Governator Makes WC Reform His Mission
Its hard to imagine any one individual accomplishing workers compensation reform by force of sheer will, but that seems to be the case in California, where populist Governor Arnold Schwarzenegger used the power of the ballot initiative as leverage to get long-debated changes passed by a divided legislature.
While some reforms were approved last year, they clearly did not go far enough to revitalize a system that had driven out many major carriers and left the State Compensation Insurance Fund covering over half of the states exposures. Costs were skyrocketing, making California a less desirable place to do business.
By threatening to go directly to the people with his own solution as part of a November ballot initiative campaign should the legislature fail to act, the governor was rewarded with a second reform package last April. It allows the creation of employer-guided provider networks, establishment of independent medical review panels to assess contested claims, and the imposition of AMA-inspired criteria to determine partial disability.
Premiums have begun to fall and more companies are beginning to move into the troubled California market as a result. Still, critics contend that progress isnt being made fast enough, and there is talk of new rate regulation to force greater savings for employersa move that could drive out carriers and discourage others from starting to write coverage in the state.
Defenders of the reform program say more time is needed before its success can be fairly judged. After all, they note, some of the reforms have not even been launchedmainly because regulations to implement them are not yet finalized.
Still, patience is running thin, and complaints about anticipated side effects are pouring out. Indeed, a court challenge was filed last month against the states Division of Workers Compensation by the California Applicants Attorneys Association. The suit charges that the reform law will force "hundreds of thousands of workers" to abandon their existing doctors because they will be required to use only those providers in the employer-chosen network.
Will this and other litigation chip away at the benefits of reform, rendering expense reduction initiatives moot? Will the elected insurance commissioner and legislators under pressure from voters demand stricter rate regulation to force insurers to pass along their savingsand then somethereby poisoning the market and driving out carriers again? Not if "The Governator" has anything to say about it. Stay tuned.
Reproduced from National Underwriter Edition, December 16, 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.
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