Existing law establishes a workers compensation system, administered by the Administrative Director of the Division of Workers Compensation, to compensate an employee for injuries sustained in the course of their employment. Existing law requires every employer to establish a utilization review process, as described, and establishes an independent medical review process to resolve disputes over a utilization review decision, as specified. Existing law requires that aggregate disability payments for a single injury occurring on or after certain dates be limited to no more than 104 or 240 compensable weeks, as provided.

This bill would authorize, on or after January 1, 2025, the Workers Compensation Appeals Board to award temporary disability benefits, as specified, if a denial of treatment requested by a treating physician is subsequently overturned by independent medical review. The bill would prohibit the temporary disability awarded by the Workers Compensation Appeals Board from exceeding the time from the date of the treatment denial through the date of the independent medical review determination overturning the treatment denial.

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

SB 1346 (Durazo) - Workers’ compensation: aggregate disability payments

Bill Summary:

SB 1346 would allow the Workers’ Compensation Appeals Board the discretion to extend the potential duration of temporary disability payments for up to 90 days if an injured employee prevails at a workers’ compensation independent medical review.

Fiscal Impact:

• DIR indicates that it would incur first-year costs of $9.1 million, and $8.3 million annually thereafter, to implement the provisions of the bill (Workers' Compensation Administration Revolving Fund).
• This bill could result in additional temporary disability benefit payments to state employees relative to current law, and a commensurate increase in administrative workload at state departments. The magnitude is unknown, but potentially in excess of $50,000 per year (General Fund and special funds).

Background:

Current law establishes a workers’ compensation system, administered by the Division of Workers’ Compensation (DWC) within DIR, and requires employers to secure payment of workers’ compensation for injuries incurred by employees that arise out of, and in the course of, employment. When an injury occurs, the utilization review (UR) process is used by employers or claims administrators to have a doctor review a medical treatment plan to determine if the proposed treatment is medically necessary after consulting a schedule of uniform treatment guidelines. These guidelines, referred to as the Medical Treatment Utilization Schedule, are adopted by DWC and in most cases are consistent with treatment guidelines adopted by the American College of Occupational and Environmental Medicine.

A UR reviewer concluding a recommended treatment is not medically necessary may modify or deny the treatment request. If the treatment request is modified or denied, the independent medical review (IMR) process can be initiated by the injured worker, or their physician or attorney, within 30 days. The IMR system operates as the employee’s appeal of a UR denial. Once IMR is initiated, the claims administrator has 14 days to provide records to the IMR provider, who then has 30 days to submit a decision. . The IMR system is operated by a vendor selected and regulated by DWC and its review is conducted by qualified medical professionals. In most circumstances, a determination by IMR is final and binding.

Additionally, current law provides, for the purpose of workers compensation, temporary disability (TD) payments. The amount is two-thirds of the weekly loss of wages during the disability, for up to two years (104 weeks).

Proposed Law:

This bill would provide that on or after January 1, 2025, if a UR denial of treatment recommended by a treating physician for an injured worker is overturned by IMR or the Workers’ Compensation Appeals Board (WCAB), any TD benefits paid or owing to the injured worker from the date of the UR denial until the date of the IMR decision may be credited as time lost by WCAB in the calculation of the aggregate disability payments.

Related Legislation:

• AB 1213 (Ortega, 2023) was substantially similar to this bill, and was vetoed by the Governor.
• AB 1295 (Chu, 2017) was substantially similar to this bill, and was held in the Assembly Committee on Insurance.
• SB 1160 (Mendoza, Chapter 868, Statutes of 2016) expedited medical care at the beginning of the injured worker’s claim, modernized data collection in the workers’ compensation system, and implemented anti-fraud measures in the filing and collection of liens.
• SB 863 (De Leon, Chapter 363, Statutes of 2012) allowed, among other things, an employee to appeal a UR decision by requesting an independent medical review either immediately after the UR decision or after getting a second UR with additional information.

Staff Comments:

As noted in the Senate Committee on Labor, Public Employment and Retirement’s analysis of this bill, DIR data indicate that 124,345 new TD claims were filed in 2021. Recent data estimates 92.5 percent of all medical treatment requests are approved without objection and 1.6 percent are approved with modifications. Therefore, 94.1 percent are approved by claims or by UR. Of the remaining 5.9 percent, 29 percent are appealed to IMR, which accounts for 1.7 percent of initial medical treatment requests.

The above data are relatively consistent from year to year; specifically, IMR generally upholds more than 90 percent of UR decisions. Consequently, the population of injured workers who would benefit from this bill would be small, reflecting (1) the low number of cases overturning a UR decision, and (2) the small percentage of such reversals applying to an injured worker likely to exhaust the full 104 weeks of TD

However, DIR anticipates that this bill would result in a significant increase to DWC’s workload. The department anticipates requiring additional new judge teams, each comprised of 3.5 positions.

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SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Lola Smallwood-Cuevas, Chair

2023 - 2024 Regular

Bill No: SB 1346 Hearing Date: April 10, 2024

SUBJECT: Workers’ compensation: aggregate disability payments

KEY ISSUE

This bill allows the Workers’ Compensation Appeals Board the discretion to extend the potential duration of temporary disability payments for up to 90 days if an injured employee prevails at a workers’ compensation independent medical review.

ANALYSIS

Existing law:

1. Establishes a workers’ compensation system, administered by the Division of Workers’ Compensation (Division) within the Department of Industrial Relations and requires employers to secure payment of workers’ compensation for injuries incurred by employees that arise out of, and in the course of, employment. (Labor Code §§3200 et seq.)
   
2. Requires every employer to establish a medical treatment utilization review (UR) process directly or through an insurer or an entity with which the employer or insurer contracts for these services and establishes penalties for failure to establish and comply with UR. Utilization review is a system whereby physicians with comparable expertise to the treating provider apply medical guidelines to determine whether the recommended treatment is appropriate. (Labor Code §4610)
   
3. Provides that an employer or the employer’s insurer can challenge the appropriateness of medical treatment recommended by a treating physician through UR. This is the only means by which an employer can deny medical treatment recommended for an injured worker. (Labor Code §4610)
   
4. Establishes the independent medical review (IMR) system that operates as the employee’s appeal of a UR denial. The IMR system is operated by a vendor selected and regulated by the Division and its review is conducted by qualified medical professionals. In most circumstances, a determination by IMR is final and binding. (Labor Code §4610.5)
   
5. Provides, for the purpose of workers’ compensation temporary disability (TD) payments, two-thirds of the weekly loss of wages during the disability for up to 104 weeks within a period of two years. (Labor Code §§4650 et seq.)
   

This bill: provides that, on or after January 1, 2025, if a UR denial of treatment recommended by a treating physician for an injured worker is overturned by IMR or the Workers’ Compensation Appeals Board (WCAB), any TD benefits paid or owing to the injured worker from the date of the UR denial until the date of the IMR decision may be credited as time lost by WCAB in the calculation of the aggregate disability payments.

COMMENTS

1. Background

All employers, or their workers' compensation claims administrators, are required to have a UR program. The UR process is used by employers or claims administrators to have a doctor review a medical treatment plan to determine if the proposed treatment is medically necessary after consulting a schedule of uniform treatment guidelines. These guidelines, referred to as the Medical Treatment Utilization Schedule, are adopted by the Division and in most cases are consistent with treatment guidelines adopted by the American College of Occupational and Environmental Medicine.

If the UR reviewer concludes a recommended treatment is not medically necessary, they may modify or deny the treatment request. If the treatment request is modified or denied, the IMR process can be initiated by the injured worker, or their physician or attorney, within 30 days. Once IMR is initiated, the claims administrator has 14 days to provide records to the IMR provider, who then has 30 days to submit a decision.

According to the Department of Industrial Relations, 124,345 new TD claims were filed in 2021. Recent data estimates 92.5 percent of all medical treatment requests are approved without objection and 1.6 percent are approved with modifications. Therefore, 94.1 percent are approved by claims or by UR. Of the remaining 5.9 percent, 29 percent are appealed to IMR, which accounts for 1.7 percent of initial medical treatment requests.

Anecdotal evidence provided by the sponsor describes several cases where UR was denied to the injured worker, only to be overturned by IMR, causing weeks to months of delay in care. Types of denials ranged from cortisone shots to major surgery. While waiting for the IMR determination, injured employees reached and exceeded their 104-week temporary disability cap, leaving them vulnerable to financial loss on top of injury.

The California Workers’ Compensation Institute (CWCI) finds this bill would result in additional expenses for claims administrators to develop new systems to track the dates of UR denials, IMR determinations, and subsequent treatment authorizations to calculate the number of days to exclude from the TD cap. CWCI estimates claims administrators would need to track 31.7 percent of all TD claims in order to identify and monitor claims that could be covered under this bill.

2. Need for this bill?

According to the author, “California’s workers’ compensation law requires an employer to provide all medical treatment necessary to cure or relieve an employee from a work-related injury. In return, the employee cannot sue their employer. As a result, California’s workers’ compensation system is a no-fault system. However, there is a 104-week time limit on temporary disability payments. The 104-week cap is applied even in instances when the employee’s medical treatment has been wrongfully denied and later authorized by either IMR or the [Workers’ Compensation Appeals Board (WCAB)].

In limited instances when a UR denial is overturned by IMR on medical necessity grounds, or by the WCAB because it was untimely and unreasonable SB 1346 would allow the WCAB, in its sole discretion, to replace lost TD benefits beyond the 2-year statutory maximum. This will ensure that workers are not unjustly penalized due to a delay in their treatment through no fault of their own.”

3. Proponent Arguments

The sponsor, California Applicants’ Attorneys Association, states “Notwithstanding the ‘no-fault’ nature of the system, injured workers are often forced to financially shoulder the burdens of a bureaucratic system dominated by the insurance adjusters and medical providers that are selected and compensated by the insurance industry or employers. One such example is manifested by the 104-week time limit on temporary disability payments… According to industry data relied on by the Division of Workers’ Compensation, less than 10% of UR denials are overturned by IMR when a denial is untimely and delays necessary treatment. It is wrong for TD benefits for 10% of injured workers to end simply because necessary treatment was erroneously or unreasonably denied, and the denial delayed the injured worker’s recovery and return to work… We believe SB 1346 adequately addresses Governor Newsom’s veto of AB 1213 last year by vesting the authority to bridge the benefit gap only with the WCAB.”

3. Opponent Arguments:

According to a coalition of opponents, “IMR is [over utilized] and that is where the delay occurs for injured workers. If the legislature wants to meaningfully reduce delays, then they should focus on the overuse of IMR by attorneys and physicians. If mitigating unreasonable delay is the issue, then the data clearly shows that ten times as many injured workers are experiencing delays because of an overuse of IMR. The Utilization Review process is not perfect, but it is consistently providing strong results for the system and the data shows clearly that UR is not the cause of delays.

Data continues to suggest that it’s a small number of physicians driving this high volume of IMR requests and therefore causing delays for injured workers. A 2021 Research Update from the California Workers’ Compensation Institute found that 1% of requesting physicians (89 doctors) account for 39.9% of disputed treatment requests. Just ten individual providers account for 11% of the disputed treatment requests. The report also notes that the same providers continue to be a problem year after year…. we believe that SB 1346 will cause injured workers and their attorneys to trigger unnecessary IMR more frequently in hopes of preserving their potential legal right to the additional temporary disability benefits allowed by the bill, with absolutely no downside for the provider or the applicant attorney, as the expenses of the IMR are carried entirely by the claims administrator even if an attorney submits an IMR for a course of treatment that has been denied by IMR as outside the legal standard dozens of times in the same year. The increase in IMR volume will have a direct impact on the turnaround time for these reviews and decisions, thus impacting the injured workers further. The IMR process takes a substantial amount of time, and employers prevail at a rate of roughly 90% over the past decade. If the result of SB 1346 is more IMR that ultimately upholds the UR determination, then it will undermine the intent of the bill by causing even more delay for workers and more frictional cost for employers… the requirements of SB 1346 would further complicate the claims administration process and result in additional system friction and litigation.”

4. Prior Legislation:

AB 1213 (Ortega, 2023) was substantially similar to this bill. In his veto message, Governor Newsom stated “While I understand the goal of the author and sponsor, there is a lack of data to support such a change. Under the existing workers' compensation system, employers are required to establish a UR process to evaluate the necessity and appropriateness of requested medical treatments. This process is in place to ensure that employees receive the appropriate evidence-based medical care.”

AB 1295 (Chu, 2017) was substantially similar to this bill. This bill was held in the Assembly Committee on Insurance.

SB 1160 (Mendoza, Chapter 868, Statutes of 2016) expedited medical care at the beginning of the injured worker’s claim, modernized data collection in the workers’ compensation system, and implemented anti-fraud measures in the filing and collection of liens.

SB 863 (De Leon, Chapter 363, Statutes of 2012) allowed, among other things, an employee
to appeal a UR decision by requesting an independent medical review either immediately after the UR decision or after getting a second UR with additional information.

SUPPORT

California Applicants’ Attorneys Association - Sponsor

OPPOSITION

Acclamation Insurance Management Services

Allied Managed Care

American Property Casualty Insurance Association

California Chamber of Commerce

California Coalition on Workers Compensation

California Joint Powers Insurance Authority

California League of Food Producers

California Restaurant Association

California State Association of Counties

Coalition of Small and Disabled Veteran Businesses

Flasher Barricade Association

Landscape Contractors Insurance Services, Inc.

League of California Cities

Monterey County

Protected Insurance Program for Schools & Community Colleges Joint Powers Authority

Public Risk Innovation, Solutions, and Management: PRISM

Schools Insurance Authority

Self-Insured Schools of California

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