The Aim of Workers’ Comp Bills

What changes will California’s new package of workers’ compensation reforms bring?

Its fundamental goal is to cut most of the bloated system’s costs, and then to use those savings to provide relief for employers and higher cash benefits for injured workers.

But history suggests that the complicated array of provisions in the bills passed by the Legislature and signed by Gov. Pete Wilson on Friday won’t yield dramatic savings, at least not quickly.

A much-ballyhooed reform package passed in 1989 and anti-fraud laws adopted later on yielded some improvements but have failed to fundamentally turn around the massive system.

Costs have fallen over the past year--largely due to the sluggish economy and a growing crackdown on abuse--but experts fear that improvement will be only temporary unless there are significant changes in the way the system is run.

Trouble is, the interest groups that have prospered from the status quo--including insurance companies, doctors, lawyers and psychologists--keep finding new loopholes to exploit even when new laws are adopted.

Stanley R. Zax, chairman of Zenith National Insurance, a major workers’ compensation carrier, said he is enthusiastic about parts of the reform package, “but I wouldn’t say it solves the problem, because the problems might not be subject to a political solution.” For instance, he said, the workers’ compensation court system still needs to be improved--an issue the reform package barely touched.

Still, many advocates for employers and workers say the reform package marks a genuine effort to clean up the system, and shows that lawmakers are now willing to take steps to revitalize the state’s business environment. The following are some questions and answers dealing with the major elements of the law and their intended consequences.

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Q: How will the reforms curb abuses in the system?

A: Employers and insurers complain that many injury claims filed by laid-off workers are bogus, particularly claims for psychiatric stress. The reforms limit the opportunities for filing “post-termination” claims. Normally, an employee will have to demonstrate evidence of the injury before being notified of a layoff.

Also, workers filing stress claims will face a tougher standard for winning benefits. Under current law, as little as 10% of a stress problem could stem from work to qualify for compensation; under the reforms, work ordinarily will have to be the “predominant” cause.

At the same time, the reforms do little or nothing to curb subjective back injury claims, which are far more common than stress claims.

Other reforms will tighten existing anti-fraud laws.

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Q: How else will the reforms cut costs?

A: Limits will be imposed on the number of medical-legal evaluations workers can receive. These often-costly evaluations are used as expert testimony in disputed cases.

In addition, doctors, vocational rehabilitation specialists and insurers will be banned from referring injured workers to facilities in which they have financial interests.

Vocational rehabilitation services are being capped at $16,000 per claim. Currently, they are estimated to cost $20,000 in an average case.

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Q: What will the overhaul mean for employers?

A: Of the anticipated $1.5 billion in savings from the various cost-cutting measures, half would go to employers. The legislation provides for a 7% cut in insurance rates, effective immediately.

Employers also have won new rights. Insurers won’t be able to cancel employers’ policies as freely as they have previously, and they will be required to notify employers of a pending cancellation at least 10 days--and in many cases, 30 days--in advance.

Employers also can insist that insurers tell them about any settlement offers they make to their injured workers and to provide other financial data about pending claims.

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Q: What will it mean for workers?

A: They would receive the other half, or nearly $750 million, in anticipated cost savings in the form of higher cash benefits. Those benefits would be phased in starting next July. The maximum weekly benefits will rise from $336 a week to $490 in 1996.

Lawyers for injured workers complain, however, that the benefit increases mainly are for workers who are considered 70% or more disabled, and that people with lesser injuries face skimpy increases. Other workers with legitimate injuries, these lawyers say, won’t get anything under the new, tougher standards.

Meanwhile, workers would cede to employers more control over the medical care they receive. Currently, employers ordinarily control where workers can go for treatment for 30 days after an injury is reported; the new law would extend that period for up to a year.

At the same time, state officials are required to step up workplace safety programs.

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Q: Are there any surprises in the law that might have a significant impact?

A: A little-noticed clause would allow the workers’ compensation courts to fine anyone involved in the system up to $2,500, along with expenses, for “bad-faith actions, frivolous tactics or tactics solely intended to cause unnecessary delay.” If actively enforced, that could go a long way toward improving the way the system is administered.

Reform Package

Responding to out-of-control costs that business leaders said were driving industry out of California, the Legislature and Gov. Pete Wilson on Friday approved measures overhauling the workers compensation system. It will be harder for some injured workers to obtain benefits. But for those who qualify, payments will be higher.

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NEW BENEFITS FORMULA

Here is how workers’ compensation benefits will change under the bills passed Friday:

Weekley benefits Current 1994* 1995* 1996* Total disability $336 $406 $448 $490 10-24% disability $140 $148 $154 $160 24-69% disability $148 $158 $164 $170 70-99% disability $148 $168 $198 $230 Life pension $64 $94 $124 $154

Two Three or more Death benefits Single dependents dependents Current $95,000 $115,000 $115,000 July 1, 1994 $115,000 $135,000 $150,000 July 1, 1996** $125,000 $145,000 $160,000

* Effective July 1. ** No increases in 1995.

Compiled by Tmes Researcher TRACY THOMAS Source: Senate-Assembly conference committee on workers’ compensation

Employers’ Skyrocketing Costs

Both workers compensation insurance premiums and the expenses incurred by firms that pay injury-related costs themselves have increased dramatically over the last decade.

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Sources: Workers’ Compensation Insurance Rating Bureau and California Workers’ Compensation Institute. * Main Story, A1