BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                          SB 826 (Leno)
          
          Hearing Date: 5/9/2011          Amended: 5/3/2011
          Consultant: Bob Franzoia        Policy Vote: L&IR 6-0
          
















































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          BILL SUMMARY: SB 826 would require the Administrative Director 
          (AD) of the Division of Workers' Compensation (division) to 
          assess an administrative penalty against a claims administrator 
          for a violation of data reporting requirements.  This bill would 
          require the AD to promulgate a schedule of penalties providing 
          for an assessment of no more than $5,000 against a claims 
          administrator in any single year, calculated by violation type 
          and excluding threshold rates of violations.  This bill would 
          require the AD to publish an annual report disclosing the 
          compliance rates of claims administrators and would authorize 
          the AD to publish the identity of claims administrators for this 
          purpose.
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                            Fiscal Impact (in thousands)

           Major Provisions         2011-12      2012-13       2013-14     Fund
           Administrative penalty Estimated $12.5 to $1,250 
          annuallySpecial*
          (revenue)
                                                                  
          Report                 Minor, absorbable costs          Special*

          Information system     Likely minor, absorbable costs   Special*
          revisions

          * Workers' Compensation Administration Revolving Fund
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          STAFF COMMENTS: 

          The effectiveness of the administrative penalty in incentivizing 
          compliance with date reporting requirements is unknown.  For 
          some claims administrators (which are comprised of insurers, 
          self-insured/self-administered employers, and third party 
          administrators), paying a penalty of $5,000 may be more cost 
          effective than the staff and time needed to fully meet the 
          requirements.   If 25 to 250 claims administrator are assessed 
          the maximum penalty annually, revenue would be $12,500 to 
          $1,250,000.  (A maximum penalty of $5,000 represents 50 
          penalties of $100.)  Costs to the division to adopt regulations 
          and to report are estimated to be minor and absorbable.









          SB 826 (Leno)
          Page 3

          Reporting compliance rates of claims administrators and 
          assessing penalties will likely require the AD to make 
          adjustment to the Workers' Compensation Information System 
          (WCIS) in order to determine whether the WCIS would 
          automatically identify reporting violations, whether WCIS 
          penalties would be identified through random audits of WCIS 
          transmissions and whether WCIS penalties would be assessed in 
          conjunction with Audit Unit penalties.