UNOFFICIAL COPY 24 RS HB 401/GA
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AN ACT relating to workers' compensation. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
ď˘Section 1. KRS 342.0011 is amended to read as follows: 3
As used in this chapter, unless the context otherwise requires: 4
(1) "Injury" means any work-related traumatic event or series of traumatic events, 5
including cumulative trauma, arising out of and in the course of employment which 6
is the proximate cause producing a harmful change in the human organism 7
evidenced by objective medical findings. "Injury" does not include the effects of the 8
natural aging process, and does not include any communicable disease unless the 9
risk of contracting the disease is increased by the nature of the employment. 10
"Injury" when used generally, unless the context indicates otherwise, shall include 11
an occupational disease and damage to a prosthetic appliance, but shall not include 12
a psychological, psychiatric, or stress-related change in the human organism, unless 13
it is a direct result of a physical injury; 14
(2) "Occupational disease" means a disease arising out of and in the course of the 15
employment; 16
(3) An occupational disease as defined in this chapter shall be deemed to arise out of 17
the employment if there is apparent to the rational mind, upon consideration of all 18
the circumstances, a causal connection between the conditions under which the 19
work is performed and the occupational disease, and which can be seen to have 20
followed as a natural incident to the work as a result of the exposure occasioned by 21
the nature of the employment and which can be fairly traced to the employment as 22
the proximate cause. The occupational disease shall be incidental to the character of 23
the business and not independent of the relationship of employer and employee. An 24
occupational disease need not have been foreseen or expected but, after its 25
contraction, it must appear to be related to a risk connected with the employment 26
and to have flowed from that source as a rational consequence; 27 UNOFFICIAL COPY 24 RS HB 401/GA
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(4) "Injurious exposure" shall mean that exposure to occupational hazard which would, 1
independently of any other cause whatsoever, produce or cause the disease for 2
which the claim is made; 3
(5) "Death" means death resulting from an injury or occupational disease; 4
(6) "Carrier" means any insurer, or legal representative thereof, authorized to insure the 5
liability of employers under this chapter and includes a self-insurer; 6
(7) "Self-insurer" is an employer who has been authorized under the provisions of this 7
chapter to carry his own liability on his employees covered by this chapter; 8
(8) "Department" means the Department of Workers' Claims in the Education and 9
Labor Cabinet; 10
(9) "Commissioner" means the commissioner of the Department of Workers' Claims 11
under the direction and supervision of the secretary of the Education and Labor 12
Cabinet; 13
(10) "Board" means the Workers' Compensation Board; 14
(11) (a) "Temporary total disability" means the condition of an employee who has not 15
reached maximum medical improvement from an injury and has not reached a 16
level of improvement that would permit a return to employment; 17
(b) "Permanent partial disability" means the condition of an employee who, due 18
to an injury, has a permanent disability rating but retains the ability to work; 19
and 20
(c) "Permanent total disability" means the condition of an employee who, due to 21
an injury, has a permanent disability rating and has a complete and permanent 22
inability to perform any type of work as a result of an injury, except that total 23
disability shall be irrebuttably presumed to exist for an injury that results in: 24
1. Total and permanent loss of sight in both eyes; 25
2. Loss of both feet at or above the ankle; 26
3. Loss of both hands at or above the wrist; 27 UNOFFICIAL COPY 24 RS HB 401/GA
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4. Loss of one (1) foot at or above the ankle and the loss of one (1) hand at 1
or above the wrist; 2
5. Permanent and complete paralysis of both arms, both legs, or one (1) 3
arm and one (1) leg; 4
6. Incurable insanity or imbecility; or 5
7. Total loss of hearing; 6
(12) "Income benefits" means payments made under the provisions of this chapter to the 7
disabled worker or his dependents in case of death, excluding medical and related 8
benefits; 9
(13) "Medical and related benefits" means payments made for medical, hospital, burial, 10
and other services as provided in this chapter, other than income benefits; 11
(14) "Compensation" means all payments made under the provisions of this chapter 12
representing the sum of income benefits and medical and related benefits; 13
(15) "Medical services" means medical, surgical, dental, hospital, nursing, and medical 14
rehabilitation services, medicines, and fittings for artificial or prosthetic devices; 15
(16) "Person" means any individual, partnership, limited partnership, limited liability 16
company, firm, association, trust, joint venture, corporation, or legal representative 17
thereof; 18
(17) "Wages" means, in addition to money payments for services rendered, the 19
reasonable value of board, rent, housing, lodging, fuel, or similar advantages 20
received from the employer, and gratuities received in the course of employment 21
from persons other than the employer as evidenced by the employee's federal and 22
state tax returns; 23
(18) "Agriculture" means the operation of farm premises, including the planting, 24
cultivation, producing, growing, harvesting, and preparation for market of 25
agricultural or horticultural commodities thereon, the raising of livestock for food 26
products and for racing purposes, and poultry thereon, and any work performed as 27 UNOFFICIAL COPY 24 RS HB 401/GA
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an incident to or in conjunction with the farm operations, including the sale of 1
produce at on-site markets and the processing of produce for sale at on-site markets. 2
It shall not include the commercial processing, packing, drying, storing, or canning 3
of such commodities for market, or making cheese or butter or other dairy products 4
for market; 5
(19) "Beneficiary" means any person who is entitled to income benefits or medical and 6
related benefits under this chapter; 7
(20) "United States," when used in a geographic sense, means the several states, the 8
District of Columbia, the Commonwealth of Puerto Rico, the Canal Zone, and the 9
territories of the United States; 10
(21) "Alien" means a person who is not a citizen, a national, or a resident of the United 11
States or Canada. Any person not a citizen or national of the United States who 12
relinquishes or is about to relinquish his residence in the United States shall be 13
regarded as an alien; 14
(22) "Insurance carrier" means every insurance carrier or insurance company authorized 15
to do business in the Commonwealth writing workers' compensation insurance 16
coverage and includes the Kentucky Employers Mutual Insurance Authority and 17
every self-insured group operating under the provisions of this chapter; 18
(23) (a) "Severance or processing of coal" means all activities performed in the 19
Commonwealth at underground, auger, and surface mining sites; all activities 20
performed at tipple or processing plants that clean, break, size, or treat coal; 21
and all activities performed at coal loading facilities for trucks, railroads, and 22
barges. Severance or processing of coal shall not include acts performed by a 23
final consumer if the acts are performed at the site of final consumption. 24
(b) "Engaged in severance or processing of coal" shall include all individuals, 25
partnerships, limited partnerships, limited liability companies, corporations, 26
joint ventures, associations, or any other business entity in the Commonwealth 27 UNOFFICIAL COPY 24 RS HB 401/GA
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which has employees on its payroll who perform any of the acts stated in 1
paragraph (a) of this subsection, regardless of whether the acts are performed 2
as owner of the coal or on a contract or fee basis for the actual owner of the 3
coal. A business entity engaged in the severance or processing of coal, 4
including but not limited to administrative or selling functions, shall be 5
considered wholly engaged in the severance or processing of coal for the 6
purpose of this chapter. However, a business entity which is engaged in a 7
separate business activity not related to coal, for which a separate premium 8
charge is not made, shall be deemed to be engaged in the severance or 9
processing of coal only to the extent that the number of employees engaged in 10
the severance or processing of coal bears to the total number of employees. 11
Any employee who is involved in the business of severing or processing of 12
coal and business activities not related to coal shall be prorated based on the 13
time involved in severance or processing of coal bears to his total time; 14
(24) "Premium" for every self-insured group means any and all assessments levied on its 15
members by such group or contributed to it by the members thereof. For special 16
fund assessment purposes, "premium" also includes any and all membership dues, 17
fees, or other payments by members of the group to associations or other entities 18
used for underwriting, claims handling, loss control, premium audit, actuarial, or 19
other services associated with the maintenance or operation of the self-insurance 20
group; 21
(25) (a) "Premiums received" for policies effective on or after January 1, 1994, for 22
insurance companies means direct written premiums as reported in the annual 23
statement to the Department of Insurance by insurance companies, except that 24
"premiums received" includes premiums charged off or deferred, and, on 25
insurance policies or other evidence of coverage with provisions for 26
deductibles, the calculated cost for coverage, including experience 27 UNOFFICIAL COPY 24 RS HB 401/GA
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modification and premium surcharge or discount, prior to any reduction for 1
deductibles. The rates, factors, and methods used to calculate the cost for 2
coverage under this paragraph for insurance policies or other evidence of 3
coverage with provisions for deductibles shall be the same rates, factors, and 4
methods normally used by the insurance company in Kentucky to calculate 5
the cost for coverage for insurance policies or other evidence of coverage 6
without provisions for deductibles, except that, for insurance policies or other 7
evidence of coverage with provisions for deductibles effective on or after 8
January 1, 1995, the calculated cost for coverage shall not include any 9
schedule rating modification, debits, or credits. For policies with provisions 10
for deductibles with effective dates on or after January 1, 1995, assessments 11
shall be imposed on premiums received as calculated by the deductible 12
program adjustment. The cost for coverage calculated under this paragraph by 13
insurance companies that issue only deductible insurance policies in Kentucky 14
shall be actuarially adequate to cover the entire liability of the employer for 15
compensation under this chapter, including all expenses and allowances 16
normally used to calculate the cost for coverage. For policies with provisions 17
for deductibles with effective dates of May 6, 1993, through December 31, 18
1993, for which the insurance company did not report premiums and remit 19
special fund assessments based on the calculated cost for coverage prior to the 20
reduction for deductibles, "premiums received" includes the initial premium 21
plus any reimbursements invoiced for losses, expenses, and fees charged 22
under the deductibles. The special fund assessment rates in effect for 23
reimbursements invoiced for losses, expenses, or fees charged under the 24
deductibles shall be those percentages in effect on the effective date of the 25
insurance policy. For policies covering covered employees having a co-26
employment relationship with a professional employer organization and a 27 UNOFFICIAL COPY 24 RS HB 401/GA
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client as defined in KRS Chapter 336, "premiums received" means premiums 1
calculated using the experience modification factor of each client as defined 2
in KRS Chapter 336 for each covered employee for that portion of the payroll 3
pertaining to the covered employee. 4
(b) "Direct written premium" for insurance companies means the gross premium 5
written less return premiums and premiums on policies not taken but 6
including policy and membership fees. 7
(c) "Premium," for policies effective on or after January 1, 1994, for insurance 8
companies means all consideration, whether designated as premium or 9
otherwise, for workers' compensation insurance paid to an insurance company 10
or its representative, including, on insurance policies with provisions for 11
deductibles, the calculated cost for coverage, including experience 12
modification and premium surcharge or discount, prior to any reduction for 13
deductibles. The rates, factors, and methods used to calculate the cost for 14
coverage under this paragraph for insurance policies or other evidence of 15
coverage with provisions for deductibles shall be the same rates, factors, and 16
methods normally used by the insurance company in Kentucky to calculate 17
the cost for coverage for insurance policies or other evidence of coverage 18
without provisions for deductibles, except that, for insurance policies or other 19
evidence of coverage with provisions for deductibles effective on or after 20
January 1, 1995, the calculated cost for coverage shall not include any 21
schedule rating modifications, debits, or credits. For policies with provisions 22
for deductibles with effective dates on or after January 1, 1995, assessments 23
shall be imposed as calculated by the deductible program adjustment. The cost 24
for coverage calculated under this paragraph by insurance companies that 25
issue only deductible insurance policies in Kentucky shall be actuarially 26
adequate to cover the entire liability of the employer for compensation under 27 UNOFFICIAL COPY 24 RS HB 401/GA
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this chapter, including all expenses and allowances normally used to calculate 1
the cost for coverage. For policies with provisions for deductibles with 2
effective dates of May 6, 1993, through December 31, 1993, for which the 3
insurance company did not report premiums and remit special fund 4
assessments based on the calculated cost for coverage prior to the reduction 5
for deductibles, "premium" includes the initial consideration plus any 6
reimbursements invoiced for losses, expenses, or fees charged under the 7
deductibles. 8
(d) "Return premiums" for insurance companies means amounts returned to 9
insureds due to endorsements, retrospective adjustments, cancellations, 10
dividends, or errors. 11
(e) "Deductible program adjustment" means calculating premium and premiums 12
received on a gross basis without regard to the following: 13
1. Schedule rating modifications, debits, or credits; 14
2. Deductible credits; or 15
3. Modifications to the cost of coverage from inception through and 16
including any audit that are based on negotiated retrospective rating 17
arrangements, including but not limited to large risk alternative rating 18
options; 19
(26) "Insurance policy" for an insurance company or self-insured group means the term 20
of insurance coverage commencing from the date coverage is extended, whether a 21
new policy or a renewal, through its expiration, not to exceed the anniversary date 22
of the renewal for the following year; 23
(27) "Self-insurance year" for a self-insured group means the annual period of 24
certification of the group created pursuant to KRS 342.350(4) and 304.50-010; 25
(28) "Premium" for each employer carrying his own risk pursuant to KRS 342.340(1) 26
shall be the projected value of the employer's workers' compensation claims for the 27 UNOFFICIAL COPY 24 RS HB 401/GA
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next calendar year as calculated by the commissioner using generally-accepted 1
actuarial methods as follows: 2
(a) The base period shall be the earliest three (3) calendar years of the five (5) 3
calendar years immediately preceding the calendar year for which the 4
calculation is made. The commissioner shall identify each claim of the 5
employer which has an injury date or date of last injurious exposure to the 6
cause of an occupational disease during each one (1) of the three (3) calendar 7
years to be used as the base, and shall assign a value to each claim. The value 8
shall be the total of the indemnity benefits paid to date and projected to be 9
paid, adjusted to current benefit levels, plus the medical benefits paid to date 10
and projected to be paid for the life of the claim, plus the cost of medical and 11
vocational rehabilitation paid to date and projected to be paid. Adjustment to 12
current benefit levels shall be done by multiplying the weekly indemnity 13
benefit for each claim by the number obtained by dividing the statewide 14
average weekly wage which will be in effect for the year for which the 15
premium is being calculated by the statewide average weekly wage in effect 16
during the year in which the injury or date of the last exposure occurred. The 17
total value of the claims using the adjusted weekly benefit shall then be 18
calculated by the commissioner. Values for claims in which awards have been 19
made or settlements reached because of findings of permanent partial or 20
permanent total disability shall be calculated using the mortality and interest 21
discount assumptions used in the latest available statistical plan of the 22
advisory rating organization defined in Subtitle 13 of KRS Chapter 304. The 23
sum of all calculated values shall be computed for all claims in the base 24
period; 25
(b) The commissioner shall obtain the annual payroll for each of the three (3) 26
years in the base period for each employer carrying his own risk from records 27 UNOFFICIAL COPY 24 RS HB 401/GA
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of the department and from the records of the Department of Workforce 1
Development, Education and Labor Cabinet. The commissioner shall multiply 2
each of the three (3) years of payroll by the number obtained by dividing the 3
statewide average weekly wage which will be in effect for the year in which 4
the premium is being calculated by the statewide average weekly wage in 5
effect in each of the years of the base period; 6
(c) The commissioner shall divide the total of the adjusted claim values for the 7
three (3) year base period by the total adjusted payroll for the same three (3) 8
year period. The value so calculated shall be multiplied by 1.25 and shall then 9
be multiplied by the employer's most recent annualized payroll, calculated 10
using records of the department and the Department of Workforce 11
Development data which shall be made available for this purpose on a 12
quarterly basis as reported, to obtain the premium for the next calendar year 13
for assessment purposes under KRS 342.122; 14
(d) For November 1, 1987, through December 31, 1988, premium for each 15
employer carrying its own risk shall be an amount calculated by the board 16
pursuant to the provisions contained in this subsection and such premium 17
shall be provided to each employer carrying its own risk and to the funding 18
commission on or before January 1, 1988. Thereafter, the calculations set 19
forth in this subsection shall be performed annually, at the time each employer 20
applies or renews its application for certification to carry its own risk for the 21
next twelve (12) month period and submits payroll and other data in support 22
of the application. The employer and the funding commission shall be notified 23
at the time of the certification or recertification of the premium calculated by 24
the commissioner, which shall form the employer's basis for assessments 25
pursuant to KRS 342.122 for the calendar year beginning on January 1 26
following the date of certification or recertification; 27 UNOFFICIAL COPY 24 RS HB 401/GA
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(e) If an employer having fewer than five (5) years of doing business in this state 1
applies to carry its own risk and is so certified, its premium for the purposes 2
of KRS 342.122 shall be based on the lesser number of years of experience as 3
may be available including the two (2) most recent years if necessary to create 4
a three (3) year base period. If the employer has less than two (2) years of 5
operation in this state available for the premium calculation, then its premium 6
shall be the greater of the value obtained by the calculation called for in this 7
subsection or the amount of security required by the commissioner pursuant to 8
KRS 342.340(1); 9
(f) If an employer is certified to carry its own risk after having previously insured 10
the risk, its premium shall be calculated using values obtained from claims 11
incurred while insured for as many of the years of the base period as may be 12
necessary to create a full three (3) year base. After the employer is certified to 13
carry its own risk and has paid all amounts due for assessments upon 14
premiums paid while insured, the employer shall be assessed only upon the 15
premium calculated under this subsection; 16
(g) "Premium" for each employer defined in KRS 342.630(2) shall be calculated 17
as set forth in this subsection; and 18
(h) Notwithstanding any other provision of this subsection, the premium of any 19
employer authorized to carry its own risk for purposes of assessments due 20
under this chapter shall be no less than thirty cents ($0.30) per one hundred 21
dollars ($100) of the employer's most recent annualized payroll for employees 22
covered by this chapter; 23
(29) "SIC code" as used in this chapter means the Standard Industrial Classification 24
Code contained in the latest edition of the Standard Industrial Classification Manual 25
published by the Federal Office of Management and Budget; 26
(30) "Investment interest" means any pecuniary or beneficial interest in a provider of 27 UNOFFICIAL COPY 24 RS HB 401/GA
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medical services or treatment under this chapter, other than a provider in which that 1
pecuniary or investment interest is obtained on terms equally available to the public 2
through trading on a registered national securities exchange, such as the New York 3
Stock Exchange or the American Stock Exchange, or on the National Association 4
of Securities Dealers Automated Quotation System; 5
(31) "Managed health care system" means a health care system that employs gatekeeper 6
providers, performs utilization review, and does medical bill audits; 7
(32) "Physician" means physicians and surgeons, psychologists, optometrists, dentists, 8
podiatrists, and osteopathic and chiropractic practitioners acting within the scope of 9
their license issued by any state, Commonwealth, or district of the United 10
States[the Commonwealth]; 11
(33) "Objective medical findings" means information gained through direct observation 12
and testing of the patient applying objective or standardized methods; 13
(34) "Work" means providing services to another in return for remuneration on a regular 14
and sustained basis in a competitive economy; 15
(35) "Permanent impairment rating" means percentage of whole body impairment 16
caused by the injury or occupational disease as determined by the "Guides to the 17
Evaluation of Permanent Impairment"; 18
(36) "Permanent disability rating" means the permanent impairment rating selected by 19
an administrative law judge times the factor set forth in the table that appears at 20
KRS 342.730(1)(b); and 21
(37) "Guides to the Evaluation of Permanent Impairment" means, except as provided in 22
KRS 342.262: 23
(a) The fifth edition published by the American Medical Association; and 24
(b) For psychological impairments, Chapter 12 of the second edition published by 25
the American Medical Association. 26