ISSUE 1-02

August 2002

AFL-CIO Department of Occupational Safety and Health

815 16th Street N.W., Washington, D.C. 20006

Insurance Companies Target California Comp

“California Workers Comp Insurance Premiums skyrocket—claims are pouring in faster than insurers can make the money to pay for them,” screams an article sponsored by the Hartford Financial Services Group Inc. on Insure.com, a leading website on the insurance industry. California GOP gubernatorial candidate Bill Simon regularly calls for “reforming workers’ compensation” in stump speeches across the state.

Less than two months after Gov. Gray Davis approved a $112 weekly increase in the state’s $490 benefits for injured workers, insurance companies, among the nation’s top donors to races for governor and president, have begun a full-court press to cut benefits and raise rates. At the same time, California’s workers’ compensation insurers are taking advantage of what they call a “hard market” (conditions favor sellers) by raising their rates. Small businesses in northern California report rate increases of 50 percent.

Meanwhile, California state worker’s compensation insurance fund, which serves as the carrier of last resort for businesses and pays benefits to workers whose companies have gone bankrupt, is also under the gun. In June, State Insurance Commissioner Harry Low set a deadline for the state fund to come up with a plan to cover anticipated claims, which, he said, would exceed premiums charged by the state fund. The Los Angeles Times reported that state fund’s president had denounced the insurance commissioner’s demands as bowing to pressure from private insurers seeking to eliminate competition from the state funds lower rates at a time when private insurers are raising rates.

State Supreme Court Decisions Favoring Workers Are also Attacked

Insurance companies have aimed their fire this year at Supreme Court decisions in Maine and Iowa that reaffirmed employer’s obligations for worker injuries aggravated by a new accident on the job. The Maine decision was reversed after Gov. Angus King and a business insurance coalition persuaded a majority of the legislature that taxes and business costs would rise. In May, Iowa Gov. Tom Vilsack vetoed an insurance-supported bill, after Iowa Federation of Labor President Mark Smith described serious flaws in the National Council on Compensation Insurance’s “legal memorandum” that had been the basis for the repeal effort.

The Maine Supreme Court decision that sparked the repeal favored Arthur Kotch, who had injured his a knee while serving in the Marine Corps. Several years later, Kotch injured his back on a new job and the court said both injuries had to be considered in determining the severity of his disability and the duration of his benefits.

The Iowa case involved Jose Venegas, who had injured his back in a 1991 work accident, and then reinjured it at his new job at IBP, the huge meat producer. The Iowa justices reaffirmed their earlier decisions, holding IBP responsible for all the medical care and compensation Venegas needed, not, as IBP claimed, the amount that could be ”apportioned” solely to his latest injury.

In each state, the National Council on Compensation Insurance (NCCI), the rate-setting and research organization funded by workers’ comp insurers, supplied the data and analysis used by legislators seeking to overturn the court decisions. Iowa Federation of Labor President Mark Smith said the “Legal Memorandum” NCCI sent to legislators was never even checked for accuracy before the legislature voted to overturn the supreme Court’s ruling in the Venegas case. In Maine, legislators voiced similar complaints.

Terrorism and Comp

Leading worker’s compensation insurers like AIG, Liberty Mutual and Chubb, together with the other leading businesses in the Coalition to Insure Against Terrorism have convinced the White House and Congress of the need for a new federal terrorism backstop insurance program. Writing in The Washington Post, AIG’s CEO Hank Greenberg, reportedly the most influential insurance executive in America, declared that no worker would be safe if the United States suffered another terrorist attack.

All state workers’ compensation laws prohibit insurers from selling coverage that excludes acts of terrorism. Citing September 11, insurers and the White House claimed that businesses—particularly construction and transportation—would come to halt unless Washington agreed to provide backstop coverage for terrorism. The House acted last December, including several so-called “tort reforms,” to restrict the rights of injured people in court. The Senate rejected tort-reform and, instead, passed a bill providing terrorism back-up insurance even more generous than the House.

The American Insurance Association, a leading industry trade group, immediately switched its support to the Senate bill. Bruce Wood, an AIA vice-president, said the insurance industry views federal terrorism insurance as a vital component of state workers’ compensation insurance. When Professor John Burton, the nation’s leading authority on workers’ compensation asked Wood whether AIA would also support federal legislation to provide health insurance coverage under state comp laws to workers and their families injured by acts or terrorism, Wood said, “No.”

The National Council for Compensation Insurance made passage of a federal terrorism insurance “backstop” the centerpiece of its annual meeting May 9. Speaking to insurance executives from across the country, both Florida Gov. Jeb Bush and NCCI President and CEO Chapin Clark claimed that September 11 would cost insurers over $1 billion. Citing the fact that insurance companies were honoring the workers’ compensation policies, despite the absence of a federal terrorism backstop, Clark compared comp insurers to the New York City firefighters and police who gave their lives in the September 11 rescue attack.

House and Senate conferees will reconcile the differences between their two bills in September.

Secret Genetic Testing and Comp

President Bush, Senate Majority Leader Tom Daschle and Americans everywhere were shocked and outraged last year when the Burlington Northern and Santa Fe Railroad (BNSF) admitted it had secretly tested workers’ blood for a genetic predisposition to carpal tunnel syndrome. At the time, BNSF faced claims from 37 workers for workers compensation. After two months of disastrous publicity and a federal lawsuit filed by the Equal Employment Opportunity Commission, BNSF agreed to cease its secret testing program and to compensate the affected workers.

Congressional Democrats and Republicans introduced bills to ban discrimination based on genetic testing by employers, insurers and unions in health insurance. Although the BNSF case began as a workers’ comp case, it is unclear whether federal ant-discrimination provisions will apply to employers and insurers in workers’ compensation cases. Sen. Tom Daschle’s bill, S. 318, co-sponsored by Sens. Harkin, Dodd, Kennedy, Biden, Bingaman, Clinton, Durbin, Inouye, Kerry, Leahy, Mikulski, Murray, Rockefeller, Sarbanes, Schumer and Corzine, has language that appears to prohibit discrimination in workers’ compensation, while the Republican bill, sponsored by Sen. Olympia Snowe does not.

The American Insurance Association, a fierce opponent of what it call “federal intrusions” into workers’ compensation, has yet to publicly weigh in on this issue. AIA, of course, supports federal terrorism backstop insurance (see above). It successfully opposed OSHA’s ergonomics rules, claiming that they would interfere with state workers compensation laws. Similarly, it opposes medical privacy protections because they limit “the exchange of vital personal medical information between health care providers and workers' compensation insurers to the so-called "minimum necessary."   

Please contact your senators and representative today [202-224-3121] and urge them to support including workers’ compensation in S. 318, the “Genetic Non-discrimination in Health Insurance and Employment Act!”

National Council on Compensation Insurance—Who are these people and what do they do?

The full 2002-2003 NCCI Holdings Inc. board of directors includes:

• Richard F. Russell (Chair), President and Chief Executive Officer, Amerisure Companies;
• Marita Zuraitis (Vice Chair), Executive Vice President, U.S. Insurance Operations, The St. Paul Companies;
• Judith A. Blades, Senior Executive Vice President, Hartford Financial Services Group;
• Sandra Austin Crayton;
• Joseph A. Edwards, Esquire, Insurance Industry Consultant;
• Roxani M. Gillespie, Partner, Barger and Wolen LLP;
• Stephen W. Lilienthal, Executive Vice President, Property and Casualty Operations, CNA;
• John Pasqualetto, President and Chief Executive Officer, Kemper Employers Group Inc.;
• Richard L. Thomas, Senior Vice President and Chief Underwriting Officer, American International Group Inc.;
• Kermit C. Smith, President and Chief Operating Officer, Atlantic Mutual Insurance Co.;
• Thomas P. Staudt, Chief Executive Officer, BenefitPort;
• Lane Summerhays, President and Chief Executive Officer, Workers’ Compensation Fund;
• David H. Long, Chief Operating Officer—National Markets, Liberty Mutual Group;
• Susan M. Rivera, President, ACE INA Holdings Inc.; and
• Chapin Clark, President and CEO, NCCI Holdings Inc.