Category: Daily News

The Golden State’s $16.5 billion workers’ compensation marketplace is stubbornly showing signs of recovery as a result of reform measures introduced through the enactment of Senate Bill 863 two years ago. The controversial legislation overhauled the state’s huge workers’ compensation system by creating a $120 million return-to-work fund, establishing an independent medical review board, revising the permanent disability rules and adding a controversial provision barring temporary staffing agencies from self-insuring for workers’ compensation.

This last provision was in the news again this month, when Irvine-based Kimco Staffing Services, one of California’s largest temporary staffing agencies, ended its costly legal battle to overturn a Court of Appeals ruling in May over its right to self-insure for workers’ compensation.

A report in PropertyCasualty 360 says the company is ” not going to appeal it to the state Supreme Court.” the Kimco Chief Executive Officer, said. Kimco had spent about $700,000 in legal fees in a bid to overturn a portion of SB 863 that prohibits staffing companies to self-insure.

The state Appeals Court sided with the state legislators in passing SB 863 because of the nature of the staffing industry in which workers can be inadequately covered for workers’ compensation claims. The court noted self-insurance deposits would not be quickly adjusted until the following year.

Kimco, for its part, has already moved on, placing its workers’ compensation coverage with Zurich Insurance Co.

In addition to Zurich Insurance, a number of other workers’ compensation insurers such as the State Compensation Insurance Fund, Berkshire Hathaway Insurance Co., American International Group, CNA Insurance Co., and CompWest Insurance Co. have all said they plan to ramp up their California workers’ compensation businesses in 2015.

This is in part due rising employer payrolls in the state, triggered by the recovering economy, and in part to SB 863 itself, which went into effect Jan. 1, 2013. In fact, a Workers’ Compensation Research Institute (WCRI) study released in April found that the reform legislation reduced California medical payments per claim by 5% in 2013 for claims with 12 months of experience.

The State Compensation Insurance Fund needs to increase rates if it wants to lower its 143.2% combined loss ratio in 2014, which was an increase from the 127.5% combined ratio in 2013. An injection of $250 million to bolster reserves served as a key factor in the fund’s operating expenses in 2014.

But that said, the verdict is still out whether SB 863 is improving or worsening the state’s workers’ compensation marketplace. “It’s too early to tell if SB 863 has made any positive improvements to the state’s workers’ compensation environment,” said Bryan Bogardus, president of California-based CompWest Insurance Co., a growing workers’ compensation carrier. He predicts that, by 2017, CompWest and other insurers will know if the workers’ compensation reform legislation improved the marketplace for insurers and insureds. If that happens, Bogardus said, CompWest plans to boost premium volume by hiring four business development consultants to assist producers submit more business in the carrier’s four target areas: healthcare, hospitality, professional services and manufacturing.

While California’s huge workers’ compensation market shows signs of eroding the 105% combined ratio that the 238 carriers collectively compiled in 2014, it will be a tough road to reach underwriting profitability anytime soon. The combined ratio marked the seventh consecutive year that the state’s workers’ compensation market had a combined ratio above 100%.

The Palm Desert Patch reports that the owner of a Thousand Palms landscaping company cheated insurance companies out of hundreds of thousands of dollars in a fraud scheme rooted in the misclassification of workers, a prosecutor said Thursday, but the defendant’s attorney argued his client was a gardener, not a bookkeeper, and had no hand in manipulating figures.

“This defendant had office managers and brokers signing off on paperwork so that if he got caught, he could say, ‘It was an accident, a mistake,”’ Riverside County Deputy District Attorney Frank Donzanti said in his opening statement in the trial of Jesse Garcia Contreras. “All the while, he was continuing this scam and not playing by the rules.”

Contreras, 59, of Indio is charged with six felony counts of workers’ compensation insurance fraud that carries a maximum penalty of 20 years behind bars. Prosecutors allege he ripped off five companies to the tune of $611,960. Donzanti outlined a case pointing to willful deception, perpetrated year after year. According to the prosecutor, Contreras became the co-proprietor of Sunshine Landscape in 2001, handling all administrative functions. Donzanti alleged that Contreras was trying to find ways early on to save on payroll, eventually finding the means by lying about his employees’ functions.

“The key to success was, don’t tell the insurance companies you have tree trimmers on the job,” the prosecutor said. “The workers comp premiums for tree trimmers are triple what they are for general landscapers. Tree trimmers work at altitude They can fall, crack their head open or break their neck.”

According to Donzanti, from 2008 to 2013, Contreras “hid the fact” that he had tree trimmers in the field by changing the human resources codes assigned to employees and ultimately reported to the state, as well as the insurance companies. “There was no disclosure of tree trimmers,” he said. “And when there were red flags raised and year-end audits coming, guess what — the defendant switched to a different insurance carrier.”

Donzanti said holding down overhead by intentionally misclassifying his workforce afforded Contreras the opportunity to “outbid other landscapers playing by the rules,” assuring Sunshine Landscape would get lucrative contracts from Coachella Valley homeowners’ associations.

Defense attorney Jeff Moore characterized the government’s case as based on misplaced “assumptions” and confusion over business practices. Moore took jurors through a lengthy explanation of Sunshine Landscape’s history and his client’s duties, noting that Contreras was “in charge of field operations,” not accounting.

“He was not the insurance procurer,” Moore said. “He was the guy who went out and got the contracts.” According to the attorney, Contreras had worked for Sunshine nearly three decades as a gardener before he got together with two other men — Santos Alvarado and Richard Calhoun — to buy the company in 2001 from desert businessman Robert Lee Sandifer. The trio did business as Sunshine Landscape but were incorporated as CAC.

The firms allegedly victimized were the State Compensation Insurance Fund, CastlePoint Insurance, Liberty Insurance, Lumberman’s Insurance and Zenith Insurance.

While the average cost per workers compensation claim increased in 2014, the number of prescriptions per injured worker and the average morphine equivalent dose per script declined, Coventry Workers’ Comp Services said Tuesday.

In 2014 the significant increase in generic AWP was the primary driver of increased prescription cost per claim. The most heavily impacted drug classes include narcotics, NSAIDs, and muscle relaxants.

Meanwhile, the number of prescriptions per injured worker decreased 5%, narcotic utilization decreased 7.4% and the average morphine equivalent dose per script decreased 4.5%, according to the analysis. Medications with the most significant decreases were hydrocdone-acetaminophen (Vicodin®) and oxycodoneacetaminophen (Percocet®), both narcotics. The rescheduling of hydrocodone combination products from a Schedule III drug to a Schedule II drug in 2014 contributed to the decline in utilization. Vicodin®, the #1 prescribed medication had the largest decrease in utilization over the last three years with a 7.8% decrease.

The number of prescriptions increases as the claim ages, typically driven by adjuvant therapies such as anticonvulsants and antidepressants that support pain management and lessen narcotic burden.

Generic utilization increased 5.9% to 82% last year, according to the analysis. But the inflated AWP drove up costs of frequently prescribed generic medications, resulting in an increased prescription cost per claim. The impact of this year’s inflated AWP has been noted throughout the report. The release of generic Cymbalta® in 2013 drove the significant reduction in spend for antidepressants

According to Coventry, compound drugs accounted for 7.7% of all managed drug spending and 28.1% of all unmanaged drug spending in 2014, up from 4.5% and 20.1%, respectively, in 2013. “The rising use of compound medications in workers compensation has created greater risks to injured worker safety and has become a cost burden on the system,” the analysis states. Despite direction from medical guidelines, compound utilization as a primary line of therapy continued to grow. In addition,new formulations were being used to target gaps in medical guidelines and formularies. In California the percentage of workers receiving compounded drugs in unmanaged cases was around 10%, and in managed cases 2%.

More states are adopting closed formularies in an effort to control pharmacy cost and utilization. Three states have already taken steps to introduce workers’ compensation closed formularies in 2015: Arkansas, Tennessee, and California. If adopted, the total number of states with implemented closed formularies and/or “preferred drug lists” will be eight.

It’s no secret that workers’ compensation patients are frequently being prescribed narcotics and other medications that can create risk for dependence and misuse. Urine Drug Monitoring (UDM) is a clinical decision-support tool that can help reduce these risks, ensure compliance with the prescribed drug regimen, and promote patient safety. However, incorporating UDM into the narcotic management of injured workers has not been an easy task for payors. Many of the medical treatment guidelines commonly referenced in workers’ compensation do not provide enough detail or have conflicting recommendations concerning the frequency or type of testing.

The California Senate voted unanimously Monday to confirm Juliann Sum as Chief of the Department of Industrial Relation’s Division of Occupational Safety and Health (also known as Cal/OSHA). The Senate also voted unanimously Monday to confirm Art R. Carter as chairperson of the Occupational Safety and Health Appeals Board (OSHAB). As Cal/OSHA Chief, Sum oversees programs that protect over 18 million workers from health hazards in almost every workplace in California.

Sum began serving as Acting Chief of Cal/OSHA in September 2013, and just over a year later, Governor Edmund G. Brown Jr. appointed her as Chief. Sum joined DIR in 2012 as special advisor to Director Christine Baker.

“Juliann’s track record at the DIR and with Cal/OSHA demonstrates her strong commitment to workplace safety,” Baker said. Sum’s extensive experience also includes work as a project director with the University of California, Berkeley, associate attorney with the Environmental Law Foundation, litigation associate with Carroll, Burdick and McDonough, and industrial hygienist and business representative with the International Brotherhood of Electrical Workers Local 1245.

Sum earned a Juris Doctor degree from University of California, Hastings College of the Law, a Master of Science degree in environmental health sciences from the Harvard School of Public Health, and a Bachelor of Science degree in biophysics from Brown University.

Art Carter was first appointed to OSHAB by Governor Arnold Schwarzenegger in 2009. OSHAB resolves appeals from private and public-sector employers regarding citations issued by Cal/OSHA for alleged violations of workplace safety laws.

Governor Brown appointed Carter board chair in 2011. Previously, Carter owned and served as the legislative advocate for Art Carter and Associates from 1984 to 2004. From 1976 to 1983, he served as chief of Cal/OSHA.

A 24-count federal indictment has been filed against four defendants for a conspiracy to unlawfully enrich themselves with millions of dollars by submitting fraudulent claims for tests allegedly performed at the El Centro Medical Clinic in El Centro, California

The indictment alleges that defendants Paul Robinson, Levon Tovmassian, Hasmik Senekerimyan, and Nazar Muradyan, conspired with Gevorg Kupelian and others to commit health care fraud and pay kickbacks for Medicare patient referrals. Kupelian – who already pleaded guilty and was sentenced in a related case — opened the El Centro Clinic and acted as its organizer and leader. He has admitted he recruited a doctor to serve as a “front” for the Clinic in order to use his Medicare billing number to submit fraudulent Medicare claims. Kupelian also admitted he recruited and paid “cappers” to find senior citizens in El Centro and convince them to go to the Clinic for a gauntlet of tests without justification or proper supervision by a physician.

The indictment alleges that Robinson, a licensed physician, acted as the nominal owner of the El Centro Clinic and that the conspirators submitted claims for the treatment of more than 1,100 Medicare beneficiaries under Robinson’s Medicare billing number between September 2012 and February 2014. The El Centro Clinic generated over $2.7 million in claims to Medicare, which resulted in payments of approximately $1.3 million to Robinson. Robinson is accused of paying 75% of the Medicare reimbursements to Kupelian. Kupelian, in turn, paid Tovmassian, Senekerimyan, Muradyan, and others for various activities and claims designed to make the Clinic appear to be a legitimate medical service provider. Robinson is also charged with obstructing a federal audit by submitting falsified and misleading medical records.

Tovmassian, the indictment alleges, was hired to pose as a Physician’s Assistant who saw and treated patients at the Clinic despite not having the requisite license from the State of California. Tovmassian also allegedly ordered unnecessary medical tests that were billed to Medicare under Robinson’s billing number. Additionally, Tovmassian is charged with making a false statement to one of the investigating agents.

Senekerimyan is accused of completing fraudulent allergy test order forms and falsely claiming to administer allergy tests at the El Centro Clinic. Her husband, Muradyan, is charged with falsely claiming to drive Senekerimyan from their home in North Hollywood, California to the El Centro Clinic several times a week for her to administer allergy tests when, in fact, no tests were ever performed. Senekerimyan and Muradyan are also charged with obstructing a health care crime investigation.

On April 6, 2015, U.S. District Court Judge Cynthia Bashant sentenced Kupelian to 30 months’ of custody and ordered he pay restitution in the amount of $964,011. Kupelian is currently scheduled to self-surrender on July 8, 2015. The defendants will be summoned to appear before U.S. District Court Judge Cathy Ann Bencivengo for an arraignment on the indictment.