Hurting in Body and Pocketbook

Arthur Flores, a 53-year-old grandfather from Downey, made a good living driving trucks before a herniated spinal disk, arthritis and five back surgeries left him permanently disabled, unable to work and financially strapped.

Now, Flores told state lawmakers Wednesday, he’s close to flat broke because of deep cuts in his disability benefits mandated by Gov. Arnold Schwarzenegger’s administration as part of the 2004 overhaul of California’s workers’ compensation insurance program.

“Some nights we eat cold cereal and scrambled eggs for dinner,” he said during emotional testimony before members of the Senate Committee on Labor and Industrial Relations. Flores “can’t even afford birthday presents or Christmas presents for my grandchildren,” he added.

Testimony at the hearing focused on regulations the state government put in place Jan. 1, 2005, that have reduced payments to permanently disabled workers by as much as 55%.

Permanent disability benefits are paid in a lump sum after injured workers have completed medical treatment and settled with their employer’s insurance company. The payouts account for about 20% of the funds that employers put into California’s workers’ compensation system, which totaled $23.6 billion in 2004.

Democratic lawmakers, who control both houses of the Legislature, and labor union leaders insist that cutting permanent disability benefits was not part of the deal to overhaul the workers’ comp system that they made with Schwarzenegger two years ago.

They want the Schwarzenegger administration to quickly boost the payments back near their former levels.

“To hold off is going to cause severe suffering for thousands and thousands of injured workers in California,” Senate Labor Committee Chairman Richard Alarcon (D-Sun Valley) said at the end of the 3 1/2 -hour hearing, held in a room packed with people wearing red T-shirts and baseball caps with the logo of their political pressure group, VotersInjuredatWork.org.

Flores, who earned about $1,100 a week as a trucker, testified that he could wind up getting a lump-sum payout of $7,316 to compensate for his injuries, about 1% of what he could have received under the previous system for rating disabilities.

The benefit, which is being contested by his lawyer in workers’ compensation court, is “a slap in the face to me and others,” Flores said.

Armando Lopez, 50, a former pressman at the San Francisco Chronicle, said his injuries “were 100% work-related.... I had four surgeries and can no longer go back to my job. Now, they don’t want to give me anything.”

Alarcon vowed that the Legislature would send the governor a bill raising permanent disability benefits for injured workers if the administration didn’t change its formula for calculating the benefits in the next few months. Alarcon is backed by Senate President Pro Tem Don Perata (D-Oakland) and Assembly Speaker Fabian Nunez (D-Los Angeles).

“It’s time for the governor to work with us to fix the flaws” in the workers’ comp overhaul, Nunez said.

Schwarzenegger said Wednesday that he was open to adjusting the permanent disability formula if there were “many workers who have fallen through the cracks.” He noted that the regulations required a review of the new rules beginning in June.

“We’re going to look at it. What was the effect of it? Were there any downsides? Were any mistakes made?” the governor said at an afternoon news conference. “The whole idea was to do something that’s good for the workers and that is good for the employers.”

The 2004 workers’ comp overhaul, together with bills signed by then-Gov. Gray Davis in 2003, lowered workers’ compensation insurance premiums paid by California employers by an average of 46% from July 2003 to January 2006.

Even more relief for employers appears to be on the way. On Wednesday, the Workers’ Compensation Insurance Rating Bureau, an industry-backed statistical and analysis service, said it would recommend that insurers cut the rates they charge employers by a further 16.4% on July 1.

The overhaul of 2003 and 2004 has resulted in “fewer claims, costing less money,” said Jack Hannan, a rating bureau spokesman.

In the three years before the overhaul, workers’ compensation premiums paid by employers doubled and in some cases tripled, forcing some companies to close, leave the state or cut back hiring.

Although most of the recent $8 billion in savings has been passed on to employers, insurers’ profits have risen to record highs, with many companies paying out only 50 cents in claims for every $1 dollar of premiums they received.

Raising permanent disability benefits would hardly make a dent in insurance company profits, Alarcon said.

Times staff writer Peter Nicholas contributed to this report.