August 15, 1995

To:
Interested Parties

From:
Casey L. Young
Administrative Director

Re:
California Workers' Compensation Information System

Enclosed you will find a status report on the development of the California Workers' Compensation Information System, including a report prepared by UC DATA/Survey Research Center entitled "A Workers' Compensation Information System Proposed For The Division of Workers' Compensation."

This report summarizes the work to date on the development of the workers' compensation information system required by Labor Code Section 138.6, which was enacted as part of the 1993 reforms. It recommends the basic framework of a workers' compensation information system, as well as a method of proceeding to complete the development process. Comments on this report will be appreciated, particularly concerning the basic framework of the proposed information system.

I will soon be appointing the Workers' Compensation Information System Advisory Committee recommended in the report to assist in completing the development of this system. I will chair the committee, and am looking for members representing a broad representation of the workers' compensation community. I will appreciate any recommendations you may have for membership.

I look forward to working with all interested parties over the next few years to construct an information system that will provide policy makers and others the information needed to make better informed decisions concerning the multi-billion dollar California workers' compensation system.

Enclosure



August 11, 1995

The Honorable Pete Wilson
Governor, State of California
State Capitol
Sacramento, CA 95814

Rick Rollens
Secretary of the Senate
California State Senate
State Capitol
Sacramento, CA 95814

E. Dotson Wilson
Chief Clerk
California State Assembly
State Capitol
Sacramento, CA 95814

Gentlemen:

This communication is to provide a report on the development of the workers' compensation information system required by Labor Code Section 138.6.

The requirement that a workers' compensation information system be developed was enacted as part of the 1993 workers' compensation reforms. The law requires the system to do all of the following:

The information system must be compatible with the Electronic Data Interchange (EDI) system of the International Association of Industrial Accident Boards and Commissions (IAIABC), an association of workers' compensation agencies.

A considerable amount of work has gone into the development of this information system, much of which is summarized in the enclosed report from UC DATA/Survey Research Center entitled "A Workers' Compensation Information System Proposed For The Division Of Workers' Compensation." This report 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.

It should also be noted that the department intensified its involvement with the EDI project of the IAIABC since this requirement was enacted. I have become a member of the EDI Steering Committee, the governing body for the project. We have successfully completed a pilot project in which we received Employer First Reports Of Injury through EDI in accordance with the standards developed under this project. We expect to be in a position to regularly receive these and other reports through EDI from claims administrators wishing to do so by the end of this year.

Finally, as noted in the report, there is considerable concern in the workers' compensation community that data collected for this system remain confidential. I strongly share this concern. The proposed design of the system minimizes the confidentiality issue somewhat by collecting only a minimum amount of data on all claims, but concerns about the release of even this data remain. While it is true much of this data is in DWC files now and is in fact a public record, once the data becomes available electronically, in easily manipulated form, it becomes economically feasible to use and misuse the data for all kinds of purposes other than those for which it was collected. I am fearful not only of the potential misuse of the data, but that data quality will suffer if those producing the data know it may be used for other purposes, and may even be used against them, such as in a lawsuit. Consequently, I recommend that legislation be enacted which will protect the confidentiality of information submitted to the department as part of the information system.

The next steps in the development process will be to widely distribute the enclosed report, further consult with the Department of Insurance and the Workers' Compensation Insurance Rating Bureau as required by statute, obtain consensus from the workers' compensation stakeholders on the framework of the information system, and appoint the recommended Workers' Compensation Information System Advisory Committee.

This is a substantial undertaking which will take more time and resources to complete. The benefits, however, should be very worthwhile to policy makers, administrators, and those who work within the workers' compensation system. The completion of this information system will enable all of us to make much better decisions concerning the multi-billion dollar workers' compensation system, and help pinpoint problems and solutions before we experience another workers' compensation crisis.

Respectfully,

CASEY L. YOUNG
Administrative Director

Enclosure