California employers pay more than almost any other state for comp coverage, with premiums set to rise again in September. California claims take twice as long and cost twice as much to resolve as the national medians, strongly indicating that insurers and Third-Party Administrators (TPAs) are not spending employers’ premium dollars efficiently.

So, why are employers’ investments into workers’ comp premiums producing such a poor return? A huge part of the answer is Preferred Provider Organizations (PPOs).

We’ve discussed how the Utilization Review (UR) and Medical Provider Network (MPN) systems contribute to the broader systemic failure. But no discussion of California workers’ comp dysfunction is complete without a hard look at PPOs.

PPOs are the single largest factor driving down (already low) provider reimbursement and making it financially untenable for practices to accept workers’ comp patients. The facts are simple, and the obvious conclusion is inescapable:

1. Treating injured workers in California is prohibitively administratively expensive for providers.
2. California’s physician fee schedule for workers’ comp is one of the lowest nationally, paying only 155% of Medicare rates in 2026 (up from 151% of Medicare in 2025).
3. PPO discounts significantly reduce reimbursement under California’s already-low fee schedule rates.
4. MPNs make providers’ eligibility to treat injured workers conditional on joining PPOs.

Below, see hard daisyData on the net impact PPOs have on provider reimbursement. Inevitably, many practices conclude that they can’t afford to accept workers’ comp patients under the reimbursement tyranny of the MPN/PPO “pay-to-play” system.

As a result, injured workers can lose access to care…and stay injured longer.

Those extended claim durations mean more doctor visits, administrative services, and legal battles. While PPO discounting may appear at a glance to lower claim costs by decreasing reimbursement, the net effect of a system that deters provider participation is bound to be worse health outcomes.

For employers, that translates to lost productivity (as injured employees remain out of work and other employees must shoulder the additional load), and, ultimately, higher workers’ comp premiums.

Clearly, PPOs are failing to control costs for employers, as California’s increasing premiums defy a nationwide trend of decreasing premiums.