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 employment. Existing law requires an employer to provide medical, surgical, chiropractic, acupuncture, and hospital treatment that is reasonably required to cure or relieve the injured worker from the effects of the injury. Upon payment, adjustment, or denial of a complete or incomplete itemization of medical services, existing law requires an employer to provide an explanation of review that includes, among other information, the amount paid and the basis for any adjustment, change, or denial of the item or procedure billed. Existing law requires every contracting agent, that sells, leases, assigns, transfers, or conveys its list of contract health care providers and their contracted reimbursement rates to a payor, to comply with certain requirements. Existing law also requires a payor to, among other things, provide an explanation of benefits or explanation of review that identifies the name of the network that the payor has an agreement with that entitles them to pay a preferred rate for the services rendered.

This bill would, when the basis for any adjustment, change, or denial of an item or procedure is a contract, would require the explanation of review or explanation of benefits to include information on that underlying contract, including whom the rendering medical provider may contact to seek a copy of the underlying contract. the state assigned medical provider network identification number and an email address that the rendering medical provider may use to request a copy of the underlying contract that entitles them to take the preferred rate. The bill would state that disclosure of a medical provider network does not satisfy this requirement and would state that if the contract is not sent to the rendering provider or their agent within 30 business days of the providers request, the bill shall be reprocessed and paid, as specified. requirement. The bill would require the payor, upon request, to provide the rendering provider or their agent with a copy of the underlying contract once per 365-day period.

Existing law requires each employer to establish a utilization review process to review and approve, modify, or deny treatment recommendations and establishes an independent medical review process to resolve disputes over a utilization review decision. Existing law requires various requirements to be met in determining whether to approve, modify, or deny requests by a physician for medical services.

This bill would require a request for authorization of medical services by a physician to be signed by that physician, and would authorize a request to be sent via mail, fax, or electronic methods, as specified. The bill would make other conforming changes.

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 employment. Existing law requires an employer to provide medical, surgical, chiropractic, acupuncture, and hospital treatment that is reasonably required to cure or relieve the injured worker from the effects of the injury. Upon payment, adjustment, or denial of a complete or incomplete itemization of medical services, existing law requires an employer to provide an explanation of review that includes, among other information, the amount paid and the basis for any adjustment, change, or denial of the item or procedure billed.

This bill would, when the basis for any adjustment, change, or denial of an item or procedure is a contract, require the explanation of review to include information on that underlying contract, including whom the rendering medical provider may contact to seek a copy of the relevant, applicable underlying contract. The bill would state that disclosure of a medical provider network does not satisfy this requirement and would state that if the contract is not received sent to the rendering provider or their agent within 30 business days of the providers request, the bill shall be reprocessed and paid, as specified.

Existing law establishes a workers compensation system, administered by the Administrative Director of the Division of Workers Compensation, within the Department of Industrial Relations, to compensate an employee for injuries sustained in the course of their employment. Among other things, the workers compensation system provides for medical and hospital treatment, disability payments, and death benefits, as specified.

Existing law requires the administrative director to contract with one or more independent bill review organizations to conduct reviews of medical providers in accordance with specified criteria. Existing law authorizes a provider under certain circumstances, including when the amount of payment is in dispute, to request an independent bill review within a specified timeframe. Existing law requires that the medical provider pay to the administrative director a fee to cover the reasonable estimated cost of the independent bill review and the administration of the independent bill review program. Existing law requires the administrative director to adopt and revise periodically an official medical fee schedule establishing reasonable maximum fees paid for medical services other than physician services, drugs and pharmacy services, health care facility fees, home health care, and all other treatment, care, services, and goods.

This bill would define a payment dispute to include a contract dispute involving any discount or reduction from the official medical fee schedule. The bill would also require, if the dispute only involves a percentage discount or reduction that results in the independent bill review upholding the decision, the independent review organization to provide a written decision to the medical provider and include the medical provider contract relied upon to uphold the decision.

Existing law establishes a workers compensation system, administered by the Administrative Director of the Division of Workers Compensation, within the Department of Industrial Relations, to compensate an employee for injuries sustained in the course of their employment. Among other things, the workers compensation system provides for medical and hospital treatment, disability payments, and death benefits, as specified.

Existing law establishes a workers compensation system, administered by the Administrative Director of the Division of Workers Compensation, within the Department of Industrial Relations, to compensate an employee for injuries sustained in the course of their employment. Among other things, the workers compensation system provides for medical and hospital treatment, disability payments, and death benefits, as specified.

This bill would state the intent of the Legislature to enact legislation to improve transparency and accountability in contracts between payers and medical providers in the workers compensation system.

SENATE COMMITTEE ON

Senator Sabrina Cervantes, Chair

2025 - 2026 Regular Session

AB 1048 (Chen) - Workers’ compensation

Bill Summary:

AB 1048 would make specified changes within the workers’ compensation medical billing and payment processes.

Fiscal Impact:

• The Department of Industrial Relations (DIR) indicates that it would incur first-year costs of $3.8 million, second-year costs of $3.5 million, and $3.1 million annually thereafter, to implement the provisions of the bill (Workers Compensation Administration Revolving Fund).
• This bill would result in increased costs to the State as direct employer. The magnitude is unknown but could reach the tens of millions of dollars annually (General Fund and special funds, see Staff Comments).

Background:

California's workers' compensation system requires employers to provide medical treatment and disability benefits to employees who suffer work-related injuries or illnesses. Medical treatment is generally provided through employer-approved medical provider networks, and disputes regarding medical treatment, disability determinations, and provider reimbursement are resolved through administrative processes administered by DIR’s Division of Workers' Compensation (DWC), including independent medical and billing review procedures.

Medical providers treating injured workers are reimbursed in accordance with the Official Medical Fee Schedule (OMFS), which establishes the maximum allowable reimbursement for workers' compensation medical services. Although providers generally bill their customary charges, claims administrators must adjust payments to reflect either the applicable OMFS rate or a separately negotiated contractual rate. When payments are adjusted, insurers must provide an Explanation of Review identifying the basis for the reimbursement.

Many insurers contract with Medical Provider Networks (MPNs) and Preferred Provider Organizations (PPOs) to obtain discounted reimbursement rates from participating providers. Existing law permits these negotiated discounts but also establishes safeguards intended to ensure transparency when provider contracts are sold, leased, or otherwise made available to additional payors through network leasing arrangements.

These provisions were enacted to address the practice commonly referred to as "silent PPO discounting," in which a provider's negotiated reimbursement rates are applied by insurers or other payors without the provider's knowledge or authorization. Current law requires contracting agents to disclose network leasing arrangements to participating providers and requires payors to identify the contractual basis for any discounted payment. Upon request, a payor must also demonstrate its contractual authority to apply the negotiated reimbursement rate. If the payor is unable to establish that authority within specified statutory timeframes, the provider is entitled to reimbursement at the applicable fee schedule or billed amount, as provided by law. Questions remain, however, regarding the extent to which these disclosure requirements are consistently followed in practice.

Proposed Law:

This bill, among other things, would do the following:

• Require the explanation of review or explanation of benefits to include the state assigned medical provider network identification number and an email address that the rendering medical provider may use to request a copy of the underlying contract (as specified) that entitles them to take the preferred rate.
• State that disclosure of a medical provider network does not satisfy the above requirement.
• Require the payor, upon request, to provide the rendering provider or their agent with a copy of the underlying contract once per 365-day period.
• Require all requests for authorization (RFAs) to bear the signature of the requesting physician and would expressly authorize RFAs to be submitted by mail, facsimile, or specified electronic methods.

Related Legislation:

• SB 668 (Hurtado, 2025) would have authorized the DWC AD to adjust the fee schedule for medical-legal evaluations every two years based on an evaluation of medical practice costs. This bill was held under submission on the Suspense File of this Committee.
• SB 863 (De Leon, Chapter 363, Statutes of 2012) enacted major reforms to the workers’ compensation system, including establishing the independent medical review and IBR processes for resolving disputes.

Staff Comments: Established in 1914, State Compensation Insurance Fund (State Fund) is California's largest provider of workers' compensation insurance and serves as the State's insurer of last resort. Amongst its other duties, State Fund directly administers claims and legal representation for almost all State of California agencies and departments. As a self-supporting entity, it processes these claims directly, dictating the ultimate cost of workplace injury payouts to the State and managing how much the state pays into the workers compensation pool.

State Fund indicates that, under this bill, all California employers (including the State itself) would experience increased cost of providing employees with workers compensation medical benefits. Specifically, the bill's provisions governing the documentation required to support payment of negotiated reimbursement rates could substantially limit the continued use of existing PPO and network leasing arrangements. State Fund indicates that its provider networks generally rely on contractual relationships between providers and PPOs, rather than direct contracts between providers and medical provider networks. As a result, State Fund contends it may be unable to satisfy the bill's documentation requirements to demonstrate its entitlement to negotiated reimbursement rates, causing many medical services to instead be reimbursed at the higher OMFS rates.

Based on its analysis of 2025 claims experience, State Fund estimates that the loss of negotiated provider discounts would increase workers' compensation claim costs for state agencies by $27.5 million annually. State Fund further indicates that applying the bill's provisions to existing claims could increase outstanding workers' compensation liabilities by hundreds of millions of dollars.

-- END --

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Lola Smallwood-Cuevas, Chair

2025 - 2026 Regular

Bill No: AB 1048 Hearing Date: June 10, 2026

SUBJECT: Workers’ compensation

KEY ISSUE

This bill makes changes within the workers’ compensation medical billing process requiring employers to include specified information on an underlying contract to justify a discount, as specified, as well as include the contact information where a provider may obtain a copy of such contract. The bill additionally prescribes an alternate payment rate for services if the contract is not sent to a provider within 30 days of the request, as specified.

ANALYSIS

Existing law:

1. Establishes a comprehensive system of workers' compensation that provides a range of benefits for an employee who suffers from an injury or illness that arises out of and in the course of employment, regardless of fault. This system requires all employers to ensure payment of benefits by either securing the consent of the Department of Industrial Relations (DIR) to self-insure or by obtaining insurance from a company authorized by the state. (Labor Code §§3200-6002)
2. Requires an employer to provide an Explanation of Review (EOR), upon payment, adjustment, or denial of a complete or incomplete itemization of medical services, in the manner prescribed by the administrative director (AD) of the Division of Workers’ Compensation (DWC) that must include all of the following:
   1. A statement of the items or procedures billed and the amounts requested by the provider to be paid.
   2. The amount paid.
   3. The basis for any adjustment, change, or denial of the item or procedure billed.
   4. The additional information required to make a decision for an incomplete itemization.
   5. If a denial of payment is for some reason other than a fee dispute, the reason for the denial.
   6. Information on whom to contact on behalf of the employer if a dispute arises over the payment of the billing. The explanation of review must inform the medical provider of the time limit to raise any objection regarding the items or procedures paid or disputed and how to obtain an independent review of the medical bill, as specified. (Labor Code §4603.1)
3. Allows the AD to adopt regulations requiring the use of electronic EOR. (Labor Code §4603.1)
4. Specifies, that in order to prevent the improper selling, leasing, or transferring of a health care provider’s contract, it is the intent of the Legislature that every arrangement that results in any payor paying a health care provider a reduced rate for health care services based on the health care provider’s participation in a network or panel must be disclosed by the contracting agent to the provider in advance and must actively encourage employees to use the network, unless the health care provider agrees to provide discounts without that active encouragement. (Labor Code §4609)
   1. Requires, beginning July 1, 2000, every contracting agent that sells, leases, assigns, transfers, or conveys its list of contracted health care providers and their contracted reimbursement rates to a payor, as specified, or another contracting agent to, upon entering or renewing a provider contract, do all of the following:
      1. Disclose whether the list of contracted providers may be sold, leased, transferred, or conveyed to other payors or other contracting agents, and specify whether those payors or contracting agents include workers’ compensation insurers or automobile insurers.
      2. Disclose what specific practices, if any, payors utilize to actively encourage employees to use the list of contracted providers when obtaining medical care that entitles a payor to claim a contracted rate, as specified.
      3. Disclose whether payors to which the list of contracted providers may be sold, leased, transferred, or conveyed may be permitted to pay a provider’s contracted rate without actively encouraging the employees to use the list of contracted providers when obtaining medical care, as specified.
      4. Disclose, upon the initial signing of a contract, and within 15 business days of receipt of a written request from a provider or provider panel, a payor summary of all payors currently eligible to claim a provider’s contracted rate due to the provider’s and payor’s respective written agreements with any contracting agent.
      5. Allow providers, upon the initial signing, renewal, or amendment of a provider contract, to decline to be included in any list of contracted providers that is sold, leased, transferred, or conveyed to payors that do not actively encourage the employees to use the list of contracted providers when obtaining medical care, as specified. Specifies that each provider’s election is binding on the contracting agent with which the provider has the contract and any other contracting agent that buys, leases, or otherwise obtains the list of contracted providers.
      6. Prohibits a provider from being excluded from any list of contracted providers that is sold, leased, transferred, or conveyed to payors that actively encourage the employees to use the list of contracted providers when obtaining medical care, based upon the provider’s refusal to be included on any list of contracted providers that is sold, leased, transferred, or conveyed to payors that do not actively encourage the employees to use the list of contracted providers when obtaining medical care.
   2. Specifies that if the payor’s explanation of benefits or EOR does not identify the name of the network that has a written agreement signed by the provider whereby the payor is entitled, directly or indirectly, to pay a preferred rate for the services rendered, the contracting agent must do the following:
      1. Maintain a Web site that is accessible to all contracted providers and updated at least quarterly and maintain a toll-free telephone number accessible to all contracted providers whereby providers may access payor summary information.
      2. Disclose through the use of an Internet Web site, a toll-free telephone number, or through a delivery or mail service to its contracted providers, within 30 days, any sale, lease assignment, transfer or conveyance of the contracted reimbursement rates to another contracting agent or payor.
   3. Requires, a payor, as specified, beginning July 1, 2000, to do all of the following:
      1. Provide an explanation of benefits or EOR that identifies the name of the network with which the payor has an agreement that entitles them to pay a preferred rate for the services rendered.
      2. Demonstrate that it is entitled to pay a contracted rate within 30 business days of receipt of a written request from a provider who has received a claim payment from the payor.
         1. Requires the provider to include in the request a statement explaining why the payment is not at the correct contracted rate for the services provided.
         2. Specifies that failure of the provider to include a statement relieves the payor from the responsibility of demonstrating that it is entitled to pay the disputed contracted rate.
         3. Specifies that failure of a payor to make the demonstration to a properly documented request of the provider within 30 business days renders the payor responsible for the lesser of the provider’s actual fee or, as applicable, any fee schedule pursuant to this division, which amount will be due and payable within 10 days of receipt of written notice from the provider, and will bar the payor from taking any future discounts from that provider without the provider’s express written consent until the payor can demonstrate to the provider that it is entitled to pay a contracted rate, as specified.
         4. A payor will be deemed to have demonstrated that it is entitled to pay a contracted rate if it complies with either of the following:
            1. Describes the specific practices the payor utilizes, as specified.
            2. Identifies the contracting agent with whom the payor has a written agreement whereby the payor is not required to actively encourage employees to use the list of contracted providers, as specified.
5. Requires each employer to establish a utilization review process, as specified, either directly or through its insurer or an entity with which an employer or insurer contracts for these services. (Labor Code §4610)
6. Requires the AD to, after public hearings, adopt and revise periodically an official medical fee schedule (OMFS) that establishes reasonable maximum fees paid for medical services provided to workers’ compensation patients. (Labor Code §5307.1)
7. Authorizes a medical provider and a contracting agent, employer, or carrier to contract for reimbursement rates that differ from the OMFS, so long as those rates do not exceed the rates established by the OMFS. (Labor Code §5307.11)

This bill:

1. Requires employers to additionally include the following information in their Explanation of Review (EOR), upon payment, adjustment, or denial of a complete or incomplete itemization of medical services:
   1. The state assigned medical provider network identification number applicable to the bill.
   2. If the adjustment, change, or denial is based on a contract, then the EOR must include specific information on the underlying contract that was relied upon to justify the discount and contact information, including an address and email address for whom the rendering medical provider may contact to receive a copy of the underlying contract.
      1. Provides that for the purposes of this section, the “underlying contract” is the contract associated with the tax identification number of the rendering medical provider and the medical provider network listed on the explanation of review.
      2. Specifies that disclosure of a medical provider network does not satisfy this requirement.
      3. Specifies that only the rendering provider or their agent shall be provided a copy of the underlying contract within a 365-day period.
      4. Requires the medical bill to automatically be reprocessed and paid at the rates mandated by the OMFS, if the contract is not sent to the rendering provider or their agent within 30 businesses days of the provider’s request.
2. Allows the AD to adopt regulations as necessary to implement the provisions of this section, as specified.
3. Additionally requires the request for authorization for medical treatment to be signed by the treating physician and may be mailed, faxed, or sent electronically through the use of a secure email system or via electronic data interchange to the address, fax number, email address, or clearinghouse designated by the claims administrator.

COMMENTS

1. Background:

Workers’ compensation billing

Under the California workers’ compensation system, if a worker is injured on a job, the employer must pay for the worker’s medical treatment and provide monetary benefits if the injury is permanent or temporarily results in lost wages. In return for receiving free medical treatment, the worker surrenders the right to sue the employer for monetary damages in civil court. In California, all employers are required to either purchase a workers' compensation insurance policy from a licensed insurer authorized to write policies in California or become self-insured.

The workers’ compensation system has several formal mechanisms for resolving disputes regarding the details of the injury, the medical necessity of aspects of the treatment plan, or the billing of insurers by medical providers that involve qualified medical evaluators (QMEs), workers’ compensation administrative law judges, and the Workers’ Compensation Appeals Board (WCAB), among others.

When a medical provider and an employer or insurer disagree on payment for medical services provided, the medical provider can submit the bill to the insurance claims administrator for a second bill review, with any remaining dispute resolved through the independent bill review (IBR) process. The only issue addressed during the IBR process is the amount to be paid for the medical service provided.

The official medical fee schedule (OMFS) establishes the maximum allowable fees to be paid to a medical provider for medical services provided to a workers’ compensation patient. DWC updates the OMFS annually, but there are often mid-year changes as necessary to conform to relevant Medicare and Medi-Cal changes. However, existing law also authorizes a medical provider and a contracting agent, employer, or insurer to contract for a reimbursement rate that differs from the OMFS, as long as the contracted rate does not exceed the OMFS rate.

Medical providers in the workers’ compensation system do not typically bill for services at the rate set for OMFS, instead they bill at their “usual and customary” rate for services and then claims administrators must accurately adjust those bills to reflect the OMFS, or their applicable contracts. When the adjustment is done and the payment is made, an Explanation of Review (EOR) is given to the provider explaining any adjustments, changes, or denials to the fee schedule or contracted network rate.

Medical Provider Networks

A medical provider network (MPN) is a group of health care providers set up by an insurer or by an entity that provides physician network services and approved by DWC's administrative director to treat workers injured on the job. Each MPN includes a mix of doctors specializing in work-related injuries and doctors with expertise in general areas of medicine. Employees covered by an MPN will be taken care of by doctors in the network unless they were eligible to pre-designate their personal doctor and do so before their injury happened.

Preferred Provider Organization (PPO) Discounting

Under an arrangement known as a Preferred Provider Organization (PPO), the insurer sends business to the medical provider, and in exchange, the medical provider offers services for a discounted rate to the insurer. However, this system has also given rise to a practice known as “silent PPO discounting.”

Silent PPO discounting is when the PPO sells or leases to other insurers its provider list, including discounted rates the PPO has brokered on behalf of an insurer to use these providers. In many instances, the providers have no knowledge and never intended to extend their discounts to these additional insurers.

To address the practice of silent PPO discounting, or improper selling, leasing or transferring of a health care provider’s contract, existing law requires contracting agents to disclose network leasing arrangements in advance by the contracting agent to the medical provider. ^[1] Payors (insurers) also must provide an explanation of benefits or EOR that identifies the name of the network that the payor has an agreement with that entitles them to pay a preferred rate for the medical services rendered.

A payor must additionally demonstrate that it has the right to pay a contracted rate within 30 business days of a written request from a medical provider. The provider must include in the request a statement explaining why the payment is not at the correct contracted rate. If the provider does not include a statement, this relieves the payor from demonstrating that it has the right to pay the disputed contracted rate. If the payor does not meet the 30-day deadlines, the payor is responsible for the provider’s actual fee or, as applicable, any fee schedule, whichever is less, and needs to be paid within 10 days of receipt of written notice from the provider. The payor also is not allowed to take any future discounts from that provider without the provider’s express written consent until the payor can demonstrate to the provider that it is entitled to pay a contracted rate. It is unclear if in practice, network leasing arrangements are properly disclosed to providers as required by law.

2. Need for this bill?

According to the author, “AB 1048 addresses unauthorized discounts and reductions on medical treatment bills in the workers’ compensation system by ensuring providers have a clear and enforceable way to challenge improper payment reductions.

Current law does not clearly address situations where third-party network administrators apply additional, unauthorized discounts through “silent” Preferred Provider Organization (PPO) arrangements. Although providers may agree to specific contractual discounts, those agreements are sometimes sold or leased to other entities, resulting in further payment reductions without the provider’s knowledge or consent.

For example, a San Diego orthopedic surgeon received $548.54 for a procedure that carries a $672.50 standard reimbursement under the Official Medical Fee Schedule. The discount was applied without explanation or agreement. She is now the only physician in her practice still treating injured workers, illustrating how these practices can drive providers out of the system. Without clear disclosure requirements or enforcement mechanisms, providers lack the information necessary to determine whether payment reductions are valid or to effectively challenge them.

AB 1048 improves transparency and accountability by establishing clear rules for contract-based payment reductions. When a payment is reduced based on a contract, the Explanation of Review must include specific information about the underlying contract and provide contact information for obtaining a copy.

The bill gives providers and their authorized agents the right to request –only once in a 365 day period - the contract used to justify a discount. That contract must be provided within 30 business days. If it is not, the claim must be automatically reprocessed and paid at the Official Medical Fee Schedule. By improving payment certainty and fairness, the bill supports continued provider participation and helps preserve injured workers’ access to timely, high-quality care.”

3. Proponent Arguments:

According to the California Orthopaedic Association, the sponsors of this bill:

“AB 1048 (Chen), which will bring greater transparency and fairness to medical treatment payment disputes within California’s Workers’ Compensation system. […] Unfortunately, physicians are increasingly facing unexplained or unauthorized reductions in payment, often through leased-network arrangements. In these situations, a provider may agree to a specific contractual discount with one entity, only to later see that contract sold, leased, or accessed by other entities that apply additional discounts without the provider’s knowledge or consent. The Explanation of Review may identify a payment reduction but fails to provide enough information for the provider to determine whether the reduction is valid, contractually authorized, or improperly taken. If a payment is reduced based on a contract, the provider should be able to identify the applicable contract and review the terms being relied upon. Without that information, the provider cannot meaningfully evaluate whether the payment was correct, request appropriate review, or challenge an improper discount.

AB 1048 provides a reasonable and targeted solution. When an adjustment, change, or denial of a workers’ compensation medical bill is based on a contract, the bill requires the Explanation of Review to include specific information about the underlying contract and contact information for obtaining a copy of that contract. To ease the burden on those required to produce the contract, AB 1048 includes practical safeguards by limiting the requirement to produce the requested contract to only once within a 365-day period and allowing up to 30 business days for this contract to be provided. If the contract is not provided within that timeframe, the payment would simply be reprocessed and paid at the rates mandated by the Official Medical Fee Schedule. To be clear, AB 1048 does not prohibit or reverse legitimate contracted discounts. It simply ensures that when a discount is given, the entity taking that discount can identify and produce the contract that authorizes it. This bill is simply about basic transparency and accountability within the payment process.”

4. Opponent Arguments:

According to the opponents, which includes the American Property Casualty Insurance Association, and a large coalition of businesses, insurers, and counties:

“We are not opposed to providing a method by which providers can receive a copy of

the applicable contract. In fact, we have proposed a version of this same policy, but the approach taken in AB 1048 creates new problems:

Creates Loophole Allowing Providers to Get Around Mutually Agreed Upon Terms of a Contract - As drafted the bill would allow providers to request a copy of the contract with every EOB, understanding that “late” delivery of the contract would invalidate their contracted discount and result in a higher payment. Providers in the workers’ compensation system are highly educated and intelligent professionals who do not need the protection of the state with regards to these mutually agreed upon contracts. Unfortunately, there are some providers in the workers’ compensation system who have a long and storied history of relentlessly exploiting narrow administrative loopholes for financial gain. Just in the last decade the legislature has had to address widespread abuse in drug repackaging, spinal surgery implant reimbursements, and even the mundane lien process. We expect that a small but impactful number of doctors will relentlessly abuse this loophole if implemented in its current form. This will result in higher costs for the system, which means higher workers’ compensation premiums for all employers in California. On the other side, the sponsors have presented one anecdotal story but have no industry-wide data to show a need AB 1048 in its current form.

The Penalty is Inappropriate – Providers sign contracts to serve network patients at a discounted rate because they benefit from the steady stream of patient referrals. They have a duty to track their own contractual relationships and understand the agreements they have made. While we do not mind sending these providers copies of the contracts they’ve entered, we don’t think we should be financially penalized for late delivery of legal documents these providers should already have. Moreover, those providers have already received the benefit of the bargain under their contracts (e.g., steerage of injured workers to the provider as part of an MPN) and are now trying to eliminate their obligations under the contract (i.e., the discount).

Allows Unlimited Copies of Contracts – As drafted, a provider could request a copy of the same contract repeatedly without limitation. There is no reason that networks should be required to provide repeat copies of contract to providers who in fact already have them. We propose limiting providers to one copy of each contract to which they are a party in each calendar year. This would keep requests at a reasonable volume and prevent a small number of providers from abusing the system.”

According to the American Association of Payers, Administrators and Network, who write in opposition, unless amended:

“While we believe AB1048 was well-intentioned, the legislation as written oversteps existing contractual provisions, mandates irrelevant data on the Explanation of Review (EOR), and risks contract disclosures to inappropriate parties. […] The preferred provider organization (PPO) relationship between payors and healthcare providers is governed by contracts, which have been mutually negotiated in good faith. Providers often accept discounts off their billable rates in exchange for networks directing business to the practices via a combination of methods including Medical Provider Network (MPN) provider directories, claims adjuster referrals, and Medical Access Assistant (MAA) referrals. AB1048 ignores these contractually agreed upon discounts and allows providers to side-step agreements that they have already signed and benefitted from due to payor customer service shortcomings. We have shared this concern with the author’s office and noted that the bill must be amended to strike Section 4603.3(a)(4)(F). AB 1048 destabilizes the provider contract negotiation process and incentivizes providers to request contract disclosures in the sole hopes of trying to force reimbursement at higher rates than their contract allows.”

5. Committee Comments:

This bill, AB 1048, aims to address discounts and reductions in medical treatment bills in the workers’ compensation system. The bill would require the EOR sent by employers to medical providers to also include specific information about the underlying contract that was relied upon to justify any discounts if the adjustment, change, or denial of an itemization of medical services is based on a contract. The bill also requires the EOR to include an address and email address for whom the rendering medical provider may contact to get a copy of the underlying contract.

Committee amendments

As mentioned, existing law already requires contracting agents (or payors) to disclose network leasing arrangements, also known as silent PPO discounts. Payors also must provide an EOR that identifies the name of the network that the payor has an agreement with that entitles them to pay a discounted rate for medical services, and must demonstrate that it has a right to pay the discounted contracted rate if a medical provider provides a written request and a statement explaining that the payment is not at the correct contracted rate. Without the written request and statement from the provider, the payor does not have to demonstrate anything. But with the request and statement from the provider, the payor has 30 business days to demonstrate it is entitled to pay a discounted rate. If not, the payor is responsible for paying for the provider’s actual fee or any specified fee schedule, whichever is less, within 10 days of receipt of the provider’s written notice.

The existing law provisions may sound a lot like the proposed bill. Proponents claim that the disclosure requirements are not enforced, and that existing law is not working the way it was designed. This bill attempts to remedy that by requiring the EOR to also include information about the underlying contract that was relied upon to justify a discount and contact information so that a provider may contact someone to receive a copy of the contract. According to the proponents of the bill, AB 1048, does not prohibit or reverse legitimate contracted discounts. They argue it simply ensures that when a discount is taken, the entity taking that discount can identify and produce the contract that authorizes it. If the payor fails to produce the contract within 30 days of the request, the payor will be responsible for the payment set at the OMFS rate. If the payor can produce the contract that shows the discount, the discounted payment will stay the same.

For clarity and consistency, the requirements under this bill should be incorporated in Labor Code Section 4609 where the network leasing arrangement disclosures and requirements for payors and providers currently exist, therefore the author has agreed to committee amendments that instead incorporate the contents of this bill, AB 1048, to Labor Code Section 4609.

The author and sponsors also claim their intent with AB 1048 is to give medical providers and their authorized agents the right to request – only once in a 365-day period – the contract used to justify a discount. However, it is not clear that the providers can only request the contract be sent to them once per year. The author has agreed to make a clarifying amendment to the bill to specify that upon request, the rendering provider or their agent shall be provided with a copy of the contract only once per year.

6. Prior Legislation:

SB 668 (Hurtado, 2025) would have authorized the DWC AD to adjust the fee schedule for medical-legal evaluations every two years based on an evaluation of medical practice costs. This bill was held under submission in the Senate Appropriations Committee.

SB 863 (De Leon, Chapter 363, Statutes of 2012) enacted major reforms to the workers’ compensation system, including establishing the independent medical review and IBR processes for resolving disputes.

SUPPORT

California Orthopaedic Association (Sponsor)

California Medical Association (CMA)

California Podiatric Medical Association

Peace Officers Research Association of California (PORAC)

Western Occupational & Environmental Medical Association

OPPOSITION

American Association of Payers Administrators and Networks

American Property Casualty Insurance Association

Association of Workers' Compensation Professionals

California Association of Joint Powers Authorities

California Chamber of Commerce

California Coalition on Workers Compensation

California Food Producers

California Joint Powers Insurance Authority

California League of Food Producers

California State Association of Counties

Medex Health Care, INC.

One Call Medical, INC.

Public Risk Innovation, Solutions, and Management (PRISM)

Schools Excess Liability Fund (SELF)

Urban Counties of California (UCC)

-- END --

1. Labor Code §4609 ↑

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Lola Smallwood-Cuevas, Chair

2025 - 2026 Regular

Bill No: AB 1048 Hearing Date: June 10, 2026

SUBJECT: Workers’ compensation

KEY ISSUE

This bill makes changes within the workers’ compensation medical billing process requiring employers to include specified information on an underlying contract to justify a discount, as specified, as well as include the contact information where a provider may obtain a copy of such contract. The bill additionally prescribes an alternate payment rate for services if the contract is not sent to a provider within 30 days of the request, as specified.

ANALYSIS

Existing law:

1. Establishes a comprehensive system of workers' compensation that provides a range of benefits for an employee who suffers from an injury or illness that arises out of and in the course of employment, regardless of fault. This system requires all employers to ensure payment of benefits by either securing the consent of the Department of Industrial Relations (DIR) to self-insure or by obtaining insurance from a company authorized by the state. (Labor Code §§3200-6002)
2. Requires an employer to provide an Explanation of Review (EOR), upon payment, adjustment, or denial of a complete or incomplete itemization of medical services, in the manner prescribed by the administrative director (AD) of the Division of Workers’ Compensation (DWC) that must include all of the following:
   1. A statement of the items or procedures billed and the amounts requested by the provider to be paid.
   2. The amount paid.
   3. The basis for any adjustment, change, or denial of the item or procedure billed.
   4. The additional information required to make a decision for an incomplete itemization.
   5. If a denial of payment is for some reason other than a fee dispute, the reason for the denial.
   6. Information on whom to contact on behalf of the employer if a dispute arises over the payment of the billing. The explanation of review must inform the medical provider of the time limit to raise any objection regarding the items or procedures paid or disputed and how to obtain an independent review of the medical bill, as specified. (Labor Code §4603.1)
3. Allows the AD to adopt regulations requiring the use of electronic EOR. (Labor Code §4603.1)
4. Specifies, that in order to prevent the improper selling, leasing, or transferring of a health care provider’s contract, it is the intent of the Legislature that every arrangement that results in any payor paying a health care provider a reduced rate for health care services based on the health care provider’s participation in a network or panel must be disclosed by the contracting agent to the provider in advance and must actively encourage employees to use the network, unless the health care provider agrees to provide discounts without that active encouragement. (Labor Code §4609)
   1. Requires, beginning July 1, 2000, every contracting agent that sells, leases, assigns, transfers, or conveys its list of contracted health care providers and their contracted reimbursement rates to a payor, as specified, or another contracting agent to, upon entering or renewing a provider contract, do all of the following:
      1. Disclose whether the list of contracted providers may be sold, leased, transferred, or conveyed to other payors or other contracting agents, and specify whether those payors or contracting agents include workers’ compensation insurers or automobile insurers.
      2. Disclose what specific practices, if any, payors utilize to actively encourage employees to use the list of contracted providers when obtaining medical care that entitles a payor to claim a contracted rate, as specified.
      3. Disclose whether payors to which the list of contracted providers may be sold, leased, transferred, or conveyed may be permitted to pay a provider’s contracted rate without actively encouraging the employees to use the list of contracted providers when obtaining medical care, as specified.
      4. Disclose, upon the initial signing of a contract, and within 15 business days of receipt of a written request from a provider or provider panel, a payor summary of all payors currently eligible to claim a provider’s contracted rate due to the provider’s and payor’s respective written agreements with any contracting agent.
      5. Allow providers, upon the initial signing, renewal, or amendment of a provider contract, to decline to be included in any list of contracted providers that is sold, leased, transferred, or conveyed to payors that do not actively encourage the employees to use the list of contracted providers when obtaining medical care, as specified. Specifies that each provider’s election is binding on the contracting agent with which the provider has the contract and any other contracting agent that buys, leases, or otherwise obtains the list of contracted providers.
      6. Prohibits a provider from being excluded from any list of contracted providers that is sold, leased, transferred, or conveyed to payors that actively encourage the employees to use the list of contracted providers when obtaining medical care, based upon the provider’s refusal to be included on any list of contracted providers that is sold, leased, transferred, or conveyed to payors that do not actively encourage the employees to use the list of contracted providers when obtaining medical care.
   2. Specifies that if the payor’s explanation of benefits or EOR does not identify the name of the network that has a written agreement signed by the provider whereby the payor is entitled, directly or indirectly, to pay a preferred rate for the services rendered, the contracting agent must do the following:
      1. Maintain a Web site that is accessible to all contracted providers and updated at least quarterly and maintain a toll-free telephone number accessible to all contracted providers whereby providers may access payor summary information.
      2. Disclose through the use of an Internet Web site, a toll-free telephone number, or through a delivery or mail service to its contracted providers, within 30 days, any sale, lease assignment, transfer or conveyance of the contracted reimbursement rates to another contracting agent or payor.
   3. Requires, a payor, as specified, beginning July 1, 2000, to do all of the following:
      1. Provide an explanation of benefits or EOR that identifies the name of the network with which the payor has an agreement that entitles them to pay a preferred rate for the services rendered.
      2. Demonstrate that it is entitled to pay a contracted rate within 30 business days of receipt of a written request from a provider who has received a claim payment from the payor.
         1. Requires the provider to include in the request a statement explaining why the payment is not at the correct contracted rate for the services provided.
         2. Specifies that failure of the provider to include a statement relieves the payor from the responsibility of demonstrating that it is entitled to pay the disputed contracted rate.
         3. Specifies that failure of a payor to make the demonstration to a properly documented request of the provider within 30 business days renders the payor responsible for the lesser of the provider’s actual fee or, as applicable, any fee schedule pursuant to this division, which amount will be due and payable within 10 days of receipt of written notice from the provider, and will bar the payor from taking any future discounts from that provider without the provider’s express written consent until the payor can demonstrate to the provider that it is entitled to pay a contracted rate, as specified.
         4. A payor will be deemed to have demonstrated that it is entitled to pay a contracted rate if it complies with either of the following:
            1. Describes the specific practices the payor utilizes, as specified.
            2. Identifies the contracting agent with whom the payor has a written agreement whereby the payor is not required to actively encourage employees to use the list of contracted providers, as specified.
5. Requires each employer to establish a utilization review process, as specified, either directly or through its insurer or an entity with which an employer or insurer contracts for these services. (Labor Code §4610)
6. Requires the AD to, after public hearings, adopt and revise periodically an official medical fee schedule (OMFS) that establishes reasonable maximum fees paid for medical services provided to workers’ compensation patients. (Labor Code §5307.1)
7. Authorizes a medical provider and a contracting agent, employer, or carrier to contract for reimbursement rates that differ from the OMFS, so long as those rates do not exceed the rates established by the OMFS. (Labor Code §5307.11)

This bill:

1. Requires employers to additionally include the following information in their Explanation of Review (EOR), upon payment, adjustment, or denial of a complete or incomplete itemization of medical services:
   1. The state assigned medical provider network identification number applicable to the bill.
   2. If the adjustment, change, or denial is based on a contract, then the EOR must include specific information on the underlying contract that was relied upon to justify the discount and contact information, including an address and email address for whom the rendering medical provider may contact to receive a copy of the underlying contract.
      1. Provides that for the purposes of this section, the “underlying contract” is the contract associated with the tax identification number of the rendering medical provider and the medical provider network listed on the explanation of review.
      2. Specifies that disclosure of a medical provider network does not satisfy this requirement.
      3. Specifies that only the rendering provider or their agent shall be provided a copy of the underlying contract within a 365-day period.
      4. Requires the medical bill to automatically be reprocessed and paid at the rates mandated by the OMFS, if the contract is not sent to the rendering provider or their agent within 30 businesses days of the provider’s request.
2. Allows the AD to adopt regulations as necessary to implement the provisions of this section, as specified.
3. Additionally requires the request for authorization for medical treatment to be signed by the treating physician and may be mailed, faxed, or sent electronically through the use of a secure email system or via electronic data interchange to the address, fax number, email address, or clearinghouse designated by the claims administrator.

COMMENTS

1. Background:

Workers’ compensation billing

Under the California workers’ compensation system, if a worker is injured on a job, the employer must pay for the worker’s medical treatment and provide monetary benefits if the injury is permanent or temporarily results in lost wages. In return for receiving free medical treatment, the worker surrenders the right to sue the employer for monetary damages in civil court. In California, all employers are required to either purchase a workers' compensation insurance policy from a licensed insurer authorized to write policies in California or become self-insured.

The workers’ compensation system has several formal mechanisms for resolving disputes regarding the details of the injury, the medical necessity of aspects of the treatment plan, or the billing of insurers by medical providers that involve qualified medical evaluators (QMEs), workers’ compensation administrative law judges, and the Workers’ Compensation Appeals Board (WCAB), among others.

When a medical provider and an employer or insurer disagree on payment for medical services provided, the medical provider can submit the bill to the insurance claims administrator for a second bill review, with any remaining dispute resolved through the independent bill review (IBR) process. The only issue addressed during the IBR process is the amount to be paid for the medical service provided.

The official medical fee schedule (OMFS) establishes the maximum allowable fees to be paid to a medical provider for medical services provided to a workers’ compensation patient. DWC updates the OMFS annually, but there are often mid-year changes as necessary to conform to relevant Medicare and Medi-Cal changes. However, existing law also authorizes a medical provider and a contracting agent, employer, or insurer to contract for a reimbursement rate that differs from the OMFS, as long as the contracted rate does not exceed the OMFS rate.

Medical providers in the workers’ compensation system do not typically bill for services at the rate set for OMFS, instead they bill at their “usual and customary” rate for services and then claims administrators must accurately adjust those bills to reflect the OMFS, or their applicable contracts. When the adjustment is done and the payment is made, an Explanation of Review (EOR) is given to the provider explaining any adjustments, changes, or denials to the fee schedule or contracted network rate.

Medical Provider Networks

A medical provider network (MPN) is a group of health care providers set up by an insurer or by an entity that provides physician network services and approved by DWC's administrative director to treat workers injured on the job. Each MPN includes a mix of doctors specializing in work-related injuries and doctors with expertise in general areas of medicine. Employees covered by an MPN will be taken care of by doctors in the network unless they were eligible to pre-designate their personal doctor and do so before their injury happened.

Preferred Provider Organization (PPO) Discounting

Under an arrangement known as a Preferred Provider Organization (PPO), the insurer sends business to the medical provider, and in exchange, the medical provider offers services for a discounted rate to the insurer. However, this system has also given rise to a practice known as “silent PPO discounting.”

Silent PPO discounting is when the PPO sells or leases to other insurers its provider list, including discounted rates the PPO has brokered on behalf of an insurer to use these providers. In many instances, the providers have no knowledge and never intended to extend their discounts to these additional insurers.

To address the practice of silent PPO discounting, or improper selling, leasing or transferring of a health care provider’s contract, existing law requires contracting agents to disclose network leasing arrangements in advance by the contracting agent to the medical provider. ^[1] Payors (insurers) also must provide an explanation of benefits or EOR that identifies the name of the network that the payor has an agreement with that entitles them to pay a preferred rate for the medical services rendered.

A payor must additionally demonstrate that it has the right to pay a contracted rate within 30 business days of a written request from a medical provider. The provider must include in the request a statement explaining why the payment is not at the correct contracted rate. If the provider does not include a statement, this relieves the payor from demonstrating that it has the right to pay the disputed contracted rate. If the payor does not meet the 30-day deadlines, the payor is responsible for the provider’s actual fee or, as applicable, any fee schedule, whichever is less, and needs to be paid within 10 days of receipt of written notice from the provider. The payor also is not allowed to take any future discounts from that provider without the provider’s express written consent until the payor can demonstrate to the provider that it is entitled to pay a contracted rate. It is unclear if in practice, network leasing arrangements are properly disclosed to providers as required by law.

2. Need for this bill?

According to the author, “AB 1048 addresses unauthorized discounts and reductions on medical treatment bills in the workers’ compensation system by ensuring providers have a clear and enforceable way to challenge improper payment reductions.

Current law does not clearly address situations where third-party network administrators apply additional, unauthorized discounts through “silent” Preferred Provider Organization (PPO) arrangements. Although providers may agree to specific contractual discounts, those agreements are sometimes sold or leased to other entities, resulting in further payment reductions without the provider’s knowledge or consent.

For example, a San Diego orthopedic surgeon received $548.54 for a procedure that carries a $672.50 standard reimbursement under the Official Medical Fee Schedule. The discount was applied without explanation or agreement. She is now the only physician in her practice still treating injured workers, illustrating how these practices can drive providers out of the system. Without clear disclosure requirements or enforcement mechanisms, providers lack the information necessary to determine whether payment reductions are valid or to effectively challenge them.

AB 1048 improves transparency and accountability by establishing clear rules for contract-based payment reductions. When a payment is reduced based on a contract, the Explanation of Review must include specific information about the underlying contract and provide contact information for obtaining a copy.

The bill gives providers and their authorized agents the right to request –only once in a 365 day period - the contract used to justify a discount. That contract must be provided within 30 business days. If it is not, the claim must be automatically reprocessed and paid at the Official Medical Fee Schedule. By improving payment certainty and fairness, the bill supports continued provider participation and helps preserve injured workers’ access to timely, high-quality care.”

3. Proponent Arguments:

According to the California Orthopaedic Association, the sponsors of this bill:

“AB 1048 (Chen), which will bring greater transparency and fairness to medical treatment payment disputes within California’s Workers’ Compensation system. […] Unfortunately, physicians are increasingly facing unexplained or unauthorized reductions in payment, often through leased-network arrangements. In these situations, a provider may agree to a specific contractual discount with one entity, only to later see that contract sold, leased, or accessed by other entities that apply additional discounts without the provider’s knowledge or consent. The Explanation of Review may identify a payment reduction but fails to provide enough information for the provider to determine whether the reduction is valid, contractually authorized, or improperly taken. If a payment is reduced based on a contract, the provider should be able to identify the applicable contract and review the terms being relied upon. Without that information, the provider cannot meaningfully evaluate whether the payment was correct, request appropriate review, or challenge an improper discount.

AB 1048 provides a reasonable and targeted solution. When an adjustment, change, or denial of a workers’ compensation medical bill is based on a contract, the bill requires the Explanation of Review to include specific information about the underlying contract and contact information for obtaining a copy of that contract. To ease the burden on those required to produce the contract, AB 1048 includes practical safeguards by limiting the requirement to produce the requested contract to only once within a 365-day period and allowing up to 30 business days for this contract to be provided. If the contract is not provided within that timeframe, the payment would simply be reprocessed and paid at the rates mandated by the Official Medical Fee Schedule. To be clear, AB 1048 does not prohibit or reverse legitimate contracted discounts. It simply ensures that when a discount is given, the entity taking that discount can identify and produce the contract that authorizes it. This bill is simply about basic transparency and accountability within the payment process.”

4. Opponent Arguments:

According to the opponents, which includes the American Property Casualty Insurance Association, and a large coalition of businesses, insurers, and counties:

“We are not opposed to providing a method by which providers can receive a copy of

the applicable contract. In fact, we have proposed a version of this same policy, but the approach taken in AB 1048 creates new problems:

Creates Loophole Allowing Providers to Get Around Mutually Agreed Upon Terms of a Contract - As drafted the bill would allow providers to request a copy of the contract with every EOB, understanding that “late” delivery of the contract would invalidate their contracted discount and result in a higher payment. Providers in the workers’ compensation system are highly educated and intelligent professionals who do not need the protection of the state with regards to these mutually agreed upon contracts. Unfortunately, there are some providers in the workers’ compensation system who have a long and storied history of relentlessly exploiting narrow administrative loopholes for financial gain. Just in the last decade the legislature has had to address widespread abuse in drug repackaging, spinal surgery implant reimbursements, and even the mundane lien process. We expect that a small but impactful number of doctors will relentlessly abuse this loophole if implemented in its current form. This will result in higher costs for the system, which means higher workers’ compensation premiums for all employers in California. On the other side, the sponsors have presented one anecdotal story but have no industry-wide data to show a need AB 1048 in its current form.

The Penalty is Inappropriate – Providers sign contracts to serve network patients at a discounted rate because they benefit from the steady stream of patient referrals. They have a duty to track their own contractual relationships and understand the agreements they have made. While we do not mind sending these providers copies of the contracts they’ve entered, we don’t think we should be financially penalized for late delivery of legal documents these providers should already have. Moreover, those providers have already received the benefit of the bargain under their contracts (e.g., steerage of injured workers to the provider as part of an MPN) and are now trying to eliminate their obligations under the contract (i.e., the discount).

Allows Unlimited Copies of Contracts – As drafted, a provider could request a copy of the same contract repeatedly without limitation. There is no reason that networks should be required to provide repeat copies of contract to providers who in fact already have them. We propose limiting providers to one copy of each contract to which they are a party in each calendar year. This would keep requests at a reasonable volume and prevent a small number of providers from abusing the system.”

According to the American Association of Payers, Administrators and Network, who write in opposition, unless amended:

“While we believe AB1048 was well-intentioned, the legislation as written oversteps existing contractual provisions, mandates irrelevant data on the Explanation of Review (EOR), and risks contract disclosures to inappropriate parties. […] The preferred provider organization (PPO) relationship between payors and healthcare providers is governed by contracts, which have been mutually negotiated in good faith. Providers often accept discounts off their billable rates in exchange for networks directing business to the practices via a combination of methods including Medical Provider Network (MPN) provider directories, claims adjuster referrals, and Medical Access Assistant (MAA) referrals. AB1048 ignores these contractually agreed upon discounts and allows providers to side-step agreements that they have already signed and benefitted from due to payor customer service shortcomings. We have shared this concern with the author’s office and noted that the bill must be amended to strike Section 4603.3(a)(4)(F). AB 1048 destabilizes the provider contract negotiation process and incentivizes providers to request contract disclosures in the sole hopes of trying to force reimbursement at higher rates than their contract allows.”

5. Committee Comments:

This bill, AB 1048, aims to address discounts and reductions in medical treatment bills in the workers’ compensation system. The bill would require the EOR sent by employers to medical providers to also include specific information about the underlying contract that was relied upon to justify any discounts if the adjustment, change, or denial of an itemization of medical services is based on a contract. The bill also requires the EOR to include an address and email address for whom the rendering medical provider may contact to get a copy of the underlying contract.

Committee amendments

As mentioned, existing law already requires contracting agents (or payors) to disclose network leasing arrangements, also known as silent PPO discounts. Payors also must provide an EOR that identifies the name of the network that the payor has an agreement with that entitles them to pay a discounted rate for medical services, and must demonstrate that it has a right to pay the discounted contracted rate if a medical provider provides a written request and a statement explaining that the payment is not at the correct contracted rate. Without the written request and statement from the provider, the payor does not have to demonstrate anything. But with the request and statement from the provider, the payor has 30 business days to demonstrate it is entitled to pay a discounted rate. If not, the payor is responsible for paying for the provider’s actual fee or any specified fee schedule, whichever is less, within 10 days of receipt of the provider’s written notice.

The existing law provisions may sound a lot like the proposed bill. Proponents claim that the disclosure requirements are not enforced, and that existing law is not working the way it was designed. This bill attempts to remedy that by requiring the EOR to also include information about the underlying contract that was relied upon to justify a discount and contact information so that a provider may contact someone to receive a copy of the contract. According to the proponents of the bill, AB 1048, does not prohibit or reverse legitimate contracted discounts. They argue it simply ensures that when a discount is taken, the entity taking that discount can identify and produce the contract that authorizes it. If the payor fails to produce the contract within 30 days of the request, the payor will be responsible for the payment set at the OMFS rate. If the payor can produce the contract that shows the discount, the discounted payment will stay the same.

For clarity and consistency, the requirements under this bill should be incorporated in Labor Code Section 4609 where the network leasing arrangement disclosures and requirements for payors and providers currently exist, therefore the author has agreed to committee amendments that instead incorporate the contents of this bill, AB 1048, to Labor Code Section 4609.

The author and sponsors also claim their intent with AB 1048 is to give medical providers and their authorized agents the right to request – only once in a 365-day period – the contract used to justify a discount. However, it is not clear that the providers can only request the contract be sent to them once per year. The author has agreed to make a clarifying amendment to the bill to specify that upon request, the rendering provider or their agent shall be provided with a copy of the contract only once per year.

6. Prior Legislation:

SB 668 (Hurtado, 2025) would have authorized the DWC AD to adjust the fee schedule for medical-legal evaluations every two years based on an evaluation of medical practice costs. This bill was held under submission in the Senate Appropriations Committee.

SB 863 (De Leon, Chapter 363, Statutes of 2012) enacted major reforms to the workers’ compensation system, including establishing the independent medical review and IBR processes for resolving disputes.

SUPPORT

California Orthopaedic Association (Sponsor)

California Medical Association (CMA)

California Podiatric Medical Association

Peace Officers Research Association of California (PORAC)

OPPOSITION

American Association of Payers Administrators and Networks

American Property Casualty Insurance Association

California Association of Joint Powers Authorities

California Chamber of Commerce

California Coalition on Workers Compensation

California Food Producers

California Joint Powers Insurance Authority

California League of Food Producers

California State Association of Counties

Public Risk Innovation, Solutions, and Management (PRISM)

Schools Excess Liability Fund (SELF)

Urban Counties of California (UCC)

-- END --

1. Labor Code §4609 ↑

 THIRD READING  

Bill No: AB 1048

Author: Chen (R)

Amended: 4/10/25 in Assembly

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 5-0, 7/9/25

AYES: Smallwood-Cuevas, Strickland, Cortese, Durazo, Laird

ASSEMBLY FLOOR: 76-0, 6/4/25 - See last page for vote

SUBJECT: Workers’ compensation

SOURCE: California Orthopedic Association

DIGEST:

This bill provides that certain contract disputes regarding discounts applied to a medical treatment bill may be resolved through the Division of Workers’ Compensation (DWC) independent bill review (IBR), as specified.

ANALYSIS:

Existing law:

1. Establishes a comprehensive system of workers' compensation that provides a range of benefits for an employee who suffers from an injury or illness that arises out of and in the course of employment, regardless of fault. This system requires all employers to insure payment of benefits by either securing the consent of the Department of Industrial Relations (DIR) to self-insure or by obtaining insurance from a company authorized by the state. (Labor Code §§3200-6002)
2. Establishes the DWC and Workers’ Compensation Appeal Board (WCAB) within DIR and charges them with monitoring the administration of workers’ compensation claims and providing administrative and judicial services to assist in resolving disputes that arise in connection with claims for workers’ compensation benefits. (Labor Code §3200 et seq.)
3. Requires that a provider of services for an injured worker eligible for workers’ compensation benefits, as specified, submit its request for payment with an itemization of services provided and the charge for each service, a copy of all reports showing the services performed, any prescription or referral from the primary treating physician, as specified, and any evidence of authorization for the services to the employer, or to the insurer or third-party claims administrator as established through written agreement. (Labor Code §4603.2(b)(1)(A))
4. Provides that, if the provider disputes the amount paid, the provider may request a second review within 90 days of the explanation of the review, which the employer must respond to within 14 days with a final written determination on each of the items or amounts in dispute, as specified; and provides that, if the provider contests the amount paid after receipt of the second review, the provider shall request an IBR. (Labor Code §4603.2(e))
5. Provides that, if the only dispute between a medical provider and the employer is the amount of payment, and the provider has received a second bill review by the claims administrator that did not resolve the dispute, the provider may request an IBR within 30 calendar days of service of the second review, as specified. (Labor Code §4603.6(a))
6. Requires, upon the receipt of a request for IBR and the required fee, the administrative director (AD) of DWC to assign the request to an independent bill reviewer within 30 days, and requires the reviewer to review the materials submitted by the parties and make a written determination of any additional amounts to be paid to the medical provider, and state the reasons for the determination, as specified. (Labor Code §§4603.6(d)-(e))
7. Provides that the determination of the IBR is final and binding on all parties unless an aggrieved party files with the WCAB a verified appeal from the medical bill review determination within 20 days of service of the determination; and provides that the determination shall be presumed correct only upon clear and convincing evidence that:
   1. The AD acted without or in excess of his or her powers;
   2. The determination was procured by fraud;
   3. The IBR was subject to a material conflict of interest;
   4. The determination was the result of bias on the basis of race, national origin, ethnic group identification, religion, age, sex, sexual orientation, color, or disability; or
   5. The determination was the result of a plainly erroneous express or implied finding of fact, provided that the mistake of fact is a matter of ordinary knowledge based on the information submitted for review and not a matter that is subject to expert opinion. (Labor Code §4603.6(f))
8. Requires the AD to, after public hearings, adopt and revise periodically an official medical fee schedule (OMFS) that establishes reasonable maximum fees paid for medical services provided to workers’ compensation patients. (Labor Code §5307.1)
9. Authorizes a medical provider and a contracting agent, employer, or carrier to contract for reimbursement rates that differ from the OMFS, so long as those rates do not exceed the rates established by the OMFS. (Labor Code §5307.11)

This bill:

1. Provides that a payment dispute, for the purposes of IBR under the workers’ compensation system, includes a contract dispute involving a discount or reduction from the OMFS that was applied to a medical treatment bill.
2. Requires, if the dispute only involves a percentage discount or reduction that results in IBR upholding the discount or reduction, IBR to provide the rationale for that ruling in a written decision to the medical provider and include the medical provider contract or contracts relied upon to uphold the discount or reduction.
   1. Requires, if the payer cannot produce a valid medical provider contract or contracts justifying the discount or reduction, the IBR organization to award the medical provider payment for the disputed medical treatment bill that is consistent with the OMFS.
   2. Specifies the IBR organization is not required to provide the medical provider with a contract to which the medical provider is not a party.

Background

Workers’ Compensation and the Independent Bill Review Process. Under the California workers’ compensation system, if a worker is injured on a job, the employer must pay for the worker’s medical treatment, and provide monetary benefits if the injury is permanent. In return for receiving free medical treatment, the worker surrenders the right to sue the employer for monetary damages in civil court. This simple premise is sometimes referred to as the “grand bargain.”

The workers’ compensation system has several formal mechanisms for resolving disputes regarding the details of the injury, the medical necessity of aspects of the treatment plan, or the billing of insurers by medical providers, etc. that involve qualified medical evaluators (QMEs), workers’ compensation administrative law judges, and the WCAB, among others. When a medical provider and an employer or insurer disagree on payment for medical services provided, the medical provider can submit the bill to the insurance claims administrator for a second bill review, with any remaining dispute resolved through the IBR process. The only issue addressed during the IBR process is the amount to be paid for the provided medical service.

As the Assembly Committee on Appropriations points out, “DWC contracts with a single organization, Maximus, to provide all independent medical review and IBR services, subject to an IBR fee paid by the requesting medical provider. According to this bill’s sponsor, this fee increased from $180 to $195 on January 1, 2025. Maximus assigns an independent bill reviewer to examine documents submitted by both parties, identifies the appropriate OMFS, and issues a written determination within 60 days of assignment. If the determination finds any additional amount of money is owed to the medical provider, the determination must also order the claims administrator to pay the additional sum owed and reimburse the provider the amount of the filing fee. The IBR determination is deemed the determination of the DWC and is binding on all parties.”

Official Medical Fee Schedule. The OMFS establishes the reasonable maximum fees to be paid to a medical provider for medical services provided to a workers’ compensation patient. DWC sets and updates the OMFS following a public hearing. However, existing law also authorizes a medical provider and a contracting agent, employer, or insurer to contract for a reimbursement rate that differs from the OMFS, as long as the contracted rate does not exceed the OMFS rate.

Under an arrangement known as a Preferred Provider Organization (PPO), the insurer sends business to the medical provider, and in exchange, the medical provider offers services for a discounted rate to the insurer. However, this system has also given rise to a practice known as “silent PPO discounting,” when an intermediary organization network leases to other insurers the network’s provider list, including discounted rates the network has brokered on behalf of an insurer to use these providers. A leasing insurer may then “double dip” on discounts by applying the direct discount the insurer has negotiated with the medical provider, as well as the additional discount the network has negotiated with the medical provider.

This bill, AB 1048, allows a medical provider to dispute an additional discount resulting from “silent PPO discounting” through the IBR process, and, if successful, receive payment in the amount set by the OMFS. If the IBR process determines the additional discount is appropriate, this bill requires the medical provider be notified of the relevant contract to which the medical provider is a party that supports the discounted rate.

Related/Prior Legislation

SB 668 (Hurtado, 2025) would have authorized the DWC AD to adjust the fee schedule for medical-legal evaluations every two years based on an evaluation of medical practice costs. This bill was held under submission in the Senate Appropriations Committee.

SB 863 (De Leon, Chapter 363, Statutes of 2012) enacted major reforms to the workers’ compensation system, including establishing the independent medical review and IBR processes for resolving disputes.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 8/18/25)

California Orthopedic Association (Source)
California Medical Association
California Podiatric Medical Association
Peace Officers Research Association of California
Western Occupational & Environmental Medical Association

OPPOSITION: (Verified 8/18/25)

American Association of Payers Administrators and Networks
American Property Casualty Insurance Association
California Association of Joint Powers Authorities
California Chamber of Commerce
California Coalition on Workers Compensation
California Food Producers
California League of Food Producers
Public Risk Innovation, Solutions, and Management
Schools Excess Liability Fund
Urban Counties of California

ARGUMENTS IN SUPPORT:

According to the sponsors, the California Orthapaedic Association:

“The [IBR] process was designed to provide a streamlined, impartial method for resolving billing disputes between medical providers and payors. However, current law does not clearly authorize providers to challenge reimbursement reductions stemming from unauthorized or ‘silent’ Preferred Provider Organization (PPO) discounts—particularly those applied without the provider’s knowledge or consent. These discounts can undercut the Official Medical Fee Schedule and, in some cases, result in payments even lower than Medicare rates. For example, an orthopedic surgeon in San Diego was reimbursed significantly below the scheduled rate for a procedure, without any prior agreement to the discount. These opaque reimbursement practices discourage provider participation in the system, leading to diminished access to care for injured workers—especially specialty services. AB 1048 addresses this gap by clarifying that the IBR can address all payment disputes as we believe it was always intended. This clarification is critical to ensuring consistent and efficient resolution of payment disputes. Importantly, AB 1048 would impose little to no cost to the state. The IBR process is entirely funded by medical providers, who pay a $195 filing fee to initiate a review by a third-party contractor (currently the company, Maximus). If Maximus determines that the provider is owed even a single penny more, the payor must reimburse both the underpayment and the $195 fee. The Division of Workers’ Compensation (DWC) incurs no cost, regardless of the outcome. In fact, by allowing these disputes to remain within IBR rather than being escalated to the Workers’ Compensation Appeals Board (WCAB), AB 1048 could reduce state costs by alleviating burdens on the appeals system. By restoring financial transparency and predictability, AB 1048 will encourage more providers to remain in—or return to—the Workers’ Compensation system, ultimately improving access to timely, high-quality care for injured workers.”

ARGUMENTS IN OPPOSITION:

According to the opponents, which includes the American Property Casualty Insurance Association, and a large coalition of businesses, cities, counties, schools, and public entities:

“Employers are broadly supportive of the IBR process because it reduces unnecessary litigation on simple billing disputes. IBR typically addresses issues related to coding, bundling of services, and application of the official medical fee schedule. Under AB 1048, however, IBR would also be asked to resolve complicated contract disputes related to billing. IBR reviewers are typically insurance and billing professionals who are quite good at resolving routine billing issues. IBR is not, however, staffed by attorneys and judges who are able to resolve legal disputes around contract application.

Many of the contracts subject to IBR under AB 1048 have binding dispute resolution provisions that would be interfered with by funneling the disputes into IBR. These provisions can include internal appeals processes, arbitration, and/or venue selection for dispute resolution. In fact, Labor Code Section 5275(b) specifically allows parties in the workers’ compensation system to agree to arbitration to resolve disputes. From our perspective it is bad public policy to move these disputes from qualified arbitrators or judges and into the IBR system.

AB 1048 ignores contracted dispute resolution provisions and instead forces these disputes into an IBR process that isn’t built for contract disputes.”

ASSEMBLY FLOOR: 76-0, 6/4/25

AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Arambula, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Chen, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gabriel, Gallagher, Garcia, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Hoover, Irwin, Jackson, Kalra, Krell, Lackey, Lowenthal, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Ransom, Celeste Rodriguez, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Schultz, Sharp-Collins, Solache, Soria, Stefani, Tangipa, Valencia, Wallis, Ward, Wicks, Wilson, Zbur, Rivas

NO VOTE RECORDED: Lee, Macedo, Ta

Prepared by: Jazmin Marroquin / L., P.E. & R. / (916) 651-1556

8/20/25 23:28:46

**** END ****

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Lola Smallwood-Cuevas, Chair

2025 - 2026 Regular

Bill No: AB 1048 Hearing Date: July 9, 2025

SUBJECT: Workers’ compensation

KEY ISSUE

This bill provides that certain contract disputes regarding discounts applied to a medical treatment bill may be resolved through the Division of Workers’ Compensation (DWC) independent bill review (IBR), as specified.

ANALYSIS

Existing law:

1. Establishes a comprehensive system of workers' compensation that provides a range of benefits for an employee who suffers from an injury or illness that arises out of and in the course of employment, regardless of fault. This system requires all employers to insure payment of benefits by either securing the consent of the Department of Industrial Relations (DIR) to self-insure or by obtaining insurance from a company authorized by the state. (Labor Code §§3200-6002)
2. Establishes the DWC and Workers’ Compensation Appeal Board (WCAB) within DIR and charges them with monitoring the administration of workers’ compensation claims and providing administrative and judicial services to assist in resolving disputes that arise in connection with claims for workers’ compensation benefits. (Labor Code §3200 et seq.)
3. Requires that a provider of services for an injured worker eligible for workers’ compensation benefits, as specified, submit its request for payment with an itemization of services provided and the charge for each service, a copy of all reports showing the services performed, any prescription or referral from the primary treating physician, as specified, and any evidence of authorization for the services to the employer, or to the insurer or third-party claims administrator as established through written agreement. (Labor Code §4603.2(b)(1)(A))
4. Provides that, if the provider disputes the amount paid, the provider may request a second review within 90 days of the explanation of the review, which the employer must respond to within 14 days with a final written determination on each of the items or amounts in dispute, as specified; and provides that, if the provider contests the amount paid after receipt of the second review, the provider shall request an IBR. (Labor Code §4603.2(e))
5. Provides that, if the only dispute between a medical provider and the employer is the amount of payment, and the provider has received a second bill review by the claims administrator that did not resolve the dispute, the provider may request an IBR within 30 calendar days of service of the second review, as specified. (Labor Code §4603.6(a))
6. Requires, upon the receipt of a request for IBR and the required fee, the administrative director (AD) of DWC to assign the request to an independent bill reviewer within 30 days, and requires the reviewer to review the materials submitted by the parties and make a written determination of any additional amounts to be paid to the medical provider, and state the reasons for the determination, as specified. (Labor Code §§4603.6(d)-(e))
7. Provides that the determination of the IBR is final and binding on all parties unless an aggrieved party files with the WCAB a verified appeal from the medical bill review determination within 20 days of service of the determination; and provides that the determination shall be presumed correct only upon clear and convincing evidence that:
   1. The AD acted without or in excess of his or her powers;
   2. The determination was procured by fraud;
   3. The IBR was subject to a material conflict of interest;
   4. The determination was the result of bias on the basis of race, national origin, ethnic group identification, religion, age, sex, sexual orientation, color, or disability; or
   5. The determination was the result of a plainly erroneous express or implied finding of fact, provided that the mistake of fact is a matter of ordinary knowledge based on the information submitted for review and not a matter that is subject to expert opinion. (Labor Code §4603.6(f))
8. Requires the AD to, after public hearings, adopt and revise periodically an official medical fee schedule (OMFS) that establishes reasonable maximum fees paid for medical services provided to workers’ compensation patients. (Labor Code §5307.1)
9. Authorizes a medical provider and a contracting agent, employer, or carrier to contract for reimbursement rates that differ from the OMFS, so long as those rates do not exceed the rates established by the OMFS. (Labor Code §5307.11)

This bill:

1. Provides that a payment dispute, for the purposes of IBR under the workers’ compensation system, includes a contract dispute involving a discount or reduction from the OMFS that was applied to a medical treatment bill.
2. Requires, if the dispute only involves a percentage discount or reduction that results in IBR upholding the discount or reduction, IBR to provide the rationale for that ruling in a written decision to the medical provider and include the medical provider contract or contracts relied upon to uphold the discount or reduction.
   1. Requires, if the payer cannot produce a valid medical provider contract or contracts justifying the discount or reduction, the IBR organization to award the medical provider payment for the disputed medical treatment bill that is consistent with the OMFS.
   2. Specifies the IBR organization is not required to provide the medical provider with a contract to which the medical provider is not a party.

COMMENTS

1. Background:

Workers’ Compensation and the Independent Bill Review Process

Under the California workers’ compensation system, if a worker is injured on a job, the employer must pay for the worker’s medical treatment, and provide monetary benefits if the injury is permanent. In return for receiving free medical treatment, the worker surrenders the right to sue the employer for monetary damages in civil court. This simple premise is sometimes referred to as the “grand bargain.”

The workers’ compensation system has several formal mechanisms for resolving disputes regarding the details of the injury, the medical necessity of aspects of the treatment plan, or the billing of insurers by medical providers, etc. that involve qualified medical evaluators (QMEs), workers’ compensation administrative law judges, and the WCAB, among others. When a medical provider and an employer or insurer disagree on payment for medical services provided, the medical provider can submit the bill to the insurance claims administrator for a second bill review, with any remaining dispute resolved through the IBR process. The only issue addressed during the IBR process is the amount to be paid for the provided medical service.

As the Assembly Committee on Appropriations points out, “DWC contracts with a single organization, Maximus, to provide all independent medical review and IBR services, subject to an IBR fee paid by the requesting medical provider. According to this bill’s sponsor, this fee increased from $180 to $195 on January 1, 2025. Maximus assigns an independent bill reviewer to examine documents submitted by both parties, identifies the appropriate OMFS, and issues a written determination within 60 days of assignment. If the determination finds any additional amount of money is owed to the medical provider, the determination must also order the claims administrator to pay the additional sum owed and reimburse the provider the amount of the filing fee. The IBR determination is deemed the determination of the DWC and is binding on all parties.”

Official Medical Fee Schedule

The OMFS establishes the reasonable maximum fees to be paid to a medical provider for medical services provided to a workers’ compensation patient. DWC sets and updates the OMFS following a public hearing. However, existing law also authorizes a medical provider and a contracting agent, employer, or insurer to contract for a reimbursement rate that differs from the OMFS, as long as the contracted rate does not exceed the OMFS rate.

Under an arrangement known as a Preferred Provider Organization (PPO), the insurer sends business to the medical provider, and in exchange, the medical provider offers services for a discounted rate to the insurer. However, this system has also given rise to a practice known as “silent PPO discounting,” when an intermediary organization network leases to other insurers the network’s provider list, including discounted rates the network has brokered on behalf of an insurer to use these providers. A leasing insurer may then “double dip” on discounts by applying the direct discount the insurer has negotiated with the medical provider, as well as the additional discount the network has negotiated with the medical provider.

This bill, AB 1048, allows a medical provider to dispute an additional discount resulting from “silent PPO discounting” through the IBR process, and, if successful, receive payment in the amount set by the OMFS. If the IBR process determines the additional discount is appropriate, this bill requires the medical provider be notified of the relevant contract to which the medical provider is a party that supports the discounted rate.

2. Need for this bill?

According to the author:

“This bill clarifies that the existing DWC [IBR] process can be utilized to resolve treatment contract disputes. If IBR upholds the discount or reduction, they must provide the basis for their reasoning and provide the relevant contract to the medical provider.

This bill addresses the need for greater transparency and accountability in the workers' compensation system, particularly in resolving contract disputes between payers and medical providers. By defining payment disputes to include contract disputes related to discounts or reduction of medical bills, the bill clarifies that these disputes can be handled under the existing [IBR] process. Just like in any other dispute resolved through the [IBR] process, IBR would issue a written decision to the medical provider, along with the relevant contract. This ensures a fairer, more transparent process for resolving disputes and fosters better communication between all parties.”

3. Proponent Arguments:

According to the sponsors, the California Orthopaedic Association (COA):

“The [IBR] process was designed to provide a streamlined, impartial method for resolving billing disputes between medical providers and payors. However, current law does not clearly authorize providers to challenge reimbursement reductions stemming from unauthorized or ‘silent’ Preferred Provider Organization (PPO) discounts—particularly those applied without the provider’s knowledge or consent. These discounts can undercut the Official Medical Fee Schedule and, in some cases, result in payments even lower than Medicare rates. For example, an orthopedic surgeon in San Diego was reimbursed significantly below the scheduled rate for a procedure, without any prior agreement to the discount. These opaque reimbursement practices discourage provider participation in the

system, leading to diminished access to care for injured workers—especially specialty services.

AB 1048 addresses this gap by clarifying that the IBR can address all payment disputes as we believe it was always intended. This clarification is critical to ensuring consistent and efficient resolution of payment disputes.

Importantly, AB 1048 would impose little to no cost to the state. The IBR process is entirely funded by medical providers, who pay a $195 filing fee to initiate a review by a third-party contractor (currently the company, Maximus). If Maximus determines that the provider is owed even a single penny more, the payor must reimburse both the underpayment and the $195 fee. The Division of Workers’ Compensation (DWC) incurs no cost, regardless of the outcome. In fact, by allowing these disputes to remain within IBR rather than being escalated to the Workers’ Compensation Appeals Board (WCAB), AB 1048 could reduce state costs by alleviating burdens on the appeals system.

By restoring financial transparency and predictability, AB 1048 will encourage more providers to remain in—or return to—the Workers’ Compensation system, ultimately improving access to timely, high-quality care for injured workers.”

4. Opponent Arguments:

According to the opponents, which includes the American Property Casualty Insurance Association, and a large coalition of businesses, cities, counties, schools, and public entities:

“Employers are broadly supportive of the IBR process because it reduces unnecessary

litigation on simple billing disputes. IBR typically addresses issues related to coding,

bundling of services, and application of the official medical fee schedule. Under AB 1048,

however, IBR would also be asked to resolve complicated contract disputes related to

billing. IBR reviewers are typically insurance and billing professionals who are quite good at

resolving routine billing issues. IBR is not, however, staffed by attorneys and judges who are

able to resolve legal disputes around contract application.

Many of the contracts subject to IBR under AB 1048 have binding dispute resolution

provisions that would be interfered with by funneling the disputes into IBR. These

provisions can include internal appeals processes, arbitration, and/or venue selection for

dispute resolution. In fact, Labor Code Section 5275(b) specifically allows parties in the

workers’ compensation system to agree to arbitration to resolve disputes. From our

perspective it is bad public policy to move these disputes from qualified arbitrators or

judges and into the IBR system.

AB 1048 ignores contracted dispute resolution provisions and instead forces these

disputes into an IBR process that isn’t built for contract disputes.”

5. Prior Legislation:

SB 668 (Hurtado, 2025) would have authorized the DWC AD to adjust the fee schedule for medical-legal evaluations every two years based on an evaluation of medical practice costs. This bill was held under submission in the Senate Appropriations Committee.

SB 863 (De Leon, Chapter 363, Statutes of 2012) enacted major reforms to the workers’ compensation system, including establishing the independent medical review and IBR processes for resolving disputes.

SUPPORT

California Orthopaedic Association (Sponsor)

California Medical Association (CMA)

California Podiatric Medical Association

Peace Officers Research Association of California (PORAC)

Western Occupational & Environmental Medical Association

OPPOSITION

American Property Casualty Insurance Association

California Association of Joint Powers Authorities

California Chamber of Commerce

California Coalition on Workers Compensation

California Food Producers

California League of Food Producers

Public Risk Innovation, Solutions, and Management (PRISM)

Urban Counties of California (UCC)

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1048

Author:(Chen)

As Amended Ver:April 10, 2025

Majority vote

SUMMARY

Clarifies that payment disputes, for the purposes of independent bill review (IBR), include contract disputes involving a discount or reduction from the official medical fee schedule (OMFS), and provides specific conditions for determinations by the IBR in such circumstances.

Major Provisions

1. Clarifies that, for purposes of IBR, a payment dispute includes a contract dispute involving a discount or reduction from the OMFS that was applied to a medical treatment bill.
2. Requires that, if the dispute only involves a percentage discount or reduction that results in IBR upholding the discount or reduction, IBR provide the rationale for that ruling in a written decision to the medical provider, and include the medical provider contract or contracts relied upon to uphold the discount or reduction; and clarifies that the IBR organization is not required to provide the medical provider with a contract to which the medical provider is not a party.
3. If the payer cannot produce a valid medical provider contract or contracts justifying the discount or reduction, requires the IBR organization to award the medical provider payment for the disputed medical treatment bill that is consistent with the OMFS.

COMMENTS

1. Workers' compensation and Independent Bill Review: The workers' compensation system has several formal mechanisms for resolving disputes among interested parties. When the injured worker and the employer disagree on details pertaining to the injury, the qualified medical evaluation (QME) process evaluates the disputed facts and provides a medical-legal report to the parties, which can then seek judgement by a workers' compensation administrative law judge, and can further appeal to the WCAB. When the injured worker disagrees with a utilization review decision denying or modifying the treatment plan based on medical necessity, the independent medical review (IMR) process relies on a neutral organization to evaluate the medical necessity of the treatment plan. And when a medical provider and employer or insurer disagree on payment for medical services provided, the medical provider can submit the bill for a Second Bill Review (SBR) by the claims administrator, and any remaining dispute can be resolved through the IBR process.

The IBR process is intended to expediently resolve billing disputes where the only issue is the amount to be paid for the provided medical service. DWC's website describes the IBR process as follows:

Medical treatment and medical-legal billing disputes are resolved through an independent bill review (IBR) process. A medical provider who disagrees with the amount paid by a claims administrator on a properly documented bill may apply for IBR. IBR applies to any medical service bill where the date of service is on or after Jan. 1, 2013 and where the fee is determined by a fee schedule established by the DWC. […]

Upon referral by the administrative director (AD), the independent bill review organization (IBRO) assigns an independent bill reviewer to examine all documents submitted, apply the appropriate fee schedule (i.e., Official Medical Fee Schedule, Medical Legal Fee Schedule, Contract Reimbursement Rates per Labor Code 5307.11), and issue a written determination within 60 days of the assignment to IBR.

If the determination finds any additional amount of money is owed to the provider, the determination shall also order the claims administrator to pay the additional sum owed and reimburse the provider the amount of the filing fee.

The IBR determination is deemed the determination of the AD and it is binding on all parties.

DWC contracts with a single organization, Maximus, to provide all IMR and IBR services. To request IBR, the medical provider can apply online through the Maximus Federal Services IBR tracking system, or can submit a hard copy, including required and/or supporting documentation and a check or money order for the IBR fee of $180.

1. Silent PPO discounting: DWC, after public hearing, sets and updates the OMFS that establishes the reasonable maximum fees to be paid for medical services provided to workers’ compensation patients. However, Section 5307.11 of the Labor Code authorizes a medical provider and a contracting agent, employer, or insurer to contract for reimbursement rates that differ from the OMFS, so long as they do not exceed the OMFS rate.

In many cases, these arrangements are mutually beneficial. The insurer sends business to the medical provider and, in exchange, the medical provider offers services for a discounted rate to the insurer. These arrangements are known as Preferred Provider Organizations, or PPOs, because insurers indicate preference for injured workers to seek treatment through those providers in exchange for the discounted rates. In some cases, especially for smaller insurers and employers who self-insure, such arrangements are made through an intermediary organization rather than directly. These networks solicit a panel of providers, and then broker discounts with insurers on behalf of those providers to direct them additional business.

This system has given rise to an untoward practice known as "silent PPO discounting," in which the network leases their provider list, including the discounted rates they've brokered with insurers for those providers, to other insurers. Rather than honoring the discounted rate the insurer has directly negotiated with the provider, the insurers instead pay the lowest rate that provider has agreed to with any insurer, or "double dip" on discounts, adding both the discount they've directly negotiated with the provider and the discount they've secured through the network.

As an example, Dr. Smith contracts with Insurer X to provide a 15% discount from the OMFS in exchange for Insurer X directing injured workers to them. Dr. Smith also contracts with Network A, which secures Dr. Smith preferred arrangements with Insurers Y and Z for discounts of 20%. Network A then leases its provider list, and the database detailing their discounts, to Insurer X. Dr. Smith provides medical care for a patient covered by Insurer X, but rather than receiving payment discounted by 15% from the OMFS, receives payment discounted by 20%, or in some cases, 35%. Dr. Smith receives no additional business as a result of the larger discount, since Insurer X was already contracted with Dr. Smith for the lesser discount.

This bill would allow Dr. Smith to dispute the additional discount through the IBR process, and, if successful, receive payment in the amount dictated by the OMFS. If the IBR determines that the payment provided was appropriate, this bill would also require the IBR to provide Dr. Smith with the relevant contract to which Dr. Smith is a party that supports the discounted rate. Notably, the bill does not require the IBR to provide Dr. Smith with any contract to which she is not a party, though these contracts can be considered in the IBR process.

If a provider has contracted for a discounted rate with the insurer, but the insurer relies on a silent PPO discount that is determined through the IBR to be without contractual merit, the provider would be entitled to the OMFS rate of payment for their services, rather than discounted rate they negotiated directly with the insurer. This would serve as a deterrent against silent PPO discounting, as doing so could result in significant cost increases to the insurer should the practice be detected and disputed.

1. Opponent concerns: This bill is opposed by a coalition of business interests and insurers including the California Coalition on Workers' Compensation (CCWC), the California Chamber of Commerce (CalChamber), and the American Property Casualty Insurance Association (APCIA), who raise concerns regarding the expertise of IBR reviewers to resolve contract disputes and the potential for the bill to interfere with binding dispute resolution provisions that may be included in contracts between providers and insurers.

Under existing law, it is not clear whether contract disputes related to discounted rates fall within the purview of the IBR process. Because existing law provides the IBR process as a mechanism for resolving disputes where "the only dispute between a medical provider and the employer is the amount of payment and the provider has received a second bill review by the claims administrator that did not resolve the dispute," medical providers may in fact already be able to avail themselves of the IBR process for resolving these contract disputes. Should this be the case, this bill would be clarifying in specifying that such disputes can utilize the IBR process, and simply detail additional conditions around determinations made by the IBR. Because the contentions raised by the opponents are specific to the use of the IBR process for resolving disputes regarding contract application, and not to the provisions of the bill that detail conditions around IBR determinations in these cases, if the IBR process can already be used in these circumstances, these contentions would be without merit.

Staff notes that the bill in print does not require that the IBR process be utilized to resolve contract application disputes between providers and insurers – rather, it clarifies that it is available for these types of disputes at the discretion of the provider. Should the contract between the provider and the insurer detail alternative binding dispute resolution procedures, the provider can utilize those procedures should they view them as fairer, more efficient, and/or less costly than the IBR process (note that the provider must surrender the filing fee to request an IBR). The provider is not precluded from resolving disputes in that manner.

The merit of the opponents' concern regarding the expertise of independent bill reviewers in contract application disputes is unclear. Maximus employs nearly 40,000 workers across a diverse array of functions, only a fraction of which serve as independent bill reviewers. Some of these workers likely have the requisite expertise to resolve these contract disputes. The author and sponsors contend that the contracts in question are generally straightforward, and do not require substantial expertise to interpret. Additionally, nothing in the bill or in the statutes detailing the IBR process prohibit the reviewer from consulting with legal experts regarding contract law. That said, if the requisite expertise is not available through Maximus at present, Maximus may need to acquire such expertise should this bill become law.

According to the Author

"This bill addresses the need for greater transparency and accountability in the workers' compensation system, particularly in resolving contract disputes between payers and medical providers. By defining payment disputes to include contract disputes related to discounts or reduction of medical bills, the bill clarifies that these disputes can be handled under the existing Independent Bill Review (IBR) process. Just line in any other dispute resolved through the Independent Bill Review process, IBR would issue a written decision to the medical provider, along with the relevant contract. This ensures a fairer, more transparent process for resolving disputes and fosters better communication between all parties."

Arguments in Support

The California Orthopedic Association, who sponsor the bill, argue:

The Independent Bill Review (IBR) process was intended to provide a streamlined and impartial resolution for billing disputes between medical providers and payers. However, current statute does not explicitly allow providers to challenge reimbursement reductions that result from unauthorized or "silent" Preferred Provider Organization (PPO) discounts – particularly those applied to medical treatment bills without the provider's knowledge or consent.

These silent discounts can severely undercut the Official Medical Fee Schedule and, in some cases, result in payments even lower than Medicare rates. […] When providers face unreasonable and opaque reimbursement reductions, many are forced to limit or stop treating workers' compensation patients altogether. As more providers exit the system, injured workers face growing delays and difficulty accessing timely, high-quality care, particularly for specialty services. AB 1048 addresses this critical gap by clarifying that medical treatment payment disputes involving contract-based reductions fall within the scope of the IBR process. By restoring financial transparency and predictability, AB 1048 will encourage more providers to remain in or return to the Worker's Compensation system, thereby strengthening the provider network and improving access to care for the Californians who need it most.

Arguments in Opposition

The aforementioned coalition of business interests and insurers who oppose the bill argues:

Under AB 1048, [IBR would be asked] to resolve complicated contract disputes related to billing. IBR reviewers are typically insurance and billing professionals who are quite good at resolving routine billing issues. IBR is not, however, staffed by attorneys and judges who are able to resolve legal disputes around contract application.

Many of the contracts subject to IBR under AB 1048 have binding dispute resolution provisions that would be interfered with by funneling the disputes into IBR. These provisions can include internal appeals processes, arbitration, and/or venue selection for dispute resolution. […] From our perspective it is bad public policy to move these disputes from qualified arbitrators or judges and into the IBR system.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, "Costs of an unknown amount, potentially in excess of $150,000, to DWC to update IBR regulations, informational materials, and forms, and to administer and adjudicate a more complex IBR process […]. However, any additional costs may be offset by cost savings of an unknown amount to DWC, as contract disputes not resolved by the IBR process are currently adjudicated through the Workers' Compensation Appeals Board."

VOTES

ASM INSURANCE: 17-0-0

YES: Calderon, Wallis, Addis, Alvarez, Ávila Farías, Berman, Chen, Ellis, Gipson, Hadwick, Harabedian, Krell, Nguyen, Ortega, Petrie-Norris, Michelle Rodriguez, Valencia

ASM APPROPRIATIONS: 12-0-3

YES: Wicks, Arambula, Calderon, Caloza, Dixon, Elhawary, Fong, Mark González, Hart, Pacheco, Pellerin, Solache

ABS, ABST OR NV: Sanchez, Ta, Tangipa

UPDATED

VERSION: April 10, 2025

CONSULTANT: Landon Klein / INS. / (916) 319-2086 FN: 0000752

Date of Hearing: May 21, 2025

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 1048

Author:(Chen) – As Amended Ver:April 10, 2025

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill provides that certain contract disputes regarding discounts applied to a medical treatment bill may be resolved through the Division of Workers’ Compensation (DWC) independent bill review (IBR) process.

Specifically, this bill:

1. Provides that a payment dispute under the workers’ compensation system includes a contract dispute involving a discount or reduction from the official medical fee schedule (OMFS) applied to a medical treatment bill.
2. If the discount or reduction is upheld through the IBR process, requires the IBR to provide the rationale for the ruling in a written decision to the medical provider and include the medical provider contract upon which the IBR relied to uphold the decision. If the insurer cannot produce a valid contract justifying the discount or reduction, the IBR must find in favor of the medical provider.

FISCAL EFFECT:

Costs of an unknown amount, potentially in excess of $150,000, to DWC to update IBR regulations, informational materials, and forms, and to administer and adjudicate a more complex IBR process (Workers’ Compensation Administration Revolving Fund). It is unclear whether DWC’s third-party administrator of IBR services would need to acquire additional expertise to carry out this bill’s provisions.

However, any additional costs may be offset by cost savings of an unknown amount to DWC, as contract disputes not resolved by the IBR process are currently adjudicated through the Workers’ Compensation Appeals Board (WCAB). Thus, this bill would shift some contract disputes from the WCAB to IBR, through which medical providers pay a filing fee for each review.

COMMENTS:

1. Purpose. According to the author, “By defining payment disputes to include contract disputes related to discounts or reduction of medical bills, the bill clarifies that these disputes can be handled under the existing [IBR] process.” The author contends, “This ensures a fairer, more transparent process for resolving disputes and fosters better communication between all parties.”
2. Background. OMFS. The OMFS establishes the reasonable maximum fees to be paid to a medical provider for medical services provided to a workers’ compensation patient. DWC sets and updates the OMFS following a public hearing. However, existing law also authorizes a medical provider and a contracting agent, employer, or insurer to contract for a reimbursement rate that differs from the OMFS, as long as the contracted rate does not exceed the OMFS rate.

In many cases, these arrangements are mutually beneficial. Under an arrangement known as a Preferred Provider Organization (PPO), the insurer sends business to the medical provider, and in exchange, the medical provider offers services for a discounted rate to the insurer. However, this system has also given rise to an untoward practice known as “silent PPO discounting,” when an intermediary organization network leases to other insurers the network’s provider list, including discounted rates the network has brokered on behalf of an insurer to use these providers. A leasing insurer may then “double dip” on discounts, applying the direct discount the insurer has negotiated with the medical provider, as well as the additional discount the network has negotiated with the medical provider.

IBR. The workers’ compensation system has several formal mechanisms for resolving disputes among interested parties. When a medical provider and an employer or insurer disagree on payment for medical services provided, the medical provider can submit the bill to the insurance claims administrator for a second bill review, with any remaining dispute resolved through the IBR process. The only issued addressed during the IBR process is the amount to be paid for the provided medical service.

DWC contracts with a single organization, Maximus, to provide all independent medical review and IBR services, subject to an IBR fee paid by the requesting medical provider. According to this bill’s sponsor, this fee increased from $180 to $195 on January 1, 2025. Maximus assigns an independent bill reviewer to examine documents submitted by both parties, identifies the appropriate OMFS, and issues a written determination within 60 days of assignment. If the determination finds any additional amount of money is owed to the medical provider, the determination must also order the claims administrator to pay the additional sum owed and reimburse the provider the amount of the filing fee. The IBR determination is deemed the determination of the DWC and is binding on all parties.

This bill allows a medical provider to dispute an additional discount resulting from “silent PPO discounting” through the IBR process, and, if successful, receive payment in the amount set by the OMFS. If the IBR process determines the additional discount is appropriate, this bill requires the medical provider be notified of the relevant contract to which the medical provider is a party that supports the discounted rate.

1. Support and Opposition. This bill is sponsored by the California Orthopaedic Association, which argues, “By restoring financial transparency and predictability, AB 1048 will encourage more providers to remain in – or return to – the Workers’ Compensation system, ultimately improving access to timely, high-quality care for injured workers.” This bill is also supported by other medical provider associations and the Peace Officers Research Association of California.

This bill is opposed by a coalition of employer and insurance associations, led by the California Coalition on Workers’ Compensation, which argues, “AB 1048 ignores contracted dispute resolution provisions and instead forces these disputes into an IBR process that isn’t built for contract disputes.”

1. Related Legislation. SB 668 (Hurtado) authorizes the DWC administrative director to adjust the fee schedule for medical-legal evaluations every two years based on an evaluation of medical practice costs. AB 668 is pending on the Senate Appropriations Committee’s suspense file.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: May 14, 2025

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 1048

Author:(Chen) – As Amended Ver:April 10, 2025

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill provides that certain contract disputes regarding discounts applied to a medical treatment bill may be resolved through the Division of Workers’ Compensation (DWC) independent bill review (IBR) process.

Specifically, this bill:

1. Provides that a payment dispute under the workers’ compensation system includes a contract dispute involving a discount or reduction from the official medical fee schedule (OMFS) applied to a medical treatment bill.
2. If the discount or reduction is upheld through the IBR process, requires the IBR to provide the rationale for the ruling in a written decision to the medical provider and include the medical provider contract upon which the IBR relied to uphold the decision. If the insurer cannot produce a valid contract justifying the discount or reduction, the IBR must find in favor of the medical provider.

FISCAL EFFECT:

Costs of an unknown amount, potentially in excess of $150,000, to DWC to update IBR regulations, informational materials, and forms, and to administer and adjudicate a more complex IBR process (Workers’ Compensation Administration Revolving Fund). It is unclear whether DWC’s third-party administrator of IBR services would need to acquire additional expertise to carry out this bill’s provisions.

However, any additional costs may be offset by cost savings of an unknown amount to DWC, as contract disputes not resolved by the IBR process are currently adjudicated through the Workers’ Compensation Appeals Board (WCAB). Thus, this bill would shift some contract disputes from the WCAB to IBR, through which medical providers pay a filing fee for each review.

COMMENTS:

1. Purpose. According to the author, “By defining payment disputes to include contract disputes related to discounts or reduction of medical bills, the bill clarifies that these disputes can be handled under the existing [IBR] process.” The author contends, “This ensures a fairer, more transparent process for resolving disputes and fosters better communication between all parties.”
2. Background. OMFS. The OMFS establishes the reasonable maximum fees to be paid to a medical provider for medical services provided to a workers’ compensation patient. DWC sets and updates the OMFS following a public hearing. However, existing law also authorizes a medical provider and a contracting agent, employer, or insurer to contract for a reimbursement rate that differs from the OMFS, as long as the contracted rate does not exceed the OMFS rate.

In many cases, these arrangements are mutually beneficial. Under an arrangement known as a Preferred Provider Organization (PPO), the insurer sends business to the medical provider, and in exchange, the medical provider offers services for a discounted rate to the insurer. However, this system has also given rise to an untoward practice known as “silent PPO discounting,” when an intermediary organization network leases to other insurers the network’s provider list, including discounted rates the network has brokered on behalf of an insurer to use these providers. A leasing insurer may then “double dip” on discounts, applying the direct discount the insurer has negotiated with the medical provider, as well as the additional discount the network has negotiated with the medical provider.

IBR. The workers’ compensation system has several formal mechanisms for resolving disputes among interested parties. When a medical provider and an employer or insurer disagree on payment for medical services provided, the medical provider can submit the bill to the insurance claims administrator for a second bill review, with any remaining dispute resolved through the IBR process. The only issued addressed during the IBR process is the amount to be paid for the provided medical service.

DWC contracts with a single organization, Maximus, to provide all independent medical review and IBR services, subject to an IBR fee paid by the requesting medical provider. According to this bill’s sponsor, this fee increased from $180 to $195 on January 1, 2025. Maximus assigns an independent bill reviewer to examine documents submitted by both parties, identifies the appropriate OMFS, and issues a written determination within 60 days of assignment. If the determination finds any additional amount of money is owed to the medical provider, the determination must also order the claims administrator to pay the additional sum owed and reimburse the provider the amount of the filing fee. The IBR determination is deemed the determination of the DWC and is binding on all parties.

This bill allows a medical provider to dispute an additional discount resulting from “silent PPO discounting” through the IBR process, and, if successful, receive payment in the amount set by the OMFS. If the IBR process determines the additional discount is appropriate, this bill requires the medical provider be notified of the relevant contract to which the medical provider is a party that supports the discounted rate.

1. Support and Opposition. This bill is sponsored by the California Orthopaedic Association, which argues, “By restoring financial transparency and predictability, AB 1048 will encourage more providers to remain in – or return to – the Workers’ Compensation system, ultimately improving access to timely, high-quality care for injured workers.” This bill is also supported by other medical provider associations and the Peace Officers Research Association of California.

This bill is opposed by a coalition of employer and insurance associations, led by the California Coalition on Workers’ Compensation, which argues, “AB 1048 ignores contracted dispute resolution provisions and instead forces these disputes into an IBR process that isn’t built for contract disputes.”

1. Related Legislation. SB 668 (Hurtado) authorizes the DWC administrative director to adjust the fee schedule for medical-legal evaluations every two years based on an evaluation of medical practice costs. AB 668 is pending on the Senate Appropriations Committee’s suspense file.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 23, 2025

ASSEMBLY COMMITTEE ON INSURANCE

Lisa Calderon, Chair

ABPCA Bill Id:AB 1048 (

Author:Chen) – As Amended Ver:April 10, 2025

SUBJECT: Workers’ compensation

SUMMARY: This bill clarifies that payment disputes, for the purposes of independent bill review (IBR), include contract disputes involving a discount or reduction from the official medical fee schedule (OMFS), and provides specific conditions for determinations by the IBR in such circumstances. Specifically, this bill:

1. Clarifies that, for purposes of IBR, a payment dispute includes a contract dispute involving a discount or reduction from the OMFS that was applied to a medical treatment bill.
2. Requires that, if the dispute only involves a percentage discount or reduction that results in IBR upholding the discount or reduction, IBR provide the rationale for that ruling in a written decision to the medical provider, and include the medical provider contract or contracts relied upon to uphold the discount or reduction; and clarifies that the IBR organization is not required to provide the medical provider with a contract to which the medical provider is not a party.
3. If the payer cannot produce a valid medical provider contract or contracts justifying the discount or reduction, requires the IBR organization to award the medical provider payment for the disputed medical treatment bill that is consistent with the OMFS.

EXISTING LAW:

1. Establishes a workers’ compensation system that provides benefits to an employee who suffers from an injury or illness that arises out of, and in the course of, employment, irrespective of fault. (California Constitution Article XIV, Section 4)
2. Establishes DWC within the Department of Industrial Relations (DIR) and charges it with monitoring the administration of workers’ compensation claims and providing administrative and judicial services to assist in resolving disputes that arise in connection with claims for workers’ compensation benefits. (Labor (Lab.) Code Sections 3200 et. seq.)
3. Requires that a provider of services for an injured worker eligible for workers’ compensation benefits submit its request for payment with an itemization of services provided and the charge for each service, a copy of all reports showing the services performed, any prescription or referral from the primary treating physician, and any evidence of authorization for the services to the employer, or to the insurer or third-party claims administrator as established through written agreement. (Lab. Code Section 4603.2(b)(1)(A))
4. Provides that, if the provider disputes the amount paid, the provider may request a second review within 90 days of service of the explanation of review, which the employer must respond to within 14 days with a final written determination on each of the items or amounts in dispute; and provides that, if the provider contests the amount paid after receipt of the second review, the provider shall request an IBR. (Lab. Code Section 4603.2(e))
5. Provides that, if the only dispute between a medical provider and the employer is the amount of payment, and the provider has received a second bill review by the claims administrator that did not resolve the dispute, the provider may request an IBR within 30 calendar days of service of the second review. (Lab. Code Section 4603.6(a))
6. Upon receipt of a request for IBR and the required fee, requires the administrative director (AD) of DWC to assign the request to an independent bill reviewer within 30 days, and requires the reviewer to review the materials submitted by the parties and make a written determination of any additional amounts to be paid to the medical provider, and state the reasons for the determination. (Lab. Code Section 4603.6(d) and (e))
7. Provides that the determination of the IBR is final and binding on all parties unless an aggrieved party files with the Workers’ Compensation Appeals Board (WCAB) a verified appeal from the medical bill review determination within 20 days of the service of the determination; and provides that the determination shall be presumed correct and shall be set aside only upon clear and convincing evidence that the determination was procured by fraud, that the IBR was subject to a material conflict of interest, that the determination was the result of bias on the basis of a protected class, or that the determination was the result of a plainly erroneous express or implied finding of fact. (Lab. Code Section 4603.6(f))
8. Requires the AD to, after public hearings, adopt and revise periodically an OMFS that establishes reasonable maximum fees paid for medical services provided to workers’ compensation patients. (Lab. Code Section 5307.1)
9. Authorizes a medical provider and a contracting agent, employer, or carrier to contract for reimbursement rates that differ from the OMFS, so long as those rates do not exceed the rates established by the OMFS. (Lab. Code Section 5307.11)

FISCAL EFFECT: Unknown.

COMMENTS:

1. Purpose: According to the author:

This bill addresses the need for greater transparency and accountability in the workers’ compensation system, particularly in resolving contract disputes between payers and medical providers. By defining payment disputes to include contract disputes related to discounts or reduction of medical bills, the bill clarifies that these disputes can be handled under the existing Independent Bill Review (IBR) process. Just line in any other dispute resolved through the Independent Bill Review process, IBR would issue a written decision to the medical provider, along with the relevant contract. This ensures a fairer, more transparent process for resolving disputes and fosters better communication between all parties.

This bill is sponsored by the California Orthopedic Association (COA).

1. Workers’ compensation and Independent Bill Review: At its core, the workers’ compensation system relies on a so-called “grand bargain.” If a worker is injured on the job, the employer must pay for the worker’s medical treatment, including monetary benefits if the injury is permanent. In exchange for receiving the guarantee of such treatment, the worker surrenders the right to sue the employer for monetary damages in civil court. All employers are required to secure the payment of workers’ compensation either by receiving approval from DIR to self-insure in accordance with substantial requirements, or by obtaining workers’ compensation insurance coverage from an authorized insurer. The Labor Code explicitly asserts that it is the policy of the state to “vigorously enforce” this law.

The workers’ compensation system has several formal mechanisms for resolving disputes among interested parties. When the injured worker and the employer disagree on details pertaining to the injury, the qualified medical evaluation (QME) process evaluates the disputed facts and provides a medical-legal report to the parties, which can then seek judgement by a workers’ compensation administrative law judge, and can further appeal to the WCAB. When the injured worker disagrees with a utilization review decision denying or modifying the treatment plan based on medical necessity, the independent medical review (IMR) process relies on a neutral organization to evaluate the medical necessity of the treatment plan. And when a medical provider and employer or insurer disagree on payment for medical services provided, the medical provider can submit the bill for a Second Bill Review (SBR) by the claims administrator, and any remaining dispute can be resolved through the IBR process.

The IBR process is intended to expediently resolve billing disputes where the only issue is the amount to be paid for the provided medical service. DWC’s website describes the IBR process as follows:

Medical treatment and medical-legal billing disputes are resolved through an independent bill review (IBR) process. A medical provider who disagrees with the amount paid by a claims administrator on a properly documented bill may apply for IBR. IBR applies to any medical service bill where the date of service is on or after Jan. 1, 2013 and where the fee is determined by a fee schedule established by the DWC. […]

Upon referral by the administrative director (AD), the independent bill review organization (IBRO) assigns an independent bill reviewer to examine all documents submitted, apply the appropriate fee schedule (i.e., Official Medical Fee Schedule, Medical Legal Fee Schedule, Contract Reimbursement Rates per Labor Code 5307.11), and issue a written determination within 60 days of the assignment to IBR.

If the determination finds any additional amount of money is owed to the provider, the determination shall also order the claims administrator to pay the additional sum owed and reimburse the provider the amount of the filing fee.

The IBR determination is deemed the determination of the AD and it is binding on all parties.

DWC contracts with a single organization, Maximus, to provide all IMR and IBR services. Maximus describes itself as “a leading strategic partner to governments across the globe [that] helps improve the delivery of public services amid complex technology, health, economic, environmental, and social challenges.” To request IBR, the medical provider can apply online through the Maximus Federal Services IBR tracking system, or can submit a hard copy, including required and/or supporting documentation and a check or money order for the IBR fee of $180.

1. Silent PPO discounting: DWC, after public hearing, sets and updates the OMFS that establishes the reasonable maximum fees to be paid for medical services provided to workers’ compensation patients. However, Section 5307.11 of the Labor Code authorizes a medical provider and a contracting agent, employer, or insurer to contract for reimbursement rates that differ from the OMFS, so long as they do not exceed the OMFS rate.

In many cases, these arrangements are mutually beneficial. The insurer sends business to the medical provider and, in exchange, the medical provider offers services for a discounted rate to the insurer. These arrangements are known as Preferred Provider Organizations, or PPOs, because insurers indicate preference for injured workers to seek treatment through those providers in exchange for the discounted rates. In some cases, especially for smaller insurers and employers who self-insure, such arrangements are made through an intermediary organization rather than directly. These networks solicit a panel of providers, and then broker discounts with insurers on behalf of those providers to direct them additional business.

This system has, unfortunately, given rise to an untoward practice known as “silent PPO discounting,” in which the network leases their provider list, including the discounted rates they’ve brokered with insurers for those providers, to other insurers. Rather than honoring the discounted rate the insurer has directly negotiated with the provider, the insurers instead pay the lowest rate that provider has agreed to with any insurer, or “double dip” on discounts, adding both the discount they’ve directly negotiated with the provider and the discount they’ve secured through the network.

As an example, Dr. Smith contracts with Insurer X to provide a 15% discount from the OMFS in exchange for Insurer X directing injured workers to them. Dr. Smith also contracts with Network A, which secures Dr. Smith preferred arrangements with Insurers Y and Z for discounts of 20%. Network A then leases its provider list, and the database detailing their discounts, to Insurer X. Dr. Smith provides medical care for a patient covered by Insurer X, but rather than receiving payment discounted by 15% from the OMFS, receives payment discounted by 20%, or in some cases, 35%. Dr. Smith receives no additional business as a result of the larger discount, since Insurer X was already contracted with Dr. Smith for the lesser discount.

This bill would allow Dr. Smith to dispute the additional discount through the IBR process, and, if successful, receive payment in the amount dictated by the OMFS. If the IBR determines that the payment provided was appropriate, this bill would also require the IBR to provide Dr. Smith with the relevant contract to which Dr. Smith is a party that supports the discounted rate. Notably, the bill does not require the IBR to provide Dr. Smith with any contract to which she is not a party, though these contracts can be considered in the IBR process.

As COA, who sponsor the bill, describe:

The Independent Bill Review (IBR) process was intended to provide a streamlined and impartial resolution for billing disputes between medical providers and payers. However, current statute does not explicitly allow providers to challenge reimbursement reductions that result from unauthorized or “silent” Preferred Provider Organization (PPO) discounts – particularly those applied to medical treatment bills without the provider’s knowledge or consent.

These silent discounts can severely undercut the Official Medical Fee Schedule and, in some cases, result in payments even lower than Medicare rates. […] When providers face unreasonable and opaque reimbursement reductions, many are forced to limit or stop treating workers’ compensation patients altogether. As more providers exit the system, injured workers face growing delays and difficulty accessing timely, high-quality care, particularly for specialty services. AB 1048 addresses this critical gap by clarifying that medical treatment payment disputes involving contract-based reductions fall within the scope of the IBR process. By restoring financial transparency and predictability, AB 1048 will encourage more providers to remain in or return to the Worker’s Compensation system, thereby strengthening the provider network and improving access to care for the Californians who need it most.

If a provider has contracted for a discounted rate with the insurer, but the insurer relies on a silent PPO discount that is determined through the IBR to be without contractual merit, the provider would be entitled to the OMFS rate of payment for their services, rather than discounted rate they negotiated directly with the insurer. This would serve as a deterrent against silent PPO discounting, as doing so could result in significant cost increases to the insurer should the practice be detected and disputed.

1. Opponent concerns: This bill is opposed by a coalition of business interests and insurers including the California Coalition on Workers’ Compensation (CCWC), the California Chamber of Commerce (CalChamber), and the American Property Casualty Insurance Association (APCIA), who raise concerns regarding the expertise of IBR reviewers to resolve contract disputes and the potential for the bill to interfere with binding dispute resolution provisions that may be included in contracts between providers and insurers. According to that coalition:

Under AB 1048, [IBR would be asked] to resolve complicated contract disputes related to billing. IBR reviewers are typically insurance and billing professionals who are quite good at resolving routine billing issues. IBR is not, however, staffed by attorneys and judges who are able to resolve legal disputes around contract application.

Many of the contracts subject to IBR under AB 1048 have binding dispute resolution provisions that would be interfered with by funneling the disputes into IBR. These provisions can include internal appeals processes, arbitration, and/or venue selection for dispute resolution. […] From our perspective it is bad public policy to move these disputes from qualified arbitrators or judges and into the IBR system.

Under existing law, it is not clear whether contract disputes related to discounted rates fall within the purview of the IBR process. Because existing law provides the IBR process as a mechanism for resolving disputes where “the only dispute between a medical provider and the employer is the amount of payment and the provider has received a second bill review by the claims administrator that did not resolve the dispute,” medical providers may in fact already be able to avail themselves of the IBR process for resolving these contract disputes. Should this be the case, this bill would be clarifying in specifying that such disputes can utilize the IBR process, and simply detail additional conditions around determinations made by the IBR. Because the contentions raised by the opponents are specific to the use of the IBR process for resolving disputes regarding contract application, and not to the provisions of the bill that detail conditions around IBR determinations in these cases, if the IBR process can already be used in these circumstances, these contentions would be without merit.

Staff notes that the bill in print does not require that the IBR process be utilized to resolve contract application disputes between providers and insurers – rather, it clarifies that it is available for these types of disputes at the discretion of the provider. Should the contract between the provider and the insurer detail alternative binding dispute resolution procedures, the provider can utilize those procedures should they view them as fairer, more efficient, and/or less costly than the IBR process (note that the provider must surrender the filing fee to request an IBR). The provider is not precluded from resolving disputes in that manner. However, in cases where the binding dispute resolution process provided for in the contract is clearly favorable to the insurer, a provider may be more inclined to utilize the impartial IBR process.

The merit of the opponents’ concern regarding the expertise of independent bill reviewers in contract application disputes is unclear. Maximus employs nearly 40,000 workers across a diverse array of functions, only a fraction of which serve as independent bill reviewers. Some of these workers likely have the requisite expertise to resolve these contract disputes. The author and sponsors contend that the contracts in question are generally straightforward, and do not require substantial expertise to interpret. Additionally, nothing in the bill or in the statutes detailing the IBR process prohibit the reviewer from consulting with legal experts regarding contract law. That said, if the requisite expertise is not available through Maximus at present, Maximus may need to acquire such expertise should this bill become law.

1. Prior legislation:

SB 863 (De León, Ch. 363, Stats. 2012) enacted major reforms to the workers’ compensation system, including establishing the IMR and IBR processes for resolving disputes.

SB 899 (Poochigian, Ch. 34, Stats. 2004) enacted major reforms to the workers’ compensation system, including authorizing medical provider networks (MPNs), and revising the qualified medical evaluator and utilization review processes.

REGISTERED SUPPORT / OPPOSITION:

Support

California Medical Association (CMA)
California Orthopedic Association
California Podiatric Medical Association

Oppose

American Property Casualty Insurance Association
California Association of Joint Powers Authorities
California Chamber of Commerce
California Coalition on Workers Compensation
California Food Producers
Urban Counties of California (UCC)

Analysis Prepared by: Landon Klein / INS. / (916) 319-2086