Healing workers' comp: a primer on what the reforms mean for businesses.

California's weathered workers' compensation system has been a top issue for California employers in recent years. The state has seen some of the highest workers' comp premiums in the nation--costs that have skyrocketed 136 percent on average in just the past four years. Employers have cited the high cost of workers' comp insurance as a major reason for stagnating job growth and moving operations out of California.

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When Gov. Schwarzenegger took office, workers' comp reform was a key part of his agenda. Bringing together employers and labor. Democrats and Republicans, a deal was reached--Senate Bill 899--that purports to bring employers some relief, while ensuring that California's severely injured workers receive the benefits they deserve.

While it's still too early to say how much money will be saved--and how far workers' comp premiums will fall--estimates from lawmakers have indicated the overhaul could trim $4 billion to $6 billion from the nearly $18 billion system by imposing stricter limits on medical benefits, setting a higher standard of proof for workers claiming to be injured, and requiring employees to use doctors approved by their employers and their insurance companies.

The bill addresses such issues as rising medical and disability costs, subjective standards and excessive litigation, all of which have contributed to increased workers' comp costs.

With some exceptions, the changes affect all pending claims, but do not require revising or reopening any past decisions.

INSIDE SB 899

Reforms contained in SB 899 will change the system for determining the level of injury and amount of disability assigned to that injury.

Key points include:

Reporting

* Requires that disability reports be based on the standards from the American Medical Association Guides to the Evaluation of Permanent Impairment, 5th Edition and that the disability schedule be objective and consistent.

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* Requires an employer/insurer to authorize medical treatment within one day of receiving an occupational injury claim, even though the claim may be delayed for up to 90 days for investigation. Limits liability for pre-acceptance medical treatment at $10,000.

* Requires that the causes of an injury or illness be classified as either work related or not work related for the purposes of determining disability. Requires doctors to address this issue in medical reports.

* Ensures that employers are only responsible for the portion of the injured workers' disability that is the result of their existing job.

* Encourages good faith reporting of fraud and protects the reporting party from civil liability.

Medical control/independent review

* Creates a medical network for employers to control unnecessary medical utilization in the workers' comp system that provides for injured workers to be treated by a network chosen by the employer. However, there are provisions that allow injured workers who are dissatisfied with their care to change doctors within the network and ultimately to ask for an independent medical review.

Under the new law, employers with a provider network will arrange the injured worker's initial medical evaluation, after which the employee may choose another network physician.

If the employee disputes the provider's diagnosis or treatment, they must obtain a second and third opinion from within the network.

If a dispute exists after that, the worker may appeal to an Independent Medical Reviewer appointed by the Administrative Director of the state Division of Workers' Compensation, who will issue an opinion on whether the disputed medical services meet the American College of Occupational and Environmental Medicine/Administrative Director guidelines. If so, the worker may receive those services from either within or outside the network.

* Sets clear parameters for what is acceptable treatment for injured workers in the workers' comp system.

Permanent disability determination/benefits

* Revises the standard for determining permanent disability from "ability to compete in the open labor market" to "diminished future earning capacity," with the final determination based on the American Medical Association Guides to the Evaluation of Permanent Impairment, 5th Edition.

Legal issues

* Creates new medical-legal processes for resolving disputed medical issues by referring disputes regarding disability to a panel of Qualified Medical Examiners for resolution.

* Expands alternative dispute resolution procedures allowing employers and groups of employers of union-represented employees to negotiate pilot programs.

Return to work

* Promotes return to work programs by providing employers of fewer than 50 employees with subsidies for workplace modifications and special equipment.

* Provides incentives to employers of 50 or more employees who return disabled employees to work. Allows a 15 percent reduction in permanent disability payments if an employer brings an employee back to the same job, at the same pay, or accommodates him or her with a modified job, as long as the job pays at least 85 percent of the previous job and lasts at least 12 months.

* Gives injured workers who work for employers of 50 or more employees who are not offered return to regular, modified or alternative work a 15 percent increase in their permanent disability award.

Temporary disability

* Sets a limit of two years (104 weeks) of paid temporary disability within two years of the first temporary disability payment, except for specified injuries that typically require extended recuperation, such as severe burns and amputations, which are capped at 240 weeks within five years of the first temporary disability payment.

Copies of SB 899 can be downloaded by visiting www.leginfo.ca.gov/bilinfo.html.

Allan Zaremberg is president and CEO of the California Chamber of Commerce. You can reach him at www.calchamber.com or [phone].