Workers’ Comp Reform: Legislative Deal or Ballot Initiative’

California Governor Arnold Schwarz-enegger said in a March 11 press conference that he might be willing to compromise with legislators on workers’ comp reforms after some key industry figures were revised, according to the Sacramento Bee. The governor met with Republican and Democratic leaders of the State Senate and Assembly on March 8 in an effort to reach a solution in the California’s workers’ comp crisis.

The Workers’ Compensation Insurance Rating Bureau of California had originally projected 2004 workers’ comp costs to insurers at $24.9 billion, but the amount was readjusted to $17.9 billion to reflect a $7 billion savings resulting from reforms passed in 2003.

The governor’s original proposals called for savings of about $11 billion, or a cut of roughly 50 percent. The governor said that he would consider making a deal with legislators on reform packages that cut between 25 and 30 percent of workers’ comp costs.
If a deal between the governor and the Legislature is not reached, Schwarzenegger plans to move forward with his endorsement of a November ballot initiative. State businesses began circulating petitions on March 8 to garner support for the initiative.
The Committee for Workers’ Compensation Reform and Accountability (CWCRA) has until April 16 to gather enough signatures to qualify the measure for the ballot. For a constitutional initiative, the number of signatures required to qualify for the ballot is approximately 593,000.

According to Beth Miller Malek, CWCRA spokeswoman, CWCRA’s goal is to collect almost a million signatures to insure that there are enough qualified signatures of registered voters.

“It is a very ambitious goal in a very tight timeframe,” Malek said.

The initiative is titled The Workers’ Compensation Reform and Accountability Act. The Act is a composite of a few previously drafted initiatives by the following entities: the Small Business Action Committee (SBAC); the Independent Business Coalition; and Grimmway Farms. Although the initiative is now under the banner of the SBAC, Malek said that Grimmway Farms continues to be CWCRA’s workers’ comp expert and is currently raising funds to support the initiative.

The initiative requires the injured employee to prove that the injury occurred at work. Also, treating physicians, whether pre-designated or selected 30 days after the injury, must be agreed upon by employers and employees. Injured employees may only receive permanent disability benefits for the portion of disability caused as the direct result of the injury occurring at work.

“The initiative’s calling for a little bit more balance in the system for employers and employees. It’s helping to eliminate some fraud and abuse and get spiraling medical control costs under control. In fact, it would take decisions out of the hands of lawyers and put them into the hands of medical doctors, so you have medical doctors making medical decisions,” Malek said.

According to the initiative’s Web site, www.reformworkerscomp.com, the initiative also contains the following reforms:

Qualified Medical Evaluators: Under the initiative, selected Qualified Medical Evaluators must specialize in treatment relative to the type of injury for which the evaluation is sought. They will also be required to support their opinions using objective findings.

Medical Treatment Dispute Resolution: Medical professionals will make decisions to resolve disagreements regarding the denial, modification, delay or approval of medical treatment.

Standardized Treatment Guidelines: The diagnosis and treatment of industrial injuries will be governed by guidelines established by the American College of Occupational and Environmental Medicine, which are based upon the best available scientific evidence. This will require evidence-based opinions by doctors and will remove speculation and conjecture as the basis for an opinion.

Benefits for Convicted Criminals: Inmates that are injured in custody will not be allowed to make claims for disability benefits.

Workers Rights: The most seriously injured employees would receive an increase in permanent disability benefits.
The governor has not yet formally endorsed the petition signature drive, but is expected to if legislators fail to come up with a solution to the crisis.

The California Applicant Attorneys Association (CAAA) is poised to fight the initiative. CAAA and labor interests are advocating rate regulation, which the insurance industry strongly opposes.
“We have very significant concerns about that,” said Nicole Mahrt, public affairs director for the Western region of the American Insurance Association. “Everybody from the insurance commissioner to the chair of the Assembly Insurance Committee agrees that rate regulation is not going to solve the problem. The problems in the system are cost drivers. Self-insured entities and the State Compensation Insurance Fund all have the same problem as private insurers, which is out of control litigation and medical costs.”

Insurance Commissioner John Garamendi met with labor interests on March 8 in hopes of reaching a legislative deal to reform the workers’ comp system so that the initiative will not be needed. Among the reform proposals circulating in the Legislature are the governor’s bills, ABX4 1, sponsored by Abel Maldonado, R-Santa Maria, and SBX4 3, sponsored by Charles Poochigian, R-Fresno. The governor’s proposals are very similar to the reforms contained in the initiative, according to Malek.

Garamendi’s own proposals are represented in ABX4 15, being carried by Assemblyman Juan Vargas (D-San Diego). That bill would require employers to deliver immediate benefits to injured workers, create an independent medical examiner to resolve disputes and require treating physicians to use the descriptions and procedures of American Medical Association guidelines.

Garamendi has given the Legislature a deadline of March 31 so that the potential workers’ comp savings can be passed along to employers by July of this year. The November ballot initiative will delay workers’ comp savings until July of 2005.

“There’s dozens of (workers’ comp) bills in the Legislature,” Mahrt said. “But quite frankly none of them matter. The main priority right now is working out whether there’s going to be a legislative deal to reform the workers’ comp system or if there’s going to be an initiative.”