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home / insurance / in the media

The San Francisco Chronicle
Apr 17, 2004

by John M. Hubbell & Lynda Gledhill

Governor beams over workers' comp overhaul

SACRAMENTO -- The Legislature, with little dissent, sent an overhaul of California's workers' compensation system Friday to a beaming Gov. Arnold Schwarzenegger, who declared it evidence of a growing bipartisan spirit flourishing under his leadership.

"When I came to Sacramento in November, the first thing I heard was that it can't be done," the governor said at a Capitol news conference shortly after receiving the bill he helped negotiate. "By working together, we have shown that we are bigger than our problems, that everything is possible. And I have to say it is a big change that is taking place in this building."

Appearing separately, Senate Pro Tem John Burton, D-San Francisco, summarized weeks of tedious negotiations that numbed even the most enthusiastic policy wonks.

"This is the first moment in the last 10 days I haven't had a goddamn headache," he said jovially.

SB899, which passed the Assembly 47-32 and the Senate 33-3, will take effect when Schwarzenegger signs it Monday in Long Beach and soon will trigger widespread changes in how California treats claims of injured employees.

The overhaul guarantees immediate treatment for workers and a new, HMO-style system of doctor selection. In addition, lawmakers hope -- but have little assurance -- that it will save billions, entice more insurance firms to the state and drive down high premiums.

Backers of an alternative ballot measure that called for more far-reaching changes in the system said Friday they would not turn in more than 1 million signatures Schwarzenegger helped them gather, avoiding a costly ballot fight that both parties feared.

Critics of the bill included some legislators who felt its complicated provisions were given far too little public scrutiny, having passed committee at about 4 a.m. Thursday after about an hour of discussion. "No one has mentioned so far that we are voting on this with a gun to our heads," said Sen. Sheila Kuehl, D-Los Angeles, shortly before voting in favor of the bill.

Some Democrats also cited concern that savings would not be realized without some type of insurance industry regulation.

"I'm deeply saddened that we didn't finish the project by making sure that the insurance companies have to pass the savings on," said Sen. Richard Alarcon, D-Los Angeles, one of three senators who voted against the bill. "Somebody has to stand up and say that the insurance companies have to be held accountable."

On a largely party-line vote, the Democratic-controlled Assembly also passed a bill Friday that would set parameters for rates. The bill faces a likely veto if it reaches Schwarzenegger, but the proposal illustrates how close the insurance industry came to being regulated.

"I told (Assembly Speaker Fabian Nunez) that I don't mind looking into the whole idea of rate regulation, because I'm open-minded about anything," Schwarzenegger said. "Finally, a few days ago, (Nunez) sent me some papers (about it). I said, look, this is not going to work. It always had a negative impact on business, and it chased away insurance companies."

He recounted telling Nunez pragmatically: "The Republicans are not going to go for it. If you want this bill to pass, drop it. And he did."

But Schwarzenegger, who repeatedly cited high premiums as "poison" to the state's business climate, said he would reconsider government intervention if rates didn't decline even after an anticipated return of competitiveness among insurance firms.

Regardless of their eventual impact, the purported reforms were seen Friday even among Democrats as a product of the governor's commanding presence and sensibilities.

While calling the now-defunct initiative drive "mean-spirited" and denying his party had caved in to the looming threat it provided, Nunez said legislators "ought to applaud (Schwarzenegger) for his steadfast efforts."

Schwarzenegger made an overhaul of workers' compensation a centerpiece of his recall campaign. In his State of the State address, he set a March 1 deadline -- the first of many -- for a bill to reach him and then began campaigning separately for a ballot initiative on the issue as talks moved slowly forward.

The message Friday was clear: His populist-themed, pass-it-or-else style is working and will continue.

"I like the idea of using the stick, and I like the idea of using deadlines, " Schwarzenegger said. "Why would we hang here for the next two years to negotiate and debate over this issue?"

"I knew that March 1 was not a realistic deadline," he said, but "it made (legislators) serious. Immediately, the next day, they started to negotiate."

Ensuing talks brought the governor deep into Sacramento's world of secret closed-door talks, lobbyist-clogged hallways and 3 a.m. calls to the former actor's hotel suite to square away complex bill language, the flavor of which ran against his promise of open government.

"It's a very good point," Schwarzenegger said Friday. "I always did campaign saying let the sun shine in. The only thing is ... that sometimes you are on such deadlines. We had to make decisions very quickly. That's why there were no hearings."

Watchdog groups wondered how many lawmakers knew much of what they had sped into law. After the bill emerged Thursday, the nonpartisan Foundation for Taxpayer and Consumer Rights gave each legislator a statement that, along with a 12-question quiz, asked them to declare they had in fact read the bill.

None was returned Friday, said spokesman Douglas Heller. But the advocacy group received a call from Sen. Jackie Goldberg, D-Los Angeles, who told them she had made it through every last line of the 101-page bill.

She voted against it.
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E-mail the writers at jhubbell@sfchronicle.com and lgledhill@sfchronicle.com


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