Oakland, CA – The California Workers’ Compensation Institute (CWCI) recently released a new study on a proposal to alter California’s 104-week cap on temporary disability (TD) benefits by excluding TD paid or due during the resolution of medical disputes if a utilization review (UR) treatment denial is overturned by independent medical review (IMR) or the Appeals Board would drive up IT and administrative expenses for claims administrators but provide only a nominal increase in total TD to less than 0.3% of all claims.
To estimate the impact of the proposal included in AB 1213, now being debated by state lawmakers, CWCI compiled special datasets that allowed it to merge insured claims data from its Industry Research Information System (IRIS) database with IMR decision data from Maximus Federal Services, which manages the IMR process for the state. The study sample began with 178,956 IRIS claims with 2015 to 2017 injury dates, which the authors grouped into those that did and did not have TD payments, noting the number of paid TD days on the TD claims as of the end of 2022. Using claims from this 3-year period allowed the authors to analyze recent claims that could have been subject to the existing cap which limits TD payments to 104 weeks within five years of the date of injury.
Nearly a third (31.7%) of the 178,956 IRIS claims had paid TD days, which represents the proportion of all claims for which claims administrators would need to develop new tracking systems and protocols to identify and monitor claims that could be covered by AB 1213. Within the subset of TD claims, however, only those that had a UR treatment denial submitted to IMR would be eligible for the proposed tolling of the TD cap, so CWCI matched the IRIS claims data to the IMR data from Maximus and found that 11.7% of all TD claims had a treatment denial that resulted in an IMR determination. A review of the IMR outcomes further narrowed the population of claims that could be affected by AB 1213 down to just 3.2% of the TD claims that had a UR denial overturned by IMR.
AB 1213 would only apply to claims that reach the 104-week TD cap, so the final step in estimating the impact of the proposed change was to determine how many of the TD claims in the study sample that had an overturned UR denial were approaching the 104-week TD cap. State law already allows up to 240 compensable weeks of TD to be paid within 5 years of the injury date for claims involving a select list of serious, long-term injuries (e.g., severe burns, amputations, or chronic lung disease), so the authors excluded those claims from this analysis. After determining the total number of weeks of TD that had been paid for each claim, the authors calculated the percentage that had reached at least 98% of the 104-week maximum and found that only 0.9% of the TD claims in the sample were approaching the 104-week TD cap at the 5-year post-injury benchmark. Moreover, those claims represented less than 0.3% of the 178,956 medical-only and indemnity claims that were included in the original IRIS study sample, underscoring the very small proportion of the total injured worker population that would likely receive a nominal increase in their total TD benefits under AB 1213.
Meanwhile, the analysis notes that AB 1213’s current language would create costly new requirements for oversight and compliance for claims administrators. Chief among these would be the automation and programming costs required to update claims systems and the ongoing administrative costs for manual processes to identify and track claims with TD payments and UR and IMR activity. These requirements would apply to every workers’ compensation claims administrator in the state, further increasing California’s average loss adjustment expense, which has historically been the most expensive in the country, and as of 2022, exceeded the average amount paid by the median state by 73%. As state lawmakers debate the relative merits of AB 1213, the findings from this study raise the question of whether the minor impact of the proposal merits the substantial cost.
CWCI has released its analysis of AB 1213 in an Impact Analysis report which is available for free to the public and can be found under the Research tab at www.cwci.org and here: CWCI Impact Analysis: AB 1213 (PDF)