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2003 workers' compensation reform

SB 228 (Chapter 639)

ADMINISTRATIVE REORGANIZATION

1. ELIMINATION OF THE INDUSTRIAL MEDICAL COUNCIL (IMC) AND TRANSFER OF FUNCTIONS TO DIVISION OF WORKERS' COMPENSATION: In order to accomplish these changes, two sections [L.C. sec. 139 and 139.1] are repealed and a number of other sections are amended to strike the IMC or to change references from the IMC to the Administrative Director (AD) or DWC. These include G.C. sec. 12813 and L.C. secs. 29, 110, 122, 124 127.6, 139.2, 139.31, 139.4, 139.45, 4061, 4062, 4062.5, 4062.9, 4068, 4628, and 5307.3. Note that some of these sections are also amended to accomplish other reform purposes. Uncodified provisions transfer assets of the IMC and the Industrial Medicine Fund to the WCARF. All IMC regulations, other than the treatment guidelines, which are repealed, continue in effect as AD regulations. All Qualified Medical Examiner (QME) appointments, terms, and disciplinary proceedings are unaffected by the elimination of the IMC.

2. FIVE-YEAR TERM FOR COURT ADMINISTRATOR L.C. sec. 138.1 gives the Court Administrator a five-year term.

FUNDING

3. PROVIDER LIEN FILING FEE: New L.C. sec. 4903.05 establishes a $100 filing fee for the initial lien filed by a medical provider, excluding Medi-Cal, VA, and public hospitals. Provides that the funds are to be collected by the Court Administrator and used to offset amount of assessments under Section 62.5. Court Administrator is to adopt regulations to implement this provision.

UTILIZATION

4. UTILIZATION SCHEDULE: New L.C. sec. 77.5. Requires CHSWC to conduct a survey and evaluation of existing medical treatment utilization standards by July 1, 2004, and to issue a report of its findings and recommendations by October 1, 2004, for adoption of a utilization schedule. The report shall be updated periodically.

5. TREATING PHYSICIAN'S PRESUMPTION OF CORRECTNESS: L.C. sec. 4062.9. Repeals the treater's presumption of correctness for all dates of injury, except in cases where the employee has "pre-designated" his or her personal physician or chiropractor, pursuant to section 4600. The retroactive repeal applies only to issues relating to the scope and extent of medical treatment. The repeal does not apply to petitions to reopen existing awards.

6. UTILIZATION SCHEDULE PRESUMPTION: New L.C. sec. 4604.5. Upon adoption by the AD of a utilization schedule pursuant to section 5307.27, it shall be presumptively correct on the issue of extent and scope of medical treatment. Effective three months after the publication date of the updated American College of Occupational and Environmental Medicine and Occupational Medical Practice Guidelines, the ACOEM guidelines will constitute the presumptively correct standard until adoption of a schedule by the AD. The section specifies the required characteristics and purposes of the recommended guidelines to be adopted by the AD. For injuries not covered by the ACOEM guidelines or the schedule, treatment shall be in accordance with other evidence-based medical treatment guidelines generally recognized by the medical community.

7. CAP ON CHIROPRACTIC AND PHYSICAL THERAPY TREATMENTS: New L.C. sec. 4604.5(d). For injuries occurring on and after 1/1/04, limits chiropractic and physical therapy treatment to 24 visits for the life of the claim. The caps shall not apply when an insurance carrier authorizes, in writing, additional visits.

8. UTILIZATION REVIEW: New L.C. sec. 4610. Requires all employers to adopt utilization review systems consistent with the utilization schedule/ACOEM. In cases involving spinal surgery, denials will go to expedited second-opinion process established in section 4062 (b). In all other cases, the existing QME/AME process under section 4062 will continue to apply. This is a complex provision with many time limits and the provision for assessment of unspecified administrative penalties by the AD for violations. These penalties are not an exclusive remedy.

9. AD UTILIZATION SCHEDULE ADOPTION REQUIREMENT: New L.C. sec. 5307.27. Requires the AD, in consultation with CHSWC, to adopt a medical treatment utilization schedule by December 1, 2004, based on CHSWC study recommendations pursuant to section 77.5.

10. SPINAL SURGERY SECOND OPINION: New L.C. sec. 4062 (b). Establishes procedure for employers to obtain a second opinion on recommendations for spinal surgery. If the employee is represented by an attorney, the parties shall seek agreement on a California-licensed board-certified or board-eligible orthopedic surgeon or neurosurgeon to prepare a second opinion resolving the disputed surgical recommendation. If no agreement is reached in 10 days or if the employee is not represented by an attorney, an orthopedic surgeon or neurosurgeon shall be randomly selected by the AD to prepare a second opinion resolving the disputed surgical recommendation. If the second opinion concurs in the treater's recommendation, the surgery is authorized. If the second opinion determines that the proposed surgery is not reasonably necessary, then parties proceed to expedited hearing. The employer is not liable for costs of surgery or associated TD when the surgery is performed prior to the completion of the second-opinion procedure. This provision sunsets on January 1, 2007. Effective January 1, 2007, the process reverts back to pre-January 1, 2004. [New L.C. 4062.01].

11. SPINAL SURGERY STUDY BY CHSWC: An uncodified provision requires CHSWC to conduct a study of the spinal surgery second-opinion process.

12. LC 5703 TREATMENT PROTOCOLS: Makes specified treatment protocols admissible before WCAB and provides procedures related to admission.

SELF-REFERRAL

13. SELF-REFERRAL PROHIBITION: L.C. sec. 139.3. Adds outpatient surgery clinics to list of prohibited self-referrals by physicians.

14. SELF-REFERRAL DISCLOSURE: L.C. sec. 139.31. Allows self-referral to outpatient surgery center where the provider discloses the financial relationship to the employer and the employer pre-authorizes the treatment at the center.

ALTERNATIVE DISPUTE RESOLUTION ("CARVE-OUTS")

15. REPEAL OF AB 749 CARVE-OUT: L.C. sec 3201.7. The aerospace and timber carve-out is repealed.

16. CARVE-OUT EXPANSION: New L.C. sec 3201.7. Establishes a new carve-out program, in any industry, except construction [already covered in 3201.5]. Only the union may initiate the process by petitioning the AD. The AD will review and issue a letter allowing a one-year window for negotiations. The parties may request a one-year extension. Minimum employer premium = $50,000. Minimum group premium = $500,000. Any agreement must include right of counsel throughout the alternative dispute resolution process.

FRAUD

17. MEDICAL BILLING FRAUD: New L.C. sec. 3823. Requires the AD to adopt a medical billing fraud referral protocol in coordination with the Bureau of Fraudulent Claims of the Department of Insurance, the Medi-Cal Fraud Task Force, and the Bureau of Medi-Cal Fraud and Elder Abuse of the Department of Justice. Requires any insurer, employer, TPA, WCJ, attorney, or other person who believes that a fraudulent medical treatment claim has been made to report the apparent fraudulent claim.

PHARMACEUTICALS

18. GENERIC DRUG REQUIREMENT: New L.C. sec. 4600.1. Requires greater use of generic drugs beyond pharmacies to other providers.

19. REPEAL OF EXISTING PHARMACEUTICAL LANGUAGE: L.C. sec. 5307.2. Repeals existing pharmaceutical schedule language.

PAYMENT REQUIREMENTS

20. PROMPT PAYMENT: L.C. sec. 4603.2. Changes time to pay medical bills from 60 calendar days to 45 working days from the date of complete billing, unless the employer is a governmental entity, in which case the time is 60 working days. Increases penalty for late payment from 10% to 15%. Provides for repayment by the defendant of the lien-filing fee if any contested amount is determined payable by the WCAB.

21. ELECTRONIC BILLING: New L.C. sec. 4603.4. Requires AD to adopt regulations on electronic payment by January 1, 2005. All employers must accept electronic billing by July 1, 2006. If bills are sent electronically and are within the fee schedule, payment must be made within 15 days of receipt.

MEDICAL FEE SCHEDULES

22. REPEAL OF EXISTING OMFS LANGUAGE: L.C. sec. 5307.1. Existing OMFS language repealed.

23. NEW FEE SCHEDULE: New L.C. sec. 5307.1. 100% of Medi-Cal for pharmaceuticals. Inpatient hospital at 120% of Medicare, 120% of the Medicare hospital outpatient department fee for hospital outpatient departments and ambulatory surgery centers; these provisions become effective 1/1/04. Until then the criteria for determining reasonable fees for outpatient facilities enunciated in the KUNZ en banc decision will apply.
Provides that the existing OMFS for physician services will remain in effect in 2004 and 2005, but fees will be reduced by 5%. As of 1/1/06, the AD will have the authority to adopt an OMFS for physician services, which need not be based on Medicare schedule.

24. ACCESS TO CARE STUDY/AD AUTHORIZATION: New L.C. sec. 5307.2. AD to conduct an annual access study. Authorizes adjustments to medical and facility fees where AD documents substantial access problems.

25. REPEALS EXISTING OUTPATIENT LANGUAGE: L.C. sec. 5307.21. Repeals existing outpatient schedule provision.

26. IMPLANTABLE MEDICAL DEVICES: New L.C. sec. 5318 Repeals AD "pass-through" regulations. Provides that instrumentation, implants, and hardware for specified DRGs will be paid at documented paid costs + 10% (up to $250), plus taxes, shipping, and handling. Expires when AD adopts new schedule provisions for these items.

IIPP

27. INSURER REVIEW OF EMPLOYER'S INJURY AND ILLNESS PREVENTION PLAN: New L.C. sec. 6401.7(l). Requires insurer review of insured's injury and illness prevention plan within four months of commencement of the initial policy term. The reviewer must be an independent licensed professional as specified.

INSURANCE MARKET REPORTING

28. INSURANCE COMMISSIONER REPORT TO THE LEGISLATURE: Uncodified Section 52.5 requires the Insurance Commissioner to report to the Legislature by July 1, 2004, and annually thereafter, on the financial condition of SCIF. The Commissioner is to review and analyze SCIF's underwriting practices and rate structure and report on the potential for reducing rates.

AB 227 (Chapter 635)

CALIFORNIA INSURANCE GUARANTEE ASSOCIATION (CIGA) CHANGES

1. CIGA BOND AUTHORITY THROUGH INFRASTRUCTURE BANK: Gov't Code sections 63010, Article 8 (commencing with new section 63049.6, and 63071). Provides that loan monies financed by Calif. Infrastructure and Economic Development Bank are available to CIGA for payment of cost of claims of insolvent insurers.

2. EXCLUDES 5814 & 5814.5 PENALTIES FOR DELAY FROM THE DEFINITION OF "COVERED CLAIMS" BY CIGA: Ins. Code sec. 1063.1(c)(8). Provides that CIGA is not responsible for paying 5814 and 5814.5 claims for unreasonable delay or claim refusal when penalties were in response to actions taken by insolvent insurance companies prior to administration by CIGA.

FRAUD

3. INCREASE IN FINE FOR COMMITTING FRAUD IN OBTAINING OR DENYING COMPENSATION: Ins. Code sec. 1871.4 (b). Increases the fine from $50,000 to $150,000 for making knowingly false or fraudulent statements for the purpose of obtaining or denying any compensation.

GROUP INSURANCE

4. GROUP INSURANCE FOR MANUFACTURING FACILITIES: New Ins. Code sec. 11656.6 (b)(8). Expands group insurance for manufacturing industry.

INSURANCE COMMISSIONER RESPONSIBILITIES

5. REQUIREMENT OF INSURANCE COMMISSIONER TO CONSIDER PROJECTED SAVINGS IN SETTING PURE PREMIUM ADVISORY RATES: New Ins. Code sec. 11735.1. Requires Insurance Commissioner to evaluate projected savings from bills passed in the 2003-04 session and include them in determination of advisory pure premium rates and that insurers' filed rates also reflect these savings.

6. REQUIRES INSURANCE COMMISSIONER TO ESTABLISH AND MAINTAIN ONLINE RATE COMPARISON GUIDE FOR TOP 50 WORKERS' COMPENSATION INSURANCE CARRIERS: New Ins. Code section 11742(a), (b) & (c). Expresses legislative finding that insolvencies have constricted the insurance market but that a central updated online information source comparing insurance rates would increase consumer power of employers buying workers' compensation coverage. Requires creation of online guide comparing rates and indicating effective dates of each rate.

7. REQUIRES COST SAVINGS DETERMINED BY THE WCIRB BE REFLECTED IN PREMIUM RATES FOR 2004 AND THAT CERTIFICATIONS BE POSTED ON THE INTERNET: New Ins. Code sec. 11742 (d). Requires WCIRB to determine cost savings of 2003 reform legislation and requires each insurer writing coverage to publicly certify that its filed rates reflect such cost savings.

SCIF STAFFING ISSUES

8. PROVIDES SCIF WITH EXEMPTIONS FROM HIRING FREEZES: New Ins. Code sec. 11873(c). Positions funded by SCIF are exempt from hiring freezes and staff cutbacks otherwise required by law.

FUNDING

9. USER FUNDING: Labor Code sec. 62.5. Provides for 100% user funding, specifies Legislative intent concerning priorities for funding including medical fraud reporting, communication of changes in medical fee schedules, clerical staffing and retention, and technology upgrades (electronic filing, calendaring, case management).

10. REQUIRES CHSWC STUDY ON REINSTITUTION OF INSURANCE RATE REGULATION: Uncodified Section 17 manifests the intent of the legislature to ensure fairness to workers and a predictable workers' compensation market, and requires CHSWC to study the feasibility of reinstituting the minimum rate law to regulate the workers' compensation market, to be phased in over a five-year period.

VOCATIONAL REHABILITATION

11. REPEAL OF VOCATIONAL REHABILITATION: L.C. sec 139.5. Repeals existing vocational rehabilitation statute [Article 2.6 (commencing with Section 4635) of Chapter 2 of Part 2 of Division 4 of the Labor Code] as part of a repeal of the vocational rehabilitation mandate.

12. SUPPLEMENTAL JOB DISPLACEMENT BENEFIT: New L.C. sec. 4658.5. Establishes a new supplemental job displacement benefit (SJDB) with savings from repeal of vocational rehabilitation. Provides that employees who do not return to work for their employer within 60 days of the end of TD period will receive a voucher of $4,000 for permanent partial disability of less than 15%; $6,000 for permanent partial disability between 15% and 25%; $8,000 for permanent partial disability between 26% and 49%; and $10,000 for permanent partial disability between 50% and 99%. The voucher must be used at state-approved or accredited schools for education-related retraining or skill enhancement, or both. The AD shall issue regulations governing the form of payment and other matters related to the proper administration of the benefit. Provides that up to 10 percent of SJDB can be used for counseling. Provides for employer notice to injured worker of availability of benefit. [NOTE: As the result of clerical error, new L.C. sec. 139.5 is identical to sec.4658.5.]

13. LIMITATION ON EMPLOYER'S LIABILITY FOR SUPPLEMENTAL JOB DISPLACEMENT: New L.C. sec. 4658.6. Provides that the employer will not be liable for the supplemental job displacement benefit if, within 30 days of the end of TD, it offers modified or alternative work, and the employee rejects or fails to accept the offer.

SUMMARY OF ADDITIONAL BILLS

1. SB 1007 (Speier) (Chapter 641): SPECIFIED MANUFACUTURING FACILITIES AS COMMON TRADE OR BUSINESS. Ins. Code sec. 11556.6. Existing law authorizes an insurer to issue a workers' compensation policy insuring an organization or association of employers subject to specified conditions, including requirements that the organization or association file certain documents with the commissioner or a licensed workers' compensation rating organization relating to (1) the percentage of its membership engaged in a common trade or business, and (2) the naming in certain statements of members eligible for insurance. The definition of "common trade or business" is now expanded to include specified types of manufacturing facilities (establishments engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products).

2. AB 149 (Cohn) (Chapter 831): ASBESTOSIS - FIREFIGHTERS. L.C. 5406.5. The one-year period from the date of death for commencing proceedings for workers' compensation benefits in the case of death from asbestosis is extended to include firefighters who die of asbestosis.

3. AB 1099 (Negrete McLeod) (Chapter 636): WORKERS' COMPENSATION INSURANCE FRAUD. Ins. Code secs. 1877.1, 1877.3, 1877.4, 1877.5. Includes the Employment Development Department as a government agency that is authorized to request and receive information regarding workers' compensation fraud. "Licensed rating organizations" (such as the WCIRB) are authorized to release information regarding workers' compensation fraud, as specified.

4. AB 1262 (Matthews) (Chapter 637): CERTIFICATION OF CLAIMS ADJUSTERS/BILL REVIEW. New Ins. Code sec. 11761. The Insurance Commissioner is to adopt regulations setting forth the minimum standards of training, experience, and skill for claims adjusters. Insurers must certify to the Insurance Commissioner that personnel employed to adjust WC claims or those employed for that purpose by a medical bill review company meets the minimum standards.

5. AB 1557 (Vargas) (Chapter 638): APPLICATION OF L.C. sec. 5814 TO UTILIZATION REVIEW. New L.C. sec. 4610.1 provides that periods of time reasonably required to conduct utilization review shall not be considered an unreasonable delay in the payment of compensation for purposes of determining "penalty" issues under L.C. sec. 5814. However, an unreasonable delay in the completion of utilization review may result in a penalty.

September 2007