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California Overhauls Troubled Workers' Compensation System - 2004-04-20

California Governor Arnold Schwarzenegger celebrated a political victory Monday when he signed an overhaul of the state's troubled workers' compensation system. The change will bring relief to businesses, but is drawing complaints from some workers and their attorneys.

Workers' compensation insurance provides medical benefits for employees hurt on the job, and California's state-run system is the nation's most expensive.

It paid out $18 billion in benefits last year, and some employers cited the soaring cost as the reason they have fled to neighboring states like Arizona.

Monday, Mr. Schwarzenegger, a former movie star, signed the new bill into law, repeating a well-known line from one of his Terminator movies. "We will terminate the fraud and abuse that was going on in the system. For those that were gaming the system, I say "Hasta la vista," because the game is over," he said.

In addition to problems with fraud, the governor said the old system was poorly managed. Under the new provisions, treatments for temporary injuries will be capped at two years. Some benefits will be reduced, but those for serious injuries will be increased by 15 percent. And workers can now receive immediate therapy. In the past, treatment for non-emergencies often required a wait of several weeks.

However, labor organizations are troubled by a provision that assigns workers a doctor from a list of approved providers.

Still, leading Democrats applauded the bill, a compromise pushed through by the Republican governor. Mr. Schwarzenegger had the upper hand in negotiations, armed with one million petition signatures that would have put the issue directly to the voters. John Burton, the Democratic leader of the state senate, said there were "many good things" in the final legislation.

A recent survey by a California business group says 30 percent of California companies have a policy of moving jobs from the state, when possible. In addition to workers' compensation payments, employers cite high housing costs and rising operating expenses.

The changes in the workers' compensation system are expected to bring savings of at least $4 billion a year to California employers.