"Workers' comp insurance becomes money loser"......

That's the title of a piece released today by Dan Walters, veteran political columnist of the Sacramento Bee.

Walters is widely admired in Sacramento and other political circles for his decades of experience as observer of the California scene.

Among the points made by Walters:
-in 2006, insurers earned nearly 27% on employer paid premiums of $17.3 billion
-premiums dropped to $9.1 billion in 2009

Walters essentially notes what I've been saying for some time.

Insurers reaped record profits in the early years after the 2003 & 2004 California comp reforms. Benefits paid to or on behalf of workers during those early years were a pitiful percentage of premium paid by employers.

Then came the housing crisis, the fall of Bear Stearns and Lehman and AIG, the tanking of the economy, and soaring unemployment.

As premium has declined (in large part because of a weak economy), costs have risen, especially medical costs.

In a number of other posts I've noted that cost containment and overhead expenses have risen sharply as a percentage of premium written.

So there's been less margin, leading the Schwarzenegger DWC to refuse to comply with the statutory mandate to revise the permanent disability rating schedule to increase benefits.

Meanwhile, benefits for workers with permanent disabilities were cut.
Using figures from a WCIRB 2008 Legislative Monitoring report, intended statutory reductions in permanent disability reduced permanent partial disability payments by $600 million. This included reductions due to changes in the law of "apportionment", PD reductions for a "return-to-work adjustment", and reductions in the number of weeks of disability paid out for many injuries.

Moreover, worker attorneys charge that PD benefits have been effectively cut by the 2005 permanent disability rating schedule and the refusal to amend the PDRS.

But as time went on, industry profits have been squeezed.

Citing the recent report from the Workers' Compensation Insurance Rating Bureau, Walters notes that "...insurers lost $1.5 billion on workers' compensation insurance policies last year after breaking even in 2008."

Walters acknowledges that insurers have been clamoring for rate increases. But Insurance Commissioner Poizner refused to recommend rate increases, and most insurers have been loathe to raise rates very much. Walters notes that there will be a new Insurance Commissioner elected in 2010.

Walters predicts that the stage is set for more workers' comp battles in the future, "making it a key, if little known, aspect of the gubernatorial duel" in the current Governor's race.

The WCIRB report, "2009 California Workers' Compensation Losses and Expenses" can be found here:
https://wcirbonline.org/wcirb/resources/data_reports/pdf/2009_loss_and_expenses.pdf

Stay tuned.

Julius Young
www.boxerlaw.com

In a recent post. "Lower Still", I wrote about the precipitous decline in written premium in California's workers' comp insurance industry:
http://www.workerscompzone.com/index.ph ... 604-075757

I noted that comp premium has fallen to $6.9 billion from over $16 billion in 2004. You don't pay premium on workers who aren't working or on business you don't have.

I noted that as premium declines, allocated and unallocated loss expenses climb as a percentage of premium. And I noted that it's likely we'll see high ratios of overhead expenses in proportionto benefits paid out to or on behalf of injured workers.

Surprise, surprise.

According to a report posted online by the astute folks at Workers' Comp Executive (wcexec.com for those who don't know it), the chief actuary of the WCIRB, Dave Bellusci has indicated that the "combined ratio" has increased to 118.2%. Bellusci was apparently speaking to the WCIRB actuarial committee.

Crudely stated, you can think of the combined ratio as the combination of losses and expenses relative to premiums collected.

Apparently (I say apparently because I don't have primary source documents on Bellusici's presentation) the "loss ratio" (ratio of indemnity and medical paid to or on behalf of workers) was 74.6% in 09, up from 2008.

The expense ratio (which includes allocated and unallocated loss expenses, broker commissions, taxes & other operating expenses) was apparently 43.1%. That's over half of the benefits paid to or on behalf of injured workers.

So as premiums fall, overhead rises as a proportion of premiums.

We have a very expensive system to deliver indemnity and medical benefits to workers.

What was also striking was word from the wcexec.com piece that the State Compensation Insurance Fund "combined ratio" ended in 2009 with a ratio of 161.5%.

As SCIF has lost market share, its overhead reductions have apparently not kept pace with its premium losses. If those numbers are for real, it's not sustainable and there's going to be a big problem soon.

With Insurance Commish Steve Poizner now a lame duck, it'll be interesting to see how the politics play out and whether the WCIRB pushes for a rate increase soon.

And at some point will the interests of insurers and employers diverge?

Stay tuned.

Julius Young
www.boxerlaw.com

Workers' comp sometimes has a Theater of the Absurd quality.

Eugene Ionesco, Jean Genet or Samuel Beckett could have designed this one: a cost containment effort that becomes a major cost center problem itself.

I'm referring to the increases in California workers' comp cost containment, which jumped 86% from 2005 to 2008. Over the period from 2002 to 2008, cost containment expenses jumped from 6.6% of treatment expenses to 14.7% (using first year treatment expenses as a sample

Cost containment as a cost driver! Who's afraid of Virginia Woolf, Virginia Woolf?

Cost containment as a cost driver!

These cost containment figures are documented in the recently released report of the California Workers Compensation Institute which you can find on their download page, "Medical Development Trends in Calif WC 2002-09":
ttp://www.cwci.org/research.html

Stay tuned.

Julius Young
www.boxerlaw.com

eMeg's campaign may be losing ground fast as Poizner tightens the race.
Whitman has been spending money at a rate of 4 cents per second. That may just have to increase.

The CWCI and DWC are out with studies on MPNs and medical treatment satisfaction. That will be fodder for commentary in coming days.

But first, turn to matters of health and work. If you're working long hours, how's your ticker?

A recent study seems to show that working overtime is bad for the heart:
http://www.oxfordjournals.org/our_journ ... ehq124.pdf

Here's further information on the results of the study:
http://www.oxfordjournals.org/our_journ ... ehq116.pdf

I know many of you readers out there are professionals working at a full tilt boogie pace. I'm one of them. But this is a reminder that there can be consequences with those long hours.

Years ago I had the pleasure of meeting Dr. Meyer Friedman, a San Francisco cardiologist. Friedman, who died in 2001, had been a prime proponent of the link between Type A behavior and heart disease, popularizing the link in his book (written with Dr. Ray Rosenman) "Type A Behavior and Your Heart". Friedman, based at Mt. Zion Hospital in San Francisco (now part of UCSF), had a quick wit and bright presence.

Friedman served as my medical expert/QME in a number of workers' comp heart cases, making the connection between work-related Type A behavior and heart disease. Two of my defense adversaries in cases of this type were present WCAB members James Cuneo and Al Moresi.

Friedman, who had had heart attacks himself, was always ready to banter with attorneys about their lifestyle choices. Like retired San Francisco orthopedic QME Joseph Bernstein (who always produced a spread of cookies and goodies for attorneys taking his deposition), Friedman was part of a rich tapestry of characters who have been in the California workers' comp system.

Some aspects of this culture have always puzzled outsiders.

I recall a lawyer friend of mine from Arkansas (who helped Bill Clinton on a thing or two) coming along as a sidekick at the deposition of deceased San Francisco cardiologist Embree Blackard. Blackard was being cross examined on "The Theory".

"The Theory" was of course the Type A theory of Meyer Friedman. My lawyer friend always asks how California courts now treat "The Theory".
I tell him it's enshrined in presumptions of compensability for public safety officers with heart trouble.

To learn more about Friedman, here's his obit:
http://www.nytimes.com/2001/05/01/us/me ... at-90.html

And here's a wikipedia entry on Friedman:
http://en.wikipedia.org/wiki/Meyer_Friedman

Stay tuned.

Julius Young
www.boxerlaw.com

Happy Mothers day to my readers in cyberspace.

I see many more mothers in my workers' comp practice than I did years ago when I began as an applicant attorney. Undoubtedly that's because women in so many families have gone to work in order for the family to make it economically.

When moms get displaced from their jobs because of an injury, the family budget can go into a tailspin.

Those moms often have a full plate. Let's just say that many of them don't have Bobby Flay waiting at home to cook dinner. Mr. Mom may be a trendy thing in some wealthy zip-codes, but it's not the norm in working America.

The AMA Guides (strictly interpreted) allocate pitiful impairment ratings for upper extremity problems suffered by many of the keyboard and hand-intensive jobs performed by women. But those women, moms many among them, have activities of daily living at work and at home that are constantly hand/arm dependent.

This is one reason why the Almaraz II approach to rating impairment has been cheered by many (including many of the defense attorneys I speak to, though they will not say so on the record for fear of losing
business from insurers and employers).

Anyway, here's a toast to the injured worker moms out there....may you have a blessed day today.

Julius Young
www.boxerlaw.com