Numbers Surrounding SB 863' s Workers' Comp Reforms Still ...

The Legislative session is coming to a rapid close and legislators are being asked to hit a moving target in reforming the state's troubled workers' compensation system. Yesterday, the Workers' Compensation Insurance Rating WCIRB (WCIRB) said proposed reforms would actually increase system wide costs beginning in the second year.? It is now projecting annual savings that would likely grow once proposed fee schedules are actually implemented. What happened?

The WCIRB is managed and operated by the insurance industry, which pays dues to it as a ?non profit? organization. Through its member companies lobbyists it communicates with the legislature. Many legislators do not realize that it is not a government body.

The Assembly Insurance Company heard the WCIRB's updated projections at an informational hearing this morning -- the first since SB 863 was gutted and amended to incorporate the reform proposals. The bill is now authored by Sen. Kevin DeLeon (D-Los Angeles) and co-authored by Assemblyman Jose Solorio (D-Anaheim). No vote was taken and the committee scheduled none.

WCIRB actuary Dave Bellusci told the committee that the WCIRB analyzed three categories of changes: benefit changes, immediate reforms to the system and future reforms. He says that overall the benefit changes will increase costs by $860 million while reforms to the system to eliminate costs from duplicate payments for spinal hardware, eliminating many of the costs associated with liens and moving to a new medical dispute resolution process would save $1 billion.?

The lack of certainty over savings is unlikely to lower rates for employers? according to one insurance carrier representative. S/he told Workers' Comp Executive that there is not much in the bill to oppose but noted that in the grand scheme the WCIRB's projected $100 million in savings could just be a rounding error.

Of course, the proposed new system is untried, untested, and more importantly not yet legally challenged and resolved by the courts. Based upon history the court action could require five or more years to resolve and in the end could end up thrown out, modified or thrashed by the courts resulting in more costs not less savings and in the interim uncertainty. WCIRB projections do not contemplate any of that.

But as we learned during the administration of former California Insurance Commissioner Steve Poizner the WCIRB is rarely, if ever,? correct in its projections about the $10 to $12 Billion per year workers? comp system.

"The cumulative impact of what we were able to evaluate, the overall cost impact would be to reduce costs in 2013 by $760 million the first year - almost $800 million," Bellusci says, noting that many of the benefit increases would be phased in. "By the second year, net savings would be $100 million per year - net annual savings."

WCIRB?s Projection Failures

But just one day earlier the WCIRB's estimates were that the reforms would increase costs beginning in year two by $300 million. Bellusci explained the $400 million difference was due to the elimination of a provision that called for PD benefits to be paid out at the temporary disability rate, which would have sped up the payout by a factor of four or five.

Bellusci also noted that there are numerous other provisions, such as a call for fee schedules for interpreters and the rapidly growing expense for home health services, that would have be calculated after the fee schedules are actually implemented. "Just calling for a fee schedule doesn't reduce costs," he noted.

Bickmore Risk Services' Mark Priven, actuary to the WCIRB representatives from business and labor, testified that his estimates are largely in line with the WCIRB's up to this point, but insists that the WCIRB is not accounting for other significant savings in the proposal in addition to the fee schedule changes. He points out that the WCIRB's estimate do not account for changes designed to limit the impact of the Valdez decision on medical provider networks as well as other reforms to the MPN rules. Priven's earlier estimate pegged the savings here at an estimated $285 million in the first year.

Others note that the WCIRB's cost projections fail to recognize savings that will come from reducing delays caused by treatment disputes. "Independent medical review will resolve the disputes in 30 days and prevents getting into the QME process that would delay resolution from 12 to 18 months during which time the injured worker is on temporary disability and the applicant attorney is developing the Almaraz/Guzman claim," one employer representative noted to Workers' Comp Executive before the hearing. "So you have to read the white space [in the WCIRB's report] on what's not being calculated."

Insurance carrier representatives observed the proceedings but did not testify before the committee, preferring to let the industry?s controlled organization, WCIRB, do the talking.

Inside the hearing, opponents to the measure -- lead by the California Applicants? Attorneys Association and the California Society of Industrial Medicine and Surgery -- latched onto the fluid nature of the cost estimates and the ongoing evolution of the bill's language at this late date as reason enough to stop the measure. But they also questioned assertions that all injured workers would gain from the proposal and maintain that injured workers who are permanently disabled and unable to return to work will be asked to sacrifice so that the majority can realize a benefit increase.

Applicant Attorney?s Say NO!

The opposition focuses largely on the elimination of consideration of future earnings losses from the computation of permanent disability benefits, but is also concerned with elimination of so called "add-ons" for sleep, sex and psychological disorders from the PD benefit equations for most claims. CAAA president Brad Chalk says the proposal also changes the definition of permanent disability to the definition allowed under the AMA Guides. "They've eviscerated 50 years of Supreme Court decisions on disability," he maintains.

Forces For

But supporters of the effort in the form of big labor's Angie Wei and big business' Sean McNally and Department of Industrial Relations director Christine Baker maintain that the time to act is now as there is rare agreement from the two major stakeholders in the workers' comp system -- labor and management. "The bill is good for workers and employers and is good for California. Frictional costs in the system are reduced and benefits are increased," Baker told the committee. "We're excited about this bill in terms of it being a wonderful opportunity for California and we hope that the stakeholders believe this something that will move forward."

Committee officials did not have a timeline for when or if a vote will be taken on the bill. The legislative session is over at the end of the month so time is short.

Click here for a copy of the WCIRB's original cost estimate.

-30-

Source: http://www.wcexec.com/Numbers_Surrounding_SB-863s-Workers-Comp-Reforms-Still-Questionable.aspx

kevin youkilis Tropical Storm Debby fox news legend of korra lebron james magic mike trailer Alan Turing