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Missouri's Second Injury Fund threatened by financial crisis

Wednesday, April 20, 2011 | 7:17 p.m. CDT; updated 12:29 p.m. CDT, Monday, April 25, 2011

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

He's had surgeries to mend spinal fusions, ruptured discs and destroyed vertebrae. And 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 on-the-job injury. He now relies on benefits from Social Security and Missouri's Second Injury Fund.

History of Second Injury Fund

  • 1943 to 1984: The Second Injury Fund paid out an estimated $40 million in Missouri.
  • 1980s: The system was flooded with an overload of claims, which it can no longer afford.
  • 2005: A workers' compensation bill fixed surcharges and drove down workers' compensation premiums. According to Rep. Barney Fisher, R-Richards, this ultimately decreased Second Injury funds.
  • 2007: State Auditor Susan Montee concluded that, without action, the fund would go bankrupt in a matter of years.
  • 2010: An audit performed by Pinnacle Actuarial Services suggested that the funding cap would need to be raised to 5.8 percent to get it through 2011.
  • 2010: Fisher introduced a bill to remove some disability claims from the fund and place them under the workers' compensation system. The bill was defeated in the House.
  • 2050-2060: It could take 40 to 50 years to pay back any debt, according to Fisher.

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The Second Injury Fund — a division of Missouri's workers' compensation system established in the 1940s — provides benefits to employees with pre-existing injuries who have sustained injuries in the workplace that added to their disability.

"This (fund) is part of my livelihood," said Simpson, who was injured in 2007 while working with a 120-pound drill. He twisted his body while picking it up; 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.

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

His mobility is seriously limited. Simpson cannot sit painlessly for long car rides or remain in a stationary position for an extended amount of time. Every night he takes medication to settle the nerves in his legs, 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."

With the help of a lawyer, Simpson and his wife — a school teacher waiting on retirement — went through the process to receive benefits from the Second Injury Fund. The couple depends financially on that settlement. But while Simpson's thankful for the benefits, he said they don't 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.

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."

Since the 1980s, an overload of claims has flooded the system, which can no longer maintain current claims. 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.

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

Nonwork-related claims

The Second Injury Fund has 27,000 pending claims, with 700 new claims coming in each month. McCarty said money has gone to people who don't need it; reports from the Missouri Department of Labor show individuals have been awarded benefits because of pre-existing conditions such as hypertension, emphysema and obesity.

"There are so many nonwork-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 thought 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."

Mending the system: Surcharges

The Second Injury Fund is subsidized from a surcharge placed on all Missouri employers workers' compensations premiums — charges those employers have resisted increasing. Currently, all employers pay a 3 percent surcharge, fixed by a 2005 bill that drove down workers' compensation premiums and ultimately brought in less money to the Second Injury Fund, Fisher said.

One proposal to save the fund aims to adjust premiums for the Second Injury Fund; under this plan, a supplemental surcharge — capped at 4 percent and lasting five years — would be added to the 3 percent premium. A 2010 audit suggested the funding cap 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. .

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.

McCarty and Jones said a system should be set up to dissolve the fund while maintaining the current 3 percent surcharge until all claims have been made. If a future injury is deemed work-related, it should be compensated under the state's normal workers' compensation system.

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

Simpson said he's scared for the future of the Second Injury Fund. He's also concerned about his benefits being taken away after an accident that wasn't his fault.

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

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


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