Davis Signs Work-Injury Measures

Gov. Gray Davis on Tuesday signed a package of bills aimed at controlling soaring costs in the ailing state system for compensating injured workers, fulfilling what the governor had described as his primary legislative objective this year.

At a signing ceremony at the Los Angeles Area Chamber of Commerce downtown, Davis and supporters said the workers’ compensation legislation would save California businesses as much as $5.7 billion a year.

The bills aim to control costs by several means, including limiting visits to chiropractors and physical therapists, and expanding the use of generic drugs.

“We think this is a very good package,” said Davis, joined by Insurance Commissioner John Garamendi and others. “The work we did today sets the stage for a job recovery that will benefit all Californians.”

Republican lawmakers, though, dismissed the legislation as insignificant, a refrain picked up recently by Republican gubernatorial candidates vying to replace Davis in the Oct. 7 special recall election.

“It is a measure that makes cosmetic changes in a failing workers’ compensation system,” said state Sen. Tom McClintock (R-Thousand Oaks). “The projections provided to the Senate indicated all it will do is slow the growth of workers’ compensation costs for a year and then they will resume their upward spiral.”

Business groups also expressed reservations.

“While this package is a first step, it doesn’t solve the crisis,” Allan Zaremberg, president of the California Chamber of Commerce, said. “California employers will still be suffering under the highest workers’ compensation premium rates in the nation, and this failed system will continue to be a drag on California’s economy.”

Many California employers say the cost of workers’ compensation insurance is soaring, driven by rising medical costs, legal disputes and flaws in the system. Employers are required by law to provide workers’ compensation insurance, which covers workers injured on the job.

Critics said the bills signed by Davis fail to address key weaknesses in the California system, including the issue of subjective medical findings, which result in legal disputes that drive up costs and delay treatment for injured workers.

The six bills Davis signed Tuesday -- Senate Bill 228 and Assembly Bills 227, 1007, 1099, 1262 and 1557 -- emerged from nearly 60 bills proposed by Republicans and Democrats this year. The Legislature’s Democratic majority managed to kill the Republican measures, which were supported by the California Chamber of Commerce.

The bills will create a fee schedule for medical procedures, a cost-saving scheme that is used in the Medicare and Medi-Cal programs. Other provisions prohibit doctors from referring patients to outpatient surgery clinics where the doctors have financial interests, increase penalties on insurers for late payments to health-care providers and increase penalties for fraud.

Injured workers will be limited to 24 visits to chiropractors and physical therapists. Payments for prescription drugs and outpatient surgery centers will be linked to the federal Medicare system, and guidelines will be laid down for treatment of specific injuries.

Republicans had sought to restrict the current definition of a work-related injury, limit compensation for permanent disabilities and roll back an increase in benefits for injured workers that went into effect in January with the support of Davis, Democratic lawmakers and labor groups.

Democratic lawmakers contend that the legislation will enable businesses to avert a recommended 12% insurance rate hike set for Jan. 1, and allow a 7% rate hike that took effect in July to be rolled back.

The Workers’ Compensation Insurance Rating Bureau on Monday identified about $4 billion in annual cost reductions in the measure, significantly less than the yearly savings being touted by Davis, Garamendi and the bill’s authors.

The agency is now recommending that insurers’ rates be rolled back an average of 2.9% next year to reflect the expected impact of the new legislation.

“It’s a total drop in the bucket,” said John DeYoung, managing partner of the Americana Car Wash in San Diego, who has seen his workers’ compensation premiums double to $30,000 in the last two years. “A 2.9% decrease does nothing for my business.”

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Times staff writer Darryl Kelley contributed to this report.