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Tag: 2013 News

Council Report Says Workers’ Compensation Market in “Distress”

Insurance brokers across the country reported price increases in the commercial lines market in the 4th quarter of 2012, according to The Council of Insurance Agents and Brokers’ quarterly Commercial P/C Market Index Survey. Pricing rose on average at a rate of 5.0 percent, compared with 3.9 percent in the 3rd quarter of 2012, across small, medium and large accounts.

The workers’ compensation market clearly was in distress last quarter. In one Northeast broker’s words, workers’ compensation was “crashing.” The broker said prices escalated 30 percent to 50 percent, mostly on large accounts. In the Midwest, a broker said some carriers weren’t particularly interested in writing workers’ compensation accounts. Others said monoline coverage was harder to find.

Property prone to catastrophes was also tough to write, according to survey results. A Southeast broker stated, “Sandy brought flood back under the microscope and carriers scrutinized coverage harder and cut flood limits.” In the Northeast where Sandy hit hardest, carriers decreased CAT limits such as flood and wind, while increasing deductibles in both areas. Brokers reported similar stories for vulnerable property across the country. Many carriers asked for percentage wind/hail deductibles and some cut back on property exposures altogether. “Carriers didn’t want an “account that was running a high loss ratio,” a Southwest broker commented.

The general feeling of the market last quarter can be summed up this way: underwriters looked carefully at their potential loss exposures and in some cases were willing to walk away rather than get caught short. The Council’s survey is the oldest, most authoritative source of existing market conditions, pricing practices and trends, dating back to 1999.

“I think you can characterize the fourth quarter as more of the same,” said The Council’s President/CEO, Ken A. Crerar. “Carriers were still cautious about the risks they were putting on their books and pushed for price increases where they could get them.”

CHSWC 2012 Annual Report Looks at Integrating Comp and Group Health Care

Group health costs have been rising much more quickly than inflation and wages. Costs have been rising even more quickly for treatment of occupational injuries in the California’s workers’ compensation system. This creates major financial challenges for employers, especially those in industries with already high workers’ compensation costs. Furthermore, group health care and workers’ compensation medical care are typically delivered through separate provider systems, resulting in unnecessary, duplicative and contraindicated treatment, and inefficient administration.

Integration of group health and workers’ compensation medical care is an alternative to two separate systems of medical care. Under integrated health care, the same individual physician or health provider group administers treatment for both occupational and non-occupational medical conditions and integrates payment for treatment under a single insurance policy. Integrating workers’ compensation medical treatment with group health treatment offers employers the potential for significant savings and could help improve the quality of care and workers’ overall access to health insurance. Research also supports the contention that an integrated 24-hour care system could potentially provide medical cost savings, as well as shorten the duration of disability for workers.

The Commission on Health and Safety and Workers’ Compensation (CHSWC) has partnered with the California HealthCare Foundation (CHCF) and the University of California (UC), Berkeley, to examine the feasibility of integrated care in California. To conduct a pilot project, partnerships between CHSWC, CHCF, UC Berkeley, DMS Facility Services, and the Service Employees International Union (SEIU) Local 1877 were established. The pilot is part of a carve-out agreement and uses Kaiser Permanente for delivery of both workers’ compensation medical care and group health benefits. The goal of the pilot is to identify areas of administrative savings and ways to reduce litigation. Savings are expected in medical utilization, indemnity costs, and administration. Medical services are expected to be delivered with fewer delays and disputes, enabling injured employees to recover more fully and return to work sooner.

CHSWC has issued a working paper titled “Comparing the Costs of Delivering Medical Benefits Under Group Health and Workers’ Compensation – Could Integration Pay for Covering the Working Uninsured?” At its October 22, 2009 meeting, CHSWC voted to create an advisory group to discuss the findings of the issue paper on integrating workers’ compensation medical and group health care. Subsequently, on February 25, 2010, CHSWC held a roundtable to discuss the issue paper in detail, get feedback from the advisory group, and examine the feasibility of adopting integrated care in California. The roundtable was composed of over 40 participants representing employers, labor, government agencies, medical providers, insurance companies, and attorneys.

Study findings indicate that total national savings estimates over the first ten years would be between $490 billion, based on National Academy of Social Insurance (NASI) data, and $560 billion, based on California insurer data. Savings for California alone would be about $10 billion in the first year and $100 billion for the ten years 2011 to 2020 inclusive. Key reasons for the savings are that it is expensive to deliver medical care separately for a single condition. This is very expensive initially and even more expensive over a life-time of separate treatment. Additionally, life-time medical costs are very difficult to predict, and insurers have to charge a “risk premium” for taking on a highly speculative liability. Health insurers are only estimating medical treatment costs over the next 12 months, a much less risky proposition.

Based upon this information The CHSWC 2012 Annual Report made the following suggestions:

  • Evaluate the administrative and overhead cost of delivering occupational medical care under workers’ compensation insurance.
  • Disseminate the results of the evaluation and the opportunities and challenges of implementing an integrated occupational and non-occupational medical treatment and insurance product.
  • Develop and provide specific details and resources on integrated care for unions and employers interested in carve-out programs.
  • Evaluate the impact of Medicare’s implementation of its secondary payor rights with regard to settlements of workers’ compensation claims, and examine alternative ways to coordinate benefits between the two systems.

DWC Announces Recipients of the Carrie Nevans Community Service Award

The California Division of Workers’ Compensation announced the recipients of the 2013 Carrie Nevans Community Service Award. This year’s award in Northern California goes to Angie Wei, Legislative Director of the California Federation of Labor, AFL-CIO. Sean McNally, president of KBA Engineering in Bakersfield is the Southern California recipient. Both are commissioners with the Commission on Health and Safety and Workers’ Compensation. The awards will be presented at the upcoming 20th annual DWC educational conference luncheons.

“We received many outstanding nominations but Ms. Wei’s and Mr. McNally’s collaborative contributions to the workers’ compensation community with their work on Senate Bill 863 were stellar” said DIR Director Christine Baker.

“Their exceptional efforts were instrumental in negotiating and developing a reform package that drastically improves the system. They personally spent hundreds of hours to craft a bill that increased benefits to injured workers and produced cost-saving efficiencies that both labor and management could agree to,” continued Ms. Baker.

Ms. Wei has been with the California Labor Federation since 2000. She previously worked as an advocate for the California Immigrant Welfare Coalition and served as a public policy director for the Northern California Coalition for Immigrant Rights. She received her undergraduate degree from UC Berkeley and a master’s degree in public policy from the Kennedy School of Government at Harvard University.

As is noted above, Mr. McNally is the President of KBA Engineering in Bakersfield. He is a licensed general contractor and serves as a trustee for the Self Insurer’s Security Fund and is very active in the community in leadership capacities. Sean has been certified by the State Bar of California as a specialist in workers’ compensation and was a partner at Hanna, Brophy, MacLean, McAleer and Jensen. He received his B.A. degree from the University of San Francisco and J. D. from the University of Pacific, McGeorge School of Law.

The DWC’s 20th annual educational conference is the largest workers’ compensation training in the state and allows claims administrators, attorneys, medical providers, return to work specialists, employers, and others to learn about the most recent developments in the system as well as on-going DWC programs. This year’s conference has many sessions devoted to SB 863 and its successful implementation. The Los Angeles conference (Feb. 28-March 1, 2013) has been sold out for several weeks, however registration is still open for the Oakland training, which take place March 4-5, 2013 at the Oakland Marriott City Center Hotel.

County Jail Inmate is Not an Employee While Working in Kitchen

The WCAB found that Stewart Espinoza, while an inmate of the Los Angeles County Men’s Central Jail, was not an employee of the County of Los Angeles at the time that he was injured while working as a cook in the jail, and that he was therefore not eligible for workers’ compensation benefits. Espinoza filed a petition for review which the Court of Appeal denied on May 17, 2012. The Supreme Court granted Espinoza’s petition for review on and transferred the matter back to the Court of Appeal with directions to vacate the order denying the petition for a writ of review. The Court of Appeal issued a writ of review pursuant to the Supreme Court’s direction and affirmed the WCAB denial of benefits in the unpublished opinion of Stewart Espinoza v WCAB and Los Angeles County Jail.

Espinoza and the County stipulated that Espinoza was working as a cook in the county jail on November 1, 2005 when he sustained an injury to his left shoulder. The parties also stipulated that if Espinoza was found to be County’s employee, the injury arose in the course and scope of employment. Thus, the only issue in the case is whether Espinoza was County’s employee. Whether Espinoza was County’s employee depends in this case on whether he performed the work he was doing voluntarily or whether he was required to work as a condition of his incarceration.

The Los Angeles County Board of Supervisors issued an order in 1970 referred to as Order #91, which provides that persons confined in the county jail may be compelled to perform labor under the direction of a county official. Order #91 goes on to state that “[n]o prisoner engaged in labor pursuant to this order shall be considered as an employee of, or to be employed by the County or any department thereof, nor shall any such prisoner come within any of the provisions of the Workmen’s Compensation Insurance and Safety Act of 1917 . . . .” Order #91 was enacted by the Board of Supervisors in response to the decision in State Compensation Ins. Fund v. Workmen’s Comp. App. Bd. (1970) 8 Cal.App.3d 978 (Childs). Childs was a case in which David Childs, then an inmate in the Los Angeles County Jail, was working on a road project in Malibu in November 1966 when he was injured.

Espinoza did not testify. Instead, there was an offer of proof that the WCJ rendered as follows: “He [Espinoza] thought his work was voluntary, and was never told his work was mandated by the terms of his incarceration. He received preferential treatment in exchange for the work.”

The WCJ reasoned that Order #91 only provides that a jail inmate “may” be compelled to work, not that the inmates “shall” be compelled to work. The WCJ went on to conclude that there was no evidence that Espinoza was compelled to work. “He [Espinoza] did the work in order to receive some extra benefits while in jail. Nothing indicates the terms of his sentence required him to work in the kitchen.”

The WCAB disagreed. Noting that it was Childs that spawned Order #91, the WCAB pointed out that similar ordinances have been held to exclude county jail inmates from workers’ compensation coverage. The WCAB cited as an example the Tulare county ordinance in Parsons v. Workers’ Comp. Appeals Bd. (1981) 126 Cal.App.3d 629 (Parsons). The WCAB’s conclusion was that an inmate’s work “is not voluntary if it is performed subject to a County ordinance that requires an inmate to work while incarcerated.”

The Court of Appeal concluded that “Given that Order #91 precludes the establishment of an employment relationship, it is not necessary to address the question whether Espinoza volunteered to work. We note, however, the manifest difficulties that would be encountered if Order #91 did not exist. With an inmate population the size of the County’s jail system, the problems of proving whether the County entered into an employment relationship with a given inmate would be practically insurmountable. It would also lead to the highly undesirable result of leaving some inmates in the workers’ compensation system and some outside of it, leaving the public agency with a completely unpredictable financial exposure. ”

Physician and Owner of Oceanside Medical Supply Plead Guilty in Fraud Case

United States Attorney Laura E. Duffy announced that a California medical doctor and the owner of the Oceanside Medical Supply in Long Beach, California, have both pled guilty to participating in a conspiracy to defraud the Medicare trust fund by submitting more than $1 million in fraudulent power wheelchair claims. According to the report in the Imperial Valley News, Dr. Irving Schwartz and Jose Melendez entered their guilty pleas before Magistrate Judge Nita L. Stormes in federal court in San Diego, and, pursuant to their plea agreements, the defendants are obligated to pay restitution to the Medicare trust fund for the losses caused by their scheme.

The fraudulent conspiracy focused on the sale of bogus prescriptions, with the ultimate goal being to obtain reimbursements from Medicare for expensive power wheelchairs that patients did not need and, in some cases, did not want. Dr. Irving Schwartz admitted during his guilty plea that in 2007-2008, he would travel to El Centro, California, in search of elderly Medicare patients. Dr. Schwartz would write prescriptions for power wheelchairs, even though the patients did not need the equipment and could walk without assistance. In exchange, Schwartz collected a $300 cash kickback for each fraudulent power wheelchair prescription. One of Schwartz’s co-conspirators would then sell the power wheelchair prescriptions to Melendez, a medical supply company owner, charging him $1,000 per fraudulent prescription.

Melendez sold some of the power wheelchair prescriptions to other co-conspirators, charging them an additional mark-up on each fraudulent prescription. As the last step in the scheme, Melendez and other co-conspirators would submit the fraudulent prescriptions to Medicare for reimbursement, billing the government thousands more per wheelchair than it had cost them to purchase and deliver the equipment. Often the unneeded equipment would sit unused in patients’ homes for years.

Dr. Schwartz admitted in open court that he wrote at least 186 fraudulent power wheelchair prescriptions for Medicare beneficiaries in exchange for more than $55,000 in bribes and kickbacks. Melendez, the owner and operator of Oceanside Medical Services, admitted that he purchased these 186 fraudulent prescriptions and used them to submit over $830,000 in false claims to Medicare.

In a related case, co-conspirators Aristeo and Laura Tavares have pled guilty and admitted to submitting more than $250,000 in false claims based on Dr. Schwartz’s fraudulent prescriptions. In total, the scheme resulted in more than $1 million in false claims to the Medicare trust fund.

The pleas are subject to final acceptance by United States District Judge Marilyn L. Huff. The defendants are scheduled to be sentenced by Judge Huff on May 6, 2013, at 9:00 a.m.

NICB Report Says DME Fraud As High as $5 Billion/Year

The National Insurance Crime Bureau (NICB) released a ForeCAST analysis that examines the impact of fraud associated with durable medical equipment (DME). The report examines questionable claims (QC) referred to NICB during the period from Jan. 1, 2009, through June 30, 2012. QCs are claims that NICB member insurance companies refer to NICB for closer review and investigation based on one or more indicators of possible fraud. A single claim may contain up to seven referral reasons. DME QCs have increased consistently since 2009 with New York (611), Michigan (366), California (63), and Florida (54) posting the most of all the states.

DME, also referred to as Durable Medical Equipment Prosthetics and Orthotics (DMEPOS), home care products, home health equipment/supplies and/or durable medical supplies, is defined as equipment that can withstand repeated use, is primarily and customarily used to serve a medical purpose, generally is not useful to a person in the absence of an illness or injury; and,is appropriate for use in the home.

All requirements of the definition must be met before an item can be considered DME. In addition to meeting the above criteria, a licensed physician must prescribe the DME and prepare a Certificate of Medical Necessity (CMN), also referred to as a Letter of Medical Necessity. The type of medical personnel allowed to order DME will vary from state to state. In some instances, physician assistants, nurse practitioners, and clinical nurse specialists may order DME.

In the 2011 report on National Health Expenditures (NHE), DME spending for 2010 comprised of $37.7 billion or 1.5 percent of total health expenditures (CMS, Office of the Actuary, National Health Statistics Group, 2011). In the 2011-2021 NHE Projections, DME is projected to increase consistently at an average rate of 6 percent. If these projections prove accurate, spending for DME could exceed $50 billion by the end of 2015 (CMS, 2011). For both public and private health care programs, the FBI in 2011 estimated fraudulent billing to be between 3 percent and 10 percent of total health care expenditures. If those percentages are applied to DME spending, estimates of the cost of DME fraud could fall between $1.5 billion and $5 billion in a single year.

The consistent growth of the DME industry, combined with a general lack of required credentials or training in order to distribute DME, provides ample opportunity for unscrupulous individuals and entities intent on defrauding the insurance industry.

Although DME fraud is but a small part of the overall medical fraud perpetrated against insurers and the government, it is most insidious when patients who have been properly prescribed for DME never receive it. Somewhere in the DME processing chain between doctor and patient, the device never gets delivered. Whether it’s diverted to others, lost in bureaucracy or simply pilfered to be sold on the black market, it is an expensive loss to patients, insurers and the governmental loss that all of us ultimately pay for through higher premiums and taxes.

The fraud occurring in the nation’s health care system is widespread and timeless. It is the reason that since 2010, NICB has been working with the Secretary of Health and Human Services, the Attorney General and others in Washington to establish an information and data sharing effort aimed at detecting and preventing insurance fraud at the public and private sector levels. It is also the reason that in July 2012, NICB was named to the Executive Board of the Health Care Fraud Prevention Partnership.

“We said at the time that there is a significant amount of crossover by those committing fraud against Medicare and Medicaid, and also taking advantage of the property and casualty insurance industry,” said NICB President and CEO Joe Wehrle. “This report confirms that and helps us focus our investigative efforts on the areas where this is a growing problem. And at the same time, it is our goal to share information and work with the public and private sectors to identify these schemes and stop them.”

Hemet Pool Contractor Faces 16 Years In Fraud Case

The owner and general manager of a Palm Desert swimming pool construction and maintenance company faces criminal charges for alleged misconduct while running the company, the Riverside County district attorney’s office announced Friday.

Hemet resident Michael Gregory Silverberg, 31, owner of United States Pools Corp., is accused of defrauding the State Compensation Insurance Fund, two insurance companies and the state Board of Equalization.. Silverberg faces two counts of falsifying statements to reduce worker’s compensation insurance rates, one count of falsifying workers’ compensation and one count of failing to collect taxes, all felonies, and a misdemeanor charge of signing a report to evade an amount due. He also faces a sentence-enhancing allegation of taking more than $500,000 through the commission of two or more white-collar crimes.

Silverberg was arrested on Jan. 21 and pleaded not guilty on Jan. 25 at the Larson Justice Center in Indio. He is due back in court on Feb. 26. If convicted, he faces up to 16 years in prison, according to District Attorney’s Office spokesman John Hall.

The Inland Empire Premium Fraud Task Force started investigating Silverberg after a complaint was made about him by a trade organization serving the California swimming pool industry, Hall said.

Silverberg allegedly reported his pool cleaning employees as independent contractors to avoid paying the appropriate payroll taxes and workers’ compensation insurance premiums. He also allegedly failed to report his new pool construction employees on his workers’ compensation policy, Hall said. In addition, the investigation revealed that Silverberg allegedly failed to properly report the required sales tax due to the state Board of Equalization on an account with a local pool contractor supplier, Hall said.

The alleged fraudulent actions resulted in a loss of about $566,950 to the various agencies between Jan. 1, 2007, and March 5, 2012, Hall said.

The case is being prosecuted by Deputy District Attorney Michael Mayman.The Inland Empire Premium Fraud Task Force includes investigators from the Riverside and San Bernardino county district attorney’s offices and the California Department of Insurance’s fraud division.

DWC Sets Public Hearings for SDJB and Interpreter Regulations

The Division of Workers’ Compensation (DWC) has issued notices of public hearings for the Supplemental Job Displacement Benefit (SJDB) regulations and interpreter services regulations.

The proposed rulemakings are to permanently adopt the emergency regulations which became effective Jan. 1, 2013. A public hearing on the proposed regulations has been scheduled for March 19 at 10 a.m. in the auditorium of the Elihu Harris Building, 1515 Clay Street, Oakland. Members of the public may also submit written comments on the regulations until 5 p.m. on that day.

The SJDB regulations implement SB 863’s changes regarding the amount of the SJDB voucher and the expenses for which it may be used. The proposed regulations administrate the supplement job displacement benefit by providing procedures and forms for those injured on or after Jan. 1, 2013.

The interpreter services regulations define “qualified interpreter for purposes of medical treatment appointments,” add “medical treatment appointments” as an event for which an interpreter is entitled to a fee, and set forth the websites where interpreters who are qualified to interpret at workers’ compensation appeals board hearings and medical treatment appointments can be found.

DWC will consider all public comments, and may modify the proposed regulations for consideration during an additional 15-day public comment period. The notices of rulemaking, text of the regulations, and the initial statements of reasons can be found at the DWC website.

Employers Must Post Annual Work-Related Injury and Illness Summary

The California Department of Industrial Relations’ Division of Occupational Safety and Health (DIR/DOSH), also known as Cal/OSHA, is providing 2013’s notification to all employers to post the annual summary of all work-related injuries and illnesses (Form 300A). The form must be posted at their place of business from February 1 through April 30.

The Form 300A is available for free download on DIR’s website. The form is a required workplace posting so that employees may have the opportunity to review any injury or illness that took place at their worksite in the prior year. Former employees and their representatives have a right to review the form as well. The form must be posted in a visible and easily-accessible area.

“Transparency and accountability are very important aspects of the employer-employee relationship,” said Cal/OSHA Chief Ellen Widess. “This form gives employees, former employees and their representatives access to worksite injury and illness data. Full and accurate reporting of injuries and illnesses is vital to understanding hazards in the workplace. It is also a good tool to determine where additional safety and health measures are needed.”

Employers are required to fill out and post the Form 300A every year, even if no workplace injuries occurred. Information that must be disclosed on the form includes total number of cases with days away from work, total number of days injured or sick employees spent away from work, and the different types of injury or illness suffered.

Employers who would like more information on their posting requirements or who would like more information on how to reduce workplace injuries and illnesses are encouraged to visit the DIR Employer Information page. In addition, if an employer would like to speak with a Cal/OSHA consultant, free assessments are available to California businesses by calling the Cal/OSHA Consultation Program 1-800-963-9424.

Employees with work-related questions or complaints can call the California Workers’ Information Hotline at 1-866-924-9757.

Cal/OSHA Issues Chevron Record $1 Million Fine

California safety officials ordered Chevron Corp. to pay a record-high fine of nearly $1 million for safety violations that led to a massive fire last summer at a refinery in the San Francisco Bay Area.

According to the report in the Los Angeles Times, after the Aug. 6 explosion at Chevron’s facility in Richmond, Calif., an emergency telephone network advised tens of thousands of people in that city to stay indoors behind closed doors and windows to avoid breathing potentially dangerous sulfuric acid and nitrogen dioxide fumes. About 200 local residents sought medical help, complaining of respiratory problems. In addition, Chevron reported that one of its employees suffered a minor injury.

Cal-OSHA said Wednesday that its investigation of the explosion at a leaking crude refining unit, among other things, showed that Chevron did not follow safety recommendations made by its inspectors in 2002 to replace a corroded pipe that subsequently ruptured and fueled the fire. The company also failed to follow emergency shutdown procedures after the leak was found the day of the fire, the state said.

In all, the state Division of Occupational Safety and Health issued 25 citations against California’s biggest oil company, including 11 “willful serious” and 12 lesser “serious” violations related to the blaze, the state said. The $963,200 fine is the highest in Cal-OSHA history, the agency said.

“Ensuring worker safety is the employer’s responsibility,” said Christine Baker, director of the state Department of Industrial Relations, which oversees Cal-OSHA. “Refineries must take the steps needed to prevent incidents like the August Chevron fire. Failure to do so can pose great dangers to workers, surrounding communities and the environment.”

Chevron said it intends to appeal some of the citations. “Chevron takes our commitment to safe operations seriously,” the San Ramon, Calif., company said in a statement. “Although we acknowledge that we failed to live up to our own expectations in this incident, we do not agree with several of the Cal-OSHA findings and its characterization of some of the alleged violations as ‘willful.'”

The company reported that since the fire it has taken a number of corrective actions to enhance safety, mechanical integrity and management oversight at the third-largest refinery in California, which processes 245,000 barrels of crude oil a day. The damaged refining unit is being repaired and should be back in operation by the end of March, Chevron said.

Chevron’s laxity endangered its neighbors, said state Assemblywoman Nancy Skinner (D-Berkeley), who represents the Richmond area. “The community expects more and demands more of Chevron,” she said. “Chevron needs to step up to the plate.”