BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 305 (Gonzalez) - Workers' compensation: permanent disability apportionment ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 30, 2015 |Policy Vote: L. & I.R. 4 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: July 13, 2015 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: For injuries occurring after January 1, 2016, AB 305 would (1) prohibit apportionment if pregnancy, menopause, or menopause-caused osteoporosis is contemporaneous with the injured worker's claimed injury, (2) prohibit apportionment in cases of psychiatric injury in specified instances, and (3) require that breast cancer not be less than the comparable impairment rating for prostate cancer. Fiscal Impact: The Department of Industrial Relations (DIR) would incur costs (special funds) of $4.25 million in the first year, and $4 million annually thereafter to implement the provisions of the bill. AB 305 (Gonzalez) Page 1 of ? As a direct employer, the State would incur increased permanent disability costs due to breast cancer. The magnitude is unknown, but potentially significant. The bill also would result in increased litigation costs to the State as a direct employer. The magnitude is unknown, but potentially significant. Background: Current law establishes a workers' compensation system that provides benefits to an employee who suffers from an injury or illness that occurs during the course of employment, irrespective of fault. This system requires all employers to secure payment of benefits by either (1) securing the consent of DIR to self-insure, or (2) securing insurance against liability from an insurance company authorized by the State. Under current law, when doctors are determining the nature and severity of an occupational injury, the American Medical Association (AMA) Guides to the Evaluation of Permanent Impairment (5th Edition) must be used to measure physical impairment and determine an injured worker's whole person impairment (WPI). When physicians prepare a report regarding whether a claimed workplace injury is permanently disabling, the physician must determine both (1) causation, and (2) what percentage of the injury is due to non-occupational issues, including prior workplace injuries. An injured worker's PD award is then adjusted down by this percentage. Only a physician can make the determination whether and to what extent if apportionment is appropriate. Additionally, current law creates the Permanent Disability Ratings Schedule (PDRS), which increases the WPI by 40 percent and adjusts for occupation and age to calculate a percentage of permanent disability, also known as a PD rating. AMA Guides rate the removal of female breasts at a WPI of zero percent, while the removal of a prostrate generally rates at 16 to 20 percent WPI. Thus, prostrate removal currently translates into a higher PD rating than female breast removal. AB 305 (Gonzalez) Page 2 of ? Proposed Law: With respect to injuries occurring on or after January 1, 2016, this bill would do the following: Prohibit apportionment in cases of physical injury based on any of the following conditions if those conditions are contemporaneous with the claimed physical injury: (1) pregnancy; (2) menopause; and (3) osteoporosis casually related to menopause. Prohibit apportionment in cases of psychiatric injury caused by sexual harassment or any of the conditions listed above if the conditions are contemporaneous with the psychiatric injury. Require that WPI ratings for breast cancer and its sequelae shall in no event be less than comparable WPI ratings for prostate cancer and its sequelae. Related Legislation: AB 1155 (Alejo) of 2011 addressed apportionment by broadly prohibiting the use of the protected classes defined in the Unruh Civil Rights Act as a basis to apportion permanent disability awards. The bill was vetoed by the Governor. Staff Comments: The Office of the Legislative Counsel has keyed this bill "non-fiscal." However, the purview of this Committee, pursuant to Joint Rule 10.5, is to review and analyze bills that would, among other things, result in a substantial expenditure of state money. Thus, even though AB 305 was keyed "non-fiscal," the Committee requested the bill to examine the extent to which it might potentially increase both workload and state costs. AB 305 has the potential to create significant fiscal pressure on the state in the following ways: (1) increased litigation, leading to higher Workers Compensation Appeals Board (WCAB) utilization, (2) increased PD costs due to breast cancer for the State of California as a direct employer (particularly for peace officers), and (3) increased litigation costs for the State of AB 305 (Gonzalez) Page 3 of ? California as an employer. Regarding WCAB utilization, it is assumed that there are about 90,000 claims annually where PD is owed. If, according to the April 2007, Commission on Health and Safety and Workers' Compensation (CHSWC) report, 10.5 percent of disability evaluations include an apportionment component, then there will be roughly 9,000 claims per year where the conditions listed in the bill would have an impact. The extent to which the effects of menopause, pregnancy, osteoporosis and a psychiatric injury from either those conditions or sexual harassment will actually result in the apportionment of disability is unknown. However, the prevalence of these conditions in women would likely produce more litigation to differentiate and identify the root cause of an apportionable impairment. If the 9,000 claims were to be disputed, but absent the bill they would not have been litigated, AB 305 would create a 13 percent increase in judicial workload of disputed cases. DIR estimates the additional workload would result in increased costs of about $4 million annually. -- END --