As Kevin stated, quite foul when killed, when killed in large numbers they have been known to wipe out tanks, but that is not too common. When alive, the problem they present is that if they grow to plague proprotions they tend to form mats, or blankets, of themselves that block out light, flow, etc, essentially smothering the corals. It sounds like you had not reached that level yet
Just to check to see if the worms you have are what we are all talking about, do a search on planaria and you should find a good picture or two.
If not, the bleaching could be caused by another type of flatworm, then truly nasty acro eating flat worm (oe AEFW, or often just AFW). They are usually invisible while in the tank, unless blown/knocked off the coral, then they tend to look brown. There are several threads in this form about these pests and what to look for.