California Workers’ Comp: What’s in Store for 2016?

California-workers'-compIn the years since the 2012 reforms, California’s $16.5 billion workers’ compensation system has been grudgingly showing signs of recovery. SB863 was a massive overhaul, creating a $120 million return-to-work fund, establishing an independent medical review board, revising the permanent disability rules, and adding a controversial provision barring temporary staffing agencies from self-insuring for workers’ compensation, among other provisions.

What impact are the reforms having?

It’s a mixed bag. According to a report by the Workers’ Compensation Insurance Rating Bureau (WCIRB), so far the impacts of the legislation have generally been playing out as predicted, possibly even with higher than projected savings in medical cost reductions.

The Department of Industrial Relations and its Division of Workers’ Compensation have found similar results, noting:

  • Workers’ access to network physicians has improved
  • Benefits to injured workers have increased
  • IMR decisions are being issued well within the 30-day statutory timeframe from receipt of medical records
  • Lien filings have decreased by an estimated 60 percent

But it’s not all good news for employers or the state…

  • Workers’ comp premiums on the rise. The WCIRB notes that workers’ compensation premiums are growing at double-digit rates. One reason is the frequency of permanent disability claims in the state, the highest in the nation. The state also has some of the costliest claims in terms of medical treatment and the cost of delivering benefits, largely due to prolonged medical treatments. Almost 20 percent of indemnity claims were open after five years, nearly four times the national average. Then there’s the sheer number of workers’ comp claims – on average, California has 14.5 claims per 1,000 employees, roughly 50 percent greater than the national average.
  • More benefits, greater costs. According to the California Workers’ Compensation Institute (CWCI), work injury claim costs will increase in 2016 due to the rise in the State Average Weekly Wage (SAWW). That will push up temporary total disability (TTD) and permanent total disability (PTD) rates, and other workers’ comp benefits that are tied to changes in the SAWW such as TTD paid two years or more after an injury, life pension and PTD payments for injuries on or after January 1, 2003, and installment payments on death claims.
  • Independent Medical Review (IMR) process still sluggish. SB863 was intended to lower costs and streamline the IMR process, but the system soon became swamped with a high volume of IMR requests. SB863 also took lawyers and the judicial system out of the dispute resolution process, leaving the IMR with sole decision-making authority on medical treatment. But while the legislation was intended to minimize litigation costs, continued expedited hearings and the high volume of IMRs is keeping litigation costs up. According to CWCI, a small number of physicians is responsible for a large portion of the state’s IMR cases, a process that could be costing payers more than $100 million.

While the jury is still out on how SB863 will ultimately play out, these are times of change for the California workers’ compensation system. But one thing hasn’t changed – the need to cut costs at every opportunity. That means being vigilant about creating a safe work environment, reducing workplace injuries, aggressively investigating every accident, and having an efficient system in place for managing your workers’ compensation claims.

Self-insured employers have even more incentive to do all of these things. That’s where Republic Capital Claims Administrators can be your best ally. Contact us today and see how we can help you mitigate your workers’ compensation costs and navigate the complexities of the system – saving you precious time and money.