Legislature(1999 - 2000)
03/06/2000 02:30 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 378 - WORKERS COMP AND WORKER SAFETY CHAIRMAN KOTT announced that the next order of business before the committee would be HOUSE BILL NO. 378, "An Act eliminating certain taxes under AS 21.09 on premiums from the sale of workers' compensation insurance; relating to the establishment, assessment, collection, and accounting for service fees for state administration of workers' compensation and worker safety programs; establishing civil penalties and sanctions for late payment or nonpayment of the service fee; and providing for an effective date." CHAIRMAN KOTT called upon Paul Grossi to present the bill, noting that Dwight Perkins, Deputy Commissioner, was present as well. [The bill was sponsored by the House Rules Committee by request of the Governor. Before the committee was CSHB 378(L&C), Version GH2072\D.] Number 1090 PAUL GROSSI, Director, Division of Workers' Compensation, Department of Labor & Workforce Development, explained to the committee that first, HB 378 eliminates the premium tax on all workers' compensation insurance policies. Second, it enacts a user fee on all workers' compensation payments. And third, it establishes a special account that those fees will go into, for the funding of workers' compensation and workers' safety or OSHA [Occupational Safety and Health Administration]. MR. GROSSI discussed the present system. All employers are required to cover workers' compensation in Alaska, which is done in one of three ways: by purchasing a workers' compensation insurance policy on which there is a premium tax; by self-insuring, for larger entities, in which case no premium tax or fee is paid; or by forming a JIA [Joint Insurance Arrangement], which applies to certain municipalities or public entities and for which there is no premium tax. MR. GROSSI reported that this bill eliminates the premium tax that some employers pay, and it enacts a user fee on all workers' compensation payments that will generate the same amount of money that the premium tax did, approximately $3.5 million. It phases in self-insurers and those who aren't currently paying, and the fee goes from 3.1 percent down to 2.6 percent as the self-insurers are phased in. People purchasing workers' compensation insurance policies will pay basically the same the first year, and then they will slowly "phase in" as the pool gets larger and all the payers participate. Ultimately, all employers will pay at the same rate, according to their claims experience: the more injuries there are, the more they would pay, and the fewer injuries there are, the less they would pay. MR. GROSSI told members he believes it is a good policy, and it is better than the current system. It provides a greater incentive for employers for provide safe workplaces, because the safer the workplace, the fewer claims there will be and the less they will pay. It also allows all employers to pay for the use of the system, according to use and need. Furthermore, it reduces the reliance on general funds for these two programs. Number 1305 MR. GROSSI noted that this proposal is unusual for the State of Alaska, but it is not out of the ordinary in other states. He provided figures from a four-page document that outlines how other states fund workers' compensation and other programs. Alaska is one of six states that funds workers' compensation on pure general fund dollars; 34 states pay through some sort of special funding mechanism; and ten states use a combination of general funds and a special fund. Of the 44 states with special accounts, 16 have funding mechanisms similar to the one proposed in this bill. Mr. Grossi noted that support for the bill isn't unanimous because entities that haven't had to pay anything will have to pay under this system. He emphasized the need to ask whether this [proposed system] is fair, however, and whether it is a better system, which he believes it is. Number 1418 REPRESENTATIVE ROKEBERG said he would direct the same question to Bob Lohr of the DCED if he were online. He then stated his understanding that nothing in the bill mandates reduction of premiums. He said one theory is that the risk will be spread to a greater number of people by going to a fee on the claim, and therefore the premium tax will go down, particularly over the phaseout period. He asked whether anything in this bill ensures that the insurance company will pass that on to the business. MR. GROSSI answered that nothing in the bill forces that, but market forces probably would dictate that ultimately. If it costs less, the product can be provided more cheaply. REPRESENTATIVE ROKEBERG asked whether that is because there are so many workers' compensation underwriters working in Alaska. MR. GROSSI said there are about 30, to his belief. REPRESENTATIVE ROKEBERG inquired about the market share of the top companies. MR. GROSSI suggested perhaps Mr. Lohr could answer that. [However, Mr. Lohr apparently was not on teleconference.] Number 1518 BARBARA HUFF TUCKNESS, Director, Governmental and Legislative Affairs, General Teamsters Local 959 State of Alaska, came forward in support of the bill, noting that her organization represents employees in both the public and private sectors across the state. Some employers have contributed "for eons" into this program, she told the committee, whereas others have never contributed. Her organization supports the concept of the bill, which they believe will level the playing field and encourage a more proactive safety program that should theoretically reduce the number of worker injuries. Number 1601 DON ETHERIDGE, JR., Lobbyist for Alaska State AFL-CIO, came forward in support of the bill. He said the AFL-CIO sees this as a way to improve worker safety and to keep the workers' compensation and OSHA programs from being killed off in the future legislative budget process, because this will fund itself. Number 1658 KEVIN RITCHIE, Executive Director, Alaska Municipal League, came forward. He advised members that the Alaska Municipal League doesn't have a problem with many of the concepts of the bill, but he pointed out that anytime that costs rise in municipal governments, that gets passed on to the people in the community. He clarified that he wasn't saying that the bill does that unfairly or that it is unjust. If the whole playing field were leveled, that would be a different issue as far as revenues go. But at this point, that is a consideration for municipalities, which is why the Alaska Municipal League board was concerned about the bill. Number 1684 REPRESENTATIVE ROKEBERG alluded to a memorandum in committee packets [from Ms. Leandra Estep] and asked whether the definition of "user fee" is still a concern. MR. RITCHIE deferred to Ms. Estep. LEANDRA ESTEP, Workers' Compensation Claims Manager, Alaska Municipal League Joint Insurance Association, Inc., testified via teleconference from Anchorage. She indicated that changes made in CSHB 378(L&C) seem to address previous concerns: the subrogation question was clearly answered, although the reinsurance was not necessarily addressed in any of those amendments. CHAIRMAN KOTT asked whether anyone else wished to testify, then closed public testimony. He asked whether there was any committee discussion; none was offered. Number 1818 REPRESENTATIVE GREEN made a motion to move CSHB 378(L&C) from the committee with individual recommendations and the attached fiscal notes. There being no objection, CSHB 378(L&C) was moved from the House Judiciary Standing Committee.
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