February 13, 2006

SBACC Continues Fight to Reform Workers' Compensation System

Plagued by skyrocketing costs and widespread conflict, California’s workers’ compensation was a system in crisis. The harmful impacts on employers and workers alike drove the need to reform California’s broken system. Lawmakers responded by enacting a series of reforms, culminating in the comprehensive reform proposal championed by Governor Schwarzenegger in 2004.

This legislation, Senate Bill 899, was crafted to address many of the core issues plaguing the system by:

- Reducing the high incidence of unnecessary and costly litigation
- Producing consistent and predictable outcomes for disabled workers and encourage return to work
- Improving medical treatment using proven methods of delivering quality care affordably and expeditiously
- Ensuring that injuries directly result from employment and benefits reflect degree of causation related to the injury
 

Passage of SB 899 was just the first step, and the Chamber is working to ensure that the legislation is implemented as intended and not undone by reform opponents. Most of the administrative regulations required to turn SB 899 into actual system change have been adopted by state regulators, but some additional regulations are still needed. Meanwhile, reform opponents — primarily those who profited from the conflict, uncertainty and subjectivity of the old system — are challenging many of the key reforms in court and the Legislature.

The Workers’ Compensation Insurance Rating Bureau (WCIRB) has estimated that recent legislative reforms will reduce workers’ compensation system costs by several billion dollars. Cost savings have already translated into significant reductions in workers’ compensation insurance premiums paid by California employers, with more reductions in the pipeline. Meanwhile, competition among
insurers is increasing.

Realizing the full cost savings from reform is critical to both public and private employers, as well as California’s economic future. Savings for local government mean more resources for public safety and infrastructure. Savings for schools mean more resources for teachers, textbooks and facilities. Savings for businesses will help employers create jobs, provide raises and benefits and keep their operations in California.

February 3, 2006

Legislative Update: Workers’ Compensation Legislation Back in 2006

In September 2005, Governor Arnold Schwarzenegger finalized his action on the bills passed by the California Legislature during the first year of the 2005-2006 legislative session. When measures where first introduced at the beginning of the 2005 session, over four dozen workers’ compensation bills were introduced. Although most of these bills focused altering the reforms mandated by legislation passed in 2003 and Senate Bill 899, there were several measures that would reinforce and strengthen California's workers' compensation. 
 

On October 7, 2005, none of the proposed workers’ compensation legislation was passed by the Legislature nor signed by Governor Schwarzenegger. California legislators, Assembly Speaker Fabian Nunez, and the Governor concluded that further improvements should be saved until the most recent measures have had time to fully infiltrate the system.
 

Despite the unanimous waiting period, the following four bills will create another stumbling block for California’s workers' compensation system: AB 1549 (Koretz), SB 46 (Alarcon), SB 538 (Kuehl) and SB 1023 (Dunn). First, AB 1549 will allow chiropractors and acupuncturists to become Independent Medical Reviewers. Second, SB 46 will impose a rate regulation scheme on workers' compensation insurers that will reduce the increasing competition in the workers' compensation insurance market currently helping to bring down costs for employers. Next, SB 538 will place burdensome restrictions on the new Medical Provider Networks established by SB 899. Finally, SB 1023 will enforce a redundant penalty structure that was previously revised within SB 899. SB 1023 was vetoed by Governor Schwarzenegger after passing the Legislature.

On the other hand, there are two bills that will provide further savings for employers. SB 178 (Poochigian) will cut the red tape for medium-sized employers forming self-insurance pools as a way of reducing their workers' compensation costs. The other measure, SB 292 (Speier), will save employers money by closing a loophole that allows medical providers to repackage drugs for sale a huge mark-ups.

Now that the Legislature is back as of the first week of January, there are a few legislative agendas to watch. First, Assembly Speaker Nunez expressed an interest during the 2005 session to research a more "comprehensive" workers’ compensation reform. The Speaker is expected to propose changes to the new permanent disability rating system that was enacted January 1, 2005. Additional legislation with goals to diminish employers’ savings resulting from SB 899 will be proposed by the California Applicants' Attorneys Association (CAAA) during the 2006 legislative year. The final to watch in 2006 is the costs of the workers’ compensation system. Most of the reform measures passed in 2003 will have penetrated the system allowing legislators the time needed to determine how well the system is working for both employers and injured workers.

With many bills shelved and many agendas proposed in 2005, there will be many workers’ compensation issues to take action on during the 2006 legislative session.

January 2006

State of California Releases Study of the Effects of the 2004 Legislative Reforms on California Workers’ Compensation Insurance Rates

Primarily due to the legislative reforms of 2004, the State of California projects that the approved insurance rates have decreased by 46% (from average rates of $4.81 per hundred dollars of payroll to $2.59 from July 1, 2003 to January 1, 2006 (a three year period). Rates are now below where they were in 1996. These rates have been adjusted for changes in the mix of payroll by industry. Click here to download the report.

January 9, 2006

Workers’ Compensation Legislation Back in 2006