Landmark WC Legislation to Provide Relief for Calif. Employers

September 11, 2003

Calif. Insurance Commissioner John Garamendi said that legislation crafted by the Workers’ Compensation Conference Committee will bring stability to the market and is an “outstanding” first step toward bringing lower premiums to employers struggling under the burden of the broken $29 billion system.

The Conference Committee moved on two bills Sept. 9, AB 227 (Vargas, Burton and Nunez), and SB 228 (Alarcon, Burton), which contain reforms that will reduce system costs by an estimated $5 billion to $6 billion annually. The full Legislature will vote on the measures by the end of this week, and the Governor has promised to sign the legislation when it hits his desk.

“This is a tremendous, superb start to a complete reform of this dysfunctional system,” Garamendi said. “I applaud the Conference Committee for its work, and I urge the Legislature to support these badly needed reforms. This is an important first step in making this system serve the injured worker and protect the employer – not feed the appetites of those who abuse it to further their own financial interests.”

California’s workers’ comp costs to employers are the highest in the nation, yet the benefits to injured workers are in the bottom 40 percent of all states. In 1995 the system cost all employers $9 billion. This year, it will cost more than $29 billion. That’s equivalent to a $20 billion tax increase, according to Garamendi, who pointed out that there are now fewer injured workers who don’t go back to work any faster.

“The legislation proposed today will stop the absurd increases that employers have seen in the last year, and produce savings that will continue on an annual basis,” Garamendi said. “The individual impact of these changes will vary per employer, but I am confident that we can bring immediate relief for many.”

Some of the reforms in the proposed legislation include:

* Establishment of an official medical fee schedule for outpatient surgical centers, indexing it to 120 percent of Medicare.

* Mandatory adoption of interim utilization guidelines governing medical treatments.

* Limits on chiropractic and physical therapy treatments to no more than 24 per claim.

* Requires dispensation of generic drugs, unless a brand name has been specifically prescribed.

* Repeals existing vocational rehabilitation statute, replacing it with a new supplemental job displacement benefit for injuries occurring on or after Jan. 1, 2004.

* Increasing the maximum fine for workers’ comp fraud from $50,000 to $150,000.

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