SAN FRANCISCO – Workers’ compensation laws are the same in Eureka as they are in El Cajon, but how claims develop throughout California varies as much as if the northern and southern parts of the state operated under different laws.

Bill Mudge, president and chief executive officer of the Workers’ Compensation Insurance Rating Bureau, in setting the theme for the state rate-making agency’s 2016 annual conference Thursday, called it “the California conundrum: one system, many outcomes.”

There’s a lot of money at stake in California’s workers’ compensation. The Golden State generated about 29% of all written workers’ compensation premiums in the nation in 2015, even though it makes up just 12% of the U.S. population. 

Mudge said there are diverse agendas among system users, and they’re constantly changing as lawmakers and regulators try to tweak how the system operates. Explaining why claims develop differently in Los Angeles than they do elsewhere is a confusing and difficult problem, he said.

“At times, its confounding because we’re trying to forecast human behavior,” he said. “It’s not an easy thing to do.”

There were several suggestions for why claims develop differently in Los Angeles, but any kind of definitive explanation seemed elusive. Blame was apportioned — seemingly equally — to the insurance industry and defense attorneys, injured workers and applicants’ attorneys, judges, regulators, lawmakers and medical providers. 

“Part of the problem is everyone is pointing fingers,” said Ronnie Caplane, former chairwoman of the Workers’ Compensation Appeals Board. Caplane, who retired at the end of April, also offered the most straightforward solution to the two-state phenomenon.

“I think we should just lop off Los Angeles and watch it sail by,” she said.

All The Numbers

California’s workers’ compensation system is itself something of an outlier compared to those in other states.

Workers’ compensation carriers in California wrote $17.6 in premium in 2015, WCIRB Chief Actuary and Executive Vice President Dave Bellusci said in his “State of the System” report. 

Written premium has been increasing by about $1 billion a year since 2009, largely because carriers were charging higher rates. But Bellusci said that could be changing and total premium volume could be flat in 2016 because rates have started to come down.

The average charged rate per $100 of payroll fell to $2.84 in the first quarter of 2016 from $2.85 in the last six months of 2015 and $3.01 in the first half of last year. In the first three months of 2015, the average charged rate was $3.09 per $100 of payroll.

California was in the only state where employers paid more than $3 per $100 of payroll for workers’ compensation insurance, according to the 2014 rate ranking study published by the Oregon Department of Consumer and Business Services. While charged rates in California are down, Bellusci said that when DCBS released its latest study this fall, “our expectation is we’ll still be the highest-cost state in the nation by far.”

One reason costs are higher in California than other states could be the frequency of claims. About one in 60 workers are projected to file a claim in 2016, down considerably compared to 1966, when roughly one in five workers filed a claim. But frequency in California has increased by a cumulative 15% since 2009 and continued to decline in the rest of the country.

There’s also a high rate of cumulative trauma claims in the Golden State. This is harder to compare to other jurisdictions, Bellusci said, because CT is not a major issue in other states. The number of cumulative claims in California has been increasing, and Bellusci said now almost one in five indemnity claims include a cumulative injury.

In many cases, it appears the Southland is what makes California so unique. The Los Angeles area was not as tightly defined Thursday as it usually is because presenters pulled together research from various studies. For the most part, the Los Angeles area referred to Los Angeles, Orange, Riverside, San Bernardino and Ventura counties. 

From 2010 to 2014, frequency increased 13% in the Los Angeles region while it declined by 6% in the rest of the state.

In Los Angeles County, 55.4% of indemnity claims resulted in permanent disability, and Orange County was a close second at 54.8%. On the other end of the spectrum were Mariposa County, where just 31.5% of indemnity claims involved PD, and Glenn County, where 34.3% of indemnity claims had permanent disability.

The rate of cumulative trauma claims in Los Angeles doubled from 6.9% of all indemnity claims in 2005 to 14.9% of all indemnity claims in 2014. The number of cumulative claims increased elsewhere, but not by as much: to 7.7% from 4.9%.

There was attorney involvement in 90% of the cumulative trauma claims in Los Angeles, compared to attorney involvement in 61% of claims filed elsewhere. In Los Angeles, 45% of cumulative trauma claims were filed post-termination, compared to 30% of claims in the rest of California. 

More than a quarter of cumulative claims in Los Angeles claimed a psychiatric condition, compared to 8% for the rest of the state.

“We’re seeing the L.A. basin being the epicenter of the cumulative injury epidemic,” said Ward Brooks, vice president of research for the WCIRB.

Alex Swedlow, president of the California Workers’ Compensation Institute, said claims from the Los Angeles area had a higher rate of mental health issues in general. Almost 23% of claims from the L.A. area had mental issue as a comorbidity. Mental health issues can drive up the cost of a claim by 20% to 50%, on the low end, and in some cases can double medical treatment costs, he said.

Claims from Los Angeles are more likely to be reported later than claims filed elsewhere in the state.

On average, claims are reported 15.5 days after injury statewide. In Los Angeles, the average delay between injury and reporting is 24.2 days. And it takes an average of 29.1 days between the date of notification and the first treatment in Los Angeles, compared to the statewide average of 23.6 days.

Colusa County is on the other end of the spectrum with claims reported an average of 4.7 days after injury and treatment starting 5.5 days after a claim is reported.

“Any time you see that kind of four- or five-fold difference, it’s tantamount to a lot of opportunity to improve that notification cycle,” Swedlow said.

The percentage of claims with attorney involvement ranges from a high of 58.3% in Los Angeles County and 56.5% in Orange County to a low of 28.8% in Mono County. 

More attorney involvement tends to result in higher frictional costs. The average allocated loss adjustment expense per claim in Los Angeles is 20% higher than the rest of the state in the early stages of a claim, and as much as 27% higher in later stages of a claim.

Displaying the graph that showed higher ALAE costs in the Southland, Tony Milano, WCIRB vice president of actuarial services, said it was becoming obvious that the L.A. region was the outlier.

“I think I can get rid of the legends at this point,” he said. “I think you know which one is going to be higher.”

A Tale Of Two Cities

Explanations for the two-state phenomenon were as varied as the backgrounds of the people offering their thoughts on the state’s comp system during the afternoon’s panel discussion.

Cynthia Casey, a workers’ compensation defense attorney in Van Nuys, said some of the blame for the increase in cumulative trauma claims lies with judges at the WCAB. She said numbers presented in the morning show the abuse that led to the prohibition on filing post-termination claims in the first place.

Despite the fact that employers have an affirmative defense to post-termination claims, she said judges don’t want her to go to trial on that defense alone. She said she defeats a specific injury claim filed after termination on a regular basis, but judges have told her that all a worker has to do is testify to experiencing pain while working, and it will destroy her defense.

Casey said she doesn’t buy into the common explanation that workers wait until after they’ve been laid off or fired to file cumulative trauma claims because they were unaware of the injury earlier.

“They know enough to get an attorney when they’re fired,” she said. “They know enough to testify they had pain and symptoms. They know enough that it was related to work. But they didn’t know until after they were terminated?”

Michael Cole, a WCAB judge in Van Nuys, said that’s not the fault of jurists but rather the law they enforce. The post-termination statute as it's related to cumulative trauma claims is “a meaningless affirmative defense,” he said.

A defense attorney can go to trial with that as a defense but is unlikely to prevail, he said. The date of injury is defined as when the worker is aware of an injury and aware that it is related to work, so if awareness comes after termination, the claim is not considered to be post-termination.

Gary Nelson, an applicants’ attorney in Modesto, said Southern California is a “different world” compared to the rest of the state. The area is flooded with doctors willing to treat injured workers on a lien basis, which is not the case elsewhere in the state.

He said he went to an applicants attorney convention in Long Beach that included a session about 36 ways to get a worker out of the medical provider network, and his colleagues in Northern California couldn’t understand why anyone would want to do that.

Dr. Basil Besh, of the FORM Hand, Wrist & Elbow Institute, said California really is a “tale of two cities.” In most parts of the state, doctors who treat work comp patients also treat people covered by other forms of insurance.

But the medical mills in Southern California are typically staffed by doctors who do only workers’ compensation. And these are the people who “game the system,” he said.

Besh said he thinks state licensing boards should be at the forefront of driving those people out of the profession. Trying to fix the comp system to control for a small percentage of bad actors is like treating a gangrenous finger by giving a patient antibiotics, he said. It doesn’t work. The finger needs to be amputated.

Besh said it doesn’t make sense to apply systemic solutions to localized problems unless someone else stands to benefit.

“The cynic in me says we don’t want the bad group to disappear because now we have (utilization review) for everyone,” he said.

Don Marshall, chairman of the Fraud Assessment Commission, said he’s been stressing the need to go after providers who game the comp system for years. It may be a small group of providers, but they significantly drive up costs for employers.

And the employers who get ripped off by unscrupulous doctors often are some of the hardest people to sway, he said. For them, claimant fraud is more personal and important.

 “When I talk to employers and I talk about health care fraud, many don’t seem to care,” he said. “They care about Bob. Bob’s ripping me off. This is personal. This is family, and he’s ripping me off. There’s this constant push by employers who, by the way, pay this assessment.”

Christine Baker, director of the Department of Industrial Relations, said she is currently talking with system users about ways to address fraud in the system. Her boss, Labor Secretary David Lanier, directed her to convene a working group and prepare a white paper identifying what more can be done to fight fraud in the state’s comp system.

Discussions already started this week with a series of invitation-only meetings.

Baker also said the DIR is using data to try to identify the problematic providers. She said she’s working on a plan to “weed out the 5% to 10% of providers who make the rest look bad.”

Presentations from the WCIRB 2016 annual conference are available here.