Lawyers Throw Workers’ Comp Deal on the Rocks

A highly sheltered workers’ comp reform proposal being quietly passed around California’s capitol has the potential to make some noise when and if it ever gets introduced.

The general consensus among those seeking reform is the need for roughly $700 million in additional permanent disability benefits for injured workers, and $1.4 billion in system wide savings.

The nearly 300-page document that proposes to achieve those goals has been kept mostly under wraps by those directly involved with negotiations, and it’s not clear whether the document was shared with other workers’ comp stakeholders until recently.

Despite the light treading, the proposal has generated vehement opposition from attorneys representing injured workers.

A hearing of the Senate Labor and Industrial Relations Committee set for Wednesday to discuss the proposal, which many have said will likely be placed into Senate Bill 863, was canceled on Tuesday. The reasons for the cancellation are unclear.

The bill is authored by state Sen. Ted Lieu, D-Torrance, who chairs the labor committee. It addresses workers’ comp liens. It was recently taken off the active file, however it’s not yet known whether that will be the bill used to carry any reform language.

“It’s too soon to say it’s in this bill,” said Ray Sotero, a spokesman for Lieu. While the language may go in the bill eventually, he said, “as of right now it is not part of 863.”

Other than that, Lieu’s camp has been quiet about workers’ comp reform, and has declined to state how much involvement the senator has had in negotiations. Lieu earlier this year headed a joint Senate and Assmebly hearing to discuss possible reform. At that hearing several workers’ comp stakeholders offered testimony and gave ideas about fixes and ways to both increase benefits for injured workers and save the system money.

But the proposal being circulated was put together as a result of talks between labor representatives and a small number of large, self-insured employers, those familiar with the negotiations say.

The insurance industry has only recently been involved, being allowed to see the proposal and make suggestions in the past week, according to Mark Sektnan, president of the Association of California Insurance Companies, who noted the draft he looked at was roughly 297 pages

“We’ve seen a variety of drafts of the bill,” he said. “We’re not sure if we’ve seen the final version.”

A version obtained by Insurance Journal on Tuesday afternoon is 279 pages.

A representative for a republican member of the Senate, who asked that his name be withheld, said he believes that the party has been left out of talks, and other members of the labor committee have only recently seen the proposal, which he said was roughly 240 pages.

“I couldn’t tell you if this is the right version or not,” he said, adding that it’s “fair to say republican leadership has been left out.”

A meeting between the large employers, which reportedly includes agricultural giant Grimmway Farms, and republicans in state legislature was organized on Tuesday by Sen. Jean Fuller, R-Bakersfield.

Representatives for Fuller were not immediately available for comment, nor were representatives for Grimmway Farms.

Also reportedly involved and at the head of the negotiations was Angie Wei, legislative director of the California Labor Federation. Neither Wei nor a spokesperson for the AFL-CIO were immediately available for comment.

So far the only known opposition against the proposal is the California Applicants’ Attorneys Association, which sent out an email to members on Tuesday blasting the proposal, stating that “workers will get less than they do under current law.”

The proposal would cut benefits for workers including those who earn low wages, older workers and workers who can’t return to their jobs, the email states.

The group notes takes issue with the proposal in regard to injuries compensated by using the American Medical Association guide of impairments, which awards points for various injuries.

Under the present system permanent disability benefits dropped 60 percent since those guidelines were established along with sweeping workers’ comp reforms ushered in during the Gov. Arnold Schwarzenegger administration in 2004.

“But this proposal would further restrict the ability of injured workers to get a fair and accurate rating of their injuries,” the CAAA email states.

The changes with which CAAA takes issue to are that the proposal eliminates three areas of the AMA guides used to rate impairment for loss of sleep, loss of sexual function and for psychiatric conditions due to injury.

“A person with a head injury, and who has psychological problems as a result, cannot get any permanent disability due to the psychological problem even though data shows that these injured workers suffer a 49% loss in earnings compared to 14% for the average injured worker,” the email states. “The proposal eliminates any increase in the rating for a person who has diminished future earnings capacity. Currently, the Schwarzenegger reform included a formula to increase the rating if the person cannot make the same wage. Because this formula was not based on current wage loss data, this formula could be rebutted in court to produce a more accurate measure of lost earning capacity. Both of these are eliminated in this bill.”

Calls to CAAA President Brad Chalk went unreturned, and other efforts to contact the group for comment were not immediately successful.

Sektnan said ACIC made some suggestions for technical changes to the proposal, but other than that the group is so far staying out of the fray.

“We’re not suggesting any major policy changes at this point,” he said.

ACIC has made those suggestions to the employer representatives, whom Sektnan declined to name, and to California Department of Industrial Relations Director Christine Baker.

Baker in the past has talked about workers’ comp reform, calling efforts to fix the system “targeted reforms,” but a spokesperson on Tuesday declined comment on Baker’s behalf citing DIR policy against commenting on “pending or proposed legislation.”

With the proposal likely stuck in neutral, it’s not clear when the rest of the state’s workers’ comp stakeholders will have an opportunity to have an official say on the matter.

Also not clear is why Wednesday’s hearing was canceled.

Sotero, with Lieu’s office, said the cancellation was due to scheduling changes. Others say it was to give parties a chance to work on a compromise and change up some wording.

“We anticipated the bill to be in print today,” Sektnan said, adding “there was no reason given” for the hearing cancellation.

A story by the Sacramento Business Journal on Tuesday reports to have examined the latest proposal, and it outlines changes being sought:

•The creation of fees for filing medical liens

•The elimination of consideration of future earning capacity in the disability formula for injuries starting in 2013

•The elimination of sleep disorder, sexual dysfunction and psychological issues as additions to primary injuries, when determining disability awards

•An increase of aggregate permanent disability benefits of $720 million per year, phased in over two years

•The creation of an Independent Medical Review system, or IMR, modeled after the IMR process of the state Department of Managed Health Care for resolving health insurance disputes.

Sketnan wouldn’t say whether ACIC or other insurance representatives would make any changes to the proposal, and as with the reforms in 2003 and 2004, the insurance industry has been largely left out of talks.

The proposal lays out what the parties want to do to increase permanent disability benefits and achieve savings, but there is no thorough explanation on the how.

“Our position is aggressively cautious,” he said.

Jerry Azevedo, a spokesman for the Workers’ Compensation Action Network, which has not been directly involved in the talks, said it will take time to digest the full proposal before any definitive opinions can be offered.

“This period right now is people looking at it, many of which are looking at it for the very first time,” he said. “It’s a lot of pages, it’s a lot of changes. It’s a complex issue.”