MIDWEST NEWS ZONE......

Medical payments per workers’ compensation claim in Michigan were among the lowest of 14 states, largely the result of lower utilization and lower prices paid for some services, according to a new study from the Workers Compensation Research Institute (WCRI).

The study, CompScope^TM Medical Benchmarks for Michigan, 9th Edition, reported that medical costs per claim in Michigan increased 6 percent in 2006 for claims at an average 12 months of experience—similar to the increase for the median study state, but at a slower pace compared to the previous five years.

The Cambridge, Mass.-based WCRI observed that medical payments per claim in Michigan were 23 percent lower than the 14-state median. The lower-than-typical medical cost per claim raises the question of what that means for injured workers, such as whether they had problems accessing the care they desired and how satisfied they were with the care they received.

Comparing Outcomes for Injured Workers in Michigan, a new WCRI study, examined these and other questions and found that Michigan injured workers reported outcomes in the middle of the range on nearly all measures, compared with worker responses in 10 other states. For example, Michigan workers had fewer problems accessing desired medical care. Their satisfaction with the overall medical care and the rate and speed of return to work were in the middle.

The study found that Michigan had a combination of lower prices paid and lower utilization for some services. Payments per claim were lower for physicians and for hospital inpatient episodes compared to the typical study state, but were closer to typical for providers of physical medicine services (chiropractors and physical/occupational therapists) and for hospital outpatient services.

For example, payments per claim to physicians were 21 percent lower in Michigan than in the typical study state. The main reason was that the services provided by Michigan physicians were less resource intensive, that is, physicians billed less often for the most complex new and established patient office visits.

But neither the utilization nor the prices paid were consistently lower across all service types, according to the study.

For example, prices paid to non-hospital providers were lower than typical for surgery and radiology, but were slightly higher than what was paid in the median state for evaluation and management and physical medicine services. These differences are aligned with Michigan’s fee schedule, observed WCRI.

Utilization (number of visits and services per visit) was somewhat lower than typical in Michigan for evaluation and management, major radiology (MRIs and CT scans), and surgery, but higher than typical only for physical medicine services.

In addition, fewer claims in Michigan involved some specialty services, such as major radiology, physical medicine, and supplies and equipment, although the surgery rate was typical.

The share of claims with chiropractic care was lower in Michigan than typical and decreasing over the study period—raising possible questions about worker access to such care.

The study also found that average payment per hospital inpatient episode was among the lowest of the study states, although the share of claims with inpatient care was like the median study state. Hospital outpatient payments per service were consistently lower than in the median state across all service categories, while fewer services per claim were provided for clinic evaluation and management and relatively more services for outpatient laboratory and physical medicine.

A key reason for the recent growth in medical payments per claim in Michigan was the higher payments per claim to hospital providers; payments to non-hospital providers were generally stable.

According to the study, overall payments for hospital outpatient services increased an average of nearly 9 percent per year from 2004 to 2006, and grew for all important outpatient services. By contrast, prices paid for non-hospital services were mostly stable in 2006 (consistent with no fee schedule changes).

Overall nonhospital utilization changed little from 2005 to 2006, but decreases were observed for some services—3 percent for physical medicine and 4 to 5 percent for radiology.

To order this report, go to the WCRI Web site: www.wcrinet.org.

• The Risk and Insurance Management Society (RIMS) is disappointed with the decision taken by the Illinois Attorney General and the Illinois Department of Insurance to allow Arthur J. Gallagher & Co. to begin accepting contingent commissions.
  
• 
  
• RIMS has consistently stated that contingent commissions should be broadly prohibited as they represent an inherent conflict of interest. The investigations, admissions and fines that culminated in the agreement signed by some brokers in 2005 prove that these practices can be, and were, manipulated to the detriment of the insurance consumer.
  
• 
  
• “RIMS is concerned that Arthur J. Gallagher & Co., who signed the agreement in 2005, is now permitted to participate in this compensation practice,” says Terry Fleming, RIMS vice president and director of the division of risk management at Montgomery County, Maryland. “However, we hope that full disclosure of all forms of compensation will be provided to the insurance buyer in a timely manner. This will allow the consumer to determine whether the broker is acting in their best interest, before binding the contract.”
  
• 
  
• The decision to lift the ban on contingent commissions comes without any concurrent proposal by the Illinois Department of Insurance and Attorney General to regulate producer disclosure.
  
• 
  
• According to Fleming, RIMS has great reservations about lifting the ban on contingent commissions without strong protections for consumers. RIMS strongly urges Arthur J. Gallagher & Co. to continue to use the compensation disclosure requirements that were part of the 2005 agreement. Historically, RIMS has argued that, in the absence of a ban on contingent commissions, all forms of compensation—direct and indirect—should be fully disclosed to the consumer. This is a crucial component to the relationship between producer and consumer. RIMS remains troubled that the insurance industry promotes compensation practices that can lead to conflicts of interest. The Society hopes for a continued open dialogue between all parties on issues of producer compensation and disclosure.

WESTERN NEWS ZONE......

Ventura County District Attorney Gregory Totten announced that Rodolfo Donjuan (DOB 1/17/1984) of Camarillo pleaded guilty to one count of felony auto insurance fraud. This case was investigated by the California Department of Insurance Fraud Division.

Donjuan contacted the Ventura County Sheriff's Department on July 18, 2008, and reported his 2000 Chevrolet Silverado had been stolen from a friend's house in Camarillo . The Silverado was subsequently located abandoned and wrecked a short distance away. Donjuan also filed a claim with his insurance carrier, Infinity Insurance.


During the next two months, Donjuan reportedly gave Infinity Insurance conflicting statements about the theft of his vehicle. His insurance claim was transferred to Infinity's Special Investigations Unit. On Sept. 24, 2008, Donjuan was deposed under oath by an Infinity Insurance attorney.


During the deposition, Donjuan was confronted with his inconsistent statements and reportedly admitted that he had lied. Donjuan stated he had been drinking beer and was driving when he crashed his vehicle. Donjuan said he ran away from the scene because he was afraid.


Donjuan is currently in custody at the Ventura County jail. His bail is set at $20,000. Donjuan will be sentenced on Aug. 25, and faces a maximum penalty of five years in state prison and a fine of up to $50,000.

NATIONAL NEWS ZONE......

With federal stimulus money paving the way for new highway construction nationwide, and more people driving versus flying during the summer vacation season, highway workers face increasing danger.


To mitigate highway worker safety exposures, Zurich in North America and The Associated General Contractors of America (AGC) have developed a new educational campaign to increase awareness of dangers while helping to reduce highway worker injuries and fatal accidents.

“This program is designed for all individuals involved in highway, street and road construction, utility installation, roadway maintenance and landscaping," said Forrest Ropp, Zurich's senior risk engineering consultant and project leader.

Ropp said the Highway Worker Safety Program is customizable program consisting of eight interactive modules that address areas such as traffic control, asphalt paving, bridge work, concrete paving, demolition work, earthwork and grading operations, short-term and mobile operations and utility and drainage work. The modules can be presented individually or in any combination depending on the need and availability of personnel.

Ropp said the program focuses on the leading causes of highway worker fatalities and serious soft tissue injuries and contains a hierarchy of safety controls, more than 80 minutes of video, trainer and trainee presentation materials, resource guides and module quizzes. The presentation package includes one Interactive DVD and one DVD-ROM with editable PowerPoint Presentation, one printed version of the Instructor's guide, and five printed versions of the Participant's Manual.

Similar programs developed by Zurich North America and The Association of General Contractors of America (Soft Tissue Injury Prevention Program – STIPP) have reportedly helped reduced the number of work related injuries as evidenced by a decrease in soft tissue injury claims.

Specifically, in the first six months of implementing an awareness STIPP, proactive customers reported decreases of 30-45 percent in strain, sprain, and lower back type injuries.

Zurich and the AGC said a similar impact from the Highway Workers Safety Program for the construction industry would be a tremendous result.

EASTERN NEWS ZONE......

Arthur J. Gallagher & Co. has acquired the Portland, Maine and Cranston, Rhode Island operations from Gresham & Associates Inc. headquartered in Atlanta.

The two New England offices are managing general agencies and wholesale insurance brokers providing insurance products for independent agents and brokers throughout the Northeastern United States.

The offices will operate as Risk Placement Services-Portland and Risk Placement Services-Cranston, and their associates will continue under the direction of Joel Cavaness, president of Risk Placement Services Inc., a subsidiary of Arthur J. Gallagher & Co.

INTERNATIONAL NEWS ZONE......

Stating that Rep. Richard Neal’s (D-MA) bill to raise taxes on foreign-based insurance companies operating within the United States was anti-consumer and anti-competitive, the Coalition for Competitive Insurance Rates (CCIR) today voiced its strong opposition to the bill.


CCIR contends that the bill would drive up consumer insurance rates by reducing competition and critical US insurance capacity. When Neal introduced similar legislation in the 110th Congress, consumer organizations and businesses that rely on affordable insurance coverage joined in opposing passage.

"We urge members of Congress to reject this legislation, as they have twice before,” said Bradley Kading, president of the Association of Bermuda Insurers and Reinsurers, a CCIR member. “Only a handful of very large, very profitable U.S. insurance companies would benefit from this bill. In contrast, the economic data make clear that American consumers and businesses would pay a steep price if Representative Neal’s proposal becomes law. This legislation represents a punitive and unnecessary tax aimed at benefiting some competitors at the expense of others."

A recent study by the Brattle Group, an economic consulting firm based in Cambridge, Mass., found that the proposed legislation would cost consumers more than $10 billion per year and would reduce U.S. reinsurance capacity by 20 percent. These negative effects would reportedly be felt most significantly in disaster-prone states like Florida, Louisiana and California. Insurers and consumers in these areas say that the Neal bill puts their states at risk. The Brattle Group study was co-authored by Temple University and Wharton School’s Dr. David Cummins.

Rep. Neal’s bill would reportedly significantly increase taxes on all foreign insurers who have U.S. subsidiaries and who provide vital insurance and reinsurance coverage to Americans. Because insurance is indisputably a global marketplace, the U.S. insurance market depends heavily on a worldwide network of foreign and domestic reinsurance companies in order to meet the country’s insurance capital needs. This is best illustrated by the fact that approximately two-thirds of all reinsurance required to protect US consumers and businesses against natural disasters is provided for by non-U.S. reinsurance companies.

“Consumers benefit from a competitive insurance marketplace. Coastal areas such as South Carolina’s are dependent on a maximum capacity of reinsurance. We believe this bill will restrict the market and ultimately raise prices for South Carolina citizens. Recent studies have shown that the results of this legislation could cost South Carolina residents more than $40 million a year. In addition, it would dislocate the market and create distinct advantages for some carriers over others, and that is not in the best interest of consumers,” said South Carolina Director of Insurance Scott Richardson who has previously written in opposition to the legislative proposal.

“The United States overall, and Florida specifically, requires a large amount of catastrophe reinsurance capacity, a substantial part of which is supplied by non-U.S. reinsurance companies,” said Dale Hammond, president and CEO of Homewise Insurance in Tampa, Florida. “Driving out competition would increase the upward pressure on insurance rates in Florida and throughout the U.S. – at exactly the wrong time.”

Earlier this year, the Senate Finance Committee received nearly 40 individual opposition letters in response to a staff draft of legislation similar to the Neal bill. Numerous organizations and individuals, including state insurance regulators, consumer groups, state legislators, trade policy experts, European governments and business owners expressed their strong opposition to the proposal.

“The international insurance market is an essential component of our ability to provide protection to homeowners and businesses,” said Bill Newton, executive director of the Florida Consumer Action Network. “We believe this tax increase proposal would in all likelihood have adverse consequences for consumers. Given today’s financial and economic conditions now is certainly not the time to make access to insurance more costly.”

“Legislation that encumbers the free market movement and the transfer of risk that are vital to a sound global insurance and reinsurance community will adversely affect America’s commercial insurance purchasers,” said Joseph Restoule, president of the Risk & Insurance Management Society (RIMS). RIMS is an association representing local government and business officials responsible for buying insurance for their organizations. “A free and fair marketplace enables the insured and insurers to seek innovative and affordable alternatives to manage risk. This legislation would drive up the cost of insurance for America’s commercial insurance consumers by reducing competition.”

Opponents of the bill say that this legislation is especially unnecessary because foreign-based insurers are already subject to a U.S. insurance excise tax and their U.S. subsidiaries pay U.S. income taxes.

“Rep. Neal’s bill is a protectionist measure that will hurt American consumers. It’s likely to send insurance rates soaring for the very consumers who can least afford big rate increases right now,” said Eli Lehrer, a senior fellow with the Competitive Enterprise Institute.

The Coalition for Competitive Insurance Rates has submitted three letters to Congress in recent years in opposition to such reinsurance tax proposals.

SOUTHWESTERN NEWS ZONE......

Texas Mutual Insurance Company has begun distributing $75 million in workers’ compensation dividends. Approximately 38,000 business owners, representing 79 percent of the company’s policyholders, will receive a dividend as a reward for committing to workplace safety.

The amount of each qualifying policyholder’s dividend check is based largely on its premium size and loss ratio. Policyholders who prevent workplace accidents and control claim costs improve their chances of earning a dividend.

This year’s dividend announcement comes as the economy continues to suffer the worst slump since the Great Depression. Texas Mutual President Russ Oliver said that the company’s 11th consecutive dividend payout is a sign of its financial stability.

“We are not immune to the volatility in the markets,” stressed Oliver, “but we had a strong year in 2008. We wrote a record $768 million in premiums and, most importantly, retained 82 percent of our loyal customers. These dividends show that our policyholders are embracing our initiatives to prevent accidents and control costs.”

One of those initiatives is Texas Mutual’s workers’ compensation health care network. The company launched the network in 2006 to help injured workers get quality medical care, recover and return to productive employment.

The second annual network report card issued by the Texas Department of Insurance in October 2008 showed that medical costs on Texas Mutual’s in-network claims are 6 percent lower than non-network claims. Patients treated in the network return to work an average of 24 percent sooner than non-network patients.

WESTERN NEWS ZONE......

California Insurance Commissioner Steve Poizner announced that Ian Max Henriquez, 42, of Los Angeles, was convicted of felony theft from an elder on July 21.

Henriquez, a former life insurance agent, was sentenced to two years in state prison and ordered to pay $100,000 in restitution, in addition to court fines and penalties.

According to California Department of Insurance Investigators, in January 2008, Henriquez illegally completed life insurance company surrender documents, forging the signature of his 83-year-old client in order to obtain $100,000 from the client's life annuity policy. When the victim had stopped receiving her annuity policy statements, she notified her son-in-law. Her son-in-law contacted the insurance company, which informed him that the mailing address for his mother-in-law had been changed and that a $100,000 check had been issued in her name against her annuity policy. Her son-in-law drove to the new mailing address and discovered that it was Henriquez's residence. He filed a complaint with CDI, and the Department immediately launched an investigation.

During the course of the investigation, Henriquez admitted to CDI investigators that he forged the victim's signature, changed her mailing address to his address and deposited her money into a business account for his personal use.

MIDWEST NEWS ZONE......

After noticing reoccurring suspicious claims activity with a large retail operation customer, Zurich in North America’s Claims and Special Investigations Units sprung into action, busting a “slip and fall” fraud ring.


The work of Zurich’s Claims and special investigators helped federal postal inspectors unravel a scheme involving 33 individuals in Illinois and Wisconsin, who filed at least 60 claims with 16 insurance companies, including Zurich.

“We believe this scheme began in August 2005 and was still active until February 2009,” said Brian Wilson, vice president of Zurich’s Special Investigative Unit. “Shutting down these fraud rings sends a clear signal that we are watching for fraudulent activity, and ultimately benefits our customers in the end by keeping their premiums lower.”

The group struck “big box” retailers, sometimes as frequently as two and three times a day. The scheme involved staging slip and fall accidents in a store. One individual set up the accident with liquid or paper on the floor, while another staged the fall. Others acted as look-outs, making sure no store management witnessed the “accident,” and then informed store officials of the incident.

Claims were filed under the retailers’ medical payment portion of their policy, meaning checks were typically mailed directly to the claimant. Each claim was in the $4,000-$8,000 range.

While the vast majority of insurance claims are honest and legitimate, the Coalition Against Insurance Fraud statistics show 10-15 percent of all claims contain some element of fraud.

• Ohio Department of Insurance Director Mary Jo Hudson announced that an earlier Cease and Desist order issued against The Beema Insurance Company of Pakistan has been made permanent.

  
  A Department investigation revealed that The Beema Insurance Company did not have a license to sell insurance products in Ohio. Beema had allegedly underwritten health insurance policies facilitated by Association of Franchise and Independent Distributors (AFID) of Springfield, Ohio. The original Cease and Desist Order was issued in early June 2009.

  
  AFID has already had a Cease and Desist Order filed against them by the Ohio Department of Insurance, who has referred the matter to Ohio Attorney General Richard Cordray for further investigation.
  

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• The North Carolina Department of Insurance has already issued a cease and desist order against both entities as well.

NATIONAL NEWS ZONE......

One's age may determine how much insurance companies spend trying to get them onboard. New research from Mintel Comperemedia, a service that provides direct marketing competitive intelligence, shows health and life insurers pay much more attention to Baby Boomers than they do to Generation X and Generation Y.

In the 12 months ending June 2009, Gen Xers received 15% fewer health insurance marketing direct mail pieces than Boomers. Gen Y saw even fewer offers: 25% less than their parents’ generation. For life insurance, the younger generations are equally ignored: Gen X and Gen Y got 18% and 23% fewer mailings, respectively, than Baby Boomers did in the past year.

“Health and life insurers seem to favor marketing to older adults, but in doing so they’re missing vast market opportunities. All generations can benefit from health and life insurance coverage, so age shouldn’t dictate insurers’ direct marketing strategy,” states Daniel Hayes, vice president of insurance services at Mintel Comperemedia.

Recent consumer data from Mintel shows Generation X is very interested in health and life insurance, despite getting less direct mail. Gen Xers are less likely than average to say they own non-employer based life or health insurance, but they’re more likely to say they’ll purchase these products in the near future (17% more likely for health insurance, 23% for life insurance).

Furthermore, 63% of Gen X adults told Mintel “it is important to be well-insured when it comes to life insurance”, versus just 58% of the general population agreeing with that same statement.

“Generation X is under-served and over-interested in life and health insurance, making them the perfect target market,” commented Hayes. “Because Gen Xers are concerned about providing for both young children and aging parents, adequate insurance coverage is extremely important. They want to keep themselves and their dependants healthy, but they also need to know their families will be provided for if they aren’t around.”

Mintel says Gen Xers are 72% more likely than the average American to say they’re currently saving for a child’s education. But at the same time, they’re preparing to support their parents: 53% of Gen Xers say they expect to be the primary caregiver for a parent or other relative.

WESTERN NEWS ZONE......

California Insurance Commissioner Poizner announced Tuesday that recently compiled Department of Insurance statistics show that scam artists may be committing more automobile insurance fraud to cash in on insurance money. The Department of Insurance has seen an increase in suspected auto arson and auto theft fraud referrals last year.

The Department of Insurance receives referrals of suspected fraud cases from insurance companies, local law enforcement agencies and directly from consumers. CDI enforcement officers carefully examine every case that is brought to the Department's attention.

CDI saw an alarming 25 percent increase in suspected vehicle arson fraud cases in 2008 as compared with referred cases in 2007. (In 2007, CDI received 344 referrals for suspected automobile arson; in 2008, CDI received 451 referrals for suspected automobile arson.) Overall, the Department received almost 300 additional suspected vehicle theft and vehicle arson cases statewide in 2008 than in 2007. CDI received approximately 200 more suspected vehicle theft fraud case referrals in 2008 than in 2007.

While the total number of suspected fraud case referrals received by CDI for all automobile fraud categories (including inflated damages, vandalism and hit and run,) has remained relatively constant since 2007, suspected vehicle arson and theft referrals have noticeably increased.

In May, Poizner announced that a San Diego husband and wife and two additional individuals were charged with felony insurance fraud for conspiring abandon a 2004 Honda Accord to collect insurance money.

In March, an El Cajon man was arrested and charged with insurance fraud after he allegedly falsely reported that his vehicle was stolen.

EASTERN NEWS ZONE......

An Ulster County, New York man who admitted that he illegally accepted workers' compensation benefits was ordered to make $77,800 in restitution and serve a 30-day jail sentence.

Judge Frank Milano sentenced Joseph A. Gambino, 58, of Saugerties, after accepting his guilty plea to charges of insurance fraud and workers' comp fraud. He was also sentenced to serve five years' probation.

Gambino was arrested Dec. 3 following an investigation by Joseph Kochetta of the New York State Insurance Department's Frauds Bureau, the New York State Insurance Fund and the Workers' Compensation Board Inspector General's Office.

Investigators reportedly videotaped Gambino engaged in such activities as moving furniture and riding a motorcycle without the cane he appeared to lean on heavily during medical exams. He had collected workers' comp benefits from the Insurance Fund for more than three years after claiming he had suffered a job-related back injury in 2003.

• New Jersey Attorney General Anne Milgram and Criminal Justice Director Deborah Gramiccioni announced that a Passaic County man pleaded guilty to charges that he fraudulently used his father’s insurance plan to obtain prescription pain medications.
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• According to Acting Insurance Fraud Prosecutor Riza Dagli, David Van Dunk, Jr., 35, of Hewitt, pleaded guilty in Passaic County to third-degree theft by deception. The charges were contained in an Oct. 7, 2008 Passaic County grand jury indictment.
  
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• The state will recommend that Van Dunk be sentenced to three years of probation conditioned on him either serving 364 days in the county jail or successfully completing a drug treatment program of at least 18 months.
  
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• In pleading guilty, Van Dunk admitted that between Jan. 24 and Nov. 8, 2006, he falsely used his father’s prescription plan to wrongfully obtain prescription medications, including oxycodone, Percocet, morphine sulfate, and Endocet. Van Dunk claimed that the medications were for his father when, in fact, they were for himself.
  
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• As a result of the fraud, Connecticut General Life Insurance Company paid various pharmacies a total of $12,140 for the prescription medications.

MIDWEST NEWS ZONE......

The Main Street America Group announced that Grain Dealers Mutual Insurance Company, an Indiana-domiciled regional property-casualty insurance company, will become an affiliate of Main Street America.

The agreement, which has been approved by the boards of directors of both companies, is subject to regulatory approval from the State of Indiana Department of Insurance, which is projected for early fourth quarter 2009. Financial terms of the transaction were not disclosed.

“Our affiliation with Grain Dealers Mutual will complement our 86 years of successfully serving our ‘Main Street’ independent agent-customers and their customers (policyholders),” said Tom Van Berkel, chairman, president and chief executive officer of Main Street America. “It will help us achieve our long-term strategy of sustained profitable growth by spreading risk and increasing scale through geographic diversification.”

Van Berkel added, “Grain Dealers Mutual has a strong brand and serves a market niche that is similar to Main Street America’s. They are a good cultural fit for us.”

Grain Dealers Mutual, based in Indianapolis, Ind., is a 107-year-old multi-line carrier that currently provides coverage in nine states, with its largest volume of business in North Carolina, Oklahoma, Mississippi and Indiana. In 2008, Grain Dealers Mutual generated nearly $33 million in direct written premium. Its product mix is 65 percent commercial, 35 percent personal. The company’s predominant line of business is commercial multi-peril, followed by homeowners and private passenger auto.

With the affiliation, Main Street America will be entering some new states, as well as increasing its presence in several existing states.

Grain Dealers Mutual president and chief executive officer Don Malcom will continue to oversee the company’s daily operations out of its Indianapolis headquarters. Grain Dealers Mutual will also maintain its regional service office in Greensboro, N.C.

“We will be affiliating with a financially strong organization that is 100 percent committed to the independent agency system,” Malcom said. “This will greatly benefit our network of independent agents and our policyholders.”

• Ohio Department of Insurance Director Mary Jo Hudson announced that the average rates for the state’s top 10 private passenger auto insurers increased 0.8 percent in 2008. The average rates for the state’s top 10 homeowners increased by 6.9 percent in 2008.

  
  Ohio has the 13^th lowest auto insurance and 6^th lowest homeowners insurance average premiums in the country, according to the most recent figures from the National Association of Insurance Commissioners (NAIC).

  
  Auto insurance rates were unchanged overall for State Farm, whereas the other top 10 writers implemented slight overall increases (0-3 percent). Homeowner insurers implemented larger overall rate increases than have been seen in the previous four years (-.5 to 13.1 percent).

  
  Based on the rate activity thus far and industry data, Department analysts expect the 2009 rate activity to continue similarly as it did in 2008. For auto insurance, the average rates will likely increase slightly. For homeowners insurance, the average rates will likely increase.

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• Changes in auto insurance rates are associated with medical costs, weather-related claims, the number of cars on Ohio roads and repair costs, while changes in homeowners insurance rates can be attributed to building and material costs and weather-related claims.

WESTERN NEWS ZONE......

A cease and desist order has been issued in Washington against Gary A.Wyche of Vancouver for reportedly selling insurance without a license.

Wyche surrendered his Washington state license on Sept. 28, 2006 in lieu of revocation for professional misconduct. The Insurance Division of the Oregon Department of Consumer and Business Services revoked his Oregon license on Sept. 19, 2005.

Wyche was arrested on April 20 this year for alleged forgery, money laundering, and acting as an insurance agent without a license.

According to the Insurance Commissioner’s investigation, Wyche continued to transact insurance business in Washington and Oregon by selling annuities and diverting the premium into his personal account. He’s currently out on bail pending trial. His business associate, Tera Gardner, also was issued an order revoking her license for reported professional misconduct on June 5.

Wyche primarily conducted his illegal activities in the Portland/Vancouver area.

Anyone who purchased an insurance product from Gary Wyche since Sept. 28, 2006 is encouraged to contact Ted Bader at the Insurance Commissioner’s office at (360) 725-7049.

MIDWEST NEWS ZONE......

Missouri Insurance Director John Huff addressed more than 130 members of the Missouri Association of Insurance Agents (MAIA) last Friday, making a strong argument that states, rather than the federal government, should continue to regulate the insurance industry.


Huff held a Q&A Friday morning with MAIA Executive Vice President Larry Case at the group’s 2009 Leadership Conference at the Lake of the Ozarks. Case said MAIA strongly opposes federal regulation of insurance, which is being advocated by some in Congress and the insurance industry. Huff agreed that states have successfully regulated insurance for more than 150 years, and that system should continue.


“For a century and a half, states have been protecting consumers, ensuring fair competition and affordable products,” said Huff, director of the Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP). “The prospect of an optional federal charter will dilute consumer protections by allowing some companies to choose the weaker regulatory option.”


Case asked Huff about the availability and affordability of earthquake insurance in Missouri, especially in the New Madrid Seismic Zone. Huff says because there is some consumer confusion about this product and its availability, the department is currently surveying the 20 largest homeowners writers in Missouri to find out what earthquake coverage they offer, along with details of their products, such as rates and deductibles.


Huff also said the department is now processing producer licensing much more efficiently, thanks to the adoption of State-Based Systems, a Web-based licensing database. With SBS, agents can now get same-day credit for continuing education hours and get their licensing applications processed in one business day. These services typically took three to five days before the department began using the new technology earlier this year.

EASTERN NEWS ZONE......

An Oneida County, New York man has been arrested for trying to get his insurance company to pay for $4,000 in living expenses at a bed and breakfast that turned out not to exist, the New York State Insurance Department reported.

State police arrested Matthew Darling, 36, of Camden, after an investigation by Tom Hurley of the Insurance Department's Frauds Bureau.

Darling is accused of submitting a fraudulent insurance claim to Kemper Insurance Company for expenses he said he incurred while his home was being repaired after smoke damage caused by a faulty furnace. The investigation revealed that a receipt for cash payments Darling submitted was phony, as was the bed and breakfast where he claimed to have stayed. He was never paid for the purported expenses.

Darling is charged with insurance fraud and falsifying business records. He could be sentenced to up to four years in prison if he is convicted. He was released pending a hearing.

• A Winchester, Massachusetts construction and demolition company was arraigned and pled guilty in Charlestown District Court last week, in connection with failing to among other things pay the proper premium for its workers’ compensation insurance policy.
  
• 
  
• P & R Partners Construction Inc. (P & R) pled guilty to charges of Workers’ Compensation Fraud. In addition, the company’s owners and officers, Elienai Coelho, age 30, of Stoneham, and Rodrigo Silva, age 29, of Medford, admitted to sufficient facts for Failing to Pay Overtime and Failing to Provide True and Accurate Payroll Records. After the plea was entered, District Court Judge Mark Summerville ordered Coelho, Silva and P & R to pay over $54,000 in restitution to 51 former employees, $50,000 in restitution to the insurance company, and a $30,000 fine to the Commonwealth. Judge Summerville also placed Coelho and Silva on probation for a period of one year.
• 
  

• Investigators from the Attorney General’s Fair Labor Division and the Insurance Fraud Bureau of Massachusetts (IFB) reviewed the company’s payroll records and determined that P & R failed to pay the proper premium for its workers’ comp insurance policy.
  

• 
  

• The Workers’ Compensation Law requires Massachusetts employers to pay workers’ comp insurance for their employees.
  

WESTERN NEWS ZONE......

In a continuing effort to make the Department of Insurance and entities overseen by CDI more efficient and effective, California Insurance Commissioner Steve Poizner released an operational review report of the California Insurance Guarantee Association (CIGA).

This is the third report of a major insurance unit issued in the last two months, with operational reviews of State Fund and the Workers' Compensation Insurance Rating Bureau released recently.

CIGA is the so-called safety net that pays the claims of insolvent property, casualty and workers' comp insurance carriers that are licensed to do business in the state. It is funded by assessments paid by insurance companies.

The operational review made 83 specific recommendations, including:

• CIGA should develop standardized fees and payment schedules along with measurable performance standards and expectations that should be coordinated with CIGA's audit process.
• CIGA should develop a consistent contract process to include a review of the initial contract with standardized review intervals. The process should also document a standardized method by which a contract would be terminated.
• CIGA should review and evaluate the basis and process for the consolidation and related costs associated with the transition of cradle to grave contracts.

A copy of the report can be found at www.insurance.ca.gov.

NATIONAL NEWS ZONE......

A recent online survey of more than 1,000 consumers found that those who purchased individual medical (IM) insurance through a professional agent were significantly more satisfied with their health plans than those who bought IM insurance online. The independent study was commissioned by Milwaukee-based Assurant Health, a national provider of Individual Medical, Small Group and Specialty health insurance products.

Some of its other key findings included:

• 64% of those who bought through agents used the word “helpful” to describe their experiences while only 36% of online purchasers used this term.
• 91% of those who purchased through an agent bought the plan their agent recommended.
• 31% of those shopping online described the experience as “time-consuming.”
• Despite the recent proliferation of Web-based insurance brokerages, 62% of the survey respondents bought their insurance through an agent.
• In addition, consumers who purchased through an agent were significantly more satisfied in regard to how easy it was to understand their options and choose a plan that gave them the best coverage tailored to their needs than those who purchased online.
• After being presented with information on how agents can help, and advised that purchasing through an agent does not increase their costs, nearly one out of four of those who purchased online reported that, if they were going to purchase IM insurance today, they would buy it through an agent.

MIDWEST NEWS ZONE......

Auto Injury Solutions Inc. (AIS) a provider of medical claim management tools for the auto insurance industry announced the expansion of its provider transaction portal, Provider Desktop, in compliance with new Minnesota legislation. This latest enhancement of Provider Desktop supports the continued evolution of electronic payment/processing technologies and future adoption of paper claims processing.

The newest release of Provider Desktop features the online capability for medical providers to submit medical bills as required under the Minnesota Health Care Administration Simplification Act. This advanced solution is offered at no cost to providers and payor-clients of AIS.

Providers will find the following features of Provider Desktop useful in the compliance with Minnesota regulations:

• A secure web portal to ensure patient information privacy is maintained
• Acceptance and processing of Minnesota compliant electronic billing records
• The capability to upload supporting medical documentation directly from electronic patient files validated with an e-Signature unique to the provider
• Patient information is stored for future submissions, reducing the time necessary to complete a request.
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For more information about Provider Desktop, and to establish an account with AIS, providers can sign up at (https://providerdesktop.autoinjurysolutions.com).

SOUTHWESTERN NEWS ZONE

Hotchkiss Insurance Agency LLC announced a $105,407 dividend to the Texas Home Builders Workers’ Comp (THB-WC) purchasing group. The group’s premium volume and loss ratio were factors in determining its dividend.

The THB-WC group, formed in September 2005 exclusively for home builders in Texas, provides qualifying members with a competitive option for workers’ compensation coverage. The announcement marks the second dividend payment for the group by Texas Mutual Insurance Company, the program underwriter.

The Texas Department of Insurance (TDI) allows employers in similar industries to reduce their workers’ comp premiums by purchasing their coverage as a group. The THB-WC Group is a TDI-approved purchasing group that is open to most residential general contractors, which includes home builders, engineers, architects and interior carpentry firms.

EASTERN NEWS ZONE......

Making the case for common sense disclosure rules, the Independent Insurance Agents & Brokers of New York met Tuesday with officials of the New York Insurance Department.

The meeting at the department’s Beaver Street offices in New York City centered around the second draft of a regulation that would require insurance producers to disclose to their clients information about how they are compensated. The department’s second draft, released on July 8, made several changes to the draft issued in January.

New York’s oldest producer trade organization was represented by Chair of the Board Lane Rubin and Past Chair Mark Hagan. Rubin is managing member of Excel Coverage Group LLC in Westbury; Hagan is president of Perry & Carroll Inc. in Elmira. IIABNY president and CEO Richard Poppa, and legislative representative Michael Barrett also attended.

Representatives of the Professional Insurance Agents of New York, the New York Insurance Association, the Council of Insurance Agents & Brokers, the Independent Insurance Agents & Brokers of America, and the Council of Insurance Brokers of Greater New York attended the meeting as well.

The meeting was IIABNY’s second with the department since the release of the first draft. The group discussed its concerns pertaining to the required description of a producer’s role in the insurance sales process, the amount of detail to be included in the disclosure of alternative quotes, and the rule’s application to different types of insurance salespeople.

“We are pleased that the department has again sought our input on the proposed rules,” Rubin said. “We had a substantive discussion about the problems we see with the new draft, and we look forward to providing our written response to them within the timeframe they have set.”

The department is accepting comments on the second draft until July 29. It has not announced a deadline for publishing the regulation as a formal proposal.

WESTERN NEWS ZONE......

California Insurance Commissioner Steve Poizner was joined Wednesday by Shannon Kelly, 21^st Century senior vice president, West Region, to announce a $34 million rate reduction for 21^st Century Auto Insurance Company policyholders in California. This represents an average decrease of 3.4 percent.

As the seventh largest auto insurer in the state, 21^st Century insures more than one million vehicles in California, covering approximately five percent of the auto insurance market.

Under the newly approved reduced rates, California policyholders will save an average of about 3.4 percent, or about $50 per policy per year - a total of $34 million. New rates apply to policies written or renewed after June 21, 2009.

Under the newly approved rate cut, 21^st Century customers in Los Angeles County will save an average of 4.9 percent, or $80 per year, per policy. 21^st Century customers in San Francisco will save an average of $58 per year, and Sacramento policyholders will save an average of $62 each year.

NATIONAL NEWS ZONE......

MedInsights Inc., a workers' compensation managed care services provider, and myMatrixx, a provider of pharmacy management solutions for workers' comp claims, announced a new partnership that is expected to help reduce loss costs through an advanced technology platform.


myMatrixx will enable MedInsights to leverage its integrated patient population data and case management capabilities to improve clinical outcomes and reduce the overall cost of workers' comp claims.

SOUTHEAST NEWS ZONE......

The Florida Office of Insurance Regulation (Office) announced that the First District Court of Appeal (DCA) has affirmed, without an opinion, the Jan. 12 final order of Commissioner Kevin McCarty regarding a State Farm request to increase rates.

McCarty’s order was based on the Dec. 12 recommended order of Administrative Law Judge Daniel Manry of the Division of Administrative Hearings (DOAH). Manry agreed with the Office’s initial Aug. 25 denial of State Farm’s indicated statewide average rate increase of 67.0 percent and its requested increase of 47.1 percent.

In his December order, Judge Manry had stated: “State Farm Florida did not show by a preponderance of the evidence that either the indicated rate or requested rate in the rate filing is not excessive, inadequate, or unfairly discriminatory.”

“We are very pleased with the District Court’s ruling,” said McCarty. “State Farm knew, or should have known, that the filing it made was contrary to the Legislature’s intent and could not be approved. State Farm’s actions suggest that it intended to use the denial of the filing as a pretext for threatening to withdraw from the Florida property insurance market.”

The DCA matter is not final until time expires for State Farm to file a motion for rehearing (15 days pursuant to Rule 9.330 Fla.R.App.P.) and the disposition of such motion is filed.

Issues with State Farm’s proposed withdrawal plan still remain unresolved. Both the Office and State Farm officials are continuing discussions, but the DOAH has set a hearing to begin Oct. 12.

NATIONAL NEWS ZONE......

The Navigators Group Inc. announced that its principal underwriting agency subsidiary, Navigators Management Company Inc., is continuing to expand its Nav Pro Professional Liability Division by partnering with Aon Affinity, a subsidiary of Aon Corp., to provide professional liability coverage to property & casualty insurance agencies, available nationally to independent agents and agencies with up to $10 million in gross commissions.


The new Agency Advantage Program includes an incentive for early claim resolution, a broad professional services definition inclusive of teaching accredited insurance courses and expert witness activities, and expanded coverage offerings to include Wholesalers, MGA and MGU firms.


Stacy Hoffman, V.P. Programs, will have management responsibility for this book of business as well as other Professional Liability/Errors & Omissions Programs produced by Navigators.

WESTERN NEWS ZONE......

Six men charged in California with running a crime ring that stole nearly $2 million from federal and private health insurers have been sentenced to state prison terms ranging from four years to 16 months in connection with their guilty pleas to conspiracy, money laundering and other charges, the Los Angeles District Attorney’s office announced.


Deputy District Attorney Celia Politeo of the Organized Crime Division said the final defendant – Edkar Mikirtijyan, 27 -- was sentenced to a four-year state prison term. Mikirtijyan pleaded guilty on June 9 to conspiracy to commit grand theft and money laundering. He also admitted the aggravated white collar crime enhancement, which adds time to any sentence.


The judge also ordered Mikirtijyan and the other defendants to pay $1.987 million to Medicare.


The case was filed against the six men a year ago following an investigation by the U.S. Immigration and Customs Enforcement’s (ICE) Office of Investigations in Los Angeles and other federal and local agencies. The defendants, all from the North Hollywood, Glendale and Van Nuys areas, were accused of conspiracy, money laundering and grand theft of personal property. It was alleged the crimes occurred between March 2005 and September 2006.


District Attorney Steve Cooley noted at the time the case was filed that nationwide, “health care fraud continues to milk billions of dollars annually from government-funded health plans and private health insurers. Health care fraud affects us all.”


The other defendants and their sentences are: Karapet Khacheryan, 38, four years in state prison for conspiracy and money laundering; Hovik Joe Altunyan, 31, four years state prison for conspiracy and money laundering; Grigor Khorikyan, 31, 16 months for conspiracy and money laundering; Vahan Harutyuyan, 33, four years from conspiracy and money laundering; and Smbat Khachtryan, 28, two years for conspiracy, money laundering and possession of an assault weapon. All defendants except Khorikyan and Khachtryan admitted the excessive taking enhancement.

MIDWEST NEWS ZONE......

Gov. Jay Nixon has signed a bill that makes improvements to the state’s captive insurance laws by simplifying the process of moving offshore captive operations to Missouri.


House Bill 577, an omnibus insurance bill, makes it easier for Missouri companies to bring their captive operations back to the state by removing certain financial restrictions and clarifying provisions on alien redomestication. The bill may also make it attractive for companies based outside Missouri to set up captive operations here.


Among the provisions of the new law:

• Specific allowance of alien redomestication, which makes the process as simple as redomestication of a U.S.-based insurer.

• Allows for reciprocal formations to accommodate the return of offshore not-for-profit groups.

• Removes a requirement for mandatory investment in Missouri, to accommodate companies with existing banking relationships.

• Allows additional options for admittance of available credit as assets for Special Purpose Life Reinsurance Captives.

• Reduces the number of resident incorporators for Special Purpose Life Reinsurance Captives from two to one.

• Mandates a portion of all captive premium tax to be allocated for department’s captive operations, helping to ensure the long-term viability of the DIFP’s program.

EASTERN NEWS ZONE......

A Niagara Falls, New York man has been arrested on multiple felonies in a case of workers’ compensation fraud for collecting wage-replacement benefits for more than a year from the New York State Insurance Fund after he allegedly returned to work.

William P. Franz, Jr., 30, faces charges including offering a false instrument for filing, insurance fraud, grand larceny, perjury and violating the Workers’ Compensation Law – all felonies – following his arrest by New York State Police.

Investigators said Franz received more than $6,000 in wage replacement benefits from NYSIF over the past year allegedly after returning to work as a roofer subcontractor for a general contracting firm in Cheektowaga, N.Y. Franz suffered a fractured foot while working as a roofer for a Depew, N.Y., remodeling service in 2004.

NYSIF estimated potential future savings on Franz’s claim to be more than $303,000, which is approximately the amount he would have been paid over the life of his claim.

Investigators said Franz, who had been classified with a permanent partial disability as a result of his 2004 injury, allegedly returned signed statements to NYSIF that he had not returned to any form of work since the injury.

NATIONAL NEWS ZONE......

(HomeInsurance.com)- Rates By State, a new online report released last week by HomeInsurance.com, gives consumers an inside view to home insurance rate trends across the country.

The report offers average home insurance premium data for 38 U.S. states based on actual sold policies in each area. The current report is displaying average rates as recent as May 2009, along with insurance shopping trends during the same period.

The report's interactive, color-coded map displays red for states with recent rate increases and green for states where home insurance rates have dropped, showing also the rate of increase and decrease for each.

While Rates By State currently only reports on actual premiums in 38 states, HomeInsurance.com intends to begin reporting in all 50 US states by the end of the year.

HomeInsurance.com has recently begun selling property insurance to Florida, Louisiana, South Dakota, West Virginia, Wyoming and coastal areas of South Carolina. An auto insurance report is in the works as well.

SOUTHWESTERN NEWS ZONE......

Medical costs per workers’ compensation claim in Texas declined dramatically over a relatively short period following a series of reforms, according to a new study by the Workers Compensation Research Institute (WCRI). However, Texas still had higher costs and utilization than many study states for some types of medical care.

The Cambridge, Mass.-based WCRI reported that in 2001, prior to system reforms, medical costs per claim in Texas were among the highest of 14 states studied, driven mainly by higher utilization, particularly higher use of chiropractic care. But by 2006, medical costs per claim in Texas were 14 percent lower than the median study state.

The study, Monitoring the Impact of Reforms in Texas: CompScope^TM Medical Benchmarks, 9th Edition, found that a combination of factors contributed to that result, among them, a lower fee schedule and more active management of medical care by payors, which led to large decreases in both prices paid and utilization of services.

Despite these significant decreases, the study noted that Texas still ranked higher than many of the study states on a number of important metrics of medical care.

For example, the number of visits per claim to chiropractors was cut by one-half from 2001 to 2006; still, Texas had more chiropractor visits than any other study state in 2006.

From 2002 to 2004, medical costs per claim fell 8 percent—largely due to the lower fee schedule and more active management of medical care by payors. In 2004, medical costs per claim in Texas were typical of study states. From 2004 to 2006, but prior to much of the effect of the medical networks under House Bill (HB) 7, medical costs per claim dropped 11 percent.

Growth in medical payments per claim in Texas began to slow and then reverse prior to the implementation of medical networks under HB 7.

The decrease in medical costs per claim observed from 2002 until 2006 (the very early use of medical networks) was likely the result of the fee schedule decreases under HB 2600 combined with an increased management of medical care by payors.

Medical payments per claim fell significantly for chiropractors, especially from 2005 to 2006, mainly because of fewer visits per claim. The study reported that visits to chiropractors in Texas were cut by about one-half, with the most significant decreases occurring from 2001 to 2002 (dropping from nearly 40 visits per claim to 33) and from 2005 to 2006 (dropping from about 27 visits per claim to 21).

The decrease in the number of chiropractor visits per claim was largely the result of a substantial decrease in the percent of claims with more than 50 visits. Despite these large decreases, Texas still had the highest number of chiropractor visits per claim in 2006—20 compared to 12 in the typical study state.

Similarly, the percentage of claims with chiropractic treatment and the share of total medical costs paid to chiropractors in Texas in 2006 were still highest among the 14 study states.

Medical payments per claim to physicians declined 16 percent overall from 2002 to 2004, largely the result of fee schedule changes under HB 2600 over that period. A further decrease of 9 percent occurred from 2005 to 2006, driven mainly by a drop in office visits that was offset in part by more complex office visits being billed.

Still, in 2006, Texas had more office visits per claim than typical, about eight compared to six in the median study state.

The pattern for diagnostic tests was similar, with decreases in the percentage of claims with these services from 2005 to 2006, but with Texas still showing somewhat higher use of these tests than typical. By contrast, Texas had among the lowest number of visits per claim to physical/occupational therapists in 2006.

The increase in the 2008 medical fee schedule conversion factors to reflect increases in practice expenses since 2002 and the separate conversion factor established for surgery will likely result in a one-time increase in prices paid for services from an estimated 16 to up to 40 percent.

To order this report, go to the WCRI Web site: www.wcrinet.org.

EASTERN NEWS ZONE......

New Jersey Attorney General Anne Milgram announced that a Morris County man has been indicted for allegedly failing to provide workers’ compensation insurance coverage to his employees. As a result, the State of New Jersey was forced to pay out more than $253,000.


According to Criminal Justice Director Deborah Gramiccioni, Mack Stevens, 40, of Lake Hopatcong, was charged with fourth-degree failure to provide workers’ comp coverage.


According to the indictment, between Oct. 7, 2003 and April 28, 2009, Stevens, the owner of Accurate Paving, an unincorporated paving company in Lake Hopatcong, failed to provide workers’ comp coverage to his employees. On Oct. 8, 2003, an Accurate Paving employee suffered serious injuries as a result of an accident that occurred while he was on the job. The employee needed surgery and a three-month stay in the hospital. It is alleged that, because Stevens did not carry workers’ comp coverage, the New Jersey Uninsured Employers’ Fund was forced to pay $253,770 to the employee for expenses that he incurred as a result of the accident.


The investigation by the Division of Criminal Justice determined that as recently as April 2009, Accurate Paving and Stevens still did not have workers’ comp coverage in place.

WESTERN NEWS ZONE......

California workers' compensation earned premium fell by $2.3 billion to less than $11 billion last year, while insurers' loss and expense payments totaled nearly $11.2 billion, resulting in a pretax underwriting loss of $84 million according to a CWCI analysis of the Workers' Compensation Insurance Rating Bureau's annual report to the governor and legislature on workers' comp calendar year losses and expenses.

The Rating Bureau's annual compilation of workers' comp insurer experience, shows earned premium gross of deductible credits or recoveries and not including retrospective rating, dividends or nonstandard coverage, fell from $13.27 billion in 2007 to $10.93 billion last year, which was less than what insurers' paid out for medical, indemnity and administrative expenses.

Medical and indemnity payments alone accounted for $6.9 billion of the insurer's calendar year 2008 payments - while the total rises to $7.12 billion if the $212 million in payments by the California Insurance Guarantee Association are added in. Insurers also added $35 million in reserves for future claim payments, so excluding the CIGA payments, insurers' incurred losses came in at 63 percent of earned premium. Adding in overhead, loss adjustment and defense payments pushed the total to 100.5 percent of earned premium. The biggest increase was on the medical side, where total payments jumped $364 million to more than $4.1 billion. Among the medical payment categories, reimbursements to physicians topped $1.5 billion and remained the biggest medical component, even though that total was down $39 million from 2007.

In contrast, hospital payments rose $131 million to nearly $1.1 billion; "other medical costs" were up $104 million (primarily due to a $98 million increase in medical payments made directly to injured workers under compromise and release agreements) medical cost containment (fees for MPN access, bill review and utilization review) jumped $97 million to $284 million; med-legal evaluation costs increased $52 million to $202 million; and pharmacy payments rose $20 million to $368 million.

On the indemnity side, aggregate indemnity payments were down $183 million for the year. Leading the decline were permanent disability payments, which fell $108 million from the 2007 total, while total insured payments for vocational rehabilitation/supplemental job displacement benefits were down $41 million; and temporary disability payments were down $36 million. The only indemnity component that registered an increase was death benefits, which edged up by $2 million to $71 million last year.

Insurers' overall loss adjustment and defense payments were up just a fraction last year, rising $13 million to $1.824 billion, but insurers did reduce their total overhead expenses by $205 million as general expenses and taxes fell by $139 million and declining premium helped push agent and broker fees down $89 million, which more than offset a $23 million increase in other acquisition expenses.