Workers’ Comp to Be Revisited

Times Staff Writer

Gov. Arnold Schwarzenegger’s signature achievement -- his overhaul of California’s long-troubled workers’ compensation insurance system -- may be headed to the repair shop.

The leaders of the Democratic-controlled Legislature, prodded by complaints from doctors, lawyers, labor unions and injured workers, have put the Republican governor on notice that rolling back major elements of the recent workers’ comp overhaul will be a top priority when lawmakers reconvene today.

Laws passed in 2003 and 2004 and subsequent regulations issued by the Schwarzenegger administration produced billions of dollars in cuts in the costly program for providing medical treatment and compensation to workers hurt on the job.

As a result, premiums paid by employers for workers’ comp insurance -- which skyrocketed in the first part of the decade -- plunged by almost 40% over the last two years.


Meanwhile, insurance company profits, after running in the red for eight of the last 10 years, rose by an average of 27% in 2004. Insurers are expected to report strong profits for last year and 2006 as well.

But the boon for businesses and insurers has come at a price for injured workers, critics contend.

Early findings from a new state study show that money paid to workers with permanent disabilities dropped by 50% in 2004. And a growing body of anecdotal evidence from patients and doctors suggests that, in some cases, insurers are denying payment for medical treatments needed to get injured workers back on the job.

Democratic lawmakers and their allies, who gained political strength by defeating four Schwarzenegger-backed initiatives in November, are convinced that at least some of the changes made to the workers’ comp system need to be rolled back.


Senate President Pro Tem Don Perata (D-Oakland) and his counterpart in the Assembly, Speaker Fabian Nunez (D-Los Angeles), are adamant about revisiting an issue that many thought was settled when Schwarzenegger signed the second overhaul bill in April 2004.

“We don’t want to open Pandora’s box, but we want to fix what’s wrong with the law,” said Nunez spokesman Steven Maviglio. “There are horror stories we hear on a daily basis about workers that need to be addressed, and the administration needs a reality check instead of being in denial.”

The lobbying -- for and against change -- has already begun.

A group called, financed in part by lawyers who represent injured workers, is assigning an injured worker from each of 120 legislative districts to lobby his or her local lawmaker so that legislators will see “the kind of dire straits the workers are in,” said Peggy Sugarman, the group’s director.


Employers, especially the owners of small firms, are preparing “to fight tooth and nail” against any changes in the current system, said Martyn Hopper, California director of the National Federation of Independent Businesses.

“To roll back any of the reforms would send the wrong signal,” said Hopper, whose 35,000 members sometimes suffered annual triple-digit hikes in their workers’ comp premiums in the early part of the decade.

Republican legislators and large employers say they’re counting on the governor to stand firm against Democratic pressures by threatening to veto major comp bills.

“The agitation has been incessant to undo the reforms, but I’m convinced that it’s a nonstarter,” said Sen. Chuck Poochigian (R-Fresno), author of the principal 2004 workers’ comp law.


California Chamber of Commerce President Allan Zaremberg said he expected Schwarzenegger to tell labor leaders that he would resist changes to the workers’ comp overhaul -- the first phase of which was actually enacted during the administration of Democrat Gray Davis -- unless he received overwhelming evidence that many workers were being harmed.

Schwarzenegger spokesman Vince Sollitto said it would be “premature to speculate” on what the governor might do until “there is good, solid data available on how the system is working.”

Some of that data -- dealing with permanent disability benefits, which account for 20% of comp costs -- could soon be landing on the governor’s desk, said Christine Baker, executive officer of the Commission on Health, Safety and Workers’ Compensation, a state-backed research group.

She said a nearly completed study of 3,500 workers’ comp cases indicated that on-the-job injuries were being evaluated much more stringently under the new rules. As a result, the average disability classification for many injured workers -- in other words, the degree to which they are found to be disabled by their injury -- has declined by 40%, according to the study. That, in turn, means that sharply lower benefits are being paid out for many types of injuries.


Critics complain that the new disability ratings aren’t comprehensive enough to cover all types of on-the-job injuries or the effect those injuries can have on a person’s ability to return to work.

Baker said the commission also was worried that new guidelines used by insurers to authorize or deny treatment plans recommended by doctors lacked flexibility and had “developed into a huge problem.”

California physicians complain that they are being second-guessed by out-of-state doctors hired by insurers to review treatment requests. Many of the reviewers are not specialists in the field of medicine that they are reviewing, the doctors contend.

The combination of new statistics, a new political dynamic in the state capital and Schwarzenegger’s dramatic success in bringing down costs so quickly could create a climate for the governor to give back some of his workers’ comp gains, predicted John Norwood, a top insurance industry lobbyist in Sacramento.


“Arguably, some of the reforms have been so effective that somebody could make the case that, ‘Geez, we did even more than we wanted to do,’ ” he said.