COMPENDIUM
Broker news from Pacific Compensation Insurance Company
California’s Workers’ Comp Specialist
www.pacificcomp.com
Spring 2011 Issue 1
E X E C UT IV E V IE WPO I N T
There’s nothing old
fashioned about
the concept that
“knowledge is power.”
James E. Little
Chairman, President & CEO
The old line says “A little knowledge is
a dangerous thing.” If that’s true, how
much more competitive could a whole
compendium of knowledge make a smart
Medicare set-asides – the next and savvy broker about workers’ comp?
You probably know that Compendium,
major cost driver the name of PacificComp’s new broker
newsletter, isn’t a made-up word. Derived
Many in workers’ compensation today are wringing their hands over Medicare
from Latin, it means “a concise, yet
Set-Aside (MSAs) arrangements and their impact on increased claims costs. MSAs
comprehensive compilation of a body
are negotiated with Medicare to set-aside a portion of a workers’ compensation
of knowledge.” We chose this name to
settlement to pay for future medical costs that otherwise would be paid by emphasize that one of the most useful
Medicare. These allocations add significant expense to an already overburdened added values you’ll get from PacificComp
system. Risk and insurance professionals must be fully informed and prepared to is current, in-depth information and
minimize the impact. analysis about the most important
legislative and regulatory issues in California
WHAT IS AN MSA? WHO IS AFFECTED?
workers’ comp. Our intent is to bring you
An MSA is best described as an account set up to cover future workers’ information and perspective that will raise
compensation medical costs for a claimant who is either receiving Medicare or your knowledge level and help your clients.
soon will be. But because of the common misunderstanding about who may Because it’s true that knowledge is power.
become a Medicare beneficiary, the downside risk extends far beyond individuals Here’s a preview of what you’re going to
who are aged 65 or older and still in the workforce. find in our first issue:
In fact, MSA allocations can involve three populations of claimants: • A major article on Medicare Set-Asides,
• Medicare beneficiaries aged 65+ who are still working when they are injured. or MSAs, the outcome of massive cost
shifting for Medicare recipients still being
Continued on page 2 Continued on page 2
2
MEDICARE SET-ASIDES charged under California’s workers’
Continued from page 1 compensation fee schedule.
E X E C UTIVE VIEW P OI NT
• Claimants aged 62-1/2 or older who Here’s one example: Previously, we
will become eligible for Medicare might have settled a case at $45,000
Knowledge is Power. within 30 months of a settlement. based on permanent disability rates
Continued from page 2
• People of any age who are and anticipated future medical
treated for old, or not-so-old, workplace receiving Social Security Disability exposure. Today, that same claim
injuries. A statute in place since 1981, it Insurance (SSDI) benefits, and will might have an MSA allocation
was never enforced until the potential automatically qualify for Medicare alone of $75,000, bringing the total
revenue stream back to Medicare after two years. In many cases, these potential settlement to $120,000.
appeared to be a “painless” way to individuals may be decades younger
address Medicare deficits. A national issue “Most troubling, once CMS makes
than 65.
with far-reaching implications for insureds a decision, it’s final. There is
and insurers alike, it is one that we believe WHAT’S THE IMPACT? currently no appeals process or
brokers and their clients need to be When extended medical treatment any other form of redress to
knowledgeable about and prepared for. is required, the industry must use ensure decisions are fair.”
• PacificComp was honored late in 2010 an MSA to protect Medicare’s future
by two different organizations for its interests against the impending DECISIONS ARE NON-NEGOTIABLE
technology innovations, at a time when medical expenses. Now, new Although MSAs affect a relatively
we were on hiatus. Jon Siglar writes about guidelines have stepped up efforts small number of claims currently, the
how that came about, and how keeping to ensure amounts “set-aside” are financial repercussions are significant.
our brokers’ interests front and center was appropriate—in many cases, enough Regional offices of Centers for
the driver that earned those awards. Medicare and Medicaid Services (CMS)
to cover injury-related care for the
• Mark Webb, PacificComp’s legislative and duration of the worker’s life. The review MSA allocations on a case-
regulatory expert, shares his views and biggest concern about MSAs is by-case basis. So far, industry reports
analysis of the trends and developments that the settlement must take into say CMS offices have been overly
in 2011 that he believes will affect workers’
account Medicare’s exposure and not conservative, aggressive, inconsistent,
comp, for better or worse.
the costs associated with workers’ and inexperienced in estimating
• In each issue, we will feature a column by compensation benefits. For example, costs for long-term medical claims—
a different PacificComp senior manager Medicare wants protection against increasing MSA amounts by 10 to 20
or expert sharing some useful, current
average wholesale price (AWP) of percent on average, and in some cases,
insight and information about the area
prescription medications associated by substantially more. Most troubling,
he or she knows best. The first is from
with the future medical costs of a once CMS makes a decision, it’s final.
Joyce Schulman, Pacific Comp’s Vice
workers’ compensation claim and
President of Claims. Joyce talks about
what PacificComp does on many levels to not the costs that would be Continued on page 3
guard against negative outcomes. These
range from actively listening to the injured
worker from the beginning to better
guide their recovery expectations, to our
deliberate movement toward a “sports
medicine” treatment model, which focuses
on what can be done to get a valued
team member back in the game quickly
and safely.
We’d like to know what you think about
Compendium and what topics you’d
like to know more about. E-mail me at
jlittle@pacificcomp.com or Jon Siglar at
jsiglar@pacificcomp.com.
3
IN SIGHT S & UP DAT E S
PacificComp is officially
declared “cool” and
“innovative.” But how
will that help you?
Jon P. Siglar, ARM
Vice President/Chief Sales &
Field Services Officer
MEDICARE SET-ASIDES more streamlined and equitable. At the end of last year, PacificComp was
Continued from page 2 honored and delighted to be singled out by
PacificComp’s comprehensive MSA
Novarica in its inaugural “Cool Capabilities
There is currently no appeals process strategy ensures a cost-effective Report” highlighting the development
or any other form of redress to ensure and proactive approach for our and implementation of our state-of-the-art
decisions are fair. policyholders: agency management system, a result of
• Accurate Medicare reporting. our successful partnership with FirstBest®
SOLUTIONS ON THE HORIZON
Legislation recently added Systems. Only days later, Insurance
PacificComp is at the forefront of Networking News handed PacificComp
mandatory reporting requirements
these critical MSA issues, helping one of only nine 2010 INNovator Awards;
with respect to Medicare
to educate the industry about key ours was in Enterprise Technology. These
beneficiaries who receive
requirements, challenges, and best awards were given to companies that “led
settlements. With most policies,
practices. On January 1, 2011, we or contributed to a business application or
PacificComp assumes claims-paying project that uses innovation to successfully
successfully launched our mandatory
responsibilities, and as a result, we drive business impact, technical impact or the
reporting process to CMS. With our
comply with reporting requirements innovation itself.”
industry-leading expertise in this area,
on our policyholders’ behalf.
we’ve pioneered the establishment These would have been kudos at any
of best practices to ensure Medicare- The penalty for failing to report time, but they were particularly welcome
related claims are strategically to CMS is $1,000 a day per claim. for their timing. As PacificComp has
managed. MSA amounts are Less savvy payers incur significant spent the last year retooling its business
penalties and pass these costs model to be broker-exclusive and taking
accurately determined and settlement
to clients. At PacificComp, we a hiatus, we used the time not only to
arrangements procured optimally to
successfully initiated our reporting make an investment, but a commitment to
save costs. This may mean that the
process the first day of this year — technology specifically to make our brokers’
future medical payments will not
lives easier. It’s one thing for a company to
be resolved by a Compromise and which has allowed us to get ahead
make promises and shout them from the
Release if Medicare’s demands are of the game. We’ve put advanced
rooftops; it’s quite another when respected
patently unreasonable. Finally, we’ve technology in place to support our
third parties announce that not only is the
led the charge in proposing legislative reporting process and ensure an
promise in fact a reality, but an innovation
reforms, which, if successful, will optimal level of accuracy, timeliness, that will make a difference for the brokers
make the MSA settlement process and efficiency. they do business with.
Continued on page 4 Continued on page 6
4
MEDICARE SET-ASIDES
Continued from page 3
P E RS PECTIVE: C LAI M S
• Significant Medicare/MSA
expertise. With the complexities
on a psycho-social level conducted by a
of Medicare and MSAs, your clients
nurse/case manager staff consultant who
may wonder if they need additional
is a workers’ comp specialist. This interview,
conducted as early in the life of the claim expertise. At PacificComp, we
as possible, provides important indicators not only serve as the Responsible
on how the claim should be managed to Reporting Entity (RRE) on your
achieve the best possible outcome. The clients’ behalf, but we also have
An Ounce of Prevention goal is not just to provide the appropriate the medical expertise to properly
medical treatment from the beginning of advise, evaluate, and secure
Joyce S. Schulman
the claim, but also prepare the employee accurate MSAs.
Vice President, Claims
for reentering the workforce at the earliest Claims involving Medicare
There are many factors currently affecting
possible time.
the claims environment, ranging from beneficiaries are typically very
consistently escalating healthcare costs and It’s also vital to explore their expectations costly. Identifying these claims
worry over Medicare Set-Asides (MSAs) to of medical care, which were formed from upfront is the first critical step
historically predictable increases in claims past events having nothing to do with
to anticipating and managing
costs during the current economic downturn. the injury. In our extensive workers’ comp
potential Medicare liabilities.
claims experience, it is at the beginning, the
The escalating loss costs result from multiple After the date of injury, we collect
inception of the claim, when the worker is
factors. For example, it is no secret that the key data elements—such as the
likely to be the most candid and forthcoming
American population has grown increasingly claimant’s date of birth and Social
about their current health status.
more obese. It is well documented that Security number—and regularly
obese individuals are more prone to A SUBTLE SHIFT IN APPROACH AND
submit eligibility queries to CMS
accidents, more likely to have complications TREATMENT FROM “INJURED WORKER”
to accurately identify Medicare
if they are injured and also more likely to TO “VALUABLE TEAM PLAYER”
beneficiaries.
have a slower recovery. In terms of the medical evaluation,
PacificComp is at the forefront of a We also have a Medicare specialist
Regardless of whether a claimant is 25 or
movement in workers’ comp toward in-house, who provides quarterly
65, slender or overweight, it is extremely
a “sports medicine model” which differs training and ongoing direction
important to know someone’s state of
both philosophically and clinically from to our claims staff regarding
health at the time of their injury. Conditions
the traditional approach. Historically, the MSA issues.
such as hypertension and diabetes can
protocol favored traditional evaluation and
significantly influence the appropriate
diagnosis of the injured worker leading to a Continued on page 5
medical treatment and speed of recovery.
treatment plan. The sports medicine model
THE OBJECTIVE IS ALWAYS A (as a point of reference, envision a valuable
POSITIVE OUTCOME professional athlete with a sidelining injury)
Once a claim is filed, we take specific steps is geared toward both prevention and
to project its likely outcome. At the same outcomes. How do we get this employee
time, we work with the medical team to back to work, comfortable, in a manner that
optimize a treatment approach that will does not risk further damage, and also get
get the employee back to work as quickly the claim closed? The intent is to respond
as possible. We maintain close three-point quickly when an injury occurs, assess its
contact with the physician, nurse/case root cause, and implement a game plan
manager and injured worker and believe that fosters a clearer path to recovery. It
that informed choices by the employee lead also incorporates the flexibility of closely
to better outcomes. monitoring the patient’s progress so that if
Part of the PacificComp three-point contact some aspect of the treatment is not working,
protocol is an interview with the claimant it can be addressed and changed quickly.
Continued on page 8
5
MEDICARE SET-ASIDES savings. For example, we often H.R. 4796 did not get to the President
Continued from page 4 propose structured settlements that in 2010. New legislation will shortly
• Diligent and accurate negotiation leverage interest-bearing accounts be introduced in Congress in 2011.
and settlement process. PacificComp to help pay for long-term care. With Our hope is that every insurance
performs careful analysis of all some cases, we know a proposed MSA professional will support MSP reform
proposed MSAs. For example, we’ve amount is significantly higher than in order to get it high on the list of
established best practices to ensure the claimant’s future medical care will public policy goals in 2011. To learn
amounts are not only appropriate, cost. Rather than a global settlement, more about reform, visit the Medicare
but also clearly documented—which we’ll negotiate an arrangement in Advocacy Recovery Coalition website
increases the likelihood for CMS which the future medical component at www.marccoalition.com.
approval. CMS bases its decisions on remains open, so we can continue to As we move into the future, a growing
the physician’s medical report. We manage and control these costs. number of people will likely fall into
work with our providers to ensure • Support for legislative reform. The one of the MSA-affected populations
their reports explicitly delineate Medicare Secondary Payer (MSP) we’ve defined: an aging workforce with
future medical care needs appropriate program requires significant reform. both Medicare beneficiaries and those
for the injury claimed by the injured In 2010, PacificComp sponsored a who will soon be eligible (44 million
worker. When possible, they must California resolution, AJR 42 (Solorio), beneficiaries today, nearly doubling to
specify duration of care or any level of which called upon Congress and the 80 million seven years from now), and
care that is deemed necessary and/or President to enact H.R. 4796, the MSP an increasing number of people who
unnecessary for a case. Enhancement Act (MSPEA) of 2010. receive SSDI benefits and consequently
For example, the injured worker The objective of H.R. 4796 was to will receive Medicare benefits. With
may require a prescription, but only establish a fair and prompt process these demographic factors, along with
for three years. Or the physician for Medicare-related settlements, so a lagging economy that historically
may believe surgery is unwarranted. there are no unnecessary delays in the results in a surge of workers’ comp
Without noting these types of resolution of workers’ compensation claims, the use and average amount
stipulations in the medical report, claims. of MSA allocations is expected to
CMS may take a more conservative Key facets of the bill included the expand significantly.
and aggressive approach by ability to create safe harbors for PacificComp has implemented a
anticipating and including costs good faith reporting of claims comprehensive strategy to deal
for lifetime use of a prescription to Medicare so as not to trigger with the MSA challenge. Our brokerage
drug or a surgical procedure into substantial penalties, establish partners and their clients can rest
the MSA amount. sensible recovery thresholds, provide assured that we use an assertive,
Our team also advocates for payers with a right of appeal, and cost-effective approach to optimally
settlement options that maximize clarify the statute of limitations on control MSA-related costs—now and
Medicare recovery efforts. into the future.
6
I NS I G H TS & U PDATES SA C R A M E N T O R E P O R T
PacificComp is “Cool“
Continued from page 3
So what does this “cool” capability and
“innovation” mean for you? For one thing,
we are determined to demonstrate to
our brokers with actions and not just
words that we’ve put our money where
our mouth is. PacificComp has made
Crystal ball +
technology investments to prove to our common sense:
brokers beyond a doubt that we’re easy Likely and unlikely
to do business with. In a competitive developments in 2011
marketplace, if we don’t make your by Mark Webb
life and the lives of your producers
Vice President,
and support staff easier, you may dial Assistant General Counsel
someone else’s number. So we put our
Predicting is always a perilous process. CONSENSUS ISSUES WILL BE VISIBLE
broker hats on, put our management
The best information available, and a few Regardless of the timing of major workers’
team in your shoes, and concluded there
hunches, can either prove prophetic or compensation legislation, there will be
were three things we could do quickly
embarrassing when actual events unfold. opportunities to address consensus issues
that would make us stand out:
This early in 2011, there are a few things that drive significant administrative costs.
• Speedy and client-sensitive quote we already know. The Commission on Health & Safety &
turnaround for both straight-through Workers’ Compensation (CHSWC) and
• The first is that the focus of
accounts and those requiring the Division of Workers’ Compensation
policymakers in Sacramento is on
underwriting (DWC) have been working for some
the budget, and that enormous task
• Direct access to human beings relegates many issues to the back time on a better benefit notice system.
empowered to answer questions and burner. A major workers’ compensation Legislation has already been introduced
solve problems, which means no proposal, with increases in the amount that would remove notices currently
unlisted numbers and no voicemail of permanent disability (PD), would mandated by statute and vest discretion
dead-ends. If the right person is not be difficult to enact given the current in the DWC to develop more rational
there or on another call, you won’t have condition of the economy and the dire notices. Assembly Bill 335, by Assembly
to wait for the next snowstorm to hear fiscal condition of local governments Insurance Committee Chairperson José
back from them. and school districts. Solorio, is in response to this effort. In
• Finding every way we can to reduce or addition, the CHSWC published a major
• We also know that there are a number
eliminate “administrivia” for our brokers. work on liens earlier this year, including
of issues that were close to resolution
recommended statutory changes.
Those goals are at the heart of our in 2010 that are likely to reemerge
Whether this can fall into a “consensus”
business strategy and our desire to form in 2011.
category, however, remains to be seen.
a successful business partnership with • Even if a major workers’ compensation
each of you. REINTRODUCTION OF LEGISLATION
legislative package is not forthcoming
TO CURB COMPOUND MEDICATION
To read more about PacificComp’s this year, there is a possibility that
ABUSES, CONTAIN COSTS
recognition from Novarica and for the progress can be made in helping
At the close of the 2010 session,
complete article about PacificComp’s to reduce the complexity of the
legislation was introduced to try to
award from Insurance Networking system and address some of the
curb the abuses evident in the use of
News, be sure to visit our website at emerging cost drivers that are driving
compound medications. Compound
www.pacificcomp.com, select the “News” up medical expenses.
tab and click on “In the News.” Continued on page 7
7
S A CRAMENTO R E P OR T
Crystal ball
Continued from page 6
medications are supposed to be drug needed judicial resources at the local added considerable expense to the process
formulas that address specific needs of a Appeals Board offices to resolve cases more of determining permanent disability, one
patient who may be resistant to regular expeditiously. of the main factors driving the increased
strength prescriptions. Because of loopholes COURT DECISIONS COMPLICATE severity in PD awards.
in the pharmacy fee schedule adopted by DETERMINATION OF PERMANENT ADDRESSING FEDERAL MSA
the DWC, however, the use of compound DISABILITY ENFORCEMENT A PRIORITY
drugs is increasing at a significant rate and FOR PacificComp
In addition, the Court of Appeal, First
is a major medical cost driver. Following
Appellate District, has before it the Ogilvie PacificComp will also continue to support
a recent report by the CHSWC, expect
decision. This case, which has added the efforts of the Medicare Advocacy
legislation to be reintroduced in 2011 to
considerable uncertainty to the PD rating Recovery Coalition (MARC) in Washington
address this issue.
process, has been fully briefed and oral D.C. to bring about changes in the
“SURGERY” POSSIBLE ON OFFICIAL arguments are set for April 13. Last year, way Medicare enforces its rights as a
MEDICAL FEE SCHEDULE the Court of Appeal, Sixth Appellate secondary payer. The costs associated
Regulatory agencies, most notably the District, upheld the WCAB’s decision on with Medicare set-aside agreements (MSAs)
DWC, still have major rule-making initiatives the use of the AMA Guides in the Guzman are exploding. As our workforce ages, this
that have yet to be completed. The most case. In November, 2010, the California will be an increasingly important driver of
significant of these is changes to our Supreme Court declined review of the medical severity. In 2010, Pacific Comp
antiquated Official Medical Fee Schedule Guzman decision. The companion case to sponsored AJR 42 (Solorio), memorializing
(OMFS). There remains considerable debate Guzman, State Compensation Insurance Fund the support of the California Legislature
over how best to update the OMFS. It is v. WCAB (Almaraz) is pending review at the for these efforts. As we start the 112th
clear, however, that many costs associated Court of Appeal, Fifth Appellate District. It Congress, we will continue to work with
with liens and bill review are driven by the remains uncertain whether Almaraz will all interested parties to move this issue to
difficulty in managing this schedule. Efforts be accepted for review. What is certain, the President’s desk.
to update the schedule and bring it more however, is that these three decisions have
in line with the Medicare Fee Schedule are
ongoing, but have been met with strong
resistance from certain specialty medical
providers. Also, the DWC was mandated
to revise the permanent disability rating
schedule (PDRS) by 2005. This long
overdue revision could be a priority for
the new Administration, even if it results
in increased awards.
LIEN BACKLOG POINTS TOWARD LIEN
CONSOLIDATION
The Courts also play a significant role in
the system. In Los Angeles, the Workers’
Compensation Appeals Board (WCAB) is
attempting to address the considerable lien
backlog problem through consolidation
of liens that have common issues of fact
and law. PacificComp is in the forefront of
these efforts relating to interpreter liens.
Resolution of lien issues can free up much
8
P E RS PECTIVE: C LAI M S
An Ounce of Prevention
Continued from page 4
The Claims staff at PacificComp is 100% certified and undergoes 2. The goal is always a speedy and healthy return to work.
monthly training on business, legal and medical issues provided 3. Recognize when there is likely to be a problem with the claim
by a range of experts, including attorneys and physicians. All as early as possible to mitigate the potential downside risk.
claims involving temporary disability are reviewed at a management
4. Address the medical vs. legal issues quickly, thoroughly
level twice a month, typically resulting in faster resolution and
and proactively.
less litigation.
In the long run, a commitment to good claims planning and
PacificComp’s claims strategy can be expressed in some
management by your carrier is one huge preventive measure that
fundamental steps:
can help your clients avoid having a worst-case scenario turn into
1. Get the injured worker the right medical care as soon as possible.
a reality.
P.O. Box 5043 Fax 818.474.8636
Thousand Oaks, California 91359 Toll Free 866.374.8500
818.575.8500 www.pacificcomp.com