Capitol Alert

2012 overhaul of workers’ compensation has dropped employer costs

Spectators watch as apprentice lineman Darin Floyd demonstrates ‘sagging’ an electrical power line at the Sacramento Municipal Utility District training academy on Nov. 6, 2015. Transportation and utility employers pay the state’s highest workers’ compensation insurance premiums because of the dangers of their work.
Spectators watch as apprentice lineman Darin Floyd demonstrates ‘sagging’ an electrical power line at the Sacramento Municipal Utility District training academy on Nov. 6, 2015. Transportation and utility employers pay the state’s highest workers’ compensation insurance premiums because of the dangers of their work. rbenton@sacbee.com

A 2012 overhaul of California’s system of compensation for work-related injuries and illnesses has moderated its employer-paid costs, but they remain, by far, the highest in the nation, according to a new study.

The data are in a “state of the system” report issued by the Workers’ Compensation Insurance Rating Bureau of California, which continuously monitors the multi-billion-dollar system and recommends changes in insurance premiums.

The 2012 overhaul was a deal between employers and labor unions, aimed at reducing costs to offset increases in cash payments to disabled workers, that the Legislature and Gov. Jerry Brown enacted.

It particularly targeted medical care, roughly 40 percent of the system’s costs, by adding new utilization reviews and restrictions, and the report says it has moderated medical expenses.

With that effect, the report says, California employers this year saw the first reduction in average workers’ compensation insurance premiums, although at $2.84 per $100 of payroll, they still are the nation’s highest.

In fact, California, with about 12 percent of the nation’s population, accounts for 29 percent of the nation’s total premiums for such coverage, although that’s down from 32 percent in 2005.

California’s premiums, $17.6 billion last year, were up from 2014, largely because the number of covered workers was increasing as the state recovered from recession. Premiums hit a peak of $21.4 billion in 2003, sparking a major overhaul by the Legislature in 2004 at the behest of then-Gov. Arnold Schwarzenegger. Premiums dropped to as low as $8.8 billion in 2009 as the state saw a major recession and unemployment climbed to more than 12 percent.

Roughly two-thirds of California workers are covered by workers’ compensation insurance. Larger employers, including most governments, generally self-insure, either through individually setting aside money or in combination with other self-insurers.

Historically, legislators and governors have made major changes in the system about once per decade, usually after two or more major stakeholder groups negotiate agreements that often hit other stakeholders in the pocketbook.

The 2012 deal was opposed by providers of medical and rehabilitation services to disabled workers and lawyers who represent workers in compensation cases. They have since pushed for reopening the issue, but so far nothing concrete has surfaced and if history is any guide, Brown’s successor as governor will face it.

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