As a high-cost, high-frequency and extremely inefficient system, California’s workers’ compensation program is not typically treated to glowing reviews. In fact, WCAN recently reviewed our archive of past newsletters and couldn’t find much good news in recent years.
But there may be reasons to be optimistic about California’s workers’ compensation system. Here’s a few that hit our radar:
- SB 863 Reforms on Track: The California Division of Workers’ Compensation reported last week that the 2012 reforms (SB 863) are “on track.” According to the report, “Employer costs are under control and injured worker benefits are increasing.” Although regulators didn’t meet WCAN’s call to implement the key SB 863 regulations by their due date of January 1, 2014, (see 14X’14) the report does show that 12 regulations have been adopted and the final two are underway. A lawsuit challenging new lien fees, meanwhile, was recently turned away by an appeals court. Read the report here.
- Rate Decrease Announced: In spring, California’s insurance commissioner issued a 5% decrease in the advisory pure premium rate for insurance policies issued after July 1. The lower advisory rate of $2.46 per $100 of payroll is based primarily on lower-than-expected costs for medical treatment in 2014 and marks only the second time the nonbinding pure premium advisory rate has been decreased since 2007. This good news is moderated by the fact that rates increased by 40% between 2009 and 2014.
- Medical Costs Decrease in the Short Term: Underlying the reduction in the pure premium advisory rate was a moderation in the growth of medical treatment costs. One example can be found in a joint study from the California Workers’ Compensation Institute and the Workers’ Compensation Insurance Rating Bureau of California (WCIRB), which found the average facility fees paid to ambulatory surgery centers have declined 27% per episode and 29% per procedure since January 2013. On the other hand, the WCIRB also reported recently that California has the most prolonged medical treatment pattern in the country, which leads to higher costs for prescription drugs, medical complications and chronic conditions.
Is California out of the workers’ comp woods yet? Absolutely not.
California remains the high-cost leader among all states. We continue to spend much of the workers’ comp dollar on litigation and other frictional expenses. And even when legislative reforms show “impressive progress” they are always at risk of being rolled back by lawmakers, thrown out by the court or undermined by changing business practices and new abuses.
So, join us in taking this good news with a hefty grain of salt and be prepared to keep up the fight for a better system.
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