Even after significant reforms negotiated by employers and labor, California remains a high-cost, high-frequency state, especially for “frictional costs.”
Employers are still burdened with an astronomical rate of permanent disability claims that clog the system with high costs, late claim reporting, slow resolution, and high rates of litigation.
Fraud persists and is highly organized among sophisticated networks that exploit injured workers and increase costs on employers.
CONTINUED CHALLENGES
- Overhead Expense: California remains the fourth most expensive state for insurance coverage. Despite modest reductions, California’s “benefit delivery expense” is 48 cents for every one dollar of benefit. That remains roughly double the national average for state workers’ comp systems. Medicare, by comparison, has a benefit delivery expense of just 2 cents per dollar. Group health insurance has a delivery benefit expense of 18 cents per dollar.
- High Rate of Claims: Claim frequency still 3rd highest in U.S. and not declining by as much as other states. CA (639) has more than 2X national rate (256) of PD claims per 100,000 employees; Los Angeles has 3X the national rate. A growing proportion of indemnity claims are for Cumulative Trauma, which have increased from 9% to 16% of indemnity claims. These claims are filed late (often post-term), have high involvement of attorneys and are typically denied upon initial application. The vast majority are filed in Los Angeles and San Diego.
- Late Reporting and Slow Resolution: California has the slowest-reporting, longest-lasting, and slowest-developing claims in the nation, largely due to California’s high rate of permanent disability and cumulative trauma claims, as well as California’s high rate of litigation and other “friction”
- 21% of claims unreported @ 12 months, compared to 10% average in comparator states
- 53% of a claim’s ultimate medical costs are still unpaid @ 3 years, compared to 28% national median; more than a quarter of medical costs are paid after year 8
- 12% of claims remain open after 5 years, compared to 5% national median
- Major Fraud: Despite legislative reforms to crack down on fraudulent providers, fraud schemes totaling hundreds of millions of dollars (each) continue to be perpetrated on the system.
- System Abuses: IMR is abused by physicians and attorneys, who indiscriminately file IMR requests.
- A small number of physicians drive much of the IMR activity, with the top 1% of requesting physicians (106 doctors) accounting for 41.2% of all disputed service requests; the top 10 individual physicians alone account for 9.9% of the disputed requests.
- There were 163,899 IMR requests in 2019, meaning just 10 doctors filed more than 16,000 requests for IMR.
- 95% of IMRs come from attorneys, not injured workers. Some law firms send 90% of all UR denials to IMR.
