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February, 2008



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Something May Stink With Your
Workers Comp Coverage
Injured workers denied care and compensation while
insurers revel in record profits
By Sue Borg

Two stories about California's workers compensation system became public on the same day last month. One was about California Highway Patrol Officer Bill Parkin, who hurt his knee on the job, while clearing traffic accidents and helping stranded motorists in July 2006. Officer Parkin put his health and safety at risk to protect us and thought he'd receive the medical care he needed to heal and compensation for his permanent disabilities.
Instead, the insurance company, State Compensation Insurance Fund (SCIF), delayed his knee surgery for months, and Officer Parkin got worse instead of better. The delays compounded the injury, ending up requiring surgery on both knees. Now, Officer Parkin doesn't know if he'll be able to return to the job he loved.

The second story was about a State Department of Insurance audit of SCIF, which revealed that Officer Parkin is one of tens of thousands of Californians whose work-related injuries the insurer neglected. The audit revealed that State Fund paid nearly $20 million in penalties between January and July 2007 for repeatedly delaying and denying appropriate care and compensation to injured workers. Delaying needed care means Californians injured at work are further harmed by SCIF, rather than healed.

California law requires that every employer purchase workers compensation insurance, so employees receive medical care and compensation for permanent disabilities from a job-related injury. Most for-profit insurance companies won't cover small businesses or non-profits. SCIF was set up to cover all those refused by private insurers. Nearly half the employers in the state, about 220,000, pay SCIF to care for and compensate employees like Officer Parkin who are injured at work. Problems at SCIF are problems for half of California businesses. And may also reflect what is taking place at private insurers.

As a small employer, I was appalled to read that while SCIF was delaying and denying injured workers' medical care and disability compensation, the insurer was awash in cash from high premiums. It takes in $3.5 billion a year in premiums from California's small businesses, public agencies and nonprofits, which often struggle to pay those premiums. Those employers believed their injured workers would receive appropriate compensation.

Since Governor Schwarzenegger pushed his workers compensation program through the Legislature in 2004, California workers compensation insurance companies have posted record profits. Insurer profits of $6.6 billion in 2006 were greater than the benefits paid to injured workers ($6.2 billion). Compensation for disabled California workers has sunk to the bottom among all the states while insurer profits have skyrocketed. While other insurers used these profits to pay top executives, and pay dividends on shares, the State Department of Insurance audit found that SCIF squandered millions and millions of dollars.

SCIF spent half a billion dollars on questionable outside marketing efforts that the audit found often provided "minimal services." About $250 million went to organizations with ties to two former SCIF directors. Some organizations received millions of dollars just for sending quarterly newsletters to their members. These millions of dollars were paid to SCIF to cover medical care and disability compensation for those injured on the job. When these dollars are squandered, we all suffer; but those who are injured lose the most. They lose their health, their lifestyle and, often, everything they worked to build. How outraged should injured workers be that while State Fund was denying needed medical treatment, it was so flush it provided 2,000 autos for just 8,000 employees?

State Fund isn't the only company to routinely delay and deny claims by California workers, as has been revealed in the Division of Workers Compensation's own audits. Insurers routinely fail to pay legitimate benefits, with the State finding an average of $1,250 unpaid to injured workers in each case of unpaid benefits.

With insurance carriers reaping record-breaking profits, and State Fund finding questionable outlets for its mountains of cash, it's time to restore balance and fairness in disability compensation and medical care for Californians injured on the job. Last October, Gov. Schwarzenegger vetoed a bill that would have restored part of the cutbacks to compensation. It's time to make sure workers compensation insurers use employers' premiums for what they're intended: to pay legitimate injury claims from Californians injured at work.

Sue Borg is president of the California Applicants Attorneys Association, an organization whose members represent Californians injured at work.

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