Workers’ Compensation Archives

NOVEMBER 16, 2015: With carve-out programs on the rise in California, a report by a carve-out administrator aims to show that alternative dispute resolution lowers litigation rates along with the delays in care and inflation of costs they entail.

Elite Force Management, a Westlake Village company that creates carve-out programs, released a white paper last week that showed low litigation rates when claims were involved in alternative dispute resolution. According to data from the Division of Industrial Relations and the Commission on Health and Safety and Workers’ Compensation, 1.4% of claims in carve-out programs in 2011 involved litigation. The highest rate of litigation in the eight years prior was 6.5% in 2007.

While a direct comparison outside of carve-out programs wasn’t available, the white paper says that 38.1% of all lost-time claims in California from 2005-2010 involved claimants who had legal representation.

According to Elite Force, the avoidance of litigation is a benefit for employers, payers and injured workers. Lost-time claims where the injured worker had an attorney cost an average of $30,000 versus $6,000 for unrepresented claimants, according to statistics from the California Workers’ Compensation Institute presented in the report.

Meanwhile, according to carve-out administrator Chris Reinhardt, injured workers avoid a court system that can move slowly and therefore delay resolution of claims and the payment of benefits.

“From our perspective, what we feel the big advantage … is that we’re not going through the WCAB, which is tremendously bogged down with cases,” said Reinhardt, who works with construction unions to run carve-outs.

While not quite as separated from the rest of the state workers’ compensation as the Texas and Oklahoma opt-out programs, ADR nonetheless keeps cases out of court.

“Some programs actually deny attorney participation until arbitration,” Reinhardt said. “Others recognize that attorneys are going to be involved and we try to keep them at a friendly distance.”

According to the Elite Force Management white paper, the average cost of a claim in a carve-out program during the eight-year study period was $13,940.

The concept appears to be growing in popularity, Reinhardt said. While carve-outs have existed in California for more than 20 years, they’ve mostly gained ground in the construction industry.

“Almost every unionized construction trade has an ADR program,” Reinhardt said in a Friday interview.

But in 2003, Senate Bill 228 opened up carve-outs to any unionized industry. These days, Reinhardt said, he’s seeing increased interest in other industries.

“We believe they’re becoming more popular,” he said. “We’re seeing a gradual (uptick) in activity, and what I mean is, we’re having more inquiries, more participants signing into the ADR programs, and we’re seeing more programs come onto the scene, particularly … outside construction.”

One area that has seen some growth is among grocery stores, Reinhardt said. In 2013, the Division of Workers’ Compensation approved a carve-out agreement between Albertson’s, Vons and seven local grocery worker unions in Southern California. The agreement covered about 20,000 employees.

“(Grocery stores) have a large employee base, they also have the labor-management agreements that usually have to be negotiated,” he said.

He also noted some growing interest among public entities. In July last year, the Orange County Fire Authority struck a carve-out agreement with the Orange County Professional Firefighters Association.

The number of carve-out programs has grown since the early 2000s, according to a studyfrom the Division of Workers’ Compensation. In the fourth quarter of 2004, there were 13 construction industry carve-outs. By the first quarter of 2011, there were 24 programs in the construction industry and four outside the construction industry. During that quarter, 38,968 full-time equivalent positions were covered through carve-outs.

However, there are some barriers in the way of more unions and employers pursuing carve-outs. Only unionized workers are eligible for alternative dispute resolution under California law. From an employer’s perspective, the process of setting up a program involves up-front costs, negotiation with labor unions and approval from the DWC. And while the program can offer faster dispute resolution, it doesn’t necessarily lower an employer’s insurance rates right off the bat.

“You may have other carriers that are pricing their product below where we’re able to price it as an ADR carrier,” he said.

Some are willing to offer discounts to employers participating in carve-outs because of the lower cost of litigation, he said. That means lower claim costs, and therefore lower insurance rates over time.

“We find that the experience (modification rating) has been proven in many cases to drop dramatically, 30 or 40% over three or four years,” he said.

But there’s also a lack of knowledge among many about how the programs work, Reinhardt said. The Elite Force Management white paper pointed to many shortfalls in the data available that prevents a better understanding of whether the programs are doing what they’re meant to. The Workers’ Compensation Insurance Rating Bureau and DWC don’t collect the same information for carve-outs that they do for other types of claims, which prevents direct comparison, according to the report.

“We find that there are many agents and brokers out there that really aren’t that familiar with it still,” Reinhardt said.


by Ben Miller, Work Comp Central

JULY 8, 2015: Today, the WCIRB released the California Medical Payment Development Up to 30 Years Post-Injury report examining California’s longer than average medical payout pattern. This WCIRB study analyzed data from approximately one million claims ($4.4 billion in medical payments) sorted into seven cohorts based on dates of injury and current medical treatment.

WCIRB researchers found that California has the most prolonged workers’ compensation treatment pattern in the country, and as claims mature, patterns of treatment evolve as prescriptions for narcotics and psychoactive drugs, treatment of chronic medical problems of aging that are unrelated to the acute injury, and complications caused by post-injury medical treatment all become more prevalent. Other observations from the report include:

  • 17% of the claims studied lasted three years or more, accounting for $1.5 billion (35%) of total medical payments.
  • The total share of prescription narcotics, especially Oxycontin, grew as claims developed over time. Additionally, shares of prescribed psychoactive drugs, such as sedative hypnotics, stimulants and anti-depressants increased with the age of the claim.
  • The share of payments for acute injuries (fractures, wounds, dislocations, sprains and strains) declined as claims aged. Conversely, the share of medical payments for chronic medical conditions, such as cardiac, respiratory and digestive problems increased as claims age.
  • Complications from medical care — a medical condition not likely associated with the initial injury — gradually increased with the age of the claim.
  • California does not have more hazardous employment, older workers, more severe injuries or worse medical conditions than other states. However, in California, medical treatment continues and claims remain open for a longer period than in other states.

Researchers also compared 20 to 30 year old California claims with a similar national cohort and found that all late-term claims have similar medical treatment patterns; however, nationally, a much greater share of injuries are resolved within three years of the date of injury. California is unique in that it allows a greater proportion of prolonged treatment and enables acute conditions to become chronic medical problems.

The complete report is available in the Research and Analysis section of the WCIRB website.


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JULY 8, 2015: Using Collective Bargaining Agreements to validate the hourly wage of construction employees.

Some Construction or Erection classifications are Dual Wage classifications that require verification that the employee’s regular hourly wage equals or exceeds a specified amount. This hourly wage verification is performed as part of the policy final audit. Dual Wage classifications are subject to record keeping requirements that are provided in the California Workers’ Compensation Uniform Statistical Reporting Plan – 1995 (USRP) at Part 3, Section IV, Rule 2a(1), Records of Payroll. This rule states, in part:

For all employees, other than salaried employees, determination of the regular hourly wage must be supported by one of the following sources:

  1. Original time cards or time book entries for each employee. Original records must include the operations performed, the total hours worked each day and the times the employee started and ended each work period throughout the workday. At job locations where all of the employer’s operations cease for a uniform unpaid meal period, recording the start and stop times of the uniform break period is not required.
  2. A valid collective bargaining agreement that shows the regular hourly wage rate by job classification of worker. If using a collective bargaining agreement, the records must include an employee roster by job classification that permits the reconciliation of individual employees to the job classifications set forth in the collective bargaining agreement. For all employees, other than salaried employees, the payroll for which an hourly wage determination cannot be reconciled to time cards or time book entries or collective bargaining agreements as specified above shall not be assigned to a classification that requires the regular hourly wage to equal or exceed a specified amount.

For all employees, other than salaried employees, the payroll for which an hourly wage determination cannot be reconciled to time cards or time book entries or collective bargaining agreements as specified above shall not be assigned to a classification that requires the regular hourly wage to equal or exceed a specified amount.

The WCIRB has received questions regarding the use of a collective bargaining agreement (CBA) to verify employees’ hourly wage rates. A CBA, also known as a labor agreement, union agreement or union contract, is a legally enforceable contract between the management of an organization and its employees represented by a trade union and it details the rules and conditions of employment, including wages, working hours and conditions, overtime, holidays, vacations and benefits.

Because a CBA is a legally-enforceable contract, it is a reliable document for the purposes of verifying employees’ hourly wage rates. A CBA does not include the names of individual employees as it usually applies to many different employers who bargain together and become a signatory to the agreement. A CBA does list categories of construction workers, and the wages and benefits that must be paid to workers in each category. When using a CBA to validate an employee’s hourly wage, it is incumbent on the auditor to reconcile each employee to their applicable category.

Related Information

Classification Search

Classification Information

Online Guide to Workers’ Compensation: The Standard Classification System

USRP Time Card Requirements – What is Acceptable?


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