Missouri's Second Injury Fund threatened by financial crisis
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Missouri's Second Injury Fund threatened by financial crisis

Date: April 20, 2011
By: Audrey Moon
State Capitol Bureau
Links: HB2272 SB420 SB430 HB788 HB893

JEFFERSON CITY - Michael Simpson was born with a birth defect resulting in lifelong back problems.

He has had surgeries to mend spinal fusions, ruptured discs and destroyed vertebrae.  For years, the 59-year-old grandfather from Agency, Mo., was able to maintain a self-sufficient lifestyle. After 32 years working as an electrician, however, life as Simpson knew it halted after an injury occurred on the job. Now, he relies on benefits from social security and Missouri's Second Injury Fund. 

Established in the 1940s during World War II, the Second Injury Fund encouraged employers to hire disabled workers. The fund, a division of Missouri's Workers' Compensation system, provides benefits to employees who have preexisting injuries and have sustained subsequent injuries in the workplace that added to the disability.

"This [fund] is part of my livelihood."

In 2007, Simpson was working with a 120 pound core drill, a device used to drill through concrete buildings. As he was picking up the drill, Simpson twisted his body. The weight and pressure from the drill was too much and as he describes it, "destroyed" his back.

"It put me to my knees immediately," Simpson said. "That pain is a one of a kind, you never forget." 

Because of the injury, Simpson was forced to hang up his tool belt for good. A judge deemed him disabled and a doctor told him he would only be able to lift 25 pounds, occasionally, for the rest of his life. 

"My tool bag weighs more than that," Simpson said.  

Simpson said the disability offices sent him through a series of doctors, and all of them had the same conclusion. He now has steel rods and cages in his back to mend the three destroyed vertebrae and loose fusion.

Now, his mobility is seriously limited. Simpson can not sit painlessly for long car rides or remain in a stationary position for extended amounts of time. Every night he takes medication that settles the nerves in his legs that have become aggravated since the surgery.

"I have days I can hardly get out of bed. I can't move," Simpson said. "Some days are worse than others. It is there for the rest of my life and I have no way of getting around that."

Simpson hired a lawyer after the accident, who receives 24 percent of Simpson's settlement for the rest of his life, and went through the process to be awarded benefits from the Second Injury Fund.

Simpson and his wife, a school teacher waiting on retirement, depend on his settlement for financial support. Simpson said he is thankful for the benefits, but said they do not come close to what he was making as an electrician.

"At least I can make a level where I can maintain," Simpson said. "If I lose that, you may as well stick a fork in me."

A system $20 million in debt

A serious threat to Simpson's benefits has been developing since the 2000s, however.

For years there have been warnings that the Second Injury Fund would go bankrupt. In a House committee hearing in February, Attorney General Chris Koster said the fund could be $20 million in debt by the end of 2011.  

"It is the 800 pound gorilla sitting in the room next to the 2,000 pound gorilla, which is the unemployment fund," said Rep. Barney Fisher, R-Richards. "Neither one of them will get up and leave," 

In 2007, the same year as Simpson's accident, State Auditor Susan Montee also concluded that, without action, the Second Injury Fund would go bankrupt in a matter of years. Ray McCarty, president of Associated Industries of Missouri, said the issue was ignored for too long.

"To wake up in 2011 and say, 'Oh my gosh we have a problem with the Second Injury Fund,' is kind of disingenuous," McCarty said. "We've seen it coming for a long time."

From 1943 to 1984 the fund paid out an estimated $40 million in Missouri. Since the 80s, however, an overload of claims have flooded the system and  it can no longer maintain current claims.

"Literally the payouts went off the charts," Fisher said. "We can't afford it." 

Nonwork-related claims

The Second Injury Fund has 27,000 claims pending, with 700 new claims coming in each month. McCarty said money has gone to people who do not need it, or injuries have not been work-related.

Reports from Missouri's Labor Department show individuals have been awarded Second Injury Fund benefits because of preexisting conditions like hypertension, emphysema and obesity.

"There are so many non-work related claims that are being paid out of that fund," McCarty said. "Previous injuries that are not work related are causing them to be able to access that fund and that is just not right."

Brad Jones, director of Missouri's National Federation of Independent Business, agreed, and said money should be allotted to strictly work-related injuries.

"If you are a three pack a day smoker, or diabetic, that is a lifestyle problem you have," Jones said. "I don't think that is necessarily a second injury problem the employer is responsible for."

Simpson said he remembers when he though certain people didn't deserve government subsidized benefits. He thinks differently now that he is one of those recipients.

"I never dreamed that I would be drawing Social Security and disability," Simpson said. "But after this happened to me, I can fully understand why people draw if because that is the only source of income they have."

Fisher said the debate over how to mend the system always comes back to the premium surcharge on business whose representatives have resisted increased charges.

Mending the system: surcharges

The Second Injury Fund is subsidized from a surcharge placed on all Missouri employers workers' compensation premiums. Currently, all employers pay a 3 percent surcharge with no fluctuation or cost of living increases.

Before 2005, surcharges were not fixed and could fluctuate based on Workers' Compensation payments. The bill that fixed surcharges drove Workers' Compensation premiums down, which Fisher said ultimately brought in less money to the Second Injury Fund.  

One proposal to save the fund aims to adjust premiums for the Second Injury Fund. An audit performed by Pinnacle Actuarial Services last year suggested the funding cap for the Second Injury Fund would have to be raised to 5.8 percent to get the fund through 2011.

Richard Moore of Missouri's Chamber of Commerce said its membership is divided on a solution, but that creating a supplemental surcharge is an option.

Under this plan, the 3 percent premium would be maintained as well as a supplemental surcharge that would be capped at 4 percent and would go away after 5 years.

Mending the system: dissolution

Another proposal is to dissolve the fund and only continue a premium surcharge until pending claims are settled or the number of living recipients declines.

"Our membership is split on whether they want [the fund] to be saved at some form, but I can tell you no one likes the form it is in right now," Moore said.

In the 2010 legislative session, Fisher introduced a bill that would take permanent or partial disability claims from the Second Injury Fund and place them under the Workers' Compensation system. The bill was defeated in the House.

"By taking permanent partials out of the Second Injury Fund and putting them into Workers' Comp., that would gain some of that ground back and drag the surcharge up with it, which would put more money into the fund," Fisher said.  

McCarty and Jones said a system should be set up to dissolve the fund and if an injury is deemed work-related, then it should be compensated under the state's normal Workers' Compensation system. 

"We think the best idea is to end the fund and allow the current 3 percent surcharge to stay in place until all the claims have been made, and then hopefully we can dissolve the surcharge," McCarty said.

Fisher said it could take 40 or 50 years to pay back any debt.

"The fund won't shut down, but dissolve, and the financial trail will go on for decades," Fisher said.

Simpson said he is scared for the future of the Second Injury Fund. Simpson also said he is concerned about his benefits being taken away after the accident, he said, was handed to him by a fate far above him.

"I didn't intentionally go to work that morning and say, 'Hey, I think I'll go to work and screw my back up so I can go into this building.' I never planned on that to happen."

Simpson said it was a sad situation and that he is afraid benefits will never come to those who deserve it because of the poor planning of lawmakers.

"Lack of planning, does that constitute an emergency on my part?" Simpson said. "I don't see how."