California Workers’ Compensation Reform Slow to Take Shape

By Denise Johnson | April 1, 2014

California’s most recent workers’ compensation reform began when Senate Bill 863 took effect on January 1, 2013. While the bill increased benefits for workers almost immediately, cost savings mechanisms outlined within the bill have yet to be realized, according to John Riggs, manager of workers’ compensation for the Disneyland Resort in Anaheim, Calif.

During a legislative update session on workers’ compensation, held at the Combined Claims Conference earlier this month, he said that Disneyland was much like a small city with its own onsite medical management facilities. Having worked in the industry for several decades, including time spent at Zenith Insurance Company, he has seen prior reforms occur as a result of system crises (like higher costs and poor outcomes).

He described a series of stages in the workers’ compensation cycle. He outlined them as:

1) Crisis;

2) Minor Reform;

3) Major Reform;

4) Stabilization;

5) Erosion;

6) Breakdown.

The latest reform was the result of increased claims costs. The cost per workers’ compensation claim began increasing in 2005, Riggs said. The expenses, also known as frictional costs, began to total more than the medical benefits.

Changes resulting from the legislation began last year and continue to occur.

Upon the effective date of January, 1, 2013, the bill increased permanent disability rates by $1 billion.

Riggs said this was a “huge benefit to injured workers across California.”

The bill also increased minimum and maximum weekly rates, created a $120 million special fund for disproportionate earnings loss, and provided an immediate $1500 payment to injured workers who lose their job as a result of work-related injury.

The bill also introduced new fee schedules for home health care, photocopy services and vocational experts which are still pending.

Because parts of the bill haven’t been implemented yet, he said that costs savings can’t be determined.

Another aspect of the bill led to a flood of independent medical review (IMR) applications that began in July 2013 as a result of the change in how medical treatment disputes were to be resolved. On that date, the bill specified that IMRs would serve as the mechanism to decide workers’ compensation medical treatment disputes.

Medical liens were also addressed in the bill. The outcome of the new lien filing requirements was that adjusters should see fewer liens. If an adjuster encounters a lien they should review the requirements to ensure the lien was filed correctly.

An overview of the Senate Bill 863 bill can be seen on the State of California’s Department of Industrial Relations website.

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