The 9th Circuit Court of Appeal, which presides over California and other western states, just ruled that the Department of Justice cannot spend money to prosecute people who violate federal drug laws but are in compliance with state medical marijuana laws. The ruling in US v Steve McIntosh et. al, prevents federal law enforcement from funding prosecution of anyone who obeys a state’s medical marijuana laws.

Despite laws passed by various states to the contrary, the sale of marijuana is still illegal under federal law. However, in 2014 congress passed a budget rule which prohibits the Department of Justice from using federal funds to interfere in the implementation of state marijuana regulations.

The ruling involves ten cases that are consolidated interlocutory appeals and petitions for writs of mandamus arising out of orders entered by three district courts in two states within our circuit. All Appellants have been indicted for various infractions of the federal Controlled Substances Act (CSA). They have moved to dismiss their indictments or to enjoin their prosecutions on the grounds that the Department of Justice (DOJ) is prohibited from spending funds to prosecute them.

In McIntosh, five codefendants allegedly ran four marijuana stores in the Los Angeles area known as Hollywood Compassionate Care (HCC) and Happy Days, and nine indoor marijuana grow sites in the San Francisco and Los Angeles areas. These codefendants were indicted for conspiracy to manufacture, to possess with intent to distribute, and to distribute more than 1000 marijuana plants.

In Lovan, the U.S. Drug Enforcement Agency and Fresno County Sheriff’s Office executed a federal search warrant on 60 acres of land located on North Zedicker Road in Sanger, California. Officials allegedly located more than 30,000 marijuana plants on this property. Four codefendants were indicted for manufacturing 1000 or more marijuana plants and for conspiracy to manufacture 1000 or more marijuana plants.

In almost all federal criminal prosecutions, injunctive relief and interlocutory appeals will not be appropriate. Federal courts traditionally have refused, except in rare instances, to enjoin federal criminal prosecutions.

Here, however, the Court said that Congress has enacted an appropriations rider that specifically restricts DOJ from spending money to pursue certain activities. It is "emphatically . . . the exclusive province of the Congress not only to formulate legislative policies and mandate programs and projects, but also to establish their relative priority for the Nation. Once Congress, exercising its delegated powers, has decided the order of priorities in a given area, it is for . . . the courts to enforce them when enforcement is sought." A "court sitting in equity cannot ‘ignore the judgment of Congress, deliberately expressed in legislation.’"

The Appropriations Clause plays a critical role in the Constitution’s separation of powers among the three branches of government and the checks and balances between them. "Any exercise of a power granted by the Constitution to one of the other branches of Government is limited by a valid reservation of congressional control over funds in the Treasury." The Clause has a "fundamental and comprehensive purpose . . . to assure that public funds will be spent according to the letter of the difficult judgments reached by Congress as to the common good and not according to the individual favor of Government agents."

The ten cases were therefore remanded back to the district courts. "If DOJ wishes to continue these prosecutions, Appellants are entitled to evidentiary hearings to determine whether their conduct was completely authorized by state law, by which we mean that they strictly complied with all relevant conditions imposed by state law on the use, distribution, possession, and cultivation of medical marijuana. We leave to the district courts to determine, in the first instance and in each case, the precise remedy that would be appropriate."

Despite the outcome, however, Judge Diarmuid O'Scannlain wrote that medical marijuana purveyors should not feel immune from federal law. "Congress could restore funding tomorrow, a year from now, or four years from now," he wrote, "and the government could then prosecute individuals who committed offenses while the government lacked funding." ...

In 2004, Andrew Hernandez, a CHP sergeant in Valencia, slipped and fell while assisting in the pursuit of a suspect who had fled on foot, injuring his low back and cervical spine. Hernandez and the CHP through its adjuster State Compensation Insurance Fund agreed that his injuries were AOE-COE and that he was 35 percent disabled and would need future medical treatment for his low back.

The principal issue in the proceeding before the WCJ concerned payments for temporary total disability. In a February 2013 decision the WCJ found that Hernandez was temporarily totally disabled from July 18, 2011 to November 8, 2011. Although Hernandez received payments equal to the full amount of his salary during that period, a portion of those sums was charged against his accrued annual vacation leave.

Hernandez petitioned in January 2015 for recovery of the full amount he should have received as paid leave-of-absence benefits under section 4800.5, plus penalties for unreasonable delay under section 5814, subdivision (a), and interest.

The WCJ agreed Hernandez was entitled to the relief he had requested; but the Workers’ Compensation Appeals Board in a divided decision after reconsideration, rescinded her ruling, concluding (1) Hernandez’s claim for reimbursement of accrued leave involved employee benefits and was outside the jurisdiction of the Board; (2) the February 1, 2013 award by the WCJ barred Hernandez’s 2015 claim for additional section 4800.5 payments under the doctrine of res judicata; and (3) there was no basis for awarding a penalty because Hernandez had received the full amount of his salary during the period of his temporary disability.

The Court of Appeal in the published opinion of Hernandez v. WCAB disagreed, and annuled the decision of the Board and remand the matter with directions to award Hernandez additional compensation under section 4800.5 in an amount equal to the value of annual leave used during the disputed period of temporary disability and to hear and determine the issue of penalties and interest.

The Board has exclusive jurisdiction over all proceedings for "the recovery of compensation, or concerning any right or liability arising out of or incidental thereto" (§ 5300, subd. (a)), as well as for "the enforcement against the employer or an insurer of any liability for compensation imposed upon the employer by this division in favor of the injured employee, his or her dependents, or any third person." (§ 5300, subd. (b); see also § 5301 [Board "is vested with full power, authority and jurisdiction to try and determine finally all the matters specified in Section 5300 subject only to the review by the courts as specified in this division:].)

Section 4800.5, subdivision (d), specifically confers Board jurisdiction to award and enforce payment of the benefits provided CHP officers by that provision of the workers’ compensation laws.

On the issue of jurisdiction over the 4800.5 issue the court went on the say that "In light of this clear violation of Hernandez’s rights under the workers’ compensation laws, the argument the Board lacks jurisdiction to provide a remedy borders on sophistry."

On the issue of the source of benefits the court concluded that "There can be no dispute that section 4800.5 obligated the CHP to pay Hernandez his full salary, in lieu of disability payments, while he was temporarily disabled..." ...

Aetna announced that it will walk away from more than two-thirds of the ObamaCare exchange markets it participated in this year, dropping from 778 counties to 242 counties next year. Aetna will maintain a presence in just four states, it says - Delaware, Iowa, Nebraska and Virginia - down from 15 states this year. Aetna covered about 838,000 people through the Obamacare exchange in its 15 states as of June 30.

Aetna, the third largest insurance company in the U.S. says the market's financials are unworkable, pointing out that it has lost more than $430 million since January 2014 on its individual products. It's not the only major player to walk away from the Obamacare exchanges.

"More than 40 payers of various sizes have similarly chosen to stop selling plans in one or more rating areas in the individual public exchanges over the 2015 and 2016 plan years," CEO Mark Bertolini said in a statement. "As a strong supporter of public exchanges as a means to meet the needs of the uninsured, we regret having to make this decision."

Aetna's announcement comes on the heels of an announcement by Anthem that, in a reversal of expectations, it is now projecting mid-single digit losses on the individual plans it sells on the exchanges. Humana said it would dial back its participation on the exchanges from 15 states to 11 earlier this month. UnitedHealth Group plans to remain on "three or fewer exchange markets," its chief executive, Stephen Hemsley, said on an earnings call in July. Cigna has said that it is losing money on the exchanges, but the insurer is planning to expand its marketplace presence to three new states in 2017.

Like other insurers, the company blamed its withdrawal on a pool of exchange participants that has turned out to be heavier users of their insurance plans than previously predicted. Insurers need healthy plan members to off set sick patients to balance the books.

The move also comes amid a fight between Aetna and the U.S. Justice Department over the government's lawsuit attempting to block the company's acquisition of insurer Humana. The government has said the deal violates anti-trust laws, but Aetna has said it will lower costs and improve choice.

One major issue is the risk pool - the balance of healthy and sick people who incur major medical costs. An analysis by the Centers for Medicare and Medicaid Services released last week showed that the per-month medical costs of members on the exchanges each month had barely budged between 2014 and 2015, suggesting that the risk pool was not getting worse.

Next year will be Obamacare’s fourth of providing coverage in the new markets. Aetna’s decision doesn’t affect people covered by the company this year, but when they look for coverage next year, they’ll need to pick a new insurer. The decision, which affects about 80 percent of Aetna’s customers in individual ACA exchange plans, raises the prospect that some consumers will only have one insurer to choose from when they buy 2017 coverage.

ObamaCare relies on privately run insurers to offer health plans that individuals can buy, often with government subsidies. About 11.1 million people were signed up for Obamacare plans at the end of March. The workers' compensation claims industry had believed that the availability of low cost insurance to those who were previously uninsured would reduce the filing of marginal industrial claims ...

The Office of Administrative Law has approved the DWC final version of the Medical Treatment Utilization Schedule (MTUS) regulations that updates the Chronic Pain Medical Treatment Guidelines and adopts Opioids Treatment Guidelines.

Following national reports of opioid misuse, DWC proposed issuing guidelines and began the process with a forum for public comment in 2014. The guidelines that have been added to the MTUS provide best practices in appropriately treating injured workers while also enhancing safety in using these medications to manage pain.

"We welcome this update and addition to the MTUS. The information in these Guidelines should aid in the provision of safer and more effective care for California’s injured workers," said DWC Executive Medical Director Dr. Raymond Meister. The changes to the MTUS Chronic Pain Medical Treatment Guidelines are set forth in section 9792.24.2, the Opioids Treatment Guidelines are set forth in section 9792.24.4, and the clarifying changes to the meaning of chronic pain are set forth in section 9792.23(b)(1) of the California Code of Regulations. The MTUS regulations went into effect on July 28, 2016 and will apply to any treatment requests made on or after July 29, 2016.

Christine Baker, Director of the Department of Industrial Relations, said, "These guidelines are an important step toward improving appropriate and safe care for workers."

DWC Acting Administrative Director George Parisotto said, "DWC will move forward shortly to initiate the process to update all of the current MTUS chapters. This process will include new chapters for chronic pain and opioids. Regardless, the new Chronic Pain Medical Treatment Guidelines and Opioids Treatment Guidelines should be consulted and relied upon when making treatment requests and determining the medical necessity of such requests."

As a result of this regulatory process, claims administrators now have more clearly articulated guidance on when to approve, or send a request for opioid prescription medication to UR for a more comprehensive review. And UR and the IMR reviewers have much better guidance on how to make decisions.

For example, the regulations have precise requirements for prescribing opioids for "sub-acute" pain which is defined as pain beyond one month following an injury. The physician should "screen for risk using validated tools" and "administer a baseline urine drug test (UDT) in the office toward the beginning of the subacute period," And this section concludes that "a history of opioid use disorder or substance use disorder is a relative contraindication to continued opioid use during the subacute phase."

The Executive Summary of the new Opioid guideline is 135 pages in length, and it is not a trivial task to understand the nuances of what has now become a more rigorous set of limits on unfettered prescribing of addictive pain medication. On this topic, the new regulation may be a game changer on the administration of medical care for pain patients ...

On September 9, 2015, Deputy U.S. Attorney General Sally Yates issued a memo entitled "Individual Accountability for Corporate Wrongdoing" to all of the Department of Justice's prosecutors and civil litigators.

Known now simply as the Yates Memo, this directive signaled a new priority in the DOJ's pursuit of corporate wrongdoing - a priority of pursuing, punishing and deterring individual wrongdoers in addition to their corporate employers.

"Fighting corporate fraud and other misconduct is a top priority of the U.S. Department of Justice. ... One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing." With these simple, straightforward words by Yates, health care executives and administrators were put on notice that the DOJ will continue to leverage and coordinate its extensive resources in order to identify and pursue individuals who may be responsible for corporate wrongdoing.

And now nearly a year later, some corporate executives have learned of the Yates Memo, and the equivalent federal policies that preceded it, the hard way.

On Oct. 25, 2007, more than 200 agents from the FBI and other federal and state agencies raided WellCare's headquarters and began a six-year investigation into the handling of state and federal money meant for behavioral care for the poor.

Investigators said that by law, WellCare was required to spend 80 percent of the money it received from the state of Florida for mental health services directly on patients. Twenty percent could go to administrative costs and profits. If less than 80 percent of the money was spent on care, it was to be returned to the state.

Authorities said WellCare funneled millions of dollars to a subsidiary, disguising expenditures to avoid returning unused money to the tune of $40 million. A whistle-blower's lawsuit put the figure at $400 million to $600 million.

In May 2009, WellCare agreed to pay $80 million to avoid conviction on a charge of conspiracy to defraud the Florida Medicaid program and the Florida Healthy Kids Corp., a program for low-income children. The same month, the company paid $10 million to settle a lawsuit from the Securities and Exchange Commission and was forced to restate several years of income downward as a result of the fraud. In June 2010, the company agreed to pay $137.5 million to the U.S. Department of Justice and other federal agencies to settle civil lawsuits.

But the federal effort went way beyond just the corporate identity. WellCare executives were ultimately indicted on charges of conspiracy to commit Medicaid fraud and making false statements. And a federal appeals court just upheld the convictions of four health care executives found guilty.

A 124-page opinion issued this month by a 11th Circuit U.S. Court of Appeals panel affirmed their convictions and found "overwhelming evidence" that the WellCare executives participated in a scheme to file false Medicaid expense reports.

Convicted were former WellCare CEO Todd Farha; former Chief Financial Officer Paul Behrens; William Kale, vice president of a subsidiary and former WellCare vice president Peter Clay.

The court found that the defendants overstated the amounts spent on Medicaid services on invoices, which allowed the company to keep millions of dollars in tax-subsidized funds that should have been refunded. The court rejected the defendants' argument that their actions were simple routine contractual and regulatory disagreements.

The advice for the non-convicted corporate executives that orchestrate schemes of health care fraud is simply this. Read the Yates Memo ! ...

Ng Kwok was employed as a restaurant manager and waiter by Nu Square Corporation, doing business as Har Lam Kee Restaurant. The owner of the restaurant was King Tak Cheung. Mr. Cheung is the older brother of Kwok’s wife, Yuk Lin Cheung.

On the morning of January 10, 2005, rain was coming into the restaurant dining area. Kwok went out to the backyard area with a ladder to inspect the leak. A few minutes later, Kwok was found lying on the ground unconscious with the ladder next to him. Kwok sustained a brain hemorrhage and was and continues to be paralyzed from the shoulders down. Since the accident, Kwok receives 24-hour medical care.

Ms. Cheung notified Mr. Cheung of Kwok’s accident by way of a phone call the day after it occurred. Mr. Cheung was then in Hong Kong for treatment of an illness.

Ms. Cheung, Kwok’s wife, filed a workers’ compensation claim for Kwok in July 2012, more than seven years after the accident. This came about because Ms. Cheung heard a radio program about workers’ compensation cases and began inquiring with attorneys.

The restaurant was insured for workers’ compensation by Farmers. Kwok’s claim first came to the attention of Farmers in July 2012. Farmers tried to verify coverage but it was difficult to verify the dates of coverage because it was a number of years since the date of injury. Coverage was ultimately confirmed through the Workers’ Compensation Insurance Rating Bureau.

Farmers investigated the claim to determine the owner of the business and the owner of the building. However, only limited information was obtained through the business owner and the owner of the building. The cause of the fall was unknown because no one actually witnessed the fall.

A copy of the application and a DWC-1 Employee’s Claim Form was served on Farmers on July 27, 2012. Farmers also confirmed that it signed a Notice Regarding Denial of Workers’ Compensation Benefits on behalf of Farmers dated March 21, 2013, and that Kwok’s claim was not denied within the 90-day period mandated in section 5402. Accordingly, Farmers agreed that section 5402 triggered the rebuttable presumption that the claim was compensable. However, Farmers did not treat Kwok’s claim as compensable.

The WCJ concluded that Kwok sustained a compensable injury and concluded that the statute of limitations did not bar Kwok’s claim. The WCJ did not address the issue of laches which was raised as an issue in the pre-trial conference statement. Farmers’ contention with respect to laches was that the "carrier was greatly prejudiced by the lengthy delay in filing an Application for Adjudication."

A petition for reconsideration was denied. The Court of Appeal sustained the WCAB in the published case of Truck Insurance Exchange v WCAB.

Within one working day of receiving notice or knowledge of injury, the employer is required to provide to the employee a claim form and a notice of potential eligibility for workers’ compensation benefits. The WCJ concluded that in this case this "was apparently never done." If an employer breaches this statutory duty, the limitations period is tolled for the period of time that the employee remains unaware of his rights. (Kaiser Foundation Hospitals v. Workers’ Comp. Appeals Bd. (1985) 39 Cal.3d 57, 60.)

Notice to or knowledge of a workplace injury on the part of the employer is deemed to be notice to or knowledge of the insurer. Since Farmers is deemed to have known of the injury the day after it occurred, Farmers cannot show delay in receiving notice of the claim, which is an essential element of laches ...

The WCIRB Governing Committee voted to authorize the WCIRB to submit a January 1, 2017 Advisory Pure Premium Rate Filing to the California Insurance Commissioner.

The Filing will propose advisory pure premium rates that average $2.26 per $100 of payroll, which is 11.0% less than the corresponding industry average filed pure premium rate of $2.54 as of July 1, 2016, and 2.6% less than the average approved July 1, 2016 advisory pure premium rate of $2.32. This marks the fourth consecutive Filing that the WCIRB has advised a decrease in pure premium rates, totaling -18.6% when compared to the average of the approved January 1, 2015 advisory pure premium rates.

In his presentation to the Governing Committee, WCIRB Chief Actuary Dave Bellusci noted that the indicated January 1, 2017 average advisory pure premium rate, while only slightly below the July 1, 2016 average approved pure premium rate, is -7.5% from the average January 1, 2016 pure premium rate. Mr. Bellusci also identified some of the factors contributing to the reduced indicated pure premium rate:

1) Medical losses on 2014 and prior accident years continue to develop favorably
2) Medical claim costs on 2015 accidents are emerging at lower than projected levels
3) Indemnity claims are settling at quicker rates than in the recent past
4) Forecasts of future wage level growth in California have increased

Despite these positive trends, Mr. Bellusci acknowledged that post-SB 863 loss adjustment expenses (LAE) and indemnity claim frequency continue to emerge higher than projected, but these increases have been more than offset by the favorable medical loss trends.

The WCIRB will submit its January 1, 2017 Pure Premium Rate Filing to the California Department of Insurance (CDI) on or around August 19, 2016. The CDI will schedule a public hearing to consider the Filing and once the Notice of Proposed Action and Notice of Public Hearing is issued, the WCIRB will post a copy in the Publications and Filings section of the website.

For More Information please review the Governing Committee Meeting Presentation - August 10, 2016 and the Regulatory and Pure Premium Rate Filings ...

John Franco was working on a film set when a special effects accident caused him to suffer serious injuries. Franco’s injuries included pelvic crush injuries, a broken hip, fractures to both femurs, crush injuries to both knees, broken tibias and fibulas, broken ribs, a punctured lung, and soft tissue injuries to his face.

His employer had two primary insurance policies with Fireman’s Fund Insurance Company, and an excess insurance policy with Ace American Insurance Company. The injured worker sued, Fireman’s Fund defended the case, and the case eventually settled with the participation of and contributions from both insurers.

Fireman’s Fund defended the Warner Brothers entities in the Francos’ lawsuit. The Francos made settlement demands within the limits of the Fireman’s Fund policies. According to Ace American’s complaints, the demands were reasonable and supported by substantial evidence, but Fireman’s Fund "failed and/or refused to pay those demands within [the insurance policies’] limits." Ultimately the Francos settled their lawsuit - for an amount substantially in excess" of the limits of the Fireman’s Fund policies. According to Ace American, Fireman’s Fund "consented to the settlement and contributed to it", and Ace American contributed the amounts in excess of the Fireman’s Fund policies’ limits. Following the settlement, the case was dismissed with prejudice.

Ace American then sued Fireman’s Fund for equitable subrogation, alleging that the injured worker initially offered to settle his case within the limits of the Fireman’s Fund policies, and that Fireman’s Fund unreasonably rejected those settlement offers. Ace American alleged that as a result, it was required to contribute to the eventual settlement, which exceeded the limits of the Fireman’s Fund policies.

Fireman’s Fund demurred, arguing that the rights of an excess insurer such as Ace American derive from the rights of the insured, Warner Brothers. As such, an excess insurer may only sue for equitable subrogation if there has been a judgment against the insured that exceeds the limits of the primary policy. Because the Franco lawsuit settled and there was no judgment against Warner Brothers, Fireman’s Fund argued, Ace American could not sue for equitable subrogation. The trial court sustained the demurrer without leave to amend and dismissed the case, and Ace American appealed.

On appeal the question presented is whether Ace American has stated viable causes of action for equitable subrogation and breach of the duty of good faith and fair dealing, or whether the lack of a judgment in the employment injury case bars Ace American’s claims. The court of appeal reversed the dismissal in the published case of Ace American Insurance v Firemans Fund.

There are conflicting decisions from different divisions of the Second District court of appeal on this issue. In Fortman, supra, 221 Cal.App.3d 1394, Division One held that an equitable subrogation action could proceed against a primary insurer that initially breached its duty to settle a case within policy limits, resulting in a settlement that exceeded policy limits. By contrast, in RLI, supra, 141 Cal.App.4th 75, Division Five held that an equitable subrogation action could not proceed under the same circumstances.

The question is whether Ace American has stated viable causes of action for equitable subrogation and breach of the duty of good faith and fair dealing, or whether the lack of a judgment in the employment injury case bars Ace American’s claims.

This division of the Second District Court of Appeal found that because Ace American, the excess insurer, alleged it was required to contribute to the settlement of the underlying case due to the primary insurer’s failure to reasonably settle the case within policy limits, the lack of an excess judgment against the insured in the underlying case does not bar an action for equitable subrogation and breach of the duty of good faith and fair dealing ...

Paraplegic patients recovered partial control and feeling in their limbs after training to use a variety of brain-machine interface technologies, according to new research published on in the journal "Scientific Reports" and reported by Reuters Health.

The researchers followed eight patients paralyzed by spinal cord injuries as they adapted to the use of the technologies, which convert brain activity into electric signals that power devices such as exoskeletons and robotic arms.

Between January and December 2014, the patients used virtual reality scenarios and simulated tactile feedback exercises to train their minds.

"To our big surprise, what we noticed is that long-term training with brain-machine interfaces triggers a partial neurological recovery," said Dr. Miguel Nicolelis, a professor of neuroscience and biomedical engineering at Duke University, according to a statement from Duke.

"What we didn't expect and what we observed is that some of these patients regained voluntary control of muscles in the legs below the level of the lesion and regained sensitivity below the level of the spinal cord injury," Nicolelis said.

The researchers believe that the training in effect rewired the circuitry in the brain, giving it new ways to communicate with parts of the injured body.

"We may actually have triggered a plastic reorganization in the cortex by re-inserting a representation of lower limbs and locomotion in the cortex," Nicolelis said.

"These patients may have been able to transmit some of this information from the cortex through the spinal cord, through these very few nerves that may have survived the original trauma. It’s almost like we turned them on again," Nicolelis said.

"It is very encouraging," Dr. Ron Frostig, a professor of neurobiology and behavior at the University of California, Irvine, said in an interview.

"It shows that not only can we train them to use their thinking to activate something to help them like a robotic arm, but now we can improve their situation even further." ...

Before a drug can be marketed, it has to go through rigorous testing to show it is safe and effective. Surgery is different. The Food and Drug Administration does not regulate surgical procedures.

So what happens when an operation is subjected to and fails the ultimate test - a clinical trial in which patients are randomly assigned to have it or not?

Spinal fusion is an operation that welds together adjacent vertebrae to relieve back pain from worn-out discs. Unlike most operations, it actually was tested in four clinical trials. The conclusion: Surgery was no better than alternative nonsurgical treatments, like supervised exercise and therapy to help patients deal with their fear of back pain. In both groups, the pain usually diminished or went away.

The studies were completed by the early 2000s and should have been enough to greatly limit or stop the surgery, says Dr. Richard Deyo, professor of evidence-based medicine at the Oregon Health and Sciences University. But that did not happen,according to an article in the New York Times. Instead, spinal fusion rates increased - the clinical trials had little effect.

Spinal fusion rates continued to soar in the United States until 2012, shortly after Blue Cross of North Carolina said it would no longer pay and some other insurers followed suit. "It may be that financial disincentives accomplished something that scientific evidence alone didn’t," Dr. Deyo said.

Other operations continue to be reimbursed, despite clinical trials that cast doubt on their effectiveness.

In 2009, the prestigious New England Journal of Medicine published results of separate clinical trials on a popular back operation, vertebroplasty, comparing it to a sham procedure. They found that there was no benefit - pain relief was the same in both groups. Yet it and a similar operation, Kyphoplasty, in which doctors inject a sort of cement into the spine to shore it up, continue to be performed.

Dr. David Kallmes of the Mayo Clinic, an author of the vertebroplasty paper, said he thought doctors continued to do the operations because insurers pay and because doctors remember their own patients who seemed better afterward.

The latest controversy - and the operation that arguably has been studied the most in randomized clinical trials - is surgery for a torn meniscus, a sliver of cartilage that acts as a shock absorber in the knee. It’s a condition that often afflicts middle-aged and older people, simply as a consequence of degeneration that can occur with age and often accompanying osteoarthritis. The result can be a painful, swollen knee. Sometimes the knee can feel as if it catches or locks. So why not do an operation to trim or repair the torn tissue?

About 400,000 middle-aged and older Americans a year have meniscus surgery. And here is where it gets interesting. Orthopedists wondered if the operation made sense because they realized there was not even a clear relationship between knee pain and meniscus tears. When they did M.R.I. scans on knees of middle-aged people, they often saw meniscus tears in people who had no pain. And those who said their knee hurt tended to have osteoarthritis, which could be the real reason for their pain.

Added to that complication, said Dr. Jeffrey N. Katz, a professor of medicine and orthopedic surgery at Harvard Medical School, is the fact that not everyone improves after the surgery. "It is not regarded as a slam-dunk," he said. As a result, he said, many doctors have been genuinely uncertain about which is better - exercise and physical therapy or surgery. That, in fact, was what led Dr. Katz and his colleagues to conduct a clinical trial comparing surgery with physical therapy in middle-aged people with a torn meniscus and knee pain.

The result: The surgery offered little to most who had it. Other studies came to the same conclusion, and so did a meta-analysis published last year of nine clinical trials testing the surgery. Patients tended to report less pain - but patients reported less pain no matter what the treatment, even fake surgery.

Then came yet another study, published on July 20 in The British Medical Journal. It compared the operation to exercise in patients who did not have osteoarthritis but had knee pain and meniscus tears. Once again, the surgery offered no additional benefit.

An accompanying editorial came to a scathing conclusion: The surgery is "a highly questionable practice without supporting evidence of even moderate quality," adding, "Good evidence has been widely ignored." ...

In what the Insurance Journal called a "success" Bermuda-based CastlePoint Holdings, Ltd. held its initial public offering of 7,682,238 common shares on March 23, 2007. The Company sold 7,562,738 shares and existing shareholders sold 119,500 shares at $14.50 per share. The IPO raised approximately $111 million. The New York-based Tower Group Inc. entered into a "strategic relationship" with CastlePoint in 2006. It became the sole shareholder of its subsidiary CastlePoint Re in February after it invested $15 million in the Company. Tower also has an 8.6 percent stake in CastlePoint.

Tower was made up of 10 insurance companies domiciled in six states that operated on a largely consolidated financial basis through an intercompany reinsurance pooling arrangement. Tower wrote workers' compensation business in California through Tower Insurance Company of New York, CastlePoint National Insurance Company, and Preserver Insurance Company.

Well things change.

The Tower Group’s troubles started emerging during 2013 when it announced that it had deficiencies of nearly $400 million in its aggregate policyholder loss reserves. That situation was compounded by accounting errors that resulted in the parent company, Tower Group withdrawing its previously filed consolidated financial statements for 2011 and 2012.

In September 2014, the Tower Group was acquired by ACP Re, a Bermuda reinsurer with ownership aligned with AmTrust Financial Services Inc. and National General Holdings Corp. While that acquisition substantially improved Tower’s situation by migrating policy and claims administration to more reliable data systems at AmTrust and National General, the volatility and deterioration of the pre-acquisition claims continued unabated through 2015.

By the end of 2015, the Tower Group reported additional loss reserve deficiencies well above $400 million.

During the past several weeks, the California Department of Insurance in close coordination with fellow regulators in Maine, Massachusetts, New Jersey, Florida, and New York, formed a plan with the owners of ACP Re and other related parties to consolidate the entire Tower Group into a single company, CastlePoint National Insurance Co., a California domiciled insurer, so policyholders of the entire Tower Group of insurance companies could be protected in single legal proceedings here in California.

Insurance Commissioner Dave Jones announced at the end of July that CastlePoint National Insurance Company, the sole remaining insurance company member of the Tower Group, was placed into conservation by order of the San Francisco Superior Court to protect policyholders and injured workers covered under policies issued by CastlePoint and the other member companies of the Tower Group.

Immediately after being appointed Conservator of CastlePoint, the Commissioner filed a motion seeking approval of a Conservation & Liquidation Plan for CastlePoint to further protect policyholders by deconsolidating CastlePoint from the Tower Group and providing for transactions that will bring in more than $200 million in new value for the benefit of policyholders and claimants.

The hearing on the motion to approve the Plan is set for 9:30 a.m., on Tuesday, September 13, 2016, at the San Francisco Superior Court.

...

Global pressure on health spending is forcing the $1 trillion-a-year pharmaceutical industry to look for new ways to price its products - charging based on how much they improve patients' health, rather than how many pills or vials are sold.

And according to the article in Reuters Health, some experiments in pricing have already been made.

But shifting the overall industry to a new model requires improvements in data collection and a change in thinking, say drug pricing experts. "Eventually, we are going to get there," said Kurt Kessler, managing principal at ZS Associates in Zurich, which advises companies on sales and marketing strategies. "But it is a long, tough slog because it's difficult to get the right data and agree on what the right outcomes are to measure."

In the past, governments and insurers made room in their budgets for new drugs by switching to cheap generics as patents expired on older drugs. But today generics already account for nearly nine out of every 10 prescriptions in key markets like the United States, and fewer big drugs are going off patent.

That leaves little headroom for pricey new medicines even as they come to market in growing numbers. The U.S. Food and Drug Administration has already approved 16 new drugs this year.

Investors got a wake-up call on the issue last recently when $10 billion was lopped off the market value of Novo Nordisk as the world's biggest diabetes firm warned of falling U.S. prices.

Pharmacy benefit managers administering U.S. health plans are pushing back hard by excluding some drugs deemed too expensive - including Novo’s - leading to a crunch in areas like diabetes, a disease that now accounts for 12 percent of global healthcare spending.

The Danish group has an unusually high exposure to the U.S. market, but it is not alone in signaling tough times ahead.

The chief executives of Novartis, Eli Lilly and GlaxoSmithKline have all warned recently that pricing will become increasingly challenging across the board.

Accounting for 40 percent of global drug sales, the fate of the U.S. market is front and center in the minds of drug company executives, some of whom privately admit to preparing for a "confrontational" period in relations with politicians.

Novartis CEO Joe Jimenez believes drugmakers must develop value-for-money pricing models, like the performance-based deal the Swiss drugmaker recently struck with two U.S. insurers for its new heart failure drug. Under that deal, payments for Novartis' Entresto pill are to be calculated in future based on the proven reduction in the proportion of the insurers' patients admitted to hospital for heart failure, not on the number of pills they consume.

The aim is a flexible pricing system that rebates healthcare providers when a drug doesn’t work as planned and charges more when it works well.

Europe is in the vanguard of such moves. Britain agreed an early performance-based deal for a Johnson & Johnson (JNJ.N) blood cancer drug back in 2007 and Italy also uses patient data to pay for cancer drugs based on actual patient responses.

GSK CEO Andrew Witty sees this outcomes-based approach slowly becoming the norm in more disease areas and geographies. "Whoever wins the election in the U.S., and also in Europe, we will see those conversations play out over the next few years," he told Reuters. "I am not particularly expecting anything dramatic in 2017. I would say it is worth keeping an eye open for evolution of change, probably in ’18 and ’19."

The pharmaceutical industry's European trade association is already discussing ways to shift to outcomes pricing, following price curbs in Germany that have caused some companies to pull products off the market, and effective rationing in Britain, where strict cost-effectiveness rules apply.

Authorities in Asia's two biggest markets, China and Japan, are also intervening in new ways to cap runaway costs.
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Wearable technology is a category of technology devices that can be worn by an individual to collect tracking information related to health and fitness. Some wearables have small motion sensors to report data back to the user. Today, many wearable devices are embedded in jewelry, clothing, shoes, bionic suits and smart helmets. These wearables use sophisticated biosensors to track metrics such as physical activity, heart rate, fatigue, stress and mood.

Wearables may be one of the fastest growing technology sectors, predicted to hit $10 billion annually within the next three years. And according to an article in Property Casualty 360, they’re poised to become a trend in the management of injured workers. And the workers’ compensation industry is staking a claim in wearable technology.

Employers and payers already are adopting wearable technology in the workplace to reduce costs and improve safety and productivity through injury prevention and recovery. Applications can range from tracking locations to reduce the risk of injury in unsafe areas, to monitoring posture and compliance with ergonomic use of equipment, to using smart wheelchairs and exoskeletons to improve and restore mobility.

The RIMS 2016 presentation, "The New Game Changer in Managing Worksite Health: Wearable Technology," identified four main categories of wearable technology with significant potential for workers’ compensation.

1) Postural Devices: The use of postural devices in the workplace is intended to positively remind employees to be aware of their posture throughout the day. Workers are sent an alert if they repeatedly slouch or deviate from an ergonomically correct position. This assistive technology benefits employees by reminding them to stretch or adjust periodically while also helping to prevent ergonomic-related workers’ compensation claims.

2) Activity Trackers: If a physical therapist has recommended physical activities such as daily walks to rebuild muscle strength, the case manager can track the degree of activity of that injured worker. If the tracking device records lower physical activity levels than prescribed, intervention and counseling can take place to improve compliance or develop a different treatment plan.

3) Exoskeletons: Injured workers such as paraplegics, amputees, and individuals with disabilities that include gait impediments can reclaim a part of their lives they thought was lost forever: walking. Recently approved by the FDA, Indego exoskeletons hold the potential to transform recovery in workers’ compensation claims by expanding the injured worker’s environment and level of independence, as well as increasing productivity and reducing the need for in-home care and other assistive devices.

4) Location trackers. In industries such as construction and mining, location trackers are an effective tool for injury prevention along with employee communication. From a prevention perspective, trackers can be set up to alert employers when workers enter unsafe areas. From a communications perspective, trackers allow employers to locate their employees in the event of an emergency for evacuation purposes. In addition, employees who are in danger can have a panic button feature that lets supervisors know immediately that they need help while transmitting their location.

Wearables are already beginning to improve the way workers’ compensation injuries are managed and prevented, getting injured workers healthy and back on the job quickly and safely. Although the industry is currently in the "early adopter" stage of incorporating wearables into its tool kit, we can expect to see considerable transformation in medical management and case management within the next several years ...

Between 2008 and 2015 at least 9,000 companies have left California for a better business environment, according to the 378 page study by Spectrum Location Solutions titled, California’s Forty Year Legacy of Hostility to Business.

Joseph Vranich, president of site selection consultants Spectrum Location Solutions (VLS) in Irvine, places the blame on the Golden State’s "hostile" business environment.

The 2015 Chief Executive Magazine annual survey of business climates was completed by 511 CEOs across the U.S. States were measured across three key categories to achieve their overall ranking: Taxes and regulations, quality of the workforce, and living environment, which includes such considerations as quality of education, cost of living, affordable housing, social amenities and crime rates.

For the 11th year in a row, Chief Executive Magazine found California to be the "worst state for business in 2015." This placement is not "near the worst" but actually "THE WORST" ranked as 50 out of 50, the lowest rank possible for each of 11 years. CEO’s comments include: "California could hardly do more to discourage business if that was the goal." "The state regulates and taxes companies unreasonably." "California is getting worse, if that is even possible."

But despite the growing anti-business environment, California’s economy grew for decades due to wonderful scenery and climate, a workforce with technical expertise, and trade access to Asian nations.

But since the start of the Great Recession and accelerating after Brown’s election as governor in 2009, a mass exodus of businesses from the not-so-Golden State to more "friendly" locations like Texas and Nevada occurred.

Between 2011 and 2012, Bureau of Labor Statistics data compiled by Bloomberg News indicated that California lost ground in a related category: the number of business establishments: "There were 1.3 million businesses in California at the end of 2012, 5.2 percent fewer than in the previous year (that’s about 73,000 fewer)." Florida, another state hard hit by the bursting of the real estate bubble, and the state with the second most businesses, added new businesses at the nation’s seventh-fastest rate.

The top 10 states that California businesses have relocated to over the last seven years are in the following order: (1) Texas; (2) Nevada; (3) Arizona; (4) Colorado; (5) Washington; (6) Oregon; (7) North Carolina; (8) Florida; (9) Georgia; and (10) Virginia.

Los Angeles was at the top of the list of the 10 California counties that suffered the highest number of disinvestment events. L.A. was followed by: (2) Orange, (3) Santa Clara, (4) San Francisco, (5) San Diego, (6) Alameda, (7) San Mateo, (8) Ventura, (9) Sacramento, and (10) Riverside counties.

The Report claims that the California government has a "dismissive attitude toward any suggestion that California has become economically uncompetitive." One example in 2014 when Toyota Motor Corp. announced it will move its Torrance headquarters to Plano, Texas, Gov. Brown revealed his aloofness towards business challenges by saying, "We’ve got a few problems, we have lots of little burdens and regulations and taxes, but smart people figure out how to make it."

The Wall Street Journal came back with this: "California’s problem is that smart people have figured out they can make it better elsewhere."

Another example of concerns is evident in a comment by Ehsan Gharatappeh, Chief Executive Officer of CellPoint Corp. of Costa Mesa. In early 2015, when launching a new facility in Fort Worth, he said in testimony in Sacramento "Even if California were to eliminate the state income taxes tomorrow, that still would not be enough to put my manufacturing operations back in California."

The Report concludes that "business interests have provided an encyclopedic accounting of California’s difficult environment to Gov. Brown and the Legislature to no avail." Well, SB 863 made workers' compensation a little bit less costly. But in the big scheme of things will it make any difference and stop dsinvestment in California? ...

A 47-year-old man who had his doctor’s license revoked after being convicted in 2013 of sexually abusing a patient at a Northridge hospital is alleged to have violated the terms of his probation by continuing to perform medical exams.

In 1998, the Medical Board of California issued a Physician's and Surgeon's Certificate to Kevin Pezeshki, M.D. He was a 1995 graduate of the University of Southern California Keck School of Medicine.

On May 24, 2013, in the case of The People of the State of California v. Kevin Pezeshki, Los Angeles County Superior Court case number LA071845 he was charged with three counts of sexual penetration by a foreign object against victims Carmen C. and Cindy T., and three counts of sexual battery by fraud against both victims, all violations of the Penal Code.

Deputy District Attorney Rena Durrant said Pezeshki pleaded no contest on Sept. 11, 2013, to one felony count of sexual battery by fraud. Pezeshki was then sentenced to three years formal probation, a year of counseling and lifetime sexual offender registration.

After his conviction, the Medical Board of California filed an accusation against him for the purposes of revoking his medical certificate. Based upon his stipulated surrender of his license, it was revoked as of March 21, 2014.

Now Pezenshki is again in trouble with the law.

Los Angeles County Superior Court Judge Gregory Dohi revoked Pezeshki’s probation on June 27 based on allegations that the defendant performed an ultrasound on a female patient although he no longer has a medical license, the prosecutor said. The defendant also is reported to have conducted an ultrasound on another woman, the prosecutor added.

The two pregnant women who allegedly received the ultrasound examinations were patients at Saint Joseph Medical Clinic in Panorama City.

If found in violation of probation, Pezeshki could face up to four years in state prison. The probation revocation hearing is underway in the Van Nuys Superior Court ...

Former State Senator Leland Yee was indicted for corruption in office which included a 2013 incident in which Yee allegedly agreed to take $60,000 -- which he believed was coming from a National Football League team owner -- in exchange for his and another senator's vote on a bill dealing with workers' compensation insurance for pro athletes. Last February Yee was sentenced to five years in federal prison following his guilty pleas.

Yee was ensnared by an FBI investigation that spanned several years and led to the convictions of Raymond "Shrimp Boy" Chow, a reputed Chinatown mobster, Keith Jackson, a former school board president and fundraiser for Lee, and others.

The mobster, Kwok Cheung Chow, AKA Raymond Chow, AKA Ha Jai, AKA Shrimp Boy was sentenced on August 4 to life in prison following his convictions for racketeering, murder, money laundering, and conspiracy charges. Chow, 55, of San Francisco, served as the Dragonhead, or leader, of the San Francisco-based Chee Kung Tong organization.

On January 8, 2016, a federal jury found Chow guilty of criminal activities in connection with the racketeering organization and additional conspiracies. In all, Chow was charged with 162 counts including 125 counts of money laundering, aiding and abetting the laundering of proceeds of narcotics sales, conspiring to deal in illegal sales of goods.

Chow originally was charged with various racketeering related crimes in a criminal complaint filed March 24, 2015. The complaint charged that the purposes of the organization included the illegal trafficking of controlled substances, extortion, and participation in the collection of illegal debts. On October 15, 2015, the charges were formally amended in a Third Superseding Indictment to include murder. Chow was charged with and convicted of arranging the murder of Allen Leung and conspiring with others to murder Jim Tat Kong.

The jury found Chow guilty of every one of the 162 charges leveled against him.

In sentencing Chow, Judge Breyer said, "The murder in this case [of Mr. Leung] that requires the life sentence was particularly callous because it was the removal of an obstacle to your ascension to power. So whether you paid for it, or not, the question is: what is your motivation for doing so? And your motivation for doing so was to take over the leadership role of the tong and corrupt their purposes."

"Chow was sentenced to serve the rest of his life in prison," said U.S. Attorney Brian J. Stretch. "We hope that this prosecution and the resulting sentence provides the victims and their families with some measure of satisfaction that Mr. Chow will never again be free to continue with his life of crime."

"This sentence reflects our commitment to vigorously pursue justice for the victims and community that Mr. Chow preyed off of for so long," said FBI Special Agent in Charge John F. Bennett. "We hope that the sentence brings some form of closure for the families of Allen Leung and Jim Tat Kong, and shows that type of greed and violence will not be tolerated."

"This was a case about power and greed," said Michael T. Batdorf, Special Agent in Charge, IRS Criminal Investigation. "From narcotics trafficking to public corruption and murder, Mr. Chow laundered millions of dollars in drug and other illegal proceeds for a profit. Today’s sentencing closes the chapter on Mr. Chow’s life of crime."

In addition to the life term of imprisonment, Judge Breyer also sentenced Chow to pay a special assessment of $16,200, to pay restitution in the amount of $15,881.60, and to forfeit $225,000. The Judge also issued an order enjoining Chow and others from profiting from his life story. Chow has been in custody since his arrest on March 26, 2014, and will begin serving his life sentence immediately.
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Banner Health announced that it is mailing letters to approximately 3.7 million patients, health plan members and beneficiaries, food and beverage customers and physicians and healthcare providers related to a cyber attack. Banner Health says it immediately launched an investigation, hired a leading forensics firm, took steps to block the cyber attackers and contacted law enforcement.

On July 7, 2016, Banner Health discovered that cyber attackers may have gained unauthorized access to computer systems that process payment card data at food and beverage outlets at some Banner Health locations. The attackers targeted payment card data, including cardholder name, card number, expiration date and internal verification code, as the data was being routed through affected payment processing systems. Payment cards used at food and beverage outlets at certain Banner Health locations during the two-week period between June 23, 2016 and July 7, 2016 may have been affected. The investigation revealed that the attack did not affect payment card payments used to pay for medical services.

On July 13, 2016, Banner Health learned that the cyber attackers may have gained unauthorized access to patient information, health plan member and beneficiary information, as well as information about physician and healthcare providers. The patient and health plan information may have included names, birthdates, addresses, physicians’ names, dates of service, claims information, and possibly health insurance information and social security numbers, if provided to Banner Health. The physician and provider information may have included names, addresses, dates of birth, social security numbers and other identifiers they may use. The investigation also revealed that the attack was initiated on June 17, 2016.

An article by NBC News claims that roughly one out of every three Americans had their health care records compromised and most are completely unaware. Such hacks give criminals a wealth of personal information that, unlike a credit card number, can last forever. Many of those records show up for sale on the "dark web" where hackers openly advertise themselves and what they've stolen. One site offers fresh healthcare profiles stolen last year in California boasting "you can use those profiles for normal fraud stuff or to get a brand new healthcare plan for yourself."

Despite high-profile hacks that have targeted high-profile retailers like Target and entertainment giant Sony Pictures, security experts are warning of a more prized target for identity thieves: medical records. Workers' Compensation claim offices are also a repository of medical records, as well as the professionals that support them such as law firms. One might suspect that sooner or later, hackers will reach deeper into the smaller caches of prized healthcare data.

Banner Health is offering a free one-year membership in monitoring services to patients, health plan members, health plan beneficiaries, physicians and healthcare providers, and food and beverage customers who were affected by this incident.

It says it "deeply regrets" any inconvenience this may have caused. Customers with questions can call 1-855-223-4412, from 7 a.m. to 7 p.m. Pacific Time, seven days a week.

Headquartered in Arizona, Banner Health is one of the largest nonprofit health care systems in the country. The system owns and operates 29 acute-care hospitals, Banner Health Network, Banner - University Medicine, Banner Medical Group, long-term care centers, outpatient surgery centers and an array of other services, including family clinics, home care and hospice services, pharmacies and a nursing registry. Banner Health is in seven states: Alaska, Arizona, California, Colorado, Nebraska, Nevada and Wyoming ...

In May 2012, an SCIF claims adjuster became suspicious that claimant Sparkle Sky Bivens was submitting fraudulent disability claims after Bivens failed to document attending certain required medical appointments. The SIU determined it needed to surveil Bivens, but because it has no internal surveilling resources, it hired Paul Chance Investigations, a third party investigator, to surveil Bivens and obtain evidence she was engaging in activities she claimed she could not perform.

Chance deployed a team of four investigators to surveil and videotape Bivens’s activities over several days. SCIF testified that although normally investigations require only one investigator, occasionally circumstances warrant a team of investigators. Chance recommended it surveil Bivens with a team, rather than an individual investigator, because Bivens lived in a crowded area of Los Angeles, heavy with traffic, and Bivens was a fast driver, conditions which would make Bivens a difficult target to follow.

Chance’s investigators eventually caught Bivens on film engaging in activities she alleged she could not do. SCIF submitted the film to a doctor who determined Bivens’s disability claims were unjustified. SCIF consequently terminated Bivens’s disability payments.

After SCIF terminated Bivens’s disability payments, Bivens’s attorney requested SCIF reinstate her disability payments. SCIF spent at least an additional $11,000 looking into reinstating the payments, but concluded its original decision to terminate the payments was correct. At the conclusion of the investigation, SCIF determined Bivens had defrauded SCIF in the amount of $4,000.

On July 10, 2013, the People filed a complaint for three counts of insurance fraud and one count of grand theft of personal property. Bivens reached a plea agreement whereby Bivens pleaded guilty to one count of felony insurance fraud in exchange for reducing her felony to a misdemeanor if she completed 250 community service hours and repaid SCIF the $4,000 she stole. Bivens completed her community service and paid SCIF $4,000, and the court reduced her conviction to a misdemeanor.

At the scheduled restitution hearing, SCIF argued it was entitled to $34,154.70 in restitution, in addition to the $4,000 Bivens already paid, due to the investigative costs it incurred determining the falsity of Bivens’s claims. After hearing argument, the court reducing SCIF’s requested restitution amount to $4,000. The People appealed.and the court of appeal sustained the reduction in the unpublished case of People v Bivens.

"Trial courts have broad discretion to order victim restitution and such an order will not be reversed if there is a 'factual and rational basis for the amount of restitution.' "

The trial court had "compelling and extraordinary reasons" for not granting SCIF’s full restitution request because the amount was unreasonably high. SCIF incurred $34,154.70 in investigative expenses, more than 8.5 times the $4,000 Bivens stole. Although SCIF presented some testimony supporting that documenting the necessary evidence to discredit Bivens required a team of investigators tailing Bivens over multiple days, as the trial court noted, this type of expensive, extensive "counter-surveillance" is more appropriate for the likes of the "Medellin Cartel."

The court of appeal concluded "SCIF makes no compelling argument this amount was "necessary" to uncover the fraud or to more significantly substantiate it. As a quasi-state agency, SCIF has a duty not to create waste, and further investigating a case it already determined to be fraud and had turned over to law enforcement is wasteful ...

Uber Technologies Inc.’s message to the judge who must approve its $100 million settlement with drivers is clear: take it or leave it. Indeed the closely watched class action will have major ramifications in employment and workers compensation law with respect to the classification of gig economy workers as independent contractors, or not.

Bloomberg reports there is an escalating game of courtroom brinkmanship, Uber has hit what may be an impasse with U.S. District Judge Edward Chen who presides over the federal class action suit pending in San Francisco, its demand that, as part of the deal, he erase his own order intended to protect the ride-hailing company’s drivers.

"Uber is almost daring Judge Chen to go against its wishes," said Charlotte Garden, an associate professor at Seattle University School of Law. "Uber all but says that if he doesn't treat the issue the way it wants, it will walk away from the deal."

That gives the San Francisco judge the choice of approving what he sees as a flawed agreement or sending lawyers back to the bargaining table knowing that the settlement is likely to fall apart. That would leave more than 350,000 drivers in California and Massachusetts with nothing to show for three years of court battles.

Uber wins either way because the settlement will let the world’s most valuable technology startup escape with a relatively small financial sacrifice and only minor tweaks to its business model, keeping drivers classified as independent contractors instead of employees. If the deal isn’t approved now, Uber may get a favorable appeals court ruling any day that will give it the upper hand in any further negotiations.

The end result may be that the case once seen as the most likely to upend the gig economy’s no-guarantees work rules could embolden Uber and other companies facing similar lawsuits across the U.S. to dig in their heels.

The turning point that shifted the momentum in Uber’s favor was a June appeals court hearing in the company’s challenge to a ruling by Chen that undermined its ability to limit lawsuits. While the appeals court hasn’t ruled, the panel gave strong hints it may allow the company to enforce arbitration agreements prohibiting the vast majority of its drivers from joining class-action lawsuits.

Uber argued in court filings that Chen’s "bizarre requirements" were an illegal intrusion into its business and would convey an inappropriate message that "drivers should opt out of arbitration."

Uber and the lawyer for the drivers, Shannon Liss-Riordan, agreed as part of the settlement announced in April that the judge’s December order must be wiped from the record.

Chen has said undoing his order might strip some drivers of their legal rights. Uber has refused to budge, saying that provision is critical to preserving the settlement.

"So much so in fact," Uber’s lawyers wrote, that the company has the right to walk away from the deal "unless and until the court vacates" its order, and allows it to "distribute and enforce" its 2015 arbitration agreement to all drivers nationwide.

Dozens of drivers and other lawyers claimed the deal lets Uber off the hook too easily, with drivers forfeiting their demand for employee status and a chance to win hundreds of millions of dollars at trial as compensation for unpaid tips and expenses.
Claims ‘Hijacked?’
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The workers’ compensation insurance system in California is over 100 years old. More than 220 insurance companies provide workers’ compensation insurance coverage to nearly 700,000 employers and deliver medical and wage replacement benefits to almost 800,000 injured workers and their families annually.

The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) is the licensed rating organization for workers’ compensation and is the California Insurance Commissioner’s designated statistical agent. As such, the WCIRB monitors the health of the workers’ compensation insurance system and makes its data and analysis available to system stakeholders and public policymakers.

The WCIRB has released its 2016 State of the California Workers’ Compensation Insurance System (Report). The Report highlights the cost of California workers’ compensation insurance based on premiums paid by insured employers, shows how premium dollars are distributed among various system components, and details cost drivers in the system. The Report also contains a brief summary of how post-Senate Bill No. 863 (2012) costs are emerging compared to initial projections.

Principal findings of the Report include:

1) Growth in California written premiums has slowed compared to that of prior years as insurer rate increases have moderated, while economic expansion has contributed to increased employer payrolls.

2) California’s insurance rates, which are on average the highest in the country, are largely driven by the greatest frequency of permanent disability claims in the country, high medical costs per claim propelled by a protracted pattern of medical treatments, and much higher-than-average costs of handling claims and delivering benefits.

3) Recent increases in indemnity claim frequency that are counter to trends in other states are largely driven by increases in the Los Angeles Basin area. After adjusting for regional differences in wage levels and industrial composition, indemnity claim frequency in the Los Angeles Basin area was over 30% higher than the statewide average. Comparatively, indemnity claim frequency in the Bay Area was approximately 15% lower.

4) Despite provisions of SB 863, which intended to reduce frictional costs, average allocated loss adjustment expenses in California have increased by 24% since 2012. Within California, average allocated loss adjustment expense costs are over 20% higher in the Los Angeles Basin area compared to the remainder of the state and is the highest ratio of loss adjustment expenses to losses in the country at almost twice the countrywide median.

5) While the difference between California medical costs and medical costs in other states has moderated with recent declines in California average medical severities since 2010, the average California medical benefit per claim remains among the highest in the country with costs more than 60% above the countrywide median.

6) Since enacting SB 863, savings in medical costs resulting from the new physician fee schedule, resource-based relative value scale (RBRVS) physician fee schedule, independent medical review (IMR), and other provisions have more than offset higher-than-projected allocated loss adjustment expenses, resulting in greater overall cost savings than initially forecast.

The Report authors will conduct a live webinar on August 8, 2016 from 10 to 11 am PT to discuss these findings and answer questions. Registration information is online. The webinar is free and open to the public.

For those unable to attend the live webinar, a recording will be posted in the Research and Analysis section of the WCIRB website following the event.

The full Report is available in the Research and Analysis section of the WCIRB website ...