Why Workers' Comp Reform Is Not the Solution - Part 2

Saturday, May 8, 2004 | 0

Why Workers' Comp Reform Is Not the Solution - What You Can Do

Now, if I was only clear on what it meant!

By Brent Heurter

In the first article in this series we took a look at how the California workers' compensation system ended up the way it is, costly, ineffective, and burdensome to both employers and employees. In this chapter of the series we ask: Chapter 2: Is the Reform Act of 2004 the Answer?

Workers' compensation costs have gone up almost 140% in the last four years, making California one of the least employer-friendly states in the country.

Governor Schwarzenegger made workers' compensation reform a top priority, and his efforts led to the workers' compensation Reform Act of 2004, which passed the legislature April 16th and was signed by the governor on April 19th. Both Democrats and Republicans gained some and lost some. The Democrats, while gaining doctor choice and immediate care for injuries, were unable to push through a bill that included rate regulation. Republicans were able to preserve their goal of more objective standards of care.

Overview of SB 899 - The bill could eventually cut from $2 billion to $7 billion of employers' annual workers' comp costs.

- The bill does not include a provision for the state to regulate premium rates charged by insurance companies.

- Injured workers may choose their doctor from a qualified pool of doctors provided by the employer or the employer's insurance company.

- The system will use nationally recognized American Medical Association (AMA) guidelines to assure reasonableness and improve the consistency of awards: Medical reports will have to use AMA guidelines to be considered in the process. A workers' impairment rating would then be modified by a new formula. The aim of this provision is to promote uniformity, consistency, and objectivity within California's workers' comp system.

- Most temporary disability payments will be limited to 104 weeks per injury. However, the bill leaves open the possibility that an employee can claim multiple separate injuries-for example, a worker could have a claim for a "specific" injury, followed by a claim for "cumulative trauma." The 104 weeks could then run consecutively.

- The permanent disability schedule will be adjusted to increase benefits to the most severely injured workers by reducing the permanent disability benefits to the least injured.

- Doctors evaluating permanent disability must assess what percentage of a problem is from a present work-related injury and what was caused by other factors, including past work injuries. Employers are liable only for the percent of the workers' comp claim related to the present work-related injury.

- The state may reimburse small businesses to make necessary workplace changes to return injured employees to work.

- The bill sets limits on fees for medical services.

- Employers must immediately authorize medical treatment for an injured worker who files a claim of occupational injury.

- California has the worst return-to-work rate in the nation. To remedy this, the bill creates a two-tier permanent disability schedule and stipulates that awards will be adjusted to reflect the ability of an employee to return to work and return-to-work offers by their employers. Employees who are not able or offered employment will have their payment increased by 15%. Employees with return-to-work offers will have their payment reduced by 15%. Small employers are exempt from the penalty of the increase of 15% but can benefit from the reduction of 15% if they offer modified work.

Point/Counterpoint of Reform Highlights

Now let's look at some of these reforms from an employers' perspective. We call this point/counterpoint:

* Point: A highlight/benefit of the new reform
* Counterpoint: What it really means
Now let's see what the bill really includes:

* Point: Estimates range from 2 to 7 billion in savings for employers.
* Counterpoint: That's a big range! We won't really have any real idea of actual savings until the WCIRB completes its analysis in a couple of weeks. Even then, we won't really know for sure for at least several years if the savings ever materialized. In the meantime, smart employers don't sit back and wait for possible pie-in-the-sky savings to materialize! They take active steps to save money.

* Point: Prevents the state from regulating premium rates charged by insurance companies.
* Counterpoint: Doesn't really "prevent" it; the bill merely just doesn't add any regulation. But rest assured, the politicking over rate regulation has continued-and will likely continue-unabated for some time to come, until rate regulation is either passed or is soundly defeated.

* Point: Requires that injured workers first use doctors provided by the employer or the employer's insurance company before being allowed to pick their own doctor.
* Counterpoint: Yes, and it does seem, at first glance, that this will keep the employer in control. But-and it's a big but-there are loopholes. If employees are unhappy with the quality of their medical care, they can request up to two additional opinions from qualified doctors from within the medical group provided by the employer. If the injured employees remain unsatisfied with their care, they will be able to get an Independent Medical Review (IMR) from a qualified state-certified doctor, who will determine whether the employee is receiving the appropriate care. If the IMR determines they are not receiving appropriate care, employees may seek the disputed medical treatment outside of the employer-provided doctor group. And, here's the biggest loophole of all: workers can still pre-designate their personal physician, and it is likely that unions will encourage this, thus circumventing employer control.

* Point: Places limits on occupational therapy to go with the 24-visit limit on physical therapy and chiropractic treatment.
* Counterpoint: That's per injury. It leaves open the possibility to claim multiple separate injuries much like workers have claims a "specific" and then a "cumulative trauma."

* Point: Requires that doctors evaluating permanent disability assess what percentage of a problem is from a present work-related injury and what was caused by other factors, including past work injuries.
* Counterpoint: The intent is to have employers pay only for the portion of an injury that is work-related. While this is potentially a big cost saver, physicians have, traditionally, had difficulty with a similar issue, that of apportionment. Look for a lot of disputes over the degree that other factors impacted the work injury.

* Point: Allows for state reimbursement to small businesses to make necessary workplace changes to return injured employees to work.
* Counterpoint: This provision already existed. The question is whether there will be sufficient funds for the reimbursement. Look for many arguments as to the "appropriateness" of the modified and alternate positions that are offered.

* Point: Sets limits on fees for medical services.
* Counterpoint: California has had a fee schedule in effect that theoretically has done this for many years. In actuality, however&.

* Point: Requires employers to immediately authorize medical treatment for an injured worker who files a claim of occupational injury.
* Counterpoint: This is a significant benefit for workers on a small portion of the cases. In the past, physicians would treat on a lien basis and get reimbursed later. Now they are entitled to immediate payment for up to $10,000 of treatment. Employers will benefit by having greater control of the doctors-but for cases where the injured worker pre-designated his or her personal physician, look for fast run-ups of the bills to the 10K limit. The bill's sponsor, Senator Charles Poochigian, believes that this will ensure that injuries are treated quickly and will eliminate the delays that often lead to more severe injuries and litigation. His hope is that this change will eliminate the need for the employee to seek independent medical care at a more costly rate and reduce litigation in the process. Only time will tell & but we are not optimistic.

Now What?

As you can see, this newly enacted workers' compensation reform raises many questions. Unfortunately, this reform is not going to be employers' saving grace. Regardless of how effective or ineffective this reform proves to be, there will always be problems with California and the workers' compensation system. It's the nature of the beast. So the key is to realize this, accept it, and focus on what can improve and change.

The bottom line is: employers still need to be vigilant about workers' compensation cost control. There are thousands of employers in California who do not bring injured workers back to work, which is one of the most effective ways to control costs. It remains to be seen whether the bill's incentives to return workers to the job will succeed. But with or without such incentives, the possibility of saving thousands-even hundreds of thousands--with a strong return-to-work program should be incentive enough.

In our next and final article of this series we'll look at Forging a Solutions-Oriented Partnership that will deliver the results the legislators promised, but probably can't deliver, without your active participation.

Article series by Brent Heurter.
Brent Heurter is the Founder and Chief Solutions Officer of ClearComp, a workers' compensation alternative for companies that desire to control and reduce their workers' compensation costs. Brent can be reached at 888-CLEAR-89 or email brent@clearcomp.com.

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The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.