"What can YOU do about it?"
This was not a rhetorical question--there probably is something you can do about this frustrating nightmare if you're willing to retain a top-notch "bad faith" insurance lawyer and fight the battle.
It's one of those "choose your battles wisely" scenarios. Perhaps, if you win the next appeal, the insurance company will be done with its attempts to frustrate your claim and wear you down . . . maybe not.
But, depending on the statutory and case law of the state (assuming this is a state workers comp claim and not a federal claim), if you retain a really smart lawyer who is an expert in bad faith claims, perhaps you can file an independent action against the insurance company for "bad faith" handling of your workers' compensation claim.
If you live in Texas, you should read this article:
SIGNIFICANT NEW BAD FAITH DECISION USES EXCLUSIVE REMEDY PROVISION TO LIMIT EXACERBATION INJURY CLAIMS
http://www.phillipsakers.com/LawReport.asp
This decision is a hurdle to bad faith claims in Texas, but not a complete barrier.
What state do you live in?