PBGC may eliminate list

of 50 worst-funded plans

WASHINGTON-The Pension Benefit Guaranty Corp. may eliminate its controversial annual list of the 50 worst funded corporate pension plans.

A PBGC spokeswoman confirmed the agency is evaluating the future of the list and that a decision is expected next month.

The list first was published in 1990-with 1988 information-as a publicity and informational vehicle to encourage employers to improve pension plan funding. PBGC officials said the fear of adverse publicity that would result from being on the list would prompt companies to boost plan funding to get off the list.

But employer benefit lobbying groups and consultants repeatedly blasted the list. They said it unnecessarily alarmed plan participants about the safety of their pension benefits.

A PBGC spokeswoman said the decision would be made based on the list's current usefulness in light of legislation Congress passed in 1994. That legislation, among other things, requires employers with underfunded plans to accelerate contributions to those plans and requires firms to disclose underfunding to participants.

Since the list was first published, the PBGC's financial position has improved significantly. Its single-employer pension insurance program in 1996 enjoyed a surplus of $869 million, compared with a deficit of $1.5 billion in 1988.

The agency's financial health has improved because of fewer terminations of big underfunded pension plans, high investment earnings on assets the agency holds and increases in premiums it charges employers with underfunded plans.

Hudson looks at claim in recall

ROGERS, Ark.-Hudson Foods Inc. may file a claim with its general liability insurer seeking coverage for the costs of its record recall of 25 million pounds of frozen hamburger patties.

The recall, enlarged from an initial amount of 20,000 pounds, is the largest made in cooperation with the U.S. Department of Agriculture, a USDA spokesman said.

Hudson has faced problems with recalls of its meat products in the past few years. In March 1995, Hudson recalled 3.1 million pounds of ground turkey because some meat contained small particles of bone, a USDA spokesman said.

Colorado health officials last month found Hudson beef patties tainted with the dangerous E. coli bacteria, and 17 illnesses have been linked to the bacteria's DNA fingerprint, they report (BI, Aug. 18).

Last Thursday, Hudson shut down its Columbus, Neb., plant, which produces about 2 million pounds of frozen raw beef each week. Hamburger patties tainted with E. coli could have gone to supermarkets and fast-food outlets in 33 states.

Hudson has a retention of $150,000 for general liability coverage.

Hudson's director of risk management, Kent Doss, said Hudson was "in the process of gathering information" that would lead to a claim and that he did not know exactly on what basis a claim would be filed.

Mr. Doss also said Hudson could not yet estimate its total losses from the recall and plant shutdown.

The USDA spokesman pointed to Hudson's poor recordkeeping in its Nebraska plant as one reason for the recall expansion. "It's a very unusual situation for a large company not to know how much meat it's producing," the spokesman said. The USDA also is investigating Hudson's suppliers, the spokesman said.

Insurers sue over lab billing

HARTFORD, Conn.-The clinical laboratory division of SmithKline Beecham P.L.C. is facing a lawsuit charging the labs defrauded dozens of insurers through overbilling.

In the suit filed last week in U.S. District Court in Hartford, Conn., many of the largest U.S. health insurers accused SmithKline of illegal practices that included billing for tests that weren't performed and double billing. Plaintiffs include Humana Inc., Prudential Insurance Co. of America, Aetna Life Insurance Co. and a number of Blue Cross & Blue Shield plans.

The suit alleges violations of the federal Racketeer Influenced and Corrupt Organizations Act, which would permit treble damages.

SmithKline Beecham, headquartered in London with U.S. operations based in Philadelphia, said in a statement the claims are "grossly exagerated" and denied "defrauding any insurance companies."

The company said the issues in the suit are similar to those raised in a U.S. government case settled for $325 million earlier this year. However, "the legal standards are vastly different," the company stated.

SmithKline made changes to its testing and administrative processes in settling the government charges that it improperly billed Medicare and other government programs.

N.Y. surcharge deadline near

ALBANY, N.Y.-Employers that missed three previous deadlines to comply with New York's medical surcharge program have yet another chance to avoid stiff penalties.

Group health care plans that elect by Sept. 1 to pay the surcharges directly to a state health care pool administrator are not liable for additional surcharges that can total more than 50% of a medical bill. The state set three previous deadlines-Dec. 2, 1996, March 3 and June 2- for plans to make the election.

Under a 1996 New York law, a basic 8.18% surcharge is added to hospital bills for health care plans that agree to directly pay the surcharge to a state health care pool administrator. Employers with employees living in New York are liable for an additional surcharge based on where in New York their employees live.

Employers that failed to elect to pay the surcharge directly to the pool administrator by the earlier deadlines have been liable for surcharges of up to 57.27% of hospital and laboratory bills their employees incur in New York. The next filing deadline is Sept. 1 and would apply for bills incurred on or after Oct. 1. The higher surcharges would apply on bills incurred before then.

More than 29,000 employers, insurers and other health care plan payers have filed applications to pay the surcharges directly, according to the New York Department of Health.

Workers comp bill vetoed

ALBANY, N.Y.-New York Gov. George E. Pataki has vetoed a controversial measure that would have changed the basis for calculating workers compensation premiums for construction companies.

In his veto message, the governor said he endorsed the concept but not the bill's particulars.

Nationally, except in Washington state, the basis for determining workers comp premiums is total payroll multiplied by the classification factor, which is based on the job hazard.

The vetoed proposal, A.B. 6543, would have amended state laws to change the basis to the number of employee "hours worked" multiplied by the classification factor for construction companies.

In endorsing the concept of a change, Gov. Pataki said the "total payroll" formula is "unacceptable" for the construction industry, which pays relatively high wages in addition to carrying a high-risk classification. As a result, high-wage paying companies end up paying higher premiums that are not warranted by a corresponding difference in loss exposure over low wage-paying employers, he said in a statement.

Nevertheless, the governor said the bill was deficient because it would have raised premiums for upstate New York contractors an average of 25% and would have forced many of them into the state's market of last resort, creating solvency problems there. The bill also called for only a six-month implementation period, which was "too short," he added.

Representatives of the New York State Builders Assn., whose members employ more than 200,000 workers, mainly in residential construction, and several insurer trade associations opposed the bill. Critics contended it would encourage employers to fraudulently underreport hours worked because that information is not readily available or verifiable.

However, the governor left the door open for future proposals, saying he plans to work with labor and business interests to develop a more workable legislative proposal.

Law limits asbestos damages

SAN FRANCISCO-Asbestos companies' liabilities for pain and suffering damages in personal injury cases are limited to their degree of fault under a 1986 ballot initiative, the California Supreme Court has ruled.

The court said the June 4, 1986, deadline-the date the so-called "deep pockets" ballot initiative took effect-applies even if the claimant can prove the disease actually began prior to that date.

The 6-1 ruling last week in Buttram vs. Owens-Corning Fiberglas Corp. stemmed from a lawsuit filed by a Northern California man who did not discover his cancer until 1991. But evidence showed the disease had been developing in his body at least seven years prior to that discovery. The plaintiff, James Buttram, died in 1995 at age 52. He was exposed to asbestos while serving in the Navy during the Vietnam War.

Mr. Buttram had won a $1.5 million judgment for pain and suffering against Owens-Corning Fiberglas. The company appealed, saying that under Proposition 51, the award should be limited to $450,000. The appellate court ruled in favor of the manufacturer, and the Supreme Court upheld the ruling.

In the lone dissenting opinion, Justice Stanley Mosk complained that the ruling will deprive victims of full compensation. In deciding whether to apply Proposition 51, which was not retroactive, the date of the injury should be the time when physiological changes leading to disease began, he wrote.

Sale of Texas fund completed

AUSTIN, Texas-The former market of last resort for workers compensation risks in Texas is running off business under new ownership by a Swiss Reinsurance Co. subsidiary.

European International Reinsurance Co. Ltd. last week completed its $5 million purchase of the Texas Workers' Compensation Insurance Facility, which hasn't written coverage since 1993. The privatization was authorized by legislation enacted in the state this year.

The insurer was renamed The Facility Insurance Corp. and will be based in Austin, Texas.

Texas workers comp insurers are paying $58 million in assessments to the insurer to boost its loss reserves. The insurers in turn will receive stock in the facility, which could pay a dividend in 20 years depending on how the company performs. The dividend arrangement solved a tax issue regarding the stock that threatened to derail the sale (BI, July 14).

The Facility Insurance Corp. will purchase $600 million in reinsurance limits from European International Reinsurance.

Briefly noted

Attorneys representing Los Angeles-area homeowners filed a lawsuit Thursday in Los Angeles Superior Court seeking compensatory and general damages from Lansdale, Pa.-based Central Sprinklers Inc., the manufacturer of Omega fire suppression sprinklers (BI, Aug. 18). The attorneys are seeking class-action status on behalf of all residents and commercial owners in the United States who have purchased Omega sprinklers. Some of the sprinklers have failed to operate during certain tests. . . .Gov. George E. Pataki has signed New York's captive legislation bill. The law allows individual companies and groups to establish captive insurance companies in New York to write most property/casualty risks (BI, Aug. 11). . . .Gov. Pataki also has signed a bill that will require health insurers to cover chiropractic care. In a written statement, the governor said the bill strikes a balance between containing costs and providing access to health care. The law covers all plans issued or renewed as of Jan. 1, 1998. . . .An Oklahoma District Court judge last week approved a 60-day extension of a grand jury investigation into the Oklahoma State Insurance Fund, the state's large assigned risk plan, and overseer Terry Tyree. The judge also imposed a gag order on all parties. . . .A bill California's state Senate is weighing would require all employers that provide sick leave to permit employees to use paid sick days to care for a child, parent or spouse. A.B. 480 was authored by Assemblyman Wally Knox, D-Los Angeles.