BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: August 31, 2012 2011-2012 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: SB 863
Author: DeLeon
As Introduced/Amended: August 30, 2012
SUBJECT
Workers' compensation.
KEY ISSUE
Should the Legislature reform the workers' compensation system
in order to cut costs for employers and increase benefits to
injured workers by more than $700 million?
PURPOSE
To reduce frictional costs, speed up medical care for injured
workers, and to increase Permanent Disability (PD) indemnity
benefits to injured workers.
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.
This bill would implement/enact a holistic reform of the
workers' compensation that would, among other things, provide
reforms in the following areas:
On Medical Provider Networks:
1)Eliminates the requirement that a Medical Provider Network
(MPN) have non-occupational medicine specialists constitute at
least 25% of the physicians in the network.
2)Requires an MPN to obtain a written acknowledgement from a
physician that the physician agrees to be in the MPN.
3)Requires all MPNs to have a "medical access assistant" staff
person or persons, who need not be employees, but who must be
located within the United States, to aid injured workers in
obtaining appointments or referrals within the MPN.
4)Allows the AD to generically approve an MPN, as opposed to
requiring a separate approval for each employer.
5)Provides that the approval of an MPN by the AD is conclusive
in a matter before the WCAB that the MPN is valid, subject to
proof that there was a specific failure as to a specific
injured worker.
6)Requires periodic administrative audits of MPNs by the AD.
7)Authorizes discretionary administrative audits of MPNs by the
AD.
8)Limits the reasons that can be used to avoid obtaining
treatment within an MPN, and establishes an expedited process
to resolve any disputes about whether the injured worker is
required to be treated within the MPN.
9)Requires a physician who knows or should know that the patient
is suffering from an occupational injury to notify the
employer within 5 days that the injured worker is being
treated outside the MPN, and prohibits payment by an employer
or insurer for any treatment provided to the injured worker
when the notice requirements have not been complied with.
Independent Medical Review:
Hearing Date: August 31, 2012 SB 863
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1)Implements an Independent Medical Review (IMR) process,
similar to what is found at the Department of Managed Health
Care (DMHC), in order to provide independent medical review by
doctors for health care disputes.
2)Allows the employee to appeal a UR decision by requesting an
IMR either immediately after the UR decision or after getting
a second utilization review with addition information.
3)Eliminates the Workers' Compensation Appeals Board's (WCAB)
authority to adjudicate medical treatment disputes that are
directed to the IMR process.
4)Provides a timeline for approval of treatment after
utilization review of 2-3 months, rather than the current
judicial timelines which can take up to 18 or 24 months;
5)Establishes a hierarchy of standards that are to be applied by
IMR, with the Medical Treatment Utilization Schedule adopted
by the Administrative Director as the highest source for
evaluating the appropriateness of medical treatment, followed
by the same ranked standards that apply to HMOs under the
Knox-Keene Act.
6)Ensures that the hierarchy of standards enforces
evidence-based medicine as the primary standard for treatment.
7)Makes the results of the IMR process binding on all parties,
absent clear and convincing evidence of fraud or conflict of
interest, that the AD acted in excess of his or her authority,
that the decision was the result of bias relating to protected
classes, or that the decision was the result of a plainly
erroneous express or implied finding of fact that is a matter
of ordinary knowledge and not a matter that is subject to
expert opinion.
8)Establishes penalties in the event an employer fails to notify
an injured worker of his or her right to IMR, or fails to
implement a decision by IMR favorable to the injured worker.
9)Provides for the Administrative Director (AD) of the DWC to
contract with qualified organizations to implement the IMR
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functions, subject to detailed conflict of interest rules and
substantive responsibilities, as specified.
10)Adopts findings and declarations of Legislative intent with
respect to the IMR process and its value to injured workers
and to the workers' compensation system, as well as a
severability clause.
Independent Bill Review:
1)Establishes an Independent Bill Review (IBR) process to take
medical billing disagreements under rules similar to the IMR
process, limiting the need for liens filing.
2)Provides for the Administrative Director (AD) of the DWC to
contract with qualified organizations to implement the IBR
functions, subject to detailed conflict of interest rules and
substantive responsibilities, as specified.
Workers' Compensation Liens Reform:
1)Prohibits the filing of a lien against an award for matters
that are subject to IMR and IBR dispute resolution.
2)Establishes a $150 filing fee in order to file a lien,
recoverable if the lien claimant prevails.
3)Establishes a $100 activation fee for legacy liens,
recoverable if the lien claimant prevails.
4)Adopts a statute of limitation within which liens must be
filed.
Fee Schedules:
1)Requires the Administrative Director to adopt a medical fee
schedule methodology based on Medicare's Resource-Based
Relative Value Scale (RBRVS) system, with specified
modifications for California's workers' compensation system,
including geographic adjustments.
2)Adopts a fee schedule for ambulatory surgery centers (ASCs).
Hearing Date: August 31, 2012 SB 863
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3)Requires the Department of Industrial Relations (DIR) to study
the feasibility of establishing a facility fee for services
performed in ASCs.
4)Clarifies the rules that govern the fee schedule applicable to
vocational expert compensation;
5)Provides that if the MediCal fee schedule for prescription
medications is reduced in order to meet specified MediCal
budget needs, the budgetary reduction shall not be included in
the workers' compensation official medical fee schedule;
6)Prohibits payment for home care services where the services
were already being provided prior to injury, authorizes the AD
to adopt a home care services utilization and fee schedule,
and limits the re-opening of old cases where home care
services are alleged to have been provided but were not
authorized or ordered by a physician before the services were
rendered.
7)Authorizes the AD to adopt a fee schedule for copying
services, and establishes substantive rules to govern these
services.
Medical Care Reforms:
1)Eliminates the pass-through for implantable surgical hardware.
2)Requires the Administrative Director to adopt a regulation to
allow an additional reimbursement where the basic hospital fee
schedule does not adequately cover the cost of the hardware.
3)Establishes a prohibition for any interested party in the
workers' compensation system to have a financial interest in
another entity to which it is referring a party for services,
or for which it is paying or receiving compensation, if the
employer is paying the charges; provided that financial
interests in affiliated entities in claims handling are
subject to mandatory disclosure rather than this prohibition.
4)Repeals the requirement that a second opinion be obtained in
Hearing Date: August 31, 2012 SB 863
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Senate Committee on Labor and Industrial Relations
cases of spinal surgery, and instead would resolve questions
of appropriateness of spinal surgery in the IMR process.
5)Limits the number of office locations that a QME may file with
the Division of Workers' Compensation (DWC) to 10.
6)Streamlines the Agreed Medical Evaluator (AME) and QME
process.
7)Limits Chiropractic QMEs to individuals who are doctors of
chiropractic and certified in California workers' compensation
evaluation by a provider recognized by the administrative
director.
8)Provides that a chiropractor who has reached the 24-visit cap
cannot serve as the injured worker's primary treating
physician.
9)Clarifies that an insurer or employer can pay for physical
medicine treatments in excess of the 24-visit cap without that
payment constituting a blanket waiver of the cap.
Interpreters:
1)Provides that where interpreter services are needed, the
injured worker shall make a request to the employer or
insurer, and the employer or insurer shall pay for the
interpreter services.
2)Requires that interpreters be certified, and authorizes the AD
to establish, operate or contract for an interpreter
certification program.
3)Prohibits an interpreter certification entity from having a
financial interest in training or employing interpreters.
Permanent Disability:
1)Increases aggregate Permanent Disability (PD) benefits by
approximately $740 million per year, phased in over a two-year
period, and adjusts the formula for calculating the benefit
amount so that compensation amounts more accurately reflect
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loss of future earnings, and to ensure that no class of
injured workers receive a lower award than under the present
system.
2)Eliminates sleep disorder and sexual dysfunction "add-ons" to
primary injuries that do not include these injuries when
calculating the level of Permanent Disability, but requires
all appropriate medical treatment for these injuries.
3)Limits psychological add-ons when calculating a PD rating to
cases involving catastrophic injury or that involved a violent
workplace incident, but requires all appropriate medical
treatment for psychological injuries.
4)Eliminates the diminished future earnings capacity (DFEC) from
the determination of permanent disability, and instead
provides that all permanent disability awards are increased by
a multiplier of 1.4 for the loss of future earnings,
comparable to the top available DFEC modifier.
5)Limits the definition of permanent disability to include only
a consideration of how occupation affects the overall
classification of employment of the injured worker, rather
than the individual injured worker's ability to compete in the
open labor market or reduction of future earnings.
6)Provides that in enacting the bill adding these changes to the
PD system, it is not the intent of the Legislature to overrule
the holding in Milpitas Unified School District v. Workers'
Comp. Appeals Bd. (Guzman) , which established that the
presumption that an AMA Guides rating is correct is rebuttable
by evidence presented by the injured worker.
Return to Work:
1)Modifies the Supplemental Job Displacement Benefit (SJDB)
rules to:
a) Change the point in time the benefit is triggered;
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b) Prohibit "cashing out" the retraining voucher in
settlements;
c) Establish which schools are qualified to be paid by the
retraining voucher;
d) Limit the time period during which the voucher is valid
to 2 years; and
e) Specify that an injury that occurs during retraining
does not constitute a compensable injury.
2)Creates a $120 million return-to-work program annually derived
from the Workers' Compensation Administration Revolving Fund
for making supplemental payments to workers whose permanent
disability benefits are disproportionately low in comparison
to their earnings loss.
3)Requires the Commission on Health and Safety and Workers'
Compensation to conduct a study comparing average loss of
earnings for employees who sustained work-related injuries
with permanent disability ratings under the permanent
disability rating schedule and evaluate the impact of
increased payments made pursuant to the "bump up" provisions,
and report to the Legislature before January 1, 2016.
COMMENTS
1. Need for this bill?
SB 863 reflects a negotiated compromise between employers and
employees to adopt a substantial increase in permanent
disability benefits ($740 million), to ameliorate unexpected
reductions that flowed from the 2004 reforms, balanced by
substantial changes in the benefit delivery system to
eliminate waste, inefficiency, and other loopholes that result
in unnecessary employer costs that go to recipients other than
injured workers.
2. Independent Medical Review:
SB 863 proposes to change the way medical disputes are
resolved. Currently, when there is a disagreement about
Hearing Date: August 31, 2012 SB 863
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Senate Committee on Labor and Industrial Relations
medical treatment issues, each side attempts to obtain medical
opinions favorable to its position, and then counsel for each
side tries to convince a workers' compensation judge based on
this evidence what the proper treatment is. This system of
"dueling doctors" with lawyers/judges making medical decisions
has resulted in an extremely slow, inefficient process that
many argue does not provide quality results. Long delays in
obtaining treatment result in poorer outcomes, reduced return
to work potential, and excessive costs in the system, none of
which are good for injured workers. SB 863 would instead
adopt an independent medical review system patterned after the
long-standing and widely applauded IMR process used to resolve
medical disputes in the health insurance system. Thus, a
conflict-free medical expert would be evaluating medical
issues and making sound medical decisions, based on a
hierarchy of evidence-based medicine standards drawn from the
health insurance IMR process, with workers'
compensation-specific modifications. The bill contains
findings that this system would result in faster and better
medical dispute resolution than existing law.
The IMR system is designed to ensure that medical expertise is
used to resolve medical disagreements. Thus, the decision
from the IMR is final and binding on the parties.
Nonetheless, in the exercise of the Legislature's plenary
authority to establish a workers' compensation system that
includes a review of decisions, there is a process to appeal
the IMR result, but this review process does not allow the
second-guessing of medical expertise. Rather, the appeal is
limited to circumstances where there was fraud, conflict of
interest, discrimination based on protected classes, or clear
mistakes of facts that do not involve medical expertise.
Certain constitutional claims have been brought up regarding
IMR. The proponents of this bill, as well as the Committee,
have reached out to outside legal counsel on the possibility
of constitutional issues. Each legal opinion stated that this
provision was within the constitutional confines on the powers
delegated to the Legislature through Article XIV, Section 4 of
the State Constitution.
3. Proponent Arguments :
Hearing Date: August 31, 2012 SB 863
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Senate Committee on Labor and Industrial Relations
Proponents argue that SB 863 is a negotiated package that
increases permanent disability benefits, minimizes delays in
medical treatment, improves access to care and provides hard
savings in excess of the cost of benefit increases.
Proponents further note that this reform package should not
come as a surprise to anyone, and that it is the culmination
of three years of research conducted by the Commission on
Health and Safety and Workers' Compensation (CHSWC), a
statewide listening tour hosted by the Brown Administration,
and the aggregation of several bills that have moved through
the legislative process and have been heard in policy
committee. Proponents argue the status quo is unacceptable
and simply unsustainable.
4. Opponent Arguments :
The California Applicants' Attorneys Association opposes the
SB 863, arguing that while the bill contains "worthy
proposals" and a "partial restoration" of permanent disability
benefits for some injured workers, CAAA believes that SB 863
takes away the rights of many of the most seriously injured
workers to get fair compensation for their injuries. CAAA
argues that, due to numerous giveaways to the business
community, this bill reduces compensation for hundreds if not
thousands of the most severely injured workers. CAAA argues
that injured workers have suffered enough under the results of
the passage of SB 899 under the Schwarzenegger Administration,
and believes that SB 863 is a step in the wrong direction.
5. Prior Legislation :
SB 863 (Lieu), as introduced in 2011, contained similar
provisions to this version of the bill regarding lien filing.
SB 959 (Lieu) of 2012 dealt with the spinal hardware
pass-through, which is also contained in this compromise. SB
959 is currently on the Assembly Inactive File.
SUPPORT
Hearing Date: August 31, 2012 SB 863
Consultant: Gideon L. Baum Page 10
Senate Committee on Labor and Industrial Relations
Acclamation Insurance Management Services
Air Conditioning Sheet Metal Association
Allied Managed Care
American Federation of State, County and Municipal Employees
Associated Builders and Contractors of California
Association of California Healthcare Districts
Association of California School Administrators
Boeing
Brand Source Pacific Rim Region
CA Faculty Association
California Association of Competitive Telecommunications
Companies
California Association of Joint Powers Authorities
California Association of Psychiatric Technicians
California Association of School Business Officials
California Association of Suburban Schools
California Chamber of Commerce
California Chapter American Fence Association
California Chapter of the American Fence Association
California Chapters of the National Electrical Contractors
Association
California Coalition on Workers' Compensation
California Concrete Contractors Association (CCCA)
California Conference of Carpenters
California County Superintendents Educational Services
Association
California Employers Association
California Faculty Association
California Fence Contractors Association
California Grocers Association
California Independent Oil Marketers Association
California Labor Federation
California Landscape and Irrigation Council
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California Manufacturers and Technology Association
California Medical Association
California Metals Association
California Nurses Association
California Professional Association of Specialty Contractors
California Professional Firefighters
California Retailers Association
Hearing Date: August 31, 2012 SB 863
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Senate Committee on Labor and Industrial Relations
California School Board Association
California School Employee Association
California Special Districts Association
California State Association of Counties
California State Council of Laborers
California State Firefighters' Association
California State Pipe Trades Council
California Teachers Association
California-Nevada Conference of Operating Engineers
Change.org
Coalition of Small and Disabled Veteran Businesses
Communication Workers of America
CSAC-EIA
Engineering Contractors' Association
FedEx
Flasher Barricade Association
International Alliance of Theatrical Stage Employees
International Brotherhood of Electrical Workers
Kern County Superintendent of Schools
Marin Builders Association
Monterey County Business Council
North Bay Labor Council
Northern California Independent Booksellers Association
Oakland Metropolitan Chamber of Commerce
Office of the Mayor, City of Burbank
Painting and Decorating Contractors of California, Inc.
Plumbing Heating and Cooling Contractors of California
Professional Engineers in California Government
Regional Council of Rural Counties
Safeway
San Francisco Builders Exchange
San Francisco Chamber of Commerce
San Francisco Council of District Merchants Association
San Francisco Small Business Network
Sheet Metal Workers
SMAC Moving Coil Actuators
Small Business California
Small Business California
Small Manufacturer Association of California
State Building and Construction Trades Council
State Compensation Insurance Fund
Tri-Counties Central Labor Council
Hearing Date: August 31, 2012 SB 863
Consultant: Gideon L. Baum Page 12
Senate Committee on Labor and Industrial Relations
U.S. Health Works Medical Group
UAW International Union and Locals 2865, 4123 and 5810
UNITE HERE
United Food and Commercial Workers
United Parcel Service
US Heallthworks
Zenith Insurance
322-individuals
OPPOSITION
California Applicants' Attorneys Association
California Chiropractic Association
Voters Injured at Work
427-individuals
Hearing Date: August 31, 2012 SB 863
Consultant: Gideon L. Baum Page 13
Senate Committee on Labor and Industrial Relations