Category: Daily News

The idea that the costs for caring for injured workers have shifted to Social Security Disability Insurance is being disputed by a recent study conducted by the National Council on Compensation Insurance Inc.

The study, released March 26,, as reported by the Insurance Journal, is focused on the interaction between SSDI and workers compensation benefits and explores cost-shifting that may occur between the two programs.

“There have been some allegations or thoughts that perhaps workers comp cuts in benefits or the tightening of compensability standards at the state level might induce injured workers to file for SSDI … we found that the majority of states did not decrease benefits with a specific focus on permanent partial disability and permanent total disability,” said Jim Davis, director and actuary for Boca Raton, Florida-based NCCI.

Looking at the overall amount that is paid through SSDI is important, according to Emily Spieler, a professor of law at Northeastern University School of Law in Boston.

“Over the last 20 years with changes in workers compensation laws, people have always gotten injured at work, they have gotten permanent partial disability settlements, they have tried to go back to work and haven’t been able to return. They will apply for Social Security disability, sometimes while they are receiving the partial benefits, but the amount that is paid out by Social Security over a lifetime for someone who has a workplace injury may be far higher than is paid by workers compensation,” said Ms. Spieler.

NCCI saw the biggest change occur in the number of SSDI applications during the 2007-2009 recession.

“The largest increase in SSDI applications was during the great recession and this is common across states … and that is in contrast or versus any kind of activity at the state level,” said Mr. Davis.

The number of Social Security Disability Insurance beneficiaries rose 58%, and SSDI expenditures grew 138%, to $143 billion from $60 billion, from 2001 to 2015. Since 2010, the number of SSDI beneficiaries has been relatively stable, and spending growth has moderated, according to the study.

In states like Illinois and Nebraska, a person who receives both workers comp permanent total disability benefits and SSDI, in these cases workers comp shoulders a greater portion of total benefits, according to Mr. Davis.

“We have two different programs here. They serve different purposes, and from time to time there might be changes, perhaps to better align the program to its original intent, and that’s what we have seen. We have seen some changes that can shift costs in either direction, but that is not necessarily a bad thing,” said Mr. Davis.

There are still some lingering questions, said Ms. Spieler.

“I think there are three questions, and this research addresses one of them,” she said. “The first is to what extent does workers compensation pay for the costs of disability arising out of injury or illness? – the second question is to what extent have what they call ‘benefit changes’ had an impact on this cost shift? And there I think the report is accurate – the third question is … whether changes in the law have led to reductions in the amount that people are getting in workers compensation, not because the weekly benefits are different but because the way claims are looked at is different.”

Christine Baker abruptly retired as Director of the Department of Industrial Relations last week. No public announcement of her decision has been made by the DIR.

Her decision comes as a surprise to the industry stakeholders. According to a post by Julius Young on his blog, her decision was announced by an email she sent last Friday to DIR employees.

Christine Baker was the first woman to serve as director of the Department of Industrial Relations.

Her experience comes from working with labor and management as chief of the Division of Labor Statistics and Research (1984-89), the deputy director for the Division of Workers’ Compensation (1990-94), and the executive officer of the California Commission on Health and Safety and Workers’ Compensation from its inception in 1994 until April 2011. During her tenure as executive officer, the commission’s role expanded to overseeing the health, safety and workers’ compensation systems in California and recommending administrative and legislative changes for improvement.

In April 2011, Christine was named acting director of DIR and was appointed director by Gov. Brown in December. The Senate Rules Committee voted unanimously to confirm her appointment in May 2012.

As director, Christine served as the state administrator of Apprenticeship, the administrator of the state OSHA Plan, an ex officio member of the California Self-Insurers’ Security Fund and an ex officio member of the State Fund board of directors.

Ms. Baker is president-elect of the International Association of Industrial Accident Boards & Commissions (IAIABC), and has chaired the California Insurance Commissioner’s Workers’ Compensation Fraud Focus Group and the advisory committee of the International Forum on Disability Management.

Ms. Baker is the recipient of numerous awards. Small Business California recognized Christine as one of its 2008 Small Business Heroes. In 2012, she received the Human Rights Award from the League of United Latin American Citizens.

The Riverside District Attorney announced that four men were arrested and charged with several felonies stemming from an alleged $8 million health care fraud scheme. The four who were charged with 33 counts were Brian Andrew La Porte, DOB: 7-7-75, of Poway, Dennis Davin Bonavilla, DOB: 1-17-79, of Murrieta, Jeffrey D. Ogletree, DOB: 7-21-74, of Meridian, Idaho, and Babar Iqbal M.D., DOB: 12-18-73, of Irvine

Dr. Babar Iqbal was the head of the Riverside Regional Surgery Center, and allegedly worked with two of the defendants to provide health care for fraudulently claimed “employees” they had sent his way. Iqbal told those people that Medi-Cal wouldn’t cover their treatment and had them sign papers for a free health insurance policy, a district attorney senior investigator said

The California Medical Board records claims that Babar Iqbal graduated Ross University School of Medicine in 2001, and that he is still currently licensed to practice in California with no record of disciplinary action.

Ross University School of Medicine (RUSM) is a private international medical school in Portsmouth, Dominica. It was founded in 1978.

In 1985 California state medical licensing officials began investigating RUSM, along with other medical schools located in the Caribbean. The officials released a report stating that RUSM at that time had nearly no admissions standards, and that the school was in the business of providing medical degrees to “everyone that wants one.”

La Porte, who along with Bonavilla formed the Kingmakers LLC in San Diego and Drexel Group LLC in Wildomar – firms that investigators said were shell companies with no actual employees. They also had connections to Free Choice Healthcare Foundation, an unregistered charity which claimed it was formed to help those in need pay health care premiums.

La Porte, who used the name La Porta in connection with the alleged shell companies set up for the scheme, was released from federal prison in 2013, where he was sent for his role in a $20 million mortgage fraud scheme charged in 2010, according to papers that seek a court review for the source of any bail money La Porte might offer.

Ogletree, in 2013 was a vice president for Hospital Sisters Health System The company operates 16 hospitals and healthcare systems in Illinois and Wisconsin and is based in Springfield Illinois.

Investigators said on Ogletree’s recommendation, Hospital Sisters Health System donated more than $5 million to Free Choice Healthcare Foundation in January 2015. The money was supposed to be used to provide health insurance to 333 poor people in the Midwest for one year.

Defendants received $5 million in fraudulent income through donations made under false pretenses, and another $3 million from illegal kickbacks of funds paid on fraudulent health insurance claims, according to Riverside County District Attorney Senior Investigator Maureen Filley in documents filed with the case in Riverside County Superior Court.

Iqbal’s Riverside Regional Surgery Center drew the attention of the district attorney’s office and the California Department of Insurance in December 2016 when 22 of 23 alleged employees for Kingmakers were treated at the Iqbal’s center within five weeks of getting health insurance policy, with initial claims totaling $4 million.

Investigators also moved in court to have assets frozen at several bank accounts linked to the defendants.

The emergence of talks between Walmart Inc. WMT 1.37% and Humana Inc. HUM 0.48% creates pressure on the health-care companies that haven’t yet made deals, amid the rapid-fire integration that is reshaping the business of managing health care.

A Walmart-Humana deal—which is far from assured, as the companies are in early-stage talks about a variety of possible options—would become the latest sign of the sector’s rapid move toward combinations that unite different businesses under one roof. It would come in the wake of the $69 billion deal between drugstore chain and pharmacy-benefit manager CVS Health Corp. and insurer Aetna Inc., and insurer Cigna Corp.’s CI -0.34% $54 billion agreement to acquire the biggest PBM, Express Scripts Holding Co. ESRX -0.93%

The spotlight is on remaining companies such as Walgreens Boots Alliance Inc. WBA -3.14% and Anthem Inc., ANTM -0.80% as well as smaller health insurers that could broaden their roles into different sectors, analysts said.

“Whether you’re a payer, a retail clinic, a retailer, a PBM or a pharma company, you’re thinking, ‘how do I start to blur those lines and start playing across those lines,’ ” said Gurpreet Singh, Health Services leader at PwC.

U.S. drugstores are under pressure to move beyond dispensing prescriptions and selling candy, makeup and soda as Amazon.com Inc. AMZN 1.11% chips away at the companies’ retail business and cost-control efforts by insurers pressure drug margins. Amazon has also signaled it may go deeper into the health-care and pharmaceutical sectors, which would add to the threat.

Asked about the possibility of a deal during a call with analysts on Wednesday, Walgreens Boots Chief Executive Stefano Pessina said the pharmacy industry is in need of a major overhaul, but “I don’t believe that the change is only possible if you merge with a health plan.” He added: “The main transformation will be to adapt the stores to what the future customer will require.”

Walgreens has nevertheless been pursuing a big deal. Resistance from federal antitrust regulators derailed the company’s attempt last year to acquire rival pharmacy chain Rite Aid Corp. Instead, it agreed to buy about 2,000 Rite Aid stores for around $4 billion.

The Deerfield, Ill., company, with more than 13,000 stores in 11 countries, recently made an approach to drug distributor AmerisourceBergen Corp. ABC 1.29% , The Wall Street Journal reported in February. Negotiations have since stalled, but could restart, according to people familiar with the talks. Walgreens executives declined to discuss Amerisource discussions when asked this week on an earnings call.

In the insurance sector, analysts said, smaller companies like WellCare Health Plans Inc. WCG 1.77% have long been seen as targets for acquisition. Centene Corp. CNC 6.50% , a giant in the Medicaid space, has been growing rapidly through acquisitions, including its effort to take over nonprofit New York health insurer Fidelis Care. Centene “hasn’t been sitting still,” said Ana Gupte, an analyst with Leerink Partners LLC. “They have been growing well organically and inorganically.”

Centene also recently invested in a PBM known as RxAdvance, a move that CEO Michael Neidorff highlighted at recent investor conference. “You’ll be hearing a lot more about it,” he said.

UnitedHealth Group Inc., UNH -2.06% parent of the biggest U.S. insurer, is already vertically integrated, with its ownership of a growing roster of doctor groups and surgery centers as well as its own PBM. The health giant has remained on the M&A warpath in recent months, including its announcement in December that it will buy DaVita Inc.’s DVA -0.09% big physician group.

Anthem, for its part, has embarked on a vertical move without a big acquisition—it is starting its own PBM, set to launch in 2020, when its current PBM deal with Express Scripts ends. The insurer’s new CEO, Gail K. Boudreaux, has said she is focused on strengthening Anthem’s own operations and expects major savings and growth from the new PBM, which could serve Anthem’s fellow Blue Cross and Blue Shield insurers, among other clients.

Asked about the Cigna deal at a recent investor conference, Ms. Boudreaux said it hadn’t changed Anthem’s thinking. “We love the capital efficiency of the model we have and feel really good about what we’ve done,” she said.

Anthem, which has deep local market share, has the scale to “go it alone for a while,” said Ms. Gupte. Down the road, analysts have said, Anthem may also have acquisition opportunities among other Blue Cross and Blue Shield insurers, an option that would be far more difficult for other major national insurers that aren’t already Blue plans themselves. Anthem already has Blue plans in 14 states.

Lanelle D. Bergen, a property owner, hired KL Construction, Inc., a licensed general building contractor, to build an addition to her home and replace her garage.

Once the owner wrote an initial deposit check, KL Construction’s managing officer Kwok Wong then asked Bergen to write payment checks directly to individual workers, saying this would be easier for him as he would not have to deposit her checks and then write more checks paying workers; Bergen agreed.

KL Construction did not issue W-2 forms or 1099 forms to the workers reporting the income Bergen provided in those checks, did not make payroll deductions for the income, and did not include the income in payroll reports it submitted to its workers’ compensation insurance carrier, State Compensation Insurance Fund.

There is no evidence Bergen was aware of these omissions.

Wong negotiated an oral agreement with a subcontractor, Miguel Gonzalez of Miguel’s Stucco, to perform stucco work. Bergen wrote Gonzalez a check. Gonzalez brought Francisco Carrillo-Torres and two or three other people to help him do the stucco work. Torres slipped off of an improperly constructed scaffold and suffered severe injuries.SCIF agreed to accept the claim Torres subsequently submitted.

Torres filed a complaint against Bergen alleging one cause of action for premises liability and negligence. He contended Bergen was his employer on the home remodel project, but that he did not qualify for workers’ compensation coverage under her homeowner’s insurance policy, because he did not work the required number of hours.

The trial court issued an order granting summary judgment in favor of Bergen. The court of appeal sustained the dismissal in the unpublished case of Carrillo-Torres v. Bergen.

Torres contended that the trial court erred in applying the California Supreme Court’s decision in Privette to conclude Bergen was not liable for his injuries, because Bergen’s and KL Construction’s payroll practices “subverted the federal and state systems for taxation and benefits related to laborers.”

Torres did not explain his own two-year delay in submitting a workers’ compensation claim after he secured the representation of counsel. SCIF agreed to compensate Torres, approved medical treatment for him, and was collecting information to determine the amount of his benefits.

Torres cites no legal authority indicating that a delay defeats workers’ compensation exclusivity or creates an exception to the Privette rule. Case law confirms that the trigger for workers’ compensation exclusivity is a compensable injury.