Monday, August 13, 2012

CA Reform - Reality Politics!

For my more national readers, this blog will probably be much more California-centric for the rest of the month than its normal Left Coast bent as the prospect of a major change to the workers' compensation system of the seventh (or eighth, depending on your source) largest economy in the world goes through the legislative vetting system on its way to becoming law.

But even those of you not from California, the entertainment value must be endless. This is reality politics! The drama surrounding California reform is better than any episode of the Kardashians.

The bill was negotiated in top secret. The first full draft was circulated to a privileged few. Some people were asked for their input then later told their help was not welcome. Some people were told their input simply was not needed at all.

In the meantime others have posted a summary of the proposed reform, and others have questioned the science and math that allegedly supports the conclusion of a 2 for 1 cost to benefit ratio.

Those who are close to the negotiations won't talk, at least not until there is a formal announcement of the bill on which the changes will ride on (rumored pretty solidly to be Senate Bill 863, a bill introduced by Sen. Ted Lieu, D-Torrance that originally would have imposed an 18-month limit for filing liens, which was passed to the Assembly last year before Lieu withdrew the measure from consideration and has been on the Assembly inactive file since Aug. 22, 2011, but was taken off the inactive file on Aug. 6).

The lastest information is that there will be a formal introduction of the bill on Wednesday with an "informational hearing."

And those of us in the audience wait, wondering, speculating - what does this mean to workers' compensation? What does this mean to my workers' compensation business? Doctors, lawyers, insurance companies, employers, interpreters, document copy services, rehabilitation schools - all of them anxious to get an analysis of this latest threat to the status quo.

Oh yeah, I forgot, workers.

According to the California Employment Development Department (EDD) there are about 18.5 million workers in the state. About 16.5 million of them are employed. The rest are presumably looking for jobs. Those that are employed average about $25 an hour. Of these, 2,379,000 belong to a union.

At least one major negotiator represented Labor, presumably looking out for the worker demographic, but 87% of the working force in California are not unionized and thus not represented in these talks.

In all honesty though, most of these 16.2 million non-union workers will never have any need for knowing anything about workers' compensation and what they may gain, or lose, in the latest reform wave.

Another major negotiator was from Big Business, presumably looking out for the employer demographic.

Speaking of which, California has 3,320,977 small businesses, according to the most current federal data available. Of those 3,320,977 small businesses in California, 1,068,602 have employees. The remaining 2,252,375 are California small businesses that have no employees. The number of self-employed persons in California (including incorporated companies that file via Schedule C) was 2,137,841. Big Business has no idea what Small Business needs.

All of which is to say... politics as usual. A minority will dictate what the majority will do.

There is nothing going on in Sacramento that those of us in the workers' compensation industry haven't been through before, and haven't experienced before. Nothing coming down the pipeline is new.

If the summaries are correct, much of what is on the table has been tried before. Much of what is going to be subject to debate has been debated before. Some of what is proposed is new, but for the most part these "reforms" are old ideas with some tweaks.

The reform is supposed to deliver $2 of savings for every $1 of benefit increase.

We'll see. My experience is that such mathematical conclusions depend on who is running the calculator.

In the end, does it all really matter? What gets to legislators for the vote may be very different than what gets presented to the public on Wednesday. For most workers in California, what happens to workers' compensation is irrelevant to their daily lives, and is not applicable because they are not union employees.

And for most employers in California what happens to workers' compensation is irrelevant until the premium notice comes in the mail and if they think it is not so much more than last year then there is no issue, and that will be the case for most employers.

Until then, only vested interests - i.e. us vendors - give a hoot. And even then its simply a matter of adaptation.

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