Reform of Workers’ Comp Falters

If there is anyone left who thinks the Capitol is not in a state of gridlock, consider the battle to fix the $12-billion workers’ compensation system.

From big business to organized labor to influential legislators, everyone agrees that California’s system for compensating workers who get hurt on the job is rife with inefficiency and fraud. In the last 10 years, its cost has tripled while injured workers continued to receive paltry benefits.

But with the legislative session drawing to a close Monday, efforts to overhaul the system have bogged down amid political brinksmanship, strong lobbying and verbal assaults--in short, a lot of business as usual in the state Capitol.

Few were expressing optimism that a deal could be reached, even though Administration officials had talked confidently for months about reaching a compromise. But business and labor leaders conferred in Wilson’s office while legislators continued to work on a bill Friday. The possibility remained that the Legislature could draft a bill to the governor’s liking or deal with it in a special session later.

Complicating it all, however, are more than 75 lobbyists from a maddening array of interest groups who are working hard to influence a final package. Among the groups are doctors, chiropractors and lawyers. Psychologists are pitted against psychiatrists. Big business fights small business. California insurance companies are in conflict with national insurers.

“This makes a Barnum & Bailey three-ring circus look small,” said Sen. Bill Leonard (R-Big Bear), the co-author of the main Republican bill and one of six members of the Senate-Assembly conference committee, which is trying to come up with a compromise.

In the meantime, legislators and lobbyists say, what is generally getting neglected is serious consideration of the key underlying issues. But Republicans and Democrats do not even agree on what the fundamental issues are. Republicans express fears that business is being strangled and regard sweeping workers’ compensation reform as essential to revitalizing the state’s economy.

Democrats support cracking down on abuses in the system but call for striking a careful balance between the interests of workers and employers. As Sen. Bill Lockyer (D-Hayward), co-chair of the conference committee, put it: “To what extent are we willing to sacrifice legitimate claims (of injured workers) for an improvement in the business climate?”

Republicans and Democrats say there is a need to hold down workers’ compensation insurance costs paid by California employers, which are among the nation’s highest. The problem is how to cut those costs and how and when to boost benefits for injured workers.

More than 80 bills have been proposed in the current legislative session, but they have been boiled down to the two partisan positions pushed by Leonard and Assemblyman Burt Margolin (D-Los Angeles). They split over, among other things, how the system should handle claims for stress and other psychiatric injuries.

California is one of only six states that compensate workers for stress that is suffered gradually, a fact that enrages many employer groups. Most state systems cover stress only if it stems from a “sudden and extraordinary” event--for instance, the stress suffered by a supermarket cashier robbed at gunpoint.

Republicans maintain that too many workers and their doctors claim stress injuries to bilk the state’s workers’ compensation system. As a result, they want to adopt the “sudden and extraordinary” standard for everyone in the private sector.

Democrats, citing studies showing that stress is a growing workplace problem, resist limiting the types of psychiatric injuries covered by the system. But they would make it harder to receive stress benefits, requiring that at least 51% of a worker’s psychiatric problem be job-related, up from the current 10%.

Republicans also would go further than Democrats to prevent workers from filing claims after they have been laid off. As for injured workers’ benefits, Democrats want an increase next year. Republicans hope to block any increase until 1995 at the earliest.

Policy differences aside, both sides accuse each other of using the issue for political gain. Republicans say Democrats do not want reforms because that would hurt their big donors, including lawyers who represent workers.

Democrats charge that Republicans are counting on inaction so they can bash Democrats in fall campaigns for failing to respond to the crisis.

“They write up a bill and they won’t change a word, not a word,” said Margolin, the other co-chair of the conference committee. “It’s all directed at the strategy of having a Republican Legislature next year.”

Assemblyman Steve Peace (D-Chula Vista), another conference committee member, agreed, saying the real reason for inaction is that the governor is hoping to embarrass the Legislature by once more showing how important work does not get done.

“Pete Wilson doesn’t want a bill. It’s the same drill as on the budget,” Peace said. “It’s a parallel to the budget fight in that (Republicans will argue) it emphasizes legislative gridlock.”

The governor, meanwhile, is taking the issue to the airwaves today, calling in a radio address for passage of a Republican-sponsored bill--and using the issue to attack the Democrats once more.

“If reforms continue to be killed by committees appointed by the (Democratic) majority, the people will be fully justified in changing the majority to change the law,” the text of Wilson’s speech said.

Margolin said his plan would cut employers’ costs by $1.2 billion, but Republicans are not accepting that figure, contending that Margolin is overestimating cost savings.

“It’s not close to what I want,” said Leonard, who along with Assemblyman Paul Horcher (R-Hacienda Heights) is carrying the main Republican bill, which has Wilson’s support.

Against all the bickering, pressure is building from outside Sacramento for a compromise. Some of the state’s biggest employers, including the Walt Disney Co. and major aerospace companies, have entered the fray seeking a solution.

Peter V. Ueberroth, who chairs Wilson’s California Competitiveness Council, endorsed the Leonard-Horcher bill. In its April report, the competitiveness council called workers’ compensation reform a key to boosting California’s economy. The report, like many before it, noted that costs are bloated by excessive bills from lawyers, doctors and others.

But identifying the problem and fixing it are two different things. Workers’ compensation bills pushed by Wilson last year and Margolin in 1989 fell short of their goals. With nearly $12 billion in annual insurance premiums at stake, some of the most well-heeled groups in Sacramento lobby hard to keep their piece of the business intact.

Yet with the cost of workers’ compensation spiraling upward, lobbyists for these groups anticipate that change is likely--even if it doesn’t happen this year.

No single group has a tougher battle ahead than vocational rehabilitation specialists who retrain injured workers. The field is under attack because the costs of retraining workers is growing faster than any other part of workers’ compensation and consumes more than $650 million a year. But the group is not without resources. It reported spending $101,000 on lobbying last year.

A bigger player is the California Applicants’ Attorneys Assn., a group of lawyers who represent injured workers. While not as well known as the more powerful California Trial Lawyers Assn., the applicants’ attorneys organization spent $315,000 on lobbying last year. Its main lobby firm, Green & Azevedo, also represents the trial lawyers group.

Some applicants’ attorneys campaign donations in the first half of the year: $12,000 to Senate President Pro Tem David A. Roberti (D-Van Nuys), $10,000 to Assembly Speaker Willie Brown (D-San Francisco), $13,700 to Assemblyman Richard E. Floyd (D-Carson), who was a key player in the debate until he was defeated in the June primary. Margolin received $3,500.

Contributors do not limit their largess to Democrats.

Consider Horcher, named by Brown to serve as the Republican assemblyman on the conference committee. Through the June primary, Horcher reported receiving $4,000 from the applicants’ attorneys and another $999 from an organization of lawyers who represent employers in the workers’ compensation arena.

The California Society of Industrial Medicine and Surgery, which represents physicians who diagnose and treat injured workers, gave Horcher $12,478 through June. The California Medical Assn., which also is heavily involved in the issue, donated $9,272 in the first six months of the year. A chiropractors’ political action committee, which wants to ensure that chiropractors continue to get part of the business, donated $6,125 to Horcher.

Horcher, like other officials, insists the campaign funds have no influence on his views.

“I don’t even pay attention to that,” the Whittier Republican said.

Traditional lobbyists are not the only ones involved. From the right comes the Independent Business Coalition Against Workers’ Compensation Fraud. Last year, conservative Assemblyman Richard Mountjoy (R-Arcadia) helped form a group of small-business owners who are being squeezed by workers’ compensation claims and premiums. He has been fanning the furor ever since.

Displaying a foot-thick binder of copies of letters sent to legislators by aggrieved business owners, Mountjoy said deep anger over workers’ compensation can be leveraged into a significant political weapon. He is carrying a bill authored by one of the group’s members and vowed to fight their battle without compromise.

He has helped direct their rage by urging that they write letters to legislators, and target half a dozen Democrats he believes are vulnerable in fall reelection campaigns.

“You can leverage it,” Mountjoy said of the workers’ compensation issue. “You relate it to job loss, and lost businesses, then it becomes a political issue.”

For all the rancor, lobbying and maneuvering, Democrats and Republicans have drawn closer on some issues. Both sides want to cut the number and cost of so-called medical-legal evaluations performed by doctors. The evaluations, used as expert testimony in workers’ compensation disputes, cost about $1,200--several times the cost in other states.

Democrats and Republicans also would encourage employers to use health maintenance organizations to control medical costs. They agree that they should abolish a provision establishing the minimum rates that employers must pay insurance companies for workers’ compensation insurance.

But the sides remain split on key issues, including benefits for injured employees. As it is, California pays a maximum of $336 a week, which puts it in the bottom third of the nation.

On Friday, after long hours of negotiation, Democrats on the conference committee produced a draft bill to be considered by the end of the session Monday. The bill can be amended in the Assembly and Senate. Margolin, for one, remained determined if not altogether optimistic.

“I don’t want to let those people with agendas and corrupt motivations prevail,” Margolin said. “It would be the ultimate indictment of the Legislature. To retreat now would be to let them win.”