is impossible for ideas to compete in the marketplace if no forum for
April 15, 2004
Over the past year I have sent you many emails and
letters to give you the most up to date information on Workersâ€™ Compensation
reform. As you know, we have reached a critical point in the reform
process and things are changing on a daily, if not hourly, basis.
The Workersâ€™ Compensation Conference Committee met and
unanimously passed (6-0) legislation that is now being sent to the
Legislature for vote. The members of this committee are Senate President
Pro Tem John Burton, Assembly Speaker Fabian Núńez, Senators Richard Alarcón
and Charles Poochigian and Assembly Members Juan Vargas and Rick Keene.
I have attached the Conference Report Committee Analysis for the reform
package that has just been released. My team and I have not completed a
full analysis, but upon initial review I believe that this legislation, in its
current form, follows many themes in “The Garamendi Plan: Bridging the Gap
Between Workers and Employers”. We will be working today and tomorrow
to analyze the language and will send our thoughts to you as soon as possible.
As you know, Iâ€™ve worked hard to keep reform of
workersâ€™ compensation a priority for California. This issue was driven with
substance and knowledge. Now that a solution is near, I want to acknowledge
you and the many other people who have worked on the reform process. Any
agreement reached cannot be attributed to just one person. Without
everyoneâ€™s input, we could not have moved forward at all.
Should you have any questions, please feel free to
contact Pam Neifert, Deputy Commissioner of External Affairs, at [email protected]
or at (916) 492-3611.
REPORT COMMITTEE ANALYSIS
user funding and specifies use of funding for return to work program;
specifies eligibility for return to work program; repeals duplicate
supplemental job displacement benefit language; restores vocational
rehabilitation program for pre-2004 injuries; authorizes collectively
bargained projects on health care integration; requires impartial findings of
fact; fully eliminates rebuttable presumption for predesignated personal
physician; specifies payment procedures for medical care; revises procedure
for obtaining qualified medical evaluation; authorizes provider medical
networks, implemented under regulations of Administrative Director of Division
of Workersâ€™ Compensation; partially repeals spinal surgery second opinion
program; establishes system of independent medical review; deems approval as
medical provider networks of health maintenance organizations and health care
organizations exhibiting competency in occupational and nonoccupational
medicine; limits most temporary disability payments to 104 weeks; provides for
capped medical lien filing fee from those filing liens; provides for immediate
authorized medical treatment to all workers filing claim forms for
occupational injury; revises penalty amounts in cases of unreasonable delay or
denial of care or benefits; provides for administrative penalties of up to
$400,000 for employers knowingly violating delay/denial laws as general
business practice; requires that insurers conduct review of injury and illness
prevention program of all new insured employers with experience modification
factors of 2.0 or more; replaces present law on apportionment with statement
that apportionment of permanent disability is based on causation; requires
physicians evaluating permanent disability to assess percentage of disability
due to work; makes employer liable only for portion of disability directly
caused by injury, restricts accumulated percentage of disability for any body
region to 100% over lifetime; requires study of insurance marketplace and rate
effects from legislative reform; allows for predesignated physician within
group health network.
conference committee amendments:
1) Give immunity to
entities that appropriately report suspected fraudulent activity
2) Restores User Funding
and allows for cost of return to work program to be funded out of user
funding. Language prohibits total amount of employer surcharges to exceed
amounts reasonably necessary to administer the workersâ€™ compensation program
and implement workersâ€™ compensation reform
3) To extent funds are
available, and operative as of July 1, 2004, allows eligible small employers
(up to 50 employees) to apply for reimbursement for workplace modifications
necessary to return injured workers to work. Program funded from user
funding and administrative penalties collected for patterns of unreasonable
behavior in delaying or denying workersâ€™ compensation payments.
4) Repeals duplicate
program of supplemental job displacement benefit created in 2003.
(Statute has identical sections in Labor Code 139.5 (repealed herein) and in
LC 4658.5, which remains.) Re-institutes vocational rehabilitation
program for injuries occurring on or before December 31, 2003, subject to
sunset in 2009
5) Authorizes parties in
collectively bargained alternative dispute resolution programs to negotiate
occupational and non-occupational health care integration projects involving
delivery of medical benefits and delivery of disability benefits.
6) Requires that all
workersâ€™ compensation findings of fact be interpreted in an impartial and
balanced manner in order that all parties are considered equal before the law
7) Eliminates the
rebuttable presumption of correctness for a comprehensive medical evaluation
by a predesignated personal physician.
8) Except under allowed
contracts, would limit the amounts paid for medical services to the reasonable
maximum amounts in the official medical fee schedule in effect on the date of
service. Medical providers would submit an itemization of medical
services provided and payment would be made accordingly.
9) Would authorize
employers, beginning in 2005, to establish medical provider networks.
States that by providing networks, legislature intends to improve medical care
for injured employees by providing them a choice of physicians. Networks
are to be established consistent with standards detailed in the bill, and that
were certified by the administrative director, and establishes procedures for
injured workers to get care through the networks. The standards would
incorporate patient protection provisions from existing health and safety code
and labor code, such as adequate numbers and types of physicians and
sufficient access. Networks would be required to provided treatment in
accordance with utilization controls established by the DWC. Provides
for disclosure of policies of economic profiling policies, and its uses in
utilization review, peer review, incentive and penalty programs, and in
provider retention and termination decisions. Provides that physician
compensation may not be structured in order to achieve goals of reducing,
delaying or denying medical treatment or restricting access to medical
treatment. Provides that in developing a medical provider network, an
employer or insurer shall have the exclusive right to determine the members of
their network. Requires submittal of continuity of care policy to
administrative director, and to employees, including in written form if
requested. Requires procedures for continuity of care, including
completion of covered services, and procedures for termination of providers.
Provides that establishment of networks would be implemented under
regulations established by Administrative Director, in consultation with the
Department of Managed Health Care, and that procedures for making medical
provider network modifications are done under AD regulations.
10) Establishes system of
independent medical review for requesting resolution of disputed health care
service issues. Provides that independent medical review could be
requested by injured workers who have had three physician opinions in the
medical provider network that dispute the workerâ€™s request for a medical
service. The standard to be used for independent medical review is
identical to that established in ACOEM guidelines or the utilization schedule
established by the Administrative Director. Establishes procedure for
applying for IMR review, process for getting assignment of reviewer, and
giving applicant discretion of whether reviewer must conduct a physical
examination of the injured employee. Reviewer shall determine whether
requested health care service was consistent with injured employeeâ€™s
specific medical needs, consistent with ACOEM or the Administrative
Directorâ€™s guidelines. Where the reviewer finds that the disputed
health care services are so consistent, the injured employee may seek the
services from a physician of his or her choice, from inside or outside the
11) Health care service
plans (Knox-Keene plans) and certified health care organizations shall be
deemed approved if they have reasonable numbers of physicians with competency
in occupational and non-occupational medicine, as determined by the
12) Provides that when the
last payment of temporary disability has been made, and regardless of whether
the extent of permanent disability can be determined at that time, the
employer shall begin payment of reasonable estimates of permanent disability.
Provides that for single
injuries occurring after effective date of bill, that aggregate temporary
disability benefits shall not extend more than 104 compensable weeks within a
period of two years from the date of commencement of temporary disability
payments. This would not apply for specified conditions for which
temporary disability benefit would be capped at 240 weeks within period of
five years. Such list includes: acute and chronic hepatitis B and C;
amputations; severe burns; HIV; high-velocity eye injuries; chemical burns to
the eyes; pulmonary fibrosis; and chronic lung disease.
13) Provides that $100
lien filing fee currently charged for each initial lien filed by providers
would also be collected from those filing on behalf of providers.
14) Provides that within
one day after employee files claim form for occupational injury under Labor
Code section 5401, the employer must authorize medical treatment, consistent
with ACOEM guidelines or the treatment utilization schedule adopted by the
Administrative Director, for the alleged injury and shall continue to provide
the treatment until the date that liability for the claim is either accepted
or rejected by the employer. Until the date the claim is accepted,
liability for medical treatment shall be limited to $10,000.
15) Present 5814 penalty
statute would become inoperative on June 1, 2004 and be repealed on January 1,
2005. New section would provide that penalty of unreasonable delay or
denial would be 25 percent of amount of payment delayed or denied, or $10,000
whichever was less. In any proceeding under this section, the appeals
board shall use its discretion to accomplish a fair balance and substantial
justice between the parties. If, prior to an employee claim of such
unreasonable behavior, the employer discovered the practice, the employer
could pay a self-imposed 10 percent penalty on the delayed payment, and avoid
the larger penalty. Upon approval of a case settlement document, or upon
submission of any issue for determination at a regular trial hearing, it is
conclusively presumed that any accrued claims for penalties for unreasonable
delay or denial have been resolved unless that issue is presented in the
settlement or statement of issues for the trial. Any increased penalty
for unreasonable delay or denial, not including the self-imposed penalty,
shall be offset by any automatic increase for late payment under section 4650.
The bill provides for a two year statute of limitations for claiming penalty
after payment due date. Any employer who knowingly violates this section
with a frequency indicating a general business practice is liable for
administrative penalties of up to $400,000. Penalty amounts are
deposited in the Return to Work fund.
16) The requirement that
every workersâ€™ compensation insurer conduct a review of the injury and
illness prevention program of each of its insureds within four months of the
initial insurance policy term is restricted to those employers with an
experience modification factor of 2.0 or greater and extended to within six
months of the policy term. The review may be done by a licensed
California professional engineer, certified safety professional, certified
industrial hygienist, or another person working under the direction of such
17) Present law replaced
by language that apportionment of permanent disability is based on causation.
Each physician preparing report on issue of permanent disability must address
issue of causation. For report to be admissible on issue of PD,
physician must determine approximate percentage of the PD that was caused by
the present work-related injury, and what portion was caused by other factors,
including prior industrial injuries. Employee claiming industrial injury
must disclose all previous permanent disabilities or physical impairments.
18) Employer is only
liable for portion of disability directly caused by injury. Any prior PD
awards to employee are conclusively presumed to exist at time of subsequent
injury. Accumulation of all permanent disability for any region of the
body shall not exceed 100% over employeeâ€™s lifetime except if injury or
illness is deemed to be total in character per Labor Code 4662. Body
regions include: hearing; vision; mental disorders; spine; upper extremities;
lower extremities; head, face, cardiovascular, respiratory and all other
systems. No single injury may accumulate more than 100% disability.
19) Completes repeal of
treating physician presumption, regardless of date of injury.
administrative director to contract, after consultation with Insurance
Commissioner, in order to study insurance market and effect of 2003 and 2004
reform legislation on workersâ€™ compensation insurance premium rates.
Final report due January 1, 2006. Governor and Insurance Commissioner
review the results of the study and make recommendations as to appropriateness
of regulating insurance rates. If they determine that rates do not
appropriately reflect the savings and timings of savings associated with
reforms, they may submit proposals to the Legislature. Proposals shall
take into consideration how rates should be regulated and by whom. Cost
of study up to $1 million paid by insurers on proportionate share of market.
21) Provides that SB 796,
the private right of action for enforcement of labor code violations, does not
apply to Division 1 and Division 4.
22) Contains severability
By: Senate Labor and
Industrial Relations Committee
Glenn Shor, Principal Consultant
John Garamendi became Californiaâ€™s first elected Insurance Commissioner in 1990.
After serving as Deputy Secretary of the Interior in Washington D.C., he returned to California and was re-elected as Insurance Commissioner in 2002.
Contact the Commissioner by e-mail: [email protected] or by mail addressed to: Insurance Commissioner John Garamendi,
California Department of Insurance, 300 Capitol Mall, Suite 1700, Sacramento, CA 95814.
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