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In California, 2007 was generally a year of transition in California workers’ comp.

Some old cases are being played out under a mixture of old and new rules. But for many workers, the 2003 and 2004 reforms are controlling.

Insurers are very happy with the results, as are most large employers and self-insured groups. Meanwhile, worker “horror stories” continued to mount.

Here are the top ten events and trends in California workers’ comp in 2007. Over the past year, I’ve covered most of these repeatedly, so check my blog archives to learn more:

1. INSURERS & EMPLOYERS WIN MAJOR VICTORIES IN THE COURTS
In 2007, the California Supreme Court made its first ruling on the ambiguities of the 2004 comp reform. The court’s ruling in Welcher allowed an earlier percentage disability award to be deducted from a percentage award for a later injury, resulting in a claimant receiving $3,360 for a work-caused amputation.
Insurers have also prevailed in a number of appellate cases where the issue was whether the new post-2005 disability rating schedule should be applied to pre-2005 injuries. As a result, the courts have adopted a narrow interpretation of the law on what criteria is required for a worker to be grandfathered in under the old (and more favorable) rating system.
Toward year end, insurers were victorious at the statewide Workers’ Compensation Appeals Board level, which ruled that the decades-old Wilkinson case no longer applies. The result? A worker who has successive injuries to the same body part while working for the same employer may be required to have each injury rated separately. Caution: this case, Benson, will probably be appealed and thus the final outcome is still in doubt.

2.COMP PREMIUM RATES HAVE NOT INCREASED
Indemnity claim frequency has continued to decline in California as have comp insurance rates generally. For example, the California Workers’ Compensation Insurance Rating Bureau reported in November 2007 that the average insurer premium is now $2.92 per $100 of payroll, down 55% from average rates charged in 2003. In November 2007, Insurance Commissioner Steve Poizner rejected a WCIRB rate hike recommendation. Most carriers have elected to not raise rates at this time.

3. INSURER PROFITS CONTINUE AT RECORD LEVELS
Nationally, comp carriers have done well over the past several years. But insurers have done spectacularly well in California recently. For accident year 2006, loss ratios were at 36% of premium dollar collected (note: final 2007 figures are not yet publicly available), and there is every reason to believe this trend will continue. Insurer profits now exceed the cost of medical and indemnity benefits paid to or on behalf of injured workers.

4. TURMOIL AT THE STATE’S LARGEST COMP INSURER
In 2007, there was turmoil at California’s largest comp insurer, the State Compensation Insurance Fund (SCIF). Resignations of directors and executives resulted as well as termination of arrangements with certain broker “safety groups.” An audit of SCIF revealed multiple areas of mismanagement. SCIF’s market share has tumbled to about half of what it was in 2003.

5. MODEST LEGISLATIVE REFORMS
Faced with a Governor whose signature issue is workers’ comp reform, most 2007 legislative efforts to change the comp system failed to reach the Governor’s desk or were vetoed. Among bills vetoed was a bill to raise benefits for permanently disabled workers and a bill to speed up the provision of educational vouchers to workers unable to return to work with their employer due to injury.
Bills that did make it included a bill to allow the Division of Workers’ Compensation to adopt standards loosening the numeric cap on post-surgical physical therapy treatments. Also successful was a bill allowing an injured worker to draw his or her two years of temporary disability over a five-year period rather than just two years from the date of commencement of temporary disability.

6. GROWING CONCERN ABOUT THE COST OF EMPLOYER FRAUD IN THE SYSTEM
In 2007, there were several high profile employer fraud “busts.” In Placer County, two Bel Air Market managers, Nichole Leddy and Amy Looper, pleaded no contest to charges of workers’ comp fraud for encouraging injured employees not to file workers’ compensation claims. In Monterey County, Smurfit-Stone Packaging and Pinnacle Urgent Care Clinic were charged with multiple felony counts for dissuading employees from filing workers’ compensation claims for on-the-job injuries.
These high-profile prosecutions followed news that appeared almost weekly of sweeps by agents from the State Division of Labor Standards Enforcement and the Economic & Employment Enforcement Coalition. The sweeps revealed that many employers in California are either not paying comp insurance or are under-reporting payroll. Landscaping businesses, janitorial services, car washes, farms, restaurants, garment manufacturers, and construction industry firms are but just a few of the types of businesses which were found to have problems in 2007.
A major study by UC Berkeley researcher Frank Neuhauser revealed that the cost to the system may run into the billions. Meanwhile, the Fraud Assessment Commission approved a 12.9% increase in the assessment employers pay to fund workers’ comp fraud efforts and a 25 member working group of system stakeholders has been formulating a report to Insurance Commissioner Poizner on the problem.

7. DEBATE CONTINUED ABOUT THE VALIDITY AND ADEQUACY OF THE
2005 PERMANENT DISABILITY RATING SCHEDULE
A bill to raise permanent disability benefits carried by Senate Pro tem Don Perata was vetoed by the Governor. Meanwhile, the Schwarzenegger Administration revealed the results of its ongoing study of wage losses of injured workers within the system. Studies by UC Berkeley researchers have shown that workers subject to the 2005
permanent disability rating schedule receive sharply lower benefits for permanent disabilities.
California now ranks among the lowest of the 50 states in payouts to injured workers for many types of disabilities according to statistics from a U.S. Chamber of Commerce comparative study of state comp laws.
In a speech at a mid-October Huntington Beach conference, DWC Administrative Director Carrie Nevans announced that a 2008 revision of the permanent disability rating schedule was in the works. Nevans indicated that awards would likely increase for disabilities to certain body parts (spines and hands) and decreased for some other body parts. The revision was not announced by the end of 2007 and it’s not clear when the proposed revision will come. Nevans did project that the revision will restore at least $150 million in cuts that had been made. But this addition-though welcome-is likely to do little to quell
arguments that a system that pays out less to workers than insurer profits is a flawed, unacceptable system.
Meanwhile, a San Francisco workers’ compensation judge-Jacqueline Duncan-ruled in the Boughner case that the 2005 system was invalid because its adoption did not comply with the law. Boughner is currently on appeal to the statewide Workers’ Compensation Appeals Board.

8. DEBATE OVER THE VALIDITY OF RISK BASED APPORTIONMENT
AARP (American Association of Retired Persons), the ACLU (American Civil Liberties Union) and the Impact Fund joined the debate over California’s apportionment law which requires apportionment to causes of a disability. In Lois Vaira vs. WCAB, the California Court of Appeal rejected apportionment based on age, remanding the case to the WCAB for more proceedings. However, the Vaira court appeared to leave the door open for apportionment to age-caused conditions. A second risk factor apportionment case, Fitzpatrick, was argued at the same court just before the end of the year. Whatever the outcome of that case, the “risk factor apportionment” issue will likely remain a hotly contested issue in other cases for several years to come.

9. THE SHRINKING POOL OF COMP DOCTORS
Both anecdotal observations by system veterans and several studies have noted that the supply of treating and evaluating doctors in California’s workers’ comp system has dwindled. The DWC has noted a 25% dropoff in the number of evaluating QMES. And a 2007 UCLA study evaluated the effect of fee schedules on the system. In some less densely populated areas of California, the dropoff in treating specialists and QMEs has left the system with a complete lack of treating and evaluating physicians.
The DWC has hired a consulting firm-the Lewin Group- to evaluate the medical fee schedule, which has not been restructured in decades. Whether the recommendations will be revenue neutral is not clear at this time.

10. TURNOVER AT THE BOARD
As 2007 ended, the terms of WCAB commissioners William O’Brien and Janice Jamison Murray expired. Soon to expire are the terms of commissioners Brass and Cuneo. Commissioner Alfonso Moresi has never been confirmed. The appointments to the open slots were not announced by the end of 2007, leaving the WCAB-which interprets the law-in a state of great flux.

To see the workerscompzone archives on these topics, click on the archives folders on the right-hand menu bar.

In the coming week, I’ll be doing a list of hot upcoming issues to watch in 08 as well as a quiz for those bold enough to make some projections.

Stay tuned.

Julius Young
www.boxerlaw.com
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Category: Top ten lists

Julius Young

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