Overview of Reform Legislation
On July 16, 1993, Governor Pete Wilson signed a package of bills
that enacted major reform of California's workers' compensation
system. These bills, AB 110 (Peace), AB 119 (Brulte), AB 1300
(W. Brown), SB 30 (Johnston), SB 484 (Johnston), SB 983 (Greene)
and SB 1005 (Lockyer), together with cleanup legislation enacted
later that year (SB 223, Lockyer), produced a sweeping reform
of the system.
This legislation was designed to rein in the cost of a workers'
compensation system that many believed to be out of control, causing
too much to be spent on litigation, medical and medical-legal
costs and causing too little to reach the pockets of injured workers.
The primary purposes of the law were to
These changes were estimated by the Legislature to produce at
least $1.5 billion in annual savings for California employers.
Half of these savings (about $750 million) were to be returned
to injured workers in the form of higher temporary and permanent
disability benefits phased in over three years.
Impact of Reform on Workers' Compensation Community
The Commission believes that the workers' compensation reform
legislation has made significant positive changes, including a
decrease in the number of claims, a decrease in fraud, reduction
in medical-legal vocational rehabilitation costs, reduction in
psychiatric claims, and reduced premium levels.
The Commission believes that further innovations are needed to
make improvements in the quality of benefits and services to injured
workers, in the quality of medical report used for disability
evaluation, in medical quality and cost control, and to meet the
Constitutional mandate to provide service to injured workers which
is "expeditious, inexpensive, and without encumbrance of
Impact of Reform on Workers
The Commission is concerned with the impact of the workers' compensation
reform legislation on California workers. The Commission is taking
several approaches to monitor how changes in the workers' compensation
system are serving injured workers.
Temporary and Permanent Disability Benefit Increases
The workers' compensation reform legislation directly affected
injured workers by providing benefit increases estimated to amount
to $750 million over three years. The maximum weekly disability
payments increased as follows:
|From 15 to 24.75%||$140||$148||$154||$160|
|From 25 to 69.75%||$148||$158||$164||$170|
|From 70 to 99.75%||$148||$168||$198||$230|
The Commission realizes that, if the injured worker is to be served
well by the system, he or she must be aware of his or her rights
and responsibilities under the changing workers' compensation
program. To address this issue, the Commission decided to evaluate
information services provided to injured workers by the Department
of Industrial Relations and other participants in the workers'
The Commission contracted with UC Berkeley's Labor Occupational
Health Program (LOHP) to evaluate these services.
Information Services to Injured Workers project
This study examined information services provided by various governmental
and private organizations designed to inform injured workers and
assist them with their claims.
Conducted by the Labor Occupational Health Program at the University
of California at Berkeley under contract with the Commission,
the project was designed to assess the efficacy of information
services currently available to the injured worker, analyze the
strengths and weaknesses, and recommend ways to improve those
The project team worked with a volunteer project advisory committee
consisting of Information and Assistance officers from the Division
of Workers' Compensation, representatives from the Department
of Industrial Relations, labor union representatives, injured
worker organizations, applicant and defense attorneys and employer
and insurance company representatives.
The methods used to evaluate information services consisted of
focus groups of injured workers, discussion groups of I &
A officers, individual interviews with other participants in the
system, and review of information and assistance programs in other
The project findings include the following:
In August 1996, the Commission released the Injured Worker Study
report entitled "Navigating the California Workers'
Compensation System: The Injured Workers' Experience".
The report, available upon request from CHSWC at no charge, is
also accessible on the DIR-CHSWC web site on the Internet.
Workers' Compensation Information Prototype project
Pursuant to its findings from the "Information Services to
Injured Workers" study, UC Berkeley's Labor Occupational
Health Program proposed a project to create an informational video
for injured workers and written information on workers' compensation
for all workers.
The project is developing seven fact sheets in both English and
Spanish designed for all workers, i.e., uninjured workers and
workers who are at various stages of a claim. Topics include
The instructional prototype video -- "Introduction to Workers'
Compensation" -- will provide a general introduction to
workers' compensation that would be applicable to injured workers
who are just entering the workers' compensation system. It will
explain the basic terms, acronyms, and benefits in workers' compensation,
the chronology of a typical claim, steps the injured worker should
take, and available resources. The video will be accompanied
by a fact sheet that will allow injured workers to retain some
of the essential information shown in the video.
The Commission is working with DWC and an Advisory Group from
the workers' compensation community to provide recommendations
for such materials. The Advisory Committee has met several times
and is in the process of reviewing proposed fact sheets and video
script. The project is expected to be completed by the end of
CHSWC Educational Conference for Workers
At its April 1997 meeting, the Commission voted unanimously to
sponsor a one day "Workers guide to Workers' Compensation"
educational conference, tentatively scheduled for May 1998. The
prototype informational materials will be presented and distributed
to the community and the public.
Impact of Reform on Employers
The reform legislation affected California employers in two significant
ways. The elimination in the workers' compensation minimum rate
law has resulted in lower premiums and the passage of a group
of provisions known as the "employers bill of rights"
has given employers more information and control over workers'
Employer Bill of Rights
The provisions of the 1993 reform legislation known as the "employer
bill of rights" are summarized as follows:
Before the implementation of these provision, insurers would not
disclose its reserves on workers' compensation cases to employers.
Yet the larger the reserve, the larger the employer's experience
modification would be resulting in a higher premium charged.
The reform legislation repealed California's 80-year-old minimum
rate law as of January 1, 1995, and replaced it with an open-competition
system of rate regulation in which insurers set their own rates
based on advisory loss costs developed by the Workers' Compensation
Insurance Rating Bureau. This transition to what is termed "open
rating" has intensified competition among insurers and so
far appears to be driving rates down even further.
The California Insurance Commissioner ordered a seven-percent
reduction in the workers' compensation minimum rate on July 16,
1993, then a 12.7 percent cut effective January 1, 1994 and another
16 percent cut on October 1, 1994.
On October 13, 1995, Insurance Commissioner Chuck Quackenbush
approved an 11.3% increase in the advisory pure premium rate for
Although the WCIRB recommended a 2.6 percent decrease in the pure
premium advisory rates, on October 22, 1996 the Insurance Commissioner
approved a 6.2 percent decrease effective January 1, 1997. Insurance
Commissioner Quackenbush indicated that this reduction was due
in part to several aspects of the 1993 reforms: the fight against
fraud which has reduced costs; an increased attention to workplace
health and safety which has led to a decrease in injuries and
claims; and the abolition of the minimum rate law.
On July 29, 1997, the WCIRB filed for a 3.5 percent decrease with
the Department of Insurance for 1998 pure premium rates.
Elimination of Minimum Rate Law (Open Rating)
The potential impact of the elimination of the minimum rate law
to the California economy has been predicted to be in the millions
of dollars by lowering total workers' compensation premiums paid
by businesses. The Commission is concerned with the effect of
the elimination of the minimum rate law on both employers and
Some observers continue to question how long insurers can maintain such low rates before concerns about profitability push rates up again. And, the issue of insurer insolvency is periodically raised. Industry analysts also worry that in order to offer competitive rates, insurers are feeling pressure to cut expenses in areas that help contain workers' compensation costs, such as loss control services, fraud investigation and claims adjustment.
Executive Summary: Findings and Recommendations
Section I The Commission on Health and Safety and Workers' Compensation
Section II Reform Legislation Impact on the Workers' Compensation
Section III Workers' Compensation Issues
Section IV Health and Safety Issues
Section V Program and Agency Operations
Section VI Commission's Future Activities