California cuts cost of worker benefits
By Michael B. Marois and William Selway
Bloomberg News Service
California legislators yesterday approved an overhaul of the state workers' compensation system, allowing Gov. Arnold Schwarzenegger to fulfill a campaign promise and saving as much as $7 billion for companies such as Costco Wholesale Corp.
Associated Press
The bill cuts costs by mandating that doctors from a pool hired by companies must declare whether a worker is eligible. The new law seeks to fix a system in which benefits rank in the lowest third among the 50 states while employers pay the nation's highest premiums.
Gov. Arnold Schwarzenegger, whose reform bill for workers' compensation was passed by the legislature yesterday, says the changes were necessary to keep businesses in California.
Schwarzenegger, winning his second victory in as many months, pushed legislators to compromise by backing a petition drive for a workers' compensation measure on the Nov. 2 ballot. A Schwarzenegger-sponsored referendum last month won 63 percent of the vote to allow the state to sell as much as $15 billion in bonds to finance record budget deficits.
Workers' compensation insurance "has been a poison on our economy," the governor told reporters in the Capitol. He will sign the bill Monday. "When I came to Sacramento, the first thing I heard was 'This couldn't be done.' Working together here, we've shown that we're bigger than our problems."
The 91-year-old system handles 800,000 workers annually and had $18 billion in claims last year. The overhaul would save as much as $7 billion annually, according to Assembly Democrats' estimates.
The Assembly passed the bill 77-3, with the Senate following it by a vote of 33-3 — both above the two-thirds majority that allows it to become effective immediately after Schwarzenegger signs it, according to California law.
California, home to almost one-sixth of the companies in the Standard & Poor's 500 Index, was being battered by insurance costs driving employers elsewhere, Schwarzenegger complained during the campaign.
The home of Intel is showing signs of lagging behind the nation in the recovery, producing 5,200 new jobs last month while the unemployment rate rose. Businesses nationwide added 308,000 jobs, the biggest gain in four years. The state accounts for about one-tenth of the U.S. economy.
The new law reduces penalties on insurance underwriters, lowers the amount paid to workers if they have a pre-existing condition, narrows the definition of permanent disability and creates incentives for employees to return to work.
