IR # 97-46
Tuesday, August 26, 1997

Rick Rice
Dean Fryer
(415) 972-8835

New Law Streamlines HCO Regulations

SAN FRANCISCO -- Governor Pete Wilson's signing this week of Senate Bill 1063 was greeted with enthusiasm by Department of Industrial Relations' acting Director John C. Duncan, who lauded the action as one which "will help an important new workers' compensation health care program achieve its full potential by streamlining the regulatory process associated with it."

The new law simplifies administrative procedures that entities must follow in applying for certification as Health Care Organizations under a program that was established during the 1993 reform of the state's workers' compensation system.

"The HCO program is designed to help lower employers' workers' compensation costs and assure quality of care for injured workers by bringing managed care techniques into the workers' compensation arena," said Duncan.

Under the 1993 reform legislation, Knox-Keene Health Care Service Plans, commonly known as HMOs, and disability insurers licensed by the Department of Insurance could apply directly to the Division of Workers' Compensation for certification as HCOs. Other medical providers who wished to apply for HCO certification had to first apply to the Department of Corporations for authorization as a Workers' Compensation Health Care Provider Organization (WCHCPO).

Under the new legislation WCHPOs may now file their applications directly with the Division of Workers' Compensation, which will perform the review and evaluation formerly performed by the Department of Corporations.

Once certified, HCOs may contract with insurance carriers and self-insured employers to provide health care plans that cover all medical services required to treat employees' job related injuries and illnesses. Employers who utilize HCO services can obtain up to 365 days of control over the injured employee's medical care. They currently have medical control for a maximum of 30 days after the injury.

Employees may enroll in a plan offered by the employer or they may choose not to participate by predesignating another doctor or medical facility to treat their work related injuries. Employees who enroll in a certified HCO plan offered by the employer also benefit from knowing that it meets quality of care standards required by state regulations.

"The new legislation eliminates the dual regulatory authority over HCOs, a duplication of functions that is both cumbersome and needlessly expensive," said Duncan, noting that the bill's author, State Senator Steve Peace, had described the dual regulatory scheme as "quite complex and administratively demanding."

"This 'fix' to the original legislation removes an impediment that may have deterred potential applicants from pursuing HCO certification," he said. "HCOs will no longer have to incur duplicative administrative burdens and costs, or pay additional and unnecessary filing fees." The new law will go into effect on January 1, 1998.