PERMANENT DISABILITY (PD) AND RETURN TO WORK (RTW)
Adopting the recommendations of the recently released report on PD and Wage Loss issued by the RAND Institute, organized Labor proposes to implement a series of substantive reforms to California’s PD and RTW components within the workers’ compensation system. These proposals will promote efficiency, consistency and cost-savings within the system, without diminishing benefits for injured workers. Additionally, these proposals create incentives to return injured workers to work by dismantling current system components which serve to keep workers in the system too long without going back to work.
Two-Tiered Benefit System: This proposal creates a two-tiered benefit system with Tier-One entitling workers who receive a return to work to offer a base level of permanent disability and Tier-Two entitling workers who do not receive a return to work offer to a supplemental PD benefit.
PD Rating Schedule: This proposal provides for a PD rating schedule based on the findings of the RAND study and on descriptions in the American Medical Association (AMA) Guides to the Evaluation of Permanent Impairment in conjunction with wage loss data.
PD Report Writing and Diagnoses: This proposal would establish PD report writing requirements for doctors that tie back to the AMA guides, and would require that diagnosis follow the American College of Occupational and Environmental Medicine (ACOEM) guidelines.
TD and PD at Same Rate: This proposal would require that workers’ compensation PD payments be made at the same benefit rate as temporary disability (TD) indemnity payments, without altering the total amount of the PD benefit paid. This would result in an injured worker receiving the PD benefits in larger amounts but for a shorter period of time.
Revamp RTW: This proposal would repeal the existing return-to-work (RTW) language for a RTW program that was never funded and never implemented. A new program would provide specified reimbursement to insured employers for the costs of workplace modifications to help industrially disabled workers return to work at their at-injury employers as well as provide a transferable credit to the new employer. This proposal would administer the program through the insurance carriers based on specified criteria.
REDUCING UNNECESSARY COSTS AND DELAYS
Costs increase whenever a dispute arises between the injured worker, the employer and or/the insurer regarding benefits, benefit delivery, compensability or a myriad of other issues within the workers’ compensation system. Accordingly, the more certainty that can be injected into the system, the greater reduction there will be in disputes and the related costs. Labor proposes implementing a series of reforms to will ensure certainty, continuity of care and a substantial reduction of disputes and costs.
Presumed Compensability: This proposal would reduce the time from 90 days to 45 days that an employer / insurer has to reject liability before a workers’ compensation claim of injury or illness is presumed compensable for non-cumulative trauma injuries or illnesses. Employers would continue to have 90 days to investigate psychiatric or cumulative injury or illness claims.
45-Day Medical Control: For workers who have not pre-designated a physician, the proposal would increase the period of employer’s control of medical treatment from 30 days to 45 days from the time the injury is reported. This conforms to the proposal to require that employers provide medical treatment pending a determination of liability and that the determination of liability be made within 45 days on claims for specific physical injuries.
Immediate Medical Treatment: This proposal would provide that within one working day after an employee files a claim, the employer shall authorize the provision of all necessary treatment for the alleged injury and shall continue to provide the treatment until liability for the claim is accepted or rejected.
Expansion of Second Opinion Process: This proposal would expand the second opinion provisions of SB 228 (Alarcón) to cover medical determinations that fall outside the ACOEM guidelines or the medical treatment utilization schedule adopted by the Administrative Director.
Medical Billing: This proposal would tie physician payments to a cost-neutral Resource Based Relative Value System (RBRVS), consistent with payment system provisions adopted in SB 228 and the Medicare program. Under this schedule, hospital costs would be reduced by 5%.
Billing Above Fee Schedule Rate – Pattern or Practice Penalty: This proposal would require medical providers to bill at or below the fee schedule rate unless under contract and would provide that a pattern or practice of billing above the rates would be subject to penalty provisions as established by the AD.
Penalties for Unreasonable Delay or Denial: Current law, as interpreted by the courts, provides for a penalty of 10% of the entire species of benefit when a payment of the benefit has been unreasonably delayed or refused. A “species of benefit” is a broad type such as Temporary Disability (TD), PD, medical treatment, death benefits, or vocational rehabilitation benefits. The penalty applies to the entire species, including amounts paid both before and after an award. The courts have criticized current law in part because the amount of the penalty bears no relationship to the amount delayed or extent of the delay. This proposal would provide for a penalty of the lesser of $5,000 or 15% of the amount that was unreasonably delayed or refused. When there have been more than three unreasonable delays of one species of benefits, the entire species of benefits would be increased by the lesser of $10,000 or 15% of the entire species of benefits.
Integrated System Carve Out Pilot: Current law allows for special negotiated “carve out” programs where a collective bargaining agreement exists. This proposal would allow the establishment of a seamless health and disability system in qualifying carve-outs, without regard to the cause of the sickness or disability. This proposal also establishes a health care and disability pilot program and provides that the Commission on Health and Safety in Workers’ Compensation (CHSWC), a joint labor-management governmental body, evaluate the pilot and issue a report.
Attorney Fees: This proposal would provide for an attorney fee schedule that reduces incentives to seek PD awards to the detriment of return to work. Current law does not provide for an attorney fee schedule. Although fees are regulated to some degree by the Workers’ Comp Appeals Board, there is no maximum on attorney fees for awards under the current statute.
INSURANCE MARKET REREGULATION
California’s workers’ compensation insurance market was deregulated in the early 1990’s. Seeking market share and cash flow with which to make investment profits, many insurers under-priced their insurance product. When the investment profits declined, the premiums were inadequate to pay the losses, and many companies became insolvent. The California Insurance Guarantee Association (CIGA) is responsible for paying the covered claims of the insolvent insurers. The influx of claims creates a crisis for CIGA and the disappearance of insurers creates turmoil for employers. This proposal is intended to prevent a repetition of the large volume of insolvencies that have occurred since the abolition of the minimum rate law.
This proposal also ensures that rates reflect real insurance costs and are not excessive. Most insurers have not passed on the savings generated by last year’s reforms. At the same time, the insurance profitability cycle is turning upward. Without regulation, profits are likely to soar and employers are unlikely to see costs reduced as a result of reforms.
CIGA Deductibles: This proposal would authorize CIGA to assess the deductible portion of a workers' compensation insurance policy with a deductible provision. Current law provides that CIGA may assess the workers’ compensation premium net of deductibles. The current assessments are made on net written premium.
Insurance Industry Regulation: This proposal would direct the Insurance Commission to examine the business affairs of the major workers’ compensation insurers at least every two years, for ten years, and then it would sunset unless extended. The Commissioner may disapprove them and may order other rates if the insurer has no approved rates. This proposal would require that rates below the advisory pure premium must first be filed with the Commissioner 60 days before they can become effective and that the insurer has the burden of proving that the rates are adequate and not excessive.
Broker Fees: This proposal would provide that the Insurance Commissioner establish commission rates for broker-agents placing WC policies, and require an interim roll-back of fees and elimination of State Compensation Insurance Fund (SCIF) broker fees until the Commissioner establishes rates.