Workers’ Comp Bill Clears Major Hurdle

Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Nunez reached agreement Tuesday on the last remaining major obstacle to overhauling California’s $22-billion system for aiding injured workers.

Barring any last-minute snags, the Schwarzenegger- Nunez deal greatly increases the likelihood that the Democratic-controlled Legislature will pass a much-anticipated workers’ compensation insurance reform bill, probably on Friday. The measure, which would then be signed by the Republican governor and could take effect immediately, aims to save employers billions of dollars on their workers’ comp premiums.

Lowering California workers’ comp costs -- among the nation’s highest -- is seen as a vital first step in Schwarzenegger’s effort to improve the state’s business climate and boost job creation, although some analysts and business leaders say the bill still falls short of providing the large savings that many employers are seeking. And some economists and business leaders say the state still must lower other high costs -- housing, energy, rents and taxes -- that they blame for driving businesses and jobs out of California.

Agreement on the last major obstacle in the workers’ comp bill came Tuesday after Nunez (D-Los Angeles) said he had given up on a Democratic demand to put controls on workers’ comp insurance rates.

Instead, the speaker agreed to a one-year study of the impact of the workers’ comp reforms to make sure that savings are passed along to employers, not pocketed by insurance companies.

“We found a compromise. I think it’s perhaps the last piece of the equation,” Nunez said shortly after meeting for 90 minutes with Schwarzenegger in the speaker’s office Tuesday afternoon.

Sources close to the governor’s office confirmed that “there won’t be any rate regulation” wording in the final workers’ compensation bill.

Labor unions, the Democratic support group that pushed the hardest for insurance company rate regulation, were disappointed. “I can’t fall in love with that,” said Barry Broad, a lobbyist for the International Brotherhood of Teamsters.

Nevertheless, Nunez said that his Democratic partner in negotiations with the governor, Senate President Pro Tem John Burton of San Francisco, would sign off on the proposal, opening the way for key votes in a legislative conference committee today and floor votes in the Senate and Assembly on Friday. The governor could sign the bill into law that same day.

The bill will take effect immediately if it receives a vote of two-thirds of the members of the Senate and Assembly. If it gets a simple majority, it will take effect in 90 days.

The conference committee meeting is scheduled for 11 a.m. today, Burton’s office confirmed. Only a few minor details needed to be hammered out late Tuesday night.

Only an unlikely major revolt by Democratic backbenchers, joining with conservative Republicans, could derail passage of the measure, now that Nunez and Burton have sealed an agreement with Schwarzenegger, legislative experts said. That aside, the two Democratic leaders should have little trouble mustering the simple-majority votes needed to send a bill to the governor.

The governor is “optimistic that the conference committee will report out a bill, and the Legislature will pass a bill that he can sign,” said Rob Stutzman, Schwarzenegger’s communications director. He cautioned, however, that the governor was still committed to a “two-track strategy” on workers’ comp. Schwarzenegger will submit almost 1 million signatures to qualify a workers’ comp reform initiative for the November ballot if he doesn’t get a bill he likes by Friday.

“If something goes wrong, I want to be 100% backed up,” Schwarzenegger said earlier Tuesday at an initiative signature-harvesting event at a Sacramento Costco store. But “I hope we can go the legislative route.”

An upbeat Schwarzenegger emphasized his commitment to getting changes in workers’ comp by either route.

“We are very close, very, very close” to reaching agreement on details of the bill, he said at the Costco event.

Some lawmakers greeted with relief rumors of a compromise that might free them from being pounded by labor unions, lawyers, doctors, business owners and other lobbying groups with a stake in the contentious workers’ comp system.

“When you begin to hear the kind of leaks we are hearing, you begin to recognize that the governor has made a deal,” said Assemblyman Dave Cox (R-Fair Oaks).

The governor apparently has been working very hard to guarantee that legislative talks don’t get sidetracked. The talks came after Schwarzenegger and legislative leaders reached agreement April 2 on broad outlines of a reform measure, after which the governor took a week off to vacation with his family in Hawaii. As his staff and Democratic staff slogged through the complicated business of drafting hundreds of pages of legal jargon, the governor this week had been meeting almost constantly with Republican legislators, Burton and Nunez said.

He has hoped all along that such personal brokering of a deal would lead to the timely signing of a bill that could almost immediately begin cutting costs for employers, who have seen their workers’ comp premiums double and triple over the last few years.

The biggest obstacle to agreement on a bill, Schwarzenegger had said, was some Democrats’ insistence on price caps. The Democrats, led by Nunez in the Assembly and Sen. Richard Alarcon (D-Sun Valley), said they couldn’t trust insurance companies to translate cost savings into lower premiums for businesses.

Schwarzenegger said he opposed rate regulation, after closely studying the issue for three weeks. “It chases companies away,” he said. “What we want to do is invite more companies, more insurance companies to California, so there’s a real competition going on.”

California’s workers’ comp market has contracted severely in the last four years as 27 companies became insolvent because of low rates, increased medical costs and investment losses.

Agreement also was reached Tuesday on another key stumbling block: whether employers or employees pick a doctor to treat a workplace injury. Workers would be required to choose from a pool of employer-provided physicians. They could seek a waiver from a medical review panel, however, to select their own doctor if still dissatisfied with treatment.

Current law allows workers to choose their own doctors after 30 days of treatment by a company or insurance physician.

Employers complain that the system is open to abuse because workers and their lawyers can shop around for a doctor who will provide a diagnosis that can be turned into a juicy disability claim.

Getting a deal takes political will, Schwarzenegger said at the Costco event, where he was heckled by protesters representing injured workers advocacy groups and attorneys who represent them.

“It’s about who is willing to turn his back on the special interests,” he said, complaining that lobbyists for attorneys and insurance companies have been slowing down the talks and pressuring negotiators.

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Times staff writers Evan Halper, Peter Nicholas and Robert Salladay contributed to this report.

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Key details

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Here’s a breakdown on the workers’ compensation reform package worked out between Gov. Arnold Schwarzenegger and Democratic lawmakers, scheduled for its first key vote today:

Medical issues: Entitles employees to get immediate medical care for workplace injuries up to $10,000. Allows employers to contract with networks of doctors, as with health insurance. Employees can change doctors within networks and can ask an independent review panel for permission to see a doctor of their choice if dissatisfied with the network doctors.

Permanent disability: Uses American Medical Assn. guidelines to rate impairments to injured workers. Provides benefits based on employees’ projected lost earning capacity. Increases benefits for workers who do not get an offer to return to work. Decreases benefits for workers who receive job offers.

Penalties on insurers: Late payments to workers would be assessed a penalty of 25%, not to exceed $10,000. Insurers can “self-correct” mistakes they discover by making corrected payments.

Apportionment: Allows employers to apportion payments to cover only work-related injuries and not partial impairments resulting from off-the-job accidents. Employees can claim no more than a total of 100% disability for multiple injuries to the same part of the body.

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Source: Legislative contacts

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Los Angeles Times