Top 10 Events in California Workers' Comp

Monday, January 11, 2010 | 0

By Julius Young

Here in no particular order are my picks as the 2009 California workers' compensation "Top 10" events. I've included some brief commentary, along with links to posts I did during the year:

1. POIZNER CONTINUES TO REJECT WCIRB RATE INCREASE RECOMMENDATIONS
In the spring of 2009 the Workers' Compensation Insurance Rating Bureau recommended to Insurance Commissioner Steve Poizner that comp rates (the "pure premium" or "benchmark") be increased by 24.4% (later amended to 23.7%). Poizner eventually responded with a July 2009 non-binding decision and order recommending no increase.

Poizner continued to criticize the WCIRB's methodology and forecasting.

Later in 2009 Poizner again rejected a whopping rate increase by the WCIRB (22.8%), recommending no increase in the benchmark rate for 2010.

As the year ended it is apparent that carriers are increasing their rates, but nowhere near the levels requested by the WCIRB. Figures from the California Department of Insurance and CHSWC show that average rates filed by insurers had fallen from 2004 as follows: -3.6% (1/1/04), -7.3% (7/1/04), -3.8% (1/1/05), -14.6% (7/1/05), -14.7% (1/1/06), -10.7% (7/1/06), -7.0% (1/1/07), -11.0% (7/1/07), -.05% (1/1/08), and -2.6% (7/1/08). In 2009, despite some claims of market deterioration by A.M. Best, the average rates actually charged rose modestly: 5.8% (1/1/09) and 8.5% (7/1/09).

2. VOCATIONAL REHABILITATION EXPIRES
By statute vocational rehab for pre-1/1/04 benefits expired 1/1/09 unless there was a vested right. Workers have lost a significant benefit.

3. GROWING CONCERN ABOUT MEDICAL COSTS AS A SYSTEM COST DRIVER
Citing concerns about the role of medical treatment costs in California workers' comp, Insurance Commissioner Poizner held a special hearing on the issue. As part of its justification for a large rate increase, the WCIRB claimed that the average comp medical bill increased between 2005 and 2007 by 23% (for all claims) and 30% (for indemnity claims). WCIRB chief actuary David Bellusci claimed that drug costs are up 42%, medical containment costs (such as utilization review, nurse case management etc) are up 51% and medical legal expenses are up 59%. A June 2009 study by the California Workers Compensation Institute (commissioned by the WCIRB pursuant to a legislative mandate) documented many of these trends.

The California Workers Compensation Institute raised alarms about the i costs and problems (including drug induced deaths) associated with increasing opioid use in the California comp system.

Efforts to mandate an "explanation of benefits" letter to injured workers fell flat in 2009. Some had pushed this as a solution to the problem of medical provider fraud, on the theory that fraudulent doctors would not bill for bogus treatments if the worker was likely to see the bogus billings.

Later in the year the DWC announced a 12 point regulatory plan to control medical costs. This was largely in response to a Rand paper on regulatory actions that could reduce medical costs.
http://www.dir.ca.gov/chswc/Reports/2009/RANDpaper.pdf

Concern about increasing lien filings choking the WCAB (particularly those out of Southern California) led that to be a factor in "secret negotiations" about further system reform (see 9 below).

And throughout 2009, the system lived in the shadow of federal healthcare reform. The final direction of "Obamacare" could have profound secondary effects on workers comp in the long run even though the idea of "24 hour care" is dead.

4. DWC'S ANNOUNCEMENT THAT IT WILL NOT ATTEMPT TO MEET DEADLINE FOR STATUTORY PD RATING SCHEDULE REVISION
At year's end, DWC Chief of Legislation and Policy Susan Gard was quoted as saying that the DWC will not move forward at this time on a revision of the 2005 PDRS (permanent disability rating schedule), citing concerns about the weakness of California's economy. The DWC has decided not to move forward on an earlier PDRS draft that would have resulted in a modest increase in permanent disability payments. The 2005 PDRS was under unsuccessful attack several years ago in the Boughner case; more recently the WCAB's Ogilvie decision (see more below) allows for a possible rebuttal strategy on the PDRS under limited circumstances. At year's end it was not clear what the legal and political ramifications of the DWC's decision will be. Meanwhile, the issue is not going away. Multiple studies have shown sharp reductions in payments to workers with permanently disabling injuries since the 2004 reforms. Permanent disability indemnity costs continue to be a relatively small percentage of overall system costs.

5. ALMARAZ, GUZMAN AND OGILVIE DECISIONS ROIL THE COMP COMMUNITY

Groundbreaking decisions by the WCAB in the Almara, Guzman and Ogilvie cases were soon appealed. Almaraz I and Guzman I allowed doctors to go "outside the American Medical Association" guides in rebuttal of the Guides.

The WCAB took the matter under further study and issue a revised decision, Almaraz II and Guzman II. Both allow rebuttal of the Guides, but only from "within the four corners of the Guides."

Ogilvie allows rebuttal of part of the rating "factors" in some cases, dependent on wage loss data and certain mathematical ratios of earnings losses.

These cases provide tools for lawyers to help some workers achieve a rating or settlement result that is more reflective of their true disability.

But the decisions have angered employers and insurers who seek to impose the more cut and dried approach of the "strict AMA" system.

It's the usual debate between system predictibility and individual justice.

Case law has confirmed for many years that the PD rating schedule is rebuttable. It's a loophole that the SB 899 reformers failed to close. To their credit, labor negotiators in the 2004 reform did not trade away rebuttability of the schedule.

Both Almaraz/Guzman and Ogilvie are being appealed, and it may be late in 2010 or even 2011 before all stakeholders can be sure what is the final result in these cases. A legislative deal or a new PD rating schedule may abrogate or moot one or both of these cases.

6. WCAB STRUGGLES WITH EFFECTS OF FURLOUGHS
Although the courts eventually exempted SCIF from furloughs, furloughs were imposed on the WCAB and its district offices. Morale among many WCAB employees suffered, and the division struggled to maintain service despite the furloughs. Many in the "comp community" were puzzled that furloughs were applied to the WCAB given its "user funding". Unhappiness about this only increased as user funding assessments were substantially increased in the fall of 2009. User funding assessments (which also fund Cal-OSHA and labor standards enforcement programs) increases met resistance from employers.

7. SCIF CONTINUES TO BE IN THE NEWS, WITH PLANNED SALE APPARENTLY STALLED
There were more leadership changes at SCIF. But the main reason SCIF was in the news was that the Governor's office hatched a plan to sell off part of SCIF in order to generate revenue to plug California's gaping budget hole. Legislators eventually went along with this plan, although there's much speculation that many voted to do so believing it was not likely to happen. At year's end the plan appears to be hopelessly stalled.


8. APPELLATE COURTS CONTINUE TO DEAL WITH SIGNIFICANT WORKERS' COMP CASES: BENSON, SMITH/AMAR; XYZZ; HERTZ (AGUILAR)

Disabled workers sustained a big loss in 2009 as the California appellate courts (in Benson, Forzetting and Vilkitis) upheld the WCAB's rationale in the Benson case. Due to the court's interpretation of SB 899 changes, doctors evaluating injuries must allocate PD to each injury separately (unless that is impossible), rather that combining permanent disability where successive injuries become stationary together. As a result, the long-held Wilkinson line of cases appears to have expired.

One bright spot for workers in the courts this year was a 6th District Court of Appeal decision in the "XYZZ case" (actually now "John Duncan vs. WCAB and X.S."), clarifying when a cost of living computation begins for payments for workers with disability ratings of 70% and above.

The decision continues to be appealed and we may not have heard the final word on this issue.

In Smith v. WCAB and Amar v. WCAB the California Supreme Court overturned an appeals court decision allowing fees against the insurer for applicant attorneys fighting medical treatment denials. Applicant attorneys had convinced the lower appellate court to allow fees under Labor Code 4607 where they were successful in enforcing the right to treatment on behalf of workers who received denials of specific treatment requests. The Supreme Court held 4607 only authorizes an award of attorney fees when defendant institutes proceedings to terminate an award. The effect of this decision will likely make it hard for many workers experiencing treatment denials under their "future medical" awards to get attorney help challenging the denial.

In Hertz v. WCAB (Aguilar) the Court of Appeal dealt with the thorny issue of applying SB 899 rules in a case where the worker alleged inability to compete in the open labor market under the "old schedule" LeBoeuf case. Although the employer prevailed in the case, a concurring opinion by once justice raised the issue of whether we would start to see an "Aguilar factor" in cases alleging total impairment under LeBoeuf, total earnings incapacity or Labor Code 4662 (permanent total disability according to fact). The case has now been taken by the California Supreme Court, although a date for argument is not currently set. At year's end, it was not clear whether, in light of the Aguilar case, one must be a "perfect man" before an injury to qualify as 100% disabled post-injury.

9. SECRET NEGOTIATIONS OVER FURTHER COMP REFORM POINT TO LIKELY FUTURE LEGISLATIVE TINKERING

Over the Summer of 2009 word leaked that secret negotiations over a "grand reform bargain" were being held by a couple members of CHSWC (notably, Sean McNally, a Grimmway Farms executive and Angie Wei of the California Labor Federation), with staff support from CHSWC.

The talks appear to have centered around cost savings generated by putting restrictions on lien claimants and ending the rebuttability of the PD schedule, in exchange for a one-time PD increase.

Most observers assume that talks among various stakeholders will increase in 2010. The 2010 governor's race looms large over any talks, as does the outcome of appeals in Almaraz/Guzman and Ogilvie.

10. LEGISLATIVE SESSION RESULTS IN MODEST CHANGES IN COMP

The 2009 California legislative session resulted in no major change. Disabled workers received no legislative benefit increase, as a PD increase bill that had been vetoed in 3 previous years was not moved to the Governor's desk in 2009.
Notable bills that did get signed included these:

• AB 483, which requires establishment of an internet website to assist in determining whether an employer is insured for workers' comp
• AB 1093, Taneka's Law.
• SB 186, which extended the right to predesignate a doctor, which otherwise was schedule to sunset at the end of 2009