California "Reforms" Workers Comp

I have written before about the California workers compensation mess

The central problem in California now is that the costs paid by employers are the highest in the country, while the benefits received by workers are about average - in part because many cases are disputed, which wastes resources.

Total costs for California employers increased to $29 billion in 2003 - eight times the gross domestic product of Haiti - from $11 billion in 1998. By one estimate, the average employer in California pays 5.2 percent of payroll for workers' compensation insurance, more than twice the average of other states. Rates are much higher in hazardous occupations: 43 percent for loggers, 33 percent for roofers, 22 percent for carpenters and 18 percent for truck drivers.

(Also here.)

Reforming the system was one of Governor Arnold's major campaign themes. He threatened to sponsor a referendum during the next election if the legislature didn't come up with a reform plan. With Schwarzenegger literally holding one million signatures, more than enough to put the referendum on the ballot, California Democrats decided that a legislative compromise might be the lesser of two evils and last week a workers compensation bill was passed and signed.

The dust hasn't cleared enough for me yet to make a final judgment, but it seems from this perspective that while the bill was a defeat for many labor positions, both sides made some compromises and the outcome probably wasn't as bad as a referendum might have been. There are articles here and here, and many more. I'd be interesting in hearing your opinions.

Labor lost on one of its major demands: capping skyrocketing insurance premiums, which would have forced insurance companies to pass along savings created by the reforms to employers through lowered premiums. There is ample evidence that rising insurance premiums were more a result in the insurance industry's bad investments than their rising expenses (see here and here), nevertheless the fear of scaring away business (and jobs) prevailed.

Permanent disability benefits will be reduced by 30% and there will be other reductions for employees able to return to light duty work. In addition, employers will have more control over the doctors that workers see and managed care will have a greater role in the system.

The proposal also would enable employers to set up a network of physicians to treat injured workers, while allowing their employees to pick doctors from within that pool. To choose a doctor outside the pool, employees could ultimately appeal to independent medical reviewers.

Attorneys who represent injured workers blasted that part of the plan.

"Free choice of doctors is very important to an injured worker," said David Schwartz, president-elect of the California Applicant Attorneys Association, a group of lawyers who represent injured workers.

On the brighter side,

the agreement would allow injured workers to seek immediate medical care paid for by the employer, repealing a provision that currently allows companies to delay paying for such care for up to 90 days. While at first glance that appears to be a hit on employers, the change is designed to get workers cared for quickly, reducing the conflict and resentment that grow when injured workers are denied the help they think they need.

Payments for permanent disabilities would be slightly reduced, while payments for the most severely injured would be nearly doubled.

Again, while on the whole, this was certainly no victory for labor, my feeling is that seeing how well business money manipulates the referendum process these days, workers may have come out better with this legislation than investing an enormous amount of resources into the ballot-box alternative. California labor also seemed to think it could have been worse:

Tom Rankin, president of the California Labor Federation, AFL-CIO, said the "deck was stacked against injured workers" under the new plan and called the compromise "far from perfect" because it didn't include rate regulation.

Still, Rankin said that injured workers fared better under Schwarzenegger than they would have under previous Republican governors.

I would, of course, welcome opposing (or supporting) opinions: