Category: Daily News

Michael Sargent worked as a City of Gardena police officer for about 20 years beginning in 2002. As president of the Gardena Police Officers’ Association, he came to know city manager Clint Osorio. Sargent alleged that after his March 2021 promotion to lieutenant, Osorio began asking him for improper favors, including running vehicle VIN numbers and helping speed up a concealed carry weapons license. Sargent declined.

In November 2021, Sargent filed a workers’ compensation stress claim and was placed off work with an industrial injury. While on leave, he learned he would likely have permanent restrictions and would not return to duty. He told Osorio that he had Parkinson’s disease and that City Resolution No. 6475 would shut him out of “Tier 1” employer-paid retiree health coverage. That resolution, effective August 2020, gives paid retiree health benefits only to employees who are at least 50 years old and elect a service retirement with at least 15 years of service. Employees who retire on industrial disability without meeting those minimums may stay in the City’s group health plan, but at their own cost.

Sargent alleged that he and Osorio reached a verbal agreement in early 2022 to amend the resolution or otherwise get him paid benefits, and he sent Osorio proposed amendments in January 2022. Around the same time, Osorio again raised the concealed carry license, and Sargent reported that to the police chief. In July 2022, Osorio texted Sargent that he was disappointed Sargent had told the chief, then blocked Sargent’s number and stopped pursuing the amendment. Sargent took an industrial disability retirement in October 2022, before turning 50, and received no Tier 1 benefits.

Sargent sued the City and Osorio under the Fair Employment and Housing Act (Gov. Code, § 12940), alleging age and disability discrimination under both disparate treatment and disparate impact theories, disability harassment, retaliation, and failure to prevent discrimination. He claimed the resolution targeted officers aged 40 to 49 and disabled retirees, and that Osorio used his age and disability as leverage when he refused to do personal favors.

The Los Angeles County Superior Court sustained the defendants’ demurrer to the third amended complaint without leave to amend. The court reasoned that the resolution actually favors older employees, that its plain language does not exclude disabled employees from Tier 1 benefits, and that none of Osorio’s alleged conduct was based on age or disability. It also found no facts showing protected activity or a causal link for the retaliation claim, and dismissed the failure-to-prevent claim because no underlying discrimination or harassment had been pleaded. Sargent appealed from the resulting judgment.

In the unpublished case of Sargent v. City of Gardena, No. B347293 (October 2026), the California Court of Appeal, Second Appellate District, Division Seven, affirmed the judgment entered after the trial court sustained the defendants’ demurrer without leave to amend. The opinion, filed October 12, 2026, is not certified for publication, so under California Rules of Court, rule 8.1115 it generally may not be cited or relied on by courts or parties in other actions.

Age discrimination. FEHA protects workers who have reached age 40 (Gov. Code, § 12926, subd. (b)). Sargent argued that this text plainly lets any worker over 40 sue when an employer favors workers 50 and older. The court disagreed, reading the statute in light of its purpose of protecting older workers from stereotyping, and noting that the California Supreme Court in Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317 framed age bias in terms of favoring significantly younger workers. Sargent cited no California authority recognizing the reverse claim. The panel found persuasive General Dynamics Land Systems, Inc. v. Cline (2004) 540 U.S. 581, where the U.S. Supreme Court rejected a nearly identical challenge to the elimination of retiree health benefits for everyone except workers 50 and over, holding that the federal Age Discrimination in Employment Act (see 29 U.S.C. § 631(a)) bars only discrimination preferring young to old. Because FEHA and the ADEA share the same objective, and because Sargent offered no reasoned textual or legislative-history argument for departing from Cline (or for following other states’ differently worded statutes), the court followed Cline. In a footnote, it observed that accepting Sargent’s theory would undermine traditional retirement plans with minimum-age requirements. His age-based disparate impact claim failed for the same reason, and he forfeited his disability-based disparate impact claim by never arguing it.

Disability discrimination and the resolution. The court held the resolution does not treat employees differently because of disability. Eligibility for paid Tier 1 benefits turns on age and years of service; had Sargent been 50 with 15 years of service, he would have qualified even if he retired for disability-related reasons. The court agreed with the trial court’s reliance on Brown v. City of Los Angeles (9th Cir. 2008) 521 F.3d 1238, which held that separate service and disability pension programs need not provide identical benefits. Sargent never alleged that he received less than a similarly situated non-disabled employee who retired before 50. If anything, the resolution gives disability retirees under 50 something non-disabled early retirees do not get: the option of continued, self-paid group coverage.

Disability discrimination based on Osorio’s conduct. The court accepted that Sargent adequately alleged a disability, given his stress-related condition and Parkinson’s diagnosis. But even assuming an adverse action and that he was qualified, he pleaded no facts suggesting discriminatory motive. Relying on Brown v. Los Angeles Unified School Dist. (2021) 60 Cal.App.5th 1092, the panel explained that Sargent’s own allegations attributed Osorio’s change of heart to Sargent’s refusal to do personal favors, not to bias against him as a disabled person. Osorio’s knowledge of the disability, standing alone, does not support an inference of discriminatory intent, and FEHA is not a remedy for harsh or unfair treatment as such.

Healthcare organizations say artificial intelligence is paying for itself fastest in the back office — billing, claims processing and other administrative work — while AI at the bedside is still struggling to earn clinicians’ trust, according to The 2026 Healthcare AI ROI Scorecard, published September 30, 2026, by venture capital firm Bessemer Venture Partners. The report is based on a survey, conducted with Bain & Company, of 226 executives at health insurers (payers), healthcare providers and pharmaceutical companies, covering 65 AI use cases. It follows Bessemer’s 2025 Healthcare AI Adoption Index, which surveyed more than 400 executives using a similar framework.

The headline finding is speed. Respondents had budgeted for AI investments to pay back in roughly 24 months, but report realizing returns in about 12, at an average of 3.5 times cost, with results beating expectations in roughly 40 percent of use cases. Fifty-four percent reported material return on investment inside the first year. Ranked by reported return, provider revenue cycle work led at 4.0 times cost, followed by payer claims and pharmaceutical preclinical discovery at 3.4 times, payer provider-network functions at 3.3 times, member engagement at 3.2 times, provider front-office work at 3.1 times, provider clinical uses at 2.9 times, pharmaceutical commercial uses at 2.6 times and clinical drug development at 2.3 times.

The gap between administrative and clinical AI shows up most clearly in how much work organizations have handed over to autonomous systems. Two-thirds of provider revenue cycle respondents now run semi- or fully autonomous AI agents, as do 62 percent of payers in member engagement, compared with just 4 percent in provider clinical work. The fastest-growing use cases were all administrative: payer contracting management rose from 19 percent to 37 percent adoption, provider credentialing and enrollment from 35 percent to 56 percent, provider contracting from 40 percent to 60 percent and prior authorization from 32 percent to 46 percent. Still, the share of use cases in full production barely moved over the year, and for payers it held flat at 6 percent.

The survey also points to workforce effects. Half of the organizations surveyed said they have already reduced headcount as a direct result of AI or plan to within six months, with cuts averaging 8 to 13 percent of the affected functions. Among payers reporting reductions, 71 percent named claims processing and 68 percent named member services; among providers, 73 percent named revenue cycle and medical billing. Bessemer estimates, as a rough calculation of its own, that this implies about $100 billion in labor-spend disruption across roughly $1 trillion in annual healthcare administrative spending. The authors also argue that healthcare is short of workers in many of these same functions, citing an American Medical Association estimate of a roughly 30 percent medical coder shortage, and suggest that nurses now staffing prior authorization and utilization review could be redeployed to care management rather than simply eliminated.

For the claims side of the business, the report highlights how much AI is being aimed at the same disputes from both directions. Providers ranked denial and appeals management as their top pain point (78 percent) and prior authorization second (61 percent), while payers placed appeals management in their top three (42 percent). Bessemer characterizes the result as “AI-to-AI combat” on mirrored workflows, and argues the larger savings would come from eliminating duplicative processes altogether through aligned incentives and faster payment — something it says AI alone cannot deliver. For scale, it points to a 2021 JAMA Viewpoint, Administrative Simplification and the Potential for Saving a Quarter-Trillion Dollars in Health Care, which estimated roughly $265 billion in potential annual administrative savings (Bessemer cites the figure as $260 billion).

Clinical AI faces steeper obstacles. Only 46 percent of respondents said they trust AI-generated tools to support clinical decision-making, and 77 percent said clinicians override AI suggestions more than half the time. Fifty-eight percent said the treating clinician bears primary accountability for AI-influenced decisions, half cited medico-legal exposure as the main barrier to scaling beyond proof of concept, and 36 percent of providers have delayed or canceled a clinical AI deployment over regulatory and compliance uncertainty. Payment is another hurdle: about 48 percent of payers said they are unwilling to reimburse fully autonomous AI care, versus about 5 percent who object to AI-assisted care in which a clinician reviews and confirms the output. Roughly 44 percent of payers expressed willingness to create payment pathways in narrower areas such as primary and preventive care, diagnostic support and medication management. Bessemer frames the stakes against workforce shortages, citing the Association of American Medical Colleges’ projection in The Complexities of Physician Supply and Demand: Projections From 2021 to 2036 of a shortfall of up to 86,000 physicians by 2036, including 20,200 to 40,400 in primary care.

Buyers are also changing how they purchase AI. Forty-two percent have completed or are running a vendor consolidation, 72 percent now have an AI governance committee, and respondents named regulatory and compliance uncertainty as the top reason deployments are delayed or canceled. More than half of next year’s incremental AI spending is earmarked for scaling proven use cases (35 percent) and integrating them into existing workflows (20 percent). Internal development has faded: 61 percent of organizations said half or fewer of their internally built AI tools are still maintained and in use.

For insurers, claims administrators and employers, the findings suggest that AI-driven automation of claims processing, prior authorization and utilization review is moving from pilots into routine operations, with real staffing consequences, while the unresolved questions around clinical AI — who is liable when a clinician follows or overrides an AI recommendation, and whether payers will pay for AI-delivered care — remain open. The survey covers group health payers, providers and pharmaceutical companies; it does not address workers’ compensation or property-casualty claims specifically.

Several caveats apply. The return figures are self-reported by respondents and reflect deployments that Bessemer says are roughly two years old; the firm presents them as a floor rather than a ceiling, but they have not been independently audited. The published article does not detail how respondents were selected or the survey’s margin of error. Bessemer is a venture investor in healthcare AI companies, and the report names portfolio companies, including Abridge and SmarterDx, among the market’s winners; the firm’s own disclaimer notes that companies discussed may be current or former portfolio companies. Characterizations of trends and opportunities in the report reflect Bessemer’s analysis and investment perspective rather than independent findings.

The U.S. Equal Employment Opportunity Commission (EEOC) has taken the first formal step toward withdrawing its 2012 guidance on how employers may use arrest and conviction records in hiring and other employment decisions. On October 6, 2026, the White House Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) logged receipt of a draft final rule from the EEOC titled “Rescission of Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act,” according to Littler Mendelson, Ogletree Deakins in The National Law Review, and Bloomberg Law.

The text of the draft has not been released. Under the federal regulatory review process, OIRA publicly lists a rule’s title, agency, stage, and date of receipt when it begins review, but the document itself generally does not become public until the agency publishes it in the Federal Register. What is known comes from that listing and from practitioner commentary.

First, the action is a complete rescission. The title indicates the EEOC intends to withdraw the 2012 guidance, not revise it. Ogletree’s attorneys wrote that, based on past practice, it is very possible the agency will rescind the guidance without issuing any replacement.

Second, it is styled as a final rule, not a proposed rule. That means no public comment period is expected. Littler’s attorneys noted that if OIRA clears the draft, the EEOC is expected to publish it and repeal the guidance effective on publication, though the timing is unclear.

Third, nothing about the rescission changes the underlying statute. Title VII of the Civil Rights Act of 1964, and the case law interpreting it, remain in place. The guidance was the EEOC’s interpretation of that law, not law itself.

The 2012 Enforcement Guidance, adopted under the Obama administration, consolidated and updated EEOC policy statements dating to 1987 and 1990. It explained that an employer’s use of criminal history can violate Title VII in two ways. The first is disparate treatment: treating applicants differently because of race or national origin, for example by excusing a record for one applicant but not another. The second is disparate impact: applying a neutral screen that disproportionately excludes protected groups and is not justified by the job. The guidance relied on national data showing higher arrest and incarceration rates for Black and Hispanic individuals to support the view that criminal record screens can have a disparate impact.

To defend a screen against a disparate impact claim, an employer must show it is job related and consistent with business necessity. The guidance said the most common way to do that was a targeted screen considering the three “Green factors”: the nature and gravity of the offense, the time elapsed since the offense or completion of sentence, and the nature of the job. It encouraged employers to follow up with an individualized assessment giving the applicant a chance to explain. The guidance also took the position that an arrest alone does not show that criminal conduct occurred, and it discouraged blanket exclusions of anyone with a record. It recognized that federal laws requiring the exclusion of people with certain convictions are a defense to a Title VII claim.

The guidance drew criticism from the start. Texas sued in 2013, arguing it had the right to refuse to hire convicted felons for state jobs. On August 6, 2019, the Fifth Circuit ruled in Texas v. EEOC that the guidance was a substantive rule the EEOC lacked authority to issue. The court barred the EEOC and the Attorney General from treating it as binding against Texas. Business groups argued more broadly that the guidance discouraged legitimate safety screening and exposed employers to liability for following state no-hire laws.

Supporters of the guidance saw it as an important tool for people re-entering the workforce after involvement with the criminal justice system. They argued that blanket exclusions shut a large share of the population out of work and fall hardest on Black and Hispanic workers, and that individualized review lets employers manage real risks without screening out people whose records have nothing to do with the job.

The current effort to withdraw the guidance is part of a broader federal retreat from disparate impact enforcement. As described by Quarles & Brady, President Trump signed Executive Order 14281, “Restoring Equality of Opportunity and Meritocracy,” on April 23, 2025. It directed federal agencies to deprioritize enforcement of disparate impact liability, specifically naming Title VII. EEOC leadership reportedly directed staff to close nearly all pending charges based solely on disparate impact by September 30, 2025. On June 9, 2026, the Department of Justice issued a formal opinion concluding that the EEOC’s existing interpretations of disparate impact liability are unconstitutional and that selection tools such as background checks should be treated as presumptively job related. The EEOC, chaired by Andrea Lucas, voted on June 30, 2026, to rescind its affirmative action guidelines.

Critics of that shift have pushed back. An EEOC administrative judge told HR Dive that the presidential directive was illegal, and the publication noted that a federal judge dismissed a 2025 lawsuit challenging the EEOC’s nonenforcement of disparate impact claims.

Practitioners across the commentary agree on several points. Disparate impact liability remains part of Title VII. The Supreme Court recognized it in Griggs v. Duke Power Co. (1971), and Congress wrote it into the statute in the Civil Rights Act of 1991. The EEOC can decline to pursue such claims, but applicants can still file charges, obtain right-to-sue notices, and bring private lawsuits, including class actions.

The Green factors come from case law, not the guidance. Courts have applied the Eighth Circuit’s framework for decades, and the Third Circuit in El v. SEPTA (2007) required employers to show that a criminal record policy accurately separates applicants who pose an unacceptable risk from those who do not. Quarles & Brady expects courts to keep weighing offense severity, recency, and job relevance, while noting that employers will likely cite the Justice Department’s opinion and that some courts may find it persuasive.

Disparate treatment claims are unaffected. The EEOC is expected to continue investigating uneven application of background check policies across racial or national origin groups. Arrest-only exclusions and blanket bans remain the riskiest practices, because an arrest is not proof of misconduct and courts have long been skeptical of across-the-board exclusions.

The federal Fair Credit Reporting Act’s notice and adverse action requirements, and the growing body of state and local “ban the box” and fair chance laws, are not affected by the rescission. That is especially significant in California. The California Fair Chance Act generally bars employers with five or more employees from asking about conviction history before a conditional job offer. It also requires an individualized assessment, and specific written notices, before an offer is withdrawn based on a conviction. The California Civil Rights Department continues to enforce the law actively, as reflected in its June 2026 settlement with the City of Signal Hill over a rescinded job offer. Ogletree’s attorneys noted that several state agencies have signaled they are prepared to fill the gap left by federal disparate impact enforcement.

There is no set deadline for OIRA to finish its review. Once the rule is published, the 2012 guidance is expected to be withdrawn immediately. Employers that built their screening programs around the guidance are generally being advised not to dismantle them, because the same practices remain the best defense under Title VII case law and are required by many state and local laws.

Workers’ compensation carriers and self-insured employers pay hospital bills under fee schedules built on the same diagnosis codes that group health insurers use, so a dispute now playing out between the nation’s largest insurer federation and the hospital industry deserves close attention from claims and bill review professionals. On September 24, 2026, the Blue Cross Blue Shield Association (BCBSA) released a claims analysis concluding that hospitals’ growing use of artificial intelligence to document and code inpatient stays has made patients look sicker on paper without any matching change in the care they received. As Fierce Healthcare reported, the association put the price of that shift at an estimated $942 million in added costs to Blue plans over 2024 and 2025, measured against a 2023 baseline.

To follow the argument, it helps to understand how a hospital stay is priced. Most inpatient admissions are paid as a single lump sum determined by a diagnosis-related group, or DRG. Each DRG family typically comes in tiers. The same operation pays one amount for an uncomplicated patient, more if the record lists a “complication or comorbidity,” and more still if it lists a “major” one. A single secondary diagnosis, such as anemia from blood loss, a low sodium level, or malnutrition, can move a stay up a tier and add thousands of dollars to the payment even though the surgery itself is unchanged.

That is where the new software comes in. AI revenue cycle tools scan physician notes, laboratory results and other chart entries for conditions that qualify as secondary diagnoses, and ambient “scribe” products listen to patient encounters and draft the clinical note. Hospitals say these tools capture conditions that busy clinicians always treated but did not always write down. Insurers say they are finding billable diagnoses that made no difference to the patient’s care.

BCBSA’s analysis, a short white paper covering claims from the first quarter of 2023 through the end of 2025, found that the share of inpatient cases billed to Blue plans as medically complex rose from 37 percent to 40 percent. About 70 percent of the increase came from more than 55,000 additional cases in which a secondary diagnosis pushed the claim into a higher-paying DRG. Those cases accounted for $653 million of the total, or roughly $11,000 per case. The paper used major bowel surgery as its example: claims in the highest severity tier climbed to 22.7 percent while uncomplicated cases fell from 36.6 percent to 32.8 percent.

The association’s central evidence is what it calls a disconnect between coding and treatment. Hospitals in the top quarter for growth in complex coding showed similar or lower rates of intensive care use, transfusion, reoperation and length of stay than their peers. For acute blood loss anemia, which BCBSA describes as a common “bump” code, the hospitals that diagnosed it most often actually transfused those patients less often, 16.9 percent compared with 19.3 percent elsewhere. Luke Chalker, the association’s senior vice president of product and data science, told reporters the data showed “no change in corresponding care for a more complex patient.” The September paper follows a March 2026 BCBSA and Blue Health Intelligence study that attributed about one-fifth of a 9 percent rise in per-member inpatient costs to coding intensity.

Hospitals reject the conclusion. In an October 5 response, the American Hospital Association said patients today are older and more clinically complex and that AI tools help providers record their conditions accurately. “The question is whether the patient’s medical record supports those diagnoses,” two AHA policy executives wrote, noting that BCBSA reviewed claims rather than charts and did not identify which claims actually involved AI. The AHA made similar points in an August fact sheet, and in a statement to CNBC it criticized insurers for raising coding concerns while relying on their own automated downcoding and denial systems.

The study’s limits are real, and BCBSA concedes the main one. It relied on claims data, not medical records, so it cannot show that any particular diagnosis was unsupported. The link to AI rests on timing and on survey figures showing that most hospital systems now use AI somewhere in the revenue cycle, not on claims traced to specific software. The white paper is not peer reviewed, it names no hospitals, and it arrived during a period of difficult contract negotiations between plans and hospital systems. Independent researchers had nonetheless raised the same concern before the insurers did. A January 2026 viewpoint in JAMA Health Forum warned that ambient scribes marketed for their ability to capture more and more severe diagnoses could drive spending upward, and an April report from the Peterson Health Technology Institute described a payer-provider AI “arms race” that raises billing intensity without fixing underlying inefficiency.

For workers’ compensation payers the relevance is direct, even though the study examined commercial health claims and its examples were bowel surgery and, earlier, maternity care. California’s Official Medical Fee Schedule prices inpatient hospital stays using Medicare’s DRG system with a multiplier, as do the fee schedules of many other states. The DRG families that dominate comp inpatient spending, including spinal fusion, major joint replacement and fracture repair, are tiered by complications and comorbidities in the same way. Acute blood loss anemia, the code BCBSA singled out, is one of the diagnoses most frequently recorded after orthopedic surgery. A hospital that deploys AI coding software applies it to every payer’s claims, not just those of Blue plans.

That raises several practical points. First, bill review programs that validate only the fee schedule calculation will not catch severity drift, because a correctly priced DRG can still rest on a secondary diagnosis the record does not support. Clinical validation, which compares the coded diagnoses against the treatment actually delivered, is the test BCBSA applied in aggregate and the one payers can apply claim by claim. Second, any objection must still be made within the deadlines and explanation-of-review requirements of Labor Code § 4603.2, and unresolved payment disputes proceed through second review and independent bill review. Third, the issue cuts both ways. Applicants’ attorneys and providers will point out that more complete documentation of comorbidities is legitimate and may bear on apportionment, causation and future medical needs, while defense counsel may question whether a newly charted secondary condition was ever clinically significant.

Payers should also expect scrutiny of their own automation. According to an Orthopedics This Week commentary, Indiana now bars health plans from using an automated tool as the sole basis for downcoding a claim without reviewing the medical record, and lawmakers in California and several other states introduced downcoding bills this year. Those measures are aimed at health plans, but they signal where regulators are heading.

BCBSA says further analyses are coming, including outpatient care and additional DRGs, and orthopedic and spine procedures are obvious candidates. The broader cost pressure is not in dispute. CNBC reported that benefits consultant Marsh projects employer health costs per employee will rise 8.2 percent in 2027. Whether AI-assisted coding represents accurate documentation finally catching up with reality or technology-enabled upcoding is a question the claims data alone cannot answer. For comp payers, the prudent step is to find out whether their bill review vendor tracks DRG severity mix over time and tests secondary diagnoses against the treatment record.

California’s 2026 legislative session produced two enacted workers’ compensation measures that claims administrators, employers and practitioners will carry into 2027: a budget trailer bill that rewrites eligibility for the Subsequent Injuries Benefits Trust Fund (SIBTF) and makes the current reconsideration deadline permanent, and a short bill that keeps prepaid card indemnity payments available indefinitely. Several other closely watched proposals, including a permanent disability rate increase, did not reach the governor. The governor’s deadline to act on bills passed this year was September 30.

This report was compiled from the chaptered bill digests, the governor’s signing announcements and legislative tracking by the Commission on Health and Safety and Workers’ Compensation (CHSWC). The California Workers’ Compensation Institute has issued its own summary of the 2026 session as a Bulletin, which is available to CWCI members and subscribers through its Bulletins page.

The centerpiece is Senate Bill 171, a labor budget trailer bill approved by Governor Gavin Newsom on July 13, 2026 and chaptered as Chapter 83, Statutes of 2026. As a budget measure it took effect immediately. The Legislative Counsel’s digest explains that case law had treated a prior condition as “labor disabling” if it could have supported an award had it been industrial, without requiring any showing of lost earnings. SB 171 replaces that approach with a statutory definition: the impairment must have caused a loss of earnings, interfered with the employee’s work in their occupation, or otherwise had a demonstrable impact on the ability to work.

The bill also changes how the preexisting disability is proved. Its existence at the time of the later industrial injury must be shown by substantial evidence drawn from medical records, testimony and other evidence that already existed before that injury. In determining whether the subsequent injury meets the statutory threshold, the bill excludes any adjustment for future earning capacity or the corresponding adjustment factor. It sets a filing deadline for SIBTF claims of five years from the date of the subsequent injury or six months from the resolution of permanent disability in the underlying claim, whichever is later.

How the new rules apply to the existing backlog was the most contested question. The digest states that claims filed on or before July 1, 2020, and claims that had reached a specified procedural status on or before June 1, 2026, are exempt from the changes, and that those provisions become inoperative on July 1, 2031 and are repealed on January 1, 2032.

SB 171 makes administrative changes to the fund as well. The Director of Industrial Relations, as trustee of the SIBTF, replaces the State Compensation Insurance Fund as the entity that pays awards, and State Fund’s authority to reimburse itself for related costs is deleted. A Senate Republican Caucus summary of the enacted budget reports 13 million dollars and 57 positions to work down backlogged SIBTF claims. That is in line with the 12.7 million dollars and 57 positions the administration requested in January, a request that CHSWC’s June legislative update said would grow to 36.5 million dollars and 177 positions by fiscal year 2030-31.

The reforms respond to rapid growth in the program. A July 2025 report by the Legislative Analyst’s Office found a backlog of more than 25,000 claims and estimated lifetime benefit costs of 2 billion to 3 billion dollars for each annual cohort of claims, costs that are funded through assessments on employers.

The second major workers’ compensation provision in SB 171 concerns petitions for reconsideration under Labor Code § 5909. Since 2024, a petition has been deemed denied unless the Workers’ Compensation Appeals Board acts within 60 days of the date the trial judge transmits the case to the Board. That rule was scheduled to expire on July 1, 2026, when the clock would again have started on the date the petition was filed. SB 171 removes the sunset, so the transmission-based deadline is now permanent.

Two further provisions affect payers directly. Workers’ compensation surcharges and assessments must now be paid by electronic funds transfer, and the bill imposes a 10 percent penalty on late or unpaid amounts and on payments not made electronically, with the penalties deposited in the Workers’ Compensation Administration Revolving Fund. The bill also removes the Administrative Director of the Division of Workers’ Compensation from a statutory salary schedule.

The other enacted measure is Assembly Bill 1683, an Assembly Insurance Committee bill that the governor signed on July 6, 2026. Existing law allowed employers to deposit disability indemnity payments into prepaid card accounts only until January 1, 2027. AB 1683 extends that authorization indefinitely. CHSWC noted that the bill tracks the recommendation in its own report on prepaid card programs, approved in February. Because the bill is not an urgency measure, it takes effect January 1, 2027, the same day the prior authorization would have lapsed.

Several bills that drew attention during the session were not enacted. Senate Bill 555 would have raised the weekly earnings range used to compute permanent partial disability indemnity from the current 240 to 435 dollars to a range of 363 to 658 dollars for injuries on or after January 1, 2027. Its first Assembly committee hearing, set for June 24, was canceled at the author’s request and the bill did not advance. Assembly Bill 1576, a separate SIBTF reform vehicle, and Assembly Bill 1048, which would have required explanations of review to identify the contract behind a discounted payment and required physicians to sign requests for authorization, were both held in committee on August 13. CHSWC’s update lists two more as having missed legislative deadlines: Assembly Bill 2098, on leave for medical treatment during work hours, and Senate Bill 632, which would have created injury presumptions for hospital employees providing direct patient care.

The permanent disability question is likely to return. Business Insurance reported in July that the chief lobbyist for the California Coalition on Workers’ Compensation told the group’s conference that employers are preparing for negotiations in 2027 over permanent disability benefits, and will seek offsetting savings in areas such as cumulative trauma claims and medical-legal costs.