miami-Luken’s former compliance officer, and two pharmacists with conspiring to distribute controlled substances.

Prosecutors said Miami-Luken and the executives failed to guard against the dangerous drugs it shipped to pharmacies in five states from being diverted for illegal uses or to report suspicious orders to the U.S. Drug Enforcement Administration.

It shipped millions of pills to rural Appalachia, where the opioid epidemic was at its peak, including 3.7 million hydrocodone pills from 2008 to 2011 to a pharmacy in Kermit, West Virginia, a town of just 400 people, prosecutors said.

Two pharmacists who ordered drugs from Miami-Luken were also charged: Devonna Miller-West, the owner of Oceana, West Virginia-based Westside Pharmacy, and Samuel Ballengee, who ran Williamson, West Virginia’s Tug Valley Pharmacy.

Defense lawyers could not be immediately identified. Miami-Luken last year said it would close its operations.

The case is the latest to result from investigations into the extent drug manufacturers and distributors helping fuel the deadly opioid abuse epidemic.

Top executives from distributors as well as Miami-Luken were called to testify before a Congressional committee in May 2018 regarding the opioid epidemic. Asked if they contributed to it, only Miami-Luken’s then-chairman, Joseph Mastandrea, said yes.

Prosecutors said Miami-Luken, which closed in October, made more than $173 million in consolidated sales from 2008 to 2015 supplying drugs to 200 pharmacies in Ohio, West Virginia, Kentucky, Indiana and Tennessee.

Federal prosecutors in Manhattan in April brought the first opioid-related criminal case against a distributor, upstate New York’s Rochester Drug Co-operative Inc. The company paid $20 million to resolve the charges.

The data, released this week by a federal court in Ohio as part of a far-reaching opioids case, shows that companies distributed 8.4 billion hydrocodone and oxycodone pills to commercial pharmacies in 2006 and 12.6 billion in 2012. That’s an increase of over 50%.

Over that seven-year period, 76 billion pills were distributed in all, according to an analysis by The Washington Post, which had sued along with another outlet, HD Media, to obtain the data.The shipments increased even after one of the companies, Purdue Pharma, was leveled with a $635 million federal fine in 2007 for falsely claiming its drug, OxyContin, was not as addictive as earlier opioids.

While OxyContin is the best-known prescription opioid, the Post analysis shows that Purdue accounted for just 3% of pills sold during that time. Three makers of generic drugs accounted for nearly 90% of the sales.

The data tracks a dozen different opioids, including oxycodone and hydrocodone, according to the Post. They account for most of the pill shipments to pharmacies.

The distribution data, maintained by the U.S. Drug Enforcement Administration, is a key element of lawsuits filed by more than 2,000 state, local and tribal governments seeking to hold drug companies accountable for the crisis.

Drug distribution companies told The Post that the federal data would not exist without their providing accurate reports to the DEA.

One company, AmerisourceBergen, said the data “offers a very misleading picture.”

Cleveland-based U.S. District Judge Dan Polster, who is overseeing most of the cases, ruled Monday that the information covering shipments from 2006 to 2012 could be made public. He said in a ruling that there is “clearly no basis” for shielding older data.

His order came a month after a federal appeals court in Cincinnati vacated Polster’s July 2018 decision that local and state governments, which had been granted access to the data, should not make it public.

A three-judge panel for the 6th U.S. Court of Appeals said Polster went too far in blocking the release of data that government attorneys argued could compromise DEA investigations. Polster asked attorneys from all sides Monday to suggest how DEA data collected for 2013 and 2014 should be protected.

The Washington Post and HD Media, which owns newspapers in West Virginia, went to court for access and were the first media outlets to receive the data. By Tuesday, it had not been made available to the public or other news organizations that had requested it, including The Associated Press.

In a statement, a group of plaintiff attorneys applauded Polster’s decision.

The first scheduled trial before Polster is set for October in lawsuits filed by Ohio’s Summit and Cuyahoga counties, areas that have been hit particularly hard by the ongoing opioid crisis. It is considered a bellwether trial that could force the defendants to reach a global settlement for all of the lawsuits.

A trial in an opioid suit brought by Johnson & Johnson by Oklahoma in state court there wrapped up this week. A judge will rule on that case. Purdue and Teva Pharmaceutical Industries Ltd. were named in that suit but settled before the trial.

Kia Zolfaghari pleaded guilty to charges regarding his role in a conspiracy to distribute fentanyl, as well as to related weapons and money laundering charges, announced United States Attorney David L. Anderson and Drug Enforcement Administration Special Agent in Charge Chris Nielsen..

In the plea agreement, Zolfaghari, 42, of San Francisco, admitted that from May of 2014 until June of 2016 he agreed with others to distribute and possess with intent to distribute fentanyl.  Fentanyl, a Schedule II controlled substance, is a highly potent opiate that can be diluted with cutting agents to create counterfeit pills that attempt to mimic the effects of oxycodone, and can typically be obtained at a lower cost than genuine oxycodone. In this case, Zolfaghari admitted that his role in the conspiracy included buying a pill press, using it to manufacture pills, and selling the pills, principally online.  Zolfaghari admitted he stamped the pills in a manner consistent with genuine oxycodone and advertised the pills as oxycodone, but that the pills did not contain oxycodone and instead contained fentanyl.  

In his plea agreement, Zolfaghari also described the roles of two of his co-conspirators in the drug trafficking conspiracy.  For example, Zolfaghari acknowledged that one of his co-conspirators assisted him in the operation by packaging and mailing pills as well as cleaning up after he manufactured the pills.  Additionally, Zolfaghari explained that another co-conspirator assisted him by maintaining a post office box for the delivery of fentanyl powder that he used to make pills and by delivering the powder that arrived in that post office box.  Zolfaghari admitted that over the course of the conspiracy he made over $400,000 through his sales, and sold at least 13,000 fentanyl pills.

Zolfaghari also pleaded guilty to conspiring to launder the proceeds of the drug trafficking operation.  Specifically, Zolfaghari admitted that sometime before May 1, 2014, he agreed with others to engage in several financial transactions to conceal the of those proceeds of his drug sales. For example, he arranged to be paid in the digital currency bitcoin, he used unlicensed bitcoin brokers to exchange the bitcoin for cash, and he directed a co-conspirator to purchase gift cards with the cash.  Zolfaghari further admitted that these transactions were intended to conceal the source and ownership of the proceeds of his drug transactions.  Zolfaghari also admitted he used the proceeds from his drug trafficking operation to make a $40,000 down payment (and additional monthly payments) on a 2015 Audi RS5 Coupe; to make payments on an apartment in San Francisco; and to make purchases of luxury goods such as high-end watches, designer shoes, and jewelry.

Zolfaghari was arrested on June 10, 2016.  At the time of his arrest, Zolfaghari was found in possession of a Smith & Wesson handgun and 500 pills containing fentanyl.  

Judge Illston scheduled Zolfaghari’s sentencing for November 22, 2019.  Zolfaghari faces a maximum sentence of life in prison and a $10,000,000 fine for the conspiracy to manufacture and distribute fentanyl charge.  The charge also carries a minimum 10 years in prison. The statutory maximum for the money laundering conspiracy charge is 20 years in prison, and a fine of $500,000 or twice the gain or loss from the criminal activity.  The statutory maximum for the weapons charge is life in prison and a $250,000 fine.  This charge carries a minimum five years in prison, which term must run consecutive to any other sentence imposed.  Additional terms of supervised release and monetary assessments also may be ordered; however, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

In April 2017, Zolfaghari jumped bail and failed to appear for a hearing in this case.  On February 9, 2018, Judge Illston sentenced his wife and co-defendant, Candelaria Dagandan Vazquez, 43, who was also a fugitive, to 151 months imprisonment.  In February 2019, the United States Marshals Service, together with the Mexican Federal Police, located Zolfaghari and Vazquez in Mexico.  Vazquez is currently serving her sentence in the custody of the Federal Bureau of Prisons.  Also prosecuted for his role in the drug distribution scheme was King Edward Harris, II, 37, of Oxnard.  On September 22, 2017, Judge Illston sentenced Harris to five years in prison for possession and distribution of 40 grams or more of fentanyl.