Workers’ Comp Rules Could Cut Benefits 58%, Study Finds

Benefits for workers who are permanently disabled by on-the-job injuries could shrink by more than 50% under workers’ compensation insurance regulations issued in January by the Schwarzenegger administration, according to an independent study done for the insurance industry.

The study, reviewed Tuesday by the Workers’ Compensation Insurance Rating Bureau, adds weight to complaints from labor unions that employees would be harmed by last year’s overhaul of the state’s system for treating victims of workplace accidents.

The research by Christopher Brigham, a medical doctor and nationally recognized expert on calculating workers’ compensation benefits, also could give new ammunition to Senate Democrats who want to reopen the debate over the best way to fix the $22-billion-a-year system. Last year’s overhaul was largely orchestrated by Republican Gov. Arnold Schwarzenegger, who vowed that workers would not be harmed by efforts to rein in premiums.

“The bottom line is that a whole lot of really injured people are going to suffer with this system,” said Barry Broad, a lobbyist for the International Brotherhood of Teamsters, one of two labor representatives on the rating bureau’s governing committee. The bureau is an industry-financed body that makes recommendations on how much insurers should charge for workers’ comp coverage.

In his report, Brigham said new guidelines written by the state Workers’ Compensation Division would reduce the number of injured workers eligible for permanent disability payments by about 40%. The workers who qualify will get 58% less in benefits than they would have before, the report says. The new rules apply to workers who are injured Jan. 1 or later.

The report “tells us what we already knew -- there are serious questions the governor must answer about his workers’ comp reforms,” said state Sen. Don Perata (D-Oakland). “If he is genuine in his promise to make sure his policies do not slash benefits that injured workers and their families have earned, he must be prepared to take appropriate steps now.”

Last month, Perata, president pro tem of the Senate, broke with his union supporters and cast a key vote to confirm the governor’s top workers’ compensation administrator.

The governor is open to listening to Perata’s complaints but probably won’t push for significant changes to his workers’ comp program, said spokesman Vince Sollitto. The research by Brigham remains primarily “speculative” and is just one of a number of conflicting reports on the possible effects of the new regulations, he said.

In the meantime, Sollitto noted that workers’ comp premiums paid by California employers have dropped about 16% since late 2003. And premiums should decline 13.8% more for policies that start or renew after July 1, according to the latest recommendation by the rating bureau to state Insurance Commissioner John Garamendi.

About a third of the reduction, representing an annual savings to employers of an estimated $850 million to $1 billion, can be pegged to a tightening of permanent-disability eligibility requirements, the bureau said.

Garamendi will review that filing at a hearing he’s called for Thursday to give insurance companies a nonbinding recommendation for setting premiums in the second half of the year.

Insurers, which are starting to reap profits in the wake of the workers’ comp overhaul, argue that they need more time to measure the effect of the law.

“We need to let things play out before we judge the system,” said Nicole Mahrt, a spokeswoman for the American Insurance Assn. in Sacramento.