Wednesday, May 28, 2003

Workers Comp Crisis

This is a rather disturbing article about the workers compensation crisis in California. [Note: The LA Times requires (free) login.] Because of sharply rising medical costs, other states -- Florida, West Virginia, and others -- are also reaching a breaking point.

California is particularly bad: "Employers in California pay more for workers' comp coverage than in any other state, yet their injured employees receive some of the skimpiest benefits in the nation....Because workers' comp costs are directly linked to the size of payroll, some employers are responding by freezing the size of their staffs, reducing hours or laying off workers."

Although California has some built-in mechanisms to save workers and employers whose workers comp companies can't make it, even that system is breaking down
The semipublic California Insurance Guarantee Assn., which pays workers' comp obligations when carriers become insolvent, is so overwhelmed with claims that it recently required an emergency bailout to keep money flowing to injured workers. Meanwhile, the State Compensation Insurance Fund, a public, nonprofit workers' comp insurer that by law cannot turn any California company away, now controls more than half the market. The fund hasn't been able to grow its capital fast enough to keep up with this torrent of new business, heightening the risk that it won't be able to pay all future claims.

"The state fund is very sick and getting worse," said California Insurance Commissioner John Garamendi. "The entire system is broken."
The construction industry has been particularly hard hit:
Some roofing firms are paying rates in excess of $99 for each $100 of payroll on their least experienced workers, said Doug Hoffner, executive director of the Roofing Contractors Assn. of California.

Hoffner says that has led some less reputable firms to game the system. Some are paying workers under the table to trim their payrolls, and thus their premiums. Others are dropping all coverage, an illegal tactic known as going bare.

Businesses that are playing by the rules say that's making it tough for them to compete. San Francisco roofing company owner Rich Lawson says he can't begin to count the jobs he has lost to low-cost competitors he suspects are cheating on their workers' comp obligations, while premiums for his 100-worker firm have quintupled since 1998 to more than $1 million annually
Meanwhile, the insurance companies blame everyone but themselves and the bad investments they made throughout the swinging '90's that made them vulnerable to the rising medical costs and poor economy that we're experiencing now.

So what are the solutions?

Behind Door #1: Merge workers compensation into a new single payer medical system. Costs come down, no insurance company profits and no insurance company bad investments. No hassling about whether an illness is work related or not; everything is covered for everyone,


Behind Door #2: The Orange Country register, calling universal health care "socialized medicine," kindly describes for us the Chamber of Commerce's favorite bills currently under consideration by the California legislature. The one I like best is AB 431, which would require "adequate evidence of a workplace injury to get a claim." I'm sure the intention must be to make it easier for workers to get compensation for repetitive strain injuries and other work-related injuries and illnesses.

Bottom line is that the system is broken, but the breakdown in the workers compensation system is only a symptom of the breakdown of our entire health care system -- plus that fact that workers keep getting hurt in preventable accidents. The ultimate answer? I'm not positive, but I"m sure it must have something to do with cutting workers' benefits (that will teach them not to get hurt), and, of course, MORE TAX CUTS will help any problem.