| Back to Table of Contents | |
Back to Partisan Home |
| Previous Section | Next Section |
On December 23, while most people were getting ready for the upcoming holidays, the Schwarzenegger administration announced a ten-day public comment period on emergency regulations to cut worker's compensation benefits. What made it an emergency was the need to get this gift to insurance companies wrapped before the twelfth day of Christmas.
The regulations implement last April's bipartisan attack on the 92-year old Workers' Compensation system. With only three votes against in each house, the Democrat-controlled legislature passed almost all of a bill written by the State Chamber of Commerce and funneled through the Republican governor's office.
The new law forces injured and ill workers to use quack doctors chosen by employers and limits coverage. Despite claims that it was needed to reduce Workers' Compensation insurance premiums to business, nothing in the law does that.
The Democrats' excuse for this shameful betrayal was fear of a proposed initiative measure from the Chamber with even worse provisions added. Polls showed that this gutting of workers' comp would be overwhelmingly defeated by voters, but legislators were unwilling to fight "Ahnuld" and big business.
In 1913, California established a system of "Workman's Compensation." All workers were covered by a mandatory insurance scheme to pay for medical treatment and lost wages caused by injuries on the job. The system was tightly regulated to make sure that companies wouldn't just collect premiums and then go out of business when it was time to pay benefits. A State Compensation Fund was created to cover employers who couldn't get private insurance and workers whose bosses had failed to cover them. Workers covered by the system lost the right to sue their employers.
The system was created by and for employers who wanted to avoid liability suits for workplace injuries, with high insurance costs and low benefits. Still, it worked for 80 years.
Then in the 1990s the "deregulation" craze which gave us the California energy crisis and airline bankruptcies was applied to workers' comp by a unanimous vote of the legislature. Big insurance companies flooded the market with cheap policies, forcing smaller ones out of business. They put the premium money into the stock market. When stocks dropped, they jacked up premiums to cover their losses.
By the end of 2001, 27 insurance companies had filed for bankruptcy and the State Compensation Fund was covering 55% of the market. Medical costs were soaring as HMOs and drug companies pushed their profit rates higher. Businesses were seeing workers' comp rates eat into profits.
Naturally, the employers and their political tools in Sacramento blamed this on injured workers, despite California's already low Workers' Compensation benefits, and despite the fact that insurance premiums were rising faster than medical costs and disability benefits combined. Let's look at some root causes.
Insurance companies are banks in disguise. They collect premiums and invest the money in stocks, bonds and real estate. They search for ways to avoid giving you back your "deposits" when you need them. An unregulated insurance company would be like a casino which didn't have to pay the winners. Regulations require the companies to stay solvent so they can pay their debts to their customers.
The quickest way to lower workers' compensation costs would be to cut out the insurance companies and have the state self-insure itself, covering all workers through the state fund as five other states and all Canadian provinces already do. This isn't just theoretical. The five U.S. states (and all Canadian provinces) with "exclusive funds" (no private insurance companies) have administrative costs of less than 1/3 those of the average insurance company.
The next big factor in workers' compensation costs is the rising price of health care. The United States spends more per person on health care than any other industrialized country (14% of Gross Domestic Product, compared with 8.2% in Austria for instance). We are the only major country which doesn't have some type of national health system, even though 60% of our health care is paid for with tax money.
Then there's the rising cost of drugs. U.S. prescription drug spending was $205 billion in 2004. Only 30% of drug costs are manufacturing costs; only 13% are research and development. At an average of nearly 20%, drug companies now have profit rates three to six times that of the average Fortune 500 company. Additionally, a whopping 31% of the price of drugs is "marketing and administration."
We need to reverse the whole system of putting corporate needs before our health. Let's look for real changes to fix the workers' comp system. We can begin with a national health care system, but we also need some changes in the way we look at disabilities.
Real needs would be better met by a single disability compensation system. Only 20% of either temporary or permanent disabilities are immediately job-related. The present system sets up an adversarial system of proving where a disability originated, which only benefits insurance companies and lawyers.
Instead of separate workers' compensation, state disability insurance, SSI, etc., programs, one public agency deciding whether or not people were disabled and giving them payments instead of worrying about how they got disabled could operate at a far lower cost. If we focus on providing benefits instead of fixing blame, we could incorporate real rehabilitation and retraining for new jobs with medical treatment.
We need to stop the unsafe working conditions that cause job-related injuries and illness. That means giving the California Occupational Safety and Health Administration (Cal/OSHA) the funds and power it needs to enforce workplace safety laws. We also need a law allowing employees to refuse hazardous work. To get such a law through, and to enforce it afterwards, we need a direct action movement for workplace safety.
[Tom Condit was the Peace and Freedom Party candidate for Insurance Commissioner in 1990 and 1994.]
| Back to Table of Contents | |
Back to Partisan Home |
| Previous Section | Next Section |