By DAN REYNOLDS, managing editor of Risk & Insurance®
Top labor relations officials in California are gathering comments toward what could amount to another round of workers' compensation reform in that state.
The director of its Department of Public Relations, Christine Baker, and Rosa Moran, administrative director of the Division of Workers' Compensation, have been taking input on possible changes from injured workers, attorneys, medical providers, employers and other stakeholders.
Before the last major reform, in 2004, California employers were beset by medical costs per claim that exceeded $15,000. As of 2010, medical costs per claim had settled closer to $10,000.
But there is always tension between the need to adequately compensate injured workers and control employers' costs. There are now voices in the administration of California Gov. Jerry Brown expressing that workers who have suffered permanent injuries are not being adequately compensated.
"It seems perfectly clear to the participants in this system that the permanently disabled worker is not being adequately compensated," said Martin Morgenstern, secretary of the California Labor and Workforce Development Agency as quoted by the Los Angeles Times' Marc Lifsher in April.
"We have a serious problem, and it needs to be fixed, and fixing it isn't going to be cheap," he was quoted as saying.
With combined ratios in workers' compensation insurance already at frightening levels for insurers, it seems hard to imagine where fixes are going to come from without raising premiums, but a group of California-based employers thinks it has some good ideas.
A large group of employers, which includes Santa Barbara, Calif.-based Select Staffing, wrote a letter to Baker and Moran on April 27 suggesting some measures that could help control premiums. Staffing companies like Select take a keener interest in workers' compensation issues than most because such companies are typically charged high workers' compensation insurance premiums.
The medical provider networks created by the reforms, are being underused, for one, the letter writers said. The reforms of 2004 created medical provider networks that allowed employers to create a list of doctors the employers felt would give injured workers adequate treatment without overcharging.
"We are not seeing adequate utilization of the medical provider network," wrote attorneys representing the employer's coalition.
California's employers are also not substantially incentivized for returning injured employees back to work, the coalition said. The coalition said employers and other payers are also being victimized by injured workers' attorneys that pad claims with "phantom" add-ons like sexual dysfunction and sleep deprivation.
A.M. Best estimates that the combined ratio for workers' compensation insurers nationally will strike 120.5 this year. With medical cost increases continuing unabated for the most part, it looks like employers and their insurers in California are looking at even tougher times to come should the Brown administration place even more costs on them.
May 8, 2012
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