Governor Gray Davis on Feb. 15 signed into law a measure, AB 749, sponsored by Assembly Insurance Committee Chairman Tom Calderon (D-Montebello), that will raise workers’ compensation benefits in California by $3.5 billion, according to the American Insurance Association (AIA).
“We look forward to working with this administration on the considerable task ahead to deliver the potential cost savings created in this legislation,” said Mark Webb, vice president, AIA western region. “If we are to continue enforcing the agreement between employers and workers that is the cornerstone of the workers’ compensation system, then it is incumbent upon those who negotiated this bill to acknowledge that this system is fundamentally flawed and that these flaws will continue to exist now even though AB 749 has become law.”
AIA urged the inclusion of some components of AB 749, such as extended control over medical treatment for employers and expanded use of the Health Care Organization (HCO) system. But savings from these reforms are not guaranteed and will not occur for three to four years.
“The potential costs savings from this bill will not be realized for several years, in fact, many of the legislators that voted for this measure will no longer be in office when the full impact of this bill occurs,” said Webb.
“There are many important reforms that were left out of this bill,” said Webb. “At a time when state and local governments and businesses throughout California are struggling, there must be a commitment to reduce system complexity, litigation and unnecessary medical treatment, and to restore the expectations of injured workers and the employers who pay their salaries.
“Specifically, we ask the administration to deliver on the promises made to reduce the costs of prescription drugs and of outpatient surgery/facility services,” said Webb. “We also call upon the administration to review and revise the permanent disability rating schedule to provide fair and equitable ratings of permanent disability and to end the inconsistency, confusion and waste that the current schedule encourages.
“We hope the Legislature will reconsider whatever elements of AB 749 that truly do not benefit injured workers,” continued Webb. “The ability of an injured worker to compromise and forfeit vocational rehabilitation is at cross-purposes with the heavy investment in returning injured workers to their jobs, which is also contained in AB 749. Let me be clear – no amount of cash settlement for rehabilitation benefits will ever replace a job.”
“Furthermore, the recommendation by the Commission on Health and Safety and Workers’ Compensation to pay indemnity benefits at a single rate was not included in AB 749. This recommendation was previously included in both SB 71 (Burton) and SB 1156 (Burton),” said Webb.
“This recommendation would have greatly simplified how insurers pay benefits to injured workers and reduced the financial impact to the worker receiving permanent disability benefits that are lower than his or her temporary disability benefits. The Legislature should strongly consider adopting this recommendation, just as it has in the past.
“In conclusion, the significant cost increases contained in AB 749 will place a tremendous burden on California’s economy. If we are to preserve this system, we must all accept responsibility for its many failures and must now all shoulder the burden for its reform.”
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