Friday, August 17, 2012

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.


  1. What about the cost of dumping the workers into the already strained community health facilities, such as emergency rooms and urgent care? Has anyone analyzed that?

    Or the cost on homeowners for increased assessments to keep these facilities open?

    Or the cost of new state workers to process the IMR program (the same folks who take 3 months to issue a QME panel)?

    Or the fact that the bill further decreases permanent disability, which everyone agreed before was already too low post SB-899?

    I believe an independent review not handled by CHSWC or its favorite contractors should be required to determine the real cost of the intended or unintended consequences of the proposed legislation.

  2. Thank you Marjorie.

    The National Academy of Social Insurance this month released their study showing that there is already a massive cost shift to general health and other programs as a result of increased constriction in state WC systems. With CA representing 20% of the national WC market I would think that there would be even more burden on other systems as your comment suggests.

  3. left this comment over at the LA Times:,0,334272.story

    Jerry Brown is shown to be just another "Schwarzenegger" in Democrat's clothing. This Governor is obviously in the pockets of Big Corporate Insurance & Corporate Business interest. More Secret backroom deals with special many times has this type of situation worked out well for the general public?

    Of course the actual injured workers never get a say in the process...they are merely pawns in a chest game for big dollars.

    I’m sure we will hear a bunch fraud propaganda in news reports, PR releases, and comments...virtually none of those pundits has ever been injured on the job; or faced this dehumanizing system that employs a well financed & deviously calculated three D tactics...delay, deny, and demonize injured workers...

    What Schwarzenegger did to hard working & honest workers who were injured on the job was an outrageous crime...What Jerry Brown and his insider cronies are doing is much worse; by adding insult to injury...rubbing salt in the wounds of every California average Joe that gets up everyday & goes to their job...

    The California Workers Compensation System is so broken and corrupted; it doesn't need needs dismantling...the Great Compromise has turned into nothing more than a Great Corporate Insurance Company $Money$ Give away...& a never ending nightmare for anyone who experiences a significant injury on the job & is thrown into this unforgiving and grossly unfair system.

    Injured workers deserve citizens of a Nation that prides itself in the rule of law, and equal justice for all....isn’t it about time to once again allow those wronged & injured in the work place the constitutionally promised ability to seek actual justice in a court of law before a jury of their peers...not in some Sacramento derived & rigged system that only serves bureaucrats & money barons.

    I can almost hear the throngs of nah Sayers crawling out of wood work crying out "Worker Comp Fraud!! Worker Comp Fraud!!"

    Please read this PBS article & educate your selves ....then ask your self the question; where is the real fraud taking place? Sacramento, Insurance Company’s, & Corporate Board Rooms?

    This is a bad bill, bad politics, bad policy, and another horrendous & inexcusable set back for the good workers of California …

  4. This is a bad bill for California injured workers. The same gang that brought you SB 899 have gotten together for the sequel and this one is even worse. The permanent disability increase is illusory since the bill gives absolute medical control to insurance carriers and rigged medical provider networks (MPN). There are no due process rights for injured workers who are trapped within these MPNs which are hand-picked by insurance companies and self-insureds. This Bill would remove the last few due process rights that the injured worker has from being under the complete domination of the insurance carrier. The permanent disability increase is illusory because you will never find a physician within the MPN to give you a fair disability rating. The doctors in these networks are beholden to the insurance carriers as the doctors have no grievance procedure when ousted from MPN. The California Labor Federation represents 17% of California's workers leaving the other 83% stuck in an insurance dominated system. This minority special interest faction of labor is always willing throw the majority of California workers under the bus to advance their agenda as well as done in SB899. This system was designed to provide benefits for injured workers and to provide redress for their grievances. Worst of all, the sacred cows of the insurance carriers are untouched. The biggest cost drivers in the system, cost containment and utilization review will continue to drive up employer costs unabated. This Bill, which was written in secret without any input from injured workers or those who represent injured workers on a daily basis, has such major flaws that should not be slid through at the end of the session.

  5. Thanks for adding your comments Stan and Charles.