Accord Reached on Work Injuries

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.

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.

Meanwhile, employer premiums have skyrocketed, to an average of $5.85 per $100 of payroll, well above the $4.40 per $100 of payroll that businesses paid in 1993, the height of the state’s last major workers’ comp crisis, according to the latest figures from the Workers’ Compensation Insurance Rating Bureau.

“It’s a huge tax on employment,” said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp. “If you talk to the business community right now, the biggest burr in their saddle is workers’ comp.”

The legislation would reform several aspects of the system:

* Fee schedules would be created for outpatient surgical centers, which would pay the Medicare reimbursement rate plus 20%. At present, there are no limits on what these clinics can charge, a situation critics said led to wildly inflated charges for treatment.

* There also would be fee schedules for pharmaceuticals, linked to the Medi-Cal reimbursement rate. Drugs are one of the costliest components of the workers’ compensation system, accounting for 7.2% of the $4.1 billion in medical expenses borne by insurers last year alone. By one analysis, the fee schedule could result in a 20% savings in the amount paid for drugs to treat injured workers.

* The number of visits that injured workers could make to chiropractors would be capped at 30. There are now no limits, and the average number of chiropractor visits in California is 34, double the average in other large states.

* So-called utilization reviews would be required. Experts say a major problem with California’s system is the lack of consistency in treatment, with workers with similar injuries often getting vastly different amounts of care, depending on their medical practitioner. The legislation recommends American College of Occupational and Environmental Medicine standards as guidelines for how much care is appropriate for any given injury.

Those guidelines were at the heart of the discussions Tuesday evening, as lawmakers struggled to define what level of health to which workers must be restored, in order to minimize litigation and stop unnecessary treatment. Current standards in California labor law say that the workers’ compensation system must do everything necessary “to cure and relieve” a worker’s injury. That’s a higher standard than most states have, and one that is open to broad interpretation.

“A better definition of ‘cure and relieve’ is exceedingly important,” said California Insurance Commissioner John Garamendi.

Also Tuesday, a Senate- Assembly conference committee endorsed a bill that would require employers to provide health insurance for their workers or pay a fee into a purchasing pool that would buy the coverage on their behalf. The bill had the support of the committee’s four Democrats while its two Republicans, echoing the opposition of employer trade associations, voted against it.

The labor-backed measure will be eligible for floor votes in each house on Thursday. The Senate is expected to approve the proposal, but its future in the Assembly is uncertain. Davis has not taken a position on it.

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Dickerson reported from Los Angeles and Vogel from Sacramento. Times staff writer Carl Ingram in Sacramento contributed to this report.