The California Division of Workers' Compensation (DWC) yesterday released its third report in its study of wage loss for permanently disabled workers. A link to the study itself is included at the tail end of this post.

This study will play a significant role in the debate over whether permanent disability payments to injured workers have been unfairly cut after the 2004 comp reform and adoption in 2005 of a "new" PDRS (lingo for the permanent disability rating schedule). Studies by UC Davis and UC Berkeley faculty confirmed that the ratings under the new schedule are 50% or more lower, thus markedly reducing payments to disabled workers. These studies were cited by Insurance Commissioner Steve Poizner in findings released yesterday (see my post of yesterday discussing Poizner's report).

All of this is against the backdrop of bills in the legislature sponsored by Senate Pro Tem Don Perata and Assembly Speaker Fabian Nunez. Both are sponsoring bills which would increase disability payments, though the bills are in rough form and currently use different methods to do that. But last year, Gov. Schwarzenegger vetoed a similar bill. Despite studies showing that only 37 cents of each premium dollar are going to disabled workers treatment and benefits, Schwarzenegger vowed recently to the Cal Chamber that he would terminate comp reform bills.

Public hearings have been set as follows:

Los Angeles
Monday June 11, 2007 from 1 to 4pm at the State building auditorium, 300 South Spring St., L.A.

San Francisco
Wednesday June 13, 2007 at the auditorium at the State Building at 455 Golden Gate Ave., San Francisco

I expect we will see input from all of the major workers' comp stakeholder groups. And there will be much comment about the methodology of the study. It's not clear whether the administration already has decided what it is prepared to do about revamping the 2005 PDRS. And at least one judge in San Francisco has ruled in a single case that the new schedule is invalid and "arbitrary and capricious." (caution to injured workers: that decision could be appealed and in any event, as a trial judge decision is not binding on other WCAB judges)

I will continue covering all of this. All of this can be crazy-making, even for experienced attorneys. Injured workers may find that all of this is just too confusing. The point now, though, is that much in comp is in flux.

When benefits are only 37 cents out of premium dollar and when carrier profits since 2004 exceed payouts to workers, the press, the politicians and the administration eventually will have to take note. Poizner as much as said so yesterday, though his focus was not principally on adequacy of benefits.

To see the DWC study released yesterday, click here:
http://www.dir.ca.gov/dwc/Uncompensated ... njuredWork

Stay tuned.

Julius Young
www.boxerlaw.com

One of my favorite bars happens to be in Rio Vista, a small town on the banks of the Sacramento River. Foster's Bighorn is a throwback to another era. An era not environmentally or politically correct. The original owner was a big game hunter in the 1940s and 50s.

Foster's collection still hangs on the walls, bizarre and tragic in its scope... from antelopes to lions and elephants.Its a testament to an era in which the ideal was human domination over the animal, kingdom rather than benevolent stewardship over the animal world. In the past several weeks, the nearby Sacramento delta (about a block from Foster's) has been the site of worldwide interest as two humpback whales swam up to Sacramento, turned back and then remained in the river.

The whales may be quite intelligent. Indeed, perhaps they are much more intelligent than we realize. Perhaps one look at Sacramento was enough.

But for observers of workers' comp the past week, the key action was in Sacramento. Unlike the whales, we have no choice but to keep our eyes trained on the River City.

Insurance Commissioner Steve Poizner issued important findings today, followed by a teleconference to the media. Poizner, a Republican elected in 2006 to replace John Garamendi, issued a call for insurers to cut workers' comp rates by 14 1/2%. Because California workers' comp rates were deregulated in the early 1990s, the insurance commissioner's recommendations are not binding on insurers.

At the bottom of this post, I have a link to the the Department of Insurance web-site so that you can read Poizner's findings yourself. But I'll list a few of the highlights for you.

Poizner noted that insurers are "reaping tremendous benefits" from the 2004 workers' comp reforms. In recent posts, I have noted that, since 2004, the carriers have paid out far less in benefits (including medical and temporary disability and permanent disability) than they have collected in premiums. Poizner noted today that the carriers are now paying out 37 cents for each premium dollar collected.

Poizner further adopted findings of his staff which include findings that Schwarzenegger's "new" permanent disability rating schedule (adopted by then-Administrative Director of Workers' Compensation Andrea Hoch)
resulted in a reduction of over 51% in payouts to disabled workers with verifiable impairment under the newly adopted AMA guidelines rating system. Poizner's findings also note that since as much as 20% of all claims formerly eligible for permanent disability payments are now no longer eligible under the more strict AMA ratings system, the total effect of the 1/1/05 permanent disability rating schedule is a 61.25% lowering of benefits paid to injured workers.

Curiously, however, Poizner does NOT wade into the fight that continues between the Governor and the legislature over whether permanent disability benefits must be increased to their former level or to some level of adequacy.

Instead, in his policy focus, Poizner made the following recommendations:

-the WCIRB (that's an acronym for the California Workers' Compensation Insurance Rating Bureau, which makes rate recommendations) must clean up its act. Poizner noted that the WCIRB has has a history of grossly miscalculating rates both on the low and the high side. From 1995 to 2000, Poizner noted that WCIRB recommendations for premiums were too low by 20% to 60%. From 2004, the premium recommendations were too high, missing the mark by 30 to 50%. As a result, he has recommended a top-to-bottom audit of the WCIRB and other structural changes.

-Poizner indicated that the Department of Insurance will join the Division of Workers' Compensation in investigating claims that injured workers are not getting proper medical attention due to faulty utilization reviews.

-Poizner called for the WCIRB to overhaul its experience modification system. This is a factor in how employers are charged premiums based on past claims history.

-Poizner called for a Workers' Comp Summit to get more insurance carriers to enter the California market. The goal would be to decrease rates by having more carriers compete for business.

-and yes, he used the F-word. No, not that F-word. Rather, he used the Fraud word. He called for more investigation of fraud by employees, employers, health care providers and others. Readers of workerscompzone may want to refer back to my post "Its the Employer Fraud, Stupid!"

In coming posts, I will discuss more of this. In the meanwhile, you can read it for yourself by clicking the links below.

To see his decision and order, click here:
http://www.insurance.ca.gov/0400-news/0 ... dOrder.pdf

To see the findings adopted by Poizner, click here:
http://www.insurance.ca.gov/0400-news/0 ... cision.pdf

To see my post "Its The Employer Fraud Stupid!," click here:
http://www.workerscompzone.com/index.ph ... ID=5fcd765

Stay tuned.

Julius Young
www.boxerlaw.com

Take a trip down memory lane back to late 2003 and early 2004. The California Chamber of Commerce and various employer coalitions were pushing several different proposals to overhaul California's workers' comp system.

Among the major players in the effort was the warehouse club, Costco.
Allied with Arnold Schwarzenegger in this effort, Costco allowed its stores to be used for signature gathering for a workers' comp overhaul initiative.
That initiative was aborted at the last moment as the California legislature caved in to Governor Schwarzenegger, passing SB 899 in May 2004.

Fast forward to May 23, 2007. The California Court of Appeal's First Appellate District Division Four handed Costco a major victory in a case, Costco Wholesale Corporation v. WCAB and Jorge Chavez (a link to the text of the decision is included at the end of this post).

The Costco/Chavez case is a major victory for employers and insurers.
Regular readers of this blog are probably aware that one of the hot legal issues in California workers' comp is what the rules are for determining which pre 1/1/05 injury cases are to be rated under the "new schedule" rather than the "old schedule". This is a vital question for workers with unresolved cases who were injured before 1/1/05.

Why? Several studies comparing the old and new schedule have shown that workers rated under the "new schedule" generally receive 50% or more less in indemnity payments to compensate for their permanent disability and diminished future earning capacity.

Virtually all lawyers and judges in the system recognize that the SB 899 comp reform was poorly drafted and that parts of the legislation are unclear. The Costco/Chavez case (authored by Justice Marie Rivera) and the recent California Supreme Court decision in the Brodie and Welcher cases all resolve SB 899 ambiguities in favor of employers and the insurance industry. In both cases the courts emphasize the overall intent of the 2004 workers' comp reform which were enacted as "urgency legislation". Not once did Justice Rivera refer to the provision in California's Labor Code that provides that workers' comp law is to be liberally construed to extend benefits to the injured worker.

Costco/Chavez basically holds that to be under the "old schedule" there must have been a pre 1/1/05 report by a physician indicating the existence of permanent disability. Costco/Chavez rejects the argument that a pre 1/1/05 "comprehensive report" that contains no indication of the existence of permanent disability will suffice to invoke the "old schedule". This sweeps thousands of injured workers' claims into the "new schedule".

A recent report from the Workers Compensation Insurance Rating Bureau (the WCIRB, a California insurance industry statistics group) revealed that since 2004 insurer profits have exceeded all benefits paid to disabled workers (including indemnity payments and medical treatment costs). Costco/Chavez is yet another present to the insurance industry which will further widen the gap between insurer profits and benefits paid to workers.

Costco/Chavez does not set for the rules for what constitutes a report indicating the "existence of permanent disability" (for example is a mere conclusory statement to that effect sufficient?). We can expect other courts to clarify that.

The issue of "new schedule" vs. "old schedule" is under study in aproximately 8 other pending appellate cases. I would wager that most, if not all of them, will follow the Costco/Chavez decision. But if there is even one court that disagrees, the issue will probably have to be resolved by the California Supreme Court. And at least one appellate court (in the Chang case) is hearing arguments that could result in all pre-2005 injuries being dealt with under the "old schedule".

Boiling in the background: the fallout from a San Francisco Judge's decision that finds the formulation of the "new schedule" by then Administrative Director Andrea Hoch to be arbitrary and capricious and thus worth of a failing grade.

Stay tuned. Its getting ugly, but its also gonna get interesting. The link to the actual full Costco/Chavez case is found by clicking here:
http://www.courtinfo.ca.gov/opinions/do ... 116145.PDF



Julius Young
http://www.boxerlaw.com/verdicts.html

Recent figures from the insurance industry show that comp insurer profits now exceed benefits paid to injured workers. But despite evidence that the system remains broken, Governor Schwarzenegger continues to claim that he "fixed" comp.

If anyone has ANY doubts about his inflexibility on further comp reform, read the text of his speech at yesterday's Sacramento Chamber of Commerce Host breakfast. Schwarzenegger and the Cal Chamber are tied at the hip.

The text of the speech is here:
http://gov.ca.gov/index.php?/speech/6305/

Someday, the mainstream press is going to start looking at how the nation's largest state can maintain a system where carrier profits from comp exceed benefits paid to and on behalf of workers. Until then, it's going to be a hard slog for injured workers and the people who care about their plight.

Julius Young
http://www.boxerlaw.com/attorneys.html