Perata seeking permanent disability reforms to workers’ comp

Senate Pro Tem Don Perata, D-Oakland, is preparing legislation to adjust the permanent disability rules for the state’s workers’ compensation system.

However, first he must figure out how to draft a bill that Governor Arnold Schwarzenegger won’t veto. According to Perata’s staff, he has not yet put any language through Legislative Counsel. Instead, he is holding open a spot bill, SB 936, to submit language later in the session.

“Certainly, permanent disability will be the centerpiece,” said Steve Hopcraft, a health-care spokesman for several labor groups that have been tracking workers’ compensation bills. But Hopcraft said he is hopeful that the bill could address long-term disability, as well.

“I think there have been some signals from the administration that they are
willing to look at some of the areas where the most harm has been caused,” he said.

Perata sought to address long-term disability last year with SB 815. The bill would have doubled the length of time injured workers would have been eligible for benefits. It made it through, albeit with narrow votes and some Democratic defections. Schwarzenegger vetoed SB 815, as well as a bill from Assemblyman Paul Koretz, saying they would have rolled back positive reforms made in the 2003-04 session.

The most prominent of these was SB 899, from Republicans Senator Charles Poochigian, who termed out last year. It enacted numerous reforms long sought by the business community. This law placed limits on the both the liabilities of
employers to pay back wages and other fees, and also made numerous changes to the finances and physical referral rules for the system.

It’s clear that the private insurance industry will fight fiercely to defend these reforms.

“Folks were looking at the workers’ compensation system as a parallel welfare system, which is was never meant to be,” said Steve Suchil, assistant vice president of state affairs for the American Insurance Association. “With these reforms, the idea is to get people back to work.”

Given the governor’s veto–Suchil referred to SB 815 as a “rush job” that was written without input from insurers or employers–any changes are likely to be incremental. Suchil indicated that changes for the most injured workers would likely be the only area where insurers would be willing to accept changes.
The negotiations come in the light of two major pieces of data. First, workers’ compensation payouts have fallen drastically since the Legislature passed the reforms. Second, there’s data showing that the most injured workers are also the ones most dissatisfied with the system.

According to data from the Workers’ Compensation Insurance Rating Bureau of California, the workers’ compensation system had costs amounting to only 54 percent of expenses in 2005, with only 30 percent going to payouts to care for injured workers. The system had jumped into the red a decade earlier, with expenses hitting 126 percent in 1995 and reaching a high of 181 percent in 1999. In that year, actual payments for worker health care hit 138 percent of what had been paid into the system.

However, by the time the Legislature started to pass the reforms in 2003, expenses had fallen to 78 percent, and payout to only 52 percent. The AIA’s Suchil said that insurers need to take in extra money now to pay down the debt from excess expenses that drove more than two dozens insurers out of business in the last few years, as well as to build up a reserve against future increases in health-care costs.

Late last month, the UCLA Center for Health Policy Research released a study conducted on behalf of the state Division of Workers’ Compensation. It found that 78 percent of injured workers were satisfied with the care they received, but those who were the most injured were twice as likely to have significant complaints.

There are several other bills that could tweak aspects of the workers’ compensation system. For instance, Assemblyman Mervyn Dymally, D-Compton, has introduced a bill to create standards for acupuncture under the system. However, Dymally said that the state Division of Workers’ Compensation is likely to address this issue via regulation. Dymally has also introduced AB 644, which would enforce stricter standards for doctors evaluating injuries.

Contact Malcolm Maclachlan at
malcolm.maclachlan@capitolweekly.net