The Monster That Needs to Be Slain : California has one of worst workers’ comp systems in U.S.

The ever-rising costs of providing for workers hurt on the job have become a monster in California. No doubt some kind of safety net for injured workers is vital, but this state’s workers’ compensation system is one of the most vile in the nation: It is the third most costly and ranks 35th in benefits.

The system’s outrageous costs have put many California businesses under the gun. And now employers face a possible hike in insurance premiums, the second this year. Without a major overhaul, the rise in costs will continue, putting onerous new pressures on business. The Council on California Competitiveness says the system, which costs employers $10.4 billion yearly, “has become a national embarrassment. National publications and television programs have exposed the depth of the problem. It is time for Sacramento to pay attention.”

The Legislature has been aware of the need for comprehensive reform, but year after year it has failed to move beyond entrenched special interests to craft a reform bill. Changes are needed in:

INSURANCE RATING SYSTEM: The state currently allows insurers to retain almost a third of all premiums for expenses. With little incentive to contain costs, rates keep going up, and they will be up another 23.1% come July if an industry rate setting group has its way. This nonsensical rating system should be scrapped. Gov. Pete Wilson opposed such a move last year, but he now says he supports repeal of the rating system law. A good sign.

STRESS CLAIMS: These have been the fastest-growing problem, rising 700% in the last 10 years. For starters, the council suggests increasing to 51% from 10% the required level of job-triggered stress needed to justify a claim. It would also eliminate good-faith, non-discriminatory personnel actions and cumulative trauma as reasons for claims. Such measures together make sense and put the state on the right course.

FRAUD AND ABUSE: Fraudulent claims make up as much as 20% of workers’ compensation. A crackdown on unethical doctors, lawyers, applicants, employers and referral services is warranted.

MEDICAL AND LEGAL COSTS: Establishing clear guidelines for medical evaluation would help contain costs and standardize the determination of impairment and disability. Runaway medical and litigation costs must be controlled.

VOCATIONAL REHAB: The system requires employers to provide redundant benefits in both vocational rehabilitation and permanent disability. Why both? This costly overlap should be eliminated. Indeed, if workers’ compensation were reformed, injured workers would wind up with higher overall benefits. That’s important, of course, because many claims for workers’ comp are fully legitimate and better benefits are needed by injured employees.

Last week’s report of the Council on California Competitiveness, led by Peter V. Ueberroth, offers a number of proposals designed to remove barriers to economic vitality. None among these barriers is so obvious--or so in need of reform--as the state’s outrageous workers’ compensation system.

Skyrocketing Employer Costs The high cost of worker’s compensation is a drain on California business.Source: Worker’s Compensation Insurance Rating Bureau