Brown Administration Had Unexpected Impact on Comp

Originally published by WorkCompCentral as authored by Greg Jones.

Expectations about the impact Jerry Brown would have on California’s workers’ compensation system at the start of his second stint as governor haven’t exactly matched reality.

When Brown, who previously served as governor from 1975 to 1982, was elected to a third term in 2010, employers were warned to brace for a raft of bills seeking to roll back the reforms of the previous administration. Worker advocates were simultaneously optimistic that they could win back some of the ground they felt they lost in the reforms of the early 2000s.

Eight years later, employers are singing the governor’s praises, and advocates for workers are hoping they’ll have more influence with Gov.-elect Gavin Newsom.

Jerry Azevedo, a spokesman for the Workers’ Compensation Action Network, said there wasn’t a lot of information available in 2010 that would have allowed employers to predict what Brown was going to do with comp, or even if he was going to do anything.

There wasn’t anything from Brown’s time as mayor of Oakland or California’s Attorney General that gave any clues, Azevedo said. And workers' comp is typically not an issue lawmakers want to wrestle with unless there’s a crisis brewing and they have to act, he said.

Azevedo said he thinks Brown has exceeded any expectations employers might have had about his interest and commitment to making sure the system functioned property and efficiently.

“Gov. Brown did two things distinctively different than many of his predecessors,” Azevedo said. “The first thing he did was he got involved before we got to a crisis stage. The second thing he did was he stayed involved and kept layering refinements on the 2012 reforms to ensure the system didn’t backslide and that we kept positive momentum going forward.”

The historic cycle of comp reform is that things start to unravel, which is reflected in costs and industry trends, according to Azevedo. That eventually is reflected in the cost of coverage. Once prices get high enough, lawmakers will enact some reform legislation, declare victory and walk away.

Historically, work reforms come about once per gubernatorial administration.

Senate Bill 863 was different in that it was an attempt to get out ahead of a budding problem with rising prices, Azevedo said. The bill, which was negotiated primarily by labor and management, implemented an independent medical review process to ensure doctors were deciding which treatments were necessary, rather than judges.

The bill implemented a $150 fee to file new liens after the start of 2013, while also requiring claimants that previously filed liens pay a $100 “activation fee” to continue pursuing payment.

It also increased permanent disability benefits by more than $1 billion and expedited delivery of the Supplemental Job Displacement Benefit Voucher intended to pay for vocational retraining. And it included a $120 million Return-to-Work Supplement program to compensate injured workers who suffered a disproportionate loss of earnings.

“The administration was intentional about what they were going after,” Azevedo said. “And what they were going after was waste and abuse.”

To some extent, the direction of system costs can be sussed out from Workers’ Compensation Insurance Rating Bureau reports that showed average charged rates continued to increase in 2013 and 2014, to an average of $2.97 per $100 of payroll. Since 2014, the average charged rate has fallen about 22%, to $2.33 in the first three months of 2018.

But under Brown, SB 863 wasn’t the last of the reforms. The governor signed a bill requiring the Division of Workers' Compensation to implement a prescription drug formulary, which rolled out at the start of the year. He also signed bills limiting the ability of lien claimants to sell receivables and requiring them to file declarations that they are eligible to seek payment for services provided.

The governor also enacted legislation requiring the DWC to stay liens filed by criminally charged providers and to suspend those who have been convicted of harming patients or defrauding comp insurers or other health care programs.

Azevedo said he was impressed with the governor sticking with comp and layering additional modifications on top of the comprehensive reforms in SB 863. He also said Brown made it an issue to engage with the primary stakeholders of labor and management to negotiate agreements and compromises for all legislation that was enacted throughout his tenure.

Azevedo said it was historically the case that reforms tend to benefit one side depending on who is in power. He said he hopes one of the lasting legacies of the Brown administration will be that lawmakers and regulators maintain the working relationship between representatives for employers and employees.

Jason Schmelzer, a lobbyist for the California Coalition on Workers’ Compensation, said Brown brought to the work comp system the same thing that he brought to the state generally: “He wasn’t afraid to veto bad bills that were politically difficult to veto.”

At the same time, Brown solidified the dynamic through which employers and labor were the primary drivers of system changes.

“To me, that was really about getting back to fundamentals as a system,” Schmelzer said.

He said he hopes the incoming administration will learn from Brown and say no to bad bills, and work with key stakeholders when the next round of fixes are needed.

“Look, it’s still the second-most expensive state for workers’ compensation,” he said, referring to the biennial Oregon rate comparison that was released in October. “Let’s not be confused about the system: It is slow to deliver care and expensive to deliver care.”

Representatives for carriers were also happy with Brown’s legacy.

Jeremy Merz, western region vice president for the American Insurance Association, said on Monday that while there may be disagreement over things such as benefit levels and the appropriate roles for utilization review and independent medical review, there’s little to debate about the stability of the comp system under Brown.

Mark Sektnan, vice president of state government relations for the Property Casualty Insurers Association of America, applauded Brown for his efforts to enact data-driven reforms.

“These reforms protect the injured worker,” he said in an email. “The reforms have also reduced unnecessary costs, which is demonstrated by continued rate reductions for employers.”

Worker advocates didn’t have quite the same rosy perspective of the Brown administration.

Jesse Ceniceros, president of Voters Injured at Work, said he got involved in comp as a result of the Gov. Arnold Schwarzenegger administration reforms and specifically, the provision in SB 899 allowing a part of a permanent disability to be apportioned to non-industrial causes. He said he was hoping for the proverbial pendulum to swing back toward injured workers under Brown.

“The truth of the matter is, I’ve heard a lot being involved with the industry that the pendulum swings one way or another depending on who is governor at the time," Ceniceros said. “During this administration, I didn’t see the pendulum swing very far on anything.”

Ceniceros acknowledged that he was able to speed up delivery of the vocational retraining voucher under Brown. He and Voters Injured and Work had sponsored a series of bills seeking to get the vouchers to injured workers without having to wait until they received an impairment rating before the language was included in SB 863.

“After that, it just seemed like it was an uphill battle to get anything else to protect the right of injured workers to their workers’ compensation benefits,” he said.

Ceniceros said he hopes Newsom will have an open ear to how issues are affecting injured workers and not adopt the cynical attitude that everyone receiving workers’ compensation benefits is committing fraud.

“That’s kind of what it felt like, that everybody felt like people who were injured were taking advantage of the system when that’s not the case,” he said.

Applicants’ attorneys Alan Gurvey, managing partner of Rowen, Gurvey & Win, in Sherman Oaks, said he and others were optimistic that Brown would hear the voices of injured workers and be “sympathetic to their plight.” They were not expecting an erosion of benefits, specifically those relating to medical treatment.

“From my perspective, it was rather shocking and it was a blow to my idealistic political perspective to see that the money interests and ‘cost containment’ drove the legislation under Gov. Brown,” Gurvey said. “It seems that he was very responsive to cutting costs while not being cognizant and aware of how these cost-cutting measures detrimentally impacted those who were legitimately injured.”

Gurvey said giving employers and carriers free rein over medical provider networks and UR was a “slap in the face to the grand bargain,” when legislation brought by advocates for injured workers was ignored or vetoed.

“Taking away the judicial intervention on medical treatment issues was a recipe for disaster, especially when the ultimate arbiter had no checks and balances,” he said. “That is the reality of independent medical review.”

He said he sees more ways to deny and delay benefits through the Labor Code now than there were at the start of the Brown administration, as well as rising litigation costs with more fighting over minutia.

“I think Gov. Brown’s legacy, at least in workers’ compensation, will be one of ignoring the rights of the individuals and creating poverty, and the worsening of medical conditions far more harmful than what we would expect to result from injuries on the job,” he said.

Gurvey said there are people from the defense bar, the applicants’ bar as well as carrier representatives who could work together and come up with workable solutions. But Brown chose to focus on unions and employers.

He said that with a new governor coming in, he hopes to see a focus on addressing medical provider networks and ensuring doctors know how to write reports that constitute substantial medical evidence. He also said he thinks UR and IMR need to be overhauled.

“There are so many fixes that are necessary, and only time will tell whether Gov. Newsom will focus on these fixes or will simply throw injured workers under the bus, as Gov. Brown did,” he said.