Thursday, March 29, 2007, 10:37 PM - Political developmentsThe rates California workers' comp insurers charge employers were deregulated in the early 1990s. Since then, the California Insurance Commissioner makes a non-binding recommendation on rates.
The rates recommended by the Insurance Commissioner often follow the recommendations of an industry group, the Workers' Compensation Insurance Rating Bureau of California, commonly known as the WCIRB.
On March 28, 2007, the WCIRB recommended that California workers' compensation rates drop by 11.3%. Insurance Commissioner Steve Poizner could adopt this recommendation or could make his own independent assessment. When John Garamendi was Insurance Commissioner, he did not always follow WCIRB recommendations. In any event, Poizner's decision is not binding on insurers, who are free to set their own pricing.
According to an article in today's Sacramento Bee by Gilbert Chan, if this cut is adopted, the total reductions in rates since 2003 would total 64%. Rates would be cut to $3.21 per $100 of payroll after having reached a high of $6.47 per $100 of payroll several years ago.
Keep in mind that not all these savings have been passed along to all employers. Many businesses have complained that they have not seen major savings after the 2003 and 2004 comp reforms.
And of the comp premiums collected, how much is being distributed to injured workers in different forms of benefits? WCIRB statistics for 2004 show that out of $23.6 billion collected in premiums, benefits to workers were paid in the amount of $8.5 billion, and $5.4 billion went towards insurer expenses. In 2004, that left profits for insurers of $9.7 billion. Shocking? A system designed to handle injured worker medical treatment and disability payments paid out only slightly more than a third of premiums collected. Carrier profits consumed more than 40% of premiums collected.
I'd call that a recipe for some serious structural reform. As they head into discussions this year of what employers can afford and what an adequate compensation system would look like, perhaps the regulators and politicians should consider some of these statistics.
Wednesday, March 28, 2007, 08:57 PM - Political developmentsIs the glass half empty or half full? Listeners to the testimony in Sacramento at today's California Assembly Insurance Committee hearing on the effect of recent changes on permanent disability and temporary disability may have wondered... are these guys all on the same planet?
Representatives of the big employer-sided interests in California testified. Manufacturers, insurers, self-insured governmental entities. For labor, there was Angie Wei of the California Labor Federation. Linda Atcherley testified on behalf of the California Applicants Atttorneys, as did insurance consultant Mark Gerlach.
The message from the employer community remains consistent: there was a crisis; SB 899 has lowered runaway and crippling workers' comp costs, so don't tinker with the system. The employer community insists that more data and further studies of the results of SB 899 (and the new rating schedule that followed it) are needed before changes are made.
Wei, Atcherly, Gerlach and other speakers noted that there is a different crisis now. A crisis for injured workers. Gerlach pointed out that inaction is a recipe for death by study. Wei, Gerlach and Atcherley all noted that the recent CHWSC study documents the predictions of prior studies. The CHWSC study shows that ratings under the new permanent disability rating schedule are on average 50% lower than under the "old" pre-Schwarzenegger schedule (see link to the CHWSC study below). Gerlach pointed out that the RAND study had questioned the adequacy of pre-2004 benefits, and that benefits have now been reduced by 50% from pre-2005 levels. Wei noted that the Labor Fed had prepared a position paper on the issue (I'll try to post it soon).
The Insurance Committee was told that the DWC (i.e. Schwarzenegger administration) will soon release the results of its analysis of data on uncompensated wage loss. The DWC indicated that proposals for revisions in the permanent disability rating schedule would then be made, and the project would enter a 120-day rule-making phase.
Interestingly, that could put final DWC action on this topic either just before or just after the usual end of the legislative session, which normally closes in early August. Thus, what the DWC does or does not do in its rule-making process could become part of a larger negotiated legislative solution this year.
The one area that seemed ripe for agreement between the sides is on the issue of the two-year temporary disability cap. Several business lobbyists testified that they could support a cap on the number of eligible weeks of TD, but spread out over a longer period (for example, a 204-week cap on TD weeks that could be used over a three or four year period). I expect we will see a bill in this area.
To see the CHWSC report, click the following:
http://www.dir.ca.gov/CHSWC/Reports/Mem ... an2007.pdf
To see the recent DWC paper on the status of its study, click the following:
http://www.dir.ca.gov/dwc/WageLossForIn ... withTD.htm
Tuesday, March 27, 2007, 10:48 PM - Political developmentsOn Wednesday, March 28 at 9 AM, the California Assembly's Insurance Committee (chaired by San Jose Democrat Joe Coto) will hold a public information hearing on the effect of recent revisions to the workers' comp permanent disability rating schedule.
The Schwarzenegger administration (through the staff of the Division of Workers' Compensation) has been conducting a study of return to work rates and earnings losses of California injured workers. Portions of the study have been released (see below to download those studies), but the study is not complete.
Meanwhile, Cheese Whiz (the California Commission on Health, Safety and Workers' Comp, CHWSC) has continued to study the issue, and recently issued a report. The CHWSC report released on February 23, 2007 verified that the impact of the 2003 and 2004 workers' comp reforms (and the new rating schedule that was adopted) has been to drastically reduce permanent disability awards.
The March 28 hearing may provide insight into how the various system stakeholders will "spin" this information and information as to where the administration is headed in its DWC study. I will be covering the results of the hearing over the next several days.
To see the DWC study released last week, click here:
http://www.dir.ca.gov/dwc/WageLossForIn ... withTD.htm
And to see a PDF version of the CHWSC study of ratings through January 2007 (prepared by Berkeley's Frank Neuhaeuser), you can click here:
http://www.dir.ca.gov/CHSWC/Reports/Mem ... an2007.pdf
Friday, March 23, 2007, 08:31 AM - Medical treatment under WCFew people in California haven't heard Mick Jagger of The Rolling Stones squawking "I Can't Get No Satisfaction." He was wailing with existential angst about finding meaning in a world bombarding him with useless information about how white his shirts could be (as well as his search for "girl reaction").
Would most California injured workers echo his unsatisfied refrain? Are California's injured workers satisfied or unsatisfied with their medical treatment? Anecdotal horror stories have indicated that they are not. The 2003 and 2004 reforms affected medical treatment in several key areas:
-medical treatment standards (the "ACOEM guidelines") were adopted as the presumptive standard of medical care allowed
-provisions were added allowing utilization review ("UR") of medical treatment requests by insurer-hired outside doctors
-employers were authorized to setup Medical Provider Networks ("MPNs") of employer selected physicians
-workers subject to an MPN lost the right to "free choice" of a doctor unless they predesignated a doctor before they were injured
-the MPN provisions were declared retroactive, allowing insurers to force many workers to terminate treatment with doctors they had seen for years
-strict limits on chiropractic treatment and physical therapy were instituted on post 1.1.04 injuries
These reforms have squeezed billions of treatment dollars out of the California comp system. But there are lots of unhappy campers. Just how many?
The UCLA Center for Health Policy Research study of worker satisfaction with treatment was published in February 2007. You can find the Los Angeles Times account of the study by clicking here:
http://www.latimes.com/business/la-fi-c ... s-business
And you can download the actual study at this site:
http://www.healthpolicy.ucla.edu/pubs/p ... ?pubID=216
Getting satisfaction. Or not. In future posts, I will discuss the results of this study as well as problems with the study. And I'll be looking at an effort being made to roll back these changes through the California initiative process.
Thursday, March 22, 2007, 11:27 PM - Political developmentsThe California Division of Workers' Compensation (DWC) has really been struggling to "get it right" in formulating regulations concerning utilization review.
The FOURTH set of revised proposed regulations has just been unveiled. These are available at the following site:
http://www.dir.ca.gov/dwc/DWCPropRegs/U ... h15day.pdf
These revisions yet again weaken the proposed regulations on utilization review enforcement. In essence, the proposed regs weaken the requirement that reviews of utilization review determinations examine a certain proportion of utilization review denials.
This is all in the context of massive criticism of the utilization review process by doctors and injured workers. As billions of dollars in treatment costs have been squeezed out of the system, some doctors and workers have experienced outrageous treatment delays or denials by non-qualified UR doctors acting on limited information.
But is it possible that the DWC regulators are missing the forest for the trees? Shouldn't utilization doctors be required to get all of the treatment records rather than a slim version of the records, or a computer summary of treatment? Shouldn't there be better procedures for treating doctors to appeal denials? Shouldn't patient (i.e. worker) input be permitted in the process? Shouldn't there be more transparent disclosure regarding the financial arrangements between insurance carriers and utilization review companies? Shouldn't the UR regs require that the UR doctor be the exact same medical specialty as the doctor requesting the treatment? Would standardized treatment request forms help resolve the problem that some physicians fail to include sufficient data on diagnosis and clinical findings and/or justification for the requested treatment?
None of these concepts are rocket science. But the DWC regs do not adopt these simple requirements, many of which would make the utilization review process clearer and fairer.