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Workers’ Compensation Workers’ Compensation and The Three Partsand The Three Parts
Workers’ Compensation Workers’ Compensation and The Three Partsand The Three Parts
Workers’ Compensation is a social Workers’ Compensation is a social insurance program that provides:insurance program that provides:
Medical careMedical care Cash benefitsCash benefits Rehabilitation servicesRehabilitation services
Three coverages are provided: workers’ Three coverages are provided: workers’ compensation insurance, employers compensation insurance, employers liability insurance, other-states liability insurance, other-states insuranceinsurance
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Objectives and Eligibility Objectives and Eligibility Requirements of Workers’ Requirements of Workers’
CompensationCompensation
Objectives and Eligibility Objectives and Eligibility Requirements of Workers’ Requirements of Workers’
CompensationCompensation Provide broad coverageProvide broad coverage Substantial protectionSubstantial protection Provide sufficient Provide sufficient
medical care/rehabmedical care/rehab Reduction of job Reduction of job
related accidentsrelated accidents Reduce litigationReduce litigation Two principal eligibility Two principal eligibility
requirements must be requirements must be metmet
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Workers’ Compensation Workers’ Compensation BenefitsBenefits
Workers’ Compensation Workers’ Compensation BenefitsBenefits
Unlimited medical Unlimited medical carecare
Disability-income Disability-income benefitsbenefits
Death benefitsDeath benefits Rehabilitation Rehabilitation
servicesservices
Keep the benefits coming!
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Workers’ Compensation Workers’ Compensation Mess in CaliforniaMess in California
Workers’ Compensation Workers’ Compensation Mess in CaliforniaMess in California
Rates were falling Rates were falling due to set rates due to set rates without state without state approvalapproval
Insurers competed Insurers competed for businessfor business
Carriers selling Carriers selling insurance at a loss to insurance at a loss to gain market sharegain market share
Firms became Firms became insolventinsolvent
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Workers’ Compensation Workers’ Compensation Mess in California (Cont.)Mess in California (Cont.)Workers’ Compensation Workers’ Compensation
Mess in California (Cont.)Mess in California (Cont.) Businesses pay highest premiums, Businesses pay highest premiums,
but injured workers get the lowest but injured workers get the lowest benefits.benefits.
Costs paid by employers are the Costs paid by employers are the highest in the country.highest in the country.
Average employer pays 5.2% of Average employer pays 5.2% of payroll.payroll.
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Problems & IssuesProblems & IssuesProblems & IssuesProblems & Issues
30% of claimants who miss work 30% of claimants who miss work hire a lawyerhire a lawyer
Doctors & patients have little Doctors & patients have little incentive to restrain costsincentive to restrain costs
Employers often hire dueling doctorsEmployers often hire dueling doctors California gives lots of discretion California gives lots of discretion Unnecessarily complex, difficult to Unnecessarily complex, difficult to
administer, some cases outdatedadminister, some cases outdated
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Problems & Issues Problems & Issues (Cont.)(Cont.)
Problems & Issues Problems & Issues (Cont.)(Cont.)
Difficulty finding workers comp. Difficulty finding workers comp. Insurance Insurance
California receive lowest disability California receive lowest disability benefitsbenefits
California has highest litigation and California has highest litigation and medical costmedical cost
Last year, job based insurance premiums Last year, job based insurance premiums increased by an average of 10%increased by an average of 10%
Nearly 1 million claims filed each yearNearly 1 million claims filed each year
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Problems & Issues (Cont.)Problems & Issues (Cont.)Problems & Issues (Cont.)Problems & Issues (Cont.)
Standards of disability awardsStandards of disability awards Stricter guidelines for permanent- Stricter guidelines for permanent-
partial disabilitiespartial disabilities Physician choicePhysician choice California exceeds national normCalifornia exceeds national norm Workers file more claims than Workers file more claims than
elsewhere elsewhere Medical cost in California far above Medical cost in California far above
averageaverage
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ProblemsProblems & Issues (Cont.) & Issues (Cont.)ProblemsProblems & Issues (Cont.) & Issues (Cont.)
Lack of fee scheduleLack of fee schedule Delays in updating existing fee Delays in updating existing fee
schedulesschedules No fault systemNo fault system Rising medical inflationsRising medical inflations IndemnityIndemnity Underwriting performanceUnderwriting performance
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Workers Compensation Workers Compensation FraudFraud
Workers Compensation Workers Compensation FraudFraud
What is workers’ compensation fraud?What is workers’ compensation fraud? The two most common types of The two most common types of
workers’ compensation fraud : workers’ compensation fraud : Premium Premium Benefit fraudBenefit fraud
Health care provider or attorney assists Health care provider or attorney assists the worker in fraudulent schemes, or the worker in fraudulent schemes, or participates in double billing.participates in double billing.
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Workers Compensation Workers Compensation Fraud Fraud (Cont.)(Cont.)
Workers Compensation Workers Compensation Fraud Fraud (Cont.)(Cont.)
In 2002-03 there were 660 fraud cases In 2002-03 there were 660 fraud cases representing more than $54 million representing more than $54 million dollars in chargeable frauddollars in chargeable fraud
Humboldt man was charged with 6 Humboldt man was charged with 6 Felony counts for defrauding workers’ Felony counts for defrauding workers’ comp.comp.
$7.1 billion in 1993 to $29 billion in 2003$7.1 billion in 1993 to $29 billion in 2003 Fraud estimated to be between $1 to $3 Fraud estimated to be between $1 to $3
billion billion
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Workers Compensation Fraud Workers Compensation Fraud (Cont.)(Cont.)
Workers Compensation Fraud Workers Compensation Fraud (Cont.)(Cont.)
Fraud committed by companiesFraud committed by companies Falsely declaring number of workers Falsely declaring number of workers Falsely declaring number of hoursFalsely declaring number of hours
California passed AB227California passed AB227 Before legislationBefore legislation
50,00050,000 NowNow
150,000150,000 Investigation departmentInvestigation department
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VideoVideo VideoVideo
Workers’ Comp. fraud:Workers’ Comp. fraud: It affects us allIt affects us all Workers’ Comp. fraud:Workers’ Comp. fraud: It affects us allIt affects us all
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Current Claims and Costs in Current Claims and Costs in CaliforniaCalifornia
Current Claims and Costs in Current Claims and Costs in CaliforniaCalifornia
Reserves more than doubled from Reserves more than doubled from $9.5 billion in 1995 to $25 billion in $9.5 billion in 1995 to $25 billion in 2002.2002.
Medical Expenditures skyrocketed Medical Expenditures skyrocketed from $2.6 - $5.3 billion.from $2.6 - $5.3 billion.
Claims have been declining, but Claims have been declining, but savings have been offset by rising savings have been offset by rising medical costs.medical costs.
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The The RiseRise In Cost In CostThe The RiseRise In Cost In Cost Substantial increases in medical costs Substantial increases in medical costs
per claimper claim Average medical cost per claim in 2002 Average medical cost per claim in 2002
was $31,000.was $31,000. California employers pay more in California employers pay more in
Workers’ Compensation premiums than Workers’ Compensation premiums than any other state.any other state. 40 states premiums average less then $4.00 40 states premiums average less then $4.00
per $100 of payrollper $100 of payroll California averages $6.50 per $100 of payrollCalifornia averages $6.50 per $100 of payroll
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Current Current ClaimsClaims & Cost & Cost (cont.)(cont.)
Current Current ClaimsClaims & Cost & Cost (cont.)(cont.)
California has difficult California has difficult political environment political environment for business.for business.
Between 1997 and Between 1997 and 2000, indemnity claims 2000, indemnity claims increased 230%.increased 230%.
62% of claim dollars go 62% of claim dollars go to medical bills and not to medical bills and not weekly benefits.weekly benefits.
Excessive use of Excessive use of prescription pain prescription pain medication.medication.
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Current Claims & Cost Current Claims & Cost (Cont.)(Cont.)
Current Claims & Cost Current Claims & Cost (Cont.)(Cont.)
Hospital Cost totaled Hospital Cost totaled $1.1 Billion in 2002.$1.1 Billion in 2002.
Chiropractor visits Chiropractor visits per claim up 70%per claim up 70%
Pharmaceutical Pharmaceutical service has grown service has grown 243%243%
$86.4 million in 1997 $86.4 million in 1997 to $296.6 million in to $296.6 million in 20022002
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Chart 1: California Distribution of WC Medical Payments, 2002 Health Care Provider
(50%)Hospital-Outpatient(17%)Hospital-Inpatient (11%)
Pharmacy (7%)
Medical CostContainment (7%)Payments Made toWorker (6%)Medical-Legal (2%)
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Table 1: Service Utilization in California vs. Other States
CA 12-State Median Difference
Average Payment Per Claim
$5,667 $5,786 Similar
Services Per Visit 3.6 3.2 Similar
Average Visits Per Claim
29.7 17.4 +71%
Average Price Per Visit
$57 $101 -44%
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CaliforniaCalifornia Legislation LegislationCaliforniaCalifornia Legislation Legislation
AB 749 was passed on February 4, AB 749 was passed on February 4, 20022002
Bill provides first increase in workers’ Bill provides first increase in workers’ compensation benefits for injured compensation benefits for injured workers since July 1, 1996.workers since July 1, 1996.
Mandates return to work programsMandates return to work programs Also provides pharmaceutical and Also provides pharmaceutical and
outpatient surgery fee scheduleoutpatient surgery fee schedule New requirements for enforcement of New requirements for enforcement of
illegally uninsured employers.illegally uninsured employers.
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ReformReform Plan PlanReformReform Plan Plan
Propose to cut workers compensation Propose to cut workers compensation rates in half.rates in half.
Which would result in $5 Billion in Which would result in $5 Billion in savings.savings.
Democrats have stated that the reform Democrats have stated that the reform package would reduce workers’ package would reduce workers’ compensation cost by 14.9%.compensation cost by 14.9%.
Plan will also increase the burden of Plan will also increase the burden of proof for claims of “cumulative proof for claims of “cumulative injuries” that builds over time.injuries” that builds over time.
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Proposed Solutions To Proposed Solutions To Workers CompensationWorkers CompensationProposed Solutions To Proposed Solutions To Workers CompensationWorkers Compensation
To regulate the To regulate the amount of chiropractic amount of chiropractic and physical therapy and physical therapy visits per claim.visits per claim.
Strict guide lines of Strict guide lines of medical treatments.medical treatments.
Make fees for Make fees for outpatient surgery outpatient surgery centers tied to centers tied to Medicare rates and Medicare rates and pharmaceutical prices pharmaceutical prices tied to Medi-Cal rates. tied to Medi-Cal rates.