Audit Results
Some State Agencies Are Overpaying for Insurance Rather Than Providing Benefits Through the Master Agreement
As we describe in the Introduction, nearly 90 percent of state agencies and departments provide workers’ compensation coverage through the master agreement. However, according to CalHR, 32 agencies or units within agencies opted to purchase insurance from State Fund rather than use the master agreement during fiscal year 2017–18. These agencies pay premiums to State Fund to cover the cost of potential claims, rather than reimbursing State Fund for administering their claims and for the actual costs associated with the claims. According to the program manager for CalHR’s benefits division, agencies usually identify funding-related reasons for choosing to pay for insurance coverage. These include the predictability of premiums compared to the unpredictable costs of workers’ compensation claims and the difficulty of funding a large workers’ compensation claim.
Although agencies can purchase insurance to mitigate the risk of unpredictable costs, historical trends do not justify the cost of insurance premiums for some state agencies. We identified 10 state agencies that each had 90 or more employees and purchased insurance from State Fund in fiscal year 2017–18. When we analyzed these agencies’ workers’ compensation costs and premiums from fiscal years 2013–14 through 2017–18, we found that each consistently paid more in insurance premiums than it would have had it instead used State Fund to administer its claims under the master agreement. We estimate that under the master agreement, these 10 agencies would have collectively paid an average of less than $1.6 million annually for the costs of the claims and State Fund’s administrative fees during the five years we reviewed. Instead, they collectively paid an average of $5.7 million per year in premiums.
As Table 4 shows, we estimate that the State could have saved more than $20 million during the period we reviewed had these 10 agencies provided workers’ compensation through the master agreement rather than purchasing insurance. For example, over the five-year period, the California Department of Food and Agriculture paid an average of nearly $1 million per year in premiums, even though we estimate that its average annual cost under the master agreement would have been less than $260,000. Similarly, the annual premiums for the Secretary of State’s Office over the five-year period ranged from $520,000 to $970,000, whereas its annual master agreement costs would have never exceeded $360,000 and would have averaged about $250,000 based on its claim activity.
| FISCAL YEAR | INSURANCE PREMIUMS PAID |
ESTIMATED MASTER AGREEMENT COST |
SAVINGS IF AGENCIES USED THE MASTER AGREEMENT |
|---|---|---|---|
| 2013–14 | $5,280,000 | $2,190,000 | $3,090,000 |
| 2014–15 | 6,590,000 | 2,600,000 | 3,990,000 |
| 2015–16 | 9,520,000 | 1,030,000 | 8,490,000 |
| 2016–17 | 3,510,000 | 1,010,000 | 2,500,000 |
| 2017–18 | 3,630,000 | 910,000 | 2,720,000 |
| Totals | $28,530,000 | $7,740,000 | $20,790,000 |
| Annual average | 5,706,000 | 1,548,000 | 4,158,000 |
Source: Analysis of CalHR data and State Fund data for 10 insured state agencies for fiscal years 2013–14 through 2017–18.
Considering the amount that these agencies could have saved if they had used the master agreement, we believe that CalHR should advise agencies that do not participate in the master agreement if doing so might result in workers’ compensation savings. Although CalHR and State Fund perform an assessment to determine an agency’s ability to pay for its workers’ compensation costs if that agency wants to participate in the master agreement, this assessment does not consider the cost-effectiveness of using the master agreement instead of an insurance policy. Moreover, the master agreement does not require either entity to assist agencies in deciding which workers’ compensation option is more cost-effective. When we asked the 10 agencies why they provide workers’ compensation coverage by purchasing insurance, eight indicated that they did so because they believed it would be the most cost-effective way to provide coverage.The ninth agency indicated that it prefers insurance for its consistent costs because it relies on federal funding, which can be sporadic. The tenth stated that another state agency reimburses it for its workers’ compensation insurance. However, as we previously described here, our analysis indicates that this belief is erroneous.
The program manager for CalHR’s Benefits Division stated that CalHR’s ability to conduct this type of analysis may require additional legislative authority to compel agencies to share the claim data necessary to conduct the analyses. Given that part of the intent of the master agreement is to protect the public through the implementation of effective cost-containment programs, we believe that it is appropriate for CalHR to conduct cost-benefit analyses for each agency that intends to purchase insurance from State Fund and compare the costs of purchasing insurance and using the master agreement.
Injured Workers Received Timely Medical Care Even When Agencies Failed to Meet Deadlines for Submitting Claims
Although the four agencies we reviewed missed some deadlines for providing forms to injured employees or submitting workers’ compensation claims to State Fund, we found no evidence that these delays affected the timely delivery of medical care to the employees. As we discuss in the Introduction, state law generally requires agencies to provide an employee form to an injured employee within one business day of the date of knowledge of a claim and requires agencies to submit an employer report to State Fund within five days of the date of knowledge. According to a claims compliance director at State Fund, when an agency submits an employer report to State Fund in a timely manner, it provides State Fund with the maximum amount of time to determine whether to accept or deny that claim.
We reviewed eight workers’ compensation claims at each of the four agencies we reviewed—a total of 32 claims—and found that all four agencies we audited failed to meet the required deadlines for providing either the employee form or employer report for one or more claims. For instance, Caltrans and CHP each submitted four of eight employer reports more than five calendar days after their dates of knowledge of work-related injuries. We also noted one instance in which CAL FIRE submitted an employer report late to State Fund and one in which Social Services did not provide an employee form to an injured employee within the one-day time frame. Managers in units handling workers’ compensation claims at CAL FIRE, CHP, and Caltrans explained that supervisors did not always submit the employer reports on time because of limitations such as remote worksites and difficulties in contacting employees to obtain required information. In addition, they explained that some injured employees did not return employee forms in a timely manner because the employees initially believed that they did not need medical treatment or that they could self-treat rather than report the injuries to their supervisors.
However, because the agencies provide up to $10,000 of specified medical benefits—as state law requires—until State Fund either accepts or denies a claim, none of the initial claim intake delays affected the injured employees’ ability to obtain necessary medical treatment for the claims that we reviewed. For example, one of the employees involved had an injury that required more than $1,000 in medical care during the nine days following his injury. Even though the agency did not send the employer report to State Fund until 26 days after the injury, the employee received medical care before State Fund accepted the claim. For each of the claims we reviewed that did not meet all required timelines, we found that employees still received medical treatment up until the point that State Fund either accepted or denied their claims.
State Fund met the majority of the mandated periods for processing the claims we reviewed at the four agencies, and in all cases, the injured employees received access to health care. State regulations generally require State Fund to notify an employee within 14 days of the date of knowledge if it delays its decision on a claim. If it does not deny a claim within 90 days from when the employee files the employee form, the claim is presumed accepted. Although we identified two instances in which State Fund missed deadlines for notifying employees that it was delaying their claims, it made all claim decisions within the 90-day time frame. Our testing showed that in both of these instances, the injured employees continued to receive medical treatment through the $10,000 in medical benefits they are entitled to until State Fund accepted or denied their claims. According to a claims compliance specialist at State Fund, notification of a delay is important for informing an employee of a claim’s status but has no significant impact on the delivery of benefits or the liability decision.
In addition, our testing showed that for six medical emergencies that were likely to exceed this $10,000 threshold, State Fund approved the claims within an average of 11 days, significantly less than the 90 days allowed under state law. For example, one employee who was involved in an automobile accident had already incurred nearly $10,000 in medical care as of the date State Fund established the claim. However, State Fund accepted this claim only six days later.
State Fund also approved medical treatments for injured employees within required time frames. State law requires State Fund to establish a process to review treatments and to approve them if it determines they are compensable. For example, state law generally requires that once State Fund is in receipt of the information it needs to make its determination, it must approve, modify, or deny a physician’s request for treatment within 72 hours for urgent cases and five business days for nonurgent cases. Our testing showed that State Fund approved, modified, or denied all treatment requests in accordance with these time frames.
A Lack of Available Medical Evaluators Has Resulted in Delays and Automatic Denials of Claims
Our review found that a lack of available medical evaluators has at times delayed appointments for medical evaluations, resulting in State Fund’s automatically denying claims and some injured employees’ having to wait to receive benefits. State Fund automatically denied four of 32 claims we reviewed because the employees could not obtain timely appointments for medical evaluations. It did not accept these four claims until an average of four months later, after medical evaluators finally saw the injured employees and determined the injuries were work-related. The agencies for which these employees worked explained that in some cases, untimely appointments for medical evaluations can also delay an employee’s return-to-work process and may unnecessarily increase a state agency’s workers’ compensation costs.
Some Employees Are Unable to Receive Medical Evaluations Before State Fund Automatically Denies Their Claims
A lack of available medical evaluators has delayed some injured employees’ appointments for medical evaluations, resulting in the automatic denial of their claims and postponing the resolution of their benefit payments. As we explain in the Introduction, the workers’ compensation process may rely on medical evaluators to resolve claim disputes. Upon receiving a request for a medical evaluator, DWC must generate a randomly selected panel according to the requested specialty. For represented employees the employee and State Fund can each remove one medical evaluator and the injured employee then schedules an appointment with the remaining medical evaluator.
The medical evaluator then has a 60-day window to conduct the evaluation, unless the party scheduling the appointment—generally the employee—waives this requirement and agrees to extend the window by 30 days. When a medical evaluator is unavailable within the extended 90-day window, state law generally allows either party to request a replacement panel or to waive the 90-day requirement altogether. Similarly, if the parties need to replace a medical evaluator or panel for other specified reasons—for instance, if the employee has moved to a new area—DWC issues a replacement panel. However, DWC is not legally required to issue a replacement panel within a specific time frame. Further, once it issues a replacement panel and a new evaluator is selected, the 60-day window restarts. Thus, each replacement panel may result in a further overall delay in claim resolution.
During fiscal year 2017–18, DWC generated about 145,000 medical evaluator panels to resolve medical disputes. In that same year, DWC received a total of nearly 19,000 requests for replacement panels because the medical evaluators on the initial panels were not available within the 60-day window. For example, one employee requested a replacement panel because of a conflict of interest with one medical evaluator and an availability issue with another. Ultimately, that employee did not see an evaluator until 195 days, or more than six months, after the initial panel request.
State law requires that regardless of the availability of a medical evaluator, State Fund must deny a claim within 90 days after an employee files it or it is presumed to be accepted. According to State Fund’s claims compliance director, State Fund automatically denies a claim within 90 days if an unresolved dispute exists about whether the employer is responsible for the injury. State Fund cites in its decision a lack of medical evidence, even when the delay is the result of a lack of available medical evaluators. However, if it denies a claim because of pending medical evidence, State Fund may subsequently accept the claim if a medical evaluator determines that the injury was work-related. Once State Fund denies a claim, it no longer pays for the employee’s medical care, and it does not pay benefits.
Our testing indicated that some employees have found it difficult to obtain appointments for medical evaluations before the end of State Fund’s 90-day decision period. For example, State Fund automatically denied one claim because the employee was not able to obtain a medical evaluator’s report until five months after State Fund denied the claim. As a result, the employee did not receive any workers’ compensation benefit payments. According to CAL FIRE, he had to use accrued time off for almost nine months until the evaluator provided a report and State Fund subsequently accepted the claim. After accepting the claim, the agency retroactively restored the employee’s accrued time off and provided IDL payments from his first day of disability. Of the 32 claims we reviewed, State Fund automatically denied four—or 12.5 percent—because the employees had not yet seen medical evaluators.
When we asked DWC about the increased number of replacement panels, the chief of medical services administration questioned whether an unavailability problem exists and stated that she has seen no indication of an access problem to obtain an appointment with a medical evaluator. However, our analysis indicates that 42 percent of all replacement panels DWC issued during fiscal year 2017–18 were because medical evaluators were not available for appointments within the 60-day window. As Figure 4 shows, the number of panels DWC replaced because of unavailability of medical evaluators more than quadrupled from fiscal year 2013–14 to fiscal year 2017–18. In addition, our data indicate that during this period, the number of medical evaluators decreased by 375, while the proportion of all panels that were replacement panels due to unavailability of medical evaluators increased from 4 percent to 13 percent. In fact, in the past four fiscal years, the total number of panel requests increased by 37 percent, while the total number of medical evaluators decreased by 12 percent.
Figure 4
The Number of Panels DWC Had to Replace Because of Unavailable Medical Evaluators More Than Quadrupled From Fiscal Years 2013–14 Through 2017–18
Source: Analysis of panel requests from DWC’s medical evaluators database for fiscal years 2013–14 through 2017–18.
Further, according to a State Fund specialist, a shortage of medical evaluators in certain medical specialties and geographic areas has contributed to some injured employees’ being unable to schedule appointments promptly. For example, from fiscal years 2013–14 through 2017–18, the number of panel requests for the field of orthopedic surgery increased by 66 percent, while the number of evaluators decreased by 7 percent. Addressing this issue will require that DWC secure and maintain enough medical evaluators to meet demand.
Delayed Appointments for Medical Evaluations May Result in Employees Waiting Longer to Receive Disability Payments or Return to Work
When a lack of medical evaluators delays appointments for evaluations to determine whether injuries are work-related or to resolve other disputes, the employees may not receive or may be delayed in receiving the appropriate type of disability benefits. As we explain in the Introduction, eligible state employees are generally entitled to receive IDL payments for a maximum of 52 weeks within two years from the first day of disability. However, they receive these benefits only after State Fund has accepted their claims. In addition, State Fund provides permanent disability payments when doctors determine that injured employees have reached maximum improvement and will never recover completely or will always be limited in the work they can perform. However, state employees are not eligible for either IDL or permanent disability payments while they are waiting for State Fund’s decisions on their claims. As we previously described here, we identified one employee in our review whose IDL payments were delayed by several months because he was unable to obtain an appointment for a medical evaluation when needed.
According to the four agencies we reviewed, when injured employees do not receive IDL and permanent disability payments because of their inability to promptly obtain appointments for medical evaluations, the burden to seek out other benefits falls on those employees. Although state law requires the agencies to provide up to $10,000 worth of specified medical treatment after an employee files a employee form, it does not require them to make disability benefit payments until the claim is accepted. CAL FIRE’s injury and accommodations unit manager (unit manager) explained that when State Fund automatically denies claims while employees wait for appointments for medical evaluations, those employees can apply for insurance payments through EDD for non-work-related disabilities. The unit manager explained that employees’ other options while awaiting their medical evaluations include applying for catastrophic leave—which is accrued leave donated by other state employees—or taking unpaid leaves of absence.
In addition to possibly delaying benefit payments to injured employees, the four agencies we reviewed agreed that in some cases, not promptly obtaining appointments for medical evaluations has delayed employees’ return-to-work processes and may have unnecessarily increased the agencies’ workers’ compensation costs. Injured employees can return to work when their primary workers’ compensation physicians release them to do so. However, representatives from several of the agencies we reviewed stated that when an employee and an agency cannot agree on the employee’s work status, a timely medical evaluation report is necessary to determine whether that employee is ready to return to work. For example, Caltrans’ return-to-work program branch chief (branch chief) explained that in certain situations, Caltrans may believe that an employee can return to work even though the employee’s primary workers’ compensation physician has placed the employee on total temporary disability status, which generally means that the employee is unable to perform job duties while healing. Similarly, CAL FIRE’s unit manager explained that at times an employee may disagree with a workers’ compensation physician’s decision to release that employee to return to work. In these instances, a state agency or the employee may request a medical evaluation to help determine the nature of work, if any, an employee is capable of performing. According to CAL FIRE’s unit manager and Caltrans’ branch chief, a lack of available medical evaluators to resolve such disputes has led to delays in employees returning to work, reducing the agencies’ workforce productivity and increasing their backfill and overtime costs.
In addition, under most circumstances, agencies pay IDL payments at a higher rate than permanent disability. Because an agency is generally required to pay IDL until a physician says that an employee can return to work or has reached maximum improvement, the CAL FIRE and Caltrans managers concluded that a delayed appointment for a medical evaluation to determine an employee’s disability status might result in that employee receiving higher overall benefit payments in the meantime. For example, in one case, State Fund may have paid a Caltrans employee who exhausted his IDL benefits more than twice the amount in disability payments—almost $1,500 in total—than it would have if it had promptly received an evaluation report declaring he had reached maximum improvement. Had it received such a report, State Fund may have transitioned this employee to permanent disability sooner.
Ensuring that medical evaluators are available for appointments to evaluate injured employees will require DWC to recruit more evaluators and to improve the panel assignment process. In November 2019, we issued Report 2019-102, titled Department of Industrial Relations: Its Failure to Adequately Administer the Qualified Medical Evaluator Process May Delay Injured Workers’ Access to Benefits, which provides additional information on the causes of medical evaluator unavailability and presents recommendations for addressing this issue.
State Agencies Have a Variety of Options for Effectively and Efficiently Resolving Claims
Employers and injured employees have multiple options for resolving workers’ compensation cases once the injured employees have reached maximum improvement. In many instances, the resolutions are fairly straightforward: of the claims that State Fund closed from fiscal years 2015–16 through 2017–18, 69 percent involving state agencies using the master agreement were closed administratively because of inactivity or because all necessary treatment had been provided, and resulted in an average of $4,000 in total costs paid per claim. According to State Fund’s claims compliance director, State Fund administratively closes claims if injuries do not result in permanent disability and do not require additional medical care. For example, an employee suffering from a shoulder injury would receive medical treatment until the treating doctor determines that the employee has no permanent disability, has reached maximum improvement, and requires no further treatment. State Fund may then close the claim.
However, other claims end in a settlement, such as a compromise and release agreement or a stipulation. In a compromise and release agreement, the employee agrees to forgo future benefits in exchange for a lump-sum payment, and the agency is no longer responsible for future medical care related to the case. Alternatively, the agency and the injured employee may voluntarily enter into a stipulation, whereby the agency generally agrees to make permanent disability payments up to a specified limit over time and to cover future medical costs related to the claim through the workers’ compensation system.
If the agency and the injured employee cannot agree on a settlement, either party may request a settlement conference with a workers’ compensation judge who assists in resolving the dispute. If the parties do not resolve their dispute at the settlement conference, the judge may set the case for trial. During the trial, the judge will review the evidence and determine the outcome of the case. If a claim goes to trial, both parties lose a degree of control because the judge may find in favor of either the injured employee or the agency on disputed aspects of the case, such as whether the claimed injury was work-related or how much the employee will receive in disability benefits.
The practice of resolving claims through compromise and release agreements is less common for state agencies than using other methods. As Table 5 shows, State agencies using the master agreement settled 5 percent of their claims through compromise and release agreements from fiscal years 2015–16 through 2017–18, compared to 16 percent of claims resolved through stipulations and 10 percent through findings and awards. The decision about the type of resolution that the parties agree to during their settlement negotiations depends on many different and often complex factors. Consequently, it is not possible to determine whether those claims resolved through compromise and release would have cost the state agencies less through a different resolution type.
| STATE AGENCIES USING THE MASTER AGREEMENT | ||
|---|---|---|
| OPTIONS FOR RESOLVING CLAIMS | PERCENTAGE OF TOTAL | AVERAGE PAID PER CLAIM |
| Compromise and release agreement | 5% | $73,000 |
| Findings and award | 10 | 72,000 |
| Stipulations | 16 | 68,000 |
| Administrative closure | 69 | 4,000 |
| Totals | $24,000 | |
| Total number of claims | 66,895 | |
| Total benefits paid over the life of the claims |
$1,193,297,000 | |
Source: Analysis of all State Fund workers’ compensation claim closures for fiscal years 2015–16, 2016–17, and 2017–18 and CalHR data for State Fund administrative costs per claim for fiscal years 1998–99 through 2017–18.
Using compromise and release agreements for settling state employee claims offers certain advantages and disadvantages for agencies and employees depending on the circumstances. Specifically, compromise and release agreements do not allow employees to file for new and additional disability benefits if their conditions deteriorate. Further, if their injuries lead to death, their dependents may be unable to file for death benefits. In addition, Social Services’ workers’ compensation unit manager stated that the focus for current employees should be on medical care, and compromise and release agreements do not necessarily address medical care as well as stipulations. Similarly, a CAL FIRE unit manager stated that not all employees want to settle through compromise and release agreements because they prefer to maintain their rights to future medical treatment related to their injuries. In other instances, compromise and release agreements can reduce the amounts agencies pay to State Fund in administrative fees, and because they limit future liability the agreements allow agencies to determine their actual costs so they can budget more effectively.
State Fund’s Failure to Provide Timely Settlement Documents to Agencies Has Affected Its Ability to Resolve Claims Efficiently
State Fund has frequently failed to provide state agencies with sufficient time to review and approve requests for settlement authority before settlement conferences, which can limit its ability to negotiate an agreement. Under the master agreement, State Fund must obtain approval from an agency before entering into a settlement, unless the agency has established prior settlement authority with State Fund. To this end, State Fund completes a request for settlement authority and submits it to the agency before the settlement conference. According to the agencies’ staff we interviewed, if an agency reviews a settlement request and believes that State Fund has overlooked some issues, it may return the request for correction. State Fund cannot enter into stipulations or a compromise and release agreement on behalf of an agency participating in the master agreement unless the agency has agreed with State Fund on the proposed settlement or the proposed settlement is within State Fund’s pre-established authority. If State Fund and the injured employee are unable to resolve the dispute, the case may proceed to trial, which can add time and expense to the process. Further, because of the uncertainty of a trial’s outcome, the agency may have to pay far more to resolve the claim.
Several of the agencies we spoke with explained that they need State Fund to provide them with 30 days to review a settlement request prior to the settlement conference. Some state agencies indicated that they need this time to properly review the documents and allow State Fund to correct any discrepancies. Settlement requests can include numerous pages and may require multiple levels of review within state agencies. The vice president of State Fund’s claims operations (vice president) stated that State Fund attempts to provide the settlement requests at least 30 days before settlement conferences. Although we did not identify specific timeline requirements in law or regulations for State Fund to provide settlement requests to state agencies, the master agreement requires CalHR and State Fund to work together to develop guidelines for the interactions between State Fund and state agencies. The guidelines state that an agency should generally provide a reply to State Fund’s request for authorization within 30 days of receiving it. To allow an agency 30 days to review the settlement request and grant authority for the settlement conference, State Fund would need to provide the request more than 30 days before the settlement conference.
Nonetheless, our review of 15 claims at CAL FIRE, Social Services, and Caltrans found that in many cases, State Fund did not provide agencies with at least 30 days to respond to the settlement requests before the settlement conferences, which may have limited the agencies’ ability to effectively resolve the claims through stipulations or compromise and release agreements in some instances.We were unable to review settlement requests that State Fund sent to CHP because CHP does not maintain the information necessary to determine which claims CHP received settlement requests for before settlement conferences. State Fund provided less than 30 days for eight, or 53 percent, of the 15 claims that we selected. We found that State Fund’s ability to negotiate a settlement was hindered in at least four of these cases because it did not have authority from the agencies in place before the settlement conferences. In fact, in these four instances, State Fund did not resolve the claims until an average of 10 months after the settlement conferences.
We found similar results when performing a more extensive analysis of Social Services’ and CAL FIRE’s settlement tracking logs for fiscal years 2015–16 through 2017–18.We did not perform a similar analysis of Caltrans’ claims because its settlement log did not provide sufficient detail. As Table 6 shows, State Fund provided the agencies with less than 30 days before the settlement conference to review settlement requests for 57, or 63 percent, of the 90 claims that went to settlement conferences. Until State Fund consistently provides settlement requests to agencies at least 30 days before settlement conferences, it risks undermining the settlement conference process because the agencies may not have enough time to provide it with settlement authority.
| NUMBER OF SETTLEMENT PROPOSALS STATE FUND PROVIDED TO THE AGENCY WITHIN THE SPECIFIED DAYS BEFORE A SETTLEMENT CONFERENCE | ||||
|---|---|---|---|---|
| TOTAL SETTLEMENT PROPOSALS | 30 DAYS OR MORE | LESS THAN 30 DAYS | PERCENTAGE LESS THAN 30 DAYS | |
| Social Services | 25 | 7 | 18 | 72% |
| CAL FIRE | 65 | 26 | 39 | 60% |
| Totals | 90 | 33 | 57 | 63% |
Source: Analysis of Social Services’ and CAL FIRE’s settlement logs for fiscal years 2015–16 through 2017–18.
Note: We did not conduct this testing for CHP and Caltrans because these agencies did not maintain sufficient electronic information for us to do so.
Various circumstances may hamper State Fund’s ability to meet the 30-day timeline for some claims. In certain time-sensitive situations, such as when the injured employee’s attorney files paperwork to proceed to conference before State Fund has completed its settlement request, State Fund may have a shortened time frame within which to act. In some of these instances, it may be unable to request settlement authority from the agency 30 days before the settlement conference. Additionally, the vice president indicated that State Fund could miss this deadline if it is waiting for medical reports that may impact the settlement amount. Nonetheless, it is important that agencies have adequate time to review settlement requests before the settlement conferences because delays in the settlement authorization process may result in the agencies’ paying more in the end, including higher ongoing medical expenses and court-related expenses if cases go to trial.
Recommendations
CalHR
To ensure that all state agencies provide workers’ compensation in the most cost-effective manner, CalHR should provide each agency that purchases workers’ compensation insurance with a cost-benefit analysis every five years that compares the cost of purchasing this insurance through State Fund with the cost of obtaining coverage through the master agreement. It should begin providing these analyses to state agencies no later than six months after the Legislature gives it authority to request the necessary information from these agencies.
Legislature
To ensure CalHR has the data necessary to compare insurance and master agreement costs for agencies using State Fund insurance policies, the Legislature should give CalHR the authority to obtain that information.
State Fund
To ensure that state agencies have adequate time to review settlement requests and provide settlement authority, State Fund should create and follow a policy by May 2020 to provide settlement authorization requests to agencies at least 30 days before settlement conferences.
We conducted this audit under the authority vested in the California State Auditor by Government Code 8543 et seq. and according to generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives specified in the Scope and Methodology section of the report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
Respectfully submitted,
ELAINE M. HOWLE, CPA
California State Auditor
November 21, 2019