Sunrise Beach couple among thousands of Missourians struggling with Second Injury Fund
The Missouri Second Injury Fund is "on life support," said Attorney General Chris Koster in a statement earlier this year during the Missouri Chamber Day at the Capitol. A fund that has helped thousands of previously injured workers in its almost 70-year existence has unpaid bills piling up against it to the tune of more than $14 million and its debt is continuing to amass, according to Koster.
A Sunrise Beach man, Allen Robinette, is one of hundreds of citizens around the state who are caught up in this issue with the Second Injury Fund (SIF), which is currently delinquent in payments to hundreds of Missourians.
According to the state website, the SIF compensates injured employees when a current work-related injury combines with a prior disability to create an increased combined disability with the concept that the whole is greater than the sum of the parts.
Robinette and wife Chris are seeking to receive payments for his 100 percent permanent disability that was vetted in a multi-year process - all after his condition possibly worsened due to state regulations on his medical care.
While the state treasurer is the custodian of the SIF, the state attorney general defends the claims made against the Fund and obtains the treasurer's authority to settle cases for it.
It is Missouri businesses, however, that fund it, paying a surcharge on all workers' compensation and self-insurance policies in order to fund the SIF. According to information prepared by the Missouri Association of Trial Attorneys, the surcharge percentage ranged from 1 to nearly 5 percent over the years.
The surcharge used to be an adjustable percentage of their premium that was set depending on the SIF's annual expenditures. In 2005, however, the state legislature passed SB 1 which permanently capped the surcharge at 3 percent.
"By 2005, the SIF had $25 million in reserve. The surcharge was 3.5 percent that year and netted another $9 million surplus," Koster said. "But rather than allowing the Department of Labor and Industrial Relations to make the appropriate actuarial adjustments to equalize the SIF's costs and coverage, the General Assembly voted that spring to permanently cap the surcharge at 3 percent."
The fiscal note attached to the bill at the time, however, predicted that the cap would lead to the SIF's insolvency, Koster said.
That prediction appears to be coming true, and is why Robinette and so many others are not only not receiving their disability checks but are also potentially owed back pay with interest.
Robinette's disability payment was court-approved in November 2011 at $256 per week, dating back to the time of his on-the-job injury in 2007. But on Dec. 23, 2011, he received a letter from the attorney general's office stating that while his claim was scheduled for payment from the Fund on Dec. 26, the SIF was "unable to make that payment."
According to Robinette, he is owed about $50,000 in back pay, not counting the interest since the time that he was scheduled to receive payments and did not get anything.
By 2008, the SIF's annual expenditures had increased to $74 million while its revenue dropped to $56 million, eating quickly into the large reserve that had existed.
"As Attorney General, my only recourse to preserve the dwindling Fund has been to triage the claims against it," Koster said.
This has included lowering the settlement authority for meritorious claims from $60,000 to $40,000. Despite this effort, the SIF's balance fell to $4 million by the end of 2009, according to Koster.
At that point, Koster said his office stopped all settlement negotiations and required every claimant to prove their case in court no matter how meritorious the claim was.
"That delayed the inevitable, but the decision has caused an accrual of interest on the Fund's debt - your debt - at a statutory rate of 9 percent," Koster said in this February speech to the Missouri Chamber.
Since then, Koster has also laid off approximately one-third of the staff and attorneys that defend the SIF.
According to Koster, two actuarial studies have confirmed that the 3 percent surcharge does not support the coverage provided by the SIF. Nevertheless, the General Assembly did not address the issue in either the 2010 or 2011 legislative sessions.
Koster's office then stopped paying new permanent total disability awards in March 2011 so that the SIF could build up enough revenue to pay its ongoing, pre-existing obligations, he said.
As of Feb. 1, 2012, the SIF had unpaid bills of more than $14 million that had mounted up since last May due to the cost of judgements to 184 claimants who received total disability awards in the 10 months since March 2011 and who are owed regular payments, according to Koster. That approximately $14.5 million of debt is accruing interest at 9 percent, meaning $1.3 million a year in interest on those 10 months alone.
"In human terms, 184 Missourians - unable to work because of their disabilities - have never received any of the benefits guaranteed them by the General Assembly and the business community, and adjudicated by Missouri's courts," Koster said. "And none of those numbers contemplate the more than 29,000 new claims filed against the fund that have yet to be litigated, and whose expenses have yet to be realized."
The number of disabled Missourians who have finalized claims but are not receiving payments for their permanent disability is now more than 380, according to the Missouri Association of Trial Attorneys.
One of those Missourians is Robinette.
Born with a hearing issue, Robinette has needed hearing aids almost of his life. The condition worsening over time, he had to have a cochlear implant in 2006.
He had long worked as a truck driver until his hearing loss became too severe and made him high risk. Then in 2007 at another job, Robinette fell in snow and ice and hurt his shoulder, tearing his rotary cup.
"I had never had a problem with it before," he said.
Eight months and four orthopedic specialists later, trying to find someone who could help him, Robinette said he was told that his condition had worsened since the initial injury and that he needed a shoulder replacement. However because of the duration of time since the initial injury, he said he was told that state regulations now considered it a pre-existing injury.
He was not eligible to have the surgery paid for, according to Robinette, but couldn't go back to the same manual labor work he had been doing without it. Plus, doctors considered him too young - he was then in his early 60s - to have a shoulder replacement.
The process to try to get total disability through the Second Injury Fund began at this point in 2009 and included a procedure to scrape it out, reviews by more doctors, attempts at physical rehabilitation and testing to try to find something else he would be qualified to do, Robinette said.
None of it panned out, and finally an administrative law judge for the Division of Workers Compensation ruled in his favor.
When he contacted his attorney to find out why he wasn't getting paid, they eventually learned of the financial troubles of the SIF and that he was one of many who were not getting the help they had been awarded.
Since then, Robinette said he has been "in limbo."
Still in pain from the injury, he has regular shots in his shoulder and neck. Prescribed different medications for his health, he has been limiting what he takes to try to avoid racking up bills he can't pay because he can't work.
Robinette and Chris were married in November. She works three days a week.
Together they live in a small apartment in Sunrise Beach, their limited income having to stretch to meet rent, car payments, insurance and their daily needs. High gas prices aren't helping either, said Chris.
"We have to watch our budget. We have to watch what we do very closely," she said. "Allen is really, really frustrated because this has been going on so long."
"It's tough," he said. "We're just trying to survive. That's all."
According to Robinette, this issue was on the agenda for the state legislature this past spring.
"They were supposed to vote on it to bring it up to date, but instead they threw it out; they pushed it to the side. They didn't want to deal with," he said.
But Chris is hopeful that the legislature will act in the fall session which starts Monday, Sept. 10.
Robinette has less faith.
"I don't trust my state representatives anymore," he said. "They should have done something about this years ago."
The two are going up to the Capitol on Tuesday, Sept. 11 for Second Fund Injury Day to raise awareness of the problem.
"Some people consider it (disability) a hand out, but it's not a hand out. It's all legit. He was hurt on the job and disabled," Chris said. "We want to get the point across. Let's get this taken care of. There are people here that need it."
Turning 65 in December, Robinette may soon become eligible for the shoulder replacement under Medicaid, but it is likely too little, too late to help him get back to work, he said.
With the SIF taking in $43 million a year in revenue, taxed with $77 million a year in expenses, having $160 million in unrealized liabilities and only $9 million in the bank, Koster said, "The Plaintiffs' bar has begun to seek writs of mandamus directly against the State Treasurer, and we have exhausted nearly all our legal options to stop them. Under these conditions, there's a genuine probability that the SIF won't even have the money to pay for the attorneys to defend the Fund, ultimately leading to a flood of frivolous default judgments that will exponentially increase SIF liabilities. Once the run on the bank begins, there will be no mechanism to stop it and no amount of lawyering or legislative self-denial will be able to save the SIF from complete collapse."
Of three options - continuing on as it has, phasing out the fund or recapitalize the Fund.
"All things being equal, I would choose (phasing out the SIF)," Koster said. "The General Assembly has proven that government should not be in the insurance business. The legislature has made basic pricing decisions regarding the SIF that no responsible businessperson would make, these decisions have bankrupted the Fund in just a few short years, and yet, faced directly with the clarity of this error, the legislature has been completely unable to correct its course."
Insurance premiums, he added, should be priced by actuaries in the private sector, not politicians.
But, Koster acknowledged that winding down the SIF is unlikely in the "current political climate" because, he said, it would mean requiring businesses to pay market rates and to pay their bills on time.
That leaves the option of recapitalizing the Fund. If that happens, Koster recommended the SIF's surcharge be based upon actuarial evidence and mathematical fact, not a three-fourths vote of elected officials as currently proposed.
He also said the General Assembly should legislate a "reasonable period of time" to bring the SIF back to solvency.
"Recapitalizing the Fund demands a long-term commitment and a willingness to face the economic realities around us," Koster said.
According to the Missouri Association of Trial Attorneys, a surcharge of 5.8 percent - nearly double its capped rate - is estimated to be necessary to bring the Fund up to meet its current obligations. In addition to permanent total disability claims, compensation of partial disabilities, death compensation, medical expenses, supplemental wage loss replacement and physical rehabilitation are all benefits to injured workers that could be in jeopardy if something is not done.