On self-insuring

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.

Fraud and more Fraud

Quis custodiet ipsos custodes?

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!

On Benson (Part II)

Yesterday we discussed the use of the Benson decision and how we can break up large permanent disability ratings into smaller (and cheaper) ones.

But what about large periods of cumulative trauma?

Well, look to see if there were any gaps in the cumulative trauma or any periods of disability dotting the timeline of alleged disability.

In the case of Ferguson v. WCAB (1970) 35 CCC 452, the applicant claimed a cumulative trauma, but had a period of disability in the middle of the timeline for which he was off work.  The Board held that, under Labor Code § 3208.2, the applicant actually sustained three injuries:

(1)    A cumulative trauma ending at the time of the specific injury;

(2)    A specific injury

(3)    A cumulative trauma beginning after the applicant returned from disability for the specific injury, and ending with the last day worked.

If you’re faced with a long period of cumulative trauma, try to look for periods of disability.  A theory with some potential, one which I’m not aware of having been tried yet, is to argue that periods off work for non-industrial injuries should serve to break up cumulative trauma into separate injuries as well, akin to the specific injury in Ferguson.

Once you use Ferguson and § 3208.2 to effectively break up the single cumulative trauma into several little ones, write to the Qualified or Agreed Medical Evaluator requesting that each injury be given its own rating under Benson (Benson v. WCAB (2009) 170 Cal.App.4th 1535) and Labor Code § 4663.

Remember, permanent disability indemnity goes up drastically as you climb the impairment ladder.  One of the best ways to bring that impairment number down (as well as the amount the applicant will eventually be entitled to) is by breaking the whole impairment into its individual parts.

Good hunting!

On Benson (Part 1)

Ready for a discussion of Benson and related authorities that lasts the span of a few minutes?  California Workers’ Compensation allows the defense a few maneuvers here and there to keep things interesting.  Here’s what you need to know about Benson.

Each injury, past or present, gets its own rating and the impairment of an applicant gets broken up into injuries and causes.  (Exception: if there is no way for the physician to parcel out the individual injuries with reasonable medical certainty, then a combined award may be appropriate.)

Pre-SB 899, the rule governing multiple injuries to one body-part was articulated in Wilkinson v. WCAB ((1977) 42 CCC 406).  The rule there was:  if there are several injuries to the same body part that become permanent and stationary at the same time, there is no apportionment and there is one massive impairment rating.

This means that four injuries to a body part that each cause an adjusted 5% disability ($2,760.00 x 4 injuries = $11,040.00) would actually be calculated as 20% disability ($17,365.00).  Mind the $6,325.00 gap – imagine the difference with the higher impairment brackets!

Enter SB 899 and the case of Benson v. WCAB (2009) 170 Cal.App.4th 1535.  Benson held that “each distinct industrial injury [must] be separately compensated on its individual contribution to a permanent disability.”  (Benson, supra, 170 Cal.App.4th at p.  1560.)

Remember to cite Labor Code § 4663 as well, especially subsection (b): “Any physician who prepares a report addressing the issue of permanent disability due to a claimed industrial injury shall in that report address the issue of causation of the permanent disability.”

If a treating or evaluating physician doesn’t include a discussion of apportionment, even amongst the various claimed injuries, then the report is not complete under subsection (c).  Usually, a letter requesting a supplemental report should do the trick.

So if you have an applicant claiming both a cumulative trauma and a specific injury, invoke Benson and break that claim up into pills a bit easier to swallow.

But that’s not all Benson is good for!  What if you have a claim for a lengthy period of cumulative trauma – one which comes with a QME report of heavy impairment rating?

Video: 

The dramatic conclusion… tomorrow morning.

Flash News! SAWW Mandates TD Increase

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 31^st.

So for 2012, the fate of temporary disability payments was sealed on March 31^st, 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.