As 2013 comes to a close, it's time to look at the Top 10 Developments in California Workers' Comp in 2013.

If you were just returning from an interstellar journey and needed to know "wassup with comp," this would be the place to come.

Here, in no particular order, are my picks for 2013:

1. REGULATIONS, REGULATIONS, REGULATIONS

Senate Bill 863 required the Division of Workers' Compensation to adopt regulations on a wide number of topics, so 2013 was a very busy year for regulatory action. Many of the regulations went through multiple changes, with extensive public comment.

As of the end of 2013, it appeared that the DWC was on the verge of adopting final independent medical review, independent bill review and medical provider network regulations. By the time you read this, those may have been finalized.

The IMR regs were a concern in particular, as it appeared that the DWC proposals would allow claims administrators to get away with sending less medical information than required by Labor Code 4610.5(l), thus prejudicing many workers who do not have access to information to supply to the Maximus reviewer.

Regulations adopted in 2013 included interpreter certification regs, physician fee schedule regs, supplemental job displacement regs and qualified medical evaluator regs. Regs on predesignation/chiropractor as primary treating physician were not finalized as of late 2013.

Toward the end of 2013, stakeholders were engaged in informal talks about an acceptable fee structure for copy services, and no regs had been proposed. Regs on home health care providers and vocational expert witnesses have not yet been promulgated by the DWC.

Also still hanging is the question of how the DWC plans to administer the $120 million fund under Labor Code 139.48 created by SB 863. That fund was to be designed to make supplemental payments to workers whose permanent disability benefits are disproportionately low in comparison to their earnings loss. The DWC obtained a Rand Corp. study suggesting possible methodologies for administering the fund. Announced assessments on insured and self-insured employers incorporated monies for the $120 million fund even though plans for the fund are still unclear.

2. LEGISLATURE ENACTS LIMITS ON ABILITY OF OUT-OF-STATE ATHLETES TO FILE COMP CLAIMS

In early 2013 the WCAB issued rulings in McKinley v. Arizona Cardinals and Carroll v. Cincinnati Bengals, declining to exercise jurisdiction under California law where the football players resided out of state, played for out of state teams and participated in a minimal amount of games in California.

These decisions followed a trend where many out-of-state pro athletes, particularly football players, filed workers' comp claims in California.

In response, the Legislature passed and Gov. Brown signed AB 1309 (Perea)(Labor Code 3600.5) which places limits on such claims. Under Assembly Bill 1309, the athlete will have a viable cumulative trauma claim only if he has worked for two or more seasons for a California-based team or worked 20% of his "duty days" in California or for a California team. If the athlete worked during the course of his career for seven or more years for a team or teams other than California-based teams, the athlete would be barred.

Opponents of the bill expressed concern about whether this might be the first move toward limiting claims by other workers who come in and out of the state, such as pilots, truck drivers and performers.

3. MEAGER YEAR FOR WORKERS' COMP IN THE COURTS

2013 proved to be a very meager year for workers' comp in the courts.

The lone notable workers' comp 2013 California Supreme Court decision was in Valdez v. WCAB (Warehouse Demo Services). Valdez affirms that even where unauthorized treatment was rendered outside a validly established MPN network, an opinion from the doctor could be admissible. The significance of Valdez was muted, however, by changes enacted under SB 863. SB 863 did three things. First, it tightened up the law on MPNs in various ways. Labor Code 4603.2(a)(3) makes it clear that where a worker impermissibly treats outside the MPN, the employer will not be liable for treatment costs. MPN validity is now an issue to be decided by expedited hearing. Second, Labor Code 4605 was amended to limit the effect of reports by unauthorized non-network physicians. While the employee may still get at his or her own expense a consulting or attending physician, 4605 now provides in part that "Any report prepared by consulting or attending physicians pursuant to this section shall not be the sole basis of an award of compensation." Third, lien procedural hurdles were enacted. So in a way, Valdez will have limited practical effect.

At the end of the year, the California 3rd District Court of Appeal rendered a notable decision in City of Sacramento v. WCAB (Cannon). The case appears to be one of the few post-Guzman appellate cases to give guidance on what language is permissible under Almaraz and Guzman to rebut the strict AMA impairment percentage rating. Essentially, the court ruled that a worker's condition does not need to be "complex" or "extraordinary" for the QME to use analogy to another impairment as a WPI rating if that is more accurate.

4.QME DELAYS PLAGUE THE SYSTEM FOR MUCH OF 2013

Throughout much of 2013, processing of represented worker QME panels was in arrears, causing frustration for employers, insurers, workers and attorneys as resolution of issues and cases languished. In May 2013, the DWC announced it was doing a review of delays. In 2012, the delays had been significantly reduced through use of staff overtime and temporary student help. Instead, the DWC pledged to look at structural delays in assignment of panels. DIR Director Christine Baker indicated that an online QME request process might be developed.

By year's end there were no announcements on an online process, but the DWC claimed it had essentially cleared the backlog. Some attorneys noted that there appeared to be wholesale rejections of backlogged QME requests based on technicalities under both the old and new QME request forms. Attorneys and prominent commentators noted the complexity of the QME panel request forms and wondered whether the forms could be greatly simplified. A WorkCompCentral.com article noted that in other states it is much easier to invoke a medical evaluation process.

In response, the DWC claimed that large numbers of requests were filled out erroneously or were not complete. As 2014 rolled around, it was not clear whether the DWC would fall behind again or whether some of the kinks in the system were straightened out. Since medical treatment disputes are no longer subject to resolution by QME opinions, it may be that some pressure on the QME system has been diverted to IMR.

On the other hand, some stakeholders have wondered whether it may not be time to go back to a system where each side can obtain its own QME.

5. CHALLENGE TO LIEN-ACTIVATION FEE SUCCEEDS

In June 2013, DIR Director Christine Baker noted that there had been an extremely sharp drop in monthly lien filings, down 95% from 2011. It appeared that the requirement that lien claimants filing after January 1, 2013, pay a $150 lien-filing fee was deterring many lien filers. Furthermore, WCAB decisions in 2013 held that lien filers were required to show proof that they filed the $100 lien-activation fee before the time of the hearing or lien conference. Many liens were dismissed due to failure to file the lien-activation fee.

Before passage of SB 863 there were some estimates that lien reforms could generate more than $400 million in savings. Many existing liens have been dismissed in 2013, probably generating substantial savings. Many observers believe that tightened MPN network procedures will lead to less treatment on a lien going forward.

Lien-activation fees proved to be a potent source of 2013 revenue for the DWC as well.

Things changed a bit later in the year, however. A handful of medical groups and other service providers filed a federal district court challenge to the lien-activation fees, Angelotti Chiropractic v. Baker.

In a November 2013 decision, U.S. District Court Judge George Wu enjoined the DWC from enforcing the $100 lien-activation fees and from dismissing liens not activated prior to a lien conference or prior to 1/1/2014. In so doing, Judge Wu rejected the constitutional "takings clause" argument advanced by the lien claimants as well as their due-process argument. However, Wu based his Nov. 19 temporary injunction on an equal protection violation theory, in that health plans and union trust funds had been exempted from lien-filing requirements while others were not.

Plaintiffs in the Angelotti case have filed an appeal with the U.S. 9th Circuit Court of Appeals on the dismissal of their due-process and takings clause claims. Because the injunction was a temporary injunction, proceedings may continue before Judge Wu on the equal protection issue.

On November 15, the DWC announced that it would no longer be requiring payment of the $100 lien-activation fee in order to appear at a hearing or file a declaration of readiness to proceed on a lien.

Other lien holders have filed both state and federal court challenges (Kancilia v. Brown, and, in different courts, Chorn v. Brown) to multiple parts of the SB 863 lien reforms: the $150 fee that is charged for filing new liens, the SB 863 provision that puts limits on assignment of liens and the lien statute of limitations.

6. IMR GETS OFF TO ROCKY START

California's new Independent Medical Review System went into effect as of 1/1/13 for post 1/1/13 injuries and became operative on 7/1/13 for all injuries that predated 1/1/13.

In a mid-December 2013 DWC Medical Unit update, Dr. Rupali Das noted that in August 2013 there were 15,731 IMR applications and that the volume of IMR usage was much greater than the division had anticipated. Moreover, IMR determinations were on average taking almost 50 days. Das blamed the delays on unanticipated high volume of requests, a high number of incomplete applications and the paper process. Maximus and the DWC are said to be working on an system for electronic submission of IMR documents.

Meanwhile, it appears that IMR as presently constituted strongly favors the employer, with decisions upholding treatment denials being issued in a 4:1 ratio to decisions to overturn denials.

At year's end troubling issues remained about how Maximus is allowed to act if a claims administrator fails to send any medical records or cherry picks what records to send, thereby creating an incomplete medical record for Maximus to review.

Union appointees to the Commission on Health, Safety and Workers' Compensation expressed concerns about the high rate of Maximus treatment denials. Meanwhile, employer groups expressed concerns about whether expected savings from IMR would materialize, given the high cost of IMR reviews and the flood of review requests. During the run up to passage of SB 863 there was indication that the Workers' Compensation Insurance Rating Bureau had pegged potential savings on medical due to IMR at more than $300 million.

Prominent applicant attorneys noted that until utilization review was better administered, a high rate of IMR appeals was likely to continue. In response to questions about whether attorneys were "gaming the system" to make it fail, attorneys noted that treatments were prescribed by doctors who in most cases are on the employer MPN network, and attorneys have an ethical duty to represent interests of their clients in seeking prescribed treatment.

Some stakeholders suggested that discussions be held to devise improvements to UR and IMR. As a result, the DWC scheduled January 2014 meetings in Van Nuys and Oakland to hear from stakeholders.

7. COMP RATES CONTINUE TO RISE AT MODEST PACE

In September 2013, the WCIRB recommended that the "pure premium" workers' comp rate rise by 6.9%. Subsequently the WCIRB amended the recommendation to a 8.6% increase. Such recommendations go to the California Department of Insurance, which then makes a regulatory finding about the appropriate benchmark rate. Those findings are not binding on insurers, however, and typically some insurers will come in higher and some lower than the benchmark rate.

Comp rates are a complicated subject because what employers pay is influenced by X-mods, credits, territorial modifiers and the like.

In late November 2013, Insurance Commissioner Dave Jones approved a rate of $2.70 per $100 of payroll. This was essentially in line with the September WCIRB analysis. By comparison, the average rate filed by insurers was $2.53 in June 2013.

Both approved rates and average filed rates have been trending upwards.

Yet, rates are far, far below where they were in 2003, when rates spiked to an average $6.29 per $100 of payroll, creating a political furor that led to the Schwarzenegger era reforms.

With the cost impact of an RBRVS-based system to compensate doctors being unclear and with IMR costs and savings being uncertain, Jones was unwilling to honor the full request by the WCIRB.

8. MAJOR ALLEGATIONS OF BAD BEHAVIOR STRETCH FROM SOUTHERN CALIFORNIA TO THE CAPITOL DOME

A 2013 story that refused to go away involved allegations of fraud and racketeering against the owners of Pacific Hospital of Long Beach and associated businesses with which they were connected. Allegations included not only fraudulent billing schemes using shell companies but also schemes to manufacture phony, non-FDA-approved hardware for use in surgeries.

After the U.S. Postal Service and FBI issued search warrants, SCIF pursued a RICO action against members of the Drobot family, and a qui tam/whistleblower action was filed against a host of defendants alleged to be involved in fraudulent schemes, said to include allegations that Tri-City Regional Medical Center in Hawaiian Gardens, Riverside Community Hospital and St. Bernardine Medical Center were using fake spinal hardware. Those actions promise to offer a fascinating but sordid window into greed gone amok in the workers' comp system.

But the story got even more interesting when Al Jazeera America published a leaked FBI affidavit that powerful State Senator Ron Calderon had been taking bribes from Michael Drobot, former owner of Pacific Hospital. Calderon is alleged to have taken payments to delay legislation cracking down on duplicate payments for spinal hardware. Moreover, the affidavit claimed that Calderon had engaged State Senator Kevin Deleon and State Senator Ted Lieu to delay or kill the so-called spinal pass-through legislation. That language finally made it into law as part of SB 863 in 2013.

Following the revelation of the FBI affidavit, Calderon was stripped of his committee assignments but has lashed out at others in the Legislature and asked that the government be held in contempt for leaking the FBI affidavit.

As 2013 ends, it is not clear where this story goes from here. Calderon has not been indicted, and Deleon, Lieu and Senate Pro Tem Darrell Steinberg all deny wrongdoing, as do the defendants in the qui tam/whistleblower and RICO actions.

9. SAVINGS FROM SB 863 IN DOUBT

As 2013 closed, there was indication that some employer groups were worried that the projected savings from the 2012 SB 863 reforms were in jeopardy. With Independent Medical Review proving more costly than anticipated and with lien-activation fees prohibited for the foreseeable future, savings from two of the savings targets were questionable.

Further, prominent employer-side lobbyist Jason Schmelzer was quoted in WorkCompCentral.com as concerned about whether the new methodology for paying treating doctors adopted by the DWC, the RBRVS, would add between $200 to $300 million in unanticipated system costs.

Employers also expressed some concerns about an increase in claims filed, known as claim frequency.

However, it appeared that many self-insured employers were keeping their costs in check. A November study by the California Workers' Compensation Institute revealed that total paid and incurred losses for public self-insured employers declined in fiscal year 2013, with both frequency and claims costs falling. According to the California Workers' Compensation Institute stats, average indemnity benefits per claim and average medical payments per claim for the public self-insureds dropped year over year.

10. MODEST YEAR FOR LEGISLATIVE ACTIVITY

Aside from the flap about workers' comp for pro athletes, it was a very quiet year in the California Legislature. Among the few that were notable are the following:

• AB 1376 (Hernandez) (Labor Code 4600) clarified the certification requirements for interpreters.
• SB 146 (Lara) (Labor Code 4603.2) clarified what documentation must be provided with pharmacy billings.
• AB 607 (Perea) (Labor Code 4703.5 and Labor Code 3501) clarified eligibility for children's dependency benefits.

Clearly, stakeholders were focused on the regulatory rollout of SB 863.

At the end of 2013 there were some rumblings that employers might try to seek more reforms in 2014 after sensing that savings from some of the SB 863 provisions were not likely to pan out.

To see the Top 10 Developments in 2012, look here.

To see the Top 10 Developments in 2011, see this link.

I'll soon be posting my quiz on the likely workers' comp developments in 2014. Meanwhile, you can see last year's quiz here.

Julius Young is an applicants' attorney with Boxer & Gerson in Oakland. This column was reprinted with his permission from his Workers' Comp Zone blog.