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The Rising Cost Of Workers' Comp


California business leaders were warned at a Central City Association forum in California that implementation of workers' compensation reforms will not help them and they should implement injury prevention programs immediately or face exploding workers' compensation costs.


Aon Risk Services and DuPont sponsored the roundtable discussion on the financial impacts of California's workers' compensation legislation. Business representatives also heard from the California Chamber of Commerce and the Los Angeles Economic Development Corporation (LAEDC).


"Worker safety should be a primary focus of business owners as a way to prevent the pain and suffering associated with workplace injuries and their ultimate cost," said Rosanne Danner of DuPont Safety Resources. "Prevention is the only sure way to avoid workers' compensation costs. Until business owners drastically reduce the number of claims, workers' compensation costs will continue to have a dramatic effect on their bottom lines."


With the implementation of AB 749, business will face exponentially rising workers' compensation costs, said Bill Goldstein, vice president of Aon Risk Services. "Since 2000, benefits paid by employers have increased by 13.9 percent, mostly due to medical costs," Goldstein said. "On Jan. 1, base rates increased 10.2 percent. Under AB 749, there will be a mid-term increase effective July 1, 2002 of 10.1 percent, and, remarkably, the expected cost increase through 2006 will be a total of 16 percent over 2002. My over 30 years of experience causes me to be very concerned about the strain of workers' compensation on the employers."


Goldstein said employers can reduce their overall costs by monitoring all claims, providing safety training for employees and getting senior management involved and committed to safety.


Danner stressed that the best, and in many ways only, solution to high workers' compensation costs in California is to implement worker safety programs that emphasize injury prevention and ultimately reduce the number of claims filed. Dominic DiMare of the California Chamber of Commerce told business leaders they still have time to change the workers' compensation rules. "The legislators have missed a golden opportunity to help the Golden State's economy by adopting an empty vessel in terms of reforming workers' compensation," DiMare said. "Every business in California that is feeling the effects of AB 749 needs to contact their state representatives to change this system before it drives more business away."


Jack Kyser, senior vice president and chief economist of the Los Angeles Economic Development Corporation (LAEDC), said the new Workers' compensation costs were driving businesses out of the state. "Small business constitutes 70 percent of the Los Angeles market. These businesses are especially vulnerable to the high costs associated with workers' compensation. California is viewed as a traditionally high-cost state. This situation just exerts further upward pressure."


Carol Schatz, president and CEO of the Central City Association, called workers' compensation "one of the biggest financial challenges to Los Angeles business."

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