This article Reprinted from Western Roofing magazine, March/April 2007, Volume 30, number 2

 

Workers’ Comp

California Workers’ Comp, Where are we Now?

by Dave Stefko, president, RCAC

 

Established in 1913, the workers’ compensation system was designed as a “no fault” system with two major goals. Protect employers from liability and compensate the injured worker equitably and efficiently.

                  What workers’ comp in California hasn’t done; protect employers from liability and compensate the injured worker equitably and efficiently.

                  This statement was being made as California headed for a man-made workers’ comp disaster proportionate to its own natural disasters of earthquakes, fires, and floods; a $27 billion dollar a year system enriching lawyers and unscrupulous doctors at the expense of the employee, and employer. Businesses were leaving California because they could not afford the workers’ compensation. Others laid employees off as a way to cut workers' comp costs. All the while, then Governor Davis was walking around Sacramento sound asleep to the plight of California business.

                  Enter Governor Schwarzenegger who realizes change is needed and fast.

                  In 2003 $.41 of every workers’ comp dollar went to PPD or permanent partial disability payments. Because the California system was so subjective and rife with fraud in determining PPD benefits, California lost time claims with PPD was 30%; New Mexico 9%, Washington 11%, Wisconsin 7%, and Oregon 15%. Get the picture.

                  Senate Bill 899, a workers’ compensation reform bill written and sponsored by then California State Senator Chuck Poochigian, was overwhelmingly approved by the legislature and signed into law by Governor Schwarznegger in April of 2004. The goal of SB 899 is simple, save jobs in California by reducing costs for California businesses and improving care for the injured worker.

                  These goals have been accomplished by setting up a medical provider network. The MPN is designed for the medical treatment of the injured worker. The division of workers’ compensation must approve each MPN. Each must provide doctors specializing in work related injury, general medical, common occupational and work related illness. This MPN allows an injured employee to seek a second and third opinion if there is a dispute with the treating physician. In the event a dispute cannot be resolved after the third opinion, the employee may seek an IMR or independent medical review for further analysis and determination.

                  While the American Medical Association (AMA) guidelines for determining injuries are used in 41 states, they are new to California. The benefit of using the AMA guidelines is objectivity and consistency in rating the injury of an injured worker.

                  Now for some numbers. First, based on a written report of SB 899 after the first year workers’ compensation in California saw a reduction of 16% with another 10% expected by mid 2005. What we have seen is a full 40%+ reduction through the end of 2006. Employers are saving money; employees are getting better care, more focused and timelier, allowing them to resume their jobs and their lives.

                  After Governor Davis, Governor Schwarznegger and the legislature took thoughtful and decisive action to help California workers and their employers. However, and there always seems to be a however, with more than 500 worker classification codes, the California roofing industry rates stand out like a beacon in a storm. The Workers’ Comp Industrial Rating Bureau (WCIRB) tracks actual average workers’ comp rates in California. They also set what are called pure premium rates that insurance companies may use as guidelines for setting their rates. These pure premium rates do not have insurance company costs or discounts included. Back to the average actual rate, by the end of 2003 California had an average workers’ comp rate of $6.35 per $100 of payroll. The pure premium for roofers was $106.94 per $100 of payroll. If you were a newer contractor with any negative history of injury you could have been much higher than that.

                  The need for further reform was evident and prompted the writing of AB 881 a work comp bill for the roofing industry. While SB 899 has had tremendous impact on the California workers’ compensation system, fraud perpetuated in roofing is still costing the system and taxpayers millions. Because roofing rates are so high and the opportunity to cheat relatively easy, roofers are doing it to the tune of about 50% of the active roof contracting licenses in California.

                  AB 881 is really very simple. Anyone who currently holds a C-39 roof-contracting license in California will be required to carry workers’ compensation insurance or lose the privilege of holding that license. Each policy is now required by law to be audited annually. The CRCA will be working with the State Compensation Insurance Fund and other insurance companies to help guide them on what to look for when auditing a roofing contractor. The cost of these audits is minimal and is included in the cost of the policy.

                  Legitimate contractors have nothing to fear with many having their policies audited annually now. Legitimate contractors who are part of the large population not audited regularly also have nothing to fear. Those who have workers’ comp policies and are deliberately and willfully cheating on their policies, watch out.

                  True one man “only” operations that have historically been exempt from the workers’ comp requirement will have to now carry workers’ compensation insurance. A minimum policy can be purchased from the State Compensation Insurance Fund (SCIF) for about $1,400 per year. That is $117 a month to help insure the legitimacy of the industry from which we all derive our living. Don’t forget, the person doing small jobs, be it roofing, or repairing a washing machine, is still exempt from licensing and workers’ comp laws as long as the work performed is under the current $750 limit.

                  SB 899 came at a time when California business was at one of its lowest points and breathed new life into a system that helps protect employers from liability and guarantees the workers in our Golden State are protected. •••