BACKGROUND
In 2002, California's workers compensation system was on the verge of collapse. California's workers compensation costs were the highest in the nation. Businesses were paying $6.46 per $100 of payroll for workers compensation coverage. This caused many businesses to leave California, taking jobs with them.
Injured workers were not being well served by the broken system. In addition to being costly, medical treatment lacked standards that assured effectiveness. Workers were not being returned to work. And disability payments failed to fairly compensate seriously injured workers.
Insurers were not faring any better. Even though insurance premiums were increasing, premiums could not keep pace with ever-increasing costs. From 2000 to 2004, 27 workers compensation insurance companies in California went insolvent.
During 2002 through 2004, the Legislature took bold action to reform the workers compensation system. The reforms eliminated unnecessary costs, established standards for effective medical treatment, specified a process for making reasonable, objective decisions about disabilities and created incentives for getting injured workers back to their jobs.
The reforms are succeeding. As of June 30, 2009, the average cost of workers compensation coverage per $100 of payroll was down to $2.33. The treatment of injured workers is being guided by scientific, evidence-based standards. Injured workers are returning to work at higher rates. Administrative decisions about disabilities are based on objective tests. Insurance rates have plummeted. Premiums have been cut by more than 50% since the enactment of the reforms. More insurance companies are competing in the California workers compensation insurance market.
The ultimate outcome of the reforms is still unclear. The regulatory implementation of the reforms is developing. And the interpretation of several provisions in the reform legislation is undergoing review by the courts.
ACIC POSITION
ACIC believes that the reform legislation should be preserved. Study of the operation of the reforms may show that some aspects of the reforms will need to be modified. The reform legislation created administrative mechanisms to address these issues. The Division of Workers Compensation has the authority and the expertise to implement changes that achieve balance and equity for the workers compensation system.