|
|
|
 |
California's Landmark Workers' Comp Reforms |
|
|
 |
|
While lawmakers predict that California's workers' comp reforms will save billions, several details have yet to be worked out.
May 3, 2004 — California Governor Arnold Schwarzenegger and other lawmakers finally drove home sweeping reforms to the state's 91-year old workers' compensation system — one of the most expensive in the country. Plagued by some of the nation's highest medical expenses, general employee and employer dissatisfaction, and out-of-control permanent disability awards, the system had become a drag on the state's economy, hampering the creation of new jobs, and even driving businesses to neighboring states. While it was a long road to change, peppered with missed deadlines and threats of a ballot initiative, California's latest reforms may soon be a model for other states.
"What's always been the issue in California … is its propensity to end up with an adversarial process," said Stan Long, chairman of the workers' comp practice for Marsh Inc., an insurance services firm. Long said that at first blush, the latest California overhaul package "looks deep and wide in scope and complexity." But he said that "what hangs in the balance is how well and wisely it is implemented...."
Los Angeles Times, 4/17/04
Passed by an overwhelming legislative majority and signed by the governor on April 19, California's reforms are significant in both their scope and complexity. The bill is a victory for businesses, local governments, and nonprofit groups that have seen their workers' compensation insurance costs double and triple since 2000. It is also a victory for employees who will benefit from a simplified process, the assurance that their care conforms to scientifically-based treatment guidelines, and immediate access to care. In addition, the legislation raises benefits for permanently disabled workers with more serious injuries.
Lawmakers have predicted that reforms will save billions of dollars in a system that would cost the state's economy between $22 billion and $29-plus billion in 2004. While the reforms are extensive, many of the details still need to be worked out by government administrators, and lawmakers still need to define and certify the medical networks described in the legislation. Many executives note that it is simply too early to predict the cost savings.
"Though specific savings remain unknown, the overhaul is projected to eventually save employers several billion dollars yearly by setting new limits on medical benefits and standardizing treatment to American Medical Association guidelines. The reform package reduces the current system's five-year limit on disability payments to two years, and makes workers accustomed to picking their own doctors pick instead from a pool of physicians authorized by the employer and its insurance company."
USA Today, 4/16/04
By passing the legislature with more than a two-thirds majority, the reforms became law with the governor's signature and went into effect on April 20. However, many are still left with questions:
- How can we properly quantify and present our losses to insurers, a third party, or, if necessary, the court, to obtain maximum recovery under our insurance policy and the law? Do we — or should we — use the same methods to quantify losses under the law as we used under the insurance policy?
- How will these changes impact our current workers' compensation program? When do reforms take effect?
While some of the implementation details may still be unclear, there is little doubt that recent reforms will have a powerful impact on the state's workers' compensation system. Some will be regulatory and others may provide employers with the opportunity to revamp and revitalize current workers' compensation programs. Key actions may include a review of internal processes and outside vendor performance and the development of management processes to improve workers’ compensation programs. Key highlights of this historic reform include:
Immediate Access to Medical Care
If injured, employees will have immediate access to medical care even before an injury is determined to be compensable. The goal is to minimize delays or access to care issues. Employer liability is limited to $10,000. For example, if an employee receives $8,000 worth of medical care and the injury is not determined to be work-related, the full amount of that employee's initial medical bills will still be covered. This change is effective immediately.
Objective Standards
Reforms place an even greater emphasis on using objective medical standards, including those established by the American Medical Association (AMA) and the American College of Occupational and Environmental Medicine (ACOEM). At every level of the process, treatment guidelines must meet established scientific, peer-reviewed standards. Once established by the state's Administrative Director, reforms go into effect on or before January 1, 2005.
Effective immediately, both employers and employees now need to meet the evidentiary burden of proof when disputing a case; previously only employers were held to this requirement. The reform also defines appropriate medical treatment as that which is reasonably required to cure or relieve the effects of the injury based on guidelines adopted by the Administrative Director.
"California's 91-year-old system has some of the nation's highest insurance premiums for employers and some of the lowest benefits for injured workers. The [reform] aims to save employers billions of dollars by setting a higher standard of proof for workers claiming to be injured; requiring employees to use doctors approved by their employers and their insurance companies; and imposing stricter time limits on medical benefits. "
Associated Press, 4/14/04
Healthcare Provider Networks
Effective January 1, 2005 under the new law, if the employer or its insurer establishes a medical provider network, employees must use it for work-related injuries. The network must be used for the entire duration of medical treatment. Employees have the right to seek second and third opinions within the network. If still unsatisfied with care, employees have the option to apply for an independent medical review (IMR). During the review process, an IMR physician will determine if the employee's request falls within the ACOEM or Administrative Director's medical treatment guidelines. If the answer is “yes”, the employee may go out of network for the disputed treatment.
While specifics on establishing networks have yet to be defined, this reform presents employers with a unique opportunity to help ensure timely, appropriate medical care for employees and to build a system based on occupational medicine. Employers should begin to review their loss history and identify injury patterns so that the right medical specialists can be integrated into provider networks. If, for example, there is a high frequency of broken or fractured bones, incorporating the right orthopedic care should be a priority. If eye injuries are more frequent, ophthalmology would be an important component of the medical network.
Return to Work
Return-to-work programs, long a key component of a well managed workers' compensation program, can be linked to lower costs. The latest reforms should encourage employers to place even greater emphasis on returning the injured employee to work as soon as he/she is medically able. Recent changes will allow permanent disability rating amounts to be increased or decreased by 15 percent based on the offer of a transitional or regular duty assignment. This will go into effect once the Administrative Director adopts a revised disability schedule.
This change provides an opportunity for employers to reinvigorate their companies’ return-to-work programs, create a robust transitional duty programs, and partner effectively with provider networks. Ensuring that employer policies and procedures meet the new California guidelines and communicating benefits of company programs to employees should be an important component of any employer's effort.
Disability Awards
Disability awards have been a major cost driver, and many felt the system had become too subjective and had insufficient guidelines. Reforms attempt to address the issue by requiring the use of more objective AMA guidelines as of January 1, 2005 for assessing injuries and requiring physicians to address causation issues. Effective immediately, employers have the right to "apportion" a share of the disability award to off-work activities. For example, a person with a knee injury and a history of skiing accidents would expect to see other previous knee injuries factored into the determination of the final workers' compensation award.
"They [the assembly speaker and senate president pro tem] also said high workers’ compensation costs were hurting the state’s economy, and that the compromise should reduce costs while guaranteeing injured workers basic protections."
Sacramento Bee, 4/18/04
In general, temporary disability payments will be capped after two years; some exceptions will apply. Changes also shift benefits from minor to more severe injuries. Less severe injuries will receive a benefit decrease of 20 percent, while more severe injuries will see an increase in benefits, giving financial assistance to those with the greatest need. Specific guidelines and an implementation schedule will be established by the system's Administrative Director.
Looking Ahead
As reforms are further defined and specifics are ironed out, employers will have a better understanding of how these new changes will affect their businesses. During this transitional period, not all of the answers will be available immediately, but employers with operations in California should begin to ask the following questions:
- How and when can I capture cost savings?
- Will I need to change policies and procedures in areas such as my return-to-work programs in order to take full advantage of the reforms?
- Is my health care organization (HCO) still applicable under these new reforms?
- Will this affect how I market my insurance program?
- Do all of the reforms apply to my business?
Guidelines need to be established and deeper questions need to be answered, but employers can be cautiously optimistic that the latest reforms will improve the system and eventually lower costs. As changes are rolled out and new regulations written, it is critical that employers stay abreast of these developments and integrate any changes into existing policies and procedures. Forward thinking companies will use these sweeping reforms as an opportunity to identify and build new programs that will further control their workers' compensation costs.
For more information about how Marsh can help you respond to workers’ compensation reform in California, please contact us.
|
|
|
|
|
|
|
|
