Governator Propels WC Reform In California

Several reform bills were passed last August during the recall campaign that would eventually land Mr. Schwarzenegger in Sacramento, but both the insurance industry and other business groups characterized these as merely a first step.

Gov. Schwarzenegger gave the legislature a deadline of March 1 to pass further workers' comp reforms, warning that if lawmakers were unable to pass any reforms, or provided an insufficient package, he would take on the issue himself. "If modest reform is all that lands on my desk, I am prepared to take my workers' comp solution directly to the people and I will put it on the ballot in November," he said.

Reforms did pass (although more than a month after the governor's deadline) that allowed the creation of employer-guided provider networks, established independent medical reviews in the event of a dispute, and set up criteria for determining permanent partial disability based on AMA guidelines.

Although the governor's representative, Vince Sollitto, said Gov. Schwarzenegger "has always viewed the legislature as his partners in governing the state," those working on both sides of the workers' comp debate place the bulk of the credit or blame for the reforms on his shoulders.

"The governor had a lot to do with the reforms," said Nicole Mahrt, a representative with the American Insurance Association in Sacramento. "He set the table and set an agenda and made sure everyone stuck to that agenda."

Ms. Mahrt said it was a "testament" to Gov. Schwarzenegger's work on workers' comp that "we're starting to see signs of competition in a market that was full of red ink for a decade. I don't really think it would have been possible without the governor."

Part of his secret for success, she said, is his charming personality. "You talk to lawmakers and they all say what a good guy he is."

However, charm, on its own, does not pass legislation, and Ms. Mahrt noted that Gov. Schwarzenegger has something else that sets him apart from his predecessors that might help provide him with the "moxie" to advance workers' comp reform. "What's different is that the man has a 65 percent approval rating," she noted.

Those on the other side of the debate also point to Gov. Schwarzenegger as the person most responsible for passage of the reforms.

David Schwartz, representing the California Applicant Attorneys Association which opposed the reforms from their inception and continues to criticize them said Gov. Schwarzenegger's public stature, which could have tipped the scales for an initiative to gain voters' approval, gave him the upper hand in dealing with Democrats in the legislature and enacting what Mr. Schwartz called a "conservative, right wing agenda" on the workers' comp issue.

"He was able to put pressure on the Democrats to the point where it wasn't a compromise it was a capitulation," he said.

But Mr. Schwartz argued that other factors helped the governor have his way on workers' comp most notably another reform already set to appear on the November ballot. That initiative calls for the repeal of a state law mandating that companies with 20 or more workers either provide them with health insurance from the private market or pay into a state controlled fund. "I don't think the Democrats wanted to fight both fights," he said.

However, despite his opposition to Gov. Schwarzenegger's policies, Mr. Schwartz acknowledged that the governor "does reach out to people," adding that the CAAA was able to meet with him on workers' comp. Although the meeting lasted only about a half-hour, he said it was more access than the group has had with any of the last several administrations in Sacramento.

Since April, opponents of the reforms have made a great deal of noise over the fact that the promised savings have yet to be seen by employers. The industry has defended the reforms and insists more time is needed to judge their impact. Still, calls for increased regulation specifically, rate regulation have been heard by the legislature, which has two bills pending.

"Rate regulation is the last thing that should be done to this market right now," Ms. Mahrt said, adding that it is "very important" the reforms be given time to work.

Both of the rate regulation bills, however, appear unlikely to become law during this session, set to end Aug. 31. One bill, written by Assembleyman Lloyd Levine, D-Van Nuys, was abruptly pulled before a Senate hearing, while the other, authored by State Sen. Richard Alarcon, D-San Fernando Valley, has been amended to include mostly "intent language," which does not carry the weight of law, Ms. Mahrt noted.

While the fate of the Levine bill remains unclear, Jeff Fuller, executive vice president and chief counsel at the Association of California Insurance Companies in Sacramento, said that while the Alarcon bill will likely make it off the Senate floor, it will have a much harder time in the Assembly. "If it gets over there, it's not going to get to the governor's desk," Mr. Fuller said.

Reproduced from National Underwriter Edition, August 19, 2004. Copyright 2004 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.