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.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1789
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO WORKERS' COMPENSATION.



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

 1      SECTION 1.  Litigating workers' compensation claims is a
 
 2 major cost for many employers.  The current system is unwieldy
 
 3 and expensive.  The purpose of this Act is to authorize employers
 
 4 to create individual medical trust accounts for each employee,
 
 5 funded by the employer, to provide direct coverage of health care
 
 6 expenses.  A worker injured on the job for anything short of a
 
 7 catastrophic injury would use the worker's own individual medical
 
 8 trust account to pay for those injuries, as well as for the first
 
 9 $3,000 of catastrophic work-related injuries.  The present
 
10 structure would be retained only for catastrophic injuries.
 
11      To protect new workers, a paper credit of $3,000 toward the
 
12 employee's account would be placed on the employer's books.  The
 
13 credit would be reduced as payments are actually made into the
 
14 account.  The employer would be responsible for these payments
 
15 only until the amount in the account first reaches $3,000.
 
16      This restructuring would eliminate litigation over less
 
17 severe injuries.  It will reduce workers' compensation costs for
 
18 employers by allowing a much higher deductible, since payment for
 
19 the less severe injuries will be covered by the individual
 

 
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 1 medical trust account, and not by workers' compensation
 
 2 insurance.  It would also encourage employees to minimize health
 
 3 care expenses for the more common and less serious personal
 
 4 injuries, as the employee will be eligible to receive an annual
 
 5 bonus of five per cent of the moneys in the account when the
 
 6 total amount reaches $12,000, and two payouts from the individual
 
 7 medical trust accounts, one-third at age sixty and the balance at
 
 8 age seventy.  To the extent employees take better care of
 
 9 themselves, they will receive the benefit of their efforts.
 
10 Thus, the creation of individual medical trust accounts will
 
11 serve as an incentive to employees to avoid on-the-job injuries.
 
12      SECTION 2.  Chapter 386, Hawaii Revised Statutes, is amended
 
13 by adding a new part to be appropriately designated and to read
 
14 as follows:
 
15           "PART    .  INDIVIDUAL MEDICAL TRUST ACCOUNTS
 
16      §386-A  Individual medical trust accounts.(a)  Any
 
17 employer may establish an individual medical trust account for
 
18 each employee with a financial or trust institution doing
 
19 business in the State.  The individual medical trust accounts
 
20 shall be funded by the employer in an amount to be established by
 
21 the insurance commissioner, in consultation with an actuary,
 
22 which shall be adjusted at the commissioner's discretion, also in
 

 
 
 
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 1 consultation with an actuary; provided that the amount of the
 
 2 employer's contributions be equal to or less than the amount of
 
 3 the premium payments in effect on June 30, 2000, and the amount
 
 4 of the premiums required under the system implemented under this
 
 5 section, which involve a higher deductible and fewer covered
 
 6 injuries.  The documentation establishing the account shall
 
 7 include the employee's birthdate.  The financial or trust
 
 8 institution shall serve as the trustee of the account.
 
 9      Each employee participating in the account program shall
 
10 have funds transmitted directly into the account by the employer;
 
11 provided that, upon the establishment of the employee's first
 
12 account, the employer shall provide an initial paper credit to
 
13 the employee's account in the amount of $3,000.  This amount
 
14 shall not be transmitted but shall remain on the employer's books
 
15 and shall decrease in the same amount as the actual payments are
 
16 transferred to the institution handling the account.  When the
 
17 amount in the account reaches $3,000, the paper credit shall be
 
18 reduced to zero and be permanently removed from the employer's
 
19 liabilities.  If an employee needs to draw on funds from the
 
20 account before the paper credit is removed, the employer shall be
 
21 liable to the injured employee in the amount of credit for that
 
22 employee that remains on its books. 
 

 
 
 
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 1      (b)  Once established, the individual medical trust account
 
 2 shall be retained by the employee throughout the employee's
 
 3 working life until final distribution pursuant to this part.  A
 
 4 financial or trust institution holding one or more individual
 
 5 medical trust account that ceases to do business in the State
 
 6 shall contact the employee for instructions on transfer of the
 
 7 individual medical trust account to another financial or trust
 
 8 institution doing business in the State.
 
 9      (c)  The financial or trust institution shall inform the
 
10 employer whenever the balance in the individual medical trust
 
11 account reaches $5,000 or $10,000.  Upon the account balance
 
12 reaching $5,000, the employer's contribution shall automatically
 
13 be reduced by twenty per cent.  Upon the account balance reaching
 
14 $10,000, the contribution shall be decreased by the same amount.
 
15 If the account balance drops below these thresholds, the amount
 
16 of the employer's contribution shall be reinstated at the
 
17 previous level, subject to increases established by the insurance
 
18 commissioner.
 
19      §386-B  Use of individual medical trust accounts.(a)  Any
 
20 employee who:
 
21      (1)  Suffers personal injury either by accident arising out
 
22           of and in the course of employment, or by disease
 

 
 
 
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 1           proximately caused by or resulting from the nature of
 
 2           employment, which is not a disability as defined in
 
 3           section 386-1, shall use the moneys in the fund; or
 
 4      (2)  Suffers a disability as defined in section 386-1, shall
 
 5           use the first $3,000 in the fund, or the moneys
 
 6           credited to the employee's account as specified in
 
 7           section 386-A(a);
 
 8 to pay for medical care, as defined in section 386-1, from any
 
 9 willing provider.
 
10      The employee shall certify to the employee's health care
 
11 provider that the injury is work-related, and the provider shall
 
12 send a copy of the bill to both the employee and the employer.
 
13 The employee has ten days in which to dispute the billing in
 
14 writing to the employer.  If no written dispute is provided
 
15 within this time period, the employer shall forward a copy of the
 
16 bill to the institution holding the trust account with
 
17 instructions to pay the bill.  The institution shall pay the
 
18 provider directly.
 
19      (b)  An employee suffering a personal injury under this part
 
20 who experiences temporary total or temporary partial disability
 
21 may also request that lost weekly wages be paid from the
 
22 individual medical trust accounts, pursuant to the schedules
 

 
 
 
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 1 established in sections 386-31(b) and 386-32(b).  Average weekly
 
 2 wages shall be as calculated as in section 386-51.  The employer
 
 3 shall verify the eligibility of the claim under this part, and if
 
 4 found to be applicable, shall promptly notify the financial
 
 5 institution holding the individual medical trust accounts of the
 
 6 amount due for lost wages, and the financial institution shall
 
 7 remit payment for the lost wages to the employee.
 
 8      §386-C  Responsibilities and liabilities.(a)  It shall be
 
 9 the responsibility of the employee to direct reimbursement
 
10 through the individual medical trust accounts only for injuries
 
11 covered under this part, and to apply to the employer for
 
12 reimbursement for lost wages only as provided in this part.  An
 
13 employee who falsely certifies to a health care provider or an
 
14 employer that the personal injury is work-related shall be
 
15 subject to criminal sanctions under chapter 710, part V.
 
16      (b)  It shall be the responsibility of the health care
 
17 provider to send billings to the employee and employer only upon
 
18 a certification in writing by the employee that the injury is
 
19 covered under this part.  A health care provider who falsely
 
20 certifies or fails to have the employee certify shall be liable
 
21 for an administrative fine of $1,000 per incident.
 
22      (c)  It shall be the duty of the employer to promptly verify
 

 
 
 
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 1 eligibility for a claim of lost wages under this part and to
 
 2 promptly notify the financial institution of the amount of lost
 
 3 wages eligible to be transferred to the employee.  An employer
 
 4 who fails to comply with this provision shall be liable for an
 
 5 administrative fine of $100 per incident.
 
 6      (d)  Payment in full from an employee's individual medical
 
 7 trust account for the cost of medical treatment for injuries
 
 8 covered under this part shall be considered fulfillment of the
 
 9 employer's obligation under this chapter for such injuries.
 
10      (e)  It shall be the responsibility of the financial or
 
11 trust institution to honor only valid claims upon the individual
 
12 medical trust accounts.  A financial institution shall be
 
13 entitled to collect a minimum administrative fee from each
 
14 account.  A financial institution that honors an invalid claim
 
15 when the institution knew or should have known that the claim was
 
16 invalid shall be liable for a fine of twice the amount of the
 
17 moneys improperly expended.
 
18      (f)  This section shall be enforced by the director, who
 
19 shall have general supervisory powers and duties over compliance
 
20 under this part; provided that the offense of perjury shall be
 
21 enforced by the prosecutor.  All moneys collected by the director
 
22 under this section shall be transferred to the credit of the
 

 
 
 
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 1 general fund.
 
 2      §386-D  Reporting.  The financial institution shall transmit
 
 3 quarterly reports on the individual medical trust account to the
 
 4 employee and the employer.
 
 5      §386-E  Disposition of the individual medical trust
 
 6 accounts.(a)  If the employee suffers a serious injury
 
 7 resulting in a permanent total disability so that the employee is
 
 8 unable to work for the current employer, the current employer
 
 9 shall be entitled to receive a refund of all contributions paid
 
10 into that employee's account, excluding the amount necessary to
 
11 satisfy the deductible under the catastrophic insurance policy.
 
12      (b)  Once the amount reaches $12,000, upon written request,
 
13 the employee may have five per cent of the amount transferred to
 
14 the employee.  The employee may request this transfer no more
 
15 than once per calendar year, provided that the transfer may only
 
16 be made if at the time the request is transmitted to the
 
17 institution, at least $12,000 remains in the account.
 
18      (c)  Upon written request by the employee upon reaching age
 
19 sixty, the financial institution shall transmit one-third of the
 
20 balance in the individual medical trust accounts to the employee,
 
21 whether retired or not.
 
22      (d)  Upon retirement at any age, the employee and employer
 

 
 
 
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 1 shall notify the financial institution.  The employee shall be
 
 2 entitled to have any health insurance premiums and any health
 
 3 care provider copayments or other expenses billed to the
 
 4 individual medical trust accounts.
 
 5      (e)  Upon written request by the employee upon reaching age
 
 6 seventy, the financial or trust institution shall transmit the
 
 7 balance of the funds in the individual medical trust accounts to
 
 8 the employee; provided that the employee may elect to retain the
 
 9 moneys in the account which may be drawn on for any use.
 
10      (f)  If an employee dies while a financial or trust
 
11 institution holds individual medical trust accounts funds for
 
12 that employee, the employee's personal representative shall apply
 
13 to the financial institution for transfer of the individual
 
14 medical trust accounts to the deceased employee's estate.  The
 
15 individual medical trust accounts shall be used first to satisfy
 
16 any outstanding medical expenses not otherwise covered, and then
 
17 all remaining proceeds shall become part of the estate of the
 
18 employee."
 
19      SECTION 3.  Section 235-7, Hawaii Revised Statutes, is
 
20 amended by amending subsection (a) to read as follows:
 
21      "(a)  There shall be excluded from gross income, adjusted
 
22 gross income, and taxable income:
 

 
 
 
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 1      (1)  Income not subject to taxation by the State under the
 
 2           Constitution and laws of the United States;
 
 3      (2)  Rights, benefits, and other income exempted from
 
 4           taxation by section 88-91, having to do with the state
 
 5           retirement system, and the rights, benefits, and other
 
 6           income, comparable to the rights, benefits, and other
 
 7           income exempted by section 88-91, under any other
 
 8           public retirement system;
 
 9      (3)  Any compensation received in the form of a pension for
 
10           past services;
 
11      (4)  Compensation paid to a patient affected with Hansen's
 
12           disease employed by the State or the United States in
 
13           any hospital, settlement, or place for the treatment of
 
14           Hansen's disease;
 
15      (5)  Except as otherwise expressly provided, payments made
 
16           by the United States or this State, under an act of
 
17           Congress or a law of this State, which by express
 
18           provision or administrative regulation or
 
19           interpretation are exempt from both the normal and
 
20           surtaxes of the United States, even though not so
 
21           exempted by the Internal Revenue Code itself;
 
22      (6)  Any income expressly exempted or excluded from the
 

 
 
 
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 1           measure of the tax imposed by this chapter by any other
 
 2           law of the State, it being the intent of this chapter
 
 3           not to repeal or supersede any such express exemption
 
 4           or exclusion;
 
 5      (7)  The first $1,750 received by each member of the reserve
 
 6           components of the Army, Navy, Air Force, Marine Corps,
 
 7           or Coast Guard of the United States of America, and the
 
 8           Hawaii national guard as compensation for performance
 
 9           of duty;
 
10      (8)  Income derived from the operation of ships or aircraft
 
11           if the income is exempt under the Internal Revenue Code
 
12           pursuant to the provisions of an income tax treaty or
 
13           agreement entered into by and between the United States
 
14           and a foreign country, provided that the tax laws of
 
15           the local governments of that country reciprocally
 
16           exempt from the application of all of their net income
 
17           taxes, the income derived from the operation of ships
 
18           or aircraft which are documented or registered under
 
19           the laws of the United States;
 
20      (9)  The value of legal services provided by a prepaid legal
 
21           service plan to a taxpayer, the taxpayer's spouse, and
 
22           the taxpayer's dependents;
 

 
 
 
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 1     (10)  Amounts paid, directly or indirectly, by a prepaid
 
 2           legal service plan to a taxpayer as payment or
 
 3           reimbursement for the provision of legal services to
 
 4           the taxpayer, the taxpayer's spouse, and the taxpayer's
 
 5           dependents;
 
 6     (11)  Contributions by an employer to a prepaid legal service
 
 7           plan for compensation (through insurance or otherwise)
 
 8           to the employer's employees for the costs of legal
 
 9           services incurred by the employer's employees, their
 
10           spouses, and their dependents; [and]
 
11     (12)  Amounts received in the form of a monthly surcharge by
 
12           a utility acting on behalf of an affected utility under
 
13           section 269-16.3 shall not be gross income, adjusted
 
14           gross income, or taxable income for the acting utility
 
15           under this chapter.  Any amounts retained by the acting
 
16           utility for collection or other costs shall not be
 
17           included in this exemption[.]; and
 
18     (13)  Amounts received as reimbursements for health care
 
19           expenses and lost wages from an individual medical
 
20           trust account made in accordance with part     of
 
21           chapter 386."
 
22      SECTION 4.  Section 386-1, Hawaii Revised Statutes, is
 

 
 
 
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 1 amended as follows:
 
 2      1.  By amending the definition of "disability" to read:
 
 3      ""Disability" means loss or impairment of a physical or
 
 4 mental function[.] when the loss or impairment results in death
 
 5 or an injury which consists, in whole or in part, in a
 
 6 significant permanent loss of use of a part or function of a
 
 7 body."
 
 8      2.  By amending the definition of "personal injury" to read:
 
 9      ""Personal injury" includes death resulting [therefrom.]
 
10 from an injury and any injury that causes a disability."
 
11      SECTION 5.  Section 386-3, Hawaii Revised Statutes, is
 
12 amended by amending subsection (a) to read as follows:
 
13      "(a)  If an employee suffers personal injury either by
 
14 accident arising out of and in the course of the employment or by
 
15 disease proximately caused by or resulting from the nature of the
 
16 employment, the employee's employer or the special compensation
 
17 fund shall pay compensation to the employee or the employee's
 
18 dependents as provided in this chapter.  If an employee suffers
 
19 an injury cognizable under part    , the employee shall not be
 
20 entitled to compensation under this section.
 
21      Accident arising out of and in the course of the employment
 
22 includes the wilful act of a third person directed against an
 

 
 
 
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 1 employee because of the employee's employment."
 
 2      SECTION 6.  Section 386-4, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "§386-4 Voluntary coverage.  Any employer who has
 
 5 individuals in the employer's employment who are not employees as
 
 6 defined in section 386-1 may elect to provide coverage for them
 
 7 under this chapter.  During the period for which the election is
 
 8 effective the employer and the individuals in the employer's
 
 9 employment covered thereby shall be deemed to be employees and be
 
10 subject in all respects to this chapter.
 
11      Election by any employer to provide coverage under this
 
12 chapter shall be made by securing compensation to the individuals
 
13 in the employer's employment affected thereby in the manner
 
14 provided in section 386-121 and giving the notice prescribed by
 
15 section 386-122[.]; or by establishing an individual medical
 
16 trust account pursuant to part    .
 
17      Every employer who elects to provide coverage under the
 
18 terms of this section shall be bound by the election until
 
19 January 1 of the next succeeding year and for terms of one year
 
20 thereafter.  Any such employer may elect to discontinue the
 
21 coverage for personal injuries occurring after the expiration of
 
22 any such calendar year by filing notice of the election with the
 

 
 
 
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 1 director of labor and industrial relations at least sixty days
 
 2 prior to the expiration of any such calendar year and at the same
 
 3 time posting notices to that effect conspicuously in such places
 
 4 of work that they can reasonably be expected to come to the
 
 5 attention of all individuals affected thereby."
 
 6      SECTION 7.  In codifying the new part added to chapter 386,
 
 7 Hawaii Revised Statutes, by section 2 of this Act, the revisor of
 
 8 statutes shall substitute appropriate section numbers for the
 
 9 letters used in the new section designations in the new part in
 
10 this Act.
 
11      SECTION 8.  Statutory material to be repealed is bracketed.
 
12 New statutory material is underscored.
 
13      SECTION 9.  This Act shall take effect on July 1, 2000;
 
14 provided that section 3 shall apply to taxable years beginning
 
15 after December 31, 1999.
 
16 
 
17                           INTRODUCED BY: ________________________