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The news is good for insurers and payers, as the percentage of workers compensation claims that close within a year has continued to increase in California — reaching its best numbers in 20 years, according to recent data that points to a downward trend in legacy claim activity.
And the quick-close rates appear to be spreading East, experts say.
“There is a trend toward claims settling quicker in California and throughout the country,” said Scotty Benton, vice president of the workers compensation practice for Sedgwick Claims Management Services Inc.
The percent of indemnity, lost-time claims closing within a year has steadily risen from 27% in 2012 to 38% in 2019, meaning more injured workers are either recovering, going back to work, or resolving their claims in settlements quicker than they have in past years, according to data from the Oakland, California-based Workers Compensation Insurance Rating Bureau.
A number of factors have impacted the “rapid acceleration” of claims closures, including legislative reforms, said Dave Bellusci, executive vice president and chief actuary of WCIRB.
In California, S.B. 863, which took effect in 2013, created medical provider networks for the comp industry and created the requirement of physicians to use evidence-based medicine to guide treatment decisions. A.B. 1124, enacted in 2015, authorized the adoption of the workers comp drug formulary that took effect in 2018, limiting the types of drugs that can be prescribed freely.
Other, more recent pieces of legislation further helped better manage claims, which experts have said led to problematic treatment and other medical issues that complicated claims.
S.B. 1160, which took effect Jan. 1, 2017, was passed with the goal of speeding up medical delivery by exempting medical services within 30 days of injury a utilization review — which experts have said had delayed treatment and thus further complicated the claims process — unless they are on the list of services not covered, according to a spokesman from the California Workers Compensation Institute.
The bill also addressed medical provider liens, which Mr. Bellusci said tended to keep claims open longer by stipulating that liens could only be filed by a lien holder, must be verified to be legitimate, would be stayed if filed by a provider charged with a crime, and are subject to filing fees.
“Liens had been a major hurdle in the claims closing process,” said Mr. Benton. Lien filings have dropped substantially, with 104,000 filed in the fourth quarter of 2016, and a record low of 24,000 filed in the second quarter of 2019.
The decrease in opioid use has also positively impacted claim duration, said Mr. Bellusci.
“There’s also a major shift in settlement, with more claims being settled by compromise and release versus leaving them open for an extended period of time to settle by stipulation,” said Mr. Benton. “(In California), employers are also more willing to settle by (compromise and release) even if the injured worker is still an employee.”
Claims administrators in California are also more open to considering settling earlier in the life of a claim, said Dave McGowan, Santa Ana, California-based managing director of claims and disability management for CompWest Insurance Co., a subsidiary of AF Group in Lansing, Michigan.
Another driver of quicker claims settlement, he says, is a decline in spinal surgeries, which tend to have a long period of disability.
“There are too many claims to count where not just one surgery would happen, (a claimant’s) pain would continue, they’d go back in for a second surgery, and if you think about all of the different medications that go along with that,” he said. “People are realizing it’s not always the best way to go for care.”
Several other states have made significant strides in indemnity claim closure rates, said Mr. Benton, including Oklahoma and Tennessee, the latter of which pushed through a slew of reforms that took effect in 2014 and have improved claim closure rates. In 2013, the Oklahoma legislature passed reforms that reduced the statute of limitations for filing cumulative trauma or accidental injury or death claims to one year. The state also adopted more specific language for covered medical services.
The decreases in Oklahoma and Tennessee may be due to the fact that the state reforms “actually lowered benefits,” said Mr. Benton.
Meanwhile in California, cumulative trauma claims — or those stemming from injuries that crop up over time — remain a significant pain point in comp, according to experts.
In October 2018, the WCIRB reported that cumulative trauma claim rates grew by 50% since 2008, and that 40% were filed after an employee’s termination. Such claims now account for nearly 20% of all indemnity claims in the state, according to the ratings agency.
A number of those post-termination claims will also have multiple body parts added to the claim, said Mr. McGowan. “Those are the types of claims we need to focus on, how to move those along and get those settled as quickly as we can.”
Most of the increase in those cumulative trauma claims are in the Los Angeles and San Diego areas, and the majority come from people making below $500 a week and 90% usually involve representation, said Mr. Benton. He said he believes this will likely continue unless the state adopts reforms regarding cumulative trauma claims.
Cumulative trauma was named a top issue in workers comp among stakeholders speaking at a panel earlier this month at the California Workers Compensation and Risk Management Conference in Dana Point, California, where experts called for legislation to tackle the issue.
Jeffrey R. Einhorn, chief executive officer of the Sacramento-based NonProfits’ United Workers Compensation Group Inc., which provides comp coverage for nonprofit organizations statewide, called it an “epidemic” in the state.
“We’ve seen cases from people who have worked there for a month and they file a claim… at the end of the day we are spending anywhere from $25,000 to $100,000 to settle these claims,” he said.
Oregon’s pure premium rate will drop by an average 8.4% in 2020 under a proposal announced Monday by the Oregon Department of Consumer and Business.