Just last year, (S.B.) 863, new legislation intended to address steadily increasing workers’ compensation (WC) costs in the state took effect. It was met with approval by a coalition of California businesses and workers’ groups who routinely supported the new law. The hope was that the new law would aid companies that annually reiterated that their cost for workers compensation insurance was detrimental to their operations and could potentially put many small companies out of business.
Labor and management agreed that in order for permanent disability benefits to be increased, costs would have to be decreased where possible (they had declined by 26 percent under the state’s 2004 workers’ comp reforms). They also agreed that where possible, the workers’ compensation process should be made more efficient. One of the benefits is that it would provide solid savings for employers, which saw the costs of WC insurance creep upward from $14.8 billion to $19 billion over the past 2 years.
To counteract another of the problems that arose out of the 2004 reforms S.B. 863 minimizes delays in medical treatment and also improves access to quality care, most of its provisions having taken effect January 1, 2013.
Reforms under the new law
The increase in permanent disability benefits for employees is balanced by significant changes in the benefit delivery system that are intended to eliminate costly waste, inefficiencies, and loopholes. The law increases permanent disability (PD) benefits by 30 percent, or approximately $740 million per year. The increase, which will be phased in over a 2-year period, adjusts the formula for calculating the benefit amount in order for the compensation amounts to more accurately reflect any loss of future earnings.
The law also excludes, with some limitations, the ability to obtain increases in permanent disability ratings for sleep dysfunction, sexual dysfunction, and psychiatric disorders. It does, however, provide medical treatment for such conditions if they are a compensable consequence of an industrial injury.
Changes to supplemental job displacement vouchers
As a result of SB 863, the voucher amount (which was on a sliding scale ranging from $4,000 to $10,000) is now fixed at $6,000 for all qualifying injured workers, and it is to be offered when the injured worker reaches permanent and stationary status and their treating physician reports on the individual’s work abilities and limitations resulting from their injury.
In addition, the bill has created a Return-to-Work Fund that establishes payments from the fund to be made available to injured workers whose permanent disability ratings are disproportionately low in comparison to their wage loss. These are just a few of the exciting changes that took place in California workers compensation insurance.