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Impact of SB 863 on California workers’ comp system 4 years later [report]

New WRCI Study reports on effect of reform legislation enacted in 2013

California employers should be relieved to learn the results of a new study on the effectiveness of the workers' comp reforms enacted in 2013. (Photo: Shutterstock)
California employers should be relieved to learn the results of a new study on the effectiveness of the workers' comp reforms enacted in 2013. (Photo: Shutterstock)

Employers in California will be pleased to learn that the state’s total costs per workers’ compensation claim with more than seven days of lost time have remained stable after enactment of Senate Bill (SB) 863 in 2013, according to a recently released study by the Workers Compensation Research Institute (WRCI).

“The total costs per California workers’ compensation claim in 2013 evaluated as of March 2016 changed little compared with injuries in 2010 with 36 months of experience. This stability in total costs per claim was a result of several offsetting trends,” said Ramona Tanabe, WCRI’s executive vice president and counsel. “A decrease in medical payments per claim likely reflected the impact of SB 863’s provisions.”

The law took effect in January 2013, and it:

  • Reduced the fee schedule rates for ambulatory surgery centers;
  • Eliminated separate reimbursement for implantable medical devices, hardware and instruments for spinal surgeries; and
  • Began a multi-year transition to a professional services fee schedule based on the resource-based relative value scale.

“One of the other policy goals of SB 863 was to increase permanent disability benefits for California’s injured workers,” said Tanabe. “This explains in part why indemnity benefits per claim grew 5 to 6 percent per year in 2014 and 2015, although an increase in wages in multiple industries also contributed to this trend.”

Some key findings

A major component of SB863 was the creation of a new independent medical review (IMR) process for handling medical treatment disputes. This provision of the law was expected to reduce medical-legal expenses for workers’ comp claims, based on the assumption that less costly IMR reports would replace the more expensive qualified medical evaluator reports. According to WRCI, this anticipated decrease has not yet been observed.

Other key findings include the following:

  • The study found that, for claims with more than seven days of lost time with 36 months of experience, total costs per claim changed little from 2010–2013 to 2013–2016. The results were similar for claims with 12 and 24 months of experience after the law’s provisions went into effect.
  • Medical payments per claim in California decreased steadily after the law became effective, likely as a result of the reduced fee schedules and reduced reimbursement rates.
  • Indemnity benefits per claim grew faster in 2014 and 2015 thank in earlier years, consistent with the expected impact of the law.
  • Higher indemnity benefits per claim were mainly due to the longer duration of temporary disability and more frequent permanent partial disability and lump-sum settlement payments.
  • Moderate growth in benefit delivery expenses per claim since 2010 continue after reform, driven in part by the continued defense attorney involvement in claims, which has increased at about one percentage point per year since 2010.

You can learn more about the study or obtain a copy by visiting WRCI’s website.

See also:

Workers’ Compensation: 10 issues to watch for 2017

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