States around the nation facing workers comp budget woes; Texas whistleblowers ‘blasted’ by chief
Update from preceding post: Sandra Herold died Monday night, according to the Boston Herald. Herald, 72, was the owner of the 200-pound chimp who mutilated Charla Nash. We first covered the story here because of the legal questions raised about workers’ compensation versus a civil settlement. Herold’s cause of death was reportedly a ruptured aortic aneurysm. Any effect on the $50 million civil suit filed by Nash’s attorney was unknown at post time, but we will continue to follow the case.
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We’ve discussed successes and shortcomings of various states’ workers comp programs, from furloughs that were ruled illegal in California, to subsequent California rulings contrasted against efforts to privatize in Oklahoma and Colorado– and even looked over the best and worst “report cards” for various states.
But according to at least one report, states may have more pending budget crunches in common than not.
Workers comp and state budgets
In a May 24 post, BusinessInsurance.com says, “State budget shortfalls are hindering the resolution of workers compensation cases and may increase employer claims costs as states cut back on judges and other critical staff, risk managers say.
“Furloughs of state workers including administrative law judges, auditors and other public employees that handle claims are increasing litigation expenses and even hamper return-to-work efforts, risk managers say.”
The article says an opposing point of view is that reduced personnel is OK because injuries/claims are going down, so less staff, at least temporarily, is not an impediment to processing and treating injured workers.
Still others counter that these same staff reductions are linked to rises in claims’ resolution problems.
“In an April report, the National Conference of State Legislatures said ‘state budget gaps loom as far as the eye can see.’ It said 31 states and Puerto Rico foresee fiscal 2012 budget gaps of at least $73.5 billion, and 21 states project fiscal 2013 budget gaps of at least $64.7 billion. ‘Including previous amounts, states will have addressed budget gaps in excess of $531 billion since the recession began in December 2007,’ according to the report.
“The issue is not apparent in all jurisdictions and depends on the state, risk managers say.”
Colorado lege thinks Pennacol is lowballing
For example, in Colorado, Pinnacol Assurance remains a hot topic for industry news, occasionally even wandering into the streetlights of mainstream news. Apparently, Pinnacol’s latest bid to take itself private–out from under its “status as a political subdivision of the state” to being a private vehicle owned by policy holders, in the form of a mutual insurance company.
“Gov. Bill Ritter Jr. had examined selling off Pinnacol as a solution in addressing Colorado’s estimated $1.3 billion shortfall for the fiscal year that begins in July,” says BI.
Pinnacol submitted a bid on itself, offering $200 million.
Nobody bit that hook, so Pinnacol recently upped the ante to $330 million–but still can’t get the lege to bite:
“Talks broke down after it became apparent that there was a lack of support for the proposal among state lawmakers, many of whom said the insurer’s worth was far greater than what Pinnacol was offering. No legislation aimed at privatizing the insurer was ever introduced.”
No legislation? At all? Not even one bill? In either house? Wow–usually some lobbyist can get at least one bill introduced.
I-1082 in Washington State
OK, let’s swing over to Washington state, where something called I-1082 is a lightning rod of sorts. (Google it. Can’t say how far down the links are relevant, but “I-1082″ returns more than 18 million results, in .33 seconds.)
A May 24 opinion piece at the Kitsap Peninsula (Washington state) Business Journal says that Washington employers of every stripe are sick of rising costs for workers comp premiums and are afraid there’s no end in sight.
“Our per worker costs are the second highest in the nation, according to the National Academy of Social Insurance. And while improvements in workplace safety have reduced injuries 55 percent since 1990, claims are taking longer, and costs skyrocket as workers are off the job until their claims are resolved.
“According to the Washington Department of Labor & Industries, injured workers who miss work are off an average 274 days, over twice the national average. Washington also leads the nation in the number of expensive, lifelong pensions awarded each year, a rate that has ballooned more than 300 percent since 1996.”
During times of plenty, writes Don Brunell , president of the Association of Washington Business, premiums were invested, thereby masking weaknesses in the system; but that’s been stripped away during the financial crisis.
Among other measures being considered, Brunell describes “Initiative 1082″ as “only the beginning” but also the only real hope for ending “the state’s monopoly on workers’ compensation insurance. Washington is one of only four states with a monopoly. With the exception of 375 large self-insured businesses, all employers are required to purchase their insurance from the government. The initiative would allow private insurers to compete with the state under the very same rules and restrictions governing L&I and self-insured companies like Boeing.”
We’ll end this post with a Texas twister on attempts to reform and streamline workers comp systems.
Workers comp whistleblowers canned in Texas
Earlier this month, the Texas Tribune ran a story called “The Workers’ Comp Whistleblowers,” Following is the nut graf, referring to former state fraud enforcement attorney Cathy Lockhart, who first was put on “emergency leave” then fired a few weeks later for ” ‘secret and clandestine’ activity — namely, that she researched how much money had been spent on medical fraud investigations”:
“Lockhart, along with three other former division employees who have come forward, say the division’s staff identified and recommended sanctions for nearly 70 Texas physicians who overbilled and overtreated patients, engaging in such practices as ordering needless surgeries or prescribing unnecessary narcotics. In the process, the former employees say, a relatively small number of rogue doctors cost insurers millions of dollars and, more importantly, placed patients in harm’s way. Yet since 2005, division records show, the state has sanctioned just five doctors with removal from the workers’ comp system — and only in cases involving paperwork violations rather than harm to patients. The other cases are said to be pending.”
Ok, you get the drift. Now let’s fast-forward a few days, to May 18, when the Tribune answers its own headline question “Workers’ Comp: What’s Next?” with this lede: “On the heels of allegations last week by former employees of the Texas Department of Insurance’s Division of Workers’ Compensation that their higher-ups have failed to sanction or remove dozens of doctors accused of overtreatment and overbilling, Texas lawmakers are pledging to investigate the consequences for patient care and the state’s finances. In addition, sources say the division’s lead enforcement attorney has resigned, bringing to six the number of employees who’ve exited the division’s medical oversight and enforcement staff since February.”
Deeper in the story, this nugget: “Three former employees of the division — Dr. Bill Nemeth, its first medical advisor, who served from 2001 to 2007; Dr. Ken Ford, the assistant medical advisor from 2004 to March of this year; and Dr. Clark Watts, a consultant on the division’s Medical Quality Review Panel (MQRP) — each say they resigned out of frustration that cases were not being enforced, and in some instances, the division leadership “traded political favors” (Nemeth’s words) in keeping cases from moving into enforcement.”
OK, so high-ranking officials quit in frustration and whistleblowers were fired. Still, “Texas lawmakers” are aware of the situation and “are pledging to investigate.” That should put a stop to any shenanigans, right?
Well, apparently not. On May 21, we get this lede from a Tribune blog, entitled “Workers’ Comp Chief Blasts Whistleblowers”: “As the Division of Workers’ Compensation heads into a public hearing at the Sunset Advisory Commission next week, Commissioner Rod Bordelon is blasting his former employees for their allegations in the Texas Tribune earlier this month, putting the blame on them for abuse and mismanagement in the system.”
The entire matter was headed for a showdown May 25 in a hearing of the Sunset Advisory Commission. More on that when it becomes available.
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