November Determines CA Savings

Whether or not California workers' compensation payers will realize the savings predicted by proponents of SB 863's lien management techniques, and ergo, whether lien claimants will know whether or not they have an Hades chance, likely will come about in November.

That's because plaintiffs and defendants in the federal lawsuit challenging the lien activation fees will request the judge, variously, for either a dismissal of the lawsuit or a preliminary injunction bringing lien fee enforcement to a halt.

WorkCompCentral yesterday received a fax from the parties of a stipulation dismissing Gov. Jerry Brown and Attorney General Kamela Harris from the suit and acknowledging that they have nothing to do with the regulatory enforcement of SB 863.

The stipulation, more importantly, sets forth key dates for management of the case:

• The defendants will answer the complaint by Sept. 12.
• Attorneys representing the defendants will file a motion to dismiss the lawsuit on Sept. 13.
• The plaintiffs will file a response to the motion to dismiss on Oct. 3.
• Replies to the brief in opposition to dismissal and a motion for a preliminary injunction to halt collection of the lien-activation fees will be filed on Oct. 17.
• A hearing on the motion for a preliminary injunction and the motion to dismiss will be held on Oct. 31.

The stipulation filed Tuesday leaves Department of Industrial Relations Director Christine Baker, Division of Workers' Compensation acting Administrative Director Destie Overpeck and Workers' Compensation Appeals Board Chairwoman Ronnie Caplane as defendants in the suit.

The suit was filed by Angelotti Chiropractic, Mooney & Shamsbod Chiropractic, Christina-Arana & Associates, Joyce Altman Interpreters, Scandoc Imaging and Buena Vista Medical Services.

This case will determine if there are really any savings in SB 863. I've heard the arguments on both sides and, frankly, the ball is up in the air.

The plaintiffs say that the government is instigating an unconstitutional taking of property. There is some merit to this argument, but the first thing that needs to be evaluated is whether workers' compensation liens in California are a vested property right.

If it is found that they are not, then the case is a loser.

But if liens are found to be vested property rights (and at what point in time do they become "vested"?) then the defendant's argument, that the government can do whatever it wants to do regarding workers' compensation because work comp is a product of legislative desire with no common law attribution, will have to be decided.

And I'm not so sure that is a winning argument in the face of vested property rights.

In the meantime we already know that the cost of medical treatment is going to go up over the next few years as the administration implements the change to a Resource Based Relative Value Scale even though the California Workers' Compensation Institute recently found that there has been a slight decline in medical costs over the past couple of accident years.

All of this uncertainty is exactly NOT what California business needs. Business and financial planners like to know what the future holds because budgets can be more accurate and executives can figure out whether there's going to be enough cash to pay the bills and maybe even some dividends and distributions.

Uncertainty creates anxiety.

The meteoric raise in premiums in the early 2000s that precipitated SB 899 caused consternation for California business, not because of excess cost, but because of excess RELATIVE cost; there was no ability from one year to the next to predict or understand what the cost of insurance was going to be.

Keep your eyes on November when the Honorable Judge George H. Wu should issue his ruling on plaintiff's request for a preliminary injunction. If it in fact issues, the likelihood of a permanent injunction is great - it is my understanding that statistically in government interdiction cases that when a preliminary injunction issues 92% of the time a permanent one follows.

In my mind, then, the proponents and opponents of SB 863's lien management provisions should sit down and figure out a reasonable compromise so that California can go about with its business with some certainty.