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Workers Comp Debate Relies on Faulty Numbers

Posted by John Regan on Oct 26, 2015 7:30:00 AM

The Massachusetts State Senate approved a bill on Thursday that would expand eligibility and compensation for injured workers under the law’s disfigurement provision.

statehousedomeThe vote followed a debate characterized by misinformation, inaccuracy and an unwillingness to determine the financial impact that the proposed changes would have on employers, the commonwealth, cities and towns and the workers compensation system as a whole.

Associated Industries of Massachusetts (AIM) opposes the measure and in a letter sent prior to the vote urged senators to examine the costs associated with each change.

Senator Sal DiDomenico, (D-Everett) led the Senate’s debate in favor of the bill.

The bill would expand covered disfigurement injuries to those occurring anywhere on a person's body and raise the current $15,000 compensation for any scar to an amount equal to 22.5 percent of the average weekly salary, or nearly $29,000.

The current system was established under the workers compensation reform act of 1991 as a compromise to ensure that workers compensation covered visible scarring from on-the-job injuries while controlling a major cost factor in the system.  Injuries resulting in disfigurement (as distinct from surgical scarring) are still compensable under Massachusetts law.  The rationale behind the scarring benefit holds that certain scars could affect quality of life post injury and may also affect return to work prospects.

Senator DiDomenico, using data received from the state’s Department of Industrial Accidents, asserted that only 1,936 workers were awarded disfigurement benefits last fiscal year and only $300,000 in benefits were awarded. He further stated that the bill would lead to no more than $500,000 in new costs. 

These figures are just wrong. 

One industry source predicts an impact to premiums in the insured market (not the self-insured or public market) of 3.4 percent or $40 million. Another estimate by an insurance provider, predicted costs could increase by twice the 3.4 percent, or nearly $80 million, because nearly 20 percent of claims involve surgery.

On the public side, (where the Senate Ways and Means Committee suggested there would be zero cost impact) Massachusetts state government spends $54.4 million on workers compensation. That means cost increases ranging between 3.4 to 6.8 percent would increase bills for the commonwealth by $2 million to $3.7 million.

Only Senator Vinny deMacedo (R-Plymouth) voted against the bill, saying he was worried that "little by little, piece by piece, slice by slice" the Senate was making it more challenging to do business in Massachusetts.

AIM agrees. 

We urge the House to review the data more carefully and to listen to those with a firm grasp of the cost implications of the bill.

Topics: Workers Compensation, Massachusetts senate

Employers Face Consequences from Loss of Insurance Terror Backstop

Posted by Christopher Geehern on Jan 5, 2015 9:51:25 AM

Congressional leaders are pledging to restore a terrorism insurance backstop program that made workers compensation and other insurance coverages affordable and available post 9-11 to employers in areas considered at high risk for attack.

USCapitol1The U.S. Senate declined to renew the Terrorism Risk Insurance Act (TRIA) before adjourning on December 18 and the law expired on December 31. The failure to re-authorize TRIA, which came as negotiations broke down amid an unrelated dispute over the licensing of insurance agents and brokers, shocked employers, insurers and some lawmakers who had worked for months to hammer out compromise legislation.

The Massachusetts Congressional delegation unanimously supported the proposed six-year renewal of TRIA.

Leaders from both parties on Capitol Hill, including House Speaker John Boehner and incoming Senate Majority Leader Mitch McConnell, have indicated that Congress will reauthorize TRIA immediately as soon as the House and Senate reconvene tomorrow.

Michael Standing, President and Chief Executive Officer of A.I.M. Mutual Insurance Companies, said the loss of TRIA not only affects cases in which an insurer writes workers compensation coverage directly for an employer, but also assessments that insurers might face through state assigned risk pools.

“The federal backstop remains important to help workers compensation insurers pay losses in the event of a large terror loss,” Standing said.

“Workers compensation insurers can't exclude or limit terrorism-related coverage, can't charge an adequate premium,  and can't predict when, where or how large a terror loss might be.”

Non-renewal of TRIA may have devastating consequences for employers.

Large workers compensation policyholders in so-called target cities, including Boston, will likely find fewer insurers willing to cover them. A large number of employees in one place in a target city equals large workers compensation loss exposure to a terror event - unlimited medical exposure and wage replacement paid to widows or permanently disabled employees.

Moreover, many existing commercial loans - projects completed, being built and being planned - are written with a provision that property insurance coverage be in place, including coverage for terrorism losses including TRIA. Real estate owners and insurers have said that mortgage defaults might result if TRIA is not renewed. Work shutdowns on large projects might occur.

The trade publication Property/Casualty 360 reported that there were legitimate concerns that the workers’ comp marketplace in New York City would be in chaos by the fourth quarter of 2014 as brokers scrambled to place coverage beyond January 1, 2015.  But the chaos did not materialize - some carriers pulled back in certain geographic locations, but others stepped up to take their place. Ultimately, employers were still able to obtain workers’ compensation coverage in the private marketplace. 

Carriers are writing coverage in terror-exposed geographies and will continue to do so as long as the promise of a re-authorization exists and negotiations are completed early in 2015.  Willingness to continue writing coverage in the private market will wane and eventually disappear the longer the uncertainty surrounding re-authorization exists.  It is imperative this coverage is re-authorized quickly.

Topics: Workers Compensation, A.I.M. Mutual Insurance Company, Terrorism Risk Insurance Act

Innovation Showcase Honors A.I.M. Mutual Injury Prevention Effort

Posted by Christopher Geehern on Jan 14, 2014 11:53:00 AM

A global forum has recognized workers compensation insurer Associated Industries of Massachusetts Mutual Insurance Cos. of Burlington for its innovative efforts to reduce workplace injuries and speed recovery times.

BuildingThe January 2014 edition of Best’s Review magazine features A.I.M. Mutual and 15 other companies the publication says have employed unique and creative approaches to problem-solving. A.I.M. Mutual’s project, “Injury Prevention/Worksite Wellness Model,” identified employee medical pre-conditions that had been shown to predict on-the-job disabilities, and then showed how wellness intervention could reduce injuries and speed recovery time.

The worksite wellness model is the culmination of a Clinical Process Improvement/Risk Reduction Initiative that A.I.M. Mutual developed over several years through its partnership with Best Doctors Occupational Health Institute (BDOHI). With BDOHI, A.I.M. Mutual first addressed the post-injury process, giving injured workers direct access to affiliated medical specialists and managing the key risk factors likely to impact recovery. The Injury Prevention/Worksite Wellness Model brings preventive measures to the forefront and expands the traditional work injury loss-control service approach to include a focus on general well-being.

Best Review’s Innovation Showcase is an annual forum for recognizing forward thinking among insurance organizations. A panel of insurance industry experts assessed the relative merits of all 41 submissions in the 2013 event. Companies from North America, Germany, China and India participated.

In reviewing this submission, Dianne Batistoni, a partner at EisnerAmper LLP, called A.I.M. Mutual’s program “the future of intelligent risk management in workers’ compensation insurance.”

“We are honored to be recognized in the A.M. Best Innovation Showcase for our Injury Prevention/Worksite Wellness Model,” said A.I.M. Mutual President Michael Standing. “The Model is a proactive approach to injury prevention combined with inviting employees to become better stewards of their own health. Both are intended to help employers reduce the rate of workplace injuries and improve medical outcomes, particularly in cases that might be compromised by known—or unknown—risk conditions.”

“Working with A.I.M. Mutual’s Claims and Injury Prevention team has been a privilege for us,” noted Michael Shor, Managing Director of BDOHI. “Together, we have embarked on an integrated effort to reduce the risk factors that complicate injuries while helping those who have suffered work-related injury get the right diagnosis and treatment the first time. These are exceptional benefits for both the employee and employer.”

To read about this innovation and all the others highlighted in the Showcase, visit www.bestreview.com. The January digital edition is available to all readers.

Best’s Review is published by the A.M. Best Co. for insurance professionals. Founded in 1899, A.M. Best Co. is the world’s oldest and most authoritative insurance rating and information source.

A.I.M. Mutual and its subsidiary companies are rated A (Excellent) by A.M. Best Company. Since inception, A.I.M. Mutual has been sponsored by the Commonwealth’s largest employer association, Associated Industries of Massachusetts, which has more than 6,500 employer members. The insurer, formed in 1989, provides workers compensation coverage for 16,000 employers throughout Massachusetts, New Hampshire and Connecticut.

BDOHI was established in 2005 by Best Doctors, Inc. Best Doctors serves more than 30 million members globally. Participating physicians, named by an impartial peer review, are among the top 5 percent in their specialty fields and are committed to helping members get the right diagnosis and medical treatment without delay.

Topics: Workers Compensation, A.I.M. Mutual Insurance Company, Workplace Safety

Don't Tinker with Workers Compensation Success Story

Posted by Christopher Geehern on Oct 9, 2013 10:04:00 AM

The Massachusetts workers compensation system is, well, working.

Workers CompensationOnce on the brink of financial collapse, the commonwealth’s system for paying the lost wages and medical bills of workers injured on the job is now a model for the rest of the country. A landmark reform passed in 1991 has reduced average workers compensation premiums 60 percent, improved workplace safety and redirected hundreds of millions of dollars to employers for investment in growth.

And that’s exactly why lawmakers should tread lightly in reviewing more than 30 bills that have been filed proposing changes to the workers compensation system. AIM supports some of these changes – including one that would increase the funeral benefit for workers killed on the job – but overall believes it is dangerous to tinker with one of the great economic and policy success stories of the past 30 years.

“By every measure, the reforms of 1991 are working and they were beneficial to both employees and employers.  This is a tremendous success story.  Rather than funding a broken system, hundreds of millions of dollars are made available to companies to invest in creating jobs and improving safety.  We have a system that works,” said John Regan, Executive Vice President of Government Affairs at AIM, in testimony yesterday before the Legislature’s Joint Committee on Labor and Workforce Development.

The turnaround of workers compensation is by now a familiar tale to most Massachusetts employers.

The system hurtled out of control from the 1980s until late 1991 as excessive benefit duration spawned an unhealthy mentality for workers who were urged to hold out for huge lump-sum settlements.  One in five workers made more while collecting workers compensation benefits than they did while earning pre-injury wages.  The voluntary insurance market collapsed, resulting in an assignment of 65 percent of workers' compensation premiums to the assigned risk pool.   

The 1991 reform stabilized the system and subsequently made the system work for both employers and workers:

  • Attention paid to workplace safety is up and accident frequency is down;
  • The number of disputed cases continues to decline;
  • The amount of insurance premium written through the assigned risk pool is modest;
  • Insurance rates are down more than 68 percent since 1993;
  • Insurers are coming to Massachusetts – 357 licensed workers compensation insurers.   

Regan outlined for legislators four principles by which AIM evaluates any proposal to change the workers compensation system:

  1. AIM supports a cost effective workers compensation system which provides for injured workers during their period of injury, helping them achieve maximum medical improvement, and allowing them to return to work earning a living for themselves and their families as soon as is safely possible.
  2. Workers compensation is a cost of doing business, which during the past several years has gone from among the highest in the nation to a more appropriate level. Massachusetts' workers' compensation costs must remain within the national average for all states. In fact, the Massachusetts system is characterized as a relatively low cost/high benefit state. At 60 percent of pre-injury wages, given the tax exempt status of compensation and given that many other work-related deductions for benefits are not withheld, take home pay for workers collecting benefits is at the appropriate level. We strongly oppose any change that will add cost to the existing system, placing Massachusetts companies at a competitive disadvantage relative to other states.
  3. AIM believes that any discussion regarding change to the current workers compensation system must be preceded by a full and fair cost/benefit analysis, which determines the practical impact of any change to the system on all parties, and on bottom-line costs.
  4. AIM advocates that all parties to the workers compensation system — workers, their families and the business community —be treated fairly, neither particularly advantaged nor disadvantaged by any proposed change. AIM is particularly concerned about increasing or incurring costs that do not accrue to the benefit of workers but to others associated with the workers compensation system.

 

Topics: Workers Compensation, Massachusetts Legislature, Issues

Court Closes Workers Compensation Loophole for Staffing Companies

Posted by Christopher Geehern on Apr 30, 2013 11:00:00 AM

The following guest blog was written by Martha J. Zackin, Esq., Of Counsel to the law firm Mintz, Levin, Cohn, Ferris, Glovsky &  Popeo, P.C.


A recent Massachusetts court decision upheld efforts by staffing companies and workers compensation insurers to close a loophole that allowed staffing-firm employees injured at a client company both to collect workers compensation benefits and to sue the company where they were hurt.

Martha ZackinThe Superior Court for the Commonwealth of Massachusetts, Suffolk County, held that by virtue of an alternate employer endorsement naming a staffing company’s client as an insured under the staffing company’s workers’ compensation policy, the client company is entitled to the same immunities as the staffing company under the Workers Compensation Ac (the Act).

Massachusetts employers since 1911 have been required by law to carry workers’ compensation insurance covering their employees, or to qualify as a self-insured under the Act.  An employee injured in the course of working for a covered employer is almost always entitled to monetary benefits, medical care, and rehabilitation services, regardless of fault or negligence.  In exchange for near-guaranteed benefits, covered employers are generally not subject to civil liability or suit by injured workers or their families.  This concept is described as the “exclusivity provision” of the Act or “immunity” under the Act.

In Massachusetts and elsewhere, staffing is a growth industry.  Staffing agencies lease employees to their clients to perform work that is part of the routine operations of the client’s business, typically side-by-side with and doing the same work as the client’s employees.  Effective use of temporary labor helps the 90 percent of U.S. companies that use staffing agencies to ramp up and down, as production needs fluctuate, without incurring the costs associated with managing employment processes.

With the growth of the staffing industry and the increasing use of temporary workers, an anomalous situation has developed whereby employees of staffing companies injured while performing services for their “direct” employers’ clients have been able to receive workers’ compensation benefits from their staffing company employers and sue the staffing clients for damages.  Stated differently, an injured employee of a staffing company would have the right to sue the client company for common law damages, but an injured employee of the client company, working side-by side with and doing the same work as the client employee, would not.  

To address this problem, workers’ compensation insurance carriers began selling alternate employer endorsements to provide primary workers’ compensation and employers’ liability coverage to staffing agencies’ clients so that client companies would be insured under the staffing companies’ policies and entitled to the same immunities associated therewith.  Until now, however, no Massachusetts court has directly addressed whether immunity under the Act extends to clients of staffing companies, to protect those clients when staffing company employees are injured during the course of providing services to the client.   

In a case of first impression, the Superior Court for the Commonwealth of Massachusetts answered the question in the affirmative.  Specifically, in Molina v. State Garden, Inc., the Court held that the alternate employer endorsement entitles the client company to the same immunities as the staffing company under the Act.

This case is important for a couple of reasons.  First, it protects staffing companies from having to indemnify clients against claims arising out of workplace injuries – or fighting with clients about responsibility for such claims – the costs of which are almost never factored into the fees charged by staffing companies to their clients.  Second, insurance companies may rest easier, knowing that at least one Massachusetts court has validated the need for, and practicality of, alternate employer endorsements. 

The Molina decision underscores the importance for staffing companies to obtain alternate employer endorsements that specifically name clients as additional insured.  The decision also underscores the importance for workers’ compensation carriers to educate staffing clients about the use of alternate employment endorsements.

Topics: Workers Compensation, Employment Law, Human Resources

Regulators Reject Workers Compensation Rate Increase

Posted by Christopher Geehern on Aug 31, 2012 10:22:00 AM

The Massachusetts Division of Insurance has rejected a proposed 18.8 percent average rate increase sought by workers compensation insurers.

Workers CompensationRegulators did not order a decrease in rates as requested by Attorney General Martha Coakley, so workers compensation premium rates will remain unchanged for the immediate future. Premium costs will continue to vary according to the claims experience of employers and discounts offered by individual insurance companies.

The decision and order follow a five-month hearing process that included statements from the public, testimony from experts and cross examination of witnesses.

Worker compensation insurers argued that rates, which have declined 65 percent since the 1991 reform law, no longer supported the rising costs of providing insurance for workplace injuries and illnesses. Workers compensation premium rates have declined more than 25 percent since 2001, while key elements of the claims paid to injured workers have increased -average weekly wages have risen 27.5 percent and medical costs, which make up 40 percent of workers compensation claims, have skyrocketed.

The industry sought rate increases in 2008 (2.3 percent), 2010 (4.5 percent), and 2011 (6.6 percent), but regulators reduced rates or kept them unchanged in each of those years.

State regulators ruled that the evidence in the current filing did not justify an increase.

"After analyzing the wealth of data and information presented during the case, we found insufficient support for such a significant increase," said Joseph G. Murphy, Commissioner of Insurance. "No matter which of the products we regulate, the Division of Insurance expects insurers to make a compelling case to justify their proposed rates. Our staff's scrutiny of every proposal is thorough and detailed, and carefully balances industry solvency with fairness to consumers."

Topics: Workers Compensation, Business Center, Issues, Human Resources

Workers Compensation Rate Increase Deserves Careful Review

Posted by Rick Lord on Mar 1, 2012 3:40:00 PM

The Massachusetts workers compensation story has been an unqualified success by any measure.

Workers compensationA landmark 1991 workers compensation reform rescued a market that was on the brink of collapse, burdening employers with premium increases approaching 25 percent per year. The reform returned stability to the market, brought private insurers back to Massachusetts and reduced average workers compensation premiums by 65 percent during the next two decades.

It may seem surprising that the business organization that spearheaded the workers compensation reform is not dismissing the insurance industry’s request filed today for an average 19.3 percent increase in workers compensation rates. But the simple fact is that the same sort of rate imbalance that made it almost impossible for many employers to obtain workers compensation in the private market 20 years ago looms over the market again today.

AIM has become concerned in recent years by the increasing number of Massachusetts employers forced to purchase workers compensation insurance in the residual market, the market of last resort for companies that cannot find private coverage. More than 25 percent of employers now purchase workers compensation through the residual market because they are unable to find insurers willing to sell them policies.

Private-market coverage is harder to come by because the economics of workers compensation no longer add up for insurers.

Workers compensation premium rates have declined more than 25 percent since 2001. During the same period, the key elements of the claims paid to injured workers have increased. Average weekly wages have risen 27.5 percent and medical costs, which make up 40 percent of workers compensation claims, have skyrocketed.

The industry sought rate increases in 2008 (2.3 percent), 2010 (4.5 percent), and 2011 (6.6 percent), but regulators reduced rates or kept them unchanged in each of those years.

The growing disconnect between costs and premiums has already prompted several insurance companies to scale back their activity in Massachusetts. AIM remains concerned that additional retrenchments will destabilize the market for a product that employers are legally required to provide to their employees. It was just such a destabilizing spiral that produced the workers compensation crisis of 1991.

In the interests of full disclosure, AIM formed an employer-owned workers compensation company at the height of the 1991 crisis and still sponsors A.I.M. Mutual Insurance Company. We acknowledge that AIM’s involvement with A.I.M. Mutual presents a potential conflict on the issue of rates. It is important to note, however, that AIM has supported and in many cases driven the 11 separate workers compensation rate decreases that reflected favorable market conditions and left employers paying one-third of what they did for coverage 20 years ago.

Employers will still enjoy some of the lowest workers compensation rates in the country if the proposed increase gains approval from state regulators. Rates would remain approximately 58 percent below their 1991 levels. Rate increases have also recently been approved in many nearby states, including New Hampshire, Rhode Island, Vermont, Connecticut, New York and New Jersey.

The workers compensation rate filing deserves careful study and AIM looks forward to taking part in the discussion.


 

 

 

Topics: Workers Compensation, Associated Industries of Massachusetts

Workers Compensation Success Offers Hope for Health-Care Cost Debate

Posted by Rick Lord on Mar 3, 2011 9:28:00 AM

An intractable problem. Rate increases of 30 percent threatening the stability of employers. Inefficiency and lack of oversight. Multiple groups pushing the system in different directions.

Health care costs in 2011? Nope. Try workers compensation issues in Massachusetts two decades ago.

Workers CompensationLong before health insurance premiums became the defining challenge facing Bay State employers, the Massachusetts workers compensation system reached the point of collapse and nearly took with it a significant portion of the Massachusetts economy.

The close parallels between the workers compensation crisis of 1991 and the health insurance crisis of 2011 provide a glimmer of hope that the same business, government, labor and  professional communities that joined together to resolve workers compensation at the start of the Weld administration can do the same with health care at the dawn of the second Patrick administration.

The workers compensation/health care comparison came to mind this week as the insurance industry and state officials announced an agreement that will keep workers compensation rates unchanged for 18 months. The industry’s Workers Compensation Rating and Inspection Bureau initially sought a 6.6 percent increase, but reached an accord with the state Division of Insurance and the attorney general to hold rates steady through August of 2012.

That’s great news for employers struggling with a balky economic recovery. It’s even better news when you consider that average rates paid by employers for workers compensation insurance – which covers the medical treatment and lost wages of employees injured on the job – have dropped more than 60 percent since Governor William Weld signed the landmark reform law on December 23, 1991.

It’s easy to forget that the workers compensation crisis of 1991 was as pervasive and seemingly hopeless as the current discussion surrounding health costs.

Workers’ compensation insurance costs had surged more than 100 percent from 1988 to 1991, raising the cost of insurance in the private marketplace to approximately $1.6 billion, not counting the self-insured market. The substantial benefit increases and sharp rise in claims throughout the late 1980s, coupled with the Division of Insurance’s resistance to providing insurers with the rate adequacy they sought, caused insurers to stop writing voluntary policies.

Companies and workers fled Massachusetts seeking more predictable cost structures in other states. Massachusetts ended up bearing the brunt of a recession that washed away 11.6 percent of the commonwealth’s employment from 1989 to 1992 (365,000 jobs).

The severity of the workers compensation crisis ultimately prompted employers, government and labor to undertake a remarkable reform that became a model for the rest of the country. The 1991 reform act limited benefits that in many cases had exceeded what workers earned while on the job and made administrative reforms to improve the efficiency and fairness of workers compensation cases.

In the interests of full disclosure, as part of our effort to address the crisis, AIM developed a workers compensation insurance company named A.I.M. Mutual. The company  now provides workers compensation coverage to thousands of  employers in Massachusetts representing almost 10 percent of the insured marketplace.

By the mid 1990s, the insurance commissioner began to reduce insurance premiums. Initial claims at the Department of Industrial

Accidents fell from nearly 41,000 per year in 1991 to fewer than 19,000 in 2000. More and more insurers began to offer policies in Massachusetts, helping to create a dynamic market that further reduced costs and enhanced efforts to improve workplace safety and protect employees.

John Gould, my predecessor as president of AIM, wrote at the time that "Passage of the workers' compensation reform in late 1991 was the turning point in what had been the most severe recession our state had seen since the Depression of the 1930's. It is highly encouraging to see that those responsible for this important business overhead area continue in a spirit of cooperation that will serve our economy in the periods ahead."

The same spirit of cooperation will be required to solve a health care cost spiral that is eroding the economic foundations of the commonwealth. Massachusetts again served as a national model with the Health Care Reform Act of 2006, but addressing the costs faced by employers looking to provide health insurance to workers is a daunting challenge filled with doctors, hospitals, insurance companies, federal Medicare and Medicaid programs, world-renowned research institutions and individuals struggling with premiums that seem to accelerate faster each month.

The stakes are enormous. A recent article in the Boston Globe about a Franklin company detailed the degree to which skyrocketing health insurance premiums and other high employment costs discourage small companies from hiring new workers.

But the example of our response to the workers compensation issue makes me optimistic that Massachusetts will again roll up its sleeves to solve a problem that stands in the way of economic opportunity for all our citizens. Leading the nation is nothing new for Massachusetts. Here’s hoping that commentators writing in this space 20 years from now will look back with admiration at the business and political leaders of 2011 who had the courage to create a health-care delivery system that keeps both patients and employers out of intensive care.

Topics: Workers Compensation, Associated Industries of Massachusetts, AIM, Health Care Costs

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