What will happen now that Governor Schwarzenegger’s lust for legacy has officially closed the door on needed reforms to California’s workers’ comp system?
Let me start from the beginning. Just about a year ago, a small group of admittedly unrepresentative but very bright self-insured employers, and one brave labor representative, met in secret over several months to develop reforms that would have raised permanent disability benefits for injured workers and reduced frictional costs in the system for all employers.
Yes, the two major players in workers’ comp—employees and employers—grew up and attempted to reach an agreement through mutual respect and compromise. Instead of posturing and waiting for the perfect moment where the politics of the time allowed them to pounce, this group came together like adults and (gasp) developed a package of reforms that bordered on a reasonable and balanced resolution to systemic problems. It is not something one sees very often in the insurance community.
Eventually, this group, with the assistance of CHSWC, began vetting potential language with a small group around Sacramento. The package was not universally loved, that much is certain. Doctors and applicant attorneys feverishly ran to and fro in the halls, pointing at the sky like a flock of Chicken Littles. Meanwhile, the usual “representatives” from the insurance industry scurried up and down stairs—in and out of doors—sowing seeds of doubt in the ears of decision makers. It was as if the ideas weren’t theirs and therefore couldn’t be considered.
This is not to say that these groups should be blamed for their actions. The doctors had a legitimate gripe because the reforms appeared to cause the workers’ comp system to start demanding something from them. The insurers, to their credit, were legitimately concerned about the approach taken in the reform package. After all, it might help employers.
What happened to this seemingly balanced reform package? It rotted on the vine. It never saw a committee hearing or floor debate. The employer lobby in Sacramento actively pushed Governor Schwarzenegger to endorse the package, a step necessary for the critics to come to the table and take the exercise seriously.
Unfortunately, the governor never devoted enough attention to the proposal to give it any credibility, even though at that point and now at this point, nearly everyone admits that permanent-disability benefits should be adjusted, medical costs need to be controlled, WCAB judges routinely make law out of whole cloth, and a number of the reforms from 2003 and 2004 have proven to be useless or, in some cases, harmful.
Costs may continue to be lower than they were in the days leading up to SB 899, but it is clear that a course correction is required. The governor was handed an opportunity to get this done with minimal effort before things got out of hand. Mind you, the governor had sent a letter to Insurance Commissioner Steve Poizner asking him to reject a large premium increase recommended by WCIRB just a few months before strategically ignoring this reform package.
His office claimed that he was busy with other things, which he may well have been. After all, he was chasing a water bond and public employee pension reform. But many suspect that the governor failed to endorse the package for a reason that is far less flattering. By outwardly supporting an effort to re-reform workers’ comp insurance, he would have been admitting that SB 899 did not permanently solve every problem in California workers’ comp, something that he apparently still believes. It was concern for his legacy that made him freeze up when presented with an opportunity to finish what he started in 2004.
Legacy is the polite term used to denote the enhanced sense of ego and self-aggrandizement experienced by a governor or other elected executive at the end of his or her time in office. This is not unique to Governor Schwarzenegger. All governors spend their last year in office running around like lunatics trying to make sure that history treats them well.
What’s done is done, and Governor Schwarzenegger has let slip through his hands the opportunity to cement the most significant aspect of his legacy—the economy-saving cost reductions that resulted from SB 899. Brokering a deal between labor and employers to finance a benefit reform through the reduction of frictional costs would have helped preserve the governor’s reforms for the long term. It also would have set the tone for the next administration.
Instead, employers are left with a 50/50 chance, at least according to the polls, that strong allies of organized labor will control the Legislature and occupy the governor’s office.
With Governor Schwarzenegger out of the picture, it will fall on either Meg Whitman or Jerry Brown to deal with workers’ comp. Conventional wisdom tells us that Meg Whitman would take an approach supported by insurers and employers, but with a Legislature filled with lemming-like followers of organized labor, that likely translates into continued stalemate.
One would expect Jerry Brown to do the bidding of the labor organizations that have so fervently supported his campaign to be only the second California governor elected to a third term (Earl Warren, governor from 1943-1953, was the other). While nothing is certain, it is clear that, at the very least, labor and the applicant attorneys would face a friendly audience when their legislation is under consideration in the Capitol’s corner office.
While uncertainty comes with a new governor, one would expect that Meg Whitman will not be interested in preventive maintenance that yields a benefit increase for the rank and file of unions that treated her poorly in the election, and Jerry Brown is not likely to use his veto pen when those same unions send him legislation to eviscerate SB 899.