Compliance

Two States Grapple With High Workers’ Comp Rates With New Reforms

By Rebecca Vesely

Oct. 30, 2012

Employers in California and Illinois are hoping to see their workers’ compensation premium rates drop with the enactment of recent reforms.

But it remains to be seen whether attempts by the two states to change the system leads to lower costs to employers, experts say.

California and Illinois have among the highest workers’ compensation premium rates in the nation, a study released in October shows. California ranked third and Illinois placed fourth among all 50 states in premium rates, the Oregon Department of Consumer and Business Services says. Alaska businesses had the highest workers’ compensation rates in the nation, the report says.

In September, California Gov. Jerry Brown signed legislation to reform the workers’ compensation system in the Golden State. The law is expected to save employers $400 million to $1 billion in workers’ compensation costs.

Among the changes are a shortened medical legal process and the creation of an independent medical review board to resolve case disputes. Long-term disability payments to workers will increase under the law.

“The chamber is hopeful we can implement this law in such a way that it will lower premiums for employers,” says Jeremy Merz, policy advocate at the California Chamber of Commerce.

Under the law, employers will no longer be obligated to pay claims if a worker sees a physician who is out of network, and the physicians won’t be able to file liens against employers to recoup these costs.

The revamped system is expected to clear a backlog of hundreds of thousands of liens in Southern California alone, Merz says.

An independent medical review board will be established in early 2013 to review disputed workers’ compensation cases under the law. This replaces the existing system under which judges rule on these disputes and appeals.

“This was a huge get for employers in the state of California,” says Jason Schelmzer, lobbyist for the California Coalition on Workers’ Compensation, a state coalition of employers, on a conference call about the new law hosted by the California Chamber of Commerce.

That’s because the existing system can leave disputed claims open for more than a year, preventing workers from getting back on the job, Merz says.

In Illinois, employers are also hopeful that a workers’ compensation reform law signed by Gov. Pat Quinn last year will result in lower rates. The changes are estimated to save businesses at least $500 million annually.

Unlike in California, the Illinois law includes an across-the-board 30 percent rate cut to hospitals and physicians who treat injured workers. The law also set new standards on determining injuries and aims to prevent waste and abuse in the system.

New arbitrators appointed by the governor and confirmed by the state Senate will decide workers’ compensation cases. The arbitrators are licensed attorneys. The law also sets up a preferred provider organization program for claims, which could lower costs to employers.

Jody Moran, a partner in the employment law firm Jackson Lewis in Chicago, says it remains to be seen how big an effect the law will have on employers’ costs in Illinois.

“The law was supposed to improve the state’s business climate,” Moran says. “There was a sense that Illinois didn’t want to lose companies because of workers’ compensation costs.”

The reforms could produce a 10 to 20 percent drop in costs to employers, as well as a system that performs better for injured workers, she says.

“I’m not sure we are seeing that yet,” Moran says.

Rebecca Vesely is a writer based in San Francisco. Comment below or email editors@workforce.com.

Rebecca Vesely is a writer based in San Francisco.

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