Raising Debate Beyond Borders: Pt. 2

Raising Debate Beyond Borders: Pt. 2

It's logically and morally right to provide workers' comp benefits to undocumented workers--and legally mandated in some states. Given this, what are the options for employers?

It can be argued that providing workers' compensation benefits to undocumented workers rewards, instead of punishes, the injured workers. As I explained in my last column, however, without workers' compensation's exclusive remedy provision, employers are left unprotected from lawsuits charging them with negligence and an unsafe workplace. By making workers' compensation benefits available, due to the exclusive remedy, civil lawsuits are avoided or minimized.

What's more, by denying benefits to undocumented workers, it encourages dishonest employers to hire illegal immigrants because they could avoid the cost of workers' compensation claims. In the event that the employer has a loss-sensitive program, this could be a considerable savings.

Allowing employers to avoid paying benefits to these undocumented workers could also undermine the goal of encouraging employers to create and maintain a workplace that is safe for all workers. A safe workplace with employees covered by workers' compensation is the right of every employee.

Injured workers--all injured workers--are entitled to disability benefits. If you hire someone, whether you know or don't know they are undocumented, employers have a moral obligation to provide benefits for legitimately injured employees. By baring workers' compensation benefits from undocumented workers, the state governments would be giving employers permission to willingly hire illegal workers. You can't bar them morally or legally

CASES TO CONSIDER

Luis Coque, an undocumented immigrant, was hired as a construction worker in New York. He was standing on a scaffold when an 80-pound bundle of shingles fell through the skylight above him, causing him to fall 25 feet to the basement floor. Coque is now a paraplegic.

Even though Coque provided false identification, a New York Appellate Division court cited prior case law in Rosa v. Partners in Process and increased his award against his employer, Wildflower Estates Developers, from $2.61 million to $6.8 million for past pain and suffering, future medical expenses, and future pain and suffering. The court viewed the employer's violation of the New York Scaffold Law (which applies strict liability for worker injuries resulting from a worker falling from some height or a falling object striking a worker) a finable violation--regardless of the recipient of the benefits.

In the cited case, Rosa v. Partners in Process, the New Hampshire Supreme Court ruled in 2005 that an employer could be liable to undocumented workers for lost wages if the employer "knew or should have known of (the employee's) status, yet hired or continued to employ him nonetheless," and if the employer did not "reasonably rely upon those documents."

Based on the Rosa case, the court ruled that Coque's employer should have known or had reason to know of his illegal status, and therefore he could recover lost wages. The employer was responsible for the injuries and recoveries caused by an unsafe workplace.

Of course, not all injured undocumented workers are so lucky. Quelino Ojeda Jimenez, 20 years old, was in the United States illegally. He was working for a roofing company when he pulled on a metal sheet that wasn't secured by nails. He fell backward more than 20 feet to the ground. His workplace accident left him a quadriplegic, unable to speak, breathe or move.

The roofing company, which is now closed, said Jimenez was working for a subcontractor who may or may not have had workers' compensation insurance--but most definitely had a moral obligation to assist Jimenez.

After four months in a Chicago hospital, without his consent, he was put onto an air ambulance and flown to Oaxaca, the capital of the Mexican state where he was born. Jimenez is now in a hospital that is resource-poor, reusing filters for the breathing machine needed to keep him alive.

OPTIONS FOR EMPLOYERS

In 2009, according to the U.S. Department of Homeland Security, Office of Immigration Statistics, there were 10.8 million "unauthorized" immigrants in the United States, and an estimated 8 million were in the workforce as of last year. The states with the largest portion of undocumented workers were Nevada (10 percent), California (9.7 percent), Texas (9 percent) and New Jersey (8.6 percent).

Immigration, workers' compensation, and undocumented workers are all topics sparking nearly every state's interest. In 2010, according to the National Conference of State Legislatures, 46 state legislatures and the District of Columbia enacted 208 laws and adopted 138 resolutions regarding immigration issues.

Each state has a current position on the issue, so it's crucial for employers to know their state's workers' compensation statues. Keep an eye on key court decisions throughout every state for the scope of benefits allowed for injured undocumented workers. Get involved in your local and state elections. Go over safety and wellness programs to prevent injuries and protect all employees.

Workers' compensation laws were created to serve a humanitarian purpose: to provide protection and benefits to all workers. While this is an employer's moral and legal obligation, it will in turn also protect the employer from damaging lawsuits.

MARK NOONAN is a managing principal and the senior knowledge manager for workers' compensation for the Casualty Practice within Integro Insurance Brokers.

The opinions expressed in this column are the author's and do not reflect the position of this publication or Integro Insurance Brokers.

(Editor's note: In part one of this column last month, Mark tackled such questions as: What issues do injured, undocumented workers create for workers' comp programs? How will new state laws affect them? Read his March column here.)

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OSHA addresses issues with compliance of cranes, derricks rule

Employers with compliance responsibilities under the new crane and derricks standard will find answers in a guide OSHA released to coincide with the rule.
The standard took effect in November and is expected to prevent 22 fatalities and 175 nonfatal injuries annually. It addresses key hazards related to cranes and derricks on construction work sites, including the four main causes of worker deaths and injuries -- electrocution, crushed by parts of the equipment, struck by the equipment/load, and falls.
Crane operators and others who work with or near cranes also may find this guide helpful. It is designed to address the most common compliance issues employers face.
Other employers have responsibilities under the new standard as well. The duties are "consistent with OSHA's multi-employer policy which recognizes that the OSH Act imposes compliance duties on employers who create or control hazards, employers whose employees are exposed to hazards, and employers with general supervisory authority over a work site," OSHA said.
The guide is divided into chapters that correspond with sections of the standard. It is intended to complement additional material on crane-related topics, including an overview, chat transcript, webinar, frequently asked questions, and fact sheets.
Read more at the WorkersComp Forum homepage.
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South Carolina: Commission eyes maximum medical payments

The Workers' Compensation Commission proposed to amend a regulation regarding maximum allowable payments to medical practitioners.
The proposal removes a limitation using a relative value scale and one conversion factor set by the commission. Comments may be mailed to Gary Cannon at 1333 Main St., P.O. Box 1715, Columbia, SC 29202 by April 26. For more information, visit www.wcc.sc.gov/NR/rdonlyres/9BAF5C25-428C-4EF8-A1F1-004F658F6F1B/0/Reg671302AMAP.pdf.
Read more at the WorkersComp Forum homepage.
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New York: Board issues certification reminder

The Workers' Compensation Board reminded each carrier and self-insured employer to certify by April 1 and that they incorporate the medical treatment guidelines into their policies, procedures, and practices.

Carriers and self-insured employers must also re-certify to the incorporation of the guidelines and regulatory provisions within 60 days of any changes to their policies, procedures, and practices. The certification can be completed by the company's designated administrator on the board's website. Also, starting June 1, a carrier or self-insured employer can no longer decide on a case-by-case basis whether to waive its right to expedited hearings and request resolution by a medical arbitrator. The company must either select the hearing process or medical arbitrator for all claims involving variance requests. To select the medical arbitrator, the administrator must check the box waiving the right to a hearing on the administrator page of the board's website.

Read more at the WorkersComp Forum homepage.

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Tornado creates higher risk of injury for truck driver

In Tennessee, when an employee suffers an injury due to an uncontrolled force of nature, the employee must prove the injury was caused by an increased risk peculiar to the nature of the employment.
Case name: Dixon v. Travelers Indemnity Co., No. W2010-00339-SC-R3-WC (Tenn. 03/03/11).
Ruling: The Tennessee Supreme Court held that a driver was entitled to benefits for injuries he sustained when his truck was hit by a tornado.
What it means: In Tennessee, when an employee suffers an injury due to an uncontrolled force of nature, the employee must prove the injury was caused by an increased risk peculiar to the nature of the employment and not a danger common to the general public at the time and place where it occurred.
Summary: A truck driver was driving an 18-wheel tractor-trailer in heavy traffic when he encountered hard rain and wind. As the storm intensified, he slowed his speed and decided to get off the interstate to seek shelter. Traffic was backed up on the exit ramp, so he decided to drive to the next exit. As he continued driving, he saw a billboard or exit sign blow across the highway. The driver then slowed his speed further. His vehicle began to vibrate and shake, so he looked in his rearview mirror and saw the truck's trailer rising up off the ground. Then a tornado struck the rig and lifted it off the ground. The entire rig was hurled through the air and dropped a half mile down the road, where it rolled into a ditch. As a result, the driver sustained lacerations to his head, feet, shoulders, and legs, as well as an injury to his shoulder that required surgery. The Tennessee Supreme Court held that he was entitled to benefits.
The court concluded that the driver had a higher risk of injury because of his employment. Engineers testified that it would take less wind force to overturn the truck than a car. Also, the driver was required to take a certain route and adhere to a strict time schedule.
The court also found that the driver did not have a meaningful return to work. The driver reasonably refused his employer's offer in another city because he was still in pain and receiving physical therapy.
Read more at the WorkersComp Forum homepage.
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A Leadership Quiz for Tomorrow

Insurance isn't only a "relationship" business anymore. The chaos of the present world will create tomorrow's business leaders and their new customers, products and services.
By Michael G. Manes
One of the responsibilities of a leader is to:
A. Comfort the afflicted
B. Afflict the comfortable
C. Both A and B above
D. None of the above
Based upon the wisdom below, I'd suggest the correct answer is C.
"In all life one should comfort the afflicted, but verily, also, one should afflict the comfortable, and especially when they are comfortably, contentedly, even happily wrong."
--John Kenneth Galbraith (in the Guardian, London, July 28, 1989)
Consider the following: Most of us like it in our comfort zone. That's why it bears that name. Unfortunately we are not in charge of the world. In the world, when one thing is different, it's change. When everything is different, it's chaos. I'd suggest our world and our industry today are near chaos.
Our industry is based upon the alignment of people, processes and products. In recent years, we have chosen to--or competition has demanded that we--"commoditize" what we offer. Technology has created processes to support this commoditization (think BOP and an extended soft market).
Now, we are cannibalizing ourselves by the advancements we have made.
Most in our business protect themselves from the change that is tomorrow by wrapping up in the security blanket of relationships. This is the safe-harbor delusion we've claimed for decades.
Unfortunately, if you study the demographics of our world, you'll discover that we are no longer a clearly defined population, organized to transition these relationships from father to sons and daughters based upon the time needs and preferences of those in charge.
Today, our workplace and the marketplace we serve are very different. Four generations are in transition. A rainbow of colors, ethnicities, genders and cultures are shaping who we are and what we do--not the other way around. We're not "our Daddy's Oldsmobile."
To make matters more chaotic, parents used to teach children how to "shop" in the market. Now, our children are running the markets and teaching us how to shop in them.
Other signs of change include the Internet and the virtual market it created that ensures that everything we do can be done by someone else better--"fast, hot, and cheap or even free." All of us have access to all the information needed and unlimited options for where and how we buy.
We've seen dictators that controlled wealth, power and the machines of war turned out by peaceful protestors on the street in many parts of the Arab world. Might is no longer right.
Who is right? For a possible answer, read this quote from the best-selling author Daniel Pink, in his book "A Whole New Mind":
"The last few decades have belonged to a certain kind of person with a certain kind of mind--computer programmers who could crank code, lawyers who could craft contracts, M.B.A.s who could crunch numbers. But the keys to the kingdom are changing hands. The future belongs to a very different kind of person with a very different kind of mind--creators and empathizers, pattern recognizers, and meaning makers. These people--artists, inventors, designers, storytellers, caregivers, consolers, big picture thinkers--will now reap society's richest rewards and share its greatest joys."
If you will accept the aforementioned paradigm shift in our world, you'll agree that leadership is necessary and that new leaders must comfort those afflicted with all this change--but more importantly, must afflict those "comfortably, contently and even happily wrong."
Here's my best guess on tomorrow. You can't get there from here. It is not possible to bring the folks who are your organization (where they are and as they are), the products you offer, the prices you charge, and the processes you use in this delivery to where they need to be.
Tomorrow's leader must venture into the future. They must determine what will be required to play in that arena and then come back and disassemble what exists, discard what no longer provides value, engage and incentivize those that can be part of the future, and build what does not yet exist. Don't try to drag the status quo into tomorrow.
I don't have the answers, but these are questions to ask:
Who will be your customers tomorrow? What will be their wants and needs? What price will they willingly pay? How will you deliver this profitably? How can technology be leveraged to eliminate all unnecessary processes, costs and friction? Who is ready, willing and able to get this done? Who can change? Who can't? How do you transition each? How can innovation be integrated into all systems and be made to permeate your new culture?
MICHAEL G. MANES is owner of Square One Consulting, a New Iberia, La.- based consulting business focusing on planning, sales and operations, and change management and architecture. He has over 37 years of insurance industry experience, including serving as an instructor of risk and insurance at Louisiana State University.
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Model law to reduce misclassifications in trucking, courier industries

State legislators involved in insurance activities have developed a solution to the issue of misclassification of employees in the trucking and courier industries. The National Conference of Insurance Legislators adopted the model law at its spring meeting in Washington, D.C. last month.
Called the Trucking and Messenger Courier Industries Workers' Compensation Insurance Model Act, the law would establish a six-point statutory test to determine whether someone is an independent contractor or an employee. The move comes in response to concerns and investigations of companies that have misclassified workers as independent contractors and therefore not covered by workers' comp laws.
The model act, based on a Minnesota law, would establish six standards, related to:
Equipment ownership.Operating responsibilities and costs.Compensation.Control over the work performed.A certification statement.People who do not meet all six standards would be considered employees.
NCOIL developed a similar model act two years ago to address misclassification of employees in the construction industry.
Read more at the WorkersComp Forum homepage.
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Employer prevented from raising immunity defense in civil action

In Florida, where the employer denies a workers' compensation claim on the basis that the worker's alleged exposure did not occur in the course and scope of her employment, the worker is not required to litigate her claim to completion before filing a civil action.
Case name: Rush v. BellSouth Telecommunications, Inc. d/b/a AT&T Florida, No. 3:10cv436/MCR/EMT (N.D. Fla. 02/17/11).
Ruling: The U.S. District Court, Northern District of Florida held that a worker was not required to litigate her workers' compensation claim to completion before proceeding with a civil action.
What it means: In Florida, where the employer denies a workers' compensation claim on the basis that the worker's alleged exposure did not occur in the course and scope of her employment, the worker is not required to litigate her workers' compensation claim to completion before filing a civil action.
Summary: The worker filed a petition for workers' compensation benefits alleging exposure to toxic mold, methicillin-resistant staphylococcus aureus, and other complications related to "sick building syndrome." In response, the employer argued that the worker's alleged exposure did not occur in the course and scope of her employment and that she did not suffer an injury by accident. Prior to the final hearing, the worker dismissed her case before any determination on the merits of her claim. The worker then sued her employer for negligence. The employer argued that the worker's remedies were limited to benefits payable under the workers' compensation law, and therefore, she should be required to litigate her claims to conclusion in the workers' compensation arena before proceeding with a civil action. The U.S. District Court, Northern District of Florida disagreed and allowed the worker's suit to continue.
The employer contended that employees must exhaust their administrative remedies before filing suit in civil court. A prior case explained that when the employer asserts in the workers' compensation proceedings that the accident was not within the course and scope of employment, the employer cannot later raise a workers' compensation immunity defense in the civil action. The two defenses are irreconcilably inconsistent, the court said. The employer asserted that the workers' compensation law did not cover the worker's injury. Therefore, the worker was not barred from pursuing her claim in court.
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Firefighter scores benefits for injury during basketball game

In Wisconsin, a firefighter who is injured while engaging in physical activity while on duty and being paid is entitled to benefits.
Case name: City of Kenosha v. Labor & Industry Review Commission, No. 2010AP883 (Wis. Ct. App. 03/16/11).
Ruling: The Wisconsin Court of Appeals held that a fire captain injured playing basketball while on duty was entitled to benefits.
What it means: In Wisconsin, a firefighter who is injured while engaging in physical activity while on duty and being paid is entitled to benefits.
Summary: A fire captain was on active duty on a 24-hour shift when he was playing basketball with fellow firefighters and members of the public in a city park near the fire station. While reaching for the basketball, he felt a pop in his right arm and experienced pain. The city's fire chief said it was common for firefighters to play basketball during their shifts. He explained that playing basketball was considered "in their quarters" for purposes of their collective bargaining agreement. He also stated that it was important for firefighters to be physically fit. The Wisconsin Court of Appeals held that the captain was entitled to benefits.
A "well-being activity exception" to workers' compensation exists if the employee is voluntarily engaged in an activity designed to improve his physical well-being and receives no compensation. The court said the exception did not apply because the captain was receiving compensation at the time of his injury.
The court explained that the captain was engaged in the city's business -- providing firefighting capabilities -- at the time of his injury. The court rejected the city's argument that under the exception, the captain would have to be receiving additional compensation for playing basketball.
The court noted that the city's argument would "produce byzantine inquiries and bizarre results." The court failed to understand how the city could pay for a firefighter injured fighting a fire but not pay for a firefighter who works to stay in shape to avoid being injured while fighting a fire. The court said that "it makes no sense."
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Is Business Interruption Insurance Even Worth It?

Our editors duke it out over the value of business interruption insurance, a hot topic given the question marks left in the wake of the Japanese earthquake.
Our managing editor, Cyril Tuohy, argues that risk managers and other commercial insurance buyers should take advantage of what's left of the soft market and maximize the limits and terms and conditions on their business interruption coverage.
Read his piece "Pile on the Coverage With Your Next Renewal."
Are additional limits on your business interruption coverage even worth it, asks Dan Reynolds, senior editor. His point: a BI loss can be so challenging to figure out that you might not get your money's worth when push comes to shove during a claim settlement.
Read his piece "Not So Fast With Coverage for Business Interruption."
These articles originally appeared as the Point/Counterpoint in the April print issue of Risk & Insurance?.
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NCCI study examines safe lift programs in long-term care industry

Employing mechanical lifting devices at long-term care facilities is only part of the solution to the increasing number of workplace injuries. The attitudes of key personnel are also a determining factor in whether the devices would help reduce workers' comp costs, according to a new study.
Long-term care facilities have higher injury rates than other types of institutions in the already injury-prone health care field, according to the Bureau of Labor Statistics. The agency reports long-term care facilities had an injury rate of 8.4 per 100 full-time equivalent workers in 2009 -- more than twice the rate for all private industries.
The growth of the long-term care industry is expected to continue, with the increased aging of the population. National Council on Compensation Insurance teamed up with the University of Maryland School of Medicine to examine the impact of safe lifting programs on workers' comp costs at long-term care facilities.
Researchers surveyed the directors of nursing at more than 200 facilities from November 2007 to May 2008. The data was linked to NCCI statistics on facility injuries and workers' comp costs to test the association between the costs and safe lift programs.
All facilities included in the study had been using mechanical lifting devices for at least three years. The researchers developed a safe lift index to capture information on the policies, training, preferences, and barriers surrounding the use of powered mechanical lifts.
"Just purchasing and having the lifts available is not enough to ensure that they are used and used correctly," the researchers said. "Therefore, the survey conducted as part of this study also included questions to measure intangibles, such as training programs and attitudes toward using the mechanical lift equipment."
The study found that one of the most critical components for an effective safe lift program was a comprehensive set of policies and procedures. "These include having procedures specifying that powered mechanical lifts should be used for residents not able to move around on their own. Specifying the use of powered mechanical lifts in the residents' care plans is also important," the study said. "Training newly hired certified nursing assistants in the use of lifts and incorporating lift use in performance evaluations are other important factors."
The preferences of the directors of nursing was another factor contributing to the overall effectiveness of safe lift programs. "Things that correlate highly with this factor include whether two caregivers may lift a resident manually and if the director of nursing prefers the use of powered mechanical lifts when moving residents from bed to chair and vice versa."
The researchers concluded that an increased emphasis on safe lift programs at the facilities is associated with fewer workplace injuries and lower workers' comp costs. "The institution's commitment to effectively implementing a safe lift program appears to be the key to success," the report says.
Read more at the WorkersComp Forum homepage.
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Agency seeks organizations to conduct online outreach courses

Workers in the construction, general, and maritime industries are targeted for upcoming online training courses. OSHA is seeking applications from organizations interested in providing the online courses.
The Outreach Training Program is a voluntary participation information resource to train workers about occupational safety and health. OSHA began these courses in 2002 and in FY 2010 saw more than 110,000 workers receive the training.
The latest training will include 10- or 30-hour online courses on workers' rights, employers' responsibilities, filing a complaint, and describing work-related hazards. Organizational and staff experience and qualifications, course content and design, and technical and administrative capabilities are some of the criteria.
A proposal conference provided applicants with information about the training program. Applicants also learned about OSHA expectations for online trainers, online courses and methods of instruction, and administrative and program requirements for online trainers.
Applications must be received by OSHA's directorate of training and education by June 27.
Read more at the WorkersComp Forum homepage.
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Self-Insured Numbers Higher Than Expected, and Growing

A new report reveals that the federal government was underestimating the number of employers that self-fund employee health benefits. Now, with healthcare reform, their numbers are set to grow.
By JULIE LIEDMAN, a freelance writer who lives in Philadelphia
On March 23, the one-year anniversary of the Patient Protection and Affordable Care Act (PPACA), the U.S. Department of Labor issued its first annual report on self-insured employee health benefits plans, mandated by the legislation.
One important aspect of the report for self-insured employers was what it omitted: Nowhere did the report claim that self-insured employers are more likely to have problems funding their plans than employers that fully fund their health benefits plan through traditional health insurance.
According to the DOL report, about 12,000 health plans filing a Form 5500 for 2008--the latest year for which complete data is are available--were self-insured, and 5,000 mixed self-insurance with insurance. Self-insured plans covered 22 million people, while mixed plans covered 25 million. Health benefits plans covering private-sector employees must file the form if they cover 100 or more participants or hold assets in trust. Because many self-insured health plans do not meet the filing requirements and therefore haven't filed the form, however, the total number of self-insured plans probably is underestimated. The DOL report acknowledged this, another success for the self-funding marketplace.
What's more, that number might be growing. Healthcare reform could make self-insurance more attractive to many companies, according to one of the nation's biggest self-insurance industry trade groups.
"We expect a larger interest in self-insurance than ever before when additional regulations such as exchanges, 'pay-or-play' and vouchers go into effect (by 2014)," said Mike Ferguson, chief operating officer of the Self-Insurance Institute of America.
By 2014, PPACA requires that health insurance be more affordable and easier to purchase for small businesses and individuals through statewide exchanges. Employers with 50 or more full-time employees must either provide specified minimum levels of coverage to their employees or pay an excise tax. This is referred to as "pay or play."
Employers who offer more than the minimum must provide a "free choice voucher" to certain eligible employees. For every such voucher the employer provides to an employee who qualifies, the employer will be required to pay the exchange where the employee uses the voucher to purchase coverage for an amount equal to the portion of the monthly cost of coverage that the employer would have paid.
Smaller employers may find it financially advantageous to pay for their own firm's risk than to be subject to the new provisions.
Purchasing a plan through the exchange, for instance, where premiums will be a function of the broader risk pool and subject to risk adjustment, could be costly, Ferguson said. If enough small firms with healthier enrollees opt out of a state's small-group market in 2014, that state exchange could experience adverse selection.
"Based on anecdotal feedback we've gotten from our members," said Ferguson, "they've digested the regulations currently in place, adapted to any new requirements and life goes on."
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Find ways to streamline reasonable accommodation process, attorney advises

While the financial cost of accommodating workers with disabilities may not be a major burden under the new ADA Amendments Act, the operational impact may be stunning. A legal expert says risk managers need to focus on the process surrounding reasonable accommodation.
"Interactive dialogue about reasonable accommodation causes them to stop what they're doing, to closely analyze jobs, to closely evaluate the impact of injuries, to brainstorm about alternatives, to communicate with doctors to get their input, and then to implement potential accommodations that may be less than certain to be successful," said Frank Alvarez, a partner at Jackson Lewis.
Creative thinking about exploring, identifying, and implementing reasonable accommodations may help. "It will all be about making the accommodation process more efficient because there will be so many more instances they have of accommodation going forward," Alvarez said.
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The Hits (and Misses) Keep Coming for Microinsurance

Microinsurance has made a few headlines lately. Is this a sign of its coming out as a full-fledged insurance market, or more a matter of a few successful ventures chirping for attention?
By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance?
You want microinsurance to succeed. As defined as insurance products for poor people in underserved regions, microinsurance could make for a very happy ending if a sustainable global market develops.
From the spate of headlines and press releases on the topic in recent months, one might suspect that we've been given that happy ending already.
As Dirk Reinhard, vice chairman of the Munich Re Foundation, put it, it can almost feel like microinsurance practitioners and supporters have passed a peak, that their market isn't "sexy" anymore. It's almost just like any other type of insurance.
Reinhard, however, is quick to explain that there is no overall success story yet. It's a matter of one project in one country, or another project in another country, succeeding.
Some established successful microinsurance projects include the Card MBA program in the Philippines and Allianz's life insurance operation in Indonesia, according to Dr. Richard Phillips, department chair and C.V. Starr Professor of Risk Management and Insurance at Georgia State University. Phillips agreed with Reinhard, defining the state of microinsurance as "episodic successes." There is a lot of experimentation going on in the world, but not yet a lot of "proven business models," he said.
The news stories and press releases come about when experimentation works.
"There are some institutions that are doing well and growing rapidly and that are tooting their horn just a little bit," Phillips said.
Funny he should say that, because his organization is one of the noise-makers. GSU's Center for the Economic Analysis of Risk made official its long-standing partnership with Munich Re Foundation. The Germany-based philanthropic arm of the reinsurance giant will continue to facilitate the conversation between the academic researchers in Atlanta and microinsurance practitioners all around the world. The cooperation culminates each year at the International Microinsurance Conference, put on by Munich Re Foundation and the Microinsurance Network. This year's event will bring together 500 professionals in Rio from November 8 to 10. The proposal submission process is still open through May.
Currently, Phillips reported, the students and teachers at the Center for the Economic Analysis of Risk are researching why insureds have different perceptions of risk than underwriters do--and what to do about that. Another topic that is near and dear to the professor's heart is how insurance governance structures impact insureds' perceived credit risk of an insurance company.
In general terms, future microinsurance research could also investigate why successful experiments succeeded, and why failures failed.
Another "experiment" tooting its horn lately--and one we can all hope succeeds--is the Microinsurance Catastrophe Risk Organization (MiCRO) in Haiti. A partnership among Swiss Re, brokerage CGM Gallagher Group, Guy Carpenter's GC Micro Risk Solutions division, relief group Mercy Corps and Haitian microfinance institution Fonkoze, the facility will offer products to protect against natural catastrophe losses.
Whatever the outcomes with GSU's research and MiCRO, keep in mind that microinsurance practitioners aren't in it for the huge profit motive, as Phillips said.
"These are earnest people, right? They want to save to the world," he said.
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Escaped Cobras Less Likely Than Slips and Falls

A zoo, its patrons and residents of a surrounding neighborhood would, statistically speaking, have to be extremely unlucky for an escaped zoo animal to actually bite someone.
By DAN REYNOLDS, senior editor of Risk & Insurance?
When a teenage, female Egyptian cobra escaped its enclosure at the Bronx Zoo on March 25, its story slithered into the limelight. After all, the well-publicized escape occurred in New York, a place that gets a lot of media attention.
People did what they do, and press conferences ensued. The snake did what snakes do and sought out a warm, dark place to relax on the zoo grounds, where it was found unharmed on March 31.
The brief tale elicited a lot of online comment and media attention. It even made headlines nationwide. From a risk management perspective, though, in terms of frequency, the event was indeed rare.
After all, human injuries or fatalities from snakes that escape from zoos are unheard of, according to Shirl Hedges, an underwriting manager for the Philadelphia Insurance Cos., one of a handful of domestic carriers that writes insurance policies for zoos in the United States.
Yet, remember the case in August 2010 of a tiger rattlesnake that escaped Zoo Atlanta. The two-foot-long snake ended up on the porch of a neighborhood homeowner. The snake was found close to a toddler and was subsequently clubbed to death by the toddler's father, according to the Atlanta Journal Constitution. The toddler was unharmed. He was lucky because the venom from a tiger rattlesnake, a native of Arizona, is very potent.
And, yes, had the child in Georgia been bitten, the claim against Zoo Atlanta would probably have been significant, given the propensity on the part of juries to award very large damages in cases where children have been harmed.
In 2009, in the case of the escaped tiger at the San Francisco Zoo, in which two young men were injured and one killed, the zoo settled for an undisclosed sum.
KEYS TO ZOO RISK MANAGEMENT
Hedges said that her company, a subsidiary of Tokio Marine, relies on the accreditation process of the Association of Zoos and Aquariums in determining whether a zoo has taken proper precautions to prevent animal escape.
"I mean, obviously you don't want mesh fences holding back tigers," Hedges said. "You don't want kids being able to poke their fingers in an alligator pit."
A spokesman for the Wildlife Conservation Society, which owns the Bronx Zoo, declined to answer questions about the society's risk management program and referred a reporter to the society's prepared statements on its website.
But in the actual world of zoo claims, according to Hedges, it's what people do, not what snakes do, that ends up generating claims.
These days, zoos have to compete with other forms of entertainment in the battle to attract a family's Sunday afternoon leisure dollar. That means building such things as monorails and carousels.
The irony is that zoos' general liability policies are more exposed to slips and falls than they are to escaping animals, Hedges said.
Insurers are also seeing property claims, particularly in the Northeast, as zoo structures give way because of the weight of snow and ice dumped onto zoo shelters from the heavier snowfalls that the Northeast has seen in recent years, according to Hedges.
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Blowing the Cyberalarm

A ruling by the 9th Circuit Court of Appeals in December may have significant implications for businesses, potentially increasing the litigation risk involved with breaches of privacy and data security.
Until now, the courts had placed a heavy burden of proof on plaintiffs to show not just that an event occurred but that damages had been suffered.
This may begin to change with the opinion handed down in Krottner v. Starbucks. In this case, the court ruled that plaintiffs whose personal information had been stolen had suffered an injury sufficient for them to have standing before the court even though the information had not yet been misused.
The background to the case: A laptop was stolen from Starbucks that contained unencrypted names, addresses and Social Security numbers of about 97,000 Starbucks employees. After receiving notification from Starbucks, the plaintiffs filed two separate lawsuits for negligence and breach of implied contract.
The court ruled that the plaintiffs faced a credible threat of harm even though the stolen information had not been misused. Although the court ruled that the plaintiffs had standing to bring their lawsuit, it also said the plaintiffs failed to adequately state a claim under Washington state law and both cases were dismissed.
Bob Parisi, the cyberliability expert at Marsh, calls this opinion a game changer, noting that up until now the costs associated with data breaches had to do with regulatory compliance ? the cost of notifying people affected by the breach, setting up a call center and offering a remedy such as credit monitoring.
However this opinion may be used to defeat a defendant's challenges to plaintiff's standing, according to a report Marsh sent out to clients in January. Once the injury-in-fact requirement has been met, a plaintiff need only find a state law allowing it to proceed on some type of legal theory based on the fear of harm due to lost private personal information, according to Marsh.
Jim Whetstone, U.S. Technology and Privacy Manager at Hiscox, on the other hand, did not see this ruling as very significant and notes that precedent continues to be set in other courts that the threat of future harm does not meet the necessary harm threshold to establish damages when alleging negligence.
But, he notes, regardless of whether or not a claim for negligence can proceed and in fact be proven, these court cases can be very costly to defend as novel questions are posed, answered and appealed. He also believes plaintiffs' attorneys are not going to stop looking for ways to recover alleged damages for their clients.
Another expert, Dave Navetta, an attorney with the Information Law Group who specializes in privacy and information security law, said that while more cases may gain standing in federal court, he believes it will remain difficult for plaintiffs to win their cases or even a settlement.
But he and Parisi both see data security litigation evolving in the same way as employment practices litigation did years ago and that means that risk is on the rise.
Parisi said he believes the issue now requires board attention and is now an operational risk.
This ruling is a wake-up call for companies. They need to be sure they have good data security policies and procedures. The case also highlights the importance of a well-rounded insurance policy that covers notification, defense and potential liability costs.
PATRICIA VOWINKEL has worked for national media outlets for more than 20 years.
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Excess Insurer Helps Healthcare Clients Realize 'Significant Cost Savings'

The injury-prone nature of the healthcare industry is well-documented. For the organizations, work-related accidents can have potentially devastating financial consequences.
According to the Midwest Employers Casualty Co., health care organizations lose operating revenue at an estimated rate of four to 10 times the direct costs of a work-related injury. With that in mind, MECC created a value-added service to help its health care clients reduce workplace injuries.
"Health care organizations are realizing that in order to provide quality patient care, they must first take care of their own staff, particularly those that deliver patient care," said Darrell Toenjes, MECC's healthcare practice leader.
MECC, a workers' comp excess insurance company, developed its Healthcare Risk Management Practice as a value-added service for its health care clients. Companies are able to monitor their results through a benchmarking component.
Toenjes works directly with clients to help them create safer environments which result in savings on workers' comp costs.
"The typical struggles are patient handling injuries, such as slips, trips and falls, and [injuries from] combative patients. Those tend to be the most severe causes of injuries," Toenjes said. "I think I'd tell clients if there's one thing they can do it should be to develop and implement a safe patient handling program."
Patient handling. Toenjes says patient handling injuries represent the majority of workers' comp costs for most health care organizations, especially acute care facilities such as hospitals. He and his team help health care organizations design and implement programs to reduce those injuries.
"What we're seeing is that the initial cost of the program -- adding staff, acquiring equipment, providing training -- is typically paid for within the first three years due to the reduction in injuries. It's a very quick return on investment," he said. "In fact, some organizations that implemented a comprehensive program were able to reduce patient handling injuries by 80 to 90 percent and in certain instances saved $1 million in the first year."
Addressing patient handling and movement injuries starts by identifying where an organization is in the process.
"I think most organizations realize they need to do something. Many don't know where to start, or they started and ran into obstacles," he says. "Many are already doing components of the program without realizing it."
From there, MECC helps health care organizations create their own programs by:
Developing a safe patient handling team. After determining the most appropriate members, the team begins to oversee the development and implementation of safe patient handling policy and procedures.Acquisition of equipment. Toenjes helps determine what other equipment a health care facility might need. He then brings in vendors to provide proposals, for things such as floor-based equipment, portable transfer devices, and ceiling mounted patient lift systems.Creating a strategy for upper management. "I help develop a business case to present to their administration of why this program would benefit the organization, using a cost/benefit analysis," he said.
Transitional-duty, return-to-work program. For those workers who do experience injuries, "the number one thing to do is have an effective transitional-duty, return-to-work program," Toenjes said. "Getting employees back to work as quickly as possible saves costs both from a human perspective as well as a corporate financial perspective."
Where return-to-work programs are somewhat challenging for many companies, health care workers are somewhat unique. Creating temporary positions is one solution.
"Health care professionals have an abundance of transferable skills, particularly those who are most highly skilled like nurses. It's easier to create temporary positions because of this wide skill set," Toenjes said. "A nurse with restrictions may not be able to do bedside care but can use [her] clinical knowledge for medical records, infection control, medical case management. We help them look at it from a different perspective."
Tasks from three different jobs, for example, can be brought together to create a temporary position. Using transitional, as opposed to light-duty work, helps the injured employee transition back to the job he was doing before he was injured.
"The key is to communicate with those individuals that it is a temporary job," Toenjes said. "It's important not to establish the mind-set that it's a permanent job."
Maintaining constant communication with the injured worker is also key to a successful return-to-work process, Toenjes said.
"The relationship that an injured worker has with his supervisor is the most important factor in how quickly or if ever the worker returns to work," he said. "It is more important than the severity of the injury. For that reason, we encourage clients to have their supervisors maintain contact with their injured workers."
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California: Bureau plans informal filing to explain loss experience deterioration

Claims frequency in California increased 4.5 percent from 2009 to 2010. That's one of the findings of the Workers' Compensation Insurance Rating Bureau.
Nevertheless, the WCIRB won't submit a midyear pure premium rate filing. Instead, members decided to issue an analysis of the latest data indicating pure premium rate inadequacy.
WCIRB's actuarial committee had suggested a pure premium increase of nearly 40 percent. But the Governing Board decided such a huge increase would detract attention from the underlying problems in the system.
"Advisory pure premium rates have not been adjusted since 2009," said Jack Hannan, spokesman for WCIRB. "So each time we go back and do an analysis of the data it compounds the prior period, plus more deterioration."
The WCIRB's proposed 27.7 percent increase in pure premium rates in January was rejected by former Insurance Commissioner Steve Poizner. The WCIRB reported a 12 percent point increase in the projected loss ratio since then based on the following factors:
Approximately plus 4 points due to loss development on accident year 2009 and prior.Approximately plus 3 points due to updated wage forecast from the University of California Los Angeles Anderson School of Business.Approximately plus 4 points due to accident year 2010 cost level.Approximately minus 2 points due to reduced indemnity severity trend assumption.Approximately plus 3 points due to increased allocated loss adjustment expense.
In the meantime, California workers' comp insurers have continued to set their own rates. That's led to what Hannan calls a disconnect between what's actually being filed and used by insurance companies and the pure premium rate process.
"No one is saying rates should go up 40 percent," Hannan said. "We're working with the Department of Insurance to compare pure premium rates to actual insurer filed pure premium rates that are being used in the marketplace to give a context to the 40 percent number."
The informal submission, expected to be release by May, will provide details of potential cost drivers in the system.
"You've got claim frequency starting to increase in California," Hannan said. "It's not clear if it's a one-time change aberration, or is this a turning point? We don't know that yet. We're continuing to look at the data."
Meanwhile, severity, which had been increasing, was relatively flat. "Again, is this an aberration or is it really starting to trend down or flatten?" he asked.
Another big driver has been a slowing of claims settlement rates. WCIRB reports there's been a 1 percent decline since 2005.
"When claims stay open longer, you end up paying more dollars on them," Hannan said. "We're still trying to quantify some of the reasons, but some have been identified as causing a slowdown in settlement rates."
Medical liens are keeping claims open longer, as are some Medicare set-asides, Hannan said.
Recent court decisions, including Ogilvie and Almaraz/Guzman have complicated claims, making them more difficult to close. California's economy is also contributing to the slower settlements because it's more difficult to return injured employees to work.
"Those are placing upward pressure on costs, including frequency," Hannan said. "Those are the cost drivers. This is what we're seeing."
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Illinois: Comp reform doesn't go far enough, business advocates say

Illinois' workers' comp premiums are among the highest in the nation. In fact, the most recent Oregon Workers' Compensation Premium Rate Ranking puts the state third highest behind Montana and Alaska.
The high workers' comp rates coupled with a recently imposed tax hike make the state a tough sell for businesses to locate -- or stay in, say business proponents. They're looking to state lawmakers to strengthen and adopt reforms proposed by the governor despite protests by medical providers.
Gov. Pat Quinn recently unveiled his proposed workers' comp reforms. Included is a 30 percent reduction in Illinois' medical fee schedule, an idea that is not sitting well with medical providers.
"Any proposal for a 30 percent payment reduction for injured workers' medical care is unacceptable," said Dr. Steven M. Malkin, president of the Illinois State Medical Society. "Illinois physicians strongly oppose such arbitrary slashing of the workers' compensation fee schedule under the guise of reform. The proposed cut is excessive and unwarranted."
But business proponents say the idea is more than fair to medical providers. "Illinois' fee schedule is incredibly rewarding to providers," said attorney Richard Lenkov, a partner in Bryce Downey & Lenkov in Chicago. "It's one of the most generous in the country."
Gov. Quinn said even with the cut the state would still have the second-highest medical reimbursement rates in the nation, "Our employers could save up to $500 million -- as much as 14.9 percent in premiums," he said.
Other elements in the governor's plan would:
Require that arbitrators be licensed attorneys.Mandate that personal claims made by arbitrators and commission employees be heard by the Illinois Court of Claims rather than arbitrators with the Illinois Workers' Compensation Commission.Put greater scrutiny on claims made by intoxicated employees and deny claims when the intoxication caused an employee's own injury.
The release of the proposal coincided roughly with Caterpillar Inc., one of the state's largest employers, sending a letter expressing dissatisfaction with the business climate, including the workers' comp system. There have been suggestions the company may consider leaving the state if things don't change.
Business advocates say the governor's plan is a good start but doesn't go far enough. They say what is needed is a provision that strengthens causation.
"What needs to happen is that the reforms are amended so the claimant has to prove work was a substantial factor in causing the disability," Lenkov said. "Right now, the standard is very, very low."
Changing the statute to require that the workplace accident or condition resulting from employment was a "significant" or "primary" factor that caused the disability rather than a "possible" factor would bring Illinois in line with many other states, Lenkov said. "Illinois is one of the most liberal states anywhere."
But getting the causation issue into the reform plan may be difficult, given that the Quinn administration is not backing it at this point, nor is the Democratically controlled Legislature.
In unveiling his proposals, the governor called on the Legislature to pass his plan by mid-April.
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Washington governor signs one bill as lawmakers debate other reforms

The workers' comp system is a focal point for Washington state lawmakers this year. Efforts to reform the system follow a state auditor's report in December showing parts of the system either are or could become insolvent in the next five years.
Gov. Chris Gregoire has signed legislation aimed at saving more than $200 million over the next four years. At the same time, lawmakers are considering other proposals that could potentially save an additional $1.2 billion in the next two years.
The bill signed last month sets up a statewide network of medical providers, based on certain standards or credentials and who use best practices. Injured workers would be able to choose their physicians from those in the network.
Meanwhile, lawmakers are looking at a variety of other reforms. Voters last year rejected a measure to privatize the state-run system. As of Dec. 31, it had less than $500 million in reserves, according to the Department of Labor and Industries.
Among the proposals being considered is one to allow settlement options for injured workers, something a majority of states provide. The DLI says most of the system's costs come from fewer than 10 percent of all claims and involve workers who are receiving benefits for a prolonged period of time or have lifetime pensions.
The proposal to allow lump-sum settlements would save $1.2 billion in a two-year period, according to an estimate from the Office of Financial Management. Opponents say the measure would result in cost shifting by injured workers who would seek money through other state assistance programs.
A separate package of bills aimed at streamlining the system would save an estimated $450 million in the next six years, according to supporters. The governor was expected to announce yet another proposal for lawmakers to consider.
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Conflicting medical testimony doesn't block temporary benefits for nurse

In Kentucky when there is conflicting medical evidence, an administrative law judge's decision will not be reversed if there is substantial evidence supporting his decision.
Case name: Bluegrass Regional Mental Health v. Bellamy, No. 2010-CA-000522-WC (Ky. Ct. App. 03/11/11, unpublished).
Ruling: In an unpublished decision, the Kentucky Court of Appeals held that a nurse was entitled to temporary total disability benefits and future medical and income benefits.
What it means: When there is conflicting medical evidence, an administrative law judge's decision will not be reversed if there is substantial evidence supporting his decision.
Summary: A nurse slipped and fell on ice in the parking lot of her employer, injuring her low back and left leg. The parties agreed that she suffered a work-related injury. The nurse had a history of low back problems. She said that her pain increased after the work-related slip and fall from radiating halfway down her left leg to radiating across both legs with numbness in both her legs and arms. The nurse sought benefits. The Kentucky Court of Appeals held that she was entitled to temporary total disability benefits and future medical and income benefits.
The employer argued that the nurse did not suffer a compensable injury. The court disagreed. One doctor testified that the work-related slip and fall produced permanent impairment while two other doctors said the injuries were temporary. Although there was conflicting medical testimony, the court said substantial evidence supported a conclusion of compensability.
The court also found that the doctor's opinion was objective medical evidence. He physically examined her and considered her history of complaints, treatment, and various injuries dating back 10 years. He also conducted motion studies, pinprick studies, strength measurements, and motor, reflex, and pulse testing. Further, he reviewed her medical records.
The court found that an award of TTD benefits was proper because the nurse was unable to return to the type of work she was customarily performing at the time of her injury. The nurse was placed on work restrictions, and the employer would not allow her to return to work with any restrictions.
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Small Company's Wellness Program Generates Big Results

If you think work site wellness programs are impractical or won't result in measurable benefits, you need look no further than Lincoln Industries. The Nebraska-based company's wellness program has garnered numerous national awards and has now captured the attention of researchers.
Over a three-year period, the program saw major improvements in health indicators, especially among older employees and those with the highest baseline values, according to the Journal of Occupational and Environmental Medicine. Researchers say replication of the program in other small business settings could have a large impact on public health.
Lincoln Industries is a supplier of products requiring high performance metal finishing. According to its website, it began a corporate wellness program in 1990 to promote better physical fitness and diet to prevent employees from following the increasing national trends of obesity, diabetes, heart disease, and cancer as well as health care costs.
The company had previously reported: Workers' comp costs dropped from more than $500,000 in 2003 to less than $50,000 in 2006.Tobacco use decreased from 77 percent in 2000 to 23 percent in 2007. Health care costs among individual employees in 2005 averaged $3,500 compared to the industry average of $10,000.
The company also reports the program has resulted in lower turnover and lower rates of absenteeism over the years.
The researchers looked at workers employed from 2007 to 2009, which totaled 279 people. "Significant improvements in body fat, blood pressure, and flexibility were observed across time," the authors reported.
The program. Every employee was allowed to participate in one of four levels: bronze, silver, gold, and platinum based on the following criteria:
Tobacco use.Quarterly screening checks for blood pressure and flexibility.Participation in wellness events.Health information updates.Health risk appraisals.Blood profiles.Behavior-based safety participation.Work behavior.
Employees who reach platinum status are eligible for a company-paid trip to Colorado to climb a 14,000-foot mountain. There were 77 climbers in 2007.
All employees were required to participate in quarterly health screenings, however, there were no sanctions for not participating. The program includes several other primary wellness activities.
Additionally, the company offers free tobacco cessation programs for employees and members of their families during work hours; reimbursements for gym memberships, home exercise equipment, or other accepted wellness fitness activities; local race sponsorships; and healthy choices in vending machines.
Encouraging participation. A deep-seated culture of wellness, combined with various financial and other incentives are credited with the high level of participation.
"While the high participation rates may be partially the result of financial incentives, it is clear that strong leadership, cultural support, organizational integration and program outreach also contribute to these high rates of participation in all program components," according to the study. "Recent research found that best practice worksite wellness programs incorporate more cultural elements into their strategies and yield nearly 2.5 times as much reduction in employee health risks as standard practice programs with fewer cultural elements."
Wellness is one of the company's corporate belief statements, a significant component of leadership development, integrated into daily company operations, and is part of both supervisor and employee performance evaluation systems, the authors say.
Company leaders embrace the culture of wellness and include it as part of individual development plans as well as company celebrations. Each shift begins with a group stretch, and departments frequently challenge each other in various wellness events.
The company has dedicated personnel and resources to its initiative. For example, there is a director of wellness and life enhancement, a full-time wellness specialist, a full-time occupational health nurse, and a wellness intern as well as a wellness committee and wellness mentors. During an annual poker walk, employees try to get the best poker hand from cards they receive at different stops throughout a milelong walk.
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Testifying at wife's hearing doesn't yield protections under ADA

In Maine, testifying in a workers' compensation hearing in opposition to an employer does not qualify as protected activity under the Americans with Disabilities Act.
Case name: Leavitt v. SW&B Construction Co., LLC, No. 1:10-cv-00030-JAW (D. Me. 02/25/11).
Ruling: The U.S. District Court, District of Maine granted summary judgment to a construction company on a safety coordinator's discrimination and retaliation claims under the Americans with Disabilities Act of 1990.
What it means: According to this court, testifying in a workers' compensation hearing in opposition to an employer does not qualify as protected activity under the ADA.
Summary: A safety coordinator for a construction company was married to an expediter for the company. The expediter suffered a work-related injury and filed a claim for workers' compensation benefits. The coordinator testified in her case and then later testified in a hearing on her petition to increase benefits. Following this, safety issues arose within the company that led the company to terminate the coordinator as part of a layoff. He sued under the ADA of 1990, alleging association discrimination and retaliation. The U.S. District Court, District of Maine granted summary judgment to the company.
The coordinator failed to establish that his testimony at his wife's workers' compensation hearing raised an inference that her disability was a determining factor in his termination. The court explained that the coordinator's claim was precluded because advocacy on behalf of individuals with disabilities implicates the ADA's retaliation, not association, provisions.
The coordinator also argued that the company's concern about workers' compensation costs and its mistreatment of injured workers showed animus toward individuals with disabilities and that his termination reflected that animus. This argument also failed because the court concluded it was about expense, not disability. Because there would be no expense to the company after settling his wife's claim, he could not establish discrimination.
The court rejected the coordinator's retaliation claim, finding that he did not engage in protected activity. He asserted that testifying in his wife's workers' compensation claim was protected, but the court disagreed. The company's participation in the claims was not an "act or practice made unlawful by the ADA." Although a complaint he made alleging the company failed to accommodate his wife was protected activity, he did not establish a causal link to his termination.
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Unexpected Benefit of Fewer Options

Thanks to ongoing mergers and acquisitions, there are fewer managed-care options than ever. That just may make this RIMS the best time to look for new partners.
In his 2004 book, "The Paradox of Choice: Why More Is Less," Barry Schwartz makes a persuasive argument for the notion that having too many options from which to choose actually decreases buyers' satisfaction levels. To support this hypothesis, Schwartz highlighted a study by Columbia and Stanford University researchers that found that, when participants were presented with a smaller selection of chocolates, they were actually more satisfied with their taste than when presented with a wider array of choices.
Although it seems at first somewhat counterintuitive, based on our recent experiences reviewing a host of RFPs for several large workers' compensation claims payers, the theory definitely seems to apply directly to our market.
Thanks to an unprecedented number of mergers and acquisitions, buyers in the workers' compensation managed-care space are now getting an opportunity to test Schwartz's theories and decide for themselves whether the "chocolate" now tastes any sweeter with fewer options to choose from.
Over the last 18 to 24 months, there has been a significant and dramatic contraction of players in the workers' compensation managed-care marketplace. The bill-review market shrunk with StrataCare's purchase of CS Stars and Mitchell's acquisition of Ingenix's PowerTrak offerings. The case management arena narrowed with Genex's purchase of Intracorp. And then ExamWorks acquired every peer review/IME company known to mankind. So there is no denying the reduction in buying choices available to employers and claims management organizations.
Fewer options are definitely not necessarily a bad thing in this case. With fewer competitors, more opportunity exists for each remaining player to differentiate themselves from the rest of the field. As differences between each company's offering become more pronounced, it becomes easier for potential buyers to identify the solution that will best match their needs. It is much easier to see one positioning itself as a generalist, one-stop shop for all your managed care programs while another is focused on becoming the best-in-class option for case management.
For example, as little as five years ago, at least a half-dozen generalist, managed-care firms all vied for employer and claims payer business. It was extremely challenging to discern meaningful differences between the programs offered by national companies like Coventry, Genex, Intracorp, CorVel, MCMC and Bunch & Associates. A proposal written by one could just as easily been written by any of the others. As mentioned before, however, this market has contracted (with Genex acquiring Intracorp, CorVel trying to morph into a third-party administrator and Bunch being acquired by StrataCare's parent company) and it is suddenly much easier to differentiate between the remaining firms.
BETTER VIEW OF BILL-REVIEW OPTIONS
This same scenario is playing itself out across the entire workers' comp managed-care spectrum. In medical bill review, where there used to be nearly a dozen different bill-review software platforms to choose from, buyers today are realistically "limited" to four. While all four platforms offer solid functionality across all aspects of the bill-review process, it is increasingly easy to see how one is seeking to differentiate itself based on efficiency and bill throughput, while another is focused on automated workflow management and a third appears to be differentiating itself as the low-cost option willing to enable and integrate a wide variety of specialty networks and services.
For potential buyers, the decision comes down to answering a few simple, high-level questions such as:
-- Would you rather have a single PPO with big inpatient hospital discounts or the flexibility to assemble a direct-contracted "mosaic" of different (potentially stacked) networks in each jurisdiction?
-- Do you want the vendor to provide integrated specialty review programs, or do you want to assemble your own "best-in-class" collection?
-- Is it more important to maximize bill reductions or minimize operational expenses?
Then they can quickly gain clear guidance on which platforms and partners will provide the best potential fit to their program.
PBM CHOICE

Perhaps nowhere is the dramatic benefit of fewer purchasing options more evident than in the arena of workers' comp prescription benefit management. At the Risk and Insurance Management Society (RIMS) conference several years ago, literally dozens of cookie-cutter workers' comp PBM options were on display, all seemingly leasing the same Restat pharmacy network.
This year's conference during the first week of May in Vancouver should provide significantly fewer, but dramatically better, PBM options from which employers and payers can select.
Once again, as the remaining PBMs seek to differentiate themselves, a few basic questions about the goals and nature of your PBM program can help narrow the field of potential partners dramatically, such as:
-- Which is more important to you, the average price per prescription or the number of prescriptions per claim?
-- Is it more important to capture a higher percentage of first fills or limit the number of claims continuing to receive prescriptions after the first 12 or 24 months?
-- Do you want to partner with or fight against third-party billers to capture more first fills?
-- How comprehensive and aggressive should DUR interventions with prescribing physicians be?
-- How tightly do you want your PBM program to integrate with bill review or case management operations?
GAINING HAPPINESS
In "The Paradox of Choice," Schwartz recommends the following basic process be used by purchasers to maximize their "happiness" or satisfaction with their buying decisions:
1. Identify your goal or goals.
2. Prioritize the importance of those goals.
3. Array your purchasing options.
4. Evaluate how likely each option will be able to meet your goals.
5. Select the best option.
6. Modify your goals.
In the rapidly shrinking world of workers' comp managed care, Steps 3 and 4 are becoming increasingly straightforward as fewer competitors become easier to differentiate and align with the goals identified in the first two steps.
Even though there may be fewer booths in the exhibit hall, this year's RIMS conference will provide a perfect opportunity for risk and claims managers to "taste the available chocolate" and decide whether different managed-care partners might better align with their goals.
DAVID HUTH is a senior partner in the Chicago-based Maddy Bowling Consulting Inc.
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Washington Legislature addresses bullying in workplace

A measure in the Washington Legislature would provide legal recourse for employees who are bullied and legal incentives for employers to prevent and respond to mistreatment of employees.
Senate Bill 5789 notes that approximately one in five employees experience health-endangering workplace bullying, abuse, and harassment which can have serious effects on the employees and serious consequences for employers. The proposal would make it an unfair practice to subject an employee to an abusive work environment.
The proposal notes that unless employees who are being bullied have been subjected to abusive treatment at work for unlawful discriminatory reasons they typically have no legal solutions.
The proposal would cover employees who have been "harmed psychologically, physically, or economically, by being deliberately subjected to abusive work environments." Abusive conduct is defined as conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive, and unrelated to an employer's legitimate business interests.
A trier of fact should weigh the severity, nature, and frequency of the conduct. Examples include "repeated infliction of verbal abuse such as the use of derogatory remarks, insults and epithets; verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating; or the gratuitous sabotage or undermining of a person's work performance." A single act would likely not constitute abusive conduct.
An affirmative defense to an action for an abusive work environment would be the employer exercised reasonable care to prevent and promptly correct the conduct and the aggrieved employee unreasonably failed to take advantage of appropriate preventive or corrective opportunities provided by the employer. Employers can show reasonable care "by adopting employment policies prohibiting abusive conduct and establishing effective enforcement procedures," the legislation says.
The proposal is in a Senate committee. The House has a companion bill, H.B. 1928.
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Attorney: New ADAAA Regulations Focus More on Employers' Actions

Assume many injured and ill employees have a disability and act accordingly. That's the advice legal experts are giving employers to avoid getting in the Equal Employment Opportunity Commission's line of fire.
The EEOC's final regulations to implement the ADA Amendments Act take effect May 24. The regulations have wide-reaching implications, experts say.
"Employers should expect that ADA cases will proceed to a point where they must defend decisions by showing individuals were not 'qualified' because they could not safely or successfully perform essential job functions, with or without reasonable accommodations, or that the employers offered or attempted unsuccessfully to offer reasonable accommodations. Every adverse employment decision that is based on an individual's inability to perform due to an injury or illness has the potential to lead to a contested ADA case," according to the law firm Jackson Lewis.
"People on workers' comp leave will be a breeding ground for ADA cases," said Frank Alvarez, a partner at Jackson Lewis. "I think you have to walk away with an expectation that most injured workers who are unable to work for any type of significant period of time will be protected by the ADA."
The new regulations have changed the focus.
"In the past most ADA cases were coverage cases," Alvarez said. "Now most ADA cases are going to be defense cases, which will mean much more costly litigation, will lead to many more claims, and the win rate should increase dramatically for employees."
Expanded definition. Among the changes under the new regulations is the definition of a disability. "Actual" and "record of" disabilities apply to physical or mental impairments that substantially limit one or more major life activities.
A "regarded as" disability pertains to actions taken by a covered entity that are prohibited by the ADA "because of an actual or perceived impairment that is not both transitory and minor." Although individuals "regarded as" disabled are not entitled to reasonable accommodation, Alvarez cautions against ignoring those who fit this definition.
"Employers would be foolish to expect that plaintiffs who bring ADA suits would rely solely on the 'regarded as' theory," he said. "And the regulations clarify that impairments that have an actual or expected duration of less than six months still may be substantially limiting and sufficiently serious to be an actual disability under the ADA, which would trigger reasonable accommodation obligations."
Another area of concern are programs that attempt to evaluate the physical abilities of applicants with the aim of reducing injuries if they are hired, Alvarez said. For example, post-job offer screenings for carpal tunnel syndrome did not previously constitute disability under the ADA.
"The final regulations make changes to the concept of 'regarded as' theory that make every one of those individuals now a viable ADA plaintiff," Alvarez said. "This is also happening at a time when the EEOC has a much greater focus and commitment to bringing class actions challenging practices that they believe create systemic discrimination, which furthers the risk for employers."
Alvarez suggests employers reevaluate programs that assess the physical abilities of job applicants to ensure they have included protocols that allow for individualized assessments concerning potential reasonable accommodation and/or direct threat assessments.
Advice to employers. Employers should be prepared to show that they engaged in dialogue about reasonable accommodation, Alvarez suggests. He cautions that while transitional work might be a part of that conversation, it cannot be the only element of the discussion.
Among the prohibited actions is "placement on involuntary leave." It falls under the "regarded as" category.
"What I believe the EEOC is getting at there is what I'd refer to as underemploying somebody -- that there is not a sufficiently rich examination of alternative ways of performing essential job functions to keep someone fully employed," Alvarez said. "If employers take injured workers and automatically place them on leave for fear of continuing injuries, or that they won't be sufficiently productive, they will be exposed to ADA claims unless they can simultaneously say that they explored potential reasonable accommodation that would overcome job limitations posed by the injuries."
Alvarez said risk managers need to be thinking ADA and reasonable accommodation, as much as they're thinking about limiting the risk of future injuries or automatically relying on a structured transitional work program.
"The number one thing [employers should do] is make certain you have good job analyses and descriptions identifying the essential functions of positions because that knowledge forms the cornerstone of any interactive dialogue and employers who don't have good functional job descriptions are going to be ill-equipped to meet their burdens of exploring reasonable accommodation," Alvarez said.
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Cosmetologist's failure to report tips for taxes slashes benefits

In Massachusetts, a worker's average weekly wage does not include tips that are not reported for tax purposes.
Case name: O'Connell's Case, No. 10-P-151 (Mass. App. Ct. 02/16/11).
Ruling: The Massachusetts Appeals Court held that a cosmetologist's average weekly wage did not include tips she received from customers that were not reported for tax purposes.
What it means: In Massachusetts, a worker's average weekly wage does not include tips that are not reported for tax purposes.
Summary: A cosmetologist injured her shoulder while working at a salon. She regularly received tips from customers averaging $45 per day. The cosmetologist did not report her tip income for tax purposes to either the IRS or the salon. However, the salon tallied up the tips each employee received each day and distributed the money accordingly. The salon discarded its informal tallies each day and kept no permanent record of each employee's tip income. The cosmetologist sought benefits. The salon's insurer acknowledged liability but contested the amount she was due. The Massachusetts Appeals Court held that the cosmetologist's average weekly wage should not include her tip wages.
The cosmetologist argued that the salon had actual knowledge of the amount she received in tips each day even though it chose to discard the information at the end of the day. The court said that to the extent the critical issue was the inability to set accurate insurance rates, the employer's access to the amount of tip income for each employee went part of the way to satisfy that concern. The court also said both the cosmetologist and the salon were trying "to have it both ways."
The court considered the legislative definition of wages in determining unemployment benefits since the workers' compensation laws do not directly address whether unreported tip income should be considered in setting benefits. For unemployment benefits, tip income is not considered unless the income was reported for taxes.
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Six Claims Shockwaves From Japan

What can U.S. commercial insurance policyholders expect when filing their claims for losses or damages from the March 11 Tohoku earthquake? Generally, insurers will take hard lines and advance little.
For non-Japanese policyholders with substantial presence in Japan or with commercial relationships with Japanese firms, much has already been written about the nature of their potential commercial property insurance claims and the scale of covered losses coming out of the Tohoku Earthquake. Little attention has been paid to what such policyholders can actually expect if they pursue their claims for insurance coverage. Yet what can a policyholder expect from its insurance company over the next three to 10 years when it actually files such a claim?
Answers to this question can be divined from the collective experience of U.S. policyholders that made claims for losses from the terrorist attacks of September 11, 2001, and Hurricane Katrina of Aug. 2005.
In terms of commercial insurance claims, these three catastrophes are very similar. Sept. 11 and Katrina spawned insurance claims that were individually large but collectively massive, putting a strain on the insurance industry as a whole and on its individual players. Given press reports noting expectations of claims in the tens of billions of dollars, the same will be true for the Tohoku Earthquake.
Additionally, the types of claims and ensuing disputes stemming from Sept. 11 and Katrina were often very similar: for example, the scope of civil authority coverage from police action in lower Manhattan, or wind-versus-flood claims after Katrina. The same will be true for claims from the Tohoku Earthquake: e.g., many U.S. policyholders with Japanese customers or suppliers are contemplating making contingent business income insurance claims.
Further, the appetite of the insurance industry for litigating commercial property insurance claims seems to have increased from Sept. 11 through Katrina. Before September 11, 2001, there were about 300 cases, decided over the course of a century, addressing business income and related coverages in the United States. Nearly 600 such cases have been decided in the 10 years since then, with more than 40 involving Sept. 11 claims and more than 60 involving Katrina claims.
While the pace of litigation in commercial property claims has increased dramatically since Sept. 11, nonetheless, commercial property case law is still quite thin. For the primary-type claim that U.S. policyholders are likely to pursue--contingent business income--there are perhaps a score of decisions to guide courts.
What does this mean for policyholders making claims for loss from the Tohoku Earthquake?
First, because of collective scale and similarity of claims, carriers will be very reluctant to take positions on coverage in one claim that may limit their room for maneuver on a host of other, similar claims. Alternatively stated, policyholders can expect insurance companies initially to take a very hard line on coverage and maintain that line for years until courts clarify common issues or the bulk of similar claims are resolved.
Second, despite the fact that business income coverage is generally marketed as something that will do for the policyholder what its operations would have done but for the catastrophe, carriers are generally reluctant to make payments as income would have been earned. Why? This can be construed as a concession of liability. Instead, carriers either make no advances at all, or small advances, and pay a bulk sum years later at the time of settlement.
Third, because of the relative paucity of case law to constrain them, property insurers can be expected to become quite creative in justifying their refusals to pay. The creativity of these positions will only increase if the cases are litigated.
Fourth, prior to litigation, insurance company claims adjusters will seek to exploit the disparity in their experience, developed over a career of adjusting claims, and that of their policyholders, each of whom should count itself as unfortunate if it has more than one major property claim a decade. Many of the insurers' coverage-minimizing positions will seem reasonable even to experienced business persons. For instance, after the Sept. 11 attacks, many New York policyholders were told that their business income recoveries had to be slashed because of depressed consumer demand immediately after the attacks. While this seems reasonable, it was a complete about-face from the position carriers had historically taken: Business income recovery must be metered by expectations as of the moment before the catastrophe.
Fifth, policyholders with significant claims should anticipate that they may have to file suit and litigate for a substantial period--perhaps even to judgment--to secure coverage.
Lastly, for all of these reasons, it will take a long time for most of these claims to get resolved, by litigation or otherwise. Litigation itself takes a long time. There were a couple of Sept. 11-related coverage decisions issued last year and Katrina coverage litigation is in full swing. Many policyholders can expect to wait up to five years to settle and as many as 10 years for judgment if they are forced to litigate.
DOUGLAS CAMERON is a partner and practice group leader of the firmwide Insurance Recovery Group at Reed Smith.
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Aircraft Loss-of-Use Not Covered Under Standard Aviation Coverage

Expert: Inspection downtime not covered in Southwest Airlines "skin fatigue" incident over Arizona desert.
By CYRIL TUOHY, managing editor of Risk & Insurance?
"To my right, a mother shrieks in hysteria, her panic rising above the din. Ahead, a young man with curly brown hair and an easy smile walks about, helping to affix oxygen masks. Behind me, a woman's tears streams down her face as the shock sets in.
I realize I have my seat mate's hand in a death grip.
This is Southwest Flight 812."
--From The Blue Muse blog, by Shawna Malvini-Redden
These were the immediate thoughts of blogger Malvini-Redden, scribbled within hours of the roof rupturing on a Southwest Airlines 737-300 aircraft at 36,000 feet on April 1, over the desert of Yuma, Ariz.
It was no April Fools joke.
Only minor injuries to a flight attendant and to at least one passenger were reported, the airline said. Southwest was able to send another plane from Phoenix to pick up the 118 passengers in Yuma and then fly on to Sacramento, Calif., the destination of the original flight.
With no reports of serious injuries, no third-party liability issues for the marketplace are apparent, said Charles Cederroth, a long-time aviation broker with Aon.
Standard airline hull coverage will respond to the physical damaged sustained by the aircraft--a six-foot-long tear in the ceiling above the overhead bins--Cederroth said. So it's all pretty cut and dry from an insurance standpoint.
NOW FOR THE ISSUES ...
Now come the more vexing issues surrounding business interruption and so-called loss of use, which are not included in standard aviation insurance policies. Standard policies also don't compensate airlines for flight rescheduling and the subsequent inspections.
On April 2, the airline announced it would inspect Boeing 737 jets for "skin fatigue," and on Sunday, April 3, two days after the incident, it announced it had inspected 19 of its 79 planes scheduled for extra inspection.
The inspections caused the airline to cancel about 300 flights, the airline also said.
"That means that neither the additional costs the airline incurred inspecting its fleet nor the revenue lost due to flight cancellations would be covered under the standard aviation policies," said Cederroth, in an interview with Risk & Insurance?.
Skin fatigue sets in when the passenger cabin goes through thousand of pressurization and depressurization cycles that stem from the takeoffs and landings. The Southwest jet that suffered the damage had logged 39,781 cycles (a cycle being one takeoff and one landing), the FAA said.
"Prior to the event regarding Flight 812, we were in compliance with the FAA-mandated and Boeing-recommended structural inspection requirements for that aircraft," said Mike Van de Ven, Southwest's executive vice president and chief operating officer, in a statement on the airline's website. "What we saw with Flight 812 was a new and unknown issue."
The aircraft manufacturer, in this case Boeing Co., has liability coverage for the grounding of aircraft as part of its aviation product liability policies, Cederroth said.
In the Southwest 812 incident, no aircraft was grounded by the Federal Aviation Administration. The FAA chose instead on April 4 to order extra inspections to early-model 737 aircraft, of which there are about 175 in operation worldwide. Of that 175 total, 80 are U.S. registered, most of which are operated by Southwest, the FAA said.
"In this case, the FAA required an increase in the frequency of inspection of certain high-cycle aircraft models," Cederroth said. "So, there is no coverage response from a manufacturer perspective."
Chartis, CV Starr, ACE, Allianz, Munich Re and Swiss Re are among the larger underwriters in the aviation marketplace. Specialized aviation pools include Global Aerospace and U.S. Aircraft Insurance Group.
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NIOSH releases framework for asbestos research

Many scientific uncertainties persist about the health risks posed by exposure to elongate mineral particles. Accordingly, the National Institute for Occupational Safety and Health has developed a national research strategy to examine the issues.
Asbestos fibers are known to "cause lung cancer and other types of serious lung disease in workers when inhaled," according to a NIOSH statement. While there has been considerable progress make to protect workers from the risks, there are still questions, especially about particles with mineralogical compositions that are identical or similar to the asbestos minerals and those already known to cause asbestos-like disease. There are also uncertainties about the physical and chemical characteristics in the particles that determine toxicity.
The new document, Current Intelligence Bulletin: Asbestos Fibers and Other Elongate Mineral Particles: State of the Science and Roadmap for Research, does not set any new NIOSH policy regarding asbestos fibers or other elongate mineral particles. Instead, it establishes a strategic framework for designing, conducting, and applying the research to address the remaining questions.
Priority areas for research include: Developing a broader understanding of the factors that determine the toxicity of asbestos fibers and other elongate mineral particles.Developing information and knowledge on occupational exposures to asbestos fibers and other elongate mineral particles, and related health outcomes.Development of improved sampling and analytical methods for asbestos fibers and other elongate mineral particles.Applying research outcomes to improve public policy.
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