Calif. Commissioner Unveils Workers’ Comp Reform Legislative Package

California Insurance Comm-issioner John Garamendi unveiled his new workers’ compensation reform package Feb. 10. His proposal aims to bridge the gap between labor and business interests and provide a solid framework for Democrats and Republicans to address the system’s serious problems.

The comprehensive reform package will require employers to deliver immediate benefits for injured workers, allowing the employer additional time—up to one year—to dispute claims. The reforms will change the system to encourage employees and employers to work toward returning injured workers to the job faster. The package will create an independent medical examiner (IME) to resolve disputes over treatment in permanent partial and total disability cases. The proposed reforms will also ferret out fraudulent actors in the workers’ comp system by increasing fraud
penalties.

Other highlights of the commissioner’s plan were revealed in a press release:

Through the utilization of effective and efficient medical treatment require physicians to use the descriptions and procedures of AMA guidelines; Collect medical billing data to identify medical billing and treatment abuse by providers; Address the irrational penalty structure on refused or delayed benefits; Regulate minimum loss cost insurance rates to stabilize the market and pass through reform savings to policyholders; and Establish a pilot program for qualifying carve-outs to integrate health and disability benefit delivery.

The package also aims to add two additional voting members to the State Compensation Insurance Fund Board and clarify the Insurance Commissioner’s authority over State Fund.

“We think it’s a welcome addition to the debate,” IBA West General Counsel Steve Young said. “There are a couple of aspects that are extremely positive from an agents’ perspective. He has not included the elimination of State Fund commissions or other caps on commissions paid by other insurance companies, which is part of labor’s plan. AFL-CIO is hocking a plan that has those elements in it. We have called out an action alert on our members for this AFL-CIO proposal. The initial reaction is probably the most vocal and angry result that we’ve ever seen in our membership.”

According to the commissioner, the reforms that labor interests are advocating will need to be addressed by the Legislature in the future.

Young pointed out that brokers are an integral part of the workers’ comp system, providing evaluation and risk management services in the workplace. They can help employees always keep safety foremost in mind, according to Young. “Agents and brokers are the best advocates in the workers’ comp markets.”

Garamendi’s proposal comes as the Legislature is considering Governor Schwarzenegger’s workers’ comp package. The governor’s reform package, which will save an estimated $11 billion, is being carried in the senate by Sen. Charles Poochigian (R-Fresno). Poochigian, in a special to the Sacramento Bee, explained that the governor’s proposal “would mandate objective medical findings based on nationally recognized medical treatment and disability evaluation standards.”

Jeffrey J. Fuller, executive vice president and general counsel for the Association of California Insurance Companies, generally agreed with the governor’s reform package. “Insurers are not the problem,” Fuller stated in a press release issued Feb. 11. “Simple economics demonstrate that the high-cost factors within the system lie elsewhere.”

IBA West supports the governor’s bill as well, but Young conceded “the governor’s plan has very little support among Democrats. The commissioner’s plans represent middle ground.”

Garamendi views his own proposal as a viable alternative that Democrats may prefer. In a conference call to the media, Garamendi said Democrats will like the comprehensive nature of his proposal. He added that his reforms guarantee quality medical care for injured workers and provide immediate benefits—such as temporary disability—to the truly injured worker.

The commissioner is urging state legislators to take immediate action on his proposal in an effort to end the current political stalemate. Garamendi’s proposal was heard by the Assembly Insurance Committee Feb. 11. It is not in bill form, but he says there is an interest by several legislators to adopt the proposal as is or perhaps with some changes and running it as a bill. Garamendi gave the Legislature a deadline of April 1 so that savings will go into effect as early as July of this year.

Garamendi hopes to avoid the expensive November ballot initiative Schwarzenegger is threatening to pursue. That initiative will delay workers’ comp savings until July 2005. Corrections: An article in the Jan. 26 issue incorrectly said Property Casualty Insurers Association of America (PCI) carriers write $154 million in annual premium. PCI carriers write $154 billion in annual premium.