Fixing blame

Last Sept. 23 Crystal Ward was nine months pregnant and working for Human Resources Solutions as a temporary employee sorting photos for LifeTouch Lab, a company that takes student class portraits for schools.

Her job was to sift through thousands of school portraits, sorting them by subject and size while seated at a long row of tables working alongside about 100 others doing the same task. It was repetitive, assembly-line work minus the conveyer belt.

“When I got to work that day,” she said, “there were not enough chairs. So a supervisor went and got me one of those white plastic patio chairs from an office, and he had me sit in it.”

After about 30 minutes of shuffling through photos of adolescent angst smiling awkwardly back at her, Ward was suddenly and unexpectedly pitched backward when the rear legs of the plastic patio chair snapped from the molded seat. As she was headed down, the back of the chair broke off, sending her sprawling onto the metal table behind her.

Ward, 22, said she had to work that late into her pregnancy because she already had two children at home and her husband, a drywall hanger by trade, had not been working steadily because of rainy weather.

She was about to find out firsthand the nightmares of the state’s ailing workers’ compensation system in California, a system that is at the heart of a major political and ideological battle now raging in the state Capitol.

A fellow worker helped her to her feet, and she was sent to Skyway Medical, which because of her pregnancy sent her to her obstetrician, who in turn sent her to the Enloe Medical Center emergency room, where she was monitored. At one point, she said, she started going into contractions. Ten hours had passed since she was pitched to the floor.

Finally she was sent home for rest. The next day her obstetrician referred her to a back doctor at Enloe Occupational Health.

“He took down the insurance information and tried to get the approval for x-rays and an MRI,” Ward recalled. “But the insurance company denied those services.”

The Enloe doctor sent his report to the insurance provider—the State Compensation Insurance fund, originally a state-run agency designed to back up the private insurance companies operating in the state.

Today there are so few workers’ comp insurance companies operating in California that the state fund issues about 60 percent of the coverage.

The people at the state fund told Ward they needed their own doctor’s opinion before they could approve testing or x-rays.

The doctor they picked used the Occupational Medical Practices Guidelines to make his decision, ruling against the Enloe doctor’s recommendation.

Curiously, the use of the book for guidance is part of workers’ comp reform passed last year but lost in the dust of the frenzied effort to recall Gov. Gray Davis.

“The book is presumptively correct,” explained Ward’s attorney, Steve Foster. “The treating doctor must supply evidence as to why the book is wrong. The burden is on the treating doctor.”

Foster says that the reform passed last year steers doctors away from using subjective considerations such as pain and more or less demands objective observations, those things that can be detected by MRIs and x-rays.

And while the state fund insurance denied the x-ray or MRI, it did approve physical therapy.

“I was having difficulty sitting and standing,” Ward said.

Then, on Feb. 27, six months after the injury, Ward used her own insurance to pay for x-rays, which revealed vertebrae with a compression fracture.

“They could have found that at the beginning,” she said. “I don’t want to have back problems. All I want is better medical care.”

Ward had her baby, and her doctor took her off work. She went from making $7 per hour at 40 hours-plus per week—$280—to $252 every two weeks.

Everybody, it seems, agrees that the state’s $17.9 billion workers’ compensation system is bloated, sick and out of control. Businesses have seen their workers’ comp insurance coverage skyrocket in the last 10 years, while injured workers have been receiving less than adequate coverage.

In fact, California has the highest premium rates in the nation, even as benefits for injured workers remain in the lower third of all states. The dysfunction affects every employer—and potentially, every employee—in the state.

Since the early 1900s, state law has required that all employers provide workers’ comp insurance for their employees. The insurance covers accidents or illness arising from employment. Benefits include lost wages, medical expenses, rehabilitation and permanent disfigurement/disability payments. In return, the workers can’t take their employers to court.

But finding the best remedy to heal the system is another story.

Republicans such as Gov. Arnold Schwarzenegger and Assemblyman Doug LaMalfa, R-Richvale, blame the workers who, if really hurt at all, receive their injuries while engaged in activities off the job, and the attorneys who represent them when their claims are delayed or denied by the insurance companies.

We’ve all seen on the evening news the hidden video of the “disabled” cop with the “slipped disc” doing half-gainers off the high board or rolling a 300 game at the local bowling alley while collecting a disability check.

Democrats and workers’ comp attorneys, on the other hand, point to insurance companies charging outrageous rates for coverage and doctors overcharging for unnecessary treatments. There are no rate regulations for the insurance companies—Demos want them reinstated—and there is a luring incentive for doctors, who get full reimbursement in workers’ comp cases, helping make up the partial payments they get in Medi-Cal cases, to overcharge or over treat their workers’ comp patients.

But such stories are statistic and bar-graph oriented, not visually suitable or sexy enough for the evening news.

Thus conventional wisdom tells us it’s those damn workers and their attorneys milking the system, hurting the business climate and ruining the state’s economy. We love to blame the lawyers, don’t we?

Schwarzenegger jumped on the bandwagon and rode it and the ill-advised rollback of the vehicle license fee—now threatening the financial stability of police and fire protection across the state—to victory in last year’s recall election.

And now, even as the state Legislature, under pressure from Schwarzenegger, is trying to hammer out a compromise fixit plan, a ballot initiative sponsored by big business, the insurance industry and the California Chamber of Commerce is gaining steam and signatures as it heads toward its April 16 deadline for qualification.

It’s not hard to imagine the 20-second sound bite commercials that will be pushing the ballot measure, should it qualify, come next fall: “Don’t let the lawyers make a killing on workers’ comp. Vote yes for …” And with the governor’s endorsement the measure will win in a landslide.

Initiative supporters include State Farm Insurance, the California Chamber of Commerce, Insurance Brokers & Agents of the West, the American Insurance Association, the California Building Industry Association and the California Logging Industry Association.

Assemblyman LaMalfa came through Chico last month touting the initiative as an incentive to get something worked out in Sacramento. The backers of the initiative have said they’ll abandon their efforts if a suitable compromise is found. And by the time this story hits the streets, that may well be the case.

However, if the Legislature comes up with a plan the backers don’t like, the ballot measure will go forward and, if approved, trump any state legislation because it would amend the state constitution, much to the delight of the insurance industry and to the detriment of the state’s injured workers.

Despite Crystal Ward’s nightmare journey through the workers’ comp maze, there’s little doubt that the initiative, if it passes, will make things even tougher on the worker.

The Attorney General’s Office interpretation of the initiative reads:

“Repeals requirement that workers’ compensation laws be interpreted to favor providing benefits to workers; replaces with impartial/balanced interpretation. Permits injured employee treatment only by employer-approved physician. Limits right to obtain second medical opinion. Requires employee to prove employment activities predominantly caused injury. Limits employer liability for permanent disabilities to percentage caused by job-related injury. Requires compensation or medical treatment to be based on objective medical findings. Provides independent review of all medical treatment disputes. Limits rights to sue for disability discrimination.”

“One of the key things on the front of the initiative, one of the things you can read, does state that employees will not be able to pick their own doctors,” said Gary Gartner, deputy press secretary for state Insurance Commissioner Steve Garamendi.

The first part of that legislative reform, passed during the drama of the Davis recall election, “has had a major impact, although not enough yet,” said Gartner. “Rates were scheduled to go up again at the end of last year, by about 12 percent. Instead, they actually went down about 3 percent.”

Christopher George, the man behind the initiative, has agreed that if the Legislature works out some kind of kind of compromise bill backers will not submit the signatures to the Secretary of State’s Office to qualify the measure.

George is founder and president of Bay Area-based CMG Mortgage, Inc. He’s also sat on advisory boards for big-money lenders like Chase and Wells Fargo. George is a member of the Small Business Action Committee, a political-action committee that, according to the initiative’s Web site, is involved in “workers’ compensation reform, opposing property tax increases and fighting against frivolous lawsuits.”

Garamendi is pushing the second half of the reforms that were put into place last year, Gartner said. The Legislature is still in the process of cleaning up that legislation.

Assemblyman LaMalfa, who blames attorneys for the high cost of workers’ comp insurance, showed up at the Work Training Center in Chico March 26 to gather signatures for the initiative. His appearance did not escape the notice of Barbara McIver, the Tehama County supervisor and Democrat running against LaMalfa in November.

She wondered why he wasn’t in Sacramento working on the legislation instead of immersing himself in the initiative process, the voters’ option when things aren’t getting done by elected officials.

“Maybe he doesn’t know the difference between legislation and the petition system,” she said. “This is a poor use of his time; there are a lot of other people who will push [the initiative].”

McIver said the initiative concerns her because “it’s got the Schwarzenegger stamp on it, and so people will vote for it. They will not look at it with caution, consider who wrote it or whether the protection is fair and balanced.”

LaMalfa sent a commentary to this paper that used language his constituents could understand.

“The number of things that need fixing in California seems endless,” he wrote. “But one thing is certain: high on the list is California’s workers’ compensation insurance system. If the system was a car, we’d call it a junker.”

Assemblyman and attorney Rick Keene, R-Chico, the only legislator with experience in workers’ comp cases, says he’s not sure whether a compromise bill will be worked out any time soon.

“There are a lot of discussions going on, and the governor’s got his own ideas,” Keene said. “The Republicans were not comfortable that the solutions were going to save money, so it was back to the drawing board to try to come up with something.”

Keene finds himself in an odd position. As a workers’ comp attorney defending his brethren, he’s squarely at odds with his party, which would like to hoist lawyers like him by their ankles and shake all the loose change out of their pockets.

LaMalfa, in the commentary he sent this paper, puts the blame for the dysfunctional system clearly on the attorneys.

“One group of people clearly benefits from the system: lawyers who make a comfortable living handling workers’ compensation cases,” he writes. “The system was originally designed to deal fairly with on-the-job injuries without costly litigation—a no-fault system. It hasn’t worked out that way in California.”

Keene suggested, rather unconvincingly, that his fellow assemblyman was referring to the lawyers’ lobby that is in Sacramento pushing for reform.

Local workers’ comp attorney Foster also takes exception to LaMalfa’s blaming of attorneys for the rising costs of the system. Workers’ comp is a no-fault system, he said.

“At the turn of the [19th] century, more industry people started getting injured on the job,” Foster explained. “The workers would sue their employers, who in turn wanted protection from civil suits.”

The answer was a workers’ comp system, whereby workers gave up the right to sue in exchange for a no-fault benefit system.

Now, he argues Republicans are hoping to increase the standards by which an employee qualifies for compensation. Attorneys for employees get involved only if a claim is denied or full benefits are not received, said Foster, a self-described conservative Republican. The fees attorneys receive in these cases are capped at 12 percent and paid for out of the injured worker’s benefits.

“Take us out of the system, and the insurance companies still have their attorneys and the injured worker has no representation,” Foster said. “That’s a huge imbalance for somebody who is already devastated financially. Most injured workers don’t know what their rights are.”

Blaming the attorneys misses the root of the problem, Foster said, which is basically the rates insurance companies and medical providers now charge. In the mid-1990s, then-Gov. Pete Wilson signed legislation deregulating insurance companies and what they could charge. The legislation, ironically, was authored by state Sen. Steve Peace, the same legislator who helped deregulate California’s power system a few years back, with devastating results.

For the three years following the deregulation of workers’ comp insurance, there was a significant dip in rates as insurance companies used “predatory practices” to undercut the competition and drive the smaller providers out of business, Foster said.

Indeed, since 1995, more than 25 of the state’s workers’ compensation insurers, with assets of more than $10 billion, have been placed in conservation, put under supervision, or liquidated in California or their state of domicile. And in the past four years at least 18 private insurance companies have stopped writing new workers’ compensation policies in California.

Once competition was eliminated, the surviving companies began to raise their rates. And in 2000, when the stock market tanked, the insurance companies took a hit as well, causing them to raise their rates even higher.

Keene, playing the part of political diplomat, says that while it is illegal there has been a significant increase in rates since the “2000 stock market adjustment.”

Foster makes no bones about whom he blames.

“Everybody wants to blame the system, but it was the insurance companies that caused the problem,” Foster said. “The California Chamber of Commerce says we need reforms, but nobody is proposing capping or regulating rates.”

Here Keene and Foster disagree. Keene warns that regulating insurance rates will discourage insurance providers from coming into the state, thus squelching competition that would keep rates down.

It is not, Foster insists, the workers who are jamming workers’ comp. The system, he said, is already set up to dissuade injured workers from filing a claim. While there is a small percentage trying to milk the system, he said, it is very much in the minority.

In 1999, the most recent year for which such statistics are available, 1.6 million workers’ compensation claims were filed in the state. But only 989 of the cases were even investigated.

Butte County District Attorney Mike Ramsey said his office prosecutes workers’ comp fraud cases using grant money from the state Insurance Commissioner’s Office. The cases, he said, are not limited to employee fraud but also include employer and medical-provider fraud and fraud by the insurance companies.

“Wholesale over-billing [by medical providers] probably drives up costs more than individual worker fraud cases,” said Ramsey.

His office is currently prosecuting a case that has 22 counts of insurance fraud against Chico chiropractor Linda Powers. Five of those counts are connected to workers’ comp cases.

Keene argued that the reasons there are so few investigations is that there are no strings tied to that grant money and thus no incentive; unlike other grants for the state’s prosecutors, the money comes in regardless of the conviction rate.

Ramsey said that simply is not true.

“We have to justify to the Department of Insurance that we are appropriately using the money we get,” Ramsey said.

Foster and Keene say the fraud that does exist in the system takes place almost entirely in Southern California and the Bay Area.

“In Southern California they are awarding up to 30 percent in attorneys’ fees, and [medical providers'] bills are up 500 to 600 percent,” Keene said.

Foster echoed that.

“The dirty little secret is that when it comes to workers’ comp, we are all covered by the same rules, but Northern California and Southern California are two different animals. Up here the number of doctors is limited, and there are even fewer who will handle workers’ comp.

“If Dr. Smith says you need surgery on your back and the insurance company objects, then you need a qualified medical evaluation. All of that can take six to eight months.”

The state’s workers’ compensation system, Keene said, is flawed compared to those in other states because of years of legislative tinkering that has promoted litigation.

“Our system is designed to find the responsible parties, which puts people at odds," Keene said. "In other states the system is designed to return people to work."