The commentary by Todd McFarren president of the California Applicants’ Attorneys Association (Capitol Weekly, Jan. 15), provides an opportunity to set the record straight about recent legislative reforms of California’s once-broken workers’ compensation insurance system.
As a result of these bipartisan reforms – which increased temporary disability benefits, required medical treatment to conform to evidence-based standards and created an objective system for measuring permanent disability – California’s system is more fair for employers and injured workers.
Here are the facts:
• Injured workers reported high levels of satisfaction with both access to and quality of medical treatment. In a survey of 1,000 injured workers conducted by the Division of Workers’ Compensation, 83 percent reported satisfaction with access to medical treatment and 78 percent reported being satisfied or very satisfied with the quality of treatment received. These results are consistent with “pre-reform” surveys and surveys conducted in group health settings.
• Claims of widespread delay and denial of legitimate medical treatment requests are unfounded. Audits by state regulators of utilization review (UR) practices (i.e., the process to determine if treatment requests are consistent with nationally recognized, evidence-based standards) found that 36 out of 37 organizations scored higher than passing, many were near-perfect. As for the non-passing organization, it processed only three treatment requests, all of which were approved. McFarren’s claim that penalties for bad behavior in the workers’ compensation system are not significant is baseless. Penalties for UR violations range as high as $50,000 per violation, and penalties for delaying or denying compensation can be as high as $400,000.
• Injured workers are getting back to work in higher numbers. The “return to work” rate for injured workers increased by five percent after the reforms and as much as 11 percent for certain injury types. This is the best outcome for injured workers and was the goal of the reforms. Unfortunately, some stakeholders remain more interested in promoting disability than recovery.
• Temporary disability benefits are more generous thanks to a major benefit increase passed in 2002 and are more effectively replacing two-thirds of lost wages than before the reforms of 2004. The maximum temporary disability rate has nearly doubled since 2002, rising from $490 per week to $958 per week in 2009. Follow-up legislation passed in 2007 increased the timeframe injured workers may receive their 104 weeks of TD benefits – from two to five years.
• California’s permanent disability (PD) benefit system was redesigned to make it more objective, less litigious and more equitable. McFarren doesn’t tell you that, prior to the 2004 reforms, California saw PD claims filed at three times the national average or that PD benefits increased 62 percent between 1999 and 2004 – largely arising from aggressive litigation driven by CAAA members.
This is what prompted state lawmakers to create an objective measurement system and increase benefits for the most seriously injured workers. After a careful review of the post-reform data, the DWC has proposed regulations that would increase PD benefits by an average of 16 percent and cost employers $200 million to $400 million per year. We have supported these regulations because they are based on empirical evidence, unlike recent legislative proposals to arbitrarily boost benefits to pre-reform levels.
McFarren also conveniently uses an apples-to-oranges comparison of how different states compensate for the loss of limbs. States have vastly different ways of compensating for these rare cases – which account for less than 1 percent of all injuries. In other words, there is no meaningful methodology to make this comparison. Other studies rank California’s total wage replacement benefits near the national median and show that California employers pay 18 percent of national “indemnity benefits,” despite employing only 12 percent of the covered workforce.
Let’s not forget that, alongside the positive outcomes for injured workers, workers’ compensation costs have been reduced for California employers, including small businesses, local governments and school districts. These are the same employers who saw workers’ compensation costs nearly triple between 1999 and 2003, harming public services and the competitiveness of California businesses, some of which were forced to shed jobs or leave the state.
Given rising unemployment and economic pressures, it is no small matter that California’s costly system – once 40 percent more costly than the next highest state – has been reformed. How many fewer jobs would California have today if not for these reforms?