Employer-paid costs of insuring against work-related injuries and illnesses continued to decline in California last year, but payouts to disabled workers and medical care providers flattened out, thus proving new grist for the perpetual political machinations over the huge workers' compensation system.
The data are contained in an annual report by the authoritative Workers' Compensation Insurance Rating Bureau, indicating that the major overhaul of the system pushed through the Legislature in 2004 by employers and Gov. Arnold Schwarzenegger is still having a big effect on its finances.
The overhaul, as implemented in later administrative rule-making, tightened up eligibility for workers' compensation benefits and on medical treatment guidelines. Ever since, labor unions and attorneys for injured workers have pressed the Legislature to undo the reforms, either wholly or in part, but Schwarzenegger and employers, who have saved tens of billions of dollars in premium costs, have staved off change.
More recently, citing increasing costs, insurers have complained about squeezes on their profits from writing workers-comp policies and have sought large premium increases, and the rating bureau has backed their pleas in its recommendations. But Insurance Commissioner Steve Poizner, a Republican candidate for governor, has held increases to a minimum, and Schwarzenegger has refused to change the administrative rules that critics say went well beyond the 2004 legislation, even though state law requires a review.
Insurers, including the state-owned State Compensation Insurance Fund, write policies for employers who don't opt for self-insurance. They billed $23.5 billion in gross premiums in 2004, but last year the total fell to $8.9 billion, $1.8 billion less than in 2008. Net premiums, after deduction credits, fell from $16.3 billion to $6.3 billion during the same period. And the average premium paid by employers declined fractionally to 2.35 percent of payroll, down from a peak of 6.45 percent in 2003.
Meanwhile, the rating bureau reported, payouts for direct benefits and medical care declined from a high of $12.3 billion in 2002 to $6.9 billion in 2009, $700 million less than in 2008.
The bureau's data have been adjusted for two highly controversial decisions by the Workers' Compensation Appeals Board, which held that the strict medical guidelines imposed by the 2004 legislation and the administrative rules could be superseded on a case-by-case basis. Those decisions, unless overturned in the courts, are likely to push workers' compensation costs upward.
The pressures from unions and lawyers have resonated with Democratic legislators, who have indicated they would back away from the 2004 overhaul if a governor would sign the legislation. And that means the next governor, whoever he or she may be, will inherit the issue and could even change the situation unilaterally by changing the administrative rules.
The full WCIRB report can be found here.
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