Getting Rid of an Albatross : When will Sacramento reform workers’ compensation?

Even before the new Legislature convenes in Sacramento later this month, members should be boning up on workers’ compensation. The California system is one of the costliest in the nation--$11 billion a year--but pays some of the lowest benefits to injured workers. Reform of workers’ compensation should be a top priority for the Legislature.

An eleventh-hour attempt to overhaul the financially troubled system last session failed, a casualty of the partisan politics of Gov. Pete Wilson and Assembly Speaker Willie Brown before the November election. The Legislature should begin in earnest now to rise above bickering and resolve an issue that has become a financial albatross around the necks of California employers.

Left as is, workers’ compensation will push costs to even more outrageous levels. This point was driven home by state Insurance Commissioner John Garamendi’s rejection of a 12.6% rate hike in insurance premiums. That increase would have added $1 billion in costs for business, still struggling in a recession.

Garamendi said the rate hike request was based on “rotten data,” noting the “wild and unexplained” variation in cost figures that insurers gave in an effort to justify a rate increase. The state allows insurers to retain almost a third of all premiums for expenses. With little incentive to contain costs, rates keep going up.

“The industry cannot be allowed to live off the ‘fat’ of a dysfunctional system while so many California employers are forced to live on starvation diets,” said Garamendi, who invited the industry to have its costs audited and to refile the request.

Rising insurance premiums are just one problem in the system. Reform must also address reducing medical and legal costs, eliminating fraud and abuse, revamping vocational rehabilitation and controlling stress claims.

There is wide consensus in and outside of Sacramento on the need to reform the workers’ compensation system. Having failed miserably to address the problem last session, the Legislature must take it on now.