On September 12th George Peterson Insurance Agency hosted the “Workers’ Compensation Crisis in California Seminar” at the Vineyard Creek Hotel in Santa Rosa. Over 100 people from area businesses attended to hear a panel discuss the crisis and review reasons why many refer to this situation as “The Perfect Storm”. The panel was comprised of Martin Grove, District Manager of State Compensation Insurance Fund; Tom LeDuc, President of North Coast Builders Exchange; Dick Caletti, of Standard Structures; Jim Leddy, District Director for State Senator Wes Chesbro and Judi Joseph, District Director for Assemblyman Joe Nation.
Even though there was half the number of disabling work injuries in 2001 as there were in 1991, Workers’ Compensation rates are at a record high average of $5.85 per $100 payroll. The construction industry has higher risks than average because of the nature of work performed. The math tells the story. If a construction company pays $7.00 per $100 payroll in workers’ compensation for 30 employees making an average yearly income of $30,000, their premium would be $63,000 for the year. That is roughly the payroll of 2 employees for the year. Tom LeDuc shared a similar example at the seminar, when he explained to his employees, “that because of the increase of Workers’ Compensation premiums, it would be like doing the same amount of work this year with three less employees than last year to pay for the premium increase over last year.” Many California companies are paying double and triple of what they paid a few years ago and it is directly impeding economic growth and expansion, pay raises and new jobs hiring.
Martin Grove stated that, “Workers’ Compensation costs in California are among the highest in the nation, but the benefits are among the lowest.” The “Perfect Storm” started in 1993 with deregulation for Workers’ Compensation rates. Many Insurers dropped their rates in hope of capturing a larger market share. Many companies became insolvent because of low reserves. State Fund survived and now insures 55-60% of the companies with employees in California, all of which are required to have Workers’ Compensation.
The other elements of the “Perfect Storm” are rising healthcare costs and litigation. Grove stated that, “lawyers take 14 cents of every Workers’ Comp dollar.” Chiropractors get 43% of the medical costs from the system and the average number of chiropractic visits per claim in California is 34, compared to the national average of 14.
California Insurance Commissioner, John Garamendi’s reform plan is keyed by a medical fee schedule that indexes the system to 120% of Medicare fee schedules. Garamendi spoke to the North Coast Builders Exchange last month in Santa Rosa in response to the efforts of the NCBE and Past President Jerry Minton and current President Tom LeDuc, who have met with Wes Chesbro in Sacramento in regards to Workers’ Compensation issues.
Towards the end of the seminar politicos Jim Leddy and Judi Joseph urged local groups to continue with their grassroots efforts so that their concerns are heard in Sacramento. The politicians have already received the message from the business sector and now it is time for them to take action to regulate and control the system. Workers’ Compensation was designed 90 years ago as a “no-fault safeguard” against the pitfalls of litigation and overpriced healthcare and it must be restored to its original intent.