Workers’ Compensation. Option to Sue. Initiative Constitutional Amendment and Statutes.

Provides option, 90 days after injury, for injured employee to sue employer or insurer for civil damages, rather than continue in workers’ compensation system. Allows injured employees to choose their own medical providers, with treatment paid by employer or employer’s insurer. Findings of selected provider are presumed correct unless rebutted by preponderance of medical opinion. Authorizes employee-selected medical provider to sue employer or insurer if provider’s bills are not paid within 60 days. Repeals provision allowing employers and insurers to contract with pharmacies to provide medicines to employees. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: Annual costs -- potentially in the mid to high hundreds of millions of dollars -- for state and local government work-related injuries.

Workers’ Compensation. Option to Sue. Initiative Constitutional Amendment and Statutes.

Provides option, 90 days after injury, for certain private sector, non-union injured employees to sue employer or insurer for damages, rather than continue in workers’ compensation system. Allows injured employees to choose their own medical providers, with treatment paid by employer or employer’s insurer. Findings of selected provider are presumed correct, unless rebutted by preponderance of medical opinion. Authorizes employee-selected medical provider to sue employer/insurer if provider’s bills not paid within 60 days. Repeals provision allowing employers/insurers to contract with pharmacies to provide medicines to employees. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: Annual costs -- potentially in the low to mid hundreds of millions of dollars -- for state and local government workers' compensation

Workers' Compensation. Benefits. Choice of Medical Provider. Initiative Constitutional Amendment and Statutes.

Increases workers’ compensation weekly permanent partial disability payments and death benefit levels in January 2007, and thereafter authorizes annual increases in death benefits tied to state average weekly wage. Allows injured employees to choose their own medical providers, with treatment paid by employer or employer’s insurer. Findings of selected provider are presumed correct unless rebutted by preponderance of medical opinion. Repeals provision allowing employers and insurers to contract with pharmacies to provide medicines to employees. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: Annual costs -- potentially in the mid to high hundreds of millions of dollars -- for the state and local government workers' compensation.

Private and Public Costs for Workers' Compensation:In 2003 and 2004, several laws were passed to reduce costs of the workers' compensation system. Consequently, costs for workers’ compensation have decreased significantly since 2004 and are expected to total around $20 billion in 2006 for all employers in California. Several provisions of this proposal -- including sections concerning medical and pharmacy networks, and the legal weight given to physician findings -- modify parts of the recent laws that have contributed to lower workers’ compensation costs. In addition, the increases in benefits would raise the costs of most future permanent disability and death claims. The magnitude of all of these increased costs would be major -- potentially in the billions of dollars annually for private and public employers.

State and Local Government Costs for Workers’ Compensation. The state and local governments are expected to spend roughly $2.5 billion for workers’ compensation for their own employees in 2006. The state and local governments could experience cost increases similar to those of other employers. Cost increases potentially could be in the mid to high hundreds of millions of dollars each year.

Other Effects on Governmental Finances. The impact on governmental revenues would depend on how the measure affected workers’ compensation costs and other costs of work-related injuries. Increased costs may reduce business profitability, thereby decreasing income tax revenues. Partially offsetting this decrease could be a gain in the gross premiums tax paid by insurance companies. The net effect of these impacts is not possible to estimate.

There is a possibility that increased benefits under this measure would reduce the number of persons seeking assistance from state health and social service programs. Such a reduction could result in state and local savings for various programs. To what extent such a reduction would occur is not known.

Fiscal Summary. This measure would have the following major fiscal impact:

• Annual costs -- potentially in the mid to high hundreds of millions of dollars -- for the state and local government workers’ compensation.

If [workers comp] reform is undone, we can expect the same problems we saw prior to reform. The economic vitality of our region will suffer. Long Beach companies will be forced to scale back services, raise costs, or lay off employees. Many businesses will look outside the state when contemplating expansion, relocation, or simply shutting down.

Furthermore, these reforms are still in the implementation phase, with much more time needed to accurately determine what their true impact on the system will be. What we do have is an initial assessment from the California Department of Industrial Relations, which was released earlier this month.

The report found that to-date the reforms have:

• Decreased workers’ compensation rates by 46% (from average rates of $4.81 per hundred dollars of payroll to $2.59 from July 1, 2003 to January 1, 2006 (a three-year period).

• Rates are now below where they were in 1996. (Adjusted for changes in the mix of payroll by industry.)

• The reforms have saved more than $8 billion and as much as $15 billion compared to what costs would have been without reform.

• Competition among insurers is increasing and more employers have options other than State Fund.

• They reduced the high incidence of unnecessary and costly litigation

• They are producing consistent and predictable outcomes for disabled workers and encourage return to work

• They are improving medical treatment using proven methods of delivering quality care affordably and expeditiously

• They are ensuring that injuries directly result from employment and benefits reflect degree of causation related to the injury

• State regulators have adopted most of the administrative requirements of SB889

• Best of all, reports confirm that the quality of care for injured workers has improved, and that workers are returning to work ready to make contributions the their employer’s company.