Today’s employment report contains a bit more of the good news workers comp have been hoping for: an increase in manufacturing employment and continued overall growth in industrial production. Overall, the economy generated 190 thousand jobs in March, the highest rate of job creation in three years.
according to Marketwatch,
“Manufacturing payrolls increased by 17,000. Construction employment rose by 15,000. Manufacturing hours increased by half an hour to 41 hours per week, with 3.7 hours of overtime on average.”
The net is positive – more jobs, longer hours, more overtime.
A decline in construction spending tempered the positive employment news, but that could have been significantly affected by the lousy weather experienced by much of the country in February.
The investment income picture isn’t quite as encouraging, with returns for the P&C industry down sharply in 2009 over the prior year, That’s somewhat offset by the jump in the equity markets over the last year. While higher returns would be nice, the silver lining is comp insurers aren’t able to keep premiums low by generating significant investment income, forcing underwriters to price to risk rather than bank on high investment returns covering claims costs.
There are some indications that carriers are beginning to strengthen pricing in selected markets and products. That’s not to say the market is turning, but the bottom may be near.
What does this mean for you?
As employment picks up in manufacturing and the spring brings increased construction activity, claims counts and frequency are also likely to rise. While bad news for the injured, this will be good news for occ medicine clinics, managed care and bill review firms, PBMs, and, most of all, TPAs.

There are some folks in the greater ‘workers comp’ world who are speculating that the ‘Feds’ are going to take over workers comp, or words to that effect.
This is idle speculation based on connecting unconnectable dots, reading unreadable tea leaves, seeing patterns where no patterns exist, some of it on the LinkedIn Workers Comp Forum group founded by Mark Walls (this is in no way a criticism of Mark; the Forum is an open discussion group where anyone can participate).
For the umpteenth time, there is NO interest on Capitol Hill in workers comp. And CMS can’t ‘take over workers comp’ without passage of a bill by Congress As I said last summer:
“we all know that comp was originally part of the Clinton reform package, known as Title Ten. What you may not know (and I didn’t until Bob Laszewski told me) is exactly one (1) person in DC wanted Title Ten. Bill Clinton. No one else, not Ira Magaziner or Jay Rockefeller or Hillary gave two hoots about WC, but the big dog did.
What is also little known is that the person who deleted Title Ten was none other than Ted Kennedy. And the Senator has not had a change of heart.
Could this change? No.
As Sen. Ron Wyden told me several months ago, when it comes to health reform, no one wants to pick a fight with anyone they don’t have to.”
To those who are engaging in this idle speculation, I ask why do you think anyone in Congress has any interest at all in taking on workers comp?
And if they did, which they don’t, where exactly would this fit on the priority list? Above the education reform bill? Just below immigration reform? Senior to the budget bill, or not? more, or less, important than the nuclear non-proliferation treaty? somewhat less significant than the Israeli West Bank settlement issue, or more? more critical than the energy bill, or no? If Congressman X has to spend time thinking about comp, or Afghanistan, or the Iraqi election, or Iran, or China’s refusal to adjust its currency valuation, or bank regulation, what do you think he will do?
As to any interest at CMS in taking over WC, wouldn’t you think they have enough to do what with expanding Medicaid by a third, revising hospital reimbursement, drastically changing physician compensation, completely redo-ing Part D, developing and implementing over a dozen pilots and trial programs, and revamping Medicare Advantage?
Get real, people. Workers comp is a tiny, all-but-insignificant industry that accounts for less than two percent of total US medical spend. Hell, workers comp amounts to only 11% of the P&C industry, and no one’s talking about nationalizing airplane hull insurance, or fire insurance, or GL or auto or…
What does this mean for you?
Anyone who thinks anyone inside the Beltway spends more than two seconds a year thinking about workers comp is not thinking.
To join Mark’s Forum, click here.

Let’s take a quick break from the ‘reform impact on work comp’ to return for a brief moment to North Dakota. You’ll recall when last we visited NoDak, we were wondering why the state Supreme Court had yet to issue a ruling in Sandy Blunt’s year-and-counting appeal.
Things have gotten even more interesting in the last few days.
Cynthia Feland, the Burleigh County Assistant State’s Attorney in charge of the state’s case against former WSI CEO Sandy Blunt, is starting to understand what it feels like to be on the other side of the table.
Sources in North Dakota indicated late last week that Feland is not only under investigation by the City of Bismarck’s police department for potential prosecutorial misconduct, but the state Bar Association has also determined Feland’s actions during the Blunt trial merit investigation.
(To which snarky bloggers might say “really? You don’t say!”.)
Bill Kidd at WorkCompCentral reported:
Bismark Police Chief Keith Witt confirmed Thursday that his department is investigating a complaint lodged against the Burleigh County State’s Attorney’s Office by Steve Cates, a Bismarck news blogger and supporter of Blunt. Witt said the investigation is “really preliminary at this point.”…A statement released at a March 9 “informational conference” by Bismarck Police Department Sergeant Mark Buschena said that Cates reported “he believes that the prosecutors of the Burleigh County State’s Attorney’s Office committed criminal violations in the prosecution of Charles (Sandy) Blunt which occurred in 2008.”
“He (Cates) also alleges that a prosecution witness committed perjury during trial and was involved in a conspiracy with the State’s Attorney’s Office concerning the prosecution,” the statement said.
The statement reported the “offenses named” were criminal conspiracy, perjury, false statement and misapplication of entrusted property during the period from Nov. 3, 2008, through Dec. 19, 2008.”
This may cause Feland a bit of difficulty in her campaign for district judge. That is, if the media in North Dakota sees fit to actually report the investigations, and, when they conclude, the results thereof. For some reason the media has yet to pay much attention to the charges faced by Feland…
Meanwhile, the State Supreme Court is still sitting on Blunt’s appeal, using their time to reach decisions on over a dozen cases filed – and heard – after Blunt’s.
Here’s hoping the State Supreme Court renders a judgment soon and the investigation of Feland moves quickly. Blunt has twisted in the wind long enough and it’s time for Feland to be brought to justice.

Loyal readers, return with us once again to the wilds of North Dakota, that ice-bound region where executives are criminalized for signing off on cookies and balloons at farewell parties, where out-of-control prosecutors deny defendants their constitutional rights, where a boss not from NoDak is pilloried despite turning around a troubled state agency.
Yes, the Sandy Blunt case has reached a new peak of incomprehensibility. Here’s the latest.
Blunt appealed his conviction to the State Supreme Court a year ago, and the case was argued five months ago. One would think that would be plenty of time for the judges to issue a ruling. After all, the Court issued seven opinions so far this year for cases argued in 2010 – two months after Blunt’s hearing.
And while logical minds would think that speedy justice, a right of all citizens conferred in the US Constitution would apply in the frozen north, apparently that is not the case. (See below for the requirements of other courts in North Dakota)
In fact, of the twelve opinions rendered by the North Dakota Supreme Court, not one was argued before Blunt’s – all were argued a month or more after his, yet the Court has not seen fit to issue a ruling in Blunt’s case.
Which leads to the next fascinating bit of NoDak current events.
Reports indicate the attorney who prosecuted Blunt is under investigation by the State Police for potential crimes including conspiracy. What makes this so interesting is that no other media outlet reported this until well after Steve Cates did in his “Dakota Beacon’.
Wait, it gets weirder.
On the day that the State Police announced the investigation into the Assistant State’s Attorney who prosecuted Blunt (Cynthia Feland), there were two other stories that actually did make the news. One would think that they must be big, if they took precedence over an investigation into potential crimes by a Prosecutor. Perhaps a bust of a huge crystal meth lab? Reports of Al Qaeda coming across the border from Canada?
Nope.
Two men, described in the media as “Native Americans” (gotta love that unbiased media…) were caught on video breaking a liquor store window and stealing fifty bucks worth of booze.
Let’s see…I’m the producer of local TV news, got two minutes to fill on the crime blotter…fifty bucks in booze, about four bottles perhaps, against allegations of criminal actions by a county prosecutor…hmmmm, seems like a pretty clear editorial decision to me – let’s slam the Native Americans! Who cares about a law enforcement official accused of conspiracy and suborning justice!
This would actually be pretty funny, even hilarious, if it wasn’t about a prosecutor who allegedly committed crimes in the course of prosecuting one of the most decent, honest, and competent executives I’ve had the honor of meeting in my 25 plus years in the business world.
(Here’s the relevant language from North Dakota’s Judiciary)
Section 1. Statement of Policy.
a. A goal of the judicial system of North Dakota is prompt disposition of cases.
b. The Supreme Court recognizes the need to provide administrative mechanisms within the unified judicial system to maintain current trial court dockets. These trial court docket currency standards and procedures are established to meet this administrative goal.
c. These standards guide the management of the trial courts of North Dakota. However, these court management standards and procedures are not intended and may not form the basis to change or affect the substantive and procedural rights of the parties in any case. Further, a violation of these standards does not cause the dismissal of any case.
d. Adherence to these standards by trial judges requires lawyers to recognize consequent adjustments in local practice. Members of the bar should anticipate the prompt disposition of cases.

Yesterday’s news that US industrial production continued to improve was a welcome sign of good news for a work comp industry that has been hammered by declining claims frequency, increased severity, horrible investment returns, and a recession that prolonged what was already one of the longer soft markets in memory.
Notably, manufacturing, long a weakening sector, has shown solid strength of late, particularly in New York, where new orders were up substantially over February’s figures. Employment in the sector was also up significantly to its highest point in two years.
As NCCI has reported, injury rates tend to spike up during an economic recovery as the pace of work speeds up, full-time workers get more hours and overtime, and new, less-experienced workers are hired.
What to watch for
The New York Fed typically is among the quickest of the 12 Federal Reserve Districts to report economic data; other Districts will be reporting over the next few days. As New York, along with the rest of the mid-Atlantic and northeastern states were hard hit by winter storms, economic activity may well have been suppressed by factory closings.
The other Districts may well report sharper increases, and if they do that’s good news for the comp business.
What does this mean for you?
Injury rates are going to increase, as is the raw number of injuries. While bad news for the affected parties, this will be positive for occ health clinics, case management and bill review companies, pharmacy benefit managers, TPAs, and other servicing entities.
Insurers will find this a mixed bag, as an increase in injuries means higher claims costs. However, better investment returns, and what appears to be a ‘de-softening’ of the comp insurance market is as welcome as it is overdue.

Medicare Set-Asides are one of those narrow but very deep niches in the workers comp (and other insurance lines) business that look simple at first glance, but are anything but.
The Federal government, more specifically the Center for Medicare and Medicaid Services (CMS) requires payers to submit MSAs for claims that meet specific requirements.
There’s been a good deal of confusion about reporting requirements, controversy over how to estimate future drug costs, concern over delays in processing MSAs by CMS vendors, and disputes over the vendors’ judgments. A lot of this is inevitable, as MSAs are a fairly recent phenomena governed by CMS’ myriad and sundry rules. But inevitable or not, the confusion and lack of clarity on deadlines, reporting and funding requirements and submission standards are causing significant problems for all involved.
There are currently two efforts to resolve much of the confusion and concern. WorkCompCentral reports a bill has been submitted to the House that addresses many payer (and CMS) issues. According to Safeway Risk Manager Bill Zachry;
“The bill was developed by the Medicare Advisory Recovery Coalition (MARC) to focus primarily on liability issues, but a number of the provisions will also affect insurance carriers and self-insured employers with respect to conditional payments and reporting of workers’ compensation payments and obligations.
The primary features of the proposed bill include:
1. Providing a specific time frame and process to be used in
determining MSP required payments before settlements
2. A right of appeal for Non-Group Health Plans with respect to MSP
obligations
3. Sensible MSP Recovery Thresholds
4. Taking Social Security Numbers (SSN) and Health Insurance Card
Numbers (HICN) Out of the Reporting Process
5. Setting a Statute of Limitation for MSP claims
6. Establishing safe harbors and clarity with respect to MMSEA §111
reporting penalties
7. Establishing a modest user fee designed to assure that the reforms
in the bill do not raise cost issues in the scoring of the bill.”
There are also indications that CMS is listening to vendor complaints, as it has recently extended the deadline for electronic submission to the end of this year. CMS is also looking for vendors to process the MSA submissions, and is asking interested parties to bid on the contract.
Click here for more details or if you’re looking to support MARC’s efforts,

In the very narrow world of work comp managed care, there’s an even skinnier slice focused on managing pharmacy. As pharma accounts for almost a fifth of all medical dollars spent in comp, its an area that certainly deserves attention – from employers, insurers, legislators and regulators.
There’s a lot going on in work comp pharmacy:
– the basis for fee schedules in 33 of the 34 states with fee schedules for comp will change within a year;
– the use of potent and potentially addictive narcotic opioids is rapidly increasing;
– price increases on brand drugs has raised the price per pill rather dramatically; and
– drug testing and the use of opioid contracts are gaining traction.
Interestingly, there’s only one state that currently has a somewhat restricted formulary in place – Washington, which actually prohibits the use of several controversial drugs for work comp claimants.
Texas has been working on a ‘closed’ formulary for a couple of years now, and has made significant progress. Basing their list of drugs on the ODG guidelines, Texas will be the first non-monopolistic state to require payers’ authorization of a number of drugs before they can be dispensed.
While the review and regulatory drafting process has taken a while, involved many parties, and required many meetings, sources indicate it is getting close to completion. The length of time it takes to get this done is not surprising, as this is new ground for regulators, payers, and clinical personnel as well.
The formulary will allow most drugs commonly used in work comp to be dispensed without any prior authorization (PA) or review (just as they are today) but a relatively few drugs will have to be specifically authorized by the payer. Among the drugs requiring a PA is my old favorite Actiq(r), a very, very expensive, very potent narcotic lollipop that is only FDA approved for breakthrough cancer pain for patients already using a narcotic opioid.
I’ve locked horns with the good folk from Texas’ DWC in the past over their managed care reporting methodologies; I’d be remiss if I didn’t applaud their efforts to address one of the most significant problems in workers comp – the inappropriate use of expensive drugs.
It isn’t just the cost of the pill that’s the issue. Patients taking narcotic opioids for extended periods are at high risk for addiction; are severely limited in their ability to return to work; and often suffer from significant and highly problematic side effects (depression, constipation, erectile dysfunction are just a few).
This is one of those issues that isn’t easy to address. Managing pain can be highly controversial, is a very patient-specific and not-well-understood aspect of medicine, and often puts physicians in a difficult position. If they don’t treat the pain as the patient desires they may be subject to sanction, but if they overtreat they may harm the patient or contribute to abuse or diversion.
Adoption of state-approved prescription medication guidelines will go a long way to helping resolve these issues, and kudos to Texas’ DWC for the thoughtful, careful way they’re going about it.

Yesterday I said
“Kudos to Worker Comp Exec, they were the first” to get the notice out about Fairfax’ purchase of work comp insurer Zenith for $1.4 billion.
I should have said Work Comp Exec was the first to send the notice to
me, as WorkCompCentral posted their news a bit earlier on their site.
Yesterday’s post appears below; first the analysis.
Good move by Fairfax. Zenith is one of those rare WC insurers; it doesn’t follow the suicidal market cycles, buying business in the soft market and running for the hills when the market hardens. CEO Stanley Zax has built a solid management team and the addition of Janet Frank (sources say she was aware of the deal and will assume the presidency of Zenith) adds additional strength.
So why now?
My take is Fairfax recognizized the market is about to turn, and decided to buy now before the stock price went up. They don’t want companies in turnaround mode as Fairfax ‘buys and leaves alone’. And if the market turns by the end of this year (as I’ve been predicting) they wouldn’t have time to fix a broken insurer. Fairfax wanted to expand their footprint with an insurer well-positioned to benefit from a hardening market, and Zenith fits that need quite well.
This represents a premium of about 30% over the current stock price, welcome news for any and all Zenith shareholders. The market appears to believe the deal, scheduled to close in the second quarter, will get done as Zenith is currently trading just shy of the stated purchase price.
Zenith will reportedly continue to operate independently; this isn’t a surprise nor is it one of those “yeah, sure, until the dust settles’ proclamations as Fairfax tends to allow its subs, which include Crum and Forster and Odyssey Re, to chart their own course.