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Workers’ Compensation Insurance
Some State Agencies Are Paying Millions of Dollars More Than Necessary to Provide Benefits to Their Employees

Report Number: 2019-106

Figure 1
Several Types of Benefits Are Available Through California’s Workers’ Compensation System

A chart that describes five workers’ compensation benefits individuals may receive in California. This includes medical benefits, or those benefits covering authorized injury-related medical expenses, including doctor visits, surgeries, prosthetics, and therapeutic services. Additionally, an individual may be eligible to receive Industrial Disability (IDL) benefits. IDL is a partial wage replacement program equating to the employee's full pay minus withholdings for the first 22 days and two-thirds pay thereafter. Payments continue until the injured employee has returned to work or generally 52 weeks, whichever occurs first. If an individual becomes permanently disabled, they may be able to receive permanent disability benefits, or compensation benefits paid according to a calculated permanent disability level within legally established minimum and maximum limits. If the individual’s agency or employer does not offer the injured employee a return-to-work option, they may receive a voucher to help pay for educational retraining or skill enhancement. Lastly, if the injury results in the death of the employee, the employer provides benefits covering reasonable burial expenses and payments generally made to the employee’s dependents.

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Figure 2
State Fund Follows a Process for Handling the Medical Aspects of a Workers’ Compensation Claim

A flowchart that outlines what happens once an employee is injured on the job, notifies the agency of their work-related injury and submits a claim. Once the employee submits a claim form, their employing agency authorizes up to $10,000 for authorized medical treatment which the employee can use to obtain emergency medical treatment or an initial medical evaluation until State Fund determines whether or not the agency is liable for the injury. State Fund has 90 days from the date the employee submits a claim to accept or deny the claims. If State Fund denies the claim, treatment for the injury would not be funded by the agency, however, if the claim is approved a workers’ compensation physician can begin proposing treatment options to State Fund. State Fund reviews treatment plans against established medical standards through an authorization process which must be completed under time requirements, which vary under different circumstances. If State Fund determines that the proposed treatment is not medically necessary the treatment is not provided. If State Fund does determine that the proposed treatment is medically necessary, the workers’ compensation physician provides the treatment. If further medical treatment is needed the physician will continue to propose treatment to State Fund for approval. The physician will also determine when the employee has reached maximum medical improvement, or the point at which the employee’s condition has stabilized and, with or without treatment, is not expected to get any better or any worse. Once the workers’ compensation physician determines the employee has reached their maximum medical improvement, State Fund can being the claim closure process found at Figure 3. Throughout this process, a qualified medical examiner or agreed medical examiner may be required if the employee or State Fund cannot come to an agreement on whether the injury was work-related, level of permanent disability, among other things.

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Figure 3
State Fund Has Established a Process for Closing Claims

A flowchart that outlines what happens once a workers’ compensation physician determines that an employee has reached maximum medical improvement. If at that point the employee does not require any medical treatment and they will not receive permanent disability benefits, State Fund may decide to administratively close the claim. However, if additional benefits might be required, State Fund determines the employee’s disability rating and uses it to develop a settlement authorization request it then submits to the employee’s agency. The agency decides whether or not to approve the Settlement Authorization Request and if it does not approve it, State Fund must submit an updated request. Once the agency has approved the request State Fund presents settlement options to the employee. These options include a compromise and release or a stipulation. A compromise and release an agreement wherein the employee releases State Fund and the agency from future liability in exchange for a lump-sum payment to cover all costs associated with the injury. A stipulation is an agreement wherein the agency and employee agree to the amount and duration of permanent disability payments, with the agency agreeing continuing to pay for injury-related medical care, if needed. Both types of settlements would need to be approved by a workers’ compensation judge. If the employee and State Fund cannot agree to a compromise and release or a stipulation, either party may request a mandatory settlement conference. This conference may result in the parties agreeing to a compromise and release or a settlement; however, it the parties cannot reach an agreement, the case is scheduled for trial. At the end of a trial a workers’ compensation judge decides compensation is owed, the judge outlines the type and amount of payments and future care that the agency provides to the employee.

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Figure 4
The Number of Panels DWC Had to Replace Because of Unavailable Medical Evaluators More Than Quadrupled From Fiscal Years 2013–14 Through 2017–18

A chart that shows that the number of replacement panels has steadily increased during our five year testing period, increasing from just under 5,000 replacement panels in fiscal year 2013-14 to slightly less than 20,000 in fiscal year 2017-18. The number increased by nearly 5,000 replacement panels between fiscal year 2013-14 and 2014-15, and increased again by more than 5,000 between fiscal year 2014-15 and 2015-16, when the number reached just under 15,000. This number remained roughly the same through the following fiscal year of 2016-17 before increasing by nearly 5,000 again between fiscal year 2016-17 and 2017-18 to slightly less than 20,000.

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