It's time to confront a fundamental problem with California's workers' compensation system.

California employers are paying higher workers' comp premiums, even as rates drop in almost every other state. To ensure those premiums fund appropriate care for injured workers, the legislature creates laws governing treatment approval, claims handling, and provider payment.

Too often, those protective laws are all but meaningless.

The agency tasked with upholding workers' comp laws, the California Division of Workers' Compensation (CA DWC), routinely fails to both enforce and follow statutory requirements. This abdication of its role doesn't just harm employers, injured workers, and providers; it enriches vendors that, arguably, thrive when workers remain injured.

As long as the CA DWC persists in its current anarchic approach, crafting legislation will be a futile exercise, incapable of improving California's deteriorating workers' comp system. Employers will keep pouring money into a system that too often fails to heal their employees, and providers will keep fleeing a system that punishes them financially.

Meanwhile, vendors will keep profiting from the system’s failure to restore injured workers to health.

CA DWC - Disregard for State Law and Providers

In case after case, the CA DWC flatly ignores legal mandates crafted in good faith by legislators. These are not random or isolated incidents, but years-long violations that prevent transparency, enable abuse, and reward non-compliance by payers and their vendors.

Examples include:

Independent Bill Review (IBR) Assignment Deadlines (Labor Code Section 4603.6): By law, the CA DWC must assign providers' requests for IBR within 30 days. In 2025, the agency violated this mandate in 96% of cases, leaving providers unpaid for months while claims administrators retained the funds in dispute.

Utilization Review (UR) Reporting (Labor Code Section 4610): Since 2016, state law has required the CA DWC to establish a system for payers to comply with mandatory electronic reporting of every UR decision, to monitor for potential abuse. Nine years later, the DWC has never implemented this monitoring system.

Claim Data Reporting (Labor Code Section 138.6): State law requires payers to report data to the Workers' Compensation Information System (WCIS). Yet, the CA DWC openly declares on the WCIS website that payers' participation in this reporting is "voluntary," a direct violation of the statute.

UR Transparency (Labor Code Section 138.8): Since 2024, the law requires the CA DWC to publish UR modification and denial rates for every physician treating injured workers. The DWC has never implemented this monitoring system.

The CA DWC also fails to enforce laws governing payers, including payment laws and regulations, appeal procedures, UR requirements, and penalty and interest payments owed to providers, while rigorously enforcing rules providers must follow.

For providers, every deadline, form, and technicality is ironclad. If a provider misses a Second Review appeal deadline by one day, they forfeit payment. If they submit an IBR request late or fail to pay the filing fee, the payer keeps the money.

This double standard drives physicians out of the workers' comp system, leaving injured workers with fewer options for care.

Who Profits From CA DWC Dysfunction?

The primary beneficiaries of the CA DWC’s regulatory neglect and selective enforcement are not employers, injured workers, or providers. The beneficiaries are vendors and, in many cases, their private equity backers.

California employers pay among the highest workers' comp premiums in the nation. The available data indicate that those premium dollars are not spent wisely or efficiently. Reportedly, it costs 51 cents in administrative costs to deliver every dollar's worth of benefits to California injured workers, nearly double the national median of 26 cents.

That money isn't going to the providers caring for your employees. California's fee schedule is among the lowest in the nation. Worse, daisyBill data show providers actually receive just 83% of those low rates, thanks to sophisticated discount mechanisms. Instead, premium dollars flow to:

• Claims administrators like Sedgwick, which until recently openly advertised how it increases profits for clients by derailing providers' requests for injured workers' treatment
• Preferred Provider Organizations (PPOs) that reduce provider reimbursement without delivering care or, arguably, any other tangible benefit
• Bill review organizations, which use elaborate methods to apply PPO discounts and otherwise reduce reimbursement
• UR organizations that deny treatment at alarming rates
• Private equity firms heavily invested in all of the above

The financial logic is simple: the longer an injured worker remains injured, the more billable administrative services (claims administration, bill review, UR) these vendors can generate. It's reasonable to posit that  every delay in recovery contributes to the revenue stream.

What Must Change in CA Workers' Comp

For the CA Legislature:

The profound dysfunction of the workers' comp system isn't due to a lack of laws; California has extensive statutes to protect providers and injured workers. The problem is a regulatory agency that fails to do its job.

California needs its legislators to:

• Demand accountability from the Department of Industrial Relations and the CA DWC
• Require regular public reporting on CA DWC compliance with existing legal mandates
• Create consequences for agency non-compliance
• Investigate why the CA DWC seemingly protects payer interests while undermining provider and injured worker protections

For CA Employers:

You are paying premium dollars into a barely regulated system that fails to heal injured employees or return them to work efficiently. It is in your power to:

• Question, loudly, why premiums are rising given low provider reimbursement and generally stable medical costs
• Ask where the premium dollars that are not spent on workers' benefits go
• Demand transparency from payers regarding treatment denial rates
• Support reforms that hold the CA DWC accountable for enforcing the laws already on the books

The CA DWC's failures have created a privileged class of vendors that siphon employer premium dollars while injured workers languish. Employers, injured workers, and providers deserve a state agency that upholds the law, not one that selectively enforces requirements to the benefit of private equity-backed payers and vendors.

Until the CA DWC faces accountability, no amount of legislative good intentions will fix a system in crisis.

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