SB 228 Targets Skyrocketing Medical Costs in WC System

California Senator Richard Alarcón (D-Van Nuys), recently introduced new legislation designed to reduce the skyrocketing medical costs in California’s workers’ compensation system. The bill, SB 228, will essentially make the workers’ comp system more efficient and provide a solution to the crisis in the ailing marketplace.

“This is something that we need to take a very close look at and is very important to the industry,” Nicole Mahrt, director of public affairs, Western region, for the American Insurance Association (AIA), said. “Employers in the business community, both that have insurance in the private market as well as self-insured companies, are facing ongoing cost increases. Until we fix the system, and implement things like the fee schedules, the costs in the systems are just going to continue to escalate, and therefore rates and premiums will continue to escalate.

“We need to be able to anticipate and project what the costs are going to be, Mahrt continued. “But because medical costs have been increasing so much, and no one can really pinpoint what those costs are going to be, the system has become very unpredictable. That’s why people can’t bring in new capacity to the market. They don’t know how to price the product; they don’t know how to predict the cost and they can’t charge an adequate rate.”

According to a press release from Senator Alarcón’s office, medical care provided for through the workers’ comp system costs an estimated 50-100 percent more for the same care than if provided through an employer or self-provided health benefits plan.

Among the solutions outlined in the bill include the implementation of workers’ comp medical billing fee schedules in areas that currently have none. “The two big areas that do not have fee schedules right now are pharmacy benefits and outpatient surgery centers,” Mark Sektnan, assistant vice president, Western region, of the AIA, said. “Fee schedules can be very helpful, but they needed to be implemented along with utilization controls.”

The creation of fee schedules will help to reduce costs by providing guidance when determining the costs of procedures. Additionally, the bill will require the automatic updating of existing schedules.

Furthermore, Alarcón plans to introduce a trailer bill stipulating the Division of Workers’ Compensation (DWC) to be 100 percent funded by employers, a system being practiced in 40 other states. “We are going to add a provision that if there is user funding, then [DWC] must provide for schedulers, and Ombudsman for medical fraud and court personnel to ensure that there is adequate staffing in the courts.”

“If the bill is passed, self-insured companies will see an immediate drop in their medical costs and insured companies should anticipate that premiums would be positively impacted,” Alarcón said. The impact will come from the Insurance Commissioner’s pressure to lower rates, thereby decreasing premiums, he added. “I anticipate maintaining the quality of care within the system but harnessing in some of the runaway costs of the outpatient surgery centers.”

Topics Workers' Compensation