Each year I do a mid-year and year end list of the top 10 developments in California workers’ comp.
The 2012 reforms continue to settle in and mature.
Here, in no particular order, is my take on what is important in California workers’ comp so far this year, i.e. my list of the top 10 California workers’ comp topics for the first half of 2015. I’ve included links to some of the underlying materials:
1. REGS, REGS, REGS
Some 3 years after the passage of SB 863, mandated regulations were still being instituted.
After extended meetings with stakeholders and repeated comment periods, copy service regulations went into effect July 1, 2015. It is not yet clear what kind of monetary savings will be generated by these regulations and whether the regs will cut down on payment delays and disputes. Also unclear is what practical effect (if any) they will have on discovery rights of workers’ comp litigants.
Revised Medical Treatment Utilization Schedule (MTUS) regulations were adopted in April 2015. The MTUS changes focus on the MTUS methodology for evaluating medical evidence and on the medical evidence search sequence. The practical effect of these changes is not yet clear.
Here are CAAA comments on the MTUS changes:
Regulations that were in the comment phase period of development as of mid-year included QME regulations and benefit notice regulations.
Still to be unveiled are final regs for payment of home health care providers; a draft was released in May 2015 for comment in a DWC forum.
Opioid guidelines were posted in a DWC forum in April 2014 and proposed chronic pain guidelines shown in December 2014, but the formal rule making process has not yet begun.
And in April 2015 the WCAB proposed changes to its Rules of Practice and Procedure. One aspect of this has been controversial: a section which would prohibit employers from taking unilateral credits for claimed overpayments; instead, a petition for credit would have to be files with appropriate documentation. Ultimately a WCAB judge would have to make an order on the credit issue.
The WCAB regulations page is here:
2. THE $120 MILLION RETURN TO WORK FUND WAS LAUNCHED
In April 2015 the DWC finally launched a program required by the 2012 SB 863 statute, the $120 million Return to Work Fund. The fund comes from employer assessments.
The statute creates the fund to compensate workers with post 1/1/13 injuries who have suffered disproportionately large wage loss. But the statute itself left the design of the program to the DWC.
After receiving a RAND study on possible design of the program, 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 (SJDB).
Unlike many applicant attorneys, the DWC does not appear to believe that the fund must contain funds for past years since the passage of SB 863. There are also concerns among some as to whether the DWC has made it more difficult to access the fund by requiring workers to do it online or visit kiosk at WCAB district offices.
Here are the regulations pertaining to the Return to Work Fund:
Here is a link to the RAND study on the Return to Work Fund:
3. UR AND INDEPENDENT MEDICAL REVIEW CONTINUE TO GENERATE CONTROVERSY
Many workers and their attorneys continued to complain of treatment denials due to utilization review and the IMR process. Two challenges to the statutory constitutionality of the IMR process are pending, Stevens v. Outspoken Enterprises (with oral arguments in the California Court of Appeal 1st District scheduled for this fall) and Daniel Ramirez v. WCAB (3rd Appellate District).
Echoing findings from a prior CWCI study, DWC Executive Director Rupali Das told CHSWC in 2015 that IMR applications are filed for between 1% and 5% of all medical requests. However, it continues to appear that the DWC and CWCI studies may be including so-called first aid injuries and minor claims in those figures and that the IMR rate may be much higher for workers with more severe, chronic injuries.
In any event, Das noted that the IMR overturn rate was 12% (i.e. 88% of UR treatment denials are upheld), that 42% of IMR determinations involve medication issues (and around a quarter of those involve opioids), and that a disproportionate amount of IMRs were filed in the Los Angeles area. Upon questioning from several CHSWC commissioners, Dr. Das admitted that the DWC had not undertaken any organized effort to train treating doctors how to better adhere to the MTUS.
In June 2015, CWCI released two studies on IMR, confirming the continuing high volume of IMR requests and claiming that a small number of physicians were responsible for a disproportionate number of IMR disputes.
Here is one of the 2015 CWCI studies on IMR:
The 2015 presentation to CHSWC by Dr. Das is here:
4. WORKERS COMP RATES DECREASE FOR MANY EMPLOYERS
As California’s economy continues to improve, the overall volume of workers comp premiums continued to increase, passing the $16 billion mark in 2014. More people are employed, leading to higher workers’ comp premium volume.
But there was good news for many employers. Workers’ comp rates paid by many employers may be set to decrease. In the first half of 2015 the WCIRB rate filing recommended a “pure premium” rate of $2.46 per $100 of payroll starting July 1, 2015. On May 7, 2015 Insurance Commissioner Dave Jones rejected the public actuary recommendation of $2.43 and approved the WCIRB recommendations for a $2.46 rate.
This is a decrease of 10.2%.
Those recommended rates are advisory only, and actual charged rates for coverage depend on various factors including X-mods, company pricing strategy and varying credits and discounts. As a result, not all employers will enjoy decreases in pricing. However, the approved rates are 10.2% below the prior rate approved by Jones, $2.74 per $100 of payroll.
In looking at the overall picture the Department of Insurance stated:
“We note that the WCIRB proposed pure premium rates are advisory, and insurers are free to make their own decisions as to what pure premium rates they will use in their rate filings. Insurers have proven their willingness over time to exercise their own independent judgment, and we cannot predict the decisions insurers will make with respect to their rate and price levels.
We note that the market currently utilizes a substantial level of schedule credits, averaging something on the order of 20% of manual premium. Collected premiums at actual charged rates in 2014 of $2.93 were on average only approximately 6% more than the WCIRB’s January 1, 2015 recommended advisory pure premium rates of $2.77, suggesting a high level of competition in the market since advisory pure premium rates make provision only for losses and loss adjustment expenses, and not for other company expenses. Our review of the California workers’ compensation insurance industry’s profitability indicates that the pricing environment continues to benefit from substantial investment income relating to substantially higher premiums in prior years and associated reserves, resulting in an average market price level that may be below what would be sustainable without this underlying level of support. However, the average charged rate in 2014 of $2.93 appears much stronger relative to the WCIRB’s July 1, 2015 indicated pure premium rate of $2.46. If lower pure premium rates are maintained in future filings, it appears that charged rates may be approaching long-term sustainable levels.”
In recommending a lower pure premium rate, the WCIRB had noted a drop in medical and indemnity costs although there was an increase in frequency of lost time claims and rising loss adjustment expenses. Those costs have been increasing at a rate of between 5% to 8% a year during the past 3 years.
A May 2015 California Workers Compensation Institute (CWCI) study claimed that California workers’ comp insurer profitability over the years 2004 to 2013 exceeded national averages except in 2012 and 2013.
The rate finding by Jones is here:
Here is the 2015 WCIRB rate recommendation:
5. CHANGE AT THE WCAB
After a long period of unfilled WCAB vacancies, Governor Brown announced an appointment to the WCAB. The new appointee is Jose Razo, formerly a defense attorney with Laughlin, Falbo Levy & Moresi, a firm that has previously been a pipeline for several other board appointments.
That still leaves one current WCAB vacancy.
Complicating the situation at the WCAB, however, is the unfortunate recent illness of Commissioner Frank Brass. Hopefully Brass will be able to recover and return to the board, but if he does not return or is out for a prolonged period, that leaves two unfilled slots. In the meanwhile, it may well be that deputy WCAB commissioners pick up some of the slack.
6. NOT A MAJOR LEGISLATIVE YEAR (YET)
As of mid-year 2015 was not shaping up to be a major legislative year, although some important bills were still on the radar.
Among the prominent bills still attracting some attention at mid year were these:
-AB 305 (Lorena Gonzalez) (prohibits gender discrimination in workers’ comp)
-AB 438 (Chiu) (requires DIR make documents and forms available in English and Spanish and potentially other languages under the Dymally-Alatorre Bilingual Services Act)
SB 623 (Lara) (prohibits immigration status as a prohibition on receiving benefits from the Uninsured Employers and Subsequent Injuries Benefit funds)
AB 1124 (Perea) (directs the DWC AD to adopt a prescription medication formulary by July 2017)
Here is the California Senate analysis of AB 1124:
A bill to prohibit utilization review of medical treatment under old medical awards (SB 563 (Pan) failed to advance.
With plenty of time left before the end of the legislative session, much can happen with some of these bills. Both the gender bias bill and the formulary bill had been amended numerous times and both had significant opposition, raising questions about their future progress toward enactment and approval by the Governor.
7. 2015 IN THE COURTS
The California Supreme Court rarely issues rulings in workers’ comp cases, but the first half of 2015 was an exception. In South Coast Framing v. WCAB (Clark) the Supreme Court issued a ruling that cheered many injured worker advocates. The case involved the standard for industrial causation in death cases under Labor Code 3600 (a). The court noted that “The question here is the required nature and strength of the causal link between the industrial injury and death.” The particular facts of the case did not show a strong link between the death and the industrially related medications. Nevertheless, the Supreme Court noted that there was some evidence that the industrial injury contributed to the workers’ medication related death. In doing so the court rejected defense efforts to establish a more stringent “materially contribute” or “material factor” standard of causation.
As of mid 2015 the WCAB had issued no 2015 en banc or “significant panel decisions”.
Certain themes continued to pop up in many WCAB panel decisions, however. Many of those decisions revolved around challenges to the validity of UR and IMR , problems with the QME selection process, home health care, and disputes about MPN doctor locations.
And there were conflicting rulings from WCAB panels. In Norberto Arredondo v. Tri-Modal, a WCAB panel ruled 2-1 that the time frames for an IMR decision are “directory and not mandatory” so that a statutorily tardy IMR decision was not invalid. But a contrary result was reached by different mix of WCAB commissioners in Stacey Saunders v. Loma Linda.
Pending at various districts of the California Court of Appeal are issues re the constitutionality of the IMR statute (Stevens and Ramirez cases), the methodology of voc rehab expert testimony rebutting the pre 1/1/13 schedule under Ogilvie (the Doreen Dahl case), and in the Gannon case, whether the WCAB properly issued a 100% rating where an AME found that the employee was limited to at-home work.
Another important case at the Court of Appeal 3rd District is City of Jackson V. WCAB (Christopher Rice) which involves questions re the validity of apportionment to genetic predisposition.
8. WORKERS’ COMP COMES UNDER MORE SCRUTINY
Generally the media pays little attention to workers’ comp except during periods of rising rates or in an occasional business page analysis.
Early 2015 was different, however. National Public Radio teamed up with the investigative journalism site ProPublica to produce a radio and print series on problems with workers’ comp systems across the U.S. The series received wide media play and generated controversy here in California.
Prominently featured in the article was a California worker, Joel Ramirez, who was cut off of home health care that had been provided for years, resulting in an immense amount of personal suffering and degradation. Realizing that it had a public relations nightmare on its hands, the Brown Administration announced it was auditing Travelers, the insurance company involved in the Ramirez case. And Brown’s Labor Secretary David Lanier wrote to ProPublica, arguing that the series had misrepresented the operation of the medical dispute resolution process and the effect of the reforms on indemnity benefits. Lanier appeared to be formulating part of his argument by relying on a 2014 WCAB significant panel decision, Patterson v. The Oaks Farm, a home health care case which prohibited removal of such care that had been provided without a change in circumstances.
The bigger picture drawn by the ProPublica/NPR series, however, was that workers’ comp systems across the country are being cut back in various ways as corporate interests have gained power in various legislatures. Interestingly, at the time of the ProPublica/NPR articles, Mother Jones magazine featured an article by Molly Redden on the activities of ARAWC, the Association for Responsible Alternatives to Workers’ Compensation. Redden outlines that the group has been involved in efforts to change workers’ comp laws in many states, including Tennessee, Texas and Oklahoma. Members include large companies that do much business in California: Nordstrom, Walmart, Safeway, Sysco, Kohl’s , Lowe’s etc.
Here is a link to the NPR/ProPublica series:
9. WORKERS COMP IN THE NEW SHARED ECONOMY
The tech revolution has been with us for some years now, but the first half of 2015 marked a time of increased focus on the implications of the new so -called “on demand” or “shared economy” for workers-and workers’ comp.
The list of shared economy companies is long and growing longer: Spoonrocket, Task Rabbit, Thumbtack, Leap, Xirx, Lyft, Door Dash, Instacart, Trycaviar, Grubhub, and on and on. Some of these companies have adopted the standard employee model rather than an independent contractor model, but many are wedded to a new model.
The most visible new economy company is Uber, which asserts that its drivers are independent contractors. Legal challenges to this are being mounted in many states and in various state law and federal law forums. In the first half of 2015 we learned that several of those cases will be heading to trial in California.
The Uber model poses a particular challenge to some unions and traditional businesses, particularly those that are delivery and service related. The implications for California workers’ comp is significant and thus it lands in my Top 10 list.
10. STUDIES AND MORE STUDIES
Studies have often been the keystone for eventual workers’ comp reforms. In addition to studies noted elsewhere in this post, there are other efforts worth mentioning.
Several important research studies commissioned by CHSWC are underway : a RAND study of the effect of SB 863 reforms on long term earnings losses and a RAND study on QME reports. Results from both will probably be available later in the year.
CHSWC also voted for a proposal to create an advisory group to study streamlining use of medical records in the comp system.
CWCI prepared a research analysis on the impact of physician networks in the California workers compensation system, looking at substantial growth in MPN networks from 2002 to 2011. Although MPN use increased over time, the CWCI study noted that savings from use of MPNs had deteriorated in many networks.
Here is the CWCI study:
A joint CWCI and WCIRB study showed a reduction on reimbursement for California workers’ comp physician reports under the transition from the former fee schedule to a Medicare RBVRS-based fee schedule.
That report is here:
And as 2nd half of 2015 began, the WCIRB produced a report of the long tail of medical treatment costs in California, “California Medical Payment Development Up to 30 Years Post Injury”:
11. BONUS: ON THE HORIZON
Developments and issues on the horizon worth watching include the following: how the California system will deal with medical marijuana (the Cockrell case involves these issues), the Affordable Care Act’s effect on the comp system, when and how the WCAB defines “catastrophic” for purposes of determining whether a worker with post 1/1/13 injuries can pursue a claim for psyche PD as a consequence of a physical injury, possible changes in federal law regarding Medicare Set Asides, and more.
Here is a link to my 2014 year end top 10 list: