BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: June 24, 2009 2009-2010 Regular
Session
Consultant: Alma Perez Fiscal:No
Urgency: No
Bill No: AB 361
Author: Bonnie Lowenthal
Version: June 16, 2009
SUBJECT
Workers' compensation: treatment authorization.
KEY ISSUE
Should the Legislature prohibit an employer from rescinding or
modifying an authorization for medical services after the
services have been rendered?
PURPOSE
To preclude an employer from refusing to pay for workers'
compensation medical treatment services if the employer had
approved those services prior to treatment.
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.
Existing law requires every employer to establish a medical
treatment utilization review 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. Utilization review (UR) is the process used by
employers or claim administrators to review and approve, modify,
delay, or deny, treatment recommendations made by physicians.
UR can occur before, during or after medical treatment to
determine if the treatment is effective. Treatment may be
modified, delayed, or denied based upon the results of the
review.
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. An employer's use of HCOs,
among other things, 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.
Under existing law , employers are also authorized to establish a
medical provider network (MPN) for the provision of medical
services under the workers' compensation system. 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. In addition, the use of an MPN
generally allows an employer to maintain medical control for the
life of the workers' compensation claim.
Existing law prohibits, in the context of health care service
plans (HMOs), the health care insurer from rescinding or
modifying an authorization for medical services after the
services are rendered.
This Bill prohibits an employer from denying payment for medical
treatment after the treatment has already been authorized and
rendered. Specifically, this bill:
Provides that regardless of whether an employer
established an MPN or entered into a contract with an HCO,
Hearing Date: June 24, 2009 AB 361
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Senate Committee on Labor and Industrial Relations
an employer that authorizes medical treatment shall not,
for any reason, rescind or modify that authorization after
the medical treatment has been provided based on that
authorization.
Provides that its provisions shall not be construed to
expand or alter the benefits available under, or the terms
and conditions of, any contract, including existing MPN or
HCO contracts.
Provides that its provisions shall not be construed to
impact the ability of the employer to transfer treatment of
an injured employee into an MPN or HCO.
Provides that its provisions shall not be construed to
establish that a provider of authorized medical treatment
is the primary care physician, as specified.
COMMENTS
1. Need for this bill?
Existing law requires that employers have a medical treatment
utilization review (UR) process for employers and/or claim
administrators to review and approve, modify, delay, or deny
treatment recommendations made by physicians. UR can occur
before, during or after medical treatment to determine if the
treatment is effective. Treatment may be modified, delayed,
or denied based upon the results of the review. Existing law
also requires that employers authorize the provision of
treatment within one working day after an employee files a
claim for the alleged injury and to continue to provide the
treatment until the date that liability for the claim is
accepted or rejected. [Labor Code 5402 (c)] However, until
the review is finalized, the law limits liability for medical
treatment to ten thousand dollars ($10,000). In addition,
treatment provided shall not give rise to a presumption of
liability on the part of the employer. In some instances, an
insurer may require prior authorization of any non-emergency
treatment or diagnostic service and may conduct reasonably
necessary utilization review as required by law. [Labor Code
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Senate Committee on Labor and Industrial Relations
4600 (d) (5)]
Concerns have been raised by the sponsors of the bill claiming
that some physicians have experienced reimbursement problems
when billing for services that had been previously approved by
the appropriate payor. This bill will prohibit an employer
when providing workers' compensation coverage from rescinding
or modifying an authorization for medical services after the
services have been rendered. UR would continue to occur,
however, if by the time the review is completed medical
services have already been provided to the injured employee,
this bill would prohibit any changes to the prior
authorization and would require employers to pay for all
services rendered.
Last year, the Legislature passed, and the Governor signed, AB
1324 (De La Torre) which established, in the health insurance
context, the same rule proposed by this bill for the workers'
compensation system.
2. Proponent Arguments :
According to proponents, most doctors obtain prior
authorization before beginning treatment, however, they argue,
some insurance companies will grant authorization for a course
of treatment and then deny reimbursement when the doctor sends
in the bill after the authorized care was provided.
Proponents argue that insurance companies will often
retroactively deny coverage for these treatments because they
do not determine until later that the doctor was not on the
correct "preferred provider" sub-panel.
The author believes this bill is necessary to prohibit an
insurance company that provides workers' compensation coverage
from rescinding or modifying an authorization for medical
services after the services are rendered. Proponents argue
that this bill would prevent retroactive denial of payment to
the physician even if the employer subsequently determines the
physician was not eligible under the MPN or HCO contract to
provide the specific treatment. According to the author, this
will assure doctors that the pre-authorized services they
provide, even if authorized in error by the insurer, will be
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Senate Committee on Labor and Industrial Relations
compensated.
In addition, proponents argue that the cost of erroneous
preauthorization should not be shifted to the injured worker.
Also, proponents assert that similar protections are afforded
patients in group health settings, and injured workers deserve
no less.
3. Opponent Arguments :
Opponents believe that this bill is unfair and would not
improve the medical care provided to injured workers. The bill
would prohibit a carrier from modifying or rescinding
authorization for treatment "for any reason," and opponents
believe that this policy ignores responsibilities for medical
treatment that are already imposed on employers and insurers.
According to opponents, Labor Code requires an employer to
authorize medical treatment within one working day after the
employee files the appropriate claim form. The authorized
treatment must be provided until the claim is accepted or
rejected. Opponents argue that in order to facilitate the
immediate provision of care, it is sometimes necessary to
authorize care when doubt exists. However, opponents claim,
when information makes it clear that injury was not a
workplace injury or when the carrier discovers that the
treatment was not appropriate the carrier/employer must, and
should, rescind such authorization. Opponents also argue that
this bill's denial of this flexibility is not in the best
interest for injured workers since it would prevent a carrier
from denying treatment that is unnecessary.
4. Prior Legislation :
AB 1324 (De La Torre) of 2007: Chaptered
This bill clarified that a health maintenance organization or
health insurer, that authorizes a specific type of treatment
by a provider, shall for no reason rescind or modify this
authorization after the provider renders the health care
service in good faith and pursuant to the authorization, as
specified.
Hearing Date: June 24, 2009 AB 361
Consultant: Alma Perez Page 5
Senate Committee on Labor and Industrial Relations
SUPPORT
California Chiropractic Association (Sponsor)
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO
Association for Los Angeles Deputy Sheriffs
California Applicants' Attorneys Association (CAAA)
California Chiropractic Association
California Labor Federation, AFL-CIO
California Medical Association (CMA)
California Nurses Association/National Nurses Organizing Com.
California Physical Therapy Association (CPTA)
California Professional Firefighters
California School Employees Association, AFL-CIO
California State Employees Association (CSEA)
Glendale City Employees Association
Los Angeles Police Protective League
Los Angeles Probation Officers' Union, AFSCME, Local 685
Orange County Professional Firefighters' Association
Organization of SMUD Employees
Peace Officers Research Association of California (PORAC)
Riverside Sheriffs' Association
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
OPPOSITION
Association of California Insurance Companies (ACIC)
Hearing Date: June 24, 2009 AB 361
Consultant: Alma Perez Page 6
Senate Committee on Labor and Industrial Relations