SB 863 - The Wrong Way to Deal With California Lien Claims

California has a very unique practice in the world of workers' compensation litigation - lien claims.

For those unfamiliar with this piece of California culture, the brief description is that when a person or entity provides services or goods to an injured worker under the state's work comp laws that person or entity may file a claim for payment before the Workers' Compensation Appeals Board (WCAB) and request judicial intervention.

The original purpose of this procedure was well intentioned, of course, but over time has become the subject of abuse by profiteers either unsatisfied with, or unwilling to accept, the "reimbursement". The "lien claimant" has a right to a day in court, and this right has resulted in a log jam, particularly in the Southern California venues to the point where the Los Angeles District Office is reporting that more than one quarter of all hearings concern lien claims.

Obviously this impedes the ability of injured workers to obtain hearings on their cases.

There have been many proposed and attempted solutions through the years, from local procedural maneuvers to legislative action. What has been lacking though is a study to identify exactly what the underlying problem is - so far all remedies have been based on anecdotal evidence resulting in solutions that address the symptom, but not the disease, and consequently the disease festers growing larger over time.

SB 863 is another example of an attempt to bandage the symptoms without addressing the disease (see WorkCompCentral story "Senate Committee Passes Lien Bill: WEST [2011-04-29]").

SB 863 by Sen. Ted Lieu, D-Torrance, requires liens be put in writing and creates a statute of limitations for filing liens. Under the bill, liens for services performed after July 1, 2012, would have to be filed within 18 months. Liens have to be filed within three years for services performed before that date.

The bill attempts to address liens filed by collection companies which buy bills from medical offices and then attempt to strong-arm payment from payers for any net difference between the billed amount and the fee-schedule adjusted paid amount by going to court. 

Testimony before the California Senate Labor and Industrial Relations Committee provided anecdotal evidence that collection companies are the culprits behind system clogging lien claims, but the lien claim system is much  more complex than just collection companies. Liens can be filed by the Employment Development Department to get reimbursed for unemployment or disability benefits that should have been the subject of work comp indemnity. Small service bills, such as for obtaining medical records during the discovery phase, are a source of liens, as are county district attorneys offices seeking reimbursement for child support services. There are many different lien claims made against an injured worker's case - not just by collection companies for medical billers.

SB 863 will do nothing to stem the flood of liens, and in fact may make things worse by constricting the time limits by which liens can be filed. There already is a statute of limitations on the books for the filing of liens - a product of the last "reform" wave. What happened as a consequence is that more liens were filed in order to meet the time limitions. So rather than reduce lien litigation the statute of limitations actually increased lien litigation.

I fear that SB 863's statute of limitations will only do the same, but make it even worse because of the compressed time limitations contained in the bill.

If the legislature was truly interested in stemming the filing of liens that are inappropriately being filed it should first fund a study that scientifically and thoroughly deduces the underlying issues of lien claims; i.e. study and deal with the disease, not the symptoms. Until then no legislation, regulation or local procedure will be effective in removing this litigation tactic.

CA FEHA Challenges the Great Bargain

One of the most pervasive arguments I encounter when I opine about the irrelevancy of work comp is whether the employer would be open to litigation and further liability for on the job injuries.

I have always maintained that a) I never proposed eliminating the "exclusive remedy" but have only proposed eliminating duplicative medical coverage, and b) that the employer, certainly in California, has much more civil liability exposure than has ever existed since the advent of work comp, thus the protection of "exclusive remedy" is merely a modern day illusion.

Take for example the recent appellate court ruling in Cuiellette v. City of Los Angeles, No. B224303, 04/22/2011 (reported in WorkCompCentral 4/26/2011).

The California Fair Employment and Housing Act (FEHA) requires that employers perform certain tasks when presented with a disabled employee, known among FEHA cognoscenti as the "interactive process". Failure to do so subjects the employer to damages and attorney fees.

Many workers, in particular those who go through the workers' compensation litigation process, end up with legally defined disability under FEHA. Since there is no longer vocational rehabilitation in California (bite my tongue - one of those "be careful what you ask for" reform measures that the business sector demanded) there is no longer anyone looking out for the unwitting employer - ergo work comp produces almost naturally a FEHA trap.

In the Cuiellette case the employer, City of Los Angeles, got hit with $1.5 million in damages, and $1.2 million in attorney fees - a total of $2.7 million that the City will have to take from some other programs in this economically challenging time - for failure to engage the injured worker (a police officer injured in the line of duty) in the interactive process or to otherwise accommodate him with an open position which he could do. Perhaps this might be unfair, perhaps not - the jury was persuaded that the City failed to follow the law and made an award accordingly.

The point is that when there are large potential liabilities that may be incurred as the result of a work injury regardless of the work comp "exclusive remedy" rule, then how relevant does work comp become vis-a-vis protection from large jury awards? At least for California employers the trade off of "protection" for "compensation" seems to have experienced significant erosion, and ironically, it was the business lobby that brought this upon the state's employers.

So, if an employer is exposed to this kind of liability how can one say that work comp provides protection to the employer in the Great Bargain scheme?

Texas Wildfires Demonstrate Work Comp Relevancy

I have opined many times that perhaps workers' compensation is becoming irrelevant in today's society because of limitations to compensability that reforms tend to implement and because of expanding coverage by federal fiat of medical care (more generally referred to as "ObamaCare").

But until there truly is a single source for medical care, workers' compensation continues to be very important to society where there is the basic, disaster or catastrophe, claim involving injury or loss of life.

WorkCompCentral this morning ran a story by our Central Bureau Chief, Bill Kidd, on the effect of the current Texas wildfire disaster and the number of claims just now starting to be filed, including two tragic death claims of volunteer fire fighters. These are the situations that workers' compensation was meant to address in the most fundamental way, and the type of situations we tend to forget about in the ongoing debate of whether workers' compensation is doing its job for both employers and employees.

When I think about the broad application of workers' compensation in a catastrophe situation where there is a broad scope of damage and injury - a big California earthquake comes to mind, but there are also devastating hurricanes in the Gulf Coast, torrential flooding in the Missouri basin - workers' compensation should be there to do the job that is generally not thought about except for those in the risk management profession: taking care of the people that put their lives on the line for the betterment of society.

Those folks, first responders and other workers who are called upon, and dutifully respond, to disaster, sometimes receive special benefits or treatment under state work comp systems. At times such special treatment is called into question because of abuse - reports of California Highway Patrolmen's "Chief's Disease" come to mind. But those statutes were written with disaster response in mind.

We can never so accurately script laws to alleviate abuse and reward honesty, but in our legal system we tend to lose sight of how law works. Interpretation of a statute must be done in light of the facts surrounding the dispute. When reform hysteria rises to legislative action, it is typically where application of the law has strayed on a factually borderline case, causing overreaction where more judicial restraint is probably a better remedy.

Regardless, when we see natural disasters impacting the lives of the working men and women who put their lives on hold for overall societal benefit, it is up to society to return the favor and provide treatment for injury and compensation where the most unfortunate can no longer provide for themselves or their family.

Texas SB 546 Heads In Wrong Direction

As we reported this morning in WorkCompCentral, the Texas Senate Health and Human Services Committee on Thursday approved Senate Bill 546 by Sen. Robert Deuell, R-Greenville.

SB 546 would allow physician dispensing of prescription drugs beyond those for immediate, necessary use or for free, and would have the system monitored by the Texas Medical Board.

I believe that this is a step backwards for Texas work comp.

The bill author, Dr. Deuell, told WorkCompCentral that he didn't believe that his bill would increase the cost of medication in the work comp system in Texas, but what he apparently didn't take into consideration is the likelihood, as experienced in California, Florida and other states, is that usage (what we call "utilization" in work comp) would increase.

Dr. Deuell certainly has good intent in his bill - he is a physician who has had a rural practice only to find that it could not service intended clientele because of a lack of pharmacies in the area where his practice was located.

Deuell told WorkCompCentral the cost of the drugs should not vary because of where they are dispensed. Allowing doctors to dispense drugs to patients could even lower costs by ensuring quicker treatment of patients, he said.

The experience with other states belies this hypothesis, however, and while Texas does things differently than most states, one thing that Texas can not control is human behavior. Legal dispensation of narcotics by physicians will, in my opinion, create a much more troublesome issue for the Texas system than is currently confronting rural patients.

Injured workers in rural areas have the option of mail order pharmacies. There are several that service the work comp community specifically. A physician could certainly dispense, legally right now, a sufficient quantity of medication to a rural injured worker pending fulfillment of the mail order prescription.

Dr. Deuell has good intentions, but good intentions don't make good law. I urge the Texas legislature to reject SB 546.

Let the Market Give EAMS Wings!

On Friday I was interviewed by representatives of the California Commission on Health, Safety and Workers' Compensation (CHSWC) who have been commissioned by the state legislature to do a review and make recommendations on the future of the Division of Workers' Compensation's Electronic Adjudication Management System (EAMS).

It's easy to bash EAMS - there are known problems not only with the technology but also with the roll out and implementation of the system.

But these are to be expected in a system that has relied upon only paper for nearly 100 years and has processes, and participants, so deeply embedded in an analog system. Rome wasn't built in a day, and neither can a change so radically different from established procedures, such as electronic court filing, be expected to be functionally perfect until the system has been used and developed over time.

Everyone that is involved in EAMS knows what the problems are, but what about the positive aspects of EAMS? Let me list them:

1. Electronic filing is here to stay - I don't really care what is good or bad about EAMS, it is going to be the architecture we have been assigned, so get used to it because it is not going away!
2. EAMS gets your documents into a case file NOW. I'm sure most of you remember hand filing paper at the Board, and if you wanted to ensure your paper went into the file you had to retrieve the file from the file storage (if it was there), take it to the clerk, get the paper date stamped, etc. etc. etc. What a burden that was, especially at the more busy Boards such as LA or Van Nuys.
3. If you have an EAMS account you can get much more information about your case than ever before, instantly.
4. Get hearing dates NOW! Regular hearing requests provide the user with a number of dates available - now you can tailor your appearances around YOUR schedule. This is a huge productivity advance for case participants!
5. See filed documents as the Board sees them and/or confirm that your documents are in the system with just a few keystrokes on an Internet connected computer.

So what was on my wish list that I conveyed to the interviewers?

1. A Software Development Kit (SDK) for third party vendor providers, such as DWC Direct (WorkCompCentral is a partner in that company) - this would allow vendors to bring to the market new innovations and solutions in a much more rapid method than is currently available;
2. On a related note, some "backdoor" availability for third party developers to test and launch products without requiring too much of DWC staff and resources;
3. Eliminate OCR forms now - OCR forms have clogged the system and are a crutch for those who don't want to commit to electronic filing in my opinion (albeit they are necessary presently because of limited licenses - but vendors such as DWC Direct can assist with this limitation);
4. Ability to retrieve case data for our customers via EAMS.

I'm sure there are more, detail oriented, wish list items, but this is the big picture.

Electronic case management on a wide-area network basis is here to stay. Making EAMS work best will require the private market to develop new technologies to bring the future to life. Private enterprise is simply better at addressing market concerns than is government. 

DWC brought EAMS to life , now it's time to let the private market give it wings!

Mixed News Shows Service is Critical

We reported several seemingly unrelated stories this morning in the WorkCompCentral news which, upon closer inspection, are all related.

In New York an appellate court upheld the constitutionality of the State Workers' Compensation Board (SWCB) to make assessments against the remaining self-insured employer members of the failed CRM Holdings, which was shut down by NY officials in 2006 due to underfunded reserves.

CRM is Majestic Capital, a Bermuda based insurance holding company and parent company of Majestic Insurance.

Yesterday the San Francisco Superior Court granted the California Department of Insurance an order placing Majestic Insurance Company into conservatorship.

In the meantime the California Workers' Compensation Insurance Rating Bureau (WCIRB - an advisory group that makes statistical analysis and assists carriers set rates) announced that carriers in that state saw a slight decline in claim costs from 2009 to 2010, that the combined ratio also declined, and that premium volume increased - all good news.

Written premium increased slightly as well to about $9.8 billion, which is still far below the "crisis" year of 2004 when skyrocketing premiums peaked at $23.5 billion, leading to a recall of Governor Gray Davis, the popular vote to office of Arnold Schwarzenegger, and the emergency "reform" of the California work comp system.

But the WCIRB's good news was tempered by the announcement that claim frequency increased by 4.5%.

Work comp is a brutal line in terms of profitability for carriers - actuarial excellence is a must, and pricing discipline defines the future financial viability of the system from the top down.

But the one element that ties this news altogether is that SERVICE to the employer remains the single most important aspect to a) ensuring reasonable rates, b) retaining business, c) and controlling costs.

Prior to "open rating" in California (which began in 1997) carriers competed almost exclusively on service, because they could not charge less than what the Department of Insurance allowed. Now we are seeing that even with "open rating" service is still the key marketing element of carriers who wish to stay in business.

Certain companies who have been through the cycles understand this. Others, such as Majestic, leave their road kill carcases on the open highway of the work comp insurance line. In this business you can't compete on pricing and remain viable. Service costs more up front, but keeps costs lower over time, and is the key to marketing the work comp line.

Illinois Problems Caused by Their Own

One of the big flaps in Illinois is the alleged abuse by prison guards seeking extra compensation through the work comp arena.

Specifically prison guards at the Menard Correctional Center have filed an unusually large amount of carpal tunnel claims, which have been granted awards. The common claim is that the injuries are caused by closing cell doors.

What drew the attention of the media is that the number of claims is so disproportionately large that there seems to be some element of higher authority conspiracy, or in the least, utter mismanagement or complacency by those in charge of these claims - namely the state's Department of Central Management Services (CMS).

A reporter for the Belleville News-Democrat, George Pawlaczyk, who has been investigating these claims, made a public records request for a sampling of the nerve conduction velocity studies used by CMS to validate benefit qualifications.

CMS refused to comply, raising numerous objections which the state Attorney General ultimately has declared invalid. The Attorney General stated in its opinion ordering release of the data, “CMS has not demonstrated how these anonymous test results constitute proprietary information that relates to the operation of CMS’ risk management program.”

CMS manages tens of millions of dollars of Illinois money in administering workers' compensation claims for the state.

One can only surmise why CMS is so reluctant to provide access to what should be innocuous documentation.

What are they hiding? Incompetence? Mismanagement? Crime?

We'll find out eventually.