California Assembly Approves Workers' Comp Bill
California’s Assembly overwhelmingly passed a landmark bill on April 16 to reform the state’s costly workers’ compensation system. In the wee hours of the morning, the Assembly passed the Senate Bill 899 reform measure, authored by Sen. Charles Poochigian (R–Fresno), by a 77–3 vote. The Senate also approved the measure by a 33–3 vote that same day.
Lawmakers said reforms in the bill, coupled with the reforms of other bills that were approved last year—including $4.8 billion in cost savings from Senate Bill 228, authored by Sen. Richard Alarcoacute;n (D–San Fernando Valley) and passed on the eve of former Gov. Gray Davis’ recall—puts the total cost savings of SB899 between $9 billion and $12 billion.
What makes SB899 stand apart from previous cost-reduction attempts is the fact that the bill does not regulate insurance rates. Instead, it allows insurers and employers to select pools of physicians that injured workers must use.
The passing of the bill has prompted criticism from some lawmakers and labor union advocates, who argue that insurance companies have too much control over insurance rates.
“Without insurance rate regulation, I, for one, am not convinced that the savings derived from tightening worker benefits will be passed on to employers in the form of lower rates,” Alarcoacute;n said. “I voted to allow this bill out of the Labor and Industrial Relations Committee, which I chair, so that my colleagues would have the opportunity to vote on this bill for themselves. I voted against the measure in the Senate. Someone has to stand up to the insurance companies.”
Alarcoacute;n said he plans to keep pushing for rate regulation, “if necessary, so that employers can get the relief they desperately need.”
California businesses contribute approximately $6.30 for every $100 of payroll toward medical coverage.
The combination of insurance rate hikes, medical cost increases and a slow economy has put apparel business owners in a tough spot. The buildup has been in motion since the mid-1990s, when the state eliminated a law that set minimum rates for workers’ comp carriers, which led insurers to price their own coverage below their cost to gain market share from rivals. As a result, several insurance carriers went out of business or left the state.
A high frequency of workplace injury claims coupled with illegal insurance claims has caused insurance costs to escalate. Some apparel business owners said they have been able to keep their fees manageable by listening to workers’ complaints about the work environment and equipment through workers’ outreach programs.
To make matters more challenging, the number of workers’ comp carriers that insure apparel businesses has dwindled to just a few major players. One of those insurance carriers is a captive insurance plan that members of the apparel industry formed last year.
Many apparel companies have embraced the new reform.
Women’s apparel maker Lonnie Kane, president and owner of the 21-year-old misses company Karen Kane, said the passage of SB899 is a step in the right direction but insurance fraud is still a top concern. “SB899 doesn’t really deal with fraud issues, and until this issue is dealt with, we have only a partial reform,” Kane said.
Currently, the Workers’ Compensation Insurance Ratings Bureau in San Francisco is evaluating the bill and will propose appropriate changes to the pure premium rates before July 1, 2004, according to WCIRB spokesman Jack Hannan.
—Claudia Figueroa
