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.

Joseph Medrano was a licensed insurance broker and the founder, owner, and president of Insurance Management Corporation (IMC), an insurance brokerage firm. In 1996 or 1997, iPass, Inc., a publicly traded software company, retained him as its insurance broker. As a publicly traded company, iPass was required to have insurance coverage in order to conduct business. Medrano assisted iPass by obtaining proposals from insurance companies, making recommendations to iPass, presenting insurance policies to iPass for approval, and procuring insurance for iPass.

In late 2008, iPass, through IMC, renewed its workers compensation and domestic package insurance with Travelers and agreed to make four quarterly payments of $79,815 – a gross premium that included all commissions and fees – to IMC for this insurance. During a meeting with Medrano he represented to the insured that he had shopped more than 15 insurance companies for the its D&O policy and only one company was interested in providing a quote.

The insured was uncomfortable with this claim, and believed it was not probable, so they checked with a competing broker, Lockton. Over the course of the next several days, Lockton called the other insurance companies and learned they had never been approached by Medrano or by anyone representing iPass. Some of the companies said they would have entertained the idea of meeting with iPass and might have offered a competing bid. Lockton also reviewed iPass’s D&O policy and noticed that IMC had been collecting full commission in addition to charging a $50,000 broker fee. Ultimately iPass changed their broker to Lockton for all insurance except for the Travelers policy that had been written.

On August 28, 2009, iPass learned that Travelers was getting ready to cancel iPass’s workers compensation and domestic package insurance because it had not received all of the premium payments. As a result, iPass made a duplicate premium payment to Travelers, this time through Lockton, so that it would not lose coverage. When Medrano was asked to refund the premium responded that his finances had suffered significantly in the economic downturn, and added, “When I lost the iPass account, I almost lost everything.” and he no longer had the money.

During the broker’s criminal trial, the prosecutor presented evidence that Medrano retained funds in a similar way from another one of his brokerage clients, Golden Valley. It argued the evidence was relevant “to show his motive as well as his intent and his knowledge that he was taking those funds [from both Golden Valley and iPass around the same time, when he was having financial issues] for his personal use as opposed to a mistake or oversight.”

After Medrano’s criminal trial the jury deliberated for less than a day and reached a verdict, finding him guilty of grand theft by embezzlement. At sentencing, the trial court sentenced him to county jail for a total of three years, with eighteen months suspended. This consisted of the middle term of two years for embezzlement and one consecutive year for the excessive taking enhancement.

Medrano appealed arguing that the trial court abused its discretion and deprived him of due process and a fair trial when it admitted evidence of his prior uncharged misconduct against Golden Valley. The Court of Appeal rejected his arguments in the unpublished case of People v Medrano.

The Supreme Court has “long recognized that if a person acts similarly in similar situation he probably harbors the same intent in each instance . . . and that such prior conduct may be relevant circumstantial evidence of the actor’s most recent intent. The inference to be drawn is not that the actor is disposed to commit such acts; instead, the inference . . . is that, in light of the first event, the actor, at the time of the second event, must have had the intent attributed to him by the prosecution.”

A new wave of failures among ObamaCare’s nonprofit health insurers is disrupting coverage for thousands of enrollees. Four ObamaCare co-ops have failed due to financial problems since the beginning of the year, the latest trouble for the struggling program. Just seven of the original 23 co-ops now remain.

All that failure has been pricey. Taxpayers are out $1.7 billion in federal loans that these co-ops will never pay back. Mismanagement, mis-pricing, low enrollment and high enrollment have all been blamed for the co-ops’ failure. The Daily Caller found that 18 of the 23 CO-OPs were paying top executives up to half a million dollars a year.

But Obamacare itself is responsible for the most recent co-op bankruptcies. As part of its effort to “fix” the individual insurance market, Obamacare banned insurers from pricing coverage based on risk. Instead, they have to take all comers and charge each one no more than three times what they charge anyone else. To make the math for this scheme work, Obamacare created a series of cross-subsidies called “risk adjustment.” Insurers who attracted less expensive, healthier-than-average enrollees were supposed to pay into a fund that would redistribute money to those who enrolled costlier, sicker-than-average patients.

Several co-ops ended up facing big “risk adjustment” bills – even though they were losing money. HealthyCT, for example, had to grapple with a $13.4 million bill, which immediately made the plan financially unstable. Oregon’s Health co-op – which lost $18 million last year – had hoped to get $5 million from the risk adjustment program. Instead, it received a $900,000 bill. Unsurprisingly, it’s closed up shop. The Land of Lincoln co-op was told it owed almost $32 million. It can’t afford to pay that sum after losing nearly $91 million in 2015.

The latest round of failures poses an even thornier problem than earlier cases because enrollees’ coverage is now being disrupted in the middle of the year. That can increase patients’ out of pocket costs and make it harder to keep the same doctors. Some theorized that ObabaCare would remove marginal claims from workers’ compensation systems. Now the reverse may be the case instead, an increase in marginal or questionable claims.

In Illinois, Oregon and Ohio, a combined total of about 92,000 people are being forced to find a new plan. A co-op in a fourth state, Connecticut, will last until the end of the year. Now there’s a similar situation in three other states.

Now, just seven co-ops – Wisconsin’s Common Ground Healthcare Cooperative; Maryland’s Evergreen Health Cooperative; Maine Community Health Options; Massachusetts’ Minuteman Health; Montana Health Cooperative; New Mexico Health Connections; and Health Republic Insurance of New Jersey – remain. Those seven all lost money last year – and may yet go out of business before the calendar turns to 2017.

The Centers for Medicare and Medicaid Services awarded $2.4 billion to 23 co-ops that were eventually created. However, the majority of the co-ops struggled to turn a profit, resulting in the collapse of 16 of the original 23 that received $1.5 billion in startup and solvency loans. Now, with just seven co-ops remaining, regulatory filings show that many ended 2015 in the red.

For the seven co-ops left to survive, they will have to increase the cost of their premiums, especially since many of the nonprofit insurers kept the costs down during the beginning years of Obamacare’s implementation to attract customers.

Since Obamacare’s implementation, it’s not only co-ops that have struggled to make money. Oscar, a startup insurance company serving New York and New Jersey that launched in 2012, lost $105 million in 2015.

Additionally, UnitedHealth Group CEO Stephen Hemsley said the company expects to lose more than $1 billion from its exchange business – $650 million in 2016 and $475 million in 2015. The company, which is the nation’s largest insurer, decided to pull out of at least 26 of the 34 exchanges it offered coverage on last year after warning the marketplaces were a risky investment.

And Health Care Service Corporation, which operates Blue Cross Blue Shield plans in five states, reported losses totaling $65.9 million in 2015. The company lost $281.9 million in 2014.

The medical literature is very inconsistent with respect to the effects of head trauma and concussion injury to professional athletes. These claims are becoming far more common in workers’ compensation claims. Researchers now claim that the brain may show signs of concussion for months or years after the injury occurred, according to a Canadian study of college athletes summarized by an article in Reuters Health.

Using advanced MRI scans, researchers found evidence of brain shrinkage in the frontal lobes of athletes with a history of concussions compared to those who never had a concussion. The frontal lobe is involved in decision-making, problem solving and impulse control, but the researchers say it’s unclear whether the concussion-related changes actually affected those abilities.

They also found less blood flow to certain areas of the brain, mainly the frontal lobes. A decrease in blood flow means less oxygen to areas of the brain, which means the brain won’t function properly, said lead study author Dr. Nathan Churchill of the Keenan Research Center of St. Michael’s Hospital in Toronto.

“If the frontal lobe is injured, you want to be concerned about how this can affect your life down the road,” he told Reuters Health. “There’s a huge body of evidence that shows this can have severe consequences.”

Up to 3.8 million Americans are estimated to experience recreation-related concussions every year, according to a 2014 study by the U.S. Department of Defense and National Collegiate Athletic Association.

For the new study, Churchill and his colleagues recruited 43 varsity athletes, 21 male and 22 female, from a variety of contact and non-contact sports, including volleyball, hockey, soccer, American football, rugby, basketball and lacrosse. Twenty-one athletes had a history of concussion and 22 did not. Concussed athletes had their last injury at least nine months before the MRI scans, and half were 26 months or more post-concussion.  The researchers report their findings in the Journal of Neurotrauma.

Detailed brain maps created with the scans showed that athletes with prior concussions had a 10 to 20 percent drop in brain size in some areas of the frontal lobe, compared to those with no past concussions. Also, the athletes who’d had a concussion had 25 to 35 percent less blood flow in the frontal lobe region, which is vulnerable to injury because the front of the brain tends to collide with the skull during head impact.

The structure of the brain’s white matter, which connects different regions, also changed. These changes can’t be easily interpreted as damage, but they look different from athletes with a history of more extensive injury, Churchill noted. “This tells us there is something different about white matter anatomy for young healthy athletes with concussion, but we’re still investigating what that is,” he said.

In brains that were previously injured, an area known as the posterior cortex also increased in size. The brain has the ability to adapt, said Churchill. “If one part of the brain is injured, the other part of the brain can pick up the slack,” he said. But why and how this happens remains unclear.

“We think it has to do with the brain recovering itself,” he said, “which is an interesting area in research – looking at how the brain reorganizes after an injury.”

The bigger question is whether athletes with concussions should be monitored more closely, especially if they continue to participate in sports. “For the future, we hope studies like ours can help develop safer protocols,” he said.

CMS released a report this week showing that investments made in program integrity activities pay off. From October 1, 2012 through September 30, 2014 every dollar invested in CMS’ Medicare program integrity efforts saved $12.40 for the Medicare program. Total savings from program integrity efforts were nearly $42 billion over the two-year period covered by the report.

CMS has achieved this impact by using a multifaceted approach, ranging from provider enrollment and screening standards, to use of enforcement authorities, to use of advanced analytics such as predictive modeling. It has previously reported on various outcomes tied to specific programs.

The Department of Health and Human Services (HHS) and its Centers for Medicare & Medicaid Services (CMS) are in the third year of implementing sophisticated predictive analytics technology to prevent and detect fraud. It is using the anti-fraud authorities provided in the Affordable Care Act and the Small Business Jobs Act (SBJA) of 2010,

The Fraud Prevention System (FPS) was created in 2010 by the Small Business Jobs Act, and CMS has extensively used its tools. The SBJA requires that the HHS Office of the Inspector General (OIG) certify the savings and costs of the FPS. CMS achieved certification in the second and third year of the program. For the first time in the history of federal health care programs, the OIG certified a methodology to calculate cost avoidance due to removing a provider from the program. This is a critical achievement as moving towards prevention requires a clear measurement of the future costs avoided.

Since CMS implemented the technology in June 2011, the FPS has identified or prevented $820 million in inappropriate payments by identification of new leads or contribution to existing investigations. During the third year the FPS identified or prevented $454 million in inappropriate payments through actions taken due to the FPS or through investigations expedited, augmented, or corroborated by the FPS. Total savings were 80% higher than the savings from the previous implementation year, with a nearly 10:1 return on investment.

Thus CMS’s efforts to pro actively prevent potentially fraudulent and improper payments from being made have been increasingly effective, moving its efforts away from the “pay-and-chase” method of recovering payments after they had already been made.

The primary focus of the FPS during the first two implementation years was identifying providers with the most egregious behavior for investigation by the new Zone Program Integrity Contractors (ZPICs) created to perform program integrity functions. During the third implementation year, CMS tested new and innovative ways to leverage the FPS technology and best practices to support additional fraud, waste, and abuse activities. In future years, CMS will continue to expand the FPS and the transfer of knowledge related to predictive analytics technology. For example, CMS will expand FPS edits to deny or reject more improper payments and CMS will provide technical assistance to states that decide to implement predictive analytics technology.

CMS collaborates with various partners. Assistance from its contractors, state Medicaid agencies, and law enforcement partners are also instrumental in this effort when potentially fraudulent and improper payments result from intentionally fraudulent activities. CMS welcomes input from beneficiaries, providers, suppliers, and others to inform possible future enhancements to our program integrity strategy. Please contact CMS at 1-800-MEDICARE (1-800-633-4227) or TTY: 877-486-2048 with your thoughts or to report potentially improper billing.