Dan Walters: Workers' Compensation War Poised for Blowup

Story Courtesy of the Sacramento Bee
Published Monday, Aug. 23, 2010

Workers' compensation is the multibillion-dollar system that is supposed to treat and support Californians who suffer job-related injuries and illnesses as the legal alternative to disabled employees suing their bosses.

It's also a perennial political issue in the Capitol because the system's all-important rules on who gets what are set by legislation and administrative decree.

The rules have immense effects on workers' benefits, employers' costs, insurers' profits and the incomes of workers' comp lawyers and medical care and rehabilitation providers.

As a perennial political issue with high-dollar impacts, it supports a clutch of lobbyists who specialize in representing the myriad stakeholders in the system. And the axiom among those lobbyists is that something big happens in workers' comp about once a decade.

The axiom's underlying theory is that when some big change in rules occurs, it takes about a half-decade for the system to adjust and winners and losers to emerge, and another half-decade for one faction or a coalition of factions to assemble enough political clout to make another big change.

By that schedule, the politics of workers' comp are getting close to another big eruption. And, therefore, it's a subliminal issue in this year's elections, especially those for governor and insurance commissioner.

As one of his earliest gubernatorial acts in 2004, Arnold Schwarzenegger, wielding a proposed ballot measure as a weapon, muscled the Legislature into passing a huge overhaul of workers' comp.

With employers complaining about escalating costs, the Legislature tightened up eligibility for direct benefits and imposed cost controls on medical treatment. In subsequent rule-making, the Schwarzenegger administration went even further.
Employers rejoiced as their insurance premiums dropped by at least $15 billion a year, but those adversely affected – labor unions, lawyers and medical providers – chafed and have been campaigning for years to roll back the changes. More recently, insurers have joined the complainers' chorus, saying that ever-higher medical costs were making workers' comp coverage unprofitable.

Schwarzenegger and Insurance Commissioner Steve Poizner have steadfastly opposed insurers' pleas for big premium hikes. As both prepare to leave office in a few months, however, the Workers' Compensation Insurance Rating Bureau is proposing a nearly 30 percent increase in premiums.
Since the governor and Poizner are resisting – Schwarzenegger said it "raises grave concerns about the impact an increase in premiums will have on businesses in California" – the issue will land on the next governor and the next insurance commissioner.

Beginning next year, therefore, the perennial war over workers' comp will heat up again – right on the schedule that veterans of the war have come to expect.