Work Comp Outlook for California in 2015

A panel at the California Workers’ Compensation & Risk Conference reports tentative -- but positive -- signs about the SB 863 reform.

The California Workers’ Compensation & Risk Conference in Dana Point opened with a session featuring employers and stakeholders in the industry weighing in on the current state of California workers’ compensation and the outlook for 2015. Panelists were: moderator Mark Walls, vice president of communications and strategic analysis at Safety National; William Zachry, vice president of risk management at Safeway; Tim East, director of risk management at Walt Disney; Bill Mudge, president and CEO at WCIRB California; Kurt Leisure, vice president of risk services/asset protection at Cheesecake Factory; Seeta Ambati , a defense attorney who is a partner at Laughlin, Falbo, Levy & Moresi; and James Butler, a plaintiff attorney with Butler Viadro. The panel began with a look at where California workers’ compensation is today: • California holds a quarter of the nation’s workers’ compensation business. • To date, 80 new carriers have entered the California market since 2004. • California is among the top three states in terms of average medical costs per claim. • California has experienced double-digit increases in premiums over the last two years. Cost drivers to the California workers’ compensation system include: • A high frequency of claims handling in the state relative to payroll, with Los Angeles County having the most claims in the region. • A multitude of expensive permanent disability claims that include attorney involvement. • Opioid prescriptions, which have doubled in frequency. SB 863 is California’s answer to addressing these costs, but it is too early to provide tangible data on whether the reform has been successful. Some early data shows that costs related to liens are down, but costs related to independent medical reviews (IMR) are significantly higher than expected. Panelists were split. Some say that, although it is too soon to judge, they are seeing the following indications that SB 863 is working: • Generally, rate increases have been cut in half because costs are showing a downward trend. • The highest costs are coming from old medical claims rather than recent claims. • Because this is the first time that California has experienced cost decline in quite some time, panelists thought that the cost cuts may make the state appear more employer-friendly, which will encourage companies to return. Panelists said there are still some kinks to work out in the reform. One stated that the IMR process, which has been designed to take non-medical professionals out of the medical decision-making process, is working well. On the other hand, the opioid decision-making process in place is not currently solving the costly opioid problem. Overall, people are still learning the new process, but panelists said they think that outcomes will be positive over time. They think that the measures are in place to help get the injured worker healthy and back to work. Most on the panel felt that peer-to-peer review is the right approach and that the system is better than it was. The California Applicants Attorney Association (CAAA) strongly disagrees, however, and views the reform as a failure that is harming citizens. A representative said that the CAAA saw more employees returning to work before the reform and that the system is averaging 4.3 medical denials per patient. The CAAA cites the cost of administering workers’ comp as one of the largest costs that a business can endure. In addition, the CAAA believes that peer-to-peer review is not working efficiently. CAAA thinks that legislative efforts to reform workers’ compensation are aiming at the worst-case scenarios, rather than the majority and, therefore, have not provided the best solutions for most companies. Panelists were asked what changes they would make to the California workers’ compensation system if they were governor for the day. Ideas included: • Take a fresh look at the 101-year old system, which is overloaded with rules, legislation, audits and controls. It is time to simplify a system that has layers of new rules on top of old rules and, as a result, enormous costs related to it all. • Do away with cumulative trauma, which is a major cost driver that creates complexity. Some states have already done this. • Make use of alternative dispute resolution. California has gone from incentives and positive reinforcement for providing prompt payments and benefits to a system focused on penalties. It needs a system that rewards promptness and minimizes disability. • Address the opioid abuse and CURE system to make every effort to avoid addiction. • Look at the system through the eyes of the injured worker and simplify accordingly. Employees can’t understand the current complex system, which is why they seek legal representation. The session served as a great kickoff for the conference, providing both an overview of the current workers’ compensation cost drivers and offering suggestions for improving the system.

Mark Walls

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Mark Walls

Mark Walls is the vice president, client engagement, at Safety National.

He is also the founder of the Work Comp Analysis Group on LinkedIn, which is the largest discussion community dedicated to workers' compensation issues.


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