Workers Comp Zone


Months race by, so now it is time to take stock of California workers’ comp after the 2017 half-way mark. What stands out?

Below, in no particular order, are my picks for the most significant topics in California workers’ comp during the first half of 2017. Most of these were discussed in my blog as the year went along.

1. Adoption of a formulary was delayed

Proposed formulary regs were unveiled, with a 45-day comment period ending with a public hearing on May 1, 2017. AB  1124, passed in 2015, amended Labor Code section 5307.27 to require the Administrative Director to adopt and incorporate an evidence-based drug formulary into the MTUS by July 1, 2017.

Many stakeholders expressed concern over the July 1, 2017 deadline, urging the DWC to take more time to “get it right”. As of early 2017 the DWC has not issued  revised regs with a 15 day comment period.

The DWC moved forward on regs required to implement the two anti-fraud measures enacted in 2016. Emergency provider suspension regs were adopted as required by AB 1244, as were WCAB lien claims filing rules, required by SB 1160.

WCIS (Workers’ Compensation Information System) regs were also adopted.

Still undone are home health care provider fee schedule regs and an interpreter fee schedule.

It should be noted that the DWC is not required to go through the Administrative Procedures Act for treatment guideline updates and OFMS (treatment fees) updates.

2. The issue of apportionment to genetic causation rose in prominence

A case decided by the California Court of Appeal Third District, City of Jackson v. WCAB (Christopher Rice) 11 Cal. App. 5th 109, addressed whether the courts would uphold a QME’s determination that a portion of the disability should be apportioned due to genetic causation. The Court of Appeal determined that this was allowable. However, the Court refused to consider arguments that this was prohibited by the California anti-discrimination statues (Government Code 11135(a) and 12940(a)) since that issue was not raised previously. Likewise, City of Jackson v. WCAB did not consider potential issues as to whether genetic apportionment was a violation of GINA, the federal Genetic Information Nondiscrimination Act of 2008.

Attorneys for Mr. Rice are hoping that the California Supreme Court will grant their petition for review. Meanwhile, it is unclear whether we will see a flurry of litigation over genetics issues in the workers’ comp system. Applicant attorneys argue that apportionment to genetics may be “risk factor” apportionment or apportionment of injury causation rather than apportionment of disability causation required under LC 4663.

If genetics becomes a big issue in cases then we will likely see extensive discovery disputes about what can be provided to the QME.

3. 2017 is not looking like a major legislative year for California workers’ comp

2017 is not likely to be a year when stakeholders come together with any major reforms.

As in any year, a number of comp-related bills died or stalled by mid-year. The bills that remained in play by mid-year won’t necessarily make it to the finish line or get the governor’s signature. But prominent bills that are still under consideration include the following:

AB 1422 (Daly) This bill would fix a loophole in the anti-fraud measures signed into law in 2016. Liens stays would remain in effect from the date of a criminal conviction until the completion of proceeds to suspend a physician from participation in the comp system.

AB 44 (Reyes) This bill addresses medical treatment procedures for terror victims such as victims of the San Bernardino terror incident. There has been a tug of war this year at the Capitol over what the bill should include. Employer advocates succeeded in amending the bill so that it would require advocacy services to workers injured in terror attacks. As of early July the author was pushing for a reputable presumption that requested care for such victims meets state MTUS guidelines.

AB 553 (Daly) A measure to amend LC 139.48 to require the DIR to spend all of the $120 Million Return to Work  Fund money each year.

AB 570 (Gonzalez Fletcher) This is the latest installment of a multi-year effort by women’s advocates legislators and CAAA to address perceived gender inequity in workers’ comp. For several years in a row Governor Brown has vetoed gender-related legislation sponsored by the author. This year’s version is somewhat different, and would prohibit the use of pregnancy, childbirth, or other medical conditions related to pregnancy or childbirth, in the calculation of permanent disability benefits for injuries occurring on or after January 1, 2018.

AB 1697 (Daly) This would require the DWC to establish an anti-fraud division within the DWC. Although the bill does not appear to be currently set for hearings, it is notable that the new state budget includes a number of position for the DWC to support anti-fraud efforts.

SB 617 (Bradford) Requires a study of  alternatives to fee for service payment models. It would also authorize the DWC to issue “outreach reports” to high-volume workers’ compensation treating physicians showing them UR & IMR performance date relative to their peers as well as alerting them to training resources.

4. Administration of the $120 Million Return to Work Fund remained controversial

In response to an inquiry by Senator Tony Mendoza, CHSWC and the DIR produced a March  2017 report on utilization of the RTW Fund which is intended to compensate workers with disproportionately high wage losses. Specifically, Mendoza had asked them to address whether there was a gap between the number of workers given a SJDB voucher and the number of workers who applied for the RTW Fund.

In early 2013 only half of the voucher recipients applied for the RTW Fund. By late 2015 about 14% of SDJB voucher recipients did not apply. That seemed a promising trend.

In March the DWC adopted regs extending the time to file for the RTW Fund. This was in response to a request by CAAA.

A pending bill (AB 553) (Daly) would require that the DIR pay out $120 Million each year. In 2015 the DIR paid less than $20 million and in 2016 slightly over $63 million. As currently structured, the DIR pays $5,000 to workers who have received a SJDB and who make a timely RTW Fund application. Depending whether the number of RTW Fund applicants grows, AB 553 might require payment of amounts higher than $5,000 per worker.

5. Anti-Fraud efforts continued to be a major theme in the system

Concern over outrageous examples of provider fraud led to two major anti-fraud bills in 2016, SB 1160 and AB 1244.

During the first half of 2017, the provisions of those bills began to take effect. Liens of many providers were stayed, and suspension notices went out to a number of providers who had been convicted or pled to fraud. The DWC began to post on its website the names of doctors who had been suspended from participation in the comp system.

Meanwhile, indictments continued to roll in during early 2017. A June 2017 Orange County indictment involved doctors, cappers and attorneys who allegedly ran a scheme to cross refer workers to medical testing, interpreting and records retrieval. This scheme was said to particularly target  Hispanic workers.

Some providers filed a challenge to the constitutionality of the SB 1160 lien stay procedures, but it would appear they are facing an uphill battle.

Meanwhile, AB 1222 winds its way through the legislature, addressing a perceived loophole that might otherwise allow lien pursuits by doctors whose suspension is not yet final.

Additional provider fraud fighting measures were outlined in a report by RAND issued in June 2017. Key recommendations included increased use of sophisticated data mining, implementation of a deny but control medical treatment option (up to $10,000 in treatment), and possible adoption of Medicare/Medicaid provider fraud suspension standards. RAND’s paper used a very broad definition of fraud, including systemic abuse.

And the new California state budget contains monies for 73 new DWC staffers, many of whom will be working on the DWC anti-fraud measures.

Also noteworthy is that a Joint Legislative Audit will be done, looking at what is being done by different governmental entities to fight fraud, what other states are doing, and what groups are committing the fraud.

6. 2017 has been a noteworthy year in the courts so far.

Court of Appeals decisions that are worth singling out include the following:

     -City of Jackson v. WCAB (Christopher Rice) (see the above discussion about apportionment to genetic causation);

Ramirez v. WCAB (3rd DCA rules that IMR is constitutional)

Southern Insurance Co. v. WCAB (Berrios-Segovia) (recission of insurance coverage after injury where employer misrepresented job conditions in application for insurance);

County of Riverside v. WCAB (Sylves) (application of LC 5500.5)

From the WCAB, there was one en banc decision:

Maxham v Dept. of Corrections (clarifying the distinction between “communication” and “information”, terms used in LC section 4062.3)

Although the WCAB did not formally designate any decisions as “significant panel decisions”, there were, as usual, many notable panel decisions though space does not permit listing them here.

An attempt to sue the DIR, WCAB and various Brown Administration officials on a gender bias theory failed. The Los Angeles County Superior Court judge dismissed the complaint without leave to amend.

King v. CompPartners (dealing with issue of whether a UR doctor owed a duty of care to a in injured worker that could be the subject of a tort civil action)  is still pending at the California Supreme Court.

7. Repeal and replace Obamacare? Single-payer, anyone?

Obamacare has its problems, and in some states the health exchanges are not working well, as insurers have exited and premiums have risen. Covered California, however, seems to be functioning. And it is undeniable that many Californians have gained coverage through it and the federal subsidies.

There is widespread suspicion and anecdotal evidence that treatment costs have been shifted away from the workers’ comp system onto group health and Covered California coverage. But there is still a lack of comprehensive documentation that this is so.

However, most applicant attorneys will tell you that clients often must seek treatment outside the comp system for denied compensable consequence conditions and management of co-morbid illnesses. So changes to the overall health market have great implications for the comp system.

As the first half of 2017 ended, comp system stakeholders were carefully watching the Washington healthcare debate. The Congressional Budget Office analyses of the House-passed “Ryancare” and of the proposed Senate version (the “Better Care Reconciliation Act of 2017”) indicate that millions would lose coverage under these proposals. From a political standpoint, prospects for a passing vote on these proposals seems to be in doubt.

The projected impact on California’s Medi-Cal program and workers in various industries has been analyzed by the UC Berkeley Labor Center and can be found here:

Meanwhile, the California Nurses Association and a group of progressive Democratic legislators were able to push a proposed (but unfunded) single-payer health system through the California Senate. SB 562, known as the “Healthy California Act”, includes a provision that to “develop a proposal for coverage of health care services currently covered under the workers’ compensation system, including whether and how to continue funding for those services under that system and whether and how to incorporate an element of experience rating.”

SB 562 went to the California Assembly, where Assembly Speaker Anthony Rendon refused to move forward on the bill this year. A nasty political food-fight among Democrats ensued. Interestingly, State Senator Ricardo Lara, a candidate for California Insurance Commissioner in 2018, was one of the named sponsors of SB 562.

8. California workers’ comp costs continued to trend lower as the Department of Insurance approved another advisory rate cut

In May 2017, Insurance Commissioner Dave Jones approved an advisory pure premium rate of $2.02 per $100 of payroll effective 7/1/17, following the WCIRB’s recommendation. This rate is non-binding on insurers, but reflects a 7.8% reduction from the $2.19 per $100 of payroll rate set by Jones in his October 2016 order for post 1/1/17. Mark Priven of Bickmore had recommended an even lower figure, $1.98 per $100 of payroll.

By comparison, advisory pure premium rates spiked to $4.37 in 2003, in part fueling some of the Schwarzenegger-era changes.

Average charged rates have been higher, however, though the trend of those has fallen. Average charged rates were $3.04 in the first half of 2015, $2.86 later in 2015, $2.67 in the first half of 2016, and somewhere between $2.58 and $2.42 in the first half of 2017.

According to a WCIRB presentation at the May 3, 2017 Department of Insurance rate hearing, the factors leading to declining rates paid by some employers are due to “medical losses developing downward”, “claim settlement accelerating”, “claim frequency decreasing”, “wage inflation increasing”, and “improving ALAE trends”.

Loss containment expenses have skyrocketed in recent years, though the WCIRB noted that this may be slowing somewhat. Still, it is very noteworthy that of the $2.02 pure premium rate per $100 of payroll, the WCIRB and DOI figures indicate that $.51 are for allocated and unallocated loss adjustment expenses and medical cost containment. Looking at it another way, ALAE/MCC/ULAE had reached a factor of 37.2% in late 2016 and per the latest WCIRB/DOI figures are at 34.2%. Loss adjustment expense is not that far from equaling the expense of indemnity (TD and PD). That’s not a good thing in a benefit delivery system.

Also worth highlighting is the slide presented by the WCIRB on p.18 of its powerpoint at the 7/1/17 DOI rate hearing (see the slide at the end of this post). Titled “SB 863 Updated Total System Cost Impact Estimates”, it indicates that the WCIRB initial prospective estimate of savings was $200M for all SB 863 components. The WCIRB November 2016 estimate for all SB 863 components was $1,300 billion.

This chart would indicate that the 2012 SB 863 negotiations came out in favor of the employer/carrier coalition:


How these results affect the general business climate of the state, and how it has affected individual workers caught up in the system is an ongoing debate.

9. Simmering dispute between DWC and QME doctors

This choice is an important but relatively under-the-radar item. In 2016 the DWC Medical Unit delayed or chose not to renew the QME certification status of dozens of QMEs, sending shock waves through the QME community.

Some QMEs have “lawyered up”.

Not all of the situations are the same, but one of the issues in some cases appears to be how QMEs can bill under the ML104 code for complex exams. At the heart of this dispute is the DWC Medical Unit interpretation that report preparation can not be billed as a factor under ML104.

This interpretation is in conflict with training materials promulgated by the DWC about 10 years ago.

Reportedly the DWC is considering promulgating amended QME regulations which would presumably address this dispute. The California Society of Industrial Medicine (CSIMS), representing many doctors, charges that the DWC is engaged in an “underground regulation”.

10. As always, there were studies and reports

Looking back at the California system from a historical perspective, today’s reports and studies often become fuel for tomorrow’s reforms.

In the first half of 2017 we had the following significant studies/reports:

From RAND, “Provider Fraud in California Workers’ Compensation”;

-From CWCI on the IMR process:

-From CWCI, a series of reports on claims in different regions of the state

-From WCIRB, April 2017 report on insurer experience in California:

-From the Kaiser Family Foundation, various studies on federal healthcare reform efforts:

That’s my list. Readers who think I’ve overlooked some significant trend or development are invited to contact me with their choices. As always, I’ll be doing an end of year list.

You can sign up to receive the blog via e-blast by subscribing in the box on the upper right-hand corner of the blog.

Julius Young