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Workers' comp faces disaster, legislator says "We're headed for a meltdown," Hollingsworth said at a forum on the crisis at Grossmont College. "I'm afraid that this will worsen before legislators act." Over the past eight years, the premiums that California employers pay for workers' compensation insurance have risen from $5.7 billion to more than $20 billion. The state has the highest-cost system in the nation and one of the lowest payout rates for claims. "It's not the insurance companies that are getting rich," Hollingsworth said. "It is a problem in the middle." Medical costs have skyrocketed in recent years, and critics contend that outdated fee schedules have caused medical providers to manipulate the system. There are no fee schedules for outpatient surgical centers, which account for about 60 percent of all "hospital costs." Under workers' comp, drug costs are estimated to be 40 to 45 percent higher than under more cost-controlled medical programs. Costs have also escalated as the program designed as a no-fault system has increasingly involved lawyers. No one seems optimistic that suitable reform is near. "I'd like to think it would happen by the end of this year or early next year," Hollingsworth said. "But it doesn't look like we are headed that way." Hollingsworth and state Assemblyman Jay La Suer, R-La Mesa, blamed Democratic legislators for failing to face up to the crisis. "The majority party has to decide it wants to reform the system before anything is accomplished," Hollingsworth said. "Unfortunately, they haven't." A spokesman for Sen. Richard Alarcon, D-Van Nuys, disputed that analysis. Alarcon's workers' comp bill, SB 228, which seeks to control medical expenses, has passed committee and will be debated on the Senate floor next week. In addition, Alarcon's bill was the centerpiece of Gov. Gray Davis' reform package that seeks to cut annual insurance premiums by $1.5 billion. Davis announced his plan in early May. Meanwhile, Insurance Commissioner John Garamendi said in San Diego yesterday that in addition to shortchanging workers and driving up the cost of doing business in California, more than two dozen California workers' comp insurance companies are in bankruptcy. "Workers' compensation medical costs are rising three times faster than general medical costs," he said. Garamendi visited the Broadway location of Senior Community Centers, which offer meals and support services to low-income seniors. In one year, the centers suffered a near doubling of their workers' comp insurance premiums, with costs rising from about $44,000 to $81,000. "That's 38,000 fewer meals the centers can provide," said Garamendi. "This is costing California $10 billion a year. That's a rate that will surpass the cost of the electricity crisis." The insurance commissioner supports a package of reforms that include new fee schedules, medical treatment standards, requirements for using generic drugs and improved dispute resolution, in addition to a crackdown on fraud. At the El Cajon forum, about two dozen East County businesses shared tales of soaring premiums, but Gary Correia, vice president of Taylor Guitars, argued that there was no return for higher premium costs. This year, the company's workers' comp insurance climbed 55 percent to $675,000. Correia complained that the company already pays the entire premium costs for health, long-term disability and life insurance on its 390 employees. "We're paying $675,000 for this, and I'm not sure what we're getting for it," he said. C.J. Buck, president of Buck Knives, said the workers' comp crisis was one of the determining factors when his company decided to move to Post Falls, Idaho. The company will shut its El Cajon factory early next year, eliminating 270 jobs.
Buck's workers' comp premiums increased from $250,000 in 2001 to $400,000 last year
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