House Hearing Praises OSHA's VPP, Stresses Need for Program Integrity

Jun 29, 2012 – EHS Today

In a June 28 House hearing surrounding OSHA's Voluntary Protection Program (VPP), witnesses largely praised the program's ability to help reduce injuries and illnesses, improve safety culture and cut costs for employers – but they also stressed the importance of oversight, accountability and program integrity.

VPP recognizes employers who go above and beyond federal standards in order to improve health and safety in their workplaces. In exchange for passing a rigorous application process and maintaining low injury and illness rates, participating VPP sites are exempt from OSHA inspections.

In his opening statements at the House Education and Workforce Committee's Subcommittee on Workforce Protections hearing, Subcommittee Chairman Tim Walberg, R-Mich., praised VPP's benefits but added "VPP is not without its weaknesses" and referenced the 2009 Government Accountability Office (GAO) report that criticized OSHA's oversight of the program. As Rep. Lynn Woolsey, D-Calif., expressed during the hearing, "There must be better OSHA oversight so that those who do not belong in VPP are removed."

Jordan Barab, deputy assistant secretary of labor for OSHA, who explained that the agency has since worked to address many of the concerns in GAO's report, said OSHA must focus on the integrity and quality of VPP.

"We do not want a few bad apples to spoil the bunch," Barab said.

OSHA Seeks Balance

R. Davis, Layne, executive director of the Voluntary Protection Programs Participants' Association (VPPA), testified that VPP can prompt a culture change within participating sites, can reduce injuries and illnesses and help employees feel more valued and more likely to look out for the well-being of their peers. Participating companies also must demonstrate that they are working to improve their safety programs and results, which "assures VPP sites can address hazards that are new or emerging to the workplace," he said.

Layne did express disappointment that OSHA's FY 2013 budget request, which included an overall increase in funds for the agency but a decrease in OSHA compliance assistance, including VPP. Part of OSHA's challenge in managing VPP lies in the program's rapid growth – the number of VPP sites doubled after 2003, according to Barab – and making use of the agency's resources to strike a balance in its various enforcement and compliance efforts.

"OSHA is committed to VPP as well as our other cooperative programs, but we need to make difficult decisions to allocate limited resources," explained Barab during the hearing. "We have, over the last several years, increased our enforcement presence. We need to have a balanced program. Our program is not balanced, especially in whistleblower [protections]. Workers need to be the eyes and ears of OSHA, otherwise it won't work."

Documenting VPP's Benefits

David Levine, a professor of the Haas School of Business at the University of California – Berkeley, co-authored a recent study that found OSHA inspections reduce occupational injuries and their associated costs without negatively impacting company performance or profits.

"The bottom line is the inspections we studied did what they were supposed to do," Levine said. "They reduced the number of injuries by 9 percent … and reduced the cost of those injuries [in terms of workers’ compensation costs] by 26 percent."

Based on Liberty Mutual estimates, Levine added, it appears each safety inspection is worth between $98,000-107,000 to an employer over 5 years. Altogether, safety inspections may save employers billions of dollars.

What VPP lacks, Levine suggested, is what his study offered OSHA inspections: the "rigorous evidence" that proves the worth of the program.

"VPP Saves Lives"

Mike Lee, vice president and general manager of Nucor Steel Decatur, testified that a safer workplace means healthier employees and better morale. Nucor Steel has 20 VPP sites and is the nation's largest steel producer.

"VPP is not top-down or bottom up approach, it's a partnership," Lee said, which means employees must be trusted and empowered to take responsibility for safety, and management must actively participate in the company's safety efforts. And it's a system that Lee believes in. "VPP saves lives and Newcore Corp. is proud to be a part of it," he said.

"We've been a participant in the OSHA VPP program for nearly 20 years," added Rob Henson, a process technician at the chemical refiner LydondellBassell, who also testified at the hearing. "Safety is truly a No. 1 priority at my facility … Participating in the VPP program has allowed our safety and health programs to be driven by our employees."

Voluntary Enforcement: Not Enough?

According to the nonprofit consumer advocacy organization Public Citizen, however, voluntary enforcement is not enough. In a statement issued on June 28, the organization argued against allowing industries to regulate themselves, and added that the lawmakers in the House hearing are "misguided" if they believe voluntary enforcement of occupational safety is enough to keep workers safe.

"While Public Citizen applauds the willingness of some employers to step up and go above and beyond the language of the required federal statue to protect their employees, scheduled OSHA inspections remain necessary," said Keith Wrightson, worker safety and health advocate for Public Citizen's Congress Watch division.

After an employer applies to OSHA to qualify to be in a VPP, OSHA performs a rigorous inspection. If the employer is granted VPP status, the designation is good for 3-5 years. Lisa Gilbert, acting director of Public Citizen's Congress Watch division, called enforcement and inspections "absolutely necessary to deter employers who may neglect workplace safety and health."

"The House Education and Workforce Committee should consider the need for federal oversight before moving to promote safe workplaces through voluntary programs alone," Wrightson concluded.

If you're an employer who wants to have the safest possible workplace and you you're always looking to impliment the best safety programs like OSHA's Voluntary Protection Program (VPP), then you should consider having a workers comensation premium recovery audit review, where your company will obtain workers compensation refunds and savings on prior years, as well as future savings for you to keep. These workers compensation refunds for your company can be used towards implimenting better safety programs.

A New Jersey court rejected an occupational stress claim by an employee. This is a major victory for employers and a good example to follow. However, although in this case the judge ruled in favor of the employer, often times employees file claim petitions against their employers claiming an occupational injury and usually the employer ends up settling for a large sum of money. In turn, the employer's experience modification rises and their workers compensation premium goes up. Through workers compensation premium recovery, we can go back and recoup overpaid premiums and obtain
workers comp refunds for employers.

Employee could not prove objectively verified stressful conditions

John H. Geaney – June 27, 2012

New Jersey has a sensible occupational stress standard, namely that the person claiming work stress as a cause for psychiatric illness must prove objectively that the work conditions were stressful.  Since all employees experience some degree of stress, this standard is not very easily met.

In Knight v. Audubon Savings Bank, A-0173-11T1 (App. Div. June 26, 2012), Jeanne Wright alleged that her boss, the chief residential loan officer and vice president, screamed at her and gave her such negative job reviews that she became incapacitated with stress.  Three co-employees testified on behalf of petitioner.

Respondent first proved that the petitioner’s actual written performance evaluations were consistently good for several years.  Although petitioner perceived them as negative, her rating was consistently “good.”

Secondly, at the time petitioner left her employment and filed for disability benefits on February 3, 2010, her mother was dying.  She told other employees that there were problems with her mother’s hospice care.  That created an inference that work stress was not the real reason for her separation.

Third, the testimony of her co-employees did not fully support her case.  All the employees said that petitioner had a strained relationship with her supervisor, but that was the only point they agreed on.  One employee said that he never saw the supervisor yell at petitioner, although he himself had been yelled at by the supervisor.  He also said he did not consider the expectations placed on petitioner at work to be unreasonable.  The second witness said that she perceived petitioner and her boss as being equally provocative.  She heard petitioner goad her supervisor on several occasions.  The final witness said that she never heard any loud disagreements between petitioner and her boss.  She did not consider the supervisor to have been inappropriately harsh with petitioner.

Respondent offered testimony from lay witnesses as well, all of whom disputed that there was any yelling at work and who said they thought petitioner left work to care for her mother.

The testimony of the expert psychiatrists in this case was completely at odds. Petitioner’s expert said that her depression and anxiety were caused by work conditions.  However, he admitted that he had been unaware that her evaluations were in fact good, and that she had been taking anti-anxiety medication since 2003 or 2004.  The respondent’s expert opined that petitioner had a personality disorder and a depressed mood due to her mother’s death.

In the end, the Judge of Compensation focused on the fact that the job evaluations were not really negative.  They contained remarks about needing to improve, but they were mostly positive.  The Appellate Division affirmed:  “As the judge observed, the only witness who described highly stressful workplace conditions was petitioner.  Her statements were refuted by other witnesses, however, and by several years of written performance evaluations.”

This case is a textbook example of how an employer can successfully defend a stress claim.  Testimony from employees disputing the allegedly stressful work conditions is crucial.  Proving that petitioner simply misapprehended her job evaluations as negative was also decisive. Occupational stress cases rise or fall on the facts, not so much on expert opinion, because the expert only knows what the claimant provides to the expert. Hence, practitioners must pin down the facts through testimony from witnesses with a particular focus on whether there is objective evidence of work stress.

(Reuters) – Insurer Travelers Companies will pay $10.5 million in refunds and penalties for violations of California insurance law in 2006, the state's insurance department said on Monday.

Travelers will refund $9 million to customers and pay a $1.5 million fine for violations in the first six months of 2006, the state said.

Examiners looked at nearly 1,300 policies and found about 220 errors, mostly related to improper underwriting or the improper application of rates.

The state noted it received "extraordinary cooperation" from the company in the course of its probe.

A Travelers spokesman could not be immediately reached for comment.

Insurers settle with N.Y. over comp overcharges

January 9, 2011

(Business Insurance) NEW YORK—Four insurance groups last week agreed to pay New York state nearly $120 million to settle workers compensation fee discrepancies.

ACE Ltd., Zurich Financial Services Group, CNA Financial Corp. and Pennsylvania Manufacturers' Assn. Insurance Co. agreed to the settlement to resolve allegations that they collected too much in workers compensation fees, the New York state attorney general's office said in a statement.

The New York State Workers' Compensation Board charges an annual fee of insurers that place workers comp business in the state, and insurers cover those fees with premium surcharges passed on to policyholders.

In 2000, the WCB adopted a new calculation method to determine the policyholder premium surcharges. As a result, some insurers collected too much from policyholders while others collected too little, according to the statement.

Former New York Attorney General Andrew Cuomo, who became governor Jan. 1, led the investigation after the state passed legislation in 2009 and 2010 to forbid such overcharging and recover the money from insurers.

Insurers said the discrepancy was ongoing since the 2000 shift, which created discord over how the annual surcharges were to be collected.

In a statement, Zurich-based ACE said it was “pleased to resolve this issue, which has impacted all insurers that wrote workers compensation coverage in New York since 2000.”

ACE, which agreed to pay $70 million under the settlement (see chart, page 3), said “the issue was caused by two conflicting state rules that created a discrepancy between the surcharge and assessment formulas that support the operation of the New York workers compensation system. This discrepancy resulted in the accumulation of funds over many years.”

ACE said the company fully complied with the state to collect specific premium surcharge amounts from policyholders and “made numerous attempts to address this issue with the state.”

In an e-mail, a spokesperson for Zurich said the insurer entered into an agreement with the WCB and New York attorney general to pay $37.5 million, which “resolves a difference of opinion as to the proper legal interpretation of laws enacted in 2009 and 2010 that imposed one-time assessments on certain insurers writing workers compensation insurance in New York.”

A spokesperson for Chicago-based CNA said the $5.75 million payment of excess funds to the state is neither a fine nor a penalty and that policyholders were not overcharged as far as premiums were concerned. The discrepancy was between how the surcharges were calculated by the WCB after 2000, the spokesperson said.

“The settlement resolved the issue created by a discrepancy in the definition of premium issued by the New York Compensation Insurance Rating Board and the New York workers compensation law,” Blue Bell, Pa.-based PMA Insurance Group said in a statement. PMA also said the state did not allege that policyholders were overcharged.

“I am pleased these members of the insurance industry and the state were able to reach an accord and hope that the spirit continues for the betterment of all New Yorkers,” WCB Chair Robert Beloten said in a statement.

The New York attorney general's office said the four insurers cooperated fully with the investigation. Other insurers that collected too much in surcharges should follow their lead “or they will be brought to justice,” Mr. Cuomo said in a statement issued before he became governor.

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Workers’ Compensation results are a drag on the P&C insurance industry’s numbers, producing a combined ratio that is 7 points worse than the industry as a whole, according to Fitch Ratings.

In a new report, Fitch says Workers' Comp came in with a statutory combined ratio of 117.2 for 2011, about 9 points worse than the commercial-lines aggregate for last year. During the five-year period from 2007-2011 the line generated a combined ratio of 108.5, about 7 points worse than commercial lines collectively.

Since 2006 premium volumes have fallen 23 percent for Workers’ Comp, which the report attributes to “numerous factors” including intense price competition and effects of the recession.

The line is also plagued by sharp increases tied to medical costs. Medical severity from Workers’ Comp rose at an average rate of 4 percent annually from 2007-2011, the report notes, citing statistics from the National Council of Compensation Insurers (NCCI).

“Recent premium rate increases in Workers’ Compensation are an encouraging sign that the market has reached a cyclical bottom,” Jim Auden, Fitch’s managing director, says in a statement. “However, claims costs will continue to be affected by rising medical severity, and premium rates will need to improve significantly for the market to reach an underwriting break-even.”

Fitch says that Workers’ Comp shifted back to positive written-premium growth of more than 7 percent last year thanks to economic improvements producing more jobs, as well as rate increases in the line during the second half of 2011.

Josh Youdovin, vice president of insurance research for global third-party insurance asset manager Conning, says in its  “Mid-Year 2012 Wokers' Compensation Insurance Segment Report" that the line has had the “highest combined ratio relative to other casualty lines of business since 2006.”

Medical inflation and increased use of narcotics will have a negative impact on Workers’ Comp profitability, Youdovin notes. With rising loss costs and premium-rate inadequacies from past years, reserve releases are “likely to diminish or end for many companies, exerting more financial pain.”

While rates are firming, the line has not yet entered a hard market—and one is not on the horizon, in his opinion.

“It is a fear of downgrades or inadequate capital, leading to withdrawals of capacity from some competitors, that tends to lead to a hard market,” Youdovin adds.

According to Fitch, the Workers’ Comp market is seeing a shift as state funds and residual markets are shrinking their policy counts. In terms of net written premium, over the five-year period from 2006-2011 AIG has lost ground to Liberty Mutual as the No. 1 writer of Workers’ Comp.

In 2011, Liberty had 10 percent of the market, taking the top slot, while AIG held just over 9 percent and is ranked second. However, Liberty’s net written premium is down more than $1 billion over the five-year period to just over $3.5 billion.

Fitch notes that both Travelers and The Hartford have significantly increased their Workers’ Comp premium over the five-year period, almost doubling their share of the market and rising to third and fourth place, respectively.

This article points out that the workers compensation insurance line has had the highest combined ratio relative to other casualty lines of business since 2006. New York has already requested an 11.5% rate increase effective October 1, 2012 after an already big increase in 2011. New Jersey had a rate increase of 6.9% and many other states have made increases as well. With poor loss ratios and big rate increases, plus the upcoming experience rating split point change (which will make bad experience mods worse), workers compensation premiums are on the rise. The fact is that when the new experience mod split point value takes effect in 2013, it will use claims from 2011, 2010, and 2009, all of which has already occurred. The claim experience for most of the 2014 and 2015 experience mods have already occurred as well. Considering that most of the experience in the 2013, 2014, and 2015 experience mods have already passed, implimenting safety programs to curb workers compensation costs in the upcoming years is no longer an option at this point. There is only one solution to making sure your company has a better experience mod to enter the renewal marketplace with. WORKERS COMPENSATION PREMIUM RECOVERY is the fastest and quickest way to recover workers compensation overcharges on prior years, obtain workers compensation refunds, and have future savings for you, the employer, to keep.