The good folks at Forbes recently offered California doctors and injured workers a slap in the face, in the form of a political fantasy narrative thinly veiled as an objective analysis of workers’ comp data.

In an article titled How An Out-of-Control Workers’ Comp System Was Rebuilt, Forbes contributor Michael Bernick tells a Tolkien-worthy tale of a workers’ comp system rescued from government bureaucracy, chronic inefficiency, and “predatory middlemen” by California Senate Bill 863.

Conveniently ignoring the arguably devastating effects of SB 863 and the current deep dysfunctions of California’s workers’ comp, Bernick rests his case entirely on data from — wait for it — the Workers’ Compensation Insurance Ratings Bureau (WCIRB), an organization made up solely of workers’ comp insurance companies, which routinely publishes reports based on incomplete, unverified data furnished exclusively by its members.

As unwarranted billing and payment friction abound, the costs of Medical-Legal disputes skyrocket, and injured workers struggle to find providers willing to navigate an impossible-seeming system rife with Pay-to-Treat schemes siphoning employer premiums, Forbes celebrates a job well done — according to insurers, anyway.

Below, we tell the other side of the story (as supported by verifiable data).

Forbes’ Source: Insurance Companies

As we pointed out in our rebuttal to the WCIRB’s sky-is-falling report on rising workers’ comp costs, the WCIRB is anything but a neutral numbers-cruncher.

It’s bad enough that the organization comprises solely workers’ comp insurers, and reports only self-reported, admittedly unverified data taken exclusively from its members. Straining its claims to objectivity even further, the WCIRB acknowledges restricting its data analyses to payments made by insurers — which are not the only payers in California workers’ comp. WCIRB reporting excludes:

• Self-insured employers, which cover 1 in 8 California employees according to the Office of Self-Insurance Plans (OSIP)
• Public/JPA Self-Insured California employers, which represent 2 million employees
• TPAs that handle claims on behalf of self-insured employers and insurers

In other words, any analysis of workers’ comp data that relies solely on the WCIRB is incomplete at best, and can read like insurer propaganda at worst. Nonetheless, Forbes declares the reforms of SB 863 “...were denounced by opponents as ‘anti-worker’ and ‘a giveaway to employers’. But now, ten years later, the data are in.”

Whose data, exactly?

Unobtainable Care Saves Insurers Money

In the insurance game, the quickest way to increase profits is not to pay the bill. And with SB 863, California legislators arguably seemed all too willing to help insurers thrive.

SB 863 introduced two important factors that allow workers’ comp insurers to restrict the care received by an injured worker, and thus reduce the amounts billed and paid:  

1. Medical Provider Networks (MPNs): When an employer’s workers’ comp insurer establishes an MPN, that employer’s injured workers may only receive care from doctors chosen by the insurer.
   
   There are 2,486 MPNs in California, and no technology allows an injured worker (or a doctor) to identify which of the 2,486 MPNs applies to any of the given 1,037,000 California employers. In practice, these MPNs are chaotic, steerage-class HMOs with inadequate regulatory oversight regarding the quality of care. Anti-worker? We’d say so.

2. Prior Authorization: Before providing all treatment (including x-rays, antibiotics, Ace bandages, Tylenol, and Bandaids), doctors must complete and fax a paper form to the workers’ comp insurer requesting the insurer’s permission.
   
   If the insurer denies the requested treatment, the injured worker must wait a year before the doctor can request the treatment again. Data drawn from 288,719 treatment authorization requests submitted through daisyAuth in 2022 indicates that only 71% of requested treatment is approved. One particular large insurer’s treatment approval rate is as low as 59%. Anti-worker? Yes indeed.

California legislators quickly implemented these care-restricting measures, which boosted insurer profits without simultaneously mandating regulatory oversight regarding the effects on injured workers. Since SB 863 passed, we have written extensively about California regulators silently standing on the sidelines, failing to enforce the minimal requirements placed on insurers.

Essentially, SB 863 allowed insurers to take injured workers’ care hostage, by allowing insurers to both:

1. Choose the injured worker’s doctor, and
2. Deny (or ignore) the treatment recommended by the doctor

Pro-insurer? There’s no question.

Medical-Legal Expenses

Forbes celebrates the “...sharp reduction of the frictional costs imposed by unnecessary ligation and predatory middlemen” in California workers’ comp since 2012.

This celebration should surprise the countless workers, employers, and claims administrators embroiled in increasingly costly Medical-Legal disputes, the result of workers having to constantly lawyer up and go to the mat to obtain care.

In 2022 Medical-Legal evaluators using daisyBill sent 123,772 bills totaling $276,072,111 owed per the Medical-Legal Fee Schedule (MLFS) to resolve care disputes (an average cost per bill of $2,230). As a comparison, daisyBill medical providers sent 1,386,874 medical treatment bills in 2022 and received payments totaling $246,885,329 (an average cost per bill of $178).

In other words, the count of Medical-Legal bills (123,772) was only 9% of the total count of medical treatment bills (1,386,874). Yet, the Medical-Legal bills cost employers almost $30,000,000 more (not including attorney fees, copy service charges, and the variety of other legal costs associated with disputed injuries) than medical treatment bills.

Verifiable data shows it cost more to prevent injured workers from receiving care than it did to…y’know, heal them. Is this the “sharp reduction in frictional costs” to which Forbes alludes?

“A Cottage Industry of Middlemen”

Along with (presumably) corrupt doctors, and injured workers who apparently should’ve just walked it off, Forbes homes in on another group of malefactors in pre-SB 863 California:

“Perhaps most of all the system came to be taken over by a cottage industry of “middlemen”—attorneys, fee-for-service medical care providers, sellers of durable medical equipment and spinal hardware. These middlemen took advantage of the billing possible in an improperly incentivized and inadequately regulated multi-billion dollar system.”

According to Forbes, thanks to SB 863, the doctors, attorneys, and ne’er-do-wells selling crutches have stopped leeching the system.

Instead, California is now blessed with Preferred Provider Organizations (PPOs), bill review services, and “entities providing physician network services” leeching employer’s premiums while providing zero services to injured workers. Replacing one kind of middleperson with another is not progress; it’s simply shifting the beneficiaries of alleged corruption.

SB 863 Fantasy vs. Reality

With no regulatory oversight (or enforcement) in California, employers, providers, and injured workers are suffering the effects of SB 863, including:

• The impenetrable MPN system, which in conjunction with PPOs, has reduced workers’ comp reimbursement to roughly Medicare rates
• Doctors burdened with mountains of nonsensical paper forms, in order to beg insurers for permission to actually treat injured workers
• A Utilization Review (UR) system incapable of addressing injured workers’ needs across Primary Treating Physicians (PTPs) and specialists, leading to irresolvable “dead ends” in care, all with zero regulatory oversight
• Endless dirty pool by some insurers, which refuse payment for care the insurers themselves authorized  

Forbes hails SB 863 as  “...the first truly successful reforms of California’s workers’ compensation.” We can’t help but agree; SB 863 was wildly successful in creating the conditions for insurers to increase profits.

If we’re going to find real solutions, stakeholders need to put posturing and politics aside and focus on instructive data and analyses — not feel-good fluff seemingly planted on an online content mill purporting to be a business magazine. To spur meaningful change, California must embrace technology and data analysis that allows the state to better understand the true impact of legislation like SB 863.

Workers’ comp can work for providers. daisyBill software, data, and expertise makes billing easier, faster, and less costly. Request a free demonstration below.

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