Reformists' Secrecy and Departmental Lobbying

Confirming that it is a political entity rather than an unbiased state agency, the California Department of Industrial Relations (DIR) formally announced support of the proposed reform - a deal that the department had a strong hand in brokering.

In its press release, DIR states, “The Workers’ Compensation Bureau [Workers’ Compensation Insurance Rating Bureau, aka WCIRB] approved a 12.6% rate increase on California businesses while industry analysts also predicted even greater hikes next year,” and that the proposed plan will reform the state’s comp system “before projected rate increases push California to a crisis situation.”

And rather than addressing direct inquiries about the data that is being relied upon to project a two to one cost savings vs. benefit increase estimate, the Department has continued to defer the topic and keep the subject matter close at hand.

Blogger and Oakland-based applicant attorney, Julius Young of the Boxer and Gerson law firm, asked Christine Baker, Director of DIR, quite pointedly whether an estimate of the pricing components that was divulged to employers in a recent closed meeting would be made available to the press.

Baker demurred, stating "It was not finalized, and is draft," claiming she will have an "updated estimate" Friday (today). Later Baker told Young to "coordinate questions through Dean Fryer," the departments public relations person, who quickly advised Young, "There is no document available for distribution."

Which of course is not what Young asked for.

WorkCompCentral reported that there are at least two projections - one by State Compensation Insurance Fund (SCIF) and another by Bickmore Risk Services.

According to Jennifer Vargen, senior vice president of marketing and communications for SCIF, the carrier was not part of the negotiating team, but put a “significant amount of work in pricing out various provisions.”

Brian Watson, senior vice president of government and business affairs for SCIF, said the carrier helped price components, such as eliminating add-ons for psychological claims, sleep disorders and sexual dysfunction, as well as the proposed increase in permanent disability benefits. He said Baker had a chart showing the projected costs that she presented during a meeting on Aug. 10.

Bickmore Director of Regulatory and Alternative Risk Consulting, Mark Priven, addressed an estimate report to Baker dated 8/13/2012, which was prepared "at your request" and released by the California Coalition on Workers' Compensation (CCWC) yesterday.

Noting that permanent disability indemnity has documented ties to utilization (i.e. the more PD available the more workers' compensation is "utilized") Priven estimates 2013 savings of $2.666B.

$1.536B of that estimate is saved in permanent disability indemnity, mostly by dropping the age and diminished future earnings modification factors in the rating schedule.

Acknowledging the tenuous nature of the study, the data, and conclusions, Priven admits that, "In many cases this analysis was based on sparse data and anecdotal information."

The report does not indicate how permanent disability indemnity is increased by $700M, a claim that has been promoted by Baker and others since the rumored reform was announced. In fact, this report seems to indicate just the opposite.

In the meantime, it appears that the Administration has been busy drumming up support for a reform bill that doesn't formally exist.

CCWC, a group of active employers whose pledge is "supporting and safeguarding California's economic future," came out yesterday with a press release announcing support for the proposed reform.

Using the same argument that DIR used in its press release, that costs are increasing because the WCIRB announced a rate filing increase of 12.6 percent, the CCWC says that "California employers, public and private sector, need the cost cutting measures included in the proposed reform."

The WCIRB's rate filing expressly states that a big component of the rate increase is simply the fact that there are still 2 million workers not employed - the shrink in payroll means there's less premium to support risk and operations which means that the base rate must go up.

Using the WCIRB's rate filing as an argument to support the reform proposal is mixing apples and oranges.

But at least CCWC provides Californians with access to the materials that the Department refuses to divulge.

Here's the list:

Draft Bill Language

Cost Analysis by Bickmore Risk Services

Contents by Subject

Code Section Guide

Thank you CCWC for at least providing the public with access to information and documents upon which big policy decisions are being made, because apparently the DIR (whose mission is "to improve working conditions for California's wage earners, and to advance opportunities for profitable employment in California") doesn't feel the public has a right know.

In the meantime, read the draft bill, the Bickmore analysis, and come to your own conclusions.