WORKERS’

COMPENSAT

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FORECAST

2011

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WELCOME TO THE WORKERS’ COMPENSATION FORECAST 2011

Jerry Azevedo, Workers’ Compensation Action NetworkAPCO Worldwide

Jason Schmelzer, California Coalition on Workers’ CompensationShaw / Yoder / Antwih, Inc.

WHO WE ARE

Workers’ Compensation Action Network

Broad-based, statewide coalition of employers and insurers dedicated to defending and advancing reform of California's workers' compensation system Includes every major employer trade association in California

Insured, private and public self-insured employers

Nonprofit organizations

Educate lawmakers, the business community and members of the media on workers’ compensation issues Track outcomes of recent legislative reforms

Disseminate original material

Provide media commentary

Conduct annual Legislative Education Day

Mobilize grassroots network to support/oppose legislative proposals

WHO WE ARE

California Coalition on Workers’ Compensation

Statewide association of employers committed to maintaining a workers’ compensation system that provides quality benefits at a reasonable cost to employers

Founded in 1985 and governed exclusively by CA employers

Advocacy Intimately involved in the development and passage of 2004 reforms Serve as the voice of California employers in legislative and regulatory

venues Unrivaled experience and knowledge of workers’ compensation policy

in Sacramento

Education Annual conference on workers’ compensation trends, strategies, and

public policy Coordinate annual Legislative Education Day

WHAT WE’LL COVER TODAY

Update on California’s Workers’ Compensation System

Election Outcomes and Their Impact on the Business Community and Workers’ Comp

Preparing for 2011

WHAT’S BREWING IN WORKERS’ COMP?

WHAT’S BREWING IN WORKERS’ COMP?

…Costs Per Claim Have Increased by 50%

WHAT’S BREWING IN WORKERS’ COMP?

Average insurance rate for employers up by approximately 3% since 2009

Rate filings for January 1, 2011 indicate an additional 3% increase

Rate increases far below recommended 27.7% increase (2009, 2010)

Insurers paid $1.25 per $1.00 earned in premiums in 2009

WHAT’S BREWING IN WORKERS’ COMP?

…Court Cases Increasing Disability Benefits, Driving Uncertainty

California's non-partisan Legislative Analyst's Office has concluded that

these rulings could lead to ‘(1) changes in PD ratings, (2) increased incentive for litigation, and (3) decreased uniformity

in determining PD. Ultimately, these effects would likely lead to increased

benefits for workers and higher costs for businesses and governments.’

“

”

WE’VE BEEN HERE BEFORE

Medical costs for workers’ compensation claims in California more than doubled between 1995 and 2002 and grew much faster than the national rate of medical inflation

Medical costs per claim were twice as high as the national average in 2002

Permanent partial disability claims were being filed at a rate three times the national average and 20 percent higher than the next highest state

RECAPPING THE REFORMS (2002 – 2004)

2002 2003 2004

Legislation AB 749 “Benefit increase

bill”

AB 227/SB 228 “Medical cost

reforms”

SB 899 “Comprehensive

reform bill”

Estimated System Cost

17.6% Increase 13.3% – 15.7% Reduction

14.7% Reduction+

14.9% Reduction (PDRS)

RECAPPING THE REFORMS (IMPACT ON EMPLOYER COSTS)

62% reduction in premium per $100 of payroll

Billions in savings for local government, schools

Increased market competition (29 new insurers)

State Fund market share reduced dramatically

But . . .

California still relatively high-cost state: 131% of national median

California employers pay 18% of national benefits, but employ only 12% of covered workforce

RECAPPING THE REFORMS (IMPACT ON WORKER OUTCOMES)

Return-to-work rate increased by 5%

Increase as high as 11% for certain body parts

Percentage of injured workers receiving TD benefits equal to two-thirds of wages increased from 80% to 97%

TD weekly max increased by 100% since 2003

Litigation rate is down, disputes being resolved more quickly

Satisfaction levels with access to medical care and quality of medical care consistent with pre-reform levels

PERMANENT DISABILITY BENEFITS

Decline in PD levels Intent of shift to objective rating system – subjective cases out Apportionment to causation Number of weeks reduced by statute for ratings lower than 15%

Measuring the decline in ratings Measurements vary from 29% to 42%

Comparison to pre-reform PD benefit costs increased by 62% between 1998 and 2004 PD cases filed at three times national average AB 749 increased PD benefits

PERMANENT DISABILITY BENEFITS

RECAP OF SCHWARZENEGGER YEARS

2 0 0 3 – 2 0 1 0

REFORM ROLLBACK CAMPAIGN

LEGISLATION TO UNWIND REFORM

Average 15-20 bills every year

Permanent disability increases

Temporary disability cap changes

Fee schedule changes

New penalties on employers

Insurance rate regulation

Public sector presumptions and special benefits

Administrative hurdles for UR and Medical Provider Networks

GOVERNOR’S RESPONSE TO LEGISLATIVE ATTACKS Pragmatic Problem Solving TD cap fix Medical treatment guidelines PD increase through regulations

Reform has been preserved through the vetoPD Increase vetoed three timesApportionment limitations vetoed twice Administrative burdens vetoed many more

Costs have been increased due to signing public safety billsCancer presumption expansionDeath benefit expansion Pre-designation bill

 

ELECTION RESULTS

CALIFORNIA’S NEW GOVERNOR

Meg Whitman – 41.5%

Jerry Brown – 53.4%

DEMOCRATS DECISIVE IN RACES FOR STATEWIDE OFFICE

Lt. Governor Newsom v. Maldonado

Treasurer Lockyear v. Walters

Insurance Commissioner Jones v. Villines

Controller Chiang v. Strickland

Superintendent of Public Instruction Torlakson v. Aceves

Attorney General (undecided) Harris v. Cooley

LEGISLATURE GETS MORE DEMOCRATIC

State Senate 24 Democrats 15 Republicans 1 vacancy

Moderate caucus  grew in 2010 election cycle

State Assembly 52 Democrats 28 Republicans

Democrats picked up two seats in 2010 election cycle

D - 24R - 15

D - 52R - 28

CALIFORNIA VOTER SENTIMENT

Low approval of legislature

Low trust of state government

Serious concerns over economy and state budget

Reform-minded electorate (Props 22, 25, 26)

Popularity of President Obama

Unpopularity of GOP

Growth of independent voters

Participation of Latino voters

Green values

ELECTION ANALYSIS

LEGISLATURE

Legislative composition not substantially altered

Senate remains more moderate house

Legislature assumes new responsibility due to lack of opposition party Governor

Budget problems will continue to be paramount and may serve as limiting factor

EVALUATING GOVERNOR-ELECT BROWN

Campaign statements

Policy agenda and priorities

Past Actions

Appointments

POLICY AGENDA AND PRIORITIES

Budget – $25 billion+ deficit 2011-2012

Jobs – Unemployment rate stagnant at 12% Infrastructure Investment Renewable energy

Other priorities likely set by legislature

PAST ACTIONS – TEMPORARY DISABILITY

History Increased the minimum TD

rate in 1976 and 1977 Increased the maximum TD

rate in 1980 and 1982 Eliminated the 240 week

TD cap in 1978

Current Issues Benefit levels indexed so

no increase needed Current 104 week cap is

controversial, even with expanded timeframe

PAST ACTIONS – PERMANENT DISABILITY

History Increased PD benefits in both

1976 and 1982

Current Issues Post-reform PD benefits levels Could be raised by regulation

or legislation

PAST ACTIONS – PRESUMPTION BILLS

History Brown signed CA’s first

cancer presumption bill in 1982

Current Issues Public sector presumptions

have proliferated Threat of presumptions

entering the private sector

PAST ACTIONS – MEDICAL CONTROL

History Signed bills allowing injured

worker physician choice in 1975

Expanded injured worker physician choice to first day in 1977

Current Issues Employers have medical

control through MPNs

APPOINTMENTS

Secretary of the Labor and Workforce Development Agency

Director of the Department of Industrial Relations

Administrative Director for the Division of Workers’ Compensation

Workers’ Compensation Appeals Board judges

Appointees in these areas will have substantial impact on policy

PREPARING FOR 2011

REFORM-ERA ACTIVISM NEEDED

“Workers’ comp is not some sleepy little issue”

Employer engagement was critical to passing and protecting the reforms

Near-complete turnover of reform-era lawmakers

Reform results partially defined by 7-year, well-funded rollback campaign

REFORM-ERA ACTIVISM NEEDED

Policymaker education must occur at all levels

Importance of stable workers’ compensation system for employers, injured workers

Impact of recession, higher WC costs on jobs and public services

Data-based, balanced approach to system improvements

WHAT CAN EMPLOYERS DO?

Get involved WCAN

www.fixworkerscompnow.org CCWC www.ccwcworkcomp.com Engage locally

Take action Connect with your legislator 2011 Legislative Day Letters and calls matter

Join us online Twitter

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Questions?

Thank You