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Italicized text includes proposed additions to law or the previous version of the bill.
Struck text includes proposed deletions to law or the previous version of the bill.

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INTRODUCED BY Committee on Insurance (Solorio (Chair), Hagman (Vice
Chair), Bradford, Carter, Feuer, Hayashi, Olsen, Skinner, Torres,
and Wieckowski)

FEBRUARY 24, 2012

An act to repeal Sections 77.7, 127.6, and 138.65 of the Labor
Code, relating to workers' compensation.


LEGISLATIVE COUNSEL'S DIGEST


AB 2302, as introduced, Committee on Insurance. Workers'
compensation: studies.
Existing law establishes a workers' compensation system,
administered by the Administrative Director of the Division of
Workers' Compensation, to compensate an employee for injuries
sustained in the course of his or her employment.
Existing law requires the Commission on Health and Safety and
Workers' Compensation to undertake a specified study examining the
causes of the number of insolvencies among workers' compensation
insurers between the calendar years of 1998 and 2008, to be conducted
by an independent research organization, and requires the commission
and the Department of Industrial Relations, no later than July 1,
2009, to publish the report of the study on its Internet Web site and
to inform the Legislature and the Governor of the availability of
the report.
Existing law requires the administrative director to begin a
study, on or before July 1, 2003, of medical treatment provided to
workers who have sustained industrial injuries and illnesses, and to
report and make recommendations, based on the results of the study,
to the Legislature, on or before July 1, 2004.
Existing law requires the administrative director, after
consultation with the Insurance Commissioner, to contract with a
qualified organization to study the effects of the 2003 and 2004
legislative reforms on workers' compensation insurance rates, and
requires the administrative director to submit the final study on or
before January 1, 2006.
This bill would repeal these workers' compensation study
requirements.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 77.7 of the Labor Code is repealed.
77.7. (a) A study shall be undertaken to examine the causes of
the number of insolvencies among workers' compensation insurers
within the past 10 years. The study shall be conducted by an
independent research organization under the direction of the
commission. Not later than July 1, 2009, the commission and the
department shall publish the report of the study on its Internet Web
site and shall inform the Legislature and the Governor of the
availability of the report.
(b) The study shall include an analysis of the following: the
access to capital for workers' compensation insurance from all
sources between 1993 and 2003; the availability, source, and risk
assumed of reinsurers during this period; the use of deductible
policies and their effect on solvency regulation; market activities
by insurers and producers that affected market concentration;
activities, including financial oversight of insurers, by insurance
regulators and the National Association of Insurance Commissioners
during this period; the quality of data reporting to the commissioner'
s designated statistical agent and the accuracy of recommendations
provided by the commissioner's designated statistical agent during
this period of time; and underwriting, claims adjusting, and
reserving practices of insolvent insurers. The study shall also
include a survey of reports of other state agencies analyzing the
insurance market response to rising system costs within the
applicable time period.
(c) Data reasonably required for the study shall be made available
by the California Insurance Guarantee Association, Workers'
Compensation Insurance Rating Bureau, third-party administrators for
the insolvent insurers, whether prior to or after the insolvency, the
State Compensation Insurance Fund, and the Department of Insurance.
The commission shall also include a survey of reports by the
commission and other state agencies analyzing the insurance market
response to rising system costs within the applicable period of time.

(d) The cost of the study is not to exceed one million dollars
($1,000,000). Confidential information identifiable to a natural
person or insurance company held by an agency, organization,
association, or other person or entity shall be released to
researchers upon satisfactory agreement to maintain confidentiality.
Information or material that is not subject to subpoena from the
agency, organization, association, or other person or entity shall
not be subject to subpoena from the commission or the contracted
research organization.
(e) The costs of the study shall be borne one-half by the
commission from funds derived from the Workers' Compensation
Administration Revolving Fund and one-half by insurers from
assessments allocated to each insurer based on the insurer's
proportionate share of the market as shown by the Market Share Report
for Calendar Year 2006 published by the Department of Insurance.
(f) In order to protect individual company trade secrets, this
study shall not lead to the disclosure of, either directly or
indirectly, the business practices of a company that provides data
pursuant to this section. This prohibition shall not apply to
insurance companies that have been ordered by a court of competent
jurisdiction to be placed in liquidation under the supervision of a
liquidator or other authority.

SEC. 2. Section 127.6 of the Labor Code is repealed.
127.6. (a) The administrative director shall, in consultation
with the Commission on Health and Safety and Workers' Compensation,
other state agencies, and researchers and research institutions with
expertise in health care delivery and occupational health care
service, conduct a study of medical treatment provided to workers who
have sustained industrial injuries and illnesses. The study shall
focus on, but not be limited to, all of the following:
(1) Factors contributing to the rising costs and utilization of
medical treatment and case management in the workers' compensation
system.
(2) An evaluation of case management procedures that contribute to
or achieve early and sustained return to work within the employee's
temporary and permanent work restrictions.
(3) Performance measures for medical services that reflect patient
outcomes.
(4) Physician utilization, quality of care, and outcome
measurement data.
(5) Patient satisfaction.
(b) The administrative director shall begin the study on or before
July 1, 2003, and shall report and make recommendations to the
Legislature based on the results of the study on or before July 1,
2004.
(c) In implementing this section, the administrative director
shall ensure the confidentiality and protection of patient-specific
data.

SEC. 3. Section 138.65 of the Labor Code is repealed.
138.65. (a) The administrative director, after consultation with
the Insurance Commissioner, shall contract with a qualified
organization to study the effects of the 2003 and 2004 legislative
reforms on workers' compensation insurance rates. The study shall do,
but not be limited to, all of the following:
(1) Identify and quantify the savings generated by the reforms.
(2) Review workers' compensation insurance rates to determine the
extent to which the reform savings were reflected in rates. When
reviewing the rates, consideration shall be given to an insurer's
premium revenue, claim costs, and surplus levels.
(3) Assess the effect of the reform savings on replenishing
surpluses for workers' compensation insurance coverage.
(4) Review the effects of the reforms on the workers' compensation
insurance rates, marketplace, and competition.
(5) Review the adequacy and accuracy of the pure premium rate as
recommended by the Workers' Compensation Insurance Bureau and the
pure premium rate adopted by the Insurance Commissioner.
(b) Insurers shall submit to the contracting organization premium
revenue, claims costs, and surplus levels in different timing
aggregates as established by the contracting organization, but at
least quarterly and annually. The contracting organization may also
request additional materials when appropriate. The contracting
organization and the commission shall maintain strict confidentiality
of the data. An insurer that fails to comply with the reporting
requirements of this subdivision is subject to Section 11754 of the
Insurance Code.
(c) The administrative director shall submit to the Governor, the
Insurance Commissioner, and the President pro Tempore of the Senate,
the Speaker of the Assembly, and the chairs of the appropriate policy
committees of the Legislature, a progress report on the study on
January 1, 2005, and July 1, 2005, and the final study on or before
January 1, 2006. The Governor and the Insurance Commissioner shall
review the results of the study and make recommendations as to the
appropriateness of regulating insurance rates. If, after reviewing
the study, the Governor and the Insurance Commissioner determine that
the rates do not appropriately reflect the savings and the timing of
the savings associated with the 2003 and 2004 reforms, the Governor
and the Insurance Commissioner may submit proposals to the
Legislature. The proposals shall take into consideration how rates
should be regulated, and by whom. In no event shall the proposals
unfairly penalize insurers that have properly reflected the 2003 and
2004 reforms in their rates, or can verify that they have not
received any cost savings as a result of the reforms.
(d) The cost of the study shall be borne by the insurers up to one
million dollars ($1,000,000). The cost of the study shall be
allocated to an insurer based on the insurer's proportionate share of
the market.