Group 4

1. Workers’ Compensation Group 4

2. Workers’ Compensation and The Three Parts Workers’ Compensation is a social insurance program that provides: • Medical care • Cash benefits • Rehabilitation services Three coverages are provided: workers’ compensation insurance, employers liability insurance, other-states insurance Workers' Compensation

3. Objectives and Eligibility Requirements of Workers’ Compensation • Provide broad coverage • Substantial protection • Provide sufficient medical care/rehab • Reduction of job related accidents • Reduce litigation • Two principal eligibility requirements must be met Workers' Compensation

4. Workers’ Compensation Benefits Keep the benefits coming! • Unlimited medical care • Disability-income benefits • Death benefits • Rehabilitation services Workers' Compensation

5. Workers’ Compensation Mess in California • Rates were falling due to set rates without state approval • Insurers competed for business • Carriers selling insurance at a loss to gain market share • Firms became insolvent Workers' Compensation

6. Workers’ Compensation Mess in California (Cont.) • Businesses pay highest premiums, but injured workers get the lowest benefits. • Costs paid by employers are the highest in the country. • Average employer pays 5.2% of payroll. Workers' Compensation

7. Problems & Issues • 30% of claimants who miss work hire a lawyer • Doctors & patients have little incentive to restrain costs • Employers often hire dueling doctors • California gives lots of discretion • Unnecessarily complex, difficult to administer, some cases outdated Workers' Compensation

8. Problems & Issues (Cont.) • Difficulty finding workers comp. Insurance • California receive lowest disability benefits • California has highest litigation and medical cost • Last year, job based insurance premiums increased by an average of 10% • Nearly 1 million claims filed each year Workers' Compensation

9. Problems & Issues (Cont.) • Standards of disability awards • Stricter guidelines for permanent- partial disabilities • Physician choice • California exceeds national norm • Workers file more claims than elsewhere • Medical cost in California far above average Workers' Compensation

10. Problems & Issues (Cont.) • Lack of fee schedule • Delays in updating existing fee schedules • No fault system • Rising medical inflations • Indemnity • Underwriting performance Workers' Compensation

11. Workers Compensation Fraud • What is workers’ compensation fraud? • The two most common types of workers’ compensation fraud : • Premium • Benefit fraud • Health care provider or attorney assists the worker in fraudulent schemes, or participates in double billing. Workers' Compensation

12. Workers Compensation Fraud (Cont.) • In 2002-03 there were 660 fraud cases representing more than $54 million dollars in chargeable fraud • Humboldt man was charged with 6 Felony counts for defrauding workers’ comp. • $7.1 billion in 1993 to $29 billion in 2003 • Fraud estimated to be between $1 to $3 billion Workers' Compensation

13. Workers Compensation Fraud (Cont.) Fraud committed by companies Falsely declaring number of workers Falsely declaring number of hours California passed AB227 Before legislation 50,000 Now 150,000 Investigation department Workers' Compensation

14. Video Workers’ Comp. fraud: It affects us all Workers' Compensation

15. Current Claims and Costs in California • Reserves more than doubled from $9.5 billion in 1995 to $25 billion in 2002. • Medical Expenditures skyrocketed from $2.6 - $5.3 billion. • Claims have been declining, but savings have been offset by rising medical costs. Workers' Compensation

16. The Rise In Cost • Substantial increases in medical costs per claim • Average medical cost per claim in 2002 was $31,000. • California employers pay more in Workers’ Compensation premiums than any other state. • 40 states premiums average less then $4.00 per $100 of payroll • California averages $6.50 per $100 of payroll Workers' Compensation

17. Current Claims & Cost (cont.) • California has difficult political environment for business. • Between 1997 and 2000, indemnity claims increased 230%. • 62% of claim dollars go to medical bills and not weekly benefits. • Excessive use of prescription pain medication. Workers' Compensation

18. Current Claims & Cost (Cont.) • Hospital Cost totaled $1.1 Billion in 2002. • Chiropractor visits per claim up 70% • Pharmaceutical service has grown 243% • $86.4 million in 1997 to $296.6 million in 2002 Workers' Compensation

19. Workers' Compensation

20. Table 1: Service Utilization in California vs. Other States Workers' Compensation

21. California Legislation • AB 749 was passed on February 4, 2002 • Bill provides first increase in workers’ compensation benefits for injured workers since July 1, 1996. • Mandates return to work programs • Also provides pharmaceutical and outpatient surgery fee schedule • New requirements for enforcement of illegally uninsured employers. Workers' Compensation

22. Reform Plan • Propose to cut workers compensation rates in half. • Which would result in $5 Billion in savings. • Democrats have stated that the reform package would reduce workers’ compensation cost by 14.9%. • Plan will also increase the burden of proof for claims of “cumulative injuries” that builds over time. Workers' Compensation

23. Proposed Solutions To Workers Compensation • To regulate the amount of chiropractic and physical therapy visits per claim. • Strict guide lines of medical treatments. • Make fees for outpatient surgery centers tied to Medicare rates and pharmaceutical prices tied to Medi-Cal rates. Workers' Compensation

24. THE END For more information, please visit our Web site at www.angelfire.com/biz7/workerscomp/index.html Workers' Compensation