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Restore Benefits to Injured Workers
Fact Sheet
Purpose
To restore adequate medical care and improve wage replacement for permanently injured workers.
Background
California’s workers’ compensation system was created to provide medical treatment and wage replacement benefits to workers injured on the job. Employers fund the system, and in return, injured workers are generally prohibited from suing the employer of injury—even if employer negligence was to blame.
In 2004, following workers’ compensation cost increases in the late 1990’s, employers began drafting a draconian ballot initiative to cripple our workers’
compensation system. Newly elected Governor Arnold Schwarzenegger, who had campaigned on a platform of workers’ compensation reform, also threatened to support the ballot measure. Legislative negotiations ensued and labor ultimately went neutral on a major reform: SB 899 (Poochigian, 2004). However, to implement the legislation, Schwarzenegger implemented rules that have been nothing short of a disaster for injured workers.
Billed as a reasonable means to address rising costs without major benefit reductions, SB 899 — and subsequent rulemaking — in fact cut benefits, delayed medical care, and generated massive new costs associated with processing and reviewing treatment decisions. All have done little to provide relief to injured workers while generating expensive waste and fraud throughout the system.
Benefits: Permanent disability (PD) indemnity benefits, or wage replacement for workers with permanently crippling injuries, were sharply reduced under new rules. The vast majority of injured workers watched their benefit duration reduced by an average of 11%, and an overhauled disability evaluation process means that 25% of injured workers now receive no benefits at all. In addition, Schwarzenegger’s regulations adopted a controversial new disability rating method that cut PD compensation by 40%. With these and other reductions, the total dollar amount awarded to permanently crippled workers has fallen by 2/3rds.
Medical treatment: SB 899 forced many reforms to the process by which a worker receives care: employers now generally control an injured worker’s choice of doctor, insurance companies review these doctors’ decisions and, in the end,
workers’ compensation judges make medical treatment decisions. These and other reforms have increased delays within and costs to the system—
with no corresponding benefit to injured workers.
Frictional costs: “Medical cost containment” figures represent the cost of administering, processing and reviewing claims. SB 899 and subsequent rulemaking were supposed to reduce these costs, but medical cost containment expenses have since tripled. This unintended 300% increase, especially in light of drastic PD benefit cuts, shows no sign of slowing down and highlights the urgency behind this year’s reform effort.
What Needs To Be Done
Specific legislation will follow months of research and negotiation between affected stakeholders, but a few key reforms will likely shape the discussions:
PD benefit increases: SB 899 cut PD benefits far beyond what opponents and even supporters envisioned. Using a system more driven by wage loss data, permanent disability benefits will be restored.
Medical treatment reforms: 2012 reform legislation will almost surely include efforts to help medical providers secure fair and timely payment. Measures to suppress abusive profiteering will also be critical.
Workers’ compensation reform legislation will also include ideas and suggestions from a statewide outreach effort and listening tour sponsored by Department of Industrial Relations Director Christine Baker. We strongly encourage labor representatives to attend these hearings, get involved, speak up and contribute pro-worker ideas to improve California’s workers’ compensation system.
Support
~ California Labor Federation
Key Contacts
Mitch Seaman, California Labor Federation - (916) 444-3676 ext. 14
Read the White Paper: "Workers’ Compensation Reform: Undoing the Damage of Schwarzenegger’s Rules."