Work comp reformsí impact on temp & permanent disability

By CMTA Staff

Capitol Update, March 30, 2007

This week the Assembly Insurance Committee held an informational hearing on how workers’ compensation reform legislation has impacted temporary and permanent disability.  SB 899 (Chapter 34, Statutes of 2004, Charles Poochigian, R-Fresno) established historic reforms to the high-cost workers’ compensation system, including new medical-fee schedules, uniform guidelines on treatment and a new objective formula to calculate permanent disability benefits (PD).  Prior to these reforms, claims were increasing, employers were paying out for higher medical costs and businesses could no longer afford the premiums for workers’ comp insurance. 

Assemblymember Joe Coto (D-San Jose), Chair of the Insurance Committee, requested a report from the California Commission on Health and Safety and Workers’ Compensation (CHSWC) to inform the discussion on legislation to be heard in his committee this year.  Judge Lachlan Taylor from CHSWC reviewed with the committee some of the immediate cost savings industry has been able to obtain with the new reforms.  One dramatic statistic was the 50% drop in the dollar value of PD awards.

The hearing also included testimony from Carrie Nevans, the Acting Director of the Division of Workers’ Compensation, on the second phase of the wage loss study that will influence the adjustments to the PD fee schedule.  Later in the hearing, an employer panel recognized the cost savings and felt that the reforms were going in the right direction, while a labor and applicant attorneys’ panel disagreed and testified that reforms were illegitimately driving down benefits and providing cost savings to employers at the expense of injured workers. 

Of particular concern to the committee were the new caps on the number of weeks an injured worker can receive temporary disability.  After the passage of SB 899, the number of weeks for TD went from 240 to 104.  It was pointed out that Assemblymember John Benoit (R-Palm Desert) has introduced AB 1341 which attempts to address the concerns surrounding these caps and seeks common ground between the stakeholders. Currently there are two spot bills (AB 338 by Coto and SB 936 by Senate Speaker pro Tempore Don Perata, D-Oakland) that might adjust the current PD rating system and the fee schedule.

CMTA was active in developing the workers’ comp. reforms and continues to work with all the stakeholders to review and possibly adjust regulations to address unintended consequences.   Nevertheless, new legislation is attempting to make drastic changes to the reforms. 

CMTA members should also be aware that an initiative has submitted to the Attorney General that would reverse practically all the steps taken to reform this complicated and expensive system.  The Legislative Analyst Office has already indicated that this initiative would result in billions of dollars in additional cost. 

It is imperative that California businesses work together to protect the workers’ compensation reforms against pressures to undo the reforms and inappropriately increase benefits.

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