California Workers Compensation and Employment News.

Transcription

1 Arthur J. Gallagher Risk Management Services Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. License No California Workers Compensation CURRENT CASES AND TRENDS AFFECTING CALIFORNIA EMPLOYERS In this issue Obesity Weighs Heavy on Workers Compensation...1 Taking the Long View in WC Settlements...2 Valdez Finally Gets a Hearing What will the California Supreme Court Decide?...4 SB 863 and the Independent Medical Review (IMR)...4 Your WC and Employment Toolbox...5 Please Note: The information in this document is informational and is not intended to be, nor should it be considered, a substitute for legal or professional advice rendered by a competent attorney with experience in the area of inquiry or other professional. If you have any questions about the application of issues raised in this document to your particular situation, please seek the advice of a competent attorney with experience in the area of inquiry or other professional. California Workers Compensation and Employment News, published by Arthur J. Gallagher Risk Management Services, Glendale, California, highlights claim advocacy news and practices as well as current cases and trends affecting California employers. The information contained in this newsletter was obtained from sources that to the best of the writers knowledge are authentic and reliable. Editor: John M. Berger, Area Vice President Arthur J. Gallagher Risk Management Services Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. License No N. Brand Blvd., Suite 600 Glendale, CA john_berger@ajg.com Obesity Weighs Heavy on Workers Compensation Recently, the American Medical Association (AMA) classified obesity as a disease instead of a condition. What is the impact on workers compensation and other related acts? Obesity is defined as a body mass index (BMI) over 30. Overweight is BMI from and morbid obesity is BMI over 40. BMI is calculated using height and weight. A BMI calculator is available at the National Heart, Lung and Blood Institute website ( A downloadable calculator for the iphone is available at the same website. The Centers for Disease Control and Prevention (CDC) has reported that more than one third of adults in the United States (78 million) and 17% of children (12 million) are classified as obese. A significant issue for workers compensation is finding obesity as a compensable consequence of the injury rather than a co-morbidity an unrelated condition that arises independently of the work-related injury. The classification of obesity as a disease may make it more likely that it will be viewed as a compensable consequence based on current studies. For example, the California Workers Compensation Institute (CWCI) recently analyzed 1.2 million claims from 2005 to The study included open and closed claims, claims of national and regional insurers and self-insured, with a sampling of worker and claim characteristics that mirror the overall population of California. The study found: Claims with obesity co-morbidity were three times more likely to be indemnity claims than those without obesity; Claims with obesity co-morbidity received 4.5 times the rate of permanent disability than those without obesity; Attorney involvement was 68.4% for claims with obesity co-morbidity vs. 15.4% without obesity; Opioids were prescribed in 69% of claims with obesity co-morbidity vs. 18.5% without obesity; and Medical back problems without spinal cord involvement were 24% for claims with obesity co-morbidity vs. 14.1% without obesity THIRD QUARTER

2 What areas other than workers compensation may be affected? While the AMA s classification has no force of law, it may pave the way for obesity to be recognized as a disability under the 2008 amendments to the Americans with Disability Act (ADA). If that were to happen, an employee classified as obese might be entitled to nondiscriminatory (disability) protections and reasonable accommodation under the ADA or any similar state or local law. Additionally, an employee might qualify for leave for obesity treatment under the Family and Medical Leave Act (FMLA) or California Family Rights Act (CFRA). The AMA s classification may have a positive impact by encouraging treatment for a condition that is a recognizable and significant health concern. It may persuade medical professionals who were previously reluctant, due to the possibility of offending their patient or the inability to obtain reimbursement, to openly discuss obesity and recommend options for treatment. And, it may also provide an incentive for the government and private sector to develop new treatments. What are some possible responses? Now may be a good time to require the primary treating physician to take height and weight measurements at the start of the claim to prevent obesity from becoming a compensable consequence like sexual dysfunction, sleep deprivation and psych were claimed to be before SB 863 when obesity is already present. When there is evidence that the injured worker was obese before the injury, it might be possible to subrogate against the worker s group health payer. Finally, if obesity is a likely issue, the claims adjuster should address it up front and take positive steps so that it is less likely to become a significant cost driver. Employers may also take other preventive measures: Provide a wellness program as part of the employee benefit package; Offer health insurance premium discounts for employees who participate in a wellness program; Conduct in-house health fairs and weight-loss seminars; Give discounts for nearby gyms or health clubs based on attendance; Stock vending machines with healthy snacks; and Make a healthy menu available at in-house cafeterias. Taking the Long View in WC Settlements A settlement is a resolution of a dispute between parties. In the workers compensation arena, the parties generally resolve their issues through one of two methods: Stipulations with Request for Award or a Compromise and Release Agreement. This article focuses on the Compromise and Release Agreement (C&R) which is a lump sum settlement that resolves permanent disability, temporary disability, and compensates the worker for other benefits (e.g., future medical care, a supplemental job displacement benefit, and the right to reopen the claim for new and further disability). There are many times when the early resolution of a claim via a compromise and release can be a positive result for both the employer and worker. For both parties, early resolution avoids the crowd of litigated cases at the Workers Compensation Appeals Board (WCAB) resulting in a fast and efficient resolution of the case. Early resolution also reduces the risk of an adverse ruling for either party by an agreement that takes into consideration the interests of both parties. For the employer, early resolution may reduce the overall loss development of the claim, terminate or reduce the letter of credit for the policy year that contains the claim, permit the employer to adjust its workforce, and lower its experience modification factor. For the worker, early resolution means receipt of a single lump sum amount for all benefits via the THIRD QUARTER I 2

3 compromise and release. It may also provide an opportunity for the worker to make a job or career change by providing a sense of closure. A 2012 study Return to Work After a Lump-Sum Settlement found on average more workers returned to work than left their jobs after a lump sum settlement. What types of cases are candidates for a lump sum settlement? The best candidates are the ones where: The claim is denied and the worker is no longer employed by the employer; The worker has been found to be at maximum medical improvement (MMI) by the treating doctor, agreed medical evaluator or panel qualified medical evaluator (AME/PQME), the worker cannot return to modified or alternative work, and the ADA interactive process has been completed; The worker has been found to be at MMI by the treating doctor, AME or PQME and the worker wants to voluntarily resign or retire; or The worker claims a specific injury and becomes MMI with minimum permanent disability and little or no future medical care and the injured worker is unlikely to repeat the same injury or have an aggravation of the same injury. How are settlements valued? The two biggest components are permanent disability and future medical care. For accepted injuries, permanent disability is generally determined by an AME or a PQME. For denied injuries, the claims adjuster and/ or defense attorney may estimate permanent disability based on their experience and expertise moderated by the likelihood of the injury becoming compensable in the future. For accepted injuries, the value of future medical care is generally based on the recommendations of the AME/PQME. The value may be moderated by calculation of present value and rated age (see rated age in the article Structured Settlement and Rated Age below). Future medical care may also be affected by the need for a medical set-aside (MSA) in cases where the injured worker is or will become a Medicare recipient. A Supplemental Job Displacement Benefit (voucher) may also be considered in the valuation. For dates of injury on or after January 1, 2004 and before January 1, 2013, the amount of the voucher ranged from $4,000 to $10,000 depending on the level of disability. For injuries on or after January 1, 2013, the amount of the voucher may be up to $6,000. Labor Code section (g) specifically prohibits settlement or commutation of the voucher for dates of injury on or after January 1, There is no similar prohibition for dates of injury before January 1, There are also a number of intangibles that may be considered including: the cost of continuing temporary disability, the possibility of increased permanent disability, the potential for an amended application to add body parts to the claim, continuing treatment cost and expenses, the need for additional or updated medical-legal reports, and continuing legal costs. Financially, a closed file may have a positive impact on the employer s loss development, California experience modification, its ability to adjust its workforce, and the reduction or elimination of an outstanding letter of credit (in a loss sensitive program). Other settlement considerations are: Is a medical set-aside (MSA) needed? Will a structured settlement improve the chance of settlement? Are there other factors outside of workers compensation that need to be addressed (e.g., impending employment litigation) before or concurrent with the workers compensation claim? When is the best time to settle? Beginning with the initial report of the claims adjuster or the opening report of the defense attorney, the case should be reasonably valued for settlement. Case valuation should be continuously updated using a cost/benefit analysis while considering the evolving plan of action as it moves through the discovery phase (medicals, subpoenaed records, witness statements, depositions, and investigation). If the case is not a candidate for trial, every legal event should be calculated to move the case to closure and an opportunity for settlement. If THIRD QUARTER I 3

4 the applicant attorney will not respond to phone calls or letters, the defense attorney should request a status conference at the WCAB to facilitate settlement. This is a team effort including the claims adjuster, employer, defense attorney, broker, consultants and experts. All of the parties need to be on the same page with regard to the valuation of the case and plan of action. If they are, an early resolution and closed claim may be just around the corner. Valdez Finally Gets a Hearing What will the California Supreme Court Decide? The California Supreme Court will hear oral argument in the case of Valdez v. WCAB on Wednesday, September 4, Last year, the Second District Court of Appeal issued its decision that reversed and remanded an en banc Workers Compensation Appeals Board (WCAB) decision that held that medical reports obtained from physicians treating outside a validly established and properly noticed medical provider network (MPN) are inadmissible. The Court of Appeal did not address whether defendants are obligated to pay for non-mpn reports an issue that was found in the defense s favor in the Board decision. In the trial court decision, the workers compensation judge (WCJ) deferred the issue of the validity of the employer s MPN, and awarded temporary disability to the applicant based upon the reporting of her unauthorized non-mpn treating physician. The Appeals Board reversed the WCJ s decision, noting that the applicant had initially treated within the MPN but suddenly decided to designate a non-mpn doctor at the advice of her attorney. The Board concluded that where unauthorized treatment is obtained outside a validly established and properly noticed MPN, reports from non-mpn doctors are inadmissible and defendants are not liable for the cost of non-mpn reports. Dissenting opinions were issued by Commissioners Brass and Caplane. You can read the previous article on Valdez in the California Workers Compensation and Employment News (2013 First Quarter). SB 863 and the Independent Medical Review (IMR) Just as the name implies, the IMR is an independent medical review. It was established by SB 863 to resolve medical treatment disputes in a manner that is efficient, cost-effective, and follows the standards of evidence-based medicine. The IMR applies to all injuries on or after January 1, 2013 and all dates of injury if the utilization review (UR) decision was communicated to the requesting physician on or after July 1, UR was established to review medical treatment requests by doctors when there was an issue regarding the reasonableness and necessity of the treatment being requested. Unfortunately, the process quickly became costly, inefficient and time-consuming as UR decisions were pushed through the medical-legal process or became subject to litigation at the WCAB. The IMR will become the sole arbiter of UR decisions and generally its decision will be final. The process will begin when UR issues a decision to modify, delay or deny a request for treatment. After the decision has been issued, the injured worker can appeal the decision by submitting a completed IMR application form (DWC IMR-1) and asking the IMR to review the UR decision. The cost of the IMR is paid by employers who are required by law to provide all reasonable medical treatment. According to Labor Code section 4610(g)(7), an employer is not required to submit treatment requests for denied injuries or disputed body parts or conditions. Currently, the IMR is being handled by Maximus Federal Services Inc., an outside vendor. Maximus has prior IMR experience as the vendor for the California Department of Managed Health Care and other government entities across the nation. The Department of Workers Compensation is collecting decisions by the IMR to help understand what types of decisions by UR are more likely to be approved or denied. The decisions are available online at the DWC website ( Decisions.htm). The California Applicants Attorneys Association has released its review of the IMR process in a podcast that can be accessed from their website ( The podcast is a condensed version of their convention presentation last June in Las Vegas. It s worth a look to view the IMR from another perspective THIRD QUARTER I 4

5 Do you have ideas for future newsletters? We want to hear from you about what you want to read! The reader who submits the winning topic for an article to appear in the next newsletter will receive a $10 Starbucks gift card. Now, a word from the author: The winner will be chosen from all entries received prior to publication of the next newsletter. There can be only one winner. Chances of winning depend upon number of entries and the topics chosen by the editors. Submit suggested topic via to: john_berger@ajg.com. Winner will be notified. Your WC and Employment Toolbox WORKERS COMPENSATION APPS Carriers, third-party administrators and medical providers are swiftly moving to provide Apps to monitor claims, search for providers on medical provider networks and store and send high-quality documents. In one scenario, an employee has a work-related injury. The carrier contacts the worker acknowledging the injury and providing links for resources and services to speed up the claim process. Later, the injured worker can signup for direct deposit, communication links to the adjuster (with language translation), and the capability to send and receive pictures and documents. Such a scenario is not far off in the future. Coventry just unveiled its Mobile Provider App which helps injured workers locate network providers and pharmacists with directions to their locations. Turboscan uses a Smartphone s built-in camera to work as a high-quality document scanner to quickly snap, store and send documents. Currently available for ios only, it should be available soon for Android. STRUCTURED SETTLEMENT AND RATED AGE The life expectancy of an injured worker (IW) is an important cost factor in a structured settlement which provides periodic payments (annuity) for the IW s life expectancy. For example, a thirty year old IW may be given the rated age or impaired risk rating of 50. That means that the underwriter for the life insurance company providing the annuity believes the injured worker has the life expectancy of a normal, healthy 50 year old based on his sex, age, and nature and extent of injury. The annuity is based on the more advanced age and the life insurance company can offer a higher lifetime annuity because of it. The life insurance company absorbs the risk that the IW may live longer than expected. The IW benefits from a guaranteed lifetime income. And, the employer gets a favorable cost in providing the guarantee Arthur J. Gallagher & Co. All rights reserved. Q\2013\BSD\Niches\Claim Advocacy\Newsletters\CA_Employment News_Q3.indd THIRD QUARTER I 5