BY PHIL WALKER — In my previous post, I laid out the current status of California’s workers’ compensation system, and the path that got us here. These are more instances to reiterate why we need to act quickly to reform our broken system:
- The reforms of 2004 resulted in premium reductions of 56%. Now, premiums are climbing again and heading towards pre-2004 rates. Prediction: Premiums will be at pre-2004 rates by 2011. This means that employers will move jobs to other states or offshore. And while these reforms were able to move the cost of California’s worker’s comp system from the #1 most expensive state in America to #13, we are now climbing back towards #1.
- California Workers’ Comp Institute reported this year that all Medical Savings achieved by reforms have now been wiped out and California is back at pre-2004 medical cost levels. Prior to 2004 reforms, an injured worker would receive 2 to 3 times as much medical treatment for a California workers’ comp injury compared to if he had the same injury anywhere else in the United States. Now, we’re seeing that all medical cost savings have been eliminated.
- Nevada has begun advertising again to lure California employers to Nevada. This is exactly what they did pre-2004: it has started again. Both Nevada and Arizona secured large numbers of California employers as a result of the work comp crisis prior to 2004. And with California now at near-Depression levels of unemployment in some areas (Central Valley–15.8%) increases in workers’ compensation costs will result in fewer jobs being placed in California when employers can do the work elsewhere at lower cost.
- 78% of all medical reports in California award $14,500 more in Permanent Disability than the law allows. These inconsistent and incorrect reports result in increased litigation costs for California employers for things as simple as getting a judge to award what the law deems appropriate. To make matters worse, the Work Comp Appeal Board recently enacted two decisions, Almaraz/Guzman II and Ogilvie II, which essentially nullify California workers’ compensation law and let judges set Permanent Disability Award at amounts higher than the law allows. Both cases are currently on appeal.
- Our system prior to 2004 resulted in 27 workers’ comp insurance companies going bankrupt or leaving the state. 60% of all claims wound up with the California Insurance Guarantee Association (which picks up for bankrupt insurers and passes its costs on to the remaining solvent insurers, thereby increasing their premiums) and the State Compensation Insurance Fund (insurer of last resort). We had new insurers come into the state after the reforms. Now, workers’ comp insurers have begun leaving the state again.
As you can see, the efforts we made in 2004 to create a veritable and fair workers’ compensation system have been rendered futile. It is time to reinstate those values that will bring our state back to an efficient and cost-effective system once and for all. Please le us know your thoughts on these issues by writing them in the blog.