WORKERS’
COMPENSAT
ION
FORECAST
2011
NO
VE
MB
ER
17
, 2
01
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WELCOME TO THE WORKERS’ COMPENSATION FORECAST 2011
Jerry Azevedo, Workers’ Compensation Action NetworkAPCO Worldwide
Jason Schmelzer, California Coalition on Workers’ CompensationShaw / Yoder / Antwih, Inc.
WHO WE ARE
Workers’ Compensation Action Network
Broad-based, statewide coalition of employers and insurers dedicated to defending and advancing reform of California's workers' compensation system Includes every major employer trade association in California
Insured, private and public self-insured employers
Nonprofit organizations
Educate lawmakers, the business community and members of the media on workers’ compensation issues Track outcomes of recent legislative reforms
Disseminate original material
Provide media commentary
Conduct annual Legislative Education Day
Mobilize grassroots network to support/oppose legislative proposals
WHO WE ARE
California Coalition on Workers’ Compensation
Statewide association of employers committed to maintaining a workers’ compensation system that provides quality benefits at a reasonable cost to employers
Founded in 1985 and governed exclusively by CA employers
Advocacy Intimately involved in the development and passage of 2004 reforms Serve as the voice of California employers in legislative and regulatory
venues Unrivaled experience and knowledge of workers’ compensation policy
in Sacramento
Education Annual conference on workers’ compensation trends, strategies, and
public policy Coordinate annual Legislative Education Day
WHAT WE’LL COVER TODAY
Update on California’s Workers’ Compensation System
Election Outcomes and Their Impact on the Business Community and Workers’ Comp
Preparing for 2011
WHAT’S BREWING IN WORKERS’ COMP?
WHAT’S BREWING IN WORKERS’ COMP?
…Costs Per Claim Have Increased by 50%
WHAT’S BREWING IN WORKERS’ COMP?
Average insurance rate for employers up by approximately 3% since 2009
Rate filings for January 1, 2011 indicate an additional 3% increase
Rate increases far below recommended 27.7% increase (2009, 2010)
Insurers paid $1.25 per $1.00 earned in premiums in 2009
WHAT’S BREWING IN WORKERS’ COMP?
…Court Cases Increasing Disability Benefits, Driving Uncertainty
California's non-partisan Legislative Analyst's Office has concluded that
these rulings could lead to ‘(1) changes in PD ratings, (2) increased incentive for litigation, and (3) decreased uniformity
in determining PD. Ultimately, these effects would likely lead to increased
benefits for workers and higher costs for businesses and governments.’
“
”
WE’VE BEEN HERE BEFORE
Medical costs for workers’ compensation claims in California more than doubled between 1995 and 2002 and grew much faster than the national rate of medical inflation
Medical costs per claim were twice as high as the national average in 2002
Permanent partial disability claims were being filed at a rate three times the national average and 20 percent higher than the next highest state
RECAPPING THE REFORMS (2002 – 2004)
2002 2003 2004
Legislation AB 749 “Benefit increase
bill”
AB 227/SB 228 “Medical cost
reforms”
SB 899 “Comprehensive
reform bill”
Estimated System Cost
17.6% Increase 13.3% – 15.7% Reduction
14.7% Reduction+
14.9% Reduction (PDRS)
RECAPPING THE REFORMS (IMPACT ON EMPLOYER COSTS)
62% reduction in premium per $100 of payroll
Billions in savings for local government, schools
Increased market competition (29 new insurers)
State Fund market share reduced dramatically
But . . .
California still relatively high-cost state: 131% of national median
California employers pay 18% of national benefits, but employ only 12% of covered workforce
RECAPPING THE REFORMS (IMPACT ON WORKER OUTCOMES)
Return-to-work rate increased by 5%
Increase as high as 11% for certain body parts
Percentage of injured workers receiving TD benefits equal to two-thirds of wages increased from 80% to 97%
TD weekly max increased by 100% since 2003
Litigation rate is down, disputes being resolved more quickly
Satisfaction levels with access to medical care and quality of medical care consistent with pre-reform levels
PERMANENT DISABILITY BENEFITS
Decline in PD levels Intent of shift to objective rating system – subjective cases out Apportionment to causation Number of weeks reduced by statute for ratings lower than 15%
Measuring the decline in ratings Measurements vary from 29% to 42%
Comparison to pre-reform PD benefit costs increased by 62% between 1998 and 2004 PD cases filed at three times national average AB 749 increased PD benefits
PERMANENT DISABILITY BENEFITS
RECAP OF SCHWARZENEGGER YEARS
2 0 0 3 – 2 0 1 0
REFORM ROLLBACK CAMPAIGN
LEGISLATION TO UNWIND REFORM
Average 15-20 bills every year
Permanent disability increases
Temporary disability cap changes
Fee schedule changes
New penalties on employers
Insurance rate regulation
Public sector presumptions and special benefits
Administrative hurdles for UR and Medical Provider Networks
GOVERNOR’S RESPONSE TO LEGISLATIVE ATTACKS Pragmatic Problem Solving TD cap fix Medical treatment guidelines PD increase through regulations
Reform has been preserved through the vetoPD Increase vetoed three timesApportionment limitations vetoed twice Administrative burdens vetoed many more
Costs have been increased due to signing public safety billsCancer presumption expansionDeath benefit expansion Pre-designation bill
ELECTION RESULTS
CALIFORNIA’S NEW GOVERNOR
Meg Whitman – 41.5%
Jerry Brown – 53.4%
DEMOCRATS DECISIVE IN RACES FOR STATEWIDE OFFICE
Lt. Governor Newsom v. Maldonado
Treasurer Lockyear v. Walters
Insurance Commissioner Jones v. Villines
Controller Chiang v. Strickland
Superintendent of Public Instruction Torlakson v. Aceves
Attorney General (undecided) Harris v. Cooley
LEGISLATURE GETS MORE DEMOCRATIC
State Senate 24 Democrats 15 Republicans 1 vacancy
Moderate caucus grew in 2010 election cycle
State Assembly 52 Democrats 28 Republicans
Democrats picked up two seats in 2010 election cycle
D - 24R - 15
D - 52R - 28
CALIFORNIA VOTER SENTIMENT
Low approval of legislature
Low trust of state government
Serious concerns over economy and state budget
Reform-minded electorate (Props 22, 25, 26)
Popularity of President Obama
Unpopularity of GOP
Growth of independent voters
Participation of Latino voters
Green values
ELECTION ANALYSIS
LEGISLATURE
Legislative composition not substantially altered
Senate remains more moderate house
Legislature assumes new responsibility due to lack of opposition party Governor
Budget problems will continue to be paramount and may serve as limiting factor
EVALUATING GOVERNOR-ELECT BROWN
Campaign statements
Policy agenda and priorities
Past Actions
Appointments
POLICY AGENDA AND PRIORITIES
Budget – $25 billion+ deficit 2011-2012
Jobs – Unemployment rate stagnant at 12% Infrastructure Investment Renewable energy
Other priorities likely set by legislature
PAST ACTIONS – TEMPORARY DISABILITY
History Increased the minimum TD
rate in 1976 and 1977 Increased the maximum TD
rate in 1980 and 1982 Eliminated the 240 week
TD cap in 1978
Current Issues Benefit levels indexed so
no increase needed Current 104 week cap is
controversial, even with expanded timeframe
PAST ACTIONS – PERMANENT DISABILITY
History Increased PD benefits in both
1976 and 1982
Current Issues Post-reform PD benefits levels Could be raised by regulation
or legislation
PAST ACTIONS – PRESUMPTION BILLS
History Brown signed CA’s first
cancer presumption bill in 1982
Current Issues Public sector presumptions
have proliferated Threat of presumptions
entering the private sector
PAST ACTIONS – MEDICAL CONTROL
History Signed bills allowing injured
worker physician choice in 1975
Expanded injured worker physician choice to first day in 1977
Current Issues Employers have medical
control through MPNs
APPOINTMENTS
Secretary of the Labor and Workforce Development Agency
Director of the Department of Industrial Relations
Administrative Director for the Division of Workers’ Compensation
Workers’ Compensation Appeals Board judges
Appointees in these areas will have substantial impact on policy
PREPARING FOR 2011
REFORM-ERA ACTIVISM NEEDED
“Workers’ comp is not some sleepy little issue”
Employer engagement was critical to passing and protecting the reforms
Near-complete turnover of reform-era lawmakers
Reform results partially defined by 7-year, well-funded rollback campaign
REFORM-ERA ACTIVISM NEEDED
Policymaker education must occur at all levels
Importance of stable workers’ compensation system for employers, injured workers
Impact of recession, higher WC costs on jobs and public services
Data-based, balanced approach to system improvements
WHAT CAN EMPLOYERS DO?
Get involved WCAN
www.fixworkerscompnow.org CCWC www.ccwcworkcomp.com Engage locally
Take action Connect with your legislator 2011 Legislative Day Letters and calls matter
Join us online Twitter
Questions?
Thank You