California Workers’ Compensation Market Trends
In this session at the 2016 California Workers’ Compensation & Risk Conference, experts gathered to discuss trends in the California workers’ compensation marketplace.
- Bill Mudge, President, WCIRB California
- Danielle Lisenbey, CEO, Broadspire
- Bryan Bogardus, Chief Operating Officer, AF Group
- Pamela Ferrandino, Executive Vice President & Senior Principal, National Casualty, Willis Towers Watson (moderator)
With all of the positive things going on it California, it still reigns highest among states with costs. Medical is still driving these costs, however, it is down 8%. In the past 25 years, the medical trend has only declined twice. One of the key questions moving forward will be related to where medical is heading.
SB 863 has, overall, had a positive effect for employers. First, the right parties were at the table to construct this bill – management and labor. Employers have seen lien savings, greater access to medical providers, and are seeing improvements on the dispute resolution process. They have also seen an increase in permanent disability benefits, which was also an intention of the bill. Overall, SB 863 has been a positive and has allowed employers to stay committed to the marketplace. From a self-insured employer perspective, employers are seeing 10-11% in medical cost savings.
SB 1160 passed last month and the purpose of this bill was to refine the utilization review (UR) process and clarify the process around liens. There is a general perspective that it will reduce treatment delays, but there is a real concern around cause of abuse in the first 30 days. This might be a negative. Will this cause behavior to shift?
From the lien side, there are three pieces that might have potential in SB 1160. The first is related to filing criminal fraud charges, the second is related to requiring declaration filing from the lien holder and how it might change behavior, and the third is the lien filing cannot be assigned to a third party.
In addition, cumulative trauma is also a large challenge for California employers. The growth has been immense. While it included 8% indemnity claims 10 years ago, it now consists of 18% indemnity claims and continuing to grow. It begets late reporting of claims, litigation and liens. This is driving costs, burdening the system and is an area that needs improvement.
Finally, the cost of prescription drugs remains one of the largest cost drivers in California workers’ compensation. Unit costs are increasing (4%), but utilization has decreased by 25% by transaction. This is a positive trend. For claims that last 10 or more years, however, drugs account for 37% of the costs. Employers are concerned about physician dispensing and patient dispensing from a cost perspective. The common thread is that employers need improved predictability of costs and guidelines to drive that predictability.