In California, every employer must either have workers’ compensation insurance or become self-insured. Given the rising workers’ compensation costs, including the costs of defending these claims, the option of self-insuring becomes more and more appealing as every dollar counts more and more.
Many of the advantages of self-insuring are outlined here by Thomas Harbinson, Esq.
Overall, the medical costs and permanent disability indemnity, along with all the other workers’ compensation benefits, will hit self-insured employers and insurance companies alike. But, if an employer can self-insure, there are several advantages that make that initial investment worthwhile.
The first advantage is control – a self-insured company gets to make sure that the loyal, hard-working employees are taken care of. The company also get to make the decision about whether frauds should be fought tooth-and-nail for every inch of ground or given Danegeld. Local control allows a company to bring its culture and history to the workers’ compensation arena.
Another advantage is cost-saving. Imagine a company owns an insurance company as a subsidiary – and all the profits can either go back to the parent company or lower the price for the one customer (the same parent company). The profits previously owned by the workers’ compensation insurer are staying within the “family” coffers.
One of the other advantages is to pool the lobbying resources as a self-insurer. There are groups such as California Self-Insurers Association that pool advocacy dollars to advance not only those interests that self-insurers share with insurance companies, but the specific interests of self-insurers as well. This includes lectures, seminars and training sessions specifically for self-insurers.
But there are some drawbacks as well that need to be considered. For entities with relatively small claims files, the insurance companies will do the job cheaper because of economies of scale. However, the answer to that is to join a self-insured group. This allows several companies to pool their resources together and (hopefully) save on the costs of insuring their employees.
And remember – self-insured doesn’t necessarily mean self-administered. There is a spectrum of options from just sending a check to a workers’ compensation insurance company to keeping it all in the company.
Another drawback is the (erroneous, I believe) perception that employers will be seen as the “bad guy.” However, if a worker feels he is not being taken care of fairly when he is hurt, he’s going to blame the company that hired the workers’ compensation insurer as much as the employer, whether there is self-insurance or not.
In either case, self-insuring is an option that should be explored and considered when ends must be made to meet.
It is an unfortunate fact that insurance companies and self-insured employers often have to lose money to fraud: so-called injured workers who claim more disability than they have sustained.
Because of this fact, the cost of this fraud is passed on to the average consumer, who pays a higher price for goods and services, the higher revenues from which are used to pay for higher insurance premiums.
Private companies are not the only victims, and sometimes the government, sleepy eyed from collecting taxes from private companies (although, not all private companies) and citizens, has its own pockets picked.
It’s not Robin Hood that does this – there are no merry men in green tights involved.
In one recent case, an Oxnard police officer stands accused of workers’ compensation fraud. Edward Idukas, the law man in question, allegedly claimed he was too injured to work, but then an investigation revealed he was regularly playing baseball while collecting benefits.
In a similar story, Oscar Fuentes III, of Willits, was arrested for alleged insurance fraud after an investigation allegedly revealed that, while receiving workers compensation benefits, he was coaching baseball, performing yard work and other physical activities. It appears that an investigation was launched after Mr. Fuentes filed a petition to reopen, seeking to raise an in-place award for 45% permanent disability to 100% permanent disability.
Coincidentally, Mr. Fuentes was a manager of the Department of Corrections and Rehabilitation, San Quentin State Prison.
Private employers, public employers and insurance companies do well to hire veteran investigators with a nose for funny business. The seed money sown in an investigation unit that develops a cooperative relationship with law enforcement reaps not only the small amounts of funds recovered through restitution orders, but also the deterrence effect of prison time.
To the deputy district attorneys, to the private investigators, and to the determined adjusters that won’t have their companies robbed, I say in all sincerity: good hunting!
Some news that’s been traveling around the California Workers’ Compensation blogosphere has found its way to this site. The state average weekly wage (SAWW) has increased, and so shall the minimum and maximum temporary disability payments for insurance companies and self-insured employers.
Under Labor Code § 4453(a)(10), “[c]ommencing on January 1, 2007, and each January 1 thereafter, the limits specified in this paragraph shall be increased by an amount equal to the percentage increase in the state average weekly wage as compared to the prior year.”
As per the code section, the test is the weekly wage as reported by the United States Department of Labor for the 12 months ending on March 31st.
So for 2012, the fate of temporary disability payments was sealed on March 31st, 2011. According to the U.S. Department of Labor (scroll down to see California), the average weekly wages are now $1,003.55.
As per Labor Code § 4659(c), this increase will also affect the pensions of those employees injured on or after January 1, 2003.
On the one hand, this means more payouts, higher insurance premiums, and a slightly larger incentive to file a claim.
On the other, it provides more of an incentive to fight bad or fraudulent claims. Remember, even a $50 increase in temporary disability, over two years [see Labor Code § 4656(c)(2), totals $5,200.00. If the claim is fraudulent, that’s money that no defendant should have to pay.
Slight increases in temporary disability, just like any other indemnity, add up and quickly become cheaper to fight than to pay. After all, when a self-insured employer or an insurer gets a reputation for big settlements, the claims increase to match. Just a thought.
While we’re on the subject of Labor Code § 4658(d), let’s take a hypothetical. Andy the applicant slips and falls at work. He twists his ankle and it’s hard for him to work. He goes to see a doctor on the same day, and the following morning returns to work. He tells his supervisor that he needs to stay off his leg, but other than that he’s fine.
Naturally, Andy’s supervisor puts him to work at the same job – sitting at a desk and working the call center.
Eventually, Andy files a claim and the matter proceeds to trial. As the defense attorney is filling out the Stipulations with Request for Award form, he gets to page 6 and is stumped – is there a 15% increase because the employer never sent out an offer of regular work? Is there a 15% decrease because Andy never missed work? Does this section even apply?
For the moment, the authority seems limited and split. Fortunately, both splits are relatively good for the defense!
In the panel decision of Hisato Tsuchiya v. County of L.A. (ADJ2508984) [scroll down to page 50], the panel found that the 15% increases and decreases do not apply when no time was lost due to the injury. In other words, the defendant was not penalized 15%, but didn’t get the benefit of a 15$ reduction either, because the proper paperwork was not done.
In another decision, Wendy Audiss v. City of Rohnert Park (2007 Cal. Wrk. Comp. P.D. Lexis 9), the Board went further to favor the defense.
There, the Board held “[d]efendant’s compliance with the purposes of this provision is evidenced by the fact that as of the date applicant became permanent and stationary March 31, 2006, she was employed by defendant performing her regular work … The subsequent timing of defendant’s offer is not dispositive for the purposes of this provision, where applicant has been employed full time in her regular work.”
Of note here is the fact that there was a formal offer of work made, but, because of late service of the treating physician’s P&S report, this offer was made more than 60 days after applicant was permanent and stationary.
Subsequent authority might later hold that, unless the Notice of Offer of Modified or Alternative Work is actually sent, the applicant will receive a 15% in permanent disability payments. I’ve known some adjusters to safeguard against this by always sending the offer of alternative work, even when the applicant’s employment has been terminated for cause.
In the meantime, it is important to press for that 15% decrease if the employee is back to work at any time before the 60-day-mark of the Permanent and Stationary report.
Under Labor Code § 4658(d) an applicant’s permanent disability payments can be increased, or decreased, by 15% if he or she returns, or doesn’t return, to work.
Essentially, the employer has sixty days from the date the applicant becomes permanent and stationary to offer an employee regular work, or the rate of permanent disability payments goes up by 15%.
In the alternative, if, at any time before the sixty days elapse, the employer makes an offer of regular work, then the permanent disability payments are decreased by 15% (immediately, not after the 60 days).
What happens if, up until trial, the issue goes unaddressed? Like that sandwich in the back of the office refrigerator, always there and never eaten, what if everyone assumes that addressing this is someone else’s responsibility?
For example, let’s say Jill gets hurt at work and files a claim. The litigation back-and-forth begins, and ultimately there is a trial before a workers’ compensation judge. At no point is the 15% increase claimed or raised as an issue, nor is the right to a 15% decrease claimed or raised, until the WCJ, in making an award, decides do add it on.
At this point, the WCJ has heard no evidence one way or another – there is nothing in the record regarding whether or not Jill returned to work and, if she did, whether it was within 60 days of becoming permanent and stationary.
Is the WCJ right in raising the issue him or herself after the record has closed? Is the WCJ to assume that Jill gets the 15% increase?
In the Reconsideration Granted opinion of Maria Parra v. E. & J. Gallo Winery (2011 – ADJ6536976) [Handled masterfully, again, by Thomas J. Harbinson (my boss) and Laura K. Lachman of Harbinson Tune Kasselik], those questions were answered.
By raising the issue of permanent disability, the issue of § 4658(d) is implied (the Board cited Bontempo v. Workers’ Compensation Appeals Board (2009) 173 Cal.App.4th 689).
However, a WCJ is bound by Labor Code § 5903(c), specifically that evidence must justify the findings of fact. This was not the case here – the WCJ did not make any findings of fact as to § 4658(d).
In other words, the WCJ can’t simply assume the insurer or self-insured employer owes money without finding the facts on which to base this assumption.
It’s easy to get cynical being a defendant in California’s Workers’ Compensation system. Don’t! You shouldn’t have to give up an inch of territory that’s yours.