BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1687 (Fong) - Workers' compensation.
Amended: June 18, 2012 Policy Vote: L&IR 4-0 Judiciary
4-0
Urgency: No Mandate: No
Hearing Date: August 6, 2012 Consultant:
Bob Franzoia
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1687 would authorize the Workers' Compensation
Appeals Board to award attorney's fees reasonably incurred by an
applicant who prevails in a proceeding in connection with the
enforcement of a final award of permanent disability. This
bill would require the Administrative Director of the Division
of Workers' Compensation to revise notices related to
utilization review (UR) to add information regarding objections
to decisions based on utilization reviews.
Fiscal Impact: Unknown, likely significant increase annually in
state workers' compensation costs; generally 55 percent from the
General Fund and 45 percent from special funds.
Minor absorbable cost in 2012-13 from the Workers'
Compensation Administration Revolving Fund to the Department
of Industrial Relations to revise regulations.
Background: UR is the process used by employers or claims
administrators to review treatment to determine if it is
medically necessary. All employers or their workers'
compensation claims administrators are required by law to have a
UR program. This program is used to decide whether or not to
approve physician recommended medical treatment which must be
based on the medical treatment guidelines.
Doctors in the workers' compensation system are required to
provide evidence-based medical treatment, that is, they must
choose treatments scientifically proven to cure or relieve
work-related injuries and illnesses. Those treatments are
contained in the medical treatment utilization schedule, which
contains a set of guidelines that provide details on which
treatments are effective for certain injuries, as well as how
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often the treatment should be given, the extent of the
treatment, and for how long, among other factors.
Existing law provides that when a party to a proceeding
institutes proceedings to terminate an award by the board for
continuing medical treatment and is unsuccessful in these
proceedings, the appeals board is authorized to award reasonable
attorney's fees to an applicant contesting the proceeding.
Proposed Law: This bill adds Labor Code 4610.2, to read:
If a final award of permanent disability made by the appeals
board specifies the provisions of future medical treatment and a
medical dispute arises in the course of a utilization review
conducted pursuant to Section 4610 in connection with the
enforcement of this award, and the 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.
Staff Comments: This bill would reverse Smith v WCAB (2007, Cal
App 2d Dist) 146 Cal App 4th 1032 to permit applicant attorney
fees, provided the board has awarded future medical treatment in
a final award and the applicant prevails. This could increase
the number of treatment recommendations that turn out more
favorably for injured workers if UR decision trends follow those
of workers' compensation claims for represented injured workers
when compared to claim outcomes for non-represented injured
workers. This does provide a more level playing field since
insurers usually involve attorneys for UR modifications, delays
or denials. At the same time, this bill could result in claims
administrators balancing potential attorney's fees against the
cost of a medical treatment and determining it is more cost
effective to not challenge the treatment.
Data specific to the frequency of utilization review for state
employees is elusive. However, data does suggest that about ten
percent of all URs are disputed. For purposes of providing a
representative cost estimate, if the average award of attorney's
fees reasonably incurred was $1,000 to $5,000, the state would
have to experience 10 to 50 UR reviews to incur costs of $50,000
(from any fund). In 2011, for state employees there were
206,000 UR decisions on 43,000 open cases. Of those decisions,
34,500 were denied and 10,000 were modified. If one percent
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(100) of the decisions that were modified resulted in the
applicant prevailing at an average award of $3,000, this bill
would result in new costs of $300,000 annually. Using another
data set, the State Compensation Insurance Fund has 12,355
claims on maintenance status (cases that have been resolved but
are still open because death, disability or medical benefits are
being paid). If one percent of those UR decisions were for
state employee medical benefits and were successfully disputed
at the same average award, costs could be $370,650 (124 x
$3,000) annually.