Legislature(2003 - 2004)
04/23/2004 09:06 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 311(JUD)
"An Act providing for a special deposit for workers'
compensation insurers; relating to the board of governors of
the Alaska Insurance Guaranty Association; stating the intent
of the legislature, and setting out limitations, concerning
the interpretation, construction, and implementation of
workers' compensation laws; relating to restructuring the
Alaska workers' compensation system; eliminating the Alaska
Workers' Compensation Board; establishing a division of
workers' compensation within the Department of Labor and
Workforce Development and assigning certain Alaska Workers'
Compensation Board functions to the division and the
Department of Labor and Workforce Development; establishing a
Workers' Compensation Appeals Commission; assigning certain
functions of the Alaska Workers' Compensation Board to the
Workers' Compensation Appeals Commission and the Workers'
Compensation Hearings Board; relating to agreements that
discharge workers' compensation liability; providing for
hearing examiners and hearing panels in workers' compensation
proceedings; relating to workers' compensation awards;
relating to an employer's failure to insure and keep insured
or provide security; providing for appeals from compensation
orders; relating to workers' compensation proceedings;
providing for supreme court jurisdiction of appeals from the
Workers' Compensation Appeals Commission; providing for a
maximum amount for the cost-of-living adjustment for workers'
compensation benefits; providing for administrative penalties
for employers uninsured or without adequate security for
workers' compensation; relating to assigned risk pools and
insurers; and providing for an effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
DOUG WOOLIVER, Administrative Attorney, Office of the
Administrative Director, Alaska Court System informed the Committee
that the Court System's testimony, rather than commenting on the
merits of the bill, would focus on how the Court System would be
impacted by the portion of the bill that would allow appeals from
the Workers' Compensation Appeals Commission (Commission) to bypass
the State's Superior Court and go directly to the Alaska Supreme
Court. He stated that, on average, 27 of the 36 WC cases that are
appealed to the Alaska Superior Court annually are resolved. The
remaining nine, he stated, are further appealed to the Supreme
Court. Furthermore, he commented, the Court System does not
anticipate that the changes proposed in this legislation would have
"much impact on the total number of cases that come to the Court
System as a whole" because rather than appeals resulting from such
things as agency competency, they are the result of such things as
"reasonable minds disagreeing on a individual case," or that
"either side could have won and the losing side decides to appeal,"
or that "a unique situation" might arise that must be resolved by
the Supreme Court. He also noted that oftentimes, people "just want
their day in Court" or "don't trust the administrative process."
Mr. Wooliver expected, therefore, that even were this legislation
adopted, the number of cases being appealed would remain constant.
He stressed that were it adopted, all of the appealed cases would
be heard by the Supreme Court rather than the Superior Court.
Mr. Wooliver noted the argument that bypassing the Superior Court
would save time in getting a final resolution to an appeal. He
pointed out that for the nine cases, or 25 percent of the total
average of 36 cases per year that normally advance to the Supreme
Court, this would be true as those cases would skip the Superior
Court action. However, he calculated that time would increase for
the balance, or 75 percent, of the cases which typically do not
advance beyond the Superior Court. He shared that under this
legislation, those 75 percent would require more time because, he
attested, the Superior Court resolves cases more quickly than the
Supreme Court, as it is "a committee of one" wherein a single judge
makes a determination as opposed to the Supreme Court which, as a
committee of five, conducts a more deliberative process, in which
opinions are drafted and deliberated. "That process by design", he
shared, "takes more time." Therefore, he concluded, while 25
percent of the cases would require less time, 75 percent of the
cases would incur more time. He reiterated that while the Court
system is not objecting to the process, as reflected in the Court
System's fiscal note #5, it is requesting additional resources
including: a staff attorney with WC expertise; one additional
clerk; and an administrative assistant, in order to handle the
additional caseload that the Supreme Court would absorb.
Mr. Wooliver stressed that, currently, the Superior Court, as the
first recourse for appeals, serves "to weed out cases." Therefore,
he communicated, were this and any future legislation to produce
more appeals, they, in their entirety, would advance directly to
the Supreme Court.
Senator Dyson asked whether Superior or Supreme Court case
decisions are "precedent setting" and would, therefore, "guide
policy and practice for the [WC] Board or Commission" in the
future.
Mr. Wooliver qualified that Supreme Court decisions "set precedent
in any area where they solve a dispute" while Superior Courts do
not. However, he noted, the majority of the WC cases at either
level "are not establishing unique new legal rules" because they
are "fact specific and they're not really usually establishing
useful precedent."
Senator Dyson asked for further information regarding the term "de
novo" and its implications.
Mr. Wooliver explained that the Supreme Court "reviews de novo" the
Superior Court's opinion in a WC case. He further explained that
"it is like the Superior Court's decision never happened" as it is
not deferred to. He pointed out, however, that the Supreme Court
would consider and defer to an agency's decision and fact-findings,
as agencies must adhere to a "substantial evidence standard."
Therefore, he summarized that what is reviewed de novo are legal
issues rather than factual findings.
Senator Bunde understood the term to mean, "to go back to step one
and start all over again."
Mr. Wooliver, while concurring, clarified that "no new testimony"
would be considered, as the information would be limited to the
record that was established.
Senator Dyson asked for a definition of the term.
Mr. Wooliver responded that it is a Latin term that "basically
means to re-look and reweigh all of the evidence" and, rather than
deferring to a lower court's "interpretation of the evidence,"
determine the ruling based on the evidence provided.
Senator Dyson asked how the "new evidence" presented by a person's
condition deteriorating during the time between hearings and
thereby "substantiating" the WC claim," would be considered.
Mr. Wooliver stated that the Department of Law could more
appropriately respond to that question. While he stated that, as a
general rule, new evidence would not be considered, he noted that
there might be some "escape mechanism" in the case of a compelling
situation or new evidence.
Senator Dyson asked why new evidence is not typically permissible.
Mr. Wooliver responded that this policy is similar to that of most
appeals' processes, as he specified, the appeal process determines,
"based on the evidence that was available at the time, whether the
lower body made an error." Furthermore, he clarified that "the
appeal itself is not a trial type setting" in which new evidence or
witnesses are heard or the case is re-tried, but it is a review of
the record to determine whether the lower court made a "legal or
factual" mistake.
Senator Olson asked for an overview of the steps involved in the
appeals process.
Mr. Wooliver explained that, in this legislation, the WC Board's
decision would be appealed to the WC Appeals Commission within an
agency, and an appeal of that determination would advance to the
Supreme Court.
Senator Bunde noted that the Department of Law would further
explain the process during its testimony.
Senator Olson opined that the Alaska Court System is currently
"clogged" and therefore, he asked how this change in the appeals
process would affect the Supreme Court.
Mr. Wooliver responded that this is a concern, as this legislation
would increase the number of cases presented to the Supreme Court.
He reiterated that the Court System has, in fiscal note #5,
requested additional staff in order "not to create too much of a
backlog." However, he stated, "in the end, we still have cases that
the Supreme Court is going to have to decide that they would
otherwise not have to decide."
Senator Olson asked why the Court of Appeals that was established
after Statehood is not included in this process.
Mr. Wooliver responded that the Court of Appeals addresses criminal
rather than civil cases. He informed that there is no intermediate
court of appeals for civil cases.
Senator Hoffman asked regarding the costs associated with the
aforementioned annual number of cases that are appealed,
specifically the costs associated with the 25-percent of the WC
cases that advance to the Supreme Courts as opposed to the cost of
the 75-percent that are settled at the Superior Court level.
Mr. Wooliver replied that the exact expense amount is unavailable;
however, he stated that were this legislation adopted, all the
cases would be heard at the Supreme Court level. Thus, he attested,
additional staff would be required in order to handle the increased
workload and not impede other Supreme Court cases.
Senator Hoffman opined that because the Supreme Court is limited in
the number of cases that it could address, a decision might be made
to handle more cases of one type and less of another.
Mr. Wooliver clarified that, unlike the US Supreme Court, the
State's Supreme Court is unable to refuse cases, with the
exception, he noted of criminal appeals, which are handled by the
Court of Criminal Appeals. Therefore, he continued, were the
caseload to increase, the Supreme Court would be required to
address them, as there is "no option to turn them away."
STEVE CONSTANTINO, Attorney, testified via teleconference from an
offnet site and informed the Committee that he had previously
served as a hearing officer on the WC Board and now represents
injured workers before the WC Board and the Courts. He stated that
he supports the bill's proposals that address the Guaranty Fund
"crisis" and the upgrade of hearing officer positions as this would
attract and retain qualified individuals. However, he opposed the
proposed process for handling WC claims, specifically the de novo
review provision. He characterized that Senator Hoffman's question
concerning the costs incurred from changing the appeals process was
"on target," as Governor Frank Murkowski's Administration and
business community representatives' answers to this question are,
"we hope it saves costs, we expect it to save costs, and it may
save costs." However, he opined, that rather than saving money,
this legislation would increase costs to the State, to businesses,
and to insurers. He voiced support for Mr. Wooliver's comments
substantiating the Court System's increase in expenses, which, he
surmised, might be "under-stated." Through experience, he attested,
people trust the Superior Court system and want their review heard
there. He stated that while he does not support the implication, it
has been implied that the Supreme Court, in addition to not having
expertise in WC cases, "gives short shrift" to them.
Mr. Constantino opined that this proposal would not streamline WC
cases and that instituting "a new de novo review through a new
bureaucracy would actually increase" the expense associated with WC
cases. He stated that while the bill would not allow "the appellate
Commission" to take new testimony, it would "allow the Commission
to reweigh the testimony" and evidence that was taken. Furthermore,
he attested, any litigant, who feels that he did not get an
adequate hearing, would appeal were this bill enacted. This, he
attested, would result in "a dramatic increase" in the number of
appeals from the WC Board as compared to the current process in
which the Board makes the final decision based on evidence and
testifier credibility. This legislation, he declared, would allow
"the bureaucracy to reweigh the evidence and reach a different
decision without ever hearing the evidence."
Mr. Constantino addressed the question regarding how new evidence
might be introduced, by sharing that the Superior Court currently
has the ability to conduct de novo review and take new evidence.
However, he communicated that these abilities are rarely exercised
due to thoroughness of the current WC Hearing Review Board's
evidence. The new process, he stated, would not provide this
"safety value."
Mr. Constantino declared that, "the current institutions are
serving our State well." Furthermore, he argued, the objectives of
streamlining the process and providing consistency in the WC
decision-making, could be accomplished by requiring the WC Review
panels to adhere to the law established by the Courts. Continuing,
he opined that this would be a "simple matter" to accomplish were
the Commissioner of the Department of Labor and Workforce
Development to instruct his hearing officer designees, "who sit as
one of three members on the hearing panel and who's role it is to
advise the lay members on the law," to follow Superior Court and
Supreme Court decisions. He stated that there would always be cases
in which "disputed issues of law are decided differently by
different Superior Court judges, and he continued, currently "the
board participates and has a right to participate in every appeal."
This ability, he declared, provides the WC Board with the ability,
in disputed cases wherein two Superior Court judges rule
differently regarding what the law is on a segment of WC, to
"instruct the attorney general who represents the WC Board, to
appeal that decision to the Superior Court and get it resolved." He
asserted that "all the mechanisms are in place to achieve all the
goals that the legislation is purported to achieve without any
additional costs," or creation of a new bureaucracy, or without
distorting the decision making process.
Mr. Constantino voiced support for Amendment #1, sponsored by
Senator Hoffman, as it would upgrade the current hearing officer
position. Otherwise, he declared that the current mechanisms are
adequate, and that this legislation would not result in any
significant savings to business, injured workers, or to the State.
Senator Bunde asked how WC attorneys are compensated.
Mr. Constantino stated that WC attorneys "are prohibited by statute
from accepting money from an injured worker." Continuing, he
explained that fees are paid contingently and "only if the client
prevails," and that while there are provisions to allow for minimum
statutory fees and reasonable fees, their amounts are controlled by
the WC Board. He noted that this system would not be altered by the
proposed legislation.
Senator Olson understood therefore that, with the exception of the
de novo provision, Mr. Constantino is in favor of the legislation.
Mr. Constantino affirmed.
JOHN GIUCHII, testified via teleconference from Fairbanks, and
voiced concurrence with Mr. Constantino's comments. He noted that
either the Attorney General's Office, employer attorneys, or
insurance carriers have been able to provide information regarding
whether this legislation would result in employer WC premium
reductions. In addition, he stressed that it would be inappropriate
for Commission members, who would be appointed without Judicial
Council referral as is the norm for Superior Court judges, to have
more power than a Superior Court judge. He stated that the ability
of the Appeals Commission "to substitute personal judgment in place
of facts that the Board finds during their hearings," does not seem
fair; specifically, he attested, in light of the fact that were the
Supreme Court to hear an appeal, they would be limited to reviewing
the actions of the Appeals Commission rather than what transpired
at the WC Board level.
Mr. Giuchii voiced that while the bill's drafters profess that the
provisions in the bill were drafted upon the national Model Act,
there is a multitude of new language in the bill that is not
reflected in the Act. Furthermore, he attested that the Model Act
is mismatched and unproven.
Mr. Giuchii avowed that only two percent of the State's appealed WC
cases "ever get changed." Therefore, he stated that to implement
this bill to address that limited number "does not make sense."
However, he voiced support for Sections 1 - 7, which address the WC
Guaranty Association as well as those sections that would institute
a penalty for employers who do not carry WC insurance. He
reiterated that he does not support the creation of an Appeals
Commission.
Senator Bunde asked whether Mr. Giuchii would support increased
penalties for WC fraud.
Mr. Giuchii replied yes.
JOE KALAMARIDES, Attorney, testified via teleconference from an
offnet site, and informed the Committee that he has represented
injured workers before the WC Commission in excess of 27 years. He
stated that according to the [unspecified] 2001 annual report,
there were 28,174 reported WC injuries. This number, he attested,
is consistent with the previous ten years' levels, which ranged
from 28,000 to 30,000 injuries per year. Furthermore, he noted that
claims filed with the Board contesting the amount paid for an
injury amounted to approximately 1,198 claims, or five percent, per
year. Continuing, his calculations, he proclaimed that
approximately one-eighth of one percent of the actual reported
injuries reach the Superior Court with approximately 25 percent of
those proceeding to the Supreme Court. Therefore, he opined that
were the current system, which costs the State "virtually nothing,"
revised as specified in this legislation, the $566,600 expense, as
denoted in the bill's accompanying fiscal notes, would amount to
approximately $15,738 per appeal based on traditional case numbers.
He declared that the appeal changes proposed in this legislation
are unnecessary, as the current system "resolves approximately 99-
percent of the reported injuries by the time it gets to the Board."
PAM LABOLLE, President, Alaska State Chamber of Commerce, testified
in Juneau in favor of the bill. She declared that WC is one of
businesses largest expenses, and she stated that both the actions
of the State and the design of the WC system could control the
associated expenses. She disclosed that the State of California is
being required to rework its WC system because it's system is so
unwieldy that other states are wooing California businesses with
claims that their WC expenses are more conducive to business. She
stressed that Alaska must avoid a similar fate to California. In
this regard, she disclosed that one Alaska State Commerce business
member, with a workforce of 50, pays $98,000 annually for WC. She
avowed that State businesses do not believe the current system is
fair as when there is no consistency in decisions and no
predictability, "insurance companies choose to cut their losses and
not appeal because of the time-consuming efforts" and the
associated costs of an unknown chance of prevailing in a decision.
Furthermore, she stated that WC costs get passed onto businesses
via WC insurance policy premiums. She declared that the most
negative affect of the problem is that the number of WC insurance
carriers willing to do business in the State is being negatively
affected. Therefore, she attested, it is "critical" that the system
be viewed as fair, predictable, and reasonable. She declared that
the previsions proposed in this legislation address these concerns.
Ms. LaBolle voiced strong support for language in the original
version of the bill that replaced the layperson review panel with
professionals knowledgeable in WC law. In addition, she voiced
support for the de novo review process at the Appeals Commission
level.
Senator Hoffman inquired to the methodology used to determine the
business support position as stated by the Chamber.
Ms. LaBolle responded that a poll of Chamber members was conducted.
Senator Hoffman understood therefore that the poll was conducted
with Chamber businesses rather than businesses in general.
Ms. LaBolle expressed that the Chamber, with a wide business
representation, represents 700 businesses throughout the State.
Senator Hoffman asked how this legislation would provide more
predictability.
Ms. LaBolle responded that predictability would be accomplished
"through the precedent-setting decisions that are possible through
the Appeals Commission" component in the law as it would establish
case law. Currently, she noted, there is no consistency or
predictability as there "are over 300 combinations for a hearing"
and no consistency in decisions. She noted that, currently when a
case is appealed to the Supreme Court, the judges might hear the
case without information regarding decisions that have been made
regarding cases with similar circumstances. This, she declared,
offers no predictability.
Senator Hoffman stated that the three attorneys who testified
indicate that, in their experience, this legislation would incur
more appeals and thereby, more expense.
SFC 04 # 92, Side B 09:53 AM
Senator Hoffman surmised therefore, that the attorneys' position is
that as more appeals and more cases go to the Supreme Court, the
result might be less predictability.
Ms. LaBolle responded that the attorneys who testified represent
workers rather than business entities. She countered that testimony
from attorneys presenting businesses might present a differing
point of view. She pointed out that "the point of law is be provide
rules that everyone" adheres to and "to provide consistency to the
actions of our society." She stated that developing a professional
realm in which there is consistency and understanding in regards to
what rules were followed, from one court to the next, would be
beneficial.
Senator Hoffman inquired as to why no business' attorneys have
testified.
Ms. LaBolle responded that she is speaking on behalf of businesses
and has no control regarding who testifies.
AT EASE: 9:55 AM / 9:58 AM
BARBARA HUFF-TUCKNESS, Director of Governmental and Legislative
Relations, Teamster Local 959, voiced, for the record, her concern
that the full Committee is not currently in attendance during this
"very important testimony," as she asserted, "that this is probably
one of the most important pieces of legislation, I believe, that
has been introduced in the State of Alaska in at least fifty years
in respect to injured workers and the potential impact." She stated
that while the bill has undergone various revisions that have
served to make "a very bad bill" better, Local 959 is opposed to
the legislation "in its current form." Nonetheless, she voiced
appreciation for the time that has been allotted to addressing the
concerns of interested parties.
Ms. Huff-Tuckness assured that people are conscious of the
increasing costs of WC insurance, and she shared that her remarks
on behalf of Local 959, an employer as well as a workers'
representative, are relative to both the perspectives of injured
workers and employers. She reviewed that WC was created to assist
workers injured on the job, and, she continued that, as a result of
that insurance arrangement, injured workers revoked their right to
take their particular claim to court. She reminded the Committee
that "the basic objectives" of WC was "to provide a swift and
certain income" as well as medical benefits to the victim of a work
accident or income benefits to their dependents, in the case of a
work-related death. The process, she continued, would provide a
single remedy and reduce court costs and delays arising out of
personal injury litigation.
Ms. Huff-Tuckness stated that, while some attest that "the system
is broken," no statistics support this claim. She exampled that
from 1999 to 2003, the current WC Board issued 1,363 decisions and
orders (DMOs) with 189 of those, or 13.2 percent, being appealed to
the Superior Court and 25, or 1.8 percent, being further appealed
to the Supreme Court. Furthermore, she shared; of the 25 cases the
decision was "50-50 decision injured worker decision verses
employer decision." She stressed that, from a statistical point of
view, the numbers do not support the claim that the system is
broken.
Ms. Huff-Tuckness qualified that the first seven sections of the
bill are "good improvements" that would enhance the solvency of the
Alaska Insurance Guaranty and increase qualifications of hearing
officers by mandating that they be members of the Alaska Bar
Association. She stated that hearing officers would be "tasked to
instruct the hearing panel members" as to particular points of law,
"in a similar manner as a judge would instruct a jury." She stated
that Local 959 supports this even though it would remove the power
of the Board by instilling hearing officer authority, similar to
that of the Courts, at an early level. Continuing, she noted that
while the provisions of the bill might remove the power of the
Board, the proposed hearing officer salary increase would serve to
promote continuity, consistency, and staff longevity that would
enhance the WC decision making process. She voiced support for the
provision stating that the three member Hearing panel, consisting
of two members of the WC Board and one hearing officer, must be
present when a hearing is conducted; however, she suggested that
consideration be provided to allowing a member of the panel to
participate telephonically.
Ms. Huff-Tuckness also noted that the bill would separate the
adjudicative and administrative functions within the department and
would formally recognize a WC division within the Department of
Labor and Workforce Development. She stated that it would also fine
employers who do not purchase WC insurance. She noted, for the
record, that the cost of Local 959's WC insurance is less expensive
than its medical insurance expense. However, she noted, while
businesses could opt not to provide medical insurance, they are
required to pay WC insurance.
Ms. Huff-Tuckness pointed out that Local 959 does not support the
Appeals Commission issue in that the Commission would, in this
bill, replace the functions of the Superior Court. This, she
attested, would create an additional layer of bureaucracy with an
expense projected to range between $500,000 and one million dollars
to provide for the three attorneys, appointed by the Governor, to
hear cases. She noted that the recommendation that the "three
member quasi judicial type commission" whose members would serve
five-year staggered terms, be appointed through the Judicial Review
Council was rejected with the argument that this would be an
administrative Appeals Commission and therefore not subject to the
appointment process.
Ms. Huff-Tuckness also stated that the de novo review process at
the Appeals Commission level makes no "logical sense at all," as
hearing officers have more experience in WC than the members
appointed to the Commission. She argued that the Commission should
be eliminated as other "very positive changes have already been
made to the panel process function" in this legislation, and that
an appeal of a hearing officer panel decision could proceed from
the panel to the Supreme Court as opposed to proceeding to the
Commission and then to the Supreme Court. However, she attested,
were one million dollars available to fund this extra layer of
State government bureaucracy, Local 959 would ask that the de novo
review be removed from the Commission process.
Ms. Huff-Tuckness reiterated that Local 959 does not support this
legislation in its current form, as it would not benefit either
injured workers or employers.
AT EASE 10:15 AM / 10:16 AM
SCOTT NORDSTRAND, Deputy Attorney General, Civil Division, Office
of the Attorney General, Department of Law shared with the
Committee the process that occurred to develop the committee
substitute before the Committee. He stated that the Department of
Law, the Department of Labor and Workforce Development, and the
Division of Insurance in the Department of Community and Economic
Development in response to concern drafted the original legislation
regarding the increase in WC rates, as well as the need to provide
funds for the Insurance Guaranty Fund. In this process, he
attested, it was determined that improving the process and making
the system more predictable, responsive, and reasonable in order to
provide insurance companies with assurances required in determining
rates would assist in controlling WC expenses, without negatively
affecting benefits. He noted that the option of reducing medical
payments rates was also reviewed; however, he attested, the
associated consequences were undesirable. Therefore, he stated, the
goal was to develop a "benefit neutral bill." This bill, he
declared, is benefit-neutral, with the lone exception of the cost-
of-living-allowance provision for out-of-State residents.
Mr. Nordstrand pointed out that the original bill was discussed by
an ad hoc labor and management group whose conclusions are
presented in the March 5, 2004 letter titled "Alaska Labor-
Management Ad Hoc Committee on Workers' Compensation," [copy on
file] from Kevin Daugherty and addressed to the Senate President
and Speaker of the House. The letter, he pointed out, states that
while the ad hoc group had not addressed procedural issues before,
they concurred with certain sections of the bill such as placing
some administrative responsibilities, formerly vested in the WC
Board, with a WC Division director, "and replacing the Superior
Court with an Appeals Commission." He noted that members of the ad
hoc group included Barbara Huff-Tuckness and John Guichii.
Senator Olson asked whether the members of the ad hoc group
unanimously supported the recommendations.
Mr. Nordstrand understood that it was unanimous; however, he
continued, due to the fact that the Department was not a
participant, he was unsure of the exact vote tally.
Mr. Nordstrand shared that the Department learned that labor
continued to have concerns regarding such things as the elimination
of lay WC Board members. He stated that in the original bill,
professional hearing officers would hear cases, and their
decisions, he noted, if appealed, would proceed to the WC Appeals
Commission, and then to the Supreme Court. In addition to the
concern regarding lay Board members, there was concern about the
composition of the Commission. He stated that to address these
concerns, representatives of the Murkowski Administration met with
representatives, over a several day period, to attempt to reach a
compromise.
Senator Bunde requested that Mr. Nordstrand, in consideration of
time, continue his testimony after the forthcoming Senate floor
session.
Senator Hoffman noted that one of primary reasons for the
introduction of this legislation was to address the increased costs
of WC. Therefore, he inquired as to the amount of savings that
would be anticipated.
Mr. Nordstrand responded that the savings have not been calculated.
Senator Hoffman asked in the case where costs remained constant or
increased, whether it would be appropriate to have a termination
date associated with this legislation in order to further review
it.
Mr. Nordstrand responded that were rates not lowered over time or
were the participants in the system to determine that further
revisions might be required, he would encourage the Legislature to
revisit the process, as he continued, incorporating a termination
date at this time would be "bad public policy." He stated that
provisions in the bill would require the Chair of the Appeals
Commission to present an annual report regarding such things as the
success of moving cases more quickly and whether the kind of
results that have transpired are good public policy. He encouraged
Legislators to review that report to determine whether further
adjustments should be made, were this legislation enacted. He
stated that the uncertainty instilled by a termination date would
be a negative factor.
Senator Hoffman stated that as a businessman, rather than being
worried about any uncertainty instilled by a termination date, he
would be worried about WC expenses, as he reiterated that reducing
the costs of the program is the goal of developing the bill.
RECESS TO CALL OF THE CHAIR 10:26 AM / 1:40 PM.
[NOTE: Co-Chair Green chaired the remaining portion of the
meeting.]
CHANCY CROFT, Attorney, testified via teleconference from an offnet
site and voiced that this bill "is important not only for its WC
implication, but also for its impact" on the State's judicial
system. He shared that the type of judicial system the State should
incorporate was a "heated topic" at the State's Constitutional
Convention. He reminded that a unified Court System was adopted in
which rules would apply to all courts and to which a unified
authority would administer the system in an efficient and un-
cumbersome manner to allow, for instance, cases from a court with a
heavy caseload to be transferred to one with a lesser caseload. He
stated that, rather than judges being elected, they are appointed
by the governor from a list of those "determined most qualified by
the Judicial Council." He noted, however, that, aside from the
Court System, a special Tax Court does exist within the Department
of Revenue because it handles "confidential matters."
Mr. Croft continued that this legislation "is the worst solution to
a problem that does not exist" in that it would allow the Governor
to appoint people to an appeals tribunal who, while not judges,
would have as much or more power that a Superior Court judge. He
stated that this is contrary to the selection process for judges as
determined at the Constitutional Convention. He declared that this
would be a "real mistake." He argued against "the justification for
this is to bring predictability and uniformity to Board decisions,"
by declaring that he has "only experienced" one situation in his
numerous years of WC experience that was important enough to be
appealed to the Supreme Court. Therefore, he stated that, due to
limited conflict, there is no need to create a new wing of
bureaucracy.
Mr. Croft declared that currently there is uniformity in the
State's WC cases as a Superior Court legal ruling "is recognized as
precedent and would be followed until it were changed by another
Superior Court or by the Supreme Court." He characterized this
legislation as being "unprovoked bad because it is going to delay
justice, its going to delay resolution of claims for injured
workers." He voiced that it might be argued, "that if the tribunal
could have a trial de novo, why is that any different than the
Superior Court doing a trial de novo." He stated that the simple
answer is that Superior Courts do not do trials de novo. He
restated a previous testifier's comment that the Superior and
Supreme Courts' action on an appeal was to determine whether the
Board's decision was supported by substantial evidence. If that is
found to be the case, he continued, the Court has to accept the
Board's decision. He quoted State Statute, AS 2330122, which he
attested, was adopted by the Legislature in 1982 at the request of
State's business community, who "wanted finality to Board decisions
and who did not want "a sympathetic court" to reweigh the evidence.
The current process has, he attested, ensured finality and has
established a standard from which few appeals are generated.
Mr. Croft stated that, because of the limited number of appeals of
Board's decision, the Superior Court is able to currently handle
appeals at no additional cost. Furthermore, he noted that because
the Court's administrators could adjust workloads, the 30 to 40
Superior Court judges average one WC appeal annually. He stated
that were the Superior Court removed from the WC process, no
savings would result, as currently the cases, per judge, are
factored in as part of the workload.
Mr. Croft informed the Committee that there is only one other state
that has a system similar to that being proposed, and, he
continued, the others, perhaps with the exception of one, have WC
systems similar to what is currently in affect in Alaska. He voiced
concern that the proposed system would cause delay by the fact that
a new hearing could be requested to reweigh all of the evidence in
addition to stays being granted. He attested that a State's system
works well if it works promptly, as, he declared, studies have
shown that "when there is a delay in determining whether people are
entitled to compensation, a lot of people" might be forced to
borrow money, go on welfare, lose their home, or face bankruptcy.
Furthermore, he pointed out that when these WA cases finally do get
a hearing, the injured worker prevails 80 percent of the time.
Mr. Croft considered Sections 1 through 7 to be good proposals in
that they would assist the solvency of the Alaska Insurance
Guaranty Fund, would charge a penalty to those employers who do not
carry WC insurance, and would elevate pay for hearing officers. He
noted that while he supports the provision in the bill that would
require all three hearing board members to be present at a hearing,
AS 44.62.600 and AS 44.62.635 of the Administrative Procedures Act
allows for teleconference participation by Board members.
Therefore, he suggested that a language change be considered as
omission of this language would result in further delays and
increased costs as such things as incumbent weather might prevent a
member from being present.
Mr. Croft voiced, in reference to questions regarding the WC
Board's member balance, that according to Department of Labor and
Workforce Development statistics, the fact that the WC Board ruled
in favor of an employer approximately 40 percent of the time
supports the position that the Board is balanced.
Co-Chair Green asked for further information regarding the
provision requiring all Board members be present at a hearing.
Mr. Croft identified the language in question to be located in Sec,
10, subsection Sec. 23.30.006(g) on page eight, lines 14 & 15 that
reads as follows.
…A hearing may not proceed in the absence of a board member.
Mr. Croft stated that this language differs from that specified for
the Appeals Commission as located in Sec. 10, subsection
Sec.23.30.007(e) on page nine, lines 17 & 18 that reads that "A
majority of the members of the commission constitutes a quorum." as
well as language in Sec. 58, Sec. 23.30.113 on page 36, lines 11 -
14 that reads "In proceedings before hearing examiners and hearing
panels, the administrative adjudication procedures of AS 44.62
(Administrative Procedure Act) do not apply, except that AS
44.62.410(b), 44.62.460(a) - (d), 44.62.470, 44.62.480, 44.62.510,
and 44.62.590 shall apply to proceedings under this chapter." He
declared that AS 44.62.600 and AS 44.62.635 should be included in
this listing.
Mr. Croft pointed out that another technical problem with the bill
is that currently were an injured worker to desire to settle their
claim and waive their rights, the WC Board must approve the
agreement in order to protect the injured worker. He avowed that
this is a good provision, as, he informed, 30 percent of injured
workers do not have attorney representation.
SFC 04 # 93, Side A 01:55 PM
Mr. Croft continued; however, that language located in Sec. 12,
beginning on line 19, page 13 of this legislation would, provided
the worker's attorney agreed to the settlement, allow for an
"automatic discharge of the liability on the part of the employer."
He stated that this is "a terrible idea," as the "it would allow
insurance companies to take advantage of injured workers."
Mr. Croft continued that trial de novo is a new concept, as
currently this option does not exist at the Superior Court level.
Continuing, he voiced support for the bill's intent language as
denoted in Sec. 8, page five of the bill; although he noted that
some of the language already exists in other legislation.
Co-Chair Green asked whether Mr. Croft had testified during the
Judiciary Committee hearing on this legislation.
Mr. Croft responded that he had testified before the Judiciary
Committee as well as at earlier hearings.
Co-Chair Green asked for further information regarding the work
group that had evolved during the Judiciary Committee hearings.
Mr. Croft responded that "a select few" had participated in the
drafting of the original version of the bill; and he continued that
during the Judiciary Committee hearings on the bill, "there was a
delay" while labor representatives met with the Attorney General's
office. He noted that this was not a public meeting or "broad based
discussion or analysis of the bill." He stated that while there
were "superficial changes" such as reinstatement of the Hearing
panel, the bill retained the authority regarding the de novo
hearing process.
Co-Chair Green asked whether the testifier preferred the original
version of the bill to the Judiciary Committee version of the bill.
Mr. Croft responded that the Judiciary committee substitute is an
improvement over the original version of the bill; however, he
supported the "complete elimination" of the Appeals Commission
rather than simply eliminating the de novo process, as he
contended, the addition of the Commission would add another layer
of bureaucracy and increase expenses. He insisted that there is no
guarantee that the members of the Commission would be as qualified
as the current system's participants. Therefore, he concluded that
while the Judiciary committee substitute is an improvement over the
original version of the bill, adopting this legislation "would be a
big mistake."
Senator Hoffman asked whether the current WC Board feels that
changes are necessary.
LINDA HALL, Director, Division of Insurance, Department of
Community and Economic Development, testified via teleconference
from an offnet site, and stated that she is unaware of the Board's
position.
KRISTIN KNUDSEN, Assistant Attorney General, Torts and Worker's
Compensation Section, Department of Law, testified via
teleconference from an offnet site, and noted that she was involved
in the drafting of the bill and would be available to answer
technical questions.
DAVE FLOERCHINGER, Attorney, testified via teleconference from an
offnet site and shared that he has been involved in WC cases since
1977 and is in favor of the bill, as he believes "it would result
in a more rapid and efficient delivery of benefits and a more rapid
resolution of disputes." He opined, "that the concept of the
Appeals Commission would address the problem of inconsistence
rulings" by various WC panels and the Superior Courts and would
result in a reduction of expenses to employers and insurance
carriers. He reiterated that he is in favor of bill, as he
contended that insurance carriers, employers, and employees would
be provided "some predictability of outcome," were this legislation
adopted.
Senator Hoffman noted that conflicting testimony has been received
in regards to whether this legislation would enhance or delay the
WC hearing process. Therefore, he asked the testifier whether he
would support imposing a termination date on this legislation in
order to readdress it were it to negatively affect the process.
Mr. Floerchinger responded that a termination date provision on the
legislation would not be "advisable" as the goal of the legislation
is to try and develop a body of law. He opined that while there
might initially be delays, they would not be expected to exceed
those currently experienced by the appeals to the Superior Court;
specifically that the current system is delayed due to delays in
generating and furthering records of proceedings at the Board
level.
CONSTANCE LIVSEY, Attorney, testified via teleconference from an
offnet site in favor of the committee substitute. She noted that
she has been practicing WC cases, primarily representing employers
and insurance carriers, since 1984. She also noted that she is a
member of the Worker's Compensation Committee of Alaska (WCCA)
Board. She stated that, as a member of the WCCA subcommittee that
has been reviewing this legislation, she has kept abreast of the
original bill's language and the subsequent changes that have been
incorporated. She opined that the creation of the Appeals
Commission would be beneficial to the process for, in her
experience, the current appeal process is prone to delay and
inefficiencies, particularly at the Superior Court level where she
has experienced such things as transmittal of record delays from
the WC Board process to the Court.
Ms. Livsey expected that these types of delays would not exist were
an Appeals Commission established, as it would address appeals in a
more efficient and consistent manner. Furthermore, she contended,
"the costs of appeals are disproportionately borne by employers,"
as she exampled that were an employee to loose an appeal, they
would not required to pay a portion of employer's appeals costs;
however, she continued, were an employer to appeal and lose, they
would be required to pay a portion of the employee's costs. She
stated that this places a burden on employers, and that the Appeals
Commission, being more efficient and quicker, would assist in
keeping the cost of an appeal to a minimum as well as resulting in
more consistency. She urged the Committee to support the Judiciary
committee substitute.
Senator Bunde asked whether she, as a practicing WC attorney, would
support there being additional penalties in place for WC fraud.
Ms. Livsey voiced that, "there is a sense on the part of employers
and insurance carriers" that it would be beneficial to increase
fines and stiffer penalties, as she contended that the current
provisions are not strong enough to discourage WC fraud.
Senator Bunde asked that she provide his office with additional
comments and suggestions regarding how to address WC fraud.
TRINA HEIKES, Attorney, testified via teleconference from an offnet
site and informed the Committee that she has been working with WC
cases since 1983. Additionally, she noted that she is a member of
the WCCA Board and its subcommittee that reviewed this legislation.
She commented that, "industry has not put forth any input" in this
bill; however, she noted that labor did negotiate with the
Murkowski Administration. The committee substitute, she contended,
is the result of those discussions. She stated that there are two
good things about the committee substitute: the first being that
while "it does not change any substantive law," it reorganizes the
way in which the board operates; and secondly, it raises the
experiences and qualifications of the hearing officers. Currently,
she stated hearing officers are not required to be licensed and
practicing attorneys or to be members of the Alaska Bar
Association. This bill, she attested, requires that hearing
officers be licensed attorneys who have experience before the WC
Board and who are members of the Alaska Bar Association. Another
positive result of this legislation, she continued, would be the
creation of the WC Appeals Commission, whose members would be
required to have five-years of WC experience and be licensed
attorneys. She stressed that this would be beneficial because,
currently "there is not one sitting Superior Court judge" who had
WC experience before being appointed to the Bench.
Ms. Heikes reviewed some of the appeals delays she has experienced
in the current process, and she stressed that the creation of an
Appeals Commission would reduce delays, because, she exampled, a
legal brief would not be required. She noted that developing an
appeals' legal brief could cost up to $10,000. The Appeals
Commission, she declared, could simply review the record and may,
if desired, request oral arguments, and then decide the case. She
declared that the proposed process would be quicker and "less
costly to the parties involved."
Ms. Heikes pointed out, in response to the concerns regarding de
novo hearings, that AS 22.10.020, subsection (d) deals with the
jurisdiction of the Superior Court in that "hearings on appeal from
a final order or judgment of a subordinate court or administrative
agency shall be on the record, unless a Superior Court in its
discretion, grants a trial de novo." She noted, that while
initially surprised that the Appeals Commission would be able to
grant a trail de novo, she, upon research, found that the Superior
Court currently has "the same level of discretion." She assured
that the de novo process would allow sufficient time for
preparation and would be decided based upon a full evidentiary
basis.
In summary, Ms. Heikes urged the Committee to support the committee
substitute, as it would increase the level of experience and
professionalism, and would, therefore, enhance the quality of the
decision-making process and quicken the appellate process. She
stressed that currently when a case is appealed to the Superior
Court and then to the Supreme Court, the Supreme Court "gives no
deference to the opinion of the Superior Court." She stated that
the current process is time-consuming and therefore, expensive.
ROBERT LOHR testified via teleconference from an offnet site and
informed the Committee that while he is speaking on behalf of
himself, he is a former director of the Division of Insurance in
the Department of Community and Economic Development. He stated
that the Division of Insurance is required to produce an annual
report to notify the Legislature about the affect previous tort
reform legislation has had on the cost of insurance. He shared that
during his years as director, "no savings was attributable to the
tort reform process," and he surmised that this legislation would
likely have the same result. Continuing, he opined that "the
savings from this radical reform" of the WC process would be "at
best, speculative." He stated that he has been following the bill's
committee hearing process, and, noting the Department of
Administration's February 9, 2004 indeterminate fiscal note, he
declared that while it is argued that the proposed process would
save money, "no one has yet quantified what those savings would be
even on an estimated basis." He "suspected" that rather than
savings, there would be "real costs" associated with the
legislation. He stated that the accompanying fiscal notes,
including the one from the Department of Labor and Workforce
Development and the Court System, amount to $700,000 per year. He
stated that insurance companies are unwilling to calculate any
savings or when they might occur. Furthermore, he stated that while
"the bill might speed up the process through the Superior Court
level," it would "bottleneck" and increase expenses at the Supreme
Court level.
Mr. Lohr voiced support for Mr. Croft's concerns regarding the
contemplation of the "special treatment of any administrative
agency of appeals in the Court system," and he urged the
Legislature to thoroughly investigate whether this would be the
appropriate action to take.
Mr. Lohr opined that the current system produces clear precedent
setting decisions at the Supreme Court level, and furthermore, he
continued, confusion in this regard, at the lower levels of the
process, "would not be significantly improved by this legislation.
He also stated that actions should be taken to ensure that
significant opportunity be provided to prosecute WC fraud, as he
shared that the State's "excellent team of investigators for
insurance fraud … used to tear their hair out at the difficulty of
making a case on Worker's Compensation because of the vagueness of
the criminal standards for WC fraud."
In conclusion, he echoed others' testimony in support of the
Insurance Guaranty Fund provision.
Mr. Nordstrand continued his earlier testimony regarding the
process that was undertaken to achieve "negotiated middle ground
with labor on this bill." He reiterated that a labor and management
ad hoc committee met to review the bill and that their
aforementioned letter denoted that the contents of the bill
addressed things that they had not ere considered, but supported,
such as replacing the WC Board with an Appeals Commission and
allowing a WC director to assume some of the responsibilities
currently assigned to the WC Board.
Mr. Nordstrand voiced surprise that some of the members of that ad
hoc group had testified against the establishment of an Appeals
Commission today.
Mr. Nordstrand stated that while the bill was in the Judiciary
Committee, the Department of Law met, for several days, with
representatives of labor both in person and telephonically, in
order to better understand what issues in the bill were or were not
supported. He stated that one of the issues that surfaced was
labor's concern that a layperson was not a member of the WC Hearing
board. He stated that the Department understood the concern and
agreed to address it. Continuing he noted that another concern was
that the Appeals Commission itself might require some member
balancing.
Mr. Nordstrand stated that following those meetings an
Administrative "team" sat down and drafted a committee substitute
containing changes and compromises to address labor's concerns.
Concerns addressed, he continued, included such things as
increasing the terms of office from four to five years. That draft,
he continued, was presented to the ad hoc committee, who responded
with a list of ten concerns [copy on file] titled "Proposed Changes
Discussed at March 31, 2004 Teleconference."
Mr. Nordstrand stated that the Administration reviewed the list and
was able to compromise or agree on eight of the ten concerns, which
were incorporated into a committee substitute. The two that could
not be agreed upon, proposed Changes Five and Nine, were
incorporated into an amendment to that committee substitute.
Adoption of the amendment, he continued, would result in a bill
that labor would accept.
Co-Chair Green asked for clarification that the amendment
incorporated language pertaining to Changes Five and Nine.
Mr. Nordstrand concurred that those two changes were put into
amendment form.
Co-Chair Green understood therefore that the other eight changes
were incorporated into the draft committee substitute.
Mr. Nordstrand concurred, and reiterated that the proposed
amendment addressed the other two concerns.
Mr. Nordstrand referred the Committee to a handout titled "What's
the Difference? Comparison in Question & Answer Format" [copy on
file} that compares the current system to that being proposed in
the original bill and in the Judiciary committee substitute. He
stated that the Judiciary committee's desire was that the Judiciary
committee substitute would address concerns and be agreeable to the
involved parties. He communicated that the lone point of
disagreement was the proposed de novo review process identified in
the comparison chart's column titled "Where does an appeal go?".
Mr. Nordstrand stated that following debate on the matter, the
Judiciary committee determined that the de novo review process was
critical to the process, and the committee substitute was reported
from committee with that process included. He stated that the
Administration worked hard to address the concerns and reach a
solution. "All in all," he concluded, while the original bill was a
clean bill, the committee substitute is a compromise bill that he
is proud of. He noted that some of the changes the Administration
conceded to, such as the specifics of the WC Hearing panel, were
major concessions.
Senator Bunde understood that there is specific concern that the
make-up of the Hearing panel might be weighted in favor of labor.
Mr. Nordstrand stated that language in the bill specifically
mandates that each Hearing panel consist of one industry
representative, one labor representative, and a "new upgraded"
hearing officer, all of whom must be present when the hearing is
conducted. He continued that the question as to whether the panel
could participate telephonically would be "troubling" and contrary
to the hearing panel's ability to judge, in person, the credibility
of a witness. Additionally, he stated that the panel's
determination of a witness' credibility is important as not to
undermine "review from above." He understood that labor was
agreeable with the concept of having all three members physically
be in attendance. He assured that the panel would be balanced.
Mr. Nordstrand also noted that there was agreement to the fact that
the Appeals Commission would consist of at least one commissioner
with experience in representing employees, one with experience in
representing employers, and one who could be either or both.
Senator Bunde asked how the State could more aggressively pursue
the WC fraud issue.
Mr. Nordstrand replied that WC fraud is an issue of concern for the
State as well as for lawyers, and he noted that the concern
includes the standards that must be met to prosecute WC fraud. He
stated that the Department would be happy to assist in drafting
legislation to address this issue.
Senator Bunde asked whether the WC fraud issue could be
incorporated into this bill.
Mr. Nordstrand responded that it would not be appropriate, at this
stage of the Legislative session, to include that language in the
bill, as he asserted that careful thought should be devoted to
determine how to address the issue. He suggested that this be
furthered during the interim between this Legislative session and
the next.
Co-Chair Green inquired to the identity of the ad hoc committee
members appointed during the Senate Judiciary committee hearing.
Mr. Nordstrand stated that the members included: Kevin Dougherty of
Alaska Laborers; Don Etheridge with Operating Engineers Local 71;
Barbara Huff-Tuckness of Teamsters Local 959; Jim Robison, former
Commissioner of Labor and former WC Board member; John Guichii, IBW
representative and current WC Board member; himself, Kristin
Knudsen, Department of Law; Paul Lisankie, Director, Division of
Worker's Compensation, Department of Labor and Workforce
Development; Ed Fisher, Deputy Commissioner, Department of Labor
and Workforce Development; and Linda Hall, Director, Division of
Insurance, Department of Community and Economic Development.
Co-Chair Green asked Mr.Nordstrand whether he was encouraged by the
outcome of the ad hoc committee meeting.
Mr. Nordstrand responded that the Administration was both
encouraged that so much had been accomplished and disappointed by
the fact that the labor representatives' position was "that they
would oppose the entire bill" were the one issue regarding de novo
review "not to go their way."
SFC 04 # 93, Side B 02:42 PM
Mr. Nordstrand stated that the Administration could not, "in good
conscience, agree to the change because to agree to not allow this
commission to review de novo," not as incorrectly referred to in
testimony today as "trial de novo," and "review the record and
reweigh the evidence, and to smooth out the edges of cases that
should have been decided another way, so that there is a uniformity
and a predictability of outcome on its way to the Supreme Court."
He reiterated that this could not be agreed to by the
Administration. Continuing, he concurred that the Administration
had veered from some of the provisions of the Council on State
Governments' Model Act because changes were required to align
procedures with the State's system. However, he stated that one
clear provision specified in the Model Act is de novo review. He
stressed that de novo review "is the standard, the norm among other
states."
Mr. Nordstrand referred the Committee to a chart, provided by the
Administration, titled "Workers Compensation Organization under
CSSB 311(JUD)" [copy on file] which he expressed, denotes that
general courts defer to agencies because of "agency expertise."
Continuing, he argued that to support labor's position would "be
folly" in that it would allow for the experienced and qualified
members of the WC Commission to defer to other qualified people
whom they "hire and fire." He stated that in the current system,
Superior Court judges, while capable, "are not necessarily
qualified in WC law." Therefore, he stressed that there is
deference to the expertise within the agency. He concluded that
this, therefore, is the source of the de novo idea as the
information provided to the Court should be of the highest caliber.
Co-Chair Green asked for an explanation on how to decipher the
information on the aforementioned chart.
Mr. Nordstrand explained that the information on the chart flows
upward from the Workers Compensation Hearing Panel information
located on the bottom of the page. Continuing, he stated that the
WC process would start with the three-person Hearing Panel, and
were its decision unacceptable to any of the parties, it would be
appealed to the WC Appeals Commission. Continuing, he stated that
were the Commission's decision also unacceptable, the appeal would
continue on to the Supreme Court.
Co-Chair Green asked what occurs after Supreme Court hearing.
Mr. Nordstrand replied that the Supreme Court could either make a
decision or "remand" the case back down the Appeals Commission with
an order to take certain action. He noted that the Appeals
Commission could also remand a case back to the Hearing panel.
Co-Chair Green asked whether the Supreme Court could remand the
case back to either the Appeals Commission or the Hearing panel.
Mr. Nordstrand clarified that the Supreme Court could remand it to
the Appeals Commission, whose action they would have reviewed.
Similarly, he continued, the Appeals Commission could remand a case
back to the Hearing panel.
Co-Chair Green asked for confirmation that in the current system, a
case would proceed from the WC Board to the Superior Court and then
to the Supreme Court. Continuing, she noted that the Supreme Court
would, rather than deferring to the decision of the Superior Court,
defer to the WC Board.
Mr. Nordstrand concurred.
In response to a question from Senator Bunde, Mr. Nordstrand stated
that in the current system, the decision of the WC Board "is the
final agency decision" and then it would proceed, if appealed, to
the Courts. Continuing, he stated that in the proposed system, the
decision made by the Hearing panel would be furthered to the
Appeals Commission.
Senator Hoffman understood therefore that under the current system,
were no appeal forthcoming, the WC Board's decision would be the
final decision.
Mr. Nordstrand affirmed.
Senator Hoffman asked for confirmation that approximately 80
percent of the WC Board's decisions are not appealed.
Mr. Nordstrand responded that while not familiar with the exact
statistics, this percentage might be true. However, he advised that
under the proposed system, the decision of the Hearing panel could
also be final.
Senator Hoffman voiced confusion therefore as to why the proposed
system is described "as a two-tiered system."
Mr. Nordstand responded that it would be considered a two-tiered
system because there are two tiers of authority within the agency.
Ms. Hall clarified, in regards to the WC rate setting process, that
NCCI Holdings, Inc., the nation's largest database of workers
compensation insurance information, does not set rates, as their
role is to develop loss-cost analysis which is the determination
"of the amount of money required to pay claims." She stated that
this determination of "only a portion of the final rate charged to
employers." Continuing, she shared that the loss-cost determination
is sent to the Division of Insurance who upon further analysis,
"approves, approves with modification, or disapproves that
determination." Furthermore, she noted that insurance carriers
review the determination and either adopt it or file a deviation,
as individual insurance companies are able to compute their own
factors into the rate structure. Therefore the rate making process,
she professed, is a computation of a multitude of factors.
Ms. Hall acknowledged testimony noting that NCCI has not provided
insurance cost or premium saving projections that might result from
this bill. In this regard, she commented that "typically" NCCI
provides estimates regarding the effect of benefit changes. She
exampled that "were the value of the whole person to change," then
there would be an affect on the amounts paid out for injuries. She
clarified, therefore, that this bill is "a system change" rather
than a benefit change, and, she continued, it is not considered to
be, at this point, "particularly quantifiable."
Ms. Hall continued that because the legislation did not incorporate
benefit changes, it was not initially provided to the ad hoc
committee. She stated that in order to address employers'
increasing WC premiums, the focus of the legislation was to modify
the system to make it "more efficient and more predictable" prior
to making any changes to benefits. She noted that at one point,
language was being considered to "tie physician fee schedules to
the Medicare schedule." She stated that this approach has recently
been implemented in California, and were it enacted in Alaska, she
stated, the Division has determined that the resulting savings
would amount to approximately $50 million. However, she noted, this
would be "a dramatic change in the way benefits would be paid," and
"out of concern to its affect on injured workers," the Division
removed the language from consideration. Therefore, she shared that
the focus shifted to changes other than benefit changes.
Continuing, she stated that this bill, while not addressing all the
cost drivers, is a beginning to making changes without a complete
"revamping" of the WC system.
In response to a question from Co-Chair Green, Ms. Hall stated that
she could not comment on Mr. Luhr's testimony as they "have very
different perspectives on this bill."
Mr. Nordstrand informed the Committee that letters of endorsement
are included in Members' packets.
Co-Chair Green stated that the sheet providing the side-by-side
comparison of the three bill versions was helpful. She asked
whether there were continuing concerns that should be addressed.
Mr. Croft asked that the concern involving the automatic release
upon compromise, were an individual represented by an attorney, be
further addressed.
There being no further testimony, Co-Chair Green ordered the bill
HELD in Committee.
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