California Senate Bill 636, which addresses a vital aspect of the Utilization Review (UR) process in workers’ comp, is on the Governor’s desk awaiting his signature.

In California workers’ comp, UR is the process by which the claims administrator denies or allows the care recommended by an injured worker’s treating physician.

Currently, California law allows any UR physician working on behalf of the claims administrator to modify or deny recommended treatment, as long as the UR physician's licensure and scope of practice are appropriate for the injury. For private employers, Senate Bill 636 would require UR physicians who modify or deny treatment to be licensed in California.

Proponents of the bill insist that UR doctors should be accountable to California for modifying or denying medically necessary and appropriate care in the state—an impossibility when UR doctors are licensed out of state. Opponents insist that limiting the pool of eligible UR physicians will increase employers' (already high) workers’ comp administrative costs.

Once again, payer advocates are trotting out the well-worn canard that providers—rather than gluttonous multinational private equity firms and blatantly non-compliant claims administrators—are leeching profit from employers’ workers’ comp dollars despite enormous evidence to the contrary.

Available data suggest that private employers should beg the Governor to sign this bill.

While UR denials may seem to save employers money, the real-world result of a broken UR system is that injured workers remain injured because longer claim durations feed more money to entities that profit at employers’ (and injured workers’) expense.

Myth: CA UR Saves Money

Thanks to California’s UR system—where two doctors are required to perform the job of one—injured workers’ care is dictated by doctors that claims administrators choose.

These claims administrators employ in-house or external Utilization Review Organizations (UROs) staffed with UR doctors who theoretically modify or deny treatment to control costs. However, two facts suggest the exact opposite:

1. In California, closing an injured worker’s claim takes twice as long as the national median. According to a report from the Workers’ Compensation Insurance Rating Bureau (WCIRB), it takes seven years to close 90% of claims in California, compared with the national median of three years.
2. During those seven years, employers pay 49 cents in administrative costs (aka profit for claims administrators, vendors, and private equity) for every dollar of benefits delivered to injured workers.

To justify this seven-year, 49-cent workers’ comp debacle to California employers, claims administrators claim their UR machines create “savings”—slapping lipstick on an extremely profitable pig. Rather than employer savings, the data demonstrate that the UR system burdens California employers with high administrative costs over comically extended claim durations.

Reality: CA UR Extends Claim Durations

Treating physicians throughout California report questionable practices by UROs, including allegations of rubber-stamped denials and dubious requests for peer-to-peer calls designed to initiate a game of phone tag to create a pretext for denial.

For 2024, daisyData shows that claims administrators' treatment denial rates range from as low as 3% of recommended treatments to as high as 46%, affirming state legislators’ (unheeded) demands that the Division of Workers’ Compensation (DWC) collect UR data from claims administrators. Most notably, only 42% of requested treatments have a UR decision posted—reflecting the DWC’s failure to implement regulations to track and enforce UR compliance by claims administrators as mandated by state law.

With massive national claims administrators employing UR physicians across the country, the DWC refusing to document UR decisions to monitor for excessive denial rates, and appeals against UR denials an exercise in futility, it’s all too easy to establish a UR “‘No’ Machine”—a denial mill that ultimately increases profits.

How much easier is it to escape accountability for potentially harmful UR practices in California when the UR physicians are in Alabama, Massachusetts, or South Dakota? In practical terms, out of state is out of reach.

CA SB 636: Only CA Doctors May Deny/Modify Treatment

SB 636 states that “It is the intent of the Legislature to require physicians performing utilization review regarding private California workers to be licensed in California and subject to the Medical Board of California.” With this bill, private employers can potentially escape some of the inflated costs brought on by UR dysfunction.

If signed into law, SB 636 would amend California Labor Code Section 4610 to add (emphasis ours):

“…commencing July 1, 2026, for purposes of private employers, a person other than a physician licensed pursuant to California state law who is competent to evaluate the specific clinical issues involved in the medical treatment services, if these services are within the scope of the physician’s practice, requested by the physician, shall not modify or deny requests for authorization of medical treatment for reasons of medical necessity to cure or relieve or due to incomplete or insufficient information…”

For years, legislators have attempted to pass the CA licensure requirement for the UR process. According to Workers’ Comp Executive, California Governors from both major political parties have vetoed the measure in past administrations.

Organized labor and other backers of the bill argue that it’s impossible for California to deter negligence or other forms of UR malpractice if the doctors are not accountable to California authorities. An argument can also be made that shrinking the pool of UR physicians to those licensed in California could potentially reduce treatment denial rates and close claims quicker—reducing the profits squeezed from employers.

All of which brings us to one of the perennial problems of workers’ comp reform: the persistent myth that somehow the money wasted in the workers’ comp system is due to rampant provider fraud. 

From pearl-clutching about fee schedule increases and Medical Legal costs (necessitated by UR denials) to persistent fetishes about fraud, providers represent the perfect shiny object to distract the Governor from the profits claims administrators, sidekick vendors, and private equity firms plunder from California employers.

We urge Governor Newsom to do what his predecessors would not, and add some measure of order to the deeply corrupted California UR process. If the concern is not to waste employers’ money, there are much better ways to cut costs—like asking the DWC why it is not enforcing payer compliance with existing laws.

Any California employer who believes that UR, as currently practiced by claims administrators, is saving money has been duped. Clearly, a majority of state legislators have seen through the veil; we hope the Governor follows suit.

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