Study: Workers' Comp Bill Cuts Overall Costs, Hikes Total System Costs

TOPIC ALERT:

On Monday, the California Workers' Compensation Insurance Rating Bureau released a study finding that a newly released workers' compensation reform bill (SB 863) could produce savings of about $400 million, the Insurance Journal reports.

However, the study found that the savings would be outpaced by benefit increases included in the bill.

Details of Bill

The legislation -- by Sens. Kevin de León (D-Los Angeles) and Jose Solorio (D-Anaheim) -- officially was introduced on Monday (Insurance Journal, 8/27).

According to a 45-point summary of proposed language for the plan, the legislation would cut costs by:

  • Eliminating benefits for certain health conditions; and
  • Scaling back considerations of future earning capacity while setting benefits (California Healthline, 8/15).

Study Findings

The study estimated that the bill's increased permanent disability benefit provisions, which would be effective on injuries occurring on or after Jan. 1, 2014, would increase costs by $700 million in 2014.

When grouped with estimated savings, the legislation would increase total system costs by $300 million, according to the study.

A WCIRB spokesperson said that the group will provide more exact estimates if the bill is passed by lawmakers.

Reaction to Study

In a statement, Insurance Commissioner Dave Jones (D) said that the study indicates that the bill "has cost savings that significantly offset the costs of providing needed increases of permanent disability benefits for California's injured workers." However, he said, "I remain concerned about continued rising costs in the system ... particularly medical costs and the expenses to adjust workers' compensation claims."

Majorie Berte -- vice president of the American Insurance Association's Western region -- in a statement said, "Much work went into the bill's development. However, the expectation by proponents that savings would be twice the cost of benefit increases is now dashed" by the study (Insurance Journal, 8/27).

Nicole Mahrt Ganley -- a spokesperson for the Association of California Insurance Companies -- said, "We remain concerned that the savings will not materialize in a timely manner while we will be facing hard cost increases immediately."

In addition, Jesse Ceniceros -- president of the workers' compensation advocacy group VotersInjuredatWork.org -- criticized the bill in a release, saying the bill would "reduce injured workers' access to needed medical specialists, increase insurance company control of medical care and make it more difficult to challenge insurers' denials of needed medical care" (Johnson, Sacramento Business Journal, 8/27).

Broadcast Coverage

On Monday, Capital Public Radio's "KXJZ News" reported on additional criticism of SB 863 (Quinton, "KXJZ News," Capital Public Radio, 8/27).

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