BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: April 29, 2009 2009-2010 Regular
Session
Consultant: Alma Perez Fiscal:Yes
Urgency: No
Bill No: SB 764
Author: Negrete McLeod
Version: As Amended April 22, 2009
SUBJECT
Workers' compensation: health care organizations.
KEY ISSUE
Should the Legislature make changes to provisions governing
health care organizations (HCOs) which could bring them more in
alignment with the provisions governing medical provider
networks (MPNs)?
PURPOSE
To delete certain allegedly burdensome operational requirements
governing health care organizations (HCOs) in the workers'
compensation system.
ANALYSIS
Existing law establishes a workers' compensation system,
administered by the Administrative Director (AD) of the Division
of Workers' Compensation (DWC), to compensate an employee for
injuries that arise out of, or in the course of, employment.
Employers are required to secure the payment of workers'
compensation for injuries incurred by their employees. Workers'
compensation insurance provides six basic benefits which include
medical care, temporary disability benefits, permanent
disability benefits, supplemental job displacement benefits or
vocational rehabilitation and death benefits.
Under existing law , employers are authorized to enter into a
contract with a specialized workers' compensation health care
organization (HCO) for the provision of medical services under
the workers' compensation system. Eligible HCOs must be
certified by the DWC for the delivery of managed care services
and may include HMOs licensed by the Department of Managed Care
Regulation, disability insurers licensed by the Department of
Insurance, and other workers' compensation health care provider
organizations (WCHCPOs). An employer's use of HCOs, among other
things, does the following:
Allows an employer to maintain medical control over the
injured employee's workers' compensation claim for up to
180 days after an injury or illness occurs, however, the
HCO is required to maintain certain standards of care as a
condition of that control.
Allows an employee within an HCO to predesignate a
personal physician, chiropractor or acupuncturist at a
facility of his or her own choosing within a reasonable
geographic area to provide their medical care.
Requires HCOs to provide specific information to the
administrative director of the DWC including costs and
utilization, rates of return to work, average time in
medical treatment and other measures as determined by the
AD.
Under existing law , employers are authorized to establish a
medical provider network (MPN) for the provision of medical
services under the workers' compensation system. An MPN is an
entity or group of health care providers set up by an insurer or
self-insured employer and approved by DWC's administrative
director to treat workers injured on the job. Under state
regulations, each MPN must include a mix of doctors specializing
in work-related injuries and doctors with expertise in general
areas of medicine. MPNs are required to meet access to care
standards which require, among other things, that:
MPNs follow all medical treatment guidelines established
by the DWC;
MPNs allow employees a choice of provider(s) in the
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Senate Committee on Labor and Industrial Relations
network after their first visit;
MPNs must offer an opportunity for second and third
opinions if the injured worker disagrees with the diagnosis
or treatment offered by the treating physician. If a
disagreement still exists after the second and third
opinion, an injured worker in the MPN may request an
independent medical review (IMR).
Existing law allows an employee within an MPN to
predesignate a personal physician if his or her employer
provides health care coverage for non-occupational injuries
and if the physician is the employee's primary care
physician for health care.
The use of an MPN generally allows an employer to maintain
medical control for the life of the workers' compensation claim.
Additionally, MPNs operate under fewer specific quality
assurance and reporting requirements than do HCOs. There is no
fee or assessment to establish an MPN as there is to get
certified as an HCO by the DWC.
Existing law establishes the Workers' Compensation Managed Care
Fund containing fees charged to certified health care
organizations and applicants for purposes of funding the cost of
administration of certification and to repay amounts received as
a loan from the General Fund.
This Bill makes several changes to existing provisions
regulating HCOs. Specifically, this bill:
Repeals existing provisions that requires employers to
give employees -- when first hired and annually thereafter
-- the affirmative choice to predesignate a personal
physician, personal chiropractor, or personal acupuncturist
who would provide the employee with medical treatment in
the event of an occupational injury. Instead, the employee
would be governed by the predesignation rules applying to
all other employees (including those who are in MPNs),
which simply allow for an employee to predesignate their
personal physician provided that the employer has
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Senate Committee on Labor and Industrial Relations
non-occupational health care coverage, as specified.
Repeals the existing requirement that employers duly
notify their employees that if they choose to receive care
from the HCO they must receive treatment for all
occupational injuries and illnesses as prescribed by the
provisions governing HCOs.
Deletes the requirement that entities applying to be an
HCO pay a fee to cover the cost of processing the
application.
Repeals the requirement that entities seeking
certification as an HCO from the DWC must report
information regarding medical and health care service cost
and utilization, rates of return to work, average time in
medical treatment, and other measures as determined by the
administrative director that may have been used by the
director to determine the effectiveness of the plan.
Repeals existing provisions specifying that the fees and
revenues collected from HCOs and applicants for
certification be used to fully fund the administration of
HCOs. Instead, the fees and revenues collected would only
be used to repay amounts received as a loan from the
General Fund.
COMMENTS
1. Need for this bill?
In most cases when there is a work-related injury, the injured
worker is referred to, and placed under the care of, a
physician chosen by the employer for the first 30 days unless
the employer has established an HCO or MPN to care for their
employees, or unless the employee has chosen to predesignate a
personal physician for their care. As evaluated above, HCOs
generally have more reporting requirements and are required to
maintain a certain minimum standard of care as a condition to
control an injured employee's workers' compensation claim for
up to 180 days after injury. The use of an MPN, on the other
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hand, allows employers to maintain medical control for the
life of the workers' compensation claim while operating under
fewer specific quality assurance and reporting requirements.
According to a study by the Commission on Health and Safety &
Workers' Compensation (CHSWC) on HCOs, there are many positive
features of the HCO system including their internal review of
the quality of their health care, nurse case management, and a
mandated return to work program, among other services. The
report found that while HCOs have the "potential" to be
beneficial for injured workers and employees, "actual results
are poorly quantified and likely to be variable." CHSWC
recommend that HCOs should be coordinated with MPNs to ensure
that HCOs remain a competitive option for employers; however,
the report did not make any recommendations to ensure timely
access to quality care in either HCOs or MPNs.
The bill, as amended, would make changes to provisions and
requirements of HCOs making them moderately similar to the
requirements of MPNs. This bill has been before this
Committee and Legislature before. An almost identical measure,
AB 871 (Keene), failed passage in our committee in 2005, was
granted reconsideration and reheard in 2006, when it again
failed.
2. Proponent Arguments :
According to the author, the general purpose behind this bill
is to eliminate duplicative fees and reporting requirements,
and make other modifications to the laws governing HCOs, in
order to maintain the viability of HCOs as a workers'
compensation system of care. With its tighter regulatory
oversight and certification requirements, HCOs generally
provide a higher level of care, and it is in both the
employers' and workers' interest to ensure that employers
continue to utilize this option. Unless some of the more
burdensome bureaucratic requirements are alleviated, however,
more employers will simply give up and revert to MPNs.
The author seeks to relieve employers from having to pay
assessments twice, once for the normal assessment that all
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Senate Committee on Labor and Industrial Relations
employers pay to fund the DWC and again when they pay fees for
their HCO, by eliminating the application and renewal fees
paid to the DWC for certification as a workers' compensation
HCO. The author also seeks to eliminate the requirement of
HCOs to make certain reports to the DWC, arguing that HCO
employers are already reporting this information in electronic
format to the Workers' Compensation Information System (WCIS)
and requiring an additional report is unnecessary. Lastly,
this bill seeks to correct a defect in that law which allows
employees to predesignate an acupuncturist or a chiropractor
by eliminating these specialty doctors from predesignation
laws, arguing that no one predesignates these specialists as
the first doctor they see if they are injured on the job and
the injured worker is still able to see a chiropractor or
acupuncturist during treatment.
Proponents view this bill as providing welcome and necessary
technical clean-up to existing regulatory requirements
affecting HCOs. They argue that the current enrollment
process and duplicative data reporting requirements in statute
have been administratively burdensome and a stumbling block in
realizing the maximum efficiencies to be gained by utilizing
HCOs. They believe that these modest changes will have the
affect of making HCOs and MPNs more user friendly, and will
assist in furthering the decline in workers' compensation
rates for employers.
3. Opponent Arguments :
Opponents argue that this bill would undo an agreement between
the sponsors and the Legislature that authorized formation of
HCOs and gave them up to 180 days of medical control.
Opponents argue that although the intent of the bill is to
relieve HCOs from a competitive disadvantage and put them on
equal footing with MPNs, however, they believe this bill would
eliminate the minimal accountability standards of HCOs whish
were enacted as incentives for quality of care, and
essentially would encourage a race to the bottom.
Additionally, opponents point out that in 2005-2006 the
proponents of this bill did not support SB 538 (Kuehl), which
would have required MPNs to develop quality of care standards
bringing them closer to what HCOs are responsible for.
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Senate Committee on Labor and Industrial Relations
According to opponents, a study by the Commission on Health
and Safety & Workers' Compensation (CHSWC) cited by proponents
in 2005 and 2006, found that the services within HCOs are
superior to MPNs. Opponents argue that if this is true, then
this bill is unnecessary because it would move HCOs to be more
like MPNs. Opponents believe that the ability of HCOs to
compete with MPNs should be enhanced only if they reduce
employers' costs by providing good medical care and
facilitating injured workers' expeditious return to work.
Additionally, opponents argue that under SB 899, an HCO that
applies for certification as an MPN automatically is so deemed
after 60 days even if no action is taken by the administrative
director. Therefore, they argue, today's HCOs are MPNs and
differ mainly to the extent that HCOs are accountable for
quality of care.
Opponents also indicate that there is a simultaneous effort
that would circumvent the Legislature and adopt
administratively the same or very similar changes that are in
this bill. Pending regulations not only would limit HCOs'
notice and reporting requirements, but also waive the balance
of their general fund loan and shift the past financial
obligation of profit-making HCOs to the taxpayers. Opponents
of this bill are also opposed to these regulations. Lastly,
opponents argue that the legislature rejected these provisions
three times within the last four years and should do so again
to reinforce legislative intent that medical providers should
be held to quality of care standards.
4. Prior Legislation :
AB 871 (Keene) of 2005 - 2006: Failed passage in Senate Labor
Committee
This bill sought to make changes to the statutes governing the
operation of health care organizations (HCOs) within the
workers' compensation system to conform the provisions to the
statutes governing medical provider networks. AB 871 was very
similar to the bill before this committee.
SUPPORT
Hearing Date: April 29, 2009 SB 764
Consultant: Alma Perez Page 7
Senate Committee on Labor and Industrial Relations
Medex Healthcare, Inc. (Sponsor)
Small Business California (Sponsor)
Kaiser Permanente Medical Care Program
OPPOSITION
California Applicants' Attorneys Association (CAAA)
California Nurses Association
California State Employees Association (CSEA)
National Nurses Organizing Committee
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Hearing Date: April 29, 2009 SB 764
Consultant: Alma Perez Page 8
Senate Committee on Labor and Industrial Relations