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Boost permanent disability benefits but cut costs: Calif. employers, insurers


SACRAMENTO, Calif.—Revamping California's workers compensation system likely will land on the state's legislative agenda this year as cost pressures mount and labor advocates seek increases in permanent disability benefits, speakers told a legislative hearing.

Wednesday's lengthy hearing before California's Senate Labor and Industrial Relations Committee and the Assembly Insurance Committee was called to hear how the state's workers comp system has faired since landmark reforms were signed into law in 2004.

Those reforms reduced costs, but worker advocates and attorneys have complained that permanent disability compensation was unfairly slashed by more than 50%.

Now insurers and employers are calling for cost-saving reforms to offset any increases in disability ratings.

“In 2012, legislators may consider a comprehensive measure that will provide increases to the permanent disability ratings,” said Mark Sektnan, president of the Sacramento-based Assn. of California Insurance Cos. “It is vital that increases in permanent disability ratings are offset by cost-saving reforms in the system,” which he said is important to workers with the most severe injuries as well as insurers and self-insured employers.

Reducing disputes over medical treatments could reduce costs, testified Sean McNally, vp of corporate and government affairs, human resources for self-insured Grimmway Farms in Bakersfield, Calif.

“Whatever we do, and we do need to do something,” Mr. McNally said, “I am very optimistic that labor and employers and management can come to an agreement on how we can enhance some of the permanent disability benefits that were removed from the system and, at the same time, find corresponding cost savings…We can't increase the cost of doing business on California business right now.”

Gov. Jerry Brown also has called for balancing increased benefits with cost-controlling reforms, but deciding which costs to cut and by how much will be a challenging and politically fraught task, speakers said.

Meanwhile, workers comp loss costs in California have increased 25% since 2006 while premiums have remained relatively flat, Insurance Commissioner Dave Jones told lawmakers.

Increased medical utilization is among significant drivers of those costs, he said.

“A number of stakeholders…have suggested that the workers compensation market overall is hardening and that workers compensation premiums will continue to increase and that coverage may be more challenging to find in the future,” the commissioner said. “A review of recent loss cost data indicates that these concerns are not unfounded.”

But positive factors are “mitigating against dramatic rate increases,” the commissioner said, noting that the market no longer is dominated by California-only, monoline insurers as was the case a decade ago.

“Workers compensation coverage today is being delivered primarily by multistate, multiline carriers,” the commissioner said. “This diversification supports a more stable market.”

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