June 8 is the date set for the conclusion of what must be the longest-running rate hearing in the history of California’s workers’ comp insurance. This is the time when the California Department of Insurance says it intends to get to the bottom of rapidly escalating medical costs in the system. Having summarily dismissed any thoughts of cost increases from the recent Workers’ Compensation Appeals Board decisions in Almaraz, Guzman and Ogilvie, arguably because, well, Governor Schwarzenegger said so, California Insurance Commissioner Steve Poizner now will set his sights on medical costs to further his goal of having no rate increases sully his summer plans.
It shouldn’t be that easy. On the other hand, this is a commissioner who had a press release demanding the Workers’ Compensation Insurance Rating Bureau withdraw its proposed rate recommendations on the aforementioned cases before the hearing was over – actually before he even made the demand. One has to admire such prescience. It would save people a lot of time and effort if the commissioner would announce what he was going to do the day before, rather than during, such hearings, so people could plan accordingly.
As of press time of this publication, the rumor that the hearing is going to be held in the Music Circus facility in downtown Sacramento could not be verified.
The drama that will be this hearing will unfold on three levels. The first is the visceral, where the proposed increase must be because of industry greed, Wall Street malfeasance or seeking reward for abysmal treatment of injured workers. The second is technical, where data supporting the rate increase will be criticized on a number of methodological levels. The third will be political, making certain that the sound bites for the next day are delivered by deadline.
Each of these levels has its own unique peril. Workers’ comp regulators have examined utilization review with a frequency matched only by Major League Baseball’s examination of A-Rod’s urine. In the case of utilization review, the examinations have largely verified that UR is being conducted as envisioned by the Legislature in SB 899 and the Supreme Court in Sandhagen. Complaints of “out-of-state reviewers” also should fall on deaf ears, since the purpose of the SB 899 reforms was to enact “evidence-based, peer-reviewed, nationally recognized standards of care,” not standards of care developed by California lawyers and doctors for their own practices. (Remember the Industrial Medical Council?)
Utilization review plans of all payers are on file with the Division of Workers’ Compensation. Some of these plans are accredited by the Utilization Review Accreditation Commission (URAC) – the gold standard for assuring quality of utilization review and procedures. Anthem Blue Cross, for example, is URAC certified. The Legislature, unconvinced that a mere “medical necessity” standard would suffice, mandated certain treatment guidelines for use in workers’ comp and defined an employer’s obligation to pay based on those guidelines. It is not inconceivable to anticipate that this would create certain friction within the workers’ comp medical community, unaccustomed as it is to asking anyone for anything. But it is to be expected post-SB 899.
Furthermore, cost pressures on workers’ comp medical treatment are not entirely unique to workers’ comp, much as industry critics would like to claim otherwise. Increased medical costs associated with an aging population, various cost pressures on California’s hospitals, from seismic retrofitting to unreimbursed Medicare costs, and costs of implementing emerging technology do not discriminate between occupational and non-occupational illnesses and injuries. What is unique to workers’ comp—lack of effective controls over pharmaceutical benefits in the system, especially over opioids—does indeed warrant legislative intervention.
The most risky issue is methodology—an issue ill-suited to public forums. When actuaries note that they can justify rate increases between 0% and 40%, it is a testament to volatility in the system—volatility a solvency regulator needs to be very sensitive to.
At the end of the day, there is an expectation that workers’ comp is somehow immune from inflationary pressures. That is not the case. The commissioner would be better served by understanding just how workers’ comp medical treatment fits into the overall delivery of medical care in California, both from the provider perspective and that of entities that establish networks delivering an increasingly large part of medical care. Wondering why insurers don’t “control” costs insults the majority of providers who honestly practice their profession and ignores the realities of a much larger health care delivery picture.
But June 8 isn’t really intended to deal with these issues, is it?