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August 17, 2011 -- Press Release

Bill expanding workers' compensation benefits will cost employers $210 million; cause delays in injured worker recovery

Millions in increased annual costs for deficit-plagued state

SACRAMENTO, Calif. - California businesses, schools, local governments and the State of California will pay an additional $210 million annually for workers' compensation temporary disability (TD) benefits under Assembly Bill 947 (Solorio - Santa Ana), according to a legislative analysis distributed today by the Workers' Compensation Action Network.

The analysis was published by the Senate Appropriations Committee based on work conducted by staff to the Commission on Health and Safety and Workers' Compensation (CHSWC). The analysis estimates that AB 947 will increase TD benefits per claim by as much as $137,000. In the aggregate, the bill would increase TD benefits by 9.5 percent and cost private employers approximately $167 million, local public agencies more than $31 million and the State of California $8 million annually. Based on the fiscal impact to the state, the Department of Finance opposed AB 947 on Monday and the committee placed the bill on its suspense file for a future vote.

"AB 947 adds huge new payroll costs for private and public employers in California, at the same time our 12 percent unemployment rate remains among the highest in the nation and government is struggling to protect public services," said Thomas Vu, policy advocate for the California Chamber of Commerce. "Workers' compensation costs per claim have increased by 60 percent in recent years, driven partly by growth in TD benefit payments. Workers' compensation claims already take longer to resolve in California and our system is more expensive than other states, a problem that will grow worse under this bill."

Current law limits TD payments to 104 weeks within five years of a workplace injury, subject to certain specific exemptions such as amputations, severe burns, eye injuries, hepatitis B and C and other injuries expected to require longer recoveries. AB 947 would allow for TD benefits up to 240 weeks "as required by the primary treating physician" to complete medical treatment past 104 weeks and become permanent and stationary. Once injured workers' reach this status, a determination for payment of permanent disability benefits can be made.

"AB 947 takes the wrong approach to improving the claims process and poses a serious threat to school district budgets in California. The bill's vague language creates opportunities for abuse and creates financial incentive for physicians to provide medical treatment as long as possible," said Martin Brady, executive director of Schools Insurance Authority and board chair for California Coalition on Workers' Compensation. "Injured workers should not be prevented from either being cleared to return to work or gaining access to permanent disability benefits simply because doctors are able to provide treatment for more than four years. Longer claims drive costs for employers, increase litigation and impede return to work."

TD benefits are paid at two-thirds of an injured workers' average weekly wage on a tax free basis. Because the benefit increases with the State Average Weekly Wage, the maximum TD rate increased from $490 to $1,010.50 between 2002 and 2012, representing a more than 106% increase in this wage replacement benefit for injured workers. In addition to an increase in the maximum benefit, the length of average TD payments increased by one week between 2007 and 2008, according to the Workers' Compensation Research Institute. WCRI research also that the average length of TD claims is longer than most other states used as peers for study purposes and 47 percent higher than the 12-state median.

The full committee analysis is available here.

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"California approved Gov. Schwarzenegger's reform of workers' compensation in 2004. This successfully reined in uncontrolled insurance costs that hurt not only businesses, but also school districts and nonprofits. Interest groups now are quietly working to roll back these reforms and should not be allowed to succeed."

- San Francisco Examiner, "Five easy ways to boost economy"