Tag: 2019 News

State Compensation Insurance Fund’s 2018 Annual Report is now available. Important financial highlights include:

— Net income of $187 million, up from $40 million the previous year.
— Earned net premiums of $1.3 billion.
— Combined ratio of 134.7 percent – about 15 points lower than the previous year of 149.4 percent.

A combined ratio of more than 100% means that an insurance company had more losses plus expenses than earned premiums and lost money on its operations. The combined ratio is essentially calculated by adding the loss ratio and expense ratio. The loss ratio is calculated by dividing the total incurred losses by the total collected insurance premiums. The lower the ratio, the more profitable the insurance company and vice versa.

By comparison, in 2015 the WCIRB reported a state wide combined ratio of below 100%, the first report below that level since 2007. By 2017 it reported a state wide combined ratio of 91%. Thus, by comparison the SCIF ratio of $134.7 percent is an expensive outlier.

State Fund’s premium slightly increased in 2018. The increase of premium was due to the net effect of the increase of premium audits, and the decreases in premium rates and policy counts.

State Fund had a $460 million underwriting loss in 2018 compared to a $658 million underwriting loss in prior year. The 2018 underwriting loss decreased due to an additional $217 million LAE reserves strengthening for prior accident years in 2017.

In 2018, net investment income and realized gain on sale of equity decreased by $46 million mainly due to the abnormally higher capital gains realized in 2017 as a result of the termination and portfolio liquidation of an equity portfolio manager.

The board of directors did not declare dividends for 2018 and 2017. State Fund realized a net income of $187 million and $40 million for years ended December 31, 2018 and 2017.

“State Fund’s financial position remained strong in 2018, allowing us to continue to deliver on our purpose – providing fairly priced workers’ compensation insurance, helping keep workplaces safe, and restoring injured workers,” said Vern Steiner, President and CEO.

In his president’s letter accompanying the financial report, Steiner also discusses how State Fund is driving improvements in a number of business areas including a new Innovation Design Center, an expanded workplace safety website, and enhanced online policy services.

Sutter Health LLC, a California-based healthcare services provider, and several affiliated entities, Sutter East Bay Medical Foundation, Sutter Pacific Medical Foundation, Sutter Gould Medical Foundation, and Sutter Medical Foundation, have agreed to pay $30 million to resolve allegations that the affiliated entities submitted inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans, which resulted in the plans and providers being overpaid.

Under Medicare Advantage, also known as the Medicare Part C program, Medicare beneficiaries have the option of enrolling in managed healthcare insurance plans called Medicare Advantage Plans (“MA Plans”) that are owned and operated by private Medicare Advantage Organizations (“MAOs”). MA Plans are paid a capitated, or per-person, amount to provide Medicare-covered benefits to beneficiaries who enroll in one of their plans.

The Centers for Medicare and Medicaid Services which oversees the Medicare program, adjusts the payments to MA Plans based on demographic information and the health status of each plan beneficiary. The adjustments are commonly referred to as “risk scores.” In general, a beneficiary with more severe diagnoses will have a higher risk score, and CMS will make a larger risk-adjusted payment to the MA Plan for that beneficiary.

Sutter Health, a non-profit public benefit corporation that provides healthcare services through its affiliates, including hospitals and medical foundations, contracted with certain MAOs to provide healthcare services to California beneficiaries enrolled in the MAOs’ MA Plans. In exchange, Sutter received a share of the payments that the MAOs received from CMS for the beneficiaries under Sutter’s care.

Sutter submitted diagnoses to the MAOs for the MA Plan enrollees that they treated. The MAOs, in turn, submitted the diagnosis codes to CMS from the beneficiaries’ medical encounters, such as office visits and hospital stays. The diagnosis codes were used in CMS’ calculation of a risk score for each beneficiary.

The settlement announced today resolves allegations that Sutter and its affiliates submitted unsupported diagnosis codes for certain patient encounters of beneficiaries under their care. These unsupported diagnosis scores inflated the risk scores of these beneficiaries, resulting in the MAO plans being overpaid.

In March 2019, the government filed a separate complaint against Sutter and its affiliated entity, Palo Alto Medical Foundation, alleging that they violated the False Claims Act by knowingly submitting unsupported diagnosis scores. That case is captioned United States ex rel. Ormsby v. Sutter Health, et al., Case No. 15-CV-01062-JD (N.D. Cal.), and is still ongoing.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the United States Attorney’s Office for the Northern District of California, and HHS-OIG.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.

This matter is being handled by Assistant United States Attorney Kimberly Friday and U.S. Department of Justice Trial Attorney Olga Yevtukhova, with assistance from Jonathan Birch and Tina Louie.

The Workers’ Compensation Insurance Rating Bureau of California has released its Quarterly Experience Report based on statewide workers’ compensation insurer loss and premium experience through December 31, 2018. The major findings of the report include:

— California written premium for 2018 is 4 percent below that for 2017 and 6 percent below that for 2016 as recent declining premium rates have more than offset payroll growth.
— The industry average charged rate per $100 of payroll for policies incepting in 2018 of $2.25 is 11 percent below that for 2017 and 24 percent below the peak in 2014.
— The projected combined ratio for 2018 of 91 percent represents the sixth consecutive year of combined ratios below 100 percent. However, the 2018 combined ratio is 6 points above that for 2017, driven by higher severities for 2018 and lower premium rates.
— Indemnity claims continue to settle quicker, and the ratio of claim closure for 2018 represents a 19-year high.
— Indemnity claim frequency increased by 11 percent from 2009 to 2014 but decreased by 7 percent from 2014 through 2018.
— Cumulative trauma (CT) claim rates continued to be at high levels in 2017, and the ratio of CT claims to all indemnity claims increased by more than 89 percent since 2005.
— The estimated accident year 2018 loss and allocated loss adjustment expense severity on indemnity claims is 6 percent higher than for 2017. This represents the second year of increases following five years of modest declines.
— Pharmaceutical costs per claim decreased by 69 percent from 2012 to 2017 and continued to decrease through the first six months of 2018, when the new drug formulary became effective.
— Lien filings since 2016 have declined significantly, with the number of liens filed in the last two quarters of 2018 dropping 60 percent below pre-Senate Bill 1160 and Assembly Bill 1244 levels.

The full report is available in the Research section of the WCIRB website.

For more than 2,000 years Chinese healers have used herbal powders and tinctures, dust made from various animal parts and strategically placed needles to treat a host of human ailments. These are used in hundreds of nations globally, but the practice in China is perhaps the most extensive, documented and catalogued.

Over the past decade proponents of Traditional Chinese medicine (TCM) have worked hard to move it into the mainstream of global health care – and it appears those efforts are coming to fruition.

Western cultures have preferred what is called “allopathic” medicine, also called biomedicine, conventional medicine, mainstream medicine, orthodox medicine, and Western medicine. Generally the term applies to a system in which medical doctors and other healthcare professionals (such as nurses, pharmacists, and therapists) treat symptoms and diseases using drugs or surgery.

Labor Code 4600 specifically authorizes acupuncture treatment. As of June 15, 2007, California workers injured on the job got an easier path to receive acupuncture treatment as part of their workers’ compensation treatment as a result of amendments to the MTUS. Previously the ACOEM guidelines only made a brief mention of acupuncture for shoulder complaints.

Now, the latest (11th) version of the World Health Organization’s list known as the International Statistical Classification of Diseases and Related Health Problems (ICD-11) will include these remedies for the first time.  ICD-11 will be presented at the Seventy-second World Health Assembly for endorsement by Member States in May. Following endorsement, Member States will begin reporting health data using ICD-11 by January 2022.

According to its own mandate, the WHO sets the norms and standards for medical treatment around the globe and articulates “ethical and evidence-based policy options.”

It categorizes thousands of diseases and influences how doctors treat them; how insurers cover those treatments; and what kind of research is done on which ailments. More than 100 countries rely on the document to determine their medical agendas.

China has been pushing for wider global acceptance of traditional medicines, which brings in some $50 billion in annual revenue for the nation’s economy.

However there is much push back allopathic medicine providers.

An extensive assessment was done in 2009 by researchers at the University of Maryland: they looked at 70 review papers evaluating TCM, including acupuncture. None of the studies proved conclusive because the data were either too paltry or did not meet testing standards.

A 2018 study in the British Journal of Clinical Pharmacology tested 487 Chinese products taken by sick patients and discovered 1,234 hidden ingredients, including approved and banned Western drugs, drug analogues and animal thyroid tissue.

And in 2012 a team led by Megan Coghlan, then at Murdoch University of Australia, identified the DNA sequences in 15 samples of traditional medicines in the form of powders, tablets, capsules, bile flakes and herbal teas. The samples also contained plants that produce toxic chemicals and animal DNA from vulnerable or endangered species (the Asiatic black bear and saiga antelope, for example) and other creatures protected by international laws.

The consunsus of these researchers is that to include TCM in the ICD is an egregious lapse in evidence-based thinking and practice. Data supporting the effectiveness of most traditional remedies are scant, at best.

The Department of Industrial Relations and its Division of Workers’ Compensation posted a progress report on the department’s Independent Bill Review (IBR) program.

IBR is a process used to resolve billing disputes for medical treatment and medical-legal services provided to injured workers.

Prior to SB 863, a medical provider engaged in a billing dispute with a claims administrator was limited to filing a lien with the Workers’ Compensation Appeal Board in order to determine entitlement to the amount initially billed.

SB 863 established Second Bill Review (SBR) and IBR to decide billing disputes expediently, in which the only issue is the amount to be paid for the medical service provided. If the medical service is covered by a fee schedule, then SBR and IBR must be used to resolve the dispute.

The “2018 Independent Bill Review (IBR) Report: Analysis of 2013-2017” examines the IBR program activity from its implementation, capturing all applicant filings through December 31, 2017, thus providing an evaluation of the program during the first five years following its enactment.

During the first few months of the program, the IBRO received only a handful of applications. In the second quarter, filings increased and then accelerated throughout the remainder of 2013. In 2014, 2,009 applications were filed. The number of filings in 2015 and 2016 was nearly identical: 2,345 in 2015 and 2,385 in 2016. In 2017, filings decreased approximately 10 percent from the peaks in previous years, to 2,151.

In the first five years following IBR’s implementation, almost half the challenged billings (46.2%) related to Physician Services, including visits, consultations, and nonsurgical procedures. The second-highest number of review requests was for services at hospital outpatient departments and ambulatory surgical centers (17.9%). Disputes with contracts for reimbursement rates were the third highest (12.6%).

Among the filings that receive a review and a case determination, 71.1 percent are “overturned,” meaning the IBRO determined that additional reimbursement is warranted. The claims administrator’s determination is reversed, so the provider is due reimbursement for the review cost, along with the amount for review of the billing and fee schedule.

Overturned IBR case decisions for applications filed in 2013-2017 resulted in reimbursement to the providers totaling $12,277,568. This amount includes the repayment of filing fees for those cases. When IBR was introduced, the filing fee was $335. Effective April 1, 2014, this fee was reduced to $250 and then further decreased to $195 on January 1, 2015.

“We hope the findings of this report will encourage health care providers to consider using IBR for some of their payment disputes,” said DWC Administrative Director George Parisotto.

The progress report is posted on the DIR website.