NAII Says Calif. WC Reform Proposals ‘A Good First Step’

September 15, 2003

Two bills moving through the California Legislature during the final days of the 2003 session would provide some of the necessary cost savings needed to stabilize the state’s beleaguered workers’ compensation system, according to the National Association of Independent Insurers (NAII).

“Assembly Bill 227 and Senate Bill 228 are good first steps in addressing the immediate problems plaguing the workers’ compensation system in California,” said Nancy Schroeder, assistant vice president of workers’ compensation for the NAII. “Rising medical costs are the single largest cost driver in the system. Provisions in the bills that would create fee schedules for outpatient surgical facilities and curb excessive use of medical treatment should help provide much needed relief.”

The bipartisan Workers’ Compensation Conference Committee was charged with bringing a comprehensive package to the floors of the Assembly and Senate last week, with a Friday deadline for approving a bill to send to Gov. Gray Davis. The two bills contain reforms that will reportedly significantly reduce system costs. California’s workers’ compensation costs to employers are the highest in the nation and have been climbing dramatically.

“NAII is pleased that the conference committee came up with a package that will provide some relief,” continued Schroeder. “The most important reforms from a cost point of view will be the repeal of the vocational rehabilitation statute, implementation of a fee schedule for outpatient surgery facilities, the repeal of the treating physician prescription in many cases and the treatment guidelines. This type of reform is sorely needed, but to accomplish true, broad reform, legal costs and administrative costs must be reduced, as well as medical costs, and permanent partial disability benefits must be tackled.”

Major provisions in the legislative package include:

· Official medical fee schedule based on Medicare for outpatient surgical centers;
· Adoption of utilization review systems, consistent with the American College of Occupational and Environmental Medicine Medical Practice Guidelines, defining the most appropriate medical treatment for a given industry injury;
· Limits on the number of chiropractic and physical therapy treatments that may be claimed on a workers’ compensation policy to no more than 24 per claim;
· Requirement of dispensation of generic drugs, unless a brand name has been specifically prescribed;
· Increase in the maximum fine for workers’ compensation fraud from $50,000 to $150,000;
· Repeal of the current presumption of correctness in favor of the treating physician;
· Repeal of the existing vocational rehabilitation statute, replacing it with a new supplemental job displacement benefit for injuries occurring on or after Jan. 1, 2004.

“It is important to keep in mind that while the legislative proposals represent a significant legislative achievement and contain some cost savings, more will need to be done to ensure that workers’ compensation is a viable marketplace in California,” said Alister McAlister, workers’ compensation lobbyist for the Association of California Insurance Companies (ACIC), the Sacramento-based affiliate of NAII. “Also, the actual realization of the estimated cost savings will depend on how the changes to the system are administered.”

ACIC and NAII agree with California Insurance Commissioner John
Garamendi’s persistent calls for substantial reform to produce significant cost savings.

“We are encouraged that Commissioner Garamendi has made a convincing case to legislators that lower rates can only occur in tandem with reductions in the cost drivers, and that the commissioner recognizes that no reduction in premiums can be belowthe actual costs of paying claims, legal costs, and administrative costs in order for insurers to make a reasonable profit,”
added McAlister.

Topics California Workers' Compensation

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