Tuesday, June 26, 2012

SJDB Vouchers - More Savings for a PD Increase

When I first read that California Assemblyman Gil Cedillo's AB 1145 was still moving along through the legislative process, I was a bit astounded.

In my opinion the entire supplemental job-displacement voucher program is a complete failure that was a token thrown at the applicant community by the Schwarzenegger Administration to get concerned legislators to sign off on SB 899.

From a practical standpoint there was no way it was going to work.

Reports have since shown that to be true, with the benefit being provided too late in the game and in amounts insufficient to be meaningful for any job retraining.

Frankly, we'd be better off just giving everyone who gets hurt on the job a couple thousand bucks and just call it a day.

But now I understand the value behind AB 1145 and how it continues to rise like a phoenix nearly every legislative session - it is a proposed vehicle for "reform" later on down the road should the legislature ever get around to messing with workers' compensation.

(And I don't use the words "messing with" lightly.)

The measure contains the same language as AB 211, also by Cedillo, which Gov. Jerry Brown vetoed in October. It is also similar to Senate Bill 3, which was held in the Senate Appropriations Committee in 2010 and AB 1636, which Gov. Arnold Schwarzenegger vetoed in 2007.

AB 1145 has now been sent off to the Appropriations Committee where the bill sits in the suspense file awaiting fiscal analysis.

Bills are sent to the suspense file if they could have a fiscal impact of $50,000 or more on the General Fund or $150,000 or more on any other account or fund. A bill on the suspense file can only be moved by a vote of the committee.

But it seems that no one really knows the true value of these vouchers. The State Fund says they average $2,159. The Workers' Compensation Insurance Rating Bureau says the average is about $6,000 - at least according to an analysis by Bob Franzoia, a consultant to the Committee.

Mark Sektnan, president of the Association of California Insurance Companies, told WorkCompCentral that in the current system the voucher can be included as part of the terms of a compromise and release agreement, so the retraining benefit is essentially “just money on top.”

Which is why I say why not just cut the charade. Forget about the voucher. It's just another layer of administrative burden and expense. Just throw the money that would be used for vouchers into the general indemnity pot and increase the payouts overall.

Realistically I very much doubt many of these voucher dollars are actually used for retraining or education. I have not seen any studies to verify or refute that statement, but my nearly 30 years of experience in this industry tells me that I'm probably correct. So overall, the fiscal impact is minimal and likely not a real concern.

The political impact however carries much more value. We know that the Brown Administration is on a tear to build a reform measure and in order to get that accomplished before the end of this legislative session there needs to be a bill pending that can be amended and passed up to the governor's desk.

The value of AB 1145 lies in its pendency state.

Jesse Ceniceros, president of Voters Injured at Work, told WorkCompCentral that Cedillo has already offered AB 1145 as a vehicle for reform language.

The "reform" script has already been written: 1) increase in PD benefits; 2) constriction on lien claims; 3) copy service fee regulation. The only thing holding back amendment of AB 1145 is the exact production language of "reform".

Franzoia said in his analysis of AB 1145 that the “data necessary to determine whether eliminating the tiered rates and implementing one rate would increase or decrease annual costs” of the benefit for public or private workers “remains elusive.”

The data regarding liens and copy services is elusive too, but that doesn't stop the political bus. It's on a roll - we just don't know exactly where it's going to stop. 

So I say that "reform" proponents may as well include in the script eliminating vouchers and throwing that money into the PD pot as well. Liens, copy services and vouchers - should be enough there to justify an increase in indemnity.

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