Legislature(2009 - 2010)HOUSE FINANCE 519
03/22/2010 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB314 | |
| HB369 | |
| HB346 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 314 | TELECONFERENCED | |
| + | HB 346 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 369 | TELECONFERENCED | |
HOUSE BILL NO. 314
"An Act relating to fees and charges for medical treatment
or services, the crime of unsworn falsification,
investigations, and penalties as they relate to workers'
compensation; and providing for an effective date."
1:37:05 PM
KONRAD JACKSON, STAFF, REPRESENTATIVE KURT OLSON, SPONSOR,
reported that HB 314 addresses medical treatment, service
fees, and penalties related to worker's compensation. He
informed the committee that the Medical Services Review
Committee met a number of times the previous year to
address the issues and generated a report with a
recommendation to set up a medical services fee schedule.
House Bill 314 sets up the schedule and addresses civil
penalties. The current fee schedule cap expires at the end
of the year.
LINDA HALL, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, provided an
overview of the background and contents of HB 314. She
noted that when changes were made to the workers'
compensation law in 2005, there was an inadvertent deletion
of the basis of the Worker's Compensation Board to adopt a
fee schedule. An expectation that stakeholders would
convene and propose legislation before August 1, 2007 was
not met; subsequently, the department has twice requested
increases to the old 2004 fee schedule. She called the 2006
and 2008 increases "artificial, across-the-board." The most
recent fee schedule will expire December 31, 2010. After
expiration, there will not be a cap on charges by providers
for services given to injured workers.
Ms. Hall referred to handouts before the committee,
beginning with "Workers Compensation Medical Losses Are
More Than Half of Total Losses; All Claims-NCCI States"
(copy on file). She explained that NCCI is the National
Council on Compensation Insurance, the statistical agent
for Alaska and 35 other states. Data collected by NCCI in
the 36 states show medical expenses in 2008 being 58
percent of the total system cost with indemnity (lost
wages) at 42 percent.
Ms. Hall directed attention to the second chart, "Workers
Compensation Benefit Split in Alaska; All Claims--Alaska"
(copy on file), with pie charts focusing on statistics in
Alaska only. She noted that Alaska's medical cost is at 72
percent; the equivalent of $0.72 of every dollar spent on
workers' compensation benefits is spent on medical
services. She emphasized that this was significantly higher
than the national average.
Ms. Hall turned to the third chart, "Alaska Medical Average
Cost per Case vs. Countrywide" (copy on file). She pointed
out that in 2008, Alaska spent approximately $40,000 per
case; the national average is $26,000.
Ms. Hall referred to the final chart, "Oregon Worker's
Compensation Premium Rates Ranking, Calendar Year 2008"
(copy on file) and emphasized that Alaska ranks number one
in both 2006 and 2008 for workers' compensation premium
rates. She believed that much of the high premium costs are
driven by medical costs.
Ms. Hall acknowledged that the proposed new fee schedule in
HB 314 was not a "fix" that would lower the premiums, but
she asserted it would replace the consumer price index
(CPI) increases that have created a static schedule with a
sustainable schedule adding back missing procedure codes,
language for medical supplies, and transportation costs,
which have seen dramatic increases. Ms. Hall asserted that
the fee schedule in the bill would be complete. In
addition, a vendor would supply the information to the
Division of Workers' Compensation. She pointed out that
there would not be changes in the process.
1:43:32 PM
Ms. Hall remarked that the second part of the bill would
update fraud prosecution language. She noted that current
language is insufficient to prosecute in cases of fraud.
Ms. Hall provided a sectional analysis, beginning with the
first section addressing the fee schedule:
Section 1. Amends AS 23.30.097(a) to provide that
after December 31, 2010, the fee may not exceed the
usual, customary and reasonable charges in a fee
schedule adopted by the board which must include the
most recent Current Procedural Terminology codes
maintained by the American Medical Association for
category I, II and III medical services and the Health
Care Procedure Coding System for medical supplies,
injections, emergency transportations and other
medically related services. The fee schedule must
reflect the cost in the geographical area where
services are provided and is set at the 90th
percentile.
Ms. Hall detailed that fees in Alaska are based on 90
percent of the predominant charges in an Alaskan
geographical area.
Ms. Hall turned to the next section providing language
regarding fraud:
Section 2. Amends AS 23.30.250(a) to clarify that the
behaviors outlined are workers' compensation fraud
which may be punished under AS 11.46.120 - 11.46.150
(criminal law).
Ms. Hall detailed that crimes committed in false
representation is considered to be a felony and subject to
criminal prosecution.
Ms. Hall noted that the next section separates criminal
penalties in Section 2 from civil penalties:
Section 3. Amends AS 23.30.250 (c) clarifies that in
addition to criminal penalties, a violation of this
chapter may result in civil liability with an award of
three times the amount of compensatory damages.
1:46:47 PM
Ms. Hall detailed that Section 3 enables a civil action in
addition to criminal penalties, noting that attorney fees
are on top of the three times the amount of compensatory
damages.
Ms. Hall referred to the next sections:
Section 4. Amends AS 23.30.280(a) to change the
specific statute citation of AS 23.30.250 to "this
chapter" to broaden the investigative authority to the
entire chapter.
Section 5. Amends AS 23.30.280(b) to delete reference
to AS 23.30.250(a) to broaden the reporting of
fraudulent acts to the employer.
Section 6. Provides for an immediate effective date
under AS 01.10.070(c) Section 1. Amends AS
23.30.097(a) to provide that after December 31, 2010,
the fee may not exceed the usual, customary and
reasonable charges in a fee schedule adopted by the
board which must include the most recent Current
Procedural Terminology.
Representative Austerman asked for clarification related to
Page 2, line 9 and the new fee structure. Ms. Hall
responded that the fee schedule is based on procedure codes
done by the American Medical Association and are standard
throughout the industry. She explained that GENEX Services
takes all the Alaska charges in geographical areas and sets
th
the schedule at the 90 percentile and replaces the current
schedule only in that it updates and adds codes and makes
the charges in line with what is actually being billed.
Representative Austerman queried the meaning of the 90th
percentile. Ms. Hall provided the example of putting ten
charges for knee surgery in a line; 90 percent would fall
th
not a percentage but becomes a maximum amount. She agreed
the number was basically 90 percent.
Ms. Hall added that the current fee schedule is missing
approximately 2,000 procedure codes that have been added to
practice since the last update.
1:50:29 PM
Vice-Chair Thomas had questions about the measure related
to seasonal workers. He asked whether damages can be
recovered if a seasonal worker intentionally injures
himself, makes a claim, and then leaves the state. Ms. Hall
replied that there are more workers' compensation claims at
the end of the season and in difficult economic times. She
explained that an employer can go before the Workers'
Compensation Board to challenge a claim. The board is able
to go out of state and investigate. She thought the ability
to extradite would depend on the amount of benefits
collected. The claim can be challenged even if the person
has moved within the states; she was not sure about what
would happen to a person who has left the country.
Vice-Chair Thomas relayed personal experience and expressed
concerns.
1:53:30 PM
Representative Fairclough queried costs on the current fee
structure. Ms. Hall answered that the structure had been in
place since 2004. She estimated that it did not cost much
to update the schedule, although it has been ineffective.
Representative Fairclough asked about letters of opposition
the committee had received related to payment methodology.
Ms. Hall replied that she had worked with two groups with
concerns. Revisions were made in response to concerns by
the state medical association. She noted additional
opposition from those who felt the original language about
fraud prosecution was too narrow. The department had made
changes in the language that were satisfactory.
Representative Fairclough quoted from a February 2, 2010
letter from the Alaska Spine Institute dated in February
2010 related to the language currently before the
committee:
This revised language provides "the board" with an
undefined and unlimited scope of authority to make changes
and establish policy with respect to the medical fee
schedule.
Representative Fairclough pointed out that the only
difference she could see is an "and" provision on line 14
[page 2] regarding the coding system. She questioned
whether the issues raised had been addressed.
Representative Gara directed attention to Section 3 (Page
3, line 10) and language regarding liability of a person
guilty of fraud. He noted that current law says a person is
"entitled to compensatory damages and an award of three
times the amount of those damages." He compared the
proposed language: "economic damages as a result of the
award and three times the amount of the compensatory
damages." He questioned the reason for the language change.
1:58:12 PM
ERIN A. POHLAND, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW (via teleconference), explained that the change was for
clarification. The change is that the person who suffers
from economic harm as a result of workers' compensation
fraud would be entitled to three times economic damages as
compared to essentially four times the compensatory
damages.
Representative Gara pointed out that original statute does
not have the word "economic." He noted that generally
statutes talk in terms of compensatory damages a person is
entitled. He suggested reverting to compensatory damages
plus an award of three times the amount of compensatory
damages. He asked the policy reason for the new language.
Ms. Hall did not know any reason not to have the original
language in the bill.
Representative Gara understood the intent was to make it
clear that the amount of compensatory language was three
times and not four. Ms. Hall believed old language had been
interpreted as four times the damages. Representative Gara
pointed out that a person usually does not get the three
times unless they got the compensatory damages; he wanted
to know if the goal was to take away the right to
compensatory damages. Ms. Hall responded that taking away
compensatory damages was not the goal.
2:02:18 PM
Representative Austerman asked whether eliminating Section
3 would make the old language law.
Representative Gara commented that the bill says a person
would be given criminal penalties. In addition, a person
would get compensatory damages plus a three times
multiplier. To be consistent with current statute, he
proposed starting with the word "person" on line 9 to read:
"person for compensatory damages as a result of the
violation and an award of three times compensatory damages
resulting from the violation".
Co-Chair Stoltze requested an explanation of the difference
between economic and compensatory damages. Ms. Hall
explained that compensatory damages are broader than
economic damages and potentially more subjective.
Representative Gara described "compensatory damages" as
resulting when someone hits a person in a car; the person
hit is entitled to compensation for losses such as physical
damages and lost wages, although lost wages tend to be
called economic damages. He was concerned that the bill was
written just in terms of economic damages. He asked whether
the attorney had problems with going back to compensatory
damages plus three times the amount of those compensatory
damages. Ms. Pohland believed there should be a discussion
with the Department of Labor and Workforce Development in
terms of the policy change. She opined that damages that
would be considered in a workers' compensation fraud case
would be economic damages.
Representative Gara described a hypothetical situation in
which there could be medical damages as opposed to economic
damages. Ms. Pohland agreed and pointed out that there are
provisions already in place addressing an insurer or
employer's failure to insure (AS 23.30.155 and AS
23.30.255). Penalties and damages are already in place; for
example, there is usually a penalty provision (essentially
an extra interest) that is tacked on when an employer or an
insurer have unfairly controverted a claim. The legislation
was intended to address other situations, such as the
intentional misclassification of employees to avoid paying
workers' compensation premiums, or lying in a case.
2:08:25 PM
Ms. Hall added that one of the reasons for the section was
a "co-mingling" of civil and criminal language, which had
presented difficulty in attempted prosecution. The language
attempted to clear up the confusion between criminal and
civil penalties.
Representative Austerman wanted to ask the Department of
Labor and Workforce Development about the change in policy.
TRENA HEIKES, DIRECTOR, DIVISION OF WORKERS' COMPENSATION,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, did not know
why the changes were made in subsection (c). She had
recommended a change in the attorney fee language.
Currently, attorney's fees allow prevailing party by law,
but that is a small percent of costs. She requested adding
an award of reasonable attorney's fees, or recovery of full
reasonable attorney's fees. Regarding Representative Gara's
question, she did not know why the change was made. She
recommended deleting the language "economic" and
"compensatory" so that damages are not delineated.
Representative Gara summarized that no one had intended to
change the damages a person is entitled to. He asked for an
evaluation by DLWD of proposed changes: line 9 to 10 (page
3) cross out "who suffers economic" and insert "for
compensatory" after "person" on line 9; on line 10 after
"violation" put "and" instead of "for". The result would
be: "a person for compensatory damages as a result of the
violation and an award of three times". Ms. Heikes replied
that her first reaction was that she did not have a problem
with the proposal.
Ms. Hall felt the proposed change left the intent intact
and clarified the issue in a way that would resolve
concerns.
2:14:06 PM
Ms. Pohland concurred that the proposal clarified the
language and makes clear what damages a person is entitled
to without changing the original intent.
Representative Doogan understood that the legislation would
get rid of the application of theft by deception in the
statute and replaces it with being guilty of perjury and
related offenses. He asked why the change was being made in
terms of the criminal code.
Ms. Hall noted that another amendment was pending that
would provide further clarity. She stated that the goal was
to make workers' compensation fraud more than a paperwork
problem or theft by deception but closer to real workers'
compensation fraud on the part of an employee, provider, or
employer. In making the change, DCCED was attempting to
clarify that it was talking about other specific things in
Section 2.
Ms. Heikes explained that the need for the change in AS
23.30.250 arose out of a problem DLWD had in prosecuting
for fraud. The statute currently says that the intent
element of the crime is to "knowingly" make a false
statement, etc., that the person is guilty of theft by
deception. However, theft by deception is a higher intent.
The law appears to establish two different intents, which
makes prosecution difficult, if not impossible. For that
reason, DLWD wanted just one intent. In the re-write, AS
23.30.250(a) provisions were gutted.
Representative Doogan queried whether the proposal would
make a misdemeanor a felony or affect other "penalty
creep." Ms. Heikes answered that under the new statute, the
felony or misdemeanor status would depend on amount of
damage or the amount taken.
2:19:12 PM
Co-Chair Stoltze MOVED to ADOPT Amendment 1 (26-LS1354\R.1,
Bailey, 3/9/10):
Page 1, line 2:
Delete "investigations,"
Page 2, line 24, through page 3, line 6:
Delete all material and insert:
"*Sec. 2. AS 23.30.250(a) is amended to read:
(a) A person who (1) knowingly makes a false or
misleading statement, representation, or
submission related to a benefit under this
chapter; (2) knowingly assists, abets, solicits,
or conspires in making a false or misleading
submission affecting the payment, coverage, or
other benefit under this chapter; (3) knowingly
misclassifies employees or engages in deceptive
leasing practices for the purpose of evading full
payment of workers' compensation insurance
premiums; or (4) employs or contracts with a
person or firm to coerce or encourage an
individual to file a fraudulent compensation
claim [IS CIVILLY LIABLE TO A PERSON ADVERSELY
AFFECTED BY THE CONDUCT, IS GUILTY OF THEFT BY
DECEPTION AS DEFINED IN AS 11.46.180, AND] may be
prosecuted under AS 11 [PUNISHED AS PROVIDED BY
AS 11.46.120 - 11.46.150}.
Vice-Chair Thomas OBJECTED
Co-Chair Stoltze remarked that he offered the amendment by
request of the Department of Law.
Ms. Hall explained that the amendment further refines
language to clarify and separate potential criminal
behavior vs. civil behavior. She noted the word
"investigations" would be removed from the title. The
deletion of Section 2 would remove references to civil
liability in order to streamline the legislation. Adoption
of the changes would make Section 4 and Section 5 on page 3
unnecessary.
Representative Doogan wondered if the changes mean the
entire criminal code would apply.
2:22:36 PM
ANNE CARPENETI, ASSISTANT ATTORNEY GENERAL, LEGAL SERVICES
SECTION-JUNEAU, CRIMINAL DIVISION, DEPARTMENT OF LAW,
explained that a person who commits a crime under any
pretext is subject to prosecution under Title 11. She
reported that the department thought it would be clearer to
simply state a person who commits a crime in relation to
this type of activity is prosecutable under Title 11, since
theft by deception under Title 11 has particular elements
that need to be proven.
Representative Doogan reiterated his concern regarding the
amendment and asked if a more discrete definition of the
offences was warranted. Ms. Carpeneti related that the
Department of Law's view of violations that occur in the
context of the worker's compensation law is already subject
to prosecution under Title 11. It is unnecessary to list
the specific offences in the legislation. The Department's
intent in recommending that Title 11 be cross referenced in
relation to these types of crimes was to keep the bill
clear , inclusive, and expand their ability to prosecute
fraud. Representative Doogan appreciated the Department's
approach.
2:28:56 PM
Representative Gara asked why Sections 4 and 5 must be
deleted if Amendment 1 is adopted. He assumed the sections
broadened the Department's investigative and prosecutorial
authority.
2:30:01 PM RECESS
2:30:57 PM
MICHAEL FORD, LIAISON, DEPARTMENT OF LAW, explained that
sections 4 and 5 were in the bill accidentally. Changes
were made in the Judiciary Committee that removed the
reference to those sections, therefore Sections 4 and 5
should have been removed in the CS. He added that the
sections could remain as a matter of policy. Representative
Gara implied that he did not want Worker's Compensation
investigators feeling constrained. Mr. Ford believed that
removal of Sections 4 and 5 simply reflect technical
changes to correct an oversight.
Representative Gara requested assurance from the Department
of Labor and Workforce Development. Ms. Heikes replied that
the DLWD supports removal of Sections 4 and 5. She
confirmed that previously the investigators could not get
prosecutions because of confusion regarding intent and the
bill clarifies that.
Vice-Chair Thomas WITHDREW his OBJECTION. There being NO
OBJECTION, Amendment 1 was adopted.
Representative Gara MOVED to ADOPT Conceptual Amendment 2:
Page 3, lines 9-10:
Delete "who suffers economic" and replace with "for
compensatory"
Page 3, line 10:
Replace "for" with "and"
Co-Chair Stoltze OBJECTED
Representative Gara read the changes, "on behalf of a
person for compensatory damages as a result of the
violation and an award of three times the amount of
compensatory damages…"
Ms. Hall agreed with the amendment.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
OBJECTION, Amendment 2 adopted.
Co-Chair Stoltze requested discussion of the fiscal notes.
Ms. Heikes explained FN 2 (LWF) that the $75 thousand was
for development of the new medical fee schedule.
Vice-Chair Thomas MOVED to report CSHB 314(FIN) out of
Committee with individual recommendations and the
accompanying fiscal notes.
CSHB 314(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with two previously published
fiscal notes: FN1 (LAW); FN2 (LWF).
2:37:31 PM RECESS
2:51:26 PM RECONVENED