California Closes in on Workers' Comp Fix

April 5, 2004 ( - California employers might soon see some relief for the state's workers' compensation system, a program whose costs are blamed for sending many employers to set up stakes outside the Golden State.

The Los Angeles Times reported Friday that both Governor Arnold Schwarzenegger and legislative leaders agreed Friday on the outline of a plan to overhaul the state’s workers’ compensation system. “It’s pretty well cooked,” Senate President Pro Tem John L. Burton (D-San Francisco), who has spent hours in negotiations with Schwarzenegger in recent weeks, reportedly told the Times.

Staff members are drafting what is expected to be a 1,000-page bill meant to revamp the state’s insurance system, though differences remain, and a final deal could still prove to be elusive. According to the Times, Burton said the negotiators hoped to have the legislation drafted by April 8, in time for lawmakers to review it over the weekend. Barring any “hitches,” public hearings could be held April 12, clearing the way for the legislation to be voted on by the Senate and Assembly shortly thereafter.

According to the Times, “multiple sources close to the negotiations” indicate the deal is taking the following form:

  • Permanent disability: The plan would create a set of objective medical conditions based on guidelines for determining the extent of a worker’s disability, and the seriousness of the disability would be translated into a numerical rating based on the worker’s estimated lifetime wage loss as calculated using a database developed by Rand Corp. The higher the rating, the greater the benefit payout.

  • Back to work: There would be a two-tier system for getting injured workers back on the payroll sooner. Employers would be encouraged to provide alternative duties that injured workers could perform without aggravating their conditions, and those who are unable to return to work would receive higher benefits than those who can.

  • Doctor choice: The program would eliminate the current system that allows an injured worker to choose his or her own physician after receiving treatment for 30 days from a doctor picked by the employer or the employer’s insurance company. Instead, a worker would be required to make three visits to the company doctor before being allowed to go to a personal physician (a request to see a personal doctor would be reviewed by an independent panel, which would decide which provider would treat the patient).

  • Rate regulation: Regulation of premiums for workers’ comp insurance, a key point of contention, would occur only if there were not enough insurers willing to sell policies in . In that case, premiums would be capped, and rate hikes would have to be approved by the state. Maximum premiums would be set based on medical costs and a company’s ratio of premiums to losses.

Combining coverage: Companies and their unions could agree to create cost-saving pilot programs combining features of current health-care systems, such as health maintenance organizations and preferred provider organizations, with workers’ compensation coverage.