Typically, when it comes to lawmaking, what happens in California doesn’t stay in California. So this workers’ comp fight in the state is worth keeping an eye on.

Gov. Jerry Brown (D) is calling for reform of California’s workers’ compensation system, and labor unions as well as many employers have taken up the cause.

Supporters of reform want to increase workers’ comp payouts for injured workers, without raising premiums for employers.

How do you do that? By squeezing waste out of the system, according to reform supporters.

Insurance companies say they’re spending more on claims, claims processing and general expenses than they are receiving in premiums paid by employers, according to the Los Angeles Times.

The LA Times reports in 2010, insurance companies spent $1.16 for every premium dollar they received, compared with 73 cents in payouts for each $1 in premiums in 2005.

The result of those increased expenses, as well as legal backups: The average permanent partial disability recipient was paid $12,000 last year, down from more than $25,000 in 2004, according to a UC Berkely Survey and Research Center report cited by the LA Times.

That’s far too little for many organizations, considering while payouts are going down, medical expenses and workers’ comp premiums are going up.

Since 2008, average insurance rates have risen from $2.16 per $100 spent on payroll to $2.37, according to the Workers’ Compensation Insurance Rating Bureau.

Some ways analysts feel spending “waste” could be eliminated and more money could be obtained for benefits recipients:

  • simplifying the criteria for calculating permanent disability compensation for injured workers
  • tying fees for outpatient surgeries to the lower-cost state and federal Medi-Cal system
  • tightening doctors’ fee schedules, and
  • speeding up medical treatment, so injured workers’ symptoms don’t linger as long and continue to drive up costs.

Source: “California workers’ comp overhaul effort is stirring,” by Marc Lifsher, Los Angeles Times, 4/12/12.

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