Workers Comp Zone


What were the most significant developments in California workers’ comp in 2015?

Every so often California has a blockbuster year in workers’ comp where comp rises to the forefront of the news. 2015 was not such a year.

Many issues continued to simmer, but few made it big. Still, here, in no particular order, is my 2015 year end take on the most significant happenings and trends in California workers’ comp. In some instances I have included links to relevant posts I did throughout the year. I also included links to some of the important 2015 primary source material such as relevant studies and rate filings.

1. 2015 featured significant legislative activity, though it was not a major reform year.

The most significant bill enacted and signed by the Governor was a prescription drug formulary measure, AB 1124 (Perea). Formularies have been adopted in many other states with varying designs that may be more or less strict re what medications are paid by the system.

By mid 2017 the DWC must establish the formulary, which will govern prescriptions in California workers’ comp. As 2016 progresses we will learn more about the DWC’s plans for the formulary.

But in 2015 the Governor also wielded a veto pen on some measures. Brown nixed AB 305 (Lorena Gonzalez), a bill passed by the legislature aimed at prohibiting certain types of gender discrimination in apportionment and PD ratings. And despite overwhelming legislative support and almost no opposition other than from DWC bureaucrats, Brown also killed AB 1542, a bill that would have maintained the QME specialty designation for neuropsychologists.

Here is my post on the veto messages:

And my post on Brown acting on other bills:

And my post on the gender bias bill:

2. The DWC moved forward toward completing most of the regulatory action required under SB 863

The passage of SB 863 in 2012 required the DWC to develop a slew of regulations. It has been a multi-year project. Some of the regs have been updated several times while others are still in development.

At year’s end the DWC appeared close to adopting final Medical Treatment Utilization Schedule (MTUS) Chronic Pain Medical Treatment Guidelines and Opioid Treatment Guidelines, probably the most controversial of the year’s regulations.

Earlier in the year the DWC adopted new Official Medical Fee Schedule regs (effective 3/5/15), new QME regs (effective 9/1/15), Benefit Notice regs (effective 1/1/16) Copy Service Fees regs (effective 7/1/15), ICD-10 regs, MTUS regs (effective 4/20/15) and WCIS regs (Workers Compensation Information System).

As of the time of this post, still slated for eventual development are regs dealing with vocational expert fees, home health care provider fees, hospital outpatient departments and ambulatory surgery centers fee schedules.

Here is my post on home health care regs:

Here is a link to the DWC rule making page:

3. Bad behavior in the comp system continued to gain headlines

Although the occasional worker fraud arrest still gets TV airplay , although studies have shown that employer misclassification and premium fraud is a significant problem, and although several other prominent bloggers (David DePaolo and Joe Paduda)  questioned whether there was a problem with pay-to-play kickbacks among vendors in the TPA industry, provider fraud seemed to continue in the primary spotlight in 2015.

Primarily this was doctor fraud, with various alleged fraud (or in some cases fraud that had been the subject of a criminal guilty plea) schemes of kickbacks and cross referral agreements involving medical entrepreneurs, doctors, chiropractors, hospitals and interpreters or combinations thereof. Most, but not all of the high profile bad behavior was in Southern California.

Here is one of my posts on this type of bad behavior which has plagued the system:

And this:

4. Workers’ comp was increasingly in the national spotlight

Generally worker’s comp is not an issue that gets much focus in the national media. That changed somewhat in 2015 after a widely noted series of reports from National Public Radio and the investigative journalism site Pro Publica ran a series on how the “grand bargain” of workers’ comp has been changing across the country. The series included a profile of an injured worker in California who were struggling to get care needed. Brown Administration officials responded, striving to blame insurer behavior for those examples  rather than the design of the system itself.

Unlike other states,  there was no talk of California moving to some form of an opt-out system used in or under consideration in such states as Texas, Oklahoma, South Carolina and Tennessee.

Here is a link to the NPR /ProPublica series on workers’ comp:

On December 29,  ProPublica published an article on excess in the “workers’ comp industrial complex” which detailed “hummer limos, go-go dancers, a live alligator, and glowing aliens in spandex” at the Las Vegas national workers’ comp expo.

But despite the national media focus on workers’ comp, there was little to no in depth coverage by California based media.

5. 2015 was not an especially big year in the courts for California workers’ comp, but several cases  stand out

The year’s most closely watched case was a challenge to the constitutionality of Independent Medical Review, Frances Stevens v. Outspoken Enterprises. In a decision the California Court of Appeal upheld the constitutionality of the IMR process and denied a rehearing. At year’s end it was uncertain whether the California Supreme Court would grant review.

Here is my post on Stevens:

The California Supreme Court did issue one significant decision, clarifying the standard of causation required in a workers’ comp death claim. The case was South Coast Framing v. WCAB (Clark), 61 Cal.4th 291. The court reversed a Court of Appeal decision that had imposed a higher threshold of causation, requiring a showing that the industrial causation was a material factor in the employee’s death. Instead, distinguishing tort principles from workers’ comp law and precedents,the California Supreme Court noted that the work injury had to be only a contributing factor and not a substantial factor.

Proponents of the 2012 lien reforms won a victory in Angelotti Chiropractic Inc. v. Baker, 80 CCC 672, when the 9th Circuit dissolved a restraining order against enforcement of lien activation fees.

This is my post on the Angelotti case:

The standard for rebutting the pre-2013 rating schedule under Oglvie continued to be an issue. In Contra Costa County v. WCAB (Dahl), 80 CCC 1119, the Court of Appeal, citing Ogilvie and Leboeuf, remanded the issue back to the WCAB for further development after nixing an analytical methodology used by the applicant’s vocational expert that had been followed by the board.

At the WCAB level, several significant panel decisions dealt with the issue of timeliness under UR and IMR rules. Different WCAB panels rendered conflicting decisions on whether a late IMR decision was fatally defective. The conflict between the Saunders decision (IMR timeframe is mandatory) vs. Arredondo (IMR timeframe is directory) will be going to the Court of Appeal 3rd District, which granted a writ in Southard v. Hallmark Greeting Cards, 2015 Cal Wrk. Comp. P.D. LEXIS 365.

As in recent years, many of the 2015 WCAB panel decisions deal with with removal petitions, QME panel disputes, MPN disputes, UR timeliness issues, claims by athletes, and lien issues.

At year’s end the WCAB still had one vacant seat. Earlier in the year the Governor had filled one vacancy by naming journeyman defense attorney Jose Razo of Laughin, Falbo Levy & Moresi to the seat.

As 2016 came, several important cases were pending at the Court of Appeal. This included a case at the 3rd DCA on the validity of apportionment to genetic predisposition, City of Jackson v. WCAB (Christopher Rice), a case at the 1st DCA dealing with the definition of “sudden and extraordinary” for purposes of coverage of psych injuries for workers employed less than 6 months, Dreher v. Alliance, and a case at the 6th DCA, Star Insurance Co. v. WCAB (Tavares), dealing with evidentiary standards for expert testimony in workers’ comp.

For a discussion of some of the other notable cases from 2015, here is my post “Ones to Watch”:

6. The $120 million Return to Work Fund was launched, but the rollout questioned

In April 2015 the DWC launched the $120 million “Return to Work Fund”, an entity required by the 2012 SB 863 comp reforms. The RTW fund was a last minute addition to the SB 863 negotiations and was a carrot to bring some wavering unions on board as the package had hit rough seas.

The RTW fund is supposed to compensate workers with post 1/1/13 injuries who have suffered disproportionately great wage loss. Some stakeholders probably envisioned distributing monies to the most severely disabled workers. RAND’s study analyzed various methods to use the money, and the DWC adopted a plan to provide $5,000 to workers with post 1/1/13 injuries who have received a $6,000 Supplemental Job Displacement Voucher (SIDB).

One issue was whether the fund would be replenished each year with employer assessments, and whether the fund would start with monies from 2013 and 2014. The answer to those questions appears to be no, at least according to a legislative counsel opinion rendered in 2015:

But as 2015 moved on, it appeared that the fund was not likely to pay out anywhere near $120 million in its first year. The DWC did little to publicize the fund.

Moreover, the DWC was criticized for instituting an application procedure that was based on dedicated computer kiosks at district WCAB offices, a procedure that was inconvenient for many workers and difficult for workers who are not computer savvy or have language barriers. The DWC claimed that I&A officers could help, but it did appear that the RTW fund rollout was not done in a way to encourage use of the fund.

It was not until December 2015 that the DWC updated the Supplemental Job Displacement Benefit Voucher form to include language notifying workers of the RTW fund.

7. Comp rates remained far below historical highs and may have declined for many employers

Earlier in 2015 Insurance Commissioner Dave Jones adopted a WCIRB recommendation of a 10.2% cut in the non-binding advisory “Pure Premium” benchmark rate. Although what rates are actually paid by employers vary based on a number of factors including experience modification factors, premium discounts and so forth, rates in 2015 were generally stable.

Later in the year the question was what rate would be established as the benchmark for 2016. Some members of the WCIRB Governing Committee recommended a decrease of slightly over 5% while the committee majority voted for a decrease of less than 1%. Then in October 2015 Insurance Commissioner Jones decided on a recommended (but not mandatory) 2% reduction in the 2016 benchmark rate, which would be at $2.42 per $100 of payroll.

In terms of average charged rates (different from the benchmark rate), a December 15, 2015 WCIRB study shows that average charged rates for the latter half of 2015 fell to $2.78 per $100 of payroll in comparison to a 2014 rate of $2.97 per $100 of payroll, a 2010 rate of $2.10 per $100 of payroll, and a $6.29 per $100 of payroll in 2003.

Here is my post on “The Rate Dance”:

Here is the December 2015 WCIRB report:

8. There was increasing focus on regional differences in California workers’ comp

Charged comp rates tend to be higher in Southern California (where regional surcharges are common) and studies over the last several years have documented a divergence in trends when comparing the LA area with other regions of the state.

So in December 2015 the California Senate Committee on Labor and Industrial Relations held an oversight hearing in Downey California on why claims costs in the LA area are more expensive.

Various theories were advanced at the hearing. Some pointed to the number of liens filed there. CWCI noted that claims in the LA area have higher costs, with more psych components, a higher percentage of claims with attorney involvement, a higher percentage of PD claims, higher claims costs,  a higher incidence of delayed claim notification and a higher rate of IMR disputes. Bickmore consultant Mark Priven noted that audit review scores were worse in the LA area. Others focused on some of the allegations of bad behavior and profiteering by providers that had led to some of the region’s high-profile indictments.

But former CAAA President Bernardo de la Torre advanced the theory that the high number of injuries to a Latino workforce in Southern California plays a role. Other speakers noted that demographics are important, as many of the high risk occupations are performed by Spanish speakers.

Others pointed to the widespread underground economy in Southern California, which may create distortions in how safety procedures and comp claims are handled.

So as 2015 ends it is clear that there is no one set of policy prescriptions that will address all of the aspects of the regional difference in how Southland claims are handled.

Here is the November 5, 2015 WCIRB study on regional differences in California workers’ comp:

9. The cost of cost containment continued to be a cause of concern, UR and IMR continued to generate controversy,  medical costs trends were unclear, and there was mixed data on TD duration

As in recent years, applicant attorneys and injured workers complained about treatment delays and worker suffering due to treatment denials by utilization review (UR) and Independent Medical Review (IMR). These complaints appeared particularly prominent among workers with long term chronic pain treatment and, increasingly, from workers who received treatment awards years ago.

Payors may be attempting to control the substantial tail costs of long term medical treatment that was documented by the WCIRB in a July 8, 2015 study:

Despite statements in the August 2015 rate filing that medical costs were coming in under estimates, in December 2015 the WCIRB claimed that recent research tends to suggest an erosion of medical cost savings, as higher costs per transaction offset a reduction in transactions:

But, as in the last several years, there remained controversy about the extent of the treatment denials, evidenced by claims in a December 2, 2015 California Workers’ Compensation Institute report claiming that 96% of requests for medical treatment are ultimately approved by UR or IMR.:

Worker advocates were skeptical of the CWCI’s conclusions, suggesting that the proper question would be to determine treatment approval rates for workers with long term injuries and that minor injury claims should be excluded from studies of approval rates. At a meeting earlier in 2015 several CHSWC commissioners had raised similar questions in reponse to a DWC presentation.

IMR requests filed continued to far exceed expectations. According to a WCIRB chart, there were 65,875 in the 3rd quarter of 2015, some 2 or 3 times what was estimated in 2012. So clearly there are a lot of treatment disputes, even if many are duplicate requests.

And whatever the true measure of treatment denial rates, claims adjustment costs & cost containment costs continued to be a cost driver. The August 2015 WCIRB rate filing for 2016 noted in referencing Chart 7 of the filing that “average ALAE costs per indemnity claim have increased significantly, while average ULAE costs have decreased at a level significantly less than initially projected.” This was also documented in a November 16,2015 WCIRB report. And in October 2015 the CWCI documented the increasing costs associated with urine drug testing.

A November 16, 2015 WCIRB report noted that there was mixed data on the trend of temporary disability duration and “the extent to which IMR may ultimately impact TD duration is unknown”. Worker advocates believe that UR/IMR delays and denials may be leading to longer TD periods.

The WCIRB rate filing for 2016 is here:

The November 16, 2015 WCIRB report is here:

In one post I examined the DWC Medical Director’s philosophy on treatment:

10. Events outside the comp system generated intense speculation as to how the comp system would evolve

Whether called the “gig economy”, the “new economy”, or the “sharing economy”, disruptions fueled by the tech revolution continued to upend some industries, causing questions about how and whether workers would be classified. Litigation proceeded in high profile cases against Lyft (Cotter v. Lyft, Inc. 80 CCC 329) and Uber (O’Connor v. Uber Technologies, Inc. 80 CCC 345), as preliminary rulings in those cases seemed to favor those who argued that the drivers are employees .

The implications for some unions and for the workers’ comp industry could be profound, and in 2015 some think tanks and legislators  began to call for the creation of a third type of classification somewhere between “employee” and “independent contractor”.

Meanwhile, the interaction between workers’ comp and the Affordable Care Act remained unclear. The ACA itself had helped some workers who were perhaps otherwise uninsurable gain health coverage. But some unions were concerned that treatment expenses were being shifted onto union health care trust funds. Those unions gained a temporary reprieve from the ACA’s “Cadillac tax” as part of a late year federal budget compromise, but were still concerned with possible cost-shifting. On the other hand, a WCRI study claimed that some doctors would treat under state workers’ comp systems because of capitated fee considerations:

The WCIRB’s July 29, 2015 report on the “State of the System” is chock full of graphs and charts as is worthwhile reading:

Here is my post on the 2014 top 10 Developments in California workers’ comp:

And here is my 2015 quiz on California workers comp:

In early 2016 I’ll be posting another quiz for 2016.

Julius Young