Employers Raise Workers’ Comp Concerns

Haesook Kim pays $500,000 for workers’ compensation coverage. Recently, the owner of Secure Nursing Service Inc., a Los Angeles-based temporary nurse placement agency, received a letter indicating that her premiums would climb an additional 5%.

Kim now is looking to relocate out of state, leaving the 250 nurses she places at hospitals on a regular basis to find jobs through another source. She wonders why state lawmakers allowed the workers’ compensation system to reach a point where, despite her good record, she can’t get coverage from private insurers and must turn to the State Compensation Insurance Fund, the state-run nonprofit that is considered the insurer of last resort.

On Thursday, Kim and other business owners got a chance to vent their frustrations at state Insurance Commissioner John Garamendi, who has pushed workers’ compensation reform to the top of his agenda since being elected in November.

“Why did it happen? There was insufficient political pressure,” Garamendi said in response to Kim’s concerns. “From this point forward, there needs to be a coalition built around the issue to drive down costs and simplify the system.”

During a meeting hosted by the Los Angeles Area Chamber of Commerce, Garamendi described workers’ compensation as a “serious crisis” in California because of skyrocketing premiums caused partly by unrestrained medical and legal costs as well as worker fraud.

Garamendi also acknowledged that the State Compensation Insurance Fund, which insures half of all California businesses, is a “financially sick company,” Garamendi said.

Fund administrators told lawmakers last month that the fund would not be able to afford to underwrite new policies soon, and said rates probably would jump 18% between now and January.

Garamendi, whose office oversees the state fund as well as private insurers, urged the business owners to keep pressure on legislators and work with employee groups and labor unions to devise feasible fixes.

“If we’re able to control costs through legislation, we could see the problem of increasing rates flip around,” he said, noting there are several proposals in the legislative pipeline that would address increasing medical and legal costs.

Still, some business owners said that for them, time was running out.

One man, who came to the downtown Los Angeles meeting from Santa Barbara, told Garamendi that in 21 years in business, he has yet to have one workers’ compensation claim filed against him. Nonetheless, his rates continue to climb.

“Very soon, I won’t be able to afford it and 22 people will be out of work,” he said. “Hundreds of people don’t have claims. Why are we being punished for it?”

Others such as Doug Barr, president and chief executive of nonprofit Goodwill Industries of Southern California, described an unseen consequence of higher workers’ compensation costs. An analysis by his organization showed that if rates had stayed the same in the last several years, “we could have helped 8,000 people get off welfare,” he said.

In Sacramento, there are some 50 workers’ compensation-related proposals lawmakers will consider in the coming months. The Los Angeles chamber has launched an aggressive letter-writing campaign to urge reforms and said it will form a task force to make policy recommendations.