Real Questions Unanswered

Now we're in the last quarter of the year, things are winding down, and the industry is still debating the impact of SB 863.

Yesterday some new data was released by the Workers' Compensation Insurance Rating Bureau on whether, and by how much, SB 863 has had on expenses in the California system and the verdict is that gross initial projections seem accurate, but the breakdown of where those savings came from is different than expected.

The cost of liens dropped more than anticipated. WCIRB spokespeople put the reason on the filing fee and that is certainly a big component as many of the small liens, such as those from interpreting services and copy shops, aren't worth much more than the fee itself.

And while that certainly may be the case, I know by talking with some of these folks that they have been waiting on the sidelines for the fee schedules on interpreting and copy services - they weren't going to risk a $150 fee on a lien if they didn't really know the value of their services and can enforce payment; payors likewise aren't going to honor a bill for services that may not be "within fee schedule," and with no certain penalty for late or non-payment there's no reason to incur such costs.

Requests for Independent Medical Reviews continues to increase.

WCIRB reports a total of 37,083 applications were submitted for IMR in the first quarter of 2014, compared to 40,930 in the final quarter of 2012. In the second quarter of 2014, the number of applications climbed to 59,967. It increased again in the third quarter to 61,793.

Quarterly increase in IMR requests.

The WCIRB's projections that IMR would save $390 million a year were based on the assumption that, at most, 5,000 applications would be filed each month.

According to WCIRB, Maximus, the IMR review company contracted to perform the service, has a backlog of about 26,431 undecided cases at this point, but has completed more than 120,000 reviews, generating about $34 million in carrier payments so far, with the WCIRB projecting that the total amount carriers will have paid for IMR in the first two years of the program to be about $77 million.

Maximus shareholder equity past 5 years.

"The unanswered question is how much was saved by denying unnecessary medical care," the WorkCompCentral story this morning queries, stating that Greg Johnson, director of medical analytics for WCIRB, said the WCIRB simply can't answer that question.

Honestly, there's no way the WCIRB will ever be able to answer that question because it is not germane to IMR filings - we don't really know that IMR is denying unnecessary medical care. We only know that IMR is upholding Utilization Review denials, which may, or anecdotally more often than we admit, may not, be about appropriate care.

As I mentioned before, the anecdotal evidence suggests that UR is being used too often for cost containment rather than directing care. And frankly the amount of time it takes to get through a couple of UR denials and appeals, and then IMR review, denial and appeal, is incentive enough not to push for any particular treatment request - it's easier just to go to a general health doctor to get treatment for an ailment of "unknown origin."

And this is peripherally supported by current data the WCIRB reported.

The Rating Bureau projected that IMR would resolve disputes faster than going to the Workers' Compensation Appeals Board, which could reduce the average number of paid temporary disability days by 5% in 2013.

But the average number of paid TD days actually increased to 92.5 in calendar year 2013 from 88.6 in 2012.

Spokespeople for the WCIRB deflect, and state that this is due to getting the program up and running, and they expect the paid TD days to ameliorate; regardless nearly 90 days or three months is too long with or without IMR, particularly compared to nearly every other jurisdiction.

The dollar value of permanent disability indemnity is falling in line with projections - and that's understandable because the historical data on PD is robust; there's a lot of history in the data, but there are still many unanswered questions because it takes time for cases originating within the SB 863 era to get to final disposition where the information is reported.

My take away from the reporting is that uncertainty continues to dominate the California system - there just are too many components to SB 863 to say whether anything is actually working or not. Traditional analyses, in my opinion, aren't sufficient to explain the behavior patterns of system vendors because there are too many moving parts that have not settled into a business practice pattern.

In the meantime, while the insurance industry continues its narcissistic conversation about costs and expenses, the real questions are: a) are employers paying less for workers' compensation insurance now compared to before SB 863? and b) are injured workers getting better treatment, faster and more efficiently than before SB 863?

So far the answer to both is ....

no.

******************SHAMELESS PLUG******************

On December 6 at the Sheraton LAX Gateway hotel I will be presenting the WorkCompCentral Word on the Industry report, which will be followed by a debate between Department of Industrial Relations Director Christine Baker, Vons/Safeway VP of Risk Management Bill Zachry, applicant attorneys James Butler (No Cal) and Robert Rassp (So Cal) with a special motivational appearance by injured worker Dwight Johnson. We'll also be presenting the Comp Laude Awards, there will be networking, food, drink, music, dancing and all of the other year end, holiday event accoutrements. Tickets are on sale now and going fast (claims adjusters call for pricing).