Unprecedented hike in workers’ comp insurance rates is unnecessary

by Todd McFarren, Capitol Weekly

On Monday, June 8, the California Applicants Attorneys Association joined the California Labor Federation, the Consumer Federation of California, VotersInjuredatWork.org, the California Society for Industrial Medicine & Surgery, and Assemblymember Dave Jones in opposing the insurance industry’s proposed 23 percent increase for workers compensation insurance.

Such an increase is unwarranted.

Much of the industry’s proposed increase would pay for insurers’ expenses to review, and almost always reduce, delay or deny recommended medical care, not to pay for medical care injured workers need so they can return to work.  
Medical care and permanent disability compensation for injured workers were drastically reduced by SB 899 and this administration’s implementing regulations. The system does not deliver the care and compensation injured workers need to survive, heal and return to work. Anyone who is aware of this, and can avoid the nightmare the workers compensation system has become, does so. Half of injured workers now avoid the workers compensation system. In calculating workers compensation case costs, the insurance industry ignored the fact that workers compensation claims have dropped by 50 percent, and that permanent disability compensation has been cut by 50 percent to 70 percent.

Because so many smaller claims are leaving the system, only the more serious claims are left. This increases average medical costs per claim, because now the average injury covered by workers’ compensation is more severe. But there are only half as many injuries to pay for, so that must be accounted for, which the insurance companies did not do.

The insurance industry is using an increase in medical costs per case to push for an unprecedented 23 percent rate hike. But the insurance industry’s own figures show that medical treatment has declined as a percentage of total workers compensation costs, while the costs of delaying and denying care have doubled. Insurers spend $550 million a year reviewing and overruling the care recommended by their own handpicked doctors.

Employers control medical treatment for nearly all inured workers. The overwhelming majority of medical treatment is provided through medical networks established by employers or insurers. Virtually all fees are subject to a fee schedule, so why is so much money going to cost control? Why is so much being spent to overrule medical care recommended by the insurers’ own handpicked doctors? 

Injured workers are required to see doctors chosen by the company, so why are insurance carriers overruling these doctors?

The insurance companies have lumped these medical management expenses in with ‘medical costs,’ but I assure you that utilization review and defense lawyers have never cured an injury.

It is folly to believe insurance industry claims that the reforms are no longer reducing costs. Statutory limits on physical therapy and chiropractic treatment are still in place, medical treatment authorization requests are still judged against nationally developed treatment guidelines and are subject to utilization review, outpatient facility fees are still subject to the Medicare fee schedule, injured workers can still receive a maximum of 104 weeks of temporary disability, penalties for unreasonable delay are still minuscule, and permanent disability awards are still subject to apportionment.
The insurance industry also grossly overstates the impact of recent court decisions that could increase costs, and failed to include those that will reduce costs.

There is considerable misunderstanding regarding the impact of two recent en banc decisions from the Workers’ Compensation Appeals Board. The two decisions ‘ Almaraz and Guzman – will have only a minor impact on permanent disability compensation. The estimated impact of these cases accounts for only 5.7 percent of the proposed 23 percent increase.  

However, because the WCAB recently granted reconsideration on both cases, any attempt to quantify their eventual impact ‘ if any ‘ on claim costs is grossly premature. What is certain is that these cases will not and cannot reverse the unintended 50% reduction in permanent disability benefits caused by adoption of the 2005 PDRS.

Other recent court decisions will reduce both benefit and expense costs.

The insurance industry ignored these cases in its proposed rate hike.

CAAA and the other worker and consumer leaders urged the Insurance Commissioner to consider these factors and deny the proposed rate increase.