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F I S C A L I M P A C T R E P O R T

SPONSOR Martinez

DATE TYPED 2/28/2005 HB

SHORT TITLE Temporary Disability Benefits Act

SB 1070

ANALYST Dunbar

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$145.0

See Narrative Non-Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVANUE

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Subsequent

Years Impact

$145.0

Non-Recurring State

Temporary

Disabilities

Fund

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Labor (DOL)

Human Services Department (HSD)

NM Public Education Department (NMPED)

Workers’ Compensation Administration (WCA)

SUMMARY

Synopsis of Bill

Senate Bill 1070 creates a new act that provides for temporary disability for non-work-related

illness or injury through a state temporary disability fund or private employer plans. The private

disability insurance plans can be entered into by employers or unions to compensate privately

employed individuals, unless the State elects to participate. The bill also creates The State Tem-

Senate Bill 1070 Page 2

porary Disability Benefits Fund and provides for penalties regarding the increasing or decreasing

of temporary disability benefits.

Significant Issues

The Act requires the formation on a new division for the Department of Labor, which is tasked

with the Act’s administration.

A new advisory council on temporary disability benefits will be formed and will be comprised of

eleven members, all but one to be appointed by the Governor. The council will be paid per-diem

and mileage as provided in the Per-Diem and Mileage Act.

The maximum total temporary disability benefits payable to a covered individual for a period of

disability shall be either 26 times the covered individual’s weekly temporary disability benefit

amount or one-third of the covered individual’s total wages in the base year, whichever is less.

FISCAL IMPLICATIONS

DOL projects the following cost to contract for implementing the system:

1.

Estimated IT Cost for the automation portion of the disability temporary benefits pro-

gram.

Hardware Cost:

PC - $12, 000 per computer

Printer Cost -

Office document printer - $3,000 per printer * 2 = $6,000

Check printer - $5,000 per printer * 2 = $10,000

Development Cost –

Senior programmer analyst - $105.00 hr * 460 hr = $48,300.00

Junior programmer analyst - $95.00 hr * 460 hr = $43,700

Computer engineer - $105.00 hr * 240 hr = $25,200

Recurring Cost –

Maintenance –

Junior programmer analyst - $95.00 hr * 80 hr = $7,600

Computer engineer - $105.00 hr * 40 hr = $4,200

Estimated Cost of automation = $145,000.00 (this estimate does not include the cost of

PC’s)

ADMINISTRATIVE IMPLICATIONS

Pursuant to this Act, the Department of Labor will be tasked with the following:

1.

Provide notice to all recipients of disability benefits explaining conditions for receiving

unemployment compensation.

2.

Review and approve private insurance plans

3.

Process and monitor payments of Temp. Disability benefits to eligible persons whether

from private plans or the disability fund.

Senate Bill 1070 Page 3

4.

Conduct investigations and hold adjudicatory hearings with hearing officers in the event

there is disagreement between the employer and the injured employee regarding eligibil-

ity for temporary disability.

5.

Pay for the cost of recording, transcribing and preparation of record.

6.

Pay for intermittent medical examination by a provider chosen by the department.

These requirements will require the Department to establish an entirely new Division to adminis-

ter and adjudicate these benefits. Additional FTEs and space with adequate technological support

will also be needed. Without further information, it is difficult for the department to determine

the entire cost of establishing a new Division with new duties. The department is unable to pro-

ject how many FTE will be required to implement this new law or the level of FTE necessary to

comply with the law (e.g. attorney vs clerk)

The Bill requires that the labor department approve private plans for disability benefits. NM

General Service Department Risk Management or the Insurance Commissioner is better situated

to conduct this survey. NMDOL employees are not familiar with state insurance laws, which is a

specialized legal area.

TECHNICAL ISSUES

•

Section 2: DEFINITIONS state in part …“covered employer” means an individual or or-

ganization, who is an employer, except the state, its political subdivisions or an instrumental-

ity of the state, unless the governmental entity elects to become a covered employer. There-

fore, this bill appears to provide the state the option of whether to become a “covered em-

ployer” or not.

•

This bill does not describe in detail how the state temporary disability benefits fund will be

funded by the “covered employer” and the “covered individual.” Therefore, the budget im-

pact for state departments cannot be determined cannot be determined at this time.

Subsection C of Section 17 defines a minor under the age of 21. NMSA 1978, Section 28-6-1

provides that … “Except as … otherwise specifically provided by existing law, any person who

has reached his eighteenth birthday shall be considered to have reached his majority as provided

in Section 12-2-2 NMSA 1978 [repealed] and is an adult for all purposes the same as if he had

reached his twenty-first birthday.”

The bill provides, in Section 13, for various grounds for the denial of benefits. However, the bill,

according to WCA, does not provide any mechanism for the Fund or the employer to contest a

claim for benefits (except against a private plan) in the event that one or both believe the claim-

ing individual is not eligible. This may result in an inability to control fraudulent claims

WCA points out that the phrase “except for benefits for permanent partial or permanent total dis-

ability previously incurred” is not explained, and the scope of the intended exclusion is not clear.

If this is intended to refer to cases where the workers’ eligibility for workers compensation bene-

fits has been exhausted, then this language might be construed as a de facto increase in workers’

compensation benefits.

OTHER SUBSTANTIVE ISSUES

Senate Bill 1070 Page 4

Currently, eligible state employees have a non-occupational disability plan that they can use. In

addition, a PERA-vested (five or more years of service credit) member is eligible for a non-duty

disability benefit as provided by the provisions of PERA.

Hearing Officer’s final order on a complaint is binding on all the parties and not subject to ap-

peal within the department but may “secure judicial review.” The Court in which the judicial

review might occur is not identified.

If employee prevails in complaint and gets award of benefits, the hearing officer may award at-

torney fees not to exceed 20% of the amount of award to be paid by the insurer or employer.

Appearance fees for medical witnesses may be assessed against individual employer or insurer.

Information gathered for the purpose of a hearing is not subject to public inspection and is confi-

dential.

ANA/sec