Young: State's Top 10 WC Developments, First Half 2018

Tuesday, July 31, 2018 | 0

Around each midyear I look back at what were the top events and trends in California workers’ compensation during the first half.

Julius Young

Here in no particular order are my picks for the top 10 developments in California workers’ comp for the first half of 2018.

1. 2018 shaping up to be important year in courts

As always, there are interesting Workers' Compensation Appeals Board panel cases galore, but in the first half of 2018 there were important cases at the appellate court level as well:

• Zuniga v. WCAB. A 1st DCA case rejecting another challenge to the constitutionality of the independent medical review system.
• County of San Diego v. WCAB (Pike). Even though there was a timely petition to reopen filed before the five-year anniversary of the injury, the WCAB had no authority to award temporary disability after the five years expired.
• Dynamex  Operations West v. Superior Court of Los Angeles. An April 2018 California Supreme Court case that adopts a more broad criteria for finding a worker to be an employee. Although this was in a wage and hour case, and the Borello test still may apply in workers’ comp, many believe that the more simple Dynamex standard will eventually be applied to workers’ comp claims. Dynamex may have major implications for “gig economy” companies.
• SCIF v. WCAB (Guzman). A worker’s soil compactor hit a rock and fell on him, but it was not a “sudden and extraordinary” event that would trigger an exception to the six-month employment rule for psychiatric claims.
• King v. CompPartners. While a ruling on this case has not been issued by the California Supreme Court, the court did hold oral argument during the first half of 2018. The issue is whether a utilization reviewer has a duty to the worker that can give rise to a tort/negligence action where the reviewer allegedly failed to warn the worker about the danger of withdrawing from a medication that the reviewer did not certify in a UR decision.

2. Controversy about QME system continue to be big issue

After a spate of qualified medical evaluator non-renewals and delayed renewals in 2017, several doctors sued the Division of Workers' Compensation. Although the case in Los Angeles County Superior Court was resolved, in May 2018 the DWC posted to a public forum proposed changes to QME report billing standards.

Those changes, which would include tightened billing rules for complex exams and medical research, created great concern among QMEs. Over 500 pages of forum comments were lodged by QMEs. Many noted that the number of QMEs has been declining for years, and that the proposed billing rules were unworkable and punitive to the point that many QMEs might simply drop out of the system.

At its June 2018 meeting, several Commission on Health and Safety and Workers' Compensation commissioners suggested that the DWC hold off formal rule-making until it schedules some face-to-face meeting with stakeholders on this topic.

A February 2018 CWCI research update analyzed trends in the QME system. Among the interesting findings, the report noted that payments for supplemental med-legals were up but that the number of ML 104 reports began to level off in 2015. The total number of QME providers decreased, by 20% between 2012 and 2017. QME management group market share continued to expand.

3. Major legislative reforms unlikely

Nevertheless, at mid-year there were some notable bills to track:

• AB 479 addresses rating criteria for breast cancer.
• AB 1749 would provide coverage for injuries to police officers injured out of state while off official duty.
• Several bills would make changes to the CURES database system (AB 1751, 1752 and 1753).
• SB 899 precludes apportionment based on race, gender or national origin. This is a bill that originally took direct aim at declaring legislative intent to reject genetic apportionment as allowed under the City of Jackson v. Christopher Rice case.
• SB 1086, a death claim statute of limitations for safety personnel.
• AB 2496, a rebuttable presumption that janitorial workers are employees.
• AB 2046 requires data sharing among government agencies involved in combatting fraud and allows Fraud Commission to use leftover funds from prior assessments.
• SB 880 allows a pilot program for payment of disability via prepaid cards where employee gives written consent.
• AB 2334 allows for release of certain information about self-insurers.

4. New comp prescription drug formulary

The formulary regulations (Title 8 CCR sections 9792.27.1 through 9792.27.23) were adopted as of Jan. 1. The formulary took effect for all drugs dispensed for all dates of injury.

In June the DWC announced the names of doctors and pharmacists who have been selected for the Pharmacy and Therapeutics Committee, tasked with revising and consulting on the safety and effectiveness of drugs on the formulary. The P&T Committee is to begin meetings this month.

A March analysis prepared by the California Workers’ Compensation Institute claimed that pharmaceuticals were 46% of the medical services sent to IMR in 2017, and IMR upheld the UR denial 92% of the time.

As of mid-2018 the formulary was so new that it is difficult to reliably gauge its effect on quality of care or costs.

The formulary was not the only new item affecting medical treatment in 2018. Revised Medical Treatment Utilization Schedule guidelines for many different body systems went into effect Dec. 1, 2017.

5. Major personnel changes at the Department of Industrial Relations

Most system stakeholders were shocked when Christine Baker, longtime director of the California DIR, announced her sudden retirement. Rumors swirled about the circumstances of her departure.

In April, WorkCompCentral published a story indicating that it had received information that there were some issues involving Baker’s brother and daughter, both of whom had worked for the DIR. Thereafter, Baker received tributes from some of the stakeholders who had worked with her on various legislative and regulatory reforms.

Andre Schoorl was appointed acting director of the DIR, reporting to Labor and Workforce Development Agency Secretary David Lanier.

George Parisotto was confirmed as the administrative director of the Division of Workers’ Compensation.

In February there was a controversy that erupted after the WCAB commissioners wrote a letter to the DIR indicating that it appeared that some WCAB email accounts had been accessed by DIR personnel, expressing concern about independence of the judiciary.

The DIR responded with a Feb. 26 explanation that addressed some of the WCAB’s questions. The exact circumstances of what occurred have not been published, but in any event the WCAB eventually issued a statement that it accepted the DIR explanation.

At the WCAB, longtime Commissioner Frank Brass retired in January. In June, Gov. Jerry Brown appointed an old school chum, Juan Pedro Gaffney, to the WCAB.

At midyear many of the stakeholders were expressing concern about what the next governor’s election might mean for their constituencies.

6. WC insurance rates decline again for many employers

Advisory rates established by the California insurance commissioner continued to decline. Seven advisory rate reductions have been made by Commissioner Dave Jones since 2015, and according to the WCIRB, average charged rates declined 22% since 2014.

Still, there were some troubling things about the numbers.

• Frictional costs, loss adjustment expense and cost containment expense continued to be extremely high in comparison to other states.
• As in 2017, it continues to cost 53 cents to deliver $1 of benefits.
• The ratio of SB 863 savings to the increased benefits to workers turned out to be much more in savings than has been anticipated.
• Defense attorney fees, and the category of commissions and acquisition expense, continued to rise significantly.

Here are some comments on the 2018 WCIRB report on 2017 results.

7. Anti-fraud efforts continue as major theme

Provider fraud continued to get more of the headlines than employer premium fraud. As of early June, the DWC announced that 263 medical providers had been suspended from participating in the workers’ comp system under the anti-fraud statutes AB 1244 and SB 1160.

While some of these were physicians who had surrendered or lost their license for reasons other than fraud, overall the suspensions were at least a start on cleaning the swamp.

In March, the DWC posted a progress report on its anti-fraud efforts, noting that 465,000 liens filed by or on behalf of criminally charged providers had been stayed, and 229,200 liens (with claimed value of $2.5 billion) had been dismissed for failure of the provider to file lien declarations required by Labor Code 4903.05.

8. Handful of regulations remain on horizon

Regulations that went into effect in 2018 included the MTUS formulary and provider suspension procedures.

Still undone at midyear were some possible other regs: new interpreter regulations, possible medical-legal expense regulations, evidence-based updates to MTUS,  home health care regs and UR accreditation regs.

9. Many UR providers miss deadline for URAC certification

July 1 was the deadline for UR providers to be accredited by URAC, as required under Labor Code 4610(g)(4), part of the SB 1160 reforms enacted in 2016. It appears that many UR providers did not meet that deadline. The consequences of that failure, and enforcement penalties, are not entirely clear. The DWC has not promulgated regulations to address the issue.

10. Studies provide data that may influence direction of system

Among the noteworthy reports in the first half of 2018:

• Rand study on options to improve the Return to Work Supplement Program (the so-called $120 Million fund), including a possibility of automating fund payments to increase participation in the fund.
• Rand study (commissioned by CHSWC) titled “Medical Care Provided to California’s Injured Workers.”
• DIR study titled “Preliminary Findings of Supplemental Job Displacement Benefits (SJDB) Voucher Program Assessment.”
• Rand report titled “Physician Reporting Requirements for Injured Workers in California.” The report was written in 2017 but was not publicized until it was found online on the Rand website by a WorkCompCentral reporter.
• California Workers' Compensation Institute report on 24-hour care and integration of such a system with California workers’ comp. Here is my blog post on that report.
• WCIRB report titled “2017 California Workers’ Compensation Losses and Expenses.” My analysis of that report, with links to it, is here.
• 2018 State of the System report from the WCIRB.
• A powerpoint presentation to CHSWC by Rand titled “Wage Loss Monitoring in California’s Workers’ Compensation System.”
• CWCI study on opioid trends. The study notes that California workers’ comp opioid spending fell in 2017 to the lowest level in a decade.

Julius Young is a claimants' attorney for the Boxer & Gerson law firm in Oakland. This column was reprinted with his permission from his blog, www.workerscompzone.com.