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Employers reel from workers' insurance Temple, whose shop hasn't had an increase in injuries, says the cost of workers' compensation insurance is as big as his rent. The money to pay it is torn straight out of his bottom line, but the law requires he have the coverage. This year's increase is so steep, Temple and his sons took a pay cut. When his secretary retired, he didn't hire a new one. Working with the machinists' union, he scaled back retirement benefits for mechanics. "I'm working for insurance companies this year," Temple sighs. Besieged by complaints from businesses, unions and other contributors, the Legislature and Gov. Gray Davis have pledged this year to overhaul California's costly 90-year-old workers' compensation insurance program. "California is last in benefits to injured workers and highest in premiums paid by employers, large and small," said Alan Zaremberg, president of the California Chamber of Commerce. "It's costing jobs and taking money out of people's pockets." So important is the issue that lawmakers expect changes to the $20 billion- a-year system to be part of a final deal on the state budget. Ten years ago, that system cost about $11 billion. The staggering jump in workers' compensation insurance costs isn't limited to small businesses. It hits major corporations as well as school districts, cities and counties. Fremont was quoted a rate of $699,740 for its next fiscal year, which begins July 1. This year, the city is paying $278,898. Ten years ago, responding to similar complaints from businesses, lawmakers in effect deregulated workers' compensation by eliminating a state-set minimum rate insurers could charge. Price wars ensued, with companies slashing premiums to gain market share. Ultimately, that drove more than a dozen companies into bankruptcy and narrowed competition to the point where the largest share of the market is now controlled by the State Compensation Insurance Fund, the state-run insurer of last resort. Insurers have been raising rates by leaps and bounds, with the increases accelerating due to rising medical costs. The Workers' Compensation Insurance Rating Bureau, a nonprofit industry association, reported that average rates reached $5.05 per $100 of payroll in September, up from $2.27 in 1999. More than 50 bills have been introduced on workers' compensation this year. Only about half propose significant changes to the system, which handles roughly 1 million claims each year. Republicans have a plan Democrats don't like. Democrats have ideas Republicans think don't generate enough savings in the system, which is supposed to provide injured workers with medical treatment in return for waiving the right to sue employers. Some bills are backed by lawyers, others by insurers. Business groups have a package that is being systematically killed by lawyers. There's a gaggle of union-supported legislation, too. Every interest group -- and workers' compensation affects many of the Capitol's most powerful -- claims its agenda will make the system better, be cheaper for businesses and provide better care to injured workers. .5 The governor, who last year approved an increase in benefits to injured workers, and Insurance Commissioner John Garamendi have offered their own prescription to ramp down costs in the system. Besides the competing plans, San Francisco's John Burton, the Senate's top Democrat, has linked every major workers' compensation bill to a measure he backs requiring businesses to provide health care for their workers. If his bill dies, so do the workers' compensation measures.
Traditionally, change in the workers' compensation system is caused by several competing
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