California Overhauls Workers’ Compensation

Governor Jerry Brown signed legislation Tuesday (September 18) aimed at tackling rising insurance premiums paid by businesses in California’s workers’ compensation program.

The new law, passed by the legislature last month with a wide majority, is expected to reduce costs to employers while increasing payouts to some workers injured on the job. Such improvements would be paid for by savings from reduced litigation, which the governor calls “waste” in the system.

“These significant reforms save hundreds of millions of dollars for California’s employers while preventing an imminent crisis of skyrocketing rates that would have hurt both injured workers and businesses,” Brown said in a statement.

The cost of workers’ compensation insurance in California skyrocketed in the past two years, rising from $14.8 billion to $19 billion, according to Brown’s office. And those costs were expected to continue growing. Under the new law, businesses could save a total of $1 billion next year.

The state, as an employer, anticipates saving $40 million each year and local governments are on track to have their premiums shrink by about $170 million.

Meanwhile, the law will boost payouts by 30 percent to workers who suffer permanent injuries on the job, while shortening the wait for approval of medical treatment from two years to three months. As the Associated Press notes, unions were concerned about benefits that had shrunken unexpectedly under changes enacted in 2004 under Governor Arnold Schwarzenegger.

A study by the UC Berkeley Survey Research Center found that permanent disability benefits have fallen to an average of $12,000 per injured worker from $25,000 in 2004, the Los Angeles Times reported last month.

The new law seems to have assuaged those worries, gaining the support of several labor groups. It sets up a binding arbitration process to resolve compensation disputes that can lead to costly court battles. It also ends coverage for insomnia, sexual dysfunction or mental health issues, unless they are directly related to a workplace injury. Such claims most commonly lead to litigation.

California attorneys were among the few groups who opposed the overhaul, arguing it would ultimately result in lower payouts to injured workers.

Some 527,000 workplace injuries were reported in California in 2011. That included 174,000 resulting in temporary or permanent disability or death, AP reports.