[author: Michael C. Jacobson, XpertHR Legal Editor]
California employers are likely to see a reduction in the cost of their workers' compensation insurance with the passage of SB 863, signed into law by Governor Jerry Brown on September 18, 2012.
The bill is set to go into effect on January 1, 2013, with some provisions going into effect on January 1, 2014.
The new bill, a sweeping overhaul of the state's workers' compensation system, will streamline the process of filing, evaluating and paying workers' compensation claims.
The resulting efficiency is likely to reduce the cost of obtaining workers' compensation insurance for employers.
New Independent Medical Review (IMR) System
Significantly, the new bill establishes an independent medical review (IMR) system to replace the Workers' Compensation Appeals Board (WCAB) as the arbiter of many disputes pertaining to workers' compensation benefits like coverage, fraud and discrimination.
The bill also requires employers to notify employees of their right to seek review in the IMR system. Employers who fail to comply with this provision may be fined $5,000 per day.
Upon payment, adjustment or denial of benefits, employers or their insurance carriers are also required to provide an Explanation of Review (ER), explaining why certain aspects of the employee's medical bills were paid and why other aspects were not paid.
If an employee chooses to bring a dispute before the IMR system, the bill mandates that treatment plans be approved or denied by the IMR arbiter within two or three months after an employee makes the request.
This is a substantial reduction from the prior judicial timelines, which were typically 18 to 24 months.
The results of IMR proceedings will then become binding on all parties, unless they are able to demonstrate, by clear and convincing evidence, that the IMR arbiter acted in excess of his or her authority, made a decision resulting from bias relating to protected classes, or made a clearly erroneous factual decision that is not subject to expert opinion.
Given this tremendous burden to overturn a decision of the IMR arbiter, many plaintiffs' attorneys have argued that this provision is unconstitutional. This bears watching and may be litigated in the courts as the new bill takes effect.
Importantly, the new IMR system will also reduce the impact of examinations performed by Qualified Medical Evaluators (QMEs), who will no longer weigh in on disputes pertaining to diagnoses or treatment by the employee's primary care physician.
This measure would also reduce the length of disputes brought before the IMR arbiter by reducing the amount of testimony obtained from both sides.
Regarding employee rights, the new bill will reduce the amount of supplemental job displacement benefits (SJDBs) to $6,000 regardless of disability, but will expand coverage of the SJDBs to individuals rendered permanently, partially disabled by a work-related injury at any time after January 1, 2004.
The SJDB vouchers can be used for education or training so that the individual can return to work. Importantly, employers who offer to re-hire such employees will be exempt from providing these vouchers.
The SJDB voucher system is part of a new, over-arching return-to-work program funded by the Workers' Compensation Administration Revolving Fund (WCARF) by revenues of $120 million, aimed at getting injured workers back into the workforce.
The new law will also raise permanent disability (PD) payments to injured workers by a total of about $740 million, most of which will be funded by the savings of lowering costs in the system and rendering it more efficient.
Finally, the new law eliminates the need for permanent disability indemnity payments to employees who file claims if the employer has offered the employee a different position that pays at least 85% of wages and compensation paid to the employee at the time of his or her injury or illness.
This provision makes it more difficult for severely injured workers to secure permanent disability status.
California employers can expect to see major changes with the way workers' compensation claims are made, disputed and handled, together with quicker turn-around on claims and expedited return-to-work efforts directed at injured workers.
The result of these measures is intended to reduce costs for employers, a welcome goal in the state of California where payouts to injured workers rose above $8 billion in 2011.
Risk Management - Health, Safety, Security > Workers' Compensation: California
Risk Management - Health, Safety, Security > Workers' Compensation