Insurers Look To 'Clean Up' Calif. WC Reform Law

The California workers' compensation reform law is “fundamentally flawed,” according to insurance industry officials, who hope to have input into the “cleanup process.”

AB 749, sponsored by Assembly Insurance Committee Chairman Tom Calderon, D-Montebello, and signed into law by Gov. Gray Davis, includes benefit boosts that the California workers' comp rating bureau estimates could cost employers as much as $3.5 billion. Rep. Calderon estimated the benefits increases would cost employers one penny per employee per hour.

The law reportedly includes savings of $1.5 billion from reforms, but Nicole Mahrt, director of public affairs for the American Insurance Association in Sacramento, said “there continues to be fundamental flaws in the system that were not addressed. Potential cost savings in the bill won't be seen for several years, if they do occur at all.” In the meantime, she said, employers will be hit with “skyrocketing rates.”

Ms. Mahrt said insurers hope to be part of the “cleanup process.” She said “there are a couple of things left out of the bill that we will ask the Davis administration to look at,” including a revision of the permanent disability rating schedule, which she said continues to be “inconsistent and confusing. Two people can have the same injury and get different permanent disability ratings.”

Keith Bateman, vice president of workers' comp and health for the Alliance of American Insurers in Downers Grove, Ill., questioned the bill's savings of $1.5 billion. “We agree that each succeeding version of the bill has had more reforms than the prior version, but there is still a long way to go to reach savings of $1.5 billion,” he said. While there is potential for significant savings in the medical cost control areas, actual savings will depend “on how the Davis administration administers those provisions,” he added.

Sam Sorich, vice president and Western regional manager at the Des Plaines, Ill.-based National Association of Independent Insurers, said, “overall we still think there is a lack of balance in the bill. Although there are some cost-saving features, we think those are far outweighed by the benefit increases that have been created.” He added that insurers are “concerned that the bill could lead to further disruption in the workers' comp system and market.”

The costs of expanded benefits have been understated by bill supporters, he said, adding that “California businesses are reeling from the electricity crisis, the global recession and the impact of the terrorism attacks. Now is not the time to add additional expenses to the state's businesses.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, February 25, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Contact Webmaster

Special Reports /

Insurers Look To 'Clean Up' Calif. WC Reform Law

Related Stories

Recommended For You