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WCAB Panel Grants Applicant’s Appeal of IMR Determination

It is not easy for parties to succeed in the appeal of an IMR determination at the WCAB. The California legislature adopted as a standard that the aggrieved party must show that at the IMR level there was a “plainly erroneous finding of fact based upon ordinary knowledge and not expert opinion.” A recent Opinion after Reconsideration demonstrates how this standard is viewed by a WCAB panel on Reconsideration.

In this case, Erlinda Cantillo suffered injury to her back and knee while working for Inc. Following her total knee replacement, and lumbar spine surgery she was using a walker to assist with ambulation, and was having “severe difficulties” with activities of daily living. Her. treating physician requested home health care 4 hours a day and 4 days a week for 3 months. After the UR process, IMR determined that the home health care was “not medically necessary and appropriate” and declined to authorize the request.

The matter proceeded to trial, and the WCJ admitted exhibits entitled Initial Approaches to Treatment Guidelines dated June 30, 2017, Medical Report of Dr. Ahmed dated June 14, 2021, and IMR Final Determination dated January 12, 2022, into evidence. After submission, the WCJ found that the “IMR determination was not the result of a plainly erroneous finding of fact based upon ordinary knowledge and not expert opinion” and denied to reverse the IMR determination.

Applicant petitioned for reconsideration, and a WCAB panel rescinded the F&O and substituted a finding that “the January 12, 2022 IMR determination applied the MTUS Initial Approaches to Treatment Guidelines in a plainly erroneous manner based upon ordinary knowledge and not expert opinion” and substituted an order that the UR determination be remanded to the AD for submission to a different independent review organization or different reviewer as provided in Labor Code section 4610.6(i) in the panel decision of Cantillo v Amazon – ADJ12704660 (June 2022).

The Court of Appeal held that IMR determinations are subject to meaningful review, even if the Appeals Board cannot change medical necessity determinations, noting that “[t]he Board’s authority to review an IMR determination includes the authority to determine whether it was adopted without authority or based on a plainly erroneous fact that is not a matter of expert opinion” (Stevens v. Workers’ Comp. Appeals Bd. (2015) 241 Cal.App.4th 1074, 1100.)

Here, the IMR reviewer relied upon MTUS providing that “[h]ome healthcare is selectively recommended . . . to overcome deficits in activities of daily living . . . [and indicated when] the patient is unable to leave the home without . . . [a] walker.” In doing so, the reviewer explicitly recognized medical evidence that applicant has ” ‘severe difficulty’ with activities of daily living” and “ambulates with [an] assistive device” due to those difficulties.

Yet the reviewer concluded that home healthcare was “not medically necessary” without explaining how this evidence fell outside the MTUS or citing evidence that applicant was able to perform daily living activities without difficulty or ambulate without an assistive device or was not “homebound” as her primary treating physician had opined.

“Hence, inasmuch as the MTUS recommend that home healthcare is to be provided to overcome deficits in daily living – and specifically indicated when the patient is unable to leave the home without major assistance requiring devices such as a walker – it is clear that the IMR determination applied the MTUS in a plainly erroneous manner based upon ordinary knowledge and not expert opinion.”

In addition, the IMR reviewer relied upon MTUS providing that a “home evaluation is necessary to develop the home health care treatment plan” as a separate ground supporting the conclusion that home healthcare was not medically necessary.

However, the MTUS do not state that a home evaluation must be performed in order for home healthcare to be recommended, but rather to ensure that such care is provided safely and correctly.

“It follows that the IMR reviewer’s conclusion that the lack of ‘documentation of home health evaluation’ provided an additional ground to deny applicant’s home healthcare request was also based upon a plainly erroneous application of the MTUS.”

Employers Fail to Keep Food and Farm Workers Safe From COVID

Although farm and food production workers were considered essential workers during the pandemic, many of California’s food employers endangered those workers, violating Cal/OSHA’s COVID-19 guidelines more often than most industries, a new report said.

The California Institute for Rural Studies’report said farm and food production employers routinely failed to provide workers with face masks, nor did they enforce physical distancing or notify workers when there were COVID outbreaks at worksites. The study was based on OSHA inspections from April 2020 through December 2021.

Though farms and food companies had the most violations of all the industries, they had some of the smallest penalties, the report said; the average penalty was $22,473.

Cal/OSHA did not answer CalMatters’ question about the size of the fines. It issued a statement Wednesday saying, “Cal/OSHA recognizes and appreciates the importance of this issue, and is reviewing CIRS’ report and recommendations.”

Dvera Saxton, a researcher with the rural studies institute, said Cal/OSHA cited food production employers four times more than any other California industries during the first year of the pandemic. But food companies utilized the judicial and appeals process to try to reduce their penalties, she said.

Oftentimes the fines will be reduced or eliminated,” she said. “We know that the food production employers – and the companies they’re producing for – have very powerful legal teams to reduce the fines.”

The companies’ violations often included failure to provide and implement a health and safety system, which is required by a 1991 state law, the study said.

The report describes food production workers as those working in meat packing, dairy operations and agriculture – primarily Black, Latino, and Indigenous people, often undocumented immigrants.  
Keeping workers safe

Among 36 agricultural workplaces that utilize contractors, the report names Brutocao Vineyards. Cal/OSHA fined Brutocao Vineyards $3,710 in September 2020 for allegedly failing to provide face masks for three workers and neglecting to keep workers six feet apart.

Len Brutocao, director of vineyard operations, blamed the violations on the workers.  “We provided the masks, and they just didn’t wear them,” he said in an interview, adding that the company has since increased training and stressed wearing masks.

California’s food and farm employers aren’t very different from similar employers around the country, said Suzanne Adely, co-director of the Los Angeles-based Food Chain Workers Alliance, a national coalition of food workers unions. The 21.5 million farm and food workers make up the nation’s largest workforce, she said. The lack of COVID protections is just one of their many vulnerabilities.

“Food workers have the lowest median wage than any workforce and are the most food insecure,” Adely said. “They have some of the highest rates of health and safety violations – and high rates of wage theft.”

As the pandemic continues, the report recommends that state leaders and Cal/OSHA officials strengthen paid sick leave protections, increase workplace inspections and ensure that employer health and safety data is more accessible to the public.

Second Suit Follows Unclear Wording of First Suit Settlement Agreement

A staffing agency (FlexCare LLC) arranged for a nurse (Lynn Grande) to work at a hospital (Eisenhower Medical Center), which she did for about a week in February 2012.

Under the terms of an agreement between the staffing agency (FlexCare) and the hospital (Eisenhower), the staffing agency purportedly “retain[ed] . . . exclusive and total legal responsibility as the employer of Staff,” including “the obligation to ensure full compliance with and satisfaction of” wage and hour requirements. The hospital retained discretion to assign shifts.

The nurse who filed the present case (Grande) joined the prior action against FlexCare as a named plaintiff, alleging wage and hour violations during the time she worked at the hospital. The hospital was not named as a defendant in this prior action and did not intervene in it.

The parties settled the prior action with the staffing agency to pay no more than $750,000, and the court entered judgment upon the settlement. The settlement did not name the hospital as a released party. For purposes of the judgment, the court certified a class of ” ‘all persons who at any time from or after January 30, 2008 through April 8, 2014 were non-exempt nursing employees of [the staffing agency] employed in California’ “

The nurse then sued the hospital based on the same alleged violations. The staffing agency filed a complaint in intervention, seeking declaratory relief. The staffing agency and the hospital argued both that the hospital was entitled to the benefit of the earlier release, and that the first judgment precludes the nurse from bringing this second suit.

The trial court found that “the language in the release clause cannot reasonably be construed to extend to claims Plaintiff may have against [the hospital] in this case.” The court further concluded that because the hospital “is not in privity with [the staffing agency], as that term is understood for claim preclusion (res judicata) purposes, Plaintiff’s claim against [the hospital] in this case is not barred by the Final Judgment” in the first action.

A divided panel of the Court of Appeal affirmed the trial court in Grande v. Eisenhower Medical Center (2020) 44 Cal.App.5th 1147 (Grande I ). The California Supreme Court agreed to hear the case, and affirmed the judgment of the Court of Appeal in Grande v. Eisenhower Medical Center, (Grande II) S261247 (June 2022).

The core of this dispute concerns the issue of privity. Judgments bind not only parties, but also “those persons ‘in privity with’ parties.Questions about privity typically arise when a litigant attempts to use a judgment against someone who was not party to that judgment The circumstances recognized as creating privity have evolved in appellate decisions over time.

The hospital and staffing agency contend that their position is supported by the Court of Appeal’s decision in Castillo v. Glenair, Inc. (2018) 23 Cal.App.5th 262. Castillo concerned a temporary staffing agency (GCA), the agency’s employees, and its client (Glenair), and two sequential lawsuits filed against the parties for labor code wage violations similar to the Grande II case here.

The Supreme Court distinguished the facts in Castillo such that it was not on point in this case The scope of the (putative) class at issue in this second action against the hospital differs from the class at issue in the first case against the staffing company.

Unlike the first suit, which concerned nonexempt employees of the staffing agency placed throughout the state (not just at Eisenhower), this second suit concerns nonexempt employees of the hospital placed by any staffing agency (not just by FlexCare).

The Supreme Court concluded by say that “For these reasons, the hospital and staffing agency have not demonstrated that the Court of Appeal erred in rejecting their claim preclusion argument. We do not decide whether preclusion would have been appropriate on any other ground.”

It is worthy of note that had the settlement documents and release been drafted with different language, the second action here may have been precluded. In this respect the Supreme Court said “The trial court’s fact-specific determination – construing this particular release, based on the evidence adduced at this particular trial – is supported by substantial evidence. We affirm on that basis. Our decision on this issue is thus fact- and case-specific.”

The lesson here for employers is that the wording of a settlement agreement in anticipation of possible avenues of additional litigation and liability is critical.

Robert Howell to Run Against Ricardo Lara for Insurance Commissioner

Republican Robert Howell will face Democratic incumbent Ricardo Lara in the race for insurance commissioner after edging Democratic Assemblyman Marc Levine for the second spot on the November ballot.

Howell, a cybersecurity equipment manufacturer, bills himself as a “Reagan Republican,” and has pledged if elected to “serve as your personal watchdog guarding against waste, fraud, and abusively inflated premiums.”

No Republican has won statewide office in California since 2006 when Arnold Schwarzenegger was re-elected as governor and Steve Poizner was elected as insurance commissioner.

During the primary campaign, Lara touted his work related to wildfires, including helping create the first “Safer from Wildfires” framework and issuing regulations requiring insurance companies to use the framework in pricing.

“There’s nothing that substitutes for the experience I have in this position working directly with consumers and wildfire survivors,” said Lara, California’s first openly LGBTQ+ statewide elected official.

Levine conceded Wednesday, acknowledging on social media, “there simply aren’t enough uncounted ballots left to change the outcome of the election.”

Howell entered Wednesday’s resumption of the count of unprocessed ballots with a 4,921-vote lead and increased the lead to 6,393, according to figures released Wednesday morning by the Secretary of State’s Office.

New ML Fee Schedule Increased Fees More Than Expected

Payments for medical-legal services used to resolve medical disputes over compensability issues in California work injury claims have risen sharply under the new Medical-Legal Fee Schedule (MLFS) that took effect last year according to a new CWCI study, with the increase in aggregate med-legal fees in the first seven months after the schedule took effect far exceeding the 25% increase anticipated by the Division of Workers’ Compensation (DWC).

In April 2021, the DWC implemented a new fee schedule that for the first time since 2006, changed the payment formulas for med-legal evaluations and reports.

The old MLFS had provided varying flat fee payments for “basic” and “complex” comprehensive (ML102 and ML103) evaluations, and time-based payments for evaluations involving “extraordinary circumstances” (ML104).

The new schedule replaced those three levels of service with a single code (ML201), for which forensic physicians are paid a single, flat fee, plus $3 per page for record reviews exceeding 200 pages (MLPRR), and time-based payments for sub rosa video reviews (ML205). The new MLFS also continued to allow additional fees for evaluations by an Agreed Medical Evaluator (AME) or those involving an interpreter, and expanded fee multipliers to certain medical specialists.

CWCI’s study compared the utilization and reimbursement of med-legal services rendered before and after the new schedule’s April 1, 2021 effective date, using data from accident year 2015 through 2021 claims, with service dates limited to January through October of each year to account for the timing of billing and payment.

The results indicate that replacing the three levels of evaluations with a single comprehensive evaluation reimbursed at a flat fee of $2,015 likely had the biggest impact on average payments. Basic evaluations (previously billed under ML102) accounted for about 40% of the evaluations paid under the new ML201 comprehensive service code, and the new flat fee increased the payment for these services by 222%. More complex evaluations (previously billed under ML103) represented 18% of the new ML201 evaluations, and payments for these services increased by 115%.

Other key findings from the study:

– – It was hoped that the new MLFS would lead to a redistribution of med-legal services, with fewer supplemental reports, but these reports increased from 34.2% of med-legal services in 2019 to 37.8% under the new schedule.
– – Compared to the same time period in 2019, the average payment for a comprehensive evaluation that includes a face-to-face exam of the injured worker rose 52.9%, and the average payment for a supplemental evaluation rose 39.1%.
– – The new per-page record review fee also contributed to the increase in med-legal payments, adding an average of $1,917 to the base fee for comprehensive evaluations, $1,410 to the base fee for follow-up evaluations and $1,437 to the base fee for supplemental evaluations.
– – Physicians specializing in orthopedic surgery provided 53% of the med-legal services during 2021, while internal medicine physicians were a distant second, providing 9% of the services.
– – One goal of the new fee structure was to attract and retain more Qualified Medical Evaluators (QMEs). A review of DWC data show that 211 new physicians joined the pool of certified QMEs in 2021, while only 18 became inactive, resulting in 2,554 active evaluators, a 3% increase from 2020 yet a 1% decrease from 2019.

CWCI has published its study in a Research Update Report, “An Early Look at the Impact of the New Med-Legal Fee Schedule,” which is available to CWCI members and subscribers who log on to the Research section at Others may purchase the report from CWCI’s online store.

Scripps Makes Merative Top Health Systems List for 6th Time

Each year, Merative 15 Top Health Systems conducts a rigorous analysis of US health system performance based on metrics aggregated from individual hospital data. The result is a list of the top performing US health systems in the nation – based on a balanced scorecard derived from publicly available clinical, operational and patient experience data.

This year Scripps Health has been named one of the top five medium-sized health care systems in the nation by Merative and the only health provider all of California to be included among a broader list covering the top 15 large, medium and small systems across the United States.

The systems were chosen by Merative from among 2,604 hospitals that were evaluated for their quality of care, operational efficiency and patient experience. They were announced in the online edition of Fortune magazine.

Merative evaluated 349 health systems and 2,604 hospitals that were members of those systems. The research was based on Medicare cost reports, Medicare Provider Analysis and Review data and data from the Centers for Medicare and Medicaid Services Hospital Compare website.

Hospitals included among the 15 best systems achieved better patient outcomes, fewer complications, shorter lengths of stay, lower readmission rates, fewer healthcare-associated infections, lower inpatient expenses, and higher ratings from patients.

Health systems do not apply for this annual listing, and winners do not pay to market the honor. Prior to 2018, the listing was produced by Truven Health Analytics.

Based on the research, the care delivered by the 15 best systems resulted in:

– – 16,000 additional lives saved
– – More than 17,000 additional patients being complication-free
– – A 5% reduction in healthcare-associated infections
– – Patients being discharged a half-day sooner

“Scripps is honored to receive this prestigious recognition once again and to be recognized as a top health system in the nation,” said Scripps President and CEO Chris Van Gorder. “This is the direct result of a constant effort by our physicians, nurses and employees to make sure the care we deliver to patients is the best available.”

The honor comes after more than two years of coping with a wide range of difficulties posed by the ongoing COVID-19 pandemic, noted Ghazala Sharieff, MD, MBA, Scripps corporate senior vice president and chief medical officer for acute care operations and clinical excellence. “We are particularly proud of this achievement considering the unprecedented challenges that we have faced recently. It’s a testament to Scripps’ long legacy of providing outstanding patient care.”

Federal Judge Gives Opiod Drug Distributors Another Rare Win

A federal judge rejected claims that the three largest US opioid distributors ignored warning signs when they sent millions of pills to a West Virginia community, handing a rare trial win for companies linked to the drug epidemic.

US District Judge David Faber said in an opinion Monday McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Corp. didn’t create a public nuisance in Cabell County, West Virginia, and its largest city, Huntington. The plaintiffs alleged between 2006 and 2014, the companies delivered more than 127 million painkillers to pharmacies in the county — or about 142 pills annually for each man, woman and child in the area.

The judge concluded the local governments didn’t prove the distributors failed to put in place “effective controls” against opioids being diverted to illegal uses and couldn’t properly hold the companies accountable for billions of dollars in harms tied to the painkillers under state law.

The federal judge conceded in his 184-page ruling that the “opioid crisis has taken a considerable toll on the citizens of Cabell County and the City of Huntington, And while there is a natural tendency to assign blame in such cases, they must be decided not based on sympathy, but on the facts and the law.”

In the Cabell County case, lawyers argued the distributors ignored warning signs about excessive opioid orders from West Virginia pharmacies.

“We are deeply disappointed personally and for the citizens of Cabell County and the city of Huntington,- lawyers for the West Virginia local governments said in a statement. “We felt the evidence that emerged from witness statements, company documents, and extensive datasets showed these defendants were responsible for creating and overseeing the infrastructure that flooded West Virginia with opioids.”

Faber’s ruling reinforces arguments Cardinal Health’s lawyers made, Eric Timmerman, a company spokesman, said in a statement. The judge found the firm properly provides a “secure channel to deliver medications of all kinds from manufacturers to our thousands of hospital and pharmacy customers that dispense them to their patients based on doctor-ordered prescriptions.”

“Pharmaceutical distributors like AmerisourceBergen have been asked to walk a legal and ethical tightrope between providing access to necessary medications and acting to prevent diversion of controlled substances,” Gabriel Weissman, a company spokesman, said in a statement. “Today’s ruling will help enable our company to do what we do best — ensuring that health care facilities like hospitals and community pharmacies have access to the medications that patients and care providers need.”

The case is City of Huntington v. AmerisourceBergen, 17-cv-1362, US District Court, Southern District of West Virginia.

Bloomberg News reports that  West Virginia has been among the hardest-hit states in the opioid epidemic, with Cabell County’s overdose death rate more than five times the national average during the period covered by the suit, according to researchers. West Virginia officials opted out of a settlement with the distributors last year, arguing it didn’t provide for their local governments still battling the scourge.

In that settlement, McKesson, based in Irving, Texas, Cardinal Health, of Dublin, Ohio, and AmerisourceBergen, of Conshohocken, Pennsylvania, agreed to pay $21 billion to settle the vast majority of the thousands of opioid lawsuits filed by states and local governments across the US.

The strategy of suing opioid companies by alleging public nuisance has had a mixed track record. An Orange County Superior Court Judge, in November 2021, ruled in favor of four pharmaceuticals (including Endo and Teva) after a bench trial in a lawsuit brought by the counties Santa Clara, Los Angeles and Orange and the city of Oakland. That same month, an Oklahoma Supreme Court overturned a $465 Million ruling against Johnson & Johnson, rejecting the public nuisance argument.

However, juries that heard cases have backed nearly identical allegations in New York state court against opioid maker Teva Pharmaceuticals and in federal court in Ohio against pharmaceutical chains including CVS Health Corp.

San Francisco’s opioid lawsuit against Walgreens and a number of pharmaceutical companies commenced a court trial at the end of April, 2022. Lawyers for San Francisco claims that Anda, Allergan, Teva and Walgreens promoted and distributed the powerful painkillers in ways that created a public nuisance that endangered the health and safety of the city’s residents. The case is still underway as of the end of June, 2022.

Physician’s Wife to Serve 8 Years for Role in $44 Million Insurance Fraud

A former Coachella Valley resident whom Israel deported after she and her then-doctor husband fled there to escape criminal prosecution was sentenced today to 97 months in federal prison for her role in a conspiracy in which insurers were fraudulently billed $44 million for unnecessary cosmetic surgeries.

Linda Morrow, 70, formerly of Rancho Mirage, was sentenced by United States District Judge Josephine L. Staton, who also ordered her to pay $14,025,904 in restitution. Judge Staton remarked that Morrow’s “greed knew no bounds.”

Morrow, who has been in federal custody since July 2019, pleaded guilty on February 4 to one count of conspiracy to commit health care fraud and one count of contempt of court.

Morrow’s husband, 77-year-old David M. Morrow, was extradited by Israel in January 2020 and is currently serving a 20-year prison sentence. David Morrow pleaded guilty in 2016 and was free on bond awaiting sentencing when the couple fled to Israel. Judge Staton imposed the 20-year sentence while the Morrows were living as fugitives, finding that the intended loss from the scheme was more than $44 million. David Morrow was a doctor whose medical license was revoked in January 2018.

Linda Morrow helped her husband run the fraudulent billing scheme out of The Morrow Institute (TMI) in Rancho Mirage and was TMI’s executive director. The Morrows schemed to defraud health insurance companies by submitting bills for procedures performed at TMI that were billed as “medically necessary” – but in fact were cosmetic procedures such as “tummy tucks,” “nose jobs,” breast augmentations, and vaginal rejuvenations.

The victims included Aetna, Anthem Blue Cross, Blue Shield of California and Cigna Health Insurance. The scheme also defrauded Staples, Inc. and a self-insured group of public entities that included school districts.

“[Linda Morrow” was not simply the ‘doctor’s wife’ to a doctor who happened to commit a crime,” prosecutors wrote in a sentencing memorandum. “To the contrary, [she] was an equal partner in their fraudulent scheme, and she participated and ran multiple parts of it.”

In 2017, Linda Morrow fled the United States with her husband to avoid prosecution and failed to appear in court as ordered. In addition to helping move $4 million from domestic bank accounts to accounts in Israel, Morrow used a fraudulent Mexican passport to enter Israel and a fraudulent Guatemalan passport while living there. While living as a fugitive in Israel, Morrow applied for Israeli citizenship using a fraudulent identity.

Israel deported her in 2019.

The FBI, IRS Criminal Investigation and the California Department of Insurance conducted the investigation into the Morrows and TMI. The FBI’s Legal Attachés in Jerusalem, Mexico City, and Guatemala; the Israeli National Police; the United States Marshals Service; the United States Border Patrol’s Northern Border Coordination Center; and the Department of Justice’s Office of International Affairs provided considerable assistance in tracking down and capturing the Morrows.

July 1 Starts National Game Changing Healthcare Cost Disclosure Rules

Consumers, employers, and just about everyone else interested in health care prices will soon get an unprecedented look at what insurers pay for care, perhaps helping answer a question that has long dogged those who buy insurance: Are we getting the best deal we can?

As of July 1, health insurers and self-insured employers must post on websites just about every price they’ve negotiated with providers for health care services, item by item. About the only thing excluded are the prices paid for prescription drugs, except those administered in hospitals or doctors’ offices.

The federally required data release could affect future prices or even how employers contract for health care. Many will see for the first time how well their insurers are doing compared with others. The requirements stem from the Affordable Care Act and a 2019 executive order by then-President Donald Trump.

And according to Kaiser Health News, the new rules are far broader than those that went into effect last year requiring hospitals to post their negotiated rates for the public to see. Now insurers must post the amounts paid for “every physician in network, every hospital, every surgery center, every nursing facility,” said Jeffrey Leibach, a partner at the consulting firm Guidehouse.

“When you start doing the math, you’re talking trillions of records,” he said. The fines the federal government could impose for noncompliance are also heftier than the penalties that hospitals face.

Federal officials learned from the hospital experience and gave insurers more direction on what was expected, said Leibach. Insurers or self-insured employers could be fined as much as $100 a day for each violation, for each affected enrollee if they fail to provide the data.

Entrepreneurs are expected to quickly translate the information into more user-friendly formats so it can be incorporated into new or existing services that estimate costs for patients. And starting Jan. 1, the rules require insurers to provide online tools that will help people get upfront cost estimates for about 500 so-called “shoppable” services, meaning medical care they can schedule ahead of time.

Everyone will know everyone else’s business: for example, how much insurers Aetna and Humana pay the same surgery center for a knee replacement.

These plans are supposed to be acting on behalf of employers in negotiating good rates, and the little insight we have on that shows it has not happened,” said Elizabeth Mitchell, president and CEO of the Purchaser Business Group on Health, an affiliation of employers who offer job-based health benefits to workers. “I do believe the dynamics are going to change.”

“Maybe at best this will reduce the wide variance of prices out there,” said Zack Cooper, director of health policy at the Yale University Institution for Social and Policy Studies. “But it won’t be unleashing a consumer revolution.”

Still, the biggest value of the July data release may well be to shed light on how successful insurers have been at negotiating prices. It comes on the heels of research that has shown tremendous variation in what is paid for health care. A recent study by the Rand Corp., for example, shows that employers that offer job-based insurance plans paid, on average, 224% more than Medicare for the same services.

Tens of thousands of employers who buy insurance coverage for their workers will get this more-complete pricing picture – and may not like what they see.

What we’re learning from the hospital data is that insurers are really bad at negotiating,” said Gerard Anderson, a professor in the department of health policy at the Johns Hopkins Bloomberg School of Public Health, citing research that found that negotiated rates for hospital care can be higher than what the facilities accept from patients who are not using insurance and are paying cash.

That could add to the frustration that Mitchell and others say employers have with the current health insurance system. More might try to contract with providers directly, only using insurance companies for claims processing.

Other employers may bring their insurers back to the bargaining table.

“For the first time, an employer will be able to go to an insurance company and say, ‘You have not negotiated a good-enough deal, and we know that because we can see the same provider has negotiated a better deal with another company,’” said James Gelfand, president of the ERISA Industry Committee, a trade group of self-insured employers.

WCIRB Annual Report Shows Med-Legal as Largest Cost Increase

The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) released its report on workers’ compensation losses and expenses for 2021. This annual report is required by Section 11759.1 of the California Insurance Code.

Medical losses paid in 2021 were $4.4 billion, or 53 percent of total loss payments.This figure includes $55.6 million in medical payments made in 2021 for COVID-19 claims.

The largest increase in medical payments was related to medical-legal evaluations in that a significant portion of the payments made for medical-legal evaluations were under the new Medical-Legal Fee Schedule adopted effective April 1, 2021.

Orthopedic evaluations accounted for about 54% of the cost of all medical-legal evaluations. The average cost of a medical-legal evaluation was $1,554 in 2021. Psychiatric evaluations were the most expensive, averaging $2,826.

Indemnity benefits paid in 2021 were $3.8 billion, or 47 percent of total loss payments.

Of this amount, temporary disability benefits accounted for 54 percent of indemnity payments and permanent partial disability benefits accounted for 35 percent.

In total, about $67 million in vocational rehabilitation related benefits were paid in calendar year 2021. This was 1.8% of all indemnity payments in 2021, of which 97% was for non-transferable education vouchers. For comparison purposes, in 2020, vocational rehabilitation benefits paid was $73 million, or 2.0% of all indemnity payments, of which 97% was for non-transferable education vouchers.

Calendar year 2021 earned premium totaled $13.6 billion as compared to the $14.1 billion of premium earned in 2020.

Insurer incurred loss adjustment expenses (allocated and unallocated) in 2021 were $2.2 billion, or 16% of earned premium. This includes the full cost to insurers of administering, adjudicating and settling claims. Incurred loss adjustment expenses include $807 million in defense attorney expenses incurred in 2021. (For comparison purposes, in 2020, incurred loss adjustment expenses were 13% of earned premium, including $828 million in defense attorney expenses.)

Although generally part of incurred indemnity losses rather than expenses, the amount paid in 2021 to applicant attorneys was derived from the WCIRB’s Annual Expense Call. In 2021, applicant attorneys were paid $389 million. (In 2020, applicant attorneys were paid $402 million.

In total, California insurers incurred $5.4 billion in expenses in 2021, or 39% of 2020 earned premium. (For comparison purposes, in 2020, total incurred expenses were 35% of earned premium.)

Total insurer combined losses and expenses incurred in 2021 were $13.1 billion, or 96 percent of calendar year premium, compared to $12 billion (or 85 percent of calendar year premium) in 2020.