SB 863 Six Years Later

| | Evidence Based Medicine, Utilization Review

Toms July 2018 Article on SB 863
SB 863 was passed by the California Legislature August 1, 2012 and signed by Gov. Jerry Brown September 18, 2012. The vast majority of changes took effect January 1, 2013. The bill was a compromise between employers and employees. The multifaceted goals of SB 863 were to increase benefits to injured workers, namely increased permanent partial disability benefits, while also lowering system or frictional costs for employers.

Here is a high level summary of reforms. The bill increased permanent partial disability benefits, eliminated the add-on claims for sleep disorders, sex disorders, and psychological issues; strengthened the medical provider networks; created a new independent medical review (IMR) process; phased in the RBRVS fee schedule; created fee schedules for home health services, copy services, interpreters and vocational experts; established independent bill review (IBR); created lien activation fees; and created a new return to work supplement.

But the biggest question remains. Did the reforms work? Did they save the California workers’ compensation system money? Recently, the Workers’ Compensation Insurance Rating Bureau (WCIRB) produced their 2018 State of the System report. The report, which is well researched and organized, provides several charts and tables that help answer this question.

If you look at page 34 of the report, you can see that the rate of growth in California workers’ compensation medical costs is well below other NCCI states and California group health premiums. The WCIRB attributes the both the 2003-2004 reforms (SB 899 and SB 228) along with SB 863, in reducing medical inflation.

In addition, if you look at page 53 you can see an interesting chart showing the results of a WCIRB cost evaluation of SB 863, and compared its initial estimates to actual numbers using 2013 to 2016 data. In terms of cost savings, the most significant savings seen thus far has been in the reduction of liens and lien litigation, along with the RBRVS fee schedule. Many system participants thought the RBRVS fee schedule would increase costs, but it has significantly decreased costs. Surprisingly, the IMR process has not yet yielded significant savings, but that is because there were significantly more IMRs than were initially projected.

So the bottom line, according to the WCIRB report, is that SB 863 has saved the California workers’ compensation system more than $1 billion in annual savings. The savings are real, but they took an unexpected and unpredictable path.

Tom Swiatek

Tom Swiatek

As Assistant Vice President of Regulatory Services, General Counsel, and Editor in Chief of UR Nation, Tom Swiatek draws on his experience as an insurance attorney on both the general liability side, as well as on workers’ compensation matters. As a California Workers’ Compensation Section Member, Tom is leading the discussion with respect to the regulatory challenges and opportunities facing the workers’ compensation system.