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Archive | October, 2004

INSURANCE COMPANY PROFITS UP,INJURED WORKERS’ CARE DOWN Injured workers can’t get care, employers can’t get relief Why Aren’t Employers Paying Attention?

Posted on 30 October 2004 by admin

SACRAMENTO, CA – Amid widespread refusals of needed medical care for injured workers, insurance companies are reporting huge profits. “Injured workers’ care has been tied in knots,” said California Applicant Attorneys President Art Azevedo. “After seeing profits more than double in 2003, the insurance industry is reporting continued profit growth in 2004. Mid-year results are in for most companies, and profit increases range from merely impressive to spectacular. It’s clear that the millions saved by forcing injured workers to live in pain is going directly into insurance companies’ pockets. “Although the reported data shows nationwide results, some available data on California workers’ compensation insurance clearly shows that it is among the most profitable lines. Nevertheless, the industry continues to insist that rate decreases are “premature” and, in fact, the most recent proposal from the industry’s rating bureau was to increase rates next year.

The 2003 results were reported by Weiss Ratings, which found that national profits for the property-casualty industry grew from $13.5 billion in 2002 to $32.3 billion in 2003. For California workers’ compensation the results have been similar. As reported by the Workers’ Compensation Insurance Rating Bureau, the 2003 loss ratio ? the percentage of collected premium paid out in claim costs – dropped by 25% from 75.5% in 2002 to just 57.1% in 2003. In fact, the industry hasn’t seen a loss ratio that low since 1993 – 1994, and it was the excessive profits being earned by the industry at that time that lead directly to the elimination of the Minimum Rate Law!

The reported mid-year results for 2004 continue the trend of steadily increasing profits for the insurance industry. Zenith National Insurance Company reported 2004 second quarter net income of $24.8 million, up more than one-third over the $18.4 million in 2003. Even more remarkable, income from workers’ compensation operations – this represents premium income after subtracting claim costs and expenses – grew from $8.0 million in the first half of 2003 to $41.9 million in 2004, and increase of 424%! Zenith had a combined ratio (the ratio of premiums to claim costs plus expenses) of 90.3% in the first half of 2004, compared to a ratio of 97.4% in 2003. This means that Zenith’s profits increased by an additional 7% of the premium from 2003 to 2004. Including the investment income earned by Zenith, the company’s average return on equity for the first half of 2004 was 24.4%, up significantly from a still very profitable 18% in 2003.

Other insurers reported similar profit increases in the second quarter of 2004. The Everest Re Group reported a 62.8% increase in after-tax operating income for the second quarter of 2004 compared to 2003. Net income, which includes realized capital gains, was up 140.9% during the second quarter. Everest’s combined ratio for the first half of the year was 91.1%, down from 94.5% last year. AIG saw its net income excluding realized capital losses jump 19.2% to a record $3 billion, and had a 92.35% combined ratio for the first half of 2004. The American Financial Group saw a net income growth of 83%, climbing from $30.5 million in the second quarter of 2003 to $55.9 million in 2004. The combined ratio for the American Financial Group in California workers’ compensation insurance dropped from 96.3% in the first half of 2003 to 92.5% in 2004.

For Liberty Mutual, net income rose 106% during the second quarter, and was up 227% for the first half of 2004. The 6-month net income grew from $211 million in 2003 to $691 million in 2004. Hannover Re reported a net income growth of 30.2% for the first 6 months of 2004. Net income for the first half of 2004 for the Hartford Group topped $1 billion, with a combined ratio of 91.4% for its property-casualty operations, down from 96.0% in 2003.

The insurance industry often criticizes similar reviews of insurer profitability because most of these figures represent profits earned in all lines of insurance and in all states where that insurer operates. The industry claims that these particular insurers may be profitable on a nationwide basis, but that doesn’t mean that workers’ compensation insurance in California is profitable. However, the data shows that the industry complaint is baseless. For example, the data reported for the American Family Group shows a separate accounting of California workers’ compensation insurance results. As noted above, the combined ratio for the first half of 2004 was 92.5%, meaning that the insurer is making a profit of 7.5% on every dollar of premium it writes – even before earning investment income. Since insurance companies typically generate all of their profit from investment income, earning a 7.5% profit even before consideration of investment income demonstrates the high profitability of the company’s California workers’ compensation insurance business.

Likewise, the results of the Zenith show how profitable workers’ compensation insurance in California is for the industry. Zenith writes only workers’ compensation insurance, and almost two-thirds of its premium comes from California (that’s up from last year, showing that Zenith is expanding its business rapidly in California). With a combined ratio of 90.3%, Zenith is earning a profit of almost 10% on its premium, without even considering its investment income! With its return on equity growing to 24.4% for the first half of 2004, Zenith’s results clearly demonstrate that the California workers’ compensation insurance market is already very profitable and that profit margins are still growing.

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INJURED WORKERS’ DEATH TOLL MOUNTS: “Injured Workers are Treated Worse than Prison Convicts”

Posted on 14 October 2004 by admin

SACRAMENTO, CA – Connie Cardinalli, the widow of John Cardinalli, Jr., an injured electrician who committed suicide in despair after fighting unsuccessfully to get the care needed to recover from his work injuries, told a State Capitol news conference today that “the workers’ comp system treats injured workers worse than convicts in prison.” Ms. Cardinalli blamed her husband’s suicide on “a never-ending battle with a system that was never on his side.” Ms. Cardinalli charged that “company doctors want to overmedicate and not treat the injured workers.”

John Cardinalli is the second injured worker to commit suicide since the latest round of cuts in care and benefits passed in April. Ms Cardinalli charged that the workers’ compensation system failed to provide effective psychiatric care, rehabilitation or hope to her husband, “My husband did not take his own life, he was murdered by a system that ignores, delays and avoids the needs of the injured worker.”

John Cardinalli was 43 years old when his life ended. The Manteca resident had worked as a production worker and electrician for many years, and developed back injuries while on the job. John had a failed back with intractable pain. After years of dealing with disabling pain, and after a request for psychiatric care was not approved, Mr. Cardinalli killed himself on August 15th by overdosing on pain medications.

Connie Cardinalli blasted the cuts in workers’ comp benefits and the failure to provide timely treatment, “The only thing my husband wanted was relief from his pain and to return to work. For three years he did everything asked of him, followed all the rules, but still never received all of the help or medical attention needed and requested by his doctor, including psychiatric counseling for the depression resulting from all the pain and problems he was going through.”

Ms. Cardinalli criticized Governor Schwarzenegger for the most recent cuts in injured workers’ care and benefits. “The new reform Governor Schwarzenegger speaks about will not improve the system or help the injured worker. His words are lies and carry no weight. Injured workers live with the reality of a system that has no respect, care, understanding or human feeling towards the injured worker. The system ignores, delays and avoids the needs of the injured worker.”

On the day of his injury, John was earning $40 per hour, plus benefits. After his injury, the Cardinalli family suffered severe financial hardship as a result of the failures of the workers’ compensation system.

Failure to Provide Vocational Rehabilitation and Disability Payments
Due to recent cuts in vocational rehabilitation for injured workers, John reached the $16,000 cap in November of 2003 and then was referred to State Disability Insurance (SDI). But due to delays by workers’ compensation system and the failure to respond to SDI, John didn’t receive any payments from SDI for months. That failure to provide needed disability payments forced Connie Cardinalli to find and work a second job to keep the family’s home. “In the last three years, we’ve lost over $75,000 per year, we lost our boat, vehicles and were forced to file bankruptcy, destroying perfect credit we worked very hard to establish. At the end, John couldn’t even afford the gas to get to school to retrain for another job.”
Failure to Provide Psychiatric Treatment
John’s treating physician had requested psychiatric treatment, but the care was not approved. Like so many other requests to meet the legitimate needs of injured workers, it was simply ignored.

John’s attorney, Sharon Kelly, told the news conference that John’s case is typical of the ways the workers’ compensation system fails tens of thousands of injured workers, “In vocational rehabilitation, John was attempting to get his certification in construction inspection, but there was not enough money under the recently-imposed cap to complete his schoolwork. Now, there is no rehabilitation for injured workers.”

Ms. Kelly also noted that John had been dissatisfied with the doctor the company had provided, and that he had requested to change doctors, which was denied. In January 2005, all injured workers will be forced to see only the company doctor. Workers like John would even be forced to leave the doctor currently treating them. “John was receiving injections and a variety of medications. Although it was chronic pain and the associated depression which led to his death, pain will not be considered in the new Permanent Disability schedule that the governor is currently developing as part of the most recent cuts.”

“John Cardinalli’s demise at the hands of the workers’ compensation system is just one of thousands of horror stories currently taking place across our state,” said David Rockwell, president-elect of the California Applicants Attorneys Association, whose members represent injured workers.

Rockwell added, “The Governor has broken his promise to make sure medical care is available to injured workers. How many more deaths will it take to get the policymakers in the Legislature and the governor’s office to recognize that the system that is supposed to care for injured workers is broken. Injured workers are paying the price for the greed of insurance carriers that is forcing injured workers to give up their doctors, give up their homes and financial assets, and eventually give up hope altogether. This is a crisis and there will be more deaths. Responsibility for those deaths should be laid precisely where it belongs: at the governor’s office door, and the doors of the insurance carriers who are refusing to meet their obligations.”

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