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California Workers’ Compensation Reform: SB 863

California Workers’ Compensation Reform: SB 863. You can’t always get what you want… But if you try sometimes… you can get what you need. Bill Zachry VP Risk Management Safeway. 863 Celebration in the Horseshoe. CA WC: Pre-SB 863. Filed Rates. PPD Benefits per PPD Claim.

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California Workers’ Compensation Reform: SB 863

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  1. California Workers’ Compensation Reform: SB 863 You can’t always get what you want… But if you try sometimes… you can get what you need. Bill Zachry VP Risk Management Safeway

  2. 863 Celebration in the Horseshoe

  3. CA WC: Pre-SB 863 Filed Rates PPD Benefits per PPD Claim *PPD Based on NCCI 2012 Statistical Bulletin: Nationwide ex California excludes monopolistic states, weighted by employment PPD benefits adjusted to California Avg. Weekly Wage **Filed rates based on OR DCBS study 2012, wtd by CA payroll

  4. What is driving the rates? • Medical Costs • High % of Total Costs • Very Slow to Pay Out • Loss Adjustment Expense: Very High CA WC: Backgroundpre-SB 863

  5. Workers Compensation Medical Cost Drivers • Severe burns / quadroplegia • Settlement philosophy (C&R vs. Stip.) • Treatments paid for that are not evidence based medicine • Treatment not authorized by UR • Compounding and Repackaging of Pharmacy • Hospitalizations • Multiple body parts • Delayed reporting of claims / Delayed provision of benefits

  6. Workers Compensation Cost Drivers • Coping skills – Adverse Childhood Experience – 20% to 70% increase per claim • Poor Medical Practice – Inconsistency in providing service • Addiction – 20% to 50% increase per claim • Litigation – 40% to 50% increase per claim • Obesity – 20% increase per claim • Diabetes – 10% to 20% increase per claim • Fatigue/Sleep issues • Employee age • Inherent increase in cost of claim • Medicare Set Aside

  7. Workers Compensation Cost Drivers • Coping skills – Adverse Childhood Experience – 20% to 70% increase per claim • Addiction – 20% to 50% increase per claim • Litigation – 40% to 50% increase per claim • Obesity – 20% increase per claim • Diabetes – 10% to 20% increase per claim • Fatigue/Sleep issues • Employee age • Inherent increase in cost of claim • Medicare Set Aside

  8. Workers Compensation Cost Drivers • Coping skills – Adverse Childhood Experience – 20% to 70% increase per claim • Addiction – 20% to 50% increase per claim • Litigation – 40% to 50% increase per claim • Obesity – 20% increase per claim • Diabetes – 10% to 20% increase per claim • Fatigue/Sleep issues • Employee age • Inherent increase in cost of claim • Medicare Set Aside

  9. CA WC: BackgroundCalifornia WCRI MPI-WC Index as of 2011(2002 = Base Year of 100) Yang & Fomenko, WCRI Medical Price Index for Workers’ Compensation, 4th Edition, March 2012, p. 99.

  10. Highest CA WC: BackgroundPercentage of Medical Paid by Year After Injury California vs. Other States California 60% 40% 20% Lowest NCCI Annual Statistical Bulletin, 2011, Exhibit IX.

  11. CA WC: BackgroundPaid Medical Management and Cost Containment per Indemnity Claim CWCI: “Analysis of Medical and Indemnity Benefit Payments”, Exhibit 2B, Page 14

  12. CA WC: BackgroundUltimate ALAE per Indemnity Claim WCIRB July 1, 2012, Rate Filing page A:B-40 Private Insurers Only

  13. CA WC: Background% of Major PD Claims with Attorney Representation At First Survey Level WCIRB March 20, 2012, Actuarial Committee III-A134

  14. California Background]Claim Frequency OSHA *WC frequency Based on NCCI 2012 Statistical Bulletin: Nationwide ex California excludes monopolistic states, only states with 3-day waiting period, weighted by employment (2008/09) **OSHA 2011 data from BLS (private & public sectors)

  15. CA WC: BackgroundFiled Loss Adjustment Expense as a Percentage of Loss California vs. Other States NCCI Annual Statistical Bulletin, 2011, Exhibit VI

  16. 60% CA WC: BackgroundUltimate Indemnity Benefits per PPD Claim 40% 20% Lowest California NCCI Annual Statistical Bulletin, 2011, Exhibit XI (adjusted for AWW, Exhibit VIII).

  17. CA WC: BackgroundDistribution of Premium, 2011 WCIRB Quarterly Market Reports, Exhibit 5 Med & Indenmity split according to 7/1/12 WCIRB rate filing

  18. CA WC Reform: SB 863WCIRB Estimate of Impact: 2013 WCIRB 1/1/13 Rate Filing, Page A:B-34

  19. CA WC Reform: SB 863WCIRB Estimate of Impact: 2014 WCIRB 1/1/13 Rate Filing, Page A:B-34

  20. Fee Schedule (RBRVS, Photocopy Service, Home Healthcare) • Med-Legal Changes to QME • Interpreter Regulations • Timeframes regarding payment of paper medical bills • Self-Insurance Security Requirements CA WC Reform: SB 863Major Provisions not Quantified

  21. CA Permanent Disability No Losers!

  22. Increase Max & Min Benefits • Most of Impact due to max not min • Add-Ons: % of Total PD • Sleep: 1.2% of Ratings, 1.4% of Cost • Sex: 0.4% of Ratings, 0.3% of Cost • Psych: 1.7% of Ratings, 3.8% of Cost • Replace FEC with AMA Modifier • 13% of Cost CA WC Reform: SB 863Impact of Changes to PD BRS Analysis of DEU Data

  23. CA WC Reform: SB 863# of Weeks at Bump Up/Bump Down Data provided by WCIRB

  24. CA WC Reform: SB 863Liens: Filing Fee $100 Filing Fee 1/1/04 EAMS Goes Live 8/25/08 Filing Fee Repealed 7/12/06 CHSWC Liens Report, 1/1/11, p. 4

  25. CA WC Reform: SB 8632012 Liens Filed WCIRB Actuarial Committee 3/20/13, Page IV-A-25

  26. Petition for Cost CA WC Reform: SB 863Distribution of 2012 Liens by Type No Petition for Cost WCIRB Actuarial Committee 3/20/13, Page IV-A-25

  27. CA WC Reform: SB 863IMR: Texas Reforms (TD & RTW) “Setting the Standard”, TDI, December 2010, Page vi.

  28. CA WC Reform: SB 863IMR: Texas Reforms (Medical Costs) “Setting the Standard”, TDI, December 2010, Page vi.

  29. CA WC Reform: SB 863IMR: Texas Reforms (Shorter Medical Tail) “Setting the Standard”, TDI, December 2010, Page 41.

  30. CA WC Reform: SB 863IMR: Texas Reforms (Medical Service Denials)

  31. Increase in PD Benefits • Phased in Over 2 Years • Prospective (applies to injuries on or after 1/1/13) • Impact on Utilization is area of dispute • Cost Reductions • Some have retrospective components (IMR & Lien changes apply to open claims) • Difficult to Price CA WC Reform: SB 863Other Important Features

  32. Change in Security Requirements CA WC Reform: SB 863 2.00 Ratio of Total Liabilities / Case Reserves 1.35 #5 #6 #7 #4 #1 #3 #2 California Private Self-Insurer

  33. CA WC Reform: SB 863Sometimes Even Hindsight Isn’t 20/20899 was off on savings and subsequent development

  34. To be addressed next…Costs

  35. Implementation • New policies • Training the examiners • Getting a feel for the new road • IMR (Maximus) • Bill Review • Liens (and the WCAB petition for costs) • Pharmacy and bill review programs

  36. Other Issues Regulations AMICUS New legislation ADR / Opt out

  37. Top WC Cost Drivers • Litigation • (Prescription) Opiates • Multiple Body Parts • Hospitalizations • Obesity • Liens

  38. Safeway Programs • Hire Smartly • Functional Restoration • Pharmacy • UR connected to Bill Review • Medical Networks • Low case loads • Settlement philosophy • Medical Treatment Philosophy

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