Calif. May Stop Paying Some Workers’ Comp Benefits

About 2,700 injured workers in California may not receive the workers’ compensation benefits they are entitled to because the state has not yet passed its budget.

According to Susan Gard, chief of legislation and policy for the California Division of Workers’ Compensation, the DWC only has about one or two more weeks of cash remaining to pay injured workers covered by the Uninsured Employer Benefit Trust Fund (UEBTF) and Subsequent Injuries Benefits Trust Fund (SIBTF). Letters were sent to the approximately 2,700 workers covered by these two special funds to make them aware of the situation, she said.

The UEBTF is a fund designed to help pay benefits to workers injured on the job but whose employers are illegally uninsured. In this situation, if an employee gets injured or sick because of work, but the employer does not have the required insurance, the worker can sue the employer for the illegal practice, work privately with the employer to secure payment for the injury, or file a claim with the UEBTF. Once the employer is joined into a lawsuit, the UEBTF then could pay the injured worker benefits from the special fund, Gard explained.

The SIBTF is in place to provide benefits to workers who are already disabled before they get injured on the job. For example, if a returning war veteran had a leg amputated because of the war, but went to work for an employer and became injured on the job, the employer is only liable for the part of the disability that occurred on the job, Gard said. “However there are times when the combined effect of the injuries — the one that existed prior to employment and the one that occurred on the job — makes the person more than 70 percent disabled. So the SIBTF trust fund is there to ensure that those workers have benefits.”

Typically, these two funds, among others, are funded based on an assessment charged to employers in the Golden State, Gard said. The assessments are based on past budgets and expenditures. However, the funds are facing cash shortages to pay benefits because the DWC has received more claims than they anticipated.

Last year, the DWC assessed $36.8 million for the UEBTF, and $16.2 million for the SIBTF. In the case of the SIBTF, claims to the fund have grown every year. Last year’s assessment was based on an increase in claims growth of 20 percent, but the number of claims this year went even beyond that anticipated growth, Gard said. For the UEBTF, last year the number of claims went down slightly, so the DWC did not anticipate claims growth. But in reality, the number of claims this year has gone beyond what the DWC allocated.

“We do these assessments very close to the vest because we’re assessing employers,” Gard said. “We want to make sure we are prudent and have a bit of a buffer, but we don’t want too much of a buffer because this is money employers have to pay. We don’t want to over-assess, but we don’t want to under-assess because we get into the situation we are in.”

Under normal circumstances, if the DWC needed to pay benefits to injured workers above the funds’ allocated amounts, the DWC would borrow money from its own budget. However, the DWC is in a cash shortage and unable to borrow money from its own budget until the state budget is passed, Gard said.

While the issue is concerning, Gard said she was hopeful the state budget would be resolved soon. “We still have a little bit of time,” she said. “If a budget is passed soon, we can quickly shift money over from our budget to pay those benefits, and then balance that out when we issue our assessment letters this fall.”

Assessment letters typically are mailed in November, but could be delayed if the legislature is still at an impasse over the budget.

California has gone a record 92 days without the governor and legislature agreeing on a budget that reconciles a $19 billion deficit. The state is required by the constitution to set a budget by July 1, the start of its fiscal year, and it needs a two-thirds majority in the legislature to pass.

“The budget gridlock continues to harm thousands of Californians while hampering our economic recovery,” said State Controller John Chiang. “Every passing day of political paralysis leads us closer to a completely avoidable fiscal meltdown that will plunge the State’s credit ratings into junk status, slow the State’s economic recovery and force us to again issue IOUs to innocent Californians.”

Workers’ Compensation Class Now Available at the Academy of Insurance