This document is the second annual report of the California Commission
on Health and Safety and Workers' Compensation.
The Commission, created by the workers' compensation reform legislation
of 1993, is charged with overseeing the health and safety and
workers' compensation systems in California and recommending administrative
or legislative modifications to improve their operation.
During the past year, the Commission has contracted with independent
research organizations in the academic and private sectors to
work with state agency personnel and interested members of the
workers' compensation community. This cooperative public-private
partnership continues to work together to identify, describe,
measure and propose solutions to problems and difficulties in
the current health and safety and workers' compensation systems.
The Commission has been focusing on assessing the impact of the
1993 workers' compensation reform legislation on the affected
systems and upon the workers' compensation community.
The following findings and recommendations are derived from the
Commission's various studies and other activities described in
IMPACT OF THE REFORM
Impact of the Reform on the Workers' Compensation Community
The workers' compensation community believes that the workers'
compensation system is still too complex and needs simplification
and further modification in certain areas.
The Commission recommends continuing evaluation and monitoring
of the California workers' compensation system.
The workers' compensation community has been very responsive to
the Commission and other DIR entities when invited to participate
in evaluation and advisory activities.
The Commission commends the community for its involvement and
recommends a continuation of this good working relationship in
all such DIR activities.
Impact on Workers
Some injured workers have indicated they feel that they do not
receive adequate information about their rights and responsibilities
under workers' compensation.
The Commission recommends that state agencies and the workers'
compensation community focus efforts on providing timely and understandable
information to workers, before and after injury. The Commission
has taken steps to improve worker knowledge and understanding
of the program, including contracting for projects to develop
written and video information and to convene a statewide task
force on young worker safety.
Impact on Employers
The reform legislation affected California employers in two significant
ways. The elimination in the workers' compensation minimum rate
law has resulted in lower premiums and the passage of a group
of provisions known as the "employers bill of rights"
has given employers more information and control over workers'
The Commission recommends continued monitoring of the costs
and benefits of the workers' compensation system to determine
the long range impact of the reforms. Current projections are
inconclusive; some indicate that costs are going up while others
predict that costs will remain near the current level.
The introduction of mandatory settlement conferences was meant
to reduce the need for formal hearings and decisions and to speed
the resolution of workers' compensation cases. However, data from
the medical-legal study suggest that this goal has not as yet
been achieved. Instead of reaching voluntary settlements that
do not necessitate active involvement by the DWC, parties are
increasingly using one or more dispute resolution methods.
The Commission recommends continued monitoring and analysis
of the claim adjudication process, delays, and timeframes for
It has been reported that Qualified Rehabilitation Representatives
may be writing plans that use funds from State Disability Insurance
(SDI) to supplement the vocational rehabilitation benefit. Concern
has been expressed that the workers' compensation vocational rehabilitation
benefit, that was "capped" at $16,000 by the reform
legislation, could possibly be circumvented by such action.
The Commission recommends that a work group be convened to
develop an issue paper on this subject, which could serve as the
basis for remedial action if needed.
Incomplete physician reports have been cited as a major factor
leading to inconsistency in permanent disability ratings. Many
of DWC's disability evaluators state that their largest problem
with the current system is the poor quality of medical reports
that they have to rate.
The Commission recommends continued efforts by IMC and DWC
to educate treating physicians and the workers' compensation medical
community in the proper reporting methods. The Commission has
contracted for a study of incomplete physician reports. The study
will determine the nature and magnitude of the problem, ascertain
who is producing incomplete reports and why, develop quantitative
analysis, provide recommendations for improving the quality of
reports and calculate the cost/benefit of possible modifications.
In an effort to reduce litigation, the California's workers' compensation reform provided a mechanism for an injured worker to obtain a summary permanent disability rating from DWC's Disability Evaluation Unit (DEU). Because of backlogs in the DEU, the Administrative Director in essence suspended the summary rating process for a time, by urging the workers' compensation community to self-rate cases, develop a proposed settlement, and submit it to DWC for review and approval.
The Commission recommends that the summary rating process be
evaluated in the future, when the program is fully operational.
The DWC reports that it is in the process of revising the Permanent Disability Rating Schedule. Draft copies of a proposed revision to the PDRS, including various guidelines were distributed to some members of the workers' compensation community for review and comment. However, some physicians are using the proposed guidelines in current medical reports.
The Commission recommends continued efforts by DWC to notify
the community that the proposed guidelines are not be used unless
and until they are adopted as part of the Permanent Disability
The Commission realizes that the rating of permanent disability
is one of the most difficult tasks of the workers' compensation
system. The manner in which California rates and compensates injured
workers for total and partial permanent disability has enormous
impact on the adequacy of their benefits, their ability to return
to gainful employment, the smooth operation of DWC's adjudication
system and the cost of the workers' compensation system to employers.
The Commission contracted with the Rand Corporation to conduct
a study that would look at California's permanent disability benefit
levels, the rating methods and the cost of providing those benefits
in comparison to similar systems in other states. The report will
include recommendations for improving the California system.
The workers' compensation managed care program was intended by
the Legislature to be self funding . However, the program has
not yet generated sufficient income to support the start-up loan
or the ongoing program and staff. It would appear that DWC has
had to absorb the difference between managed care costs and revenues.
The Commission recommends that the cost-effectiveness of the
DWC Managed Care Unit be examined in light of the reduction in
its projected workload.
The Health Care Organization certification program has been criticized
throughout the community for being too complex and posing a barrier
to participation in the workers' compensation managed care program.
The Commission recommends a reexamination of the legal mandates
of the HCO Certification Program and the approach employed to
implement the program.
The workers' compensation community has expressed concern about
the overlapping responsibilities of the Industrial Medical Council
and the Division of WorkersÃ Compensation with respect to
medical issues in meeting legislative mandates. Critics have cited
a lack of coordination between the IMC and DWC in these areas.
The Commission recommends that a review be made of the legislative
mandates and that the roles of and the relationship between the
Industrial Medical Council and the Division of Workers' Compensation
Medical Legal Evaluations
The Commission's Medical-Legal study determined that the cost
of medical-legal examinations on partial permanent disability
(PPD) claims has declined significantly since its peak during
the 1991 accident year. The study also showed that the costs of
medical-legal exams performed on permanent partial disability
claims of insured employers declined 84 percent from a high of
$394.5 million for the 1991 accident year to an estimated $64.5
million for the 1994 accident year. The cost was driven down by
revisions in the medical-legal fee schedule, restrictions on the
compensability of psychiatric claims, and limits on the number
of medical-legal exams.
The Commission concludes that the reform legislation has been
effective in this area. The Commission will continue to monitor
medical-legal costs in the workers' compensation system.
While the activities of the Department of Insurance may not specifically
be included within the Commission's purview, the Workers' Compensation
Fraud Assessment Commission and DOI's Fraud Division deal with
suspected fraud in workers' compensation claims. The Commission
notes that the workers' compensation community is being assessed
about $25 million per year to fund those activities.
The Commission fully supports anti-fraud activities in the
workers' compensation system. However, given the decline in the
number of workers' compensation claims and the significant assessment
on employers, the Commission recommends that the cost-effectiveness
of the Department of Insurance's workers' compensation fraud activities
HEALTH AND SAFETY
High Hazard Consultation and Inspection Program
The cost-effectiveness of the Cal-OSHA Target Inspection Program
may be hampered by the inability to identify the so-called "high
hazard employers." The current method utilizes various factors,
some of which are based upon dated information which does not
necessarily reflect the current situation.
The Commission recommends that the Division of Occupational
Safety and Health continue its effort to come up with guidelines
and/or develop alternative methods to identify high hazard employers.
AGENCY AND PROGRAM OPERATIONS
Division of Workers' Compensation
The Division of Workers' Compensation has been working on the
development of the "DWC Information System" to meet
the future needs of the department, the Legislature and the community.
DWC recommends that legislation be enacted to protect the confidentiality
The Commission supports this effort and the need for confidentiality
The workers' compensation community has expressed concern over
the development of the DWC Information System, citing a lack of
understanding of what the system is supposed to do and how it
is going to do it.
The Commission recommends that the DWC develop and issue written
materials to the public describing the proposed information system
and plans for its development and implementation. The Commission
also recommends that DWC continue documenting the discussions
and agreements reached at internal planning meetings.
The Commission has been somewhat hindered in its analytical evaluation
of the current system because of the lack of consistent data and
basic performance measurements available from the Division of
Workers' Compensation. This situation also hampers the operations
of the DWC.
The Commission recommends that DWC focus resources on obtaining
and reporting consistent, reliable and credible data from the
existing WCAB-Rehabilitation and Disability Evaluation online
The Commission notes that the Division of Workers' Compensation
is addressing some of its operational difficulties by reorganizing
staff reporting relationships and reengineering work processes.
The Commission supports actions designed to improve operations.
The Commission recommends that DWC form a group comprised of staff
and interested members of the community to perform ongoing monitoring
and evaluation of such changes and recommend needed modifications.
The Division of Workers' Compensation is employing outside consultants
to develop new systems and to recommend improvements in operations.
The Commission urges DWC to work closely with the outside consultants
to insure that they fully understand the unique aspects, parameters
and constraints of state service operations and the mandates that
must be met within that environment.
The workers' compensation community has expressed concern that
the DWC has negatively impacted injured workers by closing offices,
shifting workload and making other significant changes in its
service to the public without sufficient notice nor advanced planning.
The Commission recommends that DWC proceed with such activities
only after careful planning and sufficient notice to and consideration
of those affected by such actions.
It is reported that there are approximately $300 million in unrecovered
liens filed by the Employment Development Department against workers'
The Commission recommends that a work group be convened to
develop solutions to this problem.
Commission on Health and Safety and Workers' Compensation
The funding for the Commission is derived solely from penalty
monies assessed and collected by the Audit Unit of the Division
of Workers' Compensation. The level of funding is unpredictable
and hampers the Commission's ability to insure that its long-range
plans can be met. The Commission also notes that the level of
its funding depends upon the actions of an entity which the Commission
is overseeing -- an appearance of potential conflict of interest.
The Commission recommends that a definite funding level be
established for the Commission. If the Audit Unit does not collect
sufficient monies, a General Fund appropriation or user funding
assessment should be made to make up the difference. The Commission
wants to continue to provide cost-effective executive level information
to the Governor, the Legislature, the health and safety and workers'
compensation communities, and to the public. Such information
is critical to the formulation of optimum public policy benefiting
GO TO SECTION ONE