In the big debate Wednesday night, Lt. Gov. Cruz Bustamante made what might have sounded to some viewers like a creative proposal for reforming workers compensation: give safety discounts to employers with injury-free worksites. Like “good driver” discounts in auto insurance, Bustamante said, his idea would reward good behavior and penalize bad behavior, presumably leading to lower rates for firms that do the right thing.
“There’s no incentive for a good workplace and a bad workplace because they get paid or they get a premium that’s exactly the same amount,” Bustamante said. “So if we were to provide a worker, a safe-workplace discount, and we’d be able to have an incentive for those people who are not doing a good job to do a better job, we could lower premiums on those that are good worksites and increase the premiums on those that have the bad worksites.”
Amazing concept. Maybe that’s why it has long been the concept at the heart of workers compensation insurance. Called “experience modification,” it works like this: every company is assessed a basic rate according to its industry, based broadly on the risk involved in its work. Roofers pay a lot more than paper pushers for each dollar of payroll. But after that rating is done, it is modified by experience. Just one expensive injury claim can drive a company’s rates up dramatically, by 50 percent or more. They generally stay up for three years and then decline only if the firm is claim-free. A good safety record gets you – guess what – a discount!
Cruz’s idea, in other words, already exists, as any insurance seller or business owner could have told him.
A few weeks ago, in a speech in Fresno, Bustamante gave a fundamentally incorrect description of the way the state got into its budget mess, arguably the number one issue in the recall election. This week, in the biggest debate of the campaign, Bustamante gave a fundamentally incorrect description of the way workers compensation works, arguably the second most important issue in the campaign and the issue at the heart of the debate over the state’s business climate.
People make mistakes. I understand that. But these statements were not on trivial matters. They were not off the cuff. And they reveal a total misunderstanding of the basic forces at work on the state’s most debated problems. Experience in government, it seems, is no guarantee that a candidate knows what he is talking about.