Title: President, California Workers’ Compensation Institute
School: St. Bonaventure University, BA in English, graduated cum laude, 1968; Georgetown University Law Center (part of Georgetown University), juris doctor, 1971
Awards: JCI International, JCI Senator
Boards and Certifications: Member of the Bar in California, Virginia and Maryland: active in California, inactive in Virginia and Maryland
Inspiration: Board of Directors, CWCI
Favorite book or quote: I have a wide variety of interests outside of work: family; tennis; snow skiing; travel, especially ocean cruises; seeing performance art (plays, ballet, concerts); social dancing; playing Sudoku; reading; etc. I do not have one favorite book or quote.

The leading light of one of the pre-eminent workers’ comp institutions, Nolan has led CWCI since June 2001. He is a familiar face at seminars, hearings and workers’ comp events discussing some the many issues that affect the industry. No stranger to the insurance industry, he has worked for a number of insurance companies, usually in the role of general counsel. He always kicks off the CWCI annual luncheon with a rousing speech on the state of the industry.

What are the top three issues in California workers’ comp today?  
I would say labor and management resolution, of the permanent disability issue of benefits. Right now, it’s the key dispute that is dividing labor and management. Their resolution is key. I would say reducing the steep rise in medical costs [is an issue]. “Steep” is important because I don’t know that you’re going to eliminate, but you need to reduce the rise of those. The third [issue]: We need a user-friendly and working EAMS system. The fourth is an operational issue: I would say [the issue] is the use of predictability models by payers in handling their business. It’s a new issue just coming on the scene. I don’t know the impact, but I see that as a rising issue, particularly in the distribution system.

Are we headed for a hard market, and if so, when will it come? How long should we expect it to last? What are the repercussions?  
My sense is that we’re on the cusp of a somewhat hardening market, but we’re far from a hard market. I think there is still work comp availability in the system being provided. There is a strong competition. With those two elements, it’s hard to think the market is hardened, but it can be somewhat hardening.

What is in the State Compensation Insurance Fund’s future? Now that the governor says $1 billion of its assets are to be sold, will it happen and if it does, what will this mean for the carrier and the market as a whole?  
I don’t have a crystal ball, but I personally side with those who think that the sale of a significant amount of SCIF assets is very unlikely.

Are medical provider networks a help or a hindrance? How should they be improved?  
To me, medical provider networks are [tools], and a tool can be used in a way to make it a help or hindrance. It is the specific design and operations of a medical provider network that are important. A very targeted network I think has proven to be effective in empirical ways of reducing the average cost of an indemnity claim and getting an employee back to work. The challenge is having an effective medical provider network when your sphere of operation is the entire state of California. That and the regulatory challenges of staying in the regulations that make a medical provider network. The issues of [whether] a medical provider network [should] take all comers or participants…there are a lot of challenges. A properly run and designed network can have a positive effect for payer and injured worker.

How should utilization review be improved?  
The best way to improve utilization review is the establishment of a good-faith working relationship between payer and medical provider. This is something that falls outside of regulation and statutes. It’s an operational issue. Trying to handle everything through regulation is not as effective as establishing a good, firm working relationship between the two parties.

What needs to be done to improve return-to-work?  
I don’t know that there’s any one silver bullet. The only thought that occurs to me is … we have discovered what has stopped work. Bump-up and bump-down in permanent disability doesn’t have a significant impact in return-to-work. We know that a lot of return-to-work is at small employers and they have difficulty. I don’t know that there’s any one silver bullet except to keep pushing the issue and the employers to see that it’s in their best economic interest (and in the employees’). When they have that understanding, there are much better chances that return-to-work will be successful.

What do you see, other than medical, as the next big cost driver?  
There are several things. The unknown, at the present time, is what will be the outcome of Almaraz/Guzman and Ogilvie cases on permanent disability indemnity benefits. We don’t know at the present time. It’s possible that those cases will have an important impact on the system. That’s one I would say… we have a dysfunctional medical lien adjudication process. The third potential cost driver, which is unknown at the present time, is whether changes in payment management regulations adopted by decision will have a cost impact on the system. The severity of the impact of those two items is unknown.

Is it realistic to deal for more cost-cutting reforms in exchange for increasing PD benefits?  
I cannot imagine that labor or applicant attorneys will agree to any changes to the system, unless there is some sort of increase in permanent disability benefits. Something will have to be traded for it.

Where do you see applicant attorneys focusing litigation in the future?  
It would seem to me that, if I were an applicant attorney, I would certainly try to better implement these three new permanent disability cases. The permanent disability cases have sort of set out a general outline, but they have to be worked on a case-by-base basis. Moving these cases forward would be one. That’s one of the key elements of it that we’ll see: What’s the reach of these three new PD cases?

What role, if any, do you see workers’ comp playing in the Obama Administration’s health care debate?  
At the present time, none. Even though Jay Rockefeller attempted to get workers’ comp into the health care plan, that was unsuccessful. That attempt probably won’t be revived. In the future, it could be that once President Obama begins to focus on the cost side of health care and issues like evidence-based medicine, there may be a trickle-down of some of those concepts into the workers’ comp system.

What is the effect of more than $1 billion in payroll being absorbed by the self-insured groups?  
California is by far the biggest worker’s comp system. Self-insured groups play an important role. The regulations with respect to self-insured groups were recently revised to help ensure that California doesn’t suffer the same fate as a state like New York with respect to this. I personally see that there is a role for self-insured groups in a system as big as California, but it has to be a properly regulated and monitored so that it doesn’t run into the issues experiences in New York, regardless of payroll.

Are loss adjustment expenses leveling out or are they still climbing? What is the cause?  
Loss adjustment expenses are a factor of what it takes to handle a workers’ comp claim. The definition of loss adjustment is now going to be augmented by certain elements that were classified as medical cost containment and taken out of medical and put into loss adjustment expenses. Since the definition is changing to be more inclusive, the definition of medical is changing to be less inclusive. That in and of itself could increase loss adjustment expenses. It’s possible that [with respect to] the three new permanent disability cases, if it becomes common to challenge permanent disability ratings (which remains to be seen), there is a possibility that that challenge will become more expensive and increase loss adjustment expenses. If more medical decisions are declined or are modified, the treating physicians’ recommendations are taken in to court, that also would be a cost driver. There’s a mixture. There are also some areas that would tend to decrease them: if payers are conscious of their overhead cost and are looking for ways to reduce them. I don’t know how the two influences will finally net out. Right now it’s unknown whether these expenses will increase, level out or decrease. It’s the result of a lot of individual actions looking at this area of workers’ comp.

Is medical severity going to continue to climb or is it just a blip?  
It’s certainly not a blip, because it’s been increasing since 2006. Our research in this area has demonstrated that from 2006 forward there has been a steady increase in medical severity. I should point out that there’s a difference in medical cost vs. medical severity. Severity may imply we are going to see sicker people, instead of having the same mix of injured workers, but it costs more to service them. If we replace severity with the word “costs,” medical benefit costs have been rising since 2006, and there are probably more elements in place to push cost up than to bring it down.

Are there any changes to claims frequency?  
Claims frequency is a very technical number overseen by WCIRB. My best guess is that whatever changes there are, they would be moderate, instead of the strong swings that we saw a few years ago. California will probably track more closely. It is expected that we would come closer to national averages than to be a state way out of sync with those averages. That’s my best guess, not my representing. I don’t have a crystal ball.