Officials can’t pinpoint amount of savings in governor’s bill

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Associated Press

SACRAMENTO — State officials Wednesday couldn’t pinpoint exactly how much in savings the workers’ compensation changes sought by Gov. Arnold Schwarzenegger would generate.

The Republican governor proposed a massive overhaul of the 90-year-old system Tuesday, one he said would slash $11.3 billion from the nearly $30 billion annual cost of treating workers’ job-related injuries.

But at the legislation’s first hearing, administration officials could not give lawmakers a breakdown of how much in savings the changes would create.

“I really can’t do that specifically right now,” Rick Rice, assistant secretary of the Labor and Workforce Development Agency, told the Assembly Insurance Committee. “Typically after a workers’ compensation bill is enacted… we determine what the costs are.”

Assemblyman Paul Koretz, D-North Hollywood, said he would accept a rough estimate of savings generated by the “big-ticket items” in the bill, but the measure’s proponents couldn’t provide one.

Assemblyman Abel Maldonado, the Santa Maria Republican who introduced the bill for the governor, said the goal of the legislation was to reduce businesses ‘workers’ comp costs at least to the national average.

“This year we passed two pieces of (workers’ compensation) legislation and then waited to see what the (savings) number would be,” Maldonado said. “Nobody knew.”

“So the $11 billion is a goal as opposed to something you have costed out,” Koretz replied. “That is helpful to know. If we enact all of these proposals it could add up to $14 billion. It could add up to $8 billion.”

Schwarzenegger’s plan includes adopting uniform standards for determining the extent of a worker’s permanent disability, putting tougher limits on how much care workers receive, expanding use of dispute resolution to cut litigation costs and allowing employers to consolidate their workers’ health insurance and workers’ comp policies.

Businesses and insurers are pressing lawmakers to adopt the legislation, but labor leaders and attorneys who represent injured workers are concerned the bill would violate Schwarzenegger’s claim that he doesn’t want to hurt injured workers.

Arthur Azevedo, president of the California Applicants’ Attorneys Association, said the amount of savings sought by the governor was “almost frightening. … It is going to take away major, major benefits from workers.”

Insurance Commissioner John Garamendi, a Democrat, said he agreed with much of what Schwarzenegger was proposing, but he said that moving too quickly to adopt reforms could result in unintended consequences.

Enactment of a cost-cutting bill by next March, he said, would give him time to include any savings in the workers’ comp advisory rates that he will issue for insurers by July 1.

“A rush to judgment is inappropriate,” Garamendi said. “It’s not ready, fire, aim. It’s ready, aim, fire.”

But Assemblyman Russ Bogh, R-Beaumont, said lawmakers had already considered many of Schwarzenegger’s proposals earlier this year and should adopt the governor’s plan by the end of the year.

Consumer advocates, meanwhile, complained that Schwarzenegger’s legislation lacked the rate controls that would guarantee that the savings the bill generates would be passed on to employers by their workers’ comp insurers.

“Schwarzenegger’s bill gives a pass to insurance companies that are currently raking in enormous profits and forces injured workers and overcharged businesses to pay the price,” said Carmen Balber of the Foundation for Taxpayer and Consumer Rights.

The Assembly committee didn’t vote on the bill. The Senate Labor and Industrial Relations Committee, meanwhile, announced that it would start hearings on Schwarzenegger’s legislation and rival proposals on Friday.
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