Saving Workers’ Comp
Frieda’s Inc. ships kiwis and other specialty produce to grocery stores nationwide, and business has been good enough for the firm to increase its payroll by 19% over the last two years, to 126 workers. Then the family-owned Los Alamitos firm was hit with a 185% increase in workers’ compensation premiums.
That kind of outsized expense inhibits business growth in the state and is the best evidence that California’s $15-billion-a-year workers’ compensation system is sick. The badly weakened social insurance program is failing to deliver prompt medical care and compensation to injured workers at a reasonable cost to employers.
Employer-paid premiums, driven largely by medical-care costs, are soaring. Worker benefits rank in the lowest third nationwide. Common-sense legislation would solve some of the problems. Other difficulties are linked to national problems in delivering health care. The Legislature is reviewing more than 50 reform bills, and Gov. Gray Davis and state Insurance Commissioner John Garamendi soon will weigh in with their own plan.
Some of the proposals would lead to a more efficient system; others, including a California Chamber of Commerce proposal to roll back recent compensation increases, would wrongly force injured workers to carry the cost of reform.
Before cutting benefits, the system should do a better job of controlling medical-care costs; go after workers, doctors, lawyers and employers who defraud the system; and address troubling growth in permanent disability claims.
SB 228, introduced by Sen. Richard Alarcon, is a good first step. The bill, which drew bipartisan support from business and labor during a Wednesday hearing, would cut an estimated $1.3 billion in annual costs by simplifying billing and setting fee limits for prescription drugs and care provided by outpatient surgical centers. Legislators should then pick up AB 1215, which addresses fraud, and SB 354, which would place limits on chiropractic visits.
These measures wouldn’t solve all the issues. A state-managed nonprofit fund, created decades ago as an insurer of last resort, faces insolvency. Private companies have bailed out of the market, and the nonprofit fund, which provides policies to more than half of the state’s employers, grew too fast to put aside reserves. Overall reforms will help, as will pushing companies to try harder to get private insurance.
Down the line, the state should also consider proposals to integrate workers’ compensation coverage into regular health insurance. Merging medical care and case management into employer benefits would eliminate the need for much of the workers’ comp bureaucracy.
Doctors, lawyers and insurance companies are lobbying fiercely to protect their interests. Legislators should focus on the reasons that workers’ compensation exists -- to serve workers who are injured on the job and cut risk for businesses that pay insurance premiums. All the rest is just so much noise.
