Changes in workers' compensation legislation
By the Risk Advisory Practice
Effective January, the 2017 California Department of Insurance and State Compensation Insurance Fund (CDI & SCIF) and the State of California Department of Industrial Relations (CIR) released a reminder clarifying the reporting rules regarding Labor Code 5401 (definition for "first aid") and Labor Code Section 6409(a), which requires a physician who treats an injured employee to file a "Doctor's First Report of Injury" (DFR - Form 5021) with the claims administrator for every work illness or injury, even for first aid cases where there is no lost time from work. The claims administrator or self-insured employer must then forward these DFRs to the Department of Industrial Relations, Division of Labor Statistics and Research.
Under-reporting first aid claims has been a long standing issue for the state of California rating bureau. The reason for the issuance of this reminder centers on the belief that some employers and providers are circumventing the correct process with the intent of avoiding a negative impact on the employer's overall experience modification rating and in some cases delaying treatment and avoiding proper payment of workers’ compensation claims. These practices could be determined to be criminal violations directly related to premium fraud and the fraudulent denial of workers' compensation benefits to injured workers.
Historically, some medical providers and employers have created a process whereby the medical providers only prepare the DFR for the employers and allow the employers to decide whether or not a claim should be filed with the insurer or third-party administrator. As a result, one California District Attorney's office in Monterey County sees "patterns with fraud with first aid cases."
The California labor code, section 5401(a) properly defines first aid as “any one-time treatment, and any follow-up visit for the purpose of the observation of minor scratches, cuts, burns, splinters or other minor industrial injury, which do not ordinarily require medical care. This one time treatment, and follow-up visit for the purpose of observation, considered first aid even though provided by a physician or registered professional personnel.” In the case of a properly defined first aid claim by a medical professional an "exception" exists regarding the employers' requirement to file an "Employers' Report" (form 5020) or provide the "Employee Claim Form" (DWC-1). However, the costs of all claims, even if paid by the employer, need to be reported and used in the experience rating.
Potential employer impact
The potential financial impact to employers includes an increase in administrative costs for self-insured employers as additional incidents and medical-only claims are reported. Additionally, there are financial implications in regard to the experience modification for those employers who are subject to the experience modification calculation.
Effective January 1, 2017, the Workers’ Compensation Insurance Ratings Bureau adopted a new formula for calculating experience modifications that is directly related to an employer’s frequency. First aid claims have been a long standing concern for correctly calculating experience modification ratings. It creates “fairness” issues between employers who “play by the rules” and report all of their claims and suffer an increase in their experience modification rating and those employers who don’t “play by the rules” and who aren’t reporting all of their claims and so do not get penalized. These concerns are legitimate.
It is clear that the potential increase in experience modification rating creates a greater incentive to not report claims. That issue has been recognized and there is current and ongoing research into potentially not including first aid claims of $250 or less in the reporting requirement. However, the earliest that solution could be in place is June 2019.
What actions can employers take?
The California legislation is encouraging employers to focus on an accurate representation of their frequency through proper reporting. This provides for a proper analysis of losses and the development of strong safety measures that should potentially prevent employee injuries from occurring.
Considerations for employers
- Be proactive. Locate medical providers who understand workers' compensation procedures and create a strong alliance with the insurance carrier and claims administrator to ensure proper reporting according to regulation.
- Arrange for medical providers to copy you on the DFR at the same time they report it to the insurance carrier/claims administrator so you can make certain that the incident is classified correctly.
- Ensure the insurance carrier/claims administrator knows how you would like your DFR's handled. Each carrier has a different process and procedure — establish yours.
- Effectively communicate with employees about your reporting process for all injury claims regardless of severity. Stress the importance of timely and detailed reporting.
Sources: WCIRB: 2017 Quick Reference guide WCIRB Committee Meeting Minutes for October 7, 2014 – Item CR14-10-02 – Reporting of Small Medical Only Claims.
California bill brings new UR protocols and suspends providers liens
Senate Bill 1160 and utilization review
Utilization review (UR) is a process used to determine the approval of requested medical treatment by reviewing medical necessity and appropriateness.
Senate Bill (SB) 1160 reduces UR requirements for compensable work injuries allowing a bypass of the UR process. Effective January 1, 2018, all medical treatment by a physician of the employer’s choice or within the employer’s medical provider network or health care organization will be automatically approved for the first 30 days of a claim. This applies to all injuries on or after January 1, 2018 and surgery and hospital care is subject to retrospective review. Also, the physicians will still be required to submit a request and supporting documentation for their treatment request.
Senate Bill 1160 and suspended liens
Assembly Bill 1244 resulted in the Division of Workers’ Compensation suspending some medical providers from participating in workers’ compensation effective January 1, 2017. In conjunction with this, Senate Bill 1160 suspends payment of medical liens through the criminal proceedings for providers who are indicted or have criminal charges pending. There are currently 75 providers, whose liens are allowed to be suspended pending the outcome of their criminal proceedings. These account for more than 200,000 liens valued at over $1 billion. SB 1160 also requires all lien claimants to support the legitimacy of their claim by submitting their lien request on the new form and submitting an original bill with their lien filing.
Considerations for employers
- Work with your broker and carrier to identify if your claims have liens with suspended providers; develop or understand the claims administrator’s plan and process to estop lien payments to these providers.
- Work with your broker and carrier to see how fraudulent liens affect your experience modification.
- Review physician relationships by looking at medical practices and protocols of physicians in your medical provider network or health care organization network.
The tug of war involving medical marijuana
Medical marijuana is a complex issue — putting employers between “a rock” (the federal law) and “a hard place” (state law).
Federal law, the Drug Free Workplace Act, (DFWA) still prohibits the use of drugs for federal grantees or employers and safety sensitive positions. This puts federal law in conflict with state laws. However, federal law has not been enforced in states that have legalized it. If employers are covered under the Drug Free Workplace Act, then they should continue to comply with the federal regulations or speak with legal counsel to determine the potential risks of noncompliance.
For non-DFWA employers, within states that have legalized it, there is a risk-based choice — simply choose to comply with the federal standards or have loosened standards that essentially look the other way in regard to drug use. However, federal and state laws still do not allow employees to be impaired while at work or use drugs at work. This allows employers to continue with their state’s allowed drug testing programs. Employers should check with legal counsel to determine if their drug testing programs are following all specific laws.
For safety sensitive positions, such as bus drivers, pilots, aircraft maintenance, etc., federal law still requires a drug free workplace — regardless of individual state laws.
Any drug testing program would also still need to comply with federal ADA and applicable state disability laws.
The Occupational Safety and Health Administration (OSHA) recently passed a new recordkeeping rule that requires employers to post workplace OSHA logs online every year. A part of this new standard has protections against discrimination against employees who report injuries on the job. OSHA has published statements indicating that across the board post-accident drug testing is not allowed. This doesn’t mean that all postaccident drug testing is not allowed, only that there cannot be drug testing for every injury without regard for relevancy to accident causation. For example, you cannot drug test an employee because they reported carpel tunnel syndrome. Since drug use would have nothing to do with a repetitive motion injury, there is no reason to drug test the employee. However, if you had a crane operator who made a mistake and caused an injury, drug testing would be permitted. OSHA goes on to say, however, that drug testing should be applied properly in this second type of scenario. For example, in the case of the crane, who would you drug test: The employee on the ground that was injured as a result of the operator’s mistake, or the operator who made the mistake? OSHA would say most likely you could test both of them without issue. OSHA’s goal here is for there not to be any repercussions to employees who have an injury sustained at work. OSHA also states in their interpretations that drug testing for marijuana is not allowed due to the limitations of the drug tests to show impairment at the time of the incident. Alcohol testing is able to estimate impairment by time, but currently there is no adequate testing method for marijuana to show impairment at a particular moment and any information gained would not help in determining root cause of an accident.
The bottom line is that these new regulations should not change employers programs too much. We highly recommend employers who are working on these programs to speak with legal counsel to ensure they have compliant programs.
Aftermath of Florida Supreme Court rulings
There has been much discussion regarding the implications from the April 2016 Castellanos ruling, in which the Supreme Court found the attorney fee schedule for workers' compensation unconstitutional, thus allowing attorney fees based on hourly rates. Two months later, in June 2016, the Westphal case increased temporary total disability limits from 104 weeks to five years.
It was forecasted that these Supreme Court rulings would result in: premium and rate increases, an increase in petition filings, higher claim values, and increased medical activity as injured employees approach 104 weeks of disability. As a result of the ruling, a 14.5% increase in the workers' compensation rate has gone into effect.
Considerations for employers
- Make certain your claims administrator responds to written petitions or request for benefits within 30 days of receipt.
- Partner with your broker and claims administrator to develop or strengthen on your return-to-work program.
- Thoroughly complete all claim investigations and carefully document all claim denials.
New TN Bureau of Workers’ Compensation case manager license requirements
On August 29, 2016, the new rule regarding license requirements for Tennessee Workers’ Compensation case managers became effective. All new educational units and fees apply for case managers as of January 1, 2017. This means all telephonic and field case managers must obtain certification within two years or by January 1, 2019. Anyone who provides case management services or case manager assistance must obtain specific credentials within two years to continue to provide case management services.
Requirements are in place and a nurse case manager must be assigned to any claim in which an employee has been hospitalized, where medical costs exceed $10,000, or results in eight full weeks of time missed from work (40-hour week).
Additional changes were also made to the case manager thresholds on all catastrophic injuries requiring a face-to-face meeting within 14 calendar days after a case assignment. Specific reporting requirements were put in place for reporting all face-to-face meetings to the medical director of the Tennessee Bureau of Workers’ Compensation within 30 days of the meeting.
Legislative watch — Is “opt out” completely out?
Employers have been looking for alternatives to the traditional insurance market to meet their workers’ compensation exposure obligation — or “opt out.” The states of Texas and Oklahoma had afforded employer’s such an option. However, in September 2016, the Oklahoma Supreme Court upheld the lower court’s February 2016 ruling that its two-year standing “opt out” workers’ compensation program available to employers was unconstitutional.
The states of South Carolina and Tennessee had pending legislation that was introduced in 2015, but did not move forward with their respective opt-out legislation in early 2016.
After the Oklahoma Supreme Court ruling and the stalled legislation in Tennessee and South Carolina, Texas was left as the only state that allowed employers to opt out of or "non-subscribe" to workers' compensation plans.
The Tennessee “opt out” bill, which was the Employee Injury Benefit Alternative, was taken “off notice” in February 2016, but not formally withdrawn, and it’s expected to resurface this year. In addition, Florida and Arkansas recently introduced “opt out” bills similar to the Texas “nonsubscribe” program. This bill allows employers the option of not providing workers’ compensation benefit coverage in exchange for the employee’s right to file a tort claim if injured on the job.
The "opt-out" alternative will continue to garner attention around the country as legislators and employers grapple with providing appropriate financial and medical benefits to injured workers.