Cambridge, MA, May 16, 2017—California’s total costs per workers’ compensation claim with more than seven days of lost time have remained stable after the passage of Senate Bill (SB) 863, while most other 17 states experienced an increase during this period, according to a study by the Workers Compensation Research Institute (WCRI).

“The total costs per California workers’ compensation claim in 2013 evaluated as of March 2016 changed little compared with injuries in 2010 with 36 months of experience. This stability in total costs per claim was a result of several offsetting trends,” said Ramona Tanabe, WCRI’s executive vice president and counsel. “A decrease in medical payments per claim likely reflected the impact of SB 863’s provisions.”

SB 863 took effect in January 2013 and reduced the fee schedule rates for ambulatory surgery centers; eliminated separate reimbursement for implantable medical devices, hardware, and instruments for spinal surgeries; and began a multi-year transition to a professional services fee schedule based on the resource-based relative value scale.

“One of the other policy goals of SB 863 was to increase permanent disability benefits for California’s injured workers,” said Tanabe. “This explains in part why indemnity benefits per claim grew 5 to 6 percent per year in 2014 and 2015, although an increase in wages in multiple industries also contributed to this trend.”

SB 863 also created a new independent medical review (IMR) process for handling medical treatment disputes. This provision of the law was expected to reduce medical-legal expenses involving workers’ compensation claims, assuming more expensive qualified medical evaluator reports will be replaced by less costly IMR reports. WCRI found the anticipated decrease in medical-legal expenses per claim has not yet been observed.

California’s average total cost per claim remained higher than typical of the 18 states in this WCRI study, for 2013 claims with up to 39 months of experience after the implementation of SB 863.

The study, CompScope™ Benchmarks for California, 17th Edition, focuses on income benefits, overall medical payments, costs, use of benefits, duration of disability, litigiousness, benefit delivery expenses, timeliness of payment, and other metrics.

The following are among the study’s other findings:

  • One driver of higher total costs per claim in California was a higher percentage of claims with more than seven days of lost work time.
  • California’s higher indemnity benefits per claim were mainly driven by longer duration of temporary disability benefits and more frequent permanent partial disability/lump-sum settlement payments.
  • California had the highest benefit delivery expenses per claim of the 18 states WCRI studied, due to higher medical cost containment expenses per claim and higher litigation expenses per claim.

For more information on this study, visit https://www.wcrinet.org/reports/compscope-benchmarks-for-california-17th-edition.

The Cambridge-based WCRI is recognized as a leader in providing high-quality, objective information about public policy issues involving workers' compensation systems. 

ABOUT WCRI:

The Workers Compensation Research Institute (WCRI) is an independent, not-for-profit research organization based in Cambridge, MA. Organized in 1983, the Institute does not take positions on the issues it researches; rather, it provides information obtained through studies and data collection efforts, which conform to recognized scientific methods. Objectivity is further ensured through rigorous, unbiased peer review procedures. WCRI's diverse membership includes employers; insurers; governmental entities; managed care companies; health care providers; insurance regulators; state labor organizations; and state administrative agencies in the U.S., Canada, Australia, and New Zealand.  

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