You can’t always get what you want… But if you try sometimes… you can get what you need....
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You can’t always get what you want… But if you try sometimes… you can get what you need. California Workers’ Compensation Reform: SB 863 Bill Zachry VP Risk Management Safeway
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Transcript of You can’t always get what you want… But if you try sometimes… you can get what you need....
You can’t always get what you want…
But if you try sometimes… you can get what you need.
California Workers’ Compensation Reform: SB 863
Bill ZachryVP Risk Management
Safeway
863 Celebration in the Horseshoe
CA WC: Pre-SB 863
*PPD Based on NCCI 2012 Statistical Bulletin: Nationwide ex California excludes monopolistic states, weighted by employment PPD benefits adjusted to California Avg. Weekly Wage**Filed rates based on OR DCBS study 2012, wtd by CA payroll
-40.0%-30.0%-20.0%-10.0%
0.0%10.0%20.0%30.0%40.0%50.0%60.0%
Filed Rates
PPD Benefits per PPD Claim
CA WC: Backgroundpre-SB 863
What is driving the rates?• Medical Costso High % of Total Costso Very Slow to Pay Out
• Loss Adjustment Expense: Very High
Workers Compensation Medical Cost Drivers
• Severe burns / quadroplegia• Settlement philosophy (C&R vs. Stip.)• Treatments paid for that are not evidence based
medicine• Treatment not authorized by UR• Compounding and Repackaging of Pharmacy• Hospitalizations• Multiple body parts• Delayed reporting of claims /
Delayed provision of benefits
Workers Compensation Cost Drivers• Coping skills – Adverse Childhood Experience – 20% to 70%
increase per claim• Poor Medical Practice – Inconsistency in providing service• Addiction – 20% to 50% increase per claim• Litigation – 40% to 50% increase per claim• Obesity – 20% increase per claim• Diabetes – 10% to 20% increase per claim• Fatigue/Sleep issues• Employee age– Inherent increase in cost of claim– Medicare Set Aside
Workers Compensation Cost Drivers• Coping skills – Adverse Childhood Experience – 20% to 70%
increase per claim• Addiction – 20% to 50% increase per claim• Litigation – 40% to 50% increase per claim• Obesity – 20% increase per claim• Diabetes – 10% to 20% increase per claim• Fatigue/Sleep issues• Employee age– Inherent increase in cost of claim– Medicare Set Aside
Workers Compensation Cost Drivers• Coping skills – Adverse Childhood Experience – 20% to 70%
increase per claim• Addiction – 20% to 50% increase per claim• Litigation – 40% to 50% increase per claim• Obesity – 20% increase per claim• Diabetes – 10% to 20% increase per claim• Fatigue/Sleep issues• Employee age– Inherent increase in cost of claim– Medicare Set Aside
CA WC: BackgroundCalifornia WCRI MPI-WC Index as of 2011
(2002 = Base Year of 100)
Yang & Fomenko, WCRI Medical Price Index for Workers’ Compensation, 4th Edition, March 2012, p. 99.
Emergency
Evaluation and Management
Major Radiology
Minor Radiology
Neurological testing
Physical medicine
Major surgery
Pain management injections
Overall
- 20 40 60 80 100 120 140
101
116
94
91
108
110
96
102
105
CA WC: BackgroundPercentage of Medical Paid by Year After Injury
California vs. Other States
NCCI Annual Statistical Bulletin, 2011, Exhibit IX.
Year of Injury Year Following Injury Subsequent Years-5%
5%
15%
25%
35%
45%
55%
65%
75%Percentile
80%
60%
40%
20%
Lowest
California
Highest
CA WC: BackgroundPaid Medical Management and Cost Containment
per Indemnity Claim
CWCI: “Analysis of Medical and Indemnity Benefit Payments”, Exhibit 2B, Page 14
2005 2006 2007 2008 2009 -
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
632
871
1,042
1,237
1,440
980
1,299
1,564
1,883
Accident Year
24 Months from Date of Injury:Average Annual Increase = 24%
12 Months from Date of Injury:Average Annual Increase = 23%
CA WC: BackgroundUltimate ALAE per Indemnity Claim
WCIRB July 1, 2012, Rate Filing page A:B-40Private Insurers Only
2005 2006 2007 2008 2009 2010 2011 -
2,000
4,000
6,000
8,000
10,000
12,000
14,000
7,093 7,433 8,027
8,891
10,184 10,866
11,302
Accident Year
4.8%
4.0%
14.5%10.8%8.0%
CA WC: Background% of Major PD Claims with Attorney Representation
At First Survey Level
WCIRB March 20, 2012, Actuarial Committee III-A134
2005 2006 2007 2008 20090.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
75.3% 77.0% 76.6% 79.5%85.7%
87.3% 87.2% 88.3%92.6% 91.0%
Accident Year
Southern California
Northern California
California Background]Claim Frequency
*WC frequency Based on NCCI 2012 Statistical Bulletin: Nationwide ex California excludes monopolistic states, only states with 3-day waiting period, weighted by employment (2008/09) **OSHA 2011 data from BLS (private & public sectors)
Cases Recorded
Lost Time TTD PPD PTD
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
OSHA
CA WC: BackgroundFiled Loss Adjustment Expense as a Percentage of Loss
California vs. Other States
NCCI Annual Statistical Bulletin, 2011, Exhibit VI
Lowest 20% 40% 60% 80% Highest-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
13.2%15.7%
17.7%18.9% 20.1%
26.4%
State Percentile Ranking
California: WCIRB Projection 7/1/12 = 25.6%
CA WC: BackgroundUltimate Indemnity Benefits per PPD Claim
60%
40%
20%
Lowest
California
NCCI Annual Statistical Bulletin, 2011, Exhibit XI (adjusted for AWW, Exhibit VIII).
CA WC: BackgroundDistribution of Premium, 2011
WCIRB Quarterly Market Reports, Exhibit 5Med & Indenmity split according to 7/1/12 WCIRB rate filing
Indemnity; 22%
Medical; 41%
Loss Ad-justment;
21%
Other; 17%
CA WC Reform: SB 863WCIRB Estimate of Impact: 2013
Provision $ Impact(Millions)
% Impact
PD Benefit Changes $510 +2.7%
Eliminate PD Add-ons ($170) -0.9%
Eliminate Bump Up/Down ($100M) -0.5%
Liens ($480M) -2.5%
Surgical Implant Hardware ($110) -0.6%
ASC Fees ($80M) -0.4%
Independent Medical Review ($370M) -1.9%
Ogilvie Decision ($210M) -1.1%
MPN Strengthening ($190M) -1.0%
Total 2013 ($1,200M) -6.3%
WCIRB 1/1/13 Rate Filing, Page A:B-34
CA WC Reform: SB 863WCIRB Estimate of Impact: 2014
Provision $ Impact(Millions)
% Impact
Total Impact 2013 ($1,200M) -6.3%
2014 PD Benefit Increases $570 +3.0%
Total Impact 2014 ($630M) -3.3%
WCIRB 1/1/13 Rate Filing, Page A:B-34
CA WC Reform: SB 863Major Provisions not Quantified
• Fee Schedule (RBRVS, Photocopy Service, Home Healthcare)
• Med-Legal Changes to QME• Interpreter Regulations• Timeframes regarding payment of paper
medical bills• Self-Insurance Security Requirements
CA Permanent Disability No Losers!
Impairmen
t
• From Doctor (per AMA Guides)• Add-Ons
Adjustmen
ts
• Future Earnings Capacity• Age• Occupation
PD Awar
d
• Apportionment• Weeks of Benefits• Min/Max Benefit per Week
Final Adjustmen
ts
• Life Pension/Permanent Total• Bump Up/Bump Down
CA WC Reform: SB 863Impact of Changes to PD
• Increase Max & Min Benefitso Most of Impact due to max not min
• Add-Ons: % of Total PDo Sleep: 1.2% of Ratings, 1.4% of Costo Sex: 0.4% of Ratings, 0.3% of Costo Psych: 1.7% of Ratings, 3.8% of Cost
• Replace FEC with AMA Modifiero 13% of Cost
BRS Analysis of DEU Data
CA WC Reform: SB 863# of Weeks at Bump Up/Bump Down
Data provided by WCIRB
2006 (2nd survey)
2007 (1st survey)
2007 (2nd survey)
2008 (1st survey)
2008 (2nd survey)
2009 (1st survey)
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
No BumpBump UpBump Down
CA WC Reform: SB 863Liens: Filing Fee
CHSWC Liens Report, 1/1/11, p. 4
$100 Filing Fee 1/1/04
Filing Fee Repealed 7/12/06
EAMS Goes Live
8/25/08
CA WC Reform: SB 8632012 Liens Filed
WCIRB Actuarial Committee 3/20/13, Page IV-A-25
1Q12 2Q12 3Q12 4Q12 -
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
LA CountyLA Basin (Other)Rest of State
CA WC Reform: SB 863Distribution of 2012 Liens by Type
WCIRB Actuarial Committee 3/20/13, Page IV-A-25
Copy Service; 0% Interpreter; 10%
Medical; 59%
Medical-Legal; 17%
Other; 13%
Petition for Cost
No Petition for Cost
CA WC Reform: SB 863IMR: Texas Reforms (TD & RTW)
“Setting the Standard”, TDI, December 2010, Page vi.
CA WC Reform: SB 863IMR: Texas Reforms (Medical Costs)
“Setting the Standard”, TDI, December 2010, Page vi.
CA WC Reform: SB 863IMR: Texas Reforms (Shorter Medical Tail)
“Setting the Standard”, TDI, December 2010, Page 41.
CA WC Reform: SB 863IMR: Texas Reforms (Medical Service Denials)
CA WC Reform: SB 863Other Important Features
• Increase in PD Benefitso Phased in Over 2 Yearso Prospective (applies to injuries on or after 1/1/13)o Impact on Utilization is area of dispute
• Cost Reductionso Some have retrospective components (IMR & Lien
changes apply to open claims)o Difficult to Price
CA WC Reform: SB 863
California Private Self-Insurer
Ratio
of T
otal
Lia
biliti
es /
Ca
se R
eser
ves
#1 #2 #3 #4 #5 #6 #7
Change in Security Requirements
1.35
2.00
CA WC Reform: SB 863Sometimes Even Hindsight Isn’t 20/20899 was off on savings and subsequent
development
To be addressed next…Costs
Implementation
• New policies• Training the examiners• Getting a feel for the new road• IMR (Maximus)• Bill Review• Liens (and the WCAB petition for costs)• Pharmacy and bill review programs
Other Issues• Regulations• AMICUS• New legislation• ADR / Opt out
Top WC Cost Drivers
• Litigation• (Prescription) Opiates• Multiple Body Parts• Hospitalizations• Obesity• Liens
Safeway Programs
• Hire Smartly• Functional Restoration• Pharmacy• UR connected to Bill Review• Medical Networks• Low case loads• Settlement philosophy• Medical Treatment Philosophy
