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Workers' Comp First Aid

May 02, 2003

Gov. Gray Davis and Insurance Commissioner John Garamendi stood in the warehouse of a small produce distributor in Sacramento on Thursday to put a face on the need for immediate action on their joint proposal to repair California's dysfunctional workers' compensation system, which is burdened by some of the highest rates yet delivers some of the lowest benefits in the nation.

Without a quick and comprehensive overhaul to the badly deteriorated program that pays health-care costs and wages for injured workers, Nor-Cal Produce and other small employers are going to be steamrolled by hefty and continual workers' compensation insurance rate hikes. And Nor-Cal employees who are unlucky enough to be injured while shipping fruits, vegetables and flowers to retail stores risk losing vital medical care and income protection that the social insurance program long has delivered.

Describing the crisis as "an approaching train wreck," Davis and Garamendi urged legislators to quickly pass legislation that would slap controls on soaring medical costs, speed care to injured workers, pay for badly need fraud enforcement and restore the financial health of a troubled state insurance fund to which more than half of the state's employers pay premiums.

Davis and Garamendi outlined a dramatic but necessary overhaul of California's $15-billion-a-year workers' comp system that should draw strong support from employers and employees. They correctly target soaring medical, legal and administrative costs and avoid proposals to reduce employee benefits that already rank in the lowest third nationwide.

Legislators in Sacramento should start by approving SB 228, by Sen. Richard Alarcon (D-Sylmar), which would establish a schedule of medical treatment fees and encourage more doctors to treat workers by speeding payment to physicians who provide medical care. A flurry of added legislation sponsored by various senators and Assembly members would force insurers to quickly determine whether an injured worker was entitled to care paid for by workers' compensation -- and short-circuit legal wrangling by creating an independent medical review board to arbitrate medical-care disagreements.

The broken system is the result of a poorly orchestrated attempt during the 1990s to introduce more competition into the complex market. Private insurers initially used cheap rates to undercut each other but the practice severely eroded their reserves; many firms failed and others simply quit writing policies in California. That exodus led to financial problems at the State Compensation Insurance Fund, which was forced to fill the vacuum created as private firms fled the troubled California market.

Additional steps will be necessary. But Davis and Garamendi have outlined a strategy that will make the workers' comp system more efficient and speed the return of workers to their jobs. Legislators should set aside their differences and deal with a problem that threatens to further damage the state's economic health.

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