Response to Proposed Regulation on Benefit Notice Regulations

Wednesday, March 17, 2010 | 0

Editors note: This column is a reprint of a public comment to the Division of  Workers' Compensation's proposed benefit-notice regulations.

By Dennis Knotts

I think that it is important to start with a basic understanding of the relationship between Labor Codes and regulations. The Labor Code is law and tells use what to do regarding a workers’ compensation claim. Regulations are procedures and tell us how to do what the Labor Code requires. The understanding of this relationship seems to be lacking in the present and several other regulations created over the last few years. Several times I have tried to raise this as an issue and was ignored to the point I stopped commenting. Now (DWC acting Administrative Director) Carrie Nevans has used as her defense “No one complained.” to justify adding additional requirements that are not supported by the Labor Code; i.e. closing notices on medical-only claims. Ms. Nevans also commented at the DWC Educational Conference that her focus will be to fix the problems with the regulations. I will give one more attempt to try and point out the problem(s).

The position of the administrative director is to clarify the requirements of the Labor Code. Just as the role of the workers’ compensation judge is not to use case law to fix problems with Labor Code [“to insert what has been omitted or to remove what has been inserted”] the same is true with the office of the administrative director. This office [and the previous holder of this office] could learn a great deal from the case laws of Aleong v Golden Eagle and Lucky v SCIF. In Aleong , a previous administrative director, Casey Young, introduced regulations for the proper use of utilization review in the workers’ compensation system. He, too, felt utilization review was a good thing and it was needed in the industry. After he had created these regulations, a carrier relied upon them to deny surgery. They argued they had followed the regulations and the workers' compensation judge noted as he handed down an unreasonable delay penalty that Mr. Young did not have the legal right to make these regulations.

With Lucky v SCIF, an employee with a traumatic head injury filed a mileage request totaling $1,000. The State Compensation Insurance Fund adjuster had trouble auditing the reimbursement due to it being handwritten on a piece of paper and lacking documentation. The SCIF adjuster eventually determined only $500 was owed. When the payment was made the applicant attorney filed for unreasonable delay. When the WCJ award the delay it was over $300,000 due to the over-all exposure under medical due to the severity of the injury. The 2nd  District Court of Appeal set aside the decision and modified it. In its discussion, the 2nd DCA called for the Legislature to change the unreasonable delay Labor Code to avoid these problems in the future.

If the administrative director feels that there should be some mandated 30-day close notice on non-indemnity claims; then the administrative director should contact the Legislature and request they create a Labor Code making it a legal requirement. Without this new Labor Code, the administrative director lacks the legal authority to create a new demand upon the workers’ compensation industry.

There have been other problems created with the revision to the benefit notices in April 2008 and again to the revised sample notices in November 2008. They are either incorrect, or create the wrong impression for the workers’ compensation industry.

SB 899 revised Labor Code 4650 (b) to make it clear that if the employer cut off temporary disability benefits, the employer had two options: 1) deny the permanent disability benefit or 2) make its best estimate and begin advancing the permanent disability benefit.

“(b) If the injury causes permanent disability, the first payment shall be made within 14 days after the date of last payment of temporary disability indemnity. When the last payment of temporary disability indemnity has been made pursuant to subdivision (c) of Section 4656, and regardless of whether the extent of permanent disability can be determined at that date, the employer nevertheless shall commence the timely payment required by this subdivision and shall continue to make these payments until the employer's reasonable estimate of permanent disability indemnity due has been paid, and if the amount of permanent disability indemnity due has been determined, until that amount has been paid.” [Emphasis added]

Two words were added under SB 899: “regardless and “nevertheless.” Basic grammar tells us that “regardless” is used to tell the reader that whatever the argument listed in the topic is, it is not a valid argument; and should not be considered as an exception to whatever requirement the author is giving. “Nevertheless” further requires compliance to the mandated procedure.

The procedure is to make an evaluation of the level of permanent disability and then advance either the estimate or the final rating. There are no exceptions to this requirement. The only way to avoid advancing permanent disability benefits is for your estimation or the rating to show that there is no permanent disability benefits owed.

The industry was waiting for the administrative director to bring the regulations on benefit notices and Labor Code 4650 (b) into harmony. However, when the revised Regulations were finalized, delay of permanent disability benefits was still an option. If there is another Labor Code [not regulation] that authorizes the delay of permanent disability benefits it needs to be raised and clarification sought from the Legislature or courts as to which Labor Code prevails.

It appears that the legislative intent in amending Labor Code 4650 (b) was to tie in with the 104 week/240 week cap. Where it is now possible to run out of temporary disability benefits and still be temporarily disabled; the employee needs some kind of compensation to live on until he/she is able to return to work. Advancing permanent disability benefits could help to fill that gap.

An ever greater problem created by the benefit notice sample dealing with the Delay of Entire Claim Notice. There was a misconception created by SB 899 concerning delayed claims. The pre-SB-899 versions of Labor Codes 4060, 4061 and 4062 contained the procedure for both represented and unrepresented employees. SB 899 pulled the represented and unrepresented appeal procedures out of the three Labor Codes and created two new Labor Codes: 4062.1 and 4062.2. Those who do not take the time to read Labor Code 40602.1 and 4062.2 and refer back to the identified Labor Codes of 4060, 4061 and 4062 are given the misconception that when a claim is delayed, only a Panel QME physician can address the issue of causation. The regulation regarding the QME/AME process released in February 2009 added to this confusion and Regulation 30 has been raised as a battle cry by CAA as a way of winning on cases by default and not the facts of the case.

If we properly read Labor Code 4060.1 (b) it tells us if there is a need for a medical evaluation under Labor Code 4060, 4061 or4062, we use the QME process:

“(b) If either party requests a medical evaluation pursuant to Section 4060, 4061, or 4062, either party may submit the form prescribed by the administrative director requesting the medical director to assign a panel of three qualified medical evaluators in accordance with Section 139.2. However, the employer may not submit the form unless the employee has not submitted the form within 10 days after the employer has furnished the form to the employee and requested the employee to submit the form. The party submitting the request form shall designate the specialty of the physicians that will be assigned to the panel.”

If we are sloppy in our interpretation of the Labor Code we make a mental note in our minds that Labor Code 4060 is for denied claims, 4061 is for Permanent and Stationary claims and 4062 deals with all other medical issues. A serious student of the law will go to those Labor codes and read what they say:

Labor Code 4060:

“(b) Neither the employer nor the employee shall be liable for any comprehensive medical-legal evaluation performed by other than the treating physician, except as provided in this section. However, reports of treating physicians shall be admissible.”

This Labor Code is talking about a medical-legal evaluation. This should further refer us to Labor Code 4620 which defines what a medical-legal evaluation is and when it takes place:

(a) For purposes of this article, a medical-legal expense means any costs and expenses incurred by or on behalf of any party, the administrative director, the board, or a referee for X-rays, laboratory fees, other diagnostic tests, medical reports, medical records, medical testimony, and, as needed, interpreter's fees, for the purpose of proving or disproving a contested claim.” [Emphasis added]

A medical-legal evaluation is a procedure available to both the employer and employee. However, it deals solely with the issue of compensability. This is why Labor Code 4060 (a) makes it clear that if any part of the claim is accepted, then Labor Code 4060 does not apply.

There was an issue as to when this option was available to the employee. The question of a contested claim was the focus of the 1994 amendment to this Labor Code, wherein the Legislature specifically asked Judge Pamela Foust to re-write the Labor Code to resolve the disputes pending before the Workers' Compensation Appeals Board.

Labor Code 4620:

(b) A contested claim exists when the employer knows or reasonably should know that the employee is claiming entitlement to any benefit arising out of a claimed industrial injury and one of the following conditions exists:

(1) The employer rejects liability for a claimed benefit.

(2) The employer fails to accept liability for benefits after the expiration of a reasonable period of time within which to decide if it will contest the claim.

(3) The employer fails to respond to a demand for payment of benefits after the expiration of any time period fixed by statute for the payment of indemnity. [Emphasis added]

There were two requirements for entitlement to a medical-legal evaluation listed in subsection (b): 1) the employee had knowledge of the injury; and 2) the claim had to be contested. Subsection (b) gave three scenarios as to when a claim was declared “contested.”  The first was when liability had been rejected. Then-Administrative Director Casey Young told the 2nd DWC Educational Conference in San Diego that year that rejection of liability meant that a Denial Notice had been sent; not a Delay. The employer had the right to delay the claim, conduct his/her own investigation and rendered a final decision before the employee had the right to obtain medical evaluation to challenge the decision. In short, there has to be a decision made before the decision can be challenged. This also means that the employer’s medical evaluation to address causation initially does not have medical-legal status. The employer’s right to delay and investigate a claim is outside of the medical-legal arena.

The second way a claim becomes contested is when the employer fails to accept the liability after the 90-day period. In short, ninety days have passed, no Denial of Claim Notice; but still no benefits. The third is if there is no response after 14 days from the date of knowledge. At the same conference, Casey Young told attendees that a delay notice is a proper response. Therefore we are talking about the scenario of fourteen days have passed, no delay notice, no denial notice, and still no benefits.

Until the claim meets the definition of contested, the employee is not entitled to a medical-legal evaluation. Labor Code 4060 procedure is a medical-legal evaluation; and so to provide the employee with the QME panel and instruct the employee to request a panel, select a physician and address causation before the employer had made his/her decision is a violation of Labor Code 4620. This procedure should only be provided to the employee once the employer has denied the claim or the claim becomes contests by the employer failing to act within the required time frames.

However, another requirement was added to further clarify when an employee had the right to obtain a medical-legal evaluation. This third requirement is only hinted at in the benefit notices and no clear instructions or directions are provided in the benefit notices.

Labor Code 4620:

(c) Costs of medical evaluations, diagnostic tests, and interpreters incidental to the production of a medical report do not constitute medical-legal expenses unless the medical report is capable of proving or disproving a disputed medical fact, the determination of which is essential to an adjudication of the employee's claim for benefits. In determining whether a report meets the requirements of this subdivision, a judge shall give full consideration to the substance as well as the form of the report, as required by applicable statutes and regulations.

The case of Zarte v WCAB made it clear that where a claim is denied based upon a legal issue [in the case of Zarte it was whether he was an employee or independent contractor], then the employee is not entitled to a medical-legal evaluation. The current benefit notices hint at this with the comment: “if the delay is due to a medical reason.” There should also be clear comments in the Benefit Notices that if the decision is based upon a legal issue, the employee is not entitled to a QME/AME.

By not making it clear that the AME/QME is not an option for legal issue resolution; it opens the door for the WCAB to force parties into the costs and hazards of medical evaluations that cloud the legal issue before it is resolved. Labor Code 3602(c) states that if any of the conditions set forth in Section 3600 do not concur [is missing]; then the liability of the employer shall [legal mandate] be the same as if this division [Division 4] had never been enacted.

This Labor Code allows the employer to raise the issue of his/her legal liabilities as a separate issue which controls all other issue of legal liability. The benefit notices and your revised AME/QME Regulations of February 2009, suggest that cases denied based upon legal issues can still allow the employee to obtain medical-legal evaluations. This misdirects the WCAB into forcing parties into medical-legal evaluations to address issues that would be non-issues if the Labor Code 3600 issue were first addressed. If Labor Code 3602 (c) were properly enforced; WCJs would never order parties to obtain medical evaluations prior to resolving the legal issue of causation.

The proper procedure should be to allow the employer to litigate the legal issue of causation first. If the case is found to be compensable; then medical opinions should be obtained to address the medical issues. Your 2009 QME/AME regulations do not consider this as an option; but bar an employer’s right to a medical evaluation after a claim is denied based solely upon a legal issue. In short, you have written your 2009 QME/AME regulations to give you the power of the WCAB to raise and resolve legal issue. This should be the sole domain of the WCAB and the legal arena; not the administrative branch of the industry.

The failure to stress the employers’ right under Labor Code 4060, 4061 and 4062 to obtain a medical evaluation through the treating physician when there is a medical issue rather than being forced to turn the entire medical issue process to a panel QME has misdirected hundred [maybe even thousands] of cases to date. The role of the administrative director is to provide clear direction and guidelines where the Labor Code needs clarification short of a legal decision.

Labor Code 4061:

(d) If the parties do not agree to a permanent disability rating based on the treating physician's evaluation, and if the employee is not represented by an attorney, the employer shall immediately provide the employee with a form prescribed by the medical director with which to request assignment of a panel of three qualified medical evaluators. Either party may request a comprehensive medical evaluation to determine permanent disability, and the evaluation shall be obtained only by the procedure provided in Section 4062.1. [Emphasis added]

Labor Code 4062:

(a) If either the employee or employer objects to a medical determination made by the treating physician concerning any medical issues not covered by Section 4060 or 4061 and not subject to Section 4610….” [Emphasis added]

If we put these Labor Codes together we find the proper interpretation of Labor Codes 4062.1 and 4062.2.  The employer has the option of referring medical issue to the treating physician or of using the AME/QME process. If the employer chooses to use the treating physician; then once the medical opinion is issued; then the QME/AME process is activated. It should be when the employer notifies the employee of the medical determination that the offer of the QME/AME should be made. Forcing or suggesting that the QME Panel request form be sent with the Delay Notice before any decision has been made adds to the confusion over this misinformation. I feel your QME/AME Regulation 30 should also be revised to reflect this option to employers.

Lastly, only the applicant attorney and defense attorney have the right to file QME Form 106. Yet it is required to be sent to the employee. This is creating confusion where the employee may send it without consulting the applicant attorney. The regulations should only instruct that the QME Form 105 be sent to unrepresented employees, and the process of medical dispute resolution be explained to represented employees, but QME Form 106 not be sent.

Dennis Knotts is a claims adjuster and has been an instructor for the Insurance Educational Association since 1991.