WORKERS' COMP WON'T GET WELL SOON, CRITICS SAY.

Byline: Troy Anderson Staff Writer

As Gov. Arnold Schwarzenegger tries to push workers' compensation reforms as one of his top priorities, some employers say the crisis is even worse than it appears and the Legislature's claim of $5.5 billion in cost savings this year is illusory.

And in fact, some employers will see their costs rise, not fall, this year and add to the squeeze they feel under the $29 billion annual cost of the state's system for insuring workers injured on the job.

Critics say a little-known provision in this year's reforms raised the user fees that employers pay from 20 percent to 100 percent of the state's costs of administering the workers' compensation program, potentially canceling some of the savings realized in the reforms.

In Los Angeles, Metropolitan Transportation Authority spokesman Ed Scannell said the MTA expects its fees to rise from $119,260 last year to $596,300 this year.

The MTA had expected to trim $1.6 million off its costs this year, but now expects its total costs to rise from $53.8 million to $54.9 million next year due to the higher user fees and a state-approved increase in temporary benefit checks from $602 a week to $728 a week on Jan. 1.

``So whatever savings we are going to make due to this legislation is being wiped out by this increase in the user fee and the increased (benefit checks),'' Scannell said. ``There are so many companies that are not even aware of this and when they find out (next year when they get the bill in the mail), it's going to come as quite a shock to them.''

State Insurance Commissioner John Garamendi said the user fee increases were passed in last year's budget and now pay for the $100 million annual cost of administering the program, but he said the fees are a small part of the overall cost.

``The cost of claims paid by the MTA and every other employer in the state of California should go down by 15 percent if they properly implement the reforms,'' Garamendi said. ``It's a $5.5 billion reduction, of which the MTA has a portion of that.''

The Workers' Compensation Insurance Rating Bureau, the leading insurance industry research group, calculated the reforms would only save $3 billion to $5 billion.

Thomas Hagerman, president of the Altadena-based Independent Business Association, a coalition of 500 small businesses, said many businesses believe the reforms will only slow the growth of the costs.

``Several of the businesses I represent said they are getting ready to leave the state,'' Hagerman said. ``Many people are going out of business. It's melting down fast. It will probably slow the growth of the premiums, but nobody that understands the reforms is looking for any substantial reduction.''

Los Angeles Unified School District officials have not analyzed how much last session's reforms will save the district, but David Holmquist, the school district's director of risk management and insurance, said the savings will be minimal.

The LAUSD's workers' compensation costs were $108 million in 1998 to 1999 and are expected to hit $181 million by the end of this fiscal year.

``We are among the group that believes further reforms are needed to effect a change in the workers' compensation system,'' Holmquist said.

Los Angeles County government officials said they expect last session's reforms to initially cut $22 million off their costs and save $5 million on an annual basis. The county's costs were $157 million in 1998 to 1999 and are expected to reach $352 million by the end of this fiscal year.

The MTA and other employers have raised concerns about last session's reforms as Schwarzenegger has called lawmakers into a special session to overhaul the system.

Schwarzenegger's plan, which he hopes will stem the tide of job losses and bring more jobs back to California, would be aimed at ensuring that the state is in line with nationally recognized standards, establishing an independent medical review process and eliminating the need for employers who provide employees' health insurance to also carry workers' compensation insurance coverage. The proposal sets a goal of saving $11 billion in costs.

Garamendi, whose proposal involves weeding out $1 billion to $3 billion of fraud in the system, said the reforms passed in the last session of the Legislature were only half of the package that needs to be adopted.

``I have consistently called for a full package of reforms,'' Garamendi said. ``Half were done by the Legislature last session. The remaining half is still there and Mr. Schwarzenegger has picked up the remaining half. That's the reform.''

Brendan Huffman, public policy manager for the Los Angeles Area Chamber of Commerce, said if the Legislature had passed the reforms the business community lobbied for in the last session, lawmakers could have carved $10 billion to $15 billion off the system's costs.

``Saving employers $4 billion to $5 billion is not insignificant, but we can do much better,'' Huffman said. ``We are pleased the new governor called a special session on workers' compensation.

``There are several proposals that appear to have promise, but we are concerned the Legislature is going to do what it did last session and not pass nearly the amount of reforms we need. Therefore, a lot of business groups are contemplating the wisdom of a ballot initiative to implement the reforms we'd like to see.''

The IBA submitted the California Jobs Protection Act initiative to the Secretary of State's Office on Thursday. The association will need to gather about 400,000 signatures to get the initiative placed on the November 2004 ballot.

Hagerman, who served on former Gov. Pete Wilson's workers' compensation reform task force in 1993, said the initiative would require workers to prove that work was the ``predominate'' cause of their injuries, a higher threshold than the ``substantial'' cause in Schwarzenegger's proposal. He predicts that change would cut the state's costs in half.

``The system has way too many injured workers that shouldn't even be there,'' Hagerman said. ``Their medical conditions are not work-related. But the eligibility thresholds are so low that it sort of takes all comers. That's what has caused this crisis.''

Holmquist said California provides workers with three times as many treatments for the same injuries as other states, such as Arizona.

``If a person suffers a strained back, someone in another state might go to the chiropractor 17 times and here it might be more than 40 times,'' Holmquist said. ``That has been one of the most glaring components of the costs in California.''

Hagerman said that's also why reforms addressing administrative rules in 1989, 1993 and the last session have failed to reduce the spiraling costs.

Troy Anderson, [phone]

troy.anderson(at)dailynews.com