Accord Nears on Reform of Workers’ Comp

Legislative negotiators reached tentative agreement Friday on the broad outlines of a reform aimed at slashing $1.7 billion from the costly workers’ compensation system and splitting the savings between injured workers and employers.

Although some controversial issues must still be resolved, including the size of benefit increases for employees, Democratic members of the bipartisan Senate-Assembly negotiating committee said they believe that a compromise measure will be ready for floor votes next week.

The committee, which has met in marathon sessions over the past seven weeks in an effort to squeeze savings from the nearly $12-billion system, reached general agreement Friday on several major issues and narrowed the gap on others.

A final vote of the committee’s four Democratic and two Republican members was postponed until Sunday or Monday.

Sen. Patrick Johnson (D-Stockton) and Assemblyman Steve Peace (D-Chula Vista), committee co-chairmen, estimated that the proposal would extract $1.7 billion from the system over the next three years. The sum would be divided evenly between benefit increases for employees and insurance premium reductions for employers.

The cost reductions would result from reduced litigation between workers and employers, cuts in vocational rehabilitation, increased emphasis on routing employees into managed care organizations, restrictions on physicians who refer patients to facilities in which the doctors have a financial interest and tightening restrictions on claims for stress injuries.

“This is a huge, huge, huge reform of the system,” Peace said. “This proposal is significantly beyond what I felt we’d get when we started the process.”

However, representatives of labor and major employer organizations were far less enthusiastic.

John F. Henning, secretary-treasurer of the California Labor Federation, AFL-CIO, criticized a tentative provision that would make employee benefit increases in 1996-97 contingent upon savings that the reforms produced for the employer.

“It’s an abomination,” he said. “Never in history have benefits been conditioned on the employer’s profit structure. We want a guaranteed increase in the third year.”

Allan Zaremberg of the California Chamber of Commerce, chief representative of major employers, voiced concern whether the reforms would provide savings that justified $850 million in benefit increases that Johnston proposed.

“We’re skeptical,” Zaremberg said.