A test case is for 'go for launch': a critical issue in the changes to California's workers' compensation law is whether medical provider networks will provide better care at a lower price

Risk & Insurance, Dec, 2004 by Russ Allen

Lots of things are tested in California. Movies are screen tested, products are market tested, and laws of all kinds often face stiff" legal challenges. This time, the changes in the state's broken workers' compensation system are about to find out whether they'll survive in their new form--a legislative bill known as 8B 899.

The state's Senate Bill 899, as the workers' comp law is called, is an aggressive new set of laws aimed at curbing the huge workers' comp payments that have burdened medical care from the Redwoods north of San Francisco to the deserts east of San Diego.

Beginning in January, for the first time injured workers will be directed to employer-established, medical provider networks (MPNs) for their care.

Created by the new regulations, these lists of medical practices based upon occupational medicine guidelines will now be the sole recourse for such care. Injured workers will no longer be free to choose any family doctor, chiropractor, orthopedist, or other practitioner.

Critics say the reforms have given employers and their insurers too much power. Patients no longer have the ability to choose what's best for them, these critics say. Beginning in 2005, care will have to conform to a new set of statewide standards adopted from the American College of Occupational and Environmental Medicine, a set of guidelines not originally intended for the purpose of treating patients in the workers' comp care system.

Other lobbying groups like the California Labor Federation/AFL-CIO are taking a more cautious approach. "We're looking to see how bad it's going to be," says Angle Wei, the group's legislative director. "Basically, we're taking a cautious, wait-and-see approach."

Either way, the new approach to components of workers' comp reform is about to face an unprecedented test in a market of this size. In this effort, however, California is as much playing catch-up with other states as it is being innovative.

A LACK OF STANDARDS IN THE PAST

Backers of the new law claim the changes hold promise. Employers will see their workers' comp increases level off--perhaps even decrease--and employees will be able to get better care. Business and labor are the true beneficiaries in this reformed system, the proponents say.

Labor, businesses large and small, the insurance industry and lawmakers agreed that something had to be done. Faith in discounts from deregulation proved shortsighted in California. While the amount spent to cover workers' comp premiums doubled in recent years, abuses continued to mount and litigation rates climbed further. Yet medical and return-to-work outcomes remained poor.

"It was as if we had a system where everyone was eligible for unlimited care that was not applied against any standards," says Deborah Gonzalez, chief of staff for California Sen. Charles Poochigian, the author of SB 899. "Less-injured employees were sometimes taking more resources more often than seriously injured ones."

Employers had some medical control but only for the first 30 days. Afterward, employees were allowed to choose. They had a great deal of leeway to switch physicians multiple times.

With the escalating cost per claim, many insurers went out of business, left the state, or stopped writing workers' comp policies. With remaining commercial rates so high, more than half the market was now resorting to the insurer of last resort, the State Compensation Insurance Fund.

As a result, no one came out a winner. "There has also been lots of friction between parties," says Chris Wheaton, vice president of Dallas-based Concentra, an occupational medicine provider.

Among steps that the state took was asking its Commission on Health and Safety and Workers' Compensation--a nonpartisan, labor-policy body--to find specific cost areas that were out-of-line and to recommend revisions. Partly as a result of the research conducted by the commission, the California legislature passed SB 899 in the spring.

WHAT WILL HAPPEN

The standards of the American College of Occupational and Environmental Medicine that had already gone into effect last fall were meant to introduce more clarity to the system. "Doctors have to document treatment by the guidelines, which are very important to avoiding overtreatment or undertreatment," says Lachlan Taylor, a workers' comp judge on the staff of the commission. "We've now put managed care into the system."

Most claims of work-related injury are legitimate and best resolved if treated early. For these reasons, the new law makes employers responsible for providing immediate medical care [up to a $10,000] for any declared work-related injury until the injury is accepted or denied.

But employers may begin enrolling workers in their medical provider networks as of Jan. 1. Primary-care physicians and specialists will comprise the networks, and these practitioners will manage the care of injuries, in turn referring patients to other therapies. HMOs, health care provider groups, and other health care organizations already offering occupational medicine will be deemed approved pools. Self-insured employers will form their own networks.