Workers’ Comp: Here They Come Again

Forget California’s recession, troubled public schools and overburdened infrastructure. Workers’ comp reform was the issue that dominated Sacramento in 1992, producing 88 pieces of legislation, a rare special session and the memorable image of business executives kneeling on the Capitol steps, pleading for relief.

Since nothing came of the wrangling and rhetoric, workers’ comp is back this session, noisy as ever. At this point, certain premises are no longer debated. It is accepted as fact that the workers’ comp system is totally out of control, rife with fraud. It is accepted as fact that reform is essential if California wants to keep businesses from flocking to such places as Nevada and Utah--states which, incidentally, have workers’ comp problems of their own. It is accepted as fact that the best hope for reform rests in Sacramento.

Unfortunately, none of it is that simple.

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Workers’ comp is essentially a mandated insurance deal. Since the advent of the Machine Age, employers have been required to provide insurance protection for injured workers. In turn, employees cannot sue when they get hurt on the job. This is no small concession. Eliminate workers’ comp altogether, and the titans of tort could move in and make life truly miserable for business.

Still, most employers aren’t happy with the system. Just as motorists complain about auto insurance, they complain, furiously, about workers’ comp. Costs rose dramatically in the last decade. Employers now must pay roughly $3 for every $100 of payroll. In fat times, this might be accepted as a cost of doing business. In lean times, it can become the proverbial straw that breaks the camel’s back. Of course, it takes a weak camel to have its back broken by a straw. The California economy is in the dumps for many reasons, and most have nothing to do with workers’ comp.

Beyond the recession, the workers’ comp uproar is symptomatic of other larger issues--such as runaway health care costs and the wiles of the insurance industry. Doctors and hospitals, it seems, charge more every day--whether they bill through private health plans or a workers’ comp system. Similarly, insurance usually tends to be a pay-through-the-nose proposition, and workers’ comp is no exception.

In any case, these larger forces usually are ignored in the debate. The focus has been on fraud and shadowy middlemen. One hears often dark tales of “mills” of lawyers and doctors who coerce workers into making fraudulent claims. One hears less often about private investigators and expert witnesses hired to investigate legitimate workers’ comp claims, a practice that also contributes to the system’s cost.

Reform advocates like to point out that, although California ranks high nationally in terms of money paid into the system, it sits near the bottom when disability payments to injured workers are compared to those of other states. The comparison is misleading: Not mentioned is the money paid for medical care on behalf of employees. Measuring gross payments into the system and gross payments paid out on behalf of workers, California ranks about sixth in both categories. The disparity argument, though, makes for better rhetoric, suggesting that employers and employees have an equal incentive for rewriting the rules. I wonder.

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Finally, there is the dubious notion that legislation represents the best hope for reform. Insurance companies and doctors tend to support Republican politicians, while lawyers and unions back Democrats. Is is any surprise the Legislature went 0-for-88 last session? There are other remedies. If fraud is the problem, pressure prosecutors to enforce existing law and go after the cheaters. If volume of claims is at issue, then work-site programs to prevent injuries hold as much promise as new legislation. And if the honest intent is to help workers as much as owners, then reformers might consider going straight to the people through the initiative process.

For whatever reason, the business interests pushing for reform seem content to take their chances with the Legislature, and they might be right. There appears to be a determination on all sides to deliver this time. My guess is that they will give a bunch of relief to business and a little to the workers. They’ll slap around doctors and lawyers, tinker with insurers.

And when they are finished, it will be hailed as a great thing. A symbol that California again means business. It won’t end the recession, of course, or deal in any real way with escalating health care costs, or an out-of-control insurance industry. People still will get hurt on the job, still must be treated somewhere and pay for it somehow. At least, though, our friends in Sacramento will be able to find new issues. I can think of a few.