Workers Comp ‘Job Killer’ Bill Leaves Employers Worse Off Than Before 2012 Reforms

​(January 14, 2014) A California Chamber of Commerce-opposed “job killer” bill that severely undercuts the workers’ compensation reform deal agreed to by labor unions and employers in 2012 and would result in dramatic cost increases to California employers will be heard in the Senate Labor and Industrial Relations Committee on January 15.

SB 626 (Beall; D-San Jose) will result in employers paying nearly $1 billion in benefit increases to injured workers without an expectation that the increases will be fully offset by system savings

2012 Workers’ Comp Reforms

The goal of the 2012 reform package was to provide injured workers with needed benefit increases, but offset these increased costs by closing certain loopholes and making California’s workers’ compensation system operate more efficiently with fewer disputes and litigation.

The reforms were projected to achieve this balance – guaranteeing injured workers nearly $1 billion in benefit increases while reducing costs elsewhere in the system after regulatory implementation. The proposals contained in this reform were forged and vetted by representatives of both labor and employers through a multi-year process of research, discussion and extensive negotiations. The resulting legislation - SB 863 (De León, 2012) - was overwhelmingly approved on a bipartisan basis.

Distorts Balance

SB 626 distorts the entire balance of the deal and would decimate provisions anticipated to deliver hundreds of millions of dollars of costs savings, which were promised to be redirected to injured workers in the form of higher benefits. Already, important cost-saving reforms under SB 863 have been placed in doubt as a result of litigation from system vendors. Additionally, full regulatory implementation has not been completed, creating uncertainty over whether the savings will materialize. Meanwhile, California employers continue to see their workers’ compensation costs increase, due to higher medical treatment costs and an increase in the rate of claims filed.    

SB 626 would make these implementation challenges worse by rolling back reforms dealing with timely, high-quality medical treatment and a more predictable – and less litigious – permanent disability system.  SB 626 assaults the reforms on many fronts:

  • It eliminates a cornerstone cost-saving provision contained in SB 863 – independent medical review (IMR).  Under SB 626, IMR decisions would be fully appealable to the WCAB taking medical necessity decisions away from physicians and putting them back in the hands of judges.  It would also result in treatment delays for injured workers.  The projected savings associated with IMR are estimated at around $400 million. 
  • It repeals a provision in SB 863 that eliminates impairment ratings for psychiatric add-ons in some, but not all, cases. Numerous data-driven analyses demonstrated applicant attorneys had abused this add-on to artificially inflate permanent disability ratings.  
  • It repeals a provision in SB 863 that prohibits a chiropractor from being a primary treating physician once the maximum number of chiropractic treatments has been received.
  • It unnecessarily limits utilization review and Independent Medical Review by requiring that the reviewing physician hold the same license as the physician requesting treatment. Current law requires reviewers to be competent to evaluate the specific clinical issues involved in the medical treatment and utilize relevant, evidence-based medical treatment guidelines, which are not state-specific. 

Employers Worse Off

SB 626 leaves California employers worse off than they were before the reforms.  Not only will they face pre-reform escalating costs; they will be burdened by an additional $1 billion in benefit increases with no expectation that this cost will be offset by projected system savings.  SB 626 is a giant step backwards for California employers during the current fragile economic recovery.  Additionally, SB 626 reverses a bipartisan labor-employer compromise.  These types of agreements between key stakeholders that enjoy overwhelmingly bipartisan approval should be encouraged and protected, not attacked and diluted.

Action Needed

SB 626 will be heard in the Senate Labor and Industrial Relations Committee on January 15. Contact your senator and urge him/her to oppose SB 626.

Staff Contact: Jeremy Merz