By Don Jergler | December 3, 2012
Editor’s Note: This is the third in a series of articles to look at California’s workers’ compensation reform law in detail and what must be done to implement that law by Jan. 1, 2013.
Looking forward employers seem to have weathered the latest round of workers’ compensation reforms well – although the cliché “the devil is in the details” is apropos enough to be tossed out.
Like the seven-year itch, the system requires massive, sometimes painful, reform every so often. The last reforms in 2003 and 2004 were ushered in by Gov. Arnold Schwarzenegger’s administration. This time it was Gov. Jerry Brown who issued a mandate to Department of Industrial Relations Director Christine Baker to get a deal done in negotiations that were limited to labor and a group of large, self-insured employers.
The result was Senate Bill 863, and many employers expressed optimism that the new law can save them on their workers’ comp premiums and that regulations needed to give the law teeth can be hammered out by the Jan. 1 deadline.
In the last few weeks seven regulations have been made public, though they are far from being approved, and some of those regulations are nearly as complex as the massive workers’ comp reform legislation itself, which at one point was more than 150 pages long.
Sean McNally, one of the employers who sat in on negotiations and helped hammer out a deal that was approved just as the year’s legislative session was ending, was obviously bullish on what the new law promises.
In fact, he believes the new law “could just be a real game changer,” and said that if it works the way it’s designed, “I think could be just a paradigm change, really.”
McNally, vice president of corporate and government affairs for Grimmway Farms in Bakersfield, was also involved in the Schwarzenegger negotiations. Grimmway, a large agricultural producer with about 4,400 workers in California, saw significant savings following the passage of Schwarzenegger-backed Senate Bill 899 in 2004.
Not long afterward, however, those savings began to erode, McNally said.
“I’d say we had a 50 percent reduction in cost after 899,” said McNally, who noted the self-insured company manages its workers’ comp cases “aggressively and proactively.”
Despite taking a tough stance on workers’ comp cases as a company policy, costs began to escalate for firms like Grimmway as reform savings were eroded by judicial decisions, changes to the system and escalating medical costs, he said.
“I think that we lost probably almost half of the savings of what we accomplished with 899,” McNally said.
McNally declined to give actual costs, but offered a hypothetical comparison of Grimmway’s workers’ comp costs that he said were to scale. Hypothetically Grimmway’s workers’ comp costs following the Schwarzenegger reforms went from $10 million down to $5 million, he said. Then they slowly began to grow, reaching from $7.5 million to $8 million this year, he said.
“I’m hoping we get back to $6.5 million,” he said.
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