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November 1, 2013

The Real Challenge for Reforming Workers’ Comp

Summary:

When we commit to best practices both as employers and claims professionals, we can create better outcomes than Sacramento could ever hope to achieve.

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Sifting through the claims and complaints of those involved in California’s complex workers’ compensation system could leave both the casual observer and the seasoned veteran wondering when, if ever, this multibillion-dollar program will ever get properly aligned. It would be fairly easy to say, “Not during our lifetime.” But that would be too cynical even when discussing a system that for the past several decades could easily invoke cynicism.

Every participant in workers’ compensation has two faces. Some employers provide benefits, have a compliant return to work program and enforce a culture of safety at the workplace, while other employers view employees as a necessary evil. These latter employers view adherence with the legion of local, state, and federal laws and regulations regarding the workplace as burdens that need only be acknowledged if employers are required to do so, generally in the form of a legal proceeding against them.

We have seen the abuses in the medical system from unnecessary surgeries, overuse of Schedule II medications, and downright fraud in billing insurers and other payers, and yet if there is one indispensable party in the workers’ compensation system beyond labor and management it is medical providers. As recent events have demonstrated, we have yet to figure out how to empower the noble practitioners of the healing arts while keeping the venal away from injured workers.

Claims administrators vary in expertise, motivation, and professionalism, as do the various service providers and the tactics they employ to provide services and collect fees. “Insurers” have borne an unfair brunt of criticism largely because it is an easier talking point to cast such a broad brush than to single out any one bad actor or group of them. Without the ability to transfer risk, however, the workers’ compensation system could never be sustainable.

Each system participant has a particular grudge against the others. We allow policyholders to sue insurers for claims handling practices, and, in far narrower circumstances, an injured worker may pierce exclusive remedy and sue a claims administrator when conduct is so egregious that it goes beyond the grand bargain that is at the core of workers’ compensation.  Periodically, claims administrators and service providers resort to the civil courts with a variety of complaints over unfair business practices.  And, of course, the Workers’ Compensation Appeals Board is the forum where all participants flock with even the slightest provocation.

The appellate courts weigh in on a wide range of benefit delivery challenges, as well. Their decisions in Guzman and Ogilvie were two of the main incidents inciting changes in permanent disability benefit determinations codified in Senate Bill 863 (De León). Even today, we are litigating issues over the apportionment changes brought about in Senate Bill 899 (Poochigian) enacted almost a decade ago. Litigation in federal court is rare, although not unprecedented, as the current challenge to the lien activation fee in SB 863 demonstrates.   State-imposed fee schedules have periodically worked their way into federal court on the theory that reimbursement rates are so low that they are confiscatory – a challenge unlikely in California while the fee schedule is not mandatory, but still possible given the breadth of authority that the Division of Workers’ Compensation has been given to develop fee schedules for virtually all service providers.

“Well, that’s just California workers’ comp.”  That may be the case, but such resignation does tend to take the focus away from core problems that magnify the multiple personality disorder that plagues this system. As we work our way through the implementation of SB 863, we must also recognize that not every solution to the high cost of comp, both in dollar and human terms, can be put down on paper in Sacramento or Oakland.

While compliance is part of best practices, it does not define them exclusively. To be sure, the new costs associated with complying with SB 863 are consequential. As is inevitably the case when new comprehensive workers’ compensation laws are enacted, there will be considerable friction moving from one set of rules to another. The threat of litigation will hang over the changes made in this legislation just as it has in prior iterations of reform. It will take years to sort this all out.

In the meantime, there is much work to be done to improve the system even if it is not in  reaction to a new law or regulation or judicial decision. As has been the case all too often over the past two decades, laws are driven by anecdote. The adage “bad facts make bad law” applies equally to the legislative, regulatory, and judicial processes. Navigating California’s complex system is never easy. If claims administrators expect the process by which laws are made and interpreted to provide the necessary clarity and simplicity we crave to do our jobs, then we are all sadly mistaken.

Yet, when we commit to best practices both as employers and claims professionals, we can create better outcomes than Sacramento could ever hope to achieve. The challenge, therefore, is not what legislators or regulators or justices will do for us, but rather what will we do for ourselves?

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