Transcript Workers Compensation

AFWD presents:
Minimizing Worker’s
Compensation Costs
What Employers Can Do to Help Reduce Work Comp
Expenses
Introduction
• Many CA employers are frustrated and feel
that they have no control over the ever
increasing expensive and “out-of-control”
w/c costs.
• In April, 2004 Gov. Schwarzenegger
and the CA legislature passed
sweeping work comp reform with
SB899.
• This is not the first time that CA
lawmakers have passed w/c reform laws.
• Past reforms, primarily the last 2
decades, have fallen short of their goal
of reining in workers’ comp costs.
Overview
Today we will cover a
• Brief history of workers’ comp in California
– Review of most recent w/c reform SB 899
-Key provisions including intended effects
-Impact on employers, employees
• What action employers can take to reduce or
minimize work comp costs
-A simple and effective approach that every
employer can take to ensure work place health
and safety and minimized work comp costs
Worker’s Compensation Benefits
• Depending on the circumstances of the injury or
illness, workers are entitled to one or more of
five basic benefits:
–
–
–
–
–
Medical care
Temporary disability payments
Permanent disability benefits
Vocational rehabilitation/Training vouchers
Death benefits
History
• Early California's workers’ compensation law
was passed by the state Legislature in 1911,
and in 1913.
• The compromise between labor and
management was designed to shield employers
from liability regardless of fault, and to provide
workers with appropriate benefits for all
workplace injuries.
• In the 1960’s the w/c system was liberalized
by the state judicial system.
• By the 1980’s with the liberal courts as a
backdrop, w/c rates that employers paid
began a steady climb.
• (AB110) (SB 1005) 1993, did end up not
reforming the w/c system as intended.
• Then (SB 30) 1995, regulation was lifted
and the rating became “open”; no minimum
rate structure.
• From 1994-1999 w/c
rate (average) was
$2.27 per $100 of
payroll.
7
6
5
4
CA Work Comp
Premimun per
$100 payroll
3
• From 1999-2003 rate
(average) grew to $6.30
per $100 of payroll.
•
(source: Worker’s Compensation raring Bureau, WCIRB)
2
1
0
1994- 19991999 2003
• Total rate expenditure
for 1994-1999 was $5
billion a year and that
grew to over $15
billion a year for
1999-2003.
•
(source: Worker’s Compensation raring Bureau, WCIRB)
16
14
12
10
8
Total Rate
Expenditure
6
4
2
0
1994- 19991999 2003
• During the late 1990s private work comp
insurance companies cut their rates and
hoped to make up the difference in volume.
• The result: More than 30 private work comp
insurance companies went broke and many
more have left the California market.
In California:
• The (medical) cost of
each claim has
dramatically risen
from an average of
$9,000 in 1992 to
$36,000 in 2003 .
40000
35000
30000
25000
20000
Average cost
per claim
15000
10000
5000
0
1992
2003
source: Worker’s Compensation Rating Bureau, WICRB)
Other skyrocketing costs:
• Medical care
– Presumption of correctness of primary physician
– utilization (# of visits per claim)
– Cost of prescriptions
• Disability claims/benefits
• Litigation
• Fraud
Medical
• Costs have doubled since 1995.
• Medical costs of disability claims 40%
higher than national average.
• CA medical inflation rate averages 14%
over last decade vs. national 4% average.
Disability Claims/Benefits
• CA w/c claims 29% higher than national average,
while permanent partial disability claims are
nearly 3 times the national rate.
• Permanent partial disability claims equal 82% of
total benefit cost in CA, more than any state other
than New Jersey.
• CA has nearly 20% more permanent partial
disability claims per 100,000 workers than the
next highest state.
• Permanent disability costs have increased 79%
since 1995.
Litigation
• Worker’s compensation was designed to
pay benefits without the delay and
expense of lawyers and litigation.
• In CA lawyers are involved in 3 of 4
permanent disability cases. And, ranges
from 69% in the lowest rated disabilities to
over 96% for those with the highest
ratings.
Litigation
• Subjective, irrational disability ratings often
under compensate severely injured
workers and often over compensate those
with minor injuries.
• Attorney fees and legal costs have added
to the burden of work comp costs.
Fraud
• National Insurance Crime Bureau (NICB)
estimates w/c insurance fraud is the fastest
growing insurance scam in the U.S.
• SB 1218 (1991) passed to combat w/c
fraud making it a felony. Requires insurers
to report suspected fraud and established
funding enforcement and prosecution
activities.
The result after decades:
• Many carriers became under reserved, not
having enough money in “reserve” to pay
for claims and were forced from the
market.
• Resulting in California employers having
fewer carrier choices and paying
skyrocketing rates.
• As more and more insurance
carriers went broke or left
California, leaving the private w/c
insurance industry in ruins, more
employers had to obtain insurance
from State Fund.
• In recent years, State Fund went
from insuring 20% of CA
employers to close to 55%.
In a Nutshell:
• CA employers pay the highest w/c rates in the
nation while benefits are among the lowest third
of all states.
• In 3rd qtr of 2003 according to the WCIRB – CA
employers paid on average $6.30 per $100
payroll in w/c premiums. That was 9% more than
the first half of 2003 and 3 times the average rate
in 1999.
• Also, the CA rate = 94% more than NV, 184% more than Oregon and
259% more than AZ. (Source: Worker’s Compensation Action Network, WCAN)
• Effect…
• California has lost over 300,000
manufacturing jobs since December 2000
and many more in other industries.
True Story
Summary
• The worker’s compensation system in
California has been revised and reformed
repeatedly since the passage of the
Roseberry Act in 1911.
• Reform issues have been inflation, rate
and benefit increases, fraud, litigation and
fluctuations in the economy.
2004 Work Comp Reform
SB 899
SB 899 passed into CA law April 2004
Key Provisions
• Tightens standards for determining impairment
ratings by removing subjectivity and requiring
doctors to follow nationally recognized
standards;
• Permits employers to create a medical provider
network to treat injured employees;
• Strengthens an employer's ability to "apportion"
liability for injuries by requiring doctors to address
"causation" of disabilities or impairments in their
reports and employees, upon request, to disclose
all previous permanent disabilities or physical
impairments;
• Caps temporary disability benefits for most
injuries at 2 years;
• Enhances benefits for individuals with the most
severe permanent disabilities while lowering
benefits for minor permanent injuries;
• Repeals the "presumption of correctness"
currently afforded the opinion of an employee's
primary treating physician concerning the extent
and scope of medical treatment;
• Expressly exempts workers' compensation laws
from the new private right of action for penalties
known as the "bounty hunter" law;
• Requires that findings of fact made by the
Workers' Compensation Appeals Board be made
impartially to ensure employees and employers
are considered equal under the law;
• Re-authorizes "vocational rehabilitation"
benefits for pre-December 31, 2003
injuries only; and training vouchers for
injuries on and after January 1, 2004.
• Increases permanent disability payments
by 15% when reinstatement is not offered
or possible while reducing benefits by 15%
when employees receive reinstatement
offers.
• The WCIRB estimates that SB 899 will reduce
benefits by nearly 15% or $3 billion and cut lost
adjustment expenses by 9% or $300 million.
• It remains to be seen how SB899 will affect
The ever increasing complexities and
expense of workers comp. Since the
Provisions of the latest reform are being
implemented over a period of time and there
are already legal challenges, the full effects
of SB899 will not be felt for some time.
So What Can I Do?
• Current Workers Comp Policy
Work with agent/insurance carrier to
– Request and obtain a copy of current policy
– Review ALL information in policy/Ask questions
– Understand the policy including reporting and
documentation requirements
– Make sure all employee/business classifications are
accurate
– Ensure accurate premium rates
– Review policy information annually
• New Worker’s Comp Policy
– Shop for new policy to compare rates,
services, and reduce premiums.
• Develop Internal W/C Processes
– Develop, publicize, and maintain w/c policy
• Designate person to report injuries to
• Train person on procedures,reporting,documentation
for workplace injuries/illnesses For each incident
document: date; time of injury, place; and name, job
title; and signature of employee; how the injury
occurred; and any witnesses
– Communicate expectations to employees
– Enforce all rules of plan
• Work Comp Claims…When an
injury/illness occurs
– Monitor and work closely with w/c
carrier, claims/case manager on
all w/c claims. Meet with claims
manager to review progress of
claim(s).
– Bring workers back to work as
soon as possible.
– Report any suspicion of fraud or
abuse to carrier.
• Create/review/update a comprehensive
Injury and Illness Prevention Program (IIPP)
– Review and update or institute ongoing safety
training program and schedule.
– Provide ongoing employee safety training.
– Determine and correct any known workplace
safety issues.
Why have an IIPP?
 Employers MUST have an effective Injury and Illness
Safety Program, not only because it is the law, but
because it is an effective tool to minimize injuries and
illness in the workplace.
 Employers must also enforce the safety program and
document and discipline as necessary.
 Employers can be proactive and have a key role in
keeping insurance rates down by setting the goal of
zero accidents.
Legislative Action
• Stay up-to-date on legislative activity
regarding workers comp.
• Contact lawmakers, encouraging them to
stay the course and fully implement all
provisions of SB899.
Stay Informed
• Keep up to date on the latest
developments in California’s Workers’
Compensation by signing up for AFWD’s
Workers’ Comp Fax Facts.
Conclusion
It is critical that we learn from past work comp
reform experiences. If CA lawmakers and
regulators do not see the recent reforms
through, the projected billions in cost savings
may never happen and California employers will
continue to suffer and lose. If the reform is to be
successful, all players must be vigilant and bold
in demanding that provisions of the new law are
fully implemented.