Chamber Economic Stimulus Package

The California Chamber of Commerce released the following Economic Stimulus Package in August 2003.

Workers’ Comp Reform

Skyrocketing workers’ compensation premiums are needlessly draining billions of dollars from more positive pursuits, forcing employers to cut from other aspects of their business, including employee benefits, raises and jobs. The Chamber believes reforms are needed to control medical costs, fix the handling of permanent disability benefits and vocational rehabilitation, stop fraud and reduce litigation.

Medical Costs

• Official Medical Fee Schedule for Outpatient Surgery Centers. Outpatient surgical centers are not covered under California’s Official Medical Fee Schedule. These facilities should have maximum payment levels set for surgical procedures.
• Medical Utilization . While comparison studies of medical costs in California show that average prices per medical service were in line with other states, medical costs in our workers’ compensation system increased by 24 percent between 2001 and 2002. We must have effective controls on the over-utilization of medical services. The first step to utilization control is expanding medical control timelines to one year. Secondly, we need utilization review that ensures that workers are receiving sufficient treatment. With a comprehensive utilization program there should be no need for “doctor shopping” since all medical decisions will be based on the same utilization guidelines. 
• Chiropractic Utilization. A study by the Workers’ Compensation Research Institute (WCRI) showed that the average number of chiropractic visits an injured worker would receive in other states was 15 visits. California’s injured workers on average have 34 visits per claim. Controls should be placed on what has become the number one medical specialty payment under the workers’ compensation system.
• Physical Therapy Utilization. According to the WCRI, physical therapists were involved in more cases under California’s workers’ compensation system than in the median state in the study. Injured workers made 39 percent more visits to physical therapists per claim compared to similar injuries in other states. Controls should be placed on physical therapy services to ensure that patients are receiving important healing but not over-utilizing these services.
• Encourage the use of Health Care Organizations for Workers’ Compensation. Existing law allows licensed health care service plans to register as a health care organization (HCO) to provide cost-effective medical benefits to injured workers. Unfortunately, this option is underutilized due to statutory hurdles. Impediments to the increased usage of HCOs should be removed.

Permanent Disability
While California’s weekly benefit levels are constantly disparaged as being some of the lowest in the nation, California actually pays high benefits for each injury. A report by the WCRI comparing California to 11 other states shows that while California is second to last in weekly benefit levels, it pays the second highest benefits per indemnity claim. Indemnity benefits per claim on average rose 8.5 percent each year between 1994 and 2000.

• Tightening Permanent Disability Eligibility. More than 50 percent of all workers’ compensation injuries that result in seven days or more of lost time from work become permanent disability cases. California must ensure that only serious injuries that have lifelong earnings impact qualify an injured worker for permanent disability benefits. Permanent injuries should also be verifiable by objective medical findings. We must also ensure that permanent disability ratings take into account prior injuries suffered by the worker in determining how much disability is awarded.

Other Reforms

• Stopping Fraud. California’s workers compensation system is confusing and lacks accountability, allowing fraud to run rampant. Penalties for fraud should be increased to send a clear message that any participant in the system who commits fraud will suffer severe consequences.
• Vocational Rehabilitation. Vocational rehabilitation programs are not working. Last year the Legislature acknowledged this problem by allowing workers to opt for a $10,000 cash-out instead of using this system. This change in law will only drive more injured workers to choose the cash-out, thereby increasing costs to employers. This program should be voluntary for employers and the $10,000 “cash-out” should be deleted.
• Alternative Dispute Resolution Process. The successful program that allows the construction industry to use an alternative dispute resolution process for solving problems in the workers’ compensation system should be expanded to include other employers.
• Reform Administrative Penalties. Administrative penalties under the workers’ compensation system are providing a perverse incentive for applicant attorneys to chase minor paperwork violations and turn them into large awards. These penalties are based on a percentage of the total injury award instead of a flat fine or a fine based on the amount of the delayed payment. These penalties should be reformed.

There are dozens of pending “job killer” bills and the Legislature needs to put a moratorium on those harmful proposals.

Guard Against Hidden Tax Hikes

Approval of taxes disguised as fees must stop. A constitutional amendment should be placed on the ballot to require that taxes disguised as fees be subject to a two-thirds vote requirement.

Stop Extortion Lawsuits

Frivolous lawsuits exploiting weaknesses in Section 17200 of the state’s Unfair Competition Law have plagued businesses throughout the state. Small operations, such as nail salons, auto repair shops, restaurants and other minority-owned businesses, have been particularly hard hit.

Needed reforms include reigning in the questionable legal practices of firms that file lawsuits with high numbers of blank spots for defendants, to be filled in at a later date with additional businesses; prohibiting a private right of action for unfair competition suits against employers of 50 or less unless harm can be shown; limiting attorney fees for unfair competition suits; and limiting private suits when regulatory agencies have already gotten involved.

Further, harmful proposals to expand the filing of these frivolous lawsuits must be stopped.

Extend Manufacturers Investment Credit

More than 293,000 manufacturing jobs in California have disappeared just since January 2001. The manufacturers investment credit (MIC), similar to credits offered in 48 other states, is an important tool for encouraging businesses to expand or update California facilities. The Chamber’s recent Business Climate Survey revealed that a high number of California business have been offered various tax credits and other incentives to relocate to neighboring states.

Reviving and extending the MIC will help keep California competitive and spur job creation by sending the message that the state wants businesses to locate and invest here.

Control Unemployment Insurance Costs

To limit the effects of a multibillion-dollar rate increase in the employer-paid unemployment insurance (UI) tax, the administration and Legislature should temporarily suspend the third and fourth year of the recently enacted benefit increase until the shaky UI Trust Fund regains solvency, as well as enact strong anti-fraud and system streamlining cost saving reforms. The latest fund forecast shows the balance of the trust fund, at nearly $6 billion in 2001, plummets to less than $430 million in 2003, and will be more than $1.17 billion in the red in 2004.

Reform California-Only Overtime Law

California remains the only state in the nation with a complex deviation from the federal overtime pay rule, which allows flexibility within a 40-hour work week. Rescinding California’s eight-hour overtime rule to bring the state back in line with the rest of the nation would be the best solution.

At the very least, the administration and Legislature should conform California’s definition of a management worker (exempt from overtime) to match the federal law. This will eliminate many of the class action lawsuits being brought against California employers.

 

Suspend Paid Family Leave Law

California’s unique new ‘paid family leave’ law, scheduled to take effect in January 2004, should be suspended.  An outside auditor should review plans for the funding of the program to ensure that the funding anticipated is adequate to cover the actual costs of the program.

Reduce Energy Costs

Legislators should cease attempts to return the state to its pre-1996 energy regulatory structure when California paid some of the highest electricity prices in the nation.

 

In addition, the Public Utilities Commission should adopt a rate reduction package to lower energy rates in proportion to the increases endured by ratepayers during the recent pricing crisis.

Recapture Transportation Dollars

The state must act to recapture dedicated transportation funding to create construction jobs and provide congestion relief. Projects to maintain and improve the state’s transportation network can provide a quick jump-start to the economy.

Balance Budget

The Legislature must address the economic uncertainties facing the state’s fiscal situation.  By putting jobs first, lawmakers will remove much of the economic uncertainty and create an economic climate that fosters increase revenues, addresses the pending deficit in 2004-05 and puts the state on path of economic recovery.  Lawmakers must make structural reforms to the budget process to remove the monumental swings in revenues and expenditures. The budget must balance without the need for draconian cuts and new taxes that have economic consequences on job creation.