THE RATE DANCE

Keeping the California economy humming is a complicated enterprise.

There are economic forces California politicians can’t control. The availability of water. Energy prices. Housing market disruption.The apparent slowing of the Chinese economy and exchange rate adjustment, which will make life hard for California exporters. The possible end of the Fed’s easy money quantitative easing. The tech and bio-tech boom,which has created great wealth but also exacerbated transportation and income equity issues. In-migration and out-migration.

But California politicians and their bureaucrats like to think that workers’ comp costs are one thing they can control.

This concept-the notion that high comp costs are an economy killer- is what has motivated the periodic California workers’ comp reforms.

And it’s what motivates Brown Administration policymakers even now.

It’s a major factor that drives the debate this summer over whether California should have a formulary of prescription medications, how that formulary should be designed and administered, and whether it can be imposed by the DWC if a legislative compromise fails.

It’s also a big factor in what drives the revision of the chronic pain guidelines and the plan to create opioid guidelines, both of which will be discussed at a September 1, 2015 meeting convened by the DWC in Oakland.

It’s also a big factor in how Independent Medical Review was designed and administered. The constitutionality of the IMR system is under attack in several prominent appellate cases.

It’s a big factor in the increasing concern over why Los Angeles area workers comp costs seem so different than other areas in the state.

So regardless of what some injured workers, doctors and lawyers say about their experience, the Brown Administration feels that the reforms are working, controlling costs.

Cost containment costs may continue to rise, but lien reforms, spinal hardware payment changes and the transition to a new system of paying treating doctors are some of the reform successes being touted.

But the spectre of the ghost of Gray Davis still hangs heavy over the Capitol. Politicians don’t want to see workers’ comp costs spiral ,with the attendant political fallout and perception that California is not business friendly.

Even a bill to deal with gender discrimination in workers’ comp, an otherwise appealing concept, has faced tough sledding this year.

Comp is generally out of the headlines though the occasional horrific work accident makes the papers or bubbles up through the internet cacophony. Why just today I see a piece in the LA Times noting a settlement in a workplace safety criminal case out of LA, where “Bumble Bee Foods agreed today to pay $6 million for violating worker safety rules in the 2012 death of a Santa Fe Springs plant worker trapped inside an industrial pressure cooker that had been turned on.”

But what about those workers’ comp costs?

Earlier this year Insurance Commissioner Dave Jones adopted the WCIRB recommendation of a 10.2% cut in the “pure premium rate”, though recent evidence suggests that insurers have been making their own very different pricing decisions (as they are allowed to do, since Jones’ rate-making authority is advisory only).

The more recent hot question has been what rate increase or reduction the WCIRB would recommend for 2016.

Now we have an answer. The WCIRB will recommend a decrease in rates of less than 1%.

This is far from unanimous, as the vote by the Governing Committee of WCIRB split along insurer vs. public and labor members. The latter favored a basic rate decrease of more than 5%.

This will all wind up in the lap of Dave Jones several months from now. I suspect that Jones will take a hard look at this, but ultimately whatever rate he adopts for 2016 is advisory.

Yet, from a political standpoint it is critical for the politicians.Scoring a substantial 2016 recommended rate reduction on top of a double digit 2015 rate reduction is political gold.

Never mind whether many employers actually receive the reductions in the actual pricing world. And never mind how chronically injured workers may complain about their treatment.

Reality is important, but perceptions perhaps even more so.

Julius Young