Business Groups Push Workers’ Comp Redo
By SHERRI CRUZ
Gary Hernandez’s family-run business has had few workers’ compensation claims and his risk rate has declined. But this year his premiums have gone up,by at least $40,000.
“It’s killing us,” he said.
Hernandez is the administrator for Country Club Convalescent Hospital, a 54-bed facility in Santa Ana Heights.
Unlike other businesses that can reduce costs by cutting workers, his is required to keep an employee-to-patient ratio, so he has had to raise his rates and scramble to eliminate costs elsewhere.
Something has to change, he said.
“It’s getting to the point where you can’t run a business anymore,” he said.
That scenario is playing out throughout Orange County and the state. And if major reform of workers’ compensation insurance doesn’t happen this year, more companies say they will be forced to flee the state or lay off workers. Smaller businesses say they might have to close.
“Employers are really ticked off,” said Charles Bacchi, lobbyist for the Sacramento-based California Chamber of Commerce.
Gov. Gray Davis has endorsed legislation to address some of the problems with the system. But the chamber, the Sacramento-based California Manufacturers & Technology Association, businesses and others say enough tinkering,the decades-old system needs revamping.
Workers’ compensation is insurance paid by employers for workers who get injured on the job, regardless of fault.
It provides medical care, temporary and permanent disability benefits, vocational retraining and death benefits. Although the system prevents employees from filing negligence lawsuits against employers, it has prompted other disputes such as whether the worker was hurt on the job and how much the worker should receive.
“It’s turned into this massive entitlement program,” Bacchi said.
For the chamber, reforming the workers’ comp system means strict guidelines on how injuries are assessed and the frequency and mode of treatment, he said.
The injury needs to be real and it needs to happen at work. Right now injury ratings are subjective and only some are getting assessed correctly, Bacchi said.
One doctor will say a patient is 30% disabled, another will say 50%, he said.
Although a minor issue, the vocational rehabilitation piece of workers’ comp also needs to be changed, Bacchi said. A lot of money is spent on training people to do new jobs but no one knows if it’s working, he said.
With enough pressure on the politicians, the system will change, Bacchi said. It’s a matter of how much and how soon.
But it’s not going to be easy.
Once the call for reform was made, the service providers,hospitals, lawyers and others,started wielding their political clout, said Dorothy Rothrock, senior vice president, government relations, of the California Manufacturers & Technology Association.
“A lot of people are paid by the system,” Rothrock said.
Ideally, Rothrock would like to see employer groups craft a new workers’ comp system with employee groups, minus the service providers input. In reality, more patches are being applied to the system.
Plenty of bills have been introduced this year to help deal with the problem, she said. But few have passed and many good ones have failed, she said.
The doubling of workers’ comp premiums has pushed many companies to lower their costs by offering fewer or reduced benefits to their employees or by cutting staff,workers’ comp is based on the number of employees.
That’s what Jim Ignacio did. Ignacio, president of Laguna Hills-based Doctors Ambulance Service, said that though his risk rate hasn’t changed, his premiums have increased 50% in the past two years. That’s forced him to cut his employees’ healthcare benefits. Instead of paying 100% of his workers’ healthcare benefits, he now pays 85%.
Employers can adopt safety programs in the workplace to lower the number of claims and reduce their “mod” or risk rates.
But lowered risk rates haven’t lowered premiums, which baffles many employers.
What’s worse is premiums are expected to continue to go up. Legislation that went into effect at the beginning of the year increases workers benefits in the next few years.
Add high workers’ comp insurance to other business cost increases such as energy or liability insurance, and some businesses wind up with a double or even triple whammy.
“Companies look at the whole landscape of their costs and say: ‘This is it. This is the last straw,'” Rothrock said. “If they don’t see relief this year, you’ll see the fallout.”
Irvine-based Fidelity National Financial Inc. plans to move its headquarters and all workers based in Santa Barbara to Florida. It cited the state’s high cost of doing business,including workers’ comp,as part of the reason for the move.
The state’s workers’ comp system is riddled with problems, including fewer insurers, inefficient procedures, high numbers of fraudulent claims and a lack of limits on what healthcare providers can charge for treatments under the system.
Cambridge, Mass.-based Workers’ Compensation Research Institute found that the number of visits per claim in California was 40% to 100% higher than the rest of the nation. Workers in California seek treatment more frequently and for a longer period of time than most other states.
California also has one of the highest numbers of workers who use chiropractors and physical therapists. Chiropractic visits in California are 30% more expensive than most other states.
RAND, a Santa Monica-based research center, studied the state’s system and recently concluded that the appeals process is inefficient and ends up taking longer than needed.
About 200,000 of the 1 million workers’ comp claims filed annually end up before the appeals board.
Gov. Davis’ acknowledgement that the system is broken and his endorsement of a bill that includes a fee schedule for unregulated outpatient surgery centers, is a start, Bacchi said.
But it’s not enough. “If I had a magic wand and someone said fix the system, I’d probably start all over again,” Bacchi said.
