Legislature(2021 - 2022)ADAMS 519
02/02/2022 01:30 PM House FINANCE
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Audio | Topic |
---|---|
Start | |
HB187 | |
HB64 | |
HB30 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+ | HB 30 | TELECONFERENCED | |
+ | HB 64 | TELECONFERENCED | |
+ | HB 187 | TELECONFERENCED | |
+ | TELECONFERENCED |
HOUSE BILL NO. 30 "An Act relating to notice of workers' compensation death benefits; relating to the payment of workers' compensation benefits in the case of permanent partial impairment; relating to the payment of workers' compensation death benefits; and providing for an effective date." 2:51:15 PM Co-Chair Foster moved to the last bill on the agenda and indicated it was the bills first hearing. REPRESENTATIVE ANDY JOSEPHSON, SPONSOR, thanked the committee for hearing the bill. He relayed the history of the legislation. He first took up the permanent partial impairment bill in 2014. The bill had a hearing in 2015 and passed out of the House in 2018. It languished in the Senate Finance Committee. In 2019, a unique death benefit that 12 other states had was removed. The clean bill passed in 2020. He noted that at least four or five members of the current committee voted in favor of the bill. He explained that a partial impairment was an injury that was determined by a medical doctor to be permanent and partial related to the fact that the person was still living. The rating the state operated under the whole body rating while some states measured the loss by body part. The rate was calculated by the doctor determining the percent of the damage and the percentage was multiplied by the whole body number. The legislation was attempting to modify the whole body rating by increasing it from the current rate of $177 thousand, which placed the state in the bottom 5 states nationally. He reported that the rate had not been increased in 22 years and indicated that the bill proposed raising it to $273 thousand. He added that factoring in for inflation the rate should be $286 thousand. He offered that the bill updated all matters related to permanent impairment. Representative Josephson continued that the bill addressed increasing the rate for the death of a family member with dependents. The current rate was established in 1968. He characterized the provision as anti- elitist. He delineated that currently, financial support was typically cut off when a dependent of a sole surviving parent turned 19, unless the child was attending a university until the age of 23. The bill extended the benefits to all dependents between the ages of 19 and 23. Representative Josephson discussed workers compensation premiums. He observed that there was a perception that premiums were rising. However, premiums were not increasing but actually decreasing particularly in the category of indemnity. He specified that indemnity meant death or impairment and asserted that the cost of indemnity had decreased. He pointed out that the cost of indemnity was 14.5 percent of the entire cost of premiums. Within the portion of indemnity (14.5 percent) there were large decreases of about 40 percent. He explained that it was due to improved workplace safety. He emphasized that the cost of the bill to cover all workers in the state was approximately $4.8 million, which may seem like a lot but was divided by hundreds of thousands of workers. He acknowledged that the bill would increase premiums by 2 percent, but premiums had dropped 14 percent over the last several years. He surmised that the trend line on premiums was still decreasing. He highlighted how poorly the state treated its injured workers. A person who lost an arm received $106 thousand in a PPI award. In the highest state of Pennsylvania, the person received $389 thousand. The th state ranked 45 in the loss of an arm and an eye. In Maryland, if a person lost an eye at work, they were paid over $250,000 versus in Alaska where a person would be compensated only $44,000. He contended that the state could and must do better. 2:59:43 PM Co-Chair Merrick asked how many people in Alaska received a partial impairment every year. Representative Josephson could not recall and deferred the answer to the Department of Labor and Workforce Development (DLWD). 3:00:13 PM Representative Edgmon thanked the sponsor for bringing the bill forward and felt it was highly commendable. He mentioned the impending federal infrastructure funding and workforce that will be necessary for building roads and working on infrastructure projects in light of Alaska's extreme weather events. He noted someone from his hometown being injured on the job related to an extreme weather event. He asked for a better sense of who the bill pertained to. Representative Josephson responded that it applied to every worker who was an employee; blue collar workers, white collar workers, and those not self-employed. He shared from personal experience that he had purchased workers compensation for a prior campaign manager and added that it encompassed a broad pool of workers. 3:02:29 PM ELISE SORUM-BURKE, STAFF, REPRESENTATIVE JOSEPHSON, added that there was a separate category for commercial fishers, who were not covered either. 3:02:52 PM Representative Carpenter asked that when comparing the state to national averages or other states for compensation, if the total compensation and other associated costs were factored in. He noted that the state offered retraining which added costs. He asked how Alaska compared to other states that did not have retraining programs or had their own retraining process instead of a lump sum payment. Representative Josephson answered that it would be less generous than expected. He deferred the answer to DOL for comment. He recalled that a person only had the option of the reward or the training but not both. He reminded the committee that there was no way to sue except for third party liability. He exemplified that if the rung of a ladder was defective, the injured party could sue the ladder company. Mostly, workers compensation was designed to avoid litigation, but the worker likely received less. He thought a person would be awarded much more in personal injury court if it was not a workplace injury. He characterized workers compensation as part of a grand bargain that moved the process along expeditiously and was part of a give and take. An employer paid for the injury without explanation because it was a no fault strict liability, however, the injured employee would not recover as much as possible. Co-Chair Foster invited Mr. Collins to the table. 3:06:18 PM CHARLES COLLINS, DIRECTOR, DIVISION OF WORKERS COMPENSATION, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, responded that he could not recall the exact number of claims involving PPI, but remembered that in 2020 the state paid out $7.3 million for PPI. He expounded that many claims had a number of different indemnity portions; an injured worker could elect to also take reemployment and rehabilitation benefits depending on each individual plan. Some claimants might take a lump sum of PPI benefits, and some retrain and receive their benefit as a replacement wage until it ran out. He commented that the benefits were very complex and varied per individual case. He requested that the second question be repeated. 3:08:11 PM Representative Carpenter restated his question about the compensation and comparing the total benefit, including retraining to national averages - he asked if they were comparing apples-to-apples. He would argue that Alaska would be in a top tier of compensation if retraining costs were included with the payout. Mr. Collins replied that all workers compensation benefits were paid by the workers employers or their carriers, which were self-insured entities like the state of Alaska who paid the benefits directly rather than through an insurance company. He delineated that reemployment payments in Alaska through AS 23.30.041 were limited in scope and amount. He explained that the injured state worker was evaluated and if found eligible for reemployment benefits an education plan was developed and the most the state paid was $13.3 thousand in reemployment benefits. The caveat was that wage replacement called 041K derived from AS 23.30.041 (k) paid a weekly stipend while retraining. As for other jurisdictions, outside of Alaska, he expounded that each jurisdiction had its own set of laws governing worker's compensation and no two states were the same. He noted that in the state of Washington everything was done through the state; the insurance policy was purchased through the state and ran the retraining programs. In Alaska, workers compensation was run through the carriers organization and the state was removed from the process. He recounted that in 2020, there was more than $7 million in replacement wages paid out on 111 active plans and the plans dated back several years through to the present. At any given time, people were working through the system and would accept some of the 041K replacement wage, which was the most expensive portion of workers compensation. He furthered that according to AS 24.30.041 a person could take a job dislocation settlement. Even if an injured employee took either of the aforementioned benefits, PPI payments were typically paid directly to the injured employee. 3:12:21 PM Representative Carpenter understood that the injured worker received PPI compensation and retraining. He asked if he had made an accurate statement. Mr. Collins thought Representative Carpenter's comments were accurate. He qualified that if someone elected retraining before they can collect 041K they had to utilize their PPI. If the injured person was in a retraining program, their PPI was paid weekly while in the retraining program. It was possible that if a person ran out of PPI while still retraining, they could collect more 041K wage replacements. He noted that the individuals plans had to be approved by the employer as well as the department and the employee. Representative Carpenter deduced that the issue was more complex that what he had originally thought. He thought that the complexity made it difficult to compare merely the PPI payments to other states. He determined that it was necessary to compare the entire package. He was hoping someone could provide more information regarding the cost issue. 3:14:52 PM Representative LeBon observed that the purpose of the bill was to bring the benefit up to a hold harmless level for inflation. Representative Josephson responded in the affirmative. He referenced the statements that premiums had decreased and wondered whether the reason was that claims were decreasing. Representative Josephson concurred that indemnity claims had decreased and deferred further answer to Mr. Collins. Mr. Collins reported that for the past 9 years the state of Alaska actuary National Council on Compensation Insurance (NCCI) had recommended lowering the workers compensation rates in Alaska. The reason pertained to 2 factors; Alaska was a safer place to work and with the adoption of a fee schedule based on relative values versus based on the prior usual and customary costs. The medical portion also decreased. The lowest NCCI rates were lowered roughly 13 percent. Representative LeBon thought it was good news. He relayed from personal experience that early in his employment his employer offered accidental death and disability insurance and the premiums were shared 50 percent and 50 percent (50/50). He noted that most of the workers took advantage of the supplemental program over and above workers compensation. He commented that workers compensation was likely not as robust as it should have been. 3:18:09 PM Representative Edgmon asked Mr. Collins about his comment made that Alaska was one of the safest states to work in. He deemed that Alaska was not the safest place due to weather and other conditions. Mr. Collins answered that he might have misspoken. He stated that he said it was currently safer to work in Alaska than 10 to 20 years ago. He added that the data proved the statement. There had been less claims every year since 2015 and he attributed it to an overall safer workplace environment. Representative Edgmon thought he might not have heard Mr. Collins correctly. Representative Wool referenced the $7 million paid out in claims. He asked whether the amount was paid expressly for PPI. He asked about added costs. Mr. Collins replied that the $7.3 million paid was only for PPI in 2020. The total indemnity payments in 2020 was $57.1 million, which included total disability payments, PPI, and other associated benefits. 3:21:10 PM Representative Wool deduced that if the bill were adopted it would compensate for inflation. He asked where the PPI payments came from. Mr. Collins answered that the portion of PPI addressed in HB 30 was only one component but would likely increase the payout amount substantially. However, the premiums would rise only by about 2.9 percent. Representative Wool remained curious about the number of incidents the $7 million represented. He queried whether there was a formula that established the PPI payouts and whether the bill proposed to retain the same formula. Mr. Collins responded that there was a formula contained in the sixth edition of the AMA Guide, [The American Medical Association's Guides to the Evaluation of Permanent Impairment, 6th Edition, 2021]. He indicated he was not qualified to confer a rating. The process was done by a doctor that was certified to provide a PPI rating. He warned that the process was complicated. He used the index finger as an example. He elaborated that could equate to 11 percent of the whole body base rating of $177 thousand established in the year 2000. 3:24:27 PM Representative Thompson opined that the reduction in on- site injuries was attributed to big programs in Alaska geared towards job safety. He mentioned that apprenticeship programs included job safety training and most companies had yearly safety training. He thought that Alaska had changed its way of doing business to prevent job injuries and was pleased. 3:25:15 PM Representative Carpenter agreed with Representative Thompson that the work culture had changed in Alaska. He asked about workers compensation compared to what an employer might offer for life and disability through private insurers and what premiums they would pay compared to paying for workers compensation benefits. Representative Josephson answered that he did not have any idea. Representative Carpenter commented that it was valuable to the conversation to know if the industry had a comparable or less expensive way to provide it. He thought maybe the state needed to consider handling workers compensation differently. He wondered if there was a comparable alternative to workers compensation that would decrease the cost to employers without duplicating efforts. 3:27:31 PM Representative Josephson relayed that every state had workers compensation and either offered it or allowed workers to sue their employers. He reiterated that it was part of the grand bargain originally established in the late 1800s in Germany. He informed the committee that worker's compensation was relatively inexpensive per individual. He surmised that it was costly for a business with scores of workers engaged in dangerous work. He referenced Mr. Collins statements that premiums had decreased. 3:28:20 PM Ms. Sorum-Burke reminded the committee that worker's compensation was required by law for every employer, and it was a no-fault system. She elucidated that the reason for Worker's Compensation had to do with employer liability and whether the employee could sue the employer. She turned to a presentation titled HB 30 (copy on file). She addressed Slide 8 titled The Elevator Paradigm. The slide depicted a customer and an employee in an elevator that fell. The paradigm asks the question regarding what damages do each receive. The example was a single childless worker who would only receive funeral expenses. The slide contained the following: What damages do they receive? Customer: Economic Damages Non-Economic Damages Pain and suffering Loss of Consortium Punitive damages Up to $1.5 million Ms. Sorum-Burke maintained that workers compensation existed to protect employers and provided some compensation for employees. She noted that one state allowed workers compensation as an option, which was Texas. She stated that the employer was opening itself up to liability if they chose not to opt for the program in Texas. Representative Carpenter understood the participation requirement. He felt that the state could do something different than workers compensation. He recalled that he was never offered disability insurance when he began working. If the employer was offering disability, he wondered whether it was cheaper via a private insurer than paying benefits through workers compensation. He was not suggesting that liability insurance should not be provided he questioned whether workers compensation was the least costly way and wanted to look at the big picture and not just throw a bunch of money and increase payments. 3:31:53 PM Representative Thompson shared that he was on the Worker's Compensation Board from 1984 to 1994. He recalled that the board discovered that many employers were not carrying workers compensation. He asked if the state was still monitoring employers to ensure that they were not cheating the system and driving up the costs for employers who carried it. Mr. Collins replied that the state had 5 full- time inspectors and less than .01 percent of employers failed to insure. He furthered that all the fines levied against employers that failed to insure were placed in the Benefits Guarantee Fund, which paid for employees that worked for an uninsured employer. The state had done an excellent job of making sure that employers were following the law and took care of employees that were injured who worked for an uncovered employer. Representative Thompson was pleased to hear of the states diligence. Co-Chair Merrick invited Mr. Collins to review the published fiscal note from the Department of Labor and Workforce Development for Workers Compensation (FN 5 (LFW) that reported changes in revenues. Mr. Collins reported that the fiscal note showed no cost to the state. He elaborated that Workers' Compensation insurance premiums were paid by insurers or by self-insured employers and were paid to the Division of Workers' Compensation and assessed at a statutory rate of 2.9 percent. The state would gain revenue due to higher sales of premiums, which was reflected in the fiscal note. Co-Chair Merrick moved to the published fiscal impact fiscal note from the Department of Administration (DOA) for Risk Management (FN4 (ADM) 3:34:52 PM SCOTT JORDAN, DIRECTOR, DIVISION OF RISK MANAGEMENT, DEPARTMENT OF ADMINISTRATION, reviewed the fiscal note. He explained that the amount proposed currently under the Alaska Worker's Compensation Act, AS 23.30.190 (a), the whole body rating was $177,000. The bill increased the rating by 54.24 percent to $273,000 based on the ten year average (FY 2012- FY 2021) of whole body Permanent Partial Impairment (PPI). The 54.24 percent would increase the average annual payout by $423,254 thousand. Based on the $423,254 thousand the division anticipated an additional payout in second injury fund fees of 6 percent or $25,395 thousand totaling $449 thousand as noted in the fiscal note. Co-Chair Merrick turned to the final published zero fiscal note, Various for All Branches. 3:36:41 PM CAROLINE SCHULTZ, POLICY ANALYST, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR (via teleconference), reported there was a zero fiscal note for the designation Various that represented all branches of government. She indicated that Risk Management estimated the legislation would increase costs by $449 thousand annually, amounting to a roughly 2 percent average increase in risk management costs borne by paying all agencies. The state would not be increasing the associated budgets by the amount. Co-Chair Merrick thanked the presenters. She reviewed the agenda for the following day.