An Open Letter to Comm'r Garamendi - What's Wrong

Sunday, March 13, 2005 | 0

March 5, 2005

STATE OF CALIFORNIA
DEPARTMENT OF INSURANCE
OFFICE OF THE INSURANCE COMMISSIONER
LEGAL DIVISION
45 FREMONT STREET
SAN FRANCISCO, CA 94105

ATTENTION:
JOHN GARAMENDI, INSURANCE COMMISSIONER LARRY WHITE, COUNSEL FOR DEPARTMENT OF INSURANCE

RE: AN OPEN LETTER REGARDING PROPOSED REGULATIONS ON CLAIMS ADJUSTER CERTIFICATION AND THE LARGER PROBLEM WITH OVER-SEEING AND ADMINISTRATING THE WORKERS' COMPENSATION INDUSTRY

Dear Mr. Garamendi & Mr. White:

This had begun as a response to your proposed regulations on the certification of claims adjusters, but as this response continued I realized that these regulations were only the tip of the iceberg to the problems with your administration's over-seeing of the workers' compensation industry. As such it begins with my comments on the regulations and then expands to discuss solutions to the greater problem. I have no illusions that this letter will probably be screened by lower members of your staff before [or if] it reaches your desk, and so I have sent it to the workcompcentral.com website for all the workers' compensation industry throughout the United States to read, and also to some newspapers who have shown interest in printing stories to correct the workers' compensation problems. When your regulations are officially posted, then I will add these - and maybe other comments at that time.

In response to your proposed regulations concerning certification for claims adjusters and instructors, there are some serious misconceptions built into your regs, and these misconceptions need to be corrected as these regs can do a lot of damage to the industry and cripple many claims operations. My reading of the legislation on certifying claims adjusters was that its intent was to improve benefit delivery and not hinder it.

First of all, you do not take into account an event that was caused by the Department of Insurance and which did a great deal of damage to the workers' compensation claims industry. In 1994, then Insurance Commissioner John Garamendi - as one of his last acts as Insurance Commissioner changed California from a minimum rate state to an open rate state. [Yes, Mr. Garamendi. I was there and each time you make a speech and talk about what a terrible thing it was to go into open rating and the damage it caused and how many companies went belly up because of poor supervision by the state or the open rating, I also notice that you never mention you were in charge when this terrible act took place. You really need to be honest with those you are speaking to. Did you think we all forgot who was in charge back then?] These actions either prompted or were the last straw in the pricing war between carriers and what we saw was over twenty workers' compensation insurance companies collapse - several of them being large players in the industry such as Golden Eagle, Freemont and Superior National. This figure does not take into account the number of carriers that chose to leave the state, stop writing workers' compensation, merge or close up on their own account.

As this crisis caused by the Department of Insurance spread, those claims operations that survived began to downsize. Those who were the first to go "out the door" were those adjusters whose salaries cost the company more than the others, i.e., the experienced claims adjusters. For over five years it was difficult if not impossible for these highly-trained and experienced adjusters to find work in claims operations as claims operations were cutting their costs and salaries. Such adjusters were forced to find employment in other operations or cottage industries other than actual claims handling.

By creating the criteria that a claims adjuster must have five years out of the last eight years to be an experienced claims adjuster you limit a number of experienced claims adjusters who were placed out of work and out of the claims adjusting operations by the acts of the Department of Insurance and were forced to seek work in other businesses that used their skills and experience, still required knowledge of the workers' compensation system, but did not specifically adjust files. Only recently has the Legislature realized the mistake open rating was and the damage it has done to the industry. I note that with the 2003 Reform [SB 228 and AB 227] lawmakers have passed legislation to study the damage your open rating caused and consider turning the state back to a minimum rate state. This suggests that part - if not all - of the problem centered around your last action as Insurance Commissioner during your first term in office.

There is also a message contained in your regulations that - to be blunt - is insulting to the claims adjuster and the education industry. That message is that our efforts and training aren't important. That any educational goals achieved or any training performed more than two years ago is worthless - as your proposed regulations imply - is insulting. As a claims adjuster and an instructor, I take great offense to such an attitude and suggestion.

Mr. White, in his opening comments at the Los Angeles DWC Educational Seminar on 2/24/05 stated that he was not familiar with what claims adjusters do or how a claims operation works. This is obvious. The basis for limiting education to only a two-years period comes from the assumption - an incorrect assumption - that we have only had our current workers' compensation system for two years. Workers' compensation is a changing industry. It changes almost every day and not just because of workers' compensation reforms and legislation. It changes each time a workers' compensation judge, commissioner, District Court of Appeals judge or California Supreme Court judge hands down a decision on a workers' compensation case. The individual dynamics of each case change whenever a medical report is received, a statement obtained or deposition is taken. It is not the change that makes a claims adjuster unqualified to do his/her job. We deal with change every day and to suggest that only by taking or re-taking the Self Insurance Exam within the last five years or that we have only spent a certain number of hours in a classroom in the last two years makes us qualified to do our job shows a great ignorance of the workers' compensation system and law. Further, endorsing such a set of regulations raises the serious issue of whether you are truly qualified to be Insurance Commissioner since you seem to have such an incorrect view of claims adjusting - which is the very core of the Insurance Industry.

The job of a claims adjuster can be listed as a three-fold goal. This is a progressive list and the claims adjuster cannot move from goal number one to goal number two until the first goal is achieved. I will not go into detail on all three goals, but focus on Goal One, as this should make my point here. Goal number one is to provide benefits. If there is any doubt about this goal, then consider Labor Code 3202 [liberal construction doctrine]. Workers' compensation judges shall construe the law liberally to provide benefits to injured workers. Consider the main questions asked of each claims adjuster when the Audit Unit performs an audit: 1) Did you provide benefits? 2) Did you provide them timely? 3) Did you provide them correctly? Lastly, consider the training and message given to those who take the Self Insurance Exam training: If in doubt, give benefits to the insured worker. These self-same goals have been in place in the industry for at least thirty years and probably since workers' compensation was created in California in 1913.

To suggest that only those who have been to class in the last two years or have taken their Self Insured Exam in the last five years can adjust claims shows an ignorance of the history of the workers' compensation industry - which, by the way, the history of work comp is one of the required topics for training under your regs. Before the passing of AB 227 there had not been any major change to the provision of Benefits since 1989 with the Margolin Green Reform. Under Margolin Green the changes dealt with the number of Benefit Notices that had to be given with each Benefit, and the 90-day Presumption of compensability was created. Prior to that, the last major change in providing Benefits was the creation of vocational rehabilitation in 1974. There had not been any major change before that back to the creation of workers' compensation. When AB 227 passed in 2003, the one major change was that vocational rehabilitation was replaced with the voucher system. In SB 899 there was a change in that how we measure permanent disability. However, the entire industry - including those who have 120 hours of classroom training in the last two years and those who have passed the Self Insured Exam within the last five years will have to learn the new procedures along with the long-term experience adjusters.

The reality is that Labor Code 3600 has not changed as to when a person is entitled to benefits. The last change to this was the creation of a new Statutory Defense created in 1994 when Post Termination Claims became a defense. It has always been that there are four criteria that must be in place for a person to be covered by workers' compensation. The person must 1) have an injury, 2) be an employee, 3) have a condition that arises out of employment; and 4) the incident must have occurred in the course of employment. All four must be present or under Labor Code 3602 (c) the employer has no liability to provide any benefits. The change to this concept came in SB 899 where the Legislature passed an amendment to Labor Code 5402 ordering employers to provide up to $10,000 in treatment until the employer makes a decision on the compensability of the claim. By passing this amendment, the Legislature created the first incident of two Labor Codes conflicting with themselves [i.e. LC 3602 (c) and LC 5402]. Again, a very recent change that your two-year rule doesn't take into account.

The point is, the criteria for decisions on compensability still have not changed. The criteria for the medical benefits we provide have not changed. It has always been all reasonably necessary treatment needed to cure or relieve from the effects of the industrial injury [Labor Code 4600]. That criteria has not changed since the creation of the work comp system. To tell an entire industry that all their years of experience and training is not worth anything because you weren't attached to a claims operation directly handling claims or that you didn't go to class in the last two years or that you didn't pass your Self Insured Exam within the last five years is an insult and I - and I suspect my colleges - take great offense.

A major flaw in your regulations is the 120-hour classroom rule. We must have 160-hours of training with 120 hours of this training taking place in a classroom. Nothing in your regs even suggests that the person has to be awake in the class or pass any kind of test at the end of the class. It only implies you need to be present and you can do what you want while you are there. As an instructor of these classes, I can assure you a percentage of students do not want to be there, do not make a full effort, and probably will not be successful as adjusters when they leave the classroom. You need some standard that they have learned something in the classroom setting otherwise this is completely worthless.

There is also another problem with your 160-hour standard with 120 hours being in the classroom. Obviously you have not been in a claims operation or developed a successful training program. The job of claims adjuster requires more than just knowledge. It is a combination of various tasks a person performs on a claims desk. Tasks require both knowledge or information and they also require skills. You do not develop both knowledge and skills in the same manner. Knowledge is transferred in a classroom setting via lectures, discussions and reading. Knowledge can be obtained from others or obtained on your own by reading and research. Skills are developed by doing. If you had any kind of concept as to how to properly train claims adjusters, you would know that you obtain your best training by doing the job, and that would require a claims operation setting with claims to practice on. Your very use of the word "training" under Section 2592.02 (a) (1) suggests the focus is going to be on practicing and doing the job. As noted, this is done in a claims operation setting. To have the bulk of the process take place in a classroom creates people with a lot of head knowledge and no real practical experience.... Wait a minute. Wasn't that the magic word we saw back in your definitions under Section 2592.01 (f)? Yes, it was. We wanted "experienced" claims adjusters. You don't get experience from sitting in a classroom reading about how to do something. You get educated. People sitting in a classroom are educated, of course; but they are not experienced. I don't see Insurance Code 11761 requiring you to create educated claims adjusters. The word there is "experienced" claims adjusters. Do you need a dictionary to point out the difference in the meaning of those words? When a person graduates from a college, they have the highest level of knowledge and education concerning specific subjects, but you don't want a heart surgeon who just graduated medical school last week to make you his first surgery. You want a physician who has done the surgery successfully many times.

I would hate to suggest that you pulled your number of hours "out of thin air," but that almost seems the case here. Why 160 hours? Why not 200 hours? Why not 100 Hours? Did you sit down and calculate how much time was necessary to gather enough information on each subject and add them all up? Somehow I doubt it. I did design and train claims adjusters in-house and when they went out on their own no one could hold a candle to any of them. The amount of the time we spent in the classroom is not representative of your suggested hours, and the classroom time was only a small fraction of the on-the-job training portion of their training.

I would hate to suggest that when it comes to creating experienced claims adjusters you don't have the first clue as to how to do it, but the facts are speaking for themselves and they are speaking rather loudly.

I notice the wording in Section 2592.01 (b) that a "Claims adjuster" also means a person who is responsible for the immediate supervision of a claims adjuster..." Nice of you to stop for a moment and think about claims supervisors, but do you know what they do? Do you know how their job is structured? Obviously not since in Section 2592.01 (f) you define "Experienced claims adjuster" as a person who has had at least five years within the last eight of on-the-job experience adjusting California workers' compensation claims. This on-the-job adjusting experience suggests that the person is the one doing the adjusting. That implies they are the one working the file. In many of the larger claims operations, those supervising claims adjusters do not have a caseload of their own. They are over-seeing claims adjusting, but they are not the people actually doing it. This can create a problem in many claims operations as suddenly those who have been supervising claims but not actually adjusting claims for five years in the last eight may not qualify as an experienced claims adjuster. When we combine this with Section 2592.02 (i) we can see a serious potential problem. An insurer cannot authorize anyone to act as a claims adjuster unless they are an experienced claims adjuster. Under your five years adjusting experience in the last eight years, and your Self Insured Exam within the last five years and your 120 hours of classroom time in the last two year rule, most supervisors will not qualify as experienced claims adjusters and the last lines of Section 2592.02 (i) says they can't be the ones to supervise those adjusters who are not certified or experienced. Given these requirements, those claims supervisors who do not qualify would not be able to supervise their staff and would have to have a claims adjuster who did qualify take over supervising. That would take time from the experienced claims adjuster to work his/her own files and that would mean delays in benefits and poor claims handling by the claims operation. I doubt if that was the intent when the Legislature passed Insurance Code 11761.

There is also a problem with this certifying of claims adjusters. You require at least five years out of the last eight years of adjusting workers' compensation claims. Nothing in your regs say the adjuster has to know what they are doing, or has done it correctly. I have been in various claims operations and had adjusters coming into my classes and workshops with this level of on-the-job experience and they still didn't know the very basics of adjusting a workers' compensation claim. Some people can get into a large claims operation and avoid getting fired for eight years but never doing their job in an effective manner. However, other claims adjusters come into my classes and workshops who have only been on a desk for one or two years and will leave these eight years adjusters in the dust.

From my position, it seems that the purpose behind setting minimum requirements for claims adjusters is to ensure that those working files know how to do their jobs. A 120-hour in the classroom Rule or a five years out of the last eight years Rule does not ensure that the person working the file can do the job. You are approaching this from the wrong direction and based upon misconceptions.

Now to address your concept as to who is a qualified instructor. Your regulations, and Mr. White's comments at the Los Angeles DWC seminar on 2/24/05 showed a great deal of ignorance, arrogance and a lack of common sense. He was asked about whether or not an instructor who taught a subject would be given credit for that subject for continuing education. This is what the agents' continuing education system allows. He replied we did not. Somehow the idea that I can spend twelve hours a day for two weeks pouring over SB 899 and designing a 250-page book on the subject with flow charts, tables and commentary to educate the industry on the interpretation, application and strategies needed to implement SB 899, and then I can teach it as a seminar for the Insurance Education Association, and everyone that comes to my seminar gets educational credits, but I don't...well governmental bureaucracy does not even begin to describe that level of stupidity. In order to teach, someone has to do the research and the preparation. Training classes for instructors state that the instructor needs three times the amount of time to prepare for a class as he/she puts into the class actually teaching it. Someone has to be the first person to teach a new subject so others can come and learn and get the educational credits. Every teaching institution recognizes that the instructor self-teaches in preparing for new subjects. It may not be in a classroom setting because that subject may not be offered in a class. Someone has to be the first person to design, develop and teach a new subject; and to only recognize someone who has gone to a class as valid educational experience would doom the entire educational system to only teaching information that was taught fifty years ago.

Your comments, Mr. White, on 2/24/05 that we could come to the DWC Educational Seminar..."such as this one" I believe were your exact words that day [and yes, Mr. White, that was me in the audience asking those questions of you] showed your own lack of knowledge of your own regulations and their application to you, your breakout session and other breakout sessions taught at the seminar. You noted that someone who was not an instructor but was proficient in a subject could teach it if he/she was supervised by an instructor [i.e. a claims adjuster who has handled claim files for five years out of the last eight years, or had been in the industry eight years out of the last twelve years]. Let me point out something to you in response to my getting my educational credits from attending the DWC Educational Seminar. There was not a single claims adjuster with five years experience in personal claims handling in the last eight years teaching at the seminar, so we would have to verify that each speaker had eight year out of the last twelve years in the workers' compensation industry before we would know if we got credit for the various break out sessions. No such person was supervising your presentation and although you may have been with the Department of Insurance, your regulations specifically require workers' compensation, not insurance in general for you to be qualified to teach on workers' compensation. I also did not see any claims adjuster with five years experience out of the last eight supervising your presentation. Therefore, I would not get credit for your comments in the seminar as it would not qualify as a valid learning experience - and professionally, as an instructor, I would have to agree with that decision. No such person was supervising Ms Hoch as she taught the breakout session on Medical Provider Networks and by her own admission she had not been in workers' compensation prior to being appointed to her position almost a year ago. We would not be allowed to get educational credits for her presentations even though she is the Administrative Director. Are you prepared to tell the head of the entire workers' compensation system she is not qualified to teach on the subject she supervises. Under your standards, a person may be qualified to supervise, evaluate and audit claims adjusters, but would not be qualified to teach the adjusters and fix the problems they discovered.

No claims adjuster with five years experience out of the last eight was supervising the judges who were teaching case law to rooms packed with attendees. I suspect they had been in work comp for eight out of the last twelve years, but no one was informed of that before the breakout session. No such person was supervising Blair Megowan and his staff as they taught the new Permanent Disability Rating session. Mr. Megowan would slip in under your alternate definition; but shouldn't we be asking other presenters how long they have been involved in the workers' compensation system before we decide to go to their sessions?

In short, under your regulations, there may have been several breakout sessions in addition to the general session conducted by Ms Hoch that would not qualify as continuing educational credit for myself and those in attendance of the two-day seminar.

To use a time factor as the only criteria to make someone an instructor ignores the person's ability to teach. Your regulations give only a period of time either adjusting or in the industry and that the person must be proficient in the subject. There are a lot of people I know who fit that criteria, but can't teach anyone a single thing. Several freeze up when asked to speak in public. What good would it be to have someone identified as an instructor who can't teach...Oh that's right, we're just concerned about the hours in the classroom. No one is required to learn anything while they are there. There's no test at the end to document that learning has taken place. So students can come in sit in the classroom for several hours, and watch an instructor who is too terrified to speak and every one - except the instructor - gets credit for that time well spent. Your system does work after all! My apologies.

I would suspect that those who work for the State Audit Unit, and are given the task of going into claims operations and auditing the work of the claims adjusters would take offense to suggest that they - even though qualified to evaluate the work the claims adjusters are doing - are not qualified to teach the subject unless they have eight years in the business, or a claims adjuster with five years out of the last eight supervises their class. What about PD rating? Poor Blair Megowan's staff would not be qualified to teach us about the new permanent disability rating system unless one of my adjusters who has five years of claims handling in the last eight supervise their seminars or they have been in workers' compensation for eight years. Mr. Megowan had noted that the DEU had hired ten new raters and under your regulations they would not be qualified to teach until they had put in eight years or were supervised by someone else. You really can't mean that, can you?

It's not about how long you've been in an industry. It's about how well someone can teach. That's always been our criteria, and institutions such as IEA have held their instructors to a different - and more effective standard than the one you are suggesting. Hold your educational institutions to the higher standard that their classes actually teach the subject and the students learn. Let the educational institutions then do what they do best: teach. It would require the Department of Insurance actually doing some work on this - such as accrediting these educational facilities, but you don't mind a little extra work, do you? You seem so quick to pass it on to the claims adjusters without thinking about how many files they are already handling.

So to suggest that any claims adjuster who has personally handled claims files in five years out of the last eight years or that someone who has slipped into the system and avoided getting fired in the last eight years out of the last twelve would be qualified to teach is the ultimate insult to the educational industry. Public school systems and colleges make sure their instructors not only know the subject, but also know how to teach. Are we going now have a lesser standard? Of course, that would require someone who knows what a claims adjuster does and how a claims operation works, and you, Mr. White, would not qualify since by your own admission you don't know what we actually do - but you are qualified to write regulations on telling us how to do it.

Let's get reasonable here.

The Insurance Commissioner is required to set forth minimum training requirements for claims adjusters. That is what the new law said. What you have created is a "butcher job" on the industry as a whole. The problem is not people who have been in the industry for years and don't know how to do workers' compensation. The problem is from claims operations hiring those people who don't know how to spell workers' compensation or who don't know the difference between workers' compensation from workmen's' compensation. [An amendment was passed to change the name from workmen's compensation to workers' compensation (See Labor Code 3200).]

I have audited claims operations where the only person who had any claims experience was the claims manager and the entire staff was fresh out of high school. The operation bragged to me that they had just completed a two-week training program on California workers' compensation conducted by one of their people out of Texas. My wife went to work for SCIF and after three weeks of training they handed her a business card declaring that her title was "Senior Workers' Compensation Adjuster." THAT'S WHERE YOUR PROBLEM IS!!!!

Don't disqualify those who have been in the industry for years and have trained and gone to seminars and passed Self Insured Exams by making all of that no longer valid. Go after the offenders Mr. Garamendi, those claims operation that hire people with NO experience and put them on desks.

The goal of Insurance Code 11761 was to ensure that claims adjusters know how to do their jobs. Stop focusing on lengths in the industry or hours in a classroom. Put us to the test. Make us show you we know how to do our jobs. Create a State test for claims adjusters. Make it like the Self Insured Exam. That would show a level of competency. Make those coming into the system who have not passed the Self Insurance Exam take it. Recognize the work of organizations such as the Insurance Education Association and their certification programs such as the basic WCCA and the advanced WCCP designation and honor those achievements without putting a time limit on it. This organization has taught and prepared adjusters and other insurance professions to do their job a lot longer than these requirements have been around. If IEA can train all areas of the insurance industry, why are we now suggesting that their standards, programs and certificates are worthless? Why are we suggesting that only the classes they have offered in the last two years in claims handling [by the way most of those classes and seminar have been taught by me] are now worthless?

Mr. Garamendi and Mr. White, show some respect to those people who have been doing this job of claims adjusting in extreme adverse circumstances, unrealistic time frames and demands imposed by the Legislature, fraud and abuse that local District Attorneys refuse to prosecute and with a salary that barely pays the bills. They have been doing this a lot longer than you have been in office. Don't take this out on the people who are doing the job. Your problem is with those people who run the claims operations and seek to hire inexperienced adjuster because they are cheaper. Your problem is with those who understaff their claims operation because they want higher profits. Your problem is with insurance carriers who sabotage any chance their adjusters have of successfully litigating a fraudulent claim because under the Unit Stat Reporting Plan the carrier will have to refund premium dollars to the employer if the adjuster wins at trial and gets a take nothing. Therefore, the insurance carrier has a conflict of interest when it comes to successfully litigating cases.

And with regards to the continuing education requirement...That's fine, but have you actually looked at a claims operation? Carriers won't give their adjusters an additional 30 hours every two years away from the claims desk in addition to any vacation time. Have you seen the kind of mess a claims desk can get into if someone is gone for just one week? Again, if you're going to take us away from our desks to meet your educational criteria, you really need to do something about making this job physically possible to do. Have I mentioned setting limits on caseloads before? Then let me discuss it now.

These regs are not going to fix your problem because it is not addressing the real problem. Those who were putting the Bill together about minimum training for claims adjusters were looking at a system that has already collapsed and you, Mr. Garamendi, being in charge, just haven't realized it.

No government agency has set a limit on the size of a caseload claims adjusters can handle. Time and motion studies show that in order to do all the things required of a claims adjuster a caseload needs to be between 111 and 115 files. However, no claims operation will lower case loads to that level because it cuts into profit. The Audit Unit has suggested - but they are not empowered to make it official - that caseloads be no more than 150 files. Unfortunately, that recommendation was made three workers' compensation reforms ago. Why aren't you and your staff considering setting these kinds of standards? Could it be pressure from carriers who don't want to lose their profits?

There is a small item in the Unit Statistical Reporting Plan that most employers are not aware of. If a claim is found to be non-compensable it is removed from the current calculation of the experience mod and it is also removed from the two prior years of experience mod calculation. This results in the experience mod being recalculated, reduced and this should lead to a refund of premium dollars. The problem is that the definition of a non-compensable claim under Unit Stat Reporting is not the same definition used in claims operations. The Unit Stat Report only gives three criteria for a claim to be non-compensable: 1) a take nothing, 2) contested claim that is dismissed; 3) contested claim abandoned and closed. There is nothing there about settling a claim with a Compromise and Release with a Thomas Finding. We all know that to get a Thomas Finding we need to convince the judge signing the order that the claim would probably lose if it went to trial. How come that hasn't been added to the Unit Stat Plan's definition of a non-compensable claim? Could it be because it would cut into the profits of insurance carriers and they have pressured you not to do it? It obviously could not be because you are ignorant of this little "back door" that lets insurance carriers off the hook for a questionable claim but locks in all the reserves they report on that claim so they are part of the employer's premium calculation?

Let's add Thomas Findings to the definition of non-compensable claims in the Unit Stat Report and give claims operations a real incentive to fight fraudulent claims and make their claims operation effective. As Insurance Commissioner you have that authority. It doesn't take the Legislature to fix this one little problem with our industry. The insurance carrier has no financial incentive to take a case to trial and win. They do have a financial incentive to avoid trial and to pressure their adjusters into settling cases rather than litigating them - even though it has an adverse effect on their policy holders.

You've screamed about all the protection you've done to homeowners in the fires and how you protect the policyholders, but you have done nothing to protect workers' compensation insurance policy holders from the abuse of their own carriers.

If you really want to fix the system, then I suggest you start talking to the claims adjusters. Stop talking to your special interest groups and those who fund your election campaigns. Talk to the people who have been hired to do the job and which you indirectly over-see.

Any workers' compensation reform must have at its core three goals. So far none of the reforms have identified these goals. How can you reach a goal if you don't know what it is?

Goal Number One: Get the employee well! Wow! What a novel idea!

How can we do this? Restructure the fee schedule to reward those doctors who get employees well and to punish those doctors who make employees worse. This should attract the good treating physicians back into the system. It might be complicated, and I guarantee your special interest groups will scream really loud for my even suggesting this, but hold the physicians accountable. If the WCAB finds the employee has recovered and gotten well, that's a positive mark for the physician. If the employee is still disabled...especially on something that started as a minor injury and had lots of surgery, that's a negative mark against the physician. We have U/R and ACOEM in place. Use them and when doctors don't develop good treatment plans based on ACOEM or when U/R has to tell the doctor what they are doing is inappropriate for the patient, that's a negative mark. Create a grading code that is attached to the physician's Tax Id Number and is upgraded [or downgraded] each year. Those with the higher grades get fee schedule plus a percentage to reward their hard work in getting employees well. Those with bad marks get fee schedule at a reduce percentage...and let's make it go all the way down to zero so that those really bad treating doctors have no incentive to treat in the work comp system.

Will there be disputes and questions and challenges.... of course. We are cutting into some doctors' profit margins, but those doctors are doctors we do not want in the system. Let them get offended and walk away. Their patients will probably get better without them

Goal Number Two: Make the system affordable. By this I am suggesting a two-part goal: Bring the cost of workers' compensation down so employers can afford to buy it, and two: bring the benefits up to employees so they can afford to live on their benefits.

This one is going to be the hard one. You thought your special interest groups screamed about the re-defining non-compensable claim and holding doctors accountable, wait until we look at this one. There is a lot of money being wasted in the work comp system. There are a lot of inequities out there and these inequities create an opportunity to abuse the system. So here's the first step in making it work: level the playing field. Ouch! Am I really saying what you think I am saying? Yes I am. Make workers' compensation benefits the same for all employees. This means you will have to take on the Teachers' Unions, the Firefighters' Unions and the Law Enforcement Unions along with several others who have lobbied and gotten special benefits above and beyond those the rest of us get.

Let's face it, what incentive does a police officer have to go back to work when he has a sprained neck from turning his head back and forth driving all day when he not only gets his full salary for up to a year, but he gets it tax free and that means a 33% raise to stay off work?

And if we consider all these presumptions for law enforcement and firefighters it sends a very unpopular message to the rest of us. If a law enforcement officer gets a presumption that his back injury is work related just because he's wearing a gun belt on his hips, what about the firefighter who has to carry breathing equipment on his back? Or what about the construction worker who carries even more weight on his hips and does heavy lifting all day long? Surely, if we are going to look at certain occupations and say this is more likely to cause this kind of injury, why aren't these presumptions given to them? Cancer is a presumption even though law enforcement people are smokers. The argument is that they come into contact with toxic fumes from time to time in drug labs. Ok, what about those waste disposal people who dispose of the toxic materials we throw away? Are they given this presumption? What about sewage plant workers? What about medical personnel working with these toxic substances to create new medicines? Heart attacks are presumed to be work related for firefighters and law enforcement. The argument is that their job is stressful. Is it more stressful than a judge's? It is more stressful than a surgeon or an emergency room worker?

See, it is nice to give special things to law enforcement and firefighters and to teachers because they have powerful lobbies and give money and make your life miserable if you don't, but you as the Insurance Commissioner were not elected to make your life easier or to get endorsements for your political aspirations or to fund things you like. You were elected to over-see the insurance operation of the State of California and with regards to workers' compensation you have failed at your job.

Now don't get me wrong here. I appreciate firefighters and law enforcement putting their lives on the line to protect me and my property. But think about it for a minute. Would it be a better show of appreciation to give ALL firefighters and law enforcement people either better salaries or better benefits than just the police officer who has carpal tunnel syndrome from typing on his lap top?

Next, we need to fight fraud and this is another set of regulations that totally misses the point. Yes, each claims operation must have a Special Investigation Unit...however, I thought that was part of the Fraud Law passed in 1991. But your suggestion in your regulations that the problem is that the claims adjusters don't know how to identify fraud and aren't willing to report it is one of the biggest misconceptions you've had to date. Who do you think was doing all the screaming and pointing to fraud initially that made the employers and lawmakers aware of it in the first place? It was the claims adjuster...and let's be real specific here. It was the in-the-trenches-fighting-with-it-every-day claims adjusters. Our problem has always been to get the District Attorneys to prosecute them.

Here's the reality of the system and maybe this is why your focus is on the lowly claims adjuster who has not union or lobby to confront you with. Attorneys- especially those in the District Attorney's office - have the potential of moving into a political career. For many District Attorney staff attorneys their win/lose record is extremely important to them as this is their "springboard" into politics: "Look at what I did!" It is interesting that the D. A.s claim a 90% plus win rate for workers' compensation fraud [by their calculations] and yet the Department of Insurance calculates it at less than 50%. Why the discrepancy? Because the Department of Insurance includes those cases the D. A. refuses to take and the D.A. offices excludes that number from their calculation. So around 50% of all cases given to the Department of Insurance are rejected by the D. A.. Hmmm is this because the claims adjusters can't identify fraud? No....wait a minute. The Department of Insurance also looked at those files and agreed that they were fraud and should be prosecuted. So now it looks like the D.A. won't take any case that requires more work, but only those that are easy to win. But that can't be the real reason can it?

Why aren't we seeing more laws dealing with fraud and fraud prosecution? These laws would also include the Penal Code and should be written by someone who knows the fraud in the industry and what it's going to take to shut it down.

So if we make cases settled by Compromise and Releases with a Thomas Finding non-compensable, employers will have lower premiums. If we get rid of all the special interest groups special benefits and presumptions, that will free up more money for the public entities and school districts. If we actually fight fraud and make those committing fraud pay back what they've stolen and shut it down, that will reduce the costs of claims. So somewhere in all of this would be more money to pay for these added benefits without bankrupting the employer.

Since we have already added utilization schedules into the mix, what about expanding that a little and using these same studies to see how long it would take for a person to be off for various injuries and surgeries. We could then suggest that Temporary Disability be replaced with salary continuation [not tax free of course] for all employees and then create a "sliding scale." A back sprain would be expected to have a certain number of weeks to recover. With the Benefit Notice we add that per the Disability Schedule you will have salary continuation for XX number of weeks and then without documentation of any new medical condition, a different diagnosis, or complications supported by objective medical evidence your benefits will decrease over an addition month or so until they become zero. This would encourage employers to use good treating doctors and it would encourage employees to work at getting well.

Goal Number Three: Make the job do-able.

With each reform lawmakers arbitrarily set new time frames, add new forms and paperwork, increase penalties and the end result no one stops and asks if the job is now physically do-able. It's not. To demonstrate let me "steal" from NASA and the air traffic controllers industry. There was a study done evaluating how to handle multiple priorities in a high stress, fast paced environment. They came up with the conclusion that when two tasks need to be done at the same time there are only three options available.

Option One: Do one and let the other fail. The example was if you could only save one plane and you had to choose between a passenger jet and a small prop-job, you save the passenger jet and let the prop job go down. This is why I only fly in passenger jets now. It's the reality of the situation. If both cannot be done, then you let one fail. You use the test of which has the greatest punishment for failure and that's the one you do.

Surprisingly, audits over the last several years of claims operations show a high level of compliance for all those tasks that have penalties attached. The scale actually drops the smaller the penalty. If you are looking at presumption of compensability versus a $100 fine for a late benefit notice, you go for addressing the presumption of compensability file. All those tasks with little or no penalty attached have low or zero compliance. Who cares if a file that can be close hasn't been closed? Who cares if mail has not been put into the file in chronological order? There are other tasks that do a lot of damage to the claim if they are not done.

Unfortunately with the passing of the Margolin Green Reform and all the other Reforms up through SB 899, the lawmakers have added more tasks, more forms, more notices, less time frames and higher penalties on claims operations. The lawmakers have ignored the real problem: those structuring and running the claims operations. They seem to think that claims adjusters do not want to do their jobs. They seem to think that we come into work and try to find way to avoid working once we are there. I would suggest that lawmakers come into several claims operations and see the reality of life in claims operations. Have you visited any claims operations, Mr. Garamendi? Have you come in unannounced? I am speaking of you and not the Audit Unit.

The fact high-penalty tasks are performed and low-penalty tasks are ignored is not an indication of being lazy, it is an indication that the claims operations do not have the staff to handle the tasks given to it. Remember the comment about setting limits on caseloads? Could that even be a solution here?

Option Two: Juggle. You do one task and at the same time do the other. This is based upon priorities and deadlines. An example is you need to be at a meeting, but you also need gas. Can you stop and get gas on the way to the meeting and still make it on time? If so, you do that. If you can make it to the meeting and get gas later, you do that. If neither is an option, then you have to go back to Option One.

In a claims operation there are multiple tasks. You pick those tasks that have the greatest penalty for failure and do them first. If you have some flexibility in that decision regarding compensability are not all due on the same day, you pick those that need a decision today and do those. A lesser-penalty task such as a Benefit payment or medical bill is also due today. You do those when you finish your decision. When you finish those, there are some still lesser-penalty tasks such a Benefit Notices, phone calls and mail. Those come next. There are still decision files and Benefits payment and medical bills needing to be handled, but their deadline is not until tomorrow or next week. They will have to get in line to get done.

Option Three: Hand off to someone else.

In the air traffic controller's scenario you ask for help from another controller. In the NASA version they use the example of using other resources while driving. A new driver needs to look down at the brake petal to stop the car. That's fine, but when you have another car in front of you, you need to measure your approach to that car so you can't look down at the brake pedal. The solution: use your sense of touch and feel the brake pedal with your foot.

When the Margolin Green Reform was passed this was the immediate solution. The claims adjuster for workers' compensation was moved to an inside job. New positions were created such as Benefits Consultants who met with workers and explained benefits. Investigation firms were hired to take statements and investigate the injury since the claims adjuster could not longer do this. Rehabilitation specialists directed the vocational rehabilitation benefit. Attorneys were hired to attend minor conferences that the claims adjuster used to attend alone. Then came the open rating decision and funds dried up, position were eliminated, and operations downsized or went under.

The point is simply this: the Legislature, through their indiscriminate lawmaking has created the problem we have today. The job of adjusting claims and providing benefits is physically impossible to perform. Something has to fail. Something has to be left undone. Unfortunately, the lawmakers see something else being left undone and pass more laws to order the adjuster to do it. Therefore, any worker comp reform action must take into account the resources available in the claims operation, the tasks being assigned, the time frames allowed and ask; Is the job now do-able?

Mr. Garamendi, if you truly want to fix this system, the solution is not making regulations that further cripple claims operations. It is not catering to your special interest groups or those who will endorse your political career. It's going to have to be done by you doing your job. You job is to give us a system that works and can be done. Maybe my suggestions are too idealistic given the fact that the law enforcement unions do have members who carry guns and can write lots of tickets to people they don't like. But the realistic solution to fix a system that is this broken is to spread the "hits" around so everyone takes a hit rather than one or two groups taking all the hits. I believe I am an equal-opportunity offender. My comments, observations and suggestions will have offended the politicians, the insurance carriers, the physicians, the law enforcement and firefighters, attorneys, District Attorneys, the injured workers and the employers. It may even offend some claims adjuster. But the truth of the matter, we are all responsible for the mess we are in. We all have to do something to fix it. I am taking action in writing this letter/response to some of your proposed regulations. Unfortunately I have to make it in some letter format because the Insurance Commissioner's website is not user friendly to comments on proposed regs the way the Division of Workers' Compensation is. Maybe you can learn something from them. It would also be nice if we went back to the old system in addition to the internet comments and held public hearing throughout California so those who don't have internet access or don't live in San Francisco can come and speak their peace and deliver their comments in writing to an actual person not a smiling picture on the computer screen.

My tone in this letter has been sometimes abrasive, obviously sarcastic and even condescending. Unfortunately, that is the level of frustration I am dealing with as a claims adjuster of over twenty years. However, it is an honest letter. It is an honest response and the issues, problems and needs to meet certain goals are very, very serious. Please consider what has been said. The lawmakers and you have gone to great lengths to make claims adjusters accountable for what we do or don't do in our jobs. I think that it is time that we, as taxpayers, voters and workers do the same for you and the system.

Respectfully,
Dennis Knotts
Moreno Valley, Calif.

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