Section III

The Commission's Examination of

Health and Safety and Workers' Compensation

Introduction

Due to the significant impact of the 1993 workers' compensation reforms on the California health and safety and workers' compensation system, the Commission during its first year of existence has directed most of its energies and attention to evaluating the results of those reforms.

Starting with the first Commission meeting in July 1994, representatives from California's workers' compensation program and from the workers' compensation community have made presentations and have shared their concerns regarding certain aspects of the current system. The Commission appreciates their candor and willingness to work together cooperatively to assess and improve the workers' compensation system.

As part of the Commission's outreach efforts, the Executive Officer has been meeting with various members of the state's workers' compensation community to discuss their concerns and ask their opinions regarding areas on which the Commission could focus its attention. In the past year the Executive Officer has met with representatives of the California Chamber of Commerce, Californians for Compensation Reform, the California Manufacturers Association, the California Self-Insurers Association, the California Applicants' Attorneys Association, the California Workers' Compensation Institute and its Rehabilitation Advisory Committee, the Workers' Compensation Insurance Rating Bureau, the California Society of Industrial Medicine and Surgery, the Industrial Medical Council, the Rehabilitation Council of California, insurance companies and with a number of academic researchers with expertise in this area. The Executive Officer has also attended hearings of the Assembly Insurance Committee and the Joint Committee on Workers' Compensation and meetings of the Fraud Assessment Commission. The Executive Officer and Commissioner Vach made presentations at the Division of Workers' Compensation's "2nd Annual Education Conference" in Burbank and San Francisco.

The Commission is conducting an ongoing examination of the impact of recent changes to the workers' compensation program. Since some of the reform provisions are still being implemented, it is too soon to assess the effects in many program areas. The Commission has begun and will continue to monitor those areas.

In some instances, however, the Commission has decided to begin its evaluation by devoting resources to formal studies. Much of the focus is on developing a baseline structure of information about California's workers' compensation and health and safety programs. As more information is procured, a more complete, accurate and comprehensive picture will be obtained that will enable the Commission to make informed policy recommendations in the future.

To avoid potential duplication of effort, the Commission's Executive Officer met with several interested parties to identify studies that were already being contemplated or conducted by the various members of the workers' compensation community. She also requested their opinions on the Commission's proposed projects and has asked for their suggestions regarding other possible studies. The Commission has apparently identified the most crucial areas of importance to the workers' compensation community.

In assessing the impact of the 1993 legislative changes, the Commission has focused its resources on those areas which it believes would yield measurable results through critical study by independent investigative scholars. These areas of study include:

* Information Services to Injured Workers (Labor Occupational Health Program, University of California at Berkeley)

* Impact of Vocational Rehabilitation Reform (Survey Research Center, University of California at Berkeley)

* Quality of Loss Control Services (California State University at Fresno)

* Impact of Medical/Legal Reform (Survey Research Center, University of California at Berkeley

The following describes the Commission's specific areas of concern and the actions it has taken to oversee the health and safety and workers' compensation programs in California.

California's Workers' Compensation System

Recommended Changes to Existing Workers' Compensation Laws

Initially, the Commission discussed establishing a task force or study group to make recommendations as needed for changes to current law, regulations, and operational procedures.

The Commission's Executive Officer participated in a meeting with DWC and several workers' compensation interest groups on February 22, 1995 to identify areas of unnecessary complication in the workers' compensation system and develop an approach to constructing solutions.

The following areas of concern were identified by the meeting participants:

- Labor Code Sections 4061 and 4062, which deal with medical evaluation of permanent impairment and limitations, need to be reviewed and rewritten.

- The Benefit Notice program needs to be streamlined and simplified.

- The procedures in the DWC district offices need to be standardized and enforced.

- Permanent disability ratings from the DWC Disability Evaluation Unit need to be objective and issued timely.

- DWC needs to increase its focus on the delivery of proper benefits to injured workers on a timely basis.

- Reimbursement procedures for medical service costs need to be simplified and streamlined.

- Inconsistencies in the medical bill review process need to be corrected.

- The interpreter's fee issue needs to be reviewed.

- The Workers' Compensation Appeals Board (WCAB) needs to review the venue issue.

- The lien procedures need to be addressed.

- The dispute resolution process needs to be simplified and settlements that are agreed to by all parties should be expedited.

- Parameters for the certification of claims examiners need to be developed.

- The number and complexity of DWC forms need to be reduced.

DWC administrative director Casey L. Young has advised the Commission that he intended to bring together a task force to address these issues. Commission staff will monitor and provide ongoing reports on the activities of the administrative director's Task Force. The Commission also expects to receive updates from the administrative director about the Task Force from time to time as well.

Vocational Rehabilitation

The 1993 workers' compensation reform legislation made major changes affecting the level and delivery of the vocational rehabilitation benefit.

The most significant changes are as follows:

* A vocational rehabilitation claim has a cap of $16,000.

* The injured worker is restricted to one vocational rehabilitation plan, unless:

- the medical condition worsens

- the plan is disrupted beyond the employee's control

- the employer does not provide timely service

- the combined cost of all plans cannot exceed the $16,000 cap unless

permanent disability rating is 25% or more.

* If the employer offers the injured worker modified work that lasts at least 12 months, the employer terminates liability for providing vocational rehabilitation benefits, whether or not the employee accepts the offer.

* If the employer offers the injured employee alternative work under the following conditions, then the employer terminates liability for rehabilitation benefits, whether or not the employee accepts:

- Employee must have the ability to do the job.

- Total income must be within 15% of the employee's pre-injury wage.

- The job must be within a reasonable commute.

- The job must last at least 12 months.

* Vocational rehabilitation maintenance allowance payments are limited to 52 weeks.

The Commission wants to measure the impact of the reform changes on vocational rehabilitation benefits. In order to do so, it is necessary to set up a model to get baseline information this year that will provide comparative data in future years regarding the number of workers undergoing vocational rehabilitation, the duration and cost of rehabilitation programs and services and the results produced by these programs and services. Commissioner McLeod is particularly interested in comparing the vocational rehabilitation experience of public sector employees and private sector employees.

The Vocational Rehabilitation Reform Project

The Vocational Rehabilitation Reform Project is being conducted by the UC Berkeley Survey Research Center (SRC), pursuant to an interagency agreement between the Commission and the University.

The primary objective of the study is to help the Commission in evaluate the impact of the reform legislation on the vocational rehabilitation system. Questions to be answered include: Did the reforms reduce the cost of the rehabilitation benefit for employers? How have changes affected outcomes for injured workers?

The study will establish baseline data for continued monitoring of rehabilitation services and will estimate the impact of reform on the workloads for DWC rehabilitation consultants, caseloads in the DWC Rehabilitation Unit's dispute resolution process, and caseloads in the WCAB system.

The study will include:

* Statistical analysis of existing data from electronic databases in the WCAB/Rehabilitation online system at the Division of Workers' Compensation and the files on all workplace injuries maintained by the Division of Labor Statistics and Research, with matching to databases in California's Employment Development Department.

* Records review of vocational rehabilitation case files drawn from a random sample of files kept at the 27 district offices of the DWC Rehabilitation Unit.

* A survey and comparison of the injured workers' vocational rehabilitation options and outcomes under pre-reform and post-reform statutory requirements.

* Analysis of the results of the records review and survey to give an extensive and in-depth review of the impact of the recent reform legislation.

Medical-legal

The Commission wants to monitor the impact of changes to the medical-legal evaluation process by the workers' compensation reform legislation. Starting in 1989, legislative reforms restricted the number and lowered the cost of medical-legal evaluations needed to settle disputed compensation issues. In addition, the Legislature created the Qualified Medical Evaluator (QME) designation in 1989 and increased the importance of the treating physician's reports in the dispute resolution process in 1993. These changes were intended to reduce both the cost and the frequency of litigation, which not only drives up the price of workers' compensation insurance to employers but also leads to long delays in case resolution and the delivery of benefits to injured workers.

Commission staff spoke with several members of the workers' compensation community and determined that there was a great deal of interest and support in a study. The Workers' Compensation Insurance Rating Bureau (WCIRB) advised that they were very willing to work with the Commission with regard to data collection needs. Carlyle Brakensiek of the California Society of Industrial Medicine and Surgery offered several comments and suggestions regarding technical aspects of the draft Medical-legal project proposal.

Medical-legal Evaluation Study

The Medical-legal study, which will evaluate the impact of medical-legal evaluation reform on California's workers' compensation program, is being conducted by the UC Berkeley Survey Research Center, pursuant to an interagency agreement between the Commission and the University.

Questions to be answered include: Have the reforms reduced the number of evaluations? Have cost savings been similar in represented and unrepresented cases? Have the cost savings been similar in northern and southern California? Have unrepresented permanent disability cases taken substantially longer to settle, possibly as a result of the backlog of cases at DWC's Disability Evaluation Unit?

The analysis will be based upon a set of data created by the WCIRB at the request of the Legislature to evaluate the 1989 reforms. Since that time, the WCIRB has continued to collect these data on an annual basis.

This data consists of stratified samples of 3,500 permanent disability claims from 1989 accidents arising on July 1, 1988 to June 30, 1989 policies; 3,500 claims from 1990 accidents (on July 1989-June 1990 policies), and 3,500 claims from 1991 accidents (arising on July 1990-June 1991 policies). This year, the WCIRB will extend this data to include 3,500 claims from 1992 accidents (arising on July 1991-June 1992 policies) and smaller samples of 1993 and 1994 claims. Each year, all cases surveyed in the previous year that were not "closed" at the time of the survey are resurveyed. Thus, data exist on a year-by-year basis for each claim. The survey conducted in 1995 will cover over 9,000 claims extending from 1988-89 policy years to the 1994 policy year.

The data available on the surveys will be used to evaluate the closure rates for disability cases from the date of injury, the number of medical-legal reports and cost for each accident year. This study will allow the Commission to assess the changes in frequency and cost by type of requester, by type of evaluator (treating physician or QME), by specialty and by region.

This analysis will provide the Commission with information regarding the method by which WCAB cases are resolved -- compromise and release, stipulated award, take nothing, finding and award, dismissal, or voluntary payments. This assessment would also be able to determine if a request for medical evaluation is made by the injured worker, the employer/carrier or the physician.

Medical costs by calendar year and by the elapsed time from the injury date will also be determined. The study will also show whether an injured worker is represented by an attorney, the cost per case of the medical-legal exams, and the specialty of the provider of the medical-legal exams, thereby indicating whether the reforms had any different impact on represented and unrepresented cases.

The Experience of the Industrially-injured Worker with the California Workers' Compensation System

The Commission is concerned about how recent changes in the workers' compensation system are serving injured workers. The Commission realizes that, if the injured worker is to be served well by the system, he or she must be aware of his or her rights and responsibilities under the changing workers' compensation program. To address this issue, the Commission decided to evaluate information services provided to injured workers by the Department of Industrial Relations and other participants in the workers' compensation system.

At the Commission's request, UC Berkeley's Labor Occupational Health Program (LOHP) submitted a proposal to evaluate these services. The proposal was modified and finalized after discussions with LOHP, the Commission and its staff and members of the workers' compensation community. Although as originally planned the study would have focused solely on unrepresented workers, it has been expanded to include all injured workers, whether represented by counsel or not.

At the January 1995 meeting, the Commission members present voted unanimously to contract with LOHP to conduct the Information Services to Injured Workers Study. The following is a summary of that project.

Information Services to Injured Workers project

The Information Services to Injured Workers project is being conducted jointly by UC Berkeley's LOHP and Survey Research Center (SRC). The project includes represented and unrepresented injured workers and examines information services provided by all parties and organizations, not just by the state government.

The objectives of this project are to:

* assess the efficacy of information services designed to help the injured worker get through the workers' compensation system,

* analyze strengths and areas needing improvement in current information services,

* recommend ways to improve those services, and

* systematically collect information from injured about their experiences with all aspects of the workers' compensation system.

The project consists of two phases over a period of 18 months. First, the LOHP will convene a discussion group of DWC Information and Assistance officers, four focus groups of English-speaking injured workers and two focus groups of Spanish-speaking injured workers to collect data on injured workers' experiences with information services. LOHP will analyze the results of the focus group sessions and at the end of twelve months will report these results to the Commission, along with specific recommendations for improving current information services.

Second, LOHP will use these results to help design a mail survey that the SRC will send to 1,000 injured workers in the workers' compensation system. The survey will evaluate information services and all other services designed to assist injured workers. The SRC will compile the data collected from the mail survey at the end of 14 months and will provide a summary of the results of the mail survey by the end of the 18th month. The LOHP will then provide a final report.

LOHP has convened an advisory committee for the study of the experience of the injured worker with the California workers' compensation system. The advisory committee includes:

* Information and Assistance officers from DWC

* Other representatives from DIR

* Labor union representatives

* Unrepresented workers

* Applicant and defense attorneys

* Employer and insurance company representatives

Health Care Organization Program

The Commission is very interested in tracking the implementation of the Health Care Organization (HCO) program, which is designed to introduce more managed medical care into workers' compensation.

At the Commission's request, Dr. Linda Rudolph, Medical Director of the DWC's Managed Care Program, was invited to speak at the Commission's May 1995 meeting. She said that program implementation has been slow because of barriers to participation contained in the 1993 workers' compensation reform legislation setting up the program.

At several meetings the Commission discussed how it can best monitor the development of the HCO program. The Commission focused its attention on the problems caused by the authorizing legislation and regulations that are causing few health care organizations to seek certification. The Commission directed staff to monitor the program's progress, conduct background research and look at the development of similar programs in other states.

The Commission's Executive Officer attended an oversight hearing on March 27, 1995 conducted by Senator Steve Peace's Joint Committee on Workers' Compensation. There was a lot of interest in the status of the HCO program and the legislative or administrative changes that are needed to improve it.

Elimination of California's Minimum Rate Law

The potential impact of the elimination of the minimum rate law to the California economy has been predicted to be in the millions of dollars by lowering total workers' compensation premiums paid by businesses. The Commission is concerned with the effect of the elimination of the minimum rate law on both employers and employees.

The Commission explored the possibility of collecting baseline data regarding the premium amounts employers have paid by classification prior to the rate change and compare that in the future to what they pay subsequent to the elimination of the minimum rate. The Commission considered conducting surveys of employers to determine their experience with obtaining workers' compensation insurance and also monitoring the Uninsured Employers Fund with respect to insurer insolvency.

Commission staff met with the research directors of the Department of Insurance and Division of Workers' Compensation and with Dave Bellusci of the WCIRB.

However, at the March 1995 meeting, Ed Woodward, President of the California Workers' Compensation Institute (CWCI), stated that it is difficult to gauge yet the impact of repeal of the minimum rate law on the workers' compensation system. Only policies that have been renewed since January 1, 1995 have been affected by repeal, and so only anecdotal information is currently available. Insurer representatives further noted that many changes have impacted the state's workers' compensation insurers in recent years (including new requirements for loss control certification and new procedures mandated by the "Employers' Bill of Rights"), and so there are many contradictory pressures on workers' compensation carriers right now. It was estimated that in two years workers' compensation premium rate levels and costs could be analyzed, but now there is not much correlation between costs and premium rates.

Commissioner Rankin commented that he was concerned with the impact of the elimination of the minimum rate law in two areas and recommended that the Commission monitor them:

- The claims adjusting process. The Commission could determine if insurance companies have laid off adjusters in proportion to a decline in the number of claims.

- Loss control services. The Commission could determine if insurance companies have eliminated loss control services as a way of saving money to make up for cuts in the premium.

Commissioner Vach recommended that the Commission contact DWC Audit Unit staff in order to discover if there are problems with insurers' claims administration beyond those for which penalties are assessed. A comparison could be made of the number of claims per adjuster before and after repeal of the minimum rate law.

Ed Woodward commented that there are many factors that may mask the findings. One is the large increase in the cost of administering and adjusting claims today. Even though the numbers of litigated claims have gone down, insurance companies are facing increased numbers of appearances before the WCAB which are costing more. Mr. Woodward said that such anomalies are affecting the workers' compensation system and he encouraged the Commission to look at these as well.

At the Commission's request, the School of Health and Social Work at the California State University at Fresno submitted a project proposal to assess the quality and quantity of loss control services provided to employers by insurers. The project would also produce a Loss Control Services model and evaluation tool that may be utilized by the workers' compensation community.

At the May 1995 meeting, the Commission members present voted unanimously to contact with the California State University at Fresno to conduct the Assessment of Loss Control Services project. The following is a summary of that project.

Assessment of Loss Control Services Project

The Assessment of Loss Control Services project is being conducted by the School of Health and Social Work at the California State University at Fresno.

The 1993 workers' compensation reform legislation created the Loss Control Certification Program, which is designed to increase the quality and quantity of occupational safety and health loss control services offered to employers. The primary focus of loss control services is to assist in the reduction of occupational injuries and illnesses.

The reform legislation required workers' compensation insurers to provide loss control consultation services to all targeted employers. These services must include evaluation of the employer's operations, identification of factors most related to the losses experienced by the employers, formulation of recommended loss control measures, a written report documenting the consultation and ongoing evaluation of the employer to determine the effectiveness of the consultation. Insurers may not charge the employer any fee in addition to the insurance premium for these services.

Each insurer writing workers' compensation insurance in California must provide loss control and consultation services and be certified by the Loss Control Certification Unit in the Division of Occupational Safety and Health (DOSH).

Loss control services are those services offered by insurers to employers in order to prevent, reduce, or eliminate the potential for workers' compensation losses. Loss control management consists of the identification of the employer's risk exposure, measurement and analysis of exposures, the selection of appropriate loss control action and the implementation of loss control measures. Loss control services include workplace hazard surveys, training programs, consultations, accident analyses and industrial hygiene services.

The primary objective of the proposed study is to evaluate changes in the quality and quantity of loss control services before and after the reform legislation. A secondary objective is to develop a comprehensive loss control service model and evaluation tool designed to assist employers and insurers in reducing workplace injuries.

The study will determine if loss control services assist in:

* Identifying hazards related to employers' workers' compensation losses.

* Developing management and employee injury and illness prevention training programs.

* Developing and implementing first-aid and injury response programs.

* Developing the employer's required Injury and Illness Prevention Program.

* Reducing injuries and illnesses in the workplace.

The project will be conducted over a period of two years. During the first year, the project team will conduct a literature review, establish an advisory committee, develop the survey instrument, perform the pilot study, and revise the survey instrument. The survey and interviews, the presentation of findings, and the development of a loss control service model and evaluation tool will occur during the second year of the project.

Alternative Benefit Delivery Systems -- "Construction Carve-Out"

The Commission is monitoring one of the provisions of the 1993 workers' compensation reform package known informally as the "construction carve-out".

Labor Code Section 3201.5 provides that a construction industry firm that has a collective bargaining agreement with a real union can have an exclusive panel of medical and vocational rehabilitation providers as an alternative dispute resolution mechanism. This alternative dispute resolution is termed the "construction carve-out".

At the Commission's request, the DWC administrative director reported on the construction carve-out during the February 1995 Commission meeting. The administrative director said that the initial reaction from the workers' compensation community was a lot of requests to review alternative dispute resolution plans from entities that did not qualify as construction industry. Under the original provisions of the construction carve-out, the administrative director was to look at the proposed agreements, see if they complied with the law, and issue comments, but the division did not have approval/disapproval authority. A revision in 1994 gave the administrative director the power of approval and allowed the division to insure that the parties were eligible to participate. Four carve-out agreements have been made [1].

Pursuant to the requirements in Labor Code Section 3201.5(i), the DWC must report to the Legislature by June 30, 1996 on the number of employers and employees covered by carve-out agreements, as well as other data about claims costs and vocational rehabilitation.

The Commission will continue to monitor the implementation of the alternative benefit delivery system for the construction industry.

Information System for Workers' Compensation

At several Commission meetings, the DWC administrative director has reported on the development of an information system pursuant to Labor Code Section 138.6.

While there is not a specific requirement that the DWC coordinate with the Commission on this project, the administrative director stated at the first Commission meeting that he wanted to inform the Commission of his actions in light of the Commission's responsibilities to oversee the workers' compensation system as well as the injury prevention system.

The DWC is contracting with the UC Berkeley Survey Research Center (SRC) to design an information system to meet the needs of the workers' compensation community. The system would allow electronic recording of every industrial injury in the state and, in effect, would be an electronic claims file.

The administrative director reported that the project will be implemented in several phases. The first phase will determine what data is to be collected. The second phase will involve collecting the data electronically. The third phase will be voluntary reporting of information. In one or two years, DWC expects to mandate that the information be collected electronically. The DWC is required to report on its progress in developing this system to the Legislature by July 1, 1995.

The administrative director stated that the anticipated data collection methods and sources for this system include:

* Electronic data interchange. This must be compatible with the electronic data interchange (EDI) standards of the International Association of Industrial Accident Boards and Commissions (IAIABC).

* DIR's WCAB/Rehabilitation online system

* DIR's DEU/Claims online system

* Coordination with the WCIRB, DIR's Self-Insurance Plans, and the Employment Development Department

* Other information sources such as a customer feedback survey and "DWC Report Card"

The Commission expressed its concern about several aspects of the proposed information system, including the need of maintaining the proper confidentiality of certain records. A determination needs to be done regarding how confidentiality will be handled; it is a balance between the Public Records Act and the Privacy Act to get the information to those with a legitimate use for it while screening out those who do not. The administrative director stated that he was contemplating an exemption to the Public Records Act so that the data submitted pursuant to this project would be exempt from public disclosure under that Act. He believes that any data available to the public should not contain individual identifiers.

Commissioner Vach urged the administrative director to consider establishing a quasi public repository for the data, with a control mechanism for the dissemination of the data jointly shared by the suppliers and users of the data. The administrative director responded that what he envisioned was a public use data bank stripped of identifiers that could be placed on the internet or anywhere.

The Commission also voiced its concern about the cost of such a system. The administrative director explained that the proposed system will go through a full cost analysis in the feasibility study report process. A Feasibility Study Report (FSR) must be completed for any major proposed data processing project, detailing the system's purpose, goals and objectives, how it is to be developed, what it will do, an analysis of its estimated costs and projected benefits, and the timetable for development and implementation. The FSR is then submitted to the Office of Information Technology in the Department of Finance for review and approval before the project may be undertaken. Once approval is granted, DWC may then submit a budget change proposal to fund the project. At the June 1995 Commission meeting, the administrative director stated that the FSR for the DWC information system project would be completed by the late summer or early fall of 1995.

The administrative director reported that the DWC is also involved with the IAIABC's EDI project to develop national standards to enable electronic reporting by and data sharing among all states. This project is designed to reduce the costs due to the completion and processing of paper reports and eliminate mistakes made as a result of the various information requirements of different states. Several DWC staff are participating in the EDI project on the national development committee, the medical report group, the technical committee on edits and acknowledgments, and the subsequent report committee.

The IAIABC-EDI project includes the following reports:

1. First Report of Injury

2. Subsequent Report (benefit payments)

3. Proof of Coverage (who is insured by whom and for what periods of time)

4. Medical Report (diagnosis, treatment and costs)

5. Litigation Report

6. Vocational Rehabilitation Report

Delays in the Provision of Permanent Disability Ratings

The Commission is concerned with delays in the timely provision of permanent disability ratings to injured workers.

In an effort to reduce litigation, the California's workers' compensation system has provided a mechanism for an injured worker to obtain a summary permanent disability rating from the staff of the DWC's Disability Evaluation Unit (DEU). With the provision of the summary rating, the workers' compensation claim may be settled without the need for formal litigation before the appeals board.

According to the administrative director, the permanent disability rating backlog resulted from a statutory problem that has now been resolved by the 1993 workers' compensation reform legislation. Prior to 1993, "window period"[2] workers' compensation cases had to obtain a permanent disability rating from the Disability Evaluation Unit. A backlog of rating requests soon developed. The 1993 reform legislation eliminated that requirement for new cases but the Division was left with a large backlog of 20,000 requests for summary ratings and a 2,000 case backlog of rating reconsideration requests.

With this delay, the injured worker may give up hope of obtaining a summary rating and may file an application for adjudication of claim with the WCAB. So one of the mechanisms designed to reduce litigation may be contributing to increased litigation because of the delays in the issuance of summary ratings.

In response to the growing backlog, the administrative director issued a DWC Newsline (Bulletin 94-9) dated November 4, 1994 encouraging claims administrators to attempt to reach a settlement with the injured worker. The approach was to have the workers' compensation community go ahead and rate the cases and submit the settlement documents to the DWC. It is the job of the Information and Assistance (I&A) Unit and then the workers' compensation referee to make sure a settlement is fair. If the workers' compensation referee determines that a formal rating is needed, he or she will obtain a rating from the DEU.

In addition, the DEU closed for a week three times in 1995 to enable evaluators to focus on the backlogged requests. The administrative director told the Commission that these efforts are helping to reduce the backlog.

At the January 1995 Commission meeting, Ed Woodward, President of the California Workers' Compensation Institute (CWCI), commented that the delays and backlogs continue. He observed that the Division of Workers' Compensation is under a legislative mandate to provide summary ratings in 20 days from the receipt of the medical report. Where the summary rating was not provided within the 20-day timeframe, the DWC administrative director has now encouraged the parties to do "self-ratings" and settle. Mr. Woodward remarked that this action was a pressure valve or band-aid but not a solution and he doubted whether it was the intent of the Legislature.

At the same meeting, Lloyd Rowe of the California Applicant Attorneys' Association suggested that the Commission monitor the situation and initiate a study next year if the problem continues.

At the February 1995 meeting, DWC administrative director Casey L. Young stated that the permanent disability ratings (PDR) backlog was one of the two biggest problems in the Division of Workers' Compensation. (The other problem is the backlog of liens in the southern California DWC offices.)

The Commission expressed concern about the new policy to encourage settlement on the grounds that many claims adjusters in the insurance companies have only a limited knowledge of permanent disability rating. The administrative director answered that DWC did not expect them to do the complicated ratings but that there are many simple or straight-forward ratings that can be completed.

When asked what the impact would be when the proposed changes to the Permanent Disability Rating Schedule (PDRS) were implemented, the administrative director responded that since the DEU was going to test the new PDRS by rating a 2,000 case sample, the backlog is expected to increase in the short run. However, since the new PDRS is expected to make cases faster and easier to rate, it is expected to help reduce the backlog in the long run.

At the June 1995 meeting, the administrative director reported that the current backlog of requests for summary permanent disability ratings had stabilized at approximately 12,000. He said that additional disability evaluators have been hired and trained, thereby increasing the rating capacity of the DEU by 25%. The new disability evaluators are scheduled to spend 80% of their time on the summary ratings backlog.

The administrative director also noted that the numbers of settlement documents submitted to the I&A had increased from 1,600 in April 1994 to 4,000 in April 1995. He said that there are now backlogs of settlement documents with "self-ratings" in I&A which indicates that the backlog is moving from DEU to I&A and then to the WC referees for settlement.

District Office Procedures and Referee Performance

The Commission has noted that there have been repeated complaints from the workers' compensation community that differing procedures were being followed in the 27 DWC district offices statewide. The Commission was concerned that the program changes brought on by the reform might exacerbate the situation.

The Commission asked the administrative director to report on the situation at the February 1995 Commission meeting. He said that there were several reasons for the lack of uniformity in district office procedures:

* The agency has been a budgetary step child and did not receive

adequate funding.

* The district offices were left to fend for themselves, and they did.

* There is a structural problem in the way that the agency is organized:

27 offices report to one person and 27 offices operate on their own.

The administrative director stated that DWC is doing several things to alleviate these problems:

* Update the DWC Policy and Procedure (P&P) Manual which has not been updated for many years. Former administrative director Walter Brophy has been retained to update the P&P, which is expected to be issued later this year.

* Develop a reorganization plan to establish three DWC regional managers who will insure that policies are carried out on a consistent basis. The reorganization plan, which will reduce the manager-to-employee ratio, has been submitted to the Department of Personnel Administration.

* Increase staff training. When the 1993 reform legislation passed, training was provided for all DWC professional staff. All new workers' compensation referees receive a consistent training course. In the future, DWC plans to have a program of continuous training for referees.

* Deal with the backlog of liens. After consulting with the workers' compensation community, a backlog policy was issued by the administrative director and Diana Marshall, the Chair of the Workers' Compensation Appeals Board. That policy states that the DWC is to deal with liens along with the case-in-chief. A referee is not to sign the settlement document until a good faith effort has been made to resolve the liens.

The administrative director reported that DWC investigates all complaints of inconsistency. At times, some real problems have been uncovered, such as DWC's inability since 1990 to direct venue. Because of this restriction on venue, the district offices have different volumes of WCAB cases -- some offices are inundated and some are underutilized. Some offices are not being used to their potential since it is difficult and expensive to get out of facility leases and move staff around. There is no fluid way to deal with changes in the workload.

The venue problem is most apparent in Los Angeles County. Previously, an injured worker had to file in the specific DWC district office determined by a venue system based on the zip code of the injured worker's residence, the location of the injury, or the office of his or her attorney. Now, an injured worker may file at any DWC district office in the county of the injured worker's residence, the location of the injury, or the office of his or her attorney. DWC opened new offices in Agoura Hills and Pasadena to draw off some of the workload, but with the new venue rule, this has not happened.

The administrative director was asked if the proposed addition of regional managers would provide better accountability of referees and if performance standards could be enforced. He replied that if there is a clear set of expectations and if the referees are closely monitored, then they will come around. If they do not, they can be disciplined and ultimately dismissed.

In response to legislation enacted in 1993 (AB 1252, Mountjoy), the administrative director has developed regulations requiring referees to comply with the Code of Judicial Conduct adopted by the Conference of California Judges. These regulations propose a code of conduct specifically for workers' compensation referees. The code was developed by the Josephson Institute of Ethics after many interviews with and surveys of participants in the workers' compensation system. The rules cover such subjects as the duty to report misconduct, integrity of court records and ex parte communications, socializing with practitioners, financial interest in educational programs, diligence, honesty and decorum. The administrative director wants to adopt this expanded Code of Judicial Conduct with explicit enforcement provisions as regulations. In response to a question from the Commission, the administrative director stated that he was satisfied with these tools as a way of monitoring referee performance, but suggested that the question be asked again in one year.

Illness and Injury Prevention

The workers' compensation reform legislation contained three provisions affecting illness and injury prevention efforts: a program to certify insurer loss control services, a targeted inspection and consultation program and a mandate to adopt a workplace ergonomics standard.

The Commission invited representatives from the Division of Occupational Safety and Health (DOSH) to report on those three areas at the Commission's September 1994 meeting.

The Loss Control Certification Program

The Division of Occupational Safety and Health has adopted a regulation to implement Section 11721 of the Insurance Code that was created by the workers' compensation reform legislation. That regulation specifies criteria that governed the certification of workers' compensation insurers to provide loss control consultation services to their insureds.

A representative from DOSH stated that the biggest problem that division faced was how to put together a program which would effectively carry out what the Legislature had in mind by focusing on those employers which are the "worst actors" and are the most in need of loss control consultation services. During the development of the regulations, several issues emerged in the workers' compensation community.

The regulations adopted by DOSH require the insurance carrier to identify those employers being targeted for loss control consultation services. This caused a fair amount of controversy in that the insurance carriers did not want to divulge that information. The insurance carriers felt that DOSH should be aware of the types of employers they were targeting but not the identities of the individual employers. However, DOSH felt that it needed to know who are the bad actors in order to target its resources toward them.

In effect, this has created a tripartite system -- the insurance carrier's consultation, Cal-OSHA's Targeted Consultation, and Cal-OSHA's Targeted Inspections -- to go after this pool of employers who are probably creating the biggest problem in terms of workers' compensation losses.

The loss control regulations also require the carriers to offer one level of service to targeted employers and another level of service to employers who have requested their consultation services. There was some opposition from the insurance carriers who wanted to provide the same service to an employer, whether targeted or not.

A third issue is the question of what is it that DOSH is certifying when an insurance carrier requests certification for their Loss Control Consultation Service. DOSH is looking at the whole program rather than certifying individuals such as industrial hygienists who provide those services. Mr. Welsh reported that those carriers who have become certified are providing loss control consultation services in-house with some outside help. Out of the approximately 300 workers' compensation insurance carriers in the state, 106 of them have been provisionally certified.

DOSH has established an ongoing unofficial advisory committee to review the implementation process. The first meeting was on September 15, 1994 in San Francisco.

High Hazard or Targeted Inspection and Consultation Program

Dr. John Howard, Chief of the Division of Occupational Safety and Health, reported on the High Hazard or Targeted Inspection and Consultation Program that was created by the workers' compensation reform legislation.

When appropriate regulations are adopted, the Department of Industrial Relations will assess those insureds that have a workers' compensation experience modification rating of 1.25 or higher and the monies will go into the Cal/OSHA Targeted Inspection and Consultation Fund. In the interim, Dr. Howard said that $4 million had been loaned to DOSH from the General Fund to get the program started.

DOSH is to focus on those insureds with the highest rates of injuries. DOSH is establishing a program, with help from other agencies like the Department of Insurance, to identify such employers. A major problem is that workers' compensation data is collected for workers' compensation purposes and not for safety and health purposes. For instance, in the workers' compensation data, the employer's address is frequently the headquarters of the company and not the site(s) where the injuries occur. A large conference in Dallas during October 3-5, 1994 is slated to deal with these issues.

A solution to this problem may be to obtain the insurer's First Reports of Injury electronically. DOSH staff can sort that data to identify employers at sites so that they can go out and conduct inspections and/or offer consultation services.

DOSH is currently looking at industries which are intrinsically high-hazard. It has developed a protocol for the electroplating industry and is in the process of completing a protocol for fall injuries. DOSH's next protocol will be for musculoskeletal injuries.

DOSH is also developing a model injury and illness prevention program for ergonomics, currently in draft form. It is a two-step process. The first is providing background information, educating employers and employees what ergonomics is and the second is a model program which takes an employer step-by-step through establishing and implementing an effective ergonomics program. DOSH is collaborating with a number of universities and employer groups.

Dr. Howard reported that DOSH has established two offices -- one in the North and one in the South -- that are exclusively devoted to the High Hazard Program. DOSH has about 15 or 16 compliance personnel in those offices now, and hopes to have a total of 35 in that unit.

The Commission's Executive Officer attended an oversight hearing on March 27, 1995 conducted by Senator Steve Peace's Joint Committee on Workers' Compensation. Funding for the Cal-OSHA Targeted Inspection Program was a matter of concern. The current method of assessing employers based upon their experience modification is unworkable, according to the insurers and self-insured employers. It was brought to the attention of the Joint Committee that the experience modification calculations included fraudulent workers' compensation claims, thereby increasing an employer's experience modification factor inappropriately.

Proposed Ergonomic Standard

Labor Code Section 6357 mandates the Occupational Safety and Health Standards Board to adopt standards for ergonomics in the workplace designed to minimize the instances of injury from repetitive motion by January 1, 1995.

At the September 1994 Commission meeting, Dr. John Howard reported that the Division of Occupational Safety and Health, with input from several advisory committees over the years, drafted proposed ergonomic standards which went to public hearing and received 6,154 comments. DOSH revised the proposed standards and submitted it to the Occupational Safety and Health Standards Board in November 1994.

On November 17, 1994, the OSH Standards Board unanimously rejected adoption of a proposed standard which would have required all workplaces in California to take actions to prevent cumulative trauma disorder (CTD), an ailment associated with repetitive motions.

The OSH Standards Board Chairman indicated that the loudest single message that emerged from more than 6,000 that the Board reviewed is that there is virtually no agreement among the affected groups on a means to effectively regulate the prevention of cumulative trauma disorder. It was also felt that the proposed standard was overly broad and would have imposed a costly regulatory burden on a vast number of employers where the occurrences of cumulative trauma disorders have not been identified.

At the January 1995 meeting, Commissioner Rankin moved that the Commission request that the Cal OSHA Standards Board adopt an ergonomics standard as expeditiously as possible. The motion passed 6 - 1. On January 18, 1995, the Commission Executive Officer sent a letter to Jere W. Ingram, Chairman of the Occupational Safety and Health Standards Board: "During its January 12, 1995 meeting, the Commission on Health and Safety and Workers' Compensation voted (6 aye, 1 nay, 1 absent) to request that the California Occupational Safety and Health Standards Board adopt an ergonomics standard as required by Labor Code Section 6357 as expeditiously as possible."

The California Labor Federation, AFL-CIO, sued to compel the OSH Standards Board to adopt the proposed ergonomic standard. On May 26, 1995, a Sacramento superior court ruled that the OSH Standards Board must adopt an ergonomics standard within 18 months. The board will have six months to develop a proposal and twelve months to get it through the rule-making process.


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