Experts gather at USC to discuss California’s workers’ compensation crisis

While most experts agree that California’s $22 billion workers’ compensation system has reached a crisis point, consensus on how to fix the problems seemed more elusive at a gathering of government, labor and business leaders held last week at USC.

The conference, “Confronting Workers’ Compensation Issues in California,” was sponsored by USC Law, the Communications Institute, the RAND Corp. and the Commission on Heath and Safety and Workers’ Compensation. Dean Matthew Spitzer and USC law professors Catherine Fisk and Eric Talley were among the participants.

California’s workers’ compensation insurance rates are the highest in the country. Premiums in the state have nearly tripled since 2000 as costs have gone from $10 billion during the late 1990s to nearly $29 billion last year. The rising premiums have forced many businesses to reconsider whether they can afford to operate in the state.

The roots of the crisis are many. John Burton, a Rutgers University professor and an expert on workers’ compensation, noted that permanent partial disability costs in California have almost doubled since 1995 even though those costs have declined nationwide. Leslie Boden, an economics professor from Boston University, focused on the low rate of California workers who return to their place of employment after they are injured as compared to those in other states.

“A long-term system should be designed to reward employers who re-employ workers,” Burton said.

Other critics of the system said there needed to be stricter definitions of what constitutes a true disability.

“We need an objective standard for diagnosing disability,” said Patricia Salas Pineda, vice president of legal and human resources for New United Motor Manufacturing, a $2.5 billion automobile manufacturer.

But Tom Rankin, president of the California Labor Federation, said the burden of cutting costs should not land entirely on workers. Instead, he blamed the soaring premiums on the de-regulation of the insurance industry and rising medical costs.

Insurance Commissioner John Garamendi dismissed any plan to force insurance companies to lower their rates.

“All of the rate regulation isn’t going to change a thing as long as the costs are rising,” Garamendi said. “We’ve got to go after the cost drivers in this system while ensuring that employees get the best treatment when they’re injured without a lot of hassle.”

Participants in a panel of state legislators pledged to work together to reform the system. Lawmakers are under pressure from Gov. Arnold Schwarzenegger to come up with a reform package by March 1. But Republican state senator Charles Poochigian acknowledged the difficult task ahead, saying “the challenge is immense to find common ground.”

Presentations from the conference can be seen at http://www.communicationsinstitute.org.