BILL ANALYSIS Ó
SB 863
Page 1
SENATE THIRD READING
SB 863 (Lieu)
As Amended June 6, 2011
Majority vote
SENATE VOTE :37-0
INSURANCE 11-0 APPROPRIATIONS 17-0
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|Ayes:|Solorio, Hagman, Carter, |Ayes:|Fuentes, Harkey, |
| |Feuer, Grove, Hayashi, | |Blumenfield, Bradford, |
| |Miller, Olsen, Skinner, | |Charles Calderon, Campos, |
| |Torres, Wieckowski | |Davis, Donnelly, Gatto, |
| | | |Hall, Hill, Lara, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
| | | | |
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SUMMARY : Adopts reforms to the lien procedures in the workers'
compensation system. Specifically, this bill :
1)Requires lien claimants to file their liens in writing with
the Workers' Compensation Appeals Board (WCAB), accompanied by
a statement or itemized voucher supporting the lien and
justifying the right to reimbursement.
2)Requires the lien claimant to provide notice to all interested
parties.
3)Prohibits filing a lien after three years from the date the
services were provided for services provided prior to July 1,
2012, and 18 months from the date the services were provided
for services provided on or after July 1, 2012.
4)Provides that the limitation periods noted above apply to any
lien filed on or after the effective date of the bill,
regardless of the date the services were provided.
5)Clarifies that liens in favor of the Employment Development
Department (EDD) are payable from amounts owed as temporary or
permanent disability, and states that this clarification is
declaratory of existing law.
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6)Provides that a health insurer, a health care service plan, a
self-funded employee welfare benefit plan, or a publicly
funded program providing medical benefits on a nonindustrial
basis may file a lien within six months of discovering that
the injury or condition was industrial in nature, but in no
case later than five years after the services were provided.
EXISTING LAW :
1)Establishes a comprehensive system of workers' compensation
benefits for workers injured on the job, including medical
services, among other benefits.
2)Requires the Administrative Director (AD) of the Division of
Workers' Compensation (DWC) to adopt and periodically revise
an Official Medical Fee Schedule (OMFS) to establish the
reasonable maximum fees to be paid for medical services.
3)Authorizes the WCAB to determine and allow liens to be paid as
compensation for a variety of services that are provided to
injured workers.
4)Provides that when a workers' compensation award is made, or
when a compromise is submitted to the WCAB, an arbitrator, or
a settlement conference referee for approval, the parties
shall file with the board any liens that have been served on
the parties.
5)Prohibits allowing a lien claim filed with the WCAB six months
from the final order or decision, five years from the date of
injury, or one year from the date services were provided,
whichever is later.
6)Provides, based on decisional law, that these limitations are
frequently tolled, and thus do not operate to prevent late
filing of liens, and allows "implied" liens when no actual
lien was filed.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, a three-year statute of limitations should reduce
overall system costs by $44 million per year assuming a five
percent reduction in litigation and a general decrease in
medical costs. The state's share of that savings would be
approximately $2 million per year ÝGeneral Fund and various
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special funds].
COMMENTS :
Purpose . This bill seeks to adopt several of the less
controversial recommendations made by the Commission on Health
and Safety and Workers' Compensation (CHSWC) in its January,
2011 report on workers' compensation liens. Specifically, this
bill would adopt a legitimate state of limitations that would
provide certainty to employers, and prevent one of the worst
abuses - the filing of liens on very old billings, many of which
were paid at fee schedule rates when the bills were highly
inflated in the first place. The bill also requires the lien
claimant to actually file the lien, and do so in writing, with
accompanying documentation, eliminating the uncertainty of
"implied" liens.
What is a workers' compensation lien ? A lien in the workers'
compensation system can be for services other than medical
services, such as interpreter services or legal services, when
the provider believes the compensation allowed by the employer
(or the insurer acting on behalf of the employer) was not
adequate. However, medical-related liens are the most common.
There are a number of reasons for filing a lien, some more
legitimate than others. For example, a medical provider may
submit a bill to an employer, complete with detailed billing
codes, only to have the employer "down-code" the bill and pay
less than billed, even though the bill attempted to bill only to
the amount allowed by the fee schedule. The lien system is the
mechanism by which the provider can challenge that employer's
decision. On the other hand, liens can be used in ways that
many observers find abusive. One practice is for a provider to
ignore the fee schedule, and bill a higher amount, often
characterized as the provider's "usual and customary" fee. When
the employer recalculates the fee and pays the bill according to
the OMFS, the provider files a lien and seeks to obtain a
settlement by forcing the dispute into the expensive and
overcrowded workers' compensation litigation system. Another
practice involves the failure to provide notice to an employer
that a work-related injury is being treated, thereby avoiding
utilization review and other employer cost controls, and filing
liens seeking compensation for the services provided. In
addition, the Assembly Insurance Committee considered a related
abuse in AB 378 (Solorio) - over-billing for compounded
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medications - where the lien mechanism is used to leverage
higher payments even when the employer has attempted to reject
the abusive billing.
Background . According to the CHSWC report, we can expect that
450,000 liens will be filed in 2011. This volume consumes 35%
of the Los Angeles branch of the WCAB's time. Employers and
insurers set aside $200 million per year on loss adjustment
expenses each year - that is not $200 million to pay the bills
that are the basis of the liens, but rather the frictional
expense associated with merely handling the process of resolving
them. The CHSWC report makes more than 25 recommendations on
ways to improve the lien system, and this bill adopts a few of
the less controversial of those recommendations.
EDD issue . Certain cases, for example stress related heart
conditions, may cause an employee to seek medical care without
realizing the cause is work-related. If the condition is severe
enough to result in disability, the employee will seek the SDI
benefits to which he or she is entitled from EDD. Once it
becomes clear that the case is work-related, EDD will have a
lien to recover the SDI funds that should have been paid as
either temporary or permanent disability benefits. This bill's
provisions clarify this issue, and state the clarification to be
declaratory of existing law.
Double-jointing . This bill and SB 457 (Ron Calderon) both amend
Labor Code Section 4903.1. The amendments are not incompatible,
but in order to avoid chaptering out issues, the authors may
wish to double-joint the bills.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
FN: 0004667