The Capitol’s perennial jousting over workers’ compensation has been jolted by Gov. Gavin Newsom’s order extending eligibility for benefits to all workers deemed to be essential who are infected with coronavirus.
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The cloistered community of political lobbyists who specialize in the massive, but otherwise obscure, system of compensating workers for job-related illnesses and injuries had been preparing for one of their periodic clashes.
And then Gavin Newsom interceded.
About once a decade, those with stakes in the nearly $20 billion a year workers’ compensation system do battle over the rules governing both eligibility for benefits – medical care and cash support – and their scope.
There are five major interest groups – employers, insurers, labor unions, medical providers and lawyers who specialize in compensation claims – and typically, three will make a deal to financially benefit themselves and gang up on the other two to persuade legislators and governors to ratify the deal.
It last occurred eight years ago, when former Gov. Jerry Brown signed an agreement between employers and unions, with insurers implicitly supportive, to curb medical costs and use the savings to increase cash payments to disabled workers.
It worked as the deal’s sponsors hoped. In fact, it was something of a financial windfall to employers because savings more than offset cash benefit costs. Employers’ insurance costs declined, although they remained the nation’s second highest as a percentage of payrolls, according to surveys by Oregon’s Department of Consumer and Business Services that are widely accepted as authoritative.
With those effects, a new decennial clash appeared to be brewing, possibly pitting a union-medical-lawyer coalition against employers and insurers – but the politics of workers’ compensation suddenly changed last week. Newsom declared that at least temporarily, workers deemed to be doing critical work during the COVID-19 pandemic and becoming infected would be presumptively eligible for workers’ compensation without having to prove that it occurred on the job.
“This is a way of providing support to our critical workers that are essential in our capacity not only to meet the needs of people today, but as we begin to enter into this new phase and start to reopen our economy,” Newsom said.
Unions had been pushing Newsom for weeks to act, while business and employer groups countered that it would sharply increase their costs, make it more difficult to resume operations and thus worsen an already serious economic recession.
The latter cited a study by the Workers’ Compensation Insurance Rating Bureau about the heavy costs of a presumptive eligibility order, saying, “the annual cost of COVID-19 claims on ECI (essential) workers under a conclusive presumption ranges from $2.2 billion to $33.6 billion with an approximate mid-range estimate of $11.2 billion, or 61% of the annual estimated cost of the total workers’ compensation system prior to the impact of the pandemic.”
The study dealt with a “conclusive presumption” while Newsom’s order provides a “rebuttable presumption” that employers could, at least theoretically, dispute. But in practice it’s not likely to appreciably alter the order’s effect.
The decree is retroactive to March 19 and will, unless extended, expire in two months. If just temporary, its cost impact on employers might not be as heavy as they fear, but unions will be pressing Newsom to keep it in place indefinitely.
In the short run, political conflict over workers’ compensation will probably focus on the parameters and longevity of Newsom’s action. It likely will bleed over into another pending issue: whether businesses that continued to operate after being deemed essential during the pandemic should receive a blanket immunity from personal injury lawsuits.
However, the larger, ongoing workers’ compensation issues will still be there and whenever the pandemic fades, the perpetual battle over them will once again be joined.