Dear WCAN Member,

California’s workers’ compensation system is in the midst of a major transition, as the various reforms of Senate Bill 863 take effect and regulators press ahead to complete their implementation work. We invite you to read this month’s newsletter on the status of SB 863 and cost trends in the system.

Initial SB 863 reforms take effect. The New Year ushered in changes to the medical fee schedules for surgical payments, the launch of new procedures for resolving medical treatment and billing disputes, the institution of filing fees when service providers file liens, and new requirements for medical examiners and interpreters. Already, two system vendors have seen their liens dismissed with prejudice by a workers’ compensation judge in Bakersfield for failing to pay the newly-required “lien activation fee.” WCAN continues to monitor the early impacts of SB 863 reforms on the system.

Implementation process moves into the next phase. Because of the tight timeline, many of the regulations that took effect last month were done on an emergency basis. The Division of Workers’ Compensation is now moving forward to adopt these rules permanently. Hearing dates have been set in March to comment on final rules for the Supplemental Job Displacement Voucher, lien filing fees and interpreter certification. To view a complete rulemaking timeline from the DWC and hearing dates, click here.

2013 Rates Increase, But By Less than Pre-Reform Projections. Insurance Commissioner Dave Jones approved an increase in the average pure premium advisory rate from $2.49 to $2.56 per $100 of payroll beginning January 1, 2013. With California workers’ compensation insurers currently paying out 116 percent more in claims costs than they are collecting in premium, Commissioner Jones said the increase is needed to maintain insurers’ ability to pay claims and prevent insolvencies.

Prior to the enactment of SB 863 in 2012, the pure premium rate was projected to reach $2.68 per $100 of payroll. In adopting the smaller rate increase, Commissioner Jones cited system savings of $1.5 billion from the SB 863 reforms could be actuarially supported at this time, although additional savings may be possible.

Pure premium rates refer to average rates among all industry classifications necessary to cover claims cost and expenses. These differ from average rates actually charged in the marketplace and the rates an individual employer might pay. Recent news reports indicate employers are seeing average rate increases of 17 percent in 2013.

System-Wide Costs Grew in 2011. A recent report from the California Commission on Health and Safety and Workers’ Compensation provides new insight into system cost trends through 2011. The report shows total system-wide costs grew from $14.8 billion in 2010 to $16.2 billion in 2011. The report also shows that average ultimate cost per individual claim in 2011 reached an all-time high of $71,402, compared to $48,500 in 2005 – a 47 percent increase.

To stay up to date with the latest on the reforms, visit WCAN's "14x14" campaign website.

Please contact us with any questions or comments at contactus@fixworkerscompnow.org.