Changing Landscape

Wednesday, September 26, 2012 | 0

For those who live in colder climates, September is when the landscape starts to change from the lush green of summer to the spectacular autumn colors. While most of us in California experience more subtle seasonal landscapes, September is still a month for transitions, and this year marks a major one in the workers’ compensation community.

On Sept. 18, Gov. Brown signed the sweeping workers’ compensation reform bill known as Senate Bill 863, which will bring significant changes to workers’ compensation practice in the coming year. In this edition of the Bulletin, we discuss some highlights of the new law.

Permanent Disability Increases. SB 863 increases permanent disability rates, which is expected to result in an increase of approximately $740 million in permanent disability benefits paid per year, phased in over two years. Effective for dates of injury starting Jan. 1, 2013, the minimum permanent disability rate increases to $160.00 per week. For injuries in 2013, the maximum permanent disability rate will be either $230.00 per week, $270.00 per week, or $290.00 per week, depending on the percentage of disability. For dates of injury starting Jan. 1, 2014, the maximum rate for all disability up to 99% will be $290.00 per week; 100% permanent disability will still be paid at the temporary disability rate.

For those applicants who feel that the increased benefits are not enough, SB 863 establishes a $120 million “return to work fund” to which an applicant can apply for additional benefits when permanent disability is determined to be “disproportionate with lost earnings.” This is separate from benefits paid by employers, and appears to be similar to applying for benefits from the Subsequent Injuries Benefit Trust Fund.

Changes to the Rating Formula. For injuries on Jan. 1, 2013, or later, there will be a significant change in the way we calculate permanent disability. Currently, we rate disability by calculating whole person impairment, then applying the diminished future earning capacity (DFEC) adjustment per the schedule, then adjusting for occupation and age. Since the Ogilvie decision, there has been much litigation over the accuracy of the DFEC adjustment. In an apparent effort to eliminate that type of dispute over ratings, the DFEC adjustment is eliminated and instead a uniform adjustment factor of 1.4 is included in the rating where the DFEC adjustment used to be.

Also, it will no longer be permissible to add on impairment ratings for sleep dysfunction or sexual dysfunction as a compensable consequence of a physical injury. Except where psychiatric injury is the result of “violent act exposure” or “catastrophic injury,” add on ratings for psychiatric injury as a compensable consequence are also no longer permissible. The meanings of “violent act exposure” and “catastrophic injury” are yet to be determined, and we anticipate litigation on this issue.

The new rating scheme expressly does not overrule the Guzman decision, which allows adjustment of the whole person impairment portion of the rating and does not eliminate permanent disability for psychiatric injury as an independent injury claim. Also, injured workers can still get medical treatment, and temporary disability benefits, for sleep dysfunction, sexual dysfunction or psychiatric injury resulting from a physical injury.

New Effects of Returning Injured Workers to Work. It is apparently still a goal of the Legislature to encourage employers to bring injured workers back to work, but how they are motivating employers to do that is changing.

For dates of injury on Jan. 1, 2013, and later, there will no longer be a 15% adjustment in permanent disability benefits owed, up or down, depending on whether an injured worker has been offered a permanent job after permanent disability is established.

For all claims, regardless of injury date, where temporary disability ends after Jan. 1, 2013, the employer will not be required to pay permanent disability advances before an award if the employer offers return to work at earnings greater than 85% of pre-injury earnings, or the employee is working elsewhere and earning at least 100% of his or her pre-injury wage. When an award of permanent disability is issued, accrued permanent disability is still calculated from the date temporary disability ended.  

Big Changes in Reviewing Medical Treatment Disputes. Presently, if authorization for medical treatment is denied by utilization review, the applicant is required to pursue a report from an agreed medical evaluator or qualified medical evaluator to resolve the dispute. We all know this is not a very efficient process. Recognizing that, the Legislature has now created a completely different process, which is being phased in in two stages.

The new process applies to UR decisions after Jan. 1, 2013, in cases where the date of injury is Jan. 1, 2013, or later. Starting July 1, 2013, the new process will apply to all UR decisions regardless of date of injury.

The new process is called “Independent Medical Review” (IMR). Notification to an employee that a request for treatment is denied must include a one-page form informing the employee of the right to pursue IMR and the process for doing so. Unless the reason for denial of treatment is something other than medical necessity, the employee has 30 days from service of the UR denial to request IMR. If no request is made, the UR decision is final.

Without going into details about the process, it basically involves having the administrative director assign a doctor, whose identity is confidential, to review a UR denial and issue a decision. There are short and strict timelines for providing documents to be included in the review, and for the reviewer to issue an opinion. Also, except in very limited circumstances, the IMR reviewer’s decision is “binding on all” and not subject to further review. If the IMR reviewer decides the treatment should be authorized, the employer has 20 days to reimburse the cost of the treatment, or five working days to authorize it, and there are significant penalties for not meeting the deadlines. The employer is required to pay the cost of the IMR review.

The new law also eliminates the spinal surgery second opinion review process as of Jan. 1, 2013, for all dates of injury, and requires parties to use the IMR process instead.

Other Changes in Medical Treatment. Other provisions of SB 863, which go into effect on Jan. 1, 2013, applicable to all dates of injury place limits on medical treatment. Generally, these reforms are favorable to employers.

These revisions include limitations on home health care services, including provisions that these services require a doctor’s prescription, and that an employer is not required to pay for services provided more than 14 days before receipt of the prescription.

The new law specifies that an employer can pay for more than 24 physical therapy visits without that payment constituting a waiver of the cap. The new law also provides that once the 24-visit limit on chiropractic visits is reached, a chiropractor can no longer be the primary treating physician, thus eliminating all those bills from chiropractors for reviewing medical decisions made by medical doctors who are actually providing treatment.

Under the new law, an employee can get a report from a doctor outside a medical provider network, at the employee’s own expense, and that report can be considered, but the report cannot be the sole basis of an award for compensation. Reports from such doctors are to be reviewed by a QME or primary treating doctor who is to indicate whether he or she agrees with the independent doctor’s opinion.

New Process for Bill Review. Similar to the independent medical review process, SB 863 creates a new process for medical providers who dispute reduction in their bills. This process is effective Jan. 1, 2013 and applies to all dates of injury.

Under this process, if a provider objects to a reduction made in a bill review, the provider has 90 days to request a re-review. If no request is made, it is deemed waived. If still unsatisfied after the second review, the provider has 30 days to request independent bill review (IBR) through the administrative director. If no IBR is requested, the bill is deemed satisfied. However, if the employer’s reason for disputing the bill is something other than “reasonable amount payable,” that dispute must be resolved before the IBR. A provider who requests IBR is required to pay a fee to the administrative director, and like the IMR, the IBR decision is “binding on all parties,” with very limited exceptions.

New Fee Schedule Regulations Coming. Some of our favorite parts of SB 863 are the provisions requiring development of fee schedules for ambulatory surgery centers, vocational experts, copy services and interpreters. On a related topic, to help us avoid demands for payment for duplicate sets of records, there will now be a rule that an employer is not required to pay for records subpoenaed by an applicant’s attorney within 30 days of a request for service of records from the employer or carrier. There are also new rules regarding certification of interpreters.

While these provisions are effective Jan. 1, 2013, some may not be implemented right away, because the fee schedules need to be developed first.

Mullen & Filippi is a workers' compensation defense firm with 12 offices throughout California. This column was reprinted with permission from the firm's quarterly client bulletin.