Magazine article Occupational Hazards

Can California Achieve Workers' Comp Reform? Besieged by Low Benefits, High Rates, and Lengthy Delays, California's Workers' Compensation System Is Awash in Controversy

Magazine article Occupational Hazards

Can California Achieve Workers' Comp Reform? Besieged by Low Benefits, High Rates, and Lengthy Delays, California's Workers' Compensation System Is Awash in Controversy

Article excerpt


In California, workers' compensation benefits are low and rates are high. Medical and vocational rehabilitation costs continue to grow, and, according to the California Workers' Compensation Institute (CWCI), one in every nine compensation claims is litigated.

A class action lawsuit, filed on behalf of the 200,000 workers whose claims are contested each year, has charged unlawful delays in the workers' compensation adjudicatory system.

Meanwhile, Californians for Compensation Reform (CCR), which represents insurers, employers, and trade associations, is talking about putting a reform initiative on the 1990 ballot, if reforms aren't made to the system this legislative session.

"It's certainly a well-known fact that this is a system with a lot of problems -- some people feel [it's] near collapse at this point," notes Charlene Simmons, consultant to the State's Joint Legislative Audits Committee, which last year asked the Auditor General to do a comprehensive study of the State's administration of the workers' compensation system.

"The State doesn't have a lot of independent data collected on where the problems in the system are. The legislators were listeming to a lot of different groups giving their ideas of what was wrong, and they wanted some kind of independent non-partisan data," Simmons explains. She had expected the Auditor General's report to be finished early this year.

Meanwhile, a report released last March found that "the increase in the costs of California's workers' compensation system may be threatening the system's viability." The report, issued by the Commission on California State Government Organization and Economy, also known as the Little Hoover Commission, states that "the increase in system costs is primarily due to an increase in the number of people in the work force and an increase in the average cost per claim, not to an increase in the rate of claims filed."

Further, the report notes that while written premiums increased from $2.9 billion in 1982 to $5.3 billion in 1986, an increase of 83 percent, "the weekly benefit rates paid to injured workers in California remain among the lowest of the urban, industrialized States in the country."

According to U.S. Chamber of Commerce data, only five other states have total disability benefits lower than California's maximum weekly payment of $224.

The Little Hoover Commission points to specific areas of the workers' compensation system that it says are increasing rapidly in size and cost: "soft tissue" claims, mental stress claims, and employer liability claims. "Unless controlled, the increasing costs of benefits and administration in these areas may strain the workers' compensation system to the breaking point," the report warns.

What to do?

"Everybody agrees that temporary disability benefits are too low. Everybody understands that costs are high and have been growing rapidly," notes Casey Young, principal consultant to the Senate Committee on Industrial Relations.

"There's tremendous disagreement on what you do about the rest of the system before you increase temporary disability," Young adds. "Employers understandably are concerned about only increasing benefits -- adding costs to the system without doing something else to the system."

But organized labor and employers are not the only groups interested in the debate over State workers' compensation reform. Other interest groups include insurers, lawyers, doctors, and vocational rehabilitation proffessionals.

"So," Young says, "the bottom line becomes what parts of the system are going to be reformed, and who is it going to affect?"

Agreement attempts

A legislative conference committee, chaired by Sen. Bill Lockyer (D-Hayward), met this past year in an attempt to reach an agreement on reforms. …

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