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Archive | December, 2004


Posted on 08 December 2004 by admin

Due to file size this study has been divided into seven parts • 1 • 2 • 3 • 4 • 5 • 6 • 7

SACRAMENTO – The first scientific study of the impacts of Governor Schwarzenegger’s workers compensation reforms on injured workers was released today. The study shows that the Governor’s proposal to cut permanent disability ratings will drastically reduce the already-meager compensation injured workers receive. Conducted by University of California at Davis Professor Dr. J. Paul Leigh, the study of 218 back, shoulder, wrist and knee injuries found that under the governor’s proposed disability schedule, on average injured workers would receive a disability rating that is 28% lower than before the governor’s changes. just one-third of the compensation they currently receive.

Injured workers’ advocates and California Applicants’ Attorneys Association President David Schwartz said that the Schwarzenegger Administration’s proposed new permanent partial disability compensation schedule “severely reduces permanent disability benefits to injured workers.” Schwartz told a Sacramento news conference that the Administration has “refused to follow the statute and the Legislature’s intent,” and vowed to challenge the proposed cuts in permanent partial disability ratings proposed by the Division of Workers Compensation. Schwartz said that the new cuts set permanent disability levels “lower than they were in 1983. Injured workers will lose up to two-thirds of the meager compensation they get now.”

Here are some examples of injured workers who would be harmed by the governor’s proposal:

A carpenter with an injury to both shoulders who cannot lift his arms, or work, above the shoulder, would be rated 46% disabled and receive $51,550 presently. That same injured carpenter would be rated just 18% disabled and receive only $16,050 under the Administration’s plan. In 1983, this same injured worker would have received $28,000 (equal to $52,532 in 2004 dollars), significantly more than under the Administration’s proposal.

A warehouseman with a leg injury that requires amputation just below the knee, and gets an artificial leg, would receive $62,000 under the present schedule. Under the governor’s proposal, he would receive just $36,000. (In 1983, this same injured worker would have received $34,000, which is worth $64,150 in 2004 dollars. [Consumer Price Index Conversion Factor])

“The proposed new rating schedule will result in a two-thirds reduction, on average, in permanent disability benefits for injured workers,” said Schwartz. “These new ratings will not provide fair or adequate benefits for injured workers.”

Dr. J. Paul Leigh is a Professor of Health Economics, Center for Health Services research in Primary Care at the UC Davis School of Medicine. His study examined 218 cases of specific injured workers from across the state with a range of the most frequent and costly work injuries. A doctor who had been agreed upon by the insurance carrier had rated each case under the present disability schedule. The cases were analyzed by independent physicians with expertise applying the American Medical Association Guides. Their findings were then rated by one of California’s most expert disability raters. The average difference between the ratings under the current system and the governor’s proposed schedule was 28 percentage points.

The horrendous impact the governor’s proposed cuts would have on injured workers was made clear in the testimony of Domenicio Argentino, 55, who worked for 28 years at NASSCO’s San Diego shipyard worker, building scaffolding for ship repairs. Over his many years of work at the shipyard, Mr. Argentino sustained injuries to his left lower leg, both knees, and back. He suffers from constant low back pain, and cannot bend without pain. Under the present disability rating schedule, Mr. Argentino is rated as 30% disabled. Mr. Argentino is unable to return to his job, which involved lifting, carrying, climbing, hanging, squatting, twisting and pivoting. Under the governor’s proposed schedule, Mr. Argentino would be rated just 4% disabled.

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Workers’ comp misgivings aired

Posted on 08 December 2004 by admin

By Rachel Osterman — Bee Staff Writer Published 2:15 am PST Wednesday, December 8, 2004

An overhaul of the workers’ compensation system was rushed and unfairly harms injured workers, Democratic legislators and labor leaders said Tuesday at the first public hearing since new rules were unveiled.

In April, the Legislature approved a measure intended to bring uniform rulings on the size of disability benefits for permanently injured workers.

To implement the law, the California Division of Workers’ Compensation established a formula for rating an injury’s severity, but the methodology has sparked an outcry.

Speaking Tuesday at a state Senate committee hearing, Sen. Richard Alarcón said the flawed formula undermined legislative intent.

“I question the compassion here,” said Alarcón, chair of the Senate Committee on Labor and Industrial Relations. “It seems to me that truly injured workers are getting a lot less.”

But the administrative director of the system, Andrea Hoch, defended the rules, which her office drafted. She said they provide consistency and transparency in a system that was plagued with irregularities and soaring costs.

“The goal of the system is to make it more fair,” Hoch said, adding that the deadline for drafting regulations was “ambitious.”

Under questioning, she said she thought it was likely that total benefits would decrease under the new system. But she also stressed that the regulations are a work in progress.

Those rules, which are temporary, go into effect Jan. 1. Permanent regulations will be written after a public comment period.

On Tuesday, Alarcón called on Domenico Argentino, a 55-year-old shipyard worker, to testify that the new formula for calculating benefits means Argentino would receive slightly more than $4,000 for a knee injury that put him off the job. Under the old system he would have received $23,800, according to his lawyer.

Applicants’ lawyers, who were locked out of crafting the compensation laws in April, said Tuesday that the new regulations greatly reduce the amount of money that the average injured worker receives. Workers generally do not realize the implications of the rules until they have been injured, they said.

The California Applicants’ Attorneys Association released numbers that it said showed benefits on average will fall by 50 to 70 percent, according to Linda Atcherley, the group’s treasurer.
That figure was questioned by at least one insurance official: Stanley Zax, chair and chief executive of Zenith Insurance Co.

“I wouldn’t pay any attention to any study they would commission,” he said. “It’s self-motivated.”

Zax said he had not reviewed the numbers himself.

Also Tuesday, a lobbyist for the California Labor Federation said organized labor would not have remained neutral when the new law was written if it had thought workers’ benefits would be drastically reduced.
About the writer:
The Bee’s Rachel Osterman can be reached at (916) 321-1052 or Bee staff writer Gilbert Chan contributed to this report.

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Workers’ comp reforms assailed

Posted on 08 December 2004 by admin

By George Avalos
California employees face dramatic reductions in their workers’ compensation benefits, according to a university study released Tuesday, but the findings immediately were disputed by proponents of recent reforms of the system.
The study, done by a UC Davis economics professor and sponsored by attorneys who represent injured workers, determined that the new reforms could slash employee benefits by an average of 70 percent.
The benefits are derived from a rating system that is used to determine the severity of an injury in a workers’ comp case. The higher an injury is rated, the greater the benefits paid to the injured employee.
Professor J. Paul Leigh studied 218 workers’ comp cases involving back, shoulder, wrist and knee injuries to determine how the ratings would change in those cases under the rules proposed by Gov. Arnold Schwarzenegger’s administration.
“We found substantial differences” between the old workers’ comp ratings system and the new regulations, Leigh wrote in his study.
On average, a disabling injury that prior to the reforms would have produced a rating of 42 would probably produce a rating of 14 under the disability regulations that were recently proposed by the state’s Division of Workers’ Compensation, Leigh said Tuesday.
The study also suggested that the average benefit payments would decline 70 percent for permanent disabilities under the new workers’ comp guidelines. The UC Davis professor conducted the study on behalf of the California Applicants’ Attorneys Association.
“This is absolutely devastating for injured workers,” said David Schwartz, president of the association. “The governor’s reforms are turning out to be the worst nightmare that injured workers have ever had.”
But some supporters of the efforts to reform the broken workers’ comp system countered that they believe the study is based on questionable methods and assumptions in some cases.
For one thing, in all instances, the cases on which the study was based were submitted by attorneys who represent injured workers, Professor Leigh said. That’s cause for concern, said Willie Washington, an advocate for the California Manufacturers & Technology Association.
“I’m suspicious about this,” Washington said. “The attorneys may have culled through the reports and sent the ones most favorable to the position of the attorneys. These are very bright, very talented people who are not stupid at all.”
Washington also believes the estimate of a 70 percent cut in benefits for permanent disability cases is excessive.
“The big number they are using, a two-thirds reduction, is a reach,” Washington said. He said his organization has sifted through a sample of some permanent disability claims and found that in some cases, benefits increased under the proposed new workers’ comp rules and sometimes there were decreases.
Professor Leigh said that of the 218 cases he studied, about 95 percent ended up with reductions in benefits, and in 5 percent, benefits increased.
Reform proponents also believe the UC Davis study focused too greatly on injuries that are subjective, such as back and wrist ailments. The reforms were designed to use objective methods to rate injuries as a way to reduce fraud and save money for the system.
The governor and his allies hope the reforms will reduce medical and other costs in the system and thereby enable insurance carriers to reduce the premiums they charge employers to cover injured workers. Up until 2004, workers’ comp premiums had skyrocketed in California in recent years and crushed companies beneath a growing mountain of workers’ comp expenses.
The attorneys group, though, warned that the study clearly shows that injured workers could be the group that suffers the most from the reforms.
“Although it is estimated there will be a $2 billion reduction in benefits, it is unlikely that employers will see a single dime in reduced premiums,” said Mark Gerlach, an insurance consultant for the applicant attorneys.
Senate Democrats also criticized the governor’s reform program. The senators accused the Schwarzenegger administration of developing regulations that would severely and improperly slash benefits for disabled workers.
But reform proponents believe recent announcements of lower rates by a number of insurance companies, including California’s dominant workers’ comp carrier, State Compensation Insurance Fund, suggests the reforms have begun to take hold.
“There is evidence the insurance industry is responding,” said Charles Bacchi, legislative advocate for the California Chamber of Commerce. “It’s just taking longer than everyone would have liked for the reductions to reach employers.”

George Avalos covers the economy. Reach him at 925-977-8477 or

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Workers’ Safety Net Is Full of Loopholes

Posted on 08 December 2004 by admin

Yes, I did ask readers to send me their horror stories involving the workers’ compensation mess Gov. Schwarzenegger claims to have fixed.

But you can stop now.

I’ve got enough material to keep me busy until I’m eligible for Social Security, if it hasn’t gone belly up by then.

The responses ran the gamut, as was to be expected.

I got employers saying their premiums have fallen, but far more saying their premiums have jumped.

Some readers crucified me for taking a few pokes at Schwarzenegger, who was only trying to straighten things out, as they see it, even if he did go easy on insurance companies that stuffed his pockets with campaign money.

Some employers, including Jeff Kavin of Greenblatt’s Deli, wondered why I don’t write about fraud and abuse by attorneys, doctors and employees who “skim so much money out of the system” that premiums soar for business owners while “the worker with a real devastating injury is left with very little.”

Well, of course that’s part of the problem, and it always has been. Lest you doubt it, consider this week’s series on the creative energy at King/Drew Medical Center. Employees there filed 122 claims in 10 years for falling off chairs, collecting a cool $3.2 million for their tragic falls from a frightening height of about 18 inches.

But by far, most of the responses I fielded on the workers’ comp morass were from doctors, lawyers and injured employees telling me about treatment being delayed, denied or discontinued.

I’ve heard from a retired El Segundo teacher, 80 years old, who is suddenly being grilled (by mail) by a doctor she never met, part of a workers’ comp conspiracy to cut off her medication for a longtime disability.

I’ve spent a day and a half playing amateur arbitrator in the case of a jockey who was thrown from a horse, had hip surgery, and claims the home healthcare agency frequently failed to show up at her house, where she was alone and immobile.

“Insurance companies have stopped cutting checks … period,” says West L.A. physician Lauren Papa. “I have patients who should rightfully receive benefits and aren’t…. They’re going on welfare, being evicted, using food stamps, etc. Worse, it’s Christmas. Do these idiots think my patients don’t want to work?”

Bruce Traney, a workers’ comp attorney, warns that it will get worse in January, when more of the impact of the governor’s “reform” package kicks in.

“If you’re a worker in California and get hurt in the next year,” Traney says, “you’re not going to be a happy person. You’ll be human flotsam thrown to the curb.”

One of the readers who got hold of me was a gent who claimed he had no ax to grind, which always makes me suspicious. But I called him anyway.

“I am the president and editor in chief of — a news and information service for the work comp industry,” he said. “We don’t take sides. We just publish the facts.”

And what are they? I asked David DePaolo, the boss man and a lawyer who used to represent insurance carriers.

As DePaolo sees it, Schwarzenegger wanted to make good on his campaign promise to deliver a workers’ compensation reform measure, especially since so many of his supporters in the business world were complaining about rising premiums. He delivered the package, DePaolo says of SB 899.

But not the fix.

“There are too many inconsistencies and loopholes. That’s the bottom line,” DePaolo says.

“The governor said relief was on the way. That’s the way they played it — that you were going to see some immediate relief. But nobody in the industry believed that. Everybody thought it was pie-in-the-sky statements made for political reasons.”

The simplistic legislative “remedy” was no match for the forces that drove up workers’ comp rates nationwide, says DePaolo. It gets pretty complicated, but he blames the stock market crash and a multibillion-dollar fraud in the international insurance market. In lay terms, we’re talking about a Ponzi scheme and bad stock gambles.

And in California, we ended up with a “reform” package that seems to have been designed to help recoup those losses for the insurance industry.

Sure, there were obvious abuses by injured workers. Some of them received medical services that exceed anything they would get from standard health insurance companies.

But do the state reforms swing the pendulum too far in the other direction?

“I would say that based on what I’ve seen, there is a great increase in the denial of medical treatment,” DePaolo says.

Great news, of course, if you’re an insurance company.

“Financially, insurance companies are doing fantastic right now because they’re bringing in more money and paying out less.”

And the sweetest part of the deal, as I noted in the last column, is that SB 899 doesn’t require them to pass on the savings to employers.

Large companies might see a decrease in workers’ comp costs because they’re self-insured and don’t get gouged by a middle-man, DePaolo says. Smaller companies might see a temporary decrease, but he expects the real impact of SB 899 to be slower price increases rather than big discounts.

“And,” DePaolo predicts, “we’ll be in a crisis again in seven to 10 years.”

Don’t everyone fall out of your chairs.

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Work-comp rule could cut benefits by two-thirds

Posted on 08 December 2004 by admin

By Deborah Lohse
Mercury News
California workers left disabled from an on-the-job injury next year could see the rating that determines their compensation cut by two-thirds under a proposed workers’ compensation rule set to take effect Jan. 1, a new study concluded.
The study, done by researchers at the University of California-Davis and funded by lawyers who represent injured workers, caused at least one state lawmaker to worry that parts of this year’s workers’ compensation reform laws are being too harshly interpreted by the governor’s office.
Although the reform laws were passed earlier this year, many of the accompanying regulations that spell out how the reforms should be implemented are still being written by the administration of Gov. Arnold Schwarzenegger.
“The governor promised he would not cut benefits for truly injured workers,” said Sen. Richard Alarcon, D-Van Nuys, who helped write the new laws that were passed in April. Instead, “there are many indications there will be a reduction in benefits.”
The issue is the latest controversy stemming from the attempt in the spring to reform California’s clunky and costly workers’ compensation system. Part of those reform laws dictated that California should use more-objective criteria when deciding how much a worker’s injury has left him or her permanently disadvantaged in the workforce. The rating can be from 0 to 100 percent; the higher the rating, the higher the payments.
Last month, the state’s workers’ compensation director, Andrea Hoch, proposed a new rating method, which is slated to take effect Jan. 1. Instead of relying on doctors’ judgments about how much an injury has affected an employee’s ability to work, the new method relies on national criteria set by the American Medical Association. The new method will be used to assess injuries after Jan. 1, but will not apply to workers who have already been given a disability rating and are receiving weekly checks.
Some say the study unveiled Tuesday proves that injured workers will lose far more benefits under the proposed system than legislators ever intended.
In the study, two professors from UC-Davis examined files on 218 injured workers. They had a panel of raters decide what disability rating a worker would likely be assigned under the old method, as well as under the proposed method.
At the median, the workers were rated 42 percent disabled under the old system, and 14 percent disabled under the new system. The researchers did not translate those disability rating numbers into the resulting impact on disability payments to workers, said J. Paul Leigh, one of the co-authors of the study.
But the California Applicants’ Attorneys Association did. They said workers would get paid an average of $13,903 for their injuries under the proposed system, compared with $48,725 under the old system — a 71 percent decrease. That’s based on a representative sampling of 20 workers in the study, said Mark Gerlach, insurance consultant for the attorneys association.
Rick Rice, assistant secretary for the state Labor and Workforce Development Agency, said Hoch was taking the study into consideration, but she has to follow the deadline and the mandate of the law.
“The law basically frames what we have to do here, to look at the impairments from an objective methodology,” said Rice. “Whether or not rates go up or down, the law was silent on that.”
David Schwartz, the president of the lawyers’ group, said he hopes the workers’ comp office will take the study to heart, and beef up the ratings that workers can get before the proposals become law.
Otherwise, he said, “Our other recourse is to file a lawsuit.”
Contact Deborah Lohse at or (408) 271-3672.

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Democrats say new disability ratings don’t follow law

Posted on 07 December 2004 by admin

By Steve Lawrence

4:53 p.m. December 7, 2004

SACRAMENTO – Senate Democrats accused the Schwarzenegger administration Tuesday of developing regulations that would severely and improperly slash benefits for disabled workers.
The California Applicants Attorneys’ Association, a group of lawyers who represent employees who suffer job-related injuries, predicted the cuts would average 70 percent.
“It appears to me my worst fears have been achieved,” Sen. Richard Alarcon, D-Van Nuys, said after a two-and-a-half-hour hearing by the Senate Labor and Industrial Relations Committee.
Four Democrats on the committee spent most of that time grilling Andrea Hoch, the director of the Division of Workers’ Compensation, about draft regulations altering how doctors rate the severity of workers’ job-related disabilities.
The severity of the disability determines how much injured workers receive in compensation to help make up for their inability to earn a living.
Sen. Sheila Kuehl, D-Santa Monica, said lawmakers expected that the sweeping changes in workers’ comp law adopted by the Legislature in April would result in some reductions in benefits but not to the extent indicated by Hoch’s proposals.
“Nowhere in the legislation was there any intention to reduce whole hog benefits for workers,” she said.
Hoch said that there most likely would be an overall decrease in benefits but that the regulations were a work in progress and that she would take into consideration the lawmakers concerns before filing a final version.
She predicted the new system would produce more accurate and less subjective ratings. Hoch planned to adjust the regulations after they take effect Jan. 1 and their impact can be determined based on “actual wage-loss data.”
“I view the new permanent disability system … as a first step,” she said. “Get this implemented on a timely basis and then the most important thing is to start monitoring data on the new system.”
But the Democrats and other critics said that data gathering could take years. They questioned why Hoch hadn’t done a study that would attempt to gauge the impact of the proposed changes before they take effect.
Hoch said she decided not to ask the Rand Corp., the Santa Monica-based think tank that helped develop the draft regulations, to do the study because of time constraints and the wide range of disability ratings that the current system can produce.
Robert Reville, a Rand researcher, said he told Hoch that the study would result in better data.
The applicants’ attorneys said they based their prediction of a 70 percent average reduction in benefits on a study by J. Paul Leigh, a health economics professor at the University of California, Davis, School of Medicine.
In particular, they cited the case of Domenicio Argentino, a former San Diego shipyard worker who was rated 30 percent disabled because of knee and back injuries. Under the proposed regulations his benefits would drop from $23,800 to a total of $4,235, the attorneys said.
Leigh’s study, which evaluated the impact of the draft regulations on 218 injury cases, was paid for by the attorneys, but Leigh stressed that it was scientifically rigorous.
David Schwartz, the association’s president, said the draft regulations would be “absolutely devastating to injured workers.”
“We’re hoping that (Hoch) has listened to the senators that spoke today about legislative intent and she will make substantial changes,” he said. “Our other recourse is to file a lawsuit.”
Charles Bacchi, a lobbyist for the California Chamber of Commerce, said a survey of employers turned up at least a few cases in which workers would get higher disability ratings under the new regulations.
“It’s not as clear-cut as some of the rhetoric would lead you to believe,” he told the committee.

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Posted on 01 December 2004 by admin

“The State Fund insures more than half of California’s employers, and those employers will barely notice this measly reduction,” said Schwartz. “Injured workers’ compensation and medical care have been gutted, but insurers continue to conduct business as usual.”
Schwartz also criticized Governor Schwarzenegger for “making up facts to suit his wish that rates would be reduced by cutting injured workers’ benefits. It hasn’t happened, and the governor has resorted to fiction. The majority of California employers have seen little or no relief. The average rate cut has been less than 10%, after increases of as much as 300%.”
The governor stated on “Larry King Live” earlier this month that “Now the costs [of workers’ compensation insurance] have already gone down an average of 70 percent to 20 percent. Next year they will go down further.”
The injured workers’ advocates earlier this month asked the Insurance Commissioner to make four changes in the proposal submitted by the industry rating bureau:
1. Drop the assumption that more claims will be filed in 2005
Claims frequency has been cut in half since 1991, yet the industry still assumes that more claims will be filed in 2005.
2. Drop the industry assumption that medical and other claim costs will continue to climb
Recent cuts have already caused medical and other claim costs to drop, flatly contradicting the industry assumption that these costs will continue to climb.
3. Account for the reduction in permanent disability benefit weeks for virtually all workers
The industry’s filing did not take this cut into account.
4. Drop the industry’s assumption that the cost of adjusting claims will rise significantly next year
The purpose of the recent legislation was to make claims more consistent and predictable, which will reduce adjustment expenses.
“The governor and the legislature have taken away benefits from injured workers, benefits that are already too low. You can keep on cutting injured workers’ benefits down to zero, and without regulation insurance companies may not reduce premiums by a single dollar,” said Schwartz.
Although some insurance companies suffered large losses from the unprecedented four hurricanes that devastated Florida early this fall, results from other business – including California workers’ compensation – continues to provide fat profits. AIG, for example, one of the largest workers’ compensation insurers in California, reported that net income for the first 9 months of 2004, excluding the hurricane losses, reach a record level of $8.03 billion, an increase of 22.3% over last year. The American Financial Group, parent of the Great American Insurance Group) a top 10 write in California workers’ compensation insurance), reported that profits form insurance operations excluding catastrophic losses increased from $109 million to $149 million from the first 9 months of 2003 to 2004. Great American continues to operate at almost a 10% profit level even before considering investment income.

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