Workers Compensation Reform Update

Transcription

1 Office of the Chief Operating Officer Risk Management and Insurance Services Workers Compensation Reform Update Presentation to the Los Angeles Unified School District Committee of the Whole January 29,

2 Overview Challenges/Responses Workers Compensation costs continue to increase LAUSD s WC reform began in 2003 to reduce costs Additional resources have been devoted to the program Staff changes Improvements and achievements Challenges ahead 2

3 Outline Workers Compensation in General Workers Compensation Program Background Fraud Goals Current Initiatives Legislation Program Objectives 3

4 WORKERS COMPENSATION IN GENERAL 4

5 History of Workers Compensation Work related injuries increased during the Industrial Revolution Employee s s only recourse was a lawsuit against the employer California s s WC system was established in 1913 No fault system Employees benefit from prompt, equitable, guaranteed benefits Employees generally may not file suit against employer 5

6 Workers Compensation Statutes Labor Code California Code of Regulations Education Code Government Code 6

7 Benefits Provided Under Workers Compensation in California Medical Indemnity Allocated Loss Expenses 7

8 WC Cost Overall Components Administrative Fees and Charges District staff Claims Administration Actuarial Studies Supplies & Overhead Direct Program Costs Medical Expense Benefits (payments to doctors, hospitals, and other providers) Indemnity (temporary disability and permanent disability payments) Allocated Loss Expenses (legal fees, investigative charges, court costs, etc. ) Indirect Costs Substitutes Morale Productivity Student Achievement Reserves 8

9 Is California Different From Other States? Costs are highest in California Major reasons: - High use of specific kinds of medical services (chiropractic care, etc.) - Medical visits per claim are 70% greater than other states - Litigation rate Benefits for injured employees are among the lowest Source: CHSWC Annual Report 9

10 Median Number of Visits per Workers Compensation Claim by Provider Type* *( Claims with greater than seven days lost time) California 12-State Median Difference Physician % Chiropractor % Physical/ Occupational Therapist % Source: CHSWC Annual Report 10

11 California WC System Performance Costs-Medical Benefits Paid Medical Benefits ($000) Change Physicians $2,571,474 $2,941, % Capitated Medical $ 7,561 $ 8, % Hospital $1,185,651 $1,610, % Pharmacy $ 305,177 $ 423, % Payments Made Directly to Patient $ 330,136 $ 340, % Medical-Legal Evaluation $ 134,030 $ 127, % Medical Cost Containment Programs* $0 $ 407,872 N/A TOTAL $4,534,030 $5,860, % *Figures for medical cost-containment containment programs are based on a sample of insurers who reported medical cost-containment containment expenses to WCIRB. Not available for Source: CHSWC Annual Report 11 %

12 California WC System Performance Costs of Indemnity Benefits Paid % Indemnity Benefit Change (Thousands) Temporary Disability $2,027,178 $2,482, % Permanent Total Disability $ 86,456 $ 86, % Permanent Partial Disability $2,177,340 $2,328, % Death $ 65,980 $ 66, % Funeral Expenses $ 2,308 $ 2, % Life Pensions $ 39,462 $ 46, % Vocational Rehabilitation $ 663,212 $ 706, % TOTAL $5,061,935 $5,719, % Source: CHSWC Annual Report 12

13 California WC Costs Percent Growth By Year 600.0% 500.0% 400.0% 300.0% 200.0% 100.0% 0.0% % Medical Paid 1.7% 6.6% 19.3% 34.8% 56.9% 70.2% 106.1% Indemnity Paid -3.2% -1.8% 4.3% 10.4% 25.2% 27.3% 43.9% Expenses 2.6% 7.9% 21.8% 33.6% 38.0% 46.3% 97.8% Change in Total Reserves 81.7% 120.6% 150.0% 225.4% 277.8% 401.6% 550.0% Total 18.9% 32.0% 51.3% 81.1% 109.3% 145.9% 220.2% Source: CHSWC Annual Report Medical Paid Indemnity Paid Expenses Change in Total Reserves Total 13

14 BACKGROUND LAUSD WORKERS COMPENSATION PROGRAM 14

15 History of Risk Management and WC at LAUSD No stand-alone alone risk management department 2 individuals were handling workers compensation (7000 claims per year) Actuarial studies conducted only once every 3 years Same Workers Compensation third party administrator for past 10 years High claims and litigation rates Lack of coordination with other key departments 15

16 PricewaterhouseCoopers Report Recommendations Team with an excellent Third Party Administrator (TPA) Improve quality of data and frequency of reports Improve communication with employees Establish comprehensive Stay at Work/ Return to Work Program Partner with Unions Partner with Office of Environmental Health and Safety Increase Internal Staffing Status Completed 8/1/03 Completed 12/15/03 Ongoing Effective 2/1/04 Ongoing Ongoing Projected completion 2/28/04 16

17 New Third Party Administrator/ Management Reports Sedgwick Claims Management Services (SCMS) Effective 8/1/2003 Customer Service Model Information Management Systems- Benchmarking Capabilities 17

18 LAUSD CURRENT WC PROGRAM 18

19 Overview Of WC At LAUSD Program has been self-insured since 1976 Approximately 7000 claims are filed each year 2003/04 claims are expected to cost $176 million Estimated outstanding liabilities will be at least $566 million on June 30, 2004 Over 200,000 lost work days annually 81% of claims occur at school sites 19

20 Overview of LAUSD WC Reforms Labor/Management Partnership Accident Prevention/Workplace Safety Claims Management/Administration Communication/Training TPA Management Litigation Fraud and Abuse Prevention Stay at Work/Temporary Transitional Assignments Legislative Solutions 20

21 $120,000, $100,000, LAUSD WC Costs Amount paid per calendar year $80,000, $60,000, $40,000, $20,000, $0.00 year 2000 year 2001 year 2002 year 2003 Source: Risk Managem ent Board Reports, January 2000-Decem ber 2003 Indemnity Medical Allocated total 21

22 Total Claims By Fiscal Year Including Incidents Medical Only Count YTD Incident Only Indemnity Fiscal Year Source: Sedgwick CMS 22

23 Los Angeles Unified School District Open By Fiscal Year in Which Claim was Filed FY FY 2003 FY 2002 FY 2001 FY LAUSD total open claims all years = 8,572 Prior to FY Source: SCMS 23

24 2003 Paid Amount By Date of Occurrence $22,614,903 $10,096,333 $49,718,088 CY < 2001 CY 2001 CY 2002 CY 2003 $17,722,146 Source: SCMS 24

25 Workers Compensation Claim and Staffing Comparison Organization Number of Individuals Covered Number of FTE Employees in WC Department Number of Claims for LAUSD 127, ,258 County of Los Angeles 97, ,170 City of Los Angeles 43, * 9,100 San Diego USD 18, ,200 *Sworn employee cases are handled by a TPA, and civilian employee cases are handled by in-house WC Dept. Source: Telephone Interviews 25

26 Number of Claims Comparison Certificated v Classified Employees Total Number of Claims Filed 8,000 6,000 4,000 2, ,275 4,331 4,345 2,701 2,719 2,673 FY FY FY Certificated Classified Source: OEHS 26

27 Claims Rate Comparison Certificated v Classified Employees Claims Rate FY FY FY Certificated Classified Source: OEHS 27

28 Locations with Highest Claims Rates FY FY FY TRUCK OPERATIONS SCHOOL POLICE AUTOMOTIVE MAINTENANCE SPECIAL EDUCATION CTRS MAINTENANCE & OPERATIONS EARLY EDUCATION CTRS TRANSPORTATION SCHOOLS (K-12) CAS/OCC & SKILLS CTRS LOCAL DISTRICT HQs ALL OTHERS Source: OEHS 28

29 LAUSD Most Costly Types of Injuries 50% 45% 40% 35% 30% 25% 20% 15% FY00 FY01 FY02 FY03 10% 5% 0% Strain Contusion All Other (Bruise, Skin (Specific) Surface) Injuries, NOC Sprain Fracture Mental Stress Inflammation Carpal Tunnel Syndrome Laceration Source: SCMS 29

30 LAUSD Most Costly Injuries by Body Part 25% 20% 15% FY00 FY01 FY02 10% FY03 5% 0% Low Back Multiple Area Body Parts Knee Shoulder(s) Brain Wrist Ankle Hand MultipleSoft Tissue-Multiple Upper Extremities Neck Trunk Foot Source: SCMS 30

31 LAUSD Source of Funds for Workers Compensation Budget Reserves 31

32 Reserve Fund Balance $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $ Underfunded Liability Reserve Fund Balance Source: Sedgwick CMS & Armtech 32

33 Actuarial Evaluation Armtech Study as of December 31,

34 FRAUD 34

35 WC Fraud in California Scope of Problem Estimated 20% to 30% of all claims cases prosecuted 3,548 number of fraud cases reported cost $174 million Fraud vs. Abuse Knowing misrepresentation of a material fact Activity intended to make excessive or improper use of system Detection Fines Source: California Department of Insurance, WC Fraud Facts (News Release, 4/15/03) 35

36 Types & Effects of Fraudulent Claims Types of WC Fraud Claimant Provider Premium Effects of WC Fraud Fraudulent claims represent substantial and unnecessary costs to the district Adversely impacts academic performance 36

37 Fraud Prevention Initiatives Investigations by OIG, School Police, and Sedgwick SIU Fraud Prevention Task Force Members ORMIS OIG staff School Police OGC Staff Relations Sedgwick Special Investigations Unit (SIU) District Attorney s s Office Information received from administrators, managers, supervisors, and fellow employees (District fraud hotline) Assisting with District Attorney s s provider fraud prevention efforts 37

38 ORMIS Goals Provide High Quality Medical Care to Injured Employees Improve Communication Among Managers, Employees, Bargaining Units, Sedgwick CMS, Medical Providers, and Attorneys Assist the District in Reallocating Resources through Cost Control Programs 38

39 Re-Allocation of Resources Estimated Costs of Claims Filed in Equivalents: 4,250 new teachers salaries 3.5 M student textbooks 173 M student meals 4.7 % salary increase for all employees $234 per child 39

40 ORMIS Current Program Initiatives Claims Prevention Injury & Illness Prevention Program in cooperation with OEHS Accident Investigation OEHS Serious Incident Response Team (SIRT) District Wide Training Claims Management Medical Expense Management Managing Indemnity Costs Litigation Control Sedgwick CMS Paperless Initiative 40

41 Injury & Illness Prevention Program California Code of Regulations Requires employers to maintain safe and healthful workplace Mandates Injury and Illness Prevention Program LAUSD All accidents are preventable Employers are responsible for providing a safe work environment Employees are responsible for working safely 41

42 OEHS Safety Program Goals Identify Safety as a core value Injury & Illness Prevention Program (IIPP) Assist site administrators Inspections Integrated District Safety Team Review Statistics Corrective Action Plans Review Incidents 42

43 MEDICAL EXPENSE MANAGEMENT 43

44 Los Angeles Unified School District Managed Care Services Sedgwick CMS Bill Review Services PPO Network Utilization Review Telephonic and Field Case Management Pharmacy Benefits Management 44

45 Bill Review Services Fee Schedule Review Savings: Reductions from charged to Fee Schedule $10,832,720 PPO Network Penetration: 43.5% Savings: Reductions from Fee Schedule to PPO rate $1,104,900 Ambulatory Surgery Review Savings: Reductions from charged to U & C $3,323,122 Results of program to date Total Provider Charges: $29,286,110 Total Savings: $15,260,742 45

46 LAUSD Total Savings % of Charges 50% 40% 40% 49% 45% 48% 44% 30% 20% 10% 0% Aug Sep Oct Nov Dec Sedgwick CMS Book of Business Average 34% % Saved 46

47 Definition Telephonic & Field Case Management Assess and negotiate appropriate treatment Negotiate with provider for early sustainable RTW Access Physician Advisors as needed to assist to evaluate and impact treatment necessity, MMI and RTW Telephonic Case Management 264 Cases Closed 249 RTW (94%) 177 Cases currently open Field Case Management 22 Cases Closed Assist with coordination of RTW 47

48 INDEMNITY MANAGEMENT (Lost Time) 48

49 Effects of Employee Absence Costs associated with the program Direct Indirect Employee Morale Impact on Student Achievement 49

50 Stay at Work / Return to Work Program Reduces time lost and improves morale and productivity Mandatory program for all injuries and illnesses Applies to employees with either temporary or permanent work restrictions Benefits the District and injured employee Overall Absence Management Initiative 50

51 Litigation Management Many District employees retain an attorney and litigate their claims Refer as few claims to attorney firms as is prudent Closely monitor the activities of attorneys and the fees they charge OGC Litigation Oversight Tymetrix will perform legal bill review services by 4/1/04 Crash Settlement Conferences 51

52 Communication & Training Change the Culture of the Organization Regular Regular Communication ORMIS website Written materials Training Training for employee groups 52

53 LEGISLATION 53

54 Legislation Previously Passed Major Bills Assembly Bill 749 (Calderon) Assembly Bill 227 (Vargas) Senate Bill 228 (Alarcon( Alarcon) Assembly Bill 1557 (Vargas) 54

55 Assembly Bill 749 (Calderon) Effective January 1, 2003 Increased Temporary Total Disability (TTD) rate Provides automatic increases in TTD benefits each January 1st through 2007 Increases maximum amount of the average weekly wage Primary treating physician legal presumption of correctness repealed 55

56 Assembly Bill 227 (Vargas) Effective January 1, 2004 Employers assessed 100% of funding for Division of Workers Compensation Repeals Vocational Rehabilitation Benefit (VR) for dates of injury on or after 1/1/04 Mandates Supplemental Job Disability Benefit (SJDB) for all injuries occurring on or after 1/1/04 Increases penalty for Workers Compensation fraud from $50,000 to $150,000 56

57 Senate Bill 228 (Alarcon) Effective January 1, 2004 Creates a fee schedule for medical services and prescriptions based on Medicare and Medi-Cal payment Fee schedule for outpatient surgery centers Prohibits referrals to outpatient surgery clinics by doctors Requires doctors to provide generic drugs when possible Primary Treating Physician Presumption of Correctness repealed for all dates of injury Caps number of chiropractic and physical therapy visits Authorizes establishment of carve-out programs in any unionized industry 57

58 Assembly Bill 1557 (Vargas) Effective January 1, 2004 Requires employer to establish an internal utilization review process Employee no longer entitled to increase in compensation due to delays in reviewing process 58

59 Proposed Legislation Assembly Bill 1 (Maldonado) Assembly Bill 3 (Vargas) Assembly Bill 4 (Richman) Assembly Bill 5 (Richman) Assembly Bill 6 (Richman) Assembly Bill 7 (Richman) Assembly Bill 8 (Richman) Assembly Bill 9 (Richman) Assemby Bill 10 (Richman) Assembly Bill 11 (Richman) Senate Bill 3 (Poochigan( Poochigan, Aanestad,, et al.) Senate Bill 5 (Johnson) Senate Bill 7 (Scott) 59

60 ORMIS SPECIFIC PROGRAM OBJECTIVES Standard 6/30/03 6/30/04 6/30/05 6/30/06 Number of Claims Filed Number of Open Claims Number of lost work days 200, , ,000 80,000 Number of Litigated Cases Amount Paid Board Reports $108 million $110 million $115 million $120 million 60

61 ORMIS SPECIFIC PROGRAM OBJECTIVES continued Standard 6/30/03 6/30/04 6/30/05 6/30/06 Workers Comp Training None Average Cost Per Claim $23,500 $23,500 $22,000 $20,000 Allocated- Litigation Costs $11 million $9.5 million $8 million $6.5 million Reserve Fund Balance $289 million Pending Pending Fully Funded 61

62 THE END Thank you for your consideration and support 62