Date Requested: January 31, 2015
Time Requested: 02:30 PM
Agency: Insurance Commission
CBD Number: Version: Bill Number: Resolution Number:
2207 Introduced HB2426
CBD Subject: Workers Comp.


FUND(S):

7173, 7152

Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


     HB 2426 permits volunteer fire departments (VFDs) to enter the State Agency Worker's Compensation Program (SAWC) which is administered by the Offices of the Insurance Commissioner (OIC).
    
     HB 2426 would have a negative impact on the existing program designed to insure the worker's compensation risk of the 108 currently participating state agencies. All currently participating agencies are likely to experience significantly higher premiums if VFDs are included. It is also possible that the current insurance carrier, Zurich Insurance Company may be unwilling to write the VFD exposure and may cancel the current policy.
    
     HB 2426 could also negatively impact WV VFDs because participation in the SAWC by VFDs may result in significantly higher premiums, loss fund allocation participation and greater fixed / administrative costs.
    
     It is not possible to quantify the precise amount of increased costs that will be incurred by the state agencies or by the VFDs, as the amount of increase will vary from agency to agency and VFD to VFD.
    
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


    



Memorandum


     H. B. 2426
     Fiscal Impact on SAWC Program
     February 2015
    
    
     H. B. 2426 provides the opportunity for volunteer fire departments (VFDs) to enter the state agency workers’ compensation (SAWC) program administered by the West Virginia Offices of the Insurance Commissioner (WVOIC) and written by Zurich Insurance Company.
    
     The current SAWC plan structure includes 108 state agencies with nearly 900 locations throughout the state. There are approximately 24,000 state employees covered under the SAWC policy. The premium and loss fund costs for the policy are allocated among all members based on their payroll, classification and claims experience. If additional loss fund premium is due, the additional portion is only allocated among agencies that experienced losses during the policy period.
    
     Due to the high safety risk, volatility and hazardous exposure of the volunteer firefighting operations, none of the 261 insurance carriers offering workers’ compensation coverage in WV are willing to write VFD policies. This is a national trend as carriers are unwilling to assume the liability of writing these types of policies. Therefore, all WV VFDs are currently in the assigned risk pool where there is a minimum premium of $1,250 for a guaranteed cost policy. The minimum premium covers all losses and other administrative fees. Under the SAWC plan, VFDs may be subject to substantially higher premiums, loss fund allocations and other fixed and/or administrative costs.
    
     Impacts to the VFD if merged into the SAWC program include:
    
     When a claim is incurred by a volunteer, claim benefits are paid based on the volunteer’s regular or “day” wages. Estimated losses could vary extensively depending on a volunteer’s wages.
    
     As noted above, carriers are not offering coverage to VFDs in the voluntary market. The SAWC program carrier, Zurich Insurance, may be unwilling to write the VFD exposure and may cancel the SAWC policy. As no other carrier has an appetite for writing VFD coverage, it could be detrimental to all state agencies and the program as a whole and could potentially force the plan into the assigned risk market.
    
     The WVOIC is not adequately staffed to administer the policy with the inclusion of approximately 420 VFD locations. Administration includes agency invoicing, policy renewal, claims reviews, providing safety measures and inspections, implementing return to work policies, audit processing and general agency updates. The current system invoices state agencies for their portion of the policy costs and the agencies pay via IET (Internal Exchange Transaction). As VFDs are not state agencies and cannot access the State's wvOASIS system, additional resources would be required to process and reconcile checks from each VFD.
    
    
     Impacts to state agencies if VFDs are merged into the SAWC program include:
    
     Many state agencies are currently under budget cut mandates and hiring freezes in order to balance the state budget. By including VFD experience, all members would most likely experience increased premiums.
    
     The WVOIC and the state agency members have implemented safety programs and processes that are already showing positive trends. The program’s experience rating factor has decreased from 1.28 to 1.10 due to these efforts in providing safer work environments for state employees. With over 420 de-centralized VFD locations added to the program as well as the losses the VFDs will experience, it is quite plausible to conclude that the experience rating factor will increase thus erasing all current progress.
    
     As the program administrator, the WVOIC has no regulatory authority to mandate SAWC members comply with safety recommendations, plans and processes or to return audit information, provide policy renewal data, etc. By merging the VFDs into the program, administration costs of the policy may significantly increase due to the time and efforts that may be needed to provide safety services and invoicing procedures to all VFD locations. In addition, with no authority to ensure compliance with the safety programs, loss fund, fixed costs and true up costs may increase significantly thus causing all members to experience much higher policy premiums and costs.
    
     The WVOIC has concerns over the solvency of the VFDs and the capability to “pay their share” as well as to provide policy information needed for adequate policy pricing due to the nature of premium determination for volunteers. If any member of the program defaults on their premium and other policy costs or needs, the remaining members must carry the financial burden – a burden that budget strapped agencies may not be able to cover.
    
     In summary, it is our belief that by including volunteer fire departments within the SAWC plan it would put a strain on the entire program and all state agencies by most likely increasing claims costs and premiums, potentially losing a 25% credit all agencies are currently receiving in addition to finding a carrier willing to write a policy with VFD exposure. As the State of West Virginia is ultimately responsible for covering the costs of the policy, it is anticipated that more budgeted revenue would be needed by all members as well as an increase in the Volunteer Premium Subsidy to cover the loss fund, policy premium and any audit and/or true up expenses.
    
     The following is a list of state agencies who currently participate in the SAWC, whose budgets would be negatively impacted if HB 2426 is enacted:
    
     Agency:
     AIR & ENVIRONMENTAL QUALITY BOARD
     ALCOHOL BEVERAGE CONTROL ADMINISTRATION
     BOARD OF COAL MINE HEALTH & SAFETY
     CIVIL CONTINGENT FUND
     COAL HERITAGE HIGHWAY AUTHORITY
     COMMISSION FOR NATIONAL & COMMUNITY SERVICE - VOLUNTEER WV
     DEPARTMENT OF VETERANS ASSISTANCE
     DEPT OF COMMERCE OFFICE OF THE SECRETARY
     DIVISION OF JUSTICE AND COMMUNITY SERVICES
     DIVISION OF PROTECTIVE SERVICES
     DIVISION OF PUBLIC TRANSIT
     DIVISION OF TOURISM
     GOVERNOR's Office OF WEST VIRGINIA
     HEALTH CARE COST REVIEW AUTHORITY
     HOPEMONT HOSPITAL
     JACKIE WITHROW HOSPITAL
     JOHN MANCHIN SR HEALTH CARE CENTER
     MILDRED MITCHELL BATEMAN HOSPITAL
     MILITARY AFFAIRS - OFFICE OF THE SECRETARY
     MUNICIPAL BOND COMMISSION
     MUNICIPAL PENSIONS OVERSIGHT BOARD
     OFFICE OF ADMINISTRATIVE HEARINGS
     OFFICE OF ECONOMIC OPPORTUNITY
     OFFICE OF MINORITY AFFAIRS
     OFFICE OF TAX APPEALS
     PUBLIC PORT AUTHORITY
     STATE BUDGET OFFICE
     STATE RAIL AUTHORITY
     WELCH EMERGENCY HOSPITAL
     WEST VA SCHOOLS FOR THE DEAF & THE BLIND
     WEST VIRGINIA BOARD OF ACCOUNTANCY
     WEST VIRGINIA BOARD OF OPTOMETRY
     WEST VIRGINIA BUREAU OF SENIOR SERVICES
     WEST VIRGINIA DEPARTMENT OF AGRICULTURE
     WEST VIRGINIA DEPARTMENT OF CORRECTIONS
     WEST VIRGINIA DEPARTMENT OF EDUCATION
     WEST VIRGINIA DIV OF JUVENILE SERVICES
     WEST VIRGINIA DIVISION OF FORESTRY
     WEST VIRGINIA DIVISION OF HIGHWAYS
     WEST VIRGINIA DIVISION OF MOTOR VEHICLES
     WEST VIRGINIA DIVISION OF NATURAL RESOURCES
     WEST VIRGINIA HEALTH INFORMATION NETWORK
     WEST VIRGINIA HOSPITAL FINANCE AUTHORITY
     WEST VIRGINIA LAKIN STATE HOSPITAL
     WEST VIRGINIA LOTTERY
     WEST VIRGINIA MILITARY AUTHORITY
     WEST VIRGINIA OFFICE OF MINERS HEALTH SAFETY AND TRAINING
     WEST VIRGINIA RACING COMMISSION
     WEST VIRGINIA REAL ESTATE COMMISSION
     WEST VIRGINIA STATE FIRE COMMISSION
     WEST VIRGINIA STATE POLICE
     WILLIAM R SHARPE JR HOSPITAL
     WORKFORCE WEST VIRGINIA
     WV ADJUTANT GENERAL DEPARTMENT
     WV AERONAUTICS COMMISSION
     WV ATTORNEY GENERAL'S OFFICE
     WV BOARD OF ARCHITECTS
     WV BOARD OF CHIROPRACTIC EXAMINERS
     WV BOARD OF DENTISTRY
     WV BOARD OF EXAMINERS FOR REGISTERED PROF NURSES
     WV BOARD OF EXAMINERS IN COUNSELING
     WV BOARD OF EXAMINERS OF PSYCHOLOGISTS
     WV BOARD OF PHARMACY
     WV BOARD OF PHYSICAL THERAPY
     WV BOARD OF PROFESSIONAL SURVEYORS
     WV BOARD OF REG FOR PROF ENGINEERS
     WV BOARD OF RESPIRATORY CARE
     WV BOARD OF SOCIAL WORK
     WV BOARD OF SPEECH PATHOLOGY AND AUDIOLOGY
     WV BOARD OF VETERINARY MEDICINE
     WV CIVIL AIR PATROL
     WV COURTHOUSE FACILITIES IMPROVEMENT AUTHORITY
     WV DEP - OIL & GAS CONSERVATION COMMISSION
     WV DEP - SOLID WASTE MANAGEMENT BD
     WV DEPARTMENT OF EDUCATION WORK BASED LEARNING
     WV DEPARTMENT OF ENVIRONMENTAL PROTECTION
     WV DEPARTMENT OF HEALTH AND HUMAN RESOURCES
     WV DEPT OF EDUCATION & THE ARTS - CENTER FOR PROFESSIONAL DEVELOPMENT
     WV DEPT OF EDUCATION & THE ARTS - EDUCATIONAL BROADCASTING AUTHORITY
     WV DEPT OF EDUCATION & THE ARTS - EDUCATIONAL BROADCASTING WNPB TV
     WV DEPT OF EDUCATION & THE ARTS - GRANDVIEW ED TV WSWP TV
     WV DEPT OF EDUCATION & THE ARTS - OFFICE OF THE SECRETARY
     WV DEPT OF EDUCATION & THE ARTS - WEST VIRGINIA PUBLIC RADIO
     WV DEPT OF FINANCE & ADMINISTRATION
     WV DEVELOPMENT OFFICE
     WV DHHR - NURSING HOME ADMINISTRATORS LICENSING
     WV DHHR SECRETARY'S OFFICE
     WV DIV OF HOMELAND SECURITY AND EMERGENCY MANAGEMENT
     WV DIVISION OF CULTURE & HISTORY
     WV DIVISION OF ENERGY
     WV DIVISION OF FINANCIAL INSTITUTIONS
     WV DIVISION OF LABOR
     WV DIVISION OF REHABILITATION SERVICES
     WV ECONOMIC DEVELOPMENT AUTHORITY
     WV GEOLOGICAL-ECONOMIC SURVEY
     WV HUMAN RIGHTS COMMISSION
     WV INSURANCE COMMISSIONER
     WV LIBRARY COMMISSION
     WV MASSAGE THERAPY LICENSURE BOARD
     WV MEDICAL IMAGING & RADIATION THERAPY TECHNOLOGY BOARD OF EXAMINERS
     WV PAROLE BOARD
     WV REAL ESTATE APPRAISER LICENSING & CERTIFICATION BOARD
     WV REGIONAL JAIL & CORRECTIONAL FACILITY
     WV SENATE
     WV STATE TAX DEPARTMENT
     WV STATE TREASURER'S OFFICE
     WV WATER DEVELOPMENT AUTHORITY
    
    
    
    
    
    
    



    Person submitting Fiscal Note: Melinda Kiss
    Email Address: Melinda.Kiss@wvinsurance.gov