Wednesday, May 7, 2014

How To Reduce Claim Costs

If you're a regular reader of modern day "short news," the variety that has been popularized by Harry Blogett and his web site Business Insider, you know that the headline I used for this morning's post was crafted only to get your attention.

Because I really don't know how to reduce claim costs.

But the folks who have been crafting California work comp reform over the past 20 years or so think they do, or so it seems.

The collective reformer's attempted way to reduce claim costs appears to be to make the system so convoluted, so complex, so impossibly irrational, that no regular human being, let alone an injured worker in distress, could possibly get through the system without the aid of an expert.

This WorkCompCentral Forum post ( reflects just how desperate some injured workers are to understand what is happening with their claim and how to navigate the system to ensure that they are not taken advantage of by the employer/carrier responsible for providing their benefits.

Even if you are an expert, staying on top of all of the changes wrought by legislative fiat then remolded by regulatory implementation, only to be further refined (or deformed as some would insist) by case law requires constant education.

There has been debate recently highlighted in the press about the frustrations attorneys are experiencing trying to manage their client's cases with legal challenges and procedural barriers at nearly every turn, to the point that many are saying there's much less activity actually getting a case to a settlement or trial position and much more haggling and gamesmanship about procedural defects or other issues.

Here's what the sad part of this whole scenario is - workers' compensation was supposed to be generally a self-executing, administratively managed, benefit delivery system.

It is important to restate that it is supposed to be a benefit delivery system.

Not a system of Byzantine complexity or Rube Goldberg insanity.

This insanity gets worse every reform...

Yet, in the quest for cost control the legislature, and consequently the regulators, have seen to it to create incentives for injured workers to get attorneys.

The other day I basically took the California Applicant's Attorneys Association to task for singling out the PD rate in comparison to other states - my point was that the weekly rate is an insufficient basis for comparison because so much more goes into calculating the totality of compensation paid for a permanent disability.

But there is one thing for sure - more applicant attorneys are needed in this system if it is to continue in the unrealistically overburdensome restrictive state of convolution.

More applicant attorney involvement means more defense attorneys.

More attorneys on either side of the fence simply mean more costs ... to everyone, not just employers, carriers or vendors, but to injured workers too, because their claims become unnecessarily extended and with procedural madness.

And I think that the statistics bear this out over the past couple of years where defense attorney spending has risen 22% since 2010 (last numbers from the Workers' Compensation Insurance Rating Bureau reflect $780 million in 2012).

Providers of services and goods to injured workers have also been targeted, with lien filing and (currently suspended) activation fees, procedural hurdles, and just blatant discrimination at the hearing level.

A WorkCompCentral story this morning provides some illumination in just how difficult it is for providers to get paid for their services, even when legitimate and with prior authorization.

I don't know what the numbers are showing yet, but I have seen enough anecdotal evidence to indicate that SB 863 is shaping up to be an abysmal failure in terms of saving costs.

To add to the dour portrait being painted by SB 863, some are saying that the simplified method envisioned by the administration for disbursement of the $120 million slush fund will create even more liability and costs for employers.

Frank Neuhauser, a researcher for the University of California, Berkeley and no stranger to researching the vagaries of California comp, says that while linking eligibility for cash payments to the Supplemental Job Displacement Benefit voucher seems simple, the risk is a big increase in utilization of the benefit.

“I don’t think the Supplemental Job Displacement Benefit has been used that much,” he said. "Now you’re going to basically require that any worker who can use it, use it.”

And employment law attorneys are saying that this scheme opens up employers to increased exposure for Fair Housing and Employment Act liability.

Bill Armstrong, of defense firm Armstrong, Callan & Shiu, told WorkCompCentral that the Physicians Return-to-Work & Voucher Report required to inform the employer of the work capacities and activity restrictions resulting from the injury may be a trigger to the "interactive process." An unaware employer (probably most small and medium sized employers in the state) could get stung.

“Because it’s specifically stated that it’s relevant to the search for regular, modified or alternative work, my view is receipt of that form triggers the obligation to commence the interactive process for accommodating job offers,” Armstrong said. “Since California recognizes a cause of action for failure to engage in the interactive process, there can be FEHA potential if the employer receives the form and doesn’t immediately involve the worker in the process.”

So back to the opening premise of this post - I really don't know how to reduce claim costs.

But if you want to know how to increase claim costs, just go back 20 years and review all of the "reforms" that have been implemented.

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