Let's Toss The Burden Of Financial Responsibility Of Workers' Compensation On The Taxpayers Instead Of Private Insurance Companies Who Are Taking In Billions Of Dollars Of Premium Every Day!

On April 19, 2004, California Governor Arnold Schwarzenegger heralded the passage of Senate Bill 899, drastically reducing and eliminating benefits for California's injured workers, with the following statement:
"Working together, we have produced a huge win for California. Our bill provides strong reform that will save jobs, reduce costs for our employers and improve care for injured workers. Our state can now become once again the job-creating machine it once was. With meaningful workers' Compensation reform, California is open for business."

Now if you believe that fallacy, I have some prime swamp land in Arizona for you! Now, it's four years later, it is truly questionable whether these reforms have actually saved any jobs or actually reduced overall costs to employers. It appears that they have not improved, but diminished the care for injured workers. What happened to that historic agreement way back there almost a hundred years ago? The insurers still have the gold mine and injured workers are forever getting the "shaft!"

What is most clear in the aftermath of SB899 is that insurance companies have saved an enormous amount of money at the expense of California's injured workers and increasingly, California taxpayers, and that our state legislators will pass any bill without ever reading it, especially when the governor and his cronies try to squeeze it thru at 3AM in the morning.

Following is a juxtaposition of Governor Schwarzenegger's verbatim claims regarding this "huge win for California" and the reality that has materialized: a huge loss for California, which will grow expotentially larger in ways undetected by most taxpayers.

CLAIM #1: "Saving Jobs"
The Rhetoric: Schwarzenegger's Claim: "SB 899 promotes return-to-work opportunities by providing incentives in the permanent disability system for helping workers return to work. The bill would allow a 15% reduction in payments if an employer brings an employee back to the same job, at the same pay, or accommodates them with a modified job, as long as the job pays at least 85% of the previous job. Likewise it would allow injured workers who are unable to return to work, to receive a 15% increase in their award."

The Reality: The monetary incentive (15% increase or decrease in permanent disability benefits) is typically paid by the insurance company, whereas the intended action (saving jobs) is performed by the employer, whose premiums and deductible will not likely be affected by a mere 15% increase or decrease in a single species of benefits from within the claim. (Author's Note: In my personal experience as a workers' comp attorney for both claimants and insurance companies since the passage of SB899, I cannot recall even one instance where this provision seemed to have any impact whatsoever on an employer's unwillingness to take back an injured employee.

CLAIM #2: "Improving Care for Injured Workers"
The Rhetoric: Schwarzenegger explained that care for injured workers is improved because "SB899 restructures the way medical treatment is delivered in the Workers' Compensation system by allowing employers and insurers to create network pools of doctors. Employees may seek second-opinions from their choice of doctor within the network. The bill establishes an independent medical review process that allows injured workers who are unsatisfied with the network doctors' recommendation to appeal."

The Reality: The doctors who treat injured workers are now in a network chosen by the insurance company. Second opinions for injured workers are also from within that network. This gives doctors a strong incentive to avoid recommending any expensive treatment, and to curtail treatment as quickly as possible. When a doctor does dare to prescribe care that the insurance company deems too lengthy or costly, the insurance company uses the "independent medical review process" created by SB899 to obtain a written opinion from a "utilization review" specialist that the doctor's prescribed treatment isn't warranted or adequately explained. This, of course, does not "improve care for injured workers" at all.

CLAIM #3: "Reducing Costs for Employers"
The Rhetoric: Under SB 899, Workers' Compensation benefits were reduced ostensibly for the purpose of passing the savings along to California businesses in the form of reduced premiums. Schwarzenegger described it as follows: "Out-Of-Control Workers' Compensation costs had a stranglehold on the state's economy...now, thanks to this reform... premiums have dropped dramatically."

The Reality: Although it is true that premiums have been reduced, the percentage of salary employers pay for Workers' Compensation premiums is still not as low as it was during 1995-2000, under the old "Out-Of-Control" system, according to California Workers' Compensation Insurance Rating Board (WCIRB) reports. Furthermore, the reduction in premiums has not been proportionate to the huge cost savings to the insurance industry. The WCIRB has released a report on insurer premiums and payments showing that in 2004, 2005 and 2006, these insurers paid benefits amounting to 33%, 27%, and 37% respectively of the premiums paid to them. The WCIRB report reports this percentage back to 1978, and in no other year were benefits less than 50% of premiums.

Furthermore, the savings enjoyed by the insurance companies, and to a lesser extent their policyholders, has been shifted to all taxpayers, including businesses, to make up the difference between the injured workers' medical needs and the drastically reduced benefits. Temporary disability has been capped at 104 weeks, with very few narrowly-defined exceptions and no flexibility for cases where an injured worker takes longer to heal from an unusually severe injury, leaving these workers in the hands of other government welfare programs.

Finally, apportionment of permanent disability to pre-existing conditions under SB 899 has cut into levels of disability compensation that are severely scaled back by the new ratings system, and recently, the courts have interpreted SB899 as requiring that permanent disability be further divided into a separate award for each injury.

Where the separate awards (and pre-existing disability, whether work-related or not) add up to 70% or more, the California Subsequent Injuries Fund is now increasingly being required to pay the difference between the smaller, fragmented awards under SB899 and the life pension the worker would have received if the disability had not been so divided. The state has to send bi-weekly checks to the applicant for the remainder of his or her natural life, in the amount of the "savings" gift that Schwarzenegger so generously obtained for the insurance industry.

So was Schwarzenegger's Workers' Compensation reform a "huge victory for California" as advertised? If by "California" he meant California's taxpayers and workers, then clearly the answer is no. The only clear winner after SB 899 is the insurance industry. They're reaping obscene profits. But then it's all part of their 20 year plan...