Liberty International Canada Holdings Limited

Liberty International Canada Holdings Limited (Liberty Canada) is a leading supplier of supplementary health products and services. Liberty also sells commercial and personal insurance and is a major player in the area of occupational health and safety programs. Liberty Canada has operated in Canada since 1938 and has $750 million in Canadian assets. Liberty Canada employs about 1,300 people in 80 offices across the country. Many of Liberty’s clients are in Ontario and 60 percent of them are associated with the broader public sector.

Liberty International Canada Holdings Limited is a subsidiary of Liberty Mutual Insurance Group headquartered in Boston, Massachusetts. Liberty Mutual, with assets in excess of $65 billion (assets consolidated and under management), is the largest provider of workers’ compensation insurance and services in the US and one of the largest insurers in the property and casualty industry. Liberty Mutual was founded in 1912 when Massachusetts’ first workers’ compensation law created a new niche in the industry. Liberty Mutual now employs over 22,000 in over 450 offices in Canada, the US, Mexico, Japan, Ireland, Argentina, Bermuda, Venezuala and the United Kingdom. Liberty Mutual operates outside of the United States under Liberty International, a wholly owned subsidiary created in 1993.

Liberty Canada consists of:

Liberty Health provides supplementary health benefits and related services to more than two million individuals and 5,000 employee groups, private corporations, universities, and public sector employers. Liberty Health was formed when the Liberty Mutual Group acquired the assets of non-profit Ontario Blue Cross in February 1995. Liberty Health has a provider network of over 200 hospitals, 2,400 pharmacies and 2,500 dentists. When Liberty bought out Ontario Blue Cross, Blue Cross had a net annual income of $19.1 million. President Gery Barry told the Globe and Mail that profits were down in 1996 and added that Liberty Health plans to “grow revenues and profits”.

Liberty Risk Services provides loss prevention, occupational health and safety and workers’ compensation consulting services and products to Canadian companies, multinational companies with Canadian operations, and public organizations. Liberty Risk was opened in May 1994 and provides such things as workplace safety audits, machinery safeguarding programs, transport safety programs, ergonomic design studies, property inspections and industrial hygiene services.

Liberty International Canada sells property and casualty insurance to large corporations as well as loss prevention and risk management services.

Liberty Insurance Company of Canada sells personal insurance such as automobile, homeowner and life insurance policies. In 1997, Liberty purchased Prudential of America General Insurance Company (Canada) from Prudential of America, the single largest insurance company in the United States.

Privatization

Liberty has been situating itself to become the leader of private health care insurance and management in Canada. Its takeover of non-profit Ontario Blue Cross in 1995 represented a major step in this direction. “As the Canadian public health care system continues to evolve, this acquisition will help make Liberty International the private market health care alternative of choice in Canada.” As federal government funding for health care dwindles and provincial governments shorten the list of insured services, corporations like Liberty have greater opportunities to expand and profit from private health care management, insurance, and delivery.

In March 1996, Liberty was one of the sponsors of a “Summit on Access to Quality Health Care for All Canadians” subtitled “Making a good system better: public-private partnering”. Co-sponsors of the closed-door summit were MDS Health Group Ltd., SHL Systemhouse and the Canadian Medical Association. The summit report proposes increasing the private sector role in funding, management and delivery of health care services. The following statements are quoted from the summit report:

“Many participants believed that some redefinition and limits are required to principles of the Canada Health Act and some said that the principles … most notably universality, were outmoded, irrelevant and inappropriate in today’s environment.”

“Another group believed that the debate on comprehensiveness should be extended to include moral questions such as euthanasia and to address the diminishing returns on health care resources invested in the final days of life (emphasis added).”

“There seemed to be a unanimous view that extensive outsourcing opportunities are yet to be tapped in the health care system.” (The services targeted for outsourcing by participants included: laundry, food, information technology, materials management, rehabilitation, diagnostic imaging, laboratory, eye surgery, and elder care.)

Liberty Health also supported the Ontario government’s Bill C-26 which enables massive restructuring changes and private sector involvement in the broader public sector. In its brief to the Standing Committee on General Government on Bill C-26 in January 1996, Liberty suggested user fees for hospitals losing government revenue. They recommended that “government should limit the percentage increases in room rate differentials or this revenue generating opportunity will disappear.” Liberty supported the government’s drug user fees imposed on seniors and welfare recipients.

Liberty representatives claim to support Canada’s public health insurance system, though in the next breath they urge governments to define “core” and “medically necessary” health services. When publicly insured “core” services are more narrowly defined, private corporations can expand their profits from health care services outside of public plans.

Despite their rhetoric of defending the Canada Health Act, Liberty representatives have on numerous occasions exposed their true interest in seeing health care treated as commodity. When Bill Wilkerson was President of Liberty Health, he announced his plans to “radically define health care benefits in Ontario… We want to create consumerism in the health benefit industry.”

Current Liberty Canada President and CEO Gery Barry anticipates increased business for private insurers with hospital closures and bed cuts. “As more services are provided through home care… as people need insurance coverage for some of these fringe benefits, those (market opportunities) are going to be increasing over time (emphasis added).” Former President Brian Johnston was equally enthusiastic about cuts to public health insurance at a time when Canada’s population is aging. “There will be enormous demand among individuals and groups who will require additional insurance,” said Johnston. “If you want to buy it and you can afford it, you will buy supplementary health insurance.”

In the United States, Liberty lobbied furiously against President Bill Clinton’s health reform proposals in 1993 and 1994. When the Clinton administration proposed moving the medical portion of workers’ compensation into a publicly-regulated managed care system, Liberty Mutual lobbied against the reforms. Clinton’s policy advisors estimated that including workers’ compensation in the reformed health care system would save 10 to 15 percent of premiums through reduced administration and fraud. The private health industry succeeded in defeating Clinton’s health reform package.

Workers’ Compensation

Liberty is expanding in Canada and around the world in the area of occupational health and safety. Consistent with its “integrated services” strategy in the United States, Liberty is making profits on the entire spectrum of services related to workers’ compensation: policy consulting, insurance, program management, and rehabilitation therapy. Through its consulting offices, Liberty works with governments and employers to design occupational health standards and so-called “loss prevention” programs (preventing loss of profits to employers and insurers by getting injured workers back to work sooner). Liberty also profits at the other end by selling insurance and direct rehabilitation therapy.

In Canada, Liberty has been lobbying provincial governments to privatize workers’ compensation services. In the words of former CEO Brian Johnston, Liberty “has a long-term business interest as to the direction workers’ compensation takes … I believe that a viable, workable and responsive system requires private sector participation and, based on Liberty’s past experience in workers’ compensation in the United States and other countries, we probably have a place on the spectrum in Canada when the time comes”.

Liberty is not only situating itself to take advantage of privatization, it is actively influencing the direction workers’ compensation takes. Liberty spent $500,000 on an eight-month study of workers’ compensation in Canada and issued a five volume report in 1995 entitled Unfolding Change: Workers’ Compensation in Canada. The report is full of dramatic language which cloaks Liberty’s true interest in cashing-in on workers’ compensation. The following statement is one example:

“Workers compensation is an emotion-based, and complicated realm which was regrettably politicized and which, now through a recent breed of differently focused leaders, is working to break through a culture of debt to reach a new era of fiscal and human responsibility.”

Further on in the report, Liberty exposes its bias for privatization. In the section which compares workers’ compensations systems internationally, Liberty claims that “private insurance and competitive state insurance systems produce results that are significantly superior to monopolistic state run systems.” What makes the Canadian workers’ compensation system inferior, according to Liberty, is that more workers receive benefits and those benefits are more generous than in the United States and other countries which allow private sector involvement.

Liberty has held up Alberta as the model of workers’ compensation reform for Canada. The Alberta Workers’ Compensation Board has eliminated its deficit by slashing benefits and forcing injured employees back to work sooner. Alberta employers receive a rebate on their WCB payments if their rate of worker injuries falls below the industry average; this “experience rating” system encourages employers to hide accidents and discourage employees from filing WCB claims. Bill Wilkerson praised the Alberta WCB for reigning in costs: “Change in Alberta is indicative of change that will or should take place in other parts of Canada.” In another interview, Wilkerson urged employers and WCB administrators to focus on the bottom line: “Change in this area cannot and will not be meaningful unless the current or new generation of executive leaders comes to terms with the fact that they should see occupational health and safety as producing a return to profitability on investment through cost containment down the road (emphasis added).”

The umbrella group for private insurance companies in Canada is also actively lobbying for privatization of workers’ compensation. In March 1996, the Insurance Bureau of Canada issued a report entitled Private Sector Solutions for Workers’ Compensation Problems which advocates that private insurers control workers’ compensation benefits and services. Of course, insurance companies want governments to restructure WCB by slashing benefit levels and eliminating their debt before handing WCB over to private firms.

While Liberty is strategically positioning itself to take over workers’ compensation insurance in Canada, the company has also cashed-in on the treatment of injured workers. Until August 1996, Liberty owned a chain of nine Toronto-area rehabilitation clinics specialized in treating soft tissue injuries. Liberty International Canada Holdings Ltd. sold its 70% share in International Managed Health Care to Columbia Health Care Inc. of Toronto (subsidiary of Sun Healthcare Group Inc.) At the time, International Managed Health Care was $12 million in debt and the bank was demanding repayment of its loans. While Liberty sold these flailing rehab clinics, the company may venture back into the treatment business as more services are delisted from public health insurance plans and private clinics become more lucrative. Liberty is also active in workers’ compensation reform internationally through its subsidiary Liberty International. Liberty International has occupational health and safety consulting offices in Mexico and the United Kingdom. Through its consulting office in the United Kingdom, Liberty has worked with the UK Health and Safety Executive (the government health and safety department) to rework occupational health standards and programs. In May 1995, Liberty International acquired NIFAST Ltd., Ireland’s largest health and safety consulting and training company. In 1996, Liberty International established offices in Argentina to take advantage of the newly privatized workers’ compensation market in that country. As Liberty International Holdings Senior Vice President Pamela Baker noted: “We’re increasingly seeing a transition from public systems to private insurance markets.” Liberty is right there helping privatization along and reaping the financial rewards.

Managed Care

In addition to favouring privatization of Medicare and workers’ compensation, Liberty has been pushing for “managed care” in the area of disability benefits. Liberty co-sponsored the Conference on Disability and Work held in Toronto in November 1996. As Liberty Health Medical Director, Dr. Arif Bhimji stated at the conference, “Managed care is about dealing with the reality of the world. The present rate of economic growth can’t sustain the previous levels of health care investment.” Dr. Bhimji is now working as Vice President for the auto manufacturer Magna International, where he is responsible for implementing Canada’s first corporate-sponsored “integrated health service” system. The Magna Comprehensive Health Organization would manage health care services (including insured services funded by the government) for employees and their families. The Magna project represents one of the most ambitious medicare privatization efforts to date.

Managed care is a strategy to contain employers’ expenses and shift the burden for extended health plan costs to individual employees. Insurers such as Liberty promote managed care as a means of giving workers more choice and control over benefit packages. In reality, managed care has led to an erosion of employee benefits while employers make huge savings. With managed care, workers have seen increased co-payments, capped benefits, restricted drug formularies, and higher deductibles.

In the United States, Liberty Mutual pioneered the implementation of managed care. Managed care has evolved to the point where hospitals and insurance companies monitor medical decisions using a “cookbook” which defines maximum hospital stays and treatments for each type of illness and injury. In some states, governments have had to legislate minimum treatment standards to counter hospital rationing such as “drive-through” deliveries and hysterectomies. In Canada, Liberty is advocating a similar cookbook approach whereby governments define “core” medical services to be covered by public plans and open the rest of the health care system to private insurers.

COMPANY FINANCES

LIBERTY MUTUAL INSURANCE GROUP

1996$US

Revenue from Premiums 5,102,288,000

In Canada, Liberty Mutual generates revenue in excess of $1 billion (Canadian) with premium revenues of $500 million and total assets of $650 million.

CORPORATE RECORD

Liberty’s takeover of the non-profit insurer Ontario Blue Cross from the Ontario Hospital Association was surrounded by controversy. Dennis Timbrell (past Ontario Tory Minister of Health) was president of the Ontario Hospital Association and sat on the boards of International Managed Health Care, Liberty International Canada Holdings Ltd. and the Liberty Mutual. Timbrell resigned from his Liberty directorship only a few months before the OHA sold Blue Cross to Liberty. In March 1995, Timbrell received payment of $583,000 as a reward for selling the non-profit Ontario Blue Cross to US Liberty Mutual. He was subsequently fired from his position as president of the OHA when he refused to repay that sum.

Timbrell insisted that the bonus payment was proper, but the OHA disagreed and asked for its money back. It claimed that Timbrell initiated the payment without board approval. Timbrell sued the OHA for $11 million for wrongful dismissal, and the OHA has charged Timbrell with deliberate misconduct. The two sides have agreed to have the case settled by an arbitrator.

In January 1995, a coalition of Unions including CUPE, OPSEU, CAW and the OFL challenged that the sale of Blue Cross to Liberty breaches Ontario’s Charities Accounting Act. The Public Trustee responsible for regulating charitable organizations refused to investigate the sale. The provincial and federal governments also refused to intervene.

The Ontario Federation of Labour recommended to Unions that members insured by Liberty Health switch to non-profit insurance carriers. “We don’t want to be providing the seed money for an organization whose goal is to take over the administration of the workers’ compensation system.”

LABOUR RELATIONS RECORD

When Liberty Health took over Ontario Blue Cross, Brian Johnston told its 650 employees that they would retain their employment and receive staff benefits at current levels. Approximately 260 Ontario Blue Cross employees were members of the certified Employee Association. In April 1996, Liberty Health cut 103 jobs. Half of the positions were taken from management and the other half from unionized staff. Since that time, the company has spent about $20 million out of a planned $50 million on equipment and technology to improve information and product delivery systems. Then-President Bill Wilkerson explained that Liberty needed to cut jobs to remain competitive. “The reality is this: Our competitive position is jeopardized by staffing levels and work assignments no longer appropriate to the way we do business. We must change the way we work to reflect changes in technology and in the marketplace itself.” On another occasion, Wilkerson complained that “the old office was a rabbit warren that was crowded and inefficient.” The office is much less crowded with 103 fewer employees.

Liberty International Canada Holdings Limited President and Chief Executive Officer Gery Barry

Executive Vice President Frank O’Connor

Vice Chair (former President and CEO) Brian G. Johnston

Vice President, Operations John McGlynn

Senior Vice President Pat Jacobsen

Liberty Health President (as of March 1997) Gery Barry

President (until March 1997) Bill Wilkerson

Executive VP and CEO David C. Lincoln

Liberty International Canada President Gery Barry

Special Risk Underwriter Steve McConnell

Liberty Risk Services Canada Senior Vice President Ron Noblett

Vice President Howard McGraw

Vice President and Manager Mike Sheluk

Liberty Insurance Company of Canada President and CEO Ronald H. Switzer

HEADQUARTER ADDRESSES

Liberty Health Liberty International Canada 2500 Steeles Avenue East BCE Place, Bay Wellington Tower Markham, Ontario 181 Bay Street, Suite 3320 L3R 0X4 Toronto, Ontario 1-800-268-3763 M5J 2T3

Liberty Mutual Group 175 Berkely Street Boston, MA 02117 USA (617) 357-9500

opeiu 491