BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 947 (Solorio) Hearing Date: 8/15/2011 Amended: 6/28/2011 Consultant: Bob Franzoia Policy Vote: L&IR 5-0 _________________________________________________________________ ____ BILL SUMMARY: AB 947 would permit disability payments for a single injury causing temporary disability that occurred after January 1, 2012 to be extended, and would prohibit the payments from extending for more than 240 compensable weeks within five years of the date of injury. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Workers' compensation Up to $8,000 annually beginning JanuaryGeneral/ disability payments 2014 Special* extension * 55 percent General Fund, 45 percent special funds. The maximum cost per claim beginning 2012 would be $137 over current law (136 weeks x $1,010.50 per week) - The total cost system wide is estimated at $200 to $210 million annually (9.5 percent estimated increase in temporary disability benefits, which are 16 percent of all benefits) _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the Suspense File. Temporary Disability Temporary disability benefits are payments to an employee for lost wages because an injury prevents the employee from performing usual work while recovering. An employee that cannot work or can perform some work receives temporary total or partial disability benefits. As a general rule, temporary disability pays two-thirds of the gross (pre-tax) wages lost while the employee is recovering. However, an employee cannot receive more than the maximum weekly amount set by law, which is $986.69 in 2011, increasing to $1,010.50 in 2012. The minimum and maximum temporary disability amounts are AB 947 (Solorio) Page 1 adjusted annually based on the state average weekly wage. The minimum temporary total disability payment, regardless of earnings, is $132. Temporary disability payments begin when the employee's doctor determines the person cannot perform usual work for more than three days or the person is hospitalized overnight. Generally, temporary disability stops when the person returns to work or when the doctor determines the person's injury has improved as much as it may. For persons injured between April 19, 2004 and January 1, 2008, temporary disability payments were available for no more than 104 weeks from the first payment for most injuries. Persons injured after January 1, 2008 are eligible to receive 104 weeks of disability payments within a five-year period. If an employee's date of injury is in 2004 or later, the employee is limited to a total of 24 chiropractic visits, 24 physical therapy visits, and 24 occupational therapy visits, unless the claims administrator authorizes additional visits. Payments for specified long-term injuries can continue for up to 240 weeks within a five-year period and are not taxable. Permanent Disability Most persons recover from job injuries but some continue to have medical problems. Permanent disability is any lasting disability that results in a reduced earning capacity after maximum medical improvement is reached. If a person's injury or illness results in permanent disability the person is entitled to permanent disability benefits, even if he or she is able to return to work. Permanent disability benefits are limited. If a person loses income, permanent disability benefits may not cover all the income lost and if the person experiences losses unrelated to ability to work, permanent disability benefits will not cover those losses. A doctor makes the determination if an injury or illness caused permanent disability. The doctor also determines if any of the disability was caused by something other than the work injury (for example, a previous injury or other condition) in a process known as apportionment. The disability is stated as a percentage which equals a specific dollar amount, depending on the date of the injury and the person's average weekly wages at the time of injury. Permanent disability awards may increase or decrease by 15 percent, depending on whether the person worked for an employer with 50 or more employees and the employer offers a salary continuation program and the person accepts AB 947 (Solorio) Page 2 regular, alternative or modified work. Permanent disability benefits are normally paid when temporary disability benefits end and a doctor has indicated the person has some permanent effects from the injury. A person with a disability rating of less than 70 percent would receive $230 weekly and a person with a disability rating of more than 70 percent would receive $270 weekly. These amounts have not changed since 2006. Fiscal Impact An initial fiscal estimate by Commission on Health and Safety and Workers' Compensation staff using California Workers' Compensation Institute and Workers' Compensation Insurance Rating Bureau data is noted above for state employees. For other employers, the estimated annual costs are in the range of $190 million to $200 million: - $31 million in benefits to employees of self-insured local public agencies - $22 million in benefits to employees of self-insured private employers - $145 million in benefits to employees of insured employers. The calculations use a 15 percent midpoint estimate that could be high or low by ten percent. This could put annual costs in the range of $188 million to $238 million. Additionally, treatment guidelines and caps on certain medical treatments and patient-doctor relationships prolonging treatment could result in the costs being over or underestimated. First year state employee costs may be slightly higher than noted to the extent industrial disability leave benefit payment levels exceed temporary disability benefit payment levels. Also, additional medical care costs are likely to be incurred when temporary disability is extended beyond 104 weeks. Increased costs of $210 million annually would be an overall cost increase of 1.5 percent to the $14 billion workers' compensation system. Total paid state workers' compensation costs in 2009-10 were $503 million.