Legislators learn about Workers' Compensation

By CMTA Staff

Capitol Update, April 17, 2014 Share this on FacebookTweet thisEmail this to a friend

On April 2 a coalition of employers and workers’ compensation providers gathered in Sacramento to meet with dozens of state legislators to bring them up-to-date on implementation of SB 863, the major reform bill passed in 2012. 

SB 863 is projected to add $1 billion in system-wide permanent disability (PD) benefit payments in 2014 – a 50 percent increase compared to total PD dollars paid in 2012. The bill included reforms to offset this increase including dispute resolution processes to decrease litigation and speed recovery for injured workers. The projected difference between costs and savings was very slim. If SB 863 is going to achieve its stated goal of increasing benefits without increasing costs for employers, its reform provisions must be implemented and protected.

But reforms never happen exactly as intended, and several threats that may put the savings at risk have already emerged. Without successful implementation of the reforms, the law could further increase costs for employers already burdened by high workers’ compensation costs. The following points were shared with legislators:

  • Implementation status: Of the 14 key reform provisions due to take effect by January 1, 2014, only 9 have been completed. Other key aspects of reform are under attack and being undermined.
  • Costs are uncertain: The benefit increase in SB 863 may cost more than predicted due to more claims, while key reform provisions (Independent Medical Review) may save much less money than projected.
  • Costs still increasing: The cost of older claims in the system continues to increase, and the average claim cost has increased 51 percent since 2005. The average employer cost for workers’ compensation insurance has increased by 34 percent since 2009.
  • More claims being filed: The rate of new claims coming into the workers’ compensation system has increased in the past two years, which is counter to the national trend of reduced claim frequency. This increase appears to be driven, in part, by cumulative trauma claims and geographically focused on the Los Angeles region. This trend will increase the total costs of the SB 863 benefit increase.

Remaining vigilant to keep the costs of workers’ compensation from spiraling out of control is vitally important to the California economy and workers. Legislators were reminded that business and labor groups agree that benefits to injured workers are the most important value to protect, and that reducing litigation, unnecessary healthcare costs and other system inefficiencies will preserve our ability to maintain fair benefit levels and get injured employees back to work.

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