BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: April 13, 2011 20011-2012 Regular
Session
Consultant: Alma Perez Fiscal:Yes
Urgency: No
Bill No: SB 826
Author: Leno
Version: As introduced February 18, 2011
SUBJECT
Workers' compensation: data reporting requirement:
administrative penalties
KEY ISSUE
Should the Legislature impose a penalty on administrators who
fail to report necessary data to the Workers' Compensation
Information System (WCIS) to encourage compliance with current
reporting requirements?
PURPOSE
To establish administrative penalties for failure to comply with
current workers' compensation data reporting requirements.
ANALYSIS
Existing law requires employers to secure the payment of
workers' compensation for injuries incurred by their employees
that arise out of, or in the course of, employment. Workers'
compensation insurance provides six basic benefits which include
medical care, temporary disability benefits, permanent
disability benefits, supplemental job displacement benefits or
vocational rehabilitation and death benefits. The workers'
compensation system is administered by the Administrative
Director of the Division of Workers' Compensation (DWC).
Existing law requires the administrative director, in
consultation with the Insurance Commissioner and the Workers'
Compensation Insurance Rating Bureau, to develop a
cost-efficient workers' compensation information system and
requires the administrative director to adopt regulations
specifying the data elements to be collected. California's
workers' compensation information system (WCIS) uses electronic
data interchange (EDI) to collect comprehensive information from
claims administrators to help the Department of Industrial
Relations oversee the state's workers' compensation system.
This information helps facilitate evaluation of the system and
measure adequacy of benefits for injured workers and their
dependents, and also provides statistical data for research.
Existing law establishes the Workers' Compensation
Administration Revolving Fund in the State Treasury. Money in
the fund may be expended by the Department of Industrial
Relations, upon appropriation by the Legislature, for the
administration of the workers' compensation program, except as
provided, and for the Return-to-Work Program.
This Bill would require that the administrative director assess
an administrative penalty against a claims administrator for
failing to comply with any data reporting requirement as
required by adopted regulations. Additionally, this bill would:
� Require the administrative director to promulgate
regulations establishing categories of violations.
� Require that a penalty not exceed $100 for each
violation or $5,000 in any calendar year.
� Require that the annual maximum penalty be doubled for
each consecutive year that the same deficiency results in
violations of the same type.
� Provide that any penalty assessed be deposited in the
Workers' Compensation Administration Revolving Fund.
COMMENTS
1. Need for this bill?
Hearing Date: April 13, 2011 SB 826
Consultant: Alma Perez Page 2
Senate Committee on Labor and Industrial Relations
The Commission on Health and Safety and Workers' Compensation
(CHSWC) is a joint labor-management body created by the
workers' compensation reform legislation of 1993 and charged
with examining the health and safety and workers' compensation
system in California and/or recommending administrative or
legislative modifications to improve their operation.
According to a January 2011 CHSWC memorandum, a report
entitled, "Medical Care Provided California's Injured Workers:
An Overview of the Issues" (RAND, June 2007), indicates that
the State of California lacks a comprehensive performance
monitoring system that supplies actionable information on a
routine basis. A recent CHSWC study revealed that not all
entities are reporting their data to the Workers' Compensation
Information System, the principal data base in which all
claims are reported to the DWC, and there is lack of
enforcement. According to CHSWC, approximately 25% of the
claims are missing. This lack of accurate information
prevents the DWC from conducting comprehensive analyses. This
bill would establish penalties for failure to report the
statutorily required information to the WCIS.
2. Proponent Arguments :
According to the author, all workers' compensation claims are
required by law to be reported to the Workers' Compensation
Information System (WCIS) in order to gather data that is used
to analyze the efficiency of the system and highlight areas
for improvement. The author argues that although reporting
claim information is required by law, the Division of Workers'
Compensation currently has no authority to compel violators to
comply. This bill would establish penalties for failure to
report the statutorily required information to the WCIS.
Proponents argue that this is a modest penalty and that
further details of the penalty structure would be negotiated
between the DWC administrative director and affected
stakeholders to guarantee a fair, workable penalty schedule.
Proponents argue that the availability of accurate and timely
information about workers' compensation is crucial to
policymakers and legislators when they make major policy
decisions. According to proponents, this common sense measure
will enable the DWC to more comprehensively and effectively
analyze all aspects of the workers' compensation system.
Hearing Date: April 13, 2011 SB 826
Consultant: Alma Perez Page 3
Senate Committee on Labor and Industrial Relations
Lastly, proponents argue that this bill seeks to level the
playing field amongst compliant and non-compliant employers
while assuring that workers receive adequate workers'
compensation benefits.
3. Opponent Arguments :
According to opponents, while compliance is important for
having reliable information available for purposes of
analyzing trends, they question the timing of imposing
additional penalties on employers and other claims
administrators. Opponents argue that the only evidence of a
problem is a CHSWC report that finds 10-25% of required
filings are either incomplete or completely blank. However,
opponents argue that the bill would require penalties "for
failing to comply with any data reporting requirement"
contained in the regulations that implement the WCIS.
According to opponents, the WCIS regulations require claims
administrators to submit several hundred data points per claim
as specific milestones are met in the life of the claim.
Opponents contend that this bill seems to indicate that the
penalties would apply to data reporting mistakes in addition
to an overt failure to report.
Additionally, opponents argue that the $5000 maximum penalty
applies per type of violation, which means that the total
penalties required by this bill could actually total in the
hundreds of thousands of dollars for simple mistakes in
reporting. Opponents also argue that while this bill gives
the administrative director authority when setting the penalty
levels, it provides no discretion to when applying penalties
and they argue that the bill would prohibit the director from
exercising discretion in the application of penalties based on
the circumstances.
Overall, opponents argue that workers' compensation is a
direct cost of employing Californians, and the state should
not be adding to the cost of employing out-of-work
Californians while the state is saddled with a 12.3%
unemployment rate.
SUPPORT
Hearing Date: April 13, 2011 SB 826
Consultant: Alma Perez Page 4
Senate Committee on Labor and Industrial Relations
Small Business California - Sponsor
California Applicant Attorneys Association (CAAA)
California Labor Federation
OPPOSITION
California Association of Joint Powers Authorities (CAJPA)
California Chamber of Commerce
California Manufacturers & Technology Association (CMTA)
California Coalition on Workers' Compensation (CCWC)
Hearing Date: April 13, 2011 SB 826
Consultant: Alma Perez Page 5
Senate Committee on Labor and Industrial Relations