LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 19, 2001
TO: Honorable James E. "Pete" Laney, Speaker of the House,
House of Representatives
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB2600 by Brimer (Relating to the provision of workers'
compensation benefits and to the operation of the
workers' compensation insurance system; providing
penalties.), As Passed 2nd House
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB2600, As Passed 2nd House: positive impact of $4,424,958 *
* through the biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $1,309,701 *
* 2003 3,115,257 *
* 2004 5,898,606 *
* 2005 9,598,009 *
* 2006 12,976,688 *
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All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Probable Change in *
* Year Savings/ Savings/ Savings/ Savings/ Number of *
* (Cost) from (Cost) from (Cost) from (Cost) from State *
* General General Federal Other Funds Employees *
* Revenue Revenue Funds - 0997 from FY 2001 *
* Fund Fund Federal *
* 0001 0001 0555 *
* 2002 $2,322,884 $738,550 $288,468 (0.6) *
* $(1,013,183) *
* 2003 (842,408) 3,957,665 778,785 304,184 (12.6) *
* 2004 (881,094) 6,779,700 112,997 434,722 (12.6) *
* 2005 (881,094) 10,479,103 1,455,061 568,328 (12.6) *
* 2006 (881,094) 13,857,782 1,835,897 717,078 (12.6) *
***********************************************************************
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*Fiscal Probable Savings/(Cost) from Probable Savings/(Cost) from *
* Year Subsequent Injury Trust Fund Subsequent Injury Trust Fund *
* 0918 0918 *
* 2002 $(11,400,000) $8,000,000 *
* 2003 (11,700,000) 8,000,000 *
* 2004 (12,100,000) 8,000,000 *
* 2005 (12,600,000) 8,000,000 *
* 2006 (13,000,000) 8,000,000 *
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Technology Impact
The Texas Workers' Compensation Commission (TWCC) would need to modify
databases to track information on approved doctors and for the
certification of doctors to be added to the approved doctors' list.
Also, TWCC would need modifications to the current systems to include
the collection and reporting of return-to-work data and to comply with
mandatory reporting to the Research and Oversight Council on Workers'
Compensation.
Fiscal Analysis
The bill would amend certain workers' compensation policies and
requirements, affect certain TWCC policies, amend the method of funding
to the State Office of Risk Management (SORM), and authorize the creation
of a Medical Quality Review Panel to assist the Medical Advisor and to
recommend sanctions, as well as additions, deletions or suspensions of
doctors on the ADL. Further, the bill would allow insurance carriers to
apply for and receive reimbursement annually from the Subsequent Injury
Trust Fund (SIF) for the amount of income benefits paid to injured
workers that were based on other employment, and authorize TWCC to assess
a maintenance tax to insurance carriers, other than governmental
entities, in an amount to generate 120 percent of any projected unfunded
liabilities of SIF. Finally, the bill would change the sunset date for
TWCC to September 1, 2005, two years earlier than the current cycle.
The bill would take effect immediately upon two-thirds vote, or on
September 1, 2001. The Medical Network Advisory Committee would convene
by October 1, 2001.
Methodology
The bill would produce total savings of approximately $50 million over
six years. The overall savings were assumed to occur in General Revenue,
Federal Funds and Other Funds in the same proportion as the current state
expenditures.
It has been assumed that regional workers' compensation networks would be
operational to 5 percent of state employees in the first year and an
additional 10 percent each year thereafter. Seventy-five percent of
those covered by the networks are assumed to opt into the network. In
fiscal year 2000, approximately $46 million in workers' compensation
medical claims were paid to injured state employees. Assuming a general
20 percent savings in medical treatment cost to those employees choosing
to participate, and an expanding network system, a savings of $10.4
million is estimated over five years.
The significant reduction in required medical examinations would result
in an estimated one-time cost savings of $718,284 in 2002. Additionally,
the creation of a drug formulary and mandatory generic substitution
would produce an estimated savings of $1.4 million in 2002, and a five
year savings of $9.2 million.
The State Office of Risk Management (SORM) cost estimate assumes savings
of approximately $34.5 million to the General Revenue Fund in the second
through sixth years (2003-2007) of implementation of the allocation plan.
According to SORM, the Injury Frequency Rate (number of injuries per
100 employees) was reduced from 5.91 to 4.73 and saved the state
approximately $34.5 million from 1996-2000 in workers' compensation claim
payments. SORM anticipates savings to be equal to those experienced when
agencies became liable for 25 percent of employees' injuries, should the
bill pass.
The State Office of Risk Management estimates the need for three FTEs to
implement and maintain the return-to-work services required by the bill
at a cost of $200,383 in 2002 and $177,094 in 2003 and forward.
Texas Workers' Compensation Commission (TWCC) estimated a reduction in
staff of 3.6 FTEs in 2002 and an additional reduction of 12.6 FTEs in
2003. TWCC estimates a cost of $800,000 per year for litigation due to
doctor removal from the approved doctors' list. It is assumed that any
costs incurred at TWCC would be offset by additional revenue from the
workers' compensation maintenance tax.
The Research and Oversight Council on Workers' Compensation (ROC)
estimates a $60.8 million cost over five years to the Subsequent Injury
Trust Fund (SIF) in benefits reimbursed to insurance carriers provided
for in Article 10, with an increase of $5-8 million each year to the
revenue into SIF through an increased maintenance tax rate.
The SIF costs are based on a total of 4,387 claims eligible for such
reimbursement each year, an average of 11.3 weeks of temporary income
benefits (TIBs), $540 per week cap on TIBs benefits, and an average
weekly wage (AWW) of $473 projected for fiscal year 2002. The TIBs
benefit cap is assumed to increase by two percent each year and the AWW
is assumed to increase by four percent each year.
Four groups of claimants would be effected by Article 10 of the bill: 1.
two full-time jobs (175 annual claims); 2. two part-time jobs (1,184
annual claims); 3. a full-time and a part-time job with the injury
occurring on the part-time job (1,029 annual claims); and 4. a full-time
and a part-time job with the injury occurring on the full-time job (1,998
annual claims).
Depending upon the appropriation level of the Texas Workers' Compensation
Commission (TWCC) and current gross premiums remaining constant, the
maintenance tax at its statutory cap of two percent of gross premiums
would generate from $5-8 million in revenue each year for the SIF. As of
April 1, 2001, the SIF has a balance of $24 million. The average income
from death benefits from 1998-2000 has been $3.5 million per year, with
the average benefits being paid out of $2.6 million. With the increased
revenue of $8 million from the increased maintenance tax and the current
SIF revenue and balance, the full projected liabilities could be paid
beyond fiscal year 2006 without insufficient funds.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 453 Texas Workers' Compensation Commission, 478
Research and Oversight Council on Workers'
Compensation, 479 State Office of Risk Management
LBB Staff: JK, JO, RT, KM