Workers Comp Fix Could be A Monster

Workers Comp Fix Could be A Monster
Unless Loopholes Are Closed, it's Heaven for Slimy Lawyers
(Apr 30, 2004)

~ By Jill Stewart

The message of "Jurassic Park" was that if you mix one highly complex system of DNA with another---as I recall it was modern frog DNA mixed with ancient dinosaur DNA---you will create an utterly unpredictable and potentially tragic hybrid otherwise known as a monster.

If only Jeff Goldblum's character had been present during the dead of night on April 15, issuing such pearls of wisdom, when the California Legislature put the final touches on its epic, 75-page workers' compensation reform.

I truly want to report that this sweeping law will hack one-third off horrific medical, salary, legal and indemnity costs, forcing a big drop next year in insurance premiums that cripple everybody from nonprofits to cafes to factories. But this well-intended reform is so complex it may become a monster from which we all want to flee.

Among other things, Senate Bill 899 is filled with ambiguities that offer rich veins for money-grubbing lawyers to mine, although I seriously doubt this was the intent. Experts already predict a field day for slimy lawyers who feed off the workers compensation industry.

Moreover, the law is clearly biased against small proprietors, who can't afford experts to protect themselves from new liabilities of up to $10,000 per injury that they may not see coming until a worker has already spent the money. Further, a new definition of "cure and relieve" could produce never-closing claims by people who insist they have not been "relieved," a wonderfully vague term that greedy workers comp lawyers must really be crowing over.

Experts agree that billions of dollars may be saved -- but not without a lot of vigilance by California businesses. Among other things, they say that a new rule that workers who claim an injury must use a health network selected by employers is so full of holes that it could morph from a cost-savings device into a costly universal health-care program.

Dr. Jennifer Christian, an occupational medicine expert, says, "All an employee now has to do is say they have an injury in order to get the care immediately" and they can spend $10,000 before a claim is even approved. Many workers are expected to test the boundaries of this new rule, seeking out doctors in the health networks for free care of problems that were not caused by a work injury. How good will the system be in stopping this sort of thing?

Perhaps even worse, there is no guarantee that noncredible doctors who promote unneeded treatments will be kept out of these new networks. Indeed, and rather incredibly, the law expects busy employers themselves to learn if unqualified doctors are in a network. Bad idea.

Dale O'Brien, of workers' compensation consultant ClearComp, says, "You have to make sure you have credible orthopedists, credible neurosurgeons."

I can just see California's restaurant owners or construction company owners trying to discern who is a credible neurosurgeon. Please. Even the state of California, with all its resources, has chronically failed to weed out bad doctors.

Moreover, the law is vague on how to meld the complex old and new rules. For this reason, big lawsuits are predicted over the crucial issue of permanent disability. Until now, a worker could get a "permanent" disability rating of, say, 30 percent on a body part, then return to court again and again claiming a new disability rating on the same body part to win more money. Injured workers were scamming the system, getting a rating of more than 100% disabled on a single body part, and nice fat disability payments to match.

Under this reform, California finally copies states where the human body equals 100 percent and each part equals a fraction of that. Period. At least nobody can go golfing anymore when they're 300 percent disabled. However, in judicially liberal California, consultant David De Paolo, of WorkComp Central, estimates that 95 percent of workers seeking permanent disability settlements will still get them. The question is, since thousands and thousands of previously injured workers will claim new injuries, how will the courts compute the math to meld their incredibly lax pre-existing awards to the tougher measurement for the new injury? Somebody get me a math whiz.

De Paolo agrees with O'Brien, who says, "It sounds like a Supreme Court question, about four to five years from now."

In another big change under the new law, to encourage injured workers to return to work (California has the nation's worst return-to-work rate), employers must now make work sites or duties easier on the injured worker's body -- or face penalties. It's a fairly good idea, poorly executed. Expect major lawsuits over vague wording regarding the pricey 15 percent penalties.

Also, the "return to work" provision reimburses employers up to $2,500 for workplace modifications. But Allan Leno, a workers' comp consultant to businesses, says the reimbursement isn't even mandated. That means small business especially can be left holding the bad, having paid $2,500 to do a nice job on ergonomic fixes, for example, only to be told by the state of California that there's no money available to reimburse them. Remember, it ain't "mandated."

Don't get me wrong. Big savings could materialize, but it won't be quick or easy. Nationwide, insurers do not drop their rates until they have seen a steady, reliable decline in costs that persisists for several months to one year. Insurers simply do not drop rates because of some quicky change in costs, only to have to raise rates if the costs go back up. This is not just the practice in California, but nationwide. Naturally, the slow thinkers who dominate the California Legislature will almost instantly begin demanding "rate reductions" from the insurers, because California legislators (hey, you elected them) seem incapable of picking up a business magazine or an economics paper to find out how insurance works. They tend to view insurance as a vast conspiracy motivated by evil.

Despite the sheer stupidity of the legislature, SB 899 does bring forth a number of excellent and long overdue changes. Had the author of the bill, Sen. Charles Poochigian, one of the most rational and fair-minded members of the legislature, not been forced to compromise in major ways with the dumber members of the legislature to get his bill approved, we'd have dramatic reform right now.

As it is, the question of how much reform Poochigian was able to push through will not be answered for several months. We really won't know the answer until insurers announce their new rates next year. So I suggest everybody just calm down until then, and try like hell to protect yourself from the new law's surprises if you own a business.

However, there is great good in this reform bill. Among other positive changes, Christian points to "landmark, strengthening changes" that copy states in which an injured worker's treatment is decided "using evidence-based principles" instead of the wildly differing views of doctors. Up until now in California, we simply allowed any doctor to decide on any treatment and make any amount of money off the system that a doctor wished to. The result was chaos, abuse and widespread corruption.

Another plus of the new law, says Rob Bekken, a lawyer representing employers who are preparing to sue workers' comp insurers, is that SB899 "will end the doctor-shopping" for all the lax and sneaky doctors who were so into gaming the system and helping workers stay home for weeks one end. Isn't awful that we have to make laws to stop this?

Another huge plus is that disability reports -- the key evidence used by courts to award permanent disabilities -- must now rely on objective American Medical Association standards to assess injury. Before now, in Orwellian California, the giant labor unions saw to it that it was actually illegal in California to use the objective assessments of the AMA to decide if somebody was injured, and how badly.

If objective assessments had been used in California, the doctors who gamed the system and helped workers get freebie vacations would never have been able to set up their cottage industry. Naturally, huge savings could result due to this particular reform.

Vince Sollitto, spokesman for the governor, calls this "probably the single biggest reform in the package."

Despite all the flaws and ambiguities and loopholes in this thick document, perhaps the governor can use his sheer force of will to make sure the leeches and middlemen who ply the ambiguities and loopholes will somehow get shut out.

Making sure that this new law works, and that greedy attorneys drooling to feed at the trough of new ambiguities are turned away, rests heavily upon an obscure agency of state government known as the Division of Workers' Compensation. The Division must write tough, succinct regulations that are so tight the lawyers and bloodsuckers can't turn SB 899 into a giant loophole-fest. And the Division must write these regulations in such a way that small businesses don't get screwed---for example, by being left with sudden $10,000 liabilities they never saw coming.

Under Gov. Gray Davis, the Division lof Workers' Compensation was infamous for taking years to write regulations that turned out to be full of holes. However, there's some indiciation that Gov. Arnold Schwarzenegger has already recognized this crucial problem. Several days ago, he fired the unimpressive bureaucrat who has been writing the workers comp regulations in California for the past decade, replacing him with a top attorney who has years of experience in the Attorney General's office in both governmental and civil law.

Nice move by the governor. Schwarzenegger once again shows he is alert to the finer points. He and his administration just might be able to pull off a major savings. But it's equally possible that, in a couple of years, we'll be discussing a way to cage the monster the Legislature created on April 15 while the rest of us were sleeping.