SB 863: Why Are Worker Advocates In Opposition?

By Julius Young
Boxer & Gerson—Oakland, CA
Publisher of www.workerscompzone.com

Today the legislature is holding an informational hearing on SB 863, a comprehensive workers’ compensation reform bill.

Although the bill has some good elements, has been improved from recent versions and although any progressive workers’ comp reform effort may involve some compromises, SB 863 has too many takeaways for workers and should be rejected.

Supporters of SB 863 originally touted that SB 863 would result in $1.4 billion in system savings for employers while delivering $740 million in increased workers benefits, a 2:1 ratio in favor of employers. The California Labor Federation has touted that the bill would result in savings, relieving economic pressures of increasing workers’ comp costs.

But as late as yesterday [August 27, 2012], California’s Workers’ Compensation Insurance Rating Bureau (WCIRB) questioned the long-term savings effect of SB 863, projecting that it might increase workers’ comp costs. This has raised concern among members of the business community.

But why would worker advocates be concerned about SB 863?

Consider these issues:

Workers Lose Medical Rights
Under SB 863, workers would lose their right to a face to face medical exam as part of an appeal of treatment denials.

Judges Are Stripped Of Authority Over Medical Disputes
Workers’ comp judges would be stripped of ability to hear treatment denial appeals except under the most extreme circumstances.

Costly New Dispute Resolution System Is Added
Additional costs would be added to the system as a massive Independent Medical Review system would be put in place on top of the current utilization review system. Advocates for SB 863 have not produced detailed studies documenting the costs of a large IMR system and how those costs would compare with the current system of face-to-face QME reviewers.

Cost Drivers Are Not Addressed
Despite studies showing that cost containment measures such as utilization review have been increasing “cost drivers” in the comp system, SB 863 does essentially nothing to control utilization review costs.

 Benefits Likely Shifted From The More Disabled
SB 863 appears to shift benefit increases to less disabled workers rather than more disabled workers who, by definition, are likely to have higher earnings losses. SB 863 eliminates the concept of “diminished future earning capacity” from the Labor Code (a concept used in an important case known as Ogilvie), making it harder for workers with severe earnings losses to recoup fair awards.

Proving Disability Is Made More Difficult
SB 863 does increase monies paid for some percentages of disability but reduces the ability of workers to prove those levels of disability. For example, a 50 percent disability rating would receive more money under SB 863 than under current law but by eliminating the “diminished future earning capacity concept” and other criteria, SB 863 makes it less likely that the worker would be found 50 percent disabled. That’s one reason worker advocates have questioned the projections of supporters.

WCIRB Report Confirms Concerns About Accuracy Of Proponents’ Statistics
The recent WCIRB analysis seems to confirm these concerns. The report from the WCIRB’s chief actuary shows a decrease in permanent disability benefits of $130 million due to “elimination of the impact of the Ogilvie decision”. According to the WCIRB, that consists of an $80 million drop in benefits and an additional $50 million due to decreased claims filing. The WCIRB also projected further decreases in PD payments due to elimination of consideration of sleep disorders, sexual dysfunction and psychiatric residuals of physical injuries.

The bottom line is that the WCIRB analysis raises major questions about the accuracy of projections of labor advocates who claim SB will deliver large increases to workers.

Transparency Has Been a Problem
Advocates of SB 863, including the Department of Industrial Relations (DIR), have failed to produce their own studies and data showing the basis for their projections. The DIR failed to voluntarily reveal information about a memo that questioned the constitutionality of the Independent Medical Review provisions of the bill.

Injured workers suffered many losses under the Schwarzenegger-era SB 899.  Since that time workers have seen a large drop in permanent disability payments and treatment delays have led to massive complaints about the system.

It would be a terrible development if the legislature rushes into a “fix” for SB 899 that results in further take-aways for workers.

There are many areas in California’s workers’ comp system that need attention.  Parts of SB 863 are a good start, but the bill needs more analysis, more work and should be rejected.

Let’s not have “foie gras –style”California workers’ comp reform.