By Julius Young
Governor Schwarzenegger has recently promised to fix
Californias healthcare, claiming that his 2004 reforms fixed
the California workers' comp system. But recent developments in California
workers comp reveal a system that remains broken. Like the declaration of
victory in Iraq by President Bush on an aircraft carrier several years ago,
Schwarzeneggers claims that he fixed comp, despite constant
repetition, are misleading.
Insurer profits now exceed workers benefits
according to a
study released on April 30, 2007 by an industry rate
setting organization, the Workers Compensation Insurance Rating Bureau (WCIRB).
Since enactment of Schwarzeneggers SB 899 in 2004, insurer profits have
totaled $27.7 billion and benefits to workers (including medical treatment,
temporary disability payments and permanent disability benefits for diminished
earning capacity) have totaled $19.8 billion. Thats right. In what is
fundamentally a social program designed to care for injured and disabled
workers, benefits paid out to workers and to their medical providers were less
than insurer profits!
How much was paid to workers? WCIRB figures show that in
2004 out of total premiums of $23.6 billion, benefits paid to workers were $7.8
billion. In 2005, total premiums were $21.4 billion, but benefits paid to
workers only $5.8 billion. By 2006 total premium had shrunk to $16.6 billion,
but benefits to workers amounted to only $6.2 million.
for permanently disabled workers in California are now 4th lowest in the
Want some examples? The following are from a U.S.
Chamber of Commerce comparative analysis of state workers comp laws. The
national average award for loss of a leg at the hip is $114, 522. In California
it is $61,435, 6th lowest in the nation. Loss of an eye? The national average
award is $74,558. In California its $17,714, lowest in the nation. For
loss of a foot the national average is $80,977. In California its
$28,820. Loss of a thumb? Californias benefits are 7th lowest in the
Many employers have benefited from lower
workers comp premiums, but even with lower premium volume comp insurers
have managed to maintain huge profits due to the fact benefits to workers have
been reduced. Keep in mind that these figures do not factor in additional
insurer profits from investment income.
A May 2007 decision by a San Francisco workers comp
judge cast a cloud over Schwarzenegger claims that the comp system is
fixed and a successful model for healthcare reform. In the case,
Boughner vs. Comp
USA, Judge Jacqueline Duncan issued a 51 page ruling, concluding that the
new California rating system is invalid. Finding that SB 899 required that the
new rating schedule be based on empirical data, Duncan gave failing marks to
the Schwarzenegger administration staffers who designed the new disability
studies, including one undertaken by CHSWC, the California
Commission on Health, Safety and Workers Compensation, have shown that
permanent disability income replacement benefits to disabled workers have been
cut by over 50%. An administration study of the issue is being undertaken, but
Schwarzenegger appears to be in no rush to address the issue.
year Schwarzenegger vetoed a benefits increase bill, SB 815, authored by Senate
President pro Tem Don Perata. This year both Perata and Assembly Speaker Fabian
Nunez are back with bills to address the issue.
But the elephant in the room may be insurer profits. Can
there be benefits which adequately compensate disabled workers if insurer
overhead and profits are well over one half of premiums paid by employers? How
long can the Governor maintain that he fixed a system that pays out such
pitiful benefits? Does the Governor have a plan to address adequacy of
benefits? And when will the press begin to focus on the sad state of
Californias workers comp system? A system that remains broken.
Starting in 1979, Julius Young has represented thousands of
individuals who have sustained life-changing injuries or illnesses while on the
job. His goal is to secure the medical treatment his clients need and the
maximum benefits they are allowed so they and their families can survive
potentially devastating injuries. A partner of Boxer & Gerson since 1988,
he practices workers compensation and disability law in Oakland.