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California lawmakers approved a massive workers compensation reform package Friday that advocates say will boost benefits for injured workers while helping California employers to cope with rising comp rates for 2013.
S.B. 863 passed after a 72-5 vote in the state Assembly and a 34-4 vote in the state Senate. The bill, introduced late last month by State Sen. Kevin De León, resulted from months of deliberations between labor and employer groups.
“The parties have been working on this since April, so this is a well thought-out proposal,” said Mark Sektnan, president of the Sacramento-based Association of California Insurance Cos., regarding an early draft of the bill.
Provisions of S.B. 863 include an independent review process for medical treatment and billing disputes, fee schedules for home health care, language interpretation and other comp-related services, and fees for current and future lien filings.
Supporters of the bill contend that the lien fees would reduce the number of liens filed for medical payments and other workers comp-related services.
Another amendment would eliminate impairment ratings for sleep dysfunction, sexual dysfunction or psychiatric disorders caused by compensable injuries.
Backers of the legislation have said it will increase total disability benefits for injured workers by $740 million.
California Gov. Jerry Brown lauded the bill's passage in a statement last week.
“I commend the Legislature for an extraordinary workers' compensation reform bill that helps injured workers and averts an imminent crisis of skyrocketing rates,” his statement said.
In a statement Saturday, the American Insurance Association said it's unclear whether S.B. 863 will provide significant savings for employers and insurers.
“While much work went into the bill, much work remains to be done," said Marjorie Berte, AIA's western region vp. "Reduction of system costs by 1.4% can be seen as a good start, further savings must be found. Meaningful reforms that will lead to meaningful reductions in system costs are required."
California's workers comp reform debate centered on the threat of rising comp costs for employers and insurers in the state.
California's Workers Compensation Insurance Rating Bureau said last month that it would seek a 12.6% increase in average pure premium rates for new and renewing workers comp policies in 2013. The San Francisco-based bureau said that it was willing to revise its rate filing if S.B. 863 passed.
Meanwhile, medical, indemnity and administrative expenses for California workers comp insurers reached nearly $12.5 billion in 2011, according to the California Workers' Compensation Institute. That's compared with $11.2 billion in 2010.
Estimates on the potential impact of S.B. 863 varied as the deadline to vote on the bill approached last week.
The California State Compensation Insurance Fund estimated that S.B. 863 would cut California's annual comp costs by $543 million. That number was based on $600 million in increased permanent disability benefits, and large discounts resulting from lien fees, independent medical reviews and other bill provisions.
SCIF said it would seek a 5% to 7% reduction in its workers comp rates if S.B. 863 passed.
WCIRB initially projected that S.B. 863 could increase California comp costs by $300 million though 2014. However, a later analysis by the bureau said the bill would result in a total annual cost reduction of $880 million for 2013 and $270 million for 2014.
The new estimate was based in part on an eliminated bill proposal that would have required permanent disability benefits to be paid at the same higher rate as temporary disability benefits.
Mitch Seaman, legislative advocate for the California Labor Federation, said the proposed benefit increase in S.B. 863 is intended to replenish some benefits that were cut by S.B. 899, a comp reform bill passed in 2004.
There was a sense of urgency surrounding S.B. 863, because the hardening workers comp market could make employers reluctant to agree to future benefit increases, Mr. Seaman said.
“The discussion will change dramatically the longer we let costs increase the way they have been,” he said.
Despite backing from employers and some labor unions, the legislation faced opposition from groups such as the California Applicants' Attorneys Association.
In statements last week, the attorneys group railed against several provisions of the bill. For instance, it protested an amendment that would prevent diminished future wage earning capacity from being included in an injured worker's benefit calculations.
"The measure contains provisions that make it extremely difficult for many injured workers to qualify for the disability ratings needed to access the increased compensation," the association said.
AIA's Ms. Berte said conflicting opinions between California comp stakeholders were one of the main obstacles to getting S.B. 863 passed.
“It's been a very intense and yet spirited debate where all parties are really trying to ensure that their assets are covered,” Ms. Berte said.
Members of California Self-Insurers Association generally supported the bill, Executive Director Phil Millhollon said last week.
In particular, members want comp reforms that would provide a “fair” delivery of disability benefits while limiting comp costs for employers.
“There are just too many opportunities to get more benefits than what an individual may be entitled to,” Mr. Millhollon said. “It leads to unfair expectations by other injured workers that, 'I, too, am entitled to extra money,' and that's not how the system should be.”
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.