TEAMSTERS LOCAL NEWSLETTER®

SPRING 2009 ISSUE # by SCOTT A. O’MARA & MICHAEL PADILLA

WORKERS’ COMPENSATION

NEWS AND ISSUES

OF IMPORTANCE

Recently, findings of fraudulent behavior

have been made on behalf of certain

third-party administrators, who adjust

Workers’ Compensation cases for self-

insured employers. Some contracts

entered into by third-party adjusting

agencies, known as TPA’s, place limits

on the maximum number of cases to be

assigned to adjusters. As a result, some

TPA’s have assigned "phantom" adjusters

to make the caseload being handled by

one person appear smaller. Further

findings indicate that some TPA’s in

Workers’ Compensation cases have

engaged in making purchases for such

items as wheelchairs and braces at prices

beyond the normal expected cost to

business entities because the third-party

agencies have an ownership interest in the

vendor.

Some TPA’s have assigned

"phantom" adjusters to make

the caseload being handled by

one person appear smaller.

One of the more disturbing finds was a

TPA adjuster who had engaged the

services of a defense law firm when there

was a very strong social relationship

between the adjuster and one of the

principals in the law firm. Questions

have arisen regarding billings amounting

to over $1,000,000, and the rate at which

they were billed. Apparently, some third-

party entities have had a diminution of

income from their cases and have looked

for devious ways to continue their cash

flow.

Additionally, recent studies issued by the

University of California at Berkeley raise

the spectre of employer fraud based on

findings by researchers Colleen Donovan

and Frauk Meuhauser. These studies

have determined that employers who have

high Workers’ Compensation costs are

sometimes tempted to and actually do

underreport wages and/or engage in gross

misclassification of workers in higher-risk

jobs. By underreporting or misclassifi-

cation of employees to lower-risk jobs,

these employers minimize the costs they

are required by law to pay for Workers’

Compensation.

The studies indicate that as much as $100

billion was underreported in payroll in

the year 2002. As a result of this

occurrence, the fraudulent employers are

improperly shifting their economic

liability to all employers in California.

State Compensation Insurance Fund is a

quasi-governmental agency created by the

State of California to provide Workers’

Compensation to California employers.

SCIF also works as a third-party

adjusting agency under contract with

many employers. In spring 2007, the

president and vice president of State

Compensation Insurance Fund were fired

by the Board of Directors. Also at this

time, the Board demoted the general

counsel.

The terminations and demotion resulted

from a study which concluded that two

government-appointed Board members,

unbeknownst to the Governor, had either

actual or potential conflicts of interest.

These Board members received monies

from SCIF for services provided pursuant

to contracts with SCIF while holding

their membership on the Board. This

was information to which the president

and vice president were privy and

apparently did not challenge.

These events of mismanagement

and/or fraud raise a serious

question regarding the Workers’

Compensation system relative to

the employers and third-party

entities which govern the benefits

to which California workers

may have entitlement.

These events of mismanagement and/or

fraud raise a serious question regarding

the Workers’ Compensation system

relative to the employers and third-party

entities which govern the benefits to

which California workers may have

entitlement. Workers are aware that

many employers create a medical provider

network (MPN), which is a captive entity

that must please the employer to maintain

its status as an exclusive health provider

in the Workers’ Compensation system.

The medical provider network, without

serious review by entities not associated

with the employer, third-party

administrator or MPN, invites further

areas of mismanagement and/or fraudulent

behavior.

California workers were not subject to

this potential problem of the employer-

controlled medical provider network under

the previous system, which encouraged a

spirit of free enterprise. The previous

system allowed workers to select their

own treating physicians, and it

encouraged medical providers to provide

the best quality of care, because failure to

do so would disenfranchise them from

selection by workers for treatment of their

job-related injuries.

The new system creates a

monopoly — a captive audience

of medical providers who only

have to please the employer.

The new system creates a monopoly —

a captive audience of medical providers

who only have to please the employer.

This system also creates a unique

opportunity for the provider to solicit and

curry favor from employers and third-

party administrators at the medical

expense of California citizens. This

limitation, in view of the current abuses

that are coming to light, must cause

legislators to revisit this non-capitalistic

approach to the provision of medical

care.

Part of the increase in medical costs —

as well as the increase in abuses to both

the employer and the worker — has

resulted from the implementation of the

utilization review process. This process

was created to have a third-party entity

review the recommendations for treatment.

However, this review also encourages

mismanagement and/or potential fraudulent

behavior on behalf of the reviewing entity

and/or other parties that have nexus to

the process. The utilization review

companies are separate entities which

receive income from carriers and third-

party adjusting agencies. Their role is to

review doctors’ recommendations for

medical care. In speaking with numerous

adjusters encumbered by this process, I

hear the constant cry that the process is

redundant to their review of a file, delays

rather than expedites medical care, and is

of questionable merit or benefit in the

determination of medical need. In

summary, the utilization process has

increased employer costs and delayed

injured employees’ timely return to work.

A positive action that workers can take in

response to the limitations of the medical

provider network and mismanagement by

insurance companies and third-party

adjusting agencies is the utilization of

Labor Code §4600. This statute, as

amended in 2004, allows workers to pre-

designate a medical group or personal

physician. The revised provision states

that to be qualified to be pre-designated

as a treating physician, an injured

worker’s doctor or medical group must

actually have served in the capacity of a

personal physician or directed his/her

medical treatment, and must retain records

which include the employee’s medical

history. In addition, the pre-designated

physician and/or medical group must

agree to be pre-designated. This right

may expire as of December. 31, 2009.

Pre-designation (of a medical

provider) remains one of the

more valuable tools that you

as a Teamster have to ensure

higher-quality medical care.

The revised legislation requires additional

effort on your behalf to obtain the benefit

of pre-designation. Nevertheless, pre-

designation remains one of the more

valuable tools that you as a Teamster

have to ensure higher-quality medical care, as

it enables you to select a treater who is not

subject to the economic whims of the

employer and/or adjuster. However, it may

prove to be challenging to find a physician

who (1) has some understanding of the

Workers’ Compensation system; (2) can

provide quality medical care; (3) is a patient

advocate; and (4) lives within the community.

Nonetheless, this goal can be achieved in

most cases.

Your treating physician’s role in

providing evidence in a Workers’

Compensation case has likewise changed.

No longer does the treater have the

presumption of correctness as to what

medical care you should receive, how

long you should be off work, and how

much disability you have sustained. The

treater’s opinion now has no greater value

than that of the forensic doctor who

evaluates you on a one-time basis, and

that doctor may or may not even have a

practice in California or be licensed in

California. Furthermore, if that reviewing

physician has an active practice, it could

be as remote as Montana, Florida or New

Jersey.

No longer does the treater

have the presumption of

correctness as to what medical

care you should receive,

how long you should be off

work, and how much disability

you have sustained.

A significant factor in obtaining adequate

medical care is the awareness of both

you and your treating physician as to

when the ACOEM Guidelines apply and

have the presumption of correctness, and

when they do not apply. These

guidelines were established by the

American College of Occupational and

Environmental Medicine, and were

intended to be just that — guidelines as

to appropriate treatment in a given

situation — not a final determination as

to the adequacy and necessity of medical

treatment. Unfortunately, legislators

chose to use the ACOEM Guidelines as

a determinant as to whether treatment

recommended by your physician should

be authorized or not. As a result, the

ACOEM Guidelines are a direct attempt

to limit your access to medical care.

Also, as with the utilization review

process, the ACOEM Guidelines have

ultimately increased costs to the employer

and delayed injured workers’ timely

return to work in many cases.

The ACOEM Guidelines

are applicable only if

your condition is acute.

However, the ACOEM Guidelines are

applicable only if your condition is acute.

If your treating physician determinates

that your condition is sub-acute or

chronic, the guidelines do not apply, and

they no longer have the presumption of

correctness.

Therefore, it is important that you have a

treating physician who is a patient

advocate and receives reasonable

compensation for the time involved in

your case — not one who has direct

economic ties with the employer. This

reinforces the importance of your pre-

designation of a medical provider group

which is economically independent of the

employer and has motivation to

understand the law to ensure adequacy of

patient care and treatment.

In conclusion, a continuing need exists to

aggressively review the activity of third-

party adjusting agencies and fraudulent

employers to ensure the costs for other

employers are kept down, benefits are

timely provided, and injured workers are

able to return to work on a timely basis.

Treating doctors must perceive their role

is that of a treater — not a vendor who

has economic ties to employers via the

medical provider network, a perception

which opens the door to fraud,

mismanagement and increased costs for

the employer.

A continuing need exists to

aggressively review the activity

of third-party adjusting agencies

and fraudulent employers.

Pending Legislation

On the back page of this newsletter is a

reprint of an editorial from the San Jose

Mercury News by Attorney Gil Stein

addressing inadequacies of the current

Workers’ Compensation system and

discussing SB 936, one of the proposed

legislative offerings by Senate President

Pro-Tem Don Perata. Attorney Stein’s

editorial presents some of the pertinent

reasons why this legislation should be

passed.

Third-Party & Product

Liability Cases

When an industrial injury is caused by

the negligence of a third party (a party

other than the employer) or the failure of

a defective product (such as equipment

malfunctioning, a chair or ladder

breaking, etc.), the injured worker is

entitled to bring a civil action. For

injuries prior to 1/1/03, the time

limitation for filing is within one (1) year

of the date of injury. For injuries

occurring on or after 1/1/03, the

limitation period has been extended to

two (2) years.

When an industrial injury is

caused by the negligence of

a third party, the injured worker

is entitled to bring a civil action.

If a claim is against certain governmental

agencies, stricter time limitations may

require the claim to be filed within six

months or less after the date of injury.

When an employee receives money by

settlement or court judgment in a third-

party or product liability case, the

employer may be entitled to full or partial

reimbursement for Workers’ Compensation

benefits paid for medical care, temporary

disability, permanent disability and/or

vocational rehabilitation.

Recovery in a third-party or product

liability case depends on multiple factors.

Each case must be evaluated on its own

merits and its potential recovery. In

some situations, because of liability

limits, the benefits received from the

third-party case may be completely offset

by the reimbursement due the employer.

In some situations, because

of liability limits, the benefits

received from the third-party

case may be completely

offset by the reimbursement

due the employer.

Not every third-party case justifies the

filing of a lawsuit. For such action to be

considered, the following essential factors

should be present:

! A showing of liability against

the third party must be evident.

! The third party must have

sufficient assets and/or insur-

rance coverage from which

the settlement or judgment

can be obtained.

! The damage sustained must

be of such a nature as to

make the development of

a case economically sound.

In situations involving third-party and/or

product liability cases, your attorney will

work to maximize the compensation

received.

Uninsured/Underinsured

Motorist Insurance

Uninsured motorist insurance coverage

provides coverage for you and the other

members of your household. You may

obtain coverage up to the limits of the

coverage on your current vehicle policy.

This coverage protects you and your

family members as a driver, passenger or

pedestrian, either in your vehicle or

any other vehicle. This coverage is

necessary, as many accidents are created

by uninsured and underinsured motorists.

Uninsured/underinsured motorist

insurance coverage is necessary,

as many accidents are

created by uninsured and

underinsured motorists.

This additional coverage will provide

financial security and protection for you

and your household members. It is

relatively inexpensive, and all insurance

companies licensed in California must

sell it. The coverage includes medical

bills (past and future), lost earnings (past

and future), and pain and suffering.

While the concept of damages for pain

and suffering is not covered in the

California Workers’ Compensation system,

it is provided for with automobile liability

insurance.

If a reasonable settlement cannot be

reached with your insurance company,

binding arbitration is available. This

forces your insurance company to act in

"good faith", as failure to do so could

create an additional cause of action

against it. Your recovery, as in Workers’

Compensation, is tax-free.

I wish you well.

Scott A. O’Mara

Michael D. Padilla

CALIFORNIA TEAMSTERS

LOCAL 542 NEWSLETTER®

is written by SCOTT A. O’MARA

and published periodically by:

THE LAW OFFICES OF

Scott A. O’Mara

1-800-LAW-1199 (1-800-529-1199)

O’Mara & Padilla

12770 High Bluff Dr. ! Ste. 200

San Diego, CA 92130

Tel.: 858-481-5454 Fax: 858-720-9797

O’Mara & Hampton

2370 5th Ave., San Diego, CA 92101

Tel.: 619-239-9885 Fax: 619-239-3523

4049 Brockton Ave., Riverside, CA 92501

Tel.: 951-276-1199 Fax: 951-276-1485

www.scottomara.com

NOTICE

Making a false or fraudulent Workers’

Compensation claim is a felony subject to

up to 5 years in prison or a fine of up to

$50,000 or double the value of the fraud,

whichever is greater, or by both imprisonment

and fine.

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