Workers’ comp costs felt locally
Ryan Carter
Bill Wiggins did not have to go far to find the devil in the details
of workers’ compensation premiums.
The former Burbank mayor, who owns Automation Plating Corp. in
Glendale, said the compensation premiums he pays for his employees
have gone up 30% in the past year.
Wiggins ran some quick numbers, comparing what he pays in
California to what he pays for workers at his other metal finishing
shop, in Arizona.
Here, for every $100 of wages he is paying, $10.90 goes to
workers’ compensation premiums, he said. In Tucson, he is paying
$1.95 per $100 in wages.
“The comparisons will stagger you,” he said. “The whole system is
out of control.”
Indeed, as a conference committee in Sacramento grapples with the
issue of rising workers’ compensation costs and how to curb them,
local businesses from Burbank and Glendale are keeping the heat on
legislators to fix what they see as a crisis.
Concerned over businesses moving away from the area to states with
cheaper costs, chambers of commerce in both cities have banded
together over the past year to call for help from legislators to put
price controls on what they call a broken system.
“It is having a tremendous impact,” said Susan Bowers, executive
director of the Burbank Chamber of Commerce. “Businesses are having
to not expand, or they are having to lay people off, because there is
the bottom line that they have to make a profit. If they can’t, there
is no reason to stay in business.”
So far, the flight from the area has been minimal, if it’s
happened at all, local officials said, but the costs are taking a
toll.
“We can’t hire anymore,” said Sunder Ramani, owner of Beauty Kiss
Floors in Burbank. “We’re looking to see how to transition to a
business that is not so labor-intensive.”
Ramani lamented the disparities in the system’s payouts that favor
trial lawyers and physicians over the employees, he said.
“The worker who is actually injured receives the least amount from
the benefits,” Ramani said. “And the first place injured workers are
going is the lawyer. That has to stop.”
Officials said the issue also has caused cutbacks in employee
hours and has hit the labor-intensive manufacturing and restaurant
industries hard.
Local employers are calling for constraints on workers’
compensation attorneys, regulation of medical fees, and more than 30
days for employers to control the claims of injured workers before
they can seek a physician outside of the employers’ compensation
plan.
And it’s not just merchants crying wolf during sagging economic
times.
“California has the highest rate of workers’ compensation in the
nation,” said Jack Kyser, chief economist for the Los Angeles County
Economic Development Corporation. “We haven’t seen the flight yet,
but what we have seen are a lot of businesses on the fence, waiting
and waiting. We’re concerned that, unless there is a major
improvement, they will move.”
The increasing costs are affecting workers’ compensation packages
for employees from municipal governments to department stores.
“Sometimes we talk about things being a crisis, but this is truly
a crisis,” state Sen. Jack Scott (D-Burbank) said.
Scott said he has given his input to representatives on the
special committee. Scott called for tighter controls on costs of
those who are reimbursed with insurance payments, such as
chiropractors and physicians.
Insurance officials said the problem of high compensation premiums
for employers goes back to deregulation of the industry in the
mid-1990s.
“What you had was a rush of carriers to adopt a market-share-
at-any-cost mentality,” said Jim Zelinsky, spokesman for the State
Compensation Insurance Fund, the San Francisco-based workers’
compensation fund that covers about 50% of the state’s employers.
But Zelinsky said the premiums were so low that insurance carriers
in a deregulated market couldn’t cover their costs, which contracted
the market, increasing costs, including the State Compensation
Insurance Fund’s premiums.
“From 2000 to 2002, our premiums grew 200%,” Zelinsky said.