Governor Takes Action on Two Workers Compensation Bills; Signs One, Vetoes Other

Governor Edmund G. Brown Jr. has taken action on two important workers’ compensation bills, signing one bill that reduces medical disputes and increase timeliness of appropriate medical care and vetoing another that would have required employers to compensate certain pre-existing injuries or conditions that were unrelated to an industrial injury. These bills are the subject of today’s Capitol Report video.

“These actions taken together represent good news for both employers and the workers’ compensation system,” said Jeremy Merz, CalChamber Policy Advocate for workers’ compensation, taxation, privacy, transportation and infrastructure.

AB 1124: Pharmaceutical Formularies

AB 1124 (Perea; D-Fresno) signed by the Governor earlier this month, ensures that clinically appropriate medications are provided to injured workers and reduce treatment disputes by requiring the Administrative Director of the Division of Workers’ Compensation to establish a formulary for prescription medications in the workers’ compensation system.

“The goal of this formulary is to ensure appropriate care for injured workers, to reduce disputes and thus costs in the workers’ compensation system,” Merz explained. “Formularies have proven successful in other health care systems, including private group health, Medicare, MediCal, and other states’ workers’ compensation systems.”

The CalChamber supports a formulary because it has the potential to decrease dispute-driven procedural delays suffered by injured workers and reduce costs in the workers’ compensation system.

Decrease Costs in California Workers’ Compensation System

Prescription drug costs in the California workers’ compensation system have spiked over the last decade. An October 2014 CWCI study, “Are Formularies a Viable Solution to Controlling Prescription Drug Utilization and Cost in California WC?” found that the average amount spent on prescription drugs per indemnity claim tripled between 2005 and 2012.

That same report also revealed, however, that adopting a formulary in California similar to those used in Texas and Washington state “could reduce total pharmaceutical payments in the California workers’ compensation system by an estimated 12 percent to 42 percent, or $124 – $420 million.” Potential savings may in fact be greater, as the analysis did not account for any reductions in the absolute volume of prescriptions, nor did it estimate savings from reduced levels of affiliated services such as drug testing or reduced medical dispute resolution expenses for utilization review and independent medical review.

The CalChamber supports the establishment of a formulary that draws on readily available information pertaining to the clinical appropriateness of prescription drugs to establish a preferred drug list that delivers the highest quality medications, but does so in an efficient and cost-conscious fashion.

AB 305: Increases Workers’ Compensation Costs

AB 305 (Gonzalez; D-San Diego) would have increased litigation and frictional costs by expanding workers’ compensation coverage beyond industrial injuries by barring apportionment for some pre-existing injuries or conditions.

“This bill would have required employers to pay for certain conditions unrelated to a workplace injury,” explained Merz. “California’s workers’ compensation system was designed to cure and relieve on-the-job injuries.”

The bill attempted to undermine an employer’s use of apportionment when determining liability for permanent disability awards. Under the SB 899 reforms of 2004, the Legislature directed that apportionment “look at the current disability and parcel out its causative sources – non-industrial and current industrial – and decide the amount directly caused by the current industrial source.”

“This bill would have barred physicians, for certain conditions, from apportioning between industrial and non industrial injuries,” Merz said.

As a result, AB 305 would have automatically increased litigation in an effort to overturn reasonable apportionment cases and increase costs on employers who would no longer be protected from paying for a disability or impairment for certain conditions that were not the result of an actual industrial injury.

Staff Contact: Jeremy Merz

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