Legislature(2009 - 2010)BARNES 124
02/03/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB314 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 314 | TELECONFERENCED | |
HB 314-WORKERS' COMPENSATION
3:27:35 PM
CHAIR OLSON announced only order of business would be HB 314,
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."
3:28:34 PM
KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State
Legislature, explained that the purpose of HB 314 is to replace
the current medical fee schedule with an updated schedule. The
Medical Services Review Committee recommended the current
medical fee schedule be replaced with an updated schedule.
3:29:48 PM
LINDA HALL, Director, Division of Insurance (DOI), Anchorage
Office, Department of Community & Economic Development (DCCED),
provided the history of the medical fee schedule. In 2005, the
statute inadvertently deleted the mechanism for the Workers'
Compensation Board to adopt a new fee schedule. At that time
the DOI anticipated the stakeholders would propose an updated
schedule by August 1, 2007. However, that did not happen, the
medical fee schedule was frozen, and the 2004 fee schedule still
applied. A Consumer Price Index (CPI) was adopted and used from
2004 - 2006. Last year, the legislature adopted another CPI
increase which expires December 31, 2010. She discussed a
replacement for the current CPI. She referred to her handout in
the committee packets and reviewed charts, pointing out the
colored pie charts titled "Workers Compensation Medical Losses
are More Than Half of Total Losses," [page 32]. In 2008, the
National Council on Compensation Insurance, Inc. (NCCI) states,
consisting of approximately 33 states, had medical fees that
encompassed 58 percent of the medical costs, with the remaining
42 percent of the costs consisting of indemnity costs. The next
chart refers to the "Workers Compensation Benefit Split in
Alaska" with medical costs representing 72 percent of the
medical claims, which has increased by 20 percent in the past 20
years [page 31].
3:32:48 PM
MS. HALL stated that the average cost per case in Alaska is
$40,000, while the countrywide average cost is $26,000"Alaska
Medical Average Cost per Case vs. Countrywide [page 35]. Thus,
Alaska is substantially above the national average.
3:33:19 PM
MS. HALL stated that according to the Oregon Workers'
Compensation Premium Rate Ranking, Calendar Year 2008, Alaska
ranked number one [page 4]. She stated that Alaska has the
highest Workers' Compensation premium rates in the country.
While Alaska's rates have remained high, California's premiums
were once high, but California is now ranked thirteenth
nationwide. The state must review what drives up the cost for
Workers' Compensation insurance in Alaska. Although this bill
is not a complete fix and will not lower premiums, it represents
progress. This bill, HB 314, will replace the past CPI
increases with a sustainable schedule until a more permanent
solution can be found. This temporary fix approach has been
recommended by the Medical Services Review Committee. She
applauded the work the Medical Services Review Committee has
done to examine the issues and to work to find solutions.
3:35:14 PM
MS. HALL explained that HB 314 provides a fee schedule that will
eliminate the need for the DOI to come before the legislature
each year. The bill contains a full fee schedule that contains
all of the procedure codes, consisting of approximately 2,000
new procedure codes, which have been developed since 2004, at
the time when the last fee schedule was updated and adopted.
She suggested the importance in adopting the codes and assured
members that the DOI still will continue to work to address
rising transportation costs for air and ground transport,
particularly for emergency transports. She emphasized that HB
314 will bring the fee schedule up to date. The overall system
will not change, is the same system that has been in use for
many years. In fact, the regulations have been in place for the
past 20 years. She assured the committee that the DOI is not
"reinventing the wheel" and changes are not being made to the
regulatory process. A vendor compiles various bill charges and
creates the fee schedule, which is purchased and subsequently
adopted by the members of the Workers' Compensation Board. She
explained that members of the Workers' Compensation Board are
appointed by the Governor and are confirmed by the legislature.
She said she found some reactions to this bill surprising
because the system will remain the same and the overall effect
of the bill is to update the fee schedule.
3:37:36 PM
MS. HALL explained that the bill will also update the provisions
for prosecution of fraud. Workers' compensation fraud adds cost
to the system and the DOI hopes to tighten up the language in
the Division of Workers' Compensation statutes. In 2005,
investigative authority was added with the understanding that
fraud could be prosecuted, she noted. However, the Workers'
Compensation Board recently discovered it could not prosecute
fraud under its statutes.
MS. HALL provided a section-by-section analysis of the bill.
Section 1 would amend AS 11.56.205(a) to add the application for
benefit under AS 23.20 to the crime of unsworn falsification in
the first degree which is a class C felony. Thus, if a person,
with the intent to mislead submits a false written or recorded
statement that the person does not believe to be true at the
time he/she applied for a benefit will be considered a crime of
unsworn falsification, which will be a felony.
MS. HALL explained that Section 2 would amend AS
23.30.097(a)(1)(D), such that the new base fee may not exceed
the usual, customary, and reasonable charges in a fee schedule
adopted by the Workers' Compensation Board. The fee schedule is
based on a credible profile of bill charges, and includes cost
differential for geographical areas. She offered that currently
only one vendor, Ingenix, creates fee schedules. The company
uses geozips, or geographical zip codes to develop the fee
schedule. Thus, the company analyzes the primary codes and
groups together places where the charges are comparable.
Ingenix is also used by health insurers to develop standard bill
charges. The fee schedule charges are based only on Alaska
data, not on Louisiana data, noting that Louisiana has the
lowest charges in the nation. Thus, the costs in the fee
schedule are not average costs. She explained that basically,
Section 2 creates a base schedule to insert the procedure codes
back into the statutes as a complete fee schedule. The fee
schedule must include the most recent current procedural
terminology codes for category I and category II medical
treatment, or other services based on credible data for today's
charges. The schedule must also adhere to the regulations from
the Division of Workers' Compensation. The fee schedule is
based on the 90th percentile, she said.
3:42:31 PM
MS. HALL explained that Section 3 would amend AS 23.30.250(a) to
clarify that a crime that is a violation of the chapter is
prosecuted under AS 11, which is Criminal Law, and that the
violation may result in civil liability with an award of three
times the amount of compensatory damages. Insurance fraud is a
crime and Workers' compensation fraud is a similar crime.
3:43:26 PM
MS. HALL related that the changes in Section 4 would allow the
director to establish a section within the DOI for investigation
of fraudulent or misleading acts under this chapter. The DOI's
investigators would be able to investigate any type of fraud
under the chapter, which broadens the authority. This provision
would allow the DOI director to investigate whether credible
evidence exists that a person obtained a payment, compensation,
medical treatment, or other benefit provided under this chapter
by a fraudulent act or false or misleading statement.
3:44:28 PM
MS. HALL explained that Section 6 would repeal AS 23.30.250 (c)
since this provision has been included and moved to Section 3 of
this bill. She explained that is the sum extent of the bill.
3:44:59 PM
CHAIR OLSON thanked the director for the efforts made to bring
this forward. He suggested that this bill is not perfect but is
a step in the right direction.
3:45:02 PM
REPRESENTATIVE BUCH asked about the availability of enforcement
and staff to conduct investigations.
MS. HALL related her understanding that a six-person
investigative unit in the Division of Workers' Compensation
would provide assistance and uses a two-pronged approach.
Insurance companies must report suspected benefit fraud. The
DOI can investigate, as well as the Division of Workers'
Compensation, she stated. The two divisions agreed several
years ago to avoid duplicate work and to prevent cases from
"falling through the cracks." Thus, the DOI and the Division of
Workers' Compensation divided their responsibilities through a
formal Memorandum of Understanding (MOU). When the DOI receives
a fraud referral it refers the case to the investigators at the
Division of Workers' Compensation. Their investigators proceed
and take the case to prosecutors in the Department of Law for
prosecution. The Division of Insurance retained the bulk of the
premium fraud, since it more closely aligns with insurance, and
although the Workers' Compensation Board has some authority to
investigate premium fraud, the bulk of those types of cases are
investigated by its dedicated prosecutor. She related that the
authority was not clear for the Department of Law to prosecute
the DOI's cases.
3:48:02 PM
REPRESENTATIVE BUCH referred to a chart on page 4 of the handout
listing Alaska as being number one in fraud. He asked whether
the changes in HB 314 would affect Alaska's fraud status.
MS. HALL responded that the premium chart and the 90th
percentile on the fee schedule are not related. This chart is a
result of the premiums based on system costs as presented to the
DOI, but the cost of claims is what drives up premium costs.
This bill will not change any costs, but she said she hopes
provisions in HB 314 will also not increase any costs. The DOI
hopes for an overall solution so that the delivery system is
improved since is not currently an efficient system. Whether
the solution is obtained through health insurance or Workers'
Compensation changes does not really matter. However, the state
needs to discover efficiencies. The system should be adequate
so that injured workers are treated and doctors should also be
paid fairly, but the state must find ways to control costs since
Alaska's costs should not be 14 percent higher than any other
state in the country.
3:51:28 PM
CHAIR OLSON remarked that a Workers' Compensation bill will also
be taken up before the committee at some point, and that bill
may affect Workers' Compensation rates. However, the proposed
bill does not have anything to do with HB 314, he said.
3:52:02 PM
REPRESENTATIVE T. WILSON inquired as to how often fees are
reviewed.
MS. HALL responded that fees are reviewed annually or semi-
annually.
REPRESENTATIVE T. WILSON asked who approves the fee schedule.
MS. HALL responded that the fee schedule is prepared by an
outside vendor, who purchases the fee schedule based on bill
charges comprised of Alaska data. The proposed fee schedule
would be disbursed by the Workers' Compensation Board. The
vendor does not tinker with the fees, but purchases a system
based on credible data.
3:53:39 PM
REPRESENTATIVE HOLMES referred to the penalty provision in
Section 1 that establishes a class C felony and asked how claims
are currently handled for fraud.
MS. HALL offered her belief that some intent language set the
bar so high that cases could not be prosecuted. She explained
that the current standard was the "knowing standard" and seemed
to be impossible to prove in the insurance arena. She explained
that this bill establishes a reasonable standard of proof, but
that the methods for an investigation or due process do not
change under the bill. She noted that she is not an attorney.
3:55:35 PM
JIM JORDAN, Executive Director, State Medical Association,
stated that the State Medical Association wholeheartedly agrees
that HB 314 is a step in the right direction. He related that
it is "not the most artful attempt at language drafting" but
agreed with Ms. Hall's testimony. He remarked that he was
interested in the intent of the Category 2 current procedural
technology (CPT) codes. He said that essentially the CPT codes
are supplemental tracking codes that are used to help measure
performance. These were developed to minimize the
administrative burden for those interested in measuring the
quality of patient care. Data is developed so actual
development of measurements of comparative effectiveness for
treatments. A health care provider may have a number of ways to
treat an injury, but this method uses evidence-based medicine to
help determine the most effective treatment for an injury.
3:58:55 PM
MR. JORDAN, in response to Chair Olson related that he worked in
the Division of Insurance in 1988. It has been nearly two
decades since his involvement in the insurance regulatory
profession, but he has an extensive work history in the
industry.
3:59:52 PM
JED WHITTAKER stated that he is opposed to the felony charge for
unsworn falsification. He said it seemed to him that when a
worker is hurt that the injury needs to be verified by a doctor
or medical community, but often an adversarial role exists
between the interest of the worker and the interests of an
insurance company. He said he would tend to trust the worker
and not medical community. He did not think the felony charge
is a good idea since it would tie up a lot of resources in the
legal system. In the event a person who is injured did make a
false claim, even more money would be spent to incarcerate the
person. He does not support false claims, but questioned the
wisdom of this type of penalty.
4:02:44 PM
REPRESENTATIVE LYNN asked for the commonality between being hurt
and lying.
MR. WHITTAKER offered that in the instance a person is injured
and the doctor cannot find the person's source of pain and
opines the person did not hurt his/her back. In the medical
community doctors have varying opinions. He hazarded a guess
that the percentage of fraudulent claims is small.
4:03:59 PM
ERIN POHLAND, Assistant Attorney General, Human Services
Section, Civil Division (Anchorage), Department of Law (DOL),
stated that she is available for questions.
4:04:39 PM
REPRESENTATIVE BUCH asked whether the falsification would also
apply to the employer.
MS. POHLAND answered yes. She clarified that the statute
applies to a person, so it could be anyone in the workers'
compensation process.
4:05:15 PM
REPRESENTATIVE HOLMES asked about the current process for
handling fraudulent cases and whether it would change under
Section 1 of HB 314.
MS. POHLAND responded that under the current statutes the
attorney general has been unable to prosecute workers'
compensation cases. While she is not the prosecuting attorney,
the current AS 23.30.250 contains inconsistent wording for the
burden of proof and mental states. This statute would set out
the standard of proof, which is the intent of a person to
deprive another of property. However, the subsections require a
different standard of proof, which is the intent of knowing.
Thus, the current law is muddled; the attorney general's office
cannot prosecute cases and suggests a change should be made.
The Division of Workers' Compensation fraud unit has
investigators in Anchorage, Fairbanks, and Juneau. Under HB
314, the civil section remains the same, but the statute would
refer to existing criminal code for prosecution rather than the
inconsistent wording for the burden of proof contained in the
DOI's statutes.
4:07:19 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 314.
CHAIR OLSON asked for the national percentage of fraud and
whether it would be as high as 10 - 15 percent.
MS. HALL said she did not know the percentage of fraudulent
cases. In further response to Chair Olson, said she doubted it
was as high as ten percent, noting that her answer is based on
intuition, not on any statistics.
4:08:29 PM
REPRESENTATIVE LYNN asked whether unsworn falsification means
lying, but not under oath.
CHAIR OLSON said, "Let the record reflect that we have an
attorney nodding her head yes [referring to Representative
Holmes]."
4:09:05 PM
REPRESENTATIVE LYNN offered his belief that lying under oath
would be perjury, while unsworn falsification would simply be
writing or stating something false.
MS. HALL recalled from the division's investigations that a
person taking a sworn statement must be sworn peace officer.
Thus, it may not be possible for the investigators to take sworn
statements, but simply statements since the parties are not
under oath.
CHAIR OLSON noted the presence of the attorney generals present
for any additional questions.
4:09:53 PM
REPRESENTATIVE LYNN moved to report HB 314 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, HB 314 was reported from the House
Labor and Commerce Standing Committee.