WORKERS’ COMP BILL FALLS SHORT

According to Insurance Brokers and Agents of the West (IBA West), SB 71 (Burton & Calderon), a bill moving through the California Legislature, doesn’t go far enough in attempts to reduce costs to reform the troubled workers’ comp system. Without compromise, Governor Gray Davis could veto the bill, postponing the problem for another year and allowing an already troubled situation to worsen. SB 71 proposes a benefit increase of approximately $2.7 billion, but some estimates place the bill’s total cost as high as $3.6 billion. One analysis suggests an increase beyond $440 million would have a negative impact on the economy. Also, attempts to change the board of the State Compensation Insurance Fund could politicize one of the few working segments of the industry. Significant increases in workers’ comp insurance rates could force many small employers to go out of business, scale back operations or expand operations outside of California. To prevent continued deterioration of the system, the bill needs to be amended to provide a benefit increase for severely injured workers, and contain real, substantive reforms that address administrative and legal costs. With concerns over the financial well being of several major insurers in California and other companies which have been withdrawing from the state’s market, competition in the marketplace is being significantly affected, and the bill could compound that.