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| | May The Real Work Begin. Workers' Compensation Reform In California With SB 863 Will Require A Herculean Effort By Claims Adjusters.
By Bill Zachry - September 6, 2012
Last Friday night, which was August 31st 2012, the California Legislature passed SB 863.
Governor Jerry Brown had this as one of his two big policy goals for this legislative session (the other being pension reform), and I fully anticipate that he will quickly sign this bill. At the podium in support of the bill were almost every employer group represented in Sacramento as well as almost 100% of the Labor Unions. It was an unusual show of solidarity between employers and labor over what is usually a very difficult issue.
The Legislature does workers compensation reform about every ten years. This was a bit early (the last one was passed in 2004). However for the past few years, the California workers compensation system has, once again, been heading for a crisis. Gaming of the AMA Guides by some of the Applicant Attorneys, medical treatment fraud and abuse, and adverse case decisions were increasing the cost of the system by billions of dollars. Many of the insurance company loss ratios are now pushing 130% and employers were facing 18% increases in the pure premium rates.
This was taking place while injured workers continued to receive some of the lowest scheduled Permanent Disability (PD) in the nation. It is good to see a proactive attempt to bring the system under a modicum of control.
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Christine Baker, Director of the California Department of Industrial Relations. Photo by Lonce LaMon. All Rights Reserved.
The initial work on the bill started late last year, and involved many hours of direct negotiations between representatives of labor and employers. The negotiations were facilitated by Christine Baker, the Director of the California Department of Industrial Relations. Without the amazing effort and energy that Christine and her entire team put forth, there would not have been reform passed this year.
The primary goals of the negotiations were:
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Increase the PD benefit level to the legitimately injured workers (and at the same time not have any of the current level of benefits reduced)
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Create cost savings to more than off-set the increase in benefits
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Improve the quality of care for the injured workers
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Improve access to medical care for the legitimately injured worker
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Streamline the system (help reduce the need for litigation) to make it easier for injured workers to receive benefits and return to work
To meet these goals:
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The PD was factored by an automatic increase of 40% (which we believe results in about a 1/3 increase of about $740M).
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The cost savings are derived from multiple efforts to stop the lien abuses (statute of limitations, Independent Bill Review, proof of ownership of the liens, and a lien filing fee). There are also savings derived from wording to mitigate the Valdez decision, establishing fee schedules for translation services, copy service processes, transportation services, the elimination of the Future Earning Capacity (Oglivie).
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Improved quality of care will result from having medical decisions made by medical professionals rather than by WCAB Judges (Independent Medical Review) , by an agreed hierarchy for the use of evidence based medicine, improved Medical Provider Network design, and a new Access Assistant who will help coordinate medical appointments within the MPN.
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Streamlining of the system included the removal of the AME dance in front of the QME evaluations, tighter rules on QME qualifications; limiting the number of liens and removing medical decisions from the WCAB judges so they will be allowed more time to quickly bring resolution to the rest of the issues.
The above list is not complete. There are many provisions in the bill concerning self-insurance, and other system issues which I have not mentioned. I highly recommend for those practitioners who deal with the California system that they first read the two analyses which I have pasted below, and then read the bill.
Because of the nature of the changes we can expect serious challenges in the courts concerning several of the provisions of this bill. There will also be a challenge to overcome the resistance to change. This particularly applies to the IMR provisions. Like all legislation this is not a perfect bill. There will always be opportunities for abuse. However it is a good step in the right direction.
Now the real work starts.
Implementation for some of the major changes in this legislation will involve a significant cost and will require a Herculean effort on the part of the claims administrators to achieve their share of the anticipated savings. The initial focus should be on quickly implementing the IMR process and maximizing the effect of medical treatment and control by using the new MPN system fixes.
I have included the URLs (below) which will allow you access to the analysis done by the California State Assembly Insurance Committee and the California State Senate Industrial Relations Committee as well as the final wording of the bill.
Bill Zachry is the Vice President of Risk Management of Safeway, Inc. All the writing above expresses Zachry’s opinion and does not reflect the opinions of SCIF or of its Board of Directors.
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