Title: Partner at Shaw, Jacobsmeyer, Crain, Claffey & Nix
Resume: With more than 35 years in the field of workers’ comp, he has experience as both a representative of the injured workers for 18 years and now representing employers and insurance carriers before the Workers’ Compensation Appeals Board for more than 16 years.
Schools: St. Mary’s College, Santa Clara School of Law
Boards and Commissions: Mr. Jacobsmeyer serves as amicus counsel for the California Workers’ Compensation Institute and is a frequent panelist for CWCI programs. He has also served on the Board of Governors of the California Applicant Attorneys Association (CAAA), including stints as education chair, Amicus Committee co-chair and president of the Northern California Chapter of CAAA. He is a frequent panelist for workers’ comp issues for the California Self-Insurance Association, the Coalition on California Workers’ Compensation, the California Applicants’ Attorneys Association, the California Society for Industrial Medicine and Surgery, and multiple
Inspiration: Kenneth W. Larsen trained Mr. Jacobsmeyer with great patience in his beginning years as a workers’ comp attorney. As someone who had not even taken a course in the field in law school, it was all on-the-job training for Mr. Jacobsmeyer and a strong mentor was a necessary part of the process. Mr. Larsen filled the bill in spades, always patient, always knowledgeable, and always willing to look at both sides of an issue.
Favorite Book: The Lord of the Rings trilogy
Favorite Quote: Favorite Quote: Paraphrase of a quote from early-20th-century writer James Branch Cabal: An optimist is one who believes we have the best of all possible workers’ compensation systems, a pessimist is merely one who fears that is true.
Jacobsmeyer is an influential player in the workers’ comp arena, having been on both sides of the debate. He was formerly an applicant attorney. His insightful comments on the latest cases and their impact on the industry provide an excellent overview of what drives workers’ comp costs. He’s particularly well-versed on Almaraz/Guzman & Ogilvie and the recent decision on cost-of-living adjustments (COLA) in Duncan v. WCAB.
What are the top three issues in California workers’ comp today?
As a lawyer, I see primarily litigation issues [as the number one issue.] Litigation over permanent disability is the 800-pound gorilla in the room. Everybody's waiting to see what will happen with the Almaraz/Guzman cases and see how those play out. What we have to figure out is [when guidelines apply]. It's supposed to be a pretty rare when it applies, but when does it apply and when doesn't it? We have to see how cases will play out. We're eight months to two years from having final answers. It's an unsettled area and that can be paralyzing. I think the second is the future of MPNs. I think they're here to stay, but I'm not sure that now they're structured to provide benefits that the employers thought MPNs would give when they were first proposed. They thought there would be more control in medical care in the MPN, specifically control over decision making with doctors. They need to use evidence-based medicine. How do you use MPNs to have an overall impact on the cost of medical? The third issue is streamlining the medical decision-making process...the process for deciding to give medical care. UR has had the single biggest impact in cost savings. There are other ways to streamline the decision-making process...they will allow physicians to get treatment started outside of UR process. It's beyond the first 60 days is where issues come up. Benefits litigated and benefits provided are significant.
It’s no longer a question of if but when we enter a hard market, so what is in the future of State Compensation Insurance Fund? Will its market share climb back to historic levels? Do you think that further reforms are needed for the governance of State Fund, for example, does it make sense to have Senate confirmation for board members?
The answer to this question may very well depend on factors independent of the insurance market. The ability of carriers to make sufficient profit in workers’ comp is also affected by the stability and viability of the investment markets such as stocks, bonds and real estate. Until these markets turn around and carriers continue to be reluctant to jump into the comp market, SCIF should benefit from additional market share over time. I doubt we will ever see SCIF rise to 50% of the market as it was close to a few years ago. A volatile premium market probably works to SCIF’s favor.
I must admit I have not paid a great deal of attention to the governance issues with State Fund. My interest is really just in having a functioning and viable State Fund to help stabilize the marketplace.
Are medical provider networks a help or a hindrance? How should they be improved?
Right now, for the most part, MPNs are a neutral factor. It's amazing how many applicants' attorneys litigate when their client has to go to an MPN. MPNs are so big that they can find doctors if they want. Specific doctors can treat specific people…Having an MPN probably [has] a pretty neutral impact: [they are] too large to have a very large impact. It's expensive to handpick physicians for a network, but [those who do are] probably having better results from their network. We're going to see more tailored networks in the future. They have to be more structured and more tailored to the local area you have. It's important to develop relationships between employers and doctors. Doctors will feel like they'll be authorized to treat, employers and employees will feel like they'll get proper treatment. That's what treatment is supposed to be. Workers' compensation coverage should be focused on getting people back to work. That's the fundamental difference in workers' compensation cases versus the [gold standard] medical treatment. Getting back to work is more important and this is why smaller more tailored networks are good. Kaiser could be used as a model. Kaiser has a chain of command, most networks don't. There isn't a lot of guidance in the contracts of networks without chains of command.
How should utilization review be improved?
UR has seen dramatic improvement in how it functions. When it first came out there were lots of complaints that everything was being denied. The UR today is seeing most things approved. Doctors are finding out how to better ask for things. UR providers are less concerned with issues after approving. UR used to be too concerned with excessive medical care. The timeframe been improved by throwing bodies at it. They need agreements...adjustors can have options or have a contractual agreement with a medical provider to give a certain level of treatment ahead of UR. In that case, doctors can go ahead and treat certain things and get workers back to work. Delays can be significant but we're seeing more often that people can get medical treatment on an expedited basis. A focus on UR and MPNs has allowed them to do that. What can be done to UR with your own MPN doctors? That could be significant.
What needs to be done to improve return-to-work?
This is an issue of education to employers. I think we probably need to get rid of 15% bump-up/bump-down. The timeframes just don't work and employers can't make decisions. As a driver to get people back to work, it's ineffective when people didn't try to meet timeframes. It's more on the civil end. In California, we have a very liberal approach to having employers accommodating employees. I've seen dramatic improvements in the last 10 years. Return-to-work is really the answer to solving medical care and disability. They have a better improvement than the people who don't return to wok and those people are less likely to litigate. They feel better about the employer. There's a tremendous amount of benefits. For employers, it's a continuing battle for education from the HR side.
What do you see, other than medical, as the next big cost driver?
Permanent disability, temporary disability and penalties. Temporary disability and penalties are not as big a deal as they used to be. Permanent disability, especially with the Almaraz/Guzman case has the potential to be a significant cost driver. WCIRB put in a 5.5 to 6% increase in premiums based on Almaraz/Guzman, based on permanent disability, which was relatively small part of the market. That's a huge jump. Permanent disability is only 15-18% of system cost. Medical is around 50% and temporary disability and penalties fill in the rest. It is a significant increase in benefits for permanent disability if it's a 5% jump. It could be a big deal. The big cost driver is obviously medical because they're difficult to control. Medical care keeps growing and I'm not sure what will happen with that.
Is it realistic to deal for more cost-cutting reforms in exchange for increasing PD benefits?
I certainly think so…You can sidestep Almaraz/Guzman issues with a permanent disability schedule. One problem with the Almaraz/Guzman case is that they will increase litigation costs. It was one of the problems we had with the first Almaraz/Guzman case and the board said you can rebut this with anything and the defendant has to pay for it. We saw that on cases before Almaraz/Guzman...we had cases where we had $5,000 of vocational experts for $2,000 of injuries. The expenses on those cases are going to end up being a big deal. The second AG case is reducing that. With Ogilvie case...we see the litigation costs of increased depositions and increased litigation for more hearings because people don't know what to do with Almaraz/Guzman. They'll try to find out on the other end. When people disagree they end up with more litigation. [We need to] take treatment out of WCAB. Judges are asked to decide if something is [proper] medical treatment. They have to look at the pain management guidelines. How is a judge supposed to understand if [an injury] falls within the guidelines? They tend to just agree that it does apply and turn it over to a doctor. We need an independent medical review, and it might make some sense to address future UR. I'm not certain that we wouldn't be better off having that process going through a different stage and being decided by medical personnel instead of two attorneys and a judge. We should streamline the resolution process instead of having the board decide it, maybe an intermediary step.
Where do you see applicant attorneys focusing litigation in the future?
Applicant attorneys will always focus on permanent disability. There are two reasons. First, many are conscientious about medical care. Permanent disability benefits flow without applicant attorneys having to do very much. They can have an impact on what their clients get and that's what they get paid on. Permanent disability is again the focus of the income for applicant attorneys, so it's a practical matter. That's where they get paid and where they have the biggest impact. Now, they have all sorts of new and nifty tools. Some applicant attorneys have read the AMA guidelines 30 times, and can use it to win cases. They get creative on those issues.
Now that the federal health care bill has become law, what impact, if any, do you see that having on workers’ compensation and do you have any concerns?
One of my concerns would be the potential that such a step could result in even broader application of Medicare-type considerations in settlements. Our ability to settle cases is frequently restricted because of the Medicare set-aside requirements which are oftentimes much more expensive than my clients are interested in paying for settlement. Extension of this approach to federalized medical care across the board is likely to chill many C & R opportunities.
What is the effect of more than $1 billion in payroll being absorbed by the self-insured groups?
I'm not sure what it does. In the last 15 years, employers, especially self-insured employers, have become much more active in the decision-making process of workers' comp. They pay more attention than 30 years ago. 18 years ago, or so, they realized it was their money and took a much more active role. They're becoming much more influential in workers' comp on their bottom line rather than when carriers called the shots. Large employers are much more influential today. Carriers are interested in predictability and litigation costs, but employers are interested in total costs. Employers are more interested in the entire process and controlling all of the costs. It probably has helped to raise the level of concern over system costs and sparked reforms of the past 15 years. My wife, years ago, was appointed to a trade association. She asked her boss what her mission with the group was. He said she should advocate for insurance companies and that [she should] hate lawyers. "We're against whatever has to do with lawyers," he said. She came home and told me and I said tell your boss without lawyers you wouldn't have or need insurance.
What does the future hold now that Almaraz/Guzman & Ogilvie have been reconsidered? Will there be a benefits increase?
These are too unsettled now to know what’s going to happen. We’re probably three months or more from the Court of Appeals doing anything on them. I think some of these will go up to the next level. It could be up to two years before we get an answer. At this point we’re just waiting to see what’s going on. I do think there’s a possibility since we’re in the last year of the administration, there’s a change in the government’s policy, there may be some more feeling that there should be some give on the part of carriers and employers and they could strike a deal. I’m not close enough to that area to know. It would make sense and is a possibility. There’s a general perception that at the lower levels, there’s an under-compensation of permanent disability. SB 899 not only imposed the AMA guidelines, more objective guidelines, it would reduce PD ratings, which everybody expected, but they also reduced the number of weeks at lower levels. They’re being compensated less at the lower levels. Those kinds of considerations are driving this, these people need to be compensated more than they’re getting. Whenever the :egislature looks at it, it has to be a political issue.
Governor Schwarzenegger signed bills maintaining the right of injured workers to predesignate their own physicians (SB 186), tweaking utilization, and limiting the denial of benefits (AB 1093). What impact could these, if any, have on costs?
These are all really minor patchwork things. Few people actually predesignate their own physicians. There are considerable limitations on predesignation. It has never been a big deal. It's usually labor that predesignates. One had organized for all of their employees to show up at a union hall to predesignate a single doctor and [it wasn't even] going to work. He's not a primary care doctor. The limitations are fairly significant. Limiting denial of benefits might come up in half a dozen cases a year in the state. It's not a cost issue, it was a political issue. It's a slight change in the law, affecting a limited number of cases. It really only affects cases.
Where does the greatest liability lie in Medicare Set-Asides?
I don't think we have a clue. So far Medicare hasn't done anything with anybody who has set-asides. It will likely be employees seeking medical care with set-asides who can't get treatment. My clients are paranoid about Medicare. They want evaluations where clearly Medicare won't take a look at it. It's irrelevant if the cost is under $20,000. Many clients are very worried about it, even where they don't have to. As a practical matter its' going to be employees who are using set-asides for (medical care) and then they won't be able to get Medicare. We don't know the answers just yet.