post-title California Proves Evidence-Based Workers’ Comp Works  

California Proves Evidence-Based Workers’ Comp Works  


There is a movement afoot across the United States to reform workers’ compensation insurance so that it accommodates an evidence-based model for treating injured workers. The movement is being encouraged by data out of California that shows the evidence-based model does work. The only question now is whether other states will learn from California’s example.

When California set out to reform its workers’ compensation program more than three years ago, their primary objective was to reduce employer costs without sacrificing employee benefits. Research that went into crafting the reforms revealed, among other things, concerns that doctors were over-prescribing opioid pain medications to workers receiving payments from workers’ comp claims. People began openly wondering whether or not treatment guidelines were so lax as to allow for workers’ comp fraud.

In the end, workers’ comp reform in California led to strict treatment guidelines that now govern most claims. California officials say the state has saved $600 million more than their original estimates as a result.

Saving Money Despite Higher Payments

California implemented what is called the Medical Treatment Utilization Schedule in 2003 to provide guidance to treatment providers involved in workers’ compensation claims. That schedule, combined with the greater scrutiny afforded by workers’ comp reform from a couple of years ago, has reduced the cost of treating injured workers by some 8%. Even so, the minimum and maximum payments applying to permanent disability have gone up some 30% since 2012.

What appears to be a contradiction of saving money despite higher payments actually makes complete sense. Without proper scrutiny, California’s workers’ compensation program was free to spend indiscriminately on injured worker treatment. Healthcare providers were able to bill indiscriminately as well. The obvious result were costs that continued to spiral out of control. But with strict guidelines in place the flow of money is reduced. The state spends less per claim while still being able to increase permanent disability payments.

What This Means to Employers

Unless your business is located in California, you may think none of this applies to you. Actually, it does. Now that we know California’s model does indeed reduce the overall cost of workers’ compensation claims, it’s probably only a matter of time before other states start following suit. This would be a good thing for both employers and their insurance companies.

Implementing some sort of standardization for medical treatments related to workers’ compensation reduces the likelihood of fraud. It also reduces wasteful spending by government agencies that previously had no way of knowing whether they were paying too much for medical care.

Employers will eventually benefit from a nationwide evidence-based model through reduced insurance premiums – or at least less drastic increases year to year. But they will have to shop for their workers’ compensation insurance to find the most competitive deal. Simply settling on policy and not comparing for years at a time will probably not lead to saving any money.

Insurance companies will benefit by not having to pay out so much in excessive claims. Lower payments mean less risk and the eventual possibility of either reducing premiums or slowing down increases. It will allow insurance companies to be more competitive as well.

The time has come for a nationwide evidence-based workers’ compensation model. States now need to seriously look at what has happened in California as proof that such a model can save money and reduce costs if properly administrated. Hopefully, states will do so. Those that get on board with the evidence-based model will ultimately improve workers’ compensation for small business employers, employees, and insurance companies alike.