SACRAMENTO — Lawmakers on Tuesday agreed on a set of reforms for California's troubled workers' compensation system, whose spiraling costs have pounded employers, wrecked insurers and become an issue in the recall campaign.
Beating a midnight deadline, a committee of negotiators from both parties pushed through a measure widely expected to be approved by the Assembly and Senate this week, before they adjourn for the year, and signed into law by Gov. Gray Davis.
"This is the biggest reform of workers' compensation in California's history," said Assembly Speaker Herb J. Wesson (D-Culver City), a member of the committee. "This is so significant that immediately the large companies and the big self-insured governmental entities will see a significant reduction" in their costs.
The legislation is designed to generate $5.3 billion in one-time savings and about as much in each successive year. It would do this by reining in medical expenses, largely by capping fees to health-care providers and limiting injured workers' use of certain treatments.
For The Record
Los Angeles Times Thursday September 11, 2003 Home Edition Main News Part A Page 2 National Desk 2 inches; 78 words Type of Material: Correction
Workers' compensation -- An article Wednesday in Section A about legislation to overhaul California's workers' compensation system incorrectly described Assembly Speaker Herb Wesson (D-Culver City) as a member of the conference committee that forged the reform bill. He is not a member of that panel. The article also misstated the number of visits that injured workers would be able to make to chiropractors under the new legislation. The bill would set a cap of 24 visits, not 30.
The plan's architects say the cuts would be the deepest in the history of the 90-year-old system and would help slow the growth of total costs, which have ballooned from $9 billion in 1995 to about $29 billion this year. Backers say the plan would prevent scheduled increases in premiums for employers next year and go a long way toward rolling back rates to 2002 levels. Employers foot 100% of the bill for the mandatory insurance program.
But some groups representing business owners -- which have been pleading for workers' comp reform for years -- have doubted the legislation would lead to significantly lower insurance rates. These groups say lawmakers have failed to address some of the costliest aspects of the system, such as burgeoning long-term disability payments to injured workers.
"I'm astounded by the numbers. I just can't believe these numbers are real," said Willie Washington, lobbying for the California Manufacturers & Technology Assn. "I have no confidence in those numbers."
Stung by premiums that have doubled or tripled over the last several years, some California companies are freezing staffs, firing workers, closing their doors or leaving the state. Government agencies and nonprofits have likewise been slammed.
Employers have increasingly cited the workers' comp system as a major factor in hobbling a state economy that has shed nearly 300,000 jobs over the past 2 1/2 years -- and they have found a sympathetic ear among major candidates seeking to replace Davis in the Oct. 7 election.
One of the most vocal on the issue has been Republican Arnold Schwarzenegger. He has proposed lowering employers' costs of carrying workers' comp insurance by, among other things, making it tougher for workers to file lawsuits and setting up clear-cut utilization schedules for when injured workers can see doctors.
Another Republican in the race, state Sen. Tom McClintock, this year introduced a bill to require objective medical evidence to support that a worker was truly injured, a proposal scuttled by the Democrats who control the bipartisan committee that put the reform package together.
"They refused to even consider that concept. That tells you how serious they aren't about fixing the system," said John Stoos, chief consultant to McClintock. "If you don't have a doctor to qualify or quantify an injury, it's an invitation to fraud and abuse."
The reform package was cobbled together after months of political wrangling and intense lobbying by affected interests, including some that have contributed to lawmakers' campaigns. Surgery centers, for example, have donated more than $17,000 to Assemblyman Juan Vargas (D-San Diego) and more than $4,000 to Assemblyman Fabian Nunez (D-Los Angeles), both members of the committee. The California Applicants' Attorneys Assn., whose members represent injured workers, has donated $123,000 this year, including $10,000 to Sen. John Burton (D-San Francisco), another committee member. The California Orthopedic Assn. has given $3,000 to Sen. Richard Alarcon (D-Van Nuys), co-chairman of the committee.
The Legislature's aim is to bring some stability to the shaky network protecting more than 14 million California workers in the event they are injured on the job.
More than two dozen private insurance carriers have gone belly up in the last few years. That has scared off other insurers, pushed the state's insurance guaranty fund to the brink of insolvency and forced California's nonprofit insurer of last resort -- the State Compensation Insurance Fund -- to write coverage for more than half the companies in the state. That is a dangerous concentration of risk that officials fear could topple the entire system given that carrier's rapidly deteriorating finances.