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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

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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

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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,

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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

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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.


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