Business, Labor Fret Over CA Workers' Comp Proposal

April 15, 2004 ( - California's workers' compensation and insurance reform bill currently winding its way through the legislative process has come under fire from business and labor organizations.

Business groups are concerned that the bill does not give enough relief to companies in the Golden State that have seen their insurance bills double and triple over the last few years. Union leaders are frustrated by a decision by Democratic legislators to dump a demand for price caps on insurance rates, which had been a major sticking point throughout the negotiations, according to a Los Angles Times report.

California Governor Arnold Schwarzenegger has pushed hard for worker’s compensation reform in California, which has the nation’s most expensive system. California’s workers’ comp costs have soared in recent years, from $6.4 billion in claims paid in 1997 to an estimated $25 billion last year. The average cost of dealing with workplace injuries also has risen dramatically, from $2.68 per $100 of payroll in 2000 to $6.30 per $100 in 2003 – the highest rate in the nation.

Seeing this, Schwarzenegger made reform of the system a centerpieces of his administration and has threatened legislators with an initiative on November ballots if lawmakers did not reach an accord that satisfied the bottom line of Schwarzenegger’s proposals. Legislators have heeded the call, and agreed to two crucial elements of the bill: the bill will not regulate insurance rates and will allow insurers and employers to select pools of doctors injured workers must see. The latest version of the bill is projected to cut an estimated $4 to $7 billion of those costs.

The Times story, examining the synopses of the bill being circulated, says the primary cost-cutting would be generated by changes in the calculation of benefits for workers permanently disabled by on-the-job injuries. These “permanent disability benefits” could be reduced by 30%, saving at least $1.5 billion. An additional $450 million in cost reductions could come from a proposal to lower disability payments for injured employees who can return to work in light-duty positions. Putting a 104-week cap on temporary disability payments could save $300 million to $500 million more.

However, the road to reform is a long and arduous one, and analysts say the concerns raised by business and labor groups only underscores how difficult reform that appeases all the parties involved can be. If both business and labor groups are unhappy, any reform package might fail in its main objective – improving the state’s economy.