Setting the Scene for Workers’ Comp Reforms and the Need for Future Dialogue
April 7, 2006


The California Constitution gives the Legislature "plenary authority" over the workers’
compensation system. As we have seen over the past decade, the Legislature takes its role
seriously, enacting major changes to the system on a regular basis. As we have also seen,
many of those changes produce unintended consequences, such as, the creation of the
treating physician presumption of correctness in 1993. 

By 2001, the call for benefit increases overwhelmed the Governor and the Legislature,
and Assembly Bill 749 (Calderon) was signed into law. Premium increases and cries
from self-insureds, combined with the growing threat of a recall, caused the Legislature
to revisit workers compensation one year later, resulting in Assembly Bill 227 (Vargas),
which repealed the vocational rehabilitation benefit, and Senate Bill 228 (Alarcon),
which enacted many of the medical cost containment measures currently driving down
workers’ compensation rates.

However, this was too little too late to stop the recall of Governor Gray Davis. While
there were many reasons for the recall, Governor Schwarzenegger clearly made further
workers’ compensation reform a centerpiece of his campaign. On April 19, 2004, that
campaign promise was fulfilled when he signed Senate Bill 899, authored by Senator
Chuck Poochigian, a Republican from Fresno. Built on the reforms in AB 227 and SB
228, SB 899 also made significant revisions to how permanent disability is calculated.

By most accounts, the reforms have been successful. Costs for self-insureds and
premiums for insured employers have dropped significantly. Not everyone, however, is
happy with the reforms.  Labor representatives are calling for increases in permanent
disability benefits under the new law. Medical providers are also expressing concerns
over denials of treatment and inadequate compensation under the new fee schedules. The
applicant attorneys are taking their concerns to the courts, where permanent disability
ratings, apportionment, and the use of treatment guidelines are being challenged.

Ultimately, there can only be reform if the Legislature and Governor agree. The same
holds true for protecting reforms that are already on the books. Insurers and employers
must remain vigilant and engaged about what happens in Sacramento. History shows that
change is always possible. Whether change is for the better depends on all of us...and if
we make our voices heard.