New Calif. Comp Regulation Court Challenge

It targets a rule–developed as part of the state's new workers' comp reform bill–that will require injured employees to seek treatment from doctors with medical provider networks organized by insurers or businesses beginning on Jan. 1, 2005

Although insurers see the action as derailing the entire workers' comp process, CAAA President J. David Schwartz said the case involves only "a narrow issue."

At issue, he said, is regulatory language drawn up by Andrea Hoch, administrative director of the workers' comp division, stating that "employers could take employees out of existing doctor-patient relationships. We feel nothing in law allows her do to that. It's beyond what the statute says. We're not trying to stop the law from going into effect–it's her interpretation of the law we don't agree with."

He said at this point no employees have been notified they must change doctors because the law is not yet in effect, but the suit "is trying to stop a harm from happening." Mr. Schwartz said the suit asks the court to "order the administrative director not to enforce that particular regulation."

"Hundreds of thousands of workers could be affected by this, or they may not be. Employers may not decide to put them in a network, but once it happens it's too late? It's unfair to the injured worker. Imagine being told to change doctors," said Mr. Schwartz

Nicole Mahrt, a representative for the Washington-based American Insurance Association, said that every time the state has tried to reform a workers' comp system that is burdensome to business, the effort has been chipped away by "litigation like this."

According to Ms. Mahrt, the regulation has provisions for continuity of medical care, and the networks themselves are not mandatory. "What's to say these [treating] doctors are not going to be part of a network?" she asked.

She said the state is still waiting for the Division of Workers' Compensation to issue its schedule for permanent partial disability rating fees. Insurers, she said, are hopeful that will bring objectivity and predictability to the amounts awarded for the same injuries. Up to now those numbers have varied widely, she said, making it difficult for underwriters.

The network regulation, she said, was aimed at stopping doctor shopping and cases of "excessive and inappropriate treatment" aimed at securing a higher award.

Meanwhile, Ken Gibson, vice president of the Western region for AIA, issued a statement. "The applicant attorneys are right on schedule in their attempts to sabotage the workers' compensation reforms enacted by the legislature and signed by the governor earlier this year," he said. "Employers and insurers warned that these kind of lawsuits can and will thwart the implementation of California's important 2004 reforms."

He added that "litigation like this that threatens the reforms will give insurance carriers considering entering the California workers' comp marketplace and committing capacity a reason to rethink their decision."

Tim East, co-chairman of the Workers' Compensation Action Network, an organization of business and insurance groups, said that although WCAN believes the suit will fail, "we expect them to continue attempts to prolong the status quo that made our system so expensive."