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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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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

*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


  • 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


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


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


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


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


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.


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.


CA WC: BackgroundPaid Medical Management and Cost Containment per Indemnity Claim

CWCI: “Analysis of Medical and Indemnity Benefit Payments”, Exhibit 2B, Page 14


CA WC: BackgroundUltimate ALAE per Indemnity Claim

WCIRB July 1, 2012, Rate Filing page A:B-40

Private Insurers Only


CA WC: Background% of Major PD Claims with Attorney Representation At First Survey Level

WCIRB March 20, 2012, Actuarial Committee III-A134


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)


CA WC: BackgroundFiled Loss Adjustment Expense as a Percentage of Loss California vs. Other States

NCCI Annual Statistical Bulletin, 2011, Exhibit VI


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).


CA WC: BackgroundDistribution of Premium, 2011

WCIRB Quarterly Market Reports, Exhibit 5

Med & Indenmity split according to 7/1/12 WCIRB rate filing


CA WC Reform: SB 863WCIRB Estimate of Impact: 2013

WCIRB 1/1/13 Rate Filing, Page A:B-34


CA WC Reform: SB 863WCIRB Estimate of Impact: 2014

WCIRB 1/1/13 Rate Filing, Page A:B-34


  • 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


CA Permanent Disability No Losers!


  • 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


CA WC Reform: SB 863# of Weeks at Bump Up/Bump Down

Data provided by WCIRB


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


CA WC Reform: SB 8632012 Liens Filed

WCIRB Actuarial Committee 3/20/13, Page IV-A-25


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


CA WC Reform: SB 863IMR: Texas Reforms (TD & RTW)

“Setting the Standard”, TDI, December 2010, Page vi.


CA WC Reform: SB 863IMR: Texas Reforms (Medical Costs)

“Setting the Standard”, TDI, December 2010, Page vi.


CA WC Reform: SB 863IMR: Texas Reforms (Shorter Medical Tail)

“Setting the Standard”, TDI, December 2010, Page 41.


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


  • 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


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


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


To be addressed next…Costs


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


Other Issues

Regulations

AMICUS

New legislation

ADR / Opt out


Top WC Cost Drivers

  • Litigation

  • (Prescription) Opiates

  • Multiple Body Parts

  • Hospitalizations

  • Obesity

  • Liens


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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