AFWD presents: Minimizing Worker

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AFWD presentsMinimizing Workers Compensation
CostsWhat Employers Can Do to Help Reduce Work
Comp Expenses
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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.

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• In April, 2004 Gov. Schwarzenegger and the CA
  legislature passed sweeping work comp reform with
  SB899.

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• 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.

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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

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Workers 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

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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.

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• In the 1960s the w/c system was liberalized by
  the state judicial system.
• By the 1980s 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.

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• From 1994-1999 w/c rate (average) was 2.27 per
  100 of payroll.
• From 1999-2003 rate (average) grew to 6.30 per
  100 of payroll.
• (source Workers Compensation raring Bureau,
  WCIRB)

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• Total rate expenditure for 1994-1999 was 5
  billion a year and that grew to over 15 billion
  a year for 1999-2003.
• (source Workers Compensation raring Bureau,
  WCIRB)

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• 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.

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• In California
• The (medical) cost of each claim has dramatically
  risen from an average of 9,000 in 1992 to
  36,000 in 2003 .

source Workers Compensation Rating Bureau,
WICRB)
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• Other skyrocketing costs
• Medical care
• Presumption of correctness of primary physician
• utilization ( of visits per claim)
• Cost of prescriptions
• Disability claims/benefits
• Litigation
• Fraud

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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.

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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.

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Litigation

• Workers 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.

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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.

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• 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.

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• 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.

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• 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.

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• 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
  Workers Compensation Action Network, WCAN)

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• Effect
• California has lost over 300,000 manufacturing
  jobs since December 2000 and many more in other
  industries.

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True Story
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Summary

• The workers 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.

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2004 Work Comp ReformSB 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

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• 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

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• 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

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• 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.

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• 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.

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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

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• New Workers Comp Policy
• Shop for new policy to compare rates, services,
  and reduce premiums.

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• 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

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• Work Comp ClaimsWhen 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.

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• 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.

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• 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.

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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.

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Stay Informed

• Keep up to date on the latest developments in
  Californias Workers Compensation by signing up
  for AFWDs Workers Comp Fax Facts.

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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.