X-Raying Workers’ Comp

What’s more, don’t count on a friendly diagnosis to maximize your benefits. You’ll get a choice of doctors for a second opinion, all right, but from a pool selected by employers. And you have to burn through three company-approved doctors before being entitled to an independent medical review.

 

Of course, the status quo was not an option either, not with insurance premiums skyrocketing. The first step came last fall, in the last throes of the Gray Davis administration, when legislators standardized payments to doctors and limited certain treatments. In January, insurers cut their rates, but only modestly compared to rates that, for some businesses, had doubled and tripled over the past three years.

With new Governor Schwarzenegger’s blessing, the California Chamber of Commerce prepared to take matters into its own hands, with a ballot initiative that labor groups considered draconian. This pressure allowed Schwarzenegger to deal. Legislators blew right through some of the governor’s early “deadlines,” but they got it done last week, in a do-or-die stand to beat back the looming initiative.

The resulting compromise vastly outshines the Chamber’s alternative in the view of Burton et al. The Chamber’s plan gave workers no choice in doctors. The compromise lets the company pick the first doctor, while giving workers access to a second and third opinion — though the choice still must be made from a company-approved list. Workers with employer-provided health plans also have an option to pre-designate their regular doctor as the first who would see them.

And the compromise also entitles workers to as much as $10,000 in immediate treatment. Before, a company could delay payments as much as 90 days. “That’s often enough time to lead to permanent disability, and tremendous pain and suffering in the meantime,” said state Assemblywoman Jackie Goldberg (D–Los Angeles). Treatment without waiting is “a big gain, a huge change.”

But she also voted no, for the same reason cited by Alarcon, the failure to regulate insurance rates, which also drew ire from Doug Heller, executive director of the left-leaning, Santa Monica–based Foundation for Taxpayer and Consumer Rights.

“We do not dispute at all that there’s a workers’-comp crisis in the state,” said Heller. “Our own organization has seen a 75 percent increase over the last year alone and 110 percent over two years. And we don’t have it so bad, because we’re not working with manufacturing equipment. But the reason rates are so high is not because of a sudden spate of injuries or litigation or anything that’s particularly new, but because the insurance industry has absolutely gouged businesses in this state. When you mandate that consumers — in this case, businesses — must buy something, you need to regulate the sellers.”

Heller noted that the state already regulates auto insurance, medical malpractice insurance and homeowners insurance, and that some 25 states regulate workers’ comp, including Nevada, which is often described as a business-friendly magnet luring companies from California. Heller cited data showing that workers’-comp insurers managed a healthy 18 percent annual profit in Nevada over the last 10 years. The comparable figure in unregulated California is 1.8 percent, with the industry sustaining losses in recent years — a shellacking in the view of insurance companies. Heller attributes losses to policies that were underpriced to win market share. And he says the recent astronomical rate increases result from companies trying to make up the dollars they lost all at once. An insurance industry study challenges this conclusion, asserting that since 1998, on average, premiums have increased 96 percent while claims have increased 117 percent.

Schwarzenegger has sided with economic conservatives, who philosophically oppose rate regulation and also contend that it would make insurers less eager to return to the California market. “Rate regulation is unnecessary because we’re already seeing insurers from out of state coming back into the market, based on the reforms last fall,” said Lawrence McQuillan, director of business and economic studies for the right-leaning Pacific Research Institute for Public Policy in San Francisco. “We’ve turned the corner. It’s time to let these reforms play out and run them through the balance sheets of insurance companies for a couple of years.”

An industry representative agreed “Keeping the current system in place sends a message to insurers that they can come into the California market and compete against each other,” said Sam Sorich, president of the Association of California Insurance Companies. “If the insurance commissioner gets the power to establish rates, and if his decision is erroneous, companies are going to lose money, and I don’t think they want to take that risk at this time.”

But Goldberg and Alarcon are unimpressed by the small rate declines that followed last year’s reforms. Both are pushing legislation that would regulate rates. Schwarzenegger’s team wouldn’t allow rate regulation to be part of the compromise package, which suggests that he’d veto either bill.

So far, the governor’s position aligns with that of workers’-comp insurance companies, which have contributed more than $500,000 to his various campaigns since he entered politics less than a year ago. His staff denies that the governor has broken his vow to refuse special-interest money.