BILL ANALYSIS Senate Committee on Industrial Relations 1999-2000 Regular Session Hilda L. Solis, Chair Fiscal: No Urgency: No Bill No: SB 320 Author: Solis Version: As Introduced: February 8, 1999 Subject: Workers' Compensation: benefits Support: California Labor Federation, AFL-CIO American Federation of State, County and Municipal Employees AFSCME) California Teamsters Public Affairs Council California Correctional Peace Officers Association (CCPOA) State Coalition of Probation Organizations San Bernardino County Safety Employees' Association Deputy Sheriffs' Association of San Francisco, Inc. Sacramento County Deputy Sheriffs' Association Association of Orange County Deputy Sheriffs Santa Ana Police Officers Association Long Beach Police Officers Association Anaheim Police Association Fremont Compensation Insurance Group, (if amended) Opposition: California Chamber of Commerce Carlsbad Chamber of Commerce San Jacinto Valley Chamber of Commerce Greater San Diego Chamber of Commerce Visalia Chamber of Commerce County of Sacramento Printing Industries of California Professional Community Management, Inc. Farmers Insurance Group of Companies Alliance of American Insurers California Self-Insurers Association Hobbs Trucking Company California League of Food Processors California Newspaper Publishers Association California Retailers Association Arden Group, Inc. City of Riverbank Engineering Contractors' Association California Fence Contractors' Association Sacramento Builders' Exchange Marin Builders' Exchange California Chapter of the American Fence Contractors' Association Poly Seal Industries Agricultural Council of California Carris Reels of California Food & Beverage Association of San Diego County Santa Rosa Hardware Company General Mills Operations Purpose: To increase workers' compensation benefits Analysis: Vocational Rehabilitation. The Administrative Director (AD) of the Division of Workers' Compensation is required to establish a vocational rehabilitation unit, which has specified duties, including approving vocational rehabilitation plans developed by a qualified rehabilitation representative. The maximum aggregate vocational rehabilitation counselor fee that may be charged is $4,500. An employee may receive additional living expenses while receiving vocational rehabilitation. This vocational rehabilitation maintenance allowance is capped at $246 per week. In no event may the counseling fees, maintenance allowance, and costs associated with, or arising out of, vocational rehabilitation services incurred after the employee's request for vocational rehabilitation services, except temporary disability payments, exceed $16,000. Hearing Date: May 12, 1999 {u SB 320 u} Consultant: Stephen Holloway Page 2 Senate Committee on Industrial Relations Temporary and Permanent Disability. Workers' compensation disability indemnity benefits are paid at the rate of 2/3 of the worker's average weekly wages at the time of the injury or illness caused by employment but are subject to statutory minimums and maximums. Temporary disability benefits are paid during the period that a worker recovers from an illness or injury. The minimum benefit is the lesser of $126 per week or 2/3 of 1.5 times the employee's average weekly wage paid by all employers. The maximum benefit is $490 per week. Permanent total benefits are paid to a worker whose injury results in a total disability. The minimum benefit is $112 per week and the maximum benefit is capped at $490 per week for life. Permanent Partial Disability. Permanent partial disability benefits are paid to workers whose injury or illness leaves them permanently but only partially impaired. This benefit is capped at $140 per week for a disability up to 14.75 percent, $160 per week for a disability between 15 and 24.75 percent, $170 for a disability between 25 and 69.75 percent, and $230 for a disability between 70 and 99.75 percent. The minimum benefit is $70 per week. The number of weeks for which permanent partial disability payments are allowed is based on the percentage of permanent disability and increases with the severity of the disability. The duration of benefits ranges from three weeks for a one-percent disability to 694 weeks (over 13 years) for a 99.75 percent disability. Life Pension. A worker who is 70 percent or more disabled, but less than 100 percent disabled receives a life pension for the remainder of his or her life when the permanent partial benefits are exhausted. This benefit is paid at the rate of 1.5 percent for each degree of disability above Hearing Date: May 12, 1999 {u SB 320 u} Consultant: Stephen Holloway Page 3 Senate Committee on Industrial Relations 60 percent and ranges from a maximum of $39 per week for a 70 percent disability to $154 per week for a 99.75 percent disability. Death Benefits. Total and partial dependents of a worker who dies as a result of an industrial injury are entitled to a death benefit. These benefits include $125,000 for a single total dependent, $145,000 where there are two total dependents and $160,000 for three or more total dependents. This benefit is paid at the rate of temporary disability benefits, but not less than $224 per week, until the benefit amounts are exhausted. A minor who was totally dependent on the deceased worker receives the benefit until reaching the age of 18, notwithstanding the maximum limitation. {u This Bill u} expresses the intent of the Legislature to meaningfully increase temporary disability indemnity, permanent total disability indemnity, permanent partial disability indemnity, vocational rehabilitation, life pension, and death benefits for all injured workers and their dependents. Comments: 1. {u Proponents u} : The California Labor Federation and the California Applicants' Attorneys Association, sponsors of this measure, and others state that as a result of the 1993 workers' compensation reform package, employers were to receive premium and other workers' compensation savings and workers were to receive increased benefits. Savings to employers have far exceeded the amount that was estimated to result when the 1993-reform legislation was enacted. Employers' average rates are down 48.5 percent since 1993 and total annual savings are over $5 billion, but workers have received less than $500 annually in higher benefits. Therefore, benefit increases are justified. Hearing Date: May 12, 1999 {u SB 320 u} Consultant: Stephen Holloway Page 4 Senate Committee on Industrial Relations Forty-two states index their temporary disability benefits to average weekly wages. Of these states, 12 provide for a maximum amount under 100 percent of the state's average weekly wages, 22 provide for 100 percent of average weekly wages and 8 states provide for maximum amounts higher than the average weekly wage. Currently, 22 states pay higher temporary disability payments than California ranging to a high of $878 per week in Iowa. 2. {u Opponents u} : The California Chamber of Commerce and others oppose any benefit increase without offsetting reforms or easing of administrative problems in the system. Passage of benefit increases without system reform is tantamount to a tax increase on California businesses. The Chamber notes that the weekly maximum benefit for injured workers has increased by about 45 percent and there were other generous benefit increases as a result of the 1993 reforms. The Californians for Compensation Reform (CCR) states that the Commission on Health and Safety and Workers' Compensation has invested well over $1 million to contract with RAND Corp. to study benefit payout and wage loss in California-specifically, permanent disability benefits. The permanent disability system is highly adversarial, litigious, and excessively complex. This study is expected to be completed by this June. Until this study is completed CCR believes it would be premature to increase benefits without this documentation. CCR is also opposed to elimination of the $16,000 cap on vocational rehabilitation costs. Fremont Compensation Insurance Group will support this bill if amended. Fremont argues that the pressing immediate need is to improve the delivery of benefits by Hearing Date: May 12, 1999 {u SB 320 u} Consultant: Stephen Holloway Page 5 Senate Committee on Industrial Relations reducing and eliminating ever increasing administrative costs. Fremont has submitted a comprehensive list of proposals which it believes will address these concerns. 3. {u Prior Legislation u} : SB 570 (Solis, 1997) Hearing Date: May 12, 1999 {u SB 320 u} Consultant: Stephen Holloway Page 6 Senate Committee on Industrial Relations