Bulletin 96-3
March 8, 1996

DWC Sponsors New Legislation to
Streamline HCO Process

The California Division of Workers' Compensation is sponsoring new legislation, introduced as Senate Bill 2153 by Senator Rob Hurtt, which will make several important and needed changes to the Workers' Compensation Health Care Organization program.

This program, which came into effect following passage of the 1993 reform legislation, expanded the use of managed care techniques in the workers' compensation system by allowing employers and insurers to contract with certified health care organizations (HCOs) to provide medical treatment for industrially injured workers.

Under the program, qualified HMOs, disability insurers, or workers' compensation health care provider organizations can apply to the Division for certification as an HCO. The proposed changes will expedite the HCO certification process and greatly simplify the measures employers and insurers need to take to allow employees to enroll in an HCO program.

These activities are currently subject to strict regulations, promulgated by the Division to implement the original legislation.

The proposed legislative changes stem from a recent survey conducted by DWC of employer, insurer, medical, and other organizations interested in this program. The survey identified problem areas which, respondents contend, prevent the workers' compensation community from more fully reaping the benefits of managed care, such as lower costs and improved care, that were anticipated when the HCO law was passed.

The survey included approximately a hundred participants, including existing HCOs and applicants, workers' compensation insurance carriers, self-insured employers, HMOs, preferred provider organizations, medical groups, labor unions, and industry consultants. Reports from the survey indicate a general agreement that the 1993 legislation was conceptually good; however, respondents also felt the legislation was excessively complex and had created barriers which outweigh the incentives for the expansion of managed care through the use of certified HCOs.

Issues most frequently identified in the survey include the requirement that employers offer employees a choice of more than one HCO, that the period of time during which the employer maintains control of medical treatment can vary from 90 to 365 days, and that the regulations governing the program are overly complex.

Some health care companies have started to offer HCO-like products, which are not subject to existing regulatory oversight mechanisms. This has raised additional concerns by some individuals about the quality of care and impact on cost and outcome, according to the survey. To help remedy these problems, the new legislation proposed by DWC will:

"Implementation of these recommendations will allow certification of more HCOs, make the use of certified HCOs easier for employers, strengthen the sought after extended length of medical control, and encourage participation in a regulated system which offers workers some assurances regarding the quality of medical care in workers' compensation," said Casey L. Young, DWC Administrative Director.

"These proposed changes are in line with a major priority of this administration, to find state programs that aren't working properly so that they can be either fixed or eliminated," he said. "The survey helped to clarify what's not working in the HCO program. The legislative proposal is intended to fix the program and make it work right."