Vocational Rehab Spending Down 94% Since 2004

By Greg Jones, Western Bureau Chief
Insurer expense data released by the Workers’ Compensation Insurance Rating Bureau this week show that spending on

vocational rehabilitation has dwindled to one-twelfth of the amount that was spent before 2004 reforms.

Advocates who have been pushing for five years to pass legislation to boost supplemental job displacement benefits say the Rating Bureau’s figures prove disabled workers aren’t getting the retraining they need to find other jobs.

Statistical reports provided to the WCIRB’s Actuarial Committee during a meeting in San Francisco Tuesday show that in 2004, insurers spent $586.3 million for vocational rehabilitation, accounting for 12.3% of total paid indemnity.

In 2010, California insurers spent $32 million for vocational rehabilitation, accounting for 1.1% of total paid indemnity, according to the Rating Bureau’s First Quarter 2012 Review of Diagnostics.

The maintenance allowance, later eliminated by state lawmakers, accounted for $257 million of the 2004 spending, while $127 million was spent on vocational rehabilitation evaluations and $191 million was spent on education and training. In 2011, $27 million of the $32 million spent went to education vouchers.

Assembly Bill 227 and Senate Bill 228 eliminated vocational rehabilitation starting Jan. 1, 2004, and replaced the benefit with the supplemental job displacement benefit. The statute requires payment of vouchers that qualified injured workers can use for tuition, fees, books and other educational expenses. An injured worker with a permanent disability award who is not re-hired is eligible for a voucher of between $4,000 and $10,000, depending on the disability rating.

Mark Gerlach, a consultant to the California Applicants’ Attorneys Association, said because there was a broader array of benefits, such as the continuation of temporary disability during retraining, under the old system, the change to the voucher system in 2004 should have resulted in a significant drop in spending. However, Gerlach said he would expect to see similar spending on vouchers in 2010 as was spent on education and training in 2004.

Gerlach said he expected to see a major drop in the percentage of indemnity benefits spent on retraining after the reforms, but he did not anticipate it would go from 12% to 1%.

“What this shows, however, is that the design and implementation of the supplemental job displacement benefit has been so mismanaged and mis-designed that it simply is not a viable benefit for more injured workers,” he said. “At the same time, it’s causing problems for employers because there is a liability out there that they can’t close off.”

Because the voucher is not available until an injured worker receives a permanent disability award, employers can be liable for paying it years from the date of the actual injury.

The fact that the voucher is not available until there is a permanent disability award can also create problems for injured workers. There is a two-year limit on temporary disability benefits and workers need the voucher when those benefits run out, but a worker with a severe injury might not receive an impairment rating for three or more years.

“It’s the most severe injuries and disabilities that need this the most and are affected by the problem in timing,” Gerlach said. “In efforts to try to cut costs, it’s the most severely injured and severely disabled workers who are being asked to pay the price.”

Voters Injured at Work has been pushing legislation for five years to modify the delivery of the voucher system by making the benefit available when the worker is permanent and stationery and the treating physician determines there will be some level of permanent disability. Bills sponsored by Voters Injured at Work would create a flat rate of $6,000 for all vouchers issued. They also would be available to the injured worker before a disability rating is determined.

Three bills aimed at accomplishing that goal have failed. Gov. Arnold Schwarzenegger vetoed AB 1636 in 2007 to make the vouchers available sooner in the claims process. Senate Bill 3 never moved past the Senate Appropriations Committee in 2010.

Last year, Gov. Jerry Brown vetoed AB 211.
This year, Voters Injured at Work is sponsoring AB 1145 by Gil Cedillo, D-Los Angeles.

Jesse Ceniceros, president of the group, said some people are making use of the voucher, but many injured workers are in a position where they need money to pay bills and are willing to settle the benefit for pennies on the dollar.

“It’s not working because it’s so late in the process,” Ceniceros said of the voucher program. “Because of that, people aren’t utilizing the benefit and are being forced to settle for it.”

Training injured workers and getting them back into the workforce is also good for employers because it holds down claim costs, Ceniceros said. The voucher is an important benefit for all stakeholders that is going to waste because it can’t be used, he said.

“The voucher is not the answer to all the problems we’re having, we fully understand that, but it’s a start,” he said.

Ceniceros said he hopes improving the delivery of the vouchers will be included in reform discussions that will kick off with a series of public hearings in April. If vouchers aren’t part of the discussion, Voters Injured at Work is counting on AB 1145, which the California Assembly passed 49 to 24 on Jan. 26.


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