Workers’ Compensation System Could Be Poised for Another Overhaul

California employers are facing rising costs for workers' compensation insurance while injured workers are receiving less in benefits, signaling that the state might be due for another overhaul of its workers' compensation system, the San Francisco Chronicle reports.

Previous Reforms

Gov. Arnold Schwarzenegger (R) and former Gov. Gray Davis (D) helped spearhead major changes to California's workers' compensation system.

Two bills enacted under Davis reduced medical costs for workers' compensation, primarily by curbing physicians' ability to prescribe unnecessary treatments. Legislation enacted under Schwarzenegger also imposed medical cost controls and adjusted the system for awarding permanent disability payouts.

The reforms have helped reduce workers' compensation spending over the last several years. Between 2002 and 2008, medical payouts for workers' compensation have declined from $4.6 billion to $1.8 billion and disability awards fell from $4.4 billion to $1.3 billion.

Insurers Seeking Rate Increases

Since the workers' compensation changes took effect, several court rulings have challenged the new rules for computing disability awards.

The court rulings have contributed to uncertainty about the stability of the new rules, which has led many workers' compensation insurers to seek rate increases.

On Tuesday, a group representing workers' compensation insurers is scheduled to argue in favor of a 27.7% rate increase before a hearing at the state Department of Insurance (Abate, San Francisco Chronicle, 10/12).