Politics & Government

California’s workers’ compensation overhaul saved bigger bucks

The Legislature tends to pass sweeping policy changes by trumpeting their supposed beneficial impacts, but only rarely revisits their decrees to see how they worked out.

Legislative leaders pay verbal homage to “oversight,” but on the rare occasions it occurs, it is more often than not superficial or self-serving, rather than deep and objective.

Comparing what legislation purports to do with what it really does is often the subject of reports by outside interest groups, but they are generally stakeholders in the issue, rather than objective evaluators. And that makes a new report on the state’s $19 billion per year system of compensating workers for job-related injuries and illnesses something of an odd duck.

The highly respected Workers’ Compensation Insurance Rating Bureau, or WCIRB, conducted a comprehensive study of a major overhaul of the system enacted by Gov. Jerry Brown and the Legislature four years ago. And it found that it did what it was supposed to do – cut costs, especially for medical care, to offset higher cash benefits.

In fact, the study found that the savings in the employer-financed system are far greater than the benefit costs, resulting in a $1.3 billion per year net decrease, rather than the cost/benefit washout that the legislation anticipated.

That’s good news for employers, who already pay the nation’s highest workers’ compensation insurance premiums as a percentage of payroll – nearly twice the national average. But it fuels the perpetual political war over the complex system’s provisions.

There are five major stakeholder groups that joust constantly over workers’ compensation – employers, insurers, labor unions, medical care providers and specialist attorneys – and dozens of subfactions.

Roughly once a decade, a coalition within the quintet agrees on some major change and forces it on the others.

The current version of the cycle occurred in 2012 when employers and unions, with insurers’ support, forged a deal to raise cash payments to workers with “permanent partial” disabilities, the most expensive payouts, and offset their cost by tightening medical care and eligibility for benefits.

It part, it modified systemic changes that then-Gov. Arnold Schwarzenegger had made, in both legislation and subsequent rule-making, in 2004.

The 2012 deal was opposed by medical providers and lawyers who specialize in workers’ compensation cases but was pushed through the Capitol in the dying days of the 2012 session and signed by Brown.

At the time, it was supposed to raise benefits by $740 million a year and reduce costs by a like amount. However, the WCIRB report, released last week, says the savings outpace costs by $1.3 billion.

Even before report was issued, labor unions had broken with employers and joined medical providers and lawyers in pushing legislators to revisit the 2012 deal.

However, it’s unlikely that a reopening of the system’s provisions will occur until Brown’s successor is in office, since he’s evinced no interest in doing it in what remains of his second governorship.

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