Insurers Already Experiencing Record Profits Are the Ones Who Benefit: Champagne Corks Popping.

By Frank D. Russo

Frank Russo is an Oakland attorney who has been active in California politics for 40 years and has served as Chair of the Alameda County Democratic Party. In the 1970's and 80's, he worked in the Capitol for Democratic legislators in prominent positions including serving as Legal Counsel to the Speaker of the Assembly. He led a statewide advocacy organization of over 1,000 attorneys in the 1990's, and has testified on hundreds of bills, proposed regulations, and gubernatorial appointments. Over these years, many of the proposals he has drafted have become California law.

He has extensive relationships with statewide officeholders, candidates, organizations, and activists, as well as the media. Mr. Russo graduated cum laude from Yale University with a degree in Political Science and from the University of California, Berkeley, Boalt Hall School of Law. He publishes the California Progress Report, the daily briefing for politics, policy and progressive action.

The California Supreme Court just handed insurance carriers another windfall in the state's Workers' Compensation system a major victory in an interpretation of SB 899, the "reform" bill passed three years with a middle of the night hearing and next to no debate on the floor of either house of the legislature without the bill being in print or read by virtually all who voted on it. The result is that a worker who had a leg amputated as a result of an on the job injury will receive $3360 in compensation for his permanent injuries.

If anyone needed any further proof that the Workers' Compensation system needs abolishing, and that we should return to the pre 1914 system where workers could sue their employers for injuries sustained on the job, this is it. Workers' compensation was a progressive reform brought about by Hiram Johnson who was Governor of California a century ago. A bargain was struck: Workers gave up their right to sue employers where they had to prove negligence, and in return were promised an adequate system of benefits for their injuries and the medical treatment needed without delay.

Workers are getting neither of these. Even before this court decision, benefits were inadequate and there were so many delays in providing medical care that workers with other insurance, even with deductibles, were better of using their own insurance rather than relying upon that denied, delayed, and sometimes authorized under Workers' Compensation.

I know this, because for 26 years I represented injured workers as an attorney and often presided as a Workers' Compensation Judge, pro tem. Even defense attorneys, those hired by insurance carriers or employers, would admit that the system provided far too little to the vast majority of seriously and permanently injured workers.

You can read about today's Supreme Court's ruling in the case of Welcher v. Workers' Compensation Appeals Board in WorkersComp Zone, a blog maintained by Julius Young, an attorney who practices in this field.

Benefits to Permanently Injured Workers Down 50-70%, Insurance Profits Up
The State of California's Commission on Health & Safety & Workers' Compensation studied 30,000 permanent disability cases and found that the Schwarzenegger Administration's Workers Compensation permanent disability schedule reduces permanent disability benefits by more than 50%, and was not based on empirical evidence, as required by SB 899

The commission's findings parallel several prior studies showing that Schwarzenegger's schedule reduces permanent disability compensation by an average of 50% to 70%.

Meanwhile, insurers pocketed more in profits in 2005 (the last full year for which data is available) than they spent on either benefits to workers or expenses. Insurers pocketed $9.8 billion in profit, before investment income. Insurers only spent $8.5 billion on injured workers' benefits. During just the first two years under SB 899, workers' compensation insurance companies in California have earned $20.7 billion in profits, exclusive of investment income.

Governor Schwarzenegger Claims Decision as Victory
Governor Schwarzenegger said: "Today's ruling is a huge victory in protecting the successful reforms to the workers' compensation system that the legislature and I accomplished together three years ago. Thanks to these reforms, we have eliminated a poison to our economy and cut premiums by almost 65% - resulting in more than $15 billion in savings."

I'm sure Mr. Welcher will be happy to hear that, along with countless other workers whose lives have been permanently altered along with that of their families.

Governor, put yourself in his shoes, and do something to bring this system back into balance. Seems to me that you have thrown the baby out with the bath water. A lot of people are hurting--and that is not needed for a strong economy.

A copy of the decision is available here.