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2013 California workers comp reforms will define market for years to come

Reform bill of 2013 aids disabled workers, but medical reviews costly


DANA POINT, Calif. — Legislative actions at the state and federal level will continue to define the California workers compensation market for years to come, according to experts monitoring the effect of recent workers comp reforms in the state.

In California, the enactment of Senate Bill 863 on Jan. 1, 2013, introduced a host of reforms, including increased benefits for permanently disabled workers and mandated independent medical reviews for all medical treatment disputes.

“S.B. 863 came in because (partial disability) benefits had been cut significantly,” said Robert Darby, San Francisco-based president of Berkshire Hathaway Homestate Cos. “The goal was craft a cost-neutral bill, but it has turned more into a (partial disability) increase bill at the end of the day.”

While largely positive about its effects, Mr. Darby said the independent medical review process, which begins when an injured worker disputes results of a mandatory utilization review, has held some surprises.

Independent medical review “has been a little different than we expected,” he said. “It's been more expensive for the carriers from a cost standpoint as we pay for all the (the independent medical reviews) that are going through. The fact that most are being upheld is a good sign that the industry is doing a reasonably good job with utilization review, but the frictional costs associated with (utilization review) have been a little more than we expected.”

Also speaking during the California Workers' Compensation & Risk Conference in Dana Point, California, last week, Dawn Watkins, Los Angeles-based director of integrated disability management at the Los Angeles Unified School District, said the school district has felt the effect of the new workers comp law in several ways.

“Even though I represent an employer, we are happy to see the increase in benefits for injured workers. We want them to have the benefits that they need,” Ms. Watkins said. “For us, (utilization review) has worked.”

Initially following last year's new law, litigation from claimant attorneys representing aggrieved workers “dropped like a rock,” Ms. Watkins said. While litigation now is climbing again, it's “not at the rates we saw before,” she said.

Kevin Confetti, San Francisco-based director of workers compensation systems and operations and employment practices liability at the University of California, said it's too soon to tell the true outcome of the legislation, noting that some of the law's more controversial aspects likely will be tested in court.

“Workers compensation reform is long-tail in California and it's always been that way,” Mr. Confetti said. “I think the ultimate result of the cost savings from (the independent medical review) process is in the future. So for me, the jury is still out.”

Irrespective of its long-term fate, last year's law has new penalties about which employers need to be aware, said Edward Canavan, Los Angeles-based vice president of workers compensation practice and compliance at Sedgwick Claims Management Services Inc.

For example, the law mandates that medical provider networks hire medical access assistants, and if a medical access assistant fails to respond to an injured worker's query in one business day, an employer can be fined.

“You have to make sure that your medical access assistant is really engaged,” Mr. Canavan said. “There are a lot of serious penalties here.”

While the law's impact on the workers compensation market is direct, effects of the Patient Protection and Affordable Care Act are largely indirect.

More people gaining access to health insurance under ACA may exacerbate the doctor shortage already affecting the workers compensation market, said Kimberly George, Chicago-based senior vice president and senior health care adviser at Sedgwick.

“The ACA was designed to address access,” Ms. George said. “What does that mean for workers compensations in terms of the physician, nurse practitioner and physician assistant population? Will there be enough providers to treat our patient population?”

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