Critics Voice Concern About Estimated Reductions in Workers’ Compensation Benefit Awards Under New Rules

Some critics of legislation to reform the state workers' compensation insurance system said that temporary rules proposed by the Division of Workers' Compensation would substantially reduce benefits for injured workers, the Sacramento Bee reports. The rules, which are scheduled to take effect Jan. 1, 2005, establish a formula for measuring the severity of workers' injuries. Permanent regulations will be written after a public comment period.

At a hearing on Tuesday of the Senate Committee on Labor and Industrial Relations, critics of the rules cited a report sponsored by the California Applicants' Attorneys Association that stated that workers' compensation benefits would decline under the new rules (Osterman, Sacramento Bee, 12/8). The report by J. Paul Leigh, an economist at the University of California-Davis, indicates that the new rules would reduce workers' compensation benefits for permanent disabilities by an average of 70%.

For the report, Leigh examined 218 workers' compensation cases involving back, shoulder and wrist injuries to estimate the effect of the proposed rules, the Contra Costa Times reports. Leigh said that under the proposed rules, benefit awards would be reduced in 95% of the cases he considered. Benefit awards would increase in the remaining 5% of cases, Leigh said.

CAAA President David Schwartz said, "This is absolutely devastating for injured workers," adding, "The governor's reforms are turning out to be the worst nightmare that injured workers have ever had."

Some supporters of efforts to reform the state workers' compensation insurance system questioned the report's methodology, noting that attorneys submitted the cases considered by the report.

Willie Washington, an advocate for the California Manufacturers & Technology Association, said, "I'm suspicious about this," adding, "The attorneys may have culled through the reports and sent the ones most favorable to the position of the attorneys" (Avalos, Contra Costa Times, 12/8).

Stanley Zax -- chair and CEO of Zenith Insurance, which issues workers' compensation insurance policies -- said, "I wouldn't pay any attention to any study [CAAA] would commission," adding, "It's self-motivated" (Sacramento Bee, 12/8).

In addition, some supporters of the reform efforts said the report in large part focuses on "subjective" injuries, such as back and wrist conditions, the Times reports (Contra Costa Times, 12/8).

In response to questions from committee members, DWC Director Andrea Hoch said the temporary rules would make injury evaluation by the state workers' compensation insurance system more consistent and transparent, the Bee reports. She said that total benefit awards likely would decrease under the new rules (Sacramento Bee, 12/8).

"I view the new permanent disability system ... as a first step," Hoch said, adding, "Get this implemented on a timely basis and then the most important thing is to start monitoring data on the new system."

Sen. Sheila Kuehl (D-Los Angeles) said legislators had anticipated some reductions in workers' compensation benefit awards but not to the extent currently estimated. She said, "Nowhere in the legislation was there any intention to reduce whole hog benefits for workers."

Committee Chair Richard Alarcon (D-Van Nuys) said, "It appears to me my worst fears have been achieved."

Schwartz said, "We're hoping that (Hoch) has listened to the senators that spoke today about legislative intent and she will make substantial changes." He added, "Our other recourse is to file a lawsuit" (Lawrence, AP/San Diego Union-Tribune, 12/8).