Paper or Plastic?

By: Mark Webb

It seemed like such a good idea at the time. In 2018, the California Legislature allowed employers to make workers’ comp indemnity payments through a pre-paid card, following the precedent set by unemployment insurance benefit payments.


The bill, Senate Bill 880 (Pan), also had a December 31, 2022, sunset. That was extended one year in Assembly Bill 2148 (Calderon). For this session, Assemblymember Lisa Calderon – now Chair of the Assembly Insurance Committee – has introduced another one-year extension of this authority in the form of Assembly Bill 489.


Will the result this year be the same as last? Perhaps, but perhaps not. SB 880 also required the Commission on Health and Safety and Workers’ Compensation (CHSWC) to deliver a report to the Legislature by December 1, 2022, on how this has all worked out. The report includes the number of cards issued, the amount of benefits paid, and how many workers withdrew from payment cards and decided to get their future disability benefits in some other form. The report has not been delivered, but there is a strong suggestion that it will be in time to have a better-informed discussion on this issue.


In the meantime, last year the Legislature approved, and Governor Newsom signed Assembly Bill 1177 (Santiago), which created the CalAccount Blue Ribbon Commission. The Commission is required to determine the feasibility of the “CalAccount Program”, which would offer Californians access to a voluntary, zero-fee, zero-penalty, federally insured transaction account, known as a CalAccount. This is specifically intended to assist those without a traditional banking relationship and protect them from predatory, discriminatory, and costly alternatives. This was much the same rationale for SB 880.


There should be universal agreement that protecting injured workers from the high cost of converting disability payments to cash is a worthwhile goal. And yet, at least anecdotally, there has not been a significant use of this payment mechanism. The Commission on Health Safety and Workers Compensation report will likely confirm those anecdotes. The data contained in the report should also provide guidance on how to assist workers who are unbanked or are underbanked to have access to modern payment systems. As noted in the legislative findings accompanying AB 1177, in 2017, Californians earning less than $15 per hour made up 80.7 percent of the unbanked in the state. This would suggest minimum wage paying jobs. The Legislature also noted that check cashers charge as much as 10 percent of the cost of the check being cashed.


There are more issues to this form of payment than simply convincing an injured worker to accept it which will be part of the discussion. However, at a time when worker advocates are decrying the inadequacy of permanent disability benefits, the failure to add this to the mix – not as a negotiating item but as a consensus one – is disquieting.


Put another way: It is unconscionable to continue to consider payment mechanisms a secondary issue when the most vulnerable members of the workforce are potentially losing as much as 10 cents on the dollar just to access the disability benefits due them. The indemnity benefit cards carry no such penalty as any associated fees are borne by the employer.


Hopefully, 2023 will be the year this issue gets the attention it deserves.


Note: The opinions expressed herein may or may not be those of Workers’ Comp Executive. Mark Webb is a former Arizona insurance regulator, insurance company chief compliance officer, and is an expert in corporate governance, risk and compliance. He is the owner of Prop 23 Advisors.