The Great Workers’ Comp Revolt

Companies successfully fought the law in California. Will they target other states as well?

Realizing that there was a high likelihood that the initiative would succeed, legislators capitulated and worked with the governor to enact sweeping changes. In some ways they were simply catching up to the majority of other states; in other ways they were leading the charge.

Adding Insult to Injury

The workers’ compensation system in the United States and other countries is predicated on a dual purpose — reducing the prospect of litigation brought by injured workers against their employers, while mitigating the need for workers to prove their injuries were the fault of employers. In practice, the system provides workers with an absolute right to free medical care for a work-related injury, in addition to ongoing payments representing lost compensation from both temporary and permanent partial disabilities. To pay these costs, employers either buy coverage or self-insure.

Workers’ compensation in the United States is statutory, meaning each state has its own set of laws based on its particular industrial/commercial composition and workforce demographics. Most states sought to balance system costs against the needs of injured workers, but critics say California missed the mark considerably.

“The state was beset by ‘excess utilization’ — more injuries and treatments per worker than can be explained by the nature of the injury or what was happening in either the workplace or the economy,” says Robert Hartwig, president of the New York–based Insurance Information Institute, a group representing insurance interests. He attributes the disparity to laws giving doctors in California sole control over an injured worker’s medical diagnosis and prescribed treatment — a policy dubbed “physician presumption of correctness.”

Richard Victor, executive director of the Workers Compensation Research Institute, a nonprofit, public-policy research organization funded by state governments, employers, managed-care organizations, insurers, and state labor groups, agrees. Asked what was driving California’s enormous costs before the reforms, he says, “Almost everything — longer duration of disability, more-frequent litigation, more tests and office visits — you name it.”

The demise of physician’s presumption of correctness is seen as one of the key reforms. Today, care is based on a medical treatment utilization schedule that incorporates guidelines written by the American College of Occupational and Environmental Medicine and other groups, and sets out specific treatment protocols, backed by scientific findings, for injured employees. Other reforms include paring the previous five-year limit to receive temporary disability benefits to two years, except in cases of substantial injuries like amputation of a limb.

Except under limited circumstances, workers also can no longer choose their own doctors to treat their injuries; rather, they must select treatment from a network of medical providers established by the claims administrator. These networks must follow treatment guidelines and return-to-work procedures.

Doctors must also follow guidelines established by the American Medical Association when evaluating injuries that cause permanent partial disability. “Previously, our permanent partial disability rating system did not require objective evidence; doctors could schedule people to stay away from work to prove they couldn’t do the job,” explains Carrie Nevans, administrative director of the California Division of Workers Compensation, a state agency. “The new system brings science, in the form of the AMA guidelines, into the equation.”

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