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Tag: 2014 News

China Enters USA Workers’ Comp Market

Fosun International Limited and Meadowbrook Insurance Group, Inc. announced that they have entered into a definitive agreement under which Fosun will acquire Meadowbrook for US$8.65 per share in cash, representing an aggregate transaction value of approximately US$433 million. The transaction follows a thorough review of strategic alternatives by the Meadowbrook board of directors and represents a 24% premium over Meadowbrook’s closing price on December 29, 2014 and a premium of 39% to Meadowbrook’s three-month average closing price for the period ending December 29, 2014. The transaction also represents a multiple of approximately 1.04x Meadowbrook’s tangible book value per share as of September 30, 2014.

Meadowbrook Insurance Group, Inc., based in Southfield, Michigan, is a leader in the specialty program management market. Meadowbrook includes several agencies, claims and loss prevention facilities, self-insured management organizations and six property and casualty insurance underwriting companies. Meadowbrook has twenty-eight locations in the United States including California. It is a risk management organization, specializing in specialty risk management solutions for agents, professional and trade associations, and small to medium-sized insureds.

Fosun is a leading investment group headquartered in Shanghai, China with over $50 billion in total assets and operations around the world. The acquisition of Meadowbrook will enable Fosun to establish a significant presence in the U.S. property and casualty market. Currently, Fosun has more than one third of its total assets invested in insurance businesses around the world, including investments in Yong’an P & C Insurance, Pramerica Fosun Life Insurance and Peak Reinsurance, as well as Fidelidade Group, Portugal’s largest insurance company.Fosun’s most recent investment in the insurance sector was an acquisition of a 20% equity interest in Ironshore Inc. in August 2014.

Guo Guangchang, Chairman of Fosun, said, “This transaction allows Fosun to establish a presence in the important U.S. P & C market, consistent with our strategy of expanding our core insurance business. Meadowbrook has a talented employee base, comprehensive offering of high-quality specialty insurance products, robust distribution network and a strong commitment to meeting the evolving needs of its policyholders.The transaction represents another milestone for Fosun and will enable Fosun to further strengthen its insurance-oriented comprehensive financial capabilities.”

Robert S. Cubbin, President and Chief Executive Officer of Meadowbrook, said, “Combining with Fosun further strengthens our capital base as we continue to focus on supporting the needs of our customers, partners and policyholders, improving our underwriting performance and driving profitability.” Mr. Cubbin continued, “This transaction is the culmination of a thorough strategic review process to maximize shareholder value. We believe this is a positive outcome for our shareholders, who will receive significant value; our employees, who will benefit from enhanced opportunities as part of a larger, global organization; and our customers, partners and policyholders, who will benefit from an even stronger specialty risk, insurance and service provider.”

The transaction has been unanimously approved by all of the directors of the Meadowbrook board of directors present at the meeting and has been unanimously approved by the Fosun board of directors. Following the closing of the transaction, which is expected in the second half of 2015, Meadowbrook will continue to maintain its headquarters in Southfield, Michigan and will operate under the Meadowbrook brand name. The transaction is subject to the approval of Meadowbrook’s shareholders as well as regulatory approvals and the satisfaction of other specified closing conditions.

San Bernardino Child Support Officer Faces Fraud Charges

A Child Support Officer for the San Bernardino County Department of Child Support Services was arraigned late December on three felony counts related to a workers’ compensation claim she filed with the County on July 20, 2009, alleging stress-related impairment.

Esther Marinelarena, 45, of Fontana, was arraigned at the San Bernardino Justice Center and pleaded not guilty to one count of Workers’ Compensation Fraud, one count of Insurance Fraud, and one count of Concealment of, or Failure to, Disclose Material Fact Regarding Insurance Benefits (see attached copy of complaint).

On Oct. 23, 2014, following an investigation by investigators with the San Bernardino County District Attorney’s Workers’ Compensation Insurance Fraud Unit, Marinelarena was charged for allegedly making false statements regarding the degree of her impairment and lying to her treating physician about her medical and psychiatric history.

Marinelarena was arrested by District Attorney Investigators Oct. 28 and transported to West Valley Detention Center in Rancho Cucamonga.

Deputy District Attorney Scott Byrd will prosecute this case. A Disposition/Reset Hearing is scheduled Jan. 21, 2015 in Dept. S12 of the San Bernardino Justice Center.

DIR Publishes Digest of New Law Effective January 1

The Department of Industrial Relations released its 2014 Legislative Digest, which provides an overview of new laws and vetoed bills related to the work of DIR and its divisions, which include the Labor Commissioner’s Office, Cal/OSHA, the Division of Workers’ Compensation and the Division of Apprenticeship Standards. These bills were all reviewed during the second half of the 2013/2014 legislative session. Among the chaptered bills signed by the Governor in the digest are:

AB 1035 extends the time period to file a dependency case with the WCAB from 240 weeks to no later than 420 weeks from the date of injury for certain safety workers if the death was due to cancer, tuberculosis, a blood-borne infectious disease or methicillin-resistant Staphylococcus aureus skin infection; Governor Brown vetoed a similar bill last year.
AB 1746 requires that cases in which an unrepresented employee who is or was employed by an illegally uninsured employer be placed on the priority conference calendar at the WCAB. It must be held within 30 days after a DOR is filed in the case..
AB 2230 allows CIGA to levy an assessment of up to two percent of direct written premiums for the payment of covered claims and expenses.
AB 2732 makes technical, non-substantive, and clarifying changes to several Labor Code provisions amended or enacted by SB 863.

It is of interest that the Governor vetoed the following bills that pertain to Workers’ Compensation.

AB 2052 would have established or expanded presumptions of injury for safety officers In the veto message Brown said “This measure seeks to expand coverage to dozens of additional categories of officers without real evidence that these officers confront the hazards that gave rise to the presumptions codified in existing law. Presumptions should be used rarely and only when justified by clear and convincing scientific evidence.”
AB 2378 would have overturned the June 2013 decision by the California Court of Appeals in County of Alameda v. WCAB (Knittel) (2013) 213 Cal.App.4th 278, 78 Cal. Comp. Cases 81, which ruled that the period of salary continuation must be counted as part of the 104-week limit on TD benefits.
AB 2616 would have established a statutory presumption that a MRSA infection that develops in a hospital employee who provides direct patient care in an acute care hospital is work related. Brown’s veto message said “The determination that an illness is work-related should be decided by the rules of that system and on the specific facts of each employee’s situation. While I am aware that statutory presumptions have steadily expanded for certain public employees, I am not inclined to further this trend or to introduce it into the private sector.”

Other bills of interest that were signed into law include

AB 326 modernizes reporting requirements for employers reporting serious injury, illness or death. This law provides that employers may also report such incidents via email and removes the option to report via telegraph.
AB 1522 creates the Healthy Workplaces, Healthy Families Act of 2014, which provides that as of July 1, 2015, employees shall accrue compensated sick leave to care for themselves or for family members as defined in the bill. Under this bill, employers shall provide up to 24 hours (i.e., three days) of paid sick leave each year.

The Governor vetoed the following bill that pertains to Employment Law.

AB 2271 would have restricted employers, employment agencies, and persons who operate an Internet website from posting job advertisements that indicate an individual’s current employment is a requirement for a job. The veto message said “While I support the intent of this bill, it could impede the state’s efforts to connect unemployed workers to prospective employers as currently drafted. The problems facing our state’s long term unemployed are great. There is no doubt that those Californians want to get back to work and I want to help them get there – unfortunately this bill does not provide the proper path to address this problem.”

The 26 page DIR 2014 Legislative Report, or the website of the Legislative Counsel of California should be consulted for further more detailed information about these and other laws that take effect in January.

DWC Issues a Third 15 – Day Notice for Modification of MTUS Regs

The Division of Workers’ Compensation (DWC) has posted a third 15-day notice of modification to the proposed Medical Treatment Utilization Schedule (MTUS) regulations to the DWC website. Members of the public are invited to present written comments regarding the proposed modification to until 5 p.m. on Tuesday, January 13, 2015. The proposed modifications include:

1) Specification that treating physicians provide a clear and concise statement in the Request for Authorization or in an attachment to the Request for Authorization when they are attempting to rebut the MTUS’ presumption of correctness.
2) Requirement that treating physicians provide a copy of the entire study or relevant sections of the guideline containing the recommendation that the physician believes guides the reasonableness and necessity of the requested treatment when they are attempting to rebut the MTUS’ presumption of correctness.
3) Clarification that the MTUS Methodology for Evaluating Medical Evidence shall be applied by Utilization Review physicians and Independent Medical Review physicians when competing recommendations are cited to guide medical care. The MTUS Methodology for Evaluating Medical Evidence is the process used to evaluate the quality and strength of evidence used to support a recommendation.

The notice and text of the regulations can be found on the proposed regulations page.

Governor Brown Announces Comp Related Appointments

Governor Brown has announced some year end appointments, four to the Workers’ Compensation Fraud Assessment Commission and one to the Occupational Safety and Health Appeals Board.

Lilia García-Brower, 41, of Los Angeles, has been appointed to the California Fraud Assessment Commission, where she has served since 2007. García-Brower has been executive director at the Maintenance Cooperation Trust Fund since 2000. She was a teaching assistant at California State University, Northridge from 1999 to 2000 and a college counselor at Volunteers of America, Los Angeles from 1996 to 1999. This position does not require Senate confirmation and the compensation is $100 per diem. García-Brower is registered without party preference.

Donald Marshall, 60, of Fremont, has been appointed to the California Fraud Assessment Commission, where he has served since 2009. Marshall has been vice president at the Zenith Insurance Company since 2003, where he was manager of investigations from 1993 to 1996. He was director of special investigations at Gates McDonald from 1999 to 2003, vice president of CalFarm Insurance from 1996 to 1999 and special investigations coordinator at the California Casualty Insurance Company from 1991 to 1993. This position does not require Senate confirmation and the compensation is $100 per diem. Marshall is a Democrat.

John Riggs, 61, of Mission Viejo, has been appointed to the California Fraud Assessment Commission, where he has served since 2009. Riggs has been manager of worker’s compensation at Disneyland Resort in California since 2003. He was director of workers’ compensation at 99 Cents Only Stores from 2002 to 2003, a regional claims manager and vice president at the California Casualty Management Company from 1993 to 2001, claims manager at the Zenith Insurance Company Workers’ Compensation Branch from 1987 to 1993 and an independent claims consultant from 1986 to 1987. This position does not require Senate confirmation and the compensation is $100 per diem. Riggs is a Republican.

Douglas Williams, 65, of Lancaster, has been appointed to the California Fraud Assessment Commission, where he has served since 2011. Williams has been an application processor for the Labor Management Cooperative Trust, Market Retention Committee since 2012. He was a manager at Ironworkers Local Union 433 from 2006 to 2012, where he was a business agent from 2000 to 2006. Williams was a superintendent at Benson Wall Systems from 1997 to1999, a rigging foreman at Randall’s Erectors in 1997 and a lay-out foreman at South Coast Structural from 1996 to 1997. He was a journeyman at Junior Steel in 1996, a rigging foreman at Sheedy Drayage Company in 1995 and a journeyman at Plastal Manufacturing Company from 1994 to 1995 and at Atlas Industrial Contractors in 1994. This position does not require Senate confirmation and the compensation is $100 per diem. Williams is a Democrat.

Art Carter, 73, of San Francisco, has been reappointed member and chair of the Occupational Safety and Health Appeals Board, where he has served since 2009. Carter was legislative advocate for Art Carter and Associates from 1984 to 2004 and served as deputy chief administrative officer for the city of San Francisco in 1983. He served as chief of the California Department of Industrial Relations, Division of Occupational Safety and Health Administration from 1976 to 1983 and was secretary-treasurer for the Contra Costa County Central Labor Council from 1967 to 1976. This position requires Senate confirmation and the compensation is $121,778. Carter is a Democrat.

DWC Posts Example “End of MPN Coverage” Notice

The Division of Workers’ Compensation has posted an example of a streamlined End of Medical Provider Network (MPN) Coverage Notice to the DWC website.

This streamlined notice is only used when an employer-based or insurer-based MPN ends its coverage and consolidates medical care into an MPN established by an entity that provides physician network services and the medical treatment of injured workers is not affected. Medical treatment will not be affected if the underlying network of providers is used by all of the MPNs involved.

Since an injured worker’s medical treatment will remain with the same physician and continue with the MPN that is taking over medical care, a Transfer of Care Notice pursuant to California Code of Regulations, title 8, section 9767.9 is not required. However, a complete employee notification must be provided pursuant to California Code of Regulations, title 8, section 9767.12(a), along with the streamlined End of Medical Provider Network (MPN) Coverage Notice. This sample gives three options to choose from to provide the complete employee notification.

Judge Dismisses Painkiller Class Action Against NFL

A federal judge dismissed a class action accusing the NFL of giving football players dangerous painkillers to mask their injuries.

According to the report in Courthouse News, U.S. District Judge William Alsup found the lawsuit brought by more than 500 former players must be settled under the collective bargaining agreements between the NFL and the players’ union, as the crux of the claim is that players’ teams mistreated them, and that the league did nothing to stop it in his 22 page ruling. The lead plaintiff was Richard Dent, a former Chicago Bear.

“One problem is this: no decision in any state (including California) has ever held that a professional sports league owed such a duty to intervene and stop mistreatment by the league’s independent clubs,” Alsup wrote. Alsup ruled that while the agreement’s medical care provisions may not be perfect, and its protections may not specifically discuss prescribing drugs and painkillers, “this is not a situation in which the NFL has stood by and done nothing.”

“The main point of this order is that the league has addressed these serious concerns in a serious way – by imposing duties on the clubs via collective bargaining and placing a long line of health-and-safety duties on the team owners themselves,” Alsup wrote in his 22-page ruling. “These benefits may not have been perfect but they have been uniform across all clubs and not left to the vagaries of state common law. They are backed up by the enforcement power of the union itself and the players’ right to enforce these benefits.” He continued: “Given the regime in place after decades of collective bargaining over the scope of these duties, it would be impossible to fashion and to apply new and supplemental state common law duties on the league without taking into account the adequacy and scope of the CBA duties already set in place.”

At a hearing in October that signaled Alsup’s decision, he said: “The union is supposed to be looking out for the plaintiffs. The labor union is the one that is supposed to be doing this.” Alsup ordered that the players’ union weigh in on whether the retired players could still arbitrate their grievances.

The union complied with that order, and Alsup, who found that the players’ retiree status should not bar them from arbitration, quoted the union’s letter in his ruling. “On this issue, the union’s letter has explained that ‘the current CBA and former CBAs have included various provisions negotiated on behalf of current and future players that continue to benefit those players after they retire from the NFL,’ such as provisions on retirement plans or termination pay,” Alsup wrote. “In fact, former players in other cases have been able to arbitrate their grievances against the NFL or individual clubs, notwithstanding their prior retirement from the league.”

Though Alsup found the issue should not be decided in federal court, he said: “This order does not minimize the underlying societal issue. In such a rough-and-tumble sport as professional football, player injuries loom as a serious and inevitable evil. Proper care of these injuries is likewise a paramount need.”

The players may file an appeal, or may file a motion to file an amended pleading. Thus this may not be the final word on this claim filed in San Francisco, or the Workers’ Compensation claims that may also follow.

Interpreters Must State Qualifications In Deposition Transcript

SB 863 made certain changes to the California Government Code at section 11435 to require certification of interpreters who are used in WCAB hearings, depositions and medical appointments. One of the certification methods for Court Interpreters is specified in Government Code sections 68560-68566

Effective January 1, section 68561 of the Government Code will be amended by the provisions of AB 2370 which was approved by the Governor on September 18, 2014 and filed with the Secretary of State on September 18, 2014. The amendment would require certified or registered interpreters to state information for the record in depositions where a judge is not present, that documents the qualifications of the interpreter that us used. Specifically the new language of section 68561 requires the following at a deposition.

GC 68561 (h) In a deposition where a judge is not present to fulfill the requirements specified in subdivision (g), a certified or registered interpreter shall state all of the following for the record:
(1) His or her qualifications, including his or her name and certification or registration number.
(2) A statement that the interpreter’s oath was administered to him or her or that he or she has an oath on file with the court.
(3) A statement that he or she has presented to both parties the interpreter certification or registration badge issued to him or her by the Judicial Council or other documentation that verifies his or her certification or registration accompanied by photo identification.

The author of the bill explained the rationale. “There is no statutory requirement for a judge to verify the qualifications of an interpreter who claims to be certified, or claims to have an “oath on file.” Instead, non-certified interpreters often say they have an oath on file, thus giving a false impression that they are certified. This results in judges struggling to recognize when an interpreter is actually certified and when there is a need to follow court procedures for qualifying a non-certified interpreter. Ensuring that a certified interpreter has a certification number, certification status, and badge or photo identification would increase the accuracy of determining whether the court proceeding has received services from a certified interpreter or a non-certified interpreter. AB 2370 would increase accountability for the use of certified court interpreters and prevents any misrepresentation of certification by requiring a judge to direct the certified interpreter to state, for the record, their name and certification status, show photo identification, identify the language that will be interpreted and verify the filing of their oath with the court.”

It would be prudent for attorneys to insure compliance with this new law at any deposition taken after January when an interpreter is used. It is not known if failure to comply would jeopardize use of the deposition transcript at a later time. Compliance with this new law would avoid this risk.

Suit Filed Against Drug Maker for Price Gouging

A federal lawsuit alleging price gouging by the maker of hepatitis C drug Sovaldi mirrors a growing struggle to contain hepatitis C-related workers compensation prescription costs that can reach up to $150,000 per claimant. While Sovaldi, which entered the market a year ago, is a highly effective treatment that can cure patients of hepatitis C – unlike other treatments for the chronic liver infection – employers should carefully monitor its use to determine whether cheaper treatments are available or appropriate, experts say.

In the class action suit filed Dec. 9 in U.S. District Court in Philadelphia, the Southeastern Pennsylvania Transportation Authority in Philadelphia says it has paid more than $2.4 million for Sovaldi prescriptions for its employees in 2014. According to the story in Business Insurance, the agency accuses Sovaldi’s maker, Foster City, California-based pharmaceutical company Gilead Sciences Inc., of “selectively charging exorbitant prices” for Sovaldi, and is seeking unspecified restitution and monetary damages against Gilead for alleged unjust enrichment, violations of the Patient Protection and Affordable Care Act and other claims.

While the SEPTA suit relates to group health payments for Sovaldi, workers comp payers also are seeing rising costs related to the drug. Pharmacy benefit manager Express Scripts Inc. said spending for hepatitis C medications in workers comp increased 135% in the first six months of 2014 compared with the same period in 2013. About 66% of that increase is attributed to Sovaldi prescriptions, the company said in a statement. The cost increase occurred despite a reduction in the number of pharmacy prescriptions for hepatitis C medications at Express Scripts, where workers comp claims for the disease fell to 79 in the first half of 2014, down from 92 in the first half of 2013, according to the PBM’s data. Health care workers, emergency first responders and other workers who are regularly exposed to bodily fluids are most likely to file for workers comp benefits related to hepatitis C.

“Sovaldi is priced at an orphan drug price for a population that is not an orphan drug population. So it’s priced really at a premium that we can’t sustain,” said Brigette Nelson, senior vice president of workers compensation clinical management for Express Scripts in Cave Creek, Arizona. So-called orphan drugs are medications used for illnesses that affect only a small subset of the population.

Hepatitis C treatment costs can soar higher when Sovaldi, which costs $84,000 for a 12-week course of treatment, is paired with another new hepatitis C drug called Olysio, which is made by Titusville, New Jersey-based pharmaceutical company Janssen Therapeutics and costs $66,360 for a 12-week course of treatment. The U.S. Food and Drug Administration approved both drugs in late 2013. The medications often are used together to help increase the chances of curing a patient’s hepatitis C infection, said Phil Walls, chief clinical and compliance officer at Tampa, Florida-based PBM Matrix Healthcare Services Inc., which does business as myMatrixx.

Trying to limit drug costs for hepatitis C under a workers comp claim can be tricky. Experts agree that Sovaldi and other newer treatments are more effective than older, cheaper hepatitis C medications that include longer courses of treatment, have more side effects, require patients to take multiple doses a day and less likely to cure patients of the disease. “We’re not disputing that Sovaldi is a much better drug, because it is better tolerated than the previous therapies. It’s just the cost that we’re concerned about,” Ms. Nelson said.

Employers should work with their TPA or PBM to create prescription drug formularies that would automatically flag a claim for Sovaldi and initiate a review of whether the drug is appropriate for certain patients, Ms. Harer said. For example, patients recently exposed to bloodborne pathogens may be effectively treated with prophylactic antiviral medications that can prevent infection and are much less costly than Sovaldi and other hepatitis C treatments, she said. Mr. Walls said claim payers should consider using specialty drug pharmacies to fill prescriptions for Sovaldi or other hepatitis C drugs, since such pharmacies specialize in helping patients to adhere to drug treatments.

Proper adherence can make sure that a Sovaldi drug course works the first time, preventing a patient from needing to do another expensive round of the treatment in the future, he said. “You really need to be compliant with your therapy in order for the drug to be as effective as possible,” Mr. Walls said.

Ms. Nelson of Express Scripts said the company – the nation’s largest PBM – is pushing Gilead and other hepatitis C drug makers for more competitive prescription prices. “That’s the next step that needs to happen so that people have access to drugs at a cost that can be sustained,” she said.

DWC Awaits CMS Final Rule on Fee Schedule

The Division of Workers’ Compensation (DWC) has received inquiries regarding an update to the Official Medical Fee Schedule (OMFS).

The Physician and Non-Physician Practitioner Fee Schedule based on the federal Resource Based Relative Value Scale (RBRVS) was adopted pursuant to the requirements of Senate Bill 863 and became effective for services rendered on or after January 1, 2014.

The Medicare final physician fee schedule RBRVS rule for 2015 was published in the Federal Register on November 13 with an effective date of January 1, 2015. The Labor Code requires that the fee schedule be updated within 60 days after the effective date of the Medicare revision by issuance of an Administrative Director update order. DWC has been working diligently to complete review of the rule and Relative Value File and to determine the updates that are needed.

As a result of review of the published final rule, and based on prior Medicare practice, DWC anticipates that the Centers for Medicare and Medicaid Services (CMS) will be posting a Physician Fee Schedule Final Rule Correction Notice. DWC has determined that it would be most efficient to wait for the Medicare Final Rule Correction Notice before adopting an update. After publication of the Medicare Final Rule Correction Notice, DWC will review the revisions, and will issue an Administrative Director update order making appropriate adjustments to the workers’ compensation fee schedule.

The Administrative Director update order will specify the effective date of the changes. If the Medicare correction notice is issued prior to the end of December, DWC anticipates that the 2015 update to the Physician and Non-Physician Practitioner Fee Schedule will be effective for services rendered in early February 2015. The estimated date is subject to change depending on the date of issuance of the Medicare Final Rule Correction Notice, the extent of the changes, and the need to allow time for implementation by providers and payers.

You may receive the announcement of the 2015 fee schedule update by subscribing to DWC’s Newsline mailing list. Upon adoption, the 2015 fee schedule will be posted to the DWC website.