The level of permanent disability (PD) benefits is once again the talk of Sacramento. Though benefits significantly increased in 2002 with the passage of AB 749 (Calderon), the permanent disability rating system was at the core of the business community’s frustration with workers’ compensation.
In 2004, that frustration manifested itself in SB 899 (Poochigian), which adjusted PD benefits but, more important, redefined permanent disability, starting with the adoption of the AMA Guidelines. SB 899 didn’t stop there. Gone was the vexing “diminished ability to compete in an open labor market,” which spawned the dreaded “work restrictions” and subjective ratings under the 1997 permanent disability rating schedule (PDRS). In its place is the new diminished future earnings capacity (DFEC) modifier, a tribute to the tenacious efforts of the Commission on Health and Safety and Workers’ Compensation to codify years of research by RAND.
Proponents of SB 899 also tackled, successfully, the thorny issue of apportionment and the ability of workers to secure multiple permanent partial disability (PPD) awards, at times totaling more than 100 percent. As these new provisions took hold, we gained a new lexicon in workers’ comp – terms such as FEC and “zeroes” – the latter referring to injured workers who had no impairment rating under the AMA Guides – are now a common part of the WC vocabulary.
By Jan. 1, 2005, the Division of Workers’ Compensation (DWC) adopted a new PDRS, and the DFEC modifier was created. The results of the new schedule were startling, especially to labor advocates and Democratic members of the Legislature. Literally billions of dollars of PD were no longer in the system. Some of that was due to the AMA Guides lowering the frequency of permanent disability in California – historically a glaring statistic compared to other states. But a larger portion was due to lower ratings. Significantly lower ratings. That, too, is a likely by-product of moving to the AMA Guides, uneven as their application still is in the system.
The Jan. 1, 2005 PDRS set off a firestorm of challenges and more novel legal theories than could be conjured by the entire first-year class at Hastings Law School. To date, the Appeals Board has not succumbed to these efforts to rewrite SB 899 and the schedule, but new challenges pop up regularly. Perata has put significant PD increase bills on Gov. Schwarzenegger’s desk two years in a row. The bills would have doubled PD payments, purportedly replacing lost PD the Democratic supporters of SB 899 claim they never intended to cut.
Much of the debate today over PDRS centers on whether to manipulate the schedule to produce more PD benefits. Shortly after SB 899 became law, the Commission recommended the now nefarious “crosswalk” – a numeric formula that would have roughly equated new ratings to old ones. That went nowhere. Now we are back at examining the DFEC modifier and whether it will remain an equitable tool or become a device to allow this administration – and any future administration – to purposely add more dollars to this benefit. It’s a hidden tax on business.
The consequences of this debate are extremely consequential.
DWC has come a long way in developing the data necessary to make the PDRS work long-term. Though it is preferable that the Legislature and Gov. Schwarzenegger address the adequacy of the PPD benefit, the recent history of discussing disability benefit levels in Sacramento is a short and unpleasant one.
As the statewide average weekly wage (SAWW) increases in 2008, injured workers with PPD awards under 70 percent are compensated at most only for roughly 38 percent of SAWW. For those who think the Administrative Director should not be in the business of raising benefits, take note – the more there is a benefit “gap” as measured by the maximum wages for PPD relative to SAWW – the more urgent it is to address this issue.
Protecting reform does not mean rejecting any effort, even if from the governor, to increase benefits once the case is made that benefits are inadequate. Protecting reform means taking all necessary action to deliver the bargain that is workers’ compensation, both for labor and employers.
In the case of PD benefits, that action needs to happen sooner rather than later. If consigned to the ever-growing scrap heap of labor-employer failed negotiations, when things inevitably do change, they will definitely change for the worse.
Fairness is, after all, fair.