Passage of California workers comp reform bill could lead to reduced rates

The California State Compensation Insurance Fund says it plans to seek a 5% to 7% reduction in its workers compensation rates if California legislators pass a workers comp reform bill this week.

In a letter to state lawmakers Tuesday, San Francisco-based SCIF said it estimated that S.B. 863 would cut California's annual comp costs by $543 million, allowing the insurer to lower its rates.

“We believe this legislation in its current form would have an immediate and positive impact on the system,” the letter reads.

SCIF's preliminary review of S.B. 863 showed that the legislation would add $600 million in total permanent disability benefits.

However, it said a provision to charge fees for lien filings would cut costs by $600 million, based on fee revenue and reduced legal and administrative costs.

Proponents of the bill contend that the lien fee would reduce the number of liens filed for medical payments and other workers comp-related services.

SCIF also found that the bill's proposed independent medical review process would reduce costs by $152 million. A limit on fees for services performed by ambulatory surgical centers would net $153 million in reduced costs, the insurer said.

Early analysis of S.B. 863 by the California Workers' Compensation Insurance Rating Bureau showed that the bill could increase California comp costs by $300 million though 2014. That estimate was based primarily on increased permanent disability benefits and higher claim frequency in 2014.

But on Tuesday, San Francisco-based WCIRB estimated that an updated version of the bill would result in a total annual cost reduction of $880 million for 2013 and $270 million for 2014.

WCIRB said the new estimate was based in part on an eliminated proposal that would have required permanent disability benefits to be paid at the same higher rate as temporary disability benefits.

The bureau noted that it will not be able to fully estimate the impact of S.B. 863 unless the legislation is passed.