Pressure Builds to Address Costs of Workers’ Comp

Responding to angry employers hurt by soaring workers’ compensation insurance premiums, Republican state senators and officials from Gov. Gray Davis’ administration on Tuesday separately called for urgent legislative action to fix the state program for people injured on the job.

The Republican lawmakers and administration officials agreed on the need for fundamental changes in the California system, the most expensive in the country, including establishing a fee schedule to standardize medical costs. But differences emerged on other key points in the debate over how to curb rising workers’ compensation costs, which employers say are forcing them to lay off workers.

The impact of workers’ compensation costs on California businesses has emerged as a top issue at the Capitol since January, spawning about 60 bills from both parties. Davis plans to unveil his proposals for overhauling the system next week, which will include adoption of up to a dozen of the existing bills, proposed amendments and possibly new legislation, said Daniel Zingale, the governor’s cabinet secretary.

Republican state senators held a Capitol news conference Tuesday to promote the 14 bills they are proposing as solutions. The legislation would cover a broad range of workers’ compensation issues, including setting fees for medical costs, such as in the Medicare and Medi-Cal programs for the elderly, poor and disabled. Other legislation would seek to restrict the definition of a work-related injury and limit compensation for permanent disabilities.

Employers are required by law to provide workers’ compensation coverage, which pays benefits to workers who are injured on the job. California has the highest workers’ compensation premiums in the country but ranks near the bottom in benefits paid.

“We need to fix this failed system,” said Sen. Bruce McPherson (R-Santa Cruz), the author of a bill that would cap penalties for the late payment of medical bills. “The longer we wait, the more jobs we lose and the more people are impacted.”

Among the points of disagreement over workers’ compensation is Assembly Bill 749, passed last year by the Legislature and signed by Davis, which has expanded workers’ medical benefits. Some Republicans want to repeal the law. Democrats say they will oppose that effort.

State Insurance Commissioner John Garamendi, speaking for the Davis administration, acknowledged Tuesday that the system is rife with problems. He described the workers’ compensation program as “drowning in a tidal wave of rising medical and legal costs, gross inefficiencies, fraud and abuse of the system by workers, employers, insurance companies and providers.”

Garamendi sketched in broad terms a framework for fixing the system, including containment of medical costs, improving the delivery of care for injured workers and creating a more objective system for determining permanent disabilities.

Some Republicans, however, accused Democrats of advocating a piecemeal “Band-Aid approach.”

Republicans have asked Davis to call a special session of the Legislature to consider workers’ compensation bills, an idea the governor has rejected.

At their news conference, Republican lawmakers presented three people they described as victims of soaring workers’ compensation premiums.

One of these was Scott Anderson, 47, president of Zenith Specialty Bag Co.

Anderson said he was forced to lay off 40 of his 240 employees earlier this year because his workers’ compensation premiums were going to rise from $323,000 a year to $780,000. By laying off workers, he reduced his premiums to $425,000, he said.

“All I want is for my employees to be happy, safe and making bags,” said Anderson.

Anderson said the workers’ compensation system in California is “very adversarial, which it doesn’t have to be.”

Insurance companies make the same complaint. “We’d like the system to be more objective,” said Mark Sektnan, lobbyist for the American Insurance Assn. “What we really need are predictability and stability.”

Insurers say medical costs in California have tripled over the last decade, from an average of $8,000 per claim to $24,000. Industry critics, however, say insurers are responsible for many of the problems. They say insurance firms are raising premiums to recoup losses from price wars following deregulation of workers’ compensation insurance in 1993 -- a charge insurers reject.

Labor leaders and lawyers representing injured workers say the Republican proposals for fixing the system fail to address industry shortcomings.

“They’re trying to shift the costs from employers to somewhere else,” said Tom Rankin, the California Labor Federation’s chief lobbyist.