Fight Rages Over State Benefits for Workers

Wade Hough, a heavy equipment operator, is like many Californians. He knew very little about the state worker’s compensation system until after he suffered a back injury and applied for benefits.

Now, having spent months fighting his way through California’s $5-billion-a-year program for providing medical care and financial support for injured workers, Hough knows a lot about it--and he is angry.

In that respect, he is not alone.

The Legislature has tried unsuccessfully for years to reform the 72-year-old worker’s compensation system, which has the distinction of ranking near the top among states in overall costs and near the bottom in actual benefits paid.

Tug of War

The high-stakes battle to overhaul the system involves a tug of war between powerful political interests. Labor unions are on one side, pulling for higher benefits. Employer groups and insurance carriers are on the other side, digging in to bring down overall costs, particularly litigation expenses.

Just last week, Gov. George Deukmejian vetoed a labor-backed benefit-increase bill that was opposed by employer groups, saying he wants legislation “which implements both benefit increases and needed reforms.”

Much of the criticism of the program, which covers 10 million working Californians, stems from some of the things Hough discovered when he filed his case at state offices here: Benefits are relatively low, lawyers often are drawn into the fight, and cases can take months to be resolved.

“It was a fairly traumatic experience for me. It was demoralizing,” said Hough, 42, a former Marine who enjoyed good health until he woke up one day in July, 1983, in such severe pain that he said he could not go back to work operating earth movers and other heavy equipment.

Related to His Work

He said the back specialist he went to told him his injury developed from five years of bouncing and jostling atop the big machines and advised him to find another line of work.

But Hough, a member of the Operating Engineers union who lives in the Butte County community of Palermo, said his employer and its insurance company refused to acknowledge that his back injury was severe enough to keep him from working. He got a lawyer.

Then, even though his story was supported by medical evidence, he faced a long fight in getting benefits, a delay he contributed to by filing a late claim with state offices here.

The fight developed because his story was strongly challenged by his employer, Baldwin Construction Co. of Chico, and its two insurance carriers, Fireman’s Fund and Argonaut Insurance, according to state records and interviews with those on both sides of the case. A source who asked not to be identified said the carriers just did not believe that Hough, who appeared strong and healthy, suffered the type of injury that would keep him off the job.

Private Eyes Spied

In all, Hough saw seven chiropractors, medical doctors and psychiatrists. Not surprisingly, his own physicians found that he was indeed severely injured. But an insurance company doctor said he was entirely capable of going back to work. At one point, even a detective agency was hired, hoping to film him doing strenuous work, but it came up empty handed, according to a source.

“I was warned about what I’d have to go through beforehand, but even then I wasn’t prepared for what happened. I was put on trial. No facet or element of my life was left uncovered or unchallenged,” Hough said.

Hough suffered financially.

Technically, the state worker’s compensation program, which is financed entirely by employers, is considered a “no-fault” system, meaning that employers pick up the costs of medical care, up to $224 a week in lost wages and other benefits, regardless of who is at fault for the injury. But if an employer or insurance company challenges a claim, the worker gets nothing until the dispute is settled.

Went Through Savings

So Hough received temporary unemployment disability for eight weeks, and then nothing. He said he had to sell property he owned and went through his limited savings during the more than two years he has been off work.

“If my wife had not been working, I would have starved,” the equipment operator said.

The dispute just recently ended, with Hough settling his case for $20,000, less his lawyer’s fee of $2,400. That is far less than he would have received had he not been forced to quit his $15,000- to $20,000-a-year job.

The equipment operator’s experience is not considered unusual, although it represents only a small percentage of work-injury cases.

Only about 10% of the 1.2 million job-related injuries in California each year wind up in litigation before the state Worker’s Compensation Appeals Board, which would have decided the Hough case had not a settlement been reached.

Seek an Overhaul

Nevertheless, the pay-outs in these cases are behind the current push by employer groups and insurance carriers to overhaul the system.

As indicated by the Hough case, fees for the injured worker’s lawyer, payments to attorneys hired by the insurance companies and the costs of the medical examinations represent substantial sums.

Overall, the cost of California’s worker’s compensation system is projected to be $5.3 billion this year, jumping to more than $6 billion next year, which would be a 67% increase just since 1982.

Of that amount, about $600 million will go to lawyers and consulting doctors, known as forensic specialists, according to estimates by the insurance industry-financed California Worker’s Compensation Institute.

One of 12 in Litigation

“Every 12th worker’s compensation claim ends up being litigated--for a system that was designed to be a no-fault social insurance, that’s not a very good track record,” said Assemblyman Alister McAlister (D-Fremont), chairman of the Assembly Insurance and Finance Committee. He will carry an employer-sponsored bill next January.

Most of the litigation involves “stress” cases, which develop over a period of years from various job pressures and can involve heart attacks, psychic trauma, back ailments and other injuries.

Such cases are becoming so popular that lawyers and psychologists openly advertise for clients on television and in newspapers.

One recent Sunday, The Times carried six major ads by doctor and lawyer firms soliciting clients with such come-ons as: “Job pressures too much? Overworked? Harassed at work? Headaches? Poor sleep?”

Be on the Watch

An ad advised workers to be on the watch for emotional stress, physical injury, harassment and overwork, signs of which are “nervousness, low energy, irritability, insomnia, depression, headaches or other disabling psychological symptoms.” Then it advised them where to get legal and medical help.

“Don’t Take It Any More!” declared another ad.

One advertiser, Dr. George Gamez, a psychologist who operates a counseling center in the Wilshire District that is linked to a law firm, defended his ad. “I think that stress is very real and a growing problem in today’s high-pressure jobs. It can be just as damaging as a physical injury,” he said.

Gamez said ads were important because most workers are not familiar with the worker’s compensation system and are not aware that help is available. “The system is set up to protect the employer,” he charged.

Exaggerated, Faked?

Others, however, charge that many of the stress claims are exaggerated or just made up by workers who hope to win a big judgment for a faked injury.

Los Angeles lawyer Leonard J. Silberman, who specializes in worker’s compensation cases for employers, said many cases are legitimate but many others are not. He frequently has hired private detectives to track claimants.

Silberman recounted:

“In one case, a gentleman hobbled around on crutches for 2 1/2 years. He fooled all the doctors. We showed 480 feet of film of him coaching a boys’ soccer team, including repeated demonstrations of him jumping up in the air and kicking the ball over his head, then landing on his backside. Another case involved a guy who said he was blind. He said he was so bad his daughter had to quit work to lead him around. We had movies of him putting a second story on his home.”

Political Issue

The anger and mutual suspicion spills over into the political arena.

In response to the governor’s veto of the benefit-increase legislation, John Henning, executive secretary-treasurer of the California Labor Federation, said: “What big business demanded of the governor, big business got. The veto action showed no feelings for the thousands of workers each year maimed or injured on the job.”

Those with a stake in the outcome of worker’s compensation legislation represent some of the most powerful political forces in California--labor unions, employer groups, insurance companies, local governments and lawyer associations.

Each wields plenty of clout in the Legislature.

Features of Vetoed Bill

The benefit-increase bill that Deukmejian vetoed was sponsored by the California Labor Federation, AFL-CIO, and would have boosted the current maximum disability payment from $224 to $273 a week. It also would have increased the maximum death payment from $70,000 to $85,000 in cases in which there is one dependent, and from $95,000 to $115,000 when there are multiple dependents.

All sides agree that the current maximum payment of $224 a week is too low.

“People can’t make mortgage or car payments on the benefits they are receiving and it results in a lot of disastrous situations,” said AFL-CIO official Tom Rankin.

But a lobbyist for employer groups, Paul Gladfelty, said employers are so concerned about rising legal and medical costs that they will oppose any benefit-increase legislation until they get the changes they want. He said they believe they can raise benefits while reducing the costs of the system by eliminating some of the money that goes to lawyers and consulting physicians.

Tough Decisions

Gladfelty said: “Organized labor has to make some tough decisions on where the benefits go--to the injured worker or the lawyers and doctors who are taking so much out of the system.”

Gladfelty is an official with the California Manufacturers Assn. and also serves as executive director of Californians for Compensation Reform, a coalition of more than 800 employers, local governments and insurance companies lobbying for legislative changes in the system.

One of the first acts of the coalition was to put together a war chest of about $200,000 to make campaign contributions to legislators. In last year’s general election, the committee contributed $104,000 to Assembly, Senate and other candidates.

Other sides also contributed substantial amounts, including $253,600 by an insurance industry political action committee, $182,462 by the California Trial Lawyers Assn., $183,270 by the California State Employees Assn., and $47,350 by the California Applicant Attorneys Assn.

Employers’ Proposals

The bill the employer groups want would increase some benefits, but decrease others. It would replace the current system of granting awards on the basis of the severity of the injury, with one based more strictly on the amount of actual wage loss resulting from the injury.

A key provision of the McAlister bill would repeal a controversial provision of the current law that gives special legal rights to workers injured while operating power presses commonly used in the manufacture of machinery. Basically it enables an injured worker to sue in Superior Court for pain and suffering damages rather than to be limited to the benefits allowed under the compensation system.

The provision was written into the law in 1982 at the behest of the California Trial Lawyers Assn. and the Applicant Attorneys Assn. Among employer groups favoring repeal of the power press statute is the California Newspaper Publishers Assn., which fears the provision could be interpreted to include printing presses.

Estimates are that it could save employers about 5% of their overall costs. On the basis of a $6-billion system, that would be about $300 million. The savings, according to those who have analyzed the bill, would come mostly from worker benefits.

Labor is gearing up to oppose the bill. “There is no way we can support a bill that would take money out of the pockets of workers,” said the AFL-CIO’s Rankin.

PROPOSALS FOR WORKER’S COMPENSATION This is how employer group proposals for change in the state’s worker’s compensation system compare with the current system: TYPE OF BENEFIT Medical Benefits CURRENT SYSTEM All medical treatment paid for without deductibles. MCALISTER BILLNo change. TYPE OF BENEFIT Temporary/Permanent Total Disability Benefits CURRENT SYSTEM Two-thirds of gross weekly wages up to maximum of $224 a week. MCALISTER BILL80% of spendable weekly income, after deductions, up to maximum of 100% of statewide average weekly wage. This was $400 a week in 1985. TYPE OF BENEFIT Permanent Partial Disability Benefits CURRENT SYSTEM Tax-free benefits to a maximum of $224 a week, continuing up to 60 weeks or more. Paid without relationship to loss of earnings. Workers can receive benefits and continue to work. MCALISTER BILLLump-sum payment for “serious” permanent impairments. Would base benefits on actual difference between wages before and after injury. Would end current subjective method of evaluating injury. Designed to cut down on need for attorneys and doctors, but critics say worker benefits decreased sharply when this approach was tried elsewhere. TYPE OF BENEFIT Death Benefits CURRENT SYSTEM All reasonable burial expenses and a lump-sum benefit of $70,000 for one dependent and $95,000 for two or more dependents. MCALISTER BILLNo change.