Schwarzenegger Proposes More Workers’ Comp Cuts

Gov. Arnold Schwarzenegger on Tuesday proposed making deep cuts to the state’s workers’ compensation system, going much further than recently enacted legislative reforms in an effort to bring down soaring insurance premiums and burnish California’s business image.

The Legislature in September took a comparative scalpel to the $29-billion system with cuts that are estimated to yield about $5 billion in annual savings. Now Schwarzenegger is wielding an ax that would slash an additional $11 billion from the cost of treating work-related injuries.

The governor’s plan could bring significant relief to California’s businesses, but critics warned that such deep cuts probably would come at the expense of injured workers.

Senate President Pro Tem John Burton (D-San Francisco), irritated by Schwarzenegger’s criticism of the hard-fought savings obtained by the Legislature two months ago, said Tuesday that he would introduce a bill to repeal the measures, even though Schwarzenegger said he wanted to build on, not tear down, those reforms.

The governor’s plan, however, brought cheers from industry groups that had complained that the Legislature’s reforms didn’t go far enough to bring meaningful rate relief to the state’s businesses, which have seen workers’ compensation medical costs and premiums soar in recent years.

Workers’ comp premiums in California are more than twice the national average, and many businesses have blamed the spiraling costs for restraining hiring and contributing to the flight of firms to other states.

During his campaign for governor, reforming workers’ comp was a major part of Schwarzenegger’s economic platform. On Tuesday, he urged legislators to act boldly to rein in the system’s runaway costs.

“It will let the world know that California is serious about improving its business climate,” Schwarzenegger said at a packed media conference in Sacramento. He indicated that he would take the measure to California voters next year in the form of a ballot initiative if lawmakers fail to act, although observers said that was unlikely given the complexity of the issue.

Some groups vowed to stand tough on any proposal that benefits employers and insurance companies over rank-and-file employees.

“Big plans come and go in Sacramento,” said Tom Rankin, president of the California Labor Federation, AFL-CIO. “The labor movement will be here to make sure that injured workers’ benefits aren’t slashed.”

Mark Gerlach, a consultant for the California Applicants’ Attorneys Assn., a trade group for workers’ comp lawyers, said: “There is no way of cutting that amount of money from the system without seriously impacting injured workers.”

Schwarzenegger’s reform proposals, part of his California Recovery Plan, were introduced late Tuesday at a special legislative session convened to deal with the state’s fiscal and economic problems. State Sen. Chuck Poochigian (R-Fresno), a key player on the committee that drafted September’s workers’ compensation reforms, introduced the Senate version of the plan for Schwarzenegger.

Provisions of the reform legislation include:

* Overhauling the permanent disability portion of California’s system. Critics say the criteria for determining how badly a worker has been injured are too subjective, so seriously injured workers sometimes end up getting skimpier disability benefits than those with minor injuries.

* Clarifying the “cure and relieve” standard. California law requires that injured workers be given any treatment needed to cure and relieve their work-related ailments. That’s a broad definition that some employers claim leads to costly, ongoing maintenance of conditions that can’t be cured.

* Limiting the penalties that injured workers can win from insurers or employers over disputed medical bills, a system that critics say has encouraged abuses and produced a windfall for attorneys.

* Ending a worker’s ability to receive multiple disability payments for the same injury.

* Expanding the use of dispute resolution to reduce costly litigation in the system.

* Allowing companies the option of consolidating their group health insurance and workers’ compensation coverage into a single system to reduce costs and redundancies.

* Prohibiting prisoners from obtaining workers’ compensation benefits.

Many of the proposals introduced Tuesday were similar to measures Poochigian had pushed unsuccessfully earlier this year in a bid to win even deeper cuts to the system than those delivered by the September reforms. That legislation focused mainly on slowing the system’s skyrocketing medical costs.

But Republican legislators, as well as insurance industry groups, have questioned whether those measures would deliver the promised $5 billion to $6 billion in annual savings. Even if they do, Poochigian and others contend that California’s system remains plagued by a slew of other costly problems that must be fixed if the state’s employers are to gain permanent relief.

“There are elements of the [September] reform that were positive,” Poochigian said. “It was just inadequate given the scope of the problem.”

Still, even proponents of deeper cuts expressed surprise at the ambitious size of Schwarzenegger’s plan.

“That’s a lofty goal to aspire to,” said Mark Sektnan, assistant vice president for state affairs with the American Insurance Assn. in Sacramento. “It’s going to be very tough to tackle the other cost drivers in the system” because of all the special interests that will be lined up to protect their turf.

Indeed, Schwarzenegger appears to have a fight on his hands, starting with Burton, the powerful Senate leader who has threatened to repeal the September reforms.

It was unlikely that the Legislature would take such a step because that would incite chaos among insurance carriers that are in the process of setting their 2004 rates to account for expected cost savings from the September reforms. Still, analysts said Burton’s statements underscore the fierce political battle that lies ahead.

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Times staff writer Nancy Vogel contributed to this report.