Two years ago this week, Governor Jerry Brown signed SB 863. This legislation significantly increased injured worker benefits and sought to offset the cost of these higher benefits through changes to improve system efficiency, reduce conflict and litigation, and stem abusive practices.

How are the reforms working?

An assessment from the state�s Division of Workers� Compensation found both �progress� and �challenges� in SB 863�s implementation and impact on the system. The study found that:

  • Although employer costs have increased by 10 percent since 2012, �SB 863 successfully trimmed three percentage points� off of the pre-reform projection.
  • New fee schedules for Ambulatory Surgery Centers and spinal surgery hardware have significantly decreased costs for those services.
  • The lien filing fee has helped to cut the number of liens by half in its first year.
  • The new Independent Medical Review (IMR) process is less costly than the pre-reform system on a per review basis. It is upholding employer reviews of medical treatment requests at a rate of 80 percent. However, this system is being used much more frequently than the pre-reform medical review system.
  • Ten cost-saving regulations have been enacted, and additional regulations are being crafted.
  • Although the benefit increase is in effect, it is too soon to determine its cost, since permanent disability claims typically take up to two years or more to resolve.

Overall, officials found that �it is still too early to gauge the overall effect of the SB 863 reforms.� Not included in this assessment is the threat that pending lawsuits challenging the IMR and lien reforms could have on the reforms and projected cost savings.

As always, you can check out WCAN�s 14 by �14 page to track the reform�s progress, including our updated infographic on SB 863.

SB 863 infographic

How are the reforms impacting the overall system?

A broader look at the �State of the System� from the Workers� Compensation Insurance Rating Bureau found that California remains an expensive outlier when compared to other states. The analysis found that:

  • California�s workers� compensation rates are markedly higher than in other states, and the double-digit increases in premiums over the last two years have made California�s share of the nationwide premium grow to 25 percent, even though California has only about 12 percent of the nation�s population.
  • Recent increases in claim frequency in California, especially in Southern California, are running counter to the national trend of decreasing claim frequency, and have made California�s claim frequency rate the 8th-highest among all the states.
  • Indemnity costs in California are higher than the nationwide median, and medical costs in the state are among the highest in the nation.

While reforms continue to be implemented, California employers can expect to continue to see rising workers� compensation costs. The Worker�s Compensation Insurance Rating Bureau recently proposed an additional 7.9% increase in the advisory pure premium rate for January 2015 compared to average rates filed as of July 2014.

If the average rates employers pay rises accordingly, employers will have experienced a 44% percent rate increase since 2009.

Please contact us with any questions or comments at [email protected].