Legislature Passes Bill To Reform State Workers’ Compensation Insurance System
As expected, on Friday the Assembly voted 77-3 and the Senate voted 33-3 to approve a bill (SB 899) that would reform the state's workers' compensation system, the San Diego Union-Tribune reports (Ainsworth, San Diego Union-Tribune, 4/17). The bill, sponsored by Sen. Richard Poochigian (R-Fresno), would provide for immediate medical care for injured workers; require injured workers to choose from a network of employer-selected physicians for treatment, or petition a medical review panel to see a physician of their own choice; require use of American Medical Association guidelines to rate impairments to injured workers; implement provisions to encourage injured workers to return to work; and allow employers to apportion workers' compensation payments to cover only work-related injuries (California Healthline, 4/16). The bill would require employers and workers to be considered equal before the law, whereas currently workers are given the benefit of the doubt. In addition, the bill would limit temporary disability payments to two years instead of the current five years; increase benefits for workers who are more than 70% disabled; give small businesses a "state reimbursement" of as much as $2,500 for necessary workplace changes to allow an injured worker to return to work; require workers to prove that an injury exists; and eliminate payments for claims of back pain and other pains, according to the Union-Tribune (San Diego Union-Tribune, 4/17). Gov. Arnold Schwarzenegger (R) intends to sign the bill on Monday in Long Beach. Because the bill was passed by a more than two-thirds majority of the Assembly and Senate, the measure would take effect as soon as Schwarzenegger signs it (Folmar/Marimow, San Jose Mercury News, 4/17). According to the Los Angeles Times, the bill leaves "many regulations and details for administrators to hammer out" (Lifsher/Lee, Los Angeles Times, 4/17).
"Working together, we have produced a huge win for California," Schwarzenegger said Friday, adding, "Our bill provides strong reform that will save jobs, reduce costs for our employers and improve care for injured workers. Our state can now become once again the job-creating machine it once was" (Sanchez, Washington Post, 4/17). Schwarzenegger estimated that the bill could reduce workers' compensation insurance costs by as much as 25% to 30% on workers' compensation insurance premiums (Chan, Sacramento Bee, 4/17). "We're talking about billions and billions of dollars," he added. Insurance Commissioner John Garamendi (D) said, "These reforms, when fully effective, will dramatically reduce the cost of workers' comp in California and move us from a position where we are far ahead of any other state to a position that puts us in the ranks of other high-cost states." Garamendi has scheduled a hearing for April 29 to gather information needed to calculate recommended workers' compensation premium rates for bills due after July 1, the Los Angeles Times reports (Los Angeles Times, 4/17). Senate President Pro Tempore John Burton (D-San Francisco) said, "There are many good things in this bill. It is not an evil thing to the workers of the state." Allan Zaremberg, president of the California Chamber of Commerce, said that the measure is "going to reduce costs and, at the same time, not harm the truly injured worker" (Sacramento Bee, 4/17). Assembly member Mark Wyland (R-Vista) said that the measure would provide "genuine and real" savings but added that Schwarzenegger must still persuade more insurers to operate in California (San Diego Union-Tribune, 4/17). Sam Sorich, president of the Association of California Insurance Companies, said, "We think there's some good concepts, and we're hopeful that the bill is going to reach its goal of holding down costs" (Sheppard/Drucker, Los Angeles Daily News, 4/17).
According to the Union-Tribune, Democratic lawmakers who did not vote in favor of the bill did so because the measure did not include mandatory regulation of workers' compensation rates. "Somebody has to stand up and say that the insurance companies have to be held accountable," Sen. Richard Alarcon (D-Van Nuys) said (San Diego Union-Tribune, 4/17). Sen. Shelia Kuehl (D-Los Angeles) said that she voted for the bill because she was "really scared" of Schwarzenegger being able to use his popularity to pass his workers' compensation reform initiative in the November election (San Jose Mercury News, 4/17). However, she said that the bill does not address "one of the major components of worker injury, which is ongoing and serious pain, a difficult thing and yet a very real thing" (San Diego Union-Tribune, 4/17). David Schwartz, president-elect of California Applicants Attorneys Association, said that Democratic leaders "gave in" to Schwarzenegger's reform demands because they "would rather spend their resources fighting" the ballot initiative to repeal SB 2, the Sacramento Bee reports (Kasler, Sacramento Bee, 4/16). Under SB 2, scheduled to take effect Jan. 1, 2006, employers with 200 or more employees will be required to provide health insurance to workers and their dependents by 2006 or pay into a state fund that would provide such coverage. Employers with 50 to 199 employees will have to provide health insurance only to workers by 2007. The law will exempt employers with fewer than 20 employees. The law also will exempt employers with 20 to 49 employees unless the state provides them with tax credits to subsidize the cost of health insurance for employees (California Healthline, 4/15).
According to the Los Angeles Times, some lawmakers are "rattled" by Schwarzenegger's legislative victory because the workers' compensation bill was passed with little time for discussion among lawmakers outside of negotiations. Assembly member Keith Richman (R-Granada Hills) said that the reform "has not been done in an open and transparent manner where the public is going to have the opportunity to provide input." During the recall election, Schwarzenegger "promised to end closed-door dealing in the capital," the Los Angeles Times reports (Nicholas/Salladay, Los Angeles Times, 4/18). When questioned about the contradiction, Schwarzenegger said that it is "a very good point" but added that the deal faced a Friday deadline. "In principle, I always want everyone to be participating, to have an open forum and to talk and to let the public look inside. But in this case, it was not possible to do that," he said (San Jose Mercury News, 4/17).
In related news, the Assembly on Friday voted 47-32 to approve a bill (ABX4 16) that would allow the insurance commissioner to oversee workers' compensation insurance employer premium rates for two years, the Bee reports. The measure now moves to the Senate for consideration (Sacramento Bee, 4/17). The bill would establish minimum and maximum premium rates for a carrier-based formula that takes into consideration expenses, profit margins and claims costs. Under the bill, the insurance commissioner would have to approve rates that exceed the established maximum (California Healthline, 4/16). Alarcon said that without rate regulation, "there will be continued abuse" of the state workers' compensation insurance system (Los Angeles Times, 4/17). Schwarzenegger said that rate regulation has "always had a negative impact on business, and ... chased away insurance companies" (Hubbell/Gledhill, San Francisco Chronicle, 4/17). Schwarzenegger is unlikely to sign the rate regulation measure if it passes, but he "left the door open to rate regulation" on Friday, the Union-Tribune reports. "If the insurance industry does not pass on those cost savings, then we will have to look at it," Schwarzenegger said (San Diego Union-Tribune, 4/17).
In related news, as expected, supporters of a Schwarzenegger-backed workers' compensation reform initiative on Friday said that they would not submit the more than 1.1 million signatures they gathered to qualify the initiative for the November ballot, the Bee reports (Sacramento Bee, 4/17). The signatures were due to the state by the end of business Friday (California Healthline, 4/16).
Summaries of recent editorials and an opinion piece addressing workers' compensation reform are provided below.
Contra Costa Times: Schwarzenegger's promise to reform the "woeful and terribly expensive" workers' compensation system was a "knee-slapper" that was once considered among political experts to be the "hands-down winner of the Don Quixote Award for Wishful Thinking," according to a Times editorial. To pass the reform, Schwarzenegger had to take on unions, trials lawyers, insurance companies and "years of bureaucratic inertia," forces "powerful enough to stop or dramatically alter most anything in Sacramento," the editorial states. Schwarzenegger made "the improbable manifest" by negotiating with lawmakers on reform legislation, while collecting signatures to put a more expansive reform proposal on the ballot, the editorial states (Contra Costa Times, 4/19).
Los Angeles Times: The "miracle" deal in workers' compensation reform "will have its share of flaws," a Times editorial states, adding that the legislation offers a "basic framework" to what will be a "complex new puzzle." According to the editorial, state officials must implement new "controversial medical standards" for identifying and classifying work disability claims; build a dispute-resolution system that will protect injured workers while "weed[ing] out fraud"; and be willing to spend more on staff, training and technology (Los Angeles Times, 4/18).
Sacramento Bee: Although lawmakers and the public may not be familiar with the specifics of the bill to reform the state workers' compensation system, "the last-minute rush [to pass the bill] may be a small footnote on a big and important change" as the legislation may "begin to move the treatment of workers' injuries into health care's mainstream," according to a Bee editorial. Under the reforms, the separation of treatment of on- and off-the-job injuries will "begin to crumble" as the system more closely resembles an HMO style of care (Sacramento Bee, 4/18).
Santa Rosa Press Democrat: The "most important aspect" of the workers' compensation reform is its built-in incentives for injured employees to return to work, a contrast to the existing system, which breeds "hostile" relationships between employers and injured workers, according to a Press Democrat editorial. Although the legislation does not "go as far in controlling costs as some reformers wanted," it "goes far in fixing what is broken," the editorial states (Santa Rosa Press Democrat, 4/16).
- Daniel Weintraub, Sacramento Bee: Although lawmakers had to navigate an "interest-group minefield" to reach a compromise on workers' compensation reform, the agreement is an "example of the kind of progress on knotty problems that can come when partisans back away from absolutism and settle for something less than their ideal," columnist Weintraub writes in the Bee. The deal may not be perfect, but "Schwarzenegger and his legislative counterparts were smart not to insist upon [perfection]," Weintraub writes (Weintraub, Sacramento Bee, 4/18).
Summaries of recent broadcast coverage addressing reform of the state workers' compensation system are provided below.
- KPCC's "Talk of the City" Friday reported on the Legislature's approval of the bill. The segment includes comments from Vince Sollitto, deputy press secretary for Schwarzenegger (Felde, "Talk of the City," KPCC, 4/16). The complete segment is available online in RealPlayer.
- CPR's "Capital Public Radio" Friday reported on Schwarzenegger's press conference and expected signing of the bill Monday. The segment includes comments from Alarcon and Schwarzenegger (Montgomery, "Capital Public Radio," KXJZ, 4/16). The complete segment is available online in RealPlayer.
- "Capital Public Radio" Friday also reported on the provision in the bill calling for injured workers to choose from a network of employer-selected physicians for treatment. The segment includes comments from Poochigian (O'Mara, "Capital Public Radio, KXJZ, 4/16). The complete segment is available online in RealPlayer. Note: "Capital Public Radio" audio segments may not be available for more than a few days after the broadcast.
Additional information on SB 2 is available online. This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.