State of California M E M O R A N D U M REFERENCE CODE: 2002-082 DATE: December 31, 2002 TO: Health and Safety Officers Personnel Officers Return-to-Work/Claims Coordinators FROM: Department of Personnel Administration Benefits Division SUBJECT: Recent Legislative Changes in Workers' Compensation CONTACT: Keith Mentzer, Workers' Compensation Coordinator (916) 445-9792, CALNET (916) 485-9792 FAX: (916) 322-3769 Email: keithmentzer@dpa.ca.gov Effective January 1, 2003, workers' compensation benefits will increase pursuant to legislation passed earlier this year (AB 749 and AB 486). The legislation also makes administrative changes. In response to your requests for information on this legislation, we've prepared the following summary. Temporary Disability (TD) and Permanent Total Disability (PTD) Minimum weekly TD and PTD benefits will increase to the levels in the following chart. The current weekly minimum is the lesser of $126 or actual wages. The current weekly maximum is $490. Temporary and Permanent Total Disability Rates On or after January 1 of: Minimum: Maximum: 2003 $126 $602 2004 $126 $728 2005 $126 $840 2006+ $126 Adjusted to keep pace with state average weekly wage PML 2002-081 December 31, 2002 Page 2 Permanent Partial Disability (PPD) Minimum and maximum weekly PPD benefits will increase to the levels shown in the following chart. The current weekly minimum ranges from $70 to $130. The current weekly maximum ranges from $140 to $230, depending on the level of disability. In addition, the scheduled number of weeks of PPD payments will go up for each 1% of disability. For injuries on or after July 1, 2004, the week multiples increase from three to four weeks for each point of a rating of less than 10%, and from four to five weeks for each point of a rating from 10% up to 20%. Benefits will be paid at the maximum limits if the injured worker was under the age of 18, his or her incapacity is permanent, and the probable earnings capacity cannot reasonably be determined. Permanent Partial Disability Rates For injuries Minimum Maximum Maximum occurring on or (final rating (final rating after January 1 of: under 70%) over 70%) 2003 $100 $185 $230 2004 $105 $200 $250 2005 $105 $220 $270 2006 $130 $230 $270 Life Pension Benefits The maximum average weekly wage used to determine life pension benefits will increase to $515.38, which translates to a benefit payment of $307.30 per week if the total disability is 99.75%. The current maximum average weekly wage used to determine this benefit is $257.69, which translates to $153.65 per week if the total disability is 99.75%. For injuries occurring on or after January 1, 2006, life pension benefits will increase on January 1 of each year by an amount equal to the percentage increase in the state's average weekly wage. Death Benefits When an employee with no dependents dies from an industrial injury or illness, death benefits will be paid to the parent(s). Dependent children who are mentally or physically incapacitated from earning will continue receiving these benefits for life. PML 2002-081 December 31, 2002 Page 3 Effective January 1, 2004, if there are no dependents, a benefit payment of $250,000 will go to the employee's estate. Effective January 1, 2006, death benefits will double from the current levels of $125,000 to $250,000 for one dependent; $145,000 to $290,000 for two dependents; and $160,000 to $320,000 for three dependents. Settlement of Vocational Rehabilitation (VR) Employers will be allowed to offer a one-time payment, not to exceed $10,000, to settle the vocational rehabilitation portion of a represented employee's claim. The settlement agreement must be submitted to, and approved by, the VR unit upon a finding that the employee has knowingly and voluntarily agreed to relinquish his or her rehabilitation rights. The rehabilitation unit may disapprove the settlement agreement only upon a finding that receipt of rehabilitation services is necessary to return the employee to suitable gainful employment. Dispute Resolution Arbitration of any dispute will be permitted if both parties agree to arbitration. The "baseball arbitration" provisions in Labor Code section 4065 are eliminated by the new law. The Workers' Compensation Appeals Board is directed to set conferences within 30 days of the date the declaration of readiness is filed if the issue in dispute is employment or industrial causation. If the matter cannot be settled at conference, the law directs the WCAB to expeditiously set the matter for trial and issue a determination within 30 days of the trial. Fraud The new law doubles the penalties for fraud by any party. New Programs The new law authorizes new training and education programs for occupational safety and health, to be implemented by the Department of Industrial Relations (DIR). DIR will also establish and maintain a program to educate and train employers and employees on early and sustained return to work after an industrial injury. DIR also is authorized to establish an ombudsperson to provide information to employers about loss control services. PML 2002-081 December 31, 2002 Page 4 The ombudsperson would also address employer complaints and questions about loss control services provided by their insurer. Audits Performed by the Department of Industrial Relations The new law revises the audit process so that insurers such as the State Compensation Insurance Fund will be subject to audit on a more regular basis. A profile audit review will be performed at least once every five years and a full compliance audit will be performed if the subject fails to meet the applicable performance standards. Penalties will be assessed if the subject fails to meet established audit standards. The Department of Industrial Relations will be required to publish and make available a list ranking all insurers, self-insured employers, and third-party administrators based on the results of these audits. Treating Physician/Medical-Legal Reports The treating physician presumption of correctness is eliminated, except when the physician has been pre- designated by the employee. A non-represented employee who obtains an attorney after receiving a medical-legal report will be entitled to the same reports as if he or she had been represented by counsel from the time the dispute arose. Non-represented applicants who object to their panel Qualified Medical Evaluator (QME) evaluation will be able to retain an attorney and obtain another QME evaluation at the employer's expense. In this case, the defense will be allowed to obtain an additional QME as well. Penalties A delay in cashing a person's disability check will not be considered a violation of applicable penalty statutes if the delay is caused solely by compliance with state or federal banking statutes or regulations. This will eliminate penalties in situations where an applicant attempts to cash a large settlement or benefit check and the bank places a hold on part of it to verify the check will clear. Multiple penalties shall not be awarded under Labor Code section 5814 for a single delay in making a series of payments unless there's been a legally significant event that would constitute a subsequent delay. Attorney fees will be assessed in addition to any penalty for unreasonable delay in paying an award. PML 2002-081 December 31, 2002 Page 5 Prescription Drugs/Outpatient Surgery Only generic drugs may be provided unless the prescribing physician specifies otherwise in writing. In addition, employers or their claims administrators may contract with network pharmacies to fill prescriptions and require injured employees to use those pharmacies. The Department of Industrial Relations has been directed to develop a new fee schedule for prescriptions, a single pharmaceutical dispensing fee, and a new fee schedule for outpatient surgery. Liens Lien claimants will have five years from the date of injury to file and serve a lien, or one year from the date on which services were provided, or six months after resolution of the claim, whichever is later. The statute of limitations for a lien on the provision of benefits on a non-industrial basis (such as when a health maintenance organization treats an injured employee) will be six months after the person or entity first has knowledge that an industrial injury has been claimed. For More Information The State Compensation Insurance Fund has posted a two-page summary of these changes on its Web site. Go to www.scif.com/statecontracts and click on News & Information. The Workers' Compensation Insurance Rating Bureau also has posted information on the changes made by AB 749. Visit www.wcirbonline.org/index.asp and enter "AB 749" in the search box. If you have any questions, please contact Keith Mentzer at (916) 445-9792. Terri Westbrook, Chief Benefits Division