A problematic bill for cities that self-insure for workers’ compensations claims survived last week’s cutoff and is scheduled for a hearing in the Senate this week.

HB 1521 creates a duty of “good faith and fair dealing” for self-insured employers and their third-party administrators (TPAs) towards workers in self-insured workers’ compensation programs, with penalties for violating “good faith.” We last wrote about the bill here. The bill automatically makes it violation of the duty if a self-insured employer or TPA coerces an injured worker to accept less than the compensation due under state industrial insurance laws or otherwise acts in bad faith. The bill also allows Department of Labor & Industries (L&I) to write rules further outlining “good faith” duties and requires L&I to investigate and order resolution of claims. It passed out of the House on a 69-27 vote.

Amendments in the House reduced the timelines for TPAs to respond to complaints from 14 to 10 working days and require the L&I to order resolutions of complaints after 30 days even without hearing the TPA’s response to a complaint. Those amendments also drastically increased the penalties for alleged violations of the duty of “good faith.”

AWC opposes this bill because of the vague and undefined new standard, reduced timelines for compliance, increased penalties, and requirements to impose penalties. L&I has only recently implemented new rules based on legislation negotiated in 2020 that are supposed govern TPA licensing and certification, and there has not yet been enough time to know how effective those new rules might be in addressing the concerns raised by HB 1521’s proponents. The current bill appears to be based on anecdotes from small number of unique situations and possibly a misunderstanding of how presumptive workers’ compensation claims are actually handled, not on any data showing systemic violations of L&I rules by self-insured cities or TPAs.

The Senate companion, SB 5524, which was amended to only apply to municipal self-insured employers, didn’t survive the House of Origin cutoff.

We encourage self-insured cities to review this bill and provide feedback.

Dates to remember

SB 1521 is scheduled for a public hearing on Tuesday, March 14 in the Senate Labor & Commerce Committee at 10:30 am.