Tag Archives: medical disputes

SB 863 Update: Is the California Workers’ Compensation System Better Than it Was One Year Ago?

The passage of SB 863 in California came with a promise of higher benefits for injured workers and lower costs for employers.  Just over one year later, where does this promise stand?There has been improvement, but there is still a long way to go.

I recently attended and spoke at the California Workers’ Compensation & Risk Conference in Dana Point, California, where, as expected, the major focus was SB 863.  Just over one year ago, employers and labor came together at the end of the legislative term to pass a bill designed to improve benefits for workers and reduce costs for employers.

I moderated the opening session, which was a diverse panel featuring representatives from employers, carriers, injured workers, and medical providers. My first question to the panel set the tone for the rest of the session, and for the rest of the conference. That question was: “From your viewpoint, is the California workers’ compensation system better off now than it was a year ago?”

Before you can gauge the success of SB 863, you must remember where we started.  Permanent disability (PD) benefits to injured workers had been cut significantly under prior reforms, so injured workers were unhappy with the system. Employers were equally unhappy, as workers’ compensation costs in California had been increasing steadily for years.

With a system that both injured workers and employers were very dissatisfied with, something had to be done.

SB 863 provided an immediate increase in permanent disability benefits for accidents occurring after 10/10/2013.  PD is being increased by a total of 30%, phased in over two years. There is also a $120 million fund to compensate certain workers who are unable to return to their pre-injury job because of physical restrictions.

The savings for employers are to come over time.  The largest of the savings under SB 863 are to come from changing the processes for liens and medical disputes. Thus far, these changes are receiving mixed reviews.

On the plus side, liens have fallen significantly since a fee for filing them was implemented Jan. 1. Some of the drop can be attributed to the fact that medical providers filed all the liens they could before the fee took effect. However, there clearly has been a significant drop in new liens filed.

The filing fee is being challenged, though, by a lawsuit that seeks to have it declared unconstitutional, and some of the anticipated savings from SB 863 are likely to be eroded if the courts don’t uphold the fee.

The bill also restructured the medical dispute resolution process, with the introduction of the Independent Medical Review (IMR). The IMR process was modeled after successful programs in states such as Texas. It is designed to have physicians, not judges, deciding disputed medical issues. It is also designed to expedite resolution so appropriate treatment is provided to injured workers in a timely manner. The IMR process clearly remains a work in progress. First, 10 months after implementation, the process is still operating under emergency rules. Until the final rules are in place, those participating in the process will face uncertainty. Second, it appears there is significant gaming of the IMR process. Approximately 16,000 requests were filed in both August and September of this year alone, significantly more than anticipated.  In one month, there were more disputes filed than in an entire year for the same process under group health.  Employers alone bear the costs of the IMR process, so those filing all these requests may be attempting to cripple the system at absolutely no cost to themselves.

The issues facing the IMR and lien processes illustrate what many see as the major impediment to delivering cost savings for employers in California: There are special interest groups that do not want the system to become more efficient and self-executing, because they make a great deal of money off the chaos.

In her speech at the conference, Christine Baker, director of the California Department of Industrial Relations, expressed concern about “significant gaming.” While this gaming is not unique to California, from my national viewpoint its impact on the workers’ compensation system is more profound in California than in other states.

The biggest challenge is that the workers’ comp system in California is flawed by design. No other state has issues with medical liens in workers’ compensation. Bills are reduced to fee schedule with no further disputes seeking additional payment. Treatment that is not authorized is subject to litigation over necessity. If the employer prevails, “no” means “no.”  In California, “no” means “file a lien and litigate further.”

Another issue facing California employers is continuous trauma (CT) claims, which can be filed for a 1% aggravation of a pre-existing condition. The legislature recently fixed this problem for the National Football League by passing a bill specifically limiting CT claims by professional athletes, but CT claims in California continue to be a significant cost driver for other employers, and their frequency has more than doubled over the last 10 years.  It is common in California for injured workers to file both CT and specific injury claims for the same body part.  In no other state are CT claims as prevalent and embedded into the workers’ compensation system as they are in California.

In addition, allocated loss adjustment expenses (ALAE) covering items such as bill review, utilization review, and litigation costs are higher in California than other states, and these costs are increasing at an alarming rate.

The gaming of the system significantly increases the costs for employers and delays the delivery of benefits to injured workers.  The main stakeholders in workers’ compensation, the employers and workers, need to work together so that benefits can be delivered faster and at lower cost.  SB 863 was a step in this direction, but there is more work to be done. The people who worked together to make SB 863 a reality need to continue to work together to preserve the savings elements designed into the bill.  If they can do this, perhaps California can finally achieve some stability in its workers’ compensation marketplace, which would benefit both employers and injured workers.