BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
677 (Yee)
Hearing Date: 5/28/2009 Amended: 5/19/2009
Consultant: Bob Franzoia Policy Vote: Labor 4-2
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BILL SUMMARY: SB 677 would, until January 1, 2013, exclude any
person employed by his or her parent, child, spouse, or
registered domestic partner in a farming operation, as defined,
from having to secure the payment of workers' compensation,
including medical treatment for injuries incurred by their
employees that arise out of, or in the course of, employment if
they meet certain conditions. This bill would require the owner
or owners of the farming operation to submit specified
information when registering with the Department of Industrial
Relations (DIR) for the exclusion. This bill would specify that
a violation of the conditions shall constitute good cause for
DIR to cancel the farming operation's registration. This bill
would limit registrations within a calendar year to no more than
3,000 and would provide that registration shall be in effect for
one year, except as specified.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Administration of workers' Up to $198 Up to $360Up to
$360 General
compensation coverage
exclusion
Health care coverage Unknown, potentially major and
ongoingGeneral costs to state health programs
to treat
work related injuries
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STAFF COMMENTS: SUSPENSE FILE.
It appears there are conflicting interpretations of statutes and
regulations as to whether workers' compensation coverage is
required for family members working in a farming operation.
Registration for the exclusion proposed by this bill would
require the farming operation to provide the following:
- Proof that any persons that the owner of the farming operation
seeks to exclude from being an employee are covered by health
insurance.
- Proof of the amount (up to $10,000) of the owner's taxable
state income during the 12 month period preceding registration.
- A signed affidavit that no occupational injures or illnesses
have occurred on the farm during the 12 month period preceding
registration.
- Proof that the owner of the farming operation cannot afford
the workers' compensation policy premium that would apply to the
operation in the year for which exclusion is sought.
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SB 677 (Yee)
- A verified quote from a licensed insurer for the workers'
compensation policy that the owner of the farming operation
cannot afford.
Staff notes the bill does not specify criteria for determining
affordability. Presumably, DIR would adopt regulations to
address this and any other implementation procedures.
There are 27 agricultural classifications used when determining
workers' compensation premiums. For the purposes of this
analysis, it is proposed that the owner of the farming operation
is growing strawberry crops or field crops. The premium rate
for strawberry crops is $8.63 per every $100 of payroll and the
rate for field crops is $14.01 per every $100 of payroll. These
two classifications provide a range of costs under the following
scenarios:
1) One part time employee, $8.00 an hour, 20 hours a week, year
round.
2) One full time employee, $8.00 an hour, 40 hours a week, year
round
3) Two full time employees, $8.00 an hour, 40 hours a week, year
round.
These estimates should be typical of the number of employees the
owner of the farming operation would use since the acreage
farmed is small.
The yearly premiums for these scenarios are:
1) Strawberry crops = $718 - field crops = $1,165
2) Strawberry crops = $1,436 - field crops = $1,630
3) Strawberry crops = $2,872 - field crops = $3,260
These estimates are based on current rates and will change in
July 2009. The coverage and benefits are the same for all
workers' compensation, that is, there are no deductibles, etc.
(In contrast to Medi-Cal and private health insurance, workers'
compensation pays for medical care, temporary disability
benefits, permanent disability payments, supplemental job
displacement benefits or vocational rehabilitation and death
benefits.)
Under the exclusion proposed by this bill, if the owner of the
farm seeks to exclude any person from being an employee, and
thus, not subject to the requirement that they obtain workers'
compensation coverage, proof must be provided that person is
covered by health insurance.
Preliminary information indicates a person may be able to obtain
an individual health insurance policy at a monthly cost of $220
to $300, subject to medical underwriting. If the person's
spouse was employed full time in the farming operation, small
group market coverage (a group of two) would be available on a
guaranteed issue basis at a monthly cost per person of $350 to
$380. These amounts can vary by up to ten percent ($315 to
$418) and can vary by age, geography and family status and by
level of
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SB 677 (Yee)
benefits, that is, high deductable coverage is less costly,
comprehensive coverage is more expensive.
Comparing minimum individual health insurance coverage ($220 x
12 = $2,640) to the equivalent workers' compensation premiums
($1,630) and minimum small group market coverage ($315 x 2 x 12
= $7,560) to the equivalent workers' compensation premiums
($3,260), it does not appear at this time that a person or
persons could readily obtain private health insurance for less
than the cost of equivalent workers' compensation coverage.
However, for employees under age 18 and for employees over age
18 whose income is less than 250 percent of the federal poverty
level, these persons may have health insurance under state
programs such as Healthy Families, the Medical Risk Medical
Insurance Program (out-of-pocket maximum per calendar year is
$2,500 for individuals and $4,000 for an entire household), or
Medi-Cal.
Based on the above comparison of the costs of private health
insurance and workers' compensation, the number of owners of
farming operations applying for the exclusion is likely to be
low. However, if eligibility for a state health insurance
program can be proof of health insurance, the number of owners
of farming operations applying is likely to be high. The
impacts on state health insurance programs under that scenario
are unknown, but would be major and ongoing.
Based on data from the 2007 US Department of Agriculture's
agricultural census, there are approximately 7,000 limited
income family farms in the state. Under this bill, up to 3,000
would be eligible to apply for the exemption. DIR staff would
need to process applications and verify information such as
health insurance coverage, workers' compensation quotes, and
ensure that all necessary documentation has been provided. If
2,500 owners of farming operations applied for the exemption, up
to five personnel years would needed, at a cost of up to
$394,500 for 2009-10, and $360,000 for 2010-11, and thereafter.
There are potential costs to the Labor Commissioner for
violations of limitations on the exclusion and potential and
unknown costs to the Uninsured Employers Benefits Trust Fund for
claims that are filed when the conditions for the workers'
compensation exclusion are not met. It is unclear if DIR's
Division of Labor Standards Enforcement would continue to visit
or inspect these farms which may result in workload reduction
savings.