New workers’ compensation battle on horizon

About once a decade – or to put it another way, about once in each governor’s reign – powerful interest groups wage political war over the state’s system of compensating workers for job-related illnesses and injuries.

The conflicts are driven by the system’s immense financial footprint. Employers and/or their insurers pay out more than $20 billion a year to replace lost wages and provide medical care for disabled workers under rules written by the Legislature.

There are five major workers’ compensation interests – employers, labor unions, insurers, medical care providers and lawyers who specialize in disability cases – and the political pattern for decades has been brutally simple. Two or three of the interest groups, dubbed “stakeholders” in political parlance, agree to change the rules in some way advantageous to themselves, and then push it through the process.

It’s always called “reform,” but it usually costs interests on the losing side of the decennial battle lots of money.

Since the system is inherently very complex, it takes a few years for the latest “reform” to be fully implemented and its effects, intended or otherwise, to become apparent and then a few years more for alliances to develop for the next clash.

The last time it happened was in 2012, early in Jerry Brown’s second governorship. Employers and labor unions agreed to increase cash benefits to disabled workers and pay for them by imposing new cost controls on medical care and rehabilitation costs. With insurers neutral, the deal sailed through, even though attorneys who represent injured workers and, of course, medical providers despised it.

From the employers’ standpoint, it was a roaring success. Medical savings more than paid for the cash benefit increase and insurance premiums dropped sharply, from nearly $3 per $100 of payroll to $2.33 in 2018, according to the California Workers’ Compensation Insurance Rating Bureau.

It also dropped California from having the nation’s highest costs to No. 2 behind New York, according to a biennial survey by Oregon’s Department of Consumer and Business Services, the widely accepted authority.

The reduction in medical costs was so successful, in fact, that union leaders began complaining that they didn’t fare as well as employers and there have been hints that labor may form a new alliance with medical providers and attorneys for the next round. Critics of the 2012 deal, including unions that agreed to it, have complained that disabled workers are being denied vital care by the tighter treatment controls.

With the passage of time and a new governor in office, the next decennial battle may be on the horizon. It won’t happen this year but with 2020 an election year, that could be the moment. Several bills kicking around the Capitol this year are viewed in the insular community of workers’ compensation lobbyists as stalking horses for the larger conflict and hints to a potential new alliance.

One, Senate Bill 537, backed by some medical and union groups, would put a floor under medical fees. Another, Assembly Bill 1107, would make it easier to challenge medical care decisions for injured workers, supported by a union-lawyer coalition and opposed by employers. A third, Senate Bill 542, would create a legal presumption that police officers and firefighters who are diagnosed with mental illness are entitled to workers’ compensation benefits.

The only certainties are that there will be another battle in the decades-long war and that the outcome, whatever it may be, will have multi-billion-dollar consequences.