SENATE BILL REPORT

SB 5468

BYSenators Lee and Smitherman; by request of Department of Labor and Industries

Changing provisions relating to medical aid premiums.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):January 16, 1989

Senate Staff:David Cheal (786-7576)

AS OF FEBRUARY 2, 1989

BACKGROUND:

Employers covered by the state's industrial insurance program pay three separate premiums:  (1) an accident fund premium which pays for time loss and pension payments; (2) a medical aid fund premium which pays medical and vocational rehabilitation expenses for injured workers; and (3) a supplemental pension premium which pays for cost-of-living increases on time loss and pension payments.

For some time, the Department of Labor and Industries has adjusted each employers accident fund base rate by an experience modification which takes into account the particular employer's claim loss experience.  The experience modification is based on actual time loss and pension costs attributable to the employer in the three-year period prior to the effective date of the rate.  This allows employers with better than average safety records to pay a reduced accident fund premium, providing an incentive to employers to reduce workplace injuries.  In 1985, the Legislature directed the department to begin experience-rating the medical aid fund premium no later than January 1, 1989, following an interim analysis on the impact on employees, and large and small employers.  (Chapter 337, Laws of 1985.)  The purpose of that legislation was to increase the incentive to employers and employees to reduce work-related injuries.  Employers pay all of the accident fund premium, but the medical aid fund premium is shared equally between workers and employers.

Analysis by the department indicates that some employees will be heavily impacted by implementation of experience rating the medical aid fund premium.

SUMMARY:

The department is given authority to promulgate rules governing application of experience rating the medical aid fund premium.  This would allow the department to graduate the full implementation of experience rating the medical aid fund and spread the financial impact over time.

The provision indicating that the employer shall deduct one-half of the medical aid fund from the pay of each worker is deleted and replaced with a provision that indicates there shall be an employer component and an employee component of that premium.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested January 12, 1989