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Clay A. Jackson
Self-Insured
By: Paul Stremple
Clay A. Jackson

Title: President & Chief Legal Officer, Affinity Group Administrators
Resume: Prior to AWTG, Inc./Affinity group administrators, Law Offices of Clay A. Jackson, P.C., County of Napa, Napa, California. Deputy County Counsel III, Sutter County’s district attorney, Yuba City, California, Special deputy, Porter, Scott, Weiberg & Delehant, Sacramento, California, Associate Attorney
Schools: Brigham Young University, Southwestern University School of Law
Awards: Woodbadge Award, 2004 and Eagle Scout with Bronze Palm, October 1978
Boards: Chairman, 2003 Pony Express District Friends Scouting Troop Committee Chairman, Troop 67 – 1997 to 2003. Orangevale Recreation and Park Board Vice-Chairman - 1995, 1998-12/2000. Board Secretary – 1994. CHAIRMAN, June 1993 to 1996 of the Orangevale/Linda Creek flood task force.

As a well-known advocate for self-insured groups, Jackson is a well-known presence at both the Legislature and at regulatory hearings where SIGs are the subject. He’s provided extensive comments challenging the necessity of making SIG financial information open to the public. Through his company Affinity Group Administrators, he demonstrates how a SIG can be properly managed. In the past he’s lobbied on behalf of tax breaks for SIGs and had significant input on regulations that impact both self-insured employers and SIGs. When he’s not working, he enjoys engaging in various shooting sports at his ranch in El Dorado County.

What are the top 3 issues in California workers' comp today?  
PD—it’s going to be interesting. You’ve got the department that came out with a proposed schedule, and they’re supposedly working on it. The other is medical cost containment. The cost of medical is going up. The third is the erosion of the reforms and where that’s going. The governor’s office isn’t going to touch it.

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?  
The market is cyclical. What goes up must come down. It’s been hardening. We’re still seeing carriers willing to write competitive business. You’re not seeing a lot of negatives in the rate filings. It’ll be sooner rather than later. If the erosions of the reforms take effect, it will affect the costs of workers’ comp. All of those are going to contribute to a harder market. The factors that go into the rates will affect the rates.

Are medical provider networks a help or a hindrance? How should they be improved?  
In theory they should work great. I’ve been to conferences and I’ve asked so are the MPNs working out and sometimes I’ve heard yes, but most of the time I hear no. It’s so easy to get around [the MPN] if you have someone who is savvy. To get the notice right, the burden is on your human resources department. It’s a procedural nightmare. There are just too many ways to knock it over. We don’t have an MPN, we have 30-day control. If you send the injured worker to a good doctor, they’re not going to switch. If they’re not happy [after 30 days], they can move over. If it’s something small, it’s done before the 30 days is over. Employees know you’ll choose wisely because you don’t want to lose control

How should utilization review be improved?  
The best reform was the utilization review. You’ve got the ability to question every treatment and accept it or deny it. You’ve got the ability to cut it down to something reasonable. There is too short of a fuse to get adequate review. The deadlines are so tight it puts too much pressure on the employers…There are so many files to look at. To make the deadline, a treatment just gets denied and that’s not appropriate, or it’s approved and that may not be appropriate. Some things don’t need to go through UR. A guy breaks his leg at work and the crutches get put through UR. The crutches shouldn’t go through UR.

What needs to be done to improve return-to-work?  
The problem with the return-to-work is I don’t think the employers are getting the benefit—the swing, the 15% bump-up/ bump-down. It’s either being negotiated away, or it’s not being awarded. It’s not just a yes or no answer. Even from the adjusters, we’re told we got the guy back to work and then we’re advised we didn’t get the credit. It needs to be enforced. From what I understand it’s not being awarded. The [Fair Employment and Housing Act] is more effective than return-to-work. They’re both good bully pulpits for attorneys.

What do you see other than medical as the next big cost driver?  
Liens are way out of control. Even if it’s UR denied there are still multi-thousand-dollar liens. I hear there is a lot of abuse of the lien process. You’ve got people willing to abuse the system, willing to play the system. Doctors have schedule. They have a billing office that knows what [a procedure] should cost. They bill at their regular rate instead of the schedule rate, but it’s not workers’ comp fraud. Why isn’t it fraud when you charge three times the amount? [Another cost driver.] Why aren’t we sending the UR notices through the Electronic Adjudication Management System? It’s supposed to be paperless, and it has to go through the mail. If the case stays open, isn’t that a cost driver? You can’t settle a case. I’m missing the efficiencies here. I don’t see who is benefitting. Probably the biggest cost driver is going to be the Medicare Set-Asides because no is settling. You have a $40,000 claim and half of it is going to be set-aside for Medicare that can’t be touched, so they’ll just stipulate to future medical care. You don’t have to worry about Medicare, but the claim is left open. With a compromise & release you have finality. Medicare Set-Asides are not helping things settle.

Is it realistic to deal for more cost-cutting reforms in exchange for higher PD benefits?  
It’s difficult to say without seeing what the cost-cutting reforms are that are being looked at. When the governor signed SB 899, he said if there is empirical evidence justifying a different PD schedule then there would be a new schedule. The problem lies with the Legislature. Doubling it was not his criteria. We don’t know what the intent was because it was done behind closed doors. It was done at 12 a.m. at a meeting we weren’t invited to. How can we fault the judges that are trying to divine intent? [We need] to come up with new evidence and then come up with a new schedule.

Where do you see applicant attorneys focusing litigation in the future?  
PD. They’re going to go after the three cases: Almaraz/Guzman and Ogilvie. They’re going to find them. They’re going to reopen cases and see if they can’t get more money.

Now that the federal health care bill has become law, what impact do you see, if any on workers’ comp?  
None of the health care bills provide an exclusion for occupational health. It might be said that workers’ comp was included because it wasn’t excluded. You can’t exclude it because of the indemnity—PD and TD. That’ll just go into Social Security. We can’t exclude health and safety because that’s who OSHA does, right? They’ll just come and inspect work places and train employers on safety. What’s left in comp? Medical is health care. This could eliminate the workers’ comp system. It’s more of a concern that no one is concerned.

What is the effect of more than $1 billion in payroll being absorbed by the self-insured groups?  
Employers that are in self-insured groups have more control over their insurance. Employees are real people, and they do get hurt. They want to enhance the quality of the treatment for their injured workers. We get to hire the administrator. We get to hire the TPA, and hire the components of the SIG. In a SIG you get control over your destiny. Our system is a good system. We have return-to-work programs. When you’re not trading people in and out, you have a lower caseload and better case handling.

If you're self-insured, are you seeing more or fewer claims during the recession?  
We’re seeing fewer claims.

Is a recession more or less likely to drive an employer toward self-insurance?  
It is less likely because of the capital requirements. The security deposits are the single biggest deterrent to group self-insurance. It’s a good thing. You shouldn’t get into group self-insurance for lower rates.

What needs to be done to keep California SIGs from suffering the same fate as New York's trusts?  
Follow the law. I know two code sections by heart, 15484(e) and 15476. [15484(e) requires that SIG rates be based on the annual actuarial study’s 80% confidence level, plus all expenses required to operate the SIG and post its security deposit. 15476 does not permit advanced premium discounts to members.] Why is it even an issue? New York’s new and improved regulations are still worse than our original regulations. We’ll have the Self-Insured Security Fund in the mix. It’s going to give us professionals. Making our financials open to the public? What effect would that have? What would an insurance company do with those? They would try to lower their rates, go after our market share and pull more people into insurance. All right, but that’s not the same thing as trying to prevent insolvencies. They’re not thinking about protecting the integrity of the system. The public really wouldn’t be in there inspecting the financials. They expect that the entity that’s regulating [SIGs] is going to do its job. Judge Taylor and the Commission came up with the right conclusion. Make sure the SIGs are financially sound. That’s why we’ve always said, let SISF have [the financials]. We were one of the first to go on the record that the Security Fund should see the financials. If they can get the financials there is really no reason for the bills (SB and AB). It was funny because the Commission on Health and Safety Workers’ Compensation meeting just before discussing the report on SIGs, they had a session on what caused the insolvency of insurance companies. Now you’re going to shoot at SIGs? We couldn’t have paid for better placement.