Senator Curtis S. Bramble proposes the following substitute bill:


1     
WORKERS' COMPENSATION FUND AMENDMENTS

2     
2015 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Curtis S. Bramble

5     
House Sponsor: James A. Dunnigan

6     

7     LONG TITLE
8     General Description:
9          This bill modifies the Insurance Code to address the Workers' Compensation Fund.
10     Highlighted Provisions:
11          This bill:
12          ▸     modifies the definitions;
13          ▸     addresses the powers of the fund and its subsidiaries;
14          ▸     changes the method by which board members are selected;
15          ▸     removes references to the Governor's Office of Economic Development;
16          ▸     addresses compensation of board members; and
17          ▸     makes technical and conforming amendments.
18     Money Appropriated in this Bill:
19          None
20     Other Special Clauses:
21          This bill provides a special effective date.
22     Utah Code Sections Affected:
23     AMENDS:
24          31A-33-101, as last amended by Laws of Utah 2000, Chapter 222
25          31A-33-103.5, as last amended by Laws of Utah 2001, Chapters 33 and 116
26          31A-33-106, as last amended by Laws of Utah 2007, Chapter 74
27     

28     Be it enacted by the Legislature of the state of Utah:
29          Section 1. Section 31A-33-101 is amended to read:
30          31A-33-101. Definitions.
31          As used in this chapter:
32          (1) "Board" means the board of directors of the Workers' Compensation Fund.
33          (2) "Chief executive officer" means the chief executive officer appointed by the board.
34          (3) "Director" means a member of the board.
35          (4) "Fund" and "Workers' Compensation Fund" mean the nonprofit, quasi-public
36     corporation established by this chapter.
37          (5) "Injury Fund" means the premiums, reserves, investment income, and any other
38     funds administered by the Workers' Compensation Fund as provided in this chapter.
39          (6) "Joint enterprise" means a joint business activity either for-profit or not-for-profit:
40          (a) by which two or more persons provide insurance, products, or services; and
41          (b) that is established by contract between the persons providing the insurance,
42     products, or services.
43          (7) (a) "Workers' compensation products and services" means:
44          (i) medical or lost time claims management;
45          (ii) utilization review;
46          (iii) rehabilitation counseling or training;
47          (iv) fraud detection for workers' compensation claims;
48          (v) loss prevention or safety consultation;
49          (vi) data or information reporting or processing involving workers' compensation;
50     [and]
51          (vii) services related to improved employment practices, procedures, and data security;
52     and
53          [(vii)] (viii) liability insurance claims management if the claims management is related
54     to or arising out of:
55          (A) the sale of workers' compensation products and services described in Subsections
56     (7)(a)(i) through [(vi)] (vii) by:
57          (I) the Workers' Compensation Fund; or
58          (II) a subsidiary of the fund; or
59          (B) workers' compensation insurance coverage through:
60          (I) the Workers' Compensation Fund; or
61          (II) a subsidiary of the fund in accordance with Section 31A-33-103.5.
62          (b) "Workers' compensation products and services" does not include the bearing of any
63     insurance risk associated with insurance coverage.
64          Section 2. Section 31A-33-103.5 is amended to read:
65          31A-33-103.5. Powers of fund -- Limitations.
66          (1) The fund may form or acquire subsidiaries or enter into a joint enterprise:
67          (a) in accordance with Section 31A-33-107; and
68          (b) except as limited by this section and applicable insurance rules and statutes.
69          (2) Subject to applicable insurance rules and statutes, the fund may only offer:
70          (a) workers' compensation insurance and, subject to Subsection (5)(b), reinsurance in
71     Utah;
72          (b) workers' compensation insurance and workers' compensation reinsurance in a state
73     other than Utah [to the extent necessary to:];
74          [(i) accomplish its purpose under Subsection 31A-33-102(1)(b); and]
75          [(ii) provide workers' compensation or occupational disease insurance coverage to Utah
76     employers and their employees engaged in interstate commerce; and]
77          (c) death, disability, or medical benefits arising from an industrial accident or
78     occupational disease arising from employment in Utah or other states; and
79          [(c)] (d) workers' compensation products and services in Utah or other states.
80          (3) Subject to applicable law, including insurance rules and statutes, a subsidiary of the
81     fund [may:] shall operate in Utah or a state other than Utah as a for profit, taxable business
82     enterprise.
83          [(a) offer workers' compensation insurance coverage only:]
84          [(i) in a state other than Utah; and]
85          [(ii) (A) to insure the following against liability for compensation based on job-related
86     accidental injuries and occupational diseases:]
87          [(I) an employer, as defined in Section 34A-2-103, that has a majority of its employees,
88     as defined in Section 34A-2-104, hired or regularly employed in Utah;]
89          [(II) an employer, as defined in Section 34A-2-103, whose principal administrative
90     office is located in Utah;]
91          [(III) a subsidiary or affiliate of an employer described in Subsection (3)(a)(ii)(A)(I) or
92     (II); or]
93          [(IV) an employer, as defined in Section 34A-2-103, whose purchase of insurance
94     arises solely out of the purchase of workers' compensation products and services from the fund
95     or a fund subsidiary; or]
96          [(B) for a state fund organization that is not an admitted insurer in the other state:]
97          [(I) on a fee for service basis; and]
98          [(II) without bearing any insurance risk; and]
99          [(b) offer workers' compensation products and services in Utah and other states.]
100          (4) The fund shall write workers' compensation insurance in accordance with Section
101     31A-22-1001.
102          (5) (a) The fund may enter into a joint enterprise that offers workers' compensation
103     insurance and other coverage [only in the state], provided:
104          (i) the joint enterprise offers only property or liability insurance in addition to workers'
105     compensation insurance;
106          (ii) the fund may not bear any insurance risk associated with the insurance coverage
107     other than risk associated with workers' compensation insurance; and
108          (iii) the offer of other insurance shall be part of an insurance program that includes
109     workers' compensation insurance coverage that is provided by the fund.
110          (b) (i) The fund or a subsidiary of the fund may not offer, or enter into a joint enterprise
111     that offers, or otherwise participate in the offering of accident and health insurance or
112     administer a health benefit plan.
113          (ii) Subject to Subsection (5)(b)(i), the fund or a subsidiary of the fund may serve as a
114     reinsurer or reinsurance intermediary for medical or disability costs or exposures assumed by a
115     self-insured employer in Utah.
116          Section 3. Section 31A-33-106 is amended to read:
117          31A-33-106. Board of directors -- Status of the fund in relationship to the state.
118          (1) There is created a board of directors of the Workers' Compensation Fund.
119          (2) The board shall consist of seven directors.
120          [(3) Subject to Subsection (8), one director:]
121          [(a) (i) shall be the executive director of the Department of Administrative Services or
122     the executive director's designee; and]
123          [(ii) acts as the representative of the state as a policyholder of the Workers'
124     Compensation Fund; or]
125          [(b) is a public director appointed in accordance with Subsection (8)(b).]
126          [(4)] (3) One director shall be the chief executive officer of the fund.
127          [(5)] (4) (a) In accordance with a plan that meets the requirements of this section[, the
128     governor, with the consent of the Senate, shall appoint five] and the fund's articles of
129     incorporation and bylaws, the board shall nominate and the policyholders shall elect six public
130     directors as follows:
131          (i) [three] four directors who are owners, officers, or employees of policyholders [other
132     than the state], each of whom is an owner, officer, or employee of a policyholder that has been
133     insured by the Workers' Compensation Fund for at least one year before the [appointment]
134     election of the director representing the policyholder; and
135          (ii) two directors from the public in general.
136          (b) The plan described in Subsection [(5)] (4)(a) shall comply with Section 31A-5-409
137     to the extent that Section 31A-5-409 does not conflict with this section.
138          [(6)] (5) No two directors may represent or be employed by the same policyholder.
139          [(7)] (6) At least [four] five directors [appointed by the governor] elected by the
140     policyholders shall have had previous experience in:
141          (a) the actuarial profession;
142          (b) accounting;
143          (c) investments;
144          (d) risk management;
145          (e) occupational safety;
146          (f) casualty insurance; or
147          (g) the legal profession.
148          [(8)] (7) (a) [Any] A director who represents a policyholder that fails to maintain
149     workers' compensation insurance through the Workers' Compensation Fund shall immediately
150     resign from the board[, including the executive director of the Department of Administrative
151     Services or the executive director's designee if the state is no longer insured by the Workers'
152     Compensation Fund pursuant to Section 34A-2-203].
153          [(b) (i) If the state is no longer insured by the Workers' Compensation Fund pursuant to
154     Section 34A-2-203, the governor with the consent of the Senate, shall appoint a public director
155     to replace the executive director of the Department of Administrative Services or the executive
156     director's designee.]
157          [(ii) The public director appointed under this Subsection (8)(b) shall:]
158          [(A) be an owner, officer, or employee of a policyholder that has been insured by the
159     Workers' Compensation Fund for at least one year before the appointment of the director
160     representing the policyholder;]
161          [(B) have previous experience described in Subsection (7); or]
162          [(C) be the director of the Governor's Office of Economic Development.]
163          [(c) Once the executive director of the Department of Administrative Services or the
164     executive director's designee is not a member of the board under Subsection (3), the state shall
165     have a member on the board to represent the state as a policyholder only if the member is
166     appointed in accordance with Subsection (5) or (8)(b).]
167          [(9)] (8) A person may not be a director if that person:
168          (a) has any interest as a stockholder, employee, attorney, or contractor of a competing
169     insurance carrier providing workers' compensation insurance in Utah;
170          (b) fails to meet or comply with the conflict of interest policies established by the
171     board; or
172          (c) is not bondable.
173          [(10)] (9) After notice and a hearing, the [governor] board may remove any director for
174     cause which includes:
175          (a) neglect of duty; or
176          (b) malfeasance.
177          [(11)] (10) (a) Except as required by Subsection [(11)] (10)(b), the term of office of the
178     directors [appointed by the governor] elected by the policyholders shall be four years,
179     beginning July 1 of the year of appointment.
180          (b) Notwithstanding the requirements of Subsection [(11)] (10)(a), the [governor]
181     board shall, at the time of [appointment or reappointment] election or reelection, adjust the
182     length of terms to ensure that no more than two terms expire in a calendar year.
183          [(12) Each] (11) A director shall hold office until the director's successor is
184     [appointed] selected and qualified.
185          [(13)] (12) When a vacancy occurs in the membership of the board for any reason, the
186     replacement shall be appointed by a majority of the board for the unexpired term, after which
187     time the replacement shall stand for policyholder election as described in the fund's articles of
188     incorporation and bylaws.
189          [(14)] (13) The board shall annually elect a chair and other officers as needed from its
190     membership.
191          [(15)] (14) (a) The board shall meet at least quarterly at a time and place designated by
192     the chair.
193          (b) The chair:
194          (i) may call board meetings more frequently than quarterly; and
195          (ii) shall call additional board meetings if requested to do so by a majority of the board.
196          [(16)] (15) Four directors are a quorum for the purpose of transacting all business of
197     the board.
198          [(17)] (16) Each decision of the board requires the affirmative vote of at least four
199     directors for approval.
200          [(18)] (17) (a) (i) A director may receive compensation and be reimbursed for
201     reasonable expenses incurred in the performance of the director's official duties:
202          (A) as determined by the board of directors; and
203          (B) if the aggregate of compensation paid to all directors of the Workers'
204     Compensation Fund in a calendar year is less than or equal to the amount described in
205     Subsection [(18)] (17)(a)(ii).
206          (ii) (A) For the period beginning [May 1, 2007] January 1, 2016, and ending December
207     31, [2007] 2016, the amount described in Subsection [(18)] (17)(a)(i)(B) is [$75,000 except
208     that any compensation paid to a director of the Workers' Compensation Fund on or after
209     January 1, 2007 but on or before April 30, 2007 shall be included in determining whether the
210     aggregate amount described in Subsection (18)(a)(i)(B) is exceeded] $150,000.
211          (B) For calendar years beginning on or after January 1, [2008] 2017, the amount
212     described in Subsection [(18)] (17)(a)(i)(B) is the sum of the amount under this Subsection
213     [(18)] (17)(a) for the previous year and an amount equal to the greater of:
214          (I) an amount calculated by multiplying the amount under this Subsection [(18)]
215     (17)(a) for the previous year by the actual percent change during the previous calendar year in
216     the consumer price index; and
217          (II) 0.
218          (C) For purposes of this Subsection [(18)] (17), the consumer price index shall be
219     calculated as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue Code.
220          (b) Directors may decline to receive compensation and expenses for their service.
221          (c) The Worker's Compensation Fund shall pay compensation to and reimburse
222     reasonable expenses of directors as permitted by this section:
223          (i) from the Injury Fund; and
224          (ii) upon vouchers drawn in the same manner as the Workers' Compensation Fund pays
225     its normal operating expenses.
226          (d) The [following] chief executive office of the Workers' Compensation Fund shall
227     serve on the board without payment of compensation, but may be reimbursed for reasonable
228     expenses in accordance with Subsection [(18)] (17)(a)[:].
229          [(i) the executive director of the Department of Administrative Services, or the
230     executive director's designee;]
231          [(ii) the chief executive officer of the Workers' Compensation Fund; and]
232          [(iii) the director of the Governor's Office of Economic Development if appointed
233     under Subsection (8).]
234          (e) The Workers' Compensation Fund shall annually report to the commissioner
235     compensation and expenses paid to the directors on the board.
236          [(19) The requirement that the governor, with the consent of the Senate, appoint the
237     directors of the Workers' Compensation Fund specified in Subsection (5) or (8), does not:]
238          (18) The placement of this chapter in this title does not:
239          (a) remove from the board of directors the managerial, financial, or operational control
240     of the Workers' Compensation Fund;
241          (b) give to the state or the governor managerial, financial, or operational control of the
242     Workers' Compensation Fund;
243          (c) consistent with Section 31A-33-105, cause the state to be liable for any:
244          (i) obligation of the Workers' Compensation Fund; or
245          (ii) expense, liability, or debt described in Section 31A-33-105;
246          (d) alter the legal status of the Workers' Compensation Fund as:
247          (i) a nonprofit, self-supporting, quasi-public corporation; and
248          (ii) an insurer:
249          (A) regulated under this title;
250          (B) that is structured to operate in perpetuity; and
251          (C) domiciled in the state; or
252          (e) alter the requirement that the Workers' Compensation Fund provide workers'
253     compensation:
254          (i) for the purposes set forth in Section 31A-33-102;
255          (ii) consistent with Section 34A-2-201; and
256          (iii) as provided in Section 31A-22-1001.
257          Section 4. Effective date.
258          This bill takes effect on May 12, 2015, except that the amendments to Section
259     31A-33-106 in this bill take effect on January 1, 2016.