As we reported last month, the California Legislature enacted a sweeping overhaul of the state’s 91-year-old system for compensating workers injured on the job—and Gov. Schwarzenegger quickly signed the workers’ compensation legislation, S.B. 899, which took effect immediately. Employers should soon see savings from the new reforms. The Workers’ Compensation Insurance Rating Bureau has proposed a 2.9 percent reduction in the pure premium rate in its rate filing for July 1, 2004. And even bigger rate cuts could be on the way.
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Key Features
The main provisions of the new law are designed to reduce workers’ comp costs by changing the way an employee injury is determined and treated and the amount of disability assigned to that injury. The new law does the following:
- Makes the process for determining impairment less subjective by requiring doctors to follow the American Medical Association’s impairment evaluation standards.
- Permits employers to create their own HMO-style networks of medical providers to treat injured employees.
- Ensures that treatment of workplace injuries follows nationally recognized guidelines rather than a case-by-case approach.
- Repeals the existing presumption of correctness given to the opinion of an employee’s own physician concerning the scope and method of treatment.
- Limits temporary disability benefits for most injuries to two years.
- Closes a loophole that enabled some injured employees to collect multiple disability awards in excess of 100 percent of disability.
- Makes employers responsible only for that portion of an injured employee’s disability caused by his or her existing job.
- Enhances benefits for employees with the most severe permanent disabilities while reducing benefits for minor permanent injuries.
- Increases permanent disability payments by 15 percent when re-instatement isn’t offered or possible while reducing benefits by 15 percent when employees receive reinstatement offers.
No Rate Regulation
The new reform measure doesn’t regulate workers’ comp rates, a provision Democrats in the Legislature had sought. Instead, it was expected that workers’ comp insurance premiums would fall as the bill’s cost containment provisions begin to reduce the number and cost of questionable disability awards. The suggested 2.9 percent pure premium rate decrease for July is one indicator that this will likely occur soon. In the meantime, the Legislature continues to debate a variety of proposals to regulate workers’ comp insurance rates, most of which have stalled since S.B. 899’s enactment.
Compliance Strategies
According to workers’ comp claims consultant Cathy Divodi, president of Santa Rosa-based Artemis Claims Consulting, employers are still coming to terms with the new law’s enormous scope. She says the law’s immediate impact will be felt by workers’ comp claims adjustors, who must master the new provisions while continuing to handle claims filed under the old system.
Juggling two sets of standards with differing disability definitions and benefit levels could bog down an already overloaded claim handling system. And there’s a greater chance for errors and for claims to be overlooked. Thus, Divodi advises, pay close attention to how your insurer handles your workers’ comp claims if you’re not already doing so.
What’s more, because the new law makes you liable only for the portion of an employee’s disability that can be tied to their current job, it’s important to keep an eye on recordkeeping relating to employee injuries, including dates of injury and of workplace absences. Plus, evaluating the physical abilities and limitations of applicants and employees can help you determine how much an employee’s injury is actually work related. Consider obtaining a baseline through a physical fitness or agility testing procedure that complies with state and federal laws, including the Americans with Disabilities Act.
Finally, keep in mind that as workers’ comp premiums decline as anticipated, you’ll be better positioned to get a good deal if your workplace safety practices are under control.