Cage the monster

Careful what you ask for. The reforms promised in the new workers’-comp package could spawn scary loopholes and costly lawsuits.

Illustration By B.Z.

The message of Jurassic Park was that if you mix one highly complex system—in this case, frog DNA—with another highly complex system—fossilized dinosaur DNA—you will create an utterly unpredictable and potentially tragic hybrid, otherwise known as a monster.

If only Jeff Goldblum’s character had been in the room issuing such pearls of wisdom when the California Legislature put the final touches on its 70-plus-page, epic workers’-compensation-reform law April 15 in the dead of night.

I truly want to report to you that this sweeping reform will do the trick. I am dying to say that Senate Bill 899 will hack off one-third of the horrific medical, salary, legal and indemnity costs—and that the slashed costs will last long enough to force corresponding drops in insurance premiums that are crippling everybody from tiny nonprofits to small cafes to big factories.

But, as I learned from a diverse bunch of experts representing many views in the multifaceted workers’-comp debate, this well-intended reform is a monster from which we may soon wish to flee.

SB 899 is filled with ambiguities that no doubt please lawyers for whom “ambiguity” means a gold vein of lawsuits. Experts predict major suits over key provisions starting in about a year—just when big reductions in premiums should be kicking in. And rather than simplify far-too-complex rules and slash red tape that fuels the high costs, SB 899 complicates things. This deeply complex law clearly is biased against small proprietors, who can’t employ experts and could be laid bare to fat cash liabilities they won’t see coming. Moreover, SB 899 offers new loopholes for so-called applicants’ attorneys—trial lawyers who jack up awards for workplace disabilities and who have helped ensure that California’s workers’-comp costs are double those of the next-most-expensive state, Florida.

“Do you remember when Congress enacted that Federal Paperwork Reduction Act, and it resulted in some much, much longer government documents?” asked workers’-compensation consultant David De Paolo, of WorkComp Central. “That’s what SB 899 reminds me of.”

I covered an April 22 teleconference held by ClearComp, a workers’-compensation consultant, which invited experts to present numerous sides of the workers’-comp debate. I heard more diverse thinking than anything I witnessed during a year of partisan-driven workers’-comp debates in Sacramento.

But, despite their diverse views, the experts all were bugged about SB 899. And the experts included a lawyer representing an “applicants’ attorneys” group; an embittered injured worker heading a workers group; a leading occupational-medicine physician; a lawyer representing businesses suing their insurers; a consultant for the workers’-comp insurers and a claims adjuster for a top workers’-comp claims processor.

Too bad this crowd wasn’t invited to cut about 40 pages from the tome approved by bleary-eyed Republican and Democratic leaders after 3 a.m. on April 15 and signed by a beaming Governor Arnold Schwarzenegger at a rousing 2,800-person event at Boeing in Long Beach on April 19.

Here’s what I learned:

• A much-ballyhooed rule in which workers who claim a workplace injury must use doctors from a special health network selected by employers is so full of holes it could morph from a cost-savings device into a costly universal health-care program for workers milking the network for their general health care. “It is, indeed, a potential de facto universal health-care system,” said Dr. Jennifer Christian, an occupational-medicine expert. “All an employee now has to do is say they have an injury in order to get the care immediately.”

According to Christian and several others, preventing this outcome rests largely on the overburdened state Division of Workers’ Compensation. That division must write SB 899 into regulation and close loopholes. Sadly, the track record of the division in writing tough regulations is spotty, to say the least.

• There is no guarantee that quacks and non-credible doctors who promote costly and unneeded treatments will be kept out of the new, employer-chosen health networks.

Indeed, the experts agreed that the new law expects busy employers themselves to learn somehow if sloppy, unqualified or sleazy doctors are in a network when choosing one. “The employer is about to be barraged by networks who want them to use them,” said Dale O’Brien, of ClearComp. “But you have to make sure you have credible orthopedists, credible neurosurgeons.”

I can just see California’s restaurant owners, shoe-store owners and construction-company owners trying to discern who is a credible neurosurgeon. How does a business figure this out, when the state of California, with all its resources, chronically has failed to identify the non-credible workers’-comp doctors?

• The law is silent on how to meld the old and new rules involving permanent disability, and this is expected to spawn huge lawsuits. Under California’s awful old rule, a worker could get a permanent disability rating of 30 percent on a body part and then return to court again, claiming a new injury on the same part, and win another disability payment. In some cases, workers were granted more than 100-percent disability on a single body part. Under SB 899, California finally copies the intelligent states, where the human body equals 100 percent, and each body part equals a sensible fraction of that.

But how to deal with thousands of workers who have a pre-existing “permanently disabled” body part and then re-injure that part under the new law? In judicially liberal California, De Paolo estimates that 95 percent of workers who seek permanent-disability settlements in court get them. So, how do you compute the math to meld pre-existing awards to new awards for the same body part under changed measurements? “It sounds like a Supreme Court question, about four to five years from now,” predicted O’Brien.

• To return injured employees to work who often stay home for months (California has the nation’s worst return-to-work rate), employers now must spend large sums to make work sites easier on injured workers’ bodies—or face extra fines. First, expect major lawsuits over the unbelievably vague wording regarding the fines. Second, the “Return to Work” provision reimburses employers $1,250 to $2,500 for workplace modifications. But the reimbursement is not mandated. Instead, costs of major work-site changes are slated to be reimbursed using penalties paid by companies who break California’s business-practices laws.

But Allan Leno, a workers’-comp consultant to employers, said, “Historically, there have been very, very few of these [business-practices fines] assessed. … It’s an experiment.” To say the least. According to De Paolo, business-practice violations bring very little money to the state, and “the fund has been nearly empty for years.”

A lot of these messes could be fixed if the division whose job it is to write laws into usable regulations was highly competent.

But the underfunded Division of Workers’ Compensation took years to finish writing the regulations during the last big reform in the 1990s. Meanwhile, loopholes bloomed. Tom Hagerman, of the Independent Business Coalition, says division Administrative Director Dick Gannon “just flat failed to get the job done.”

Schwarzenegger must have heard. On April 26, he removed Gannon and appointed no-nonsense attorney Andrea Hoch, California’s chief assistant attorney general for civil law. Don’t get me wrong. Billions of dollars in savings could materialize in the next year or so from SB 899. But it won’t be quick or easy. Major savings could be produced by what Christian called “landmark, strengthening changes” long used in far wiser states in which an injured worker’s medical treatment is decided “using evidence-based principals” instead of relying upon the wildly differing views of the treating doctors.

California’s law said that any physician treating a worker was presumed correct. This foolishness spawned some of the worst doctor-shopping in the United States and gave workers tremendous power in decisions over whether they were actually injured on the job and how much treatment they got. Rob Bekken, a lawyer representing employers who are preparing to sue workers’-comp insurers, said SB 899 “will end the doctor-shopping.”

In a related area, SB 899 copies the much-more-forward-thinking states that require that disability reports—the key documents upon which the courts base permanent disabilities—use objective American Medical Association (AMA) standards instead of subjective opinions that, in California, lead to huge disparities in awards. Once the AMA reform takes hold, major savings could occur. Vince Sollitto, a spokesman for Schwarzenegger, calls that “probably the single biggest reform in the package.”

Schwarzenegger is proving to be a savvy, energetic, well-meaning governor. Polls show he is popular with voters of every political stripe. Perhaps the governor can use his sheer force of will to fix the ambiguities and loopholes in well-meaning SB 899. Perhaps the leeches and middlemen who ply the ambiguities and loopholes to sap the workers’-comp system will get shut out somehow.

But I suspect that in a couple of years, we’ll be discussing a way to cage the monster the Legislature created on April 15, 2004, while the rest of us were sleeping.