A California Jam
Oct 11, 2017


A wave of wildfires tore through Napa, Sonoma, and Mendocino counties this week, killing at least 10 people, injuring dozens of others, and destroying more than 1,500 homes and businesses. The fires destroyed several of the region's most prominent wineries and vineyards. Winds gusted up to 70 mph, creating flame walls nearly 100 feet high. Governor Jerry Brown declared a state of emergency for Napa and Sonoma counties. Monday's fires rank among the most destructive in the state's history. Coupled with natural disasters across the U.S. this year, these northern California fires will likely push the U.S. into a new record for casualty loss and devastation.



Last month, the Earthquake Engineering Research Institute reported that San Diego's Rose Canyon fault could trigger a 6.9 magnitude quake, resulting in up to 2,000 fatalities and $40 billion in property damage. Only 12 percent of Californians with home insurance or rental insurance have earthquake protection. Unlike flood, there is no national, government-backed program to insure people against earthquake damage. But following the repor, and with recent quakes in Mexico, California has seen a rise in demand for coverage through California Earthquake Authority, a state-run non-profit organization that creates earthquake insurance policies which are sold by private insurance companies.



The Federal District Court for the Northern District of California ordered the Interior Department to reinstate an Obama administration regulation aimed at restricting methane emissions from oil and gas production on federal lands. The methane rule, finalized last November, forces energy companies to capture methane "flared" at drilling sites on public lands. An estimated $330 million a year in methane escapes into the air through leaks or release, enough to power about 5 million homes annually.



Governor Brown signed into law this week AB 1641. This law will give the California Department of Insurance (DOI) more flexibility in deciding whether to add surplus insurance coverage for the "Export List," or a list of risks where the availability of primary coverage in California is limited or cost-prohibitive. The measure previously passed unanimously through both chambers of the California legislature. Advocates for the expansion of surplus lines maintain that AB 1641 will ensure coverage for emerging technologies, like high-speed rail and autonomous vehicles, as well as the state's valued horticulture, now including recreational cannabis. September was one to remember, and there are many reasons to keep our eyes on California.

Medicare & Medicaid Revisited


This week the U.S. House of Representatives unveiled the HEALTHY KIDS Act of 2017, which includes a five-year extension for the Children's Health Insurance Program (CHIP), a measure that provides low-cost health insurance to 9 million children. The legislation passed the House Energy & Commerce Committee and is expected to be considered on the House floor in short order. Significantly, the bill contains a two-year postponement of a "pay for" provision we have been watching called, "Medicaid Strengthening Third Party Liability." This measure would have allowed state Medicaid offices greater latitude to pursue full lien recoveries against entire civil settlements, instead of the Supreme Court's guidance on Medicaid's "pro-rata" recovery rights on medical damages.



We previously reported that CMS issued a MedLearn article to medical providers which called for Medicare beneficiaries to alert providers of set aside funds related to workers' compensation, no fault, or liability settlements. The MedLearn article instructed providers to bill the set aside administrator and not Medicare. Following this missive, we participated in a meeting at CMS to discuss the implications of releasing a new liability set aside protocol without a full vetting of the overall LMSA program among the affected stakeholder groups. This week, CMS rescinded the MedLearn article. We will keep you up-to-date on the development of the LMSA process.

Making Our Way Around the Country


The National Academy of Social Insurance released a report called, "Workers' Compensation: Benefits, Coverage, and Costs." The report is based on 2015 data. The report examined the costs and benefits of workers' compensation as a share of payroll and concluded that benefits per $100 of payroll fell from $0.92 in 2014 to $0.86 in 2015—the lowest level since 1980. Meanwhile, workers' compensation employer costs per $100 of payroll dropped to $1.32 in 2015 - the fourth lowest level since 1980. In aggregate, workers' compensation benefits paid in 2015 were $61.9 billion, a 0.7 percent increase from 2011. Aggregate employer costs for workers' compensation coverage increased by 20.1 percent across the same period, reaching $94.8 billion in 2015.



President Donald Trump proposed a new flood insurance plan that would fundamentally change the National Flood Insurance Program (NFIP). The White House Office of Management and Budget (OMB) sent a letter to Congress calling for a proposal to prevent homes built in flood plains after 2020 from obtaining insurance under the program. Those homes could instead seek private coverage, if available. The White House plan would continue insurance for existing homes within the 100-year flood plain. The current extension on the NFIP lapses on December 8th.



Montana is preparing to adopt a closed drug formulary for injured workers. The state's Labor-Management Advisory Council voted unanimously to begin using the Official Disabilities Guidelines (ODG) formulary, which is used in Texas, Oklahoma, Arizona, and Tennessee. The state will commence with project planning. We'll watch Big Sky Country for these developments.



Yesterday marked the 25th annual "World Mental Health Day." The campaign's organizer, the World Federation of Mental Health, seeks to raise awareness about mental health issues around the world and mobilize efforts to support mental health. This year's theme is mental health in the workplace, examining how the workplace experience can be improved to promote mental health and wellbeing. In the wake of distressing and rapidly breaking news in recent weeks, we commend these efforts and wish you much wellness along the way.

About The Way

The Way is Gallagher Bassett's weekly governmental briefing on state and federal affairs that affect our industry. We thank you for starting your Wednesday morning with us. Please be sure to follow #GBTheWay for additional news and updates as we make our way throughout the country on the issues affecting our industry. For more information, please connect with GB on LinkedIn, follow us on Twitter, or contact the authors, Greg McKenna or Cari Miller, directly.



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