Dan Walters: Assessing the latest workers' compensation overhaul

dwalters@sacbee.comOctober 15, 2012 

Ostensibly, one of the two or three most important acts of the 2012 legislative session was an overhaul of the huge and hugely complex system that provides medical care and cash benefits to workers with job-related illnesses and injuries.

The 170-page legislation was hammered out in months of private negotiations between employer and labor representatives and then given to lawmakers in the session's final hours.

With business and labor lobbyists, legislative leaders and Gov. Jerry Brown all pressing lawmakers hard for approval, it passed, despite late-blooming opposition from lawyers who specialize in disability cases.

Cash benefits to permanently injured workers are increased sharply in the bill, with costs supposedly more than offset by procedural reforms and a tightening of benefit eligibility.

It was the latest incarnation of a once-a-decade syndrome of changing workers' compensation's arcane rules when enough of the multibillion-dollar system's stakeholders reach accord to, in effect, gang up on other stakeholders.

The syndrome began 30 years ago, during the final days of Brown's first governorship, when a union- insurer combo jammed through a $3 billion-a-year increase in employer-paid benefits.

In 1994, the Legislature did an overhaul that included deregulation of workers' comp insurance premiums. A decade later, in 2004, then-Gov. Arnold Schwarzenegger, using a proposed initiative as a club, forced the Legislature to tighten eligibility for benefits and thus sharply reduce then-soaring employer costs.

While the 2004 overhaul drew fire from unions, workers' comp attorneys and medical providers, the criticism turned white-hot when Schwarzenegger's administration issued regulations that critics said went too far, denying disabled workers legitimate medical care and benefits.

This year's overhaul partially undoes Schwarzenegger's, but Brown insisted that the burden of increasing benefits not fall heavily on employers, presumably because he was cultivating business to support, or at least not oppose, his tax increase, Proposition 30.

While legislators were told of the measure's supposed financial impacts, they were just educated guesses. As the Workers Compensation Insurance Rating Bureau said this month, the net impacts will depend on the implementing regulations from the Brown administration and the underlying loss experiences of insurers.

The bureau's initial analysis is that while the overhaul may mitigate the need for insurance premium increases, it likely will not eliminate increases.

If history is any guide, it will take several years for impacts of 2012's changes to fully reveal themselves, and several more years for stakeholders to choose up sides for the next version of the perpetual war over rules of the workers' comp game.

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