SAN FRANCISCO — As the Workers’ Compensation Insurance Rating Bureau sought to explore the implications of emerging technologies on future medical care and labor relations during its annual conference on Thursday, a Southern California attorney identified two fixes to the more immediately pressing issue of extraordinarily high administrative expenses.

Saul Allweiss

Tony Milano, actuarial vice president for the WCIRB, said it now costs 53 cents to deliver $1 of benefits to injured workers in California. For comparison, he said it costs about 18 cents for private health insurers to deliver $1 of benefits, and 2 cents for Medicare.

Using data from the Workers Compensation Research Institute and the National Council on Compensation Insurance, he said that in a middle-of-the-road state, ultimate allocated loss-adjustment expenses and medical-legal costs are about $5,600 per indemnity claim. In California, ultimate ALAE and med-legal costs per indemnity claim is about $18,000.

Defense costs average $2,700 per claim in a median-cost state, compared to $9,000 in California. In the median state, medical cost containment is about $1,500 per claim compared to $3,200 in California. And medical-legal costs average $500 in the median state, and $2,600 in California.

Cumulative trauma claims are one reason for the high administrative expenses in California, Milano said. The proportion of indemnity claims alleging a cumulative injury increased from 12.4% in 2010 to 19% in 2014. And the proportion of cumulative trauma claims with administrative expenses greater than $1,000 increased from 58% to 64% over the same period.

Milano said it’s a triple whammy. California has more cumulative trauma claims than other states and are more expensive in general, and they have higher loss-adjustment expenses than other claims.

Saul Allweiss, a workers’ compensation defense attorney with the Law Offices of Allweiss and McMurty, said he thinks lawmakers should consider a higher causation standard for cumulative trauma claims as well as an outright ban on most post-termination claims.

Allweiss referred to what he said was a real-world case — using the fictitious name of Jane Doe as the claimant working for fictitious employer Innocent Bystander Inc. — to illustrate the problem.

Jane Doe asked for two weeks of vacation shortly after she was hired. Her employer denied the request, but she takes off anyway and is fired.

A month later, the 31-year-old Jane Doe had an attorney and filed a claim alleging cumulative injuries to her fingers, hands, wrists, elbows, shoulders, neck, back, hips, legs, knees and gastrointestinal system — “what we lovingly call in Southern California a skin-and-contents claim,” Allweiss said.
 
The Labor Code prohibits workers from filing comp claims after they’ve been fired. But Allweiss said this isn’t much protection for cumulative trauma claims because of a loophole in Labor Code Section 5412 that requires a worker to know about an injury for the post-termination bar to apply.

“The standard is, the injured worker is not charged with knowledge until they see an attorney, which is always after they were terminated,” he said.

At her first exam, Jane Doe gets a prescription for physical therapy, chiropractic care, opioid painkillers, sleeping pills and an anti-inflammatory. Medical costs climb as Jane continues to treat outside the employer’s network because the insurer is investigating the claim.

Allweiss said the cost of these types of cumulative trauma claims can approach or exceed $100,000, and at some point, carriers have to seriously consider trying to settle the case for “nuisance value” of $10,000 or $15,000.

“This, to me, is the anatomy of what the problem is in Southern California,” he said. “These are the cases that are driving all the behavior.”

One solution would be for lawmakers to establish a predominant causation standard for post-termination cumulative trauma claims, according to Allweiss.

Right now, the injured worker has to show that only a fraction of the injury was caused by work for the claim to be compensable. Allweiss said requiring workers to prove 51% of a post-termination cumulative trauma claims are related to work would eliminate some of the questionable claims.

He also recommended using evidence-based medicine to determine causation. Doctors sometimes rely on intuition when determining causation, he said. They’ll assume that sitting all day causes back problems or that using a computer causes carpal tunnel syndrome, when there is growing evidence that neither is correct.

“If you require the doctor to look at evidence-based studies and combine that with a predominant cause standard, I think you might have effective tools to get rid of the problematic CT claims,” he said.