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California reforms saving comp industry billions: WCIRB

California comp savings

Legislation passed in California in 2012 and 2013 have provided significant costs savings to the state’s workers compensation system, the California Workers Compensation Insurance Research Bureau stated in a cost monitoring update released Thursday.

The WCIRB found that S.B. 863, which was signed into law in 2012 and took effect in two waves on Jan. 1, 2013, and Jan. 1, 2014, has saved the state’s workers comp system $2.3 billion annually, or 12% of total loss and loss adjustment expense cost.

S.B. 863 made structural changes to the state’s workers comp delivery system by creating a medical provider networks for the comp industry and requiring physicians to use evidence-based medicine to guide treatment decisions. Total savings to the system, said the WCIRB, total more than $10 billion since the law’s implementation and has resulted in a series of pure premium rate decreases totaling more than 40%, resulting in the lowest average premium rates in the marketplace in 40 years.

Although permanent disability benefits in the state have increased and frictional cost savings have not resulted in expected relief, the medical cost reductions as a result of the law have been greater than expected, according to the brief.

The law has also substantially reduced the use of permanent disability add-ons on comp claims and the medical treatment resolution process has increased the speed at which permanent disability claims are settled, said the WRIRB, and the creation of the independent medical review and independent bill review process, reductions in ambulatory surgical center fees and fee schedule changes have resulted in an annual decrease of $1.2 billion in total system costs.

Although the law’s provisions also decreased lien filings, the brief found that lien-related disputes have continued and negatively impact claims handling costs.


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