IR #99-06
Monday June 14, 1999

Dean Fryer
(415) 703-5050
Richard Stephens
(415) 703-4680

DWC Certifies Four New HCOs

SAN FRANCISCO --The state Division of Workers' Compensation (DWC) has certified four new Health Care Organizations (HCOs) since the beginning of the year, the California Department of Industrial Relations (DIR) has announced.

HCOs are a relatively new type of health organization, which provides medical care to employees with job-related injuries or illnesses in a managed care setting. Insurance carriers and self-insured employers may contract with a certified HCO as a way of reducing workers' compensation costs while at the same time helping to ensure that injured workers receive quality medical care for their injuries.

The four newly certified organizations are Comp Partners Access and Comp Partners Direct, both of Irvine, which offer services statewide; CorVel, which has offices in 21 counties covering most of the state; and Priority Comp Net 2, which is located in Torrance and serves the southern California area.

"These newest certifications will provide more options for employers and carriers interested in the HCO approach," said DIR Director Stephen J. Smith, noting that they bring the total of certified HCOs to ten.

In addition, several revisions to DWC's HCO regulations went into effect on May 17, which should help make it somewhat easier for employers and carriers to consider contracting for medical services with a certified HCO, Smith said.

Under current regulations, an employer in an HCO gains additional medical control over the care of the injured employee, ranging between 90 days (if no group health insurance coverage is offered) to 365 days (if the employee's provider of non-occupational healthcare is also in the HCO network).

The revised regulations clarify that employers gain the additional medical control by offering non-occupational health coverage, even if the employee does not enroll in a general health plan. The new rules also clarify a notification requirement. Employers must inform employees annually that they may choose at least once a year to continue enrollment in an HCO, change to another HCO, or be treated by their own physician.

The HCO program was ushered in with the 1993 reforms of the state's workers' compensation system. Health care plans interested in certification apply to DWC, which reviews their provider network access, quality of care and grievance systems, as well as their capacity to work with carriers on promoting return to work and health and safety.

Administration of the HCO program is funded through an enrollment fee paid by certified HCOs and applicants. Under legislation passed last year, amending Labor Code Section 4600.7, future funding and a full repayment of the original start-up loan from the state General Fund is assured by providing an additional per enrollee surcharge over the next five to eight years. The revised funding mechanism went into effect with the new DWC regulations.

"This is still a new concept for many underwriters and employers, but once they understand HCOs they are all for it," said Darwin Hall, Underwriting Program Manager for Western Regional Insurance Services. "We expect HCOs to be a key part of the new business we are writing."

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A list of certified HCOs is attached or can be found on the DWC web site at'_Compensation/DWC/HCOlist.htm"