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Further Clarification on Workers' Compensation Assembly Bills 749 and 486
From Majestic Insurance
AB 749 was signed into law and took effect on January 1, 2003. The key
provisions of the law include benefit level increases, benefit rate increases
and significant structural changes in the administration of workers' compensation
in California. AB 486 was enacted to amend and clarify the provisions
of AB 749.
Majestic Insurance Company is providing its policyholders and producer
partners with this brochure to help them better understand the key provisions
of AB 749 with regard to their rights, obligations and potential penalties
under the law.
The intent of this new legislation is to improve the benefit levels provided
to injured workers, for injuries occurring on or after January 1, 2003,
and provide incentives to employers that will reduce the net cost of workers'
compensation. Insurers and policyholders alike have expanded responsibilities
in the implementation and observance of the new statutes.
Benefit Increases will Affect the Premium You Pay
AB 749 impacts the cost of workers' compensation insurance policies incepting
on or after January 1, 2002. The outstanding portion of these policies
is subject to mid term rate increases provided for by the California Legislature,
since 2003 injuries will arise out of policies that incept prior to and
expire after January 1, 2003.
All policies incepting during 2003 will be fully impacted by these benefit
increases and will continue to be impacted by the 2004 changes. The Workers'
Compensation Insurance Rating Bureau (WCIRB) estimates that when fully
implemented, AB 749 will increase benefit costs by 17.8%, or $3.2 billion
annually.'
A key feature of the legislation is the gradual increase in workers' compensation
benefits annually through 2006. The chart on pages 9 and 10 illustrates
the annual benefit level increases that are being phased in for injuries
occurring on or after January 1, 2003.
Changes to the Temporary Disability and Permanent
Total Disability Indemnity Rates
AB 749 increases the minimum and maximum temporary disability and permanent
total disability weekly benefits. These benefits are based on two thirds
of the average weekly earnings, subject to a minimum and maximum. The
minimum weekly payment for injuries occurring on or after January 1, 2003
is $126. The maximum benefit amount increases annually. Weekly benefits
increase to $728 in 2004 and to $840 in 2005. Injured workers on temporary
total disability for two or more years are entitled to increases up to
the maximum rate in effect at the time of payment.
Changes to the Permanent Partial Disability Rates
Minimum permanent partial disability (PD) payments increase to $105 in
2004 and to $130 in 2006. The increases in maximum payments depend on
the partial disability rate. In 2004, PD ratings less than 70% will be
paid at a maximum of $200 per week; PD ratings at least 70%, but less
than 100% will be paid at a maximum of $250 per week.
Change in the Death Benefit Maximums
Death benefits are scheduled based on the number of dependents. Beginning
in 2004, the maximum amount payable to the estate of a deceased employee
with no dependents will be $250,000, up from $125,000 in 2003.
In 2006, the following changes will apply:
o When the employee has no total dependents, but has one or more partial
dependent(s), the partial dependents) will receive eight times the annual
support provided by the employee, not to exceed $250,000.
o If the employee has one total dependent and no partial dependent(s),
the maximum amount payable will double to $250,000.
o In the case of one total dependent and one or more partial dependent(s),
the total dependent will receive a maximum of $250,000. The partial dependents)
will receive four times the annual support provided, not to exceed $40,000.
o For two total dependents, the maximum will double to $290,000; for three
or more dependents, it will double to $320,000.
o A child found by any trier of fact to be physically or mentally incapacitated
from earning will be conclusively presumed to be wholly dependent.
Changes in Life Pension Rates
The weekly wage used to determine maximum life pension benefits will double
from $257.69 to $515.39 in 2006. Thereafter, the rate will increase on
an annual basis determined by the percentage increase in the state average
weekly wage.
Changes pertaining to Pharmacy and Outpatient Surgery
To help control the increasing pharmaceutical costs, the use of generic
drugs, when available, is required unless otherwise prescribed by the
physician.
Employers may send injured employees to their own Preferred Provider Network
(PPO) for prescription and outpatient surgical services even if the employee
has medical control.
Fraud Reform
Civil penalties for fraud have doubled from $2,000 $5,000 per claim to
$4,000 $10,000 per claim. Any person who has been previously convicted
of fraud is subject to an additional penalty of $4,000 for each violation.
There may be additional assessments for medical treatment and/or medical
legal expenses paid. California Insurance Code fines for making knowingly
false or fraudulent statements with the intent to obtain or deny compensation
increased from $50,000 to $150,000.
Majestic Insurance Company reviews all cases for potential fraud abuse.
We will investigate and pursue all instances of fraudulent activity from
all aspects of a workers' compensation claim including employee, employer,
medical and legal.
Changes to Medical Disclosure
To ensure the medical privacy of an injured employee, an employer is entitled
to receive medical information limited to "the diagnosis of the mental
or physical condition for which workers' compensation is claimed and the
treatment provided for this condition." The employer also may receive
medical information that is necessary to modify the employee's work duties.
The employer will no longer be allowed information as to the "diagnosis
of the injury affecting the employer's premium." A preexisting condition
will not be disclosed unless part of the actual claim.
Changes to the Predesignation of Physician
The employee may predesignate a personal physician in writing prior to
a work related injury. If no predesignation is made, the employer will
continue to have thirty (30) days of medical control and the personal
physician will not have the presumption of correctness. Further, the predesignated
physician will not have the presumption of correctness for cases arising
under Labor Code §4064.5.
"Personal physician" is defined as the employee's regular licensed
physician or surgeon who has previously treated the employee and who holds
his/her medical records, including medical history.
Utilization Review Guidelines
A Utilization Review (UR) process will be used to approve, modify, delay
or deny treatment plans based on whether the proposed treatment is medically
necessary to cure and relieve the industrial injury pursuant to Labor
Code §4600. This plan is to be in writing, consistent with sound
clinical principles and process, filed with the Administrative Director
and made available upon request. Only medical information reasonably necessary
to make the treatment decision may be requested. The UR program must be
directed by a California licensed physician.
Majestic Insurance Company has a UR plan on file with the Administrative
Director. By reporting your claims through us, your workers' compensation
carrier, you are deemed to be in compliance.
New Official Medical Fee Schedule (OMFS)
After January 1, 2004, specific regulations govern fees for medical services
(other than physician services) such as surgical, chiropractic, acupuncture,
and hospital treatment, including pharmaceuticals, durable medical equipment,
health care facility fees and home health care services. The existing
OMFS rates for physician services will remain effective, with a 5% reduction,
in calendar years 2004 and 2005.
Vocational Rehabilitation/Supplemental Job Displacement Benefit
The vocational rehabilitation statue is repealed for injuries occurring
on or after January 1, 2004. Injured employees with permanent partial
disability who do not return to work within 60 days after termination
of temporary disability will be eligible for a supplemental job displacement
voucher. This voucher can be used at accredited or state approved schools
for education related retraining and/or skill enhancement. The amount
of the voucher depends on the percentage range of PD.
New Forms, Notices and Postings
Various forms and notices have been changed. The law requires that insurers
provide their policyholders with information on these changes and advise
them of potential penalties if the new statutes are violated.
1. DWC 1 Claim Form & Notice of Potential Eligibility
Employers must provide the employee a claim form for workers' compensation
benefits and a notice of potential eligibility for benefits within one
(1) working day of learning of an injury that results in lost time beyond
the employee's work shift or medical treatment beyond first aid.
Labor code §5401 was amended to require a new claim form to be drafted
with input from workers' compensation professionals. The new form is expected
to be approved by the Office of Administrative Law this year. In the meantime,
continue to use the current form.
2. Employer's Report of Occupational Injury or Illness,
Form 5020
California law requires employers to report every occupational injury
or illness that results in lost time beyond the date of the incident or
requires medical treatment beyond first aid, within five (5) days of knowledge.
In the event of a serious injury, illness or death a report must be made
immediately by telephone or telegraph to the nearest District Office of
the California Division of Occupational Safety and Health. CaIOSHA penalties
have been raised from $500 to $5,000 for non compliance. For a complete
discussion of this new record keeping requirement, please refer to Majesties
Bulletin: OSHA Record Keeping and Reporting Requirements (Serious Injury,
Illness and Fatality Reporting Update) available on our web site or by
contacting Ronda Mitchell, Majestic Insurance Risk Control Coordinator
at 800 216 7770. REPORT ALL INJURIES IMMEDIATELY
Filing a claim form is not admission of liability. We encourage you to
file the form even if you feel that the claim is not valid. Majestic Insurance
Company will review each claim for validity and compensability. Our Three
Point Contact standard will ensure that we get accurate information from
you, the employer, the injured employee and the treating physician. We
can then begin or delay benefits, refer the claim to an investigator and
assure that the injured employee is receiving appropriate medical care.
The Employer's Report of Occupational Injury or Illness (Form 5020) was
revised to conform to OSHA forms and terminology as well as medical confidentiality
standards. The revision allows employers to use the 5020 as an equivalent
of the OSHA form 301 and submit this form to OSHA. The new 5020 form is
available for registered policyholders/ users at www.mamesticinsurance.com.
Policyholders reporting their claims electronically through our Web site are already receiving the revised 5020 via e mail. A Majestic Insurance specialist is also available 24 hours a day, 7 days a week to help you complete the 5020 via our toll free number at 1 877 557 2232.
3. Changes in Loss Control
AB 749 eliminated the state's loss control certification unit as of December
31, 2002. It has been replaced by the "Workers' Occupational Safety
and Health Education Fund". The Department of Industrial Relations
will establish a Loss Control Services Coordinator to provide information
to employers and respond to service complaints. The fund will also support
the Commission on Health and Safety and Workers' Compensation for training
and education programs. These programs and new position will be funded
by fees collected from insurers. Employers are required to comply with
Occupational Safety and Health Standards mandated by CaIOSHA.
4. Posting Notices
AB 749 amended Labor Code §3550 requiring a new format and additional
content for the workers' compensation notice that employers are required
to post at all their worksites. The amendment requires that insurers provide
the notice to their policyholders with advice regarding posting requirements
and the penalties for failure to post.
The "If a Work Injury Occurs..." poster revised in December
2003 complies with the amended Labor Code. Employers must post the notice
with the name of their insurer and information about workers' compensation
benefits in a prominent location that can be seen by employees during
business hours. Likewise, if the employer has Spanish speaking employees,
the notice must also be available in Spanish.
Failure to keep this notice posted could result in a misdemeanor and evidence
that the business is illegally uninsured. If the employer fails to post,
the injured employee gains the right to treat with his/her personal physician
for injuries occurring during the period of failure to post even if he/she
did not predesignate a personal doctor. Thus, the employer loses the right
to medical control for the first (30) thirty days from the date the injury
is reported. Civil penalties of up to $7,000 for each violation will also
apply.
5. New Employee/Time of Hire Pamphlet
As an employer, you are required to advise your employees of their rights
to workers' compensation benefits at the time of hire or by the end of
the first pay period. This mandated notice must be easy to understand
and available in both English and Spanish. The "Facts About Workers'
Compensation" pamphlet was revised in November 2003 to include an
explanation of the role of the primary treating physician and a form that
the employee may use to notify the employer of the name and address of
his/her designated personal doctor. It also includes information related
to enactment of AB 227 and SIB 228.
last updated: May 27, 2004
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