What’s Wrong with this Picture?
WORKERS’ COMPENSATION INSURANCE VS. GROUP HEALTH:
CALIFORNIANS INJURED AT WORK GET SECOND-CLASS TREATMENT
Why does the State of California require Group Health Insurers to Meet High Standards and not Workers’ Compensation Insurers?
CAAA PRESS RELEASE FOR IMMEDIATE RELEASE: Thursday, July 24, 2014
Contact: Steve Hopcraft 916/457-5546, Steve@hopcraft.com; Twitter: @shopcraft
Sacramento, CA - The California Applicants’ Attorneys Association (CAAA), whose members represent Californians injured on the job, today launched a new series comparing quality health care measures in workers’ compensation insurance to group health insurance. The first release compares the percentage of the insurance premium dollar that goes to health care and disability compensation to insurance carriers’ administrative overhead. Workers’ compensation insurance carriers spend more than twice as much (36% vs. 15%) on their own operations.
“It would be illegal for California health insurers to spend as much of each premium dollar as workers’ compensation insurers do on administrative overhead,” said CAAA President Jim Butler. “Why should California firefighters, peace officers, nurses and others hurt doing their jobs get second-class treatment? Californians would not stand for the treatment they get in workers’ compensation if they were treated that way in their group health insurance.”
Every California business is required by the State to buy workers’ compensation insurance, or to self-insure. Every Californian injured at work is required to go through the workers’ compensation insurance company for treatment and compensation. No California workers’ compensation insurer is required to spend a certain percentage of premium dollars on medical claims; nor are their prices or profits limited or regulated; nor are they subject to effective penalties for misbehavior.
Group Health insurance law in California mandates that $.80 cents of premium dollar must be spent on medical claims. Large Group Health policies under the Affordable Care Act (ACA) must spend only 15% of the premium dollar on administrative expenses. The Affordable Care Act requires that insurers spend no more than $.20 ($.15 for large group plans) on marketing, fees to brokers, administrative costs, profits and items other than medical claims. Insurers who exceeded that ratio have rebated $1.6 billion to individuals and businesses in the last two years.
Workers’ Compensation insurance has no such limits, and $ .36 (or 36%) of each dollar is spent on administration. California workers’ compensation insurance companies are allowed to spend as much of the premium dollar on non-medical items as they wish.
“Much of this overhead is spent denying recommended medical treatment. Insurers’ Utilization Review (UR) denies over 3.5 million treatment requests annually. 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 denials that is keeping injured workers from healing and returning to work,” said Butler.
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. “Overused and costly UR will continue to threaten the integrity of the IMR process,” Butler said. “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.”
CAAA announced that the series would compare rates at which the two systems deny medical treatment; sustain or overturn patient appeals of Utilization Review (UR) denials, among other measures.
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