Senate Bill 863 Signed Into Law
Governor Jerry Brown of California signed into law on September 19, 2012 what was known as Senate Bill 863. The new law, which goes into effect on January 1, 2013, makes major changes in the largest (and many people would argue the most complex) state workers’ compensation system. Unfortunately, instead of simplifying the workers’ compensation law, it appears the changes in the law will make the California system even more complex.
Insurers Not Sure Will Realize Cost Savings
Governor Brown, who actively promoted the new law, claims the changes in the workers’ compensation system will reduce cost to employers by $1 billion dollars in the first year. However, insurers overall are not so sure, with many of them considering the changes in the workers’ compensation law to be neutral in cost at best, and foresee higher claims cost if the theoretical savings forecasted by the authors of the law do not come about.
Changes and New Regulations
The new law is over 100 pages long and approximately 60,000 words. There are approximately 50 statutory changes that go into effect on January 1, 2013. Some of the areas of workers’ compensation that will be impacted with changes or new regulations/ requirements include:
- Payment of permanent disability awards
- Independent review process for medical treatment
- Creation of an independent review process for medical billing disputes
- Fees for current and future lien filings
- Vouchers
- Fee schedules for home health care, language interpretation and other workers’ compensation related services
- Psychological/sleep/sexual claims
- Self insurance
- Carve outs
30% Increase in Permanent Disability Benefits
The reason many insurers do not foresee a cost benefit to the new law is due to the change in the payment of permanent disability benefits. The new law will increase permanent disability benefits by 30%. That is a given. The estimated cost savings to be derived from the other changes are supposed to offset the increased level of permanent disability benefits plus save California employers an additional billion dollars per year. The issue for insurers is the increase in permanent disability benefits is a definite cost increase while the cost savings from the other changes in the law are speculative at best.
The reason the cost savings are considered speculative is the new law leaves to the California Department of Industrial Relations (DIR) to draw up regulations on how to implement the new law. As there is only 3 months before the law is scheduled to go into effect, the DIR which is required to get public in-put, will be pressed to establish all the necessary regulations in a timely manner. There are insurers who are concerned that the new regulations from the DIR will not be employer friendly, and will not contain the proper level of balances and controls.
Short Time Before Law Goes Into Effect, Educate Yourself
The short time frame before the new law goes into effect also creates a substantial problem for employers, defense attorneys, medical providers, and claims adjusters in learning the new workers’ compensation requirements. The law is complex and it will require a significant amount of retraining and/or rethinking by the people who on a daily basis have to deal with the workers’ compensation system.
If you are a California employer, we recommend you quickly take the necessary steps to educate yourself on the changes coming in California workers’ compensation.
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.
Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.
WORKERS COMP MANAGEMENT MANUAL: www.WCManual.com
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
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