SACRAMENTO — Gov. Arnold Schwarzenegger promised "billions and billions" of dollars in savings when he signed a landmark overhaul of the state's workers' compensation system at a Long Beach aircraft factory back in April.
But five months later, bureaucrats are struggling to craft rules to implement the complex legislation, with the first deadline only 45 days off. And lawyers, industry lobbyists and union officials are arguing about exactly what it was they agreed to when the workers' comp bill was rushed through the Legislature.
For California businesses, the behind-the-scenes turbulence could mean they will see little or no significant savings when they open their workers' comp insurance bills beginning in January.
"Everyone wants to think it was fixed because they had a press conference at Boeing," said Robert Vines, an Ontario attorney who represents injured workers. Overhauling workers' comp is "like the war in Iraq; they didn't plan for what we'd do after we declare victory."
The disarray is expected to be a prime topic today when state Insurance Commissioner John Garamendi convenes a hearing on a proposal to raise premiums by 3.5% on workers' comp policies that start or renew in the first six months of 2005. Industry researchers said the hike was needed to reimburse insurers for a previously scheduled boost in injured workers' benefits.
"We can't do a thing" about cutting rates until regulations are issued and their financial impact can be assessed, said Stanley Zax, president of California's fifth-largest workers' comp carrier, Zenith National Insurance Co. "Hopefully, the costs are going to go down. But they haven't gone down yet."
Schwarzenegger's much-ballyhooed workers' comp law made wholesale changes to the state's troubled $20-billion system for providing medical treatment and financial benefits to victims of workplace injuries. The latest restructuring, combined with legislation approved in 2003, halted a trend that had pushed workers' comp costs up by 80% from 1998 to 2003. Since then, premiums have fallen about 10%, less than many employers anticipated.
Despite the limited success, few are ready to declare the governor's effort a failure.
"I'm expecting significant drops in our costs over the next several years," said William M. Zachry, vice president for workers' comp at Pleasanton, Calif.-based Safeway Inc. Nevertheless, Zachry conceded that the biggest savings "have not hit the bottom line yet."
