DAVIS PROPOSES WORKERS' COMP FIX.

Byline: Troy Anderson Staff Writer

Promising to solve the state's workers' compensation crisis, Gov. Gray Davis proposed legislation Thursday that would rein in excessive insurance premiums and out-of-control medical and litigation costs as well as crack down on fraud.

The soaring cost of workers' compensation has been blamed for driving businesses and jobs out of California and driving up the cost of government, with Los Angeles County and local cities within the county spending $1 billion this year.

``The workers' compensation system is heading toward a train wreck,'' the governor said during a Sacramento press conference with state Insurance Commissioner John Garamendi. ``Reforms are essential to keep small businesses alive and provide the care workers need.

``Without these reforms, the kind of doubling and tripling of workers' compensation premiums we experienced this year will become the norm,'' Davis said. ``This package of bills will stem the bleeding, stop the skyrocketing increase in premiums and bring stability to the system.''

Questions were immediately raised by Assemblyman Keith Richman, R- Granada Hills, who has fought to reform workers' compensation for several years, about whether Davis' proposal would curb soaring costs.

``I think there needs to be much more extensive reforms in order to control health care costs, reduce litigation, improve efficiency and reduce fraud,'' Richman said. ``Much more needs to be done.

``I hear from businesses every day that are closing their doors or moving out of California. Just on Saturday, I had a town-hall meeting in Granada Hills and a businessman told me (that) the day before he had closed his doors because of workers' compensation costs.''

Last year, Davis signed Assembly Bill 749, raising the temporary workers' compensation disability check Jan. 1 from a maximum of $490 to $602 a week. The maximum benefit will jump to $728 in 2004 and hit $840 in 2005.

The bill increased employers' cost for workers' compensation insurance by 23 percent, in addition to a 77 percent increase over the previous three years, Richman said.

The total premiums paid by businesses have risen from $5.7 billion in 1995 to $15.5 billion today - and could hit $20 billion by Dec. 31. Many businesses are paying 20 percent to 40 percent more in premiums than they did a year ago, and some in Los Angeles County have seen increases of up to 400 percent.

Meanwhile, costs have almost doubled since 1996-97 for Los Angeles city and county, the Metropolitan Transportation Authority, the Los Angeles Unified School District and other agencies, jumping from about $400 million to nearly $700 million this year.

More than 10 percent of the Los Angeles police force is drawing disability pay at any one time.

Davis said the proposals would reduce the premiums that businesses pay by $1.5 billion.

``We have two goals,'' Davis said. ``One is to improve health care for injured workers. The second is to make premiums supportable for small businesses up and down the state.''

Garamendi said the package includes bills to contain fraud, medical and insurance company costs as well as bills to deal with the way injured workers are treated by doctors.

Garamendi said a proposed independent medical review program would reduce overcharging while making sure workers get the care they need.

``It's absolutely critical these bills move immediately,'' Garamendi said. ``We are on the right path. The governor has put his shoulder to the wheel and is pushing to get this problem solved.''

If the bills are far enough along by July 1, a proposed 10 percent increase in premiums might be avoided, Garamendi said.

Los Angeles Area Chamber of Commerce President Rusty Hammer said businesses have supported many of the bills Davis and Garamendi discussed.

``But it doesn't go far enough,'' Hammer said. ``We called on him (Davis) to call a special session of the Legislature so these bills can be passed through a special session and go into effect immediately.

``Businesses in California are suffocating under these onerous workers' compensation increases,'' he said. ``We have to do something about them soon. We need leadership.''

In addition to announcing new reforms to modernize the state's 90- year-old workers' compensation system, Davis and Garamendi are working with legislators on already-introduced bills aimed at easing employer costs.

Among the reforms is Senate Bill 228 by Sen. Richard Alarcon, D-Van Nuys, which requires the development of a fee schedule for unregulated outpatient surgery centers, one of the major cost drivers in the workers' compensation system. Fee schedules already exist for doctor and hospital costs; a fee schedule is under development for prescription drugs.

At the request of Davis and Garamendi, Alarcon has incorporated provisions in his bill to help preserve access to health care services. Alarcon also added a proposal that would reduce the current 90-day time frame in which an insurer can accept or reject injured workers' benefit claims.

Alarcon said strong legislation is needed to change regulations governing the insurance industry.

``The insurance companies have the primary responsibility to reduce rates,'' Alarcon said. ``Without addressing this issue we cannot guarantee cost reduction. We need to confront this problem head-on if we are to give California's businessmen and -women real relief from skyrocketing workers' compensation insurance premiums and get our state's economy back on track.''