The Commission is charged with overseeing the health and safety and workers' compensation systems in California and recommending administrative or legislative modifications to improve their operation.

The Commission has the following observations about the performance of state agencies regarding the operation of the specific programs for which they are responsible and in the fulfillment of tasks mandated by the reform legislation.

In its evaluation of agency operations, the Commission is more concerned with the approach and status of efforts to meet those requirements than with the completion of those tasks by the mandated deadlines.

Division of Workers' Compensation

General Observation

The Commission has been somewhat hampered in its evaluation of DWC's operations due to the lack of availability of consistent workload data and performance measures. The Commission supports DWC's long-range efforts to design and implement an information system for the future and it also urges DWC to modify the current system to provide basic data needed for ongoing program administration.

Claims Adjudication

Liens

Lien Backlogs

One of the most persistent administrative problems facing the DWC in recent years has been the development of a backlog of lien claims at some appeals board offices. This problem continues in the Van Nuys, Santa Ana and Los Angeles areas, but DWC reports that the other district offices are able to handle their ongoing lien filings.

In response to the backlog, the DWC established special Lien Units in the Santa Ana and Van Nuys district offices to focus on the backlogged liens. DWC now reports that these Lien Units have been scaled back.

EDD Liens

It is reported that there are approximately $300 million in unrecovered liens filed by the Employment Development Department against workers' compensation cases. The Commission attempted to verify this reported amount but EDD advised that there is disagreement within EDD as to the exact extent of the unrecovered monies.

EDD's Disability Insurance (DI) pays benefits when there is medical certification that a claimant cannot work. If there is an industrial component, DI will investigate. They notify the employer and the insurer of the liability to pay benefits when a determination is made. EDD advised that they must pay within 14 days or deny benefits while insurers have up to 90 days to accept liability.

DI provides a safety net for the injured worker, paying benefits on an interim basis and expecting to be reimbursed through the lien process when the injury is determined to be industrial and thus covered by workers' compensation. EDD continues to pay benefits under a lien, and when an application is filed with the WCAB to resolve the issue, the EDD is joined as a party to the WCAB case. When a WCAB case is resolved with a Findings and Award or Compromise and Release, the parties agree and the lien is settled. There are approximately 60,000 EDD lien filings per year.

Ordinarily, if the workers' compensation claim is accepted, then EDD is not involved because there is no dispute. However, the majority of claims are disputed.

Several problems have been noted with this procedure:

• EDD oftentimes does not receive notice of a case settlement, particularly in "walk through" calendar situations, which comprise about 25% of the caseload.
  

• There are duplication of benefits paid by EDD and the workers' compensation insurer, and the case must go before the WCAB for resolution. The reimbursement must come out of the employee's settlement.
  

• Investigation is cumbersome. A preponderance of medical evidence, a review of the timeliness of the denial, a Qualified Injured Worker determination, and a determination of benefits paid are all required before monies can be recuperated.
  

The Commission recommends that a work group be convened to develop solutions to this problem. Potential solutions that have already been identified include:

• Improve WCAB service notification to EDD when benefits are being picked up by insurers. (EDD advises they are no longer always receiving service.)
  

• Co-locate EDD offices with WCAB district offices. (EDD wishes to have a desk available in order to address the walk-in calendar.)
  

• Provide EDD with a daily calendar from each WCAB office.

Information System

The reform legislation directs the Division of Workers' Compensation to develop a workers' compensation information system compatible with the International Association of Industrial Accident Boards and Commissions Electronic Data Interchange (EDI) system. The legislation requires the system to help the Department of Industrial Relations to manage the workers' compensation system more effectively, to help evaluate the efficiency of the benefit delivery system, to help measure how adequately injured workers are indemnified and to provide statistical data for research.

At several Commission meetings, the DWC administrative director has reported on the development of an information system pursuant to Labor Code Section 138.6. He pointed out that this is a broad charge and therefore open to interpretation. 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.

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 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. Mr. Young declared that DWC is not going to propose anything that's going to be terribly costly, especially in this environment and that this project has got to be developed in a very cost efficient way.

The Division reports that a considerable amount of work has gone into the development of this information system. An August 1995 report from UC DATA/Survey Research Center entitled "A Workers' Compensation Information System Proposed For The Division Of Workers' Compensation" outlines the framework of a workers' compensation information system, and makes recommendations for completing the development work. The report recommends a layered approach, obtaining a small amount of data on all claims, more data on a ten percent sample, medical detail on a one percent sample, and the most detailed information through surveys. It recommends appointing an Advisory Committee made up of the various workers' compensation stakeholders to help oversee the completion of the development of the information system.

DWC reports that a Workers' Compensation Information System Advisory Committee has been appointed and has been meeting in order to promote a process to obtain consensus from the workers' compensation stakeholders on the framework of the information system. Subcommittees were formed to produce discussion and recommendations in the areas of confidentiality, system performance, and agency performance.

The Division recommends and the Commission concurs that legislation be enacted which will protect the confidentiality of information submitted to the department as part of the information system.

Disability Evaluation

The Permanent Disability Rating Schedule

The 1993 reform legislation directs the administrative director of the DWC to revise the schedule for the determination of permanent disabilities. This revision must update the standard disability ratings and occupations to reflect the current labor market. When complete, the revision must be approved by the Commission on Health and Safety and Workers' Compensation before the DWC may officially adopt it. The reform legislation requires the administrative director to submit the proposed revision to the Commission by July 1, 1994 and to complete the revision by January 1, 1995.

This requirement has not been met. The DWC administrative director has yet to submit a final proposal for a revised permanent disability rating schedule to the Commission.

At the time the Commission issued its first annual report in July 1995, it was anticipated that the administrative director would submit a revised schedule to the Commission later that year.

In September 1995 the Commission was advised that DWC was in the process of testing a proposed schedule by rating a sample of claims. The Division randomly selected about 2200 cases containing ratings performed in 1993. After two training sessions on how to use the proposed schedule, DEU shut down and re-rated the files, recording both the original rating in total, and the new rating using the proposed schedule. DWC Research Unit was beginning their analysis to determine the overall effect of the proposed rating schedule as well as the individual impact on categories of injuries such as upper extremities, lower extremities and backs.

The Commission requested that DWC Administrative Director Casey L. Young report on the status of the PDRS at the Commission's November 1995 meeting. Mr. Young reported that the DWC survey of the summary ratings sample indicated that the proposed PDRS schedule would increase permanent disability ratings by about 2%. Most of the increase came from the occupation changes; the other modifications seem to be fairly insignificant.

However, Mr. Young said he was uncomfortable with those findings for a couple of reasons. Because only summary ratings were reviewed, just the simple ratings were evaluated in the survey -- the more complicated ratings that are often disputed were not included. The other difficulty was to rerate doctor's reports where the doctor had used the existing schedule and try to figure out what the rating would be under the new schedule -- for example, if the evaluators should use the work capacity guidelines in the proposed schedule instead of the objectives and subjectives.

The administrative director stated that DWC received other indications about the proposed PDRS revisions. When DWC gets appeals from summary ratings on current cases and the doctor inappropriately used the proposed work capacity guidelines, the contention is that the PD ratings are too high. Mr. Young thus believed that the increase in the permanent disability ratings under the revised PDRS is probably more than what DWC's particular sample and methodology produced.

The administrative director said he wasn't comfortable putting the proposed PDRS out to public hearing until he had some sense of what the economic impact would be. He stated that he did not have confidence that the sample of summary cases reflected the real impact of the new PDRS since litigated cases were not included. To get information on the impact of the PDRS on litigated cases would take several months, well beyond the scheduled date in January 1996 for the Commission's permanent disability fact-finding hearing..

Mr. Young said that he was very reticent to put forward a change in the permanent disability rating schedule with an uncertain impact if something else will be done in the next year or two. That would create basically two more tracks that the claims administrators and attorneys would have to follow. He said that his inclination was to wait until the Commission's January hearing and see if the Commission and DWC can do the whole thing together. Then at least when a change is made there will be just one new track and he would have some more confidence than he had right now.

In May 1996, DWC reported that it has formed a Permanent Disability Rating Maintenance Committee to try to encourage agreement and strategies for rulemaking for changes in the PD schedule. For example, this group is working on consensus building around ways to include previously unscheduled categories into the schedule. DWC said that it expected to propose regulations in the summer of 1996 to change the occupational grouping, age groupings, and add new language on work restrictions.

Inappropriate Use of Proposed PDRS Revision

While the revision of the Permanent Disability Rating Schedule was in process last year, draft copies were made available to interested members of the workers' compensation community for their review and comment. However, DWC discovered that some physicians were improperly using the draft PDRS instead of the current version.

In June of 1995, the Division of Workers' Compensation advised doctors who perform medical evaluations that a proposed revision of the California Permanent Disability Rating Schedule has not yet been adopted and should not be used. In a letter distributed to all Qualified Medical Evaluators (QMEs), physicians were told that the use of these proposed guidelines is clearly inappropriate until such time, if ever, they are adopted through the regulatory process, and that their reports will likely be returned as unratable if the work guidelines in the proposed schedule are used.

The community has advised the Commission that the draft PDRS is still being used improperly by some physicians. The Commission recommends that DWC renew its efforts to direct physicians not to use a proposed PDRS revision unless and until it has been officially adopted.

Backlogs of Disability Ratings

In its first annual report, the Commission noted that DWC was dealing with a large backlog of requests for permanent disability ratings. As of late 1994, the DWC had a backlog of 20,000 requests for summary ratings and a 2,000-case backlog of rating reconsideration requests.

The backlog resulted from a provision of the Workers' Compensation Reform Act of 1989 that required all claims in which the injured worker was represented and unrepresented to obtain a permanent disability rating from the DEU in the DWC. The 1993 reform legislation eliminated the requirement that new represented cases be rated, but the DEU still had to rate all of the backlogged cases and all new cases where the injured worker was unrepresented.

DWC reports that the backlogs have now been eliminated. The administrative director explained that DWC employed three major strategies to remove the backlog:

• DWC suspended disability evaluation service to the WCAB district offices during one week in January, February and March 1995 and devoted evaluator time only to processing the backlog of summary rating requests.
  

• DWC hired new disability evaluators who, after training, spent at least 80% of their time on backlogged summary ratings.
  

• DWC issued a bulletin in November 1994 to encourage claims administrators who had not received a summary rating from the Disability Evaluation Unit (DEU) within the statutory 20 day requirement, to self-rate the cases, try to reach a settlement with the injured worker and bring in a Stipulation or Compromise and Release settlement document for DWC Information and Assistance Unit and judicial review and approval.
  

Judicial Ethics Regulations

In response to legislation enacted in 1993 (AB 1252, Mountjoy), the DWC administrative director developed regulations requiring workers' compensation referees to comply with the Code of Judicial Conduct adopted by the Conference of California Judges, effective December 1, 1995.

The regulations were developed by the Josephson Institute of Ethics after interviews with and surveys of participants in the workers' compensation system. They 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 new regulations specify that written approval of the Administrative Director must be obtained before anything of value is transferred from practitioners, attorneys, interest groups, or others to a Workers' Compensation Judge. The Judges now have a duty to report misconduct that they see in the courtroom or around whether it be by another Judge, a witness, an attorney or others. The regulations also specifically prohibit Judges from putting on educational programs for the workers' compensation community for profit.

The DWC administrative director advised that a significant aspect of the regulations is the creation of an ethics advisory committee, made up of individuals representing labor, employers, insurers, and attorneys. The ethics advisory committee will review the complaints, forward them with a recommendation to the Administrative Director and then monitor to make sure the appropriate action(s) are taken. The advisory committee will also be responsible for doing a report to the Legislature, the Governor, and the Administrative Director on the ethical state of the judicatory system in workers' compensation and other kinds of issues.

Audit Unit

A record number of workers' compensation claims audits were conducted last year resulting in $1,099,610 in penalty assessments according to the Division of Workers' Compensation 1995 audit report to the Legislature.

In 1995, the Audit Unit conducted 64 audits and audited 16,261 claims, an increase from the 56 audits and 13,196 audited claim files in 1994. The audits resulted in 25% more citations than in 1994 and the average amount of a penalty assessment in 1995 was $130, up slightly from $127 in 1994.

Of the 64 audits, 57 were selected at random, while seven were selected based on results of a prior audit or following investigation of claims handling practices resulting from complaints. In addition to the scheduled audits, 40 investigations were conducted in which 116 claims files were reviewed based on complaints regarding claims handling practices. Nine non-random audits have been selected for 1996 as a result.

A total of 8,481 administrative penalty assessments were issued against the 31 insurance companies, 11 self insured employers, and 22 third party administrators (TPAs) audited in 1995. The average number of penalty citations per audit subject was 133 and the average amount in penalty assessments per audit was $17,181, Most assessments were found in the indemnity, complaint, and denied claims.

The following are the six most common types of violations and the number of times they have been cited in 1995 audits

1. Failure to Timely Provide Proper and Accurate Benefit Notice

   3,997 penalty citations totaling $310,120
   (47% of penalties and 28.2% of dollar amount)
   

2. Late Indemnity Payments

   $1613 penalty citations totaling $119,605
   (19% of total penalties and 10.9% of the total dollar amount)
   

3. Failure to Pay Accrued and Payable Indemnity in Undisputed Claims

   $1,613 penalty citations totaling $119,605
   (19% of total penalties and 10.9% of the total dollar amount)
   

4. Failure to Timely Comply with Voc. Rehabilitation Notice Requirements

   686 penalty citations totaling $263,080
   (8.1% of the total penalties and 23.9% of the total dollar amount)
   

5. Failure to Pay/Object to Medical or Medical-Legal Bills within 60 days of Receipt

   552 penalty citations totaling $34,440
   (6.5% of the total penalties and 3.1% of the total dollar amount
   

6. Unsupported Denial of Liability for Claims and Failure to Investigate

   55 penalty citations totaling $112,200
   (0.6% of the total penalties and 11% of the total dollar amount.
   

In addition to the 8,481 administrative penalty assessments totaling $1,099610 which were assessed as a result of audits, an additional 68 penalties totaling $13,900 were assessed not as the result of individual audits, but for the failure of claims administrators to timely file an Annual Report of Inventory of Claims with the Audit Unit as required by Title 8, California Code of Regulations, Section 10104.

DWC Organization

The Division of Workers' Compensation has adopted a new management organizational structure.

DWC Administrative Director described the reorganization at the Commission's November 1995 meeting:

Mr. Young said that the opportunity came after the 1993 reforms passed and DWC convinced the Governor and the Legislature that they needed a different structure to ensure that the changes that were made are carried out in a consistent and uniform basis around the state.

DWC proposed a new personnel classification and a new organization chart and obtained approval by the Department of Industrial Relations, the Department of Personnel Administration and then finally, the State Personnel Board, effective June 1995.

Mr. Young said two major changes were made.

One is a new position at the top of DWC's organization entitled the Chief Deputy Administrative Director who acts as a Chief Operating Officer and is responsible for the day-to-day operations within the Division. This is a Career Executive Appointment (CEA) position.

The other organizational change is the creation of a middle management structure for Claims Adjudication. Previously, the Claims Adjudication function, the largest in the Division, had 27 Presiding Judges from Eureka to San Diego reporting to the DWC Assistant Chief resulting in a span of control that was too broad. To enforce policies and procedures in the district offices, the DWC proposed a smaller span of control and some management in between. A new classification entitled DWC Regional Manager was created and three new positions were established.

The Commission notes that this revised organizational structure has just been implemented and thus believes that it is too early to gauge its effectiveness.

Community Concerns

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.

At the March 1996 meeting of the Commission, John Sikora of the Association of California State Attorneys and Administrative Law Judges (ACSA) asked the Commission to take a look their concerns about the Division of Workers' Compensation specified in a March 12, 1996 letter to Ms. Baker from Stephen D. Beck.

ACSA requested that the Commission conduct an investigation of DWC's claims adjudication function. ACSA, the exclusive representative of the workers' compensation judges, is concerned with the manner in which DWC closed the Norwalk office and relocated staff, and has filed an Unfair Labor Practice Charge with the Public Employment Relations Board.

The Association also believes that DWC is spending monies on studies inappropriately. Mr. Sikora said last year DWC spent $160,000 on an ethics study that was criticized by another study for being too limited. Now DWC is spending hundreds of thousands of dollars to contract with Peat Marwick for a study to address issues that he believes the DWC administration itself should determine. When asked if ACSA intended to bring their concerns before the Assembly and Senate Insurance Committees, Mr. Sikora responded that ACSA was in process of so doing.

Industrial Medical Council

The reform legislation charged the Industrial Medical Council (IMC) with several new responsibilities:

Medical treatment guidelines

The IMC contracted with the University of California - San Francisco Division of Occupational and Environmental Medicine and the University of California - San Diego to develop guidelines for medical treatment of common industrial injuries (occupational asthma, occupational dermatitis, and various injuries to the hand, wrist, arm, back, neck, knee and shoulder). The guidelines for occupational asthma and contact dermatitis have been adopted. The other proposed guidelines are currently going through the public hearing process.

Soft tissue injuries

The reform legislation (LC _139.05) required the IMC to study the feasibility of requiring objective medical findings for soft tissue injuries. The IMC contracted for the study with the University of California - San Diego, which completed its report in December 1994.

As a result of the mandated study, the IMC in their December 29, 1994 report to the Legislature, stated "We propose that there is no accepted medical test to evaluate all soft tissue injuries which can lead to a medical diagnosis." In their May 3, 1995 progress report to the Legislature, the IMC concluded that "... evaluation of the patient by an informed and motivated physician remains the appropriate approach to each individual case, and other, perhaps simpler (and perhaps more costly) measures or modalities, have not been identified." In conclusion, the IMC noted that in light of its medical, economic and social importance, the IMC would like to continue to pursue the issue.

Disability evaluation

The IMC has adopted protocols pursuant to Labor Code Section 139(e)(8) governing the evaluation of pulmonary, immunologic, cardiac, psychiatric and neuromusculoskeletal disabilities.

Causation Report

The University of California - Los Angeles School of Medicine recently developed and submitted to the IMC guidelines for physicians to use in evaluating and determining causation of occupational injuries and illnesses.

Treating physician form

The IMC has developed a form for treating physicians to use when reporting on medical issues necessary to determine compensability. This form was approved and distributed to 122,000 treating physicians throughout the state in 1995.

QME exams

The reform legislation required the IMC to develop and administer an examination that health care providers must pass in order to be certified as a qualified medical evaluator (QME).

In June 1994 the first QME examination was administered to 4,456 physicians, of whom 93 percent passed. A second general QME exam was taken by 1,208 physicians in September 1994, of whom 81 percent passed. Another 392 physicians took the third general exam in April 1995, with 68 percent passing. In September 1995, 274 physicians took the general QME exam, and 61 percent passed. In March 1995, 271 physicians took the exam with 86 percent passing. Special QME examinations for acupuncturists were also given in October and November 1994 and April 1995. IMC reports that the general QME exams will be given twice each year.

Division of Occupational Safety and Health

High-Hazard Employer Program

The reform legislation directed the Division of Occupational Safety and Health to begin a program targeting especially hazardous employers for consultations and inspections, to be funded by assessments upon employers with higher than average workers' compensation costs.

Assessment for High-Hazard Program

The reform legislation specifies that the targeted inspection assessment is to be levied on insured employers with experience modifications of 1.25 or more and private self-insured employers with an equivalent experience rating of 1.25 or more.

In August 1994, DIR required insurers to advance assessment funds to the department on behalf of affected policyholders and then to collect this assessment at the time of policy renewal. The Association of California Insurance Companies and eight insurers subsequently sued the state to block DIR from requiring them to collect the assessment. A Sacramento Superior Court judge initially granted a fifteen-day temporary injunction preventing DIR from collecting the funds from these insurers, but upon expiration refused to extend the order into a preliminary injunction. The department and the workers' compensation community then began negotiating a new approach to collecting the assessment.

Problems were also identified by the self-insured employers. Because of the proposed assessment methodology, individual employers felt that they would receive both excessive and disproportionate individual assessments.

Senate Bill 996 was passed to resolve the problem until a better methodology can be developed. Among other provisions, SB 996 requires that the department submit a report to the legislature by January 1, 1998, addressing one or more alternative methods of funding the Cal-OSHA targeted inspection and consultation programs. The report shall also propose and evaluate one or more alternatives to the use of workers' compensation insurance experience modification ratings for the identification of employers subject assessment, and alternative methods for determining assessment amounts and collecting the assessments.

In 1996, due to difficulties initially encountered when insurers billed employers, DIR revised its method and sent invoices for the High Hazard program assessment directly to the insured employers and notified the insurers which of their insured employers were being billed.

Loss Control Certification Unit

The Loss Control Certification Unit (LCCU) in the Division of Occupational Safety and Health (DOSH) certifies the loss control capabilities of insurers.

Program Implementation

The loss control certification program is new in California and exists no where else in the United States. The Loss Control Certification Unit staff have worked with the insurance carriers to optimize its implementation.

LCCU reports that the great majority of the industry has cooperated. The Loss Control Advisory Group has worked with LCCU to develop the certification process and there has been a lot of dialog between the LCCU staff and insurers.

The few insurers who are not cooperating are ones that are deficient or are reluctant to do the paperwork. For example, some east coast insurers say that their computer systems do not generate the information required by the LCCU.

Loss Control Certification

The Loss Control Certification Unit is currently certifying the Loss Control Consultation Service Plans for 106 insurer groups writing workers' compensation insurance in California.

LCCU reports that more and more insurers are offering "unbundled" workers' compensation policies. "Unbundling" is a marketing device whereupon the insurer, insured employer, and broker/agent/producer have agreed to sell the policy at reduced price and without some of the services traditionally associated with a workers' compensation policy. These "unbundled" services then become the responsibility of the employer who may elect to have them provided by the broker/agent, or by a private consultant, or the employer may elect to provide them himself. The "unbundled" services may be any one or more of several services, but usually are confined to loss control and/or claims handling. Thus the insurer is providing insurance coverage only -- leaving the insured to do what they wish with these critical services. LCCU has determined that there is no general agreement among the insurers as to the exact definition or meaning of the concept of "unbundling".

The specific problem LCCU faces is that current legislation does not speak to "unbundling" in any way. Therefore LCCU is still required to certify the insurers to provide loss control services as a condition to writing workers' compensation insurance in the state, in spite of the fact that a growing number are issuing more and more 'unbundled' policies . Since the practice of 'unbundling' is not regulated in any way, LCCU has not been able to make an accurate determination as to the size or volume of 'unbundled' business, but most insiders agree that it is a growing element and just one of many innovations the insurers are using to cope with the continuing open rating price wars. In their ongoing evaluations, LCCU will attempt to draw some conclusions as to the magnitude of the problem which may ultimately have to be addressed by the Legislature.

LCCU Evaluations (Audits)

The Loss Control Certification Unit has begun the process of auditing insurers to determine how effectively they are providing loss control services to high hazard employers. LCCU reported that the evaluation process is evolving from a review of documents in the office to obtaining information from the site. LCCU began with test audits, implementing some changes and getting good feedback that it is on the right track.

The evaluation is both quantitative and qualitative. Currently there is no standard format in which to report the loss control budget but LCCU reports that there are plans to include that in the regulations. The LCCU is aware of several carriers who have laid off the great majority of their internal loss control staff as a cost-cutting measure, opting to provide service through contractors and/or consultants. While this is permissible under current regulations, LCCU expresses serious concerns as to the ability of the contractor/consultant industry to handle this workload shift without a serious loss in the quality of service. The ability of these consultants to operate in this environment without conflicts of interest is another concern. These concerns will be a major influence in LCCU's posture regarding the Evaluations, as LCCU must hold the insurers accountable, not the contractors/consultants.

Since the LCCU has only three Evaluator (auditor) positions, audits will normally be performed on insurers whose performance indicate an audit need, e.g., complaints from insureds or how they responded during the certification process. Out-of-state insurers will be difficult to audit since there is no law which requires insurers to maintain offices or keep records in California. When auditing an out-of-state insurer, the LCCU reports that it will have to request that files be sent to California, or send auditors out-of-state.

At the March 1996 Commission meeting, the LCCU manager reported that the Unit has received offers from several insurers to allow the LCCU to perform "test" audits of their program for LCCU training purposes.

Several "test" evaluations were completed in April and May 1996 and the first two "for record" evaluations were completed in June 1996. A minimum of two evaluations per month are scheduled for fiscal year 1996-97 and three will be scheduled in selected months if training of the incoming staff allows.

Administration

The Loss Control Certification Unit reports that it has made considerable progress in the past year. Current staffing is as follows:

Approval is expected from the State Personnel Board for the announcement of an open spot examination to fill the three authorized Plan Evaluator positions. In the interim, the unit will continue to utilize the three safety professionals on temporary assignment from DOSH. These three people have undergone extensive training in workers' compensation to enable them to perform evaluations (audits) of insurer operations in the field.

The Loss Control Certification Unit further reports:

• Authority in Senate Bill 1051 (Solis, 1995) to grant extensions, exceptions and exemptions to insurer Annual Plan Certification is being used effectively.

• Complete LCCU Financial Status Report was given to insurers at the July 26, 1996 meeting of the LCCU Advisory Workgroup.

• Long-range plan to modify the method of selection for employers for mandated loss control service by insurers is being developed. The current system of allowing each insurer to design their own 'methodology' has been found to be clumsy, inefficient, and costly.

Next Steps

When asked by the Commission in March 1996 if there were legislative modifications or changes needed in order to increase the efficiency of its program, DOSH replied that it believes that Legislative changes are not needed at this time.

DOSH is asking the Loss Control Advisory Committee to consider the following regulatory changes:

• Establishing a formal certification year which runs from 1 April to 31 March which would provide standardization in the calculation of certification fees and in the gathering and reporting of loss control statistics.

• Narrowing the minimum criteria set forth in the loss control regulation for selection methodologies.

• Requiring insurers electing not to identify insureds by name to do so by policy number or BIN (Workers' Compensation Rating Insurance Rating Bureau identification number) to facilitate auditing by the LCCU.
  
  

Community Concerns

At the Commission's March 1996 meeting, Willie Washington of the California Manufacturers Association expressed concerns about DOSH's Loss Control and High Hazard programs. Mr. Washington believes that there are loss control models and that it should be a goal for DOSH to come up with a model program. He pointed out that it is the insurers that receive a Loss Control certification, but there is a need to make sure that outsourced loss control providers are doing a good job. Mr. Washington encouraged DOSH to continue to hold insurers responsible. He noted that when insurers are not providing the information that LCCU needs for certification, LCCU has the "ultimate hammer" -- the certification itself.

Mr. Washington stated that he does not believe that the High Hazard Program is going well. In the handout provided by DOSH, Mr. Washington said some sources were not relevant since they were over three years old. He also expressed the opinion that the ExMOD is useful on an interim basis until a better measurement is devised.

Commission on Health and Safety and Workers' Compensation

Commission mandates

The following is a description of the steps that the Commission on Health and Safety and Workers' Compensation has taken to fulfill its mandates.

The workers' compensation reform legislation established the Commission on Health and Safety and Workers' Compensation. Pursuant to California Labor Code Sections 75 through 78, the Commission is authorized to perform the following duties:

1. Issue an annual report on the state of the California workers' compensation system, including recommending administrative or legislative modifications which would improve the operation of the system.
   

   The first annual report was issued in July 1995.

   The second annual report (this document) was issued in September 1996
   
   

2. Review and approve applications for grants to assist in establishing effective occupational injury and illness prevention programs.
   

   The Commission awarded grants to nine applicants in 1994. A description of the Commission's grant program is contained in Section I - The Commission. In subsequent years, the Commission has elected to contract with independent research organizations for studies in particular areas of interest and concern.
   

3. Review for approval a proposal by the Administrative Director of the Division of Workers' Compensation as required by California Labor Code Section 4660 to change the standard disability ratings.
   

   The Commission has not yet received such a proposal from the DWC administrative director. A discussion of this project is contained in "Agency Operations - Division of Workers' Compensation". The Commission has also held a public fact-finding hearing and subsequently contracted with RAND for a comprehensive study of workers' compensation permanent disability. A description of this activity is contained in Section III - Workers' Compensation Issues.
   

4. Consult with the Administrative Director of the Division of Workers' Compensation, as required by Section 139.2(o) of the California Labor Code, on the adoption of regulations prohibiting a Qualified Medical Evaluator (QME) from requesting or accepting any compensation or other thing of value from any source that does or could create a conflict with the QME's duties as a medical evaluator.
   

   As reported in the Commission's first Annual Report, the DWC Administrative Director has announced that he will not go forward with such regulations without clarification of the legislative intent.
   

5. Conduct continuing examinations of the California Workers' Compensation System and of California's activities to prevent industrial injuries and occupational diseases and examine these programs in other states.
   

   The Commission is fulfilling this mandate in several ways. Its ongoing studies of various issues include the determination and analysis of comparable programs in other states. The Commission's educational program "Challenges in California's Workers' Compensation: A Symposium" brought together the workers' compensation community in California with program managers and public officials from other states which had specific programs designed to address concerns that California shares.
   
   
   

Commission Funding

The Commission on Health and Safety and Workers' Compensation derives its funding by appropriations from a special fund entitled the "Workplace Health and Safety Revolving Fund".

Monies are deposited into the Workplace Health and Safety Revolving Fund from collections made by the Division of Workers' Compensation from administrative and civil penalties assessed by the Audit Unit pursuant to Labor Code Section 129.5 and from civil penalties assessed against physicians pursuant to Labor Code Section 4628. The amounts collected vary from year to year.

The Commission has experienced some uncertainties relating to this source of funding. The Commission is in a position of evaluating the actions of the Division of Workers' Compensation, whose penalty collections are its only funding source. The Commission is totally dependent on the activities of the DWC -- if the Division does not collect penalty monies, the Commission is in jeopardy.

Since the penalty collections are unpredictable, so are the amount of monies deposited into the Workplace Health and Safety Revolving Fund, the source of the Commission's funding. The Department of Finance has informed the Commission that it has been reluctant to establish additional permanent staffing primarily because the CommissionÃs funding source has been so unpredictable.

GO TO SECTION SIX