Business Insurance

Top Four Things Employers Should Know About Workers Compensation Reform

Happy Worker - workers comp
By Sue Ludden, Leavitt Group

On September 18, 2012 Governor Brown signed into law Senate Bill 863 (SB 863).  This bill encompasses sweeping changes to California’s workers compensation system.  Negotiated between labor and management, the bill was designed to increase benefits to injured workers, while reducing costs to employers through improved system efficiencies including lien reform, enhanced fee schedules, and adjustments to permanent disability benefits.

Most statutes of SB 863 took effect on January 1, 2013. The following is a summary of some of the key elements of SB 863.

1. Lien Reform

Lien reform is probably the most significant of all the cost-saving measures for employers.  The new law brings Independent Bill Review (IBR) which applies to any medical service where the fees are determined by the Official Medical Fee Schedule.  If a medical provider disputes the Explanation of Benefits and corresponding payment, their sole remedy is the IBR process.  If the provider fails to request IBR in a timely manner, their bill is deemed satisfied.  The IBR decision is final and binding on all parties.  The Workers Compensation Appeals Board will no longer have jurisdiction to order additional payment, thus these types of liens will eventually be eliminated from the system.  To clear the system of old liens, SB 863 establishes activation fees and filing fees as disincentives.  Inactive liens on file prior to 1/1/13 for which an activation fee of $100 has not been filed before 1/1/14 will be dismissed by operation of law. Lien claimants not subject to IBR can still adjudicate their liens, but they must now pay a filing fee of $150 to be heard.  These changes are expected to clear the pipeline of outdated liens and so-called “zombie” liens that have bogged down the system for decades.

2. Enhanced Fee Schedules

Enhanced fee schedules will limit payments to vocational rehabilitation experts, copy services, interpreters, and ambulatory surgery centers.  Previously negotiated without an official fee schedule, these types of vendors had egregiously price gouged the system for years.  There will also be limitations imposed on “home health services” along with a fee schedule to be created by 7/1/13.  The employer will no longer be liable for retroactive home care services provided before the receipt of a doctor’s prescription, and the employer will not owe for services provided by family members to the extent that family members already provided those services before the injury (such as gardening, housekeeping, etc.).

3. Permanent Disability Benefits

There are several adjustments to permanent disability benefits for injuries occurring after 1/1/13.  The rating schedule still takes into account the AMA Guides and the employee’s occupation and age; however, the diminished future earning capacity modifier is eliminated.  Instead, each whole person impairment from the AMA Guides will be increased by 1.4 (140 percent).  The maximum weekly rate for permanent disability benefits is also rising.  Phased in over two years, the maximum rate will increase from $230 per week to $290 per week by 2014.  Although SB 863 increases permanent disability benefits for injured workers, it bars add-on impairments for alleged sleep dysfunction, sexual dysfunction, and psychiatric disorders.  There is no limitation on medical treatment for these conditions if they are a consequence of an industrial physical injury, but an increase in permanent disability will no longer be allowed.  The 15 percent adjustment up/down has also been eliminated by SB 863.  There is no longer an increase or decrease in permanent disability benefits depending on the employer’s ability to offer regular, permanent modified, or alternative work.

The full array of statutory changes resulting from SB 863 is vast.  These are merely a few examples of the multitude of changes.

4. “Time of Hire” Pamphlet

In conjunction with the new law, the Department of Industrial Relations has updated the “Time of Hire” pamphlet which is mandatory per Labor Code 3551, which states in part:

Every employer…shall give every new employee either at the time the employee is hired or by the end of the first pay period, written notice of the information contained in section 3550.  The notice required by this section shall be easily understandable and available in both English and Spanish.  In addition to the information contained in section 3550, the content of the notice shall include:

  • Generally, how to obtain appropriate medical care for a job injury
  • The role and function of the primary treating physician
  • A form the employee may use to notify the employer of the name of the employee’s personal physician or personal chiropractor

The mandatory form/pamphlet can be found online at  Go to the Workers Comp tab and select Employer Information.  On the Employer Information page look for the General Information bar. The “Time of Hire” pamphlet can be found here and is available in English and Spanish, free of charge.