Former Gov. Arnold Schwarzenegger often cited an overhaul of the system that compensates workers for job-related illnesses and injuries seven years ago as one of his proudest achievements.

Schwarzenegger is gone, but the very controversial changes that tightened up eligibility for employer-paid benefits and imposed stricter medical care guidelines are continuing to have a major effect on the multi-billion-dollar system, a recent report indicates. And it adds fuel to a burgeoning political debate.

The Workers' Compensation Insurance Rating Bureau says that during 2010, compensation insurance premiums paid by employers were $9.7 billion, slightly higher than in 2009, but generally continuing a years-long downward trend.

The figure (which does not include costs of large employers who self-insure for workers' compensation) is just 41.6 percent of the $23.3 billion that employers paid to insurers in 2004.

That's when Schwarzenegger, then newly inaugurated, bulldozed the Legislature into overhauling the system. He was backed by employers who threatened a ballot initiative to change the system if the Legislature failed to act.

The changes, which were fleshed out in rules that Schwarzenegger's administration later adopted, sparked protests from labor unions, lawyers for workers' compensation applicants and medical care providers, and they have tried ever since to roll back the 2004 changes. Critics say that the eligibility and medical care rules have denied legitimate payments and therapy to those disabled on the job.

Insurers have also complained about losing money on compensation, but Schwarzenegger and former Insurance Commissioner Steve Poizner opposed multiple efforts by the industry to sharply increase premiums.

The WCIRB's report says that during 2010, insurers' operating expenses, payments to injured workers and medical care outstripped premium income by $1.5 billion, lending credence to their pleas for premium boosts.

With Democrat Jerry Brown now governor, Democrat Dave Jones now insurance commissioner and Democrats controlling both legislative houses, there are new moves to effect change and put pressure on Brown to undo the much-criticized administrative rules.

At the same time, however, business groups contend that raising employers' costs will impede recovery from recession and discourage rehiring the million-plus workers who have lost jobs.

Although California's workers' comp costs have dropped sharply since 2004, they're still fifth highest in the nation, according to an Oregon state agency's study, and a third higher than the national median.

It's another issue, like the budget and water, that Brown finds familiar as he returns to the governorship after a 28-year absence. He tried and failed to overhaul workers' compensation during his first stint as governor.

© Copyright The Sacramento Bee. All rights reserved.

Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters

• Read more articles by Dan Walters