Legislature(2005 - 2006)CAPITOL 17
03/06/2006 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB445 | |
| HB392 | |
| HB51 | |
| HB424 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 445 | TELECONFERENCED | |
| + | HB 392 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 51 | TELECONFERENCED | |
| += | HB 424 | TELECONFERENCED | |
HB 51-EMPLOYER ASSN FOR WORKERS' COMP INS ACTING CHAIR KOTT announced that the next order of business would be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 51, "An Act relating to modifying the qualifications required for workers' compensation self-insurance and permitting employers in the same trade or industry to form an employer association for self- insured workers' compensation coverage; and providing for an effective date." ACTING CHAIR KOTT informed the committee that it was not his intent to move the bill at this time. MICHAEL PAWLOWSKI, Staff to Representative Kevin Meyer, Alaska State Legislature, informed the committee that the proposed committee substitute (CS) addresses the issues of regulatory oversight of self-insured groups and whether or not workers' claims would be paid in the event of an insolvency. In regard to the regulatory oversight, he said that the CS shifts the oversight of self-insured groups from the Department of Labor and Workforce Development to the Division of Insurance. In regard to the payment of claims, he explained that several sections were added which deal with the rules the self-insured groups would be required to follow to ensure payment. MR. PAWLOWSKI explained that Section 21.77.200 of the CS requires the association adopt a plan for payment, which must be approved by the director of the Division of Insurance. The plan would include an advance payment of at least 15 percent of the total, with the remainder to be paid quarterly or monthly. This will ensure, based on actuarial accounting, that the self- insured group has appropriate reserves to cover costs and liabilities. He stated that "appropriate reserves" are defined on page 12, Section 21.77.210. These are: actual claims, claims incurred but not reported, reserves for uncollected debts, and are based on the experience of other associations. He said that at least 65 percent of the money collected must be placed in an account to pay claims, with the remaining 35 percent put towards operating costs. MR. PAWLOWSKI explained that workers' compensation rates are determined by the standard workers' compensation system, and the CS does not change this. He said that the CS creates a benefit for the self-insured groups by allowing the groups to plan actuarially what the costs will be. He said that Section 21.77.230 of the CS requires the self-insured group to collect an additional assessment to make up for any short-fall. If this is not done, he said, the director can require an additional assessment. He referred to page 11 and explained that if too much money is collected, the self-insured group must receive approval from the director before the money is returned, which ensures that there is enough money to pay claims. He said that the CS attempts to build in as much oversight as possible. He stated that the director would determine the amount of re- insurance or excess insurance the group is required to purchase. He said: So, ... not only do we ensure [that the group] collects enough money, but they buy re-insurance and excess insurance to limit the liability of loss on the upside. So, you can't have a claim that will ever cost you more than this, or, you cannot ever incur costs in this aggregate. That's the insurance plan that you require of the backup. Further, that's determined by the director. MR. PAWLOWSKI said that page 9 of the CS states that in the event of a bankruptcy, the claims are still payable. He stated that the joint and several liability provisions mean people are pledging their companies that the claims will be paid. He explained that this places the impetus on the members and the director to ensure that there are enough reserve funds. MR. PAWLOWSKI stated that the CS includes the requirement of a surety bond that will go to the state. In the event that all the "checks and balances" fail, there is a bond to pay the claims. In conclusion, he said that the aforementioned additions are to ensure that workers' compensation claims are paid. MR. PAWLOWSKI, in regard to reciprocal groups, stated that if a reciprocal fails, the [debts] are referred to the guarantee fund. He noted an instance when this occurred, and stated that all the payees in the system were required to "pay in" to make up the balance, which, in turn, caused workers' compensation rates to increase. He stated that if a self-insured group were to fail, the joint and several liability, reserves, and bonds would all be available to pay the claims, and the costs do not fall back to the state. He said: The point of self-insurance is that these groups are asking for the ability to take ownership of their costs and obligations. To see a direct benefit for the loss and safety programs they put in, and to really control the cost and their destiny. And that's what a self-insured group allows them to do. It won't put the burden on the rest of the state. ... The attempt of the committee substitute is to come back to the committee's questions and see if we can't get as far toward the regulatory oversight and financial oversight as possible. 5:20:41 PM REPRESENTATIVE CRAWFORD asked what happens to the self-insured group and the remaining employees if a "dominant employer" retires. MR. PAWLOWSKI replied that five employers are required, therefore removal of one employer would lead to the dissolution of the self-insured group. However, he said, the bonds and obligations would still exist to pay for the claims incurred under the previous self-insured group. He noted that this is beyond bankruptcy, selling or [any other issue that may arise]. REPRESENTATIVE LEDOUX made a motion to adopt CSSSHB 51, Version 24-LS0233\S, Bailey, 3/3/06, as the working document. There being no objection, Version S was before the committee. REPRESENTATIVE LEDOUX asked if a self-insured group would receive a refund if it did not receive any workers' compensation claims and dissolves. MR. PAWLOWSKI replied that any refunded money would need to be approved by the director. He surmised that the money would be refunded in this scenario. He said that the director may hold onto a potion of the money for a time, as not all workers' compensation claims are immediately filed. 5:23:42 PM ROBERT VOGEL, Pro Group Management, stated that he is in support of HB 51, which provides the state and employers in the state a broader opportunity to provide workers' compensation insurance. He stated that this would give the employers the control to provide a safe working environment and take care of injured employees. He opined that this is to the benefit of the employers and employees in the state, and added that this is not a mechanism to save money, but is intended to provide long-term stability and continuity. REPRESENTATIVE ROKEBERG asked if, in Mr. Vogel's experience, groups have voluntarily dissolved. MR. VOGEL replied that no groups have dissolved voluntarily or involuntarily. REPRESENTATIVE ROKEBERG asked if any groups have become insolvent. MR. VOGEL replied that no groups have become insolvent. He stated that the "key" issue is that the actuarial projections are designed to collect enough money, based on payroll exposure. He explained that losses are projected over the amount of exposure, with the intent of paying all losses, claims and expenses with this amount. He said that in the event of a bankruptcy or dissolution, the money has already been collected to cover the losses and expenses that were created. He stated that the actuarial projections which are required yearly is to collect enough money based on experience. He explained that it can take time for all of the costs and expenses to be known, and added that if the projection is less than was actually needed, small adjustments can be made to collect the money over time. MR. VOGEL, in response to an earlier question, said that the self-insured group is pooling funds to cover expenses, rather than paying on an individual basis. He stated that the actuarial analysis considers all losses for all of the members during the time that they were active in the group. He said that if, when the group dissolves, the director approves the return of funds, the division will retain a pool of money to pay claims. He stated that the joint and several liability agreement obligates each member for the liability during the time they were in the group. If the amount retained for claims is not enough, the division will approach the member(s) who are no longer a part of the self-insured group to ensure payment. 5:30:41 PM REPRESENTATIVE ROKEBERG asked what the premiums are for surety bonds and "stop loss" insurance. MR. VOGEL replied that typically, the excess insurance market charges 12-15 percent for excess and aggregate reinsurance. He noted that this is dependent upon the deductible layer the group selects. Generally, he said, the deductible is $500,000- $750,000 with an aggregate of 100-110 percent of premiums. He noted that this is not charged to the members in addition to the premiums, but is what the group pays to the excess insurance company. MR. VOGEL, in response to further questions, stated that a surety bond is an amount to cover expected claims and is not equal to the premiums. He said that the director would give the amount and this would be negotiated based on the members' experience level. REPRESENTATIVE ROKEBERG asked if surety bonds are available in the market. MR. VOGEL said yes, and added that generally, these are through the excess carriers. 5:33:10 PM RAY HICKEL, President, Anchorage Home Builders Association (AHBA), stated that the AHBA, the Alaska State Home Builders Association (ASHBA), and the Associated General Contractors - Board of Realtors support the legislation. He said that the AHBA and the ASHBA would like to have "control over [its] destiny." He said that this will enable the AHBA to keep and reward capable employees. REPRESENTATIVE ROKEBERG asked if the $1 million net worth would be affordable. MR. HICKEL replied that he does not believe the $5 million will be a problem. MR. HICKEL, in response to questions, said that the AHBA initiated the bill in an effort to keep the ASHBA from being burdened by the time and cost of working on it. He said that the Fairbanks Home Builders Association is welcome to join the [self-insured] group at any time. He stated that while the AHBA asked for support from the ASHBA, it did not ask for money. 5:35:36 PM LARRY PARTUSCH, Anchorage Home Builders Association (AHBA), said that he is in support of the legislation. He said that the AHBA has been working on the bill for two years and has worked with the [Division of Insurance] to address its concerns. He stated that being industry specific allows the self-insured groups to police themselves better than other groups would be able to. He said that the intention is to get injured employees back to work as soon as possible. 5:37:37 PM ACTING CHAIR KOTT, referring to page 1, line 9, of the CS, noted that it reads "the director may issue a self-insurance certificate;" however, on page 5, lines 4-5, it reads "the director shall issue a certificate of self-insurance." MR. PAWLOWSKI surmised that this is an incongruence that should be fixed and added that if this is not the case, he will look into the reasoning behind the difference. ACTING CHAIR KOTT stated that any issues with the bill should be discussed before the next committee hearing. Therefore, HB 51 was held over. 5:39:11 PM
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