LOSS CONTROL CERTIFICATION PROGRAM,
HIGH HAZARD ENFORCEMENT PROGRAM AND
HIGH HAZARD CONSULTATION PROGRAM
Division of Occupational Safety and Health
Department of Industrial Relations
Former Labor Code Section 62.9(i)(1) and (2) required that the Department of Industrial Relations submit to the Joint Legislative Budget Committee an Interim (1997) and a Final (1998) Report on the Targeted Enforcement (Inspection) and Consultation Programs. An Interim Report had to be submitted no later than January 1997, and a Final Report no later than January 1998. The Department submitted these legislatively-required reports in a timely manner.
Labor Code Section 62.9 specified that the Interim and Final Reports must contain the following information: (1) number and type of targeted employers inspected; (2) number and type of follow-up inspections conducted; (3) the number and type of violations observed and corrected; (4) the number and type of enforcement actions taken; (5) the total number of program staff hours expended in enforcement, administration, and support for the program; and (6) an overall assessment of the efficacy of the programs, supported by workplace injury and illness data.
Labor Code Section 62.9 was amended in 1998 by Assembly Bill 1957, and no longer requires reports on the High Hazard Enforcement and Consultation Programs. Even though no statutory mandate still exists, the Division of Occupational Safety and Health believes that it is important to report annually on the status of the Loss Control Certification Program, High Hazard Enforcement Program and High Hazard Consultation Program.
The 2002 Report summarizes the status of the programs established by the Department of Industrial Relations as a result of the 1993 reforms to the workers' compensation insurance system--the Loss Control Certification Program, the High Hazard Enforcement Program and the High Hazard Consultation Program--their activities during the calendar year 2001 and measures of how effective the programs have been in meeting their goals.
Loss Control Certification Program
As of December 2001, a total of 107 insurer group plans have been recertified. This represents a total of 263 individual insurers. Fifteen (15) individual insurers have been given provisional certifications because they are new to the loss control certification program. One (1) insurer became uncertified in 2001 and this information was reported to the Department of Insurance. The insurer failed to achieve recertification prior to the expiration of a current annual plan. Eleven (11) insurer groups requested and received extensions to their certifications to permit changes to their selection methodologies or to receive additional data to complete their plan submittals.
Through 2001, the LCCU has conducted a total of 142 primary evaluations of insurers' Annual Loss Control Plans. Forty (40) insurer groups have received their second evaluation. Evaluations by the LCCU have now covered all of the workers' compensation market in California.
Insurer selection methodologies for targeting their insureds often fail to identify those who have the greatest workers' compensation losses or the most significant preventable safety and health problems. In 2001, numerous insurers have developed more effective methodologies. The LCCU has worked closely with insurers to assist in revising the methodologies which have proven to be less than effective. Methodologies which use policy premium or experience modification as a single criterion have proven to be the most unreliable. This finding, which has been consistently noted from 1994 through 2001, has prompted the LCCU to propose changes in the Loss Control regulations governing selection methodologies.
In order to provide a quantitative profile of the effectiveness of the Loss Control Certification Program, the LCCU examined in 2000 insured employers' experience with the Loss Control Certification Program, as reported by their workers' compensation insurers to the Workers' Compensation Insurance Rating Bureau (WCIRB) for the premium years 1998 and 1999. The results of this effectiveness survey is contained in the LCCU's Analysis of Employer Experience.
Due to the limitations inherent in insurer-provided data that is not consistent across insurer groups, tests of statistical significance cannot be reliably applied to the data. Nevertheless, the insurer reports are based on objective evaluation of employer experience. An analysis of that experience indicates that insurers, as a group, have successfully identified employers with greatest workers' compensation losses and the most significant and preventable health and safety hazards.
The other findings from the 2000 Analysis of Employer Experience are: (1) insurer loss control intervention has led to the improvement of the loss experience for a significant percentage of target employers; (2) loss control services delivered to targeted employers under the Loss Control Certification Program have had a significant positive impact in reducing the frequency of injuries to California workers and on the reduction of workers' compensation losses for targeted employer-insureds; (3) the percent of targeted employer-insureds achieving reductions in frequency of claims and/or reduction of workers' compensation losses remains consistently high; (4) the costs to insurers for the Loss Control Certification Program do not present an undue burden on insurers, relative to their direct written premium or loss control budgets; (5) competition under "open rating" continues to cause significant turnover in the coverage of targeted employers, which has led to the exclusion of a number of targeted employers identified as eligible for loss control services; (6) adoption of a uniform selection methodology, based on a criteria already recognized by the insurance industry, will ensure the selection of employer-insureds, across all insurer groups, who would most benefit from loss control services; and (7) the Loss Control Certification Unit is meeting its mandate contained in Labor Code Section 6354.5.
Legislation (AB 749) signed by the Governor on 15 February 2002 repeals the statutory basis for the Loss Control Certification Unit and mandate a "Loss Control Coordinator." Changes to Labor Code Section 6354.5 specify that "the coordinator shall provide information to employers about the availability of loss control consultation services and respond to employers' questions and complaints about loss control consultation services provided by their insurer." Insurers would no longer be required to submit an annual plan to the Department, or to undergo an audit of their plan. AB 749 will go into effect on 1 January 2003 and the Loss Control Certification Unit will cease operations.
Targeted Inspection and Consultation Fund
The 2002 Report describes the status of the Targeted Inspection and Consultation Fund (TICF) (Labor Code Sections 62.7 and 62.9) for insured and self-insured employers. In 1995, 1996, 1997, 1998, 1999, 2000 and 2001, 11,650, 11,387, 11,378, 11,812, 13,019, 13,977 and 11,579 employers, respectively, were reported by the Workers' Compensation Insurance Rating Bureau (WCIRB) to have had an ExMOD of 1.25 or more, and were subject to the TICF assessment under Labor Code Section 62.7 (in 1995) and Section 62.9 (in 1996, 1997, 1998, 1999, 2000 and 2001). A total of 84,802 TICF invoices were sent to insured employers for the years 1995 through 2001. The total amount invoiced for 1995 through 2001 was $50,582,072. As of 1 February 2002 the net amount collected from insured employers for 1995 through 2001 is $49,149,098, or 97.1% of the total assessment.
As provided by Labor Code Section 62.9(c)(5) and (6), employers who have been sent TICF invoices, but who have failed to pay the amount assessed in thirty (30) days, receive a "Notice of Delinquency" from the Department of Industrial Relations. Delinquent TICF invoices (plus a 25% penalty) are then referred to the Franchise Tax Board, Non-Tax Debt Collection Unit, for collection after 15 days of non-payment. As of 1 February 2002, a total of 5,929 unpaid TICF accounts have been referred to the Franchise Tax Board, representing $3,416,146.69 in uncollected monies (with imposition of the 25% penalty, the total is $4,274,309.99). As of 1 February 2002, $1,400,974.80 (33%) has been collected by the Franchise Tax Board (although amounts collected by FTB for 2001 accounts are not available at the time of this Report). The TICF Assessment for self-insured employers indicates that since 1995, 789 self-insured employers were sent invoices and were assessed a total of $2,159,273. As of 1 February 2002, a total of $2,159,273 (100%) has been collected from self-insured employers.
High Hazard Consultation Program
The 2002 Report describes the status of the High Hazard Consultation Program (see Labor Code Sections 62.9, 6354 and 6355).
In 2001, 663 employers were provided on-site high hazard consultative assistance. During consultation with these employers, 4,336 Title 8 violations were observed and corrected as a result of the provision of consultative assistance. Since 1994, 5,100 employers have been provided direct on-site consultative assistance, and 24,401 Title 8 violations have been observed and corrected.
Beginning in 2000, the efficacy of high hazard consultative assistance is assessed through measurement of a high hazard employer's Lost Work Day Case Incidence Rate (LWDI) and an employer's Experience Modification Rating (ExMOD).
For employers who were provided high hazard consultative assistance in 1999 and surveyed in 2001 (n=393), 114 employers responded with detailed information from their Log 200 Record of Occupational Injuries and Illnesses to calculate their Lost Work Day Incidence Rate (LWDI) for the three years prior to the consultative assistance intervention and for the year following the intervention. As Table 4A indicates, the average LWDI for this 1999 cohort, the average LWDI decreased by 22% (from 6.82 to 5.33). For the same cohort, the 2001 experience modification rating (ExMOD) of 114 employers was obtained from the Workers' Compensation Rating Bureau (WCIRB) and compared to the ExMOD for the year prior to the consultative assistance intervention. As Table 4B indicates, the average ExMOD for this 1998 cohort decreased from decreased by 25% (from 216 to 162).
High Hazard Enforcement Program
The 2002 Report describes the status of the High Hazard Enforcement Program (see Labor Code Section 6314.1).
In 2001, 401 employers underwent a high hazard enforcement inspection. During these inspections, 1,650 violations were observed and cited. Since 1994, 3,296 employers have undergone a high hazard enforcement inspection, and 16,002 violations have been observed and cited. Of these violations, 41.12% were classified as "serious."
For a series of six cohorts of employers who underwent high hazard enforcement inspections during the years 1994 through 1999, detailed information from their Log 200 Record of Occupational Injuries and Illnesses was used to calculate their Lost Work Day Incidence Rate (LWDI) for the year in which the enforcement inspection took place (baseline), and for each subsequent year up to and including 2000 (except for the 1994 cohort). As Table 5G indicates, the cumulative percent change in the LWDI for each of the six cohorts (except the 1995 cohort) indicates that inspected employers' LWDI decreased by anywhere from 20% (for 1999 cohort) to 68% (for 1996 cohort) and by a total of 32% for all cohorts.
The 2002 Report indicates that the targeting of establishments with elevated rates of workplace injuries, and illnesses and the application by Cal/OSHA of consultation or enforcement resources to those establishments, is an effective way to identify hazards and violative conditions and to reduce injury and illness incidence rates and workers' compensation loss indicators arising from those hazards and violative conditions.
Please direct any questions about the 2002 Report, or suggestions for the 2003 Report, to John Howard, Chief, Division of Occupational Safety and Health, P.O. Box 420603, San Francisco, CA 94142.