California Workers Comp System – What Happened To The Reform(s)?

May 6, 2015 By JL Risk Management Consultants

California Workers Comp System Reforms Fizzled?

The California Workers Comp System was supposed to reduce costs after SB 863 was enacted in 2013.

SB 899 was the previous cost-saving measure that seemed to hold California’s Workers Comp costs which seemed to work for five to seven years.

Picture Of Hand Putting Money California Workers Comp System In Piggy Bank

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Check out this summary page from WCAN (Workers Compensation Action Network). The surprising figures show the California Workers Comp system:

Total costs increased by 17% from 2012 to 2013
Was/Is the most costly WC system when comparing insurance premiums paid by employers
Cost more than double the median workers compensation amounts
Average ultimate cost per claim was $86.845 – which explains the increased premium cost to employers
California employers paid $3.48 per $100 of payroll for WC coverage.

The nationwide median was $1.83. The lowest rate was North Dakota at $.88 per $100 of payroll. WC is usually measured per $100 of payroll.

Woman California Workers Comp System Putting Coins On Piggy Bank

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North Dakota may be changing over time as many of the very unsafe oil worker jobs would have recently increased due to the oil boom in North Dakota.

In the early 2000s, a few of our California roofing clients were paying over $138 per $100 of payroll. The roofers had a very large overhead from just WC alone. I had sometimes wondered how they were able to stay afloat.

Most of this data came from the Premium Rate Ranking Summary from Oregon’s Department of Consumer and Business Services. The Oregon study, however, should not be taken as the final word on these figures.

The WCIRB – California workers comp system rating bureau- had also recommended a heavy rate increase even after the reforms were put in place.

The reason I cover the California workers comp system extensively is that many of the conundrums that are present in the state are ones that other states have faced or will face in the future.

I will cover the reasons to look further beyond this study later this week. The studies that many people base the costs of WC in the nation may be skewed.

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California SB 863 Failure Result In 6.7% WCIRB Rate Increase?

August 26, 2014 By JL Risk Management Consultants

California SB 863

California SB 863 was supposed to be a cost-cutting measure for all parties involved in their WC system. Last week, the WCIRB (Workers Comp Insurance Rating Bureau) recommended a 6.7% increase due to a number of factors for policies effective January 1, 2015.

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According to the WCIRB press release, there were numerous factors that led to the recommended rate increase:

Continued adverse medical loss development
Greater recognition of changing long-term medical paid loss development patterns
Continued high levels of indemnity claim frequency
Higher than anticipated loss adjustment expense inflation in part attributable to less than projected frictional costs savings resulting from Senate Bill No. 863 (2012)
Lower than forecast wage growth
Modest increase in the experience rating off-balance correction factor

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The Cost Driver Section in WCIRB’s rate filing report delved further into the reasons for the recommended increase. SB 863 was supposed to save $200 million which never materialized due to the Independent Medical Review (IMR) process. The WCIRB had to remove the $200 million in savings from their calculations.

The WCIRB went on to say:

The WCIRB’s estimated frictional cost savings related to IMR were predicated on replacing higher cost medical treatment dispute resolution mechanisms such as medical liens and the qualified medical evaluator (QME) and expedited hearing processes with lower cost IMRs.

However, Division of Workers’ Compensation (DWC) data on IMR suggests the volume of IMRs is two to four times higher than that contemplated in the initial cost estimates. Also, while at a reduced volume, medical treatment on a lien basis is still occurring.

Finally, while qualified medical evaluations are generally not being conducted on medical necessity issues, many claims, partially in response to the Dubon decision, are having expedited hearings on utilization review issues.

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Workers Compensation Action Network (WCAN) – Great California Chart

April 29, 2014 By JL Risk Management Consultants

Workers Compensation Action Network

Workers Compensation Action Network (WCAN) produced another great graphic on the Workers Comp situation in California. Click here for the chart. Why do I try to point out most of the happenings on WC in CA? This is a WC system that is becoming prohibitively expensive for employers.Some of the same variables are present or growing in other states’ Workers Comp systems can be seen in California presently.The most startling number was the 41% medical cost increases in such a short time (2007- 2008 and 2011-2012). SB 863 may shorten the continuation on some of the increases.

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As pointed out often in these articles, California seems to be on the cutting edge quite often for any workers comp developments. What happens in CA may soon be coming to your state.

The trends that occur in CA seems to flow out into other states’ WC systems. That is why I try to point out any significant developments that occur in CA..

Sitting behind a desk and thinking that your Workers Comp related job will always be the same is just not going to work in today’s insurance and legal environment.

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Workers Comp Action Network – California SB 863 – Great Infographic

April 21, 2014 By JL Risk Management Consultants

Workers Comp Action Network Produces Great SB 863 Infographic

The Workers Comp Action Network produces great summary charts for California work comp analysis. They have once again made the complicated much simpler with their great work.

Graphic Of Computer Screen Workers Comp Action Network With Analysis

WCAN (Workers Comp Action Network) has created the best explanation of the implementation and cost of California’s SB 863. You can find the infographic here. (Requires PDF reader).WCAN’s position is that if not all of SB 863 is after implementation the costs may end up outweighing the benefits. Nine of the 14 areas of SB 863 have been implemented overall. Three of the nine are on track for cost: savings. Those areas are:

Lien filing fees
Ambulatory Service Center fees
Spinal Hardware pass-through payments

There are three areas where costs have increased post SB 863:

Workload has tripled for IMR’s (Independent Medical Reviews)
Litigation
Permanent disability filings have increased 5% after SB 863 vs. the 1% forecast

It is highly recommended that you download the infographic. The infographic is the simplest analysis of SB 863 that I have seen to date. The link to the infograph has been provided at the top of this article. Upgrades to WordPress now allow the graphics/charts to be included in some of the articles.

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Statistical Madness – Another Shining Example From Internet

November 14, 2013 By JL Risk Management Consultants

Statistical Madness – Eating While Driving

More statistical madness was created with another shining example this month. Over time, a few Workers Comp statistics articles are published that basically have no basis in fact. For example, many pundits said that California SB 863 was going to save employers large amount of premium. That just did not happen. The WC system is a delayed system. The results are really not known for 4 – 6 years after any law is enacted in any state.

Picture Of Man Calling On Phone Statistical Madness Car Accident

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How can statistics be so far from reality? The following example is one the general public even caught onto very quickly. The comments section says it all. This was likely just a headline – attention grabber, better known as clickbait for website traffic.

This article on distracted driving from CBS Los Angeles has the title: Eating While Driving Significantly Increases Chances Of A Car Accident, Experts Say. Where did the reporter get the idea there was an 80% risk increase while eating? Of course, if someone says an expert says so, then it must be a fact.

A quote from the article:

Asked if the CHP has seen an increase in drivers who eat, Galvan said, “We did have a [Distracted Driving Awareness Month] in April. Over 10,000 enforcement contacts were made and over 240 citations were issued for an unsafe speed related to distracted driving. So, quite possibly, there could have been a good majority that were eating.”

Man And Woman Statistical Madness Traveling Fast In Car

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That is 2.4% for speeding due to distracted driving, not 80%. The reference to 80% might have resulted from a 2009 study by the National Highway Transportation Safety Administration (NHTSA). I followed three pages of Google search links and then tried to use the NHTSA website which is always very slow.

Regardless, I wonder if this would fall under distracted driving even though it was in a Dunkin’ Donuts parking lot.

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California SB 863 Webinar – Thumbs Up To Presenters

October 3, 2012 By JL Risk Management Consultants

Thumbs Up – California SB 863 Webinar

According to sponsors, the SB 863 Webinar turnout was massive. That is to be expected with such a confusing subject. The reforms were extensive. They presenters had to cover a large amount of info in 75 minutes.

Emoticons Color Yellow Smiley SB 863 Webinar Thumbs Up

The three sponsoring organization were:

· WCAN (Workers Comp Action Network)

· CA Chamber of Commerce

· California WC Coalition

The groups align well with our outlook as they are basing their info from the viewpoint of an employer for the most part.

The general overview was:

· Need for Reform

· Understanding SB 863 details

· What employers should know

· Where we go from here

Five year trend for medical costs +40%

Five year trend for cash benefits +35%

Volume of claims increased +9.1%

Insurers paying 36% more than they collected in premiums – ouch!!!

Insurers were paying over 35% of the claims dollars to administer the claims. That is a surprisingly high figure.

Close up of hand jigsaw SB 863 Webinar Puzzle

Wikimedia Commons – Charles Hamm

SB 863 goals were the same as any reform, reduce costs and increase efficiency especially medical care for injured workers. Reducing litigation costs was also an expected goal.

SB 863 wanted to strengthen Medical Provider Networks (MPN’s) also known as Workers Comp PPO’s. Limiting out-of-network treatment was a goal. I think that was a great idea. I have written a large numbers of posts on medical control.

There must now be an assistance staff that helps the employee find proper in-network care. That was a good idea.

Independent Medical Review (IMR) will be established and will have all jurisdiction over an employee dispute about medical treatment Division of Workers Compensation (DWC) will contract this duty to an approved third party reviewer.

Utilization Review (UR) will fit in the IMR process. Employee initiates IMR process by filing a form with the DWC within 30 days of treatment. My response is great, another form. I am not sure if adding another process on top of the other processes is that efficient. As the presenters pointed out, it is a work in process. The treating physician can also initiate the IMR process. I wonder if that could be abused in some way.

The handling of medical bill payments was also a big issue. The doctors have to provide better info such as the applicable treatment notes. Only the original treating doctor can approve any other services. This is basically what already happens in states that allow medical control.

The carrier/TPA must pay medical bills within 45 days. The Explanation of Review must have all the info for medical provider to understand the payment received from the payer.

If there is Independent Bill Review (IBR) over charges, the medical provider must pay the DWC a fee if there are no additional charges. If the carrier or TPA owes an additional amount, they will pay the DWC a fee. This functions as an incentive to pay the bill properly in the first place.

IBR will cut down the length of time on medical bills disputes and not allow them to linger for years. If the provider did not use the IBR process, there is no lien applicable. This is a good development for the CA WC system.

Medical legal reforms required that chiropractors pass the same qualified medical examiner (QME) tests as other medical providers. QME’s are limited to a maximum of 10 locations.

The reforms limited spine surgeons receiving a rebate for a medical implantable device from the manufacturer and then receiving full payment by the carrier/TPA.

Fee schedules will be now based on Medicaid/Medicare fee schedules. This is the same as most states have been doing for many years.

Permanent disability (PD) payments are going to increase. The law that allowed this was legislated in 2009, but it was never enacted or enforced.

As with the SB 899 reforms, expect a large amount of litigation on SB 863 along with legislative attacks to dilute the reforms.

The presenters said the advisory rates recommended by the WCIRB (CA Rating Bureau) will be unchanged with no increases. However, the word on the street is that some of the major carriers are asking for 21+% increases. As I pointed out a few weeks ago, the advisory rates are nefarious figures if they carriers deviate heavily from the advisory rates.

Overall, heavy kudos should be given to the presenters and their organizations. They did a good job in presenting a concise overview of a very large reform.Even if you are not a CA employer, some of these reforms and concerns will be coming to states in which you operate your business.