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Legislative Update: Dec. 6, 2019 - California Not Prepared To Protect Most Vulnerable


Auditor Reports State Not Prepared to Protect Most Vulnerable from Natural Disasters

The California State Auditor  this week released a report assessing the emergency planning of three counties to protect vulnerable populations before, during, and after natural disasters. The report revealed those counties did not have complete, updated plans for alerting, evacuating, and sheltering their residents before the recent wildfires—2018 Camp Fire, 2017 Sonoma Complex Fires, and 2017 Thomas Fire. 

It went on to note despite guidance from FEMA and other organizations, none of the counties used key best practices for emergency planning to protect their most vulnerable residents during natural disasters. In developing emergency plans, the counties did not involve community representatives of people with a variety of access and functional needs to provide insight and did not assess their populations and resources needed to assist people with access and functional needs during a natural disaster. 

Additionally, the audit found the California Office of Emergency Services (Cal OES) has failed to provide important resources to help local jurisdictions in planning, even though in some cases it is required to do so by state law. Cal OES has failed to provide guidance related to strategies for identifying people with access and functional needs and for evacuating people with disabilities and has not published after-action reports that include lessons learned.


Congressional Democrats Unveil Data Privacy Bill While State Finalized CCPA Regulations

A sweeping online privacy bill proposing to let consumers sue businesses for violating data privacy measures was introduced by four Democratic Senators of the Commerce Committee. 

Led by Senator Maria Cantwell of Washington, the proposal would provide for a "private right of action" to file lawsuits over misuses of data. Additionally, it would set a federal floor and allow for state privacy laws to remain effective unless they directly contradict the federal measure. These two provisions have emerged as key sticking points in bipartisan talks with Republicans.

This measure would give consumers the right to access, delete, and correct their data. It would also prevent companies from letting data be used to discriminate against a certain class of people, subject to enforcement from the Federal Trade Commission.

California state lawmakers have conveyed to their Congressional counterparts that they are open to a federal override of state data privacy laws, noting a patchwork state-by-state regulatory environment for data privacy does not make sense.

Politico has reported that “California prepares to roll out its own landmark privacy law, the strongest in the nation.” It would be expected that in communicating with federal lawmakers, state leaders would be cautious to have any overriding federal law diminish the provisions of California law on data privacy matters.

This comes at a time when California Attorney General Xavier Becerra is wrapping up the rule-making process for the California Consumer Privacy Act (CCPA). In a series of four public forums throughout the state, the Attorney General is taking public input on the draft regulations.

On Monday, representatives for insurance, advertising, and manufacturing associations argued that some of the proposed regulations go beyond the underlying law, creating unreasonable burdens for businesses.

Politico reported, “A proposed requirement that businesses honor users' "do not track" browser preferences or plug-ins, treating them as formal requests not to sell their data, drew the most criticism from the industry. The surprise provision, applauded by many consumer advocates, also poses technical challenges.”

Industry groups continue to pressure the Attorney General to ease some of the more onerous proposed regulations that were recently published in October. 


Insurance Commissioner Calls for Statewide Non-Renewal Moratorium Due to Wildfire Insurance Denials

Insurance Commissioner Ricardo Lara issued a mandatory one-year moratorium on insurance companies non-renewing policyholders, intending to help at least 800,000 homes in wildfire disaster areas in Northern and Southern California. The commissioner’s action is the result of Senate Bill 824 (Lara, 2018) in order to give temporary relief from non-renewals to residents living near a declared wildfire disaster. This is the first time the department has invoked the new law, which took effect in January 2019.

Commissioner Lara went a step further and called on insurance companies to voluntarily cease all non-renewals related to wildfire risk statewide until December 5, 2020. This comes in the wake of Governor Gavin Newsom’s declaration of statewide emergency due to fires and extreme weather conditions. A statewide moratorium would provide all California homeowners, renters, and businesses peace of mind, allowing the time for stakeholders to come together to work on lasting solutions, help reduce wildfire risk and stabilize the insurance market.

While existing law prevents non-renewals for those who suffer a total loss, SB 824 established protection for those living adjacent to a declared wildfire emergency who did not suffer a total loss—recognizing in law the disruption that non-renewals can cause in communities following wildfire disasters.

This action comes amid growing evidence that homeowner insurance has become more difficult for Californians to obtain from traditional markets, forcing them into more expensive, less comprehensive options such as the FAIR Plan that do not offer the same level of coverage or protections.

In August, the Department of Insurance released data revealing insurance companies are dropping an increasing number of residents in areas with high wildfire risk. The number of non-renewals rose by more than 10% last year in seven counties from San Diego to Sierra, a direct response to California’s recent devastating wildfires. The number of consumers covered by the FAIR Plan has surged in areas with high wildfire risk. According to the U.S. Forest Service, more than 3.6 million California households are located in the wildland-urban interface where wildfires are most likely to occur.

To note, by February 1, 2020, the FAIR Plan will offer a monthly payment plan without fees and allow people to pay by credit card or electronic funds transfer without fees. By April 1, 2020, the FAIR Plan will increase the Dwelling Fire combined policy limit from $1.5 million to $3 million, in recognition of higher home values. By June 1, 2020, the FAIR Plan will expand its coverage to offer a full homeowners’ policy in addition to its current limited fire-only policy.


Attorney General Becerra Joins Coalition Opposing Federal Proposal Regarding Overtime Pay

California Attorney General Xavier Becerra joined a coalition of 18 attorney generals in filing a comment letter opposing a proposed rule by the U.S. Department of Labor (DOL). Under the proposal, DOL is attempting to allow the expanded use of fluctuating workweek salaries, which result in less pay for every additional hour worked and drastic reductions in pay for overtime hours. In the comment letter, Attorney General Becerra urges DOL to rescind the proposal and highlights California’s strong labor laws protecting against such pay methods.

DOL estimates nearly 700,000 workers are currently paid under the fluctuating workweek method nationwide. The method was initially developed to permit certain non-exempt or non-professional employees who work irregular hours to negotiate a consistent minimum salary with their employers. Under a fluctuating workweek system, non-exempt employees would be guaranteed the same salary no matter how many hours they work in a week.

The Attorney General contends this method relies on the flawed premise that low-wage workers and other employees have the bargaining power to negotiate a fair minimum salary. The Attorney General also claims it reduces a worker’s regular hourly rate with each hour worked and is contrary to state law restrictions regarding daily overtime requirements. The fluctuating workweek overtime computation method is unlawful in California.

The filing also claims the proposed rule would exacerbate inequities in the fluctuating workweek system by expanding the types of pay that are used to calculate weekly fixed salaries. Under the rule, employers would now be able to include compensation such as shift differential pay, premium pay, or incentive pay. Currently, people receiving such premium pay cannot be subject to the fluctuating workweek system. As a result of the proposal, the Attorney General states that workers could see reductions in their overall compensation and could incentivize employers to require employees to work longer hours for less money.


Quick Takes

WCIRB Report on Providers. On December 3, the Workers’ Compensation Insurance Rating Bureau (WCIRB) released its research brief, “Treatment Patterns of Medical Providers Indicted for Fraud in California Workers’ Compensation.” The brief is a follow-up to an earlier study assessing the impact of anti-provider fraud provisions in Assembly Bill 1244 (Gray) and Senate Bill 1160 (Mendoza) chaptered in 2016. Per the study, “… these (indicted) providers tended to treat, on average, significantly more injured workers and rendered more services on each claim compared to other providers. Indicted providers also received significantly higher shares of medical payments for complex and expensive office visits and ML evaluations and, on average, treated a slightly higher share of indemnity claims involving CT. This is consistent with the concentration of indicted providers in the LA Basin.” While these results come as no surprise, medical-legal evaluations and medical treatment undertaking by providers who were defrauding the system should enter into the discussions next year as the debate over the medical-legal fee schedule likely heats up.

Self-Insureds Publish Study Claiming Cheaper than Insurance. On December 3, the Self-Insurer's Security Fund (SISF) released the findings of a study conducted by Bickmore Actuarial. The study commissioned by SISF compares the overall cost of workers' compensation self-insurance with the cost of traditional workers' compensation insurance. It examined workers' compensation costs for 14 California self-insured employers across a variety of industries and with different self-insured retentions. Per the study, “Self-insured employers receive an average savings of 21%. The savings from being self-insured are driven mainly by the reduction in commissions, profit, marketing, and administrative/overhead costs charged in traditional insurance policies.” Only a summary of the study was available, so there are a number of questions raised by the report that remain to be answered. Particularly in need of answering are: “If system-wide insurance data was used to compare the costs to large employers, for whom self-insurance is an option?” and, possibly a more fundamental question, “Why is the Security Fund – which manages the deposits and alternative security program for self-insureds and pays the claims of bankrupt businesses – is commissioning such a study in the first place?”

CTA Asks for AB 5 Injunction. The California Trucking Association (CTA) has asked for a preliminary injunction against the state from enforcing the “Dynamex” law, Assembly Bill 5 (Gonzalez), against truckers. As noted in the motion, “Plaintiffs seek to enjoin AB 5 as it applies to motor carriers and the independent owner-operators only. The injunction will not prevent the balance of AB 5 from taking effect.” The case is California Trucking Association v. Becerra, No. 3:18-cv-02458, in the United States District Court, Southern District of California. The request was filed on December 2 with a hearing scheduled for December 30. 

DIR Assessment Notices Out. On the day before Thanksgiving, the Department of Industrials Relations (DIR) released its assessment notices for the 2019-20 fiscal year. The assessments support the Division of Workers’ Compensation (Workers’ Compensation Administration Revolving Fund – WCARF), Subsequent Injuries Benefit Trust Fund (SIBTF), Uninsured Employers Benefits Trust Fund (UEBTF), Occupational Safety and Health Fund (OSHF), Labor Enforcement and Compliance Fund (LECF) and Workers’ Compensation Fraud Account (FRAUD). Combined, the assessments total over $1 billion. Of particular concern is the continued unchecked growth of the SIBTF. In fiscal year 2014-15, the SIBTF was $35,105,623. The current assessment is $140,262,000. To put the assessments in perspective, total assessments five years ago were roughly $740 million. The assessment against all payers has increased by almost 50 percent during this period.

Commission Meeting Postponed Until 2020. The Commission on Health and Safety and Workers’ Compensation (CHSWC) has postponed its December 2019 meeting until next year. The reason cited on the DIR website was the lack of a quorum. In 2019, the Commission met only twice. There was no meeting in Q1 of 2019.