Reporting of Small Medical Only Claims

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1 W o r k e r s C o m p e n s a t i o n I n s u r a n c e R a t i n g B u r e a u o f C a l i f o r n i a Reporting of Small Medical Only Claims WCIRB Classification and Rating Committee May 10, 2016

2 Notice The information provided in this Presentation was developed by the Workers Compensation Insurance Rating Bureau of California (WCIRB) solely for the purpose of discussion during this Presentation. The WCIRB shall not be liable for any damages, of any kind, whether direct, indirect, incidental, punitive or consequential, arising from the use, inability to use, or reliance upon information provided in this Presentation Workers Compensation Insurance Rating Bureau of California. All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted by federal copyright law. No copyright is claimed in the text of statutes and regulations quoted within this work. Workers Compensation Insurance Rating Bureau of California, WCIRB, WCIRB California, WCIRB Connect, X-Mod Direct, escad and the WCIRB California logo (WCIRB Marks) are registered trademarks or service marks of the WCIRB. WCIRB Marks may not be displayed or used in any manner without the WCIRB s prior written permission. Any permitted copying of this work must maintain any and all trademarks and/or service marks on all copies. To seek permission to use any of the WCIRB Marks or any copyrighted material, please contact the Workers Compensation Insurance Rating Bureau of California at customerservice@wcirb.com. 2

3 Introduction & Background Underreporting of Small Medical-Only or First Aid Claims Longstanding Concern Experience rating fairness Can limit injured worker s access to medical benefits Can create difficulties in managing claim that may later deteriorate Uneven playing field to insurers, providers and producers C & R Committee Recommendation at 10/7/14 Meeting: Prior to Analyzing Potential Changes to Experience Rating Plan to Address Reporting Concerns, Review All Aspects of Issue with Broad Group of System Participants Working Group Formed in 2015 Meetings Held in 2015 & 2016 Objectives of Working Group Provide WCIRB broad understanding of issues surrounding reporting of small medical only claims and their use in experience rating Discuss potential regulatory changes to address the issues Report back to C & R Committee 3

4 Introduction & Background Insurance-Related Requirements California Labor Code & Standard Policy Contract Does Not Provide for an Exception to Insurer s Liability for Workplace Injuries Uniform Statistical Reporting Plan (USRP) Requires Insurers to Report Cost on All Claims (No First Aid Exception) Experience Rating Plan (ERP) Requires that the Cost of All Claims be Used in Experience Rating (No First Aid Exception) WCIRB in Consultation with the CDI has Published Several Bulletins that Specify that All Claims with Costs Incurred Must be Reported 4

5 Introduction & Background DIR Requirements Employers Not Required to Provide Claim Form (DWC-1) to Injured Worker on First Aid Claims (Labor Code Sec. 5401) Employers Not Required to Submit Employer s Report of Injury to DIR on First Aid Claims (Labor Code Sec ) Cal-OSHA requirements Include an Exception to the Logging of First Aid Injuries (Cal-OSHA Definition of First Aid Differs from Labor Code Sec. 5401) Physicians Required to File a Doctors First Report of Injury on All Claims in which They Provide Treatment Including First Aid Claims (Labor Code Sec. 6409(a)) 5

6 Introduction & Background Labor Code Section 5401 Definition of First Aid first aid means any one-time treatment, and any followup visit for the purpose of observation of minor scratches, cuts, burns, splinters, or other minor industrial injury, which do not ordinarily require medical care. This one-time treatment, and followup visit for the purpose of observation, is considered first aid even though provided by a physician or registered professional personnel. 6

7 Working Group General Observations Inconsistency of Reporting Requirements and Definitions Create Confusion Often to Employer s Economic Advantage to Pay Own Claim Rather than Reporting it to Insurer and Having its Cost Reflected in X-Mod Calculation Use of X-Mod Beyond its Intended Use Impacts Potential to Underreport Claims New 25% Impact Limit on Single Claim in Experience Period Increases Incentive to Underreport Difficult for Insurer to Report Costs on Claims it Did not Pay or Know About Requirements in USRP and ERP Not Always Being Followed Consistently Which Can Create Fairness Issues, Questions of Access to Benefits and Reduced Ability to Control the Cost of Claim Regulatory Changes to Address Issue Should be Considered Clarification of unit statistical claim reporting requirements Elimination of small claims from experience modification calculation Other statutory/regulatory changes related to first aid definitions and Department of Industrial Relations claim reporting requirements 7

8 Potential Clarifying Changes to WCIRB Reporting Requirements Definition of Medical Only Claims A claim or injury for which no indemnity is incurred. In general, such claims include, but for which medical treatment costs are incurred is a medical only claim or injury, regardless of whether the cost of medical treatment, including first aid, is paid by an employer or insurer, or regardless of whether a Workers Compensation Claim Form (DWC 1) is filed. Medical Only claims or injuries include but are not limited to all compensable injuries in which the disability does not extend beyond the waiting period specified in the workers compensation laws of California., or injuries for which medical treatment has been provided prior to a determination of compensability pursuant to Labor Code Section 5402(c). 8

9 Potential Clarifying Changes to WCIRB Reporting Requirements Reporting of Claims Any and all claims, including those involving first aid as defined in California Labor Code Section 5401(a), in which Indemnity Losses or Medical Losses are incurred or Allocated Loss Adjustment Expenses are paid must be reported individually. 9

10 Feasibility of Adjusting Experience Rating Formula % of All Claims Eliminated by Alternative Threshold Amounts 60% 54% 50% % of Total Claims Eliminated 40% 30% 20% 15% 36% 10% 0% First $250 of Claim Eliminated First $500 of Claim Eliminated First $1,000 of Claim Eliminated 10

11 Feasibility of Adjusting Experience Rating Formula Impact on Predictive Accuracy at Alternative Threshold Amounts All Employers Smaller Employers % Deterioration in Risk Weighted Predictive Accuracy 15% 10% 5% 0% 2.1% 3.6% First $250 of Claim Eliminated 3.9% 7.3% First $500 of Claim Eliminated 6.4% 12.6% First $1,000 of Claim Eliminated 11

12 Feasibility of Adjusting Experience Rating Formula Impact on Claim-Free X-Mod - Smallest 50,000 Rated Employers 90% Average Claim-Free Experience Modification 80% 70% 60% 79% Current Formula 80% First $250 of Claim Eliminated 81% First $500 of Claim Eliminated 83% First $1,000 of Claim Eliminated 12

13 Feasibility of Adjusting Experience Rating Formula Potential Impacts on Experience Modifications All Employers 40% 35% 30% Share of Risks 25% 20% 15% 10% 5% 0% -15%<= -14% -13% -12% -11% -10% -9% -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% >= Change in Modification from Variable Split Baseline 10% $250 $500 $1,000 13

14 Feasibility of Adjusting Experience Rating Formula Summary of Findings Elimination of First $500 or $1,000 of Losses from X-Mod Formula Many claims eliminated from X-Mod computations Significant loss in predictive accuracy Increases in claim-free X-Mods Majority of smaller employers would see X-Mod increase Elimination of First $250 of Medical Impacts of less magnitude than under elimination of first $500 or $1,000 of losses Some first aid claims above $250 Staff Recommendations Continue analysis of potential elimination of first $250 of each claim from Experience Rating Formula Potentially propose change as part of 2018 Regulatory Filing to be Effective on 2019 X-Mods 14

15 Potential Additional Regulatory & Statutory Changes Based on Working Group Input Staff has Contacted Department of Industrial Relations with Respect to Several Regulatory/Statutory Issues Consistency of first aid definitions Consistency of claim reporting requirements 15