Workers Compensation in CaliforniaWorkers Compensation in California

Gabe BrownGabe Brown

Bryan SnitselaarBryan Snitselaar

Eric TennisonEric Tennison

Felipe TrevinoFelipe Trevino

Marjan ElahiMarjan Elahi

HistoryHistory

California Workers Compensation law was passed California Workers Compensation law was passed in 1913 to shield employers from liability and in 1913 to shield employers from liability and provide employees with benefits for workplace provide employees with benefits for workplace injuires.injuires.

Once passed workers compensation was Once passed workers compensation was mandatory for all employers in the state.mandatory for all employers in the state.

Guarantees 3 types of benefits: Medical care for Guarantees 3 types of benefits: Medical care for the injury, Indemnity cash payments for lost the injury, Indemnity cash payments for lost wages & rehabilitation services to enable wages & rehabilitation services to enable

claimants to return to work.claimants to return to work.

Workers’ Compensation MovieWorkers’ Compensation Movie

DWC Movie **Put a link here if DWC Movie **Put a link here if possible**possible**

California Plan SpecificsCalifornia Plan Specifics

BenefitsBenefits Medical CareMedical Care First Aid TreatmentFirst Aid Treatment Temporary DisabilityTemporary Disability Permanent DisabilityPermanent Disability Vocational RehabilitationVocational Rehabilitation Death BenefitsDeath Benefits

LawsLaws

California employers must provide Workers California employers must provide Workers Compensation benefits to employees under the Compensation benefits to employees under the California Labor Code Section 3700.California Labor Code Section 3700.

Executive officers and directors of companies Executive officers and directors of companies must be covered in the policy unless they fully must be covered in the policy unless they fully own the corporation.own the corporation.

Fine for not having Workers Compensation is Fine for not having Workers Compensation is $1000 per employee.$1000 per employee.

RegulationRegulation

Purchase Insurance through Purchase Insurance through insurance company or the STATE insurance company or the STATE FUNDFUND

They can also self insureThey can also self insure

California Workers California Workers CompensationCompensation

Market Share by Type of InsurerMarket Share by Type of Insurer

45%

36%

19%

61%

22%

17%

44%

1%

55%

0%

25%

50%

75%

100%

% M

arke

t Sha

re

1994 1997 2003

Calendar Year

National Insurers California Insurers State Fund

Note: “California Insurers” are defined as private insurers who write at least 80% of their workers’

compensation business in California.

Source: Workers Compensation Insurance Rating Bureau of California (WCIRB)

BillsBillsSB 228 & AB 227SB 228 & AB 227

Medical TreatmentMedical Treatment1.1. Chiropractic & Physical Therapy VisitsChiropractic & Physical Therapy Visits

2.2. Using Generic drugsUsing Generic drugs

3.3. Late payment penalty increaseLate payment penalty increase

Pricing IssuesPricing Issues1.1. Calls for development of online rating of 50 Calls for development of online rating of 50

largest insurers.largest insurers.

Fraud PenaltiesFraud Penalties1.1. Increase to $150,000 or twice the amount of Increase to $150,000 or twice the amount of

fraud.fraud.

Workers Compensation Reform & AccountabilityWorkers Compensation Reform & Accountability

1.1. Fight Fraud & AbuseFight Fraud & Abuse

2.2. Qualified doctors in charge of Qualified doctors in charge of treatmenttreatment

3.3. Base treatment decisions on facts and Base treatment decisions on facts and evidence.evidence.

4.4. Guarantee fair compensation for real Guarantee fair compensation for real injuries.injuries.

5.5. Balance the rights of injured workers Balance the rights of injured workers with the interests of their employers.with the interests of their employers.

California Workers Compensation California Workers Compensation Average Rate Per $100 of Payroll Average Rate Per $100 of Payroll

1989-20031989-2003

Source: Workers’ Compensation Insurance Rating Bureau of California (WCIRB)

State ComparisonState Comparison

$5.85

$4.50

$3.29 $3.02

$2.06

$1.65 $1.63

$2.46

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

Workers' Compensation Costs Per $100 Payroll

FraudFraud

Abuse: is defined as using the Abuse: is defined as using the system for something other than it system for something other than it was intended.was intended.

Fraud: Occurs when there is clear Fraud: Occurs when there is clear intent to misrepresent injuries or intent to misrepresent injuries or fabricate injuries.fabricate injuries.

Workers Compensation Fraud in Workers Compensation Fraud in CaliforniaCalifornia

Different types of fraud in CaliforniaDifferent types of fraud in California Employee fraud Employee fraud Employer fraud Employer fraud Medical fraud.Medical fraud.

Employee FraudEmployee Fraud

Include claims fraud by workers who Include claims fraud by workers who report accidents that never report accidents that never happened, exaggerate the severity happened, exaggerate the severity of their injury or try to collect for a of their injury or try to collect for a non-work related event or file a claim non-work related event or file a claim just prior to a plant closing or just prior to a plant closing or seasonal layoff.seasonal layoff.

Employer FraudEmployer Fraud

Premiums fraud, is perpetrated by Premiums fraud, is perpetrated by employers that try to reduce costs by employers that try to reduce costs by underreporting payroll, placing underreporting payroll, placing employees in improper job employees in improper job classifications, providing an improper classifications, providing an improper business address or misrepresenting business address or misrepresenting the company’s loss history.the company’s loss history.

Medical FraudMedical Fraud

Medical providers can also commit Medical providers can also commit fraud by submitting claims that fraud by submitting claims that reflect an “upcoding” of the injury to reflect an “upcoding” of the injury to support higher fees, switching to support higher fees, switching to products that are not indicated or products that are not indicated or billing for services that were never billing for services that were never rendered.rendered.

Proposed SolutionsProposed Solutions

Employers improve safety training.Employers improve safety training. Two bills AB 227 & SB 228.Two bills AB 227 & SB 228. Put a CAP on Litigation.Put a CAP on Litigation. Governor Arnold’s Reform, November Governor Arnold’s Reform, November

ballot.ballot.

Effects of the solutionsEffects of the solutions

Establishing a risk management Establishing a risk management program. program.

Reduction of 11.3 billion overall with Reduction of 11.3 billion overall with SB227 and AB228SB227 and AB228

A cap on litigation would ensure A cap on litigation would ensure lower costs and ultimately benefit lower costs and ultimately benefit the system. the system.

Alternative Dispute Resolution.Alternative Dispute Resolution.

Recommendations for CaliforniaRecommendations for California

Senate Bill 227 and Assembly Bill Senate Bill 227 and Assembly Bill 228228

Training employees/ risk Training employees/ risk management program management program

Cap on Litigation with utilizationCap on Litigation with utilization of ADRof ADR

Large DeductibleLarge Deductible

Employee Benefit WheelEmployee Benefit Wheel

InternalInternal

1.1. Total Compensation StrategiesTotal Compensation Strategies

2.2. Wants vs. NeedsWants vs. Needs

3.3. Cost IssuesCost Issues

4.4. HR Management PhilosophyHR Management Philosophy

5.5. Business ObjectivesBusiness Objectives

Employee Benefits WheelEmployee Benefits Wheel

ExternalExternal

1.1. CompetitionCompetition

2.2. InflationInflation

3.3. Legal RequirementsLegal Requirements

4.4. TaxationTaxation

5.5. Benefit InnovationBenefit Innovation

Company Web SitesCompany Web Sites

http://www.cna.comhttp://www.cna.com http://firemansfund.comhttp://firemansfund.com http://thehartford.comhttp://thehartford.com http://scif.comhttp://scif.com http://travelers.comhttp://travelers.com http://icwgroup.comhttp://icwgroup.com

Work Comp Web SitesWork Comp Web Sites

www.reformworkerscomp.comwww.reformworkerscomp.com www.wcirbonline.orgwww.wcirbonline.org www.departmentofinsurance.ca.govwww.departmentofinsurance.ca.gov

Any Questions?Any Questions?