Legislation imposing sweeping reforms on the California workers'compensation system was passed by the state legislature late Fridayand sent to Gov. Jerry Brown for signature.

The bill is S.B. 863.

Insurance industry officials had voiced concern with the legislation, pointing to an analysisthat cast doubt on the cost-savings components of thelegislation.

Nicole Mahrt Ganley, public affairs director for the Associationof California Insurance Companies, says the critical issue “ismanaging the expectations of the projected savings.”

Citing reforms on the system made in 1992 and 2004, “most of thetime the results are different than expected,” Ganley says.

Marjorie Berte, western region vice president for the AmericanInsurance Association, said that while the bill contains beneficialreform components that address many well-documented cost-drivers,“its projected savings are minimal.”

One of the factors driving the bill was the unintendedconsequences of 2004 reforms pushed in 2004 by then-Gov. ArnoldSchwarzenegger that unexpectedly reduced benefits for permanentlyinjured workers.

In general, the new bill seeks to increase benefits to workers,especially those on long-term disability, by 30 percent. It paysfor this by imposing certain reforms, including changing howbenefits are calculated for injured workers, creating a bindingarbitration process to resolve coverage disputes and eliminatingcoverage for conditions that most commonly lead to lawsuits.

It also seeks to reform the unique “lien system” in theCalifornia system that allows medical providers to seek additionalpayments when they feel short-changed for services by imposing afiling fee.

Supporters projected that the original changes would increasebenefits to injured workers by $700 million, partly paying for itby imposing reforms that would save $400 million a year.

Supporters said the legislation could reduce rates by as much as7 percent by slowing the upward climb of medical and legal costs inthe $16 billion system.

However, a late compromise demanded by advocates for thepermanently disabled adds a $120 million pool to compensate injuredworkers for lost future earnings.

This will be paid for through a special assessment on employersthat finances the system.

At the same time, another compromise requires the Workers'Compensation Insurance Rating Bureau, which advises the state onworkers compensation fund costs, to rethink a 12.6 percent advisorypure premium rate increase it proposed to be effective inJanuary.

The WCIRB agreed to begin work on that re-evaluation startingWednesday, and to hold a public hearing before making a finalrecommendation.

In a statement issued after the Senate vote, Gov. Brown praisedthe bipartisan support for the legislation, saying it “helpsinjured workers and averts an imminent crisis of skyrocketingrates.”

Berte of the AIA says that the WCIRB has projected the bill willprovide $880 million in savings but will add $610 million in 2014benefit increases.

The estimated savings of $270 million on 2014 injuriesrepresents a decrease of just 1.4 percent in total system costs,she says.

She adds that the AIA would have preferred the adoption oflegislation that contained additional cost-cutting measures thatwould result in greater savings.

Correction: The name of the advisor to the statecompensation fund was originally incorrect and was corrected toWorkers' Compensation Insurance Rating Bureau.