Readers of the Beacon know that in 2004 the Governor, backed by employers and insurance companies, gutted the laws that were supposed to protect injured workers. Now, in 2006, we are starting to see the true impact of the assault on worker benefits: permanent disability benefits have been gutted, while insurance companies have gotten rich.
Workers who sustain on the job injuries and are left with permanent disabilities and impairments are entitled to monetary compensation, which was historically intended as a partial compensation for their diminished ability to compete in the labor market. For instance, if a worker blew out a knee and required a total knee replacement, that worker was less able to compete against workers with good knees. The law allowed for partial compensation for the loss.
Even under the pre-2004 law, permanent disability compensation wasn=t much compared to what people lost. In fact, permanent disability costs are the smallest part of overall workers= comp expenditures. For example, the overall workers’ comp budget for a fire district in Southern California is $23 million per year. Permanent disability benefits amount to about 10% of the overall budget.
In 2004, the rules changed. Now, the American Medical Association guidelines govern permanent impairment ratings. The Governor’s administration slapped low modifiers on the AMA ratings, designed to cut benefits. The result is a 50% to 70% reduction in benefits.
Let’s see how this works. Using the total knee replacement example, under the old law the rating was based on many factors, including how the disability limited the injured worker. Although ratings in each case can vary, it was not unusual that a total knee would leave a worker with 40% to 60% permanent disability, worth $43,150 to $73,200 at 2004 rates. Under the AMA, a total knee replacement impairment is capped at 10%, which is modified to 11%, worth $9050 at 2004 rates! I’m too depressed writing this to do the math, but it doesn’t take a law degree to see that the worker gets hammered under the Governor’s law.
In the meantime, comp costs have gone down by 46% in the last three years. They will go down even more because these AMA guidelines are only now being felt. Insurance companies are making money hand over fist – “returning to profitability” is the phrase they like to use.
What can be done? Democrats in the legislature say that cutting permanent disability benefits was never the intent of the 2004 law. There is some momentum to changing the administration’s modifiers to bring compensation under the new law in line with prior law. The Governor and his insurance lobby masters (if you don’t believe this, follow the money!) are resisting any changes. Firefighters and their friends should let their representatives know that they will not sacrifice their benefits for insurance and employer profits.
