Author: WorkCompAcademy

Group health costs have been rising much more quickly than inflation and wages. Costs have been rising even more quickly for treatment of occupational injuries in the California’s workers’ compensation system. This creates major financial challenges for employers, especially those in industries with already high workers’ compensation costs. Furthermore, group health care and workers’ compensation medical care are typically delivered through separate provider systems, resulting in unnecessary, duplicative and contraindicated treatment, and inefficient administration.

Integration of group health and workers’ compensation medical care is an alternative to two separate systems of medical care. Under integrated health care, the same individual physician or health provider group administers treatment for both occupational and non-occupational medical conditions and integrates payment for treatment under a single insurance policy. Integrating workers’ compensation medical treatment with group health treatment offers employers the potential for significant savings and could help improve the quality of care and workers’ overall access to health insurance. Research also supports the contention that an integrated 24-hour care system could potentially provide medical cost savings, as well as shorten the duration of disability for workers.

The Commission on Health and Safety and Workers’ Compensation (CHSWC) has partnered with the California HealthCare Foundation (CHCF) and the University of California (UC), Berkeley, to examine the feasibility of integrated care in California. To conduct a pilot project, partnerships between CHSWC, CHCF, UC Berkeley, DMS Facility Services, and the Service Employees International Union (SEIU) Local 1877 were established. The pilot is part of a carve-out agreement and uses Kaiser Permanente for delivery of both workers’ compensation medical care and group health benefits. The goal of the pilot is to identify areas of administrative savings and ways to reduce litigation. Savings are expected in medical utilization, indemnity costs, and administration. Medical services are expected to be delivered with fewer delays and disputes, enabling injured employees to recover more fully and return to work sooner.

CHSWC has issued a working paper titled “Comparing the Costs of Delivering Medical Benefits Under Group Health and Workers’ Compensation – Could Integration Pay for Covering the Working Uninsured?” At its October 22, 2009 meeting, CHSWC voted to create an advisory group to discuss the findings of the issue paper on integrating workers’ compensation medical and group health care. Subsequently, on February 25, 2010, CHSWC held a roundtable to discuss the issue paper in detail, get feedback from the advisory group, and examine the feasibility of adopting integrated care in California. The roundtable was composed of over 40 participants representing employers, labor, government agencies, medical providers, insurance companies, and attorneys.

Study findings indicate that total national savings estimates over the first ten years would be between $490 billion, based on National Academy of Social Insurance (NASI) data, and $560 billion, based on California insurer data. Savings for California alone would be about $10 billion in the first year and $100 billion for the ten years 2011 to 2020 inclusive. Key reasons for the savings are that it is expensive to deliver medical care separately for a single condition. This is very expensive initially and even more expensive over a life-time of separate treatment. Additionally, life-time medical costs are very difficult to predict, and insurers have to charge a “risk premium” for taking on a highly speculative liability. Health insurers are only estimating medical treatment costs over the next 12 months, a much less risky proposition.

Based upon this information The CHSWC 2012 Annual Report made the following suggestions:

• Evaluate the administrative and overhead cost of delivering occupational medical care under workers’ compensation insurance.
• Disseminate the results of the evaluation and the opportunities and challenges of implementing an integrated occupational and non-occupational medical treatment and insurance product.
• Develop and provide specific details and resources on integrated care for unions and employers interested in carve-out programs.
• Evaluate the impact of Medicare’s implementation of its secondary payor rights with regard to settlements of workers’ compensation claims, and examine alternative ways to coordinate benefits between the two systems.

The WCAB found that Stewart Espinoza, while an inmate of the Los Angeles County Men’s Central Jail, was not an employee of the County of Los Angeles at the time that he was injured while working as a cook in the jail, and that he was therefore not eligible for workers’ compensation benefits. Espinoza filed a petition for review which the Court of Appeal denied on May 17, 2012. The Supreme Court granted Espinoza’s petition for review on and transferred the matter back to the Court of Appeal with directions to vacate the order denying the petition for a writ of review. The Court of Appeal issued a writ of review pursuant to the Supreme Court’s direction and affirmed the WCAB denial of benefits in the unpublished opinion of Stewart Espinoza v WCAB and Los Angeles County Jail.

Espinoza and the County stipulated that Espinoza was working as a cook in the county jail on November 1, 2005 when he sustained an injury to his left shoulder. The parties also stipulated that if Espinoza was found to be County’s employee, the injury arose in the course and scope of employment. Thus, the only issue in the case is whether Espinoza was County’s employee. Whether Espinoza was County’s employee depends in this case on whether he performed the work he was doing voluntarily or whether he was required to work as a condition of his incarceration.

The Los Angeles County Board of Supervisors issued an order in 1970 referred to as Order #91, which provides that persons confined in the county jail may be compelled to perform labor under the direction of a county official. Order #91 goes on to state that “[n]o prisoner engaged in labor pursuant to this order shall be considered as an employee of, or to be employed by the County or any department thereof, nor shall any such prisoner come within any of the provisions of the Workmen’s Compensation Insurance and Safety Act of 1917 . . . .” Order #91 was enacted by the Board of Supervisors in response to the decision in State Compensation Ins. Fund v. Workmen’s Comp. App. Bd. (1970) 8 Cal.App.3d 978 (Childs). Childs was a case in which David Childs, then an inmate in the Los Angeles County Jail, was working on a road project in Malibu in November 1966 when he was injured.

Espinoza did not testify. Instead, there was an offer of proof that the WCJ rendered as follows: “He [Espinoza] thought his work was voluntary, and was never told his work was mandated by the terms of his incarceration. He received preferential treatment in exchange for the work.”

The WCJ reasoned that Order #91 only provides that a jail inmate “may” be compelled to work, not that the inmates “shall” be compelled to work. The WCJ went on to conclude that there was no evidence that Espinoza was compelled to work. “He [Espinoza] did the work in order to receive some extra benefits while in jail. Nothing indicates the terms of his sentence required him to work in the kitchen.”

The WCAB disagreed. Noting that it was Childs that spawned Order #91, the WCAB pointed out that similar ordinances have been held to exclude county jail inmates from workers’ compensation coverage. The WCAB cited as an example the Tulare county ordinance in Parsons v. Workers’ Comp. Appeals Bd. (1981) 126 Cal.App.3d 629 (Parsons). The WCAB’s conclusion was that an inmate’s work “is not voluntary if it is performed subject to a County ordinance that requires an inmate to work while incarcerated.”

The Court of Appeal concluded that “Given that Order #91 precludes the establishment of an employment relationship, it is not necessary to address the question whether Espinoza volunteered to work. We note, however, the manifest difficulties that would be encountered if Order #91 did not exist. With an inmate population the size of the County’s jail system, the problems of proving whether the County entered into an employment relationship with a given inmate would be practically insurmountable. It would also lead to the highly undesirable result of leaving some inmates in the workers’ compensation system and some outside of it, leaving the public agency with a completely unpredictable financial exposure. ”

The National Insurance Crime Bureau (NICB) released a ForeCAST analysis that examines the impact of fraud associated with durable medical equipment (DME). The report examines questionable claims (QC) referred to NICB during the period from Jan. 1, 2009, through June 30, 2012. QCs are claims that NICB member insurance companies refer to NICB for closer review and investigation based on one or more indicators of possible fraud. A single claim may contain up to seven referral reasons. DME QCs have increased consistently since 2009 with New York (611), Michigan (366), California (63), and Florida (54) posting the most of all the states.

DME, also referred to as Durable Medical Equipment Prosthetics and Orthotics (DMEPOS), home care products, home health equipment/supplies and/or durable medical supplies, is defined as equipment that can withstand repeated use, is primarily and customarily used to serve a medical purpose, generally is not useful to a person in the absence of an illness or injury; and,is appropriate for use in the home.

All requirements of the definition must be met before an item can be considered DME. In addition to meeting the above criteria, a licensed physician must prescribe the DME and prepare a Certificate of Medical Necessity (CMN), also referred to as a Letter of Medical Necessity. The type of medical personnel allowed to order DME will vary from state to state. In some instances, physician assistants, nurse practitioners, and clinical nurse specialists may order DME.

In the 2011 report on National Health Expenditures (NHE), DME spending for 2010 comprised of $37.7 billion or 1.5 percent of total health expenditures (CMS, Office of the Actuary, National Health Statistics Group, 2011). In the 2011-2021 NHE Projections, DME is projected to increase consistently at an average rate of 6 percent. If these projections prove accurate, spending for DME could exceed $50 billion by the end of 2015 (CMS, 2011). For both public and private health care programs, the FBI in 2011 estimated fraudulent billing to be between 3 percent and 10 percent of total health care expenditures. If those percentages are applied to DME spending, estimates of the cost of DME fraud could fall between $1.5 billion and $5 billion in a single year.

The consistent growth of the DME industry, combined with a general lack of required credentials or training in order to distribute DME, provides ample opportunity for unscrupulous individuals and entities intent on defrauding the insurance industry.

Although DME fraud is but a small part of the overall medical fraud perpetrated against insurers and the government, it is most insidious when patients who have been properly prescribed for DME never receive it. Somewhere in the DME processing chain between doctor and patient, the device never gets delivered. Whether it’s diverted to others, lost in bureaucracy or simply pilfered to be sold on the black market, it is an expensive loss to patients, insurers and the governmental loss that all of us ultimately pay for through higher premiums and taxes.

The fraud occurring in the nation’s health care system is widespread and timeless. It is the reason that since 2010, NICB has been working with the Secretary of Health and Human Services, the Attorney General and others in Washington to establish an information and data sharing effort aimed at detecting and preventing insurance fraud at the public and private sector levels. It is also the reason that in July 2012, NICB was named to the Executive Board of the Health Care Fraud Prevention Partnership.

“We said at the time that there is a significant amount of crossover by those committing fraud against Medicare and Medicaid, and also taking advantage of the property and casualty insurance industry,” said NICB President and CEO Joe Wehrle. “This report confirms that and helps us focus our investigative efforts on the areas where this is a growing problem. And at the same time, it is our goal to share information and work with the public and private sectors to identify these schemes and stop them.”

The Division of Workers’ Compensation (DWC) has issued notices of public hearings for the Supplemental Job Displacement Benefit (SJDB) regulations and interpreter services regulations.

The proposed rulemakings are to permanently adopt the emergency regulations which became effective Jan. 1, 2013. A public hearing on the proposed regulations has been scheduled for March 19 at 10 a.m. in the auditorium of the Elihu Harris Building, 1515 Clay Street, Oakland. Members of the public may also submit written comments on the regulations until 5 p.m. on that day.

The SJDB regulations implement SB 863’s changes regarding the amount of the SJDB voucher and the expenses for which it may be used. The proposed regulations administrate the supplement job displacement benefit by providing procedures and forms for those injured on or after Jan. 1, 2013.

The interpreter services regulations define “qualified interpreter for purposes of medical treatment appointments,” add “medical treatment appointments” as an event for which an interpreter is entitled to a fee, and set forth the websites where interpreters who are qualified to interpret at workers’ compensation appeals board hearings and medical treatment appointments can be found.

DWC will consider all public comments, and may modify the proposed regulations for consideration during an additional 15-day public comment period. The notices of rulemaking, text of the regulations, and the initial statements of reasons can be found at the DWC website.

California safety officials ordered Chevron Corp. to pay a record-high fine of nearly $1 million for safety violations that led to a massive fire last summer at a refinery in the San Francisco Bay Area.

According to the report in the Los Angeles Times, after the Aug. 6 explosion at Chevron’s facility in Richmond, Calif., an emergency telephone network advised tens of thousands of people in that city to stay indoors behind closed doors and windows to avoid breathing potentially dangerous sulfuric acid and nitrogen dioxide fumes. About 200 local residents sought medical help, complaining of respiratory problems. In addition, Chevron reported that one of its employees suffered a minor injury.

Cal-OSHA said Wednesday that its investigation of the explosion at a leaking crude refining unit, among other things, showed that Chevron did not follow safety recommendations made by its inspectors in 2002 to replace a corroded pipe that subsequently ruptured and fueled the fire. The company also failed to follow emergency shutdown procedures after the leak was found the day of the fire, the state said.

In all, the state Division of Occupational Safety and Health issued 25 citations against California’s biggest oil company, including 11 “willful serious” and 12 lesser “serious” violations related to the blaze, the state said. The $963,200 fine is the highest in Cal-OSHA history, the agency said.

“Ensuring worker safety is the employer’s responsibility,” said Christine Baker, director of the state Department of Industrial Relations, which oversees Cal-OSHA. “Refineries must take the steps needed to prevent incidents like the August Chevron fire. Failure to do so can pose great dangers to workers, surrounding communities and the environment.”

Chevron said it intends to appeal some of the citations. “Chevron takes our commitment to safe operations seriously,” the San Ramon, Calif., company said in a statement. “Although we acknowledge that we failed to live up to our own expectations in this incident, we do not agree with several of the Cal-OSHA findings and its characterization of some of the alleged violations as ‘willful.'”

The company reported that since the fire it has taken a number of corrective actions to enhance safety, mechanical integrity and management oversight at the third-largest refinery in California, which processes 245,000 barrels of crude oil a day. The damaged refining unit is being repaired and should be back in operation by the end of March, Chevron said.

Chevron’s laxity endangered its neighbors, said state Assemblywoman Nancy Skinner (D-Berkeley), who represents the Richmond area. “The community expects more and demands more of Chevron,” she said. “Chevron needs to step up to the plate.”