California Applicants' Attorneys Association Report: Insurers Deny 1 in 5 Doctors’ Treatment Requests; Up to 3,500,000 Denied Per Year

Significant UR Problems Undermine SB 863
Contact: Steve Hopcraft 916/457-5546,; Twitter: @shopcraft

SACRAMENTO, CA - The California Applicants’ Attorneys Association (CAAA), whose members represent Californians injured on the job, today released a report estimating that insurance carriers’ Utilization Review (UR) denies one in five physicians’ requests for medical treatment - up to 3,500,000 per year. CAAA based its report on information from the Division of Workers’ Compensation (DWC), and rejected insurers’ estimates of UR denials as “incorrect and misleading.” “Recent insurer information on UR is incorrect or misleading, seriously underestimates denials and masks a significant problem with UR denials of recommended care,” CAAA President Jim Butler said. “Excessive, costly Utilization Review (UR) threatens to undermine the anticipated cost savings from SB 863. Turning down 3.5 million doctors’ recommendations is an avalanche of denial that is keeping injured workers from healing and returning to work. It is inefficient and costly to the system to have so many treatment requests submitted and denied. Rampant UR denial is harming employers who need productive workers back on the job, as well as injured workers and their families.”

The DWC estimates there are 20 million medical treatment requests for injured workers each year. The most recent DWC UR investigation shows that less than 65% of requests for treatment authorizations were approved. DWC’s investigations also showed that individual claims administrators vary widely in their rate of UR denials. Nearly one of every five claims administrators audited by the Division had a denial rate of more than 50%. DWC’s investigation found that 15 claims administrators denied nearly one of every two requests for authorization. Two of the insurers with the highest denial rates are major insurers – the AIG companies (Chartis/Health Direct) and Fireman’s Fund Insurance Company ­­- with denial rates of 62.7% and 56% respectively. For AIG, the figures show that only one of every three requests for treatment is approved in UR, while almost two of every three treatment requests are denied.

“A significant number of claims administrators deny one out of every two requests for medical treatment. That percentage of treatment denials is likely much larger in serious injuries. It is apparent that there are major problems with UR,” said Butler. “If as many as 50% of treatment requests are sent to elevated UR, and over 35% of those requests are denied, that represents a denial rate of almost 18%. In a system with 20 million treatment requests each year, this represents a UR denial of over 3.5 million treatment requests annually.”

A recent insurer-funded release (from CWCI) claimed that up to 75% of requested medical services were approved in UR. But the CWCI information does not differentiate between “medical-only” claims, minor injuries entailing little or no permanent disabilities, and more significant work injuries. Medical-only claims represent less than 7% of total medical treatment costs. High rates of treatment approval in these minor injury cases have little effect on total system costs.

“Since no one in California tracks UR denials, it is impossible to say how many treatment requests are being denied. But recent DWC investigations indicate that many insurers are denying routine medical requests,” said Butler. “It is no help to employers when appropriate and necessary medical treatment is delayed or denied, as this not only creates unnecessary costs through the UR and IMR processes, but also delays return to work. It is likewise no help to employees when inappropriate or unnecessary medical treatment is requested. We need two things to happen to improve the system. Physicians have to submit appropriate and fully-documented treatment requests.”  Teaching physicians to do so is the subject of a special March seminar CAAA is putting on with the California Society for Industrial Medicine and Surgery (CSIMS). “The rules must facilitate the quick approval of appropriate, properly documented requests,” added Butler. CAAA has proposed rules and procedures that assure expeditious delivery of appropriate and necessary medical treatment.

UR has almost quadrupled since 2005, and is one of the fastest-growing costs in California workers’ compensation insurance, costing several hundred million dollars per year. CAAA is urging a thorough overhaul of the UR process. “Unless the UR process is improved,” Butler said, “it will continue to threaten the integrity of the IMR process. UR denies care even when the cost of denial is greater than the cost of the requested treatment. The cost of UR and IMR for an x- ray is much more costly than the x-ray itself. We call for the DWC to curb this abuse.”

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