Alliance Disappointed with CA Legislature’s Efforts to Pass Needed Workers’ Comp Reform

September 20, 2001

For the third year in a row, the California legislature has come up short in its efforts to increase workers’ compensation benefits while enacting badly needed system reforms, according to the Alliance of American Insurers.

Commenting on the passage of two workers compensation bills–SB 71 and AB 1176–by the California General Assembly, Keith Bateman, Alliance vice president and director of workers’ compensation and health, expressed disappointment that the process again degenerated into a standoff between the Senate Democratic leadership and Democrat Gov. Gray Davis.

“Elected officials need to put aside their differences to help both employers and employees,” Bateman said. “Benefits are too low and system costs too high. Therefore, it is important that both be appropriately addressed in any workers’ comp package. While we are still reviewing the final versions of the bills that passed the legislature, we are concerned that these objectives have not been accomplished.”

The Alliance and others in the industry had suggested a number of reforms that would have reduced the cost of administering claims in California, including simplifying benefit notice requirements and making penalty provisions more rational, that were not addressed in either bill. “However, we do appreciate the efforts of the legislative leadership to address issues such as the problems caused by the treating physician presumption, the cost of pharmaceuticals and the need for an outpatient fee schedule,” Bateman said.

In the closing days of the session, the governor also advanced proposals that in a number of cases improved on the legislative offerings and addressed some insurer suggestions that had not been accepted by the legislature. Unfortunately, these were rejected out-of-hand.

“Of great concern to insurers are the retroactive benefit provisions of SB 71,” said Bateman. Those provisions would have cost insurers $3.2 billion that could not be recovered from our insureds. AB 1176, on the other hand, would replace the SB 71 provision with language that substantially reduces the retroactive period, but still would require insurers to pay $1.3 billion out of their existing surpluses.

“It’s no secret that competitive forces have led a number of insurers to under-price California workers compensation insurance. Several insurers are in shaky financial condition, and the last thing they need are new unfunded liabilities,” Bateman said.

“Unfortunately, the energy crisis quite naturally diverted the attention of both the governor and the legislature from giving more focus to the issue of reasonable workers’ comp benefit increases coupled with system reform. As a result, discussions did not occur in time to allow for new approaches when the proposed solutions proved unacceptable.

As a consequence, a consensus was not reached between the governor and the legislative leadership.”

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