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Reforms reduce annual comp system costs by $1.3 billion

Reforms reduce annual comp system costs by $1.3 billion

A recent report from the California Workers’ Compensation Insurance Rating Bureau estimates that workers compensation reforms passed in 2012 have reduced the state’s annual comp costs by $1.3 billion, or 7% of total system costs.

S.B. 863, passed by California legislators in September 2012, increased benefits for injured workers as of January 2013 and included a number of changes intended to reduce California comp system costs. Those included an independent review process for medical treatment and billing disputes, fee schedules for home health care, language interpretation and other comp-related services and fees for lien filings.

Overall, there has been a 10% decline in medical treatment costs as a result of S.B. 863 changes to liens, independent medical reviews, independent bill reviews, medical provider networks and other areas, according to Oakland, California-based WCIRB.

Dave Bellusci, executive vice president and chief actuary for WCIRB, said in an interview with Business Insurance that the overall results of S.B. 863 have been “positive” so far.

“It’s increased benefits to permanently disabled workers and at the same time has reduced costs in the system, and it’s helped result in some decreases in pure premium rates,” Mr. Bellusci said.

The WCIRB report showed that increased benefits for injured workers caused California workers comp system costs to increase by $650 million annually. But changes in how liens are filed and handled have reduced system costs by $480 million a year, while new fee schedules for ambulatory surgical centers and physician services have reduced costs by another $410 million a year.

Edward Canavan, Riverside, California-based vice president for the workers compensation practice and compliance at Sedgwick Claims Management Services Inc., said changes to how liens are filed under S.B. 863 have helped reduce a “glut” of liens in California’s comp system.

State law allowed claims for payment for services or benefits provided to or on behalf of injured workers to be filed as a lien against an employee's benefits claim. But the process was often abused by providers filing liens for excessive amounts or selling old receivables to third parties, which would then file liens to force a settlement from insurers or employers. The S.B. 863 reforms included a $150 lien filing fee and lien filing deadlines.

“Before S.B. 863, if a medical provider disputed the amount they were being paid, they were able to file a lien and medical providers who felt it was too labor intensive or cumbersome to do that could just sell their outstanding account receivables to a company that then would file liens and try to make that money back … That created an industry of itself with liens. A lot of people started filing liens, companies that could acquire liens started buying them and then filing them, and trying to get that money back,” Mr. Canavan said.

The WCIRB study showed that the number of liens filed in the third quarter of 2016 was down 34% from the same period in 2011.

Katherine Pettibone, Sacramento, California-based vice president of state affairs, Western region for the American Insurance Association, said the trade group believes California’s workers comp reforms have been “working well” so far.

“One of the things we are focusing on going into next year is continuing to work on the fraud within the system, but overall it’s been very good,” she said.





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