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California passes workers compensation overhaul

By a wide margin, California legislators passed the workers’ compensation reform bill (SB863) on August 31st.

Proponents of the new legislation claim that the medical and legal cost cutting provisions of the bill will result in a reduction of workers’ compensation rates by as much as 7%. In addition to the expected reduction in lawsuits and medical costs, the bill will actually increase compensation to injured workers by $7,000,000 per year.

The bill is expected to be signed by Governor Brown who has praised the legislation, saying . . . “it helps injured workers and averts an imminent crisis of skyrocketing rates.”

In perhaps the best sign that the new legislation will have some desired effect on the California workers’ compensation system, the bill was formally opposed by the following three groups: California Applicants’ Attorneys Association, The California Chiropractic Association and Voters Injured at Work.

Below are some of the more significant features of SB863:

    • The use of Chiropractors as “Qualified Medical Evaluators” (QME) would be restricted.
    • The bill adds significant restrictions and associated penalties for doctors referring patients to other entities in which they have a financial interest (For example, a doctor who refers a patient for therapy or x-rays at a facility in which he has a financial interest would be subject to a $15,000 penalty.)
    • The bill revises the method for computing permanent partial disability benefits.
    • The bill significantly revises the Supplemental Job Displacement benefits.
    • The method for the determination of percentages of permanent disability is being revised.
    • The bill would significantly limit the employer/insurer’s responsibility for providing home healthcare services to specified circumstances.
    • The use of liens in workers’ compensation claims would be restricted and there would be mandated documentation, a filing fee and declarations made under oath.
    • The bill contains a number of provisions relating to revisions to “Medical Provider Network” (MPN) procedures and requirements.

Procedurally, once the bill is signed into law by the Governor, a panel would be formed to put together all of the regulations and processes needed to make the bill work. While some of the provisions of the bill go into effect on January 1, 2013, this is likely to be pushed back as it is unlikely that the regulations will have been put into place by then. They say the Devil is in the Details, so we will continue to watch this process closely.

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William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.

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