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Updated SB 863 Cost Monitoring Report Released

The WCIRB has released its Senate Bill No. 863 WCIRB Cost Monitoring Report — 2014 Retrospective Evaluation which is part of a multi-year cost monitoring plan developed by the WCIRB following the signing of SB 863 by the California Governor on September 18, 2012.

This report includes an updated retrospective evaluation of the cost impact of a number of SB 863 provisions based on data emerging through the third quarter of 2014. Based on the most current information, the WCIRB estimates the impact of SB 863 is an annual net savings of $0.2 billion, or 1.2%, of total system costs.

Shown below are the principal findings of the Report:

  1. The impacts of increases to weekly permanent disability (PD) minimums and maximums for 2013 injuries are emerging consistent with initial projections. (The most significant increases to PD maximums did not become effective until 2014 and cannot be assessed based on post-SB 863 experience until next year.)
  1. Changes to PD ratings for adjustments related to future earning capacity (FEC) and PD add-ons were projected to increase average PD ratings by approximately 6% (prior to any impact from the Ogilvie v. City and County of San Francisco decision). This is generally comparable to data on early 2013 PD ratings from the Disability Evaluation Unit (DEU) which suggests an approximate 4% increase in average PD ratings.
  1. The changes to PD related to FEC were estimated to eliminate any increases to PD for the Ogilvie decision. While specific information related to Ogilvie adjustments to permanent disability ratings is not available, WCIRB data does not suggest any significant post-SB 863 increases to average PD ratings.
  1. Indemnity claim frequency was projected to increase by approximately 2% from 2012 to 2014, in part due to SB 863 changes to indemnity benefits. Emerging claim frequency through June 30, 2014 indicates a 6% increase.
  1. The number of lien filings was projected to decrease by approximately 41% as a result of the SB 863 lien filing fee and statute of limitations. Lien filings in 2013 and 2014 have decreased by approximately 60% annually when compared to 2011 levels.
  1. SB 863’s elimination of the duplicate payment for spinal surgical implants was estimated to save approximately $20,000 per procedure. WCIRB Medical Data Call (MDC) data shows an approximate $10,000, or 17%, reduction in the average cost of these procedures in 2013 when compared to pre-SB 863 levels. However, WCIRB MDC data also shows an estimated 10% decrease in the utilization of these services for the same period. As a result, the estimated 25% decrease in total paid amounts for these surgeries is generally consistent with the WCIRB’s prospective estimates.
  1. SB 863’s reduction in maximum ambulatory surgical center facility fees was estimated to reduce those costs by 25%, which is consistent with the reductions observed based on WCIRB MDC data estimates comparing post-January 1, 2013 reimbursements to pre-SB 863 levels.
  1. The frequency of independent medical review (IMR) requests through the third quarter of 2014, even after eliminating duplicate and ineligible requests, is far above the levels initially projected.
  1. Medical-legal costs, utilization review costs, litigation costs, and average unallocated and allocated loss adjustment expense costs continue to increase through 2013, suggesting any reductions to frictional costs from IMR or other SB 863 provisions are not materializing.
  1. Temporary disability (TD) duration was projected to decrease by 5% as a result of SB 863 provisions related to IMR and medical provider networks (MPNs). CWCI information on average TD duration for accident year 2013 shows an increase of approximately 4% at 12 months and average TD duration for accident year 2012 also shows an increase. However, inasmuch as the issuance of IMR decisions has experienced significant delays during the initial transition period due to a far greater than anticipated volume of requests, the extent to which IMR may ultimately impact TD duration remains uncertain.
  1. Although it is still too early to assess the impact of IMR on medical treatment levels, average medical paid per indemnity claim shows a modest decrease in 2013.
  1. Preliminary estimates of medical provider network usage through 2014 show that network utilization in 2013 and 2014 is continuing to increase modestly and the impact of network utilization on cost levels is generally consistent with that for prior years.
  1. The changes to convert the physician fee schedule to a Resource-Based Relative Value Scale (RBRVS) basis were estimated to increase physician costs by 2.4% for services provided in 2014. Conversely, preliminary estimates of medical payments through the first six months of 2014 suggest a modest decrease in physician payments per claim.
  1. Relatively few independent bill review (IBR) requests have been filed when compared to IMR filings, with early information suggesting that the majority of decisions favor the provider and result in additional payments.

The WCIRB will conduct a live WCIRB Research Forum webinar on November 19, 2014 at 10:00AM PT to discuss this report and answer questions. The presenters of the webinar include Dave Bellusci, Chief Actuary, Gregory Johnson, Ph.D., Director of Medical Analytics and Tony Milano, VP and Actuary.

Registration for the webinar is required and space is limited to 100 attendees. For those unable to attend the live webinar, a recording will be posted in the Research and Analysis section of the WCIRB website following the event.

Webinar Registration

Date:  November 19, 2014
Time:  10:00 AM PT
Register:   https://www1.gotomeeting.com/register/111343496.

Related Information

SB 863 Cost Monitoring Report - 2014 Retrospective Evaluation

Other WCIRB Research Related to SB 863

November 14, 2014