Redondo Beach Chamber of Commerce & Visitors Bureau

December 20, 2007

Redondo Beach Chamber Continues to Fight Against Workers’ Comp Rate Increases

The Redondo Beach Chamber of Commerce & Visitors Bureau applauds California Insurance Commissioner Steve Poizner’s recommendation late last year not to raise the “pure premium advisory rates” for workers’ compensation insurance beginning January 1, 2008. This will help insure that reforms from 2004 continue to help businesses maintain stability when dealing with the workers compensation system.

The Chamber continues to highlight the excessive workers' compensation costs that result in the loss of jobs, the closing of businesses, businesses moving out of the state and out of Redondo Beach, and businesses deciding not to locate in the state and city of Redondo Beach. In 2004, the legislature and Governor Schwarzenegger worked together to reform the workers compensation system. Those reforms are working.

We commend the Commissioner in taking the right step in keeping businesses competitive especially since workers compensation costs, although necessary, were out of control and disruptive to businesses.

The pure premium rates, which are set twice per year, reflect expected losses and loss adjustment expenses on a statewide basis for each industry classification, such as carpentry or roofing. Pure premium rates are not binding, but provide a benchmark for rates set by insurance companies. The state’s largest insurer, the State Compensation Insurance Fund (“State Fund”), announced earlier this week that its rates would remain at the same level.

The Workers’ Compensation Insurance Rating Bureau (WCIRB), which analyzes the system and recommends pure premium rate adjustments to the Commissioner, had previously recommended a 5.2 percent increase due to increased costs for administering claims and recent legislation (AB 338) increasing costs for temporary disability benefits. According to the WCIRB, “pure premium rates for individual classifications will change (some higher and some lower) based on the approval of new classification relativities.”

September 1, 2007

The Redondo Beach Chamber of Commerce & Visitor’s Bureau continues to fight proposed legislation that would allow for workers’ compensation increases. A pending job killer in the Legislature, SB 942, would create new requirements for employers when an injured employee returns to work. This would add to the costs of workers compensation, which California saw spiral out of control three years ago.

Current law protects employees from discrimination based on their workers’ compensation claims. SB 942 would create an assumption that an employer has discriminated against the employee if the employee was not returned to work with full pay and benefits within one day of the employee being released to full duty.

SB 942 also changes the timeframe of which supplemental job displacement vouchers are distributed. SB 942 will revert the workers’ compensation system back to the days of high premiums and will ultimately have businesses pay for the out of control costs it mandates. This is the wrong direction for Redondo Beach businesses and employees.

June 15, 2007

Redondo Beach Chamber Fights Workers Compensation Increases

Redondo Beach Chamber-opposed SB 936 (Perata) increases employer costs by doubling permanent disability benefits in the California workers’ compensation system.

“We believe that there is no statistically valid and objective evidence that warrants an increase in benefits,” stated Marna Smeltzer, Redondo Beach Chamber President/CEO.

The drop in overall amounts spent on permanent disability benefits is due to the application of objective medical evaluations using American Medical Association guidelines, the appropriate use of apportionment, the reduction of benefit weeks for low ratings, and return-to-work adjustments.

“Prior to the Redondo Beach Chamber-supported reforms of 2004, the workers compensation system was out of control,” stated Brad Scott, Redondo Beach Chamber Government Relations Committee Chair. “It harmed employees by creating an adversarial system focused on litigation and disability instead of reasonable and appropriate medical treatment and return-to work, and it did so at incredible cost to employers,” continued Scott.

Workers' compensation premiums and system costs tripled from 1999 to 2003. Outside of the high cost of operating in California, skyrocketing workers’ compensation premiums had a negative impact on businesses and local governments to the point where expansion of the workforce came at a high price and public services suffered.

According to the Public Policy Institute of California, one of the major reasons for skyrocketing costs was the increasing number of permanent disability claims. Before the implementation of SB 899 (Poochigian), permanent disability claims were filed at a rate of three times the national average, and California was 20 percent higher than the next highest state. A subjective system of work preclusions led to injured workers getting higher permanent disability rates, and litigation that preyed on this subjectivity compounded the situation.

Although there has been evidence of a drop in benefits, the Chamber believes that California should take a data-driven approach to reviewing the available information before considering a permanent disability increase, let alone doubling benefits. Measuring the adequacy of permanent disability ratings under the current system by comparing them against the old system is irrational.

Premiums have come down, objectivity has been established, and a sense of balance has been returned to the California workers’ compensation system. California’s private and public employers stand ready to resolve any inequities that have resulted from recent reforms; however, the Chamber believes that California cannot proceed on a path that will lead the state back to the days of skyrocketing premiums, adversarial litigation, and an unbalanced system.

September 29, 2006

Redondo Beach Chamber Continues Fight to Protect Workers Compensation Reforms

For too many years, California’s out-of-control workers’ compensation system was the biggest barrier to our state's and our region’s economic growth. Recently, Governor Schwarzenegger prevented our economy from going backwards to a time of soaring insurance premiums and stagnant job growth.

The Governor has reiterated his commitment to employers and employees by vetoing SB 815, which would have undermined recent bipartisan workers’ compensation reforms by arbitrarily doubling the duration of permanent disability payments without sound data on which to base the increase. "When I ran for office, skyrocketing workers' compensation costs were the poison of our economy," said Governor Schwarzenegger.

The Governor made another important point: "Because of our historic workers' compensation reforms, we created a positive business environment and California has added more than 600,000 jobs since I took office.” A major reason why I applaud the Governor for vetoing the Redondo Beach Chamber-opposed SB 815.

His action protects workers compensation reforms that have brought us one step closer to stabilizing the high cost of doing business in Redondo Beach and California. We were successful in 2004 with SB 899 by Senator Charles Poochigian that made fundamental changes to the way the workers’ compensation system determines the level of injury and the amount of disability assigned to an injury and created new medical networks to provide quality, cost-effective care to workers. This package ensured that medical treatment follows nationally recognized guidelines and sets clear parameters for what is acceptable treatment for injured workers in the system, while also reducing excessive litigation.

Included in the 2004 workers’ compensation reform package were changes in the law designed to bring rationality to the process of determining which conditions contributed to an injury and how much -- so that employers would be responsible for only the portion of an injured worker’s disability resulting from the existing job-related injury. As a result, California employers have saved $15 billion from what they would have paid absent the reforms!

The 2004 workers’ compensation reforms were the result of bipartisan compromise that was fair to both workers and their employers. As provided for in the law, any modifications to the carefully crafted reforms should be done only after thoughtful review of sufficient empirical data, not through hasty legislation rushed through at the end of the legislative session. Log on to www.RedondoAdvocacy.biz for more on our work on workers’ compensation reform.

Workers’ Compensation Reform Killers to Begin Gathering Signatures

In 2004, the legislature and Governor Schwarzenegger worked together to reform the workers compensation system. Those reforms are working. Three initiatives to overturn the 2004 reforms were released in late February from the Attorney General’s Office to begin gathering signatures for the November 7 General Election.

“The Redondo Beach Chamber is committed to ensuring that regulations that affect Redondo Beach businesses are kept to a minimum and do not put them at a competitive disadvantage,” stated Marna Smeltzer, President and CEO of the Redondo Beach Chamber. “The workers’ compensation reforms in 2004 are working. Let’s keep it that way,” Smeltzer continued.

The Redondo Beach Chamber, California Chamber and the Californians Against the Job Killer Initiative (a statewide coalition of non-profits, businesses, taxpayers and other organizations) has promised an all-out fight against these initiatives to preserve the workers’ compensation reforms.

“Workers’ compensation costs affect everyone and all three of these initiatives threaten not only small businesses but non-profits, school districts and local governments,” said California Chamber President and CEO Allan Zaremberg. “These initiatives would take away savings that could be used to hire more teachers, build new roads and serve the less fortunate, ” Zaremberg continued.

The Redondo Beach Chamber-supported reforms in Senate Bill 899 made several important changes to the workers’ compensation system that have resulted in lower insurance premiums and better management of cases. SB 899 ensured that medical treatment follows nationally recognized guidelines and sets clear parameters for what is acceptable treatment for injured workers in the system, while also reducing excessive litigation.

According to a recent study by the Division of Workers’ Compensation, the reforms have saved $8.1 billion in comparison to 2003 workers’ compensation costs and an estimated $15 billion in comparison to what 2006 costs would have been without reforms. The Legislative Analyst notes that the annual costs of the proposed initiatives could be in the mid to high hundreds of millions of dollars for state and local government work-related injuries. This estimate could be understated considering Los Angeles County alone estimates it will save $600 million annually by the year 2011 as a result of the current reforms.

All three versions of the so-called “Worker Empowerment Act” propose to eliminate the use of medical provider networks, established under the provisions of SB 889, and reinstate the ability of the injured workers and/or their advocates to, after 30 days, select a different doctor who would be granted a presumption of correctness.

Furthermore, all three proposals would undermine the ability of employers and insurers to utilize pharmaceutical benefit managers to help contain the cost of prescription drugs within the workers’ compensation system.

In addition to these proposals, Version 3 of the initiative proposes an increase in benefits for injured workers that could be greatly inflated by any prospective increase in the minimum wage.

Versions 1 and 2 of the workers’ compensation initiative also include provisions that would eliminate workers’ compensation as the exclusive remedy for injured workers and grant injured workers the ability to pursue an action at law.

With the issuance of titles and summaries, the supporters of these initiatives, who have not publicly revealed themselves, are able to begin the process of collecting signatures to place the measures on the ballot. All three proposed initiatives are far from qualifying for the ballot. To qualify a measure to be placed on the ballet, proponents must collect 598,105 signatures of registered voters, equal to 8 percent of the total votes cast for Governor in the 2002 gubernatorial election. Supporters have 150 days to circulate petitions.

“Another issue to consider is that historically, there has been a debate about whether the workers’ compensation system can be amended through the ballot process. All three proposals seek to end this debate by amending the state Constitution to clearly state that that the workers’ compensation system can be amended by both the Legislature and by initiative. This is dangerous to the interests of the businesses in California,” asserted Marna Smeltzer

Chamber Continues to Represent the Interests of Businesses in Workers' Compensation Reform Fight

Plagued by skyrocketing costs and widespread conflict, California’s workers’ compensation was a system in crisis. The harmful impacts on employers and workers alike drove the need to reform California’s broken system. Lawmakers responded by enacting a series of reforms, culminating in the comprehensive reform proposal championed by Governor Schwarzenegger in 2004.

This legislation, Senate Bill 899, was crafted to address many of the core issues plaguing the system by:

- Reducing the high incidence of unnecessary and costly litigation
- Producing consistent and predictable outcomes for disabled workers and encourage return to work
- Improving medical treatment using proven methods of delivering quality care affordably and expeditiously
- Ensuring that injuries directly result from employment and benefits reflect degree of causation related to the injury

Passage of SB 899 was just the first step, and the Chamber is working to ensure that the legislation is implemented as intended and not undone by reform opponents. Most of the administrative regulations required to turn SB 899 into actual system change have been adopted by state regulators, but some additional regulations are still needed. Meanwhile, reform opponents — primarily those who profited from the conflict, uncertainty and subjectivity of the old system — are challenging many of the key reforms in court and the Legislature.

In September 2005, Governor Arnold Schwarzenegger finalized his action on the bills passed by the California Legislature during the first year of the 2005-2006 legislative session. When measures where first introduced at the beginning of the 2005 session, over four dozen workers’ compensation bills were introduced. Although most of these bills focused altering the reforms mandated by legislation passed in 2003 and Senate Bill 899, there were several measures that would reinforce and strengthen California's workers' compensation.

On October 7, 2005, none of the proposed workers’ compensation legislation was passed by the Legislature nor signed by Governor Schwarzenegger. California legislators, Assembly Speaker Fabian Nunez, and the Governor concluded that further improvements should be saved until the most recent measures have had time to fully infiltrate the system.

Despite the unanimous waiting period, the following four bills will create another stumbling block for California’s workers' compensation system: AB 1549 (Koretz), SB 46 (Alarcon), SB 538 (Kuehl) and SB 1023 (Dunn). First, AB 1549 will allow chiropractors and acupuncturists to become Independent Medical Reviewers. Second, SB 46 will impose a rate regulation scheme on workers' compensation insurers that will reduce the increasing competition in the workers' compensation insurance market currently helping to bring down costs for employers. Next, SB 538 will place burdensome restrictions on the new Medical Provider Networks established by SB 899. Finally, SB 1023 will enforce a redundant penalty structure that was previously revised within SB 899. SB 1023 was vetoed by Governor Schwarzenegger after passing the Legislature.

On the other hand, there are two bills that will provide further savings for employers. SB 178 (Poochigian) will cut the red tape for medium-sized employers forming self-insurance pools as a way of reducing their workers' compensation costs. The other measure, SB 292 (Speier), will save employers money by closing a loophole that allows medical providers to repackage drugs for sale a huge mark-ups.

Now that the Legislature is back as of the first week of January, there are a few legislative agendas to watch. First, Assembly Speaker Nunez expressed an interest during the 2005 session to research a more "comprehensive" workers’ compensation reform. The Speaker is expected to propose changes to the new permanent disability rating system that was enacted January 1, 2005. Additional legislation with goals to diminish employers’ savings resulting from SB 899 will be proposed by the California Applicants' Attorneys Association (CAAA) during the 2006 legislative year. The final to watch in 2006 is the costs of the workers’ compensation system. Most of the reform measures passed in 2003 will have penetrated the system allowing legislators the time needed to determine how well the system is working for both employers and injured workers.

With many bills shelved and many agendas proposed in 2005, there will be many workers’ compensation issues to take action on during the 2006 legislative session.

In September 2005, Governor Arnold Schwarzenegger finalized his action on the bills passed by the California Legislature during the first year of the 2005-2006 legislative session. When measures where first introduced at the beginning of the 2005 session, over four dozen workers’ compensation bills were introduced. Although most of these bills focused altering the reforms mandated by legislation passed in 2003 and Senate Bill 899 (Poochigian), there were several measures that would reinforce and strengthen California's workers' compensation.

Workers' Compensation Rates Continue to Decline

Recent recommendations of double-digit workers' compensation rate reductions are the result of the reforms that passed last year beginning to take hold. New guidelines have brought California's standards closer in line with those used by the rest of the nation and are helping keep costs down. The best way to restore competition, and provide much-needed relief to small businesses, is to see that last year's workers' compensation overhaul is fully implemented.

Rate Recommendations Indicate Further Relief

Twice a year, the Insurance Commissioner recommends workers' compensation rates - known as the "pure premium advisory rate" - as a target for insurance premiums. On June 1, the Insurance Commissioner announced his pure premium rate recommendation reduction of 18% for workers' compensation policies written after July 1. The Workers' Compensation Insurance Rating Bureau (WCIRB), the designated statistical agent of the Insurance Commissioner, recommended a 13.8% rate reduction. The cumulative rate reduction recommended by the Insurance Commissioner is 36%, while the cumulative WCIRB rate reduction recommended since reform is 33%.

While the Commissioner's pure premium rate is merely advisory, California insurers submit their actual rate plan to the Commissioner for his approval. The Commissioner has approved insurance rate plans with an average rate reduction of 17% between 2003 and January 2005, despite the fact that his pure premium rate recommendations totaled 22% (see chart below).

Note: Average Insurer Rate Changes for 7/1/05 and the Cumulative Average Insurer Rate Change will be available at the end of June.

Insurance Commissioner Approves an Average 14% SCIF Rate Reduction, 4% Less Than His Pure Premium Advisory Rate:

The insurance Commissioner has also approved a rate reduction plan for the State Compensation Insurance Fund (SCIF) which will provide an average 14% reduction for new or renewing policies as of July 1. The SCIF plan also includes an average 3.8% rate reduction for already in-force policies and a new safety credit for small employers. State Fund rates will be down 26.2% overall since the workers' compensation overhaul began two years ago.

Other Insurers File Rate Reductions:

To date, carriers have filed rate reductions of 10.4% to 18% for their July 1, 2005 rate filing. These rate reductions are pending before the Insurance Commissioner and if approved, would apply to new or renewing policies beginning July 1, unless otherwise noted.

The impact of rate reductions on individual policyholders will depend on when they last renewed their policies and their own experience rates. For policyholders renewing after July 1, their rate will include the January 1, 2005 and the proposed July rate reduction adjusted for their own experience ratings.

Reclassification or Inappropriate Action Could Slow Rate Reductions:

Some employers have expressed concern that despite approved rate reductions, their individual rates have not gone down. If employers feel that their employees have been inappropriately reclassified or they have seen other changes to their policies that they believe have incorrectly affected rates, they may seek assistance from the WCIRB Ombudsman. The Ombudsman is there to assist policyholders with obtaining and understanding information about their insurance.

Despite Opposition from Senator Debra Bowen, Senate Confirms Andrea Hoch as Director of Workers' Compensation

The Redondo Beach Chamber applauds the State Senate for confirming the nomination of Andrea Hoch. State Senator Debra Bowen voted AGAINST the confirmation. Andrea Hoch has done an exceptional job this far in implementing the cost-saving reforms enacted last year, and her continued leadership is key to bringing costs down further for California’s employers.

The bi-partisan overhaul of California’s broken workers’ compensation system is just beginning to bring cost savings to California’s job creators. It is essential that we keep on course to enact the entire reform package to improve our business climate, keep employers here and bring new jobs to California.

Andrea Hoch is waiting to be confirmed by state Senate as California's Administrative Director of the Division of Workers’ Compensation.

Ms. Hoch was appointed by Governor Arnold Schwarzenegger to the division last year to implement critical workers’ compensation reforms passed by the legislature. Ms. Hoch has done an exemplary job of meeting necessary deadlines to implement the reforms and putting the workers’ compensation system back on track.

Redondo Beach business owners cannot afford to go backwards. Thanks to Ms. Hoch’s work the system is showing strong signs of recovery.

Ms. Hoch should be allowed to continue the challenging job of restoring our workers’ compensation system.

The following are the ten most common misconceptions regarding workers' comp and the correct explanations of the law:

1. Employees should be treated by their own physician for all work-related illness or injury.

You have the right to select the doctor who provides care for your employee's work-related injuries or illnesses for the first 30 days following an incident, unless the employee has predestinated his/her personal physician. You have similar control for up to 180 days of treatment (or 90 days if you do not provide health insurance) if you provide occupational health services through an HCO and the employee has not predestinated a personal physician.

2. Time away from work for work-related illness or injury is not included in other protected leaves of absence.

Employers subject to FMLA/CFRA should advise eligible employees that workers' compensation leave runs concurrently with leave under FMLA/CFRA for up to 12 weeks and give them applicable family medical leave notices.

3. If I offer an injured employee temporary modified duty, I must pay his/her regular rate of pay.

An offer of temporary modified duty to an employee who is receiving temporary disability benefits does not have to be at his/her regular salary. The pay rate can be appropriate for the modified job and the employee can receive partial temporary disability pay from workers' compensation.

4. I must continue my employee's health benefits for the entire duration of workers' compensation leave.

Employers with health plans subject to ERISA do not have to continue health benefits for the duration of an employee's workers' compensation leave. Benefits must be continued for as long as you would provide them for employees on non-occupational medical leaves. Thereafter, COBRA rights must be offered.

5. Workers' compensation insurance only covers injuries occurring on the company's premises.

Injuries that occur outside the workplace, even in an employee's home, may be covered by workers' compensation, provided they arise out of employment and occur in the course of employment. This may include injuries that occur during commuting to and from work, if you control the employee's route of travel or the employee is allowed to engage in work activities during the commute, such as cell phone calls.

6. Stress in an employee's personal life is a major factor in workers' compensation stress claims.

In order to receive workers' compensation for stress, the employee must show that work accounts for more than 50% of all sources of stress. Thus, evidence that the majority of stress factors can be attributed to non-work circumstances is an effective defense against stress claims.

7. A new employee who is unable to cope with the pressures of his job is a prime candidate for a successful workers' compensation stress claim.

An individual who has been employed by you for less than six months will not be compensated for work-related stress, unless the stress results from a sudden and extraordinary employment condition. Also, lawful, non-discriminatory, good faith personnel actions (such as discipline and terminations) are not grounds for stress claims. Early action should therefore be taken when a new employee is identified as unable to cope with a job.

8. First aid cases need not be reported to my workers' compensation carrier.

If an injured worker requires only first aid treatment and suffers no time lost from work beyond the date of the illness or injury, you may pay the doctor for services direct, and avoid payment by your workers' compensation carrier. The Doctor's First Report must still be filed.

9. I can refuse continued employment to an employee unless and until he/she fully recovers from a work-

An employee who is disabled as a result of a work-related illness or injury will likely be considered disabled under state and/or federal law. Employers must comply with disability discrimination laws and provide reasonable accommodation to such injured workers who can perform essential job functions. Failure to do so may result in a claim under both workers' comp law and disability discrimination law. However, you are not required to create a position or displace another employee.

10. A case of serious injury or death from a work-related incident need not be reported to Cal/OSHA until all the details have been identified.

You must report any work-related serious injury or death to Cal/OSHA within 8 hours after you know of the incident. Failure to properly report can result in heavy fines and criminal prosecution.

On September 2nd, the State of California released its fiscal analysis of California's workers' compensation costs. The data is based on information submitted by insurers in March 2004.

The report found that the average statewide insurer rate per $100 of payroll for policies written in the first quarter of 2004 is $5.89, down eight percent from the $6.37 rate charged for the second six months of 2003.

This amount is seventeen percent below the average rates that would have been charged in the first quarter of 2004 if the cost-saving-reforms of 2003 and Senator Poochigian's workers' compensation overhaul this year (SB 899) had not been enacted. Of course, much more relief is still needed.

Other information found in the report includes the fact that indemnity claim frequency for the first quarter of 2004 is estimated to be 5% lower than for the first quarter of 2003. Currently, 2004 indemnity claim frequency is estimated at approximately one half of its all-time high. Important Regulatory Work Underway SB 899 (Poochigian) was signed into law on April 19, 2004. (see story on the right)

While some aspects of the legislation went into effect immediately, the Division of Workers' Compensation is currently in the process of developing regulations to implement some of the most important components. Guidelines for implementing employer doctor networks and the creation of a new permanent disability schedule are some of the most important, and potentially cost-saving regulations still awaiting approval.

Source: State Senator Charles Poochigian, author of the historic workers compensation reform legislative bill SB 899

Governor Names California Chamber Executive to Chair State Fund

Governor Arnold Schwarzenegger this week announced the appointment of California Chamber Senior Vice President Jeanne Cain as chairwoman of the State Compensation Insurance Fund Board.

“Reinvigorating the State Compensation Insurance Fund Board is the next step in achieving real workers’ compensation reform for California’s employers and workforce,” the Governor said upon announcing the appointment of Cain and two other board members — Kent Dagg, executive director of the Shasta Builders Exchange, and Vincent Mudd, president and chief executive officer of San Diego Office Interiors.

“It is essential that the Board work toward creating an environment of increased competitiveness in the marketplace to lower insurance costs to businesses and attract more insurers to California,” the Governor continued. “I am confident that Jeanne, Kent and Vincent are keenly aware of the issues confronting the system and will work to foster an atmosphere that refocuses the State Fund toward its originally intended role in the market.”

“I am honored by Governor Schwarzenegger’s appointment and his confidence in my abilities to meet the challenges ahead,” Cain said. “Workers’ compensation costs are a significant issue to California’s economic recovery. I look forward to helping provide the best product for California employers and workers.”

The State Compensation Insurance Fund provides workers’ compensation insurance coverage for many of California’s small and medium-sized businesses. As the insurer of last resort, the fund currently has a 60 percent market share in California.

The fund board consists of five Governor’s appointees and three non-voting members: the director of the Department of Industrial Relations, the speaker of the Assembly and the Senate president pro tempore.

Members appointed by the Governor must be a policyholder or the employee or member of a policyholder in the State Compensation Insurance Fund for one year prior to their appointment, and must continue in this status throughout their appointment period. The Governor appoints one member from organized labor and four public members and names the chair.