February 10, 2006

Christine Baker

Commission Adopts the Permanent Disability Rating Schedule Analysis

OAKLAND -- The California Commission on Health and Safety and Workers' Compensation (CHSWC) has voted to adopt a CHSWC staff report entitled "Permanent Disability Rating Schedule Analysis" examining the impact of the changes to the permanent disability rating schedule. After months of research and public discussion, CHSWC voted to adopt the report with addenda containing all public and peer review comments. It also extended the public comment period seven more days. The final report with all public comments received through February 16, 2006, will be delivered to the legislature by February 23, 2006.

The CHSWC report was developed in response to a request from Senate President pro Tem Don Perata and Assembly Speaker Fabian Nuņez for information regarding a change in the California workers' compensation Schedule for Rating Permanent Disabilities effective January 1, 2005. The legislative leadership requested that CHSWC report to the Legislature on the impact of the change in the schedule, as well as how the schedule could now be amended to remain in compliance with Labor Code Section 4660(b)(2), which requires the use of findings from a specified RAND report and other available empirical studies of diminished future earning capacity.

The report finds an overall reduction in Permanent Disability costs of up to two thirds, with the PD schedule alone accounting for 50% of the overall savings in Permanent Disability since 2004.

During research for the report, CHSWC found large discrepancies between ratings for different types of injuries. The CHSWC Permanent Disability report provides a methodology for updating the permanent disability rating schedule to obtain more consistent ratings for all types. The report recommends a new mathematic formula using administrative data from the Division of Workers' Compensation and the latest available wage loss data, to make all ratings calculations consistent. The ratings are then entered into the existing system to calculate the level of benefits. An important recommendation in the report is that periodic revision to the rating schedule be adopted such that any future trends in medical impairments and earnings losses can be detected and incorporated in the formula.

The paper also suggests that, beyond using a consistent methodology, overall levels of ratings and compensation should be considered a separate public policy issue. The report acknowledges that issues of benefit adequacy and affordability are issues for policymakers to debate.

CHSWC is charged with overseeing the health and safety and workers' compensation systems in California and recommending administrative or legislative modifications to improve their operation. CHSWC was established to conduct a continuing examination of the workers' compensation system and of the state's activities to prevent industrial injuries and occupational diseases and to examine those programs in other states.

The report and information about CHSWC are available on the CHSWC web site, by contacting CHSWC by writing to 1515 Clay Street, Room 901, Oakland, 94612; by phone at (510) 622-3959: by fax at (510) 622-3265; or by email