Insurance Commissioner Steve Poizner has established a task force to see what can be done to address rising costs of medical benefits within the California workers’ comp system. Across the way, the Commission on Health and Safety and Workers’ Compensation is proselytizing for its changes – primarily dealing with permanent disability and liens.
Not to be outdone, the Division of Workers’ Compensation, perhaps spurred by criticism of the Department of Insurance, but more likely driven by the ticking clock of this administration, is working on its own package of administrative changes, including implementing long-awaited electronic medical billing requirements, looking at a regulatory structure for pharmacy benefit management systems, and perhaps even revising the permanent disability rating schedule and the official medical fee schedule.
This seems to be a lot of activity for an issue that remains fairly low on the priority list for the cash-strapped State of California and its feckless Legislature.
The “stakeholders” in the system, labor and self-insured employers, appear to be focusing on permanent disability, liens, and responses to the irritants du jour that somehow, when expressed by employers with humongous payrolls, become public policy issues. That is why issues such as permanent-disability advances and the rate of pay of benefits somehow manage to be included within a discussion of overturning the Almaraz, Guzman, and Ogilvie cases.
Interestingly, there is no discussion of how to address medical cost inflation in the commission’s work product.
But the commissioner sees insurer data (in even more detail than the published information from the rating bureau) as well as the always critical self-insured employer anecdotes, and seems to be addressing a different set of problems. Currently, his efforts appear to be geared toward trying to make insurer data conform to the world of self-insured anecdotes in various areas of medical costs. But it would also appear that the Department of Insurance and the Department of Industrial Relations agree that medical cost inflation in insurance data is more the result of insurer inefficiency than any fundamental problems with medical provider networks, utilization review or pharmacy benefit management.
There are a number of problems with this analysis, but at its core is the refusal to acknowledge that medical provider networks, and consequently utilization review, aren’t the same kind of fit for self-insureds as they are for insurance companies. No amount of criticism of so-called efficiencies can alter the fact that when the reforms of 2003-2004 were being put on the books, the final work product was designed for the self-insured employer, and the public policy apparatus remains far more enamored with its logos than with its data.
According to the California Workers’ Compensation Institute, total paid medical costs for those self-insured employers that report claims to CWCI in calendar year 2008 increased by 16.5% over 2007 and by 11.2% overall since 2005, the first calendar year post-reform. During the same calendar year 2007-2008 period, paid medical for insurers increased 7.9%—less than half the rate of self-insureds. Calendar year 2005 and 2007 numbers were essentially the same, meaning that from the 2005-2008 calendar year periods, insurer medical costs increased at the same 7.9% overall rate. To be sure, without a clearer understanding of what goes into the definition of “paid medical” for self-insureds, we cannot be certain we are making an apples-to-apples comparison. Bringing more clarity to the published self-insured data components would be remarkably helpful, but also does not seem to be forthcoming.
These numbers do not fit neatly into the current discussions and, as is so often the case, have been largely ignored. Requiring self-insureds to provide the same unit statistical reporting to WCIRB as carriers do would go a long way toward getting more accurate data to analyze.