Workers’ Comp Reform, Phase II: Schwarzenegger Steps In

Despite the recent enactment of this year’s workers’ compensation reform legislation Gov.-elect Arnold Schwarzenegger plans to call a special session of the Legislature Nov. 18 to tackle the issue again.

The governor and politicos are aiming for further improvements to the system and they want to use this year’s reforms as a launch pad for further cuts. Topping the list is a complete overhaul of the state’s permanent disability rating system, which Democrats in Sacramento have been reticent to tinker with. But the list is lengthy, including various housekeeping items like cleanup language for the reform bills passed this year as well as those passed in 2002, when benefits were kicked up substantially.

Lobbyists, trying to read the tea leaves, say it’s too early to tell how much cooperation the moderate Republican governor will receive from the left-wing Democrats who rule the roost at the Capitol. His biggest challenge will be working with the firebrand Senate President Pro Tempore John Burton (D-San Francisco), among other liberals who could put the kybosh on Schwarzennegger’s ambitions.

“They could meet in special session and adjourn the session within minutes,” Mark Sektnan, assistant vice president of the western region for the American Insurance Assoc-iation, said. “I’m sure that this is part of the discussion [Democrats are having].”

He added that while Republicans and moderate pro-business Democrats are feeling empowered after the election, some left-leaning Democrats “are outright hostile.”

And he said, it’s possible Schwarzenegger won’t enjoy much collaboration from the Capitol’s power brokers.

Still, Burton and other Democrats—as well as State Insurance Commissioner John Garamendi—promised to work with Schwarzenegger when he made his schmoozing rounds at the Capitol last month. Drowning in criticism from the business community of the newly passed reforms Burton even went so far as to fire off a letter saying that he’d introduce legislation to repeal the new laws.

“This forces Schwarzeneg-ger into the Legislative process,” said Mark Webb, government relations for American International Group.

Norman Williams, spokesman for the California Department of Insurance, said that Schwarzenegger and Garamendi agreed to milk workers’ comp experts for more reform ideas at a summit before the new governor is sworn into office.

“The commissioner suggested a summit at which they would draw in all the experts on the issue,” Williams said. “That would feed into the special session.”

Garamendi’s wish list is chock full of heavy-duty reform ideas, but by far the most significant is a complete overhaul of the state’s upside down permanent disability system. The state Commission on Health and Safety and Workers’ Compensation through its studies has concluded that there is no predictability in the way injured workers’ disabilities are rated. Different raters who examine the same injured workers often come up with wildly disparate estimates of the percentage of permanent disability they’ve suffered. This causes uncertainty in the system and drives up costs, experts say.

The CHSWC is feverishly trying to hash out some legislative language that would inject predictability and objectivity into the PD system, said Christine Baker, executive director of the commission.

Other reform ideas include:
Inventing new treatment guidelines supported by an independent medical review process, which could reduce litigation.

Indexing all of the workers’ comp system’s fee schedules to the Medicare fee schedule. This year’s reforms only tied the outpatient surgery fee schedule to Medicare.

Eliminating laws forcing claims adjusters to pay a 10 percent penalty on the entire cost of the claim for paying just one indemnity payment late. This provision in the law has in some cases resulted in fines exceeding $100,000.

Encouraging more use of return to work programs, which CHSWC has found is the best way to keep injured workers’ from staying on the dole too long.

Launching 24-hour care, which melds workers’ comp and health insurance into one insurance system. This is one of Garamendi’s pet priorities during his tenure as insurance commissioner.

Forcing employers to provide immediate medical care to injured workers, whether they disagree with the claim or not.

Creating an independent medical review process for injuries and pushing alternative dispute resolution.

Clarifying and cleaning up confusing or flawed language in this year’s reform bills AB 227 and SB 228.

Schwarzennegger also plans to change the leadership at the Division of Workers’ Compensation, which oversees and monitors the system in California. This he can do without any legislation. He also wants the DWC to start rooting out medical providers that are abusing the system by over-treating, over-billing or performing unnecessary treatment.

As for reform, it may be penned at the special session, next year’s session, or if gridlock ensues it could be years for them to broach it again.

And that is where the future gets fuzzy.