After months of negotiations, California labor unions and employers finally came together to help produce SB 863, a new law that overhauls much of that state’s workers’ compensation system.  Everyone agreed that the system needed to be more efficient.  And everyone agreed that some things needed to become less costly.  But the parties to the negotiations disagreed on where, exactly, to find the savings.

The result, SB 863, is anticipated to save employers in the nation’s most populous state about $400 million—even while benefits for injured workers (which, labor advocates say, hadn’t kept up with healthcare costs) will increase by an average of 29%.  Additionally, analysts predict a decrease in legal expenses and payments for ambulatory surgical care services, quicker treatment for injured workers, and faster resolutions of claims disputes.

Specific changes to the system include (1) increasing the minimum and maximum weekly benefit amounts for the permanently disabled, (2) the creation of a $120 million per-year “Return to Work Fund,” (3) the introduction of an independent medical review process (that’s set to take about 40 fewer days to resolve disputes than under the old system), (4) changes to fee schedules, and (5) changes to the interaction of self-insured employers and workers’ compensation—among others.

But, as these changes give much to both workers and employers while simultaneously cutting money from the system, something has to give.

Thus, savings will be found from the complete elimination of benefits for a number of health conditions like psychiatric problems, sexual dysfunction, and sleep loss.  The conditions that are being cut out of the system are generally ones that tended to involve a good deal of dispute.

These so-called “specialty services” will, then, stop being as lucrative for medical providers needing to keep up profits.  Thus, the Sacramento Business Journal and other California media outlets are beginning to report a rise in general primary care costs.

It will remain to be seen exactly how this piece of legislation, only signed into law a few months ago, will affect every aspect of healthcare in California.  But, certainly, other states will be looking to California’s reforms as potential models for their own systems.

For the bill itself, see http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_0851-0900/sb_863_bill_20120907_enrolled.html.  For a detailed summary, see http://www.dir.ca.gov/dwc/SB863/SB863_Overview.htm.