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SB 863--Advice To Claims Operations To Review The Regulations.
By Bill Zachry - January 10, 2013

SB 863 was passed on the last day of August 2012.  It is the largest and most comprehensive change to the California workers compensation system since April 2004 when SB 899 passed.

To make sure that the new law is implemented properly, the California Division of Workers Compensation and the Workers Compensation Appeals Board have both promulgated extensive regulations.  Some of the regulations, by their nature, were considered “emergency” and were approved by OAL (Office of Administrative Law) on Dec. 31. 
Because of the extensive impact of the various articles in the legislation, there will be ongoing regulatory efforts at least through the first six months of this year. 
I strongly encourage all claims operations to review these regulations, provide their insight thoughts and comments on a timely basis to the DWC.  You can find all of the regulations on the California Department of Industrial Website or the California Division of Workers Compensation web site.
Implementing SB 863:
On the front lines there are many legitimate questions, such as: How much of the new law applies to my existing cases?

If I have started PD advances, and if the employee has returned to his/her regular work, do I still need to advance PD?
  • What is IMR?
  • How will I pay for the IMR evaluation?
  • Under what circumstances will I have to use IMR?
  • What happens if I have an old case and the applicant attorney claims a sleep disorder?
  • What are the new ways to rate Permanent Disability?
  • What happens if the lien holders have not paid their lien filing fee?
To assist with helping claims operations and claims departments in implementing the new law, I have provided SB 863 Implementation and Survival Guides. The first was organized by Mark Webb and the second by Corey Ingber.  They are intended to assist claims operations in the day-to-day implementation of SB 863.
I have also attached below a link to the original wording of the bill. SB 863 as amended on August 24, 2012, in Assembly can be viewed at:
Napoleon’s Corporal
Napoleon Bonaparte conquered most of Europe and North Africa.  Many do not know the inside story of why he was so successful a military leader.  One reason was his unique and extensive use of cannon.  However he also had a secret weapon…His advantage was his use of a corporal. 
Napoleon realized that war was a complex endeavor.  When his generals outlined the battle plan, he had a random corporal assigned to shine his boots.  After the plan was explained to Napoleon, he would look down at the corporal and ask if he understood the plan.  If the corporal (who had been listening to the explanation of the plan) understood, Napoleon would then authorize the attack.  However if the corporal was confused or did not understand the plan, then Napoleon had his generals re-do the plan to simplify it. 
Napoleon understood that it was his front line that needed to execute the battle plan.  If the plan was confusing the front line would not be successful. 
I recommend that this concept be considered when implementing SB 863. 

Comments and observations on developing claim procedures to implement SB 863:
  • Usually the best and the brightest are used to develop procedures in claims departments.  That does not always result in simple processes. This is because the focus is usually only on compliance with the new laws (which does not include simplifying the existing processes or the new process). 
  • When the claims departments are developing their policies, rules and procedures; front line claims assistants and examiners should be included in the development of the processes and should also review the proposed plans to determine if they can be understood and implemented. 
  • Unfortunately many times the  new procedures result in processes that reflect the axiom “we have always done it this way”.  Include folks who think “out of the box” and allow their voices to be heard.
  • SB 863 will result in major changes within the claims offices procedures and claims handling. Now is the time to take advantage of the change and embrace the change rather than to resist the change. 
  • The focus on implementation should be: Benefit provision, Compliance, Cost Savings, Simplification, Documentation, Training.
  • For many claims adjusters, this will be the third system that they will be working with  (Pre-899, 899 and 863). 
  • Segregating claims by system may help but is not a panacea. (because many of the provisions of SB 863 apply to all existing claims)
  • Claims systems will also have to be changed.  Limitations of some of the claims systems will result in problematic work around procedures for a while.
  • Sometimes working out a manual process first, allows one to identify efficiencies.  Do not be afraid to use a manual process for a while (as the bugs are worked out).
  • Regular reviews of the implementation team specifically focused on simplification are productive.
  • The team should have a dedicated focus on the new laws cost saving provisions.
  • The team should keep track of its costs and also develop an analysis of costs of implementing the laws.
  • The new laws may change the claims staffing model. 
  • TPAs should notify their customers of the potential increased costs (PD for example) and also projected savings (lien reduction and resolution)
  • TPAs should review their contracts with their customers to determine if the changes in the laws that impact their current pricing models are best for their clients and for their success.
  • Bill review vendors and UR companies both have major changes to implement.
  • SIU and Fraud Reporting have new issues to report because of the increased conflict of interest provisions in the law.  Include SIU as part of the implementation team.
  • I recommend an implementation team to include: A senior claims executive, a senior claims supervisor, a claims examiner, a claims assistant, a bill specialist, a hearing representative, a finance person, a claims system expert, an attorney who knows the new law, and a person who is responsible for documenting the discussions, processes and procedures.
  • Training of the entire staff will take more than just one meeting and more than one month. 
  • Assume that there will be a need for re-training on a regular basis for the first nine months.
Bill Zachry is the Vice President of Risk Management at Safeway, Inc.  He is also a member of the Board of Directors at State Compensation Insurance Fund, and is a Board Member of the California Self Insurers Security Fund. The opinions in this article are Bill Zachry's alone and are not those of the State Fund or its Board of Directors.

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