May 2011
In the State of California, current law requires carriers and health care service contractors to notify when rate changes are about to happen. In the case of health insurance regulated by the Department of Insurance (i.e., DOI), there is a prohibition of any rate that results in a life-time loss ratio below 70%. New Federal law prohibits annual loss ratios below 80%. However, there is no current authority given to regulators to approve or reject rates.
AB52 changes that by granting regulators the authority to reject and rate or rate change that is found to be excessive, inadequate, or unfairly discriminatory. The bill also requires specific information to be submitted for review by regulators. The bill would authorize the imposition of fees on health care service plans and health insurers for purposes of implementation, for deposit into newly created funds, subject to appropriation. The bill would impose civil penalties on a health care service plan or health insurer, and subject a health care service plan to discipline, for a violation of these provisions, as specified. The bill would establish proceedings for the review of any action taken under those provisions related to rate applications.
AB52 clearly authorizes regulators to be more aggressive in their review of rates and rate increases. Current regulation seems to unnecessarily restrict what regulators can do. To the extent that health plans and carriers propose rates and rate increases that are unreasonable, this provides valuable enabling regulation. On the other hand if rates and rate increases are reasonable, AB52 provides a more aggressive and more visible forum for argument and discussion.
Directors' & Officers' Liability Coverage — The Basics
Directors' & Officers' (D&O) liability has become an increasingly core coverage for many companies, regardless of size, type, non-profit/for-profit status, and rightfully so. Considering our litigious society, and today's difficult economic environment, D&O coverage should be an essential part of your insurance program.
Typical D&O coverage provides for "any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his/her duties." In basic terms, D&O policies are designed to provide financial protection for your directors and officers while performing their duties as relates to their company.
Directors' & Officers' Liability — The Risks
Common activities and situations in which D&O coverage would come into play:
- Conflicts of Interest — many executives serve on multiple boards and/or have investment portfolios that could potentially create conflict of interest situations. Non-profit board members, in particular, are more likely to be affiliated with a number of organizations within their communities, both professionally and personally, placing them at additional risk. Be certain your company adopts and enforces formal Conflict of Interest policies that all members must adhere to.
- Information Disclosure — the SEC has specific requirements that all publicly traded firms must follow as to when and how information is released and broadcast to the public. In addition, your employees and other directors and officers have certain expectations regarding confidentiality. Breach of these regulations, rules or expectations may open your company up to both civil and criminal suits and judgments. Ensure your company has strict, written protocols regarding the dissemination of information, both privately and publicly.
- Breach of Duty of Loyalty and Breach of Duty of Care — Your directors and officers can be held personally responsible for negligent investment decisions and/or alleged failure to operate in honesty and good faith, whether these actions be direct or indirect. Employees and shareholders alike expect a company's portfolio to perform well and a lackluster performance can oftentimes be traced back to the lack of corporate governance and poor management. Your firm's officers must create and adhere to strict written fiduciary care guidelines so as to avoid shareholder derivative actions.
A few months ago, my husband began experiencing back pain. First it was nagging, then moderate, and within a couple of days it had reached an intolerable level. I was shocked to see this stoic man with a "mind over matter" approach to his health succumb to such pain. He was completely unable to function.
And so the medical journey began. First came a prescription for opiates, and then came diagnostics (yes, in that order). Next came an epidural injection and then therapy and exercise. At this point, the story sounds much like what we experience in Workers’ Comp on a daily basis. The difference was ... this was not Workers’ Comp. My husband is a self-employed realtor. If he doesn’t work, there is no opportunity for pay. There would be no Temporary Disability, no Permanent Disability, no "add on" disabilities, no attorneys. The only motivation was to recover quickly enough to be able to work.
We found the best specialists, in this case opting for a spine clinic that specializes in treating athletes. Diagnostic tests were completed within days, and the epidural was done within a week. No Utilization Review delays. No authorizations. No shopping for discounted diagnostics. No delays ... on anyone's part. It was truly the "sports medicine" approach — excellent up-front treatment, with everyone focused solely on achieving a positive outcome. He cooperated fully with his physician’s advice, doing all the exercises prescribed while at the same time steadfastly refusing to accept any limitations. And his only financial incentive was to be well enough to work. And therein lay my "light bulb" moment.
It would be naïve, of course, to assume that motivations alone can make the difference. Granted, the underlying condition was amenable to quick results. But we all know that much of the time when we see protracted outcomes, it was not the underlying condition that caused the outcome. Many of the outcomes we see are the result of the "system" and those of us who make our living from the system.
Do we do everything in our power to assist the injured worker in his recovery? Do we contribute to the problem unintentionally by incenting the wrong behaviors, or through our application of the very principles meant to protect the injured worker? In particular, do we use Utilization Review as a tool, or as a crutch?
On January 4, 2011 the California Second Appellate District summarily denied a Petition for Writ of Review by a lien claimant, California Pharmacy Management, which challenged a determination by the Workers' Compensation Appeals Board that proof of acquisition costs of pharmaceuticals is a prerequisite to the recovery of their lien.
The appropriate reimbursable amount of pharmaceutical lien claims, like other forms of medical treatment apart from physician services, is highly dependent on the date of service. The formulas for calculating appropriate reimbursable amounts are set forth in Labor Code §5307.1, but require reference to external sources such as the AWP, Medicare reimbursement schedules, and the Official Medical Fee Schedule (OMFS), and Medi-Cal reimbursement schedules.
Beginning January 1, 2004 and continuing through the present time, the appropriate reimbursable amount for pharmaceuticals was set at 100% of the Medi-Cal payment system.
Pharmaceuticals prescribed prior to 2004 are reimbursable at OMFS rates which are published in the OMFS.
Repackaged Pharmaceuticals — an Exception to the Rule
Under California Pharmacy Management v. WCAB (Mendoza), when evaluating repacked drugs only, the same valuation applies for all repacked drugs dispensed from 1/1/1996 through 2/28/07. In these repackaged drug cases, the lien claimant provider is entitled to reimbursement based on the lesser of the provider’s cost for the drugs or the 2003 OMFS formulary.
In the recent (unpublished) decision by the California Court of Appeal, Moore v. California Surety, the Court held that the employer’s handling of the interactive process and attempts to provide reasonable accommodation to an injured worker were wholly adequate, and that the employee’s case was properly dismissed as a matter of law.
In Moore, the employee, who was working as a “bounty hunter”, suffered a back injury in the course and scope of his employment. He was declared TTD for some time. When he was released to return to work with significant restrictions the employer searched for an alternate, available position for the employee and offered the employee two “desk jobs.” The employee turned down both positions, stating that they were too far away from his home and that he was not interested in the jobs. The employer then stated they would try to find a position in their corporate office, but the employee stated he needed to make the same amount of money as he was making in the position he was employed when injured.
The next time the employer tried to speak with the employee (via its counsel) it was referred to the employee’s newly hired attorney. Further conversation with that attorney revealed that plaintiff was interested in settlement of his purported claims, and no mention of continuing the interactive process was mentioned. Soon thereafter the employee filed suit against the employer claiming, among other things, that he was denied reasonable accommodation and terminated.
This letter was respectfully submitted to then First Lady Hillary Rodham Clinton by Dennis Kelly in 1992, but it is more relevant today.
The promise of reforming our national healthcare system has created a forum for ideas on how to tackle this monumental issue. Some proposals, such as Managed Competition (Exchanges), represent viable approaches to reform; yet, their programs create certain "winners" and "losers" within the healthcare system. With so many varied interests at stake, it is nearly impossible to completely satisfy everyone. Our goal should be to establish a system that is considered fair to all concerned.
As a nationally-ranked professional in the insurance industry, Dennis Kelly and Incenta, LLC has developed an employee benefit program which we believe is fair — a view shared by an increasing number of corporations that are implementing our program in their own attempts to reform employee healthcare benefits that had gotten out of control.
The program is based on ideas that provide for more of the deserving people to "win" and it brings into line those who haven't been playing fairly.
In this report I have highlighted some of these ideas in the form of three major goals; the current problems surrounding each one; and, proposals for reform that could help consumers save money on their annual health insurance costs while providing better protection against serious illness, free up money that could be placed within the tax system and used to subsidize indigent healthcare, alleviate the financial tug-of-war between healthcare providers and insurance companies, and hold insurance companies more accountable to serving consumers fairly and responsibly.
Please consider these points for improving our national healthcare system.
The Worker’s Compensation market in California is hardening. Rates have been increasing on an incremental basis and are expected to continue to rise as the cost of medical care increases. Employers can reduce their insurance costs by instituting strong safety measures and preventing losses from occurring. However, in the event of a small claim, employers can minimize their costs by implementing a first aid program and reducing their experience modification factors.
Under the new experience rating formula instituted by the Workers' Compensation Insurance Rating Bureau (WCIRB) as of January 1, 2010, all claims under $7001 now go into the modification on a dollar-for-dollar basis, which means that these claims now impact employers more heavily than they have in the past. Claims under $2001 have always gone into the formula at full value and when we talk about instituting a first aid program, we are focusing on these small claims. The medical costs for any claim that meets the legal criteria for 'first aid' can be paid by the employer, rather than by the insurance company. Section 5401 of the California Labor Code defines first aid as:
"any one-time treatment, and any follow up visit for the purpose of observation of minor scratches, cuts, burns and splinters, or other minor industrial injuries, which do not ordinarily require medical care. This one-time treatment, and follow-up for the purpose of observation, is considered first aid even though provided by a physician or registered professional personnel."
Almost four out of five U.S. households own some form of life insurance, meaning that to some degree, there is national consensus regarding the importance and usefulness of life insurance. However, the average household only owns enough coverage to replace 3.6 years of income, creating a significant gap between the amount of coverage families have versus the amount of coverage they actually need. Forty-four percent of U.S. households would agree that they do not have sufficient coverage to meet their potential needs. The question then arises of why so many Americans are underinsured.
One of the primary reasons why we suspect that many Americans are not sufficiently covered is that they are not sure about what type of coverage they need or how much. They have concerns about affordability as well, especially in light of the nation’s current economic struggles. Most families are tightening their budgets in an effort to weather the storm, and unfortunately, life insurance is often one of the first expenses to go. With these issues in mind, we have come up with some basic answers to some of the most common questions that develop as families consider the purchase of life insurance.
Why do I need life insurance?
Traditionally, life insurance has been viewed as a way to cover burial costs and replace income. However, there are many additional ways that life insurance can serve as a valuable investment and risk management tool. For example, it can be used to pay estate taxes, pay off a mortgage, equalize an estate among multiple heirs, diversify investment and retirement plans, donate a substantial gift to charity, or purchase a partner’s share of a business if he or she passes away. If you do your homework, you will likely be surprised at the variety of life insurance plans that exist as well as their creative uses and how they can benefit you and your family when you pass away and while you are still alive.
Insurance Thought Leadership aggregates best practices from highly respected experts in their field. Insurance Thought Leadership provides knowledge and experience at a time when its needed most, times of sweeping change and market uncertainty.
Whether it’s Healthcare, Worker’s Compensation, Property & Casualty, Auto, Sophisticated Life Insurance designs, Directors & Officer’s, Safety, Risk Control or other Claims Management, Insurance Thought Leadership promises to deliver the most relevant mind share the industry has to offer.
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Dave Dias
David Axene
Jeff Pettegrew
Jennifer Weathersbee
Mark Webb