Masters Thesis

Policy analysis of California Workers' Compensation claim costs

Senate Bill 899 was a partial success as it was able to lower the costs of workers’ compensation for California’s insurance carriers and employers. That 2004 reform bill led to a substantial reduction in overall claim volume by limiting the various extensions of injured worker benefits and increasing the requirements to qualify for particular benefits. By the year 2009, any progress made by the 2004 reform had already been erased. The state’s insurance carriers averaged a 25% loss on workers’ compensation premiums that year. Gradual price increases in workers’ compensation premiums, over the last several years, have significantly contributed to California’s notorious distinction as one of the worst states in which to operate small businesses. From a historical review, workers' compensation system premium pricing goes through a cycle of highs and lows that project over several years. The high years prompt cost reducing reforms and the low years prompt new actions from involved parties that result in rising costs. Currently, Status Quo projects a workers' compensation system that is unsustainable for businesses and insurance carriers due to mounting pressure from rising claim costs that have already overcome the SB899 reform. Over 90 percent, of the total costs in the system, stem from claims involving temporary disability. In addition, the system allows for claim lifespans and medical profits that significantly out-pace those of similar claims for non-industrial injuries. Policy changes are needed in the form of medical treatment containment measures and overall claim resolution motivators. The larger focus of future reforms should be on returning injured workers to their job in a functional capacity and at a universally accepted pace. Alternatives to the problem can largely be devised from existing components of the workers' compensation system. Current AME/QME procedures and ACOEM guidelines should be used to formulate small scale reforms that attempt to return claim costs and durations to a logical level as opposed to reforms that aim only to cut exorbitant costs.

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