Lien Fees Working Out in California Workers’ Comp

Jason Molnar makes a living deep in the trenches of workers’ compensation battles in California, so you’d think when there was a no show from an opponent at an official lien hearing that he’d be relieved by what should have been an easy win.

But Molnar, a partner in the law firm Manning & Kass, Ellrod, Ramirez, Trester LLP, never felt too much relief. He knew that in the case of a no show, a judge was required to file notice of intent to dismiss, and then only if there were no further actions from the filing party the matter would be at an end.

That has all changed, easing the burden a bit for Molnar, and more importantly for his employers.

In a step that many citizens would argue doesn’t occur too often, the government created a new law to improve the state’s unwieldy worker’s comp system– and it looks like some measure of success has been achieved.

If you file a lien but don’t pay the newly required fees, your case gets automatically tossed out. And most people who bother to pay a fee for a lien, are more likely to show up at hearings, according to Molnar.

The fees are part of California’s workers’ compensation reform law Senate Bill 863 passed last year. The comprehensive reform that went into effect Jan. 1 includes a 30 percent increase in permanent disability indemnity rates for workers phased in over two years, cost reductions for businesses and the establishment of an independent medical review process

Under SB 863, liens for reasonable medical expenses incurred by or on behalf of the injured employee are subject to a filing fee of $150. For liens filed before Jan. 1, there will be a $100 activation fee which must be paid prior to Jan. 1, 2014, or the lien will be subject to dismissal.

The fees were intended to reduce the hundreds of thousands of liens filled each year costing the system hundreds-of-millions of dollars, according to the Workers’ Compensation Insurance Rating Bureau.

In May Molnar had a case with 24 lien claims, all from practitioners in one form or another that allegedly rendered services for a female worker with a back injury, who her doctor sent out to “every specialist under the sun,” Molnar said.

Right away he got nine lien claims dismissed for failure to pay the required $100 activation fee.

“It kind of gets rid of the frivolous liens,” said Molnar, who settled the remainder of those 24 cases for between 10 and 20 cents on the dollar.

Many on the receiving side of liens levied are praising the fees for loosening up the muck in the system.

Reno, Nev.-based EMPLOYERS, a monoline workers’ comp carrier that conducts more than 60 percent of its business in California, where it also sees more than half of its claims, is reporting that the lien fees are already easing the company’s losses.

“It will save us on medical costs, and it will save us on defense costs,” said Christina Ozuna, vice president of claims for the Western Region for EMPLOYERS.

Ozuna said it’s too soon to provide estimates on how much cost savings there will be, but she said they will be worth noting.

“We believe we’re going to have significant cost savings,” she said.

Those savings should continue due to the en banc decision in the case in January of Figueroa v. B.C. Doering Co., in which the Workers’ Compensation Appeals Board detailed the process for lien activation and the consequences for not activating a lien prior to a lien conference set after 2013.

WCAB ruled the lien activation fee must be paid prior to the commencement of a lien conference, and if the lien claimant fails to pay, its lien must be dismissed with prejudice. In Figueroa WCAB ruled the judge was required to dismiss the case and that the failure to enter into negotiation or provide a proper notice is not excuse from paying the fee.

Operationally, carriers like EMPLOYERS will still be required to negotiate, Ozuna said, adding, “but going forward we’ll see many liens fall out of the system.”

She added, “We’re seeing many, many dismissals of liens out of the system.”

The dismissals are having a direct impact on EMPLOYERS by reducing the cost of defense of these liens, however some people are still poking at the loopholes in the lien filing process, she said.

Instead of liens, many copy services and interpreting agencies with charges they want paid have acted to avoid the fees by instead filing petitions for costs.

“Their argument is they are not medical providers and are not trying to provide claim for cost in the form of a lien,” Ozuna said. “This is their effort to sort of get outside of that.”

The lawmaker who originally introduced the lien filing fees before they were integrated into the workers’ comp reform bill was state Sen. Ted Lieu, D-Torrance, who had intended the bill to eliminate some of these loopholes that allow people to game the system.

However, there was one thing he didn’t intend, and that was to make the fees retroactive.

To fix that Lieu has authored cleanup legislation, Senate Bill 258, which clarifies that liens assigned prior to Jan. 1, 2013 can still be pursued even if the medical provider is still in business.

“To do otherwise would probably be unconstitutional,” said Ray Sotero, a spokesman for Lieu.

Lieu’s bill also requires all members of the WCAB to be attorneys. All members now serving are attorneys, but Leiu believes a law is required to ensure that in the future all WCAB members are highly trained in matters of law.

“The Workers’ Compensation Appeals Board was created in 1965, and the workers’ compensation system it oversees has grown greatly in complexity since that time,” Lieu said in a statement. “Like a court, the WCAB deals with complex legal issues, and it is necessary that the members of the WCAB are attorneys with significant legal experience. To do otherwise gives short-shrift to the needs of injured workers and employers.”

As far as liens go, Estelle Freeman, claims supervisor for Carl Warren & Co. in Tustin, Calif., said while her organization has not felt the full impact of the new law, she’s noticed some changes.

“I have noticed a lot more lien claimants trying to aggressively settle their liens before the case goes to a hearing to avoid paying the lien filing and/or lien activation fee,” Freeman said.

In fact, it appears that in 2012 in anticipation of the lien fees taking affect several lien filers got aggressive and made their claims as soon as possible, according to WCIRB’s Actuarial Committee.

According to the committee, there was a sharp increase in lien filings in the fourth quarter of 2012 in anticipation of new lien filing and activation fees as part of SB 863. Citing Department of Workers’ Compensation data, WCIRB notes that nearly 1.2 million liens were filed in 2012 compared with less than 500,000 in 2011.

Molnar with Manning & Kass said many of those who fail to file liens appear to be the same ones who are often no shows at the lien conferences.

“The same people who don’t file their activation fee before the lien conference are generally the ones who don’t show up for their lien conference,” Molnar said. “With this lien activation fee they’re automatically dismissed and then they’re dead.”

That doesn’t cut down his workload as much as Molnar would like, because he still has to go through the trouble of setting up a conference, and analyzing the case and preparing, then showing up.

But it has reduced his clients’ liability considerably. He estimated he’s saved one client $20,000 in dismissed lien cases so far due plaintiffs not paying the fees. And that hard dollar savings, he believes, will have a positive impact on the entire process.

“It has some real world ramifications for it,” he said.