THIS WEEK IN
Prepared by Norwood & Associates
WORK COMP MANIA!!
After weeks of partisan stalemate on workers’ compensation
reform, the Legislature finally sprang into action. There was activity on several different
fronts—the Legislature, the Insurance Commissioner, and various stakeholders in
the workers’ compensation battle. However,
despite the sudden actions by the various interested parties, workers’
compensation is still an issue seeking a process.
Labor Pushes WC
Proposal, Governor’s Staff Attend Meeting
The AFL-CIO is continuing to push its workers’ compensation proposal, which, among other things, threatens to eliminate commissions paid by the State Fund, cap agent/broker commissions paid by other insurers and institute a Proposition 103 type rate regulatory scheme for workers’ compensation.
Labor held additional meetings this week with various employer groups, including those in the construction industry, promoting their proposal as the best solution for employers and employees. Of particular interest was the presence of the Governor’s staff at the second meeting held by labor with the broad-based group of employers who first met last week. This unexpected development is the first sign of what may develop into a formal process where negotiations might actually take place to develop compromise language.
Garamendi’s
Proposal Attempts to “Bridge the Gap”
Commissioner Garamendi introduced
his own proposal at a workers’ compensation forum held at the
Garamendi’s plan would not eliminate commissions paid by the State Fund or cap commissions paid by other insurers. The Commissioner’s proposal does include rate re-regulation; however, not to the extent of that proposed by the AFL-CIO. Key elements of Garamendi’s plan include:
· New standards to determine the amount of permanent disability a worker suffered from a job-related injury.
· A second medical opinion to help resolve disputes between employers and workers.
· Paying benefits to workers immediately after an injury and allowing the employer up to one year to dispute claims.
· Stiffer penalties for fraud.
· Requiring the State Fund to shed business that can be handled by other carriers.
· Tying physician’s fees to federal Medicare reimbursement rates.
Garamendi also presented his plan before the Assembly Insurance Committee on Wednesday. Neither the applicant attorney’s nor labor is enamored with the Commissioner’s proposal, saying it does not take a tough enough stand on insurance industry regulation.
Big 5 Meet Prior to Assembly Insurance Hearing
The Governor’s office hosted a meeting of the “Big 5”—Assembly Speaker Fabian Nunez, Senate President Pro Tempore John Burton, Assembly Minority Leader Kevin McCarthy, and Senate Minority Leader Jim Brulte—on Tuesday afternoon to discuss workers’ compensation. After what was reported to be “a productive meeting,” it was decided that the scheduled hearing on Wednesday of ABx4 1, the Governor’s workers’ compensation proposal, before the Assembly Insurance Committee would be informational only rather than a vote on the bill as originally anticipated.
The meeting of the “Big 5” is an essential first step towards ending the gridlock on workers’ compensation reform. This may signal that some type of formal process is developing that has the potential to lead to a legislative compromise. Legislative leaders did not indicate that a compromise was in the works, but may have started the beginning of a process for ongoing discussions.
Assembly Insurance Committee Hears ABx4 1
In a packed committee room on
Wednesday, Assemblymember Abel Maldonado presented ABx4 1 before the Assembly
Insurance Committee. Assembly Insurance
Committee Chair Juan Vargas offered to take the bill up for a vote; however,
Asssemblyman Maldonado asked that the committee not vote, but instead use the
time to gather more information from the interested parties on the best ways to
reform
Business representatives, local government leaders and executives of nonprofit organizations spoke in support of the Governor’s proposal. In almost every instance, the witnesses provided committee members with compelling stories of their continuously increasing workers’ compensation premiums and the actions they have had to take—such as layoffs, cutting medical benefits and reducing hours and management pay—in order to keep their businesses afloat.
Labor and the applicant’s attorneys testified in opposition to the bill, arguing that the Governor’s plan threatened to take away benefits and medical treatment for workers. AFL-CIO President Tom Rankin touted his own proposal, which calls for rate re-regulation of the insurance industry and the elimination/capping of commissions paid to broker-agents.
Commissioner Garamendi also
testified at the hearing to present his own workers’ compensation
proposal. Although the Commissioner’s
proposal would establish a minimum rate carriers could charge, he cautioned
labor leaders that a stronger rate regulatory scheme would keep new carriers
out of the
Senate Holds Hearing on Permanent Disability
The Senate Labor and Industrial Relations Committee held the first of six informational hearings on Wednesday, starting with how benefits for workers with permanent disabilities are determined. The committee heard testimony from the Workers’ Compensation Insurance Rating Bureau (WCIRB), the Rand Institute for Civil Justice, Senator Poochigian (who is carrying the Governor’s proposal in the Senate), the AFL-CIO, the California Applicant’s Attorney Association (CAAA), the California Chamber of Commerce, and the California Injured Worker’s Coalition.
The representative from the WCIRB explained to the committee how benefits are currently determined for those injured workers who are permanently disabled. The committee discussed which injuries are the most problematic, what to do about the inconsistencies in rating and which injuries would be eliminated under the Governor’s proposal.
Senator Poochigian explained to the committee that the goal of the Governor’s proposal was to make the permanent disability (PD) system more objective and provide PD benefits to those workers with injuries that can be proved with measurable and reproducible evidence.
Labor testified on the two-tiered system for PD in their workers’ compensation proposal. Tom Rankin argued that the two-tiered plan provides additional incentives for workers to return to work. In addition, his plan would make temporary and permanent disability payments the same.
Lastly, Mark Webb, testifying on
behalf of AIG, pointed out that labor’s proposal only applies to insureds. He refuted labor’s claims that only small
businesses are suffering, stating that 20% of employers employ 80% of workers
in
Senator Alarcon, chair of the committee, expressed his doubts about the cost savings proposed in the Governor’s plan. He also requested the WCIRB to develop a list of problematic injuries and a list of injuries that would be excluded from receiving PD payments under the Governor’s plan. He also requested a cost analysis of the Governor’s bill.
More Proposals/Action to Come
When we look back on how workers’ compensation ultimately plays out this legislative session, this week’s events may have been the watershed developments. As stated earlier, workers’ compensation is a huge political issue, but, up until now, has been without any real process that would lead to some type of legislative solution.
All of the elements are now in play for this to change. There are proposals by the Governor, the Insurance Commissioner and labor, as well as others expected from the Commission on Health, Safety and Workers’ Compensation and Senator Speier. Labor and management have begun a dialogue and legislative leaders and the Governor have begun discussions relative to workers’ compensation. Even legislative leaders have conceded that some type of legislative deadline is necessary and that the Commissioner’s March 31 deadline is more realistic than the Governor’s deadline of March 1.
In any event, it will take an expedited legislative process to meet either deadline and it now appears for the first time that all sides have seriously engaged.
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