BILL ANALYSIS Ó Senate Committee on Labor and Industrial Relations Ted W. Lieu, Chair Date of Hearing: April 24, 2013 2013-2014 Regular Session Consultant: Gideon L. Baum Fiscal:Yes Urgency: No Bill No: SB 626 Author: Beall As Introduced/Amended: April 18, 2013 SUBJECT Workers' Compensation. KEY ISSUE Should the Legislature reverse several key provisions of the 2012 workers' compensation reform, including the Independent Medical Review process? 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 creates a Commission on Health and Safety and Workers' Compensation (CHSWC), comprised of 8 voting members: four from organized labor and four from the employer community. (Labor Code §75) Existing law provides that medical, surgical, chiropractic, acupuncture, and hospital treatment, including nursing, medicines, medical and surgical supplies, crutches, and apparatuses, including orthotic and prosthetic devices and services, that is reasonably required to cure or relieve the injured worker from the effects of his or her injury shall be provided by the employer. (Labor Code §4600) Existing law , with certain exceptions, provides that an employee injured on or after January 1, 2004 is entitled to no more than 24 chiropractic, 24 occupational therapy, and 24 physical therapy visits per industrial injury. (Labor Code §4604.5) Exceptions to the 24 Visit Caps include: 1) When an employer authorizes in writing additional visits to a health care practitioner for physical medicine services; and 2) Postsurgical physical medicine and postsurgical rehabilitation services provided in compliance with a postsurgical treatment schedule established by the Administrative Director. Existing law provides that a chiropractor may not be a primary treating physician after the employee has received the maximum number of chiropractic visits allowed under existing law. (Labor Code §4600) Existing law requires that all employers create a utilization review process, which is a process that prospectively, retrospectively, or concurrently review and approve, modify, delay, or deny, based in whole or in part on medical necessity to cure and relieve, treatment recommendations by physicians, prior to, retrospectively, or concurrent with the provision of medical treatment services. (Labor Code §4610) Existing law provides that, in the event over a dispute over a utilization review decision on or after July 1, 2014, all disputes must be submitted for Independent Medical Review (IMR). The independent reviewer's information must be kept confidential. (Labor Code §§4610.5 and 4610.6) Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 2 Senate Committee on Labor and Industrial Relations Existing law requires that, in the absence of fraud, error, or illegal conduct, the IMR decision is final and binding. (Labor Code §4610.6) Existing law prohibits permanent disability impairment ratings for sleep dysfunction, sexual dysfunction, or psychological disorders arising from a compensable injury. An increase in impairment ratings for psychological disorders is allowable if the following is applicable: 1) The injured worker is a victim of a violent act or direct exposure to a significant violent act; 2) The injured worker suffers a catastrophic injury, including, but not limited to, loss of a limb, paralysis, severe burn, or severe head injury. Existing law explicitly preserves the ability of an injured employee to obtain treatment for sleep dysfunction, or sexual dysfunction, or psychiatric disorder, if any, that are a consequence of an industrial injury. (Labor Code §4660.1) This bill would expand the Commission on Health and Safety and Workers' Compensation (CHSWC) to 10 members, adding another employer representative and an injured worker representative. This bill would lift the 24 visit cap on chiropractic, occupational therapy, and physical therapy visits and delete the prohibition of a chiropractor serving as a primary treating physician. This bill would allow a physician to continue to serve as the primary treating physician, even if additional treatment is denied, as long as the physician continues to comply with reporting requirements set by the Administrative Director. This bill would require that all review of appropriate treatment in utilization review, Independent Medical Review (IMR), and medical provider network be conducted by medical professionals who hold the same California license as the requesting physician. Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 3 Senate Committee on Labor and Industrial Relations This bill would remove the confidentiality requirement of independent reviewers in the Independent Medical Review process. This bill would allow for review of Independent Medical Review decisions by the Workers' Compensation Appeals Board (WCAB) or the any higher court. This bill would allow increases to permanent disability impairment ratings due to psychological disorders arising from a compensable injury. COMMENTS 1. SB 626 and the 2012 Workers' Compensation Reform: Policy Impacts SB 863 (DeLeon), Statutes of 2012, Chapter 363 represents a significant and data-driven reform to the workers' compensation system. The goal of the reform was to provide a more objective and equitable process for injured workers, as well as speeding up the process by which medical treatment is provided. SB 626 impacts several specific provisions of these reforms, which are discussed below. Independent Medical Review: One of the key objections to the pre-SB 863 reforms was that disputes on medical treatment were decided by workers' compensation judge, leading to an extremely slow, inefficient process that did not provide quality results. The adjudicatory process led to long delays in obtaining treatment, which resulted in poorer outcomes, reduced return to work rates, and excessive costs in the system. SB 863 addressed this with the creation of Independent Medical Review (IMR), patterned after the long-standing IMR process used to resolve medical disputes in the health insurance system. With IMR, an independent medical expert would be evaluating medical issues and making the final ruling on Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 4 Senate Committee on Labor and Industrial Relations medical decisions, based on a hierarchy of evidence-based medicine standards drawn from the health insurance IMR process, with workers' compensation-specific modifications. While not fully implemented , the IMR process promises to speed up medical treatment and increase objectivity in the provision of medical services. SB 626 impacts the IMR process in two principle ways. The first is that it removes the confidentiality currently afforded to independent reviewers. While the full impact of this is unknown, one fear is that it would reduce the independence of the reviewer . Currently, the Department of Managed Health Care does not post the identity of independent reviewers on their website, and the Committee is unaware of any issues with that confidentiality. Additionally, SB 626 makes IMR decisions appealable to the WCAB or a higher court. The end result of this is that IMR ceases to be the final word on medical decisions, but rather a temporary stop before final litigation. This makes judges the final decider on medical decisions, encourages litigation, and removes the objectivity and speed that the IMR process brings to the workers' compensation system. Medical Quality Control and Chiropractors: In the workers' compensation system, chiropractors are included in the definition of "physicians". This, however, is not the case in the group health or Medicare setting. This is because chiropractors are not medical doctors. While the workers' compensation system allows chiropractors to provide medical treatment, there are caps of 24 visits for chiropractic treatment. This is because, while for some chiropractic treatment can provide relief, for others it will not and therefore a medical doctor needs to step in and review treatment. Therefore, removing the 24 visit cap on chiropractors will lead to worse medical outcomes for injured workers and increase costs . Psychological Disorders and Impairment Ratings: Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 5 Senate Committee on Labor and Industrial Relations As a part of the SB 863 benefit increase, the systemic value of the use of the impairment ratings "add-ons" of sleep dysfunction, sexual dysfunction, and psychological disorder were socialized across all ratings. The logic of this decision is that all permanently disabled workers will experience one or both of these impacts, but the pre-SB 863 system only awarded such benefits in the event of a successful legal argument. However, SB 863 had no impact on the ability of an injured worker to get treatment for any of the above conditions. SB 626 would allow for an impairment rating add-on for psychological disorders, but would have no impact on the provision of treatment. 3. SB 626 and the 2012 Workers' Compensation Reform: Fiscal Impacts As noted above, SB 626 would undermine the cost savings provided in the IMR process, bring back the costs associated with increased impairment ratings for psychological disorder, as well as increase medical utilization costs. Using WCIRB data, we can estimate that the IMR provisions of SB 626 would cost $230 million (excluding utilization and loss adjusted expenses) and the increase impairment rating would be approximately $52 million (excluding utilization and loss adjusted expenses), however, we cannot estimate the additional medical utilization costs. Therefore, we can conservatively estimate the fiscal impact of SB 626 at $300 million. 4. Proponent Arguments : Proponents argue that the 2012 workers' compensation reform made several changes to the workers' compensation system that were inequitable and hurt workers. Proponents believe that SB 626 will return equity to the system. Specifically, proponents argue that the psychological add-on will only cost $50 million and will ensure appropriate psychological treatment. Proponents also argue that SB 626 will increase the number of California physicians in the workers' Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 6 Senate Committee on Labor and Industrial Relations compensation system, increasing jobs in the state. Finally, proponents argue that SB 626 strikes an unconstitutional denial of appeal from the IMR process. 5. Opponent Arguments : Opponents note that the 2012 workers' compensation reform was a collaborative process that led to roughly $1 billion in employer cost savings and significant benefit increases for injured workers. Opponents argue that SB 626 eliminates many of the reforms that made this reform possible. Specifically, opponents argue that SB 626 would undermine IMR, leading to slower medical care, higher costs, and worse return-to-work rates. Additionally, opponents note that the psychological add-on that existed prior to the 2012 reform was a source of significant litigation costs with few benefits accruing to the worker. Opponents argue that a return to that litigation, particularly when the 2012 reform had no impact on the provision of psychological treatment, would only need to increased attorney awards, rather than increased injured worker benefits. 6. Prior Legislation : SB 863 (DeLeon), Statutes of 2012, Chapter 363, was discussed above. SUPPORT Dolores Huerta Foundation, Inc. (Sponsor) California Chapter of the International Association of Rehabilitation Professionals California Chiropractic Association California Neurology Association California Psychological Association California Society of Industrial Medicine and Surgery California Society of Physical Medicine and Rehabilitation California Workers' Compensation Services Association The Weinmann Report Voters Injured at Work 1-individual Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 7 Senate Committee on Labor and Industrial Relations OPPOSITION 101 Manufacturing Acclamation Insurance Management Services Actief Case Management Allied Managed Care ALPHA Fund American Fence Association American Insurance Association Associated Builders and Contractors Associated General Contractors Association of California Healthcare Districts Association of California Insurance Companies Brand Source Pacific Rim Region Brea Chamber of Commerce Building Owners and Managers Association of California California Apartments Association California Association for Micro-Enterprise Opportunity California Association of Competitive Telecommunications Companies California Association of Joint Powers Authorities California Business Properties Association California Business Roundtable California Chamber of Commerce California Chapter of the American Fence Association California Clubs of Distinction California Coalition on Workers' Compensation California Construction and Industrial Materials Association California Employers Association California Farm Bureau Federation California Fence Contractors' Association California Fish and Seafood Industry California Grocers Association California Independent Grocers Association California Labor Federation, AFL-CIO California Landscape Contractors Association California League of Food Processors Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 8 Senate Committee on Labor and Industrial Relations California Manufacturers and Technology Association California Metals Association Coalition California Professional Association of Specialty Contractors California Professional Firefighters California Restaurant Association California Retailers Association California School Employees Association California Special Districts Association California State Association of Counties Camarillo Chamber of Commerce Chambers of Commerce Alliance of Ventura & Santa Barbara Counties Claremont Chamber of Commerce Coalition of Small and Disabled Veteran Businesses Committee on Jobs-San Francisco County of Los Angeles County of San Bernardino Dowdle & Sons Mechanical El Dorado Hills Chamber of Commerce Engineering Contractors Association Flasher Barricade Association Fullerton Chamber of Commerce Garden Grove Chamber of Commerce GMGS Risk Management & Insurance Services Golden Gate Restaurant Association Golden Oak Cooperative Corporation Greater Bakersfield Chamber of Commerce Greater Conejo Valley Chamber of Commerce Greater Riverside Chambers of Commerce Grimmway Farms Independent Cities Risk Management Authority Independent Insurance Agents & Brokers of California Inland Valley Business Alliance-Rancho Cucamonga International Paper Irwindale Chamber of Commerce League of California Cities Lodi Chamber of Commerce Long Beach Chamber of Commerce Los Angeles Chamber of Commerce Los Angeles County Board of Supervisors Main Street Chamber-Rancho Cucamonga Main Street Chamber-Upland Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 9 Senate Committee on Labor and Industrial Relations Marin Builders Association Marriott International Metro Risk Management Monterey County Business Council National Federation of Independent Business North Bay Schools Insurance Authority Northern California Independent Booksellers Association Oakland Metropolitan Chamber of commerce Orange Chamber of Commerce Oxnard Chamber of Commerce Pacific Contractors Association Palm Desert Chamber of Commerce Plumbing-Heating-Cooling Contractors Association of California Plumbing-Heating-Cooling Contractors Association of San Francisco Porterville Chamber of Commerce PPG Aerospace Property Casualty Insurers Association of America Redondo Beach Chamber of Commerce Regional Council of Rural Counties Rural County Representatives of California Safeway San Fernando Valley Chamber of Commerce San Francisco Builders Exchange San Francisco Chamber of Commerce San Francisco Council of District Merchants Association San Francisco Locally Owned Merchants Alliance San Francisco Small Business Network San Jose Silicon Valley Chamber of Commerce Santa Clara Chamber of Commerce Schools Insurance Authority Schools Insurance Group Sedgwick Claims Management Services Simi Valley Chamber of Commerce Small Business California Small Business Majority Small Manufacturers Association of California South Bay Association of Chambers of Commerce Southwest California Legislative Council Stuart Baron & Associates Tiger Lines LLC Torrance Chamber of Commerce Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 10 Senate Committee on Labor and Industrial Relations United Parcel Service Urban Counties Caucus Valley Industry & Commerce Association Visalia Chamber of Commerce Western Electrical Contractors Association Western Growers Association Hearing Date: April 24, 2013 SB 626 Consultant: Gideon L. Baum Page 11 Senate Committee on Labor and Industrial Relations