Thursday, March 17, 2016


There are now two independent reports out that call into question administrative and lawmaker's early assertions that the 2012 reform in California, SB 863, has met target goals.

One goal was to reduce friction in the California work comp system by interposing new administrative paths for various specialty disputes, such as the resolution of medical treatment requests. Another was to reduce costs in the system to pay for benefit increases by building roadblocks for vendors such as independent bill review and lien filing fees.

In the first instance, at least, the law encouraged payers to escalate their spending in response to the bureaucratic burden. In the second instance, it seems, that when push comes to shove those claiming unpaid balances on their vendor bills aren't discouraged by paying a lien fee.

Carriers and self-insured employers paid an estimated $7.647 billion in loss-adjustment expenses, commissions, acquisition fees, general costs and taxes in 2014, according to the Commission on Health and Safety and Workers’ Compensation's 2015 annual report.

Compare to $7.553 billion for medical benefits and $5.079 billion for indemnity benefits in 2014...

Though not the first time that administrative burden has exceeded actual benefits in California, the rapid pace of growth stemming from SB 863 is a worry.

Expenses increased 13.9% to $6.965 billion in 2013 compared to $6.114 billion in 2012. And the $691 million increase in expenses in 2014 was a 9.9% increase over 2013.

A breakdown of expenses by category in the report shows loss-adjustment expenses -- which include costs for IMR and UR, bill review, defense attorney fees, overhead and other costs associated with handling insurance claims -- are the fastest growing component of expenses.

Loss-adjustment expenses increased 12.36% to $4.364 billion in 2014 from $3.884 billion in 2013. Loss-adjustment expenses in 2013 were 18.92% higher than the $3.266 billion paid in 2012.

General expenses, which are not defined in the report, added another $1.229 billion to costs in 2014, but this was only 4.86% more than the $1.172 billion in general expenses reported for 2013.

In the meantime, the volume of liens filed is nearing pre-reform levels, having doubled in 2015, according to the Workers’ Compensation Insurance Rating Bureau.

There were 362,899 liens filed in 2015, according to the agenda for the March 22 meeting of the WCIRB’s Actuarial Committee, which is 91.1% more than the 189,951 liens filed in 2014, and 94.8% more than the 186,264 liens filed in 2013.

Compare to the period of 2000 to 2011, which recorded an average of 373,488 liens filed per year, 2.84% more than the total number filed in 2015. From 2000 to 2014, an average of 402,490 liens were filed each year, 9.84% more than what was filed last year.

Most of the volume increase was due to medical, and yes, Los Angeles County's reputation for leading the rest of the state in medical costs is reflected in the lien stats.

Medical providers filed 309,693 liens in 2015, up 97.6% over the 156,770 liens filed in 2014 and more than double the 137,982 filed in 2013.

A total of 230,436 liens were filed in Los Angeles County (accounted for in the Long Beach, Los Angeles, Marina Del Rey, Pomona and Van Nuys district offices) in 2015, an increase of 92.8% over the 119,522 filed in the county in 2014.

The remainder of the Los Angeles area (Anaheim, Oxnard, Riverside, San Bernardino and Santa Ana) saw a 96.1% increase in liens, with 91,612 filed in 2015 compared to 46,762 filed in 2014. San Diego had the single largest increase, 11,052 liens filed last year which was 108.8% more than the 5,294 filed in 2014.

The rest of the state wasn't immune from lien filing increases though.

Liens filed in Eureka, Redding and Santa Rosa increased 35% to 1,339 from 992; liens filed in Sacramento increased 30% to 2,009 from 1,546; and liens filed in Oakland, San Jose and San Francisco increased 28.4% to 9,207 from 7,169.

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