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TO:                  MEMBERS OF THE SENATE

                        FINANCE AND COMMERCE COMMITTEE

DATE:            March 14, 2024

SUBJECT:      Strike everything amendment to H.B. 2204, relating to workers' compensation; premiums



Allows an insurance carrier to reduce the amount of premiums paid by an employer by up to five percent if the employer is a part of a qualifying membership organization and the insurance carrier has a program agreement with that membership organization.


The Industrial Commission of Arizona (ICA) administers and enforces state laws relating to the protection of life, health, safety and welfare of Arizona's employees, including workers' compensation. Worker’s compensation insurance provides coverage of medical costs, rehabilitation and lost wages for an employee who has suffered injury or illness in the course of performing job related duties. Statute requires employers in Arizona to provide workers’ compensation to their employees either by securing insurance through an authorized carrier or providing the ICA with proof of financial ability to pay workers’ compensation costs. An employer can demonstrate financial ability to pay benefits directly or through participation in an approved self-insurance compensation pool (Ariz. Const. art 18 § 8; A.R.S. § 23-961).

Both a tax and an assessment are levied on workers’ compensation insurance premiums. The levies are in lieu of all other taxes on workers' compensation insurance. The tax rate is a maximum of three percent of net premiums, and revenues are used for the administrative expenses of the ICA. The ICA rules must specify the premium plans and methods to be used for the calculation of rates and premiums, which is the basis for the taxes assessed to self-insured employers. The tax must be at least $250 per annum and must be computed and collected by the ICA and paid to the State Treasurer for the credit of the ICA's Administrative Fund at a rate of up to three percent to be fixed annually by the ICA. 

Current law allows an insurance carrier to reduce the amount of premiums paid by an employer by up to five percent if the insured employer: 1) complies with statutory drug testing policy requirements; 2) conducts drug testing of prospective employees; 3) conducts drug testing of an employee after the employee has been injured; and 4) allows the employer's insurance carrier to have access to the drug testing results (A.R.S. § 23-961).

There is no anticipated fiscal impact to the state General Fund associated with this legislation. However, there may be a fiscal impact to the ICA depending on how many insurance carriers enter into a program agreement with a membership organization and how many employers are part of such membership organizations.



1.   Allows an insurance carrier to reduce the amount of premiums paid by an employer by up to five percent if:

a)   the insured employer is part of a membership organization that is:

i.   comprised of persons in a similar or related line of commerce;

ii.   organized to promote and improve business conditions in that line of commerce; and

iii.   not engaged in a regular business of a kind that is ordinarily carried on for profit and whose net earnings do not inure to the benefit of any member; and

b)   the insurance carrier has a program agreement with the membership organization of which the insured employer is a member.

2.   Makes technical and conforming changes.

3.   Becomes effective on the general effective date.