BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: March 23, 2011 2009-2010 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: SB 457
Author: Calderon
Version: As Introduced February 16, 2011
SUBJECT
Workers' compensation: liens.
KEY ISSUE
Should the Legislature require the Workers Compensation Appeals
Board (WCAB) to allow a lien in excess of the Official Medical
Fee Schedule (OMFS) when it is found that a health care
provider, a health care service plan, a group disability policy,
a self-insured employee welfare benefit plan, or a hospital
service contract provided benefits outside of the workers'
compensation system?
PURPOSE
To require full reimbursement of benefits expended by a health
care provider, a health care service plan, a group disability
policy, a self-insured employee welfare benefit plan, or a
hospital service contract when an injury is found to be
compensable through the workers' compensation system.
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 requires the administrative director of the
Division of Workers' Compensation (DWC) to adopt and
periodically revise an Official Medical Fee Schedule (OMFS) to
establish reasonable maximum medical fees for medical services.
Existing law permits the Workers' Compensation Appeals Board
(WCAB) to determine and allow liens against any sum to be paid
as compensation for a variety of services or expenses.
Allowable liens include a reasonable fee for legal services, the
reasonable expense incurred in the provision of medical
services, and the reasonable value of living expenses of an
injured employee subsequent to the injury.
Existing law requires that when a legal compromise or an award
settlement of a workers' compensation claim is submitted for
approval to the WCAB, an arbiter, or a settlement conference
referee for approval, the parties must also file any liens which
they have been served with the WCAB, arbiter, or settlement
conference referee.
Existing law requires that, when the WCAB, arbiter, or
settlement conference referee issues an award finding that an
injury or illness qualifies for treatment through the workers'
compensation system, and makes an award for reimbursement for
self-procured medical costs, the WCAB shall allow a lien, by a
health care provider, a health care service plan, a group
disability policy, a self-insured employee welfare benefit plan,
or a hospital service contract to the extent of benefits paid or
services provided in treating the industrial injury.
This bill would specify that, in the event that a lien is
allowed due to an award for reimbursement of self-procured
medical costs, the lien amount shall not be tied to the Official
Medical Fee Schedule (OMFS).
This bill would also limit the size of the lien to the extent of
benefits paid by a health care provider, a health care service
plan, a group disability policy, a self-insured employee welfare
benefit plan, or a hospital service contract in the treatment of
an industrial injury or illness, excluding from the lien amount
Hearing Date: March 23, 2011 SB 457
Consultant: Gideon L. Baum Page 2
Senate Committee on Labor and Industrial Relations
any services provided.
COMMENTS
1. What is a Workers' Compensation Lien?
Within the workers' compensation system, liens involving
medical services or benefits are direct claims against the
defendant (either the employer or the insurer of the employer)
for medical benefits or services provided by the lien claimant
which the lien claimant believes the employer was required to
provide due to a worker's industrial injury. The lien
claimant may not pursue the lien against an injured worker
unless the injury is ruled to be non-industrial, and therefore
outside the workers' compensation system.
In short, liens serve as a vehicle for contesting the
employer's determination (or the determination of the
employer's insurer) of the amount payable for medical goods or
services.
2. Need for this bill?
The sponsor of this bill, the California Professional
Firefighters, is seeking to address a specific issue in the
realm of workers' compensation liens: the reimbursement of
benefit dollars spent on an injured worker upon the discovery
that the injury is due to employment, and therefore
compensable through the workers' compensation system.
Unique to firefighters and law enforcement, Labor Code
provides certain rebuttable presumptions that if a fire
fighter or law enforcement officer suffers from an injury or
illness, that injury or illness is considered an occupational
injury or illness. Examples include heart trouble and
pneumonia, both of which can require immediate
hospitalization. This can create a situation where an
occupational injury is treated as a non-occupational injury,
and case law requires that if the injured employee has health
insurance the health insurance company should pay the costs of
treatment and receive reimbursement through liens in the
Hearing Date: March 23, 2011 SB 457
Consultant: Gideon L. Baum Page 3
Senate Committee on Labor and Industrial Relations
workers' compensation system (Silberg v. CA Life Insurance
Company (1974) 11 Cal. 3d 452).
However, the sponsors state that workers' compensation
insurers are asserting that the official medical fee schedule
precludes full reimbursement if the costs of treating the
occupational injury exceed the maximum fees set in the
official medical fee schedule. They cite an example of
employee-funded health care trust fund paying out $1.4 million
in medical treatment dollars, but only receiving $1.1 million
in return from the employer, creating a $300,000 shortfall in
an employee-funded trust fund.
3. Proponent Arguments :
Proponents argue that SB 457 would close a loop hole in
existing law to ensure that an employee funded health care
trust fund is reimbursed for the medical benefits they expend
when an industrial injury was treated as a non-industrial
injury. Proponents further argue that contention put forward
by workers' compensation insurers of the applicability of the
Official Medical Fee Schedule (OMFS) forces employee fund
health care trust funds to subsidize the employer funded
workers compensation system, which violates the constitutional
requirements that obligate employers to provide a system of
workers' compensation.
4. Opponent Arguments :
The California Joint Powers Authority (CAJPA) notes that the
Official Medical Fee Schedule (OMFS) was put in place to avoid
abusive fees and billing practices by medical providers, and
CAJPA is concerned that freeing reimbursement practices from
the OMFS could dramatically increase workers' compensation
costs for local governments. CAJPA also argues that SB 457
could create a perverse incentive for individuals to receive
treatment outside of the workers' compensation system, and
then require his or her health care trust to lien the full
costs, leading to increased gaming of the workers'
compensation system.
5. Prior Legislation :
Hearing Date: March 23, 2011 SB 457
Consultant: Gideon L. Baum Page 4
Senate Committee on Labor and Industrial Relations
AB 640 (Swallisch). Statutes of 1939, Chapter 256, created the
rebuttable presumption for firefighters and police officers
that heart trouble and pneumonia are occupational injuries or
illnesses.
SUPPORT
California Labor Federation, AFL-CIO
California Professional Firefighters (Sponsor)
OPPOSITION
California Joint Powers Authority (CAJPA)
Hearing Date: March 23, 2011 SB 457
Consultant: Gideon L. Baum Page 5
Senate Committee on Labor and Industrial Relations