SB 0374 - Fiscal Note

Fiscal Note - SB 0374 - Modifies provisions regarding the termination of workers' compensation benefits

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 1705-09

BILL NO.: Perfected SCS for SB 374

SUBJECT: Workers' Compensation; Insurance

TYPE: Original

DATE: April 21, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Workers' Compensation Fund	(Unknown)	(Unknown)	(Unknown)
Total Estimated Net Effect on All State Funds	(Unknown)	(Unknown)	(Unknown)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None	$0	$0	$0
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

With regard to subsection 3 of Section 287.160, RSMo, the Department of Labor and Industrial Relations (DOL) assume this proposal would not fiscally impact their agency because DOL merely sets the interest rates to be applied to late workers' compensation payments and does not collect any monies resulting from late payments. The weekly benefit payments for workers' compensation claims are paid by the employer, or the insurance companies handling the claims, directly to the employee. In the event of a late payment to the injured party, the employer or insurance company is assessed an interest rate that must be applied the payment due the employee. Therefore, the employers or insurance companies that process workers' compensation claims would experience an increase in costs in the event that they do not distribute the benefit payments in a timely manner.

With regard to an SSA 1 for SA 1, concerning refundable tax credits for insurance companies, officials from DOL state there would be a cost to the Workers' Compensation Fund, however that amount cannot be determined. The Workers' Compensation Division can not estimate the total number of temporary awards that will be issued finding benefits already paid to the employee as not being owed. The fiscal impact would result in a reduction in payments to the Workers' Compensation Fund by insurance carriers that pay temporary total disability and permanent total disability benefits to employees that are found not to be owed. The carrier may be entitled to a refundable tax credit pursuant to payments owed under section 287.690, RSMo, in the amount equal to the excess benefits paid to the employee. The insurance carrier is already provided an offset during the settlement or final award for any payment owed for permanent disability for those temporary disability payments made to an employee that are not owed. Also, if benefits are paid to the employee and the claim is found to be fraudulent or noncompensable, after a hearing, the insurer can be indemnified under section 287.160, RSMo.

Oversight has indicated the cost to the Workers' Compensation Fund as unknown.

With regard to Section 287.203, RSMo, officials from the DOL assume this proposal would not fiscally impact their agency.

With regard to Section 287.210, RSMo, officials from the Department of Labor and Industrial Relations, Department of Transportation and the Department of Insurance assume this proposal would not fiscally impact their agencies.

ASSUMPTION (continued)

Also with regard to Section 287.210, RSMo, officials of the Office of the Attorney General (AGO) estimated they would request additional staff (i.e., 5 assistant attorney generals, 1 paralegal and 2 secretaries). The AGO assumes that the proposal would mainly affect partial disability claims filed against the Second Injury Fund (SIF). If SIF cases were allowed to be submitted on medical reports cases previously settled or dismissed would be taken to hearing, resulting in an additional 800 to 1,200 cases. Along with this increase appeals would increase. In order to adequately defend these cases, SIF attorneys would have to cross-examine the claimant's doctor. Costs are estimated at $335,557 in FY00; $345,900 in FY01; and $354,928 in FY02.

The Attorney General's Office also estimated a loss to the Second Injury Fund of $5.0 million annually, due to an increase in claims.

With regard to Section 287.210, RSMo, dealing with Second Injury Fund evidence, based on an Oversight Subcommittee decision on March 30, 1998, the financial impact of this proposal is assumed to be zero.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
WORKERS' COMPENSATION FUND
Cost - additional tax credits for insurers	(Unknown)	(Unknown)	(Unknown)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that they would incur additional interest penalties in the event of a late payment.

DESCRIPTION

This proposal modifies workers' compensation law regarding temporary total benefits. Awarded temporary total benefits under a workers' compensation claim may only be terminated by consent of the employee, by the terms of the award, or by proving the employer is justified in terminating

compensation. Compensation shall continue during the period until a decision is made

concerning termination of benefits. If no award is made to the employee, the employer receives a judgment against the employee. Currently, an employer terminates workers' compensation

benefits by notifying the employee and providing a reason for the termination of compensation. The employee may then request a hearing before the Division of Workers' Compensation and proceed through a 75-day hearing process (60 days to set the hearing and 15 days to render a decision). A 90 day schedule applies to employers.

Interest calculations for workers' compensation awards payments under subsection 3 of Section 287.160, RSMo are changed. Uncontested late payments accrue interest at 10% per annum from

the date when due upon being fifteen days late. Provisions regarding interest calculations on contested payments are removed.

This proposal would allow certain medical reports into evidence in second injury fund cases. The current subsection 7 of Section 287.210, RSMo, allows testimony by a treating or examining physician, introduction of medical reports, physician interrogatories and other records. The second injury fund is currently excluded from the applicability of subsection 7.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Department of Labor and Industrial Relations

Department of Insurance

Department of Transportation

Office of Attorney General

Jeanne Jarrett, CPA

Director

April 21, 1999