What Price Workers’ Comp’

As was widely expected, on Feb. 15, California Gov. Gray Davis signed a workers’ comp-related bill, AB 749 (Calderon & Burton), which had passed both the state’s House and Senate on Feb. 4. But while it may seem that AB 749 went through the legislature with great alacrity, its passage comes close on the heels of similar legislation vetoed last year (SB 71), and, for that matter, the year before and the year before that.

In short, the new law provides maximum benefits paid to employees for work-related injuries to be increased incrementally over a four-year period—from the current $409 a week to $840 a week in 2006. After that, according to the National Association of Independent Insurers (which had encouraged Davis to veto AB 749), “Automatic increases…would be based on the state’s average wage increases. The proposed law is expected to cost $3.5 billion in benefits over four years.”

It would appear there may not be unanimity among the insurance industry as to whether passage of the bill is a good thing or a bad thing.

On the positive side, passage of the bill forestalls an initiative for this year’s November ballot, which was already being circulated by labor interests after the defeat of SB 71. That initiative had the potential to raise benefits much more than AB 749. And AB 749 includes both the elimination of the primary treating physician presumption and some other attempts at reform aimed at controlling certain escalating costs in areas that have been wreaking havoc on the state’s workers’ comp system.

That aside, there has been some concern on the employers’ side that the bill will dramatically increase their costs, particularly over the short term.

Many industry lobbyists felt left out in the cold during this recent political process, maintaining it boiled down to Davis and groups from the labor and applicants’ attorneys sides hammering out a compromise that fell somewhere between SB 71 and what eventually morphed into AB 749.

One of the concerns expressed before the veto of SB 71 was that its proposed benefit increases would have a highly negative impact on the California economy. For AB 749 there was scaling back on some of the benefits in addition to the aforementioned “tweaking” of some reform areas.

But according to some, a number of important reforms were left out of AB 749. The American Insurance Association stated the bill does not address the “fundamental flaws” which have long plagued the California workers’ comp system.

An IBA West spokesman noted another issue it considers a strong focus for agents and brokers—that AB 749 does not adequately present the issue of who can access claims-related records to determine whether or not reserves are being established at a proper level.

Then again, some industry watchers note that benefits for injured workers have not been raised since 1996, and while this benefit increase is significant, it contains elements of moderation the initiative, for example, would not have.

Insurance Journal is interested in learning our readers’ opinions on this subject. Please direct all e-mail to me at the address listed below.

Topics California Legislation Workers' Compensation