This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0829 - Revises Workers' Compensation Law
L.R. NO. 1932-02
BILL NO. SB 829
SUBJECT: Workers' Compensation
TYPE: Original
DATE: February 12, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
General Revenue $38,500 $46,200 $46,200
Highway $467,055 $599,699 $641,678
Workers'
Compensation ($536,891) ($512,732) ($525,407)
Partial Estimated
Net Effect on All
State Funds ($31,336) $133,167 $162,471
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government Unknown Unknown Unknown
FISCAL ANALYSIS
ASSUMPTION
The Office of Administration (OA) - Risk Management anticipates a cost
savings as a result this proposal. Risk Management assumed that workers'
compensation benefits could be reduced by as much as 33% because of social
security and employer retirement benefits received. It is estimated that
there are approximately seven cases per year in which this issue arises.
Assuming an annual salary of $20,000, annual savings of $46,200 could be
generated.
The Department of Highway & Transportation (DHT) expects cost savings in an
indeterminable amount. DHT responded to a similar fiscal note last session
and stated the Department's workers' compensation contribution would decrease
5% to 10%. In addition, they reported that based upon an actuarial study,
DHT's losses for calendar year 1994 were estimated at $6.1 million. An
inflationary factor of 7% had been included per year to reach an FY 96
projected level of losses of $6,984,000.
Oversight assumes DHT will experience savings similar to that reported last
year. Adding 7% inflation for fiscal year 1997 generates projected losses of
$7,472,880. Oversight assumes the estimated savings will be 7.5%.
The Department of Labor & Industrial Relations (DOL)-Division of Employment
Security (ES) assumes that the DOL-Division of Workers' Compensation (DWC)
would be responsible for establishing, maintaining and funding any exchange
of information regarding workers compensation recipients who receive
unemployment benefits. ES stated that Section 287.735 of the proposal which
allows employers whose employees are not eligible for workers' compensation
to not pay the related taxes could cause the United States Department of
Labor to determine that Missouri is not in conformity with federal
requirements. If this occurred, Missouri employers could lose federal
unemployment tax credits of more than $700 million and ES could lose $70
million in administrative funds. In addition, the proposal appears to require
unemployment taxes only on those wages of workers who are eligible to receive
benefits. Income to the Unemployment Insurance Trust Fund would decrease from
$350 million to $18 million, a reduction of $332 million.
Oversight assumes that Section 287.735 refers to taxes on employee wages that
are eligible and not those actually receiving benefits. Therefore, no
reduction in income to the Unemployment Insurance Trust Fund is reflected.
The Department of Labor & Industrial Relations (DOL)-Division of Workers'
Compensation (DWC) would be impacted by this proposal. WC estimated personal
services and expense and equipment costs based on the need for 14 FTEs.
Total costs for fiscal year 1997, prorated to 10 months, would be $536,891.
Costs would be $512,372 in fiscal year 1998 and $525,407 in fiscal year 1999.
The proposal, in sections 287.805 and 287.806, requires the development of
quality of care and utilization review procedures for those injuries that
form the bulk of workers' compensation related injuries. One (1) Physician
III and one (1) Nurse III would be needed to develop standards and review and
identify cases needing referral.
The responsibilities of the Fraud and Non-Compliance Unit would be expanded
under sections 287.128 and 287.129 to include the investigation of medical
billing practices. DWC expects this provision to generate new complaints.
Since this is the single largest cost factor in the workers' compensation
system, DWC anticipates the need for a total of two (2) Investigator II's to
be responsible for investigating medical billing fraud.
DWC will provide certificates of self-insurance for 523 employers if any
person requests the certificates. In addition, the DWC will be required to
provide notice of cancellation or revocation to any person requesting a
certificate of self-insurance.
The proposal in section 287.650 requires the DWC store depositions, medical
records and other reports and records. DWC would need five (5) additional
scanning units and five (5) Clerk Typist II's in order to accomplish the
scanning of 1,875,000 additional pages of records.
DWC is currently investigating the costs of data exchange between DWC and ES
in order to identify persons receiving both unemployment and workers'
compensation benefits.
Section 287.380 of the proposal pertains to the filing of the notice of
injury for accidents that involve less than $500 in medical costs. A minor
savings would be expected.
The Attorney General's Office (AGO) responded to a similar fiscal note last
session and reported the need for .25 FTE to handle the challenges when
benefits are denied. The AGO expects this increase to be temporary for the
first two fiscal years. Oversight assumes that the increased workload could
be absorbed with existing resources. However, the enactment of more than one
similar bill resulting in a minimal fiscal impact to the AGO could require an
increase in the AGO's appropriation for such purposes.
Officials from the Department of Conservation (MDC), Office of State Courts
Administrator (CTS), Department of Insurance (INS), Consolidated Health
Care Plan (HCP), Department of Health (DOH), State Treasurer's Office (STO),
Department of Corrections (DOC) and the Department of Social Services (DOS)
stated that passage of this legislation would have no fiscal impact on their
department.
FISCAL IMPACT - State Government FY 1997 FY 1998 FY 1999
(10 Mo.)
GENERAL REVENUE FUND
Savings-Office of Administration
Division of Risk Management (RM)
Reduction in Workers' Compensation $38,500 $46,200 $46,200
Benefits Due to the Receipt of
Social Security or Employer
Retirement Benefits
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND $38,500 $46,200 $46,200
HIGHWAY FUND
Savings-Department of Highway & Transportation (DHT)
Reduction in Workers' Compensation $467,055 $599,699 $641,678
Contribution
ESTIMATED NET EFFECT ON
HIGHWAY FUND $467,055 $599,699 $641,678
WORKERS' COMPENSATION FUND
Costs-Department of Labor & Industrial Relations
Division of Workers' Compensation (WC)
Personal Service (14 FTE) ($292,380) ($359,987) ($368,715)
Fringe Benefits (89,878) (110,660) (113,343)
Expense and Equipment (154,633) (42,085) (43,349)
Total Costs-WC ($536,891) ($512,732) ($525,407)
ESTIMATED NET EFFECT ON ($536,891) ($512,732) ($525,407)
WORKERS' COMPENSATION FUND
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
Savings to Local Governments as a result of the Receipt of Social Security or
Employer Retirement Benefits. The amount of the savings cannot be
quantified.
DESCRIPTION
This act makes the following changes to the Missouri Workers' Compensation
Law:
1. It narrows the definition of injury by requiring work to be the
"major" factor as the cause of the injury for the injury to be compensable.
To be the major factor would mean that the work comprised more than 50% of
all the factors combined which caused the injury. An injury, including an
injury resulting directly or indirectly from idiopathic causes, is not
compensable as a triggering or precipitating factor. Ordinary and gradual
deterioration of the body caused by aging or normal, day-to-day activities
are not directly caused by the employment. Compensability is not allowable
for aggravation of a preexisting condition except to the extent that the
work-related injury increases disability. 2. Currently, under the Workers'
Compensation Law, any reference to the employer also includes his insurer.
Under this act it would also include a group self-insurer. 3. Under current
law, contractors are secondarily liable for the employees of subcontractors
if the subcontractor had not insured the employee. The contractor, or
secondary employer, is not liable if he maintains on file copies of current
certificates of insurance from his subcontractors. A certificate of
insurance shall provide that the holder be notified ten days prior to its
cancellation or revocation. 4. The injured worker, the last employer and
any prior employers of the injured worker may join any other prior employer
to determine if there was repetitive motion exposure and to determine where
the liability lies. If the injured worker does not cooperate in testifying
to the facts surrounding a repetitive motion injury, the administrative law
judge shall suspend all rights to workers' compensation benefits for that
injured worker. 5. Currently, an employer is liable for an employee's
injury or death resulting from an accident arising out of and in the course
of employment, but the employer is released from all other liability. Under
this act an employer's release from liability would include any of the
employer's unintentional acts, under any theory of liability. 6. The
exclusive remedy doctrine of the Workers' Compensation System is expanded to
exempt co-employees, as well as the employer, from tort liability. 7. The
act clarifies that safety measures adopted by an employer pursuant to a
safety plan adopted by the insurer, if not to obeyed or followed by an
employee, shall result in a 15% reduction in benefits if such failure to obey
the safety requirements results in an injury. 8. Currently, workers'
compensation does not cover voluntary participation in recreational
activities. This act also would bar compensation for injury or death
resulting from voluntary participation in exercise activities or social
events, regardless of whether it occurs on the employer's premises. 9. The
act bars compensation if the injury was a result of horseplay, unless the
employer had actual knowledge and did not take disciplinary action or the
employer condoned it. 10. The penalty for filing a fraudulent Workers'
Compensation claim by a provider is a Class A misdemeanor and subject to a
fine of $10,000 or two times the value of the fraud, whichever is greater.
11. Managed care organizations certified by the Department of Insurance
before August 28, 1993 must obtain recertification under criteria set by the
Department. 12. Permanent disability assessments must be based upon
objective medical evidence. 13. Currently, when a third party is liable to
the employee or dependents for injury or death, the employer's right is
subrogated to the employee/dependents, and any recovery by the employer is
apportioned between the employer and employee. Under this act, any recovery
by the employer in excess of employer-paid compensation and recovery
expenses, shall be paid to the employee/dependents and is treated as an
advance payment by the employer for any future payments of compensation.
Under current law, if the liability for death and compensation is paid, the
employer receives the sum paid for wrongful death. Under this act, the
employer receives the sum, regardless of whether the dependents are entitled
to share in the proceeds. In addition, current law, which voids contract
language waiving subrogation rights involving employers in construction, is
removed. 14. An employer may initiate benefit payments before a claim is
filed but a voluntary payment is not an admission of the validity of the
claim. 15. Any workers' compensation payments to the employee for
temporary total/partial or permanent total disability shall be reduced by the
amount of any retirement benefits received by the employee under Social
Security, or any other retirement or pension benefits provided by the
employer. 14. Temporary total, temporary partial or permanent total
disability benefits cannot be paid if the injured worker is receiving
unemployment compensation benefits. 15. A provision enacted in 1993
required an employer who terminated benefits to notify the injured worker of
such termination and the reasons for such termination and allowed the injured
worker to request a hearing on the termination. This provision is repealed
in this act. 16. An injured person shall be examined by a vocational expert
to determine whether he can be rehabilitated. The vocational expert need not
be a physician and his testimony shall be admissible. The testimony of a
physician or a vocational expert shall be admissible as in civil cases.
Costs of depositions shall be borne proportionally by the parties based on
the total number of pages. The cost of expert witnesses should be paid by
the party incurring costs and shall act as a lien against the party. 17.
Currently, if an employer fails to insure or self-insure as required, funds
from the second injury fund may be used to cover necessary expenses of the
injury, or of the death of the employee. This act would limit such necessary
expenses to medical expenses in the case of injury, and funeral expenses in
the case of death. 18. The definition of "dependent" as it pertains to a
dependent of a deceased employee, would be modified to exclude a child when
that child marries. 19. When an injured worker with multiple employment is
entitled to temporary total disability benefits, the employer for whom the
employee was injured is liable for compensation only to the extent that the
employer would have to pay if he was the sole employer of the injured
worker. The difference between that employer's liability and the full amount
of compensation due shall be paid by the Second Injury Fund. 20. Currently,
compensation payable other than for medical expenses and therapy is
assignable for child support obligations. This act also makes it assignable
for spousal maintenance. 21. Caps are placed on attorney fees for any
compensation claim. An attorney's fee shall not exceed the lessor of: a
reasonable amount for such services, or 25% of an amount recovered less than
$10,001, 20% of an amount between $10,001 and $20,001 and 15% of an amount
greater than $20,001, in addition to actual expenses incurred. The maximum
amount in permanent disability or death cases is $25,000. No attorney fees
for medical bills or temporary total disability compensation shall be charged
unless a proper payment amount is refused or the employer terminates payment
and the compensation is obtained/reinstated by the attorney. Any claim in
which there is no material issue in dispute prior to attorney representation,
or where the amount to be paid in compensation is less than the employer's
offer prior to attorney representation, attorney fees shall not exceed a
reasonable amount for time actually spent by the attorney, as decided by an
administrative law judge or Commission. Attorney fees are recoverable only
out of the compensation actually paid, except that additional, reasonable
attorney fees shall be paid for subsequent representation for review and
modification for additional benefits. An attorney found by an administrative
law judge to be in violation of the attorney fees requirements shall be
required to make restitution. 22. Temporary total and partial disability
payments made for persons eligible for public assistance are no longer
considered to be a debt due to the state. 23. A provision was enacted in
1993 that changed the injury reporting requirements for injuries costing less
than $500 in medical costs. This act repeals that provision and puts the
reporting requirement for those injuries back to what they were prior to
1993. 24. Administrative law judges are prohibited from referring either
party to a claim to any attorney or physician except in cases where the judge
appoints an impartial physician to examine the injured worker to determine
the extent of liability. If a judge should make a prohibited referral, the
Division shall recommend to the Governor termination of the judge. This
prohibition also applies to all employees of the Division of Workers'
Compensation. The Division shall not refuse to approve a compromise
settlement. 25. Administrative law judges are required to hear all evidence
in a disputed claim within 30 days of the commencement of the hearing and
issue a written award within 30 days after hearing the last of the evidence.
26. Currently, proceedings before the Commission or any commissioner are
simple, informal, summary and without regard to the technical rules of
evidence. Under this act, administrative law judges, the Commission or any
commissioner and appellate courts shall conduct proceedings according to the
rules of evidence. 27. Applications and notices of appeal may be filed by
fax, with an original with additional, required copies mailed on the same
day. 28. Records in compensable cases, which must contain certain reports,
treatment records and copies of settlements, shall be available for at least
10 years for future determination of any preexisting conditions. Any party
to a workers' compensation or personal injury case shall have an absolute
right to inspect and copy those records. 29. No notice of hearing is
required in any claim before the Commission which is dismissed for failure to
prosecute; rather the claim shall be dismissed by the judge by a written
order sent by certified mail. 30. After the effective date of the act any
claim for compensation for which no hearing has been conducted for three
years after the claim for compensation was acknowledged by the Division shall
be dismissed. 31. Any injured worker who fails to keep a second regularly
scheduled medical appointment for treatment related to a claim of injury
shall reimburse the physician for an appropriate amount for the physician's
time. If the employer or insurer pays for the unkept appointment then the
injured worker must reimburse the employer or insurer out of any settlement
proceeds. 32. Current Workers' Compensation Law requires that the provisions
of that law be construed liberally. This act changes that to require that
the provisions of the law "be impartially construed with a view to the public
welfare." 33. The Division of Workers' Compensation shall establish an
independent advisory panel, consisting of two persons from the business
community and eight licensed, clinical experts, to review and to provide
guidance to the Division regarding the Division's database to assess current
trends or patterns in occupational injuries and illnesses, and the costs
associated. The Division shall establish specific quality of care and
utilization methods based on the advisory panel's recommendations. A
independent review organization, made up of four persons from the business
community, one representative of labor and two licensed, clinical experts
shall provide an independent written assessment to the division if an
individual circumstance warrants it. This assessment shall be incorporated
into the claims adjudication process.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements.
SOURCES OF INFORMATION
Department of Insurance
Department of Corrections
Department of Conservation
Department of Health
Department of Social Services
Office of Administration
Department of Highway and Transportation
Consolidated Health Care Plan
Department of Labor
Office of State Courts Administrator
State Treasurer's Office
Not Responding: Attorney General, Department of Public Safety