California Workers' Compensation Reform

 For over a decade, the California workers' compensation system has been notorious for being one of the most expensive and complex insurance systems in the nation. One of the primary drivers of the high cost of insurance in the state is the left-leaning legislature which vigorously protects employees' rights. This promotes a litigious environment in which attorneys and "ambulance chasers" pursue long-shot injuries and milk the workers' compensation system for increased damages and compensation.

However, in September, 2012, Governor Jerry Brown signed a new bill (SB 863) into law, overhauling the California's workers' comp system. The purpose of the bill was to increase workers' comp benefits for injured employees by generating savings through various changes to the workers' compensation system. Most of these changes will likely reduce the number of lawsuits filed over treatment and compensation.

Following months of private negotiations between employers and labor union representatives, the legislation received strong bipartisan support, passing the Assembly with a 66-4 vote, the Senate, 34-4.

The general thrust of SB 863 changes California's system for treating and compensating injured workers. Some key elements of the bill include:

· An increase of permanent disability benefits by $740 million, or an average increase of approximately 30 percent;

· It creates a $120 million program for workers injured who cannot go back to a job at their previous wage level;

· It provides cuts and dramatic reductions in medical costs and administrative procedures;

· It limits the circumstances where lawsuits can be filled against the employers and insurance companies.

The measure was praised by California businesses due to the prospect of easing a potentially large increase in workers' compensation insurance costs in the following year. While California is still facing double-digit increases, they are lower than previously predicted. The State Compensation Insurance Fund (SCIF) had stated it would reduce employers' premiums should the legislation be enacted.

California Workers' Compensation Reform

"These significant reforms save hundreds of millions of dollars for California's employers while preventing an imminent crisis of skyrocketing rates that would have hurt both injured workers and businesses," Brown said in a statement. "It's extraordinary to see Republicans and Democrats come together to solve a problem before it becomes a crisis."

The only opposition to the bill stemmed from lawyers who represent injured workers and some medical care and rehabilitation groups.

If you are interested in learning more about the impact of this legislation on California workers' compensation rates, policies and markets, please contact a qualified workers' compensation consulting firm before renewing your 2013 policy.

California Workers' Compensation Reform

Ari Rosenstein is the Director of Marketing at CPEhr, a human resource outsourcing firm, specializing in labor law compliance and PEO services. It currently services 15,000 employees and hundreds of clients nationwide.

CPEhr was founded in 1982 and assists small employers with the management of their employees and compliance with employment regulations. CPEhr provides a range of employment support services, such as the management of Human Resources administration, providing legislative compliance consulting, management training and recruiting services.