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California Workers Compensation Crisis Question

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Question – The California Workers Compensation Crisis

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Our blog readers sent in this question on the California Workers Compensation Crisis.   This is a timely question.  I thought I would answer the question now.

Workers Comp Crisis – What happened to it and what settled everything down in the state with the worst Workers Comp environment?

The California Workers Compensation  Crisis was in my opinion almost eliminated due to seven things occurring over the last four years.

  • The Governor becoming very involved with Workers Comp – Governor Schwarzenegger stepped in quickly to fix the system.
  • Senate Bill 899 which introduced Medical Provider Networks  was critical to the success of the California workers compensation.
  • The emergence of Medical Provider Networks (MPN’s) – these are one of the best cost controls
  • A new Insurance Commissioner
  • More Workers Comp insurance carriers entering the market – The State Compensation Insurance Fund (SCIF) now has more competitors.
  • The cleaning up of the State Fund
  • More control exerted on the California Workers Comp Insurance Rating Bureau (WCIRB)

The Governor – The fix(es) to the failing Workers Comp system in California, in my opinion, began when Governor Schwarzenegger took office. He made Workers Comp reform part of his main platform in his campaign.

The quickest way to fix a Workers Comp program is the buy-in of higher management of the need to fix the current situation. The buy-in is very crucial whether the organization is a governmental entity or an employer. The Governor was not going to take no for an answer.

Senate Bill 899 – This Bill brought in a Workers Comp theory of law that was already established in other states. Quite a large portion of the bill had worked in the State of Florida during Florida’s Workers Comp reforms. The main part of the bill that cut the Workers Comp Cost for employers was the establishment of Medical Provider Networks. (MPN’s)

MPN’s – The real application of MPN’s was to enable California employers to control who the employee treated with medically, and removed doctor-shopping by employees. Controlling the medical treatment by the employer is one of my Five Secrets to Controlling Workers Comp Costs. Medical control leads to the control of most of the Workers Comp claim. Please see my previous posts on the Five Keys to Cutting Workers Comp Costs.

A New Insurance Commissioner – when Commissioner Steve Poizner came into office, immediate changes occurred in the California Workers Compensation arena. The following are some of the changes he enacted:

  • The cleaning up of the California State Fund (SCIF) – There was a large amount of conflicts of interest and lack of accountability in SCIF. Commissioner Poizner made SCIF more accountable in all areas. He also eliminated all the conflicts of interest that existed in SCIF. The conflicts of interest centered on officials and Board of Directors referring work to companies that they privately owned.
  • More control exerted on the California Workers Comp Insurance Rating Bureau (WCIRB) – Commissioner Poizner made the WCIRB more accountable for their increases and decreases in the pure premium rates. He immediately overruled a rate increase. The figures that he predicted have seemed to be accurate.

More Workers Comp insurance carriers entering the market – this is the final positive and the most important result of the California Workers Compensation reform. With all the reforms in place now in California, the market became more competitive. The barriers to entry to the Workers Comp insurance carriers were removed. The more carriers in the marketplace, the more healthy the competition. Now that Workers Comp insurance carriers can now forecast a profit, there are more carriers writing policies which will reduce the Workers Comp premiums that they charge.

Up Next – A Question from One of Our Readers on the CA Workers Comp Reform

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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