In the early 2000s California had the highest workers’ compensation costs in the country, but also poor outcomes for injured workers, including relatively low return to work rates compared to other states. In 2004 the state passed a comprehensive workers’ compensation reform, which among other things changed the disability rating system, limited physician shopping and created strong incentives for the employer to rehire a permanently disabled worker. A brief from the Rand Corporation examines the effects of these reforms on return to work rates in California. (Rand Brief)
The researchers found that re-employment rates increased, and increased the most for workers with the most severe injuries. The new disability rating system reduced severity of injuries and consequently benefit payments to permanently disabled workers to about two-thirds of what they were before the reform, meaning less of lost income was being replaced. The higher return to work rates offset a significant portion of this decline, again especially for more severely injured workers. Returning to work likely has a number of benefits in addition to income increases; it probably increases the quality of life for most of the disabled employees.