Bill Undermining Workers’ Comp Reforms Awaits Consideration on Senate Floor

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A California Chamber of Commerce-opposed “job killer” bill that undermines cost-saving workers’ compensation reforms will be considered next by the full Senate.

SB 563 (Pan; D-Sacramento) undermines the entire medical treatment review process in California’s workers’ compensation system, thereby exposing injured workers to potentially inappropriate treatment, triggering significant system cost increases and subverting the recent data-driven reform process.

SB 563 alters the current medical treatment review process—reformed through a joint labor-management negotiated legislative package—by limiting the application of that process.

Cost Increases

The recently enacted Independent Medical Review (IMR) process was estimated to save nearly $400 million by increasing the efficiency of resolving medical disputes. By significantly undermining the IMR process, SB 563 threatens to eliminate potential savings from the recent reforms and drive employer costs higher in what already is the country’s most expensive workers’ compensation system.

Undermines Treatment Review

The current process of reviewing medical treatment requests to ensure consistency with evidence-based treatment guidelines includes both utilization review and IMR. The process was designed to ensure injured workers receive the most necessary, effective and appropriate treatment.

The process is heavily regulated with prescriptive statutes and rules, limited treatment review timeframes, thorough performance audits by the Division of Workers’ Compensation, and a robust penalty scheme for noncompliance.

Currently, decisions to delay, deny, or modify a treatment recommendation must be made by a physician, not by a claims administrator. This process serves as a limited check on dangerous care and results in approval of nearly 95% of requested treatment. Yet SB 563 undercuts that process by creating ambiguous exceptions. In many situations under SB 563, the initial approved treatment would stand without question as to its appropriateness in the future.

For example, if an initial treatment request for opioid medication was approved, all subsequent requests for the same medication (even if they did not fit within the evidence-based medical guidelines) would be approved unless the provider indicated a change in the injured worker’s status—a conclusion that would not be subject to review. Employers would not be able to seek a review for the appropriateness of the prescription, nor could they seek an independent review through the IMR process.

This potential outcome of SB 563 is of particular concern in light of the ongoing overutilization of opioids and other dangerous prescription drugs in the California workers’ compensation system.

Litigation

In addition to the impact on medical treatment decisions, SB 563 would result in a great amount of litigation and undermine recent efforts to take medical decisions out of the hands of unqualified administrative law judges. SB 563 gives judges the power to determine that utilization review and IMR processes do not apply, and to override medical decisions.

SB 563 puts medical decisions squarely back in the hands of judges, thereby exposing injured workers to long calendar delays for hearings and employers to higher litigation costs.

Subverts Data-Driven Reforms

The recent system reforms were developed through data-driven analyses that allowed stakeholders to thoughtfully vet and better understand the impacts of any proposed system changes. The result was a balanced reform that has moderated system cost increases while providing nearly $1 billion in new benefits.

SB 563 veers away from this approach by creating massive system changes without any review or understanding of the policy’s impacts. The lack of information and analysis threatens to trigger huge cost swings that the reforms sought to prevent.

Key Vote

The bill passed the Senate Labor and Industrial Relations Committee on a party-line vote on April 29, 4-1.

Ayes: Mendoza (D-Artesia), Jackson (D-Santa Barbara), Leno (D-San Francisco), Mitchell (D-Los Angeles).

No: Jeff Stone (R-Temecula).

Action Needed

The CalChamber is urging members to ask their senators to oppose SB 563.

An easy-to-edit sample letter is available at www.calchambervotes.com.

Staff Contact: Jeremy Merz

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Jeremy Merz
About Jeremy Merz
Jeremy Merz specialized in workers’ compensation, taxation, privacy, transportation and infrastructure issues while a CalChamber policy advocate from December 2011 through December 2016. He now is vice president, state affairs – western region at the American Insurance Association. Merz came to the CalChamber from Downey Brand, LLP, where he represented private defendants in state and federal courts on business litigation, employment law and workers’ compensation litigation. He earned a B.A. in economics from the University of California at Davis and a J.D. with distinction from the McGeorge School of Law, University of the Pacific, where he served on the editorial board of the McGeorge Law Review.