California’s annual workers’ compensation report is usually analyzed from the same perspective.
How much are employers paying? Are insurance costs increasing? Are claims becoming more expensive?
Those are legitimate questions. But they are not the only way to judge the health of the workers’ compensation system.
The California Commission on Health and Safety and Workers’ Compensation’s 2025 Annual Report also tells us what is happening to the injured workers the system was created to protect. Read from that perspective, the report is far less reassuring.
Permanent disability benefits are losing value to inflation. The average cost of psychiatric claims has fallen sharply. Almost nine out of every ten treatment decisions appealed through Independent Medical Review remain denied or modified. State auditors continue to find thousands of claims-handling violations and hundreds of cases involving disability benefits that should have been paid but were not.
The question should not only be whether California workers’ compensation is costing employers more.
The question should be whether injured workers are receiving adequate medical treatment and benefits in return.
Permanent Disability Benefits Are Being Eroded by Inflation
Permanent disability benefits compensate injured workers who are left with lasting impairment after a job injury.
These are workers who may never regain their full physical function. Some cannot return to their former occupations. Others return to work but live permanently with pain, reduced mobility, restrictions, or the need for continuing medical treatment.
Yet permanent partial disability benefits generally receive no annual cost-of-living adjustment.
The state report acknowledges the consequences. From 2020 through 2024, total indemnity payments increased by 26 percent. Permanent partial disability payments increased by only 11 percent.
Permanent partial disability also represented a shrinking share of the benefits paid by the system. It accounted for approximately 36 percent of indemnity payments in 2020, but only 31 percent in 2024.
Even those numbers do not fully show how far injured workers have fallen behind.
For injuries occurring in 2014, the maximum weekly permanent disability payment was $290. For injuries occurring in 2026, the maximum remains $290. The maximum rate has not increased in more than a decade.
During that time, the cost of living in California increased dramatically.
According to California Department of Finance CPI data, consumer prices in California increased approximately 39 percent between 2014 and 2024. A $290 payment in 2014 would need to be approximately $403 in 2024 merely to have the same purchasing power.
Instead, the worker still receives no more than $290 per week.
In practical terms, the maximum permanent disability payment has lost approximately 28 percent of its purchasing power.
Rent did not remain frozen. Groceries did not remain frozen. Utility bills, gasoline, insurance, and nearly every other basic expense increased. The benefit paid to the permanently injured worker did not.
The problem is even greater because permanent disability is normally paid for a fixed number of weeks. Inflation does not merely reduce one check. It reduces the value of every payment and therefore reduces the real value of the entire award.
A worker can use our free California permanent disability calculator to estimate how a whole person impairment may translate into a permanent disability rating. But even a correctly calculated rating is paid under a weekly benefit structure that has not kept pace with California’s cost of living.
The state report says permanent disability payments increased by 11 percent between 2020 and 2024. That is aggregate system spending, not an 11 percent raise for individual workers.
For most injured workers, there was no raise at all.
Psychiatric Claim Costs Have Fallen by Almost Half
The report’s findings concerning psychiatric and mental-stress claims are equally troubling.
In 2020, the average combined medical and indemnity cost of a permanent disability psychiatric or mental-stress claim was approximately $49,200.
By 2024, it had fallen to $26,200.
That is a decline of approximately 47 percent in only four years.
The decline occurred on both sides of the claim:
- Average psychiatric medical costs fell 57.6 percent.
- Average psychiatric indemnity costs fell 30.9 percent.
- From 2023 to 2024 alone, psychiatric indemnity costs fell another 11.6 percent.
No other major injury category in the report experienced a comparable decline.
These figures do not prove that every psychiatric claim is being underpaid. They do raise serious questions about why the average amount devoted to treatment and disability compensation for these claims has fallen so dramatically.
Psychiatric injuries do not become less disabling because the harm cannot be seen on an MRI. Severe anxiety, depression, post-traumatic stress, panic attacks, and sleep disruption can prevent someone from working just as completely as many physical injuries.
These claims are also among the most aggressively disputed in California workers’ compensation. Injured workers face heightened causation requirements, employment-duration defenses, good-faith personnel action defenses, and restrictions on psychiatric permanent disability arising from physical injuries.
The state data shows the result: psychiatric and mental-stress claims are costing the system far less than they did only a few years ago.
Workers suffering from anxiety, depression, PTSD, or other work-related psychological conditions can read our guide to psychiatric work injuries in California to better understand the unusually difficult standards applied to these cases.
Almost Nine Out of Ten Treatment Decisions Are Upheld Through IMR
California’s treatment system is structured in a way that is difficult for many injured workers to accept.
An insurer or self-insured employer establishes the Medical Provider Network. The injured worker is generally required to obtain treatment from physicians inside that network.
The worker sees an MPN doctor. The doctor examines the worker and recommends treatment. The insurer then sends that request through Utilization Review, where another doctor can deny or modify what the treating physician requested.
Think about what that means.
The insurer controls the network of available doctors. It requires the worker to treat within that network. But when one of those doctors recommends an MRI, physical therapy, injections, medication, surgery, or another form of care, the insurer does not necessarily trust the recommendation of its own network physician.
It sends the request to another layer of review.
If UR denies or modifies the treatment, the worker’s primary remedy is Independent Medical Review.
In 2024, the IMR organization received 199,651 applications and issued 141,621 final case determinations. Because individual cases can involve more than one requested service, reviewers decided 248,716 separate treatment requests.
Only 12.7 percent of those treatment decisions were overturned.
The remaining 87.3 percent were upheld.
Stated more plainly, almost nine out of every ten treatment denials or modifications challenged through IMR remained in place.
For the injured worker, the process can feel predetermined. The treating doctor requests care. UR says no. The worker appeals. IMR says no again in nearly nine out of ten disputed treatment decisions.
Even the overturn rate should be concerning.
If 12.7 percent of disputed decisions were overturned, IMR concluded that tens of thousands of treatment requests denied or modified through UR were actually medically necessary and appropriate.
Those workers had to go through an appeal simply to obtain treatment that should not have been denied in the first place.
The report also reveals a major transparency problem. California is still developing an electronic reporting system that would collect information on individual UR decisions. The stated goal is to allow DWC to evaluate timeliness, compare decisions, measure consistency, and study the effect of treatment guidelines.
That system should already exist.
California has used Utilization Review to control injured workers’ medical treatment for years. Yet the state still lacks a complete, standardized database showing what is requested, what is approved, what is denied, who issues the decisions, and whether particular insurers, UR organizations, doctors, treatments, or regions produce abnormal results.
Better monitoring would not require abandoning evidence-based treatment guidelines. It would allow the state to determine whether those guidelines are being applied consistently and fairly.
California cannot properly supervise a treatment-review system it does not comprehensively measure.
Workers whose medical care has been denied can review our guide explaining Utilization Review, Independent Medical Review, and the deadlines for challenging denied treatment.
State Audits Found Thousands of Claims-Handling Violations
The audit findings may be the most important part of the report for injured workers.
In 2024, DWC compliance officers audited 2,698 claim files.
Of those files, 2,676 were randomly selected. Only 22 were audited based on complaints received by DWC.
That matters because these were not simply 2,698 files selected from workers who had already complained about serious mistreatment. Nearly all of the audited files were randomly selected from claims involving indemnity payments.
Across 40 completed audit subjects, the Audit and Enforcement Unit cited 4,531 claims-handling violations.
That works out to an average of approximately 113 violations for each audited insurer, administrator, or self-insured employer.
The potential administrative penalties associated with those violations totaled approximately $1.35 million. But $336,588 in potential penalties was waived or not assessed under the applicable audit rules.
The penalties actually assessed and subject to collection totaled approximately $1.01 million.
The average cited penalty was approximately $297 per violation.
In a workers’ compensation system involving billions of dollars, an average citation of $297 raises a legitimate question about deterrence. For a penalty system to change behavior, the cost of violating the rules must be meaningful enough to discourage the violation.
The more important finding, however, is what the auditors discovered was still owed directly to injured workers.
Auditors Found Hundreds of Workers Who Had Not Been Paid What They Were Owed
The Audit and Enforcement Unit issued 275 notices of compensation due in 2024.
The average unpaid amount was $1,610 per notice.
Using the report’s average, that represents approximately $443,000 in disability compensation identified as unpaid in the audited files.
That is roughly one notice of unpaid compensation for every ten claim files reviewed.
The report does not establish that ten percent of every California workers’ compensation claim is underpaid. But because nearly all the audited files were randomly selected, the findings cannot be dismissed as merely a review of a handful of unusually bad cases.
The types of unpaid compensation are particularly revealing:
- Temporary disability and salary continuation in place of temporary disability accounted for 46 percent.
- Permanent disability accounted for 44 percent.
- Self-imposed increases for late indemnity payments accounted for 10 percent.
- Interest, penalties, and unreimbursed medical expenses made up the remaining fraction.
In other words, approximately 90 percent of the unpaid compensation identified by auditors involved the two fundamental disability benefits injured workers depend on: temporary disability and permanent disability.
These were not obscure administrative reimbursements.
These were payments meant to replace lost wages while workers were unable to work and payments owed because workers had been left with permanent impairment.
Temporary Disability Is a Financial Lifeline
Temporary total disability benefits are paid when an injured worker cannot work or has restrictions the employer cannot accommodate.
For many workers, TTD is the only income coming into the household while they recover.
The rent remains due. The worker still needs food, transportation, insurance, and money to support a family. A missed disability check is not a minor paperwork problem. It can immediately place the worker behind on basic living expenses.
That is why the audit finding is significant.
Temporary disability and salary continuation were the largest single category of unpaid compensation found by state auditors in 2024. They have also historically represented the majority of unpaid compensation identified in many prior audit years.
At Lee Partners Law: Work Injury Attorneys, we fight hard to obtain and protect temporary disability benefits. We examine wage statements, concurrent employment, overtime, bonuses, irregular earnings, work restrictions, job offers, and the medical reporting used to start or stop payments.
Insurance carriers have a substantial financial incentive to minimize or terminate weekly TTD payments. A worker receiving the wrong weekly rate can lose thousands of dollars over the course of the claim.
Our guide on calculating the correct temporary disability rate explains how wages, multiple jobs, commissions, overtime, tips, and other earnings can affect what an injured worker should receive.
The state’s audit data confirms why this benefit requires close attention.
Workers are not always paid correctly. Some are not paid at all until an audit, court proceeding, or attorney forces the issue.
What the California Workers’ Compensation Report Means for Injured Workers
Every discussion about the California workers’ compensation system seems to begin with the same concern: how much the system costs employers and insurance carriers.
That framing misses the point.
Workers’ compensation exists because people get hurt earning a living. The system is supposed to provide medical treatment, replace lost wages, and compensate workers who are left with permanent disability. Employer cost matters, but it cannot be the only measure of whether the system is working.
California’s own numbers show a system that is failing too many injured workers.
Permanent disability benefits still receive no meaningful annual cost-of-living increase. The maximum weekly permanent disability rate remains $290, even though California prices have increased approximately 39 percent. Rent has gone up. Food has gone up. Gas, utilities, insurance, and nearly every other household expense have gone up.
The permanent disability rate did not.
That is not a small technical problem. It means the real value of California permanent disability benefits has been cut year after year by inflation while lawmakers have done nothing.
The same report shows that permanent partial disability now consumes a smaller share of total indemnity spending. Average psychiatric claim costs have fallen approximately 47 percent since 2020. IMR upheld 87.3 percent of disputed treatment decisions. California still does not have the comprehensive data system needed to properly monitor Utilization Review decisions across the state.
The medical treatment structure is especially difficult to defend.
The employer or insurance carrier selects the Medical Provider Network. The injured worker is forced to treat with doctors inside that network. But when one of those doctors recommends treatment, the carrier sends the request to Utilization Review because it does not trust the recommendation of the very doctor inside its own network.
When treatment is denied, the worker appeals through Independent Medical Review. Nearly nine out of ten disputed decisions are upheld.
That is the California workers’ compensation medical system in practice: the carrier controls the doctors, questions its own doctors, denies treatment, and then sends the injured worker into an appeal process where the denial is overwhelmingly likely to remain in place.
The audit findings are just as disturbing.
State auditors cited 4,531 claims-handling violations and found 275 instances of unpaid compensation. The unpaid benefits primarily involved temporary disability and permanent disability, the two payments injured workers depend on most.
These are not harmless paperwork mistakes.
Temporary disability benefits are often the only income an injured worker has while unable to work. Missing or underpaid checks can mean unpaid rent, late bills, mounting debt, and families struggling to buy groceries.
Permanent disability benefits are supposed to compensate workers for injuries they may live with for the rest of their lives. Yet state auditors continue to find payments that were never issued, while the maximum weekly rate remains frozen at $290.
The system should not receive credit simply because benefits exist on paper. Benefits only matter when they are calculated correctly, paid on time, and sufficient to provide meaningful support.
California workers’ compensation should be judged by what happens to the injured worker after the accident.
Did the worker receive treatment?
Was temporary disability paid at the correct rate?
Were checks issued on time?
Was permanent disability properly calculated?
Was treatment denied through UR?
Did the carrier pay penalties when benefits were unreasonably delayed?
The 2025 CHSWC Annual Report gives us the answer too often: no.
The California workers’ compensation system is spending billions of dollars, but injured workers are still waiting for medical care, living on benefits that have been destroyed by inflation, and discovering that money legally owed to them was never paid.
That is not a system working as intended.
At Lee Partners Law: Injury Attorneys, we represent injured workers throughout California. We fight denied medical treatment, stopped temporary disability payments, incorrect weekly benefit rates, unpaid permanent disability, and penalties for delayed benefits.
Call or text 310-295-0822 for a free consultation. We fight to make insurance carriers pay what they owe.
