A pair of California pro-business groups focused on workers’ compensation on Tuesday hailed Gov. Jerry Brown’s record on handling legislation sent to him this year in a combined report that offers their take on the year-in-review as well as their outlook for workers’ comp.
Their report also points to some troubling times ahead for California’s massive workers’ comp system.
The California Coalition on Workers’ Compensation and the Workers’ Compensation Action Network webinar, titled “2011 Report Card and 2012 Forecast,” states that while workers’ comp was not a priority in state Legislature this year, Brown’s record on vetoes versus his bills signed on workers’ comp was “perfect.”
“In our opinion, he batted 1,000,” said Jason Schmelzer, a legislative advocate for CCWC. “Frankly it displayed some bravery we can appreciate.”
The groups listed about a dozen pieces of workers’ comp-related legislation that reached Brown’s desk that they wanted him to sign, and those bills they wished him to veto.
“He signed what needed to be signed, and vetoed what needed to be vetoed,” Schmelzer said. “That tells us the governor is willing to make politically difficult decisions on workers compensation.”
And based on the messages sent by the governor and his staff along with those vetoes, “reforms are coming, broad reforms,” Schmelzer added.
In interpreting the governor’s actions in 2011 on workers’ comp, Jerry Azevedo, a spokesman for WCAN, said Brown “didn’t want to do things that would increase litigation, that’s very clear.”
What other signals was the governor sending? “He wants to look at changes to workers compensation in a balanced fashion,” Azevedo said. “He wants to maintain stability; he doesn’t want any time bombs.”
That was the good. The bad, according to the groups, is that going forward there are some tough times for the system.
“Ultimately, we can see the trend here, which is costs are going up, up, up,” Azevedo said.
According to the group, the five-year trend for medical costs is up 40 percent and the five-year trend for cash benefits is up 30%., while temporary disability benefits are being paid longer at higher levels.
The groups also found fault with slower permanent disability settlements, including higher benefits, more litigation, and in increase in expense costs.
The average insurer ratio is 126 percent for California in the 2010 accident year, according to the Workers’ Compensation Ratings Bureau.
It’s high nationally, and even higher in California, Azevedo said, adding, “The bottom-line for the P&C insurers in the workers’ comp line is that the combined ratio continues to escalate. Nationally it’s over 100 percent, and well past that in California.”
Recommended rate of $2.33 per $100 payroll of 2010 represents a 10% increase over 2008, when the industry average charged rate was $2.16. In the first quarter of 2011 it was $2.38. Insurance Commissioner Dave Jones has asked the WCRB for a 2 percent decrease to be based on new calculations for the pure premium average rate. Such a small adjustment instead of a larger one means that insurers are likely already on target with their rates and are probably experiencing increased costs, Azevedo said.
The bottom-line is California’s workers’ compensation system is again recognized as one of the costliest, according to the report issued by the groups.
“It’s headed in the wrong direction for employers, it’s headed in the wrong direction for insurers,” Azevedo added.
And if the trend continues, the handful of bills that come out of the state Legislature each year aimed at fixing aspects of the system will not be able to keep up with in problems that arise each year, Azevedo added.
“Piecemeal reform will be outpaced by new abuses and unlikely to generate necessary compromises,” he said.
Schmelzer put in: “Frankly broader reform is coming, and it’s probably coming next year.”