BILL ANALYSIS                                                                                                                                                                                                    




                   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.