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F I S C A L I M P A C T R E P O R T
SPONSOR SCORC
ORIGINAL DATE
LAST UPDATED 2/16/07 HB
SHORT TITLE Self-Insured Group Reporting Requirements
SB 490/SCORCS
ANALYST Lucero
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
NFI
NFI
NFI
NFI
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
LFC Files
SUMMARY
Synopsis of Bill
Senate Corporations Committee substitute for Senate Bill 490 amends the Workers’
Compensation Act to exempt group self-insurers from providing evidence of the net worth of all
the group’s members if the group’s annual financial statement for the prior calendar year shows a
surplus of at least one-third of its claim reserves and is not less than five million dollars
($5,000,000). The bill also corrects grammatical content of the original act.
FISCAL IMPLICATIONS
No known fiscal impact to the Workers’ Compensation Administration.
SIGNIFICANT ISSUES
At this time, group self-insurers are required to have a combined net worth of $3 million for all
its members. The requirement exists because the members share joint and several liabilities.
Recently, the WCA passed a regulation requiring the groups to provide documentation
establishing the combined net worth of all its members. The language contained in this
amendment exempts some employers from that regulation. Verification of the net worth
requirement is a crucial element in ensuring the financial solvency of a group self-insurer.
The bill provides that if a group had a surplus of at least one-third of its claim reserves and not
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Senate Bill 490/ SCORCS – Page
2
less than $5 million minimum then the group shall not be required to provide evidence of the net
worth of all of the group’s members. The $5 million minimum is greater than the initial
requirement of $3 million to set up a group self-insurer; which seems evidence enough of a
group’s solvency.
PERFORMANCE IMPLICATIONS
No significant impact to Workers’ Compensation Administration, but the act does nullify a
portion of a current regulation.
ADMINISTRATIVE IMPLICATIONS
The proposed new amendment to the Act might make the verification process a bit easier. Those
groups who are exempted may not receive as much scrutiny as those who can’t be exempted
because they haven’t met the $5 million threshold.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
None at this time.
TECHNICAL ISSUES
The Advisory Council on Workers’ Compensation has not approved this bill.
It is unclear whether “a surplus of at least one-third of its claim reserve and not less than five
million dollars ($5,000,000)" is sufficient proof of solvency because WCA has not made an
analysis such as this for self insured groups. The $5 million threshold is greater than the initial
requirement establishing self-insured groups.
OTHER SUBSTANTIVE ISSUES
None at this time.
ALTERNATIVES
None at this time.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
Status Quo
DL/mt