April 1999

Workers' Compensation Upcoming Legislative Changes

Legislation that will most likely affect all CSRMA workers' compensation program members is being discussed in the California Senate. There is an expectancy that the changes will take effect this coming January 2000.

What are the changes?

The 1993 workers' compensation reform act included a cap on the amount of total vocational rehabilitation benefits payable to an injured employee. The act was designed to reduce costs in the workers' compensation system.  SB 320 intends to undo that reform by doing away with vocational rehabilitation caps (currently at $16,000).

We are one of only three states that freezes dependent death benefit levels. This will also be changed to allow for a cost of living increase to the dependants.

In addition there is a very strong push "to meaningfully increase workers' compensation benefits for all injured workers." The upshot of this is the increase of the minimum benefit levels for temporary and permanent disabilities. There are no specific details yet on the amount of the increase. The discussion is that it could be as much as 20% over current levels.

How does this affect CSRMA?

CSRMA will need to ensure that there is adequate funding to pay for these proposed increases. This could mean up to a 10% increase in rates over last year. The insurance industry is also gearing itself up for these changes, albeit from a different angle. The traditional workers' compensation insurers have been looking for an excuse to increase rates for sometime now and this seems to be the perfect vehicle to advance that goal.

Insurer's reserves are at an all time low, as they have been aggressively cutting rates in order to gain market share at the expense of services such as risk control.

In the same instance, CSRMA also needs to ensure it is adequately funding its workers' compensation program, however, the incentive is very different. Insurers' provide profit for shareholders, whereas CSRMA' 5 focus is to ensure that loss costs are kept to a minimum. Any funds that are not used to pay for losses become available to be returned to the membership in the shape of retrospective rating adjustments and dividends.

If CSRMA is to continue it's trend of conservative funding as well as meet the expected benefit increases, then we must continue to focus on reduction of losses through active risk control measures as well as our reliance on quality third party claims administration through Gregory B. Bragg & Associates.

To this end, CSRMA continues to monitor the proposed legislative changes and will inform the membership when the changes take effect as well as the fiscal impact to the JPA.

If you have any questions regarding the proposed changes to the Workers' Compensation rates or upcoming legislation, please call

David Forsyth at (415) 371-5405.