The California Supreme Court, in a 7-0 decision, affirmed the authority of the California Insurance Commissioner against a major insurance industry legal challenge to his regulatory authority. The case involves regulations pertaining to homeowner insurance policies, but will have application to his regulatory authority in all areas of insurance, including Workers’ Compensation policies.

The back story to this case involves wildfires, which are a fact of life in California. After the 1991 Oakland Hills fire and 2003 Southern California wildfires, legislators discovered an additional aspect of the danger wildfires pose to homeowners – underinsurance. Homeowners discovered that their coverage fell well short of what they needed – sometimes by hundreds of thousands of dollars – to rebuild their homes.

Guaranteed replacement coverage was the norm as recently as the 1990s, but only a limited number of homeowners qualified for such a product – and only a small subset of insurers even offered it. The Legislature took several steps to address the divergence between homeowners’ expectations of insurance coverage and the actual scope of coverage.

Between 1992 and 2005, the Legislature took several steps to address the divergence between homeowners’ expectations of insurance coverage and the actual scope of coverage. The California Insurance Commissioner adopted regulations accordingly, resolving this problem which became effective on June 27, 2011.

The insurance industry, led by the Association of California Insurance Companies and the Personal Insurance Federation of California, filed its lawsuit a few weeks before the regulation took effect, challenging the Insurance commissioner’s authority to adopt these regulations. The trial court invalidated the Regulation on the ground that the Commissioner exceeded his authority. And the Court of Appeal affirmed. But the Supreme Court reversed and ruled the insurance commissioner has broad discretion to adopt rules and regulations as necessary to promote the public welfare in the case of the Association of California Insurance Companies vs Dave Jones as Commissioner of the CDI.

The replacement cost regulation reviewed by the Supreme Court is codified at California Code of Regulations, title 10, section 2695.183. The Regulation does not require an insurer to set or recommend a policy limit or to provide an estimate of the cost to rebuild or replace a home. But if the insurer does choose to opine on replacement costs, the Regulation specifies how that estimate is to be calculated and communicated.

It pointed out that in 1959, the Legislature enacted the Unfair Insurance Practices Act (UIPA) (Ins. Code, § 790 et seq.). Its purpose is to regulate trade practices in the business of insurance “by defining, or providing for the determination of, all such practices in this State which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined.” Empowered by authority granted in the UIPA, the Commissioner may investigate those engaged in the business of insurance.

The UIPA also grants the Commissioner rulemaking power: “The commissioner shall, from time to time as conditions warrant, after notice and public hearing, promulgate reasonable rules and regulations, and amendments and additions thereto, as are necessary to administer this article.” With respect to this provision, the Court noted “What authority the Legislature conferred here appears to be quite broad.”

“In this instance, the Commissioner undertook an investigation into the widespread problem of underinsurance and, in particular, the disconnect between a homeowner’s expectation and the actual scope of insurance coverage purchased. Based on that investigation, he determined that an incomplete replacement cost estimate – i.e., an estimate that fails to account for all of the costs necessary to rebuild the structure – qualifies as ‘a specific kind of misleading statement,’ and that regulation of any misleading statement “is authorized by the broad statutory prohibition against false and misleading statements’ in section 790.03, subdivision (b).”

The parties agreed to utilize Doctors Abeliuk, Johnson, and Lapins as AMEs in this case.

Applicant’s counsel provided defendants with draft copies of letters to the AME’s asking if defendants had an objection to them. The defendants objected to all the letters and asked applicant’s counsel to redraft and send the letters back for review. But applicant’s counsel then sent these letters to the AMEs over their objections.

A hearing was set to resolve issues related to applicant’s submission of the advocacy letters.The parties specified the following issue to be decided: “Whether applicant counsel’s letter to Drs. Johnson, Abeliuk and Lapins constitutes ‘other information’ as contemplated by Labor Code § 4062.3 and 8 CCR § 35.”

The WCJ found that the letters to Doctors Lapins, Abeliuk, and Johnson constituted “communications” under section 4062.3(f), rather than “information” under section 4062.3(c), and thus did not require defendants’ agreement before they were sent. Specifically, the WCJ found that section “4062.3(f) controls and when ‘communications,’ including advocacy letters, are sent to an AME, they need only be served on the opposing party.”

The defendant filed a Petition for Removal. The WCJ recommended that the petition be granted “because applicant’s letter arguably constituted both a “communication” and “information” under the Labor Code, it likely should not have been served on the AMEs over defendants’ objection without an order from the WCJ.” Thus the WCAB granted the Petition for Removal in the En Banc case of Maxham v California Department of Corrections and Rehabilitation Service, and return this matter the trial level for further development of the record after clarifying the law on this issue.

The Labor Code requires the parties’agreement before any “information” is provided to an AME. (Lab. Code, § 4062.3(c).) In contrast, when a party wishes to send a “communication” to an AME, it is necessary only to serve the opposing party with that communication. Obtaining the opposing party’s consent regarding a “communication” with an AME is not necessary. (Lab. Code, § 4062.3(f).)

Because of the tension between these provisions, it is important to delineate when documents and other materials provided to an AME constitute “information” rather than “communication.” Section 4062.3(a) defines “information” as follows: “(1) Records prepared or maintained by the employee’s treating physician or physicians[,]” or “(2) Medical and nonmedical records relevant to determination of the medical issue.”

At first blush, applicant’s advocacy letters to the AMEs should constitute “communication” because they do not fall into one of the two categories of records that characterize “information,” as that term is defined in section 4062.3(a). however, that “[a] given piece of correspondence or a letter to a party, under certain circumstances, may be more than simply an act of ‘communication.’ It may also be ‘information.’ … We have accordingly held that sub rosa video provided to a QME constituted “information” because, “Information, such as a film or video is separate from a communication and its enclosure with a communication will not transform it into a communication.”

“We disagree with defendants, however, that applicant’s letters to the AMEs constitute “information” simply because the body of the letter itself included the applicant’s legal position.” “…advocacy letters discussing legal positions or decisions would not constitute “information” as defined by section 4062.3(a).

Correspondence engaging in “advocacy” or asserting a “legal or factual position” can, however, cross the line into “information” if it has the effect of disclosing impermissible “information” to the AME without explicitly containing, referencing, or enclosing it. Misrepresentation of case law or legal holdings, engaging in sophistry regarding factual or legal issues, or misrepresentation of actual “information” in a case are three ways in which a party might attempt to convey purported “information” to a medical examiner to which the opposing party has not agreed. The WCJ retains wide discretion in assessing the contents of a parties’ advocacy letters to ensure parties do not serve correspondence which could confuse or misdirect the attention of a medical examiner, even if that “communication” does not expressly contain, reference, or enclose “information.”

“We recognize that previous panel decisions on this issue may have created confusion regarding the precise delineation between “communication” and “information” and whether engaging in advocacy crosses that line. To the extent that those decisions do not comport with the above analysis of the dividing line between “information” and “communication,” we disagree with them. Despite our previous indications to the contrary, engaging in legitimate “advocacy” does not transform correspondence with a medical examiner from “communication” into “information.””

A federal judge Monday temporarily blocked the proposed $37 billion mega-merger between health insurance industry giants Aetna and Humana, ruling that the transaction would reduce competition for consumers.

Although the antitrust decision can be appealed, the outcome could have significant ramifications on how older Americans purchase government Medicare and private Medicare Advantage coverage in the rapidly changing U.S. healthcare market, as well as on the options available to individuals who don’t have employer coverage.

The ruling marks a significant setback for the companies, which in July announced the proposed deal to create the largest seller of Medicare Advantage plans, covering more than 4.1 million seniors. Humana could get a $1 billion breakup fee from Aetna if the deal ultimately falls through.

“In this case, the government alleged that the merger of Aetna and Humana would be likely to substantially lessen competition in markets for individual Medicare Advantage plans and health insurance sold on the public exchanges,” U.S. District Court Judge John Bates wrote in his 156-page ruling. “After a 13-day trial, and based on careful consideration of the law, evidence, and arguments, the court mostly agrees.”

The judge based his decision enjoining the merger on evidence of “overwhelming market concentration figures” the merger would generate, plus findings of head-to-head competition between Aetna and Humana that would be eliminated if the deal were finalized.

The decision represents legal vindication for the Justice Department, which was joined by eight states and the District of Columbia in opposing Hartford, Conn.-based Aetna’s proposed takeover of Louisville, Ky.-based Humana during the Obama administration. Eight states and the District of Columbia joined the federal action.

The companies contended the deal would not lessen competition. They also said their complementary strengths in technology and relationships with health care providers would benefit consumers. But, calling those arguments “unpersuasive,” Bates’s ruling concluded that federal regulation would be insufficient to keep the merged firms from raising prices or cutting benefits. The judge also ruled that neither new health insurance competitors nor business divestitures the companies proposed to address antitrust concerns would replace competition eliminated by the merger.

“Today’s decision is a victory for American consumers – especially seniors and working families and individuals,” Deputy Assistant Attorney General Brent Snyder, the current head of the Justice Department’s Antitrust Division said in an official statement. “Millions of consumers have benefited from competition between Aetna and Humana, and will continue to benefit, because of today’s decision to block this merger.”

In response, Aetna spokesman T.J. Crawford said “we’re reviewing the opinion now and giving serious consideration to an appeal, after putting forward a compelling case” in the non-jury antitrust trial heard by Bates in December.

NBC Bay Area has been highly critical of the California workers’ compensation medical delivery system in a string of articles dating back to mid 2016.

Its thesis has been that “Many injured workers and their doctors say the California workers’ compensation system is dragging out their medical care, making it difficult to recover and get back on the job.”

The Investigative Report essentially was based upon anecdotal accounts of perhaps a dozen cases that it says leads to its conclusion that “Injured workers across California say the workers’ compensation system is dragging out or denying the medical care needed to get them back to work. Those workers say they feel trapped in the sprawling labyrinth of a system, battling insurance companies and navigating through red tape instead of getting well.”

But now the director tasked with administering California’s workers’ compensation system respondes to the criticism.

Christine Baker, the director of the Department of Industrial Relations, defended the system, saying reforms made four years ago improved access to medical treatment and helped contain costs. She also credits a new law enacted in January for further strengthening the system.

The major changes launched in 2013 under SB 863 emphasized evidence-based medicine and shifted treatment decisions from the courts to medical reviewers using state-approved guidelines to authorize or deny treatment requests. According to Baker, the changes are paying off.

“Benefits are going to workers, treatment has been sped up and appropriate treatment is being approved,” she said. “It is overall an improvement to the workers’ comp system, which is very complex.”

According to recent estimates, the reforms also cut costs to the nation’s most expensive workers’ comp system by more than a billion dollars per year.

NBC Bay Area responded to her assertion with more anecdotal accounts saying “many doctors and attorneys who represent injured workers told NBC Bay Area the savings have come at a price. They say denials have reached all-time highs. They believe the guidelines touted by state administrators are too rigid and don’t always keep up with modern treatment techniques”.

Baker rejects those claims.

“Ninety-five percent of medical care decisions are approved,” Baker said. “There are a few that don’t get approved and it could be that it’s inappropriate care or the doctor didn’t document the requirements for care.”

NBC refutes Baker’s claim. “But the data cited by Baker is impossible to verify. Until this year as a result of new reforms, the state has not collected data on the number of medical treatment requests that are approved or denied by insurers.”

“Instead, state administrators point to studies published by the California Workers’ Compensation Institute. The research group relies on data voluntarily provided by its members – insurance companies – which is not made available for public inspection.”

Baker said she’d have to look at these individual cases to understand why they faced denials, but reiterated the majority of the 250,000 workers who go through the system each year get satisfactory results.

“Most people are not stuck,” Baker said. “Most get back to work. Most people are getting their treatment.”

Baker said the state is also coordinating an outreach effort to help doctors understand how to properly document a request for a specific course of treatment, which she expects to further reduce denials.

“It’s an education piece and the Division of Workers’ Compensation is working hard at getting information and educational information about treatment guidelines on our website and how to use them,” Baker said. “We’re hoping the holistic approach will overall really make improvements to workers’ comp in California.”

The World Economic Forum (WEF) is a Swiss nonprofit foundation, based in Cologny, Geneva. The flagship event of the foundation is the invitation-only annual meeting held during the winter at the end of January in Davos, Switzerland, bringing together chief executive officers from its 1,000 member companies, as well as selected politicians, representatives from academia, NGOs, religious leaders, and the media in an alpine winter environment.

Among the many speakers at the 2017 Davos event was Vice President Joe Biden. Also at this years Davos event, leaders of the global pharmaceutical industry, blasted by incoming U.S. President Donald Trump for “getting away with murder” on drug prices, are putting a brave face on the challenges in their biggest market.

The following are comments from chief executives on U.S. pricing prospects, based on Reuters interviews at this week’s Forum in Davos:

JOE JIMENEZ, NOVARTIS: “The new administration has been pretty vocal about supporting innovation. They understand that when you spend money on research and you develop intellectual property there needs to be some level of return for that investment. I believe, based on who the president-elect has put in place around him, that there is a clear understanding of investment and return on investment.”

KEN FRAZIER, MERCK & CO: “Pricing will remain a challenging issue for those of us who are in the research-based pharmaceutical industry, as well as a challenge for the overall healthcare system in terms of what it can afford.” “The tweets will be what they will be, but the subject matter of the tweets has been a challenge before the election and I think it will remain a challenge after the election.”

ANDREW WITTY, GLAXOSMITHKLINE: “Clearly, the industry has an obligation to deliver value-creating innovation and it needs to price it at a level that is deemed to be acceptable.” “Industry has to price in an empathetic way. Just because you can demonstrate value doesn’t mean it is affordable.”

SEVERIN SCHWAN, ROCHE: “If you provide true medical differentiation coupled with a strong intellectual property position, I think the U.S. will continue to reward this kind of innovation. If you don’t offer that then, frankly, I think it is the right thing that prices should come down.”

OLIVIER BRANDICOURT, SANOFI: “It’s very difficult to understand what all those comments and tweets will end up being.” “It’s going to probably be very difficult to issue legislation on drug pricing.”

FLEMMING ORNSKOV, SHIRE: “I think we are in good position to prove the value of our products but, of course, there will be challenges.”