Colorado Legislative Council Staff

STATE

FISCAL NOTE

TABOR Refund Impact

No State General Fund Impact

Cash Fund Revenue and Expenditure Impact


Drafting Number:

Prime Sponsor(s):

LLS 98-459

Rep. Dyer

Date:

Bill Status:

Fiscal Analyst:

January 14, 1998

House Business Affairs

Will Meyer (866-4976)

 

TITLE:      LIMITS ON THE RULE-MAKING AUTHORITY OF THE DIRECTOR OF THE DIVISION OF WORKERS’ COMPENSATION, AND, IN CONNECTION THEREWITH, DENYING THE DIRECTOR AUTHORITY TO ADOPT OR MAINTAIN MEDICAL IMPAIRMENT RATINGS OR GUIDELINES OR TO ADOPT RULES THAT INCREASE OR DECREASE BENEFITS OR COSTS.



Summary of Legislation


                  This bill would repeal the current statutory provisions that authorize the Director of the Division of Workers’ Compensation, Department of Labor and Employment to adopt rules establishing medical impairment guidelines and to maintain a medical impairment rating system.


                  This bill would also prohibit the director from adopting rules that increase or decrease workers’ compensation benefits or increase or decrease the overall cost of administering the Workers’ Compensation Act. The bill would provide for an exception for rules adopted in connection with establishing the state’s average weekly wage and the fee schedule for medical benefits, including medical treatment guidelines and utilization standards as required by current law. This bill would become effective upon signature of the Governor.


STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

State Revenues

General Fund

Workers’ Compensation Cash Fund



$99,000



$99,000

State Expenditures

General Fund

Workers’ Compensation Cash Fund



$99,000



$99,000

FTE Position Change

None

None

Local Government ImpactNone.

   * This expenditure estimate does not include the additional costs for increased litigation.


                  The repeal of the authority to adopt rules providing for medical impairment guidelines and rating system would increase the costs to the division resulting from increased litigation. The requirement that rules adopted by the director neither increase nor decrease the cost of administration would require the division to defend its rules on this basis. In order to defend the cost impact of its rules, the division would contract with outside experts to conduct an extensive impact analysis of any proposed rule changes. This would result in additional costs to the division.



State Revenues


                  The costs of administration of the Workers’ Compensation Act are paid for by a surcharge on the premiums paid on workers’ compensation insurance policies. The amount of the surcharge is adjusted to cover the costs of administration. The surcharge would be increased to generate sufficient revenues to cover the additional costs of administration.



TABOR Refund Impact


                  Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.



State Expenditures


                  The medical impairment rating guidelines that would be prohibited by this bill were implemented due to increases in litigation and to assist physicians who felt that they needed clearer direction in the use of the American Medical Association (AMA) guidelines and apportionment. Without these guidelines, the division believes that disparate ratings would be adopted by participating physicians. This would likely lead to increased litigation.


                  The division purchases the services of Administrative Law Judges (ALJs) from the Division of Administrative Hearings, Department of Personnel, to preside over workers’ compensation hearings. It is not possible to accurately estimate the increased costs of the increased litigation.


                  The rule making procedure currently utilized by the division is provided for in Section 24-4-103 (4.5)(a)(II), C.R.S., the State Administrative Procedure Act. It requires a state agency to provide “to the extent practicable, a description of the probable quantitative” impact of a proposed rule, “economic or otherwise”. Subsection (4.5)(d) provides that , “If the agency has made a good faith effort to comply...the rule shall not be invalidated on the ground that the contents of the regulatory analysis are insufficient or inaccurate”. The provisions of this bill would require a level of analysis beyond what is currently required. The division assumes that it would be necessary to contract with outside consultants who have the expertise to perform an comprehensive analysis to ensure that a proposed changed would not have the effect of increasing or decreasing benefits or increasing or decreasing the overall costs of administering the Workers’ Compensation Act.


                  The division would continue to promulgate rules related to the medical fee schedule and the treatment guidelines. In addition to the medical fee schedule, there are ten injury specific treatment guidelines that would be impacted by this bill. Based on current costs to conduct retrospective studies to review the costs and medical adequacy of procedures in the treatment guidelines, it is estimated that it would cost $33,000 to conduct a comprehensive analysis of each proposed rule change. It is assumed that the division would initiate changes to three rules in each of the next two years at a cost of $99,000 in contract costs each year.



Spending Authority


                  This fiscal note implies that the Division of Workers’ Compensation, Department of Labor and Employment would require additional cash spending authority of $99,000 in FY 1998/99.

 


Departments Contacted 


                  Labor and Employment