As 2012 come to a close, it’s time to look back with perspective on the most significant events and trends in California’s workers’ compensation system in 2012.
Here, in no particular order, is workerscompzone’s list:
1. THE LISTENING TOUR
In the Spring of 2012, Department of Industrial Relations director Christine Baker and then-DWC Administrative Director Rosa Moran toured the state, holding a series of public forums on the problems in California workers’ comp. Baker and Moran took comments from a wide variety of workers’ comp system stakeholders, including lots of injured workers.
Themes emerged, including problems of MPN access, QME process delays, backlogged liens, treatment delays and denials, and stakeholder abuses.
Many of the themes that emerged in the road tour are items that will be addressed in the changes wrought by SB 863. Clearly, while the DIR roadshow was taking place key stakeholders held negotiations on a major comprehensive reform package, with the blessing and assistance of DIR personnel. A key goal was to reduce “frictional costs”, particularly costs generated by various providers who were seen as abusing the system.
2. SB 863
In 2009, efforts by several prominent self-insured employers and CHSWC members to deliver a comprehensive comp reform bill failed. But in 2012, those efforts were successful. In August 2012 a legislative proposal surfaced, and a month of furious back room and public lobbying began.
As the month proceeded, amendments to SB 863 were made again and again, as applicant attorneys, doctors, and some unions sought changes to make the reforms more palatable. Proponents of the legislation touted projections that the bill would increase benefits to injured workers at around $700 million while cutting various frictional costs and achieving savings of over a billion dollars in a rough 2-1 ratio.
At several points it appeared that SB 863 might stall in the legislature. But passage was ultimately achieved as Governor Brown became personally involved in lobbying for the package and as some changes in the bill were
made in the last several days to satisfy a group of unions and some key legislators, particularly in the California Senate, who had concerns about the bill.
Among the key provisions of SB 863 are these provisions, some of which take effect at different times depending on the date of injury and many of which require administrative regulatory frameworks:
-an increase in permanent disability monies (by raising PD maximums and minimums) for post-2012 injuries
-changing the law regarding supplemental job displacement vouchers
-elimination of rating add ons for sleep disorder, sexual dysfunction and also eliminating compensable consequence psyche claims in non-catastrophic injury claims
-a $120 million annual fund is to be established for the AD to compensate workers “whose permanent disability benefits are disproportionately low in comparison to their earnings loss”.
-eliminating the 15% bump up/down for post 1/1/13 injuries
-new language changing the definition of permanent disability by dropping the “FEC factor” , removing the reference to “diminished future earning capacity” and mandating a new 1.4 numeric rating multiplier instead
-modifications to utilization review process rules and to QME process rules
-new procedures are established to resolve treatment denial disputes Independent Medical Review) and billing disputes (Independent Bill Review)
-reform of lien procedure rules, including requiring a lien filing or lien activation fee
-provisions designed to address problems with MPNs and to make it harder for workers to seek treatment outside a valid Medical Provider Network (MPN)
-requirement of new fee schedules that will be instituted to regulate interpreters, copy services, doctors, vocational experts, home healthcare, ambulatory surgery centers and implantable medical devices
-new language outlining prohibited referrals
-changes in self-insurance regulations
3. SLOW YEAR IN THE COURTS
If 2012 was one of the most important legislative years in California workers’ compensation history, 2012 was also one of the slowest years for workers’ comp in the courts.
In February 2012, Governor Brown appointed attorney Marguerite Sweeney of Redding to fill a vacancy on the statewide WCAB. But even after Sweeney’s appointment, two vacancies remained on a seven-person board at year’s end. 2012 saw the WCAB issuing only one en banc decision, Torres v. ABC Sandblasting, an opinion addressing the standard of proof required for a lien claimant to prevail where a lien claimant proceeds to trial after the case in chief has been resolved.
With huge systemic changes under SB 863 coming, it is safe to say that that 2013 and beyond will be busy years at the WCAB.
In the California Courts of Appeal, 2012 was a relatively quiet year for workers’ comp. Among the cases worth noting are the following:
-Dutra v. Mercy Medical Center Mt. Shasta (examining the relationship between 132A and a “Moorpark” civil tort action)
-Meeks Building Center v. WCAB (Najjar) (payment of TD to attend a QME evaluation did not trigger the start of a 104-week TTD limit under Labor Code 4565(c)(1)
-SCIF v. WCAB (Garcia) (fall from a 24 foot ladder while picking avocados was not “sudden and extraordinary” so as to permit a psyche claim for a worker who had worked less than 6 months on the job)
-County of San Bernardino v. WCAB (McCoy) (good-faith personnel action defense applied to claimed migraine headaches injury form on the job stress claim)
-City of Sebastopol v. WCAB (Braga) (Labor Code 4658(d) 15% increase not applicable where employee does not miss time from work)
With so few notable workers’ comp cases coming down from the appellate courts in 2012, many practitioners shifted attention to WCAB panel decisions covered by sources such as the LexisNexis California WCAB Noteworthy Panel Decisions Reporter.
4. MORAN RESIGNS AS AD
Following passage of SB 863, DWC Administrative Director Rosa Moran resigned. Moran’s departure generated widespread speculation, but was never explained by any public statements. Moran, who had moved into the AD slot from a position as a workers’ comp judge, returned to the bench as a WCJ in Oakland.
5. REGULATIONS PROMULGATED TO EFFECTUATE SB 863
Still pending in late December 2012 were inpatient hospital fee schedule regs and regs dealing with fee schedules for hospital outpatient departments and ambulatory surgical centers.
And just before Christmas 2012 the DWC had submitted to the Office of Administrative Law various proposed “emergency regulations” required by SB 863 dealing with the following:
-Independent Medical Review and Independent Bill Review
-Supplemental Job Displacement Vouchers
-Lien filing fees
With it expected that the OAL will approve those emergency regulations, the DWC will shift to a 2013 permanent rulemaking process on those topics and fee rules for home health care services, vocational experts and physicians.
6. FOOTBALL IN THE COMP SPOTLIGHT
Pro football injuries continued to be a topic that received attention in the press.
An August 2012 U.S. Court of Appeals 9th Circuit case, Matthews v. National Football League Management Council rejected a challenge by a Tennessee Titans ex-player who claimed that an arbitration decision prohibiting him from pursuing California workers’ comp was a violation of the full faith and credit clause of the U.S Constitution and a federal labor violation.
In December an arbitrator ruled against a number a players, finding them bound by choice of forum clauses in player contracts. Thereafter, the players filed an action in the U.S. Federal District Court in Northern California, seeking to overturn the arbitrator’s decision.
Meanwhile, concerns contine to mount about the long term effects of concussions in the sport.
7. THERE WERE STUDIES AND MORE STUDIES
Among the prominent studies regarding California’s workers’ comp system that were unveiled in 2012 were these:
-a January 2012 study presented to CHSWC by UC Berkeley’s Frank Neuhauser that documented a 58% reduction in permanent disability payments to injured workers after adoption of the 2005 rating schedule based on the AMA Guides, even with the Almaraz-Guzman and Ogilvie cases factored in
-an October 2012 analysis by AON Risk Management contended that the cost savings measures under SB 863 would not be liekly to offset the benefit increases and that the overall costs of the system will increase. AON concluded that “We expect the permanent disability rates to increase higher than the WCIRB estimate, due to optimistic assumptions on the add-ons and greater utilization due to higher benefits”. AON also questioned estimates regarding savings to be generated from the SB 863 provisions on liens, IMR and MPNs
-a WCIRB analysis (quoted in a piece by Greg Jones of workcompcentral.com) of liens filed pre-2004 reforms found that liens were filed in 44% of Northern California Claims and 64% of Southern California claims, with 44% of the liens being for medical treatment, 13% for durable medical equipment or pharmacy and 12% for diagnostic studies.
-a March 2012 California Workers’ Compensation Institute study of data from the California Office of Self Insurance Plans (OSIP) noted that average paid and incurred losses on comp claims filed by workers employed by cities, counties and other public self-insureds had risen sharply and that Medical losses have been the biggest cost driver for California public self-insureds in the last five years….:
-a June 2012 CWCI study claimed that excessive surgical hardware reimbursement costs “added nearly $67.5 million in medical costs to the California workers’ comp system in 2010”.
-a study by David I. Levine of the Haas School of Business at UC Berkeley published in Science found that OSHA workplace inspections resulted in substantial declines in injury rates and injury costs and that OSHA inspections did not adversely affect employer competitiveness or destroy jobs.
-another CWCI study analyzed head and spine injuries, finding that a high percentage result in lost time,, permanent disability and attorney involvement
-a study of California claims done by the Massachussetts based Workers’ Compensation research Institute (WCRI) evaluated California claims data from 2005 to 2010, noting some links between the data and the impact of the recession in California
-a study presented to CHSWC in December 2012 by Dr. Teryl Nuckols of UCLA and RAND outlined concerns about opioid prescribing practices and identified various possible opioid guidelines that are used in other jurisdictions
-a July 2012 study by the California Workers’ Compensation Institute noted that “After surging to a record level two years ago, highly addictive Schedule II opioid painkillers such as fentanyl, oxycodone, and morphine are now becoming less prevalent in California workers’ compensation, with new CWCI data showing they fell from 5.8% of all prescriptions dispensed to injured workers in the 2nd quarter of 2010 to 3.4% of the prescriptions in the 4th quarter of 2011.”
-and yet another CWCI study, showing that medical treatment costs had climbed 79% per claim from 2005 to 2010
8. COMP PREMIUMS CLIMBED BY A MODERATE AMOUNT
One of the ironies of 2012 was that the impetus for reforms came from large self-insured employers such as Disney, Safeway and Grimmway Farms, not from the insurance industry. Yet, it’s the rates insurers charge that often grab the business press headlines.
California workers’ comp premiums are set by the marketplace, not by fiat of the California Insurance Commissioner. Still, Insurance Commissioner Jones is charged by law with setting a benchmark rate known as the “pure premium rate”.
In an August recommendation to Insurance Commissioner Jones, California’s Workers Compensation Insurance Rating Bureau (WCIRB) advised a 12.6% increase (to $2.68 per $100 of payroll) in the pure premium rate be set for 2013. By comparison, the average filed rate was said to be $2.38 per $100 of payroll.
In November 2012 Jones issued his order, recommending that insurers set the benchmark comp rate at $2.56 per $100 of payroll. This represents a 2.8% change from the average pure premium rate of $2.49 as of November 9, 2012.
While less than the $2.61 per $100 of payroll that had been recommended by the WCIRB Actuarial Committee, the recommendation is significantly more than the $2.38 per $100 of payroll figure which was eventually recommended by the WCIRB Governing Committee. The Governing Committee’s vote for a lower pure premium rate had been widely seen as a political move and Jones used his rate decision to criticize the process used by the WCIRB in making its rate recommendation.
A last look at December 2012 rate filings shows that carriers were filing for increases of around 9% on average.
In an October 2012 workers comp market update, AON said:
“What does the future look like for rates? Very uncertain. Not only do disagreements on cost estimates exist, but certain reform measures need to be implemented by numerous parties and their impacts quantified”.
9. GOVERNOR BROWN SCORED BIG ON COMP
Yes, we’ve already covered SB 863 in other portions of this post. Still, it would be remiss to not give the Governor his due with a separate entry.
As noted above, Brown drug the faltering SB 863 bill across the legislative finish line, making clear to all parties that he wanted a comp bill this year.
That’s not to say that Brown is passionate about the underlying workers’ comp issues and details. In fact, almost all sources say he isn’t.
But Brown found himself with bigger fish to fry. Brown’s moves can be understood in the context of wanting to avoid further perceived deterioration in the state’s economy and as a measure to avoid sniping by a business community that he needed to stay neutral in his successful campaign for a tax hike.
Whether SB 863 does or doesn’t hold down costs or does or doesn’t benefit injured workers will be answered over time. Meanwhile, Brown has reaped a considerable political harvest.
10. MANY UNCERTAINTIES LINGERED AS 2012 CAME TO AN END
We have SB 863 as the year ends, but what does that portend? Will workers see $700 million in increases and employers see double that in savings? As the year ended there were many known unknowns such as the following:
-will there be a challenge to the constitutionality of the IMR provisions, the lien filing fee or the limit on chiropractors serving as PTPs after 23 or 24 sessions?
-with rather expensive fees to be paid to Maximus (purveyor of IMR determinations) by the employer for each IMR, how will the new IMR system affect medical costs and medical treatment access?
-what will be the effect of a fee of $335 per bill review to be paid by the provider challenging the amount of a bill paid?
-can the DIR limit the $120 fund to workers injured after 1/1/13 or will the fund be available to those injured before as well?
-will some stakeholders find loopholes in order to continue out-of-network treatment on a lien?
-in failing to address rising cost containment costs such as utilization review costs, did SB 863 miss one of the real sources of increased costs in the system?
-the Almaraz-Guzman cases appear here to be here to stay, but is the Ogilvie approach to rating truly dead ?
-with preparations proceeding for the Affordable Care Act, how will
Obamacare affect California’s workers’ comp system?
These are but a few of the questions as we end 2012.
Category: Political developments