California’s state government is among the world’s largest economies. It is time for it to demonstrate that it can rein in unnecessary and destructive costs that burden the business engine of our state.
Legislative focus needs to be on the Subsequent Injuries Benefits Trust Fund (SIBTF), a special workers’ compensation fund that is separate and distinct from California’s workers’ compensation system. It has generated some $26 billion in future liabilities and is piling on $3 billion in additional debt every year. So far, our legislative leaders are only touching the edges.
SIBTF was created in 1945 as an adjunct to the California workers’ compensation system with separate and distinct rules. The intent was noble. It was meant to encourage the hiring of seriously disabled workers who otherwise could be a financial liability to an employer should they suffered another, later, serious injury at work.
The SIBTF statute provides that individual hiring employers do not bear the benefit cost. Benefits come out of a special fund (administered by DIR) that is fed by assessments on all employers subject to workers’ compensation requirements.
The problem that must be solved is that SIBTF has morphed into a cost-generating cancer on the balance sheets of all California employers, including private businesses, public schools, city and county governments, self-insureds, and the state itself, all of which must bear the burden of these ever-increasing costs.
The SIBTF was created to fill the compensation gap for a soldier having a permanent partial disability due to a war injury when, after returning from war, the veteran suffered a subsequent workplace injury causing permanent disability much greater than would have existed had there not been a preexisting disability.
The SIBTF statute specifically highlights the kinds of injuries it is meant to apply to by stating that compensation will be provided if:
“…the previous disability or impairment affected a hand, an arm, a foot, a leg, or an eye, and the permanent disability resulting from the subsequent injury affects the opposite and corresponding member…”
The authors of the SIBTF statute did not limit injuries to these situations — they included broader, more vague language mandating compensation for any subsequent work injury disproportionately adding to a previous disability.
That opening provides for the current expansion of work injuries qualifying for SIBTF benefits. It is amplified by the fact that there was and is no requirement for the initial injury to be work-related.
Fast forward to the present with statutory language, which has not changed since 1959, and this is the road we’re on: Workers’ compensation case law and administrative decisions, pressured by increasingly aggressive applicants’ lawyers, have continually expanded the kinds of injuries and health impairments that can be considered work related and thereby qualify for benefits.
Lifetime SIBTF benefits can range as high as $1704 per week, and frequently exceed the permanent disability benefits from workers’ comp.
And that is how we got into this $26 billion and growing debt trap.
The outsized cost of SIBTF is depressing business growth. Ironically, it is jeopardizing the ability of the state to award benefits to seriously injured workers who are most in need of them, since awards of SIBTF benefits now are spread among workers with all kinds of health conditions that are not only questionable in the degree of disability they cause, but too, whether they are work-related in the first place. Examples include obesity, arthritis, and GERD.
Dave Bellusci, former Chief Actuary for California’s Workers’ Comp Bureau and now a consultant, and RAND, in its study of SIBTF, outline the following policy actions needed:
- “Amend the SIBTF Statutes to Provide a More Specific Definition of What Constitutes a Pre-Existing Permanent Partial Disability for Purposes of SIBTF Eligibility.
- Amend the SIBTF Statutes to Address the Todd Decision and Specify That Use of the Combined Values Chart Is Necessary in SIBTF Cases
- Adopt a Statute of Limitations for SIBTF Case Filings”
- The medical-legal and permanent disability determination procedures for SIBTF claims should be consistent with those of standard workers’ compensation claims, see Assembly member Ortega’s AB 1329, regarding QME requirements under the WC system.
These changes should apply not only to future subsequent injury claims but also to SIBTF claims that have not progressed to a final order or award. Ortega’s bill does not go far enough in fixing the problem.
Both private employers and governments are in dire need of immediate action – this session – by the Legislature and the Governor.
SIBTF needs to return to focusing on unquestionably serious, work-disabling injuries rather than serving as a cash cow to lawyers and to claimants who are not in genuine need of the kind of compensation SIBTF was meant to provide.
NOTE: Dale Debber is a fifty-year veteran of workers’ compensation and a subject matter expert. Known as a journalist and the publisher of Workers’ Comp Executive, he has designed and built information systems for carriers and the industry in general. He is president of Compline, a California-based Workers’ Compensation Advisory Organization.