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State: Calif. Young: Always Under the Microscope: [2019-12-18] |
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California’s workers’ comp system is always under the microscope, and 2019 has been no different, with a stream of studies released during the year. What did we learn this year? Many attorneys working in the system can go a whole year without really paying attention to system analyses. I know. I paid little attention for years until I started blogging. Most injured workers are understandably too absorbed with their own claims to follow the paper trail of system studies. Studies that look at the system from a macro level usually fail to capture the struggles some workers have getting timely and helpful treatment and regaining a successful earnings career. Anecdotal experiences do matter. But system stakeholders such as employers, insurers and medical provider groups do trot out studies to make arguments buttressing their preferred policy goals. Studies can be key in the direction of the system. Ignore them at your own risk. Here are my takeaways from prominent 2019 California workers’ comp studies, together with links to the source material. 1. The 2012 SB 863 reforms under Gov. Jerry Brown resulted in a far larger ratio of cost savings for employers when compared to benefit increases for workers than had been promised or expected. An October 2012 report by the Workers' Compensation Insurance Rating Bureau WCIRB noted some of the expected benefit cost increases and savings from SB 863. That report included the following projection:
But what a difference a few years makes! Yes, there were some benefit increases in SB 863, but the effects of other provisions far outstripped projections. Some seven years later, an October 2019 WCIRB monitoring report shows system savings from SB 863 of $2.3 billion annually and notes that:
The report further notes that:
While actual comp insurance rates charged to employers may vary, both the Department of Insurance-approved advisory rate and the average rates have continued to drop, including a 9% “pure premium” recommended rate cut for 2020, the ninth consecutive advisory rate cut. Attorneys and some worker advocates are impatient to see more of the post-SB 863 system savings spread around to injured workers, but as yet have been unable to get any traction in the Legislature or the court of public opinion. 2. California’s QME system for medical-Legal reports remains very troubled. Efforts by the Division of Workers' Compensation to develop a revised system for compensating California qualified medical evaluators have been bogged down for some time now, though meetings with stakeholder groups are ongoing after stiff resistance to several draft proposals. Meanwhile, a November 2019 report by the California State Auditor documented significant problems with the QME system. The report cited the Department of Industrial Relations, charging that “Its failure to adequately administer the qualified medical evaluator process may delay injured workers’ access to benefits." The audit report noted problems with the numbers of QMEs, inappropriate DWC administration of the QME reappointment process, and lack of efforts by the DWC to ensure report quality. An attempted rebuttal by the DWC was met with a point-by-point rejoinder from the state auditor. 3. Efforts to reduce opioid use in the California system have been a large success. A November 2019 California Workers' Compensation Research Institute report, “The Impact of Declining Opioid Use on Lost-Time Claim Development & Outcomes in California Workers’ Compensation,” documents a steep drop in opioid use in California’s comp system over the 10 years from 2008 to 2018. Among the key study findings:
4. A relatively small subset of treating physicians have been driving a large percentage of medical disputes — and some are indicted providers. As medical data analytics becomes more sophisticated, data scientists are starting to take a closer look at the physicians who are involved in large numbers of treatment disputes. One such analysis was the December 2019 WCIRB research brief, “Treatment Patterns of Medical Providers Indicted for Fraud in California Workers’ Compensation,” which found that:
And:
5. Regional differences in California workers’ comp remain significant. A 2019 “Geo Study” from the WCIRB reported on California regional differences. The study claims that, “even after controlling for industrial mix and wage level differences,” claims frequency was significantly higher in the Los Angeles Basin and lower in the San Francisco Bay Area, with the Peninsula/Silicon Valley being the lowest. Also significantly higher in the L.A. Basin were cumulative trauma claims, med-legal costs and allocated loss expenses (ALAE). However, the share of total claims involving cumulative trauma or occupational disease dropped in 2017 in Southern California. 6. Although the data is still in development, the prescription drug formulary adopted pursuant to AB 1124 and implemented in 2018 under Brown is reducing some frictional costs, but the full impact is not yet clear. A CWCI March 2019 study examines the distributions of prescriptions and payments by formulary category, including discussion of “exempt” and “non-exempt” medications. The WCIRB released an August 2019 research brief, “California’s New Drug Formulary — One-Year Checkup.” The study after one year of experience with the formulary notes that:
However, WCIRB researchers conclude that:
Also noteworthy is a February 2019 CWCI study, “California Workers’ Compensation Prescription Drug Utilization & Payment Distributions, 2009-2018.” The 2019 WCIRB Geo Study notes that:
7. Costs to administer California’s system are the shamefully high. The WCIRB State of the System documents system administrative expenses that are the highest in the nation. Loss adjustment expenses in 2018 were 23% of system costs, almost as high as incurred indemnity benefits (TD and PD payments), which were 26% of system payments. Indemnity (26%) and medical payments (28%), when added together, totaled 54% of system payments. The national median ratio of allocated loss adjustment expense to overall losses was 10.6%, but California clocked in at 22.9%. Unallocated loss expenses in California were 13.6% in comparison to a national median of 7.6%. California’s system costs 54 cents to deliver a dollar of benefits. The national workers' comp median is 24 cents. Medicare costs 2 cents to deliver one dollar of benefits. 8. Rand continues to do wage-loss monitoring studies. A September 2019 presentation by Rand researchers to the Commission on Health and Safety and Workers' Compensation noted Rand research is ongoing but on an interim basis. It reported:
9. Researchers have begun to study the interaction between gig/platform-based alternative work arrangements and workers’ compensation. A 2019 paper prepared by Rand researchers for the National Bureau of Economic Research, “How Do Alternative Arrangements Affect Income Risk After Workplace Injury?" was presented to CHSWC. The authors claim, “this study provides the first evidence on how differences in work arrangements influence the extent of income risk workers face conditional on injury.” In conclusions that may be relevant to the debate over AB 5 and the codification of the Dynamex case, researchers note that:
10. Insured employers could be saving themselves money by going self-insured, according to a 2019 study. The study prepared for the California Self-Insurers Security Fund, by Mark Priven of Bickmore Actuarial, claims that self-insurers save 21% on average. 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. |