AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. According to a new AM Best report underwriters of workers’ compensation insurance have consistently generated better underwriting profits than other property/casualty (P/C) lines of business, again doing so in 2020 amid the pandemic.  

The Best’s Market Segment Report, titled, “Workers’ Compensation Still Outpacing Other Lines” states that underwriting results of workers’ compensation insurers remained strong in 2020, despite a 10% decline in bottom-line net premiums written, owing to the substantial drop in payrolls during the second quarter of the year.

The combined ratio of 91.1 in the workers’ compensation segment in 2020 was a few points higher than in 2019, but still comfortably under the breakeven mark of 100.0, reflecting profitable underwriting. Given the decline in premium, expense ratios rose, but the increase was nominal and did not overly dampen underwriting earnings.

Premium volume for workers’ compensation writers also has been constrained by rate decreases in most states. According to the report, some writers are looking to develop new products and explore new markets in other lines of coverage and allowing their workers’ compensation top-line premium to decline in the states where they generate significant premium.

Despite the smaller premium base, workers’ compensation insurers remained highly profitable in comparison with other P/C lines. Workers’ compensation underwriters have benefited from a decline in lost-time claims frequency tied to efforts to improve workplace safety. Other factors that have benefited the line’s profitability are the declines in fraud, workplace accidents and defense costs.

AM Best also analyzes the overall health of the workers’ compensation line of business through its Workers’ Compensation Composite, which is composed of U.S. companies, including state funds, whose workers’ compensation and excess workers’ compensation net premiums constitute 50% or more of their total net premiums. Even with the 2020 decline in workers’ compensation premium due to the pandemic, the market share of these specialists rose to 26.2% in 2020, up considerably from 16.7% in 2011.

AM Best’s negative market segment outlook for the workers’ compensation segment, the largest component of the U.S. commercial lines market, reflects the continued uncertainty about the effects of COVID-19, from an economic and a regulatory perspective, as well as a legislative one as states consider presumptive legislation stemming from the pandemic. Moreover, although the impact of the pandemic on insurers’ balance sheets to date has been tempered, concerns about the prolonged low interest rate environment persist. As a result, investment returns are expected to remain flat, and insurers may begin seeking riskier investments to generate higher yield.

An Orange County pharmacist has been sentenced to 70 months in federal prison for submitting more than $13 million in claims for medically unnecessary compounded medication prescriptions.

42 year old Thu Van Le, a.k.a. “Tony Le,” who lives in Placentia, was sentenced by United States District Judge R. Gary Klausner.

In addition to the prison term, Judge Klausner ordered Le to pay $10,982,759 in restitution to Tricare, the U.S. military’s managed health care plan, and $768,488 in restitution to Amplan, Amtrak’s employee health care benefit plan.

Le, a pharmacist who owned TC Medical Pharmacy located at 760 S. Washburn Ave. #1 in Corona California, pleaded guilty on July 12 to one count of health care fraud.

From March 2015 to December 2016, Le’s pharmacy submitted more than $13 million in total claims to Tricare and AmPlan, against which Tricare paid $10,982,759 and AmPlan paid $768,488. Le, in turn, paid so-called “marketers” handsome kickbacks of up to 50 percent of the Tricare reimbursements.

The marketers used personal and insurance information to generate fraudulent prescriptions for compounded medications, according to court documents. Marketers who participated in the scheme solicited beneficiaries of the health plans through misleading cold calls that promised free compounded medications. In some cases, beneficiaries were not contacted at all and simply received expensive medications that they did not order.

Compounded drugs are tailor-made products doctors may prescribe when the Food and Drug Administration-approved alternative does not meet the health needs of a patient.

Le agreed to be bound by Tricare and AmPlan rules for reimbursement of claims for their beneficiaries. Tricare and AmPlan required that medications be medically necessary, that beneficiaries be examined by physicians, and that Le’s pharmacy collect co-payments. The prescriptions were supposed to be for unique patient needs, but they instead were formulated to maximize reimbursements and were prepared on an assembly-line basis.

The Defense Criminal Investigative Service, the FBI, IRS Criminal Investigation, Amtrak’s Office of Inspector General, the Office of Personnel Management’s Office of Inspector General, the United States Department of Labor – Employee Benefits Security Administration, the Department of Health and Human Services, and the California Department of Insurance investigated this matter.

Assistant United States Attorney Mark Aveis of the Major Frauds Section prosecuted this case.

Our ability to sense heat, cold and touch is essential for survival and underpins our interaction with the world around us. In our daily lives we take these sensations for granted, but how are nerve impulses initiated so that temperature and pressure can be perceived? This question has been solved by this year’s Nobel Prize laureates.

The laureates identified critical missing links in our understanding of the complex interplay between our senses and the environment.

University of California, San Francisco David Julius utilized capsaicin, a pungent compound from chili peppers that induces a burning sensation, to identify a sensor in the nerve endings of the skin that responds to heat. Scripps Research in La Jolla, California scientist Ardem Patapoutian used pressure-sensitive cells to discover a novel class of sensors that respond to mechanical stimuli in the skin and internal organs. These breakthrough discoveries launched intense research activities leading to a rapid increase in our understanding of how our nervous system senses heat, cold, and mechanical stimuli.

Prior to the discoveries of David Julius and Ardem Patapoutian, the understanding of how the nervous system senses and interprets our environment still contained a fundamental unsolved question: how are temperature and mechanical stimuli converted into electrical impulses in the nervous system?

In the latter part of the 1990’s, David Julius saw the possibility for major advances by analyzing how the chemical compound capsaicin causes the burning sensation we feel when we come into contact with chili peppers. Capsaicin was already known to activate nerve cells causing pain sensations, but how this chemical actually exerted this function was an unsolved riddle.

After a laborious search, a single gene was identified that was able to make cells capsaicin sensitive. The gene for capsaicin sensing had been found! Further experiments revealed that the identified gene encoded a novel ion channel protein and this newly discovered capsaicin receptor was later named TRPV1. When Julius investigated the protein’s ability to respond to heat, he realized that he had discovered a heat-sensing receptor that is activated at temperatures perceived as painful.

While the mechanisms for temperature sensation were unfolding, it remained unclear how mechanical stimuli could be converted into our senses of touch and pressure. Researchers had previously found mechanical sensors in bacteria, but the mechanisms underlying touch in vertebrates remained unknown. Ardem Patapoutian, wished to identify the elusive receptors that are activated by mechanical stimuli.

The breakthrough by Patapoutian led to a series of papers from his and other groups, demonstrating that the Piezo2 ion channel is essential for the sense of touch. Moreover, Piezo2 was shown to play a key role in the critically important sensing of body position and motion, known as proprioception. In further work, Piezo1 and Piezo2 channels have been shown to regulate additional important physiological processes including blood pressure, respiration and urinary bladder control.

The California Insurance Guarantee Association (CIGA) was created by legislation in 1969 as an association of insurers that makes payments to policyholders of property/casualty, workers’ compensation and “miscellaneous” insurers when the member insurance company becomes insolvent and is unable to do so. It is a statutory entity that depends on the establishing legislation for its existence and for a definition of the scope of its powers, duties and protections.

CIGA is funded by premium surcharges upon applicable lines of insurance, and those surcharges are limited by statute to a maximum of 2%.

The purpose of CIGA is to pay “covered claims” of member insurance companies that have become insolvent. CIGA’s total liability for any single claim is $500,000, other than claims for workers’ compensation, which are not limited. CIGA does not have to pay a claim to the extent that it is covered by any other insurance of a class covered by this law and available to the claimant or insured (Insurance Code §1063.1(c)(9)(A)).

There are several catastrophic risks that contribute CIGA’s need to be able to access large amounts of cash including pandemic risks, the risk of a devastating earthquake occurring during work time in a major city, and potential losses due to wildfires and other natural disasters.

In 2003, Assembly Bill 227 (Vargas) provided express authority for CIGA to issue up to $1.5 billion in bonds to fund workers’ compensation claims payments for injured workers of insolvent insurers. At the time and beginning in the late 1990s, CIGA had assumed responsibility for paying covered claims of 27 insolvent workers’ compensation insurance companies. The Legislature placed a sunset provision on the original bonding authority and has extended the date on four separate occasions.

The California legislature has passed, and Governor Newsom has just signed AB 1541 a fifth extension of this bonding authority. The last date upon which CIGA is authorized to issue bonds would change from January 1, 2023 to January 1, 2026.

Specifically, this new law extends the existing ability of CIGA to request the issuance of bonds by the California Infrastructure and Economic Development Bank to more expeditiously and effectively provide for the payment of covered claims arising from insolvencies of insurance companies providing workers’ compensation insurance.