Report Title:

Workers' Compensation

Description:

Allows employers to establish individual medical trust accounts to cover the health care expenses of employees arising from work-related injuries.

HOUSE OF REPRESENTATIVES

H.B. NO.

450

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO WORKERS' COMPENSATION.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Litigating workers' compensation claims is a major cost for many employers. The current system is unwieldy and expensive. The purpose of this Act is to authorize employers to create individual medical trust accounts for each employee, funded by the employer, to provide direct coverage of health care expenses. A worker injured on the job for anything short of a catastrophic injury would use the worker's own individual medical trust account to pay for those injuries, as well as for the first $3,000 of catastrophic work-related injuries. The present structure would be retained only for catastrophic injuries.

To protect new workers, a paper credit of $3,000 toward the employee's account would be placed on the employer's books. The credit would be reduced as payments are actually made into the account. The employer would be responsible for these payments only until the amount in the account first reaches $3,000.

This restructuring would eliminate litigation over less severe injuries. It will reduce workers' compensation costs for employers by allowing a much higher deductible, since payment for the less severe injuries will be covered by the individual medical trust account, and not by workers' compensation insurance. It would also encourage employees to minimize health care expenses for the more common and less serious personal injuries, as the employee will be eligible to receive an annual bonus of five per cent of the moneys in the account when the total amount reaches $12,000, and two payouts from the individual medical trust accounts, one-third at age sixty and the balance at age seventy. To the extent employees take better care of themselves, they will receive the benefit of their efforts. Thus, the creation of individual medical trust accounts will serve as an incentive to employees to avoid on-the-job injuries.

SECTION 2. Chapter 386, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART    . INDIVIDUAL MEDICAL TRUST ACCOUNTS

§386-A Individual medical trust accounts. (a) Any employer may establish an individual medical trust account for each employee with a financial or trust institution doing business in the State. The individual medical trust accounts shall be funded by the employer in an amount to be established by the insurance commissioner, in consultation with an actuary, which shall be adjusted at the commissioner's discretion, also in consultation with an actuary; provided that the amount of the employer's contributions be equal to or less than the amount of the premium payments in effect on June 30, 2000, and the amount of the premiums required under the system implemented under this section, which involve a higher deductible and fewer covered injuries. The documentation establishing the account shall include the employee's birthdate. The financial or trust institution shall serve as the trustee of the account.

Each employee participating in the account program shall have funds transmitted directly into the account by the employer; provided that, upon the establishment of the employee's first account, the employer shall provide an initial paper credit to the employee's account in the amount of $3,000. This amount shall not be transmitted but shall remain on the employer's books and shall decrease in the same amount as the actual payments are transferred to the institution handling the account. When the amount in the account reaches $3,000, the paper credit shall be reduced to zero and be permanently removed from the employer's liabilities. If an employee needs to draw on funds from the account before the paper credit is removed, the employer shall be liable to the injured employee in the amount of credit for that employee that remains on its books.

(b) Once established, the individual medical trust account shall be retained by the employee throughout the employee's working life until final distribution pursuant to this part. A financial or trust institution holding one or more individual medical trust account that ceases to do business in the State shall contact the employee for instructions on transfer of the individual medical trust account to another financial or trust institution doing business in the State.

(c) The financial or trust institution shall inform the employer whenever the balance in the individual medical trust account reaches $5,000 or $10,000. Upon the account balance reaching $5,000, the employer's contribution shall automatically be reduced by twenty per cent. Upon the account balance reaching $10,000, the contribution shall be decreased by the same amount. If the account balance drops below these thresholds, the amount of the employer's contribution shall be reinstated at the previous level, subject to increases established by the insurance commissioner.

§386-B Use of individual medical trust accounts. (a) Any employee who:

(1) Suffers personal injury either by accident arising out of and in the course of employment, or by disease proximately caused by or resulting from the nature of employment, which is not a disability as defined in section 386-1, shall use the moneys in the fund; or

(2) Suffers a disability as defined in section 386-1, shall use the first $3,000 in the fund, or the moneys credited to the employee's account as specified in section 386-A(a);

to pay for medical care, as defined in section 386-1, from any willing provider.

The employee shall certify to the employee's health care provider that the injury is work-related, and the provider shall send a copy of the bill to both the employee and the employer. The employee has ten days in which to dispute the billing in writing to the employer. If no written dispute is provided within this time period, the employer shall forward a copy of the bill to the institution holding the trust account with instructions to pay the bill. The institution shall pay the provider directly.

(b) An employee suffering a personal injury under this part who experiences temporary total or temporary partial disability may also request that lost weekly wages be paid from the individual medical trust accounts, pursuant to the schedules established in sections 386-31(b) and 386-32(b). Average weekly wages shall be as calculated as in section 386-51. The employer shall verify the eligibility of the claim under this part, and if found to be applicable, shall promptly notify the financial institution holding the individual medical trust accounts of the amount due for lost wages, and the financial institution shall remit payment for the lost wages to the employee.

§386-C Responsibilities and liabilities. (a) It shall be the responsibility of the employee to direct reimbursement through the individual medical trust accounts only for injuries covered under this part, and to apply to the employer for reimbursement for lost wages only as provided in this part. An employee who falsely certifies to a health care provider or an employer that the personal injury is work-related shall be subject to criminal sanctions under chapter 710, part V.

(b) It shall be the responsibility of the health care provider to send billings to the employee and employer only upon a certification in writing by the employee that the injury is covered under this part. A health care provider who falsely certifies or fails to have the employee certify shall be liable for an administrative fine of $1,000 per incident.

(c) It shall be the duty of the employer to promptly verify eligibility for a claim of lost wages under this part and to promptly notify the financial institution of the amount of lost wages eligible to be transferred to the employee. An employer who fails to comply with this provision shall be liable for an administrative fine of $100 per incident.

(d) Payment in full from an employee's individual medical trust account for the cost of medical treatment for injuries covered under this part shall be considered fulfillment of the employer's obligation under this chapter for such injuries.

(e) It shall be the responsibility of the financial or trust institution to honor only valid claims upon the individual medical trust accounts. A financial institution shall be entitled to collect a minimum administrative fee from each account. A financial institution that honors an invalid claim when the institution knew or should have known that the claim was invalid shall be liable for a fine of twice the amount of the moneys improperly expended.

(f) This section shall be enforced by the director, who shall have general supervisory powers and duties over compliance under this part; provided that the offense of perjury shall be enforced by the prosecutor. All moneys collected by the director under this section shall be transferred to the credit of the general fund.

§386-D Reporting. The financial institution shall transmit quarterly reports on the individual medical trust account to the employee and the employer.

§386-E Disposition of the individual medical trust accounts. (a) If the employee suffers a serious injury resulting in a permanent total disability so that the employee is unable to work for the current employer, the current employer shall be entitled to receive a refund of all contributions paid into that employee's account, excluding the amount necessary to satisfy the deductible under the catastrophic insurance policy.

(b) Once the amount reaches $12,000, upon written request, the employee may have five per cent of the amount transferred to the employee. The employee may request this transfer no more than once per calendar year, provided that the transfer may only be made if at the time the request is transmitted to the institution, at least $12,000 remains in the account.

(c) Upon written request by the employee upon reaching age sixty, the financial institution shall transmit one-third of the balance in the individual medical trust accounts to the employee, whether retired or not.

(d) Upon retirement at any age, the employee and employer shall notify the financial institution. The employee shall be entitled to have any health insurance premiums and any health care provider copayments or other expenses billed to the individual medical trust accounts.

(e) Upon written request by the employee upon reaching age seventy, the financial or trust institution shall transmit the balance of the funds in the individual medical trust accounts to the employee; provided that the employee may elect to retain the moneys in the account which may be drawn on for any use.

(f) If an employee dies while a financial or trust institution holds individual medical trust accounts funds for that employee, the employee's personal representative shall apply to the financial institution for transfer of the individual medical trust accounts to the deceased employee's estate. The individual medical trust accounts shall be used first to satisfy any outstanding medical expenses not otherwise covered, and then all remaining proceeds shall become part of the estate of the employee."

SECTION 3. Section 235-7, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There shall be excluded from gross income, adjusted gross income, and taxable income:

(1) Income not subject to taxation by the State under the Constitution and laws of the United States;

(2) Rights, benefits, and other income exempted from taxation by section 88-91, having to do with the state retirement system, and the rights, benefits, and other income, comparable to the rights, benefits, and other income exempted by section 88-91, under any other public retirement system;

(3) Any compensation received in the form of a pension for past services;

(4) Compensation paid to a patient affected with Hansen's disease employed by the State or the United States in any hospital, settlement, or place for the treatment of Hansen's disease;

(5) Except as otherwise expressly provided, payments made by the United States or this State, under an act of Congress or a law of this State, which by express provision or administrative regulation or interpretation are exempt from both the normal and surtaxes of the United States, even though not so exempted by the Internal Revenue Code itself;

(6) Any income expressly exempted or excluded from the measure of the tax imposed by this chapter by any other law of the State, it being the intent of this chapter not to repeal or supersede any such express exemption or exclusion;

(7) The first $1,750 received by each member of the reserve components of the Army, Navy, Air Force, Marine Corps, or Coast Guard of the United States of America, and the Hawaii national guard as compensation for performance of duty;

(8) Income derived from the operation of ships or aircraft if the income is exempt under the Internal Revenue Code pursuant to the provisions of an income tax treaty or agreement entered into by and between the United States and a foreign country, provided that the tax laws of the local governments of that country reciprocally exempt from the application of all of their net income taxes, the income derived from the operation of ships or aircraft which are documented or registered under the laws of the United States;

(9) The value of legal services provided by a prepaid legal service plan to a taxpayer, the taxpayer's spouse, and the taxpayer's dependents;

(10) Amounts paid, directly or indirectly, by a prepaid legal service plan to a taxpayer as payment or reimbursement for the provision of legal services to the taxpayer, the taxpayer's spouse, and the taxpayer's dependents;

(11) Contributions by an employer to a prepaid legal service plan for compensation (through insurance or otherwise) to the employer's employees for the costs of legal services incurred by the employer's employees, their spouses, and their dependents; [and]

(12) Amounts received in the form of a monthly surcharge by a utility acting on behalf of an affected utility under section 269-16.3 shall not be gross income, adjusted gross income, or taxable income for the acting utility under this chapter. Any amounts retained by the acting utility for collection or other costs shall not be included in this exemption[.]; and

(13) Amounts received as reimbursements for health care expenses and lost wages from an individual medical trust account made in accordance with part     of chapter 386."

SECTION 4. Section 386-1, Hawaii Revised Statutes, is amended as follows:

1. By amending the definition of "disability" to read:

""Disability" means loss or impairment of a physical or mental function[.] when the loss or impairment results in death or an injury that consists, in whole or in part, in a significant permanent loss of use of a part or function of a body."

2. By amending the definition of "personal injury" to read:

""Personal injury" includes death resulting [therefrom.] from an injury and any injury that causes a disability."

SECTION 5. Section 386-3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) If an employee suffers personal injury either by accident arising out of and in the course of the employment or by disease proximately caused by or resulting from the nature of the employment, the employee's employer or the special compensation fund shall pay compensation to the employee or the employee's dependents as provided in this chapter. If an employee suffers an injury cognizable under part     , the employee shall not be entitled to compensation under this section.

Accident arising out of and in the course of the employment includes the wilful act of a third person directed against an employee because of the employee's employment."

SECTION 6. Section 386-4, Hawaii Revised Statutes, is amended to read as follows:

"§386-4 Voluntary coverage. Any employer who has individuals in the employer's employment who are not employees as defined in section 386-1 may elect to provide coverage for them under this chapter. During the period for which the election is effective, the employer and the individuals in the employer's employment covered thereby shall be deemed to be employees and be subject in all respects to this chapter.

Election by any employer to provide coverage under this chapter shall be made by securing compensation to the individuals in the employer's employment affected thereby in the manner provided in section 386-121 and giving the notice prescribed by section 386-122[.]; or by establishing an individual medical trust account pursuant to part    .

Every employer who elects to provide coverage under the terms of this section shall be bound by the election until January 1 of the next succeeding year and for terms of one year thereafter. Any such employer may elect to discontinue the coverage for personal injuries occurring after the expiration of any such calendar year by filing notice of the election with the director of labor and industrial relations at least sixty days prior to the expiration of any such calendar year and at the same time posting notices to that effect conspicuously in such places of work that they can reasonably be expected to come to the attention of all individuals affected thereby."

SECTION 7. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2003; provided that section 3 shall apply to taxable years beginning after December 31, 2002.

INTRODUCED BY:

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