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Workers' Comp Time Bomb

March 14, 2004

Workers' compensation is a no-fault social insurance program that protects employees and employers when people are hurt on the job. Injured workers get quick access to quality care and, when needed, monthly checks until they can return to work. Employers who pay for workers' comp coverage escape costly legal disputes that otherwise would erupt. And the state makes sure it all happens as planned.

That's the theory. In practice, California's workers' comp premiums are among the nation's highest while worker benefits are among the lowest. The insurance industry last week said system costs could drop by several billion dollars this year, but business owners say more is needed to balance costs that soared by 80% to $19.8 billion in the last three years. The bloated system arguably is the single largest drag on the state's troubled economy, and companies are delaying new hires or laying off employees to cover skyrocketing premiums.

Reform has been impossible because Democrats traditionally have protected the interests of labor, lawyers and doctors; Republicans have safeguarded the interests of business. Gov. Arnold Schwarzenegger, though, has served notice that the stalemate is going to be broken. Sacramento's "Big Five" -- Schwarzenegger, along with Senate President Pro Tem John Burton (D-San Francisco), Assembly Speaker Fabian Nunez (D-Los Angeles), Senate Minority Leader Jim Brulte (R-Rancho Cucamonga) and Assembly Minority Leader Kevin McCarthy (R-Bakersfield) -- are meeting frequently to find a compromise that gives businesses needed relief without jeopardizing worker health.

A dangerous clock, though, is ticking in the form of a reform initiative that state business leaders promise to put on the November ballot if legislators don't move quickly. The timing is critical because business owners could see noticeably lower premiums as early as July if a solid reform package clears the Legislature by March 31. Business owners who risk being buried by surging insurance premiums need help now. Even if the business-sponsored initiative passed in November, rates wouldn't begin to shrink until next year, assuming the process isn't stalled by court challenges.

The Big Five clearly have their work cut out for them. Lower workers' comp premiums would provide a badly needed spark for California's sluggish economy -- but a healthier economy should not come on the backs of injured workers. That the Big Five continue to meet suggests that Sacramento is trying to build upon common ground that led to bipartisan support for the $15-billion bailout bond and balanced-budget amendment propositions.

Legislative leaders, including Nunez and McCarthy, have said they desperately want to move past Sacramento's poisoned partisan politics. Now is their chance to prove it.

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