1. 1

2. 2Workers' Compensation Workers’ Compensation and The Three Parts Workers’ Compensation is a social insurance program that provides:  Medical care  Cash benefits  Rehabilitation services Three coverages are provided: workers’ compensation insurance, employers liability insurance, other-states insurance

3. 3Workers' Compensation Objectives and Eligibility Requirements of Workers’ Compensation  Provide broad coverage  Substantial protection  Provide sufficient medical care/rehab  Reduction of job related accidents  Reduce litigation  Two principal eligibility requirements must be met

4. 4Workers' Compensation Workers’ Compensation Benefits  Unlimited medical care  Disability-income benefits  Death benefits  Rehabilitation services Keep the benefits coming!

5. 5Workers' Compensation Workers’ Compensation Mess in California  Rates were falling due to set rates without state approval  Insurers competed for business  Carriers selling insurance at a loss to gain market share  Firms became insolvent

6. 6Workers' Compensation Workers’ Compensation Mess in California (Cont.)  Businesses pay highest premiums, but injured workers get the lowest benefits.  Costs paid by employers are the highest in the country.  Average employer pays 5.2% of payroll.

7. 7Workers' Compensation Problems & Issues  30% of claimants who miss work hire a lawyer  Doctors & patients have little incentive to restrain costs  Employers often hire dueling doctors  California gives lots of discretion  Unnecessarily complex, difficult to administer, some cases outdated

8. 8Workers' Compensation Problems & Issues (Cont.)  Difficulty finding workers comp. Insurance  California receive lowest disability benefits  California has highest litigation and medical cost  Last year, job based insurance premiums increased by an average of 10%  Nearly 1 million claims filed each year

9. 9Workers' Compensation Problems & Issues (Cont.)  Standards of disability awards  Stricter guidelines for permanent- partial disabilities  Physician choice  California exceeds national norm  Workers file more claims than elsewhere  Medical cost in California far above average

10. 10Workers' Compensation Problems & Issues (Cont.)  Lack of fee schedule  Delays in updating existing fee schedules  No fault system  Rising medical inflations  Indemnity  Underwriting performance

11. 11Workers' Compensation Workers Compensation Fraud  What is workers’ compensation fraud?  The two most common types of workers’ compensation fraud : Premium Premium Benefit fraud Benefit fraud  Health care provider or attorney assists the worker in fraudulent schemes, or participates in double billing.

12. 12Workers' Compensation Workers Compensation Fraud (Cont.)  In 2002-03 there were 660 fraud cases representing more than $54 million dollars in chargeable fraud  Humboldt man was charged with 6 Felony counts for defrauding workers’ comp.  $7.1 billion in 1993 to $29 billion in 2003  Fraud estimated to be between $1 to $3 billion

13. 13Workers' Compensation Workers Compensation Fraud (Cont.)  Fraud committed by companies  Falsely declaring number of workers  Falsely declaring number of hours  California passed AB227  Before legislation 50,000 50,000  Now 150,000 150,000  Investigation department

14. 14Workers' Compensation Video Video Workers’ Comp. fraud: Workers’ Comp. fraud: It affects us all It affects us all Workers’ Comp. fraud: Workers’ Comp. fraud: It affects us all It affects us all

15. 15Workers' Compensation Current Claims and Costs in California  Reserves more than doubled from $9.5 billion in 1995 to $25 billion in 2002.  Medical Expenditures skyrocketed from $2.6 - $5.3 billion.  Claims have been declining, but savings have been offset by rising medical costs.

16. 16Workers' Compensation The Rise In Cost  Substantial increases in medical costs per claim  Average medical cost per claim in 2002 was $31,000.  California employers pay more in Workers’ Compensation premiums than any other state. 40 states premiums average less then $4.00 per $100 of payroll 40 states premiums average less then $4.00 per $100 of payroll California averages $6.50 per $100 of payroll California averages $6.50 per $100 of payroll

17. 17Workers' Compensation Current Claims & Cost (cont.)  California has difficult political environment for business.  Between 1997 and 2000, indemnity claims increased 230%.  62% of claim dollars go to medical bills and not weekly benefits.  Excessive use of prescription pain medication.

18. 18Workers' Compensation Current Claims & Cost (Cont.)  Hospital Cost totaled $1.1 Billion in 2002.  Chiropractor visits per claim up 70%  Pharmaceutical service has grown 243%  $86.4 million in 1997 to $296.6 million in 2002

19. 19Workers' Compensation

20. 20Workers' Compensation Table 1: Service Utilization in California vs. Other States CA12-State MedianDifference Average Payment Per Claim $5,667$5,786Similar Services Per Visit3.63.2Similar Average Visits Per Claim 29.717.4+71% Average Price Per Visit$57$101-44%

21. 21Workers' Compensation California Legislation  AB 749 was passed on February 4, 2002  Bill provides first increase in workers’ compensation benefits for injured workers since July 1, 1996.  Mandates return to work programs  Also provides pharmaceutical and outpatient surgery fee schedule  New requirements for enforcement of illegally uninsured employers.

22. 22Workers' Compensation Reform Plan  Propose to cut workers compensation rates in half.  Which would result in $5 Billion in savings.  Democrats have stated that the reform package would reduce workers’ compensation cost by 14.9%.  Plan will also increase the burden of proof for claims of “cumulative injuries” that builds over time.

23. 23Workers' Compensation Proposed Solutions To Workers Compensation  To regulate the amount of chiropractic and physical therapy visits per claim.  Strict guide lines of medical treatments.  Make fees for outpatient surgery centers tied to Medicare rates and pharmaceutical prices tied to Medi-Cal rates.

24. Workers' Compensation 24 For more information, please visit our Web site at www.angelfire.com/biz7/workerscomp/index.html