OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

sSB-907

AN ACT CONCERNING ADDITIONAL REQUIREMENTS FOR AN EMPLOYER'S NOTICE TO DISPUTE CERTAIN CARE DEEMED REASONABLE FOR AN EMPLOYEE UNDER THE WORKERS' COMPENSATION ACT.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 14 $

FY 15 $

Various State Agencies

GF, TF - Cost

Potential Significant

Potential Significant

Dept. of Administrative Services

GF - Cost

$85,510

$88,075

State Comptroller - Fringe Benefits1

GF - Cost

$29,535

$30,421

Dept. of Administrative Services (WC Administrator Account)

GF - Cost

At least $150,000

At least $150,000

Municipal Impact:

Municipalities

Effect

FY 14 $

FY 15 $

All Municipalities

STATE MANDATE - Cost

Potential Significant

Potential Significant

Explanation

The bill will result in a cost to the state2 and municipalities' workers' compensation programs, the Department of Administrative Services (Personnel Services and Workers' Compensation Third Party Administrator (TPA) accounts), and the Office of the State Comptroller Fringe Benefit Accounts in order to comply with the provisions of the bill. The fiscal impact is as follows:

Medical Costs for Workers' Compensation Programs

The bill will result in potentially significant medical costs for public workers' compensation programs'. First, the bill limits the employers' ability to provide alternative courses of care provided through the managed care process to injured workers. The bill allows the injured worker to select their course of care in the event there is a disagreement between providers. The managed care process provides the state and municipalities a mechanism for controlling medical costs in their workers' compensation programs. The state's average medical spend for its workers' compensation program over the past two fiscal years (FY 11 and FY 12) was $43.8 million. The cost to the program would depend on the cost differential between the course of medical care selected by the employee and its alternative.

Secondly, the bill requires the state to continue to cover disputed medical care for an injured worker until a written decision is rendered by the Workers' Compensation Commission (WCC) which may take several weeks. In the event the care is determined to be unreasonable, there is no procedure for reimbursing the state for the cost of the medical care provided. The cost to the state and municipalities will be based on the amount of medical care provided which is determined to be unnecessary. This provision of the bill only applies to those state and municipal employees that are not afforded health insurance coverage. In the case of the state this includes many temporary, part-time and newly hired employees.

Under current law if an employer disputes a proposed course of treatment, the employer is required to notify the employee and the employee may request a hearing before the WCC. While the dispute is pending the cost of treatment is paid by an employee's group health insurance. If the WCC determines the treatment is covered under workers' compensation the employer or workers' compensation carrier (for fully insured municipalities) reimburses the health insurer.

Third, if a notice is required to be issued to an employee3, the notice needs to include a Respondent's Medical Examination (RME) or an appointment for an RME. The state and municipalities workers' compensation programs will bear the cost of the RME and the cost of care while the results from the RME are pending. In FY 11 the state spent approximately $2.9 million on medical exams and approximately $786,000 in FY 12. The wide spread in cost is due to the complexity of the claims.4

Lastly, the bill imposes strict notice deadlines which if unmet preclude the employer from discontinuing, reducing or denying the disputed medical treatment. Consequently, the bill may result in increased medical costs as the timeframe under current law is open ended and the bill imposes a 10 day notice requirement and a 30 day requirement for a RME if needed. The state and municipalities' liability will depend on the medical care provided which might have otherwise not been covered under workers' compensation.

Personnel and TPA Costs

The bill will result in increased personnel costs to the Department of Administrative Services and the Office of the State Comptroller's fringe benefit accounts of $115,045 and $118,496 in FY 14 and FY 15 respectively to hire two additional clerical staff. The clerical staff is necessary to review health insurance coverage for employees with workers' compensation claims to determine notice requirements.

Lastly, the state will bear increased contract costs in order to comply with the 10 day notice requirement imposed in the bill. The increased cost to the Workers' Compensation Third Party Administrator contract will be at least $150,000 per year for increased administrative expenses. The current TPA contract's annual award is approximately $5.3 million. Under the bill the TPA will have 10 days to review proposed treatment for injured workers. The TPA receives an average of 13,000 pieces of medical treatment correspondence, in various forms each month.5

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation. In addition, normal annual pension costs (currently estimated at 7.5% of payroll) attributable to the identified personnel changes will be recognized in the state's annual required pension contribution in future actuarial valuations.

1 The fringe benefit costs for most state employees are budgeted centrally in accounts administered by the Comptroller. The estimated active employee fringe benefit cost associated with most personnel changes is 34.54% of payroll in FY 14 and FY 15.

2 The State's workers' compensation program is self-insured and therefore is responsible for the total cost of claims incurred as opposed to a fully-insured policy where the state pays a set premium irrespective of cost.

3 The notice requirements in the bill apply to employees without health insurance.

4 The FY 11 and FY 12 medical exam costs are included in the aforementioned total average medical spend for the same periods.

5 Source: Department of Administrative Services