All posts tagged California

Insurance Commissioner Okays Benchmark Rate Decrease for California Employers

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California’s insurance commissioner has approved a recommendation to reduce average baseline rates on workers’ compensation policies by 7.8% at the mid-year mark.

The mid-year reduction to the baseline rate is largely the result of reforms that were introduced in 2013 that have sped up the settlement process for claims (including many long-term claims), in addition to reducing medical costs.

Also, because of these reforms the cost of adjusting workers’ comp claims in California has dropped over the past few years.

Insurance carriers use the benchmark rate – also known as the pure premium rate – as a starting point for pricing their policies.

The benchmark rate is an average across all industries and employers may or may not see decreases in their workers’ comp premium come renewal as many other factors are at play, not the least of which is the employer’s own safety history.

Insurers are free to price their policies as they wish under California insurance law.

Region is also important and insurers are pricing policies for Southern California employers higher than for the rest of the state due to the continuing problem of cumulative trauma claims being filed by workers post-termination, mostly in the greater Los Angeles area.

“Cumulative injury claims often involve multiple injuries [that have developed over time], are very frequently litigated, are filed disproportionately in the Los Angeles Basin and often are filed on a post-termination basis,” the Workers’ Compensation Insurance Rating Bureau stated in a report on the state of the market as of Dec. 31, 2016.

Indeed, while cumulative trauma claims accounted for just 8% of all claims in 2005, in 2015 they comprised 18% of all claims, according to the Bureau.

The state insurance commissioner sets the benchmark rate with guidance from the Rating Bureau, which recommended a 7.8% rise to him in April.

The approved rate is 7.8% less than the pure premium rate for policies incepting on or after Jan. 1, 2017. The average advisory pure premium rate starting July 1 will be $2.02 per $100 of payroll. That’s compared with $2.19 per $100 of payroll as of Jan. 1.

The pure premium rate is a reflection of an overall decline in the total cost of claims thanks to SB 869, the legislation that was signed into law in 2013.

By addressing numerous cost drivers it has helped reduce medical costs, expedite claims settlements, and reduced the frequency of workers’ compensation claims. The legislation also increased benefits for some injured workers.

As a result, the average projected ultimate cost of a claim increased to $82,234 at the end of 2016, compared to $74,699 in 2013.

Rating Bureau Recommends Benchmark Rate Decrease for California Employers

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IN A SURPISE move, the Workers’ Compensation Insurance Rating Bureau of California has filed a recommendation to reduce average baseline rates on policies by 7.8% at the mid-year mark.

The mid-year reduction to the baseline rate is largely the result of reforms that were introduced in 2013 that have sped up the settlement process for claims (including many long-term claims), in addition to reducing medical costs.

Also, because of these reforms the cost of adjusting workers’ comp claims in California has dropped over the past few years.

Insurance carriers use the benchmark rate – also known as the pure premium rate – as a starting point for pricing their policies.

The benchmark rate is an average across all industries and employers may or may not see decreases in their workers’ comp premium come renewal as many other factors are at play, not the least of which is the employer’s own safety history.

Region is also important and insurers are pricing policies for Southern California employers higher than for the rest of the state due to the continuing problem of cumulative trauma claims being filed by workers post-termination, mostly in the greater Los Angeles area.

“Cumulative injury claims often involve multiple injuries [that have developed over time], are very frequently litigated, are filed disproportionately in the Los Angeles Basin and often are filed on a post-termination basis,” the Rating Bureau stated in a report on the state of the market as of Dec. 31, 2016.

Indeed, while cumulative trauma claims accounted for just 8% of all claims in 2005, in 2015 they comprised 18% of all claims, according to the Bureau.

The state insurance commissioner sets the benchmark rate with guidance from the Rating Bureau. A hearing will be held in June, after which the commissioner can choose to approve the rate filing, reject it or set another rate that’s either higher or lower than that recommended by the Bureau.

The rate filing is 7.8% less than the approved pure premium rate for policies incepting on or after Jan. 1, 2017. It recommends an average advisory pure premium rate of $2.02 per $100 of payroll. That’s compared with $2.19 per $100 of payroll as of Jan. 1.

The pure premium rate is a reflection of an overall decline in the total cost of claims thanks to SB 869, legislation that was signed into law in 2013.

By addressing numerous cost drivers it has helped reduce medical costs, expedite claims settlements, and reduced the frequency of workers’ compensation claims. The legislation also increased benefits for some injured workers.

As a result, the average projected ultimate cost of a claim increased to $82,234 at the end of 2016, compared to $74,699 in 2013.

Rising average payouts for wage losses and medical costs per claim are both contributing to average claim cost increases, according to Rating Bureau data.

Measure Aims to Reduce Unnecessary Opioid Prescriptions

Pharmacist in pharmacy (Digital Composite)

Employers and insurers in California are enthusiastic about the prospects of legislation that aims to reduce the chances of injured workers getting hooked on opioids when they are recovering from workplace injuries.

Senate Bill 482, which is sailing the through the Legislature, would require doctors to first check the state’s prescription drug monitoring system before writing a prescription for opioids.

The bill is moving through the state Legislature after a new study found that doctors have been seriously curtailing the amount of opioid prescriptions they write to injured workers. The study found that stronger laws on prescription drug monitoring were likely a main reason for opioid prescriptions having waned during the study period.

SB 482 aims to further tackle the opioid scourge that has hit injured workers hard, leading to addictions that reduce the chances of them returning to their at-injury employer. California has already seen a decrease in the opioid prescriptions for injured workers, but if this legislation passes, it would strengthen safeguards even further.

SB 482, authored by Sen. Ricardo Lara, a Democrat from Bell Gardens, aims to force doctors to use the Controlled Substance and Utilization Review and Evaluation System (CURES) database.

Even though CURES is the oldest such system in the nation, legislators believe that few doctors consult it before writing prescriptions for opioids, which are highly addictive and are often associated with slower recovery periods for injured workers.

Under the measure, doctors authorized to prescribe, order, administer, furnish or dispense a controlled substance, would be required to check CURES no earlier than 24 before writing a prescription for a Schedule II, Schedule III or Schedule IV controlled substance for the first time – and at least annually thereafter.

Doctors who knowingly fail to check the database before writing a prescription would be referred to their licensing board for administrative sanctions.

The measure has already been passed by the State Senate and two committees in the Assembly (in unanimous votes) and looks like it will have a smooth ride on the Assembly floor thanks to amendments that were made in June.

Employers and insurers are encouraging passage of the bill.

The American Insurance Association says that CURES and other prescription drug monitoring programs have been shown to be effective in controlling the practice of “doctor shopping”, whereby patients will visit different doctors to obtain prescriptions for addictive medications. The association also said it will protect patients and improve outcomes.

Additionally, the California Chamber of Commerce says that SB 482 would discourage doctor shopping and identify the handful of physicians who write the majority of inappropriate prescriptions for opioids.

 

Addictive Medications

Schedule II: Substances that have a high potential for abuse which may lead to severe psychological or physical dependence.

Types: : Methadone, meperidine (brand name Demerol), oxycodone (brand names OxyContin, Percocet), fentanyl, morphine and high-strength codeine.

Schedule III: : Substances with a potential for abuse less than substances in Schedule II, and abuse of which may lead to moderate or low physical dependence or high psychological dependence.

Types: : Hydrocodone (brand name Vicodin), codeine (Tylenol with Codeine).

Schedule IV: Substances in this schedule have a lower potential for abuse than schedule III drugs.

Types: : Brand names Xanax, Soma and Valium.

 

The study

The study, released in June by the Workers’ Compensation Research Institute, found “significant” decreases in the amount of opioid prescriptions being written for injured workers.

Fourteen of the 25 states examined by the institute recorded decreases in opioid prescriptions of between 11% and 31% in the study period, which measured 24-month periods ending in March 2012 and March 2014.

Michigan saw the biggest drop (31%), followed by Oklahoma (29%) and Massachusetts (24%). Texas saw a drop of 19%; Connecticut, 17%; California, 12%; and Pennsylvania, 4%. Just four states saw increases.

The institute noted that the decreases coincided with various states enacting legislation aimed at reducing the abuse of opioids by improving prescription drug monitoring programs and adopting more stringent treatment guidelines and drug formularies.

 

Pharmacist in pharmacy (Digital Composite)

Pharmacist in pharmacy (Digital Composite)

Agency Mulls Not Counting Portion of First Aid Claims in X-Mods

first aid stuff

California’s workers’ compensation rating agency is developing new guidelines that would exempt a portion of first aid claims from being included in the calculation of employers’ X-Mods.

Under state regulations, employers are required to report injuries that require first aid and are not severe enough for the employee to seek medical treatment or miss work. But despite the rules, few employers report the claims to their insurance companies.

The Workers’ Compensation Insurance Rating Bureau hopes that creating an exemption in the experience rating plan for first aid claims and injuries would increase reporting.

According to the trade press, the Rating Bureau is working on a plan that would exclude a portion of every claim from the X-Mod formula. The amount for that exemption has not been set and it’s likely that the change, even if approved this year, won’t take effect until at least 2017 or 2018.

But regardless, the move would be a welcome development for California employers, many of which are reluctant to notify their insurers of any injuries that involve only first aid treatment for fear that it will affect their X-Mod or because they are confused by the rules. The reporting of first aid claims is typically not mandatory in most other states.

The industries in which the lack of first aid claim reporting is most prevalent are the construction and restaurant industries, but it occurs in other sectors as well, according to the Rating Bureau.

When employers fail to report first aid claims it causes problems for claims adjusters, hinders workers’ ability to access workers’ comp benefits and has a negative impact on the employers that play by the rules and report all of their claims.

Also, what starts as an injury that only requires first aid treatment can later develop into a full-blown claim if the initial injury worsens.

According to the trade publication Workers’ Comp Executive, the Rating Bureau is looking at imposing a first aid claim exemption of $250, $500 or $1,000. It has been testing the different amounts and the effects on ensuring reliability of employers’ X-Mods.

 

Depending on the amount, it would have a substantial impact on reportable claims:

  • The $250 threshold would eliminate 15% of the claims in the system.
  • The $500 threshold would eliminate 36%.
  • The $1,000 threshold would eliminate 54%.

 

The biggest concern is that eliminating so many claims could reduce the rating system’s ability to accurately predict system costs and set accurate rates.

The Rating Bureau expects that at the $250 threshold, the change would mostly affect employers who have no other claims and that it would push up their X-Mod by just one percentage point on average.

The committee studying the issue “thought this was a reasonable trade off to get more claims into the system,” David Bellusci, the Rating Bureau’s chief actuary, said during a classification and rating committee meeting in early April, according to the trade publication.

The perception there is that the honest employers reporting all of their claims, including these smaller first aid only claims, are at a disadvantage to employers that are not currently reporting these claims.

Also, the Rating Bureau plans to work Cal/OSHA in regard to changing the definition of first aid. Cal/OSHA regulations do not require that employers report injuries that require first aid to the agency.

 

Seven Tips for Navigating a Workers’ Comp Audit

Audit_1

No business ever wants to be audited, but in the world of workers’ compensation insurance it’s a regular occurrence that does not need to be a stressful event.
A workers’ comp audit by your insurer is common for most mid-sized or larger employers, and the audit threshold in California is $16,000 or more in annual premium.
While many employers are used to audits and have their procedures and policies in place to ensure a smooth experience, some of you may be growing concerns that now are large enough to be subject to audits.
The key to a workers’ comp audit is preparation and having your paperwork (and electronic files) in order, so you can produce the required documents swiftly. We’ve prepared the following seven ways to prepare for an audit, and if you follow this advice it can save you stress and perhaps money.

1. Understand why you are being audited. Workers’ comp carriers base your premiums on your number and cost of any previous claims, your industry and your payroll. At the end of the policy, the insurer needs to audit your payroll to make sure that the payroll and class codes that you reported at the inception of the policy were correct and if they’ve changed during the last year. Remember that an audit can go both ways. The insurer’s auditor will be looking to see if you either owe or are owed money. You may have underestimated your payroll or incorrectly classified employees, or you may have overpaid due to similar classification errors.

2. Gather all records and paperwork requested by the auditor, and ensure that your documentation is in order. You’ll most likely be asked for the following:
• Employee records
• Payroll records
• Cash disbursements
• Certificates of insurance
• A detailed description of your business operations

3. Review prior audits. When you are preparing for an audit, go back further than your current policy year’s documents. Categorizing your employees correctly is what’s most important to ensure a smooth audit and not be hit by surprises. Knowing how your employees have been categorized in the past can help you make sure they’re categorized correctly in future audits.

4. Double-check the categorization for employees of subcontractors. This is one of those situations in which many small businesses have been overcharged by thousands of dollars in a single year because of an error. If your subcontractors carry their own workers’ compensation insurance, you aren’t responsible for paying premiums for them. If they don’t, you could be responsible for the exposure under your policy.

5. Don’t forget to keep track of overtime for your employees. Premiums are not calculated against the full overtime pay rate. Your workers’ compensation premiums aren’t calculated at a full overtime pay rate. Typically, the auditor will break out overtime pay and discount it to straight time. This is another situation that can cost you unnecessarily if your records aren’t accurate.

6. Don’t volunteer more information or records than the auditor asks for. This will help keep the audit focused and moving along, and avoid adding confusion and more questions that aren’t relevant to the audit.

7. Ask the auditor for the worksheet when the audit session is done, and then have us review it for accuracy. If you suspect there are mistakes in the worksheet, it’s your right to ask for a corrected audit.

Spending some time preparing for your next workers’ compensation audit is a worthwhile investment. With workers’ comp being one of your biggest expenses, you should not be paying any more than you need too, especially due to a small mistake.

Agency Recommends Further Rate Cuts for California Employers

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The reforms that were ushered in by the state Legislature in 2012 seem to be paying off, with the Workers’ Compensation Insurance Rating Bureau of California recommending that benchmark rates be cut by an average of 5% in July.

The Rating Bureau has forwarded its recommendation for a mid-year rate cut to the California Department of Insurance, and the insurance commissioner will hold a hearing on the filing likely in May. The filing was made in reaction to lower-than-expected medical cost development, as well as the cost of indemnity benefits per claim.

The Rating Bureau is recommending that the average rate that California employers pay for workers’ compensation coverage be adjusted downward to $2.30 per $100 of payroll. That’s 5% lower than the official benchmark rate as of Jan. 1 and 10% lower than the average rates that insurers had on file on Jan. 1.

If the insurance commissioner agrees with the recommendation and he reduces the official benchmark rate, the new rate will apply starting July 1.

Insurers are free to file their own rates and they use the official benchmark rate as a guide-post for pricing their policies.

Rates will vary across industry sectors, and more often carriers have been adding surcharges on policies for employers in certain regions, such as Southern California.

Besides some costs decreasing, the Rating Bureau noted that there are also some upward cost pressures – such as insurers’ overhead costs of adjusting claims, and fees paid to outside attorneys, experts and investigators. There was also a 91% increase in lien filings in 2015.

SB 863, passed by California legislators in September 2012, increased benefits for injured workers as of January 2013 and included a number of changes intended to reduce system costs.

Those included an independent review process for medical treatment and billing disputes, fee schedules for home health care, language interpretation and other comp-related services, and fees for lien filings.

 

New Workplace Notice Requirements Take Effect

one caucasian business woman man couple dispute conflict  in silhouette studio isolated on white background

IF YOU have more than five employees you are required to have in place as of April 1 anti-discrimination, anti-harassment and complaint investigation policies.

You are also required to post starting April 1 a notification to your employees about California’s pregnancy disability leave law.

The regulations, updated by the California Fair Employment and Housing Council, were spurred by recent court decisions. If you have not done so, now is the time to review your anti-harassment, discrimination and retaliation policies.

 

 

Steps You Need to Take Now

  • Include a mechanism that permits employees to complain to someone other than his or her immediate supervisor, such as a human resources manager or other supervisor, a complaint hotline, or an ombudsperson. It should also include contact information for the California Department of Fair Employment and Housing and the U.S. Equal Employment Opportunity Commission as additional avenues for employees to lodge complaints.
  • State that you will conduct a fair, timely and thorough investigation and that all parties will be given due process.
  • State that you will ensure that you will keep the matter confidential to the best extent possible, but not that it’s completely confidential.
  • Require supervisors to report complaints of misconduct to a designated person, such as a human resources manager.
  • Have a mechanism for remedial measures if you find misconduct.
  • Assure your workers that you will not retaliate against them for filing a complaint.

 

Ant-harassment Policy Basics

  • Set the policy in writing.
  • List all current protected categories covered under the Fair Employment and Housing Act.
  • Indicate that the FEHA prohibits not only supervisors and managers from engaging in prohibited conduct, but also co-workers and third parties with whom employees come into contact.
  • Create a complaint process to ensure that complaints receive the following:

–           Designation of confidentiality, to the extent possible.

–           Timely responses.

–           Impartial and timely investigation by qualified personnel.

–           Documentation and tracking for reasonable progress.

–           Options for remedial actions and resolutions.

–           Timely closure.

 

Pregnancy Disability Notice

Starting April 1, if you have five or more employees you are also required to post the “Your Rights and Obligations as a Pregnant Employee” notice alongside all of your other mandatory employment-related postings at your workplace.

You can find a copy of the new poster from the state at this website:

www.dfeh.ca.gov/res/docs/Publications/Brochures/2016/DFEH-100-20%20(04-16).pdf

Employers with 50 or more workers will continue to be requried to post the “Family Care and Medical Leave and Pregnancy Disability Leave” notification that has been required since July 2015.

California Wage & Hour Violations Can Create Personal Liability

A new California law gives the state labor commissioner expansive new powers to go after employers that have judgments against them for non-payment of wages, including issuing stop-work orders and holding officers personally liable.

The Fair Day’s Pay Act, which took effect Jan. 1, adds a whole new section to the state Labor Code aimed at reducing wage theft and making employers pay for skirting wage and hour laws. Specifically, those violations include:

  • Final payment of wages at termination.
  • Issuing wage statements.
  • Meal and rest break laws.
  • Expense reimbursement.
  • Payment of minimum wage.
  • Attorney’s fees for complainants.
  • Waiting time.

 

The new law has the potential to increase litigation against employers and it comes at a time when overall wage and hour cases have ballooned 58% between 2013 and 2015. Just between 2014 and 2015, there was a 28% increase in cases, according to Advisen.

The average value for these types of claims in California is $6 million.

While all of these laws are already on the books, the new law gives the labor commissioner new tools to enforce collection of judgments in wage and hour law cases. It adds a whole new level of liability to companies, but equally importantly to the men and women who run these enterprises as they can be held personally liable for judgments.

Some of the new tools at the labor commissioner’s disposal when trying to collect on judgments for non-payment of wages are:

  • Issuing stop orders against employers.
  • Issuing levies against employers’ bank accounts and accounts receivables.
  • Placing liens against an employer’s real and personal property.

 

 

The steps for collection under the new law are as follows:

  • Twenty days after a judgment is entered by a court in favor of the labor commissioner, or in favor of any employee, the commissioner can move to collect by issuing a notice of levy on a company’s funds, property and accounts receivable.
  • If a final judgment against an employer remains unsatisfied after a specified period of time, after the time to appeal has expired and no appeal is pending, the bill would prohibit an employer from continuing to conduct business in this state, unless the employer has secured a bond.
  • If an employer is found conducting business in violation of the bond requirement, the commissioner could issue a stop order prohibiting the use of employee labor by the employer until the employer complies with the bond requirement. The law would make the failure by an employer, owner, director, officer, or managing agent of the employer to observe a stop order a misdemeanor.

 

Officers in the crosshairs

The law also imposes criminal and personal liability against individuals who act for the employer, such as owners, officers, directors and managing agents. Because of this new law, those individuals have potential personal liability for a liability that didn’t exist before.

With this new area of liability opening up, and in light of the boom in wage and hour litigation anyway, it’s important for all employers to consider director’s and officer’s liability insurance and employment practices liability insurance.

Typically, EPLI policies have excluded coverage for unpaid wages and associated fines and penalties. Some insurance companies, though, will carve back a sublimit of coverage for wage and hour claims, but that is usually only for related defense costs.

There are also some novel options available from Bermuda and London insurers that blend a wage and hour policy with an existing EPLI policy. These policies vary in price and are still evolving.

Unfortunately, your typical D&O policy includes an exclusion for wage and hour claims.

But there is an option in specialty products called Side A “Differences in Condition” policies that can be attached to a D&O policy. Differences in condition policies generally don’t include an exclusion for wage and hour claims.

Depending on how the terms of these policies are written, they could include coverage for defense costs and possibly for settlements and judgments in suits that name directors and officers.

As the highly litigious area of wage and hour law evolves, please talk to us to evaluate your coverage and minimize your exposure.

Also, now is the time to revisit all of your wage and hour policies, including breaks and waiting time, to make sure they comply with state law. Don’t get left blindsided by a lawsuit that can bankrupt your company.

Top 10 Laws and Regulations Affecting Business in 2016 (Part 1)

Top 10 gold

AS WITH every New Year, businesses are faced with a slew of new laws and regulations. We’ve condensed them into a list of the top 10 most likely to affect your operations.

 

  1. New teeth to gender equal pay laws

A new state law adds teeth to the laws on gender pay equality.

Before SB 358, employees seeking to prove pay discrimination had to demonstrate that they are not paid at the same rate as someone of the opposite sex at the same establishment for “equal work.”

Under the new law, the requirement of “same establishment” has been deleted, and the employee need only show he or she is not being paid at the same rate for “substantially similar work.”

Substantially similar work means a composite of skill, effort and responsibility, performed under similar working conditions.

Employment law attorneys say the employer has the burden to affirmatively demonstrate the pay difference being complained about is based on any or all of these specific factors:

  • A seniority system,
  • A merit system,
  • A system that measures earnings by quality or quantity of production, or
  • Another factor, such as education, training or experience.

 

  1. Minimum wage increase

On Jan. 1, the state minimum wage increased to $10 an hour, the last of two incremental increases since legislation was passed in 2013. The first came on July 1, 2014, which moved the rate up to $9 an hour, where it has been until now.

 

  1. Employer mandate part II

At the end of 2015, the Affordable Care Act reprieve for business with 50 to 99 full-time or full-time equivalent employees ends.

Employers of this size are required to provide health insurance to at least 95% of their full-time employees and dependents up to age 26 starting this year.

For employers who don’t provide coverage, the fee is $2,000 per full-time employee (minus the first 30 full-time employees).

Companies with 100 or more full-time employees were required to cover their workers, starting in 2015.

 

  1. Health coverage reporting

Starting in 2016, employers with 50 or more full-time or full-time equivalent employees are required to make additional filings with the IRS, as well as supply their staff with forms.

Applicable large employers (with 50 or more full-time and full-time equivalent employees in the preceding calendar year) will use Form 1094-C and Form 1095-C to satisfy reporting requirements.

If filed on paper, these forms must be put in the mail no later than Feb. 28. If filing is done electronically, the due date is March 31.

You must provide 1095-C to your employees before the end of January, along with their W-2 forms

 

  1. Leeway to avoid frivolous lawsuits

AB 1506 gives employers 33 days to fix technical violations on an itemized wage statement before an employee can pursue civil litigation under the Private Attorneys General Act.

The California Chamber of Commerce championed the bill, which took effect on Oct. 2, 2015, saying it will greatly reduce frivolous litigation over an issue for which “injury” is hard to prove.

 

You can find out about the next five laws in our Thursday blog entry.