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California's workers compensation system still faces several administrative problems, including a continuing controversy about how much of a $3.5 billion drop in employer costs is due to reforms, a new study finds.

Representatives of employers and workers hold "widely divergent views on the amount of cost savings and the percentage of savings attributable to the 1993 reforms," according to the study by the Workers Compensation Research Institute in Cambridge, Mass.

Labor representatives contend that many of the reforms, particularly the limitations placed on vocational rehabilitation benefits, have been harmful to workers.

Labor groups are calling for more benefit increases beyond those hikes in weekly maximum benefits for temporary total and permanent partial disability benefits that already have been approved.

For example, under the 1993 reforms, the maximum weekly temporary total disability benefit rose 46% to $490 from $336, phased in from 1994 to 1996. At $490, the TTD maximum represented 85% of the state average weekly wage, up from 63% at the $336 rate.

Those increases still are low compared with other states, according to the WCRI study. At the start of this year, 35 states had higher maximum TTD benefits calculated as a percentage of the state average weekly wage.

Additional increases workers seek would be "in keeping with the negotiated agreement in 1993 that one-half of the cost savings associated with the reforms be given to workers through higher benefits," the WCRI said in a research brief summarizing the 145-page study report.

Business interests, however, say it is difficult to isolate the effects of reforms, which included stricter standards on psychiatric and post-termination claims, limits on medical-legal evaluations and caps on vocational rehabilitation benefits. Other market forces also played a role, including deregulation of workers comp rates at the start of 1995 (BI, Aug. 5, 1996) and a severe recession from 1991 to 1994 that reduced employment and workers comp premiums.

Apart from the debate over reform savings, several major findings of the WCRI study underscored the need for administrative improvements:

The high frequency of permanent partial disability payments and inconsistency in determining outcomes suggests a need for policymakers to address these issues.

The structure of California's workers comp system "is cumbersome and complicated and presents distinct administrative challenges."

The system faces unusual challenges, including large claims volume and cost, as well as regional differences.

Some system participants question the administration's decisions in allocating resources, including staffing as well as office closings.

California lacks the ability to measure overall system performance. This makes it difficult for the policymakers to evaluate the impact of workers comp reforms and to target future efforts for improvement.

The study is the fourth on California in the past five years by the WCRI, a non-partisan, non-profit public policy research organization funded by employers, insurers, state government and labor organizations.

Copies of "Revisiting Workers' Compensation in California: Administrative Inventory" are free for members of the Workers Compensation Research Institute and cost $29 for non-members. Copies must be requested in writing from the WCRI, 101 Main St., Cambridge, Mass. 02142; fax: 617-494-5240.