Wednesday, January 21, 2009, 08:55 PM - Political developmentsThe long wait is over.
Governor Schwarzenegger has filled the last open slot on the California Workers Compensation Appeals Board. The appointment went to a fellow Republican, Greg Aghazarian. Aghazarian represented an area encompassing San Joaquin County as an elected member of the California Assembly (26th District) from 2002 to 2008.
Aghazarian (who I've never met) recently ran an unsuccessful race for an open California State Senate seat, losing to Davis-area Assemblywoman Lois Wolk by a 65% to 35% margin. One issue that surfaced in the campaign was his acceptance of six-figure per diem expenses while living in Stockton and commuting to Sacramento.
Aghazarian is a graduate of USC and McGeorge School of Law in Sacramento.
In the Assembly he served on the Public Safety and Natural Resources Committees as well as Chair of the Republican caucus.
He was honored in 2008 by the California Civil Justice Association, a business group that supports tort reform:
http://www.cjac.org/newsandresearch/pre ... zarian-ho/
According to political blogs I've seen, there had been speculation a few years ago on whether Aghazarian would take a shot at unseating first term U.S. Rep Jerry McNerney. But eventually Aghazarian did not make the race.
There had been much speculation over whether the Governor would give the final slot as a plum to a political appointee or whether he would reserve the slot for an industry veteran. Earlier Schwarzenegger appointments have been widely applauded by insiders in the "comp community"; the earlier appointees were all distinguished attorneys with years of workers' comp experience.
The current WCAB members all live in the San Francisco Bay Area. There was criticism of a former WCAB member, Janice Murray, who lived in Los Angeles and did not appear at WCAB staff meetings on cases in San Francisco.
Hopefully Aghazarian will make the move from Stockton and be a hands on member of the board, which is a vital part of the California workers' comp system.
Here is a link to a site on Aghazarian's voting record in the legislature:
http://www.allballots.com/user/candidat ... spx?Id=736
Aghazarian may or may not have handled a handful of comp cases, but he clearly is not an attorney with years of experience in the field. However, he will receive guidance from the terrific staff counsel at the the WCAB and other WCAB members who have decades of comp experience.
As a member of the WCAB, he will participate in decisions on appeals in workers' comp cases for years to come.
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Friday, January 16, 2009, 09:33 PM - Top ten listsYou're ready to look ahead. I can understand that.
But as the transition from Bush to Obama occurs along the Potomac, it's time to take a last look at how labor fared under the Bush Presidency.
Workers' compensation is not a federal law, so Bush had no direct effect on state workers' compensation benefits. But his term had major impact on workers generally.
The Bush Administration rolled out the red carpet for business and industry. Unions and the interests of workers took a back seat. There was nothing subtle about George W's labor policy.
Historians in future years will sift through the Bush record on civil liberties, national security, the "Bush Doctrine", immigration law enforcement and presidential powers. Partisans will debate whether some of his measures made us more or less safe. Economists will debate the impact of 2 wars and the role of Bush and Greenspan's Fed in the great financial unraveling we're seeing unfold.
But the record on labor issues is more straightforward. Most worker advocates didn't like the Bush labor policy; management did.
Yet, there were a handful of bipartisan surprises that will please workers. But those were few and far between.
What follows is a list of the major developments regarding workers during the eight years of Bush.
1. Under Bush, OSHA fell asleep on the job. The Occupational Safety and Health Association (OSHA) is tasked with setting and enforcing standards for safe and healthful workplaces. Problems at OSHA during the Bush years included the following:
-Draft regulations and warnings on workplace hazards were withdrawn or delayed, including regs on air contaminants, hazardous chemicals, ionizing radiation, berylliuum and silica, brake linings, glycol ethers, tuberculosis, crane safety and many other hazards
-Political appointees and industry lobbyists ignored OSHA staff recommendations that were based on scientific studies, creating a pattern of sweetheart collusion with industries OSHA was tasked to regulate. Regulatory functions were politicized.
-Confusion over OSHA's mission. Bush's first OSHA director announced that employers, not the nation's workers, were OSHA's customers.
-proposed new "risk assessment rules" that would change the way work hazards are regulated
-in a new January 2009 "midnight" regulation, issued a new OSHA Field Operations Manual
For more information on OSHA under Bush , here's a piece by R. Jeffrey Smith in the Washington Post, "Under Bush, OSHA Mired in Inaction":
http://www.washingtonpost.com/wp-dyn/co ... 24_pf.html
For particulars on OSHA and occupational health & safety developments under Bush, I recommend the archives on the excellent blog www.thepumphandle.wordpress.com
2. Bush's National Labor Relations Board (the "NLRB") rolled back labor protections. The NLRB is the agency which is charged with policing labor cases, giving it great influence over national labor policy. Under Bush's tenure the following are notable:
-Many workers lost labor law protection including temps, graduate teaching assistants, and workers in rehabilitation programs
-Double standards were applied to supervisors' anti-union and pro-union conduct
-Work rules that discouraged organizing activity were permitted
-In IBM Corp., the NLRB ruled that non-union employees have no Weingarten rights (the right to have a co-worker present during a disciplinary hearing), overturning a precedent that went back to 1975
-Standards for fair elections were weakened
- Remedies for labor law violations were weakened
-Union busting lockouts were permitted
-Employers were excused for many violations
-Rules were relaxed to allow employers who acquire a unionized workplace the right to immediately begin efforts to decertify the union
(MV Transportation, a 2002 NLRB decision)
-Employers were required to post information on how workers could begin to decertify a newly organized union
Altogether, the Bush NLRB made organizing a union more difficult and gave employers additional tools to chill workers' exercise of their rights.
Less than 8% of American workers are now covered by union contracts.
A summary of these developments involving the NLRB can be found in this July 13, 2006 report by the U.S. House of Representatives Committee on Education and the Workforce:
http://www.changetowin.org/fileadmin/pd ... -13-06.pdf
3. Bush appointees to the U.S. Supreme Court joined in the Ledbetter v. Goodyear Tire & Rubber case. In Ledbetter the Supreme Court rejected an equal pay lawsuit by Ms. Ledbetter, ruling that the 180 day statute of limitations for equal pay lawsuits ran from the date the pay was agreed to, not from the date Ledbetter discovered that she was paid less than men doing the job.
Here's a link to an earlier blog post I did on this issue:
http://workerscompzone.com/index.php?en ... 603-162015
4. The Bush Department of Labor in November 2008 published final rules implementing amendments to FMLA (the Family and Medical Leave Act). Although these regulations, effective 1/16/09, contain some provisions, including notice requirements, that will we welcomed by employees, they are on balance more favorable to business interests. For a summary of the FMLA regs, check this legal update by Jackson Lewis, a major law firm that represents employers:
http://www.jacksonlewis.com/legalupdate ... m?aid=1563
A good summary on the notice requirements under the new regs is here:
http://ohioemploymentlaw.blogspot.com/2 ... -mean.html
http://ohioemploymentlaw.blogspot.com/s ... amendments
The regs have some privacy rights implications:
http://privacyblog.littler.com/2009/01/ ... employers/
5. On March 20, 2001 Bush signed a Congressional Resolution of Disapproval which killed an ergonomics standard that had been under development in the Clinton Administration. The ergonomics rules were designed to prevent repetitive stress injuries and to reduce the amount of and severity of on-the- job injuries. In 2002 a national advisory commission on ergonomics was formed, but the safety advisory committee was stacked with a 3-1 ratio of management to worker advocates. Comprehensive replacement regulations were never issued. Instead, the emphasis has been on encouraging "voluntary" measures by businesses.
6. Following the 9/11 World Trade Center attack, the Bush adminstration pressured the EPA to tone down reports about potential health hazards from the event and the resulting cleanup. This was detailed in a report by the EPA inspector general.
7. Black lung regulations were suspended by a federal judge at the behest of Bush administration attorneys. These regulations, which had gone into effect in 2001, were aimed at streamlining claims by miners suffering mine-related disease.
8. Bush issued several executive orders aimed at union organizing ( note: several of these were later nixed by the courts):
-An order to bar so-called "project labor agreements" on federally sponsored construction projects. These agreements have been commonplace since World War II
-An order to end rights when there is a change in federal contractors. This was aimed at changing a rule that bound federal contractors to rehire displaced workers when there was a change in contractors, a rule that discouraged turnover in low-wage jobs.
-An order requiring government contractors to post notices advising workers how to object to union dues. The order did not require that explanation of the right to organize a union be posted.
9. Bush allocated relatively little money to labor law enforcement.
-The 2009 Fiscal Year budget request for labor law enforcement by Bush's Department of Labor allocated $2,500 per union to investigate unions and $26.08 per employer. As an AFL-CIO blogger noted, "President Bush wants to spend almost 100 times more per union to make sure they comply with the laws than to make sure employers comply with the law".
-Bush cut back in many areas of enforcement, but expanded enforcement of the Landrum-Griffin Act, a law which empowers the Secretary of Labor to audit union finances and internal union affairs.
-Meanwhile, money for mine safety, OSHA enforcement, and wage and hour law enforcement actually had as of 2007 dropped significantly below 2001 levels.
10. Workers found themselves working harder and longer in what writer Steven Greenhouse has called "The Big Squeeze" . The American economy was more and more leveraged and in hock to Asian economies, with huge continuing trade imbalances. Enemies of globalization and privatization argued that workers were losing ground as part of a grand transnational "shock doctrine". CEO pay soared but worker pay did not, as outsourcing and waves of downsizing created worker anxiety through much of Bush's term, only to end with a drastic economic collapse in late 2008. As energy and other commodity prices climbed (until 2008), the middle class lifestyle was increasingly under pressure as many workers lost health coverage, employers abandoned 401k contributions, employees faced furloughs, and the social compact between workers and management frayed.
11. The struggle over immigrant labor continued. Unable to strike a politically acceptable deal on immigration reform, Bush leaves office with immigration reform still a political "third rail". Although the public will probably support some sort of immigration amnesty solution in exchange for some sort of increased enforcement mechanism against entry and employment of future illegal immigrants, a compromise was never reached. High profile enforcement against immigrant workers and employers was stepped up, particularly in the later years of the Bush presidency. Industries such as meat and poultry processors and car washes were found to be heavy employers of undocumented workers (as well as violators of wage and hour and safety laws). Efforts to create a social security number verification system ran into legal challenges. As the Bush presidency ended, the Department Of Homeland Security has delayed proposed E-Verify rules til February 2009, giving the Obama administration an opportunity to put its own stamp on immigration work rule policy.
Meanwhile a late 2008 Bush regulation to the agricultural guestworker program (the H2-A program) allows agricultural employers to hire temporary foreign guest workers if there are not enough domestic workers able or willing to fill the jobs. Critics include some who oppose immigration altogether and also farmworker advocates, who fear this will result in lower wages, slashed protections and labor abuses.
To understand some of these concerns, check this:
http://texascivilrightsreview.org/phpnu ... mp;thold=0
http://www.dallasnews.com/sharedcontent ... 60737.html
11.On the positive side, as part of a negotiated compromise with Congress, Bush did sign the Americans With Disabilities Amendments Act of 2008. The 2008 amendments (which were not as favorable to workers as S.1881, the "ADA Restoration Act" which had been proposed) were designed to restore the originally intended definition of disability under the ADA, thus making the ADA law more useful to workers (note: despite the 2008 amendments, most California employment lawyers still prefer to file cases under the California FEHA law rather than in federal court under the ADA). Court decisions over the years had narrowed the ADA's definition of disability. Included in this bill is a provision making it clear that (with the exception of eyeglasses), the determination of disability is to be made without considering the impact of mitigating measures. Other improvements included in the law include a clarification that a condition which "substantially limits" means "materially restricts" rather than the more difficult standard "prevents or seriously restricts". Also, added was a provision that "an impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active".
12. In May 2008 Bush signed the Genetic Information Nondiscrimination Act. Genetic Information is now added to the list of prohibited discrimination categories (along with race, sex, national origin etc.) It is now illegal for an employer to refuse to hire, discharge, or discriminate
against an employee because of genetic information.
13. On May 15, 2002 Bush signed the "No-FEAR Act" (the Notification and Federal Employee Antisdiscrimination and Retaliation Act of 2002). The law, passed with bipartisan support, bans federal managers and supervisors from engaging in unlawful discrimination and retaliation and requires agencies to fund awards out of their budgets.Support for this law was sparked by a jury verdict that found the EPA had violated the rights of a staffer who had reported mine safety violations.
14. After Democrats took control of the House of Representatives in 2007, Bush did sign a minimum wage increase which was part of Speaker Nancy Pelosi's quick action plan. The bill, The Fair Mimimum Wage Act of 2007, raised the minimum wage to $7.25 per hour. President Bush signed only after the minimum wage bill was loaded up with $4.8 billion in tax breaks for business.
15. In 2006, President Bush signed the Pension Protection Act of 2006.
This bill requires companies who have underfunded pensions to pay more premiums to the Pension Benefit Guarantee Corporation and closed some loopholes in employer pension funding practices. In addition, the bill gave workers greater control over how their accounts are invested, raised the amount that employers were allowed to invest in their own plans, and increased some disclosure requirements. Given the 2008-2009 financial meltdown, many pension funds are under extreme financial stress.
But enough looking backwards for now.
We can expect the Obama administration to launch prompt initiatives to reverse some of the Bush-era labor law developments. I'll be here to cover some of these developments, an important backdrop for California workers.
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Monday, January 12, 2009, 09:54 PM - Political developmentsOne of the more embarrassing recent episodes in California workers' comp has come to a close.
Dollar Tree Stores has agreed to pay the death claim in the case of Taneka Talley. Talley was murdered in 2006 while working as a salesclerk in Fairfield. A customer who Talley did not know walked into the store and stabbed her.
We may never know all of the true circumstances in the mind of the attacker that fateful day. But we do know that there was no personal connection between Ms. Talley and the assailant other than the fact that the workplace provided the connection which led to the attack.
A decision to fight the claim by Dollar Tree (which may or may not have been recommended by its attorneys, Gray and Prouty) garnered national outrage. The case became a textbook example of poor public relations planning.
Talley's family was capably represented by my colleague Moira Stagliano at Boxer & Gerson in Oakland. Boxer & Gerson is proud that we were able to help her family achieve some sense of justice after suffering the loss of Ms. Talley in the senseless murder.
Here's the article of the settlement that appeared in the San Francisco Chronicle:
http://www.sfgate.com/cgi-bin/article.c ... =printable
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Wednesday, January 7, 2009, 11:54 AM - Political developmentsWhat's ahead in the comp world for 2009 and beyond?
It's time for soothsayers among us to crawl out of the post-holiday haze. Rev up your futurescope and take the quiz:
1. Regarding the vacant WCAB commissioner spot, in 2009 Gov. Schwarzenegger will a) continue to leave it unfilled, helping the state budget crunch in the process; b) appoint someone from outside the comp world as a plum post as part of a legislative budget deal; c) appoint a workers' comp insider from the "comp community"; d) appoint a DWC figure to the board; e) none of the above
2. Looking ahead to 2010, applicant attorneys will a) be very divided, with most of the current crop of Democratic candidates finding a share of applicant attorney support; b) unite early behind AG Jerry Brown as the best hope for workers; c) largely hold back from supporting any candidate in hopes that Senator Feinstein will find the Governor's race more interesting than being Senate Intelligence Committee Chair; d) flirt with a Steve Westly candidacy in hopes that Westly can match up well against Republican Silicon Valley CEOs seeking the governorship: e) sit on their hands
3. The issue involving Benson vs, Permanente Medical Group and the apparent demise of the Wilkinson case allowing some successive injuries to be rated as one will be a) resolved quickly and definitively by the 1st District Court of Appeal; b) be unresolved as of 1.1.10 as conflicting decisions are rendered in 09 by different District Courts of Appeal; c) delayed as the Court of Appeal remands the case to the WCAB for more development of the record: d) resolved by the California Supreme Court in 09
4. A revision of the 2005 permanent disability rating schedule will a) be
adopted mid-09, similar to what was proposed in 2008; b) shelved, with
the Schwarzenegger administration claiming that the state's recesssion is too severe to risk any benefit increase; c) adopted at the end of 2009 to go into effect for injuries after 2010; d) dropped in favor of a legislative compromise allowing for a small increase in permanent disability rates; e) still under study at the end of 09
5. 2009 will see California comp insurers a) continuing to enjoy healthy profits; b) in some instances having trouble because of financial problems at parent companies continuing from 08; c) quietly nodding in favor of a benefit increase as they find premium volume continue to decrease; d) attempting to control overhead/loss adjustment expenses as a percentage of premium by laying off staff;
6. In 2009, the following will occur: a) significant shrinkage of the QME pool as old timers say sayonara; b) consolidation and shrinkage of the applicant bar as some practitioners exhaust their supply of pre-899 cases; c) a Federal economic stimulus package creates a boomlet of late 09 construction site cases; d) major changes in the comp defense bar due to decreased claim volume; e) economic shift causes a dramatic loss of power for unions in California, weakening worker advocacy
7. By late 2009, EAMS will : a) be working more smoothly, in part due to better training by the DWC; b) be limping along, with some boards relying on local rules as "workarounds" are developed to avoid some of the time consuming aspects of EAMS procedures and forms; c) be in a state of chaos, as unscannable forms and tasks mount up in EAMS limbo; d) become a subject of legislative hearings
8. By mid 09 the DWC and WCAB district offices will a) breathing a sigh of relief that a legislative budget solution was reached that prevented furloughs and layoffs: b) celebrating that layoffs and furloughs at SCIF were avoided at the DWC and WCAB due to "user funding"; c) operating with terrible morale, as furloughs and budget cuts amounted to wage cuts; d) operating pretty much as always
9. Big stories in 2009 will be a) financial crunch at the Self Insurers Fund due to a spate of corporate bankruptcies; b) the effect on the comp system as the safety net of public health services, unemployment benefits and SDI comes under pressure due to the economy and state budget; c) the California Supreme Court decision in the Smith case on attorney fees for handling treatment denial issues; d) a major Court of Appeals decision on apportionment issues; e) changing CMS rules regarding handling of Medicare SetAsides;
10 . In the legislature 2009 will be a) a repeat of 2008, where a number of bills sponsored by labor and the applicant bar were passed only to face a gubernatorial veto; b) a slow year, with very little legislation pushed by labor and the applicant bar during this legislative year; c) a productive year, where comp legislative deals are cut as part of legislative dealing on the budget and finance issues; d) a year when the Governor softens his opposition to making some changes in his SB 899 comp reform package; e) a year marked by a minor battle over renewal of the right to predesignate
11. On the issue of rebutting the PD schedule by testimony on diminished future earning capacity, by the end of 2009 a) the issue of how to rebut the schedule per the Costa case will clarified by WCAB en banc decision; b) under consideration at the Court of Appeal level; c) still unclear, as various WCAB cases deal with the issue on a piecemeal basis; d) moot, as a PD schedule fix makes such an approach unnecessary or impractical
12. As Republican candidates gear up for the 2010 Governor's race, we will see: a) Insurance Commissioner Poizner holding the line on insurer rate hike requests; b) Former EBay CEO Meg Whitman gathering considerable support from comp insurance interests; c) little if any focus on workers' comp issues; d) one of these candidates reaching out to labor in an effort to broaden their base
13. The incoming Obama administration will in 2009: a) other than in the economic policy area have no direct affect on the comp world ; b) will unveil a healthcare reform package with profound implications for comp; c) enact legislation making it easier for unions to organize and retain members; d) push legislation for Federal insurance company charters; e) achieve immigration reform which will have secondary effects on workers' comp
14. In 2009 there will be increasing interest in: a) regulation of expensive opioid treatments for chronic pain: b) integrating SDI and comp indemnity benefits; c) integrating workers comp and healthcare benefits; d) dropping EAMS altogether; e) integrating retraining voucher rules and fair employment laws;
15. By the 5th anniversary of the passage of SB 899, system observers will be: a) noting how little public attention is paid to comp anymore;
b) observing how comp is insinuating itself into the 2010 governor's race; c) marveling at the resilience of the California Applicant Attorneys
Association; d) noting that system administration and overhead costs are rising and benefits dropping, signaling ongoing problems with the system; e) starting to focus on new strategies to keep medical cost drivers under control; f) speculating on what further major changes will be made at SCIF to get it back on track
Serious entrants in the contest are welcome to e mail me their answers at
firstname.lastname@example.org. I'll tabulate answers at the end of 09. The winner gets a bottle of Dom Perignion for 1/1/10.
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Tuesday, December 30, 2008, 03:11 PM - Top ten listsAs always, the huge California workers' comp industry continues to be an area of great controversy. In 2008 the 2003 and 2004 reforms continued to settle in, but there were important new developments.
There are many possible items for a Top 10 list for California workers' comp in 2008. Here, in no particular order, are my picks:
1. GOVERNOR ISSUES VETO OF COMP BILLS
Intent on protecting the interests of business interests and loathe to make changes in his signature legislative success, Governor Schwarzenegger vetoed a group of bills passed by the Democratic-dominated legislature. Among the bills vetoed:
-a bill to reverse some of SB 899's sharp cuts in permanent partial disability benefits was vetoed for the third year in a row.
- a bill that would have explicitly prohibited discrimination in the application of apportionment statutes was nixed by a veto.
- Also vetoed was a bill that would have required California licensure of utilization review physicians
-and a bill that would have prevented abuses in workers' comp "cottage industries".
2. EAMS MAKES A ROCKY DEBUT
The California Division of Workers' Compensation unveiled the new computer management system, EAMS . Several years in the planning process by the DWC with lead contractor Deloitte and software contractor Curam, EAMS has been a subject of great anticipation and concern among comp world stakeholders.
One can only assume that the system will be upgraded over time, but as 2008 ends, attorneys, judges, and WCAB file clerks who are happy with the system are hard to find. Complaints run the gamut: forms that are too lengthy and confusing for practitioners and clients, extra work tasks occasioned by quirks in the system, poor training, lack of a coherent strategy for rolling out EAMS regulations and forms, lack of uniformity as to how to handle legacy cases, calendar delays and more.
EAMS appears to be a system best designed for data mining rather than practical interface with thousands of users.
The consensus seems to be that the system gets a "D". Unless substantial progress can be made, this assessment may be a stain on the record of Court Administrator Keven Star, currently off on extended military leave. It was under Star's watch when many of the key decisions on EAMS architecture were developed.
3. APPELLATE COURTS CONTINUE TO INTERPRET 2003/2004 REFORMS
Appellate court activity slowed somewhat in 2008, but important issues continued to be resolved. The California Supreme Court rendered its decision in SCIF v. WCAB (Sandhagen). The Sandhagen court noted that "An employer may not bypass the utilization review process and instead invoke section 4062's provisions to dispute an employee's treatment request".
In Fagundes-Guerrero the Court of Appeal rejected a challenge to the 24-visit chiropractic cap.
In Foster v. WCAB the 3rd District Court of Appeal ruled that where independent injuries result in concurrent periods of temporary disability, the 104 week two-year limitation runs concurrrently.
In Hertz v. WCAB (Aguilar) the 6th District Court of Appeal rejected a finding of permanent total disability under the LeBoeuf theory where the worker's non-feasibility was said to be due to language and literacy factors.
And at year end the comp community was awaiting a decision by the 1st District Court of Appeal in Benson v. Permanente Medical Group. Benson is an appeal of a WCAB en banc decision that rejected the decades-old Wilkinson doctrine. Unless Benson is overturned, separate injuries which become stationary at the same time will be usually be rated individually rather than rated as one. The 2nd District Court of Appeal is considering two cases (Vikitis and Forzetting) with Benson-type issues.
4. INSURERS CONTINUED TO REAP LARGE PROFITS IN THE CALIFORNIA WORKERS COMP MARKET BUT WARN REFORM SAVINGS DWINDLING
Overall premiums collected declined, but WCIRB statistics revealed that carriers continued to do extemely well in the California market. According to WCIRB statistics as of September 2008, loss ratios had deteriorated somewhat, but were projected at 52% of premium collected, a very favorable ratio by historic standards. Combined losses and overhead were 87% of premium. This was the 5th year in a row where insurer losses and expenses were significantly below premium collected.
Meanwhile, the WCIRB called for a 16% increase in comp premiums. This recommendation was rejected by Insurance Commissioner Poizner, who countered with a non-binding recommendation of a 5% increase. Most carriers came in with rates closer to Poizner's figure, casting further doubt on the WCIRB's forecasting.
In September 2008 the California Workers Compensation Institute noted concern about rising costs, particularly medical costs. Although the CWCI noted that usage of medical networks was increasing,certain medical costs, including opioid medical costs, had increased at high rates.
Raids by the Economic and Employment Enforement Coalition in 2008 continued to find many California employers without comp insurance, cornfirming a 2007 study for CHSWC that claimed that uninsured employers were defrauding the system of billions in premiums.
5. WORKERS AND THINK TANKS NOTED THE SYSTEM IS NOT WORKING
The current system came under criticism from workers and some system researchers.
In a November 2008 report prepared for CHSWC, UC Berkeley researcher Frank Neuhauser claimed that California state disability (SDI), funded by workers, is subsidizing California workers' comp. Neuhauser's research finds that up to 8.4% of work injuries and two-thirds of occupational diseases are being misclassified as non-industrial. Neuhauser also noted that SDI delivers benefits at a cost of about $.05 per dollar of SDI benefits whereas workers' comp costs $2.40 to deliver $1 in benefits.
Neuhauser called for integrating workers' comp and SDI. The publisher of workcompcentral.com, David DePaolo, issued an impassioned call for rethinking the system overall. But with the Governor and the legislature failing to advance healthcare reform in California, all eyes at the end of 2008 turned to see what the incoming Obama administration will propose on healthcare and how that might affect workers' comp.
Disabled workers received no relief from low permanent disability awards. Several post 2004 studies (including sudies by UC Davis and UC Berkeley researchers and the DWC's own figures) had shown that awards are reduced by as much as 50% or more from pre-2004 levels.
A legislative PD fix was vetoed by the Governor in September. The DWC unveiled a tentative proposal for a revision of the rating schedule which would result in a small PD increase, but at the end of 2008 that proposal appears to be in administrative limbo.
Meanwhile, WCIRB figures released in 2008 demonstrated that insurer overhead (ALE and ULAE) had risen and that when broker commissions and insurer overhead are added together, the cost of middlemen/overhead is as much as 60% of the benefits paid to or on behalf of disabled workers.
Concerns about system benefit adequacy went unaddressed. Worker advocates continued to note that benefits to workers seemd to be dwarfed by the interests of system stakeholders.
6. THE STATE COMPENSATION INSURANCE FUND RECEIVED NEW MANAGEMENT CONTINUED UNDER SCRUTINY
SCIF, California's largest comp insurer, has had its share of problems over the past few years. A scandal over arrangements with directors and certain "safety groups". A scathing audit and resulting legislative investigation. Removal of two executives in 2007 and resignation of 3 board members.
New management was at the helm in 2008, but problems persisted. New management sought to "rebrand" SCIF with a new image. Yet, SCIF was haunted by word that its loss-adjustment expense ratio had tripled to 38.4% over the past six years as its market share decreased from 50% to around 20% of the California market.
A Department of Insurance report noted that SCIF was bloated; SCIF had staffed up to process increased claim volume, but had not decreased staff as its market share declined. As the year ended it was not clear whether furloughs and layoffs proposed the the Governor would apply to SCIF (or the WCAB district offices for that matter) and whether this might provide impetus to SCIF to shed some of its overhead.
7. RECESSION RESULTS IN HIT TO SELF-INSURERS FUND
As both the national and California economies rapidly deteriorated in the fall of 2008, the parent of AIG teetered on the verge of bankruptcy before receiving government bailout rescue funding. Several other corporate parents of California comp insurers found themselves under pressure due to exposure to the subprime mortage fiasco.
A major corporate casualty of the economic downturn (and alleged chicanery by venture capitalists who took over the company) was major retailer Mervyn's. Since Mervyn's was self-insured, its comp obligations have been transferred to the California Self-Insurers' Security Fund.The projected exposure is said to be around $19 million.
In November 2008, fund manager Jeff Pettegrew was quoted as noting that the Self-Insurers Fund has adequate funding in place to absorb Mervyn's claims. According to an article in workcompcentral. com, Pettegrew noted that the Alternative Security Fund's 355 members have $5.5 billion in assets and "a recent actuarial report by Oliver Wyman concluded that the fund could withstand a major recession, pandemic or major earthquake".
With a number of companies having trouble in the current business climate, we may not have seen the end of this story.
8. ADMINISTRATIVE INACTION AND ACTION
As 2008 ends, it's apparent that the DWC has been in no hurry to finalize a number of long-promised regulatory changes. Among the regulations that have gone through multiple drafts and repeated public comment are:
-proposed new QME regulations
-proposed medical treatment utilization schedule (MTUS) regs, which would add chronic pain treatment guidelines consistent with the ODG guidelines and postsurgical treatment guidelines
Also of note on the regulatory front was the departure of DWC Medical Director Anne Searcy. Searcy headed to a position with Zenith Insurance.
9. THE SUN SETTING ON VOCATIONAL REHABILITATION
As the year ended, voc rehab for workers injured before 1/1/04 was considered by many to be sunseting 1/1/09 per Labor Code 139.5. If so, this marks a historic end to a benefit that was a pillar of the workers' comp benefits package for decades (note; workers injured after 1/1/04 may qualify for a lesser benefit, a schooling voucher).
In an e-mail, Neil Sullivan, deputy commissioner of the WCAB noted that after 1/1/09 the WCAB has jurisdiction to preside over "whether or not injured workers might be entitled to new or additional vocational services or benefits on or after 1/1/2009".The Rehab Unit as we have known it is gone as of 1/1/09.
What is not clear is whether the WCAB will have any statutory basis to award future voc rehab services or benefits after 1/1/09. You can expect litigation over this issue in 2009.
10. QME POOL SHRINKING
In June DWC Administrative Director Carrie Nevans noted in remarks at a CSIMS conference that 1,000 QMEs had dropped out of the California workers comp system over the past five years. At a time when evaluations under the AMA guidelines have become more complex, the graying and thinning of the pool of QMEs has been of great concern to many system observers.
That's the list. In a coming post I'll list links to many of the studies cited in this piece. In the meanwhile, you can use the search box feature on the right column to read posts I've done in 2008 on all these issues.
In coming posts I'll feature a quiz on projected events and trends for 2009. Stay tuned. Happy New Year to my readers.
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