New Workers’ Compensation Regulations Could Reduce Benefits 58%, Study Shows

Workers' compensation benefits for permanently disabled workers could be reduced by 58% under rules issued in January by the administration of Gov. Arnold Schwarzenegger (R), according to an independent study reviewed Tuesday by the Workers' Compensation Insurance Rating Bureau, the Los Angeles Times reports (Lifsher, Los Angeles Times, 5/18). The study estimates that the new guidelines will reduce workers' compensation payments by as much as $1 billion (Chan, Sacramento Bee, 5/18).

The study -- by Christopher Brigham, a physician and nationally recognized expert on calculating workers' compensation benefits -- estimates that the new guidelines written by the Division of Workers' Compensation will reduce the number of injured workers eligible for permanent disability payments by about 40%. The new rules apply to workers who are injured Jan. 1 or later (Lifsher, Los Angeles Times, 5/18).

A separate study by Frank Neuhauser, a University of California-Berkeley workers' compensation expert, estimated that benefit payments would decrease by about 7% (Sacramento Bee, 5/18).

According to the Times, Brigham's study "adds weight to complaints from labor unions that employees would be harmed" and also "could give new ammunition" to Senate Democrats who want to reconsider strategies to address the state workers' compensation insurance system.

Senate President Pro Tempore Don Perata (D-Oakland) said the report "tells us what we already knew -- there are serious questions the governor must answer about his workers' comp reforms." He added, "If he is genuine in his promise to make sure his policies do not slash benefits that injured workers and their families have earned, he must be prepared to take appropriate steps now."

Vince Sollitto, a spokesperson for Schwarzenegger, said the governor is not opposed to listening to Perata's points. Sollito said Schwarzenegger is not likely to push for significant changes to the workers' compensation reforms in part because Brigham's research is primarily "speculative" and is one of several conflicting reports on the possible effects of the new regulations.

Nicole Mahrt, a spokesperson for the American Insurance Association, said. "We need to let things play out before we judge the system" (Los Angeles Times, 5/18).

In related news, WCIRB at a hearing on Thursday is expected to recommend a 13.8% reduction in premium rates for workers' compensation insurance policies written or renewed after July 1, the Bee reports.

WCIRB previously recommended a 10.4% reduction for employers renewing policies after July 1, but revised the recommendation after calculating the financial savings expected to emerge from permanent disability benefits for injured workers.

Insurance Commissioner John Garamendi (D) is expected to review the recommendations and issue a nonbinding benchmark for insurers (Chan, Sacramento Bee, 5/18).