More news from around the country, showing the stressors at work in workers’ comp programs

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We’ve been following  the situation in Colorado with Pinnacol since 2009. Pinnacol Assurance has wanted to break free of quasi-government agency and be owned privately by policy holders.

Pinnacol bails out–Colorado state employees left up in air

According to an Aug. 5 piece in The Washington Post, “A Colorado-chartered workers’ compensation insurer will no longer administer the claims of state employees following disagreements with state officials over lavish trips, compensation and golden parachutes for key executives.

“Pinnacol Assurance’s decision to bail forced Colorado to scramble to hire an independent contractor to administer claims for state workers. State Rep. Sal Pace, D-Pueblo, said about 42,000 employees were affected, including about 1,000 who have claims pending.”

‘Do the damned work”

It’s not clear how a state-chartered entity can refuse to do its work, and doing so has drawn the ire of a leader in State House, according to a piece in the Pueblo Chieftain. Apparently, Pinnacol had announced its intention in January:

“It sounds like they just don’t want to do the work,” said House Minority Leader Sal Pace, D-Pueblo. “I’m sorry to tell Pinnacol this, but you’re owned by the state of Colorado. Do the damned work.”

One year remained on Pinnacol’s contract as third-party administrator of state employees’ workers’ compensation claims when it terminated its services to the state and forced Colorado to put the services out to bid.

“They didn’t say why, but they did send a letter,” said Markie Davis, state risk manager.

Davis acknowledged that Pinnacol informed the state in January of its intent to discontinue offering administrative services to the state, which is self-insured as it had been before Pinnacol bowed out.

According to the Denver Post, the idea of changing Pinnacol to a private company is still on the table. We’ll keep monitoring developments.

Alaskan tour operator busted

Another early August article, from Canadian Business, describes a sorry situation involving an Alaskan tour operator that’s getting popped for more than a mil in penalties because they did not carry workers’ comp coverage for employees:

An Alaska tour operator has been fined $1.5 million for allegedly failing to carry workers’ compensation insurance, violating stop work orders and misclassifying employees as independent contractors.

Ultimate Tours LLC and Godwin Glacier Tours LLC can appeal the Alaska Workers’ Compensation Board decision or ask that it reconsider. An attorney for the tour operator declined comment Friday.

Mike Monagle, director of the workers’ compensation division, said the state attempted to reach agreement with the company but it wasn’t cooperative with investigators.

He said stop work orders were issued in 2005 and 2010, meaning the company couldn’t have employees. He said the operator designated workers as independent contractors.

What were they thinking?

It really makes you wonder, doesn’t it? What are employers thinking when they get warned and proceed, anyway, to try to:

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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Are you covered by Workman’s Compensation?

Read here for an introduction.

A month after a private company’s issuance of “report cards” on individual states’ performance regarding working workers compensation, some states are reporting rate decreases, some are reporting increases, and others seem to be, well, in a mess. Officials in New York, according to “EHS Today,” are reminding 9/11 workers from around the country that only “12 months remain until the final registration deadline of Sept. 11, 2010″ for  “workers and volunteers who participated in rescue, cleanup or recovery operations following the attack on the World Trade Center to register with New York State’s Workers’ Compensation Board to preserve the right to file for 9/11-related workers’ compensation.”

Says EHS Today in a Sept. 16 post, “Those who have yet not registered must do so in order to file for medical and wage replacement benefits if they are currently sick or if they are concerned they might get sick in the future.”

On July 22, the Work Loss Data Institute (despite the name, a private company that says it has offices in Texas and California) announced its self-proclaimed “much-anticipated” 2009 edition of its “State Report Cards for Workers’ Comp,” which it says uses “the most current data available” in order to “help employers, insurers, TPA’s, state governments and consultants answer the questions, ‘Who is doing well and why?’ “

According to the company, which also sells a trademarked line of products under the “Official Disability Guidelines” umbrella, the 2009 report cards show that “Iowa performed the best of all the states for 2006 and Minnesota came in a close second. Both states received a grade of ‘A+’ based on an average of their 2006 scores in the five categories above. Illinois came in last, with Wyoming, Rhode Island and New York very close to the bottom. In total, nine of the 43 states received a grade of ‘F’ in 2006. A summary of each grade for all states is shown on a  U.S. Map Showing Grades by State.

According to that graphic, six states are in the best, top tier, (“Tier I,” from, roughly west to east): Utah, Kansas, Minnesotta, Iowa, Alabama and Virgina. Again roughly west to Eest, the “Tier II” states are Nevada, Arizona, Indiana and Georgia.

In the mid-ranks, “Tier III” states include Montanna, New Mexico, Missouri, Arkansas, Michigan, Delaware, Vermont and Maine; the “Tier IV” states are Alaska, Oregon, Washington, Nebraska, Wisconsin, Tennessee, Kentucky, Florida, North Carolina, South Carolina, Delaware and Connecticut.

In the lower two brackets, the “Tier V” states are Hawaii, California, West Virgina and Maine; apparently the Hall of Shame states, comprising Tier VI, are Wyoming, Texas, Oklahoma, Louisiana, Illinois, New York, New Jersey and Rhode Island.

Oddly enough, two neighboring “Tier IV” states, Oregon and Washington, are on divergent paths as far as workers comp rates are concerned.

From the Portland Business Journal, this Sept. 11 post says “Workers’ comp rates drop for fourth straight year.” But next door in Washington, also according to PBJ, “premiums will increase by an average of 7.6 percent, or about 4 cents per hour worked, the state Department of Labor and Industries announced” Sept. 21.

In Oregon, the “Department of Consumer and Business Services announced that the workers’ compensation ‘pure’ premium rate will decrease by a 1.3 percent average in 2010, saving employers $18.1 million. Workers’ compensation rates have decreased each year since 2006 and have not increased since 1990, according to department officials.

“Oregon’s costs remain low because the state continues to experience fewer workplace injuries and illnesses, said Cory Streisinger, director of the Department of Consumer and Business Services. The state’s workplace injury and illness rates in Oregon have declined nearly 19 percent since 2004.”

The rate story in Washington is a bad news/good news scenario. Yes, rates are expected to climb  nearly 8 per cent, but earlier projections had forecast a rise of 15 to 20 per cent. Several business groups decried the premiums hike, but the state’s director of the Department of Labor and Industries Judy Schurke explained that the “increase is needed for several reasons: Workers’ comp funds now have weaker investment returns, there are fewer premiums because people aren’t working as many hours, and there are fewer jobs for injured workers to return to. In addition, health-care costs have increased by 8.5 percent and wages increased by 3.4 percent.”

Another state with good news is Kentucky, as reported Sept. 21 in Business First–savings there will begin before 2010: “Kentucky’s largest workers’ compensation insurance provider is lowering its rates for businesses across the state.

“The reduction by Kentucky Employers’ Mutual Insurance amounts to an overall average of 6 percent, it said Monday in a news release.

Businesses eligible for preferred rates might see decreases of as much as 30 percent.

The new rates go into effect Oct. 1 and apply to both new and renewal policies.”

Apparently officials in Wisconsin and Colorado might be happy if all they had to deal with were rate hikes. According to a Sept. 21 account in the Green Bay Press-Gazette, a conference on workers compensation scheduled for today was quite apprpopriately organized around a railroad theme: ” ‘In Wisconsin, the workers compensation process is a bit of a train wreck,’ said Sandy Wight, marketing executive with the Orthopedic & Sports Institute of the Fox Valley in Appleton.”

According to a Sept 18 cbs4denver.com post, the recent Pinnacol hearings have left legislators in Colorado with little choice to revamp the current system. “Colorado lawmakers say they can’t ignore problems that came up during hearings on the state’s biggest workers compensation insurer, Pinnacol Assurance.”

One item in particular is a sore spot: seems Pinnacol employees have in the past earned bonuses for denying claims. Here’s a highlight of reform proposals, from a Sept. 18 piece on denverpost.com:

• “Bar financial incentives for denying or delaying claims or medical treatment and require that conflicts of interest be disclosed.
• “Require greater oversight by Pinnacol’s board, including “improved complaint provisions . . . and annual reporting.”
• “Institute a mechanism for lowering policyholders’ rates.
• “Create a “Worker’s Bill of Rights” to better inform injured employees of their rights.
• “Require a “probable reason” to suspect fraud before conducting surveillance on injured workers.

A detailed account of the Colorado situation is here.

Hard times are causing states to rethink approaches for funding various workers’ comp funds, and in California, a superior court judge “has ruled that Gov. Arnold Schwarzenegger illegally furloughed 7,400 employees of the State Compensation Insurance Fund this year,” according to a post at the Insurance & Financial Advisor Web site.

“Superior Court Judge Charlotte Woolard affirmed a prior ruling against the state involving the employees for the “State Fund,” which sells workers’ compensation insurance to employers and uses the proceeds to operate, according to the San Francisco Chronicle. The State Fund relies on no funding from the state treasury.”

The IFA post said the ruling would provide “back pay plus interest for the days they missed work,” but a more recent Chronicle story reports the issue is undecided. Explaining that “[t]he ruling came in a case filed by the Service Employees International Union Local 1000, which represents 6,260 fund employees,” the article also says,  “It’s unclear whether employees will be able to collect back pay for the days they were furloughed. The state fund and the SEIU believe the order entitles them to it.

“But, said a spokesman for the governor’s office, ‘The judge did not rule on the issue of back pay. She was silent on the issue.’ ”

A legislative task in Oklahoma recently heard testimony from Nevada officials that changing from a state-operated to a privately operated system has improved rates for businesses in Nevade, according to a CNBC post dated Sept. 2.

“Nevada’s workers’ compensation insurance rates have dropped since that state privatized the agency providing such insurance, Nevada executives told an Oklahoma legislative task force Wednesday.

“The task force is considering privatizing Oklahoma’s workers’ compensation agency, CompSource Oklahoma.”

The change in Nevade came a decade ago, “when it transformed the agency from a monopoly to a mutual insurance agency owned by its policyholders, said Douglas Dirks, president and chief executive of Employers Holdings, Inc.

” ‘Rates have gone down fairly consistently since the market was opened,’ Dirks said.”

Reports from Colorado include descriptions of  a “parade of angry workers [who were] hurt on the job” and subsequently testified in a recent probe of the state-chartered, tax exempt, quasi-governmental agency Pinnacol by a special committee of legislators and citizens.

According to a “Politics West” spot in The Denver Post on Sept. 1, injured workers questioned not only a surplus of coverage denials but also surplus cash reserves, too much spying on claimants and an out-of-touch perks package for agency compensation packages.

“Mike Byrd, hurt in a work-related car accident in 2004, told a special panel created by the legislature about Pinnacol denying treatments and trying to send a company nurse with him to every one of his doctor’s appointments as a ‘spy.’

“Like others, Byrd questioned how Pinnacol, a quasi-governmental agency that was struggling to remain solvent a decade ago, could grow so profitable that it has amassed a $700 million surplus.”

Also on Sept. 1,  the Durango Herald reported: “A former Durango firefighter testified Monday that the state’s workers’ compensation company spied on him and trashed his reputation in the community in an attempt to deny his claim for an injured back.”

Stahl said he was injured twice and Pinnacol paid for the first claim but refused the second. “He finally sold his house to pay for surgery out of his own pocket. Surgery has helped, but he had to retire from the fire department. He became a nurse and now is studying case management for injured workers.”

Both accounts report a few injured workers testified that their cases were handled well by Pinnacol, but the Herald piece ends thusly:

“Stahl said it was inexcusable for the state’s dominant workers’ compensation insurer to spend $143,930 for a luxury suite at Invesco Field, home of the Denver Broncos; a $133,000 trip to the Four Seasons Resort in Scottsdale, Ariz.; and a $2,515 dinner, which included two plates of $144 lobster and three bottles of $115 wine, while workers suffer.

“Pinnacol has defended the expenses as good for morale.”

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Have you been injured on the job?

Here’s what to do first.