Senate Bill No. 863 (SB 863) was signed by California's Governor on September 18, 2012. The bill increases permanent disability benefits while making a number of reforms designed to reduce administrative costs and speed the delivery of medical care to injured workers. The WCIRB is closely monitoring the impact on system costs of SB 863 as they emerge in statewide loss and loss adjustment expenses. Shown below is the WCIRB's cost monitoring plan and links to the research reports and WCIRB Wire stories that have been released thus far.
Executive Summary Senate Bill No. 863 (SB 863) had a significant and measurable impact on California workers’ compensation medical costs. This analysis of medical transactions from July 2012 through June 2015 encompasses a three-year period reflecting data developed prior to and after the implementation of SB 863. In this study, the WCIRB shows that from the second half of 2012 to the first half of 2015, the average cost of medical services per claim dropped by 8%. This decrease contrasts with an average 6.5% per year increase in average medical costs per claim from 2005 to 2012. Some of this decrease is explained by the medical components of SB 863 that the WCIRB was able to separately evaluate. However, a significant portion appears to be driven by other SB 863 components that the WCIRB was unable to separately evaluate on a prospective basis, including the impact of independent medical review (IMR). These cumulative savings were primarily driven by physician fee schedule and pharmacy services, which collectively represent approximately 61% of all medical service payments. Additional savings were generated by outpatient facilities and medical equipment providers, when combined, represent approximately 16% of all medical service payments. Medical-Legal and Inpatient Hospital services, when taken together, represent approximately 23% of all payments and were the only services to register increases in costs per claim over the three-year period. The findings from the first half of 2015 run counter to the recent downward trend, as there are significant increases on a medical cost per claim basis in 2015 compared to the second half of 2014. This recent reversal may be an early indicator of a potential erosion of SB 863 savings, similar to the erosion that occurred following the full implementation of the comprehensive reforms enacted in 2003 and 2004.