Never one to shy away from brash comments, Republican presidential hopeful Newt Gingrich asserted in an interview this week with ABC's Jake Tapper that he will be the GOP nominee.

What does Gingrich think about workers' comp?

Longshore workers, federal employees and some defense contractor workers are covered by federal workers comp programs.

But in a speech to the November 18, 2010 Republican Governor's Conference, Gingrich outlined his ideas about where state workers compensation laws should go.

Gingrich urged that Governors should seek to:
"Replace litigation-focused workers compensation with a rehabilitation and capabilities focused program that maximizes the speed of helping people medically, and focuses on retraining and focusing on what they can do rather than on what they can't do."

California has moved in the other direction, of course, nixing vocational rehabilitation in favor of a small and unwieldy "retraining voucher" system that is underutilized and untimely for most workers who need it.

Here is a link to the text of Gingrich's speech so you can see his prescriptions in context:
http://www.aei.org/article/politics-and ... ssocation/

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

It's fascinating to read the California Watch investigative report on the behavior of some California hospitals.

Reporters at California Watch looked at Medicare billing data and determined that some hospitals were billing for expensive treatments at far above the state average. For example, Chino Valley MedicalCenter in San Bernardino billed for cardiac failure treatments for 35.2% of its Medicare patients.

Medicare now gives bonus payments for treating patients with complications. California Watch determined that Chino Valley Hospital went from almost no acute cardiac failure billings to 1,971 after the Medicare rules were changed.

Other hospitals with high percentages of cardiac failure billings were Paradise Valley Hospital in National City, Huntington Beach Hospital, Sutter Coast Hospital in Crescent City, Centinela Hospital in Inglewood, Desert Valley Hospital in Porterville, San Leandro Hospital, La Palma Intercommunity Hospital, Montclair Hospital Medical Center, and West Anaheim Medical Center.

Predictably, some of the hospitals dispute that they have done anything improper.

But if the billings are fraudulent, is it hospital policy to miscode treatments or action by physicians? Where in the management chain do these policies start?

We'll likely see much more on this story.

The relevance for workers' comp? Could there be a similar phenomenon in workers' comp, where some doctors or hospitals pad treatment bills or upcode?

Inquiring minds would love to know.

The California Watch piece by Lance Williams, Stephen K. Doig and Christina Jewett, "Heart Failure Cases Surge Among Prime Hospitals" can be found here:
http://californiawatch.org/health-and-w ... ents-13703

Julius Young
www.workerscompzone.com
www.boxerlaw.com

It's likely that during the next year we'll see Californians debating the merits of various revenue raising initiatives.

This week the Think Long Committee for California unveiled its "Blueprint to Renew California", sponsored by the Nicolas Berggruen Institute (See link to the full report at the bottom of this post). Assembled by Berggruen, the Think Long Committee is composed of some of the heavy hitters in California politics......Willie Brown, Gray Davis, Arnold Schwarzenegger, Robert Hertzberg...Ronald George, former California Chief Justice....Maria Elena Durazo from the L.A. County Labor Federation...Eric Schmidt of Google, Terry Semel, former Yahoo! and Warner Brothers CEO....Laura Tyson, economic adviser to Democratic presidents...Condi Rice and George Schultz...business leaders Gerald Parsky and Eli Broad...and more. Advisers included former budget directors Mike Genest and Tim Gage.

They propose "an integrated set of proposals that we believe will update and modernize the state's broken system of governance".

With billionaire Berggreuen apparently ready to donate heavily to advance the concepts, it's likely we'll see the Think Long plan in some sort of initiative in 2012.

Meanwhile, Farallon Capital Management founder Tom Steyer is proposing a plan to tax out of state firms based on California sales. According to some press reports, the plan would raise over $1 billion. Steyer, a philanthropist interested in environmental policy, has spent freely on past environmental initiatives. Funds raised through the initiative would be shared between clean energy projects and schools.

And various labor unions are likely to push another revenue proposal for the ballot.

So with California failing to meet revenue targets and with the LAO reporting a $12.8 billion gap, voters will be asked in 2012 to decide whether to raise revenues or whether to accept massive cuts to schools, universities and social services.

What's this mean for workers' comp? Maybe not much.

But tucked away in the Berggruen plan is a proposal to expand the tax base to include a tax on services.

This isn't novel. Look back at a 2010 piece in the New York Times, detailing
efforts afoot in many states to tax services....accountants, attorneys clowns, undertakers, plumbers, accountants, tailors, dry cleaners:
http://www.nytimes.com/2010/03/28/us/28 ... wanted=all

So if your yoga class is taxed and your hair stylist is taxed, will workers' comp attorney fees be taxed?

Would this tax be absorbed by applicant attorneys, or passed along to applicants by higher fee requests? Paid directly by defendants out of the stip or C&R proceeds? Or paid by the attorney? What record keeping and reporting requirements would be required?

And on the defense side, this is a cost factor to consider in assessing allocated risk adjustment numbers.

The Berggruen report proposed that the new sales tax on services would be
at a rate of 5 to 5.5% and would apply to all services, including to businesses and consumers, except for health care and educational services.
The tax would be phased in over several years.

Lest readers run out and join Grover Norquist's anti-tax group, I would urge that we all take a deep breath and look at the merits of the various proposals that emerge.

California has problems, and some shared sacrifice (which may include revenue increases along with belt tightening) is going to be required to solve them.

Here is a link to the Think Long Report:
http://berggruen.org/files/thinklong/20 ... new_ca.pdf

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

With pending layoffs, transition continues at California's quasi-public insurer, the State Compensation Insurance Fund.

With new leadership, including CEO Tom Rowe and board chair Larry Mulryan, attempting to trim staff and expenses, SCIF has been in turmoil. As with any organization going through reorganization, some long-term staff aren't happy campers.

Some have been transferred to various locations, such as from San Francisco headquarters to Vacaville. Real estate is being sold and some offices closed. Some of the employees were transferred and then subject to layoffs.

SCIF's share of the California workers' comp market shrank drastically over the past decade, leaving it with high administrative overhead.

In early 2011 the union representing most SCIF employees, SEIU Local 1000
challenged layoffs.

So what's the current status?

It seems that SCIF has agreed to pay severance packages to as many as 1,800 employees who may be laid off. Severance packages will range up to $55,000 for some employees according to a deal worked out between SEIU and SCIF.

Jon Ortiz of the Sacramento Bee has the details on the severance agreement:
http://www.sacbee.com/2011/11/19/406620 ... %20Stories

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

In several recent posts I discussed workers' comp premiums and the new methodology adopted by Insurance Commissioner Dave Jones.

I noted that the recently recommended rates continue a pattern of workers' comp rates that have been quite stable for California employers for the last five years.

Last weekend I had the pleasure of discussing this with insurance consultant Mark Gerlach. Gerlach serves as a consultant to CAAA and is widely respected in the industry for his knowledge on insurance issues.

I asked Gerlach what he thought. Here's what he offered:

"Your two posts last week regarding pure premium rates highlighted the primary problem with those rates. Specifically, the problem is that the "approved" pure premium rates don’t seem to mean anything.
As you noted, the average "charged" rate in 2011 was $2.38 while the average "filed" pure premium rate was $2.37. But what you didn’t say was that the average "approved" pure premium rate was actually quite a bit less than the average "filed" pure premium rate of $2.37. In fact, the Commissioner's Decision denying the WCIRB’s request for 2011 noted that the average "filed" rates at that time were 36% higher than the "approved" pure premium rates."

Gerlach continues:

"What this means is that insurers make independent decisions regarding rates, and movement – or the lack of movement – of the "approved" pure premium rates doesn’t have much impact on their decisions. Consequently, even if the "approved" 2012 pure premium rates were higher than the previous "approved" rates, assertions that this change in pure premium rates will lead to a major increase in employers’ insurance costs are wrong. The SCIF action – dropping its average rates by 1% – is further confirmation that changes in the approved pure premium rates just don’t impact the market."

According to Gerlach:

"So, why is this a problem? A review of the industry’s combined ratios over the 16 years since adoption of competitive rating shows a disastrous pattern of extreme fluctuation. The combined ratio rose from 95% in 2004 – the last year under the Minimum Rate Law – to 128% in 1995. That was probably a reasonable combined ratio (128%) given that this ratio does not consider investment income. But insurers instigated a price war over the next several years and the average rate consistently dropped while the combined ratio soared to 184% by 1999. Rates then began a swift climb, almost tripling between 1999 and 2003, while the combined ratio fell to a disgracefully low 55% in 2005. Rates then dropped by two-thirds by 2008, while the combined ratio rose again, reaching 128% by 2010."

Moreover, Gerlach says:

"By any measure this dismal record signifies that the system of uregulated competitive rating introduced in 1995 has been an unmitigated disaster. Several dozen insurance companies became bankrupt, wiping out a large segment of the independent California insurance market. Employers were subject to huge price swings, paying rates that swung from grossly inadequate to grossly excessive. And injured workers suffered a huge – and, in my opinion – unnecessary reduction in indemnity benefits; arbitrarily capping TTD benefits, cutting PPD benefits by almost 70%, and totally eliminating vocational rehabilitation benefits."

Concluding, Gerlach notes:

"Bottom line, the 2012 "approved" pure premium rates are higher than the previous "approved" rates, but because those rates are largely ignored by insurers that change has little or no impact on the ultimate rates that employers pay. That’s the good news. The bad news is that the unregulated pricing authority given to insurers has caused huge problems for all system participants over the past 15 years. Workers’ compensation insurance is the only Property/Casualty line of insurance that doesn’t give the Insurance Commissioner any effective regulatory authority over "charged" rates, and unless and until that is changed I believe we will inevitably experience similar problems in the future."

Gerlach makes good points. The benefits side of workers' comp is but one side of the industry equation. Policyholders need to keep that in focus as they move forward to consider further reforms.

Regulation has been a dirty word in some political circles. But at some point it may make sense to take another look at giving the Insurance Commissioner more power over rates rather than just an advisory role.

Here's the last post I did on the subject:
http://www.workerscompzone.com/index.ph ... 109-213717

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com