Orlando, Fla.--Despite challenges over the last two years to major reforms in California's workers' compensation system, cost-saving changes will remain in place this year--barring a last-minute political deal to hike permanent disability payments, according to an industry official.

That assessment came from J. Michael Nolan, president of the California Workers' Compensation Institute, during a briefing yesterday on workers' comp reform at the annual Workers' Compensation Educational Conference here.

Mr. Nolan said that the cost of workers' comp insurance has fallen from a high of $6.45 per $100 of payroll in 2003--when the last piece of reform legislation was voted into law--to $3.75 in the first quarter of this year. He called the steady decline "an indicator the reforms are holding."

The session on reform was one of seven sessions and a keynote address on national trends put on by The National Underwriter Company as part of its partnership with the Florida Workers' Compensation Institute, which runs the WCEC event.

Before the legislative changes, Mr. Nolan noted, the cost of an average California comp claim was above $48,000 in 2002 and came in at $43,175 last year--up slightly from 2004 due to higher medical and indemnity costs.

A consulting firm study's midrange estimate of claims cost savings on 2006 policies was $8.1 billion when compared to 2003--and $15 billion in comparison with what costs might have been absent reform, Mr. Nolan added.

Among some of the effects noted in the study were a 55.8 percent reduction in visits to chiropractors and 40 percent less physiotherapy visits. (For more on the impact of the California reforms, see NU's Aug. 14 edition.)

Mr. Nolan said applicants' attorneys are contending "the reforms are terrible," arguing that assessment guidelines are being used by payers to delay and deny medical care.

Employers, he added, generally say the reforms are working and are fair to workers, but that the new regulations implementing the legislative reforms have made it difficult for payers who have had to learn the new system, and for employers who have data-gathering difficulty.

He said it was possible that a last-minute deal might be reached with the governor to increase permanent disability rates through a substitution of language in an existing bill on another topic--a process known in the California legislature, he noted, as "gut and switch."

Assessing reforms in other large states, Eric Oxfeld, president of UWC Strategic Services on Unemployment & Workers' Compensation, a Washington-based business lobby, said that while there had been debate over legislative proposals in New York, reform efforts there "are not going anywhere...Nothing's happening in New York."

Texas, which enacted reforms in 2005, made changes that included the abolition of the Texas Workers' Compensation Commission while shifting its functions into a unit of the Department of Insurance. Mr. Oxfeld said how that change will work out remains to be seen.

The biggest reform in Texas, he said, was permitting the use of certified medical provider networks to provide treatment of injured workers.

A third speaker--Tim Wisecarver, president of the Pennsylvania and Delaware Compensation Rating Bureaus, based in Philadelphia--said Pennsylvania's last changes to the comp system were in 1996, noting that the state has seen a 6-to-7 percent drop in claim frequency since the changes went into effect.

Speaking generally about achieving comp reform, Mr. Wisecarver noted that getting such changes into law is very difficult because there will always be "somebody left at a less desirable position after change--or they believe they will be."

Advocates of reform must therefore convince legislators who are dealing with "a host of competing [legislative] priorities," he added.

Mr. Oxfeld told his audience of workers' comp professionals that those lobbying for state reforms need their help because legislators are more sensitive to arguments for change when they hear from actual constituents who would be affected.

Special Reports /

Calif. Comp Reforms Remain On Track

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