Things SB 899 Did Not Think About

Saturday, December 17, 2005 | 0

by Dennis Knotts

Having taught SB 899 and related topics since it was passed on 4/19/04, it has become very obvious that SB 899 while a good idea to begin with, did not contain the detail and foresight to do what it needed to do, i.e. make claims adjusting do-able.

Historically, we have seen many Reforms rushed and passed late at night [or in the morning] and the mistakes were addressed in a clean up Bill. There has not been any clean up Bill for SB 899 and none seems to be appearing on the horizon.

Unfortunately, we still need to provide benefits, resolve issues and try to manage work comp on a day-to-day basis.

This following discussion is from an adjuster-in-the-trenches' point of view. I am not an attorney. I am not offering legal advice, and suggest that any of the following be run by legal experts before putting these into practice. Some will need to be litigated to see if they work or not. It is just that with all the fighting going on in Sacramento, no one has taken the time to help us figure out how to do our jobs.

DELAYED CLAIMS:

I have had numerous people tell me their defense attorney or consultant told them they had to send a QME panel request form when they send their delay notice. Looking at Labor Code 4062, I have to ask: Why? Labor Code 4062 tells us "If either the employee or employer objects to a medical determination made by the treating physician..."

Yes, the treating physician will address AOC/COE issues and when he/she does; then Labor Code 4062 is triggered and applies to the claim. However, until a medical determination is made by the treating physician, there is nothing to object to via the QME panel procedure.

In short, it seems we should just send the Delay Notice and begin our discovery using the treating physician. The treating physician should do an evaluation and if he/she is unable to make an immediate determination; then the treating physician should develop and monitor a treatment program until diagnostic testing can be performed, medical records obtained and any necessary statements provided to the treating physician. At that point, the treating physician makes his/her determination and at THAT point the QME panel request form should be provided.

LABOR CODE 4600 VERSUS 5402:

We are now mandated to provide medical treatment up to $10,000 on delayed claims or until we make a decision on the case - whichever one comes first. Unfortunately SB 899 created a conflict between two Labor Codes: 3602 (c) and 5402.

3602 (c) states that "In all cases where the condition of compensation set forth in Section 3600 do not concur, the liability of the employer shall be the same as if this Division had not been enacted."

This means that until it is determined that all four conditions listed in Labor Code 3600 [injury, employee, arising out of employment and course of employment] are present, then Division Four has no legal authority over the case. It's like they never passed the law to create Division 4. Division 4 runs from Labor Code 3200 through 6100. Obviously Labor Code 5402 falls under Division 4 and so Labor Code 3602 (c) tells us that Labor Code 5402 does not apply until we have verified that all four conditions set forth in Labor Code 3600 apply to the case.

Obviously, Labor Code 5402 says the opposite, and Legislative intent implies 5402 is an exception to Labor Code 3602 (c). Where a Labor Code and a Regulation contradict, we go with the Labor Code. Where two Regulations contradict, we go with the Labor Code the Regulations are based on. But what do we do when two Labor Codes contradict?

It would be nice if someone in Sacramento had amended Labor Code 3602 (c) to state "except for Labor Code 5402..." or if Labor Code 5402 had been amended to state "Regardless of Labor Code 3602 (c)..." this would resolve the problem. Unfortunately, no one thought to do this and it now falls to the claims adjuster to figure out a way to make this compatible.

What some operations are doing is using 4600 as the medical treatment benefits for accepted injuries, and Labor Code 5402 as the procedure for delayed claim medical benefits. This results in the practice that an employee whose claim is delayed is not entitled to pre-designate his/her personal treating physician, change doctors, or take over medical control after 30 days. These are all listed under 4600, not under 5402. Those using this interpretation set and control the medical until the decision is made. If the decision finds the injury is work-related; then the employee shifts over to Labor Code 4600 procedures, and can pre-designate his/her physician, request a change of physician, etc. Again, it will take some litigation to determine if this is the correct solution to the problems.

LABOR CODE 4050 VERSUS 4062 AND 4600 AND MPN:

We have run into another major problem with regards to SB 899 and the procedure for medical disputes in the MPN. Andrea Hoch went on record at the DWC Education Seminar at LAX Marriot in February 2005, as stating that she did not believe the employer had the right to activate the 2nd/3rd/IMR medical dispute procedure. This creates some serious problems for claims adjusters. Labor Code 4050 states: "Whenever the right to compensation under this division exists in favor of an employee, he shall, upon the written request of his employer submit at reasonable intervals to examination by a practicing physician provided and paid for by the employer." This establishes our right to initiate the medical evaluation process. Labor Code 4062 had been the procedure for obtaining this evaluation. However, SB 899 states that Labor Code 4062 does not apply to the MPN. Thus, we have the right to an evaluation, but no procedure in place. It would make sense to allow the employer to activate the 2nd/3rd/IMR process for the MPN, but the Administrative Director needs to revisit the MPN Regulations and create a procedure for the employer.

OTHER MEDICAL DISPUTES:

The dispute resolution procedure allows the employee to dispute the diagnosis and/or the treatment plan via the 2nd/3rd/IMR process. Unfortunately, it does not discuss other medical issues. What is the procedure for a determination that the injury is not work-related? That does not deal with the diagnosis or treatment plan. Would this fall under 4060? So we are now outside of the MPN and now back to the AME/QME procedure. What about the determination to return someone back to work? Does that fall under treatment plan? Maybe? What about the determination that the employee is P&S or the level of disability? Those do not fit neatly into the treatment plan or diagnosis categories. Do we slip out of the MPN and now go to Labor Code 4061 and the AME/QME route? Again, the Regulations need to make this clear or offer some other procedure for the system. From a "what-else-could-I-do position, the claims adjuster will probably activate the 4060 or 4061 procedure on these just because they are not barred by SB 899, but it seems to defeat the purpose of creating a medical dispute procedure in the MPN separate and apart from the AME/QME procedure.

PERMANENT DISABILITY INCREASE/DECREASE:

Where and employee does not return to his/her former position, and the employer makes an offer of modified/alternate work, the employer can reduce the weekly PD rate by 15%. If no modified/alternate work is offered, then the weekly rate is increased by 15%.

Some people have tried to argue that this increase/decrease does not increase/decrease the over-all Award for PD, it only shortens or lengthens the time to pay out the Award. That's not what the labor Code states. The percentage of permanent disability determines the number of weeks permanent disability is paid out, not the dollar amount. So you will still have to pay out the same number of weeks based upon the percentage of PD. Now if you increase or decrease the weekly rate, you will, therefore, increase or decrease the over-all amount. The new Stipulation With Request for Award form released by the Administrative Director follows this concept.

So where an employee returns to his/her regular job, he/she gets the straight PD Award at the Labor Code rate. Where the employee does not return to the regular job, then if the employer offers modified/alternate employment, the weekly rate is decreased by 15% and the over-all Award is decreased. If no offer of modified/alternate work is made, then the weekly rate and over-all Award is increased by 15%.

As another point to make, if the employer makes the offer and later terminates or lays off the employee, it seems that from that point forward, any unpaid portion of the Award would be entitled to the 15% increase.

SUPPLEMENTAL JOB DISPLACEMENT BENEFITS:

Those passing SB 899 did not think this one through either. If an employee's temporary disability is cut off, then within 10 day a Notice must be sent via certified mail. This discusses the benefit. However, a modified/alternate position must be offered within 30 - 60 days after cutting off the Temporary Disability Benefit of the employee becomes entitled to the SJDB.

What about where an employee has been terminated for cause? That does not seem to be a legal basis for denying the benefit.

Also, what about returning the employee to a temporary position in order to allow the employee to return to some kind of work until he/she fully recovers and can go back to his/her regular job? The Labor Code and Regulations are silent in this area, too. Some claims operations are sending the mandatory 10-Day Notice, but then sending a denial of SJDB as the employee is expected to return to his/her full-time position. Again, the Audit Unit may not accept this as a viable procedure.

There is also the criteria that the position must pay 85% of the former salary. What about a wage loss situation where the employee comes back for half days and will later increase to full days? The employer will not pay 85% of the salary for half-day work. The position will not last for 12 months. This means the modified/alternate employment does not meet the criteria under Labor Code to absolve the employer from providing SJDB because the concept of bringing an employee back to modified work until he/she can return to full duty is not addressed, and as such cannot be an exception to the rule.

Given this structure, an employer may be forced to provide SJDB to an employee who will eventually return to work but must be on modified work longer than 60 days, but not for a full 12 months, or not receiving 85% of the salary.

Last point, and this is opened to a lot of debate and will require litigation to resolve: how much SJDB do we pay on minor claims? The Labor Code states the employee is entitled to $4,000 in SJDB for anything less than 15%. Technically 0% is less than 15%. The Administrative Director suggested in her Regulations that there had to be 1% PD. That's not what the Labor Code says, and so the Administrative Director may have exceeded her legal authority in creating that Regulation. Until there is a legal opinion on this, some claims operations are paying the $4,000 for 0% PD cases where the employee has not returned to his/her previous position.

CONCLUSION:

I am sure there are a lot of other problems with the SB 899 and the lack of a clean up Bill. Each adjuster and claims operation will continue to do what he/she can do based upon his/her understanding of the Labor Codes, Regulations and SB 899 legislative intent. Needless to say, litigation will be a good source of income for several months/years to come.

by Dennis Knotts, Instructor - Insurance Education Association.

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