Previous workers’ compensation laws in California created a situation where the costs associated with providing medical treatment and benefits to injured workers and administering workers’ compensation claims had begun to rise significantly. If costs were permitted to continue to rise, employers would be faced with increases in their workers’ compensation insurance rates, which would add additional financial stress to many businesses. California lawmakers have begun to address this issue by instituting some workers’ compensation reform in the form of SB 863. This law has been widely lauded as a “new and improved” workers’ compensation reform package. It was signed into law this past September.
One of the things the law does is increase permanent disability benefits, which declined by 26 percent under the 2004 workers’ compensation reforms.
“As of January 1st this year, we’ve got changes to both the minimum and maximum weekly benefit amounts – which have been increased – with further increases being phased in over a 2-year period. At the end of those 2 years, the maximum weekly benefit will rise from its present rate of $230 a week up to $290 a week.” Paul Wolfe explained in a recent CER webinar.
This is happening because there was a wide perception for a long time that permanent disability was not enough to compensate injured workers for loss of income and loss of ability to perform in the labor market. This was driving a lot of litigation and dispute in the workers’ compensation appeals board. This new legislation provides a real tangible benefit.
More changes to permanent disability in California
Another issue that SB 863 addresses is the permanent disability ratings system. This was another aspect that kept permanent disability payments low, but litigation costs high.
How is the rating of a permanent disability determined? In general, the system uses the AMA guides, the rating schedule in the labor code, and a medical evaluator’s opinion on permanent impairment; these pieces of information are used in a calculation to determine a permanent disability rating. The rating then includes modifiers for the diminished future earning capacity, the occupation in question, and the age of the person.
This is meant to account for the issue that the same injury may have a more severe earnings impact for one individual over another, depending on the age of the person and whether that injury precludes that person from performing their usual job. The rating then was applied to determine the permanent disability payout.
The new California labor code changes have a new permanent disability rating scheme. SB 863 says the administrative director may formulate a new permanent disability rating schedule for age and occupation. Additionally, “they are making some mandatory, across-the-board changes to aspects of the rating.” Wolfe advised. “Certain modifiers are being increased. The end result is to increase permanent disability advances for these workers and also to decrease litigation and dispute during the process.”
This article outlines just a couple of the many changes SB 863 is bringing. The goal of the legislation is to make the workers’ compensation process more efficient. Employers want real savings and a system that works. Applicants want greater permanent disability benefits. SB 863 – with the changes outlined here and many more – is the start of this process.
The above information is excerpted from the webinar “Workers’ Comp Reforms: How S.B. 863 Will Affect Your Workplace; Get Prepared Now.” To register for a future webinar, visit CER webinars.
Paul Wolfe is an attorney in the greater San Francisco offices of Grancell, Lebovitz, Stander, Reubens and Thomas. He is an experienced workers’ comp defense attorney.
It’s worth noting that SB 863 limits the determination of the extent of permanent disability to the consideration of the nature of the physical injury or disfigurement, the injured employee’s occupation, and his or her age when injured. That means it no longer considers the injured worker’s diminished ability to compete in the open labor market or diminished future earning capacity.
It’s worth noting that SB 863 limits the determination of the extent of permanent disability to the consideration of the nature of the physical injury or disfigurement, the injured employee’s occupation, and his or her age when injured. That means it no longer considers the injured worker’s diminished ability to compete in the open labor market or diminished future earning capacity.