Multiple Agency Fiscal Note Summary

Bill Number: 1932 HB Title: Firefighter diseases

Estimated Cash Receipts

Agency Name 2009-11 2011-13 2013-15 GF- State Total GF- State Total GF- State Total

Total $

Local Gov. Courts * Local Gov. Other ** Local Gov. Total Estimated Expenditures

Agency Name 2009-11 2011-13 2013-15 FTEs GF-State Total FTEs GF-State Total FTEs GF-State Total Office of the State .0 0 0 .0 100,000 100,000 .0 200,000 200,000 Actuary Department of Labor .0 0 902,882 .0 0 277,770 .0 0 277,770 and Industries

Total 0.0 $0 $902,882 0.0 $100,000 $377,770 0.0 $200,000 $477,770

Local Gov. Courts * Local Gov. Other ** Local Gov. Total

Prepared by: Mike Woods, OFM Phone: Date Published:

360-902-9819 Final

* See Office of the Administrator for the Courts judicial fiscal note

** See local government fiscal note FNPID 24487 : FNS029 Multi Agency rollup Individual State Agency Fiscal Note

Bill Number: 1932 HB Title: Firefighter diseases Agency: 035-Office of State Actuary

Part I: Estimates

No Fiscal Impact

Estimated Cash Receipts to:

FUND

Total $

Estimated Expenditures from: FY 2010 FY 2011 2009-11 2011-13 2013-15 Fund General Fund-State 001-1 0 0 0 100,000 200,000 Total $ 0 0 0 100,000 200,000

The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates, and alternate ranges (if appropriate), are explained in Part II.

Check applicable boxes and follow corresponding instructions:

If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note X form Parts I-V.

If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).

Capital budget impact, complete Part IV.

Requires new rule making, complete Part V.

Legislative Contact: Billie Schubert Phone: 360-786-7125 Date: 02/03/2009

Agency Preparation: Darren Painter Phone: 360-786-6155 Date: 04/23/2009

Agency Approval: Matthew M. Smith Phone: 360-786-6140 Date: 04/23/2009

OFM Review: Jane Sakson Phone: 360-902-0549 Date: 04/23/2009

Request # -1 Form FN (Rev 1/00) 1 Bill # 1932 HB

FNS063 Individual State Agency Fiscal Note Part II: Narrative Explanation

II. A - Brief Description Of What The Measure Does That Has Fiscal Impact Briefly describe by section number, the significant provisions of the bill, and any related workload or policy assumptions, that have revenue or expenditure impact on the responding agency.

II. B - Cash receipts Impact Briefly describe and quantify the cash receipts impact of the legislation on the responding agency, identifying the cash receipts provisions by section number and when appropriate the detail of the revenue sources. Briefly describe the factual basis of the assumptions and the method by which the cash receipts impact is derived. Explain how workload assumptions translate into estimates. Distinguish between one time and ongoing functions.

II. C - Expenditures Briefly describe the agency expenditures necessary to implement this legislation (or savings resulting from this legislation), identifying by section number the provisions of the legislation that result in the expenditures (or savings). Briefly describe the factual basis of the assumptions and the method by which the expenditure impact is derived. Explain how workload assumptions translate into cost estimates. Distinguish between one time and ongoing functions.

Part III: Expenditure Detail III. A - Expenditures by Object Or Purpose FY 2010 FY 2011 2009-11 2011-13 2013-15 FTE Staff Years A-Salaries and Wages B-Employee Benefits C-Personal Service Contracts E-Goods and Services G-Travel J-Capital Outlays M-Inter Agency/Fund Transfers N-Grants, Benefits & Client Services P-Debt Service S-Interagency Reimbursements T-Intra-Agency Reimbursements 9- Total: $0 $0 $0 $0 $0 Part IV: Capital Budget Impact

Part V: New Rule Making Required Identify provisions of the measure that require the agency to adopt new administrative rules or repeal/revise existing rules.

Request # -1 Form FN (Rev 1/00) 2 Bill # 1932 HB

FNS063 Individual State Agency Fiscal Note

ACTUARY’S FISCAL NOTE

RESPONDING AGENCY: CODE: DATE: BILL NUMBER:

Office of the State Actuary 035 4/23/09 HB 1932

WHAT THE READER SHOULD KNOW

The Office of the State Actuary (“we”) prepared this fiscal note based on our understanding of the bill as of the date shown above. We intend this fiscal note to be used by the Legislature during the 2009 Legislative Session only.

We advise readers of this fiscal note to seek professional guidance as to its content and interpretation, and not to rely upon this communication without such guidance. Please read the analysis shown in this fiscal note as a whole. Distribution of, or reliance on, only parts of this fiscal note could result in its misuse and may mislead others.

SUMMARY OF RESULTS

This bill impacts the Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) by amending the definition of occupational disease for fire fighters in RCW 51.32.185. This definition applies in determining eligibility for certain death and disability benefits in LEOFF.

Impact on Pension Liability (Dollars in Millions) Current Increase Total Today's Value of All Future Pensions $10,507 $2.3 $10,510 Earned Pensions Not Covered by Today's Assets ($939) $0.0 ($939)

Impact on Contribution Rates: (Effective 9/1/2009) 2009-2011 State Budget LEOFF Employee (Plan 2) 0.01% Employer: Current Annual Cost 0.01% Plan 1 Past Cost 0.00% Total 0.01%

State 0.00%

Budget Impacts (Dollars in Millions) 2009-2011 2011-2013 25-Year General Fund-State $0.0 $0.1 $2.1 Total Employer $0.3 $0.3 $5.6

See the Actuarial Results section of this fiscal note for additional detail.

O:\Fiscal Notes\2009\1932_HB.docx Page 1 of 11

WHAT IS THE PROPOSED CHANGE?

Summary Of Change

This bill impacts LEOFF by amending the definition of occupational disease for fire fighters in RCW 51.32.185. This definition applies in determining eligibility for the special, duty-related death benefits in both plans of LEOFF, and in determining eligibility for line-of-duty disability and survivor benefits in LEOFF Plan 2.

This bill adds esophageal cancer to the list of cancers and methicillin-resistant staphylococcus aureus (MRSA) to the list of infectious diseases presumed occupational for fire fighters.

Effective Date: 90 days after session.

What Is The Current Situation?

The definition of occupational disease for fire fighters in RCW 51.32.185 applies in determining eligibility for the special, duty-related death benefit in both plans of LEOFF. It also applies in determining eligibility for line-of-duty disability and survivor benefits in LEOFF Plan 2. There are two primary criteria for an occupational disease; a general criteria that applies to all members, and a presumptive criteria that only applies to fire fighters.

To meet the general criteria the disease must be caused by distinctive conditions of the workplace, and that finding must be supported by medical documentation. Using this criterion the burden of proof is on the member to show that the disease is work related.

To meet the presumptive criteria the disease must be on the list of presumed occupational diseases for fire fighters found in RCW 51.32.185. The listed occupational diseases include respiratory disease, heart problems experienced within 72 hours of exposure to smoke, fumes, or toxic substance; heart problems experienced within 24 hours of strenuous physical exertion due to fire fighting activities, prostate cancer diagnosed prior to age 50, primary brain cancer, malignant melanoma, leukemia, non-Hodgkin's lymphoma, bladder cancer, ureter cancer, colorectal cancer, multiple myeloma, testicular cancer, kidney cancer, HIV/AIDS, hepatitis, meningococcal meningitis, and mycobacterium tuberculosis. If a fire fighter’s disease is among those listed above, then the burden of proof is on Department of Labor and Industries (L&I) to show that the disease is not work related.

The current presumption of occupational disease may be rebutted by a "preponderance of the evidence." Such evidence may include a worker’s use of tobacco products, lifestyle, fitness, hereditary factors, exposure from activities unrelated to work, or personal choice in performing work.

Survivors of LEOFF members who die as a result of a duty-related illness or occupational disease receive a $150,000 lump-sum special death benefit. Eligibility for the benefit is

O:\Fiscal Notes\2009\1932_HB.docx Page 2 of 11 determined by the L&I according to Title 51 RCW. A member who dies from one of the presumed occupational diseases would likely qualify for the special death benefit.

In addition to the special death benefit, the presumption of occupational disease impacts disability and survivor annuity benefits in LEOFF Plan 2. LEOFF Plan 1 is not similarly affected in these areas due to differences in plan provisions and benefits administration.

Survivors of LEOFF Plan 2 members who are "killed in the course of employment" as determined by L&I may receive an unreduced pension. These survivors may also participate in healthcare insurance offered through the Public Employees' Benefits Board (PEBB) and receive reimbursement from the plan for premiums paid. Based on past administrative practice, a member who dies from an occupational disease would likely be considered "killed in the course of employment" for purposes of the unreduced survivor benefit and reimbursement of healthcare insurance premiums.

According to the Department of Retirement Systems (DRS) a LEOFF Plan 2 member who becomes disabled due to an occupational disease as determined by L&I would qualify for a duty-disability retirement. A member disabled in the line of duty may choose between a non-taxable one-time payment equal to 150 percent of the member's eligible retirement contributions, or an unreduced benefit subject to a minimum monthly benefit of at least 10 percent of the member's final average salary (FAS). A member disabled in the line of duty such that it prevents him or her from performing "substantial gainful employment" may receive a duty-disability benefit equal to 70 percent of the member's FAS. The benefit is subject to offsets by Social Security and Workers Compensation payments. The total benefits cannot exceed 100 percent of the member's FAS, but in no case can the offsets reduce the benefit below the member's accrued retirement benefit. A member disabled from other than in-the-line-of-duty causes may receive a service retirement allowance actuarially reduced from age 53 or a refund of up to 150 percent of the member's accumulated contributions.

Non-LEOFF state pension plans covering fire fighters in Washington State are not affected by the presumption of occupational disease due to differences in plan provisions and benefits administration.

Who Is Impacted And How?

We estimate that this bill could impact all active, terminated vested, and retired fire fighters or their survivors through improved benefits. The following table shows counts and percentages of fire fighters compared to the total system membership.

O:\Fiscal Notes\2009\1932_HB.docx Page 3 of 11

LEOFF 2 Membership as of 6/30/2007 Fire Fighters Total Members Percent Fire Fighters Active 6,874 16,099 43% Terminated 193 628 31% Vested Retired 283 924 31% Total 7,350 17,651 42%

Due to the additional diseases this bill includes in the presumption of occupational diseases for fire fighters, we expect one additional duty-related death to occur every two years in LEOFF Plan 2. We expect that most of the additional duty-related deaths would be classified as in the course of employment for active members and the survivors would be eligible for the member=s unreduced retirement annuity and the subsidized PEBB premiums.

We estimate that for a typical active member impacted by this bill, the increase in benefits would come from a duty-related disability caused by an injury or disease that was not previously recognized as duty related. The increase in benefits would be the difference between non-duty-related disability benefits and the duty-related disability benefits offered by LEOFF Plan 2.

We estimate that for a typical survivor impacted by this bill, the increase in benefits would come from a duty-related death caused by an injury or disease that was not previously recognized as duty related. The increase in benefits would be the $150,000 lump-sum paid to a beneficiary (LEOFF Plan 1 and 2) and, in some cases in LEOFF Plan 2, a survivor pension without any early retirement reduction applied and reimbursement for healthcare insurance premiums paid by the survivor.

Additionally, this bill impacts all 16,099 active LEOFF Plan 2 members of this system through increased contribution rates. Currently the 513 active LEOFF Plan 1 members don’t pay contribution rates.

See the Special Data Needed section of this fiscal note for more details.

WHY THIS BILL HAS A COST AND WHO PAYS FOR IT

Why This Bill Has A Cost

We expect members diagnosed with MRSA or esophageal cancer who are unable to continue working would leave employment. Under current law, these members would have to prove their illness was duty-related to receive duty-related benefits. They may still receive a non-duty disability or service retirement pension if eligible, or take a refund of contributions. Under this bill, members would not have to prove their illness was duty-related to receive duty-related benefits. As a result, we expect this bill will increase the number of duty-related death and disability benefits paid by LEOFF Plan 2.

O:\Fiscal Notes\2009\1932_HB.docx Page 4 of 11

Benefits paid for duty-related death or disability exceed benefits paid for non-duty related death or disability. Part of the increase in cost from the additional duty-related death and disability benefits gets offset by a reduction in cost from fewer members receiving non- duty disability or service retirement pensions, or taking refunds of contributions.

This bill increases the liabilities in LEOFF Plan 1 by a less than $100,000. As of the most recent valuation this plan was fully funded with no contributions required under current funding policy. This bill does not bring the plan out of a surplus situation.

Who Will Pay For These Costs?

The increase in cost resulting from this bill gets subsidized by the plan through increased contribution rates using the standard LEOFF Plan 2 cost sharing formula:  50 percent member.  30 percent employer/local government.  20 percent State.

The increase in the cost resulting from this bill for LEOFF Plan 1 gets paid from the existing surplus.

HOW WE VALUED THESE COSTS

Assumptions We Made

We relied on the L&I for assumptions about the rate at which fire fighters are diagnosed with MRSA and esophageal cancer. These assumptions included rates of disablement caused by these illnesses and rates of death among members diagnosed with these illnesses. We converted these rates into the following assumptions:  An increase in the duty-related death rate among all LEOFF members from 37.6 deaths per year per 100,000 members to 41.0 deaths per year per 100,000 members.  An increase in the duty-related disability rate among all LEOFF members of 0.35 per 100,000 members per year.

We relied on data from the Washington State Department of Health (DOH) about the number of all deaths among fire fighters by cause. We converted these counts into an increase in the assumption we use to value post-employment deaths among fire fighters. We assumed deaths from MRSA and esophageal cancer equal one percent of all deaths among fire fighters age 50 and older and 0.67 percent of all deaths among fire fighters under age 50.

We expect that most of the additional deaths among fire fighters classified as duty related as a result of this bill will also be classified as occurring in the course of employment. The number of these deaths that would not be classified as in the course of employment is expected to be so low that, for simplicity, we assumed all additional line-of-duty deaths under this bill would also be classified as occurring in the course of employment. We

O:\Fiscal Notes\2009\1932_HB.docx Page 5 of 11

assumed the liability increase for health insurance premiums paid for survivors of members killed in the course of employment would be proportional to the liability increase of the other duty-related death benefits.

For more detail please see Appendix A.

How We Applied These Assumptions

We modeled the expanded eligibility for receiving line-of-duty disability benefits by increasing the percentage of disabilities among active members that are considered duty related and recalculating the Present Value of Fully Projected Benefits (PVFB). Similarly, for the expanded duty-related death benefits, including the $150,000 lump-sum payment, the unreduced annuity benefits to survivors, and survivor PEBB premium reimbursement, we increased the percent of deaths among current active members that are considered duty related and determined the new PVFB.

Since we also increased the rate of disablement of fire fighters, we decreased termination and retirement rates. This recognizes that members who could not receive disability benefits under this bill were either terminating service or taking a service retirement.

We used the Entry Age Normal Cost Method to determine the fiscal budget changes for future new entrants. We used the Aggregate Funding Method to determine the fiscal budget changes for current plan members.

Otherwise, we developed these costs using the same methods as disclosed in the June 30, 2007, Actuarial Valuation Report (AVR).

Special Data Needed

We relied on data from DOH for counts of deaths among fire fighters by cause and age range from 1950-1999 to develop our assumptions regarding additional duty-related deaths among active and retired fire fighters.

Otherwise, we developed these costs using the same assets and data as disclosed in the AVR.

ACTUARIAL RESULTS

How The Liabilities Changed

This bill will impact the actuarial funding of LEOFF Plan 1 and 2 by increasing the present value of future benefits payable under the system as shown below.

O:\Fiscal Notes\2009\1932_HB.docx Page 6 of 11

Impact on Pension Liability (Dollars in Millions) Current Increase Total

Actuarial Present Value of Projected Benefits (The Value of the Total Commitment to all Current Members) LEOFF Plan 1 $4,358 $0.0 $4,358 LEOFF Plan 2 6,149 2.2 6,151 LEOFF Total $10,507 $2.3 $10,510

Unfunded Actuarial Accrued Liability (The Portion of the Plan 1 Liability that is Amortized to 2024) LEOFF Plan 1 ($939) $0.0 ($939)

Unfunded PUC Liability (The Value of the Total Commitment to all Current Members Attributable to Past Service that is not covered by current assets) LEOFF Plan 1 ($975) $0.0 ($975) LEOFF Plan 2 (974) 1.6 (972) LEOFF Total ($1,949) $1.6 ($1,947) Note: Totals may not agree due to rounding.

How Contribution Rates Changed

The rounded increase in the required actuarial contribution rate results in the supplemental contribution rate shown below that applies in the current biennium. However, we will use the un-rounded rate increase to measure the budget changes in future biennia.

Impact on Contribution Rates: (Effective 9/1/2009)

System/Plan LEOFF Current Members Employee (Plan 2) 0.007% Employer: Normal Cost 0.004% Plan 1 UAAL 0.000% Total 0.004%

State 0.003% New Entrants* Employee (Plan 2) 0.007% Employer: Normal Cost 0.004% Plan 1 UAAL 0.000% Total 0.004%

State 0.003% *Rate change applied to future new entrant payroll and used to determine budget impacts only. Current members and new entrants pay the same contribution rate.

O:\Fiscal Notes\2009\1932_HB.docx Page 7 of 11

How This Impacts Budgets And Employees

Budget Impacts (Dollars in Millions) LEOFF 2009-2011 General Fund $0.0 Non-General Fund 0.0 Total State $0.0 Local Government 0.3 Total Employer $0.3 Total Employee $0.3

2011-2013 General Fund $0.1 Non-General Fund 0.0 Total State $0.1 Local Government 0.2 Total Employer $0.3 Total Employee $0.3

2009-2034 General Fund $2.1 Non-General Fund 0.0 Total State $2.1 Local Government 3.5 Total Employer $5.6 Total Employee $5.6 Note: Totals may not agree due to rounding.

The analysis of this bill does not consider any other proposed changes to the system. The combined effect of several changes to the system could exceed the sum of each proposed change considered individually.

As with the costs developed in the actuarial valuation, the emerging costs of the system will vary from those presented in the AVR or this fiscal note to the extent that actual experience differs from the actuarial assumptions.

HOW THE RESULTS CHANGE WHEN THE ASSUMPTIONS CHANGE

To determine the sensitivity of the actuarial results to the best-estimate assumptions selected for this pricing we varied the following assumption:

 The rate of increase in the duty-related death rate.

We chose to vary the duty-related death rate assumption because it produces about 90 percent of the liability increase under this bill. For the low end sensitivity we assumed

O:\Fiscal Notes\2009\1932_HB.docx Page 8 of 11

half the increase in the duty-related death rate, and for the high end we assumed double the increase. The table below compares selected results to the expected results.

LEOFF Plan 2 Sensitivity To Duty-Related Death Rate (Dollars in Millions) Low Expected High Duty-Related Death Rate 0.000393 0.000410 0.000444 Liability Increase $1.29 $2.24 $4.13 Total Contribution Rate Increase 0.008% 0.015% 0.027%

We did not vary any assumptions for LEOFF Plan 1 due to the immaterial increase in liability for that plan. This bill mainly impacts active members and LEOFF Plan 1 only had 513 actives as of the 2007 AVR.

ACTUARY’S CERTIFICATION

The undersigned hereby certifies that:

1. The actuarial cost methods are appropriate for the purposes of this pricing exercise. 2. The actuarial assumptions used are appropriate for the purposes of this pricing exercise. 3. The data on which this fiscal note is based are sufficient and reliable for the purposes of this pricing exercise. 4. Use of another set of methods, assumptions, and data may also be reasonable, and might produce different results. 5. We prepared this fiscal note for the Legislature during the 2009 Legislative Session. 6. We prepared this fiscal note and provided opinions in accordance with Washington State law and accepted actuarial standards of practice as of the date shown on page 1 of this fiscal note.

While this fiscal note is meant to be complete, the undersigned is available to provide extra advice and explanations as needed.

Matthew M. Smith, FCA, EA, MAAA State Actuary

O:\Fiscal Notes\2009\1932_HB.docx Page 9 of 11

APPENDIX A – ASSUMPTIONS WE MADE

We relied on L&I for assumptions about the rate at which fire fighters are diagnosed with MRSA and esophageal cancer. These assumptions included rates of disablement caused by these illnesses and rates of death among members diagnosed with these illnesses. We converted these rates into the following assumptions:  An increase in the duty-related death rate among all LEOFF members from 37.6 deaths per year per 100,000 members to 41.0 deaths per year per 100,000 members.  An increase in the duty-related disability rate among all LEOFF members of 0.35 per 100,000 members per year.

L&I provided the following information about esophageal cancer. L&I expects the population of fire fighters to be diagnosed with esophageal cancer at different rates depending on gender. The rate at which members are diagnosed with esophageal cancer, or incidence rate, equals 8.9 cases per 100,000 males and 2.3 cases per 100,000 females. Of these cases, L&I expects 80 percent to result in death. Of the 20 percent who survive, L&I expects half to receive a total and permanent disability benefit.

L&I provided the following information about MRSA. L&I expect the population of fire fighters to be diagnosed with MRSA at rates equal to 18.2 cases per 100,000 members, independent of gender. L&I expects 1.2 cases per 100,000 members to result in death. Of the members who survive, L&I expects all to recover and return to work.

We used our assumptions from the AVR concerning the percent of LEOFF Plan 2 consisting of fire fighters (43 percent) and the percent of the LEOFF Plan 2 population that is male (90 percent) to convert the L&I expectations into an increase in the duty- related death rate for LEOFF Plan 2. For esophageal cancer we assumed an increase in the duty-related death rate of 0.000029. For MRSA we assumed an increase in the duty- related death rate of 0.000005.

Similarly we used the percent fire fighters and percent of male assumptions to convert the L&I expectations into an increase in the duty-related disability rate for LEOFF Plan 2. Only esophageal cancer resulted in total and permanent disabilities. We assumed an increase in the duty-related disability rate of 0.000004.

Otherwise, we developed these costs using the same assumptions as disclosed in the AVR.

O:\Fiscal Notes\2009\1932_HB.docx Page 10 of 11

GLOSSARY OF ACTUARIAL TERMS

Actuarial Accrued Liability: Computed differently under different funding methods, the actuarial accrued liability generally represents the portion of the present value of fully projected benefits attributable to service credit that has been earned (or accrued) as of the valuation date.

Actuarial Present Value: The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the application of a particular set of actuarial assumptions (i.e. interest rate, rate of salary increases, mortality, etc.).

Aggregate Funding Method: The Aggregate Funding Method is a standard actuarial funding method. The annual cost of benefits under the Aggregate Method is equal to the normal cost. The method does not produce an unfunded liability. The normal cost is determined for the entire group rather than on an individual basis.

Entry Age Normal Cost Method (EANC): The EANC method is a standard actuarial funding method. The annual cost of benefits under EANC is comprised of two components:

• Normal cost. • Amortization of the unfunded liability.

The normal cost is determined on an individual basis, from a member’s age at plan entry, and is designed to be a level percentage of pay throughout a member’s career.

Normal Cost: Computed differently under different funding methods, the normal cost generally represents the portion of the cost of projected benefits allocated to the current plan year.

Projected Unit Credit (PUC) Liability: The portion of the Actuarial Present Value of future benefits attributable to service credit that has been earned to date (past service).

Projected Benefits: Pension benefit amounts which are expected to be paid in the future taking into account such items as the effect of advancement in age as well as past and anticipated future compensation and service credits.

Unfunded PUC Liability: The excess, if any, of the Present Value of Benefits calculated under the PUC cost method over the Valuation Assets. This is the portion of all benefits earned to date that are not covered by plan assets.

Unfunded Actuarial Accrued Liability (UAAL): The excess, if any, of the actuarial accrued liability over the actuarial value of assets. In other words, the present value of benefits earned to date that are not covered by plan assets.

O:\Fiscal Notes\2009\1932_HB.docx Page 11 of 11 Individual State Agency Fiscal Note

Bill Number: 1932 HB Title: Firefighter diseases Agency: 235-Department of Labor and Industries

Part I: Estimates

No Fiscal Impact

Estimated Cash Receipts to:

FUND

Total $

Estimated Expenditures from: FY 2010 FY 2011 2009-11 2011-13 2013-15 Fund Accident Account-Non-Appropriated 424,232 78,649 502,881 157,298 157,298 608-6 Medical Aid 339,765 60,236 400,001 120,472 120,472 Account-Non-Appropriated 609 -6 Total $ 763,997 138,885 902,882 277,770 277,770

Check applicable boxes and follow corresponding instructions:

If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note X form Parts I-V.

If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).

Capital budget impact, complete Part IV.

Requires new rule making, complete Part V.

Legislative Contact: Billie Schubert Phone: 360-786-7125 Date: 02/03/2009

Agency Preparation: Melody Porter Phone: 360-902-4618 Date: 02/09/2009

Agency Approval: Chris P Freed Phone: 360-902-6698 Date: 02/09/2009

OFM Review: Mike Woods Phone: 360-902-9819 Date: 02/09/2009

Request # 1932 HB-1 Form FN (Rev 1/00) 1 Bill # 1932 HB

FNS063 Individual State Agency Fiscal Note Part II: Narrative Explanation

See Attached.

Part III: Expenditure Detail III. A - Expenditures by Object Or Purpose FY 2010 FY 2011 2009-11 2011-13 2013-15 FTE Staff Years A-Salaries and Wages B-Employee Benefits C-Personal Service Contracts E-Goods and Services G-Travel J-Capital Outlays M-Inter Agency/Fund Transfers N-Grants, Benefits & Client Services 763,997 138,885 902,882 277,770 277,770 P-Debt Service S-Interagency Reimbursements T-Intra-Agency Reimbursements 9- Total: $763,997 $138,885 $902,882 $277,770 $277,770 Part IV: Capital Budget Impact

None.

Part V: New Rule Making Required Identify provisions of the measure that require the agency to adopt new administrative rules or repeal/revise existing rules.

None.

Request # 1932 HB-1 Form FN (Rev 1/00) 2 Bill # 1932 HB

FNS063 Individual State Agency Fiscal Note Part II: Explanation

This bill amends current law1 and extends the presumptive workers’ compensation coverage for any firefighter who has contracted methicillin-resistant staphylococcus aureus (MRSA). It also adds esophageal cancer to the list of cancers considered under presumptive coverage.

II. A – Brief Description of What the Measure Does that Has Fiscal Impact

Section 1 (3) adds esophageal cancer to the list of cancers considered under presumptive workers’ compensation coverage for firefighters and their supervisors.

Section 1 (4) allows MRSA as an infectious disease in the presumptive workers’ compensation coverage for firefighters and their supervisors.

II. B – Cash Receipt Impact

It is estimated in Fiscal Year 2010 there will be an increase in premium for the firefighter risk classification.

As an insurance entity, Labor and Industries rates are intended to match premiums to claims cost projections. Therefore, for this fiscal analysis we assume the incremental costs for the firefighters risk class will equal the incremental revenues collected. As the claims history develops we will adjust premium rates in the future based on claims experience.

II. C – Expenditures

Below is a summary of the dollar impact on annual claims costs.

Summary of Estimated Claim Costs Accident Fund Medical Aid Fund Total Esophageal Cancer $61,023 $40,486 $101,509 MRSA $17,626 $19,750 $37,376 Total: $78,649 $60,236 $138,885

1 RCW 51.32.185 Page 3 of 10 Labor and Industries Bill #HB 1932 2/9/2009 Please see attachment for details on how the additional claim costs were actuarially calculated for the increased coverage of esophageal cancer and methicillin-resistant staphylococcus aureus (MRSA).

The additional conditions included in the bill are occupational diseases which develop over time. Claims for these diseases are typically filed some time after the disease first required medical treatment or became partially or totally disabling. This means the date used to determine entitlement to benefits is retroactive, resulting in a one-time cost to the Accident Fund and Medical Aid Fund reserves and show in Fiscal Year 2010.

Summary of One-Time Costs - Reserves Accident Fund Medical Aid Fund Total Esophageal Cancer $268,210 $187,884 $456,094 MRSA $77,373 $91,645 $169,018 Total: $345,583 $279,529 $625,112

Please see attachment for details on how the increases in reserve (benefit liability) were actuarially calculated for the coverage of esophageal cancer and MRSA.

Summary of Costs

SUMMARY OF TOTAL COSTS Costs Fund FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Reoccurring Costs 608-6 $78,649 $78,649 $78,649 $78,649 $78,649 $78,649 Reoccurring Costs 609-6 $60,236 $60,236 $60,236 $60,236 $60,236 $60,236 Sub-Total: $138,885 $138,885 $138,885 $138,885 $138,885 $138,885 One-Time Liability 608-6 $345,583 $0 $0 $0 $0 $0 One-Time Liability 609-6 $279,529 $0 $0 $0 $0 $0 Sub-Total: $625,112 $0 $0 $0 $0 $0 608-6 $424,232 $78,649 $78,649 $78,649 $78,649 $78,649

609-6 $339,765 $60,236 $60,236 $60,236 $60,236 $60,236 TOTAL: $763,997 $138,885 $138,885 $138,885 $138,885 $138,885

Page 4 of 10 Labor and Industries Bill #HB 1932 2/9/2009 We assume the Self-Insured employers will have exposures to be 80 percent of the size of State Fund exposures.

Part IV: Capital Budget Impact None.

Part V: New Rule Making Required None.

Page 5 of 10 Labor and Industries Bill #HB 1932 2/9/2009 FISCAL NOTE – ATTACHMENT FOR HB 1932

Fiscal Note for HB 1932: Table 1. Summary Cost Estimates for HB 1932

Accident Fund Medical Aid Total Fund Esophageal Ca $61,023 $40,486 $101,509 MRSA $17,626 $19,750 $37,376 Total $78,649 $60,236 $138,885

Details for calculation and estimation of the fiscal note.

Esophageal Cancer: Esophageal cancer presumption fiscal note calculations rely on the following estimations:

1. The estimated number of firefighters in Washington State according to actuarial records in Fiscal Year 2008 is 4,808. There are no expected increases in firefighter employment for Fiscal Year 2009.

2. The percentage of firefighters that will qualify for the presumed new cancer conditions of this bill with 10 years of experience is 62.36 percent, which is 2,998 firefighters. With respect to the cancers presumed to be an occupational disease, an active or former firefighter must have cancer that developed or manifested itself after at least 10 years of service and must have had a qualifying medical examination at the time of becoming a firefighter that showed no evidence of cancer. The 62.36 percent is derived from the following article: Murphy SA, Beaton RD, Pike KC, Cain KC. “Firefighters and paramedics: years of service, job aspirations, and burnout” American Association of Occupational Health Nurses (AAOHN) Vol. 42 No. 11 November 1994.

3. The estimated male to female ratio for firefighters is 95 to 5 according to the Firefighters Union. This ratio must be estimated due to the different rates of esophageal cancer by gender.

4. Estimated time loss per occupational disease claim is 13.07 months. The 13.07 months is based on the average number of days of incurred time loss on compensable, occupational

Page 6 of 10 Labor and Industries Bill #HB 1932 2/9/2009 FISCAL NOTE – ATTACHMENT FOR HB 1932

disease claims from the accident periods running October 1, 1989 through September 30, 1992.

5. Estimated cost per month of time loss for Fiscal Accident Year 2009 is $1,900. The $1,900 is a current actuarial assumption based on what the Labor and Industries Actuarial staff are using for all Fiscal Accident Year 2009 calculations.

6. Current estimated per claim cost for Fiscal Accident Year 2009 for total permanent disabilities from esophageal cancer is $236,337 and is based on what actuarial staff are currently using for all Fiscal Accident Year 2009 calculations. Most esophageal cancers are fatal and therefore the estimate of the cost of a fatality will be set to the cost of a temporary total disability amount.

7. Current estimated medical costs are $157,595. This current estimate is derived from cost data from Washington Hospital Discharge Data and estimated costs of chemotherapy and outpatient medical treatment.

8. Incidence rates for esophageal cancer are based on age standardized incidence rates for the Washington State population using the Washington State Cancer Registry. Estimate incidence in men is 8.9 cases per 100,000 population and for women 2.3 per 100,000 population.

9. Based on medical literature – about 80 percent of esophageal cancers will result in a fatality; 10 percent in a total permanent disability (TPD) and 10 percent in neither a fatality nor TPD.

Page 7 of 10 Labor and Industries Bill #HB 1932 2/9/2009 FISCAL NOTE – ATTACHMENT FOR HB 1932

Table 2: Esophageal Cancer Fiscal Note Calculations for HB 1932

Estimation Row Id Calculation Result Explanation Used A Exposure 4,808 firefighters #1 Restriction to Fire Fighters (FF) B with 10 years experience 2998 = 0.6236 * 4,808 #2 C Male Firefighters 2848 = A * 0.95 #3 Rate of Esophageal Cancer in 8.9 per 100,000 D Male FF firefighters #8 Number of Esophageal Cancers E in Male FF 0.2535 = C * D F Female Firefighters 150 = A * 0.05 #3 Rate of Esophageal Cancer in 2.3 per 100,000 G Female FF firefighters #8 Number of Esophageal Cancers H in Female FF 0.0035 = F * G Total Annual Number of I Esophageal Cancers 0.2569 = E + H Time Loss (TL) Duration in J Months 13.07 #4 K Cost Per Month Time Loss $1,900 #5 Time Loss Per Esophageal L Cancer $24,833 = J * K M TL Cost Fiscal Year 2009 $6,380 = L * I Total Permanent Disability N (TPD) /Fatality Cost $236,337 #6 O Percent Cases Fatal or TPD 90% #9 P TPD/Cost per Fatality $54,643 = I * N * O Q Total Accident Fund Cost $61,023 = M + P

R Medical Cost per Claim $157,595 #7 S Total Medical Aid Fund Cost $40,486 = R * I

Page 8 of 10 Labor and Industries Bill #HB 1932 2/9/2009 FISCAL NOTE – ATTACHMENT FOR HB 1932

Methicillin-Resistant Staphylococcus Aureus (MRSA):

This estimate is based on the interpretation of the bill to cover invasive infections with MRSA and primary infections with MRSA instead of hospital acquired infections due to treatment of a non-occupational injury or illness. 1. The estimated number of firefighters in Washington State according to actuarial records in Fiscal Year 2008 is 4,808. There are no expected increases in firefighter employment for 2009.

2. The expected rate of new cases of MRSA is 18.2 per 100,000 firefighters based on medical literature of the incidence of community acquired and community health care associated MRSA. The expected fatality rate of MRSA is 1.2 per 100,000 firefighters based on medical literature of the incidence of community acquired and community health care associated MRSA (See Klevens RM, Morrison MA, Nadle J, et al. Invasive methicillin-resistant Staphylococcus aureus infections in the United States. JAMA 2008 298(15):1763-1771).

3. Current estimated cost per month of time loss for Fiscal Accident Year 2009 is $1,900. The $1,900 is the current actuarial assumption based on what the L&I Actuarial staff are using for all Fiscal Accident Year 2009 calculations.

4. Average time loss duration for a MRSA infections is 2.4 months. This estimate is from a review of accepted State Fund MRSA cases for skin and soft tissue infections and pneumonia.

5. Average medical cost per MRSA claim is $22,570. This estimate is from a review of accepted State Fund MRSA cases for skin and soft tissue infections and pneumonia.

6. Estimated per claim cost for Fiscal Accident Year 2009 for total permanent disabilities from MRSA is $236,337 and is based on what actuarial staff are currently using for all Fiscal Accident Year 2009 calculations. Estimate of the cost of a fatality will be set to the cost of a temporary total disability amount.

Page 9 of 10 Labor and Industries Bill #HB 1932 2/9/2009 FISCAL NOTE – ATTACHMENT FOR HB 1932

Table 3: Methicillin-Resistant Staphylococcus Aureus (MRSA) Fiscal Note Calculations for HB 1932

Row Estimation Id Calculation Result Explanation Used A Exposure 4,808 firefighters #1 B Rate of MRSA Cases 18.2 per 100,000 firefighters #2 C Rate of MRSA Fatalities 1.2 per 100,000 firefighters #2 D Number MRSA Cases 0.8751 = A * B E Number MRSA Fatalities 0.0577 = A * C Time Loss (TL) Duration in F Months 2.4 #4 G Cost Per Month Time Loss $1,900 #3 H Time Loss Per MRSA case $4,560 = F * G I TL Cost Fiscal Year 2009 $3,990 = H * D Total Permanent J Disability/Fatality Cost $236,337 #6 K TPD/Cost per Fatality $13,636 = E * J L Total Accident Fund Cost $17,626 = I + K

M Medical Cost per Claim $22,570 #5 N Total Medical Aid Fund Cost $19,750 = M * D

Reserve Benefit Liability Increases:

Occupational disease claims, such as esophageal cancer and Methicillin-Resistant Staphylococcus Aureus (MRSA) claims, may be filed some time after the disease first required medical treatment or became partially or totally disabling. This means the date used to determine entitlement to benefits is retroactive, resulting in a one-time cost to the Medical Aid and Accident Fund reserves to cover the costs of those claims covered by the provisions of the bill which have not yet been filed. These one-time costs are estimated at $279,529 (MRSA $91,645; Esophageal Cancer $187,884) for the Medical Aid Fund and $345,583 (MRSA $77,373; Esophageal Cancer $268,210) for the Accident Fund reserves.

Page 10 of 10 Labor and Industries Bill #HB 1932 2/9/2009