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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