Sacramento Report

Watching a Train Wreck

by David K. Milton

"Workers Comp System heads for a Train Wreck."
— Dan Walters, Sacramento Bee, (2/18/03)

Along with the budget crisis, workers’ compensation reform is taking center stage as one of the major issues for the California Legislature this year. It is shaping up as a classic confrontation between liberal Democrats who want no change at all, and moderate Democrats aligning with Republicans to stem the tide of escalating workers’ compensation premiums and benefit payments.

The California Apartment Association (CAA) has provided legislators and the California Insurance Commissioner with evidence from the rental housing industry concerning premiums that have nearly doubled in one year. This increase occurred despite the fact that rental housing owners and property managers who submitted this information had no claims for 10 to 15 years.

The Insurance Commissioner, John Garamendi, announced in February his “game plan” to attack the state’s workers’ compensation problem. He has observed on several occasions that, “the premium costs to employers are spiraling out of control and will continue this upward movement unless legislative and regulatory action is taken immediately.” He believes the legislature and his office need to combine efforts in seven key areas:

Improvement of financial oversight
Containment of medical costs
Consistency in determining the level of permanent disability
Improved coordination and communication with state agencies regulating the system
Continued aggressive fraud interdiction
Creation of a 24-hour medical care system merging health insurance with workers’ compensation medical care
Development of professional training and quality standards for service decision-makers.

To reach these over-all goals, the commissioner sees responsibilities breaking down as follows:

Legislative

Control medical costs
Create uniformity and certainty in disability systems
Reduce litigation Establish standards for claims adjusters and appeals judges

Regulatory

Preserve fiscal integrity of insurance companies
Reduce fraud
Coordinate state agencies’ activities

The California Chamber of Commerce and the California Restaurant Association have initiated the creation of the “Workers’ Compensation Insurance Reform Employers’ Coalition,” of which the CAA is an active member. This coalition includes more than 50 organizations, representing employers from virtually every industry conducting business in California.

The goal of this coalition is to achieve the enactment of meaningful reform to the workers’ compensation insurance environment in the 2003-04 legislative session, whether by individual legislation or through the state budget process. Given the Democrat-controlled legislature, most likely any comprehensive reform will have to be achieved through the budget-negotiation process.

Below is an overview of the various bills that have been introduced this year to reform California’s workers’ compensation system:

AB 1262 (D- Matthews) – This bill would require the Insurance Commissioner to conduct a study of the workers’ compensation system, examining the state of competitiveness of the market as well as ways to improve market functioning.

AB 1434 (R- Wyland) – This bill would expand the field of employers with collective bargaining agreements, as well as permit any group of employers that has paid an aggregate of $250,000 or more in annual workers’ compensation insurance premiums (such as CAA) to submit an application to the Department of Industrial Relations (DIR) to participate in an Alternative Workers Compensation (AWC) program.

AB 1480 (R- Richman) – This bill would require physicians to submit workplace injury reports to employers in a timelier manner than currently mandated by state law.

AB 1481 (R- Richman) – This bill would require the Workers’ Compensation Appeals Board to calculate permanent disability apportionment based on sound medical science.

AB 1482 (R- Richman) – This bill would limit medical treatment payments to the levels set in the medical fee schedule adopted by the Administrative Director of the Division of Workers’ Compensation (AD) and proposes to require a medical outpatient fee schedule to be adopted by the AD by 2005.

AB 1483 (R- Richman) – This bill would require that every physician who treats workers’ compensation injuries be certified

AB 1579 (R- Cogdill) – This bill would require an employee to disclose to an employer when an adjudicative body has determined that the employee has committed workers’ compensation fraud in the past.

AB 1581 (R- Cogdill) – This bill would require insurers, when creating an experience-rating plan, to give employers merit credits that decrease a policyholder’s rates based on the employer’s record of job safety.

SB 228 (D- Alarcon) – This bill would modify requirements that form a basis for the Administrative Director of the Division of Workers’ Compensation official medical fee schedule.

SB 354 (D- Speier) – This bill would reduce excessive chiropractic costs within the system, increasing fines for fraud to create a greater deterrence of such behavior, as well as curtailing inappropriate referrals and the costs associated therewith.

SB 366 (R- Johnson) – This bill would require employees to present clear and convincing evidence that, when claimed, psychiatric injuries have arisen as a direct result of their employment.

SB 414 (R- McClintock) – This measure would require injuries to be compensated under the workers’ compensation system to be determined by “objective” findings.

SB 457 (R- McPherson) – Current law provides a 10 percent penalty when workers’ compensation benefits have been unreasonably delayed or refused. This bill would modify this figure when such a delay has occurred, and establish as a pre-condition that an employee notify an employer before such a claim can be filed.

SB 893 (R- Poochigian) – The Division of Workers’ Compensation has prepared and adopted a permanent disability schedule. This bill would provide that when applying this schedule, no injury rating should be based on a medical report that is not in accordance with specified medical publications. We’ll keep you posted on the events surrounding workers’ compensation reform.

For more information regarding the CAA please go to their web site. The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. David K Milton is the Vice President and counsel, Local Government and political affairs of the California Apartment Association.