California Department of Industrial Relations California Department of Industrial Relations Commission on Health and Safety Commission on Health and Safety and Workers and Workers’ ’ Compensation Compensation New Experiments New Experiments 24- -Hour Integrated Health Coverage for Service Workers Hour Integrated Health Coverage for Service Workers 24 CHSWC Members CHSWC Members Presentation by Presentation by Allen L. Davenport Allen L. Davenport Christine Baker Christine Baker Leonard C. McLeod Leonard C. McLeod Executive Officer Executive Officer Alfonso Salazar Alfonso Salazar Kristen Schwenkmeyer Kristen Schwenkmeyer Robert B. Steinberg Robert B. Steinberg Darrel “Shorty” Thacker Darrel “Shorty” Thacker Angie Wei Angie Wei John C. Wilson John C. Wilson 1
California’ ’s s California Workers’ ’ Compensation System Compensation System Workers 1913 “ “bargain bargain” ” between labor and employers between labor and employers 1913 Employers provide no- -fault insurance against fault insurance against Employers provide no • • workplace injuries. workplace injuries. Delivers five benefits: Delivers five benefits: • • Temporary disability payments (TD) Temporary disability payments (TD) � � Medical expenses (both evaluation & treatment) Medical expenses (both evaluation & treatment) � � Vocational rehabilitation or Supplemental Job Vocational rehabilitation or Supplemental Job � � Displacement Benefits (SJDB) Displacement Benefits (SJDB) Permanent disability (PD) Permanent disability (PD) � � Death benefits Death benefits � � 2
Paid Workers’ ’ Compensation Compensation Paid Workers Indemnity and Medical Benefits Indemnity and Medical Benefits California - - 2005 2005 California Indemnity Medical Paid Paid $4.4 billion $3.8 billion 54% 46% 3
Growth in California WC Medical Costs Growth in California WC Medical Costs Compared with Medical Care Inflation Compared with Medical Care Inflation since 1997 since 1997 140% 120% 100% 80% 60% 40% 20% 0% 1998 1999 2000 2001 2002 2003 2004 10% 24% 45% 57% 100% 138% 124% Percentage Change in WC Medical Costs since 1997 3% 7% 11% 16% 22% 27% 32% Percentage Change in 4 Medical CPI since 1997
WC Medical Reforms in California WC Medical Reforms in California Recent reforms reduced WC medical costs Recent reforms reduced WC medical costs • Caps on chiropractic and physical therapy Caps on chiropractic and physical therapy • • Medical treatment guidelines Medical treatment guidelines • • Employer control through approved Employer control through approved • networks networks • Medicare Medicare- -based medical fee schedules based medical fee schedules • 5
Carve- -Outs with 24 Outs with 24- -Hour Care Hour Care Carve Can Reduce WC Medical Costs Can Reduce WC Medical Costs Workers compensation carve- -out programs out programs Workers compensation carve with 24- -hour medical care can hour medical care can with 24 � Protect workers Protect workers � � Improve benefit delivery Improve benefit delivery � � Reduce costs Reduce costs � 6
What are “ “Carve Carve- -Outs Outs” ”? ? What are Workers’ ’ compensation compensation “ “carve carve- -outs outs” ” allow allow Workers organized labor and management to establish organized labor and management to establish � Improved benefit Improved benefit- -delivery systems, and delivery systems, and � � Alternatives to the dispute resolution Alternatives to the dispute resolution � procedures in the state system. procedures in the state system. 7
Carve- -outs in California outs in California Carve Labor Labor- -Management negotiated agreement Management negotiated agreement • • Statute only allows unions and union Statute only allows unions and union • • employers to negotiate carve- -out agreements out agreements employers to negotiate carve Can cover all aspects of workers’ compensation Can cover all aspects of workers’ compensation • • medical and benefit delivery medical and benefit delivery Negotiated as addendum to collective Negotiated as addendum to collective • • bargaining agreement bargaining agreement “Carves out” a system essentially separate “Carves out” a system essentially separate • • from State system (DWC and WCAB) from State system (DWC and WCAB) 8
How Were Carve- -Outs Established? Outs Established? How Were Carve Carve- -outs were established by workers’ outs were established by workers’ Carve compensation reform legislation in California. compensation reform legislation in California. SB 983 in 1993 for construction industries. for construction industries. SB 983 in 1993 � � AB 749 in 2002 adds aerospace, timber. adds aerospace, timber. AB 749 in 2002 � � SB 228 in 2003 expands to all industries SB 228 in 2003 expands to all industries � � SB 899 in 2004 allows employer and union to SB 899 in 2004 allows employer and union to � � negotiate any aspect of benefit delivery if negotiate any aspect of benefit delivery if employees are eligible for group health and employees are eligible for group health and non- -occupational disability benefits. occupational disability benefits. non 9
Key Components of a Carve- -Out Out Key Components of a Carve A carve- -out agreement may include the following out agreement may include the following A carve components: components: � Alternative dispute resolution (ADR) Alternative dispute resolution (ADR) � � Alternative delivery of medical benefits, such Alternative delivery of medical benefits, such � as 24- -hour integrated care hour integrated care as 24 � Agreed list of medical evaluators (AME) Agreed list of medical evaluators (AME) � � Joint labor Joint labor- -management safety committee management safety committee � � Return Return- -to to- -work program to facilitate safe work program to facilitate safe � transition back to full employment transition back to full employment 10
Carve- -outs: Potential Benefits for outs: Potential Benefits for Carve Employers & Unions Employers & Unions • Cost savings through Cost savings through • � Lower medical costs Lower medical costs � � Fewer delays and disputes Fewer delays and disputes � � Reduction in overuse, Reduction in overuse, � � Standardization of provider fees Standardization of provider fees � � Discounts from insurers Discounts from insurers � • Prompt medical care Prompt medical care • � Faster healing Faster healing � � Fuller recovery Fuller recovery � 11
Carve- -outs: Potential Benefits for outs: Potential Benefits for Carve Employers & Unions Employers & Unions � Effective return to transitional work and Effective return to transitional work and � to sustained employment to sustained employment � Fewer misunderstandings and delays; Fewer misunderstandings and delays; � faster resolution of disputes; reduced faster resolution of disputes; reduced litigation litigation � Satisfaction, morale, productivity, and Satisfaction, morale, productivity, and � competitiveness of the business competitiveness of the business 12
Opportunities for Improvement Opportunities for Improvement Achieve further medical care cost savings Achieve further medical care cost savings • • � Reduction in overuse Reduction in overuse � � Standardization of provider fees Standardization of provider fees � Reductions in Group Health Care Costs Reductions in Group Health Care Costs • • Quality improvement – Quality improvement – more appropriate use more appropriate use • • Administrative cost savings – – only if health only if health Administrative cost savings • • insurance is integrated insurance is integrated → reduction in disputes Worker satisfaction → reduction in disputes Worker satisfaction • • 13
Challenges in Carve- -Outs Outs Challenges in Carve Determining the cost of the combined Determining the cost of the combined • • program. program. Estimating the potential savings and Estimating the potential savings and • • premium reductions. premium reductions. Passing actual savings on to management Passing actual savings on to management • • and labor and labor 14
Savings for Employers Savings for Employers Improvements for Workers Improvements for Workers How can carve- -outs save money while outs save money while How can carve improving benefit delivery? improving benefit delivery? � Alternative Dispute Resolution (ADR) Alternative Dispute Resolution (ADR) � � Medical treatment Medical treatment � � Medical dispute reduction Medical dispute reduction � � Medical Medical- -legal evaluation (PD, causation, legal evaluation (PD, causation, � apportionment) apportionment) � Duration of disability Duration of disability � 15
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