Assembly, Senate Committees Hold Workers’ Compensation Hearings

As expected, the Assembly Insurance Committee and the Senate Labor and Industrial Relations Committee on Wednesday held separate hearings on Gov. Arnold Schwarzenegger's (R) proposals to reduce employers' workers' compensation costs, the Sacramento Bee reports (Chan, Sacramento Bee, 2/12). During his State of the State address last month, Schwarzenegger said he would seek to place a measure on the November statewide ballot if legislators do not pass reform legislation by March 1. As part of his "California Recovery Plan," Schwarzenegger in November proposed reducing by $11.3 billion the cost of the state's $29 billion workers' compensation program, under which employers pay $5.85 per $100 of payroll -- the highest rate in the nation -- for coverage. Schwarzenegger's plan includes measures that would prohibit workers from receiving multiple disability payments for the same injury; require dispute resolution more frequently to reduce litigation costs; limit penalties paid by insurers and employers in medical bill disputes; and establish uniform standards for permanent disability. However, Democrats in the Legislature, who generally do not support all of Schwarzenegger's reforms, have said that no workers' compensation reforms will be ready until the end of March (California Healthline, 2/11). The Labor and Industrial Relations Committee hearing was the first of six on
problems facing the state's workers' compensation system, the AP/Monterey County Herald reports. Wednesday's hearing focused on how benefits for permanently disabled workers are determined (Lawrence, AP/Monterey County Herald, 2/12).

The Insurance Committee was scheduled to vote on Schwarzenegger's proposals to but delayed the vote "amid signs that lawmakers want to craft a compromise to stave off a ballot box fight," the Contra Costa Times reports. The vote was delayed at the request of Assembly member Abel Maldonado (R-San Luis Obispo), who is sponsoring the Schwarzenegger proposal in the Assembly (Lohse, Contra Costa Times, 2/12). The move delayed "what many saw as a likely defeat" for Schwarzenegger's proposal, the Los Angeles Times reports (Lifsher, Los Angeles Times, 2/12). Maldonado testified that a meeting held on Tuesday between Schwarzenegger and Assembly Speaker Fabian Nunez (D-Los Angeles), Assembly Minority Leader Kevin McCarthy (R-Bakersfield), Senate President Pro Tempore John Burton (D-San Francisco) and Senate Minority Leader Jim Brulte (R-Rancho Cucamonga) was "productive" in attempting to craft a bipartisan compromise (Contra Costa Times, 2/12). The Los Angeles Times reports that the "Big Five" -- Schwarzenegger and the Legislature's party leaders -- instructed their staffers to develop proposals to cut the costs of the state workers' compensation system without a reduction in benefits (Los Angeles Times, 2/12). Maldonado said, "After the discussions in the governor's office, they made it very clear they'd like to see this hearing be a hearing where we continue to gather information" instead of voting on Schwarzenegger's proposal.

Insurance Commissioner John Garamendi (D), business owners who support Schwarzenegger's proposal, workers who do not support Schwarzenegger's proposal, and others testified at the insurance committee hearing (Contra Costa Times, 2/12). The Assembly committee did not indicate when it might vote on the Schwarzenegger proposals (AP/Monterey County Herald, 2/12). At the hearing, Garamendi said that reducing workers' compensation insurance premiums through rate regulation would keep new insurers out of the California market and would not give businesses rate relief, the Bee reports. Garamendi said that the committee should instead focus on State Compensation Insurance Fund, which provides workers' compensation insurance to more than 50% of California businesses. "State Fund is the market leader. What State Fund does tells the rest of the market what to do in terms of (rates)," Garamendi said (Sacramento Bee, 2/12).

The Los Angeles Times reports that the "pieces [are] now in place to begin working toward a deal, increasing the chances that legislators could pass a workers' comp bill by the end of March," but not before Schwarzenegger's deadline of March 1 (Los Angeles Times, 2/12). Assembly member Juan Vargas (D-San Diego), chair of the Insurance Committee, said, "I'm very conscious of the (governor's March 1) deadline. I hope we can come to a resolution. If we don't get to an agreement it would be a terrible failure" (Sacramento Bee, 2/12). Nunez said, "We've got to [pass a workers' compensation bill] as soon as possible" but added that "we've got to do it right." Vince Sollitto, a spokesperson for Schwarzenegger, said that the governor is "prepared to launch a ballot measure" but would "prefer a legislative solution," the Los Angeles Times reports. Sollitto added that Schwarzenegger is "encouraged by the tone of the meeting and considers it very positive that the Legislature is engaging" in discussions for a possible deal (Los Angeles Times, 2/12). After the Insurance Committee hearing, Sen. Charles Poochigian (R-Fresno), who is sponsoring Schwarzenegger's workers' compensation proposal in the Senate, said that he saw "some pretty strong indications that we can get to a consensus." He added that the specifics of the proposal are not "cast in stone. The only thing that's an absolute prerequisite is that the consequences of what we do must be predictable, quantifiable and major in terms of cost savings" (Contra Costa Times, 2/12).

In related news, the California Labor Federation on Wednesday released a workers' compensation reform proposal, which it said would save employers "billions of dollars," the AP/Herald reports (AP/Monterey County Herald, 2/12). The plan would give the insurance commissioner the authority to regulate workers' compensation insurance premium rates and calls for the setting of commission rates for insurance brokers and agents, the Bee reports (Sacramento Bee, 2/12). The plan also calls for:

• A system to determine how much an injury has permanently affected a workers' ability to perform his or her job;
  
  
• Incentives for doctors, workers and employers to return to work;
  
  
• Employers to immediately pay benefits to workers;
  
  
• Employers to have 45 days to dispute a worker's injury claim instead of the current 90-day period; and
  
  
• Lawyers representing workers to get paid for helping workers obtain medical care or temporary disability payments instead of the current system of only getting paid if workers are found to have compensable permanent injuries (Folmar/Lohse, San Jose Mercury News, 2/12).

In related news, Richard Gannon, administrative director of the Department of Industrial Relations, sent a letter to Carlo Michelotti, head of the California Pharmacists Association, warning that pharmacists are not allowed to charge workers' compensation patients for prescription drugs. The letter said that pharmacists could face "monetary sanctions" for charging workers' compensation beneficiaries, who are supposed to receive medical care and prescription drugs at no out-of-pocket cost. However, some drugstore chains have "threatened to charge injured workers for prescriptions" because they are "angered by a new workers' compensation law that slashes how much they can be reimbursed for drugs," the Bee reports (Sacramento Bee, 2/12). In September, former Gov. Gray Davis (D) signed into law two bills (AB 227 and SB 228) regarding workers' compensation that established fee schedules for treatments and prescription drugs; limited chiropractic and physical therapy visits; implemented reviews that use national standards to determine the proper amount of care for certain injuries; and increased penalties for employer fraud from $50,000 to $150,000 (California Healthline, 1/28). Michelotti said that pharmacists can charge workers' compensation patients by treating their prescriptions as "private transactions" (Sacramento Bee, 2/12).

"California can do many things -- immediately -- to defuse the workers' compensation crisis," and Schwarzenegger "should start by abandoning" the March 1 deadline for legislation to reduce employers' workers' compensation insurance costs, a Los Angeles Times editorial states. The editorial notes that legislation enacted last year "put needed controls on certain overused treatments, including chiropractic care," adding that lawmakers "now must withstand fierce lobbying by doctors, lawyers and others with a hand in the system's pocket" to pass additional legislation to reduce employers' workers' compensation insurance costs. According to the editorial, Sen. Richard Alarcon (D-Sun Valley) and Assembly member Rick Keene (R-Chico) this week agreed to "common ground" on a bill that would "for starters, allow objective medical guidelines, not lawyers, to determine treatment." The editorial concludes, "Asking voters to choose in November between dueling initiatives sponsored by injured workers' lawyers and corporations is not the right path to reform" (Los Angeles Times, 2/12).