Let’s see, we establish a system designed to protect the interests of two groups with diametrically opposed interests, give them a level playing field, sprinkle in insurance carriers and thousands of support vendors providing a plethora of services, and tell them to manage all to the best of their ability. What could be so difficult about that?

Described as “the great compromise”, workers' compensation is a simple idea wrapped within an enormously complex machine with thousands of moving parts. A machine, comprised of competing and divergent interests, regional and jurisdictional variations, and both local and national influences, that when viewed from a high level looks as if it should not work at all. But it has worked. And it will continue to work. Not perfectly, but it has met the original challenges it was designed to resolve – notably chaotic litigation with absolutely no safety net for injured employees when they need it the most.

Over the years workers’ comp legislation and standards in most states have swayed like a pendulum, going far in one direction and then a corresponding correction in the other. The industries inherent adversarial nature means that we will never please everyone, and that someone will always oppose the latest and greatest efforts to set the ship right. The continuing challenge has been, and will continue to be, finding “perfect equilibrium”.

Good luck with that.

California is again the latest state to make the attempt, with the passage of SB 863, a bill designed to both increase benefits for workers and reduce systems costs for the employer. According to an analysis by the WCIRB, the bill could result in a total annual cost reduction of more than $1 Billion over the next two years. At the same time, the bill is projected to increase total permanent disability benefits by $600 million. The savings, it seems, will be gained from controls and cost limits placed on medical providers and ancillary services. The California State Compensation Insurance Fund has said it believes a provision to charge fees for lien filings alone will cut costs by $600 million.

Of course, if this sounds familiar, it is because we have been here before. In 2004 California enacted sweeping legislative changes with the passage of SB 899, which allowed for the creation of Medical Provider Networks, pre-designation of Physicians and limits to Occupational Therapy. There were a host of litigation changes, with one of the most notable being a change in fining structure for late or missing payments. Additionally, there were significant reductions in disability benefits. Vocational Rehab was severely curtailed, while a Return to Work program was put into place.

SB 899 was the latest and greatest “latest and greatest” for the state of California, up until that is, SB 863. Only time will tell how great this reform is, particularly compared to all the great reforms that preceded it.

I am not picking on California. This happens in all states at some point. My own state of Florida, known up until 1994 as a paradise for litigators and chiropractors, strongly reversed course in both 1994 and 2003. Court decisions and other elements have since forced the state to revisit the issue as recently as this year. Kansas last year underwent dramatic reforms that are playing out very well on the employer side thus far. Of course, people representing injured workers see it a bit differently. It was the first major revision in that state since 1992.

The point is, that the road to hell is often paved with good intentions (for sake of argument I am assuming attempted reforms are well intended – to assume otherwise is an entirely different topic). Despite the best efforts of legislators and stakeholder representatives who craft this legislation, things can go wrong. Court decisions can twist on a single word or sentence, poorly crafted or misapplied within legislative text. Regulatory interpretations can similarly skew the intent of the legislature.

A recent example of that was a Virginia Workers’ Compensation Deputy Commissioner's ruling on a new law that legislators had just passed to correct a previous oversight. That oversight was resulting in the denial of benefits to workers who suffered brain trauma, simply because they could not remember, and therefore testify, about their accident. The “fix” was a new law that provided a presumption that the accident was work related if a worker is “physically or mentally unable to testify” because of his injuries. The Deputy Commissioner ruled that State legislators only intended that the new law apply to “fatally injured workers” or those in comas who are completely unable to testify. Since, in the case before him the severely disabled worker could remember his name but not the accident, the commissioner ruled against him essentially because he wasn't dead.

Of course, sometimes reform fails or falls short because politicians get misguided ideas that make for bad law and worse policy. The wholesale elimination or restriction of certain services may not represent the best interests of the active participants in the system. The best non-comp example I can think of for that is the way Medicare controls some of its costs; by simply slashing its reimbursement rates, resulting in a shortage of doctors who will take new Medicare patients.

On the road to Hell, intended results often come with unintended consequences.

Another reason well intended reforms need future reforms applied to them is the creativity and profit motivation of the human mind. Sometimes attempts to control costs by mandating controls or limits are much like squeezing a balloon. You may shrink the area you are concentrating on, but the balloon suddenly expands in another area where you were not holding it or paying close attention. Similarly, vendors and providers within the industry may get creative in their services and pricing in ways that counteract methods intended to control them. This is not unique to workers' comp. This happens everywhere. Early attempts to legislatively control assault weapons failed because, when the government outlawed certain models by name, the manufacturers simply renamed the weapons. Our industry is subject to the same pressures and influences, and creative people get creative, taking advantage of legal opportunities every day.

Review Joe Paduda's comprehensive piece on how Physician Dispensing firms market their services, if you don't believe me.

Bottom line: Our industry remains in a constant state of flux and change, and likely will always be that way.  California's SB 863 is just the latest most notable attempt to reform previous reforms, and it is too early to tell where, and not if, the leaks will develop.

The adversarial nature of our industry, the opposing interests it manages and represents, virtually assure us that current reformers will always be reforming previous reformers reforms.

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