BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: June 13, 2012 2011-2012 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: AB 1687
Author: Fong
As Introduced/Amended: June 6, 2012
SUBJECT
Workers' compensation: utilization review.
KEY ISSUE
Should the Legislature require the Administrative Director to
require the sending of a notice to an injured worker on how to
object to a utilization review decision to modify, delay or deny
medical treatment?
Should the Legislature permit the Workers' Compensation Appeals
Board to award attorney's fees in the event of a successful
challenge of a utilization review decision to delay, modify, or
deny medical treatment if the injured worker has previously
settled his or her claim and the settlement included future
medical care?
PURPOSE
To require an injured worker to receive a notice in the event of
medical treatment being modified, delayed, or denied through the
utilization review system, as well as allowing the Workers'
Compensation Appeals Board to award attorney's fees under
specified conditions.
ANALYSIS
Existing law establishes a workers' compensation system that
provides benefits to an employee who suffers from an injury or
illness that arises out of and in the course of employment,
irrespective of fault. This system requires all employers to
secure payment of benefits by either securing the consent of the
Department of Industrial Relations to self-insure or by securing
insurance against liability from an insurance company duly
authorized by the state.
Existing law defines "utilization review" (UR) as utilization
review or utilization management functions that prospectively,
retrospectively, or concurrently review and approve, modify,
delay, or deny treatment recommendations by physicians, based on
medical treatment guidelines. (Labor Code §4610)
Existing law requires every employer to establish a medical
treatment utilization review (UR) process, in compliance with
specified requirements, either directly or through its insurer
or an entity with which the employer or insurer contracts for
these services. Those requirements include:
a) Each utilization review process shall be governed by
written policies and procedures. These policies and
procedures shall ensure that decisions based on the medical
necessity to cure and relieve of proposed medical treatment
services are consistent with the schedule for medical
treatment utilization adopted pursuant to regulations from
the Administrative Director;
b) These written policies must be reviewed annually by
actively practicing physicians and disclosed to a physician
or injured worker if used as the basis of a decision to
modify, delay, or deny services in a specified case under
review;
c) No person other than a licensed physician who is
competent to evaluate the specific clinical issues involved
in the medical treatment services may modify, delay, or
deny requests for authorization of medical treatment;
d) Utilization review processes must follow certain
specified timelines as provided in law, which are generally
5 to 14 days for prospective review, 30 days for
retrospective review, or 72 hours in the event of emergency
medical circumstances for an injured worker; and
e) The Administrative Director may assess, by order,
administrative penalties in the event of an employer,
Hearing Date: June 13, 2012 AB 1687
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Senate Committee on Labor and Industrial Relations
insurer, or other entity fails to meet any of the
utilization review timeframes or fails to meet any other
utilization review requirements.
(Labor Code §4610)
Existing law provides that, when the payment of compensation,
which includes medical treatment, is unreasonably delayed or
refused, the amount delayed or refused shall be increased by up
to 25 percent or $10,000, whichever is less. (Labor Code §5814)
Existing law provides that, in the event of an unreasonable
delay or refusal of payment of compensation, reasonable
attorney's fees incurred for enforcing the payment of
compensation may be awarded. (Labor Code §5814.5)
Existing law requires that the Administrative Director of the
Division of Workers' Compensation, in consultation with the
Commission on Health and Safety and Workers' Compensation, must
prescribe reasonable rules and regulations for serving the
employee or the employees dependents certain specified notices.
These notices include:
1) Notice of the right to consult with an attorney;
2) Notices of any change in the amount or type of benefits
being provided, the termination of benefits, the rejection
of any liability for compensation, and an accounting of
benefits paid; and
3) Notices of rights to select the primary treating
physician, written continuity of care policies, requests
for comprehensive medical evaluation, and offers of regular
modified, or alternative work.
(Labor Code §138.4)
This bill would include to the above-discussed list a notice
that includes explanations of the options available to object to
a decision made pursuant to the utilization review process to
modify, delay, or deny medical treatment.
This bill would also provide that if an award made by the
Workers' Compensation Appeals Board specifies the provision of
future medical treatment and a dispute arises in the course of a
utilization review with the enforcement of this award, and the
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Senate Committee on Labor and Industrial Relations
applicant employs an attorney for purposes of enforcing the
award and prevails, the appeals board may award attorney's fees
reasonably incurred by the applicant in connection with
enforcement of the award.
COMMENTS
1. Need for this bill?
The requirement for insurers and employers to utilize
utilization review in the workers' compensation setting was
first created by SB 228 (Alarcon), Chapter 639, Statutes of
2003. The idea was to create a mechanism to transparently
address questions on if a request for medical treatment in the
workers' compensation system followed the medical utilization
guidelines set by the Division of Workers Compensation. This
bill focuses primarily on an unusual facet of the utilization
review process: what happens when future medical treatment
that has already been stipulated to by the employer or insurer
gets modified, delayed, or denied by utilization review.
In the workers' compensation system, it is somewhat common for
cases for a settlement to require that the employer or insurer
continue to provide the injured worker future medical
treatment through the workers' compensation system for his or
her occupational injury. Since the case in the main has been
settled, generally speaking, the applicant attorney would
receive his or her fees (which is usually a percentage of the
monetary award) and move on to other cases. In the event of
the agreed-upon medical care getting modified, delayed, or
denied by utilization review, the injured worker would be
limited in his or her ability to enforce the award of future
medical benefits.
AB 1687 seeks to address this by allowing the Workers'
Compensation Appeals Board, in the event of a dispute arising
from utilization review, to award reasonably incurred
attorney's fees in the enforcement of an award that specified
future medical treatment. Additionally, AB 1687 includes a
notice requirement for an injured worker in the event of a
Hearing Date: June 13, 2012 AB 1687
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Senate Committee on Labor and Industrial Relations
modification, delay, or denial of treatment pursuant to the
utilization review process.
2. AB 1687 and Utilization Review Data:
While AB 1687 was moving through the Assembly, several
stakeholders questioned the numbers used by Assembly
Appropriations Committee in estimating the number of
utilization review requests that are denied. While the
Assembly Appropriations Committee estimated that between 6%
and 20% of all utilization review requests are denied, citing
data from the Division of Workers' Compensation (DWC), other
stakeholders put the number at closer to 80% to 90%. For the
purposes of clarity, this issue will be addressed, as well as
put in the context of AB 1687.
Labor Code §129 requires the Division of Workers' Compensation
to audit insurers, self-insured employers, and third-party
administrators. Each audit subject is audited every 5 years.
As a part of this audit, a random sample of requests for
utilization review authorization from an insurer, self-insured
employers, or third-party administrators are reviewed. The
findings from this portion of the audit are available on the
DWC website.
When looking at the samples from 2010 and 2011, the denial
rate for utilization review authorization is 23% and 27%,
respectively. For 2012, the audits are ongoing, but the
current denial rate is 17%. Additionally, this aggregation is
somewhat complicated by the fact that the utilization review
denial rates vary greatly from firm to firm; in some cases, no
utilization review requests were denied, while in others
virtually every utilization review request was either delayed,
modified, or denied.
In the context of AB 1687, this gives us some sense of the
pool of utilization review denials that would require a
notice. Additionally, this is the probable source of claims
that may trigger legal assistance, assuming the above-samples
are reflective of the workers' compensation system as a whole.
However, it is currently unknown how many of those denials
involve workers with settled claims that include future
Hearing Date: June 13, 2012 AB 1687
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medical treatment. Additionally, it is not known how many of
those individuals would retain an attorney to pursue an action
in from of the Workers' Compensation Appeals Board.
Finally, as it is unknown what kind of notice the
Administrative Director of the Division of Workers'
Compensation would prescribe, as well as the circumstances
that such a notice would go out, it is unknown how many
notices would go out, as well as their impact.
3. Possible Amendments:
As was discussed above, most future medical awards occur when
the workers' compensation claim is largely settled. However,
the language currently in the bill leaves open the question of
how settled the claim must be to allow the Workers'
Compensation Appeals Board to award attorney's fee. This
could create a situation where future medical care is
stipulated without an award of permanent disability, which
could then drive attempts to seek attorney's fees which are
beyond the author's goal with this legislation.
To address this, the Committee may wish to insert the
following language on page 8, line 38, after the last
sentence: "This section shall apply only to medical disputes
arising after a final award of permanent disability."
3. Proponent Arguments :
Proponents note that existing law protects injured workers in
the workers' compensation system by providing notices and
ensuring that their appellate rights can be utilized.
However, proponents note that existing notice requirements do
not provide injured workers information on how to object to
utilization review decision to modify, delay, or deny medical
treatment. Additionally, proponents note that for injured
workers who have settled their workers' compensation but
continue to receive future medical treatment through the
workers' compensation system, a utilization review dispute is
particularly difficult, as they would need to address the
delay, modification, or denial of medical treatment without
representation.
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Senate Committee on Labor and Industrial Relations
Proponents believe that AB 1687 addresses both these issues by
requiring that the injured worker receives a notice of the
options available to him or her to object to a utilization
review decision as well as allow the Workers' Compensation
Appeals Board to award attorney's fees in the event of a
successful objection to a utilization review delay,
modification, or denial of medical care.
4. Opponent Arguments :
Opponents are opposed to the bill, arguing that the additional
notification requirements are unduly complicating and costly
additions to a utilization review system that is performing a
valuable function of preventing inappropriate treatment that
is not evidence-based, and which forces treating physicians to
practice evidence-based medicine because the failure to
provide proper documentation for treatment requests will
result in delays due simply to inadequate medical information.
Opponents also argue that there are already enforcement
provisions for unreasonable delays, denials or modifications,
but that good faith use of the utilization review system
should not be made more costly. Finally, opponents also argue
that this bill creates more frictional costs which are
currently trying to be eliminated from the system.
Opponents also argue that giving the ability to the Workers'
Compensation Appeals Board to award attorney's fees as
provided in AB 1687 will add costs to the system, and that the
Division of Workers' Compensation already has an Information
and Assistance Unit located in 24 places throughout California
to help injured workers in these sorts of cases.
5. Prior Legislation :
AB 584 (Fong) of 2011 would have required a physician
conducting utilization review in the workers' compensation
system to be licensed in California. AB 584 was vetoed by
Governor Brown.
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Senate Committee on Labor and Industrial Relations
SUPPORT
California Professional Firefighters (Sponsor)
California Labor Federation
California School Employees Association
California Society of Industrial Medicine and Surgery
California Society of Physical Medicine and Rehabilitation
Glendale City Employees Association
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
Union of American Physicians and Dentists/AFSCME-Local 206
Voters Injured at Work
OPPOSITION
Acclamation Insurance Management Services
Allied Managed Medical Care
ALPHA FUND
American Insurance Association
California Association of Joint Powers Authorities
California Chamber of Commerce
California Coalition on Workers Compensation
California Special Districts Association
California State Association of Counties
League of California Cities
Los Angeles County Board of Supervisors
Regional Council of Rural Counties
Hearing Date: June 13, 2012 AB 1687
Consultant: Gideon L. Baum Page 8
Senate Committee on Labor and Industrial Relations