By Julius Young, Partner
Boxer Gerson Oakland, California
It’s time to take stock of 2021 in California’s workers’ comp system. This is a feature I’ve done every year since starting the blog in 2007.
Here was the backdrop in 2021….Workers’ comp has been a backwater issue for some years now. Workers’ comp did not come up in the Newsom recall fight, and there is no indication that Newsom focuses on the comp system. In a year of COVID, the “Great Resignation”, inflation, racial reckoning, and political division, California workers’ comp was pretty quiet. But stuff always happens.
The following is my assessment of the critical events, trends and themes that stood out in 2021:
- Although a number of potentially significant workers’ comp bills were introduced in the California legislature, relatively few made it into law.
Most bills died in legislative committees, and a prominent bill was vetoed by Governor Newsom, SB 788 (Bradford), a bill prohibiting discrimination in apportionment. However, a raft of non-workers’ comp bills sponsored by labor advocates did make it into law. A full account of the bills which stalled and the bills that were approved can be found in my post, “The 2021 Legislative Season”: https://www.boxerlaw.com/workerscompzone/the-2021-legislative-season/
- After years of consideration, the California Division of Workers’ Compensation adopted a new payment schedule to compensate QMEs who evaluate injured workers.
Settling on a revised formula to compensate the doctors who perform these evals had proved to be a vexing problem and rounds of stakeholder meetings and tentative proposals floated by the DWC resulted in little progress over multiple years. But finally, a new payment formula was adopted effective April 1, 2021. This new schedule jettisons “complexity factors” and creates a flat fee plus per page payment for record reviews: https://www.dir.ca.gov/dwc/DWCPropRegs/2020/Medical-Legal-Fee-Schedule/Med-Legal-Fee-Schedule.htm
The DWC website contains recordings of two April 2021 Q&A meetings on the new MLFS: https://www.dir.ca.gov/dwc/FAQ/MLFS_Resources.html
Some, but not all, QMEs applauded the new payment schedule. But payors have expressed alarm that charges for record reviews will spur a significant rise in Medical-Legal evaluation costs: https://vimeo.com/549389352
And many in the system are skeptical that the new payment formula will be sufficient incentive to attract new QMEs, particularly in some of the specialized medical disciplines that have few QMEs.
- Workers comp rates paid by many employers continued to decline in 2021.
In July 2021, Insurance Commissioner Lara adopted a “pure premium” non-binding benchmark rate finding of $1.41 per $100 of payroll, effective September 1. This marks the 11th consecutive decrease since 2015 in rates recommended by the California Department of Insurance.
In hearing testimony on rates, Lara heard contrasting recommendations. The WCIRB recommended an increase of 2.7% in advisory rates (from the prior advisory rate of $1.46 per $100 of payroll to $1.50 per $100 of payroll): https://vimeo.com/546574252
Providing a contrasting analysis, actuary Mark Priven recommended a decrease of advisory rates by 8.2%, to $1.34 per $100 of payroll. Lara’s decision appears to have essentially “split the baby”.
The gap between the WCIRB and Priven projections included different assumptions about claim frequency, medical cost inflation, and loss adjustment expenses. In any event, it is always critical to remember that CDI recommended rates are not what most employers will actually pay. Actual charged rates will differ based on many factors, including prior claims experience, discounts and such.
But Lara’s findings give us another headline: i.e. that workers’ comp costs have continued to decline in California.
- The California workers comp system continued to deal successfully with the challenges of COVID.
2021 brought the reopening of more economic activity across the state, but also waves of Delta and Omicron infections. Attorneys, doctors, and judges continued to do much of their business over video or telephonic platforms, though some in-person hearings resumed after October 1, 2021, as did much in-person medical treatment and many face-to-face QME evals. Despite the challenges, system stakeholders continued to prove themselves nimble in the workarounds needed to keep cases moving in the system.
But due to the ongoing Omicron variant emergency, the DWC issued a December 2021 notice of emergency telehealth regulations.
Meanwhile, COVID itself continued to strike many working Californians. According to a CWCI database, as of December 13, 2021, 172,452 COVID claims had been reported (about 53,376 from January 2021 to November 2021) and 1,240 industrial deaths claimed: https://www.cwci.org/CV19claims.html
CWCI issued a report on COVID death claims: https://www.cwci.org/document.php?file=5059.pdf
And the WCIRB released a report on the multi-state impact of COVID : https://www.wcirb.com/sites/default/files/documents/covid-19_insights.pdf
5. 2021 appellate court activity on workers’ comp was very meager
At the WCAB panel level some issues frequently arose, including the following: QME process disputes, direct vs compensable consequence psyche injury, application of the Kite case to disputes over whether disability should be added or combined, post-LeBoeuf and post-Dahl cases on whether a worker was 100% due to lack of amenability to rehabilitation, exceptions to the going and coming rule, whether the record constituted substantial evidence or whether further development of the record should be ordered, the validity of apportionment, whether an injury was sudden and extraordinary or catastrophic, etc etc.
But there was only limited workers’ comp case activity at the California Supreme Court or Court of Appeal level. Cases that bear mentioning include:
• Town of Los Gatos v. WCAB (Hart) (6th DCA)(dealing with start of cola under LC 4658(c))
• Applied Materials v. WCAB (6th DCA)(dealing with disability caused by doctor’s sexual misconduct with applicant)
• See’s Candies v. Superior Court (Matilde Ek) (California Supreme Court) (derivative injury tort lawsuit where worker’s husband died after contracting COVID allegedly through wife’s work exposure)
• Banerjee v. Superior Court (4th DCA) (insurance fraud under LC 139.3 and 139.31)
• Zamora v. Security Industry Specialists (6th DCA) (FEHA claim arising out of workers’ comp claim events)
• Mendez v. Stratasys (2nd DCA; unpublished) (FEHA claim arising out of work comp claim events)
Also, a notable decision was rendered by an Alameda County Superior Court Judge, who found Prop 22 (the Uber/Doordash initiative) unconstitutional. My post on that case can be found here: https://www.boxerlaw.com/workerscompzone/sand-in-the-gears/
6. Defense costs appeared to be a significant driver of frictional costs
A 2021 WCIRB report on frictional costs noted that California has both a significantly higher share of claims involving nontrivial defense costs and a higher average defense cost on these claims when compared to the median state: https://www.wcirb.com/sites/default/files/documents/frictional_cost_report-ar_0.pdf
7. The Los Angeles basin is, well, different when it comes to workers’ comp
If there was ever any doubt, the 2021 WCIRB Geo Study documented that the LA/Orange County/Long Beach/Inland Empire areas are different when it comes to workers’ comp: https://www.wcirb.com/sites/default/files/documents/wcirb-geo-study-2021-final_0.pdf
Indemnity claim frequency, Med-Legal costs, allocated loss expenses and the share of cumulative trauma claims were higher in many of the LA-area counties. Although this pattern is not new, it appears to be persistent. WCIRB researchers will likely be intensifying their focus to learn more about why this is so.
8. 2021 regulatory activity by the DWC was notable
In addition to adopting the new fee schedule for QMEs, in 2021 the DWC adopted new guidelines under MTUS for mental health, low back and COVID-19 treatments.
Online forums were held in the first half of 2021 regarding possible QME regulations (dealing with education requirements and discipline, among other things) and Disability Evaluation Unit (DEU) regulations. The DWC held an August 2021 public hearing on a copy service price schedule, but had not issued a formal rule making proposal by year’s end. The DWC also held a December 2021 hearing on electronic service of Medical-Legal reports by evaluators, but again, there was no formal rule making by year’s end.
The WCAB held a September 2021 hearing on proposed amendments to its Rules of Practice and Procedure: https://www.dir.ca.gov/DIRNews/2021/2021-85.html
9. Concerns about California MPNs continued to surface in 2021
As I noted at mid-year, applicant attorneys and worker advocates have complained for years that injured workers have trouble finding doctors on MPNs who are available and willing to provide treatment in a reasonable timeframe and geographically appropriate manner. Countering this, insurer advocates claim that most injured workers receive timely treatment, and they question the need for reform.
In opposition to the AB 1465 proposal for a statewide MPN network, CWCI produced a position paper questioning the need, “AB 1465 and Medical Provider Networks” : https://www.cwci.org/document.php?file=4858.pdf
AB 1465 was turned into a “study” bill but even that did not advance to Governor Newsom’s desk.
Meanwhile, there has been increasing concern among many physicians that MPN contracts & lack of transparency in discount agreements are discouraging physicians from participating in the system, leading many to refuse workers’ comp cases and others to complain about contracted rates. This is an issue which pits doctors against insurers, billing companies and MPN network assemblers.
Readers who want to learn more about “the murky world of contract discounts” should take a look at the Daisy Bill blog: https://blog.daisybill.com/CA-SB-537-discount-reimbursement-contracts
On July 1, 2021 the DWC unveiled a new form which requires (pursuant to Labor Code 5307.12, effective 7/1/21) that entities providing physician network services disclose a contracted discount rate which is less than 80% of the Official Medical Fee Schedule (OFMS). That form can be found here: https://wcc-public-news-storage-4081.s3.us-west-2.amazonaws.com/21/06-June/DWC-5307-12.pd
Later in 2021 the DWC held an online public forum on how to improve workers comp medical quality of care in California, receiving an earful of complaints from providers and other stakeholders. The video of that forum has not been posted by the DWC on its site.
10. There were comp system studies aplenty in 2021
Stakeholders often use workers’ comp studies to kill policy proposals or advance their projects. Perhaps the most essential study is always the WCIRB’s State of the System report, which can be found here: https://www.wcirb.com/content/report-state-workers-compensation-insurance-system
Here are other studies that surfaced:
From the California Division of Workers Comp:
• Report on 2020 IMR data: https://www.dir.ca.gov/dwc/IMR/reports/IMR-Annual-Report.pdf
• Report on IBR: https://www.dir.ca.gov/dwc/IBR/Reports/IBR-Report.pdf
From the California Workers’ Compensation Institute (CWCI):
• Report on IMR 2014 to 2020: https://www.cwci.org/document.php?file=4849.pdf
• Analysis of SB 335 (a bill that failed to advance): https://www.cwci.org/document.php?file=4954.pdf
• An analysis of self-insured losses: https://www.cwci.org/press_release.html?id=870
From the WCIRB:
• Report on prescription drug trends: https://www.cwci.org/restricted_document.html?id=4826&referer=/research.html
• Report on the cost impact of California’s prescription drug formulary: https://www.wcirb.com/sites/default/files/documents/rb-drugformulary-2021-ar.pdf
• Report on California claims and costs as of 4thQ. 2020: https://www.wcirb.com/sites/default/files/documents/wcirb-quarterlyexpreport-2020-4q-ar_0.pdf
• A November 2021 report on frictional costs in the California system: https://www.wcirb.com/sites/default/files/documents/frictional_cost_report-ar_0.pdf
• A June 2021 report on 2020 Workers’Comp Losses and Expenses: https://www.wcirb.com/sites/default/files/documents/2020_ca_wc_losses_and_expenses_report-complete.pdf
• Report on regional differences in California workers’ comp claims and costs: https://www.wcirb.com/research/geo-study
Notably, in 2021, CHSWC commissioners raised questions about the methodology of two studies CHSWC had requested: https://www.boxerlaw.com/workerscompzone/chswc-tightens-up/
That’s a wrap.
In early 2022, I’ll be posing a quiz on the likely events and themes in 2022.