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California workers comp law has doctors resolving many more medical disputes

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California's workers compensation reforms have produced an unexpected surge in independent medical reviews, but experts and employers say more time is needed to see whether the changes reduce costs and claims management delays.

The legislation, signed into law in September 2012, was intended to reduce workers comp costs for employers and insurers and boost permanent disability benefits for workers by 30% through this year.

Provisions of the law include instituting independent reviews for medical treatment and billing disputes, creating first-time fee schedules for home health care, language interpretation and other workers comp-related services. It also introduced fees that were intended to reduce the number of liens filed for medical payments and other services.

California workers comp experts say more time is needed to determine whether the law will relieve cost pressures for insurers and employers as the California Division of Workers' Compensation in San Francisco continues implementing the law.

“We're starting to see third parties asking for changes, and we just think it's too soon,” said Carlos Rojas, director of risk management at Helpmates Staffing Services in Irvine, California, which provides workers comp coverage for about 2,000 temporary workers a year.

“There's a lot that was done in good faith, where you had labor and employers actually come together, and what we're seeing right now is positive. We just need more time before we make more changes,” Mr. Rojas said.

The law is “playing itself out,” said Steve Suchil, Western region vice president at the American Insurance Association in Sacramento, California.

“We're not seeing everything that was promised, but we're seeing a lot of it.”

Experts see the greatest savings potential from independent medical reviews, where physicians resolve disputes about medical care for injured workers rather than workers comp judges.

The process, which allows 50 days to make such determinations, is meant to expedite resolution of medical disputes. Insurers or employers pay $550 for each physician working as an independent medical reviewer working on a case.

So far, the independent medical review process has been used at a “staggering” rate compared with initial estimates, said Mark Sektnan, president of the Sacramento-based Association of California Insurance Cos.

There were 19,663 independent medical review requests in April for workers comp claims, the California Workers' Compensation Insurance Rating Bureau in San Francisco said in a June report. That compares with 178 independent medical review requests in April 2013, just after the review process was initiated at the beginning of that year.

The state workers comp agency said in a December webinar that it was receiving about 20,000 independent medical review applications per month, about five times greater than had been expected when the review process began in July 2013. About one-third of those applications are duplicates, the division said.

“We anticipated a significant number of independent medical review cases, but we didn't anticipate the huge volume of independent medical review cases that we are seeing,” Mr. Sektnan said.

Despite the spike, the rating bureau said independent medical reviews are expected to reduce some costs. The rating bureau said reducing medical treatment delays is expected to reduce the duration of temporary disability claims by 4% and system costs by 2.1%, or $390 million annually.

Eddy Canavan, vice president of workers compensation practice and compliance at Sedgwick Claims Management Services Inc. in Riverside, California, said workers comp experts are optimistic about the future benefits of independent medical reviews.

“The whole idea of independent medical review is very innovative and refreshing in that they wanted to keep medical decisions with medical professionals, and they wanted to provide fair, nonbiased payment to an injured worker when they wanted to appeal a decision,” Mr. Canavan said.

Still, experts worry that several lawsuits could reduce the effect of that process.

For instance, the California Workers' Compensation Appeals Board ruled in February that the board, not an independent medical reviewer, must decide whether a claimant's spinal surgery was medically necessary.

“Every time one of these cases succeeds, it undercuts the reforms,” Mr. Sektnan said.

The AIA's Mr. Suchil said he's hopeful that the California Division of Workers' Compensation will find a way to train workers comp judges in applying the provisions of the 2012 law.

“I think the judges really need to have consistency across the state with respect to implementing the bill,” Mr. Suchil said.

The California workers comp agency is still drafting regulations and implementing some portions of the law, such as a fee schedule for workers comp-related copy services, and experts say the state needs time to finish its work before determining if further changes are needed.

“The reforms seem to only be good for three or four years before we have a variety of elements that come into play,” Mr. Sektnan said.

“One is the courts make rulings that nobody anticipated. You (also) get changes in behavior that nobody foresaw.”

One behavioral change since the law was enacted is the advent of service providers charging for drug tests that determine if workers comp claimants are using medications correctly or if their prescriptions are causing health problems, Mr. Sektnan said.

“What we're finding is that Medicare charges ... $300 for a drug test and the companies charge the workers comp people, like, $1,000 because there's no fee schedule for drug testing,” he said. “So it gets very complicated.”

While such services could create problems down the road, employers have asked regulators to hold tight on implementing workers comp changes outside the 2012 law to allow the measure to realize its full potential, Helpmates' Mr. Rojas said.

“We're asking for all the rules and regulations that were implemented to play out and then (the state can) make adjustments later,” Mr. Rojas said.

“We see (the law) as a huge benefit for the employer community.”