Study shows impact of recent workers' comp decisions will increase costs

By CMTA Staff

Capitol Update, Oct. 23, 2009 Share this on FacebookTweet thisEmail this to a friend

Last week the Legislative Analyst’s Office (LAO) released a study that highlighted the potential impacts of the recent Almaraz/Guzman and Ogilvie rulings by the Workers’ Compensation Appeals Board (WCAB).  These decisions would introduce more subjectivity into the ratings and will result in increased litigation over Permanent Disability (PD) ratings.  The study also showed that the increased PD cost would be placed on local and state governments.

Prior to the 2004 reforms the workers’ compensation system in California was highly subjective and required clear standards by which to rate PD.  Therefore, the reforms included the use of the American Medical Association’s Guides as the new evidence-based standard.  This method brought objectivity to the system because it relied on quantifiable factors.  Unfortunately, two "en banc" decisions issued by the WCAB may have completely undermined this standard by allowing doctors to go out of the AMA Guides to rebut claim decisions.

The Almaraz/Guzman and Ogilvie decisions will probably result in more litigation and a significant cost increase to the system.  The WCAB first issued a ruling in February 2009 that determined that the current system used to measure PD could be "rebutted".  In September 2009 these decisions were revised and are currently under review at the California Circuit Appeal level.  The uncertainty of these decisions may last a couple of years. In the meantime, the "en banc" decisions are binding and the litigation has begun.

The LAO specifically recommends:

    •    Option One: Take No Action
    If the legislature does nothing, this would allow the court of appeals process to run its course, during which time litigation using the "en banc" decisions will continue.  This "wait and see" approach would also allow for a study of its financial impact to the system. For the time being, PD benefits would be determined with greater variation than strictly adhering to the AMA Guides.

    •    Option Two: Clarify the Statute Now
    If the Legislature does not intend for the PD ratings to be rebuttable, it could clarify the statute now to explicitly say so. In particular, it could remove the "prima facie" evidence clause from the workers’ compensation law. Removing this clause would essentially return the workers’ compensation system to the way it operated before the board rulings and require that PD ratings adhere to the AMA Guides.
    Alternatively, if the Legislature finds that the current schedule is too inflexible in certain situations, it could specify in statute (1) which portions of the PDRS are rebuttable, and (2) the criteria that a case needs to meet in order to be eligible for a potential rebuttal. For example, certain injuries are known to result in PD ratings of zero under the AMA Guides even though they result in some type of impairment. In specific situations such as this, the Legislature could specify that parties would be permitted to rebut their ratings. Specifying which portions of the PDRS are rebuttable would mean that only workers who meet certain specified criteria would be able to rebut their PD rating.

    •    Option Three: Modify the PDRS
    Under these rulings the ratings have been found to be rebuttable, so, benefits for injured workers who successfully rebut their ratings would increase. If the Legislature’s goal is to increase the relative generosity of PD benefits, a more direct way would be to change the amount of PD compensation rather than allowing PD ratings to be rebuttable.
The LAO’s report can be found here:
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