Rescue California

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Garamendi: Workers' comp will collapse unless it's repaired

June 14, 2003

California's teetering workers' compensation system will collapse by January if major reform is not enacted by the Legislature this year, State Insurance Commissioner John Garamendi said Friday at a town hall meeting in Ventura.

"It's imploding as we speak," Garamendi said. "It will collapse completely if new laws aren't in place by Jan. 1. Time has run out."

Garamendi's warning met with nods and applause from a packed audience of business owners, nonprofit organization administrators, injured workers and government officials. Dozens told Garamendi of their frustration with inefficiency, fraud and rising premiums that are crippling their businesses.

At Buenaventura Medical Group in Ventura, premiums for workers' comp rose 91 percent this year, said Susan Graham, the group's vice president of human resources and chairwoman of the Ventura Chamber of Commerce workers' comp task force. As a result, the workweek for the group's 450 employees has been reduced to 36 hours.

"That's a 10 percent cut in pay for every employee, all because of the cost of workers' comp premiums," Graham told Garamendi during the forum.

The rising costs are affecting cities and counties as well, said Ellis Green, risk manager for the city of Ventura.

In the past 21/2 years, workers' comp premiums for the city have risen 300 percent, Green said. Next budget year, the city will budget $15.5 million to pay for workers' comp coverage.

"That's the equivalent of 50 extra police officers, 50 extra firefighters, 100 public works senior maintenance workers with full salary and benefits," Green said. "What we need is a system with integrity and common sense. That is what's lacking."

Garamendi agreed and outlined a list of reforms he is pushing on a statewide tour of counties. At the top of his list: containing runaway medical costs within the workers' comp system. Reform must include instituting a fee scale for what can be charged, a standard of what and how long treatment is required, and a review board made up of physicians -- "not lawyers as is the case right now," Garamendi said.

Other reforms include stiffer penalties for fraud and better training for claims adjusters.

Employers statewide are protesting workers' comp increases, including payments for permanently disabled workers that are going from $490 a week last year to $840 by 2005. Average rates in the state reached $5.20 per $100 of payroll by the end of last year, up from $2.27 in 1999, according to the Workers' Compensation Insurance Rating Bureau, a nonprofit industry association.

The rising costs are driving businesses out of the state, said Garamendi, who has enlisted the support of Gov. Gray Davis for his reform package.

As insurance commissioner, Garamendi said, he intends to crack down on abuses within the system. He plans to enlist other state agencies, including the state attorney general's squad of medical fraud investigators, he said.

In 2002, California insurers wrote $15.4 billion in workers' comp premiums. Garamendi said California provides more services per injury claim than any other state.

About 1 million claims are filed each year in the state.

As a result of soaring premiums, business owners statewide are cutting employee health care benefits, hours, raises and positions.