Workers’ Compensation

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Workers Compensation

• Group 4

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Workers Compensation and The Three Parts

• Workers Compensation is a social insurance
  program that provides
• Medical care
• Cash benefits
• Rehabilitation services
• Three coverages are provided workers
  compensation insurance, employers liability
  insurance, other-states insurance

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Objectives and Eligibility Requirements of
Workers Compensation

• Provide broad coverage
• Substantial protection
• Provide sufficient medical care/rehab
• Reduction of job related accidents
• Reduce litigation
• Two principal eligibility requirements must be
  met

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Workers Compensation Benefits
Keep the benefits coming!

• Unlimited medical care
• Disability-income benefits
• Death benefits
• Rehabilitation services

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Workers Compensation Mess in California

• Rates were falling due to set rates without state
  approval
• Insurers competed for business
• Carriers selling insurance at a loss to gain
  market share
• Firms became insolvent

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Workers Compensation Mess in California (Cont.)

• Businesses pay highest premiums, but injured
  workers get the lowest benefits.
• Costs paid by employers are the highest in the
  country.
• Average employer pays 5.2 of payroll.

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Problems Issues

• 30 of claimants who miss work hire a lawyer
• Doctors patients have little incentive to
  restrain costs
• Employers often hire dueling doctors
• California gives lots of discretion
• Unnecessarily complex, difficult to administer,
  some cases outdated

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Problems Issues (Cont.)

• Difficulty finding workers comp. Insurance
• California receive lowest disability benefits
• California has highest litigation and medical
  cost
• Last year, job based insurance premiums increased
  by an average of 10
• Nearly 1 million claims filed each year

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Problems Issues (Cont.)

• Standards of disability awards
• Stricter guidelines for permanent- partial
  disabilities
• Physician choice
• California exceeds national norm
• Workers file more claims than elsewhere
• Medical cost in California far above average

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Problems Issues (Cont.)

• Lack of fee schedule
• Delays in updating existing fee schedules
• No fault system
• Rising medical inflations
• Indemnity
• Underwriting performance

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Workers Compensation Fraud

• What is workers compensation fraud?
• The two most common types of workers
  compensation fraud
• Premium
• Benefit fraud
• Health care provider or attorney assists the
  worker in fraudulent schemes, or participates in
  double billing.

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Workers Compensation Fraud (Cont.)

• In 2002-03 there were 660 fraud cases
  representing more than 54 million dollars in
  chargeable fraud
• Humboldt man was charged with 6 Felony counts for
  defrauding workers comp.
• 7.1 billion in 1993 to 29 billion in 2003
• Fraud estimated to be between 1 to 3 billion

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Workers Compensation Fraud (Cont.)

• Fraud committed by companies
• Falsely declaring number of workers
• Falsely declaring number of hours
• California passed AB227
• Before legislation
• 50,000
• Now
• 150,000
• Investigation department

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Video

• Workers Comp. fraud
• It affects us all

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Current Claims and Costs in California

• Reserves more than doubled from 9.5 billion in
  1995 to 25 billion in 2002.
• Medical Expenditures skyrocketed from 2.6 - 5.3
  billion.
• Claims have been declining, but savings have been
  offset by rising medical costs.

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The Rise In Cost

• Substantial increases in medical costs per claim
• Average medical cost per claim in 2002 was
  31,000.
• California employers pay more in Workers
  Compensation premiums than any other state.
• 40 states premiums average less then 4.00 per
  100 of payroll
• California averages 6.50 per 100 of payroll

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Current Claims Cost (cont.)

• California has difficult political environment
  for business.
• Between 1997 and 2000, indemnity claims increased
  230.
• 62 of claim dollars go to medical bills and not
  weekly benefits.
• Excessive use of prescription pain medication.

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Current Claims Cost (Cont.)

• Hospital Cost totaled 1.1 Billion in 2002.
• Chiropractor visits per claim up 70
• Pharmaceutical service has grown 243
• 86.4 million in 1997 to 296.6 million in 2002

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Table 1 Service Utilization in California vs.
Other States
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California Legislation

• AB 749 was passed on February 4, 2002
• Bill provides first increase in workers
  compensation benefits for injured workers since
  July 1, 1996.
• Mandates return to work programs
• Also provides pharmaceutical and outpatient
  surgery fee schedule
• New requirements for enforcement of illegally
  uninsured employers.

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Reform Plan

• Propose to cut workers compensation rates in
  half.
• Which would result in 5 Billion in savings.
• Democrats have stated that the reform package
  would reduce workers compensation cost by 14.9.
• Plan will also increase the burden of proof for
  claims of cumulative injuries that builds over
  time.

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Proposed Solutions To Workers Compensation

• To regulate the amount of chiropractic and
  physical therapy visits per claim.
• Strict guide lines of medical treatments.
• Make fees for outpatient surgery centers tied to
  Medicare rates and pharmaceutical prices tied to
  Medi-Cal rates.

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THE END

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  at
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