Calif. Workers’ Comp System Inadequate in Replacing Lost Earnings

Permanently disabled workers in California’s workers’ compensation system have historically faced poor return-to-work rates and high levels of lost earnings after a disabling injury, a new study has found. In fact, workers’ compensation benefits, despite imposing high costs on California’s employers, have generally been insufficient to adequately replace these losses, with benefits falling about 26 percent since the state implemented reforms in 2005, according to RAND Corp. However, the nonprofit research organization said improving return-to-work for injured workers — thereby lowering earnings losses while also reducing employer costs — has been a key goal of policymakers in recent years.

RAND’s research, which was requested by the California Commission on Health and Safety and Workers’ Compensation (CHSWC), analyzed the effects of several large changes to the workers’ compensation system on return-to-work rates and the adequacy of benefits for California’s injured workers.

The study found that overall return-to-work rates have improved, although it is unclear how much of that improvement can be attributed to changes in workers’ compensation policy. Disability benefits have fallen sharply as a result of changes to the system for evaluating the severity of workplace injuries, the group said. These benefit cuts have reduced the adequacy of workers’ compensation benefits — despite the gains in return-to-work rates over the same period.

The study estimates that the replacement of lost income from workers’ compensation benefits fell by about 26 percent after the reforms took effect in 2005. Had the return-to-work rates not improved, replacement rates would have fallen an additional 15 percent, it said.

The study, “Workers’ Compensation Reform and Return to Work: The California Experience,” is available at http://www.rand.org/pubs/monographs/MG1035.html.