MEANINGLESS 'MEANINGFUL REFORM' WATCH FOR POLS TO PULL A FAST ONE AS WORKERS' COMP DEADLINE LOOMS.

Byline: Keith Richman 

IT is no surprise to most Californians that a sleight of hand is being used in the workers' compensation issue. It is one of the most trusty tools in the politicians' bag of tricks.

With pressure building to meet a March 31 deadline for quick premium relief, those threatened by an overhaul of California's expensive and dysfunctional workers' compensation system are resorting to distraction and deception in an attempt to block meaningful reform.

One special interest group, the so-called personal injury lawyers, is promoting ``re-regulation'' of workers' compensation insurance rates as the cure to California's workers' compensation system crisis.

But if insurance companies are the problem, what explains the out-of- control workers' compensation costs affecting self-insured employers, such as cities, counties, fire departments, school districts and the nonprofit, state-run insurer of last resort?

Recent reports document that workers' compensation costs for local governments have increased by as much as 55 percent in the last three years. The consequences are horrendous. The city of Los Angeles, for example, noted that the additional $30 million it has had to spend on workers' compensation would support 400 peace officers for a year.

The roots of the crisis are simple: California's workers' compensation system allows too many lawyers to push too many questionable disability claims. Insurance premiums are but one symptom of the soaring costs plaguing the workers' compensation system.

The attorneys justify their call for ``rate regulation'' by charging that insurance companies are reaping huge profits from California workers' compensation. But a report from the National Association of Insurance Commissioners proves that selling workers' compensation insurance in California has not been profitable for the past seven years. Workers' compensation insurance in California is a loser - insurers continue to pay about $1.17 for every $1.00 in earned premium despite rising rates - which helps explain why many insurers have gone out of business and others have simply left California's workers' compensation market.

It also explains why nearly 60 percent of all insured employers have been forced to the State Compensation Insurance Fund, a nonprofit, state-run entity that has also hiked its rates. In fact, only about 20 percent of California employers get workers' compensation coverage from a for-profit insurance company.

These inconvenient facts are always left out of the politicians' deceptive pitches.

Yes, workers' compensation insurance premiums are high. But the attorneys' answer - a regulatory scheme that forces reductions in rates without reducing out-of-control disability claims and litigation - will drive even more insurers out of California and leave privately insured employers with even fewer choices. It will also do nothing for self-insured employers - some of California's largest businesses as well as local government agencies - that don't purchase insurance for workers' compensation.

California Insurance Commissioner John Garamendi has expressed concern that an onerous ``rate regulation'' scheme would discourage insurers from returning to California, leaving employers with too few choices and insufficient competition to keep rates low.

So why are the attorneys and their mouthpieces urging additional regulation of insurers as the cure-all to the workers' compensation crisis? The answer is simple: They are getting rich off the broken system, taking too much of the money intended for injured workers.

California suffers from an irrational system for evaluating claims and compensating permanent disability. The lack of an objective system for evaluating permanent disability means that two workers with the same injury can get wildly different results. Of course, in a subjective system, disputes arise. When disputes arise, attorneys get involved. When attorneys string out cases and demand their cut of the settlements, costs and premiums go up.

Permanent disability costs consume 82 percent of total benefit costs, higher than every other state except New Jersey. Attorneys get involved in three out of every four of these types of claims, and they have no incentive for quick resolution when additional delay and conflict can drive up the total benefit award and, with it, the attorney's contingency fee.

Instead of performing their sleight-of-hand trick, politicians should negotiate a real, bipartisan overhaul of the workers' compensation system by March 31, while there is still time to reduce bills due out July 1.

Gov. Arnold Schwarzenegger's reform proposal will address the real costs in the system and bring relief to every employer, whether privately insured or self-insured, whether a small business, school district, city, county, police department or large company. Rate regulation will not help these struggling self-insured employers or those covered by the state's own nonprofit fund.