Excellent news out of the California Workers Compensation Institute (one of my favorite research outfits) that the frequency of comp claims has dropped significantly after enactment of reforms. The decrease, of 13% from 2004 to 2005, continues a decline that has seen comp injuries drop over 60% since 1990.
Self insured employers saw an even bigger decrease of 17%.
Even better news – according to Workers Comp Executive:
“n addition to frequency, claims costs have also started to decline thanks the recent reforms along with pure premium rates. CWCI points out that with claims frequency at a record low, additional rate decreases will depend on what changes state regulators, the courts or the legislature make to the current reforms.”
What does this mean for you?
A lower cost of doing business in California.

Ohio’s workers comp scandal keeps getting better and better. One of the principal figures (Tom Noe, aka “the perp”) has just been busted after a 10 month investigation that uncovered a very close relationship between the perp and the Governor’s chief of staff and a theft of over a million dollars
The perp a former investment manager for the Ohio state workers comp fund, pled not guilty to 53 charges, including stealing more than $1 million from the state’s work comp reserves.
According to the AP, the charges:
“conclude a 10-month investigation by state and federal prosecutors into the $50 million rare-coin investment Mr. Noe managed for the state insurance fund for injured workers.
The investigation led to sweeping changes at the state workers’ compensation bureau, an agreement by Gov. Bob Taft and two former aides to plead no contest to ethics charges, and pending charges against two other former Taft aides.
Mr. Noe is accused of stealing from the investment by writing checks, sometimes for hundreds of thousands of dollars each, knowing that the money was not his to use.
His lawyer has acknowledged a shortfall of up to $13 million of the money Mr. Noe invested for the Ohio Bureau of Workers’ Compensation.
One of the charges in Monday’s indictment accuses Mr. Noe of stealing at least $1 million. The state attorney general has accused him of stealing up to $6 million.
Mr. Noe, 51, already faced charges of using colleagues and associates to funnel $45,000 illegally to President Bush’s re-election campaign. The new counts include forgery, theft and money laundering.”
This has it all – lost treasure, political backroom deals, corruption in high places, theft from injured workers, and political scandal at the state and Federal level.
What does this mean for you?
Yet another reason to love the workers comp business; as if you needed one.

My friends at Workers’ Comp Insider have posted a round-up of WC news, including a summary of the recent AIG settlement. Part of AIG’s $1.6 billion settlement is to go to pay back taxes owed for workers comp premiums that were not reported to the various states as such.
States tax insurance premiums to gather revenue and to build up funds to cover any costs associated with insurers that go belly-up. The reporting of premiums is also used to determine how much of the residual market is assigned to each insurer (in states that handle the residual market this way).
Turns out AIG systematically under-reported work comp premium and engaged in a variety of other financial shenanigans to avoid taxes and assessments. And now they are paying $343 million for their sins.
What does this mean for you?
The final note, we hope, in the denoument of AIG’s reputation as a respected and feared company.

Yesssss!!!
The scandal continues! The latest news is that Thomas Noe, he of the “I know, let’s buy $50 million in rare coins with workers’ comp reserves!” fame has been caught funneling illegal campaign contributions to several Ohio judicial candidates through a third party. (thanks to Work Comp Executive newsletter for this choice bit)
Noe, who is up to his eyeballs in other legal trouble (not only was he involved in the coin scandal, he also is accused of illegally contributing $45,400 to the Bush campaign), is accused of conspiring to contribute more than the legal limit to three candidates in Ohio.
And here we thought workers comp was boring (well, ok, so it’s only peripherally related…)
Meanwhile, the scandal has blocked efforts to convert Ohio’s monopolistic WC system to something more free-market. Recent testimony before the state legislature pointed out that it probably makes sense to hold off on any drastic moves until the mess gets cleared up.

Sources indicate Coventry has made an offer to a person to lead the workers comp division of sub First Health. As noted here previously, several candidates were on the bubble in December. Evidently one has dropped out and an offer has been made to another; expect an announcement this month.
Spencer Stuart is the search firm. Indications are that the new leader will have control over staffing, which might result in changes among the present leadership at First Health.
The new leader will have a few challenges, with the highly profitable workers comp network business under pressure from Aetna and others; several large WC insurers moving business away, increasing pricing pressure from customers, changes to WC fee schedules in several key states, and increasing negotiating strength on the part of hospitals.
What does this mean for you?
A little more turmoil before FH settles down.

There have been several tentative efforts to bring provider profiling to workers comp, with decidedly mixed results. The problems are the usual – bad data, not enough data, poor coding, and insufficient claims counts coupled with widely varying severity making it very difficult to compare physicians.
One of the leading managed care firms in the southeast, CHOICE Medical Management, just announced their new effort in provider practice analysis, and it looks promising. According to CHOICE’s news release;
“”This is the first provider analysis in the industry using data from the whole claim, medical, indemnity and total claim costs, as well as administrative processes,” Tom Barrett, CHOICE president said.”
Providing access to all data, including the critical indemnity and return to work (RTW) data, is vital to assessing the performance of comp docs. With so many dollars riding on return to work, failing to consider this may lead to highly misleading conclusions.
Aetna has also been working on provider profiling, using their extensive database of group health information in an attempt to identify docs that can treat work comp cases effectively. While I admire their effort, there are several key problems with this.
1. RTW is not contemplated in managing a group health patient episode, so there is no way to assess the impact of the physician on disability.
2. Many group health-oriented docs don’t and/or won’t take workers comp patients.
3. Two of the key WC specialties, occupational medicine and physiatry, are either non-existent or barely represented in group health networks. And occ med docs provide a lot of the primary care and case management in comp. How you can assemble a network or assess outcomes without looking at occ med and physiatry is a mystery to me.
4. Group health decisions are often complicated by reimbursement, copay, and deductible issues. There is ample evidence that patients make decisions based in part on their financial impact on the patient. Such is not the case in comp, which is “first dollar, every dollar”.
5. Several studies indicate that medical care for certain conditions is just different for work comp patients than for those covered by group health. Back pain/strain is one example. While all of us agree that a back is a back, the reality is the financial, motivational, and regulatory differences inherent in group and comp drive different medical practice.
What does this mean for you?
A comp-based provider analysis will likely lead to better understanding of comp cost drivers.

Just when I was afraid this was going away, it rears its grinning head again. The scandal at the Ohio Bureau of Workers Comp (you remember, the group that had invested claimant reserves in rare coins, questionable securities, wine (!) and other “non traditional financial vehicles” remains under investigation, and the investigators need $85,000 more to finish up.
For those in need of a refresher on this most entertaining of scandals, here’s the background.
Dare we hope that even more revelations are forthcoming? Perhaps junkets to foriegn lands to investigate real estate opportunities? Jewelry bought as an investment to increase reserves, temporarily stored around the neck and wrist of an illicit girlfriend? Art work safely ensconced in the homes of BWC execs? Rare cigars, safely guarded in a BWC-funded humidor?
A blogger’s delight!

Corvel Corporation announced that earnings were up substantially although revenues dropped by 10% in the last quarter of 2005. EPS were up 45% from a year earlier, despite a decrease in revenues from $70 million to $63 million. The announcement followed other recent news indicating continued struggles by CorVel.
The company’s press release blamed the drop in revenue on various contributors including the decrease in workers comp claims, offshoring of jobs, regulatory compliance issues, and the hurricane.
Well…all these may have had some impact, but claims did not drop 10% from the prior year, and the jobs that were outsourced were not in retail, transportation, food service, health care, and construction, major contributors to the nation’s occupational injury count.
What’s really happening? Likely several issues. First, CorVel has been looking for a COO for some time, likely recognizing that there are internal challenges (i.e. problems) that need more and better attention. Second, CorVel’s IT infrastructure is highly decentralized, making it tough for the company to compete for national business. Third, their provider network is faring poorly in competition with Aetna, First Health, and Focus.
Rumors have been floating about the possibility of a leveraged buyout of CorVel. Anything’s possible.

Prescription drug costs in workers comp are driven by utilization and price – how many pills and how much they cost. Oh, and by the physicians who prescribe the pills, based on what the patient needs. We hope.
Into this has been injected a new profit motive for physicians – the ability for them to become their own drug stores. Several companies are offering this service, enabling docs to dispense drugs out of their own offices.
The positive spin is this enhances compliance and reduces errors due to interpreting illegible scripts. However, no studies have been found to substantiate those claims.
What has been substantiated is the ability of these on-site dispensaries to get around state fee schedules, thereby driving prices up several times over the fee schedule. Here’s an excerpt from an article in Workers’ Comp Executive;
“According to preliminary research done by CWCI and the Commission on Health and Safety and Workers’ Compensation, some doctors charge between 400 and 700 percent more than what’s charged at a pharmacy for the same medication.
CWCI research indicates that the repackaged drug Zantac goes for $255.56 for 150 mg. pills. At a pharmacy, the retail cost is $25.90. At Drugstore.com, the cost is $19.71. Repackaged pricing for naproxen (Aleve) and ibuprofen (Advil) were less than $255 but still more than the alternatives.”
The result – docs can make between $20,000 and $90,000 per year in additinal profit with no risk.
There are several firms involved in this, including Allscripts (IL) and Physicians Total Care (OK).
Several of HSA’s clients, including very large WC insurers, have seen more than half of their drug costs in California come from doctor office-based dispensaries.
What does this mean for you?
If you are a comp payer, higher costs, less control over utilization, and more frustration.

In an attempt to turn over a new leaf, the administrator of Ohio’s troubled Bureau of Workers’ Compensation (BWC) has announced plans to improve financial results by up to $424 million. These improvements appear to be based on plans to cut health care expenses, improve investment income, and other administrative changes.
Ohio’s workers comp fund, the only source for comp insurance in the state, has been hammered by reports of excessive payments to hospitals, fraudulent investments, including reserves invested in rare coins, cronyism and back-room dealings resulting from ineffective oversight.
While I sincerely hope they get their act together, if they do, I’ll sure miss the entertainment value. After all, its not every day you see work comp hit the daily news… and certainly rare indeed when comp is mentioned in the same sentence with Abramoff, Delay, and the rest of the current crop of miscreants.