The study, funded by the state's Commission for Health and Safety and Workers' Compensation (CHSWC), focuses on 68 self-insured firms. All of them are large employers that have demonstrated to the state that they can bear the full costs of their workers' compensation claims. Self-insured firms account for 21 percent of claims at private employers in California.

The findings closely track those in a 1997 RAND study that found high wage losses at smaller, insured firms in California. Since self-insured firms are about 17 times larger and employ a more skilled workforce, many observers had assumed that their claimants would fare better.

Compared to insured firms, self-insured firms do a better job of returning injured workers to work. After injury, permanent partial disability (PPD) claimants at self-insured firms were more likely to continue to work, less likely to drop out or retire, and more likely to work at the at-injury employer than their counterparts at insured firms.

"We know that return to work is crucial," noted Christine Baker, Executive Director of CHSWC, the bipartisan commission charged with examining the state system. "Self-insured claimants who returned to their jobs at their at-injury employers did the best. Their wages quickly returned to pre-injury levels." However, workers' compensation places caps on benefits, which result in large uncompensated losses for the higher-wage workers at self-insured firms. As a result, the average self-insured replacement rate is 48 percent; for workers injured at insured firms it stands at 53 percent.

"It's true that self-insured employers are better at accommodating disabled workers," said Robert Reville, the report's lead author. "But these workers' benefits are so much lower than their wages that those who can't or don't stay at work have very large losses."

Some other key findings:

• At both self-insured and insured firms, California workers' compensation benefits for many PPD claimants did not meet the commonly applied standard for adequacy, which is to replace two-thirds of pre-tax earnings.

• At both groups of firms, replacement rates were very low for workers with the lowest-indemnity claims (those with the least serious injuries). At the self-insured, claimants with the lowest indemnity had 14 percent of their lost earnings replaced by benefits; at insured firms, the replacement rate was 11 percent.

Stakeholders responded to the study findings with calls for conflicting courses of action. Several letters of response are included in the report.

Tom Rankin, President of the California Labor Federation, AFL-CIO, argues that: "The study findings are clear on the desperate need for a benefit increase. Even at the best firms in California, wage replacement rates are unacceptably low.

Lori C. Kammerer, managing director of Californians for Compensation Reform, an employers' group, insists that: "Increasing the benefits will only ensure that more lawyers will encourage more injured workers to spend more time out of work to increase their permanent disability rating. Instead, [the state should] allow employers to use the money to bring the workers back to work," by strengthening return-to-work programs.

Permanent Disability at Private, Self-Insured Firms: A Study of Earnings Loss, Replacement, and Return to Work for Workers' Compensation Claimants, by Robert Reville, Suzanne Polich, Seth Seabury, and Elizabeth Giddens is available at www.rand.org/publications/MR/MR1268/.

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