Reform Update

Legislative Reform Goals Being Met in California

Studies have identified strong evidence that California's SB 863 reforms are positively impacting workers' comp costs.
By: | September 3, 2015 • 3 min read

“The recent decrease in the advisory pure premium rate, and the Workers’ Compensation Insurance Rating Bureau studies that reflect medical cost savings are positive indicators that the SB 863 reform is reducing costs,” said a new report.

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“Projections indicate that costs will continue to decrease as additional fee schedules go into effect, including the copy service fee, the interpreter fee, and the home health care fee schedules.”

California’s Department of Industrial Relations and its Division of Workers’ Compensation said injured workers are getting increased payments and employers are seeing “significant cost-saving benefits,” which will continue. However the report details continued challenges to the implementation of the legislation.

S.B. 863 became law in January 2013. The changes included:

Increases in the maximum weekly benefit for permanent disabilities to $290 from $270; with the minimum rate up to $160 per week from $130.

Revisions to the medical provider networks, resulting in more accountability to the DWC. Three physicians must be available to injured workers within an MPN.

Implementation of an independent medical review program in which physicians use evidence-based medicine to determine whether requested treatments are necessary.

“The progress made since the passage of SB 863, which allows medical — rather than legal — experts to make medical decisions, is very encouraging,” said DIR Director Christine Baker.

“More appropriate treatment is now being provided more quickly, which reduces waste and improves the whole system.”

Evidence of savings to employers comes from the recently approved WCIRB advisory pure premium rates effective July 1.

On average, the rates are 5 percent lower than the industry average for rates as of Jan. 1, and 10.2 percent less than the average of the approved January advisory pure premium rates.

The report also said lien filings have decreased by about 60 percent, with savings recently estimated at $690 million.

But the report also said more work is needed to reduce delays and improve the state’s workers’ comp system. Among the challenges noted were litigation questioning the constitutionality of the IMR process and cases that have delayed collection of lien activation fees.

The report also noted the cost of pharmaceuticals. It said medical costs paid for medications increased 235 percent from accident year 2005 to AY 2014.

“Evidence-based formularies provide the preferred solution to the problem of medically inappropriate pharmaceutical prescriptions and runaway costs,” the report said. “An evidence-based formulary would improve care for workers and reduce costs in the workers’ compensation system.”

One workers’ comp insider agreed a pharmacy formulary is needed to curb abusive prescribing and ensure injured workers get appropriate medications in a timely fashion. He also agreed rates are stabilizing.

“Unfortunately those rates are stabilizing with the highest costs in the nation based on recent studies,” said Mark Walls, vice president, communications and strategic analysis for Safety National.

“Reform is also needed to California’s threshold of compensability which allows a continuous trauma claim for even minor aggravations of preexisting conditions.”

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Included among the report’s “next steps” to implement the legislation were revisions to the Medical Treatment Utilization Schedule, which it said will be ongoing throughout the year. MTUS opioids and chronic pain guidelines are expected to be completed by mid-2015 while others are anticipated to be revised by late in the year.

Also this year, the Interpreter Fee Schedule and Home Health Care Fee schedule will be completed; Benefit Notice Regulations will be final soon and have an effective date of Jan. 1; revisions for medical data reporting will take effect next April 6; and audit regulations will be scheduled for a public hearing this fall.

“The goals of SB 863 are being realized,” the report said.

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]