Legislature(2003 - 2004)
04/05/2004 08:00 AM Senate JUD
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM
CHAIR SEEKINS informed members that the Department of Law and
some representatives of labor have done a lot of work on SB 311
and produced a draft committee substitute (CS), labeled 23-G2.
SENATOR THERRIAULT moved to adopt version 23-G2 as the working
document before the committee.
CHAIR SEEKINS noted without objection, version 23-G2 was before
the committee. He then announced his intention to ask Mr.
Nordstrand and Mr. Dougherty to provide the committee with an
explanation of the changes made in the bill since the last
meeting. He noted he is aware of one proposed amendment that the
committee will address after it reviews the changes made to the
CS.
MR. SCOTT NORDSTRAND, Deputy Attorney General of the Civil
Division, Department of Law, distributed a handout comparing the
existing workers' compensation program with the proposed
program.
MR. KEVIN DOUGHERTY, Alaska Laborers' Union, told members he had
not spoken with Mr. Nordstrand for a few days so he did not feel
up to speed on the changes made to the bill.
CHAIR SEEKINS said he spoke with Mr. Jim Sampson on Friday night
to explain the protocol about how he planned to proceed with the
legislation. He asked Mr. Nordstrand to begin with the
explanation of the changes.
MR. NORDSTRAND asked to explain the process that has occurred so
far on SB 311. He noted the handout has three columns comparing
the original workers' compensation act with the original
versions of SB 311 and HB 450, as proposed by the governor, and
the proposed committee substitute (23-G2). He then said the
Governor's Office asked representatives from the Department of
Law, Ed Fisher, the Deputy Commissioner of the Department of
Labor and Workforce Development, Linda Hall, Director of the
Division of Insurance, and Paul Lisankie, Director of the
Division of Workers' Compensation, to meet with representatives
of labor who were appointed by Mr. Sampson - Barbara Huff
Tuckness, Don Etheridge, Kevin Dougherty, John Giuchici, a
member of the Workers' Compensation Board, and Jim Robison of
the AFL-CIO, to attempt to compromise on a new workers'
compensation system for the State of Alaska. He continued:
The essential sticking point, I think it's safe to say
for all parties, was that under our proposed system,
there would not be lay board members hearing cases. I
think most of the disputes involve that issue, at
least at that time. And so what we did was we met and
we then came back, the Administration went back,
rewrote the bill, and integrated a new - we sort of
took our system and the old system and meshed it in a
way and that's what's on the top sheet here. You can
see this is the proposed CS essentially. I think the
easiest thing to do without going through each system
- the current, the proposed, and then this one is just
walk through this so you can see what it is that this
will do.
At the top of the chart is the commissioner of labor
and workforce development. The commissioner would
have, within the Department of Labor, two separate
entities dealing with workers' compensation; one would
be the director of the division of workers'
compensation and the division itself. As you know,
we've talked before, there is no division of workers'
compensation in the current act, there is no director
in the current act. The board does everything so this
is a new concept and this list of authority for the
director of the division is an attempt to separate the
administrative function in workers' comp from the
adjudicative function - the advocacy from the
deciding, so to speak. That hadn't been done in our
system in the past.
So you can see that the director has a certain list of
authority there and that was all part of what the
existing workers' comp board has now. That's been
segregated off as an administrative function for the
director.
On the other side, on the left, you see the workers'
compensation appeals commission and our original
commission still exists here from the original bill
with a couple of changes. One, we've changed the term
of office to five years. That was proposed by labor.
We thought that was a good idea. It actually might
encourage more folks to apply if they could vest in
PERS or something after one term so we thought that
would be a good idea. We also agreed to have one of
the members designated as a person who is experienced
in employee representation and one employer. It's sort
of like the current workers' comp panel theory, and
then one undesignated. It could be either. It could be
both. It doesn't matter as long as they meet the
minimum criteria under the statute, which requires a
certain level of experience in workers' compensation
and having practiced law for five years. And then much
of the rest of this is the very same as from our
original bill. It didn't change.
Underneath that, this is where the meshing shows up.
We created what we call a workers' compensation
hearing board. Now this is not the workers'
compensation board, as we know it now. It has no
administrative functions. In fact, there's no reason
for it to ever meet as a group. It is simply a panel
from which hearing officers will be drawn to sit in
the familiar one labor, one industry, one hearing
officer configuration under this plan, just like the
existing system with some modifications. And the same
folks who are on the board now would be transferred
over on to this board and it would just continue on.
The difference is that this hearings board, or these
panel members, when they're setting up - pretend Kris
is the hearing examiner, I'm an industry member,
there's a labor member over here. The labor and
industry member would not be in the business of
deciding what the law is. They would not be in the
business of deciding what evidence should come before
the particular panel. They would not be in the
business of presiding over or conducting the procedure
of the hearing. And frankly, from our discussions with
labor, that's basically the way it works now anyway.
This is just essentially codifying the existing
circumstance. And so the hearing officer would do
that, would sit with these panels, and actually we
reached agreement that the type of hearing officer,
which we've changed in this bill to hearing examiner,
and we just changed the name because there's actually
a thing in state government known as a hearing
examiner that fits where we needed them to be on the
range and step salary structure, but anyway, the
hearing examiner will sit with these folks and they,
too, will have to be a member of the Alaska Bar, as we
had suggested in the last bill and certain other
requirements, to make sure we have high quality
hearing examiners available to sit on these boards.
That was all acceptable to labor. We haven't talked
about anything here yet that was unacceptable. The
only thing at the end of the day that we could not
agree on, the one issue in a 60-some whatever page
bill, was the relationship between the hearing panel
and the commission. Essentially that's what you have
in front of you in the form of that amendment. What
we've done in the CS is this is the Administration's
position of what this bill should look like. This is
our best compromise we could reach to achieve the
results that we desire.
CHAIR SEEKINS distributed the proposed amendment, which reads as
follows.
23G-2
4/2/2004
(1:51 PM)
A M E N D M E N T 1
OFFERED IN THE SENATE BY_________________
JUDICIARY COMMITTEE
TO: Proposed CSSB 311(JUD)(23-G2)
Page 38, lines 2-4:
Delete "testimony presented by a witness who appears in a
hearing. When credibility is disputed, the hearing panel's
determination of credibility must be supported by specific
findings."
Insert "a witness. A finding by the hearing panel
concerning the weight to be accorded a witness's testimony,
including medical testimony and reports, is conclusive even if
the evidence is conflicting or susceptible to contrary
conclusions. The findings of the hearing panel are subject to
the same standard of review as a jury's finding in a civil
action."
Page 41, line 4:
Delete ", hearing panel,"
Page 41, lines 5-10:
Delete "Unless not supported by specific findings, a
hearing panel's findings regarding the credibility of testimony
of a witness who appeared in the hearing is binding on the
commission, but all other findings, including the weight to be
accorded medical testimony and reports, may be set aside by the
commission. The findings of the hearing panel, if not set aside
by the commission, are conclusive."
Insert "When reviewing decisions of a hearing panel, the
commission shall use the same standard of review as that
established by the Alaska Supreme Court in workers' compensation
cases."
MR. NORDSTRAND explained that the DOL representatives drafted
the proposed amendment because he received from the labor
representatives a list of 10 changes to the bill that they
wanted. The group reviewed those changes and, at the end of the
day, they could not reach agreement on two of those issues,
which are included in the amendment. He indicated, "So you have
the distinction in view between labor and the Administration, as
we know it, on the workers' compensation bill."
MR. NORDSTRAND described the distinction and the
Administration's position as follows.
The relationship issue here really is, should the
commission have the power to review the determinations
of a hearing panel - this new hearing panel, de novo,
not that they must, but should they have the power if
that were to be appropriate in a particular case.
There also is a provision here that has to do with
what deference will be given to the - you can see the
very first part of this amendment has to do with
credibility of witnesses. It's sort of the flip side
of this. What deference do you give and on the other
side of that is what power does the hearing panel
have. It's kind of the same question.
The reason we believe that de novo review is essential
- there's a couple of reasons. First of all, we've
heard some discussion, I think, through the process of
the origination of this bill started, I guess, with
the Council of State Governments' draft legislation.
Point one is, and we've tried to stay close to some of
the concepts here. Point one is in this bill, it was
recommended that there be de novo review within the
agency by an appeals board. That's key to this concept
- review in the agency, not at the court level, there
shouldn't be de novo review there but within the
agency. That particular view was based upon,
originated in the National Commission of Workers'
Compensation Report in 1972 that also said the very
same thing - within the agency, there should be de
novo review to essentially even out the discrepancies
between decisions to make for greater predictability.
There is a concept, and I think you've probably heard
of it, that courts generally should defer in some way
to agency expertise because those are the experts. The
courts aren't the experts in everything and therefore
there should be some deferral to the decisions below.
We think that's an accurate concept and we think that
should apply to the courts. We think within the
agency, now think about this, we're going to put,
theoretically, the best workers' compensation lawyers
we can find on this commission. These hopefully will
be the best and the brightest in the system. Those are
the experts. It would not make sense for them to defer
their views to those who, in fact, in the case of a
hearing examiner, are the folks who work for them.
It's simply to us not a matter of deferring to
expertise below, it's a matter of letting all of the
experts come with the best result out of the agency,
which would then be reviewed.
Let me say just one last thing. The reason this is
essential, and this issue is essential, we could not
compromise on it is the whole point of this bill in
large measure is to create greater predictability in
outcomes in the workers' compensation system. We have
now combinations of panels that could be dozens,
depending on how you structure them, you know, a
hearing officer and 14 different panel members. They
can reach ... inconsistent results, regardless of the
fact that there is a body of case law from the Supreme
Court that they can rely upon. All questions are not
answered, as we know. And so they reach differing
results in different cases, with similar facts, and it
frustrates the system - insurers, employers, and
others, in trying to get what will be the result in a
particular case. Uncertainty breeds, I think,
increased rates in insurance. Over time it simply
must. Certainty breeds predictability and a
predictability in rates. And so, we think that without
some control, some ability to reign in the odd case
that may be off the mark, that we will lose the
ability to create that silo effect we're looking for
of having a relationship between the Supreme Court and
the commission and these ... originally hearing
officers, but now board members or panels.
I think we went as far as we could go and we're left
with this one issue, Mr. Chairman. We really can't
compromise on that in our view and that's all I have.
If there are questions...
CHAIR SEEKINS asked Mr. Nordstrand to describe the exact changes
made in the proposed CS.
MR. NORDSTRAND asked members to take a look at the chart. The
Division of Workers' Compensation will continue to run the
system, in terms of record keeping and enforcement functions.
While awaiting transmission of a copy of the chart, MR.
DOUGHERTY told members that the process left a lot to be desired
and has caused the labor representatives to be cautious. He only
received the proposed CS this morning. He said:
And I think if we were to contrast the system that we
are working under now compared to the ad hoc
committee, which operated for 23 years, and on that ad
hoc committee process we had employers from the oil
industry, construction, airline industry, the list
goes on and on, and we had labor as well, that
committee gave us the opportunity to reflect and make
sure we didn't make mistakes that hurt good employers
and hurt good employees who would be covered by the
system so this is not the best way to do it. I will
accept that that may be the [indisc.] and we can live
with it. I think we all need to be very cautious this
morning and as we proceed forward. I don't want to
detract from the fact that we may be there - that's
fine. If we come to an agreement I think we've made a
lot of progress and I'm thankful for that.
CHAIR SEEKINS said he has no intention of throwing caution to
the wind.
MR. NORDSTRAND told members the group had one full-day meeting
where DOL took input and turned it into an original CS that was
presented to the labor group. That group came back with two
typewritten pages of ten proposed changes to be considered. The
entire group then met again and considered all ten issues.
According to John Guichici, the only two issues that could not
be agreed upon were the proposed changes numbered 5 and 9. Those
two changes are now the substances of the proposed amendment.
CHAIR SEEKINS said people from the Alaska State Chamber of
Commerce, VECO, and ABC of Alaska want to weigh in on the
proposed CS and that both John Guichici and Jim Sampson were
listening online. He then said he would review the sections and
would ask the members of the ad hoc group whether all agree.
He began with the first item on the chart regarding who runs the
system. Hearing no comment, he moved on to the second item on
the chart, regarding who makes the regulations.
MR. NORDSTRAND told members that item 2 remained unchanged from
the original SB 311.
CHAIR SEEKINS affirmed there was no disagreement on that point.
He then moved to item 3, regarding who investigates and accuses
uninsured employers and who decides the case against uninsureds.
MR. NORDSTRAND again said no changes were made to that item from
the original bill.
MR. DOUGHERTY agreed.
CHAIR SEEKINS moved to item 4, which pertains to where an
injured worker or confused employer would go for general
information.
MR. NORDSTRAND said that item did not change from the new
Division of Workers' Compensation and was agreed to.
MR. DOUGHERTY agreed.
CHAIR SEEKINS asked about item 5, which is where the notice of
injury gets filed.
MR. NORDSTRAND said it would be filed in the new division and
all agreed to that.
CHAIR SEEKINS asked about item 6, who does the informal dispute
resolution.
MR. NORDSTRAND said Division of Workers' Compensation staff
would do it and all agreed.
CHAIR SEEKINS asked about item 7, which pertains to who decides
if a medical examination is needed before a hearing.
MR. NORDSTRAND said the director of the division would do it,
which is the case in both bills, and all agreed.
MR. DOUGHERTY said he believes that is the case but would like
more time to double-check.
MR. NORDSTRAND said nothing mentioned in the 10 proposed changes
had anything to do with item 7.
CHAIR SEEKINS moved to item 8, regarding who schedules a
hearing.
MR. NORDSTRAND said the only difference in the original bill and
the proposed CS is the name change from "hearing officer" to
"hearing examiner" and that was agreed to.
MR. DOUGHERTY affirmed that is correct.
CHAIR SEEKINS asked about item 9, regarding protective orders.
MR. NORDSTRAND said all agreed to item 9, which MR. DOUGHERTY
affirmed.
CHAIR SEEKINS asked about item 10, regarding who decides a
worker's claim or employer's petition.
MR. NORDSTRAND replied, "As you know, originally it was a
hearing officer. In the new bill it would be a hearing panel
with the two members plus the hearing examiner and that was
agreed to."
MR. DOUGHERTY commented, "The answer is yes, but obviously we
need to have the [amendment]. The one-page [amendment] would
assure that that hearing panel had the proper respect. With that
I think we're there."
CHAIR SEEKINS questioned the agreement on item 11, regarding who
the board members are.
MR. NORDSTRAND said it goes from no board under SB 311 to a
workers' compensation hearings board, which would be comprised
of the same members of the current workers' compensation board.
He added that all agreed on that item.
MR. DOUGHERTY said that is the case as long as the [amendment]
is adopted.
CHAIR SEEKINS asked about item 12, regarding the requirement
that all hearing officers be attorneys.
MR. NORDSTRAND said there was no change between the CS and SB
311 and all agree, which Mr. Dougherty confirmed.
SENATOR FRENCH asked if the model act allows grandfathering in
of existing [hearing officers] when a new regime is instituted,
whether the ad hoc group discussed that matter and why this
legislation did not follow the model act.
TAPE 04-34, SIDE B
MR. NORDSTRAND explained that the bill has a transition
provision that allows the chair to essentially relax the
requirement that hearing examiners be members of the Alaska Bar
for a period of up to 18 months. Therefore, if existing hearing
officers apply to become hearing examiners, the fact that they
may not be members of the Alaska Bar will not be held against
them. He noted the ad hoc group compromised on that item. DOL's
original proposal was to allow that requirement to be relaxed
for 12 months while the labor group requested two years.
SENATOR FRENCH asked if the hearing examiner would have 18
months to pass the Alaska Bar.
MR. NORDSTRAND clarified that the hearing examiner would have to
be a bar member within 18 months of the effective date of the
bill.
CHAIR SEEKINS moved to item 13, which pertains to how hearing
officers are paid.
MR. NORDSTRAND said item 13 was changed. DOL's original proposal
was that hearing officers would be partially exempt and excluded
from PERA, so they could not organize in a union. The ad hoc
group compromised so that hearing officers would be excluded
from PERA but be in classified service. The pay range did not
change.
MR. DOUGHERTY affirmed that is correct.
CHAIR SEEKINS asked if the workers' compensation act contains
provisions about impartiality and disqualification.
MR. DOUGHERTY responded:
There were some but, of course, the prior SB 311 only
concerned hearing officers at that level so what we
did when we added the hearing panels and the workers'
compensation hearings board, we put in a provision
that talks about how to tell when there's a conflict
for a lay board member, which we don't have now. That
was agreed to by labor as well.
MR. DOUGHERTY affirmed that is correct.
CHAIR SEEKINS moved to item 15, relating to whether the director
of the Division of Workers' Compensation can be a party in a
case.
MR. NORDSTRAND said the director can and that is a vast
improvement over the current system under both SB 311 and the
CS.
MR. DOUGHERTY agreed.
CHAIR SEEKINS asked about item 16.
MR. NORDSTRAND said originally the hearing officer would have
been the sole deciding officer so would have decided the law.
Under the new panel system, the hearing examiner will decide
what the law is and instruct the lay board members, similar to
the way a judge instructs a jury.
MR. DOUGHERTY affirmed that all agreed to that item.
CHAIR SEEKINS referred to item 17.
MR. NORDSTRAND explained that at a hearing, under SB 311, the
hearing officer would decide the facts. Under the CS, the three
members would decide the facts.
SENATOR THERRIAULT asked if that is similar to the judge and
jury system in that the judge directs how the law is to be
interpreted but the other members come in when there are
questions of facts.
MR. NORDSTRAND said the easiest way to envision the new set up
is to recognize that the only distinction between the hearing
panel and a normal jury would be that when the jury goes to the
jury room to deliberate, under the CS the judge would go with it
and vote as one of three.
CHAIR SEEKINS asked about item 18: If an employee wants
something that the workers' compensation law doesn't cover, must
we still have a hearing on the merits?
MR. NORDSTRAND explained that right now there is no good way to
stop short of a hearing on a lot of cases where there might be a
legal impediment to going to a hearing. Under SB 311 and the
proposed CS, summary judgment would be a possibility. The only
distinction between the two is who decides. Under SB 311, the
hearing officer would decide; under the proposed CS the hearing
panel would decide. He noted that labor agreed to the hearing
panel.
MR. DOUGHERTY affirmed that is correct.
CHAIR SEEKINS took up item 19: What if a person wants
reconsideration?
MR. NORDSTRAND said reconsideration was a good idea added to the
original bill. That provision is identical in the committee
substitute and no one objected, which Mr. Dougherty affirmed.
MR. NORDSTRAND then addressed item 20 and said there is no
difference in where the appeal goes. The only difference is whom
one could appeal from. A person could appeal from the hearing
panel rather than the hearing officer. He added on the issue of
de novo, the group did not reach agreement.
MR. DOUGHERTY stated, "Yes, so as Mr. Nordstrand just said, the
de novo issue was hanging out and not agreed to but it is
critical that the one-page [amendment] before you - we
understand that that was part of the agreement that we came to,
that we had to do that one pager."
CHAIR SEEKINS moved to item 20.
MR. NORDSTRAND said item 20, whether the appeal decision is
binding on the board, is the same in both versions and was
agreed upon, which Mr. Dougherty confirmed.
SENATOR FRENCH asked how the model act handles that question.
MR. NORDSTRAND said he did not know the exact answer but the
model act does have an appeals board from which original
hearings are appealed. He said he could not conceive of any
other way to do it than to have the hearing panel have control
and precedent over those below.
SENATOR FRENCH indicated that under the current system, the
Superior Court decision is not binding; only Supreme Court
decisions are. He continued, "So as the appeals commission is an
intermediary court, the way the system works now, is you don't
have binding decisions and I think the model act does not
envision binding decisions either by the appeals commission.
That's my reading of the model act."
MR. NORDSTRAND asked if it would not be binding within the
agency.
SENATOR FRENCH said that is correct.
MR. NORDSTRAND offered to look at that but said he cannot fathom
a system that could function effectively that way. He said that
Superior Court decisions are not binding because they are not
reported or consistent and no single point of view can emerge
since there are 30 or 40 Superior Court judges. He said it is
practical for one commission that sits unified to say this is
the law for everything below, much the way the Supreme Court
says that to the Superior Court.
CHAIR SEEKINS brought up item 22: An employee can't get a lawyer
to appeal, but the case is novel. Can the division help?
MR. NORDSTRAND responded under both SB 311 and the CS, the
director can act on the employee's behalf to resolve this novel
question. That is not the case in the present system.
MR. DOUGHERTY said all agreed on that issue.
CHAIR SEEKINS moved to item 23, the next level of appeal.
MR. NORDSTRAND said the next level of appeal is to the Supreme
Court, which is unchanged.
MR. DOUGHERTY said that is correct.
CHAIR SEEKINS moved to item 24: If an insurer wants second
injury fund reimbursement, who decides who pays?
MR. NORDSTRAND said this change owes its existence to hearing
panels - it was changed from the director to the hearing panel
without objection.
MR. DOUGHERTY agreed.
CHAIR SEEKINS asked about the reemployment benefits
administrator.
MR. NORDSTRAND said in both SB 311 and the committee, the
reemployment benefits administrator is a partially exempt
employee of the director.
MR. DOUGHERTY affirmed he had no objection.
CHAIR SEEKINS asked about item 26, which is whether an employee
needs approval to settle her case.
MR. NORDSTRAND explained that the employee would not need
approval by the workers' compensation board if an Alaskan
attorney represents the person and no one objected.
MR. DOUGHERTY affirmed that is correct.
MR. NORDSTRAND said one other issue was an area of compromise
that is not on the chart. The bill contained intent language
that was an area of consternation. DOL was attempting to codify
what it thought was fair and reasonable workers' compensation
intent language. Labor objected and requested that DOL simply
restate that language used in prior uncodified legislation (1988
amendments) as the intent language. DOL took the language from
those amendments and put that in.
MR. DOUGHERTY said that is correct.
CHAIR SEEKINS said it appears the issue of de novo has not been
agreed upon. Before addressing the proposed amendment, he
decided to take public testimony and asked testifiers to comment
on the proposed CS and the proposed amendment.
MS. PAM LABOLLE, President of the Alaska State Chamber of
Commerce [the Chamber], told members the Chamber has not seen
the proposed CS or the chart, and was not included in the
discussions. She noted the Chamber represents 700 businesses and
that the three parties most concerned with workers' compensation
issues are business, labor and a third party. She protested the
fact that this bill was taken out of the public process and that
all of the agreements were made between two of those parties.
She told members that on Friday afternoon, she and Thyes Schaub
of the National Federation of Independent Businesses (NFIB),
were invited to a briefing during which Mr. Nordstrand explained
what had been negotiated and decided. She remembered at the
hearing on SB 311 last week, both Senators French and Ellis
expressed concern that the meetings would include all
stakeholders. When she called to find out what was going on, she
was told the meeting was in progress and was assured the Chamber
would be brought into the loop. It was, but after the fact.
MS. LABOLLE expressed concern that this process is becoming the
preferred method of operation among the labor unions. It
marginalizes the parties that the unions don't want to discuss
the issues with by taking it out of the public process. She
noted the issues are determined by the labor unions and whomever
the labor unions want to negotiate with and then brought to the
legislature. She cautioned that process is getting away from the
legislative system of public negotiation, decision making,
record keeping and documentation.
MS. LABOLLE said one item that the Chamber feels was a
significant compromise was that the hearing panel will change
from a fully professional, unbiased combination of people to
determine issues to lay people. She said business didn't mind
giving up its lay representative on the board but now it's back
to the original system. She said she has yet to see a document
but, from what she can tell, the Chamber agrees with the
positions put forth by Mr. Nordstrand and believes DOL did a
pretty good job of representing what would have been the
Chamber's position. She maintained that the Chamber agreed with
the original SB 311.
Regarding the de novo issue, MS. LABOLLE said the Chamber
supports the Administration's viewpoint. She repeated the
Chamber essentially agrees with what has been done but would not
have agreed with the lay panel. However, she emphasized that the
Chamber is very dissatisfied with the process.
CHAIR SEEKINS said he is partially to blame. He noted that SB
311 is the Governor's bill and during the original presentation
before the committee, many points of disagreement became
evident. The committee did not want to work through each of
those points of disagreement individually so he asked the
Governor to work with others and bring a proposed CS before the
committee that would not consume as much committee time. The
public process will start now. He pointed out the committee was
not involved in the original drafting of SB 311. He instructed
the Governor and the members of labor who had the greatest
points of disagreement to bring the committee a CS that the
committee could work from. He noted:
I understand that there's been an ad hoc process and
that this process has gone on for all these other
years. I can understand how people should work on
that. That is not a function of the committee. The
function of the committee to me was to bring to us for
consideration a bill that came - that we would be able
to work on without having to decide all the disputes
between these two major parties but, without any
opportunity for you to comment - no. You'll recall
that the Chairman called you and said I have a CS, I
have a proposed amendment and I need you to be able to
provide testimony on that as well. The Chairman didn't
ignore the State Chamber of Commerce and you know
that. Nor would I try to ignore other business groups
that are out there. I think their input is very
important and now we're in that process. We're not
railroading this bill. We're not intending for it to
get out of committee today as we go forward but we're
much closer than we were before without the committee
having to do a lot of the work. And that was the
intent of the Chair when I asked those people to get
together and, within a week, bring us back a CS that
we could work with without taking up a lot of our
time. So I don't think that there's any intent for us
to go outside of any public process. We're now diving
headfirst into it, in my opinion.
MS. LABOLLE said she appreciated the chair's point of view and
position, however there are three major players in the arena of
workers' compensation, it seems strange to her that only two of
those were notified and involved in the ad hoc group.
CHAIR SEEKINS said he appreciates Ms. LaBolle's point.
9:15 a.m.
MS. LABOLLE repeated that the Chamber agrees with most of what
was determined and is willing to move ahead because it wants the
workers' compensation system to be reformed. The Chamber does
not want to see the bill delayed and would prefer that the bill
move ahead as quickly as possible.
CHAIR SEEKINS said he wants to do that but does not want to
throw caution to the wind. He asked that she bring up any points
of value to the business community.
MS. LABOLLE said she hopes to see the proposed committee
substitute, the amendment, and the chart shortly.
MR. NORDSTRAND offered to provide Ms. LaBolle with a copy of the
CS.
CHAIR SEEKINS continued taking public testimony.
MR. JOHN GUICHICI of Fairbanks told members the heart of the
reform of the workers' compensation system in this bill is the
creation of a three-person appeals committee that will bypass
the Superior Court, where many people feel the decisions are
inconsistent. However, the bill actually goes a lot further than
that in that it reduces the role of the three-person hearing
panel that hears disputed cases. The reality of creating a
three-person appeals commission to deal with the 36 appeals each
year on average that the Superior Court hears at a cost of $1
million to the state, does not seem worthwhile. He said he has
spent a lot of time talking to employer attorneys, insurance
carriers, Representatives and assistant attorneys general, and
no one can give any estimate of premium reductions or savings to
employers. Usually when a reform of this nature is proposed,
someone is able to identify some savings. Language in the bill
that is problematic is addressed in the amendment. It would
guarantee that any decision of the hearing panel that does not
favor the carriers would be advanced to the appeals commission
with no weight given to the hearing panel's decision. Once the
appeal is at the commission level, the testimony of a witness
who appeared before a hearing panel would be binding on the
commission. All other findings, including depositions from
claimant doctors and medical reports, may be set aside by the
commission, the critical point being that rarely does the
claimant have a live medical witness, as that is costly. The
live witness for the carrier usually doesn't have an active
practice. Those witnesses are hired and paid for by the carriers
to express their opinions.
MR. GUICHICI informed members that this proposed bill also
removes the standards of review that courts are held to, which
is unfair to the claimant. This new system will not be good for
the State of Alaska, injured workers or the employers without
the amendment. The only ones who will benefit from the proposed
CS are a few carrier attorneys who want to see their work
percentages increase. They currently win over 60 percent of the
cases. He said he does not like the bill at all without the
amendment as he believes it will come back to bite employers,
injured workers, and the state.
MS. NICHOLA LIENHART, VECO Corporation, stated support for the
proposed CS as described by Mr. Nordstrand. The bill would
increase both the efficiency and fairness of workers'
compensation hearings, which will benefit both employers and
employees. VECO believes it is important to bring consistency to
decisions.
MR. DOUG WOOLIVER, Alaska Court System, told members the court
system takes no position on SB 311 but he would explain the
impact of one section of the bill on the court. That section
provides for direct appeals to the Supreme Court. He said as
mentioned earlier, an average of 36 cases come to the court
system from the workers' compensation board each year. About 27
of those are resolved at the Superior Court level. The remaining
25 percent go on to the Supreme Court. The court system does not
believe the changes the bill makes are likely to have any impact
on the number of cases that come to the court for a few reasons.
First, the court system already hears a small percentage of the
total workers' compensation claims, and a small percentage of
the board's decisions are appealed to the court system. People
appeal for a variety of reasons. Some appeal on the basis of
merit, as they believe the appeals commission simply got it
wrong. The Supreme Court applies a deferential standard of
review; reasonable minds will always differ on what was
supported and reasonable. Second, every year the court system
sees a handful of novel legal issues. Those issues will continue
to come to the Supreme Court because that is the body that can
finally resolve those issues. Third, a certain number of people
who do not trust administrative agencies and will appeal any
decision to get out of the agency setting. Finally, a small
number of people are simply tenacious and will not give up until
their cases are heard in court. He said one reason some people
appeal directly to the Supreme Court is to cut down the delay in
the court process. That will be the result of this bill in about
25 percent of the cases. For each one of those cases, a
considerable amount of time will be saved because the Superior
Court process will be bypassed. The court system's concern is
the other cases that are currently heard by the Superior Court.
If they are bypassed, they are likely to take more time because
a Superior Court judge can decide a case more quickly than the
Supreme Court. The Superior Court judge is a committee of one.
The Supreme Court is a more deliberative body with a panel of
five people. Opinions are drafted, circulated for comment, and
redrafted. He explained that the court system's fiscal note
reflects its desire to add staff to the Supreme Court to not
only resolve the workers' compensation cases more quickly but to
enable the Supreme Court to address its increased caseload in a
timely fashion.
MR. WOOLIVER commented that in the original version of SB 311,
the court system assumed it would not see new cases but it was
concerned about the lack of balance on the appeals commission
between labor and employers. Its concern was that the lack of
balance might lead to an increased caseload in the court system.
He noted the proposed CS provides for some balance on the
appeals commission and alleviates that concern.
9:30 a.m.
SENATOR THERRIAULT asked if part of Mr. Wooliver's concern about
an increase in the court's caseload will be mitigated by the
fact that there will be a narrowing of the interpretation of the
law early on in the system. He explained that right now there is
no narrowing in the administrative process. One takes a case
before one of 30 or 40 Superior Court judges so the narrowing
does not occur until one gets to the Supreme Court. That way,
people will know exactly how the law is going to be applied.
MR. WOOLIVER replied that over time that may be the result but
it will be hard to tell initially. He reminded members that only
a certain percentage of cases that are fact-specific are
appealed because people have the right to do so. Therefore, even
if the commission helps the Supreme Court narrow the legal
issues, that must be balanced by the concern that a new system
will initially lead to more appeals.
MR. CHANCY CROFT, testifying on his own behalf, told members he
is an attorney who has only represented injured workers for the
past 25 years with one exception. He owns two businesses and
employs on average 10 people per year. He suggested that he may
be the only witness who has policies with the two largest
workers' compensation carriers in Alaska. He made the following
points.
There are some provisions in this bill that are needed
and even desirable and I urge the committee to
separate those out and to pass them immediately. There
are others that are going to make a difficult
situation worse that could be solved by administrative
action but instead you are being asked to assume the
responsibility for what could be done very quickly and
efficiently by the administration. You have heard a
lot about the price of uncertainty in the workers'
compensation system and how a tribunal appointed by
the Governor without any review of its members by the
judicial council will somehow provide certainty. But
you have not been given one single case in the last
five years, for that matter even longer, which is -
because of the uncertainty had caused an impact on
premiums and the board took it up to the Supreme Court
to get a decision on it - not one.
So you are being asked to spend a million dollars to
solve a problem that basically doesn't exist and could
be resolved by the administration if it wanted to.
Every time somebody appeals to the Superior Court or
to the Supreme Court, and I've handled more than 50
cases in the Alaska Supreme Court, there's a provision
for the board to participate. They get a copy of all
of the proceedings. And if there is an important
issue, they can go to the Supreme Court to get it
resolved if that's necessary. The last time that was
done, to my knowledge, was in Frasier. I know about
that because that was my case. It's more than 10 years
ago and the board did present a brief in that case.
But I don't know of any other case in the Supreme
Court where the board has presented a brief, and
certainly in the last five years, and you haven't been
presented with any indication that it was important
enough for the board or the administration that they
told the board to file a brief in that case or take
that case on up to the Supreme Court.
As far as obtaining any predictability out of Superior
Court decisions, the commissioner of labor and
workforce development could simply say to his
appointees, the hearing officers, follow the opinions
of the Superior Court in any case in which there is a
Superior Court decision unless those decisions
conflict, and in the one where there is now a
conflict, appeal that decision to the Supreme Court.
So this could be resolved without a million dollars,
hiring a dozen or more people.
But my concern is that the solution is going to cause
delay. It's going to cause a delay in a system that
only works if it works quickly. Workers' compensation
premiums are going up and so something needs to be
done. One of the reasons they're going up is that
medical costs are going up. This year nationwide
medical costs will go up 14 percent and that is one of
the reasons why the cost of workers' compensation is
going up. In Alaska, medical costs are 50 percent of
the payout in workers' compensation benefits. For the
first time in our history it's been going up each year
for the last 10 years but in 2002, the latest year for
which we have statistics, for the first time it went
over 50 percent. Two-thirds of the claims now
basically involve medical benefits only, not time
lost, not permanent impairment, not rehabilitation,
not anything else like that but medical benefits only.
In the last 10 years, the cost of providing medical
benefits has increased 75 percent. In the last five
years alone, it's increased 50 percent. The cost of
providing medical benefits is now approximately $4,000
a claim on average just to provide medical benefits.
This bill does absolutely nothing about that even
though people that had been involved from the
employers' point of view had asked that that be
addressed. It's not in any place in this bill.
The second issue is the insolvency of some companies
triggered in some part by 911, where there were small
companies that were impacted by the claims or the
awesome reinsurance because of 911 and, in other
cases, by allowing insurance companies, as California
did, from coming in and offering premiums at too low a
rate. Now that's a dangerous thing to say - no, no,
no. We're going to insist that you charge employers
more premiums and California didn't do that. It said
okay, whatever the lowest bidder is, that's the
premium in effect. And so a lot of the companies that
have gone bankrupt have been California companies -
Superior and Paula and recently Freemont.
Superior and Paula didn't affect us. It had a big
impact on California but our rates of workers'
compensation are somewhat artificial here. They are
not measured against actual experience. We're a small
state and so we're kind of the tail that gets wagged
by the dog. We do have one advantage. We have a
company, and have for 25 years, Alaska National
Insurance, that is the largest work comp carrier in
the state, has been for years, writes a tremendous
amount more than - you have to add up the next three
or four, maybe ten, to get the volume that Alaska
National writes. Alaska National is doing quite well.
In 2001 and 2002 it paid out a dividend that was the
highest in its history. I say more power to them.
They're tough adversaries. When they tell you they're
going to fight you they do. When they tell you they're
going to pay, you can count on the check. They're
highly competent and they're doing quite well in the
existing system.
But there is this problem with the fact that Freemont,
which was writing 20 or 25 percent, maybe even as high
as 27 percent when it stopped writing here - the
policies in Alaska, was doing it on the cheap. And you
could tell it was doing it on the cheap because you
couldn't get the claims adjusted. Nobody should have
been surprised that Freemont was going to go under
because you could not get a hold of an adjuster to get
a claim resolved, even when they got a defense
attorney. The defense attorney couldn't get a hold of
the adjuster. It was a terribly run company. It had
banked on building up a huge volume of workers'
compensation cases so it got its premiums and it was
going to make its money, like everybody does, in the
stock market and with its investments. And when the
stock market tanked, Freemont, it was inevitable that
it was going to go under because it had written
policies at a rate that it could not sustain itself
without tremendous investment anyhow.
So I urge you to do the first five sections, pages 2
through 4, Sections 1 through 5, of the Guaranty
Association and then the two that are kind of
technical, 6 and 7, that relate to the workers'
compensation board, to get the Guaranty Association
healthy again here. I don't think we have much choice
and I think it's important to do that and I don't
think we should wait on these other things to do it.
But there's one thing that's not fair in that. I don't
represent insurance companies and I don't care usually
which insurance company pays as long as my client gets
paid. But there's a real unfairness about what the
administration is proposing here. To those companies
that write premiums in Alaska, like Alaska National
... [END OF TAPE]
TAPE 04-35, SIDE A
MR. CROFT CONTINUED:
... of the benefits that are paid out are paid out by
self insurers, the biggest of which is the State of
Alaska. If it were an insurance company, it would be
the second largest insurance company in the state
given the volume of its clients. The Municipality of
Anchorage and the Anchorage School Board are also
self-insured. Big companies are self-insured, British
Petroleum and the like, and what happens with self-
insurance is the cream of the insurance premiums are
removed. That goes to - they often have low incidence
rates, low severity rates, that's the cream of it and
so what's left for Alaska National and the 160 or 70
other workers' compensation carriers is the tougher
ones. And what does that do? That impacts small
businesses who cannot become self-insurers, generally.
And yet when it comes to saving the Guaranty
Association, which ensures that all injured workers
are going to get their benefits but, equally
important, that the employers that have been insured
by a defaulted insurance company that has now been
declared insolvent in California are not going to be
forced by people like myself and other attorneys to
pay benefits to injured workers where those companies,
those small businesses felt that they were going to be
covered by insurance and had in good faith bought a
policy of insurance, if there isn't money in the
Guaranty Association to make those payments, you can
bet employers are going to wind up being sued to make
those payments.
So I urge you to consider that the self-insureds
should contribute to the insolvency of the Guaranty
Association on the same basis, the same percentage,
that all of the work comp carriers who've been
standing up there and taking the tougher cases and
making sure that small businesses can get insurance to
make sure that the burden doesn't fall entirely on
them when insurance companies go bankrupt. Now that is
an example - insurance guaranty is an example of a
model act because throughout the nation, there are
states that have adopted an insurance guaranty act.
There is no model workers' compensation act. There is
not an act like the Uniform Child Support Enforcement
Act or the Uniform Commercial Code or any of that that
applies like a workers' compensation act would. There
is no such thing as a model act. The Council of State
Governments for more than 30 years has been saying
here is a good act. No state, at least checking it on
the Internet yesterday, has adopted all of those
recommendations. Alaska has adopted many, is above
half the states but is below about 20 in adopting all
of the 19 recommendations and the reason is businesses
have continually objected to the model act because
they say it's going to make it more expensive.
So I don't think there is a model act. The intent, and
the reason the intent, people wanted to keep the
intent in Section 8 on page 5, is that it says quick,
efficient, fair and predictable delivery of services.
I don't think this bill is going to be quick. It is
going to cause delay. It puts in a whole new level of
litigation in this case, trials de novo, so that there
is no predictability by injured workers and I think
it's a bad idea. But I have taken some time. There are
other people wanting to testify.
I have about 10 sections of the bill that I think are
particularly bad. Let me tell you just one that I was
extremely disappointed that labor signed off on. It's
on the second - it's on the third page, the bottom. An
employee wants to settle her case, does she need
approval. Under the present system yes but under the
two systems that are proposed, the original bill and
the committee substitute, if you're represented by an
attorney, you don't have to have approval. I haven't
checked it this morning, but the latest case decided
by the Alaska Workers' Compensation Board, unless
there was one that came in this morning, was decided
at 3:32 Friday afternoon. It's a case called Adepoju
out of Fairbanks. Mr. Adepoju had a long history of a
workers' compensation claim. He finally agreed to
settle for a lump sum settlement, which he wrote. He
didn't agree with a lot of it but he's signing it and
he wanted the board to approve it. The board said
well, we think there's some real problems here because
he's waiving all of his right to any future medical
benefit. The board exercised its authority to order an
independent medical evaluation, not a hearing officer
but the board did it. They sent him to Bruce
McCormick, a neurosurgeon in San Francisco, whose
report came back - this guy's got problems and is
likely going to need medical treatment in the future.
And Friday afternoon, the board said we are not
approving that compromise in release because it's not
in his best interest.
What does that have to do with this section? Mr.
Adepoju was represented by an attorney and that's why
it's a good idea to have the board look at these
because otherwise there's going to be a real erosion
of the employee's negotiating position. When a check
for $20 or $30 or $40,000 is dangled in front of them,
they haven't gotten any compensation for a year or
two, they've gone to the hearing panel and the hearing
panel said yes but the tribunal said no, we're going
to do a trial de novo, they're about to lose their
house or have lost it, they don't have money for the
kids to go to school that year, they can't pay the
utilities and so are they going to settle their claim
for $20, $30,000 to simply make ends meet? Yes. And
that's why Arthur Larson, if you want to talk about
model suggestions, is so opposed to any lump sum
settlement but it would be a travesty to allow it
whether you're represented by an attorney or not
without board approval.
I don't want to take time from other people. I'm
willing to testify later because there are many
sections - I haven't even gotten to the ones that I
think are most important.
CHAIR SEEKINS asked Mr. Croft to provide a [written] review of
the other sections, which would be distributed to all members.
MR. CROFT said one question he has is why would there be no
judicial review for the appeal commission, when Title 43
requires all of the judges for the tax court to undergo judicial
review. This would be the first time in Alaska's history where
the state has given the authority to someone who is not a judge
to make binding precedent. He offered to testify again at a
later date.
SENATOR OGAN asked Mr. Croft if he had any suggestions in
relation to his statement that this bill will do nothing to
remedy the rise in medical costs.
MR. CROFT said that Judy Peterson, who was the president of the
WCAA board of directors, provided some suggestions from the
business sector in November to remedy increasing medical costs.
Those suggestions relate to the approval of payment of medical
benefits and what types of treatments are authorized. He opined
that area is difficult in that costs can't be kept so low that
people can't get medical treatment. However, on the other hand,
simply paying whatever amount is charged is unacceptable. Until
the question of medical costs is addressed, there will be no big
savings in any workers' compensation bill.
CHAIR SEEKINS thanked Mr. Croft and called Ms. Larson to
testify.
MS. EDEN LARSON, president and CEO of Associated Builders and
Contractors of Alaska (ABCA), told members ABCA is comprised of
161 companies that employ about 5,000 workers throughout Alaska.
She pointed out her testimony is largely anecdotal in that she
heard earlier today that the system is not broken. According to
her membership, the system is very broken in that employers find
it very difficult to encourage their insurers to appeal. ABCA
supports a restructuring of the workers' compensation system. It
feels the proposed CS is a step in the right direction.
Regarding the amendment, the ABCA believes the CS provides for
accountability and checks and balances for the hearing panel in
that it requires it to determine credibility based on documents
of fact. The ABCA will not support the CS if the amendment is
incorporated.
CHAIR SEEKINS said he would set the bill aside at this time for
further consideration. He encouraged all interested parties to
review the proposed CS, labeled 23-G2, 4/2/04. He asked anyone
interested in viewing the amendment to call his staff. He then
took up CSHB 230(STA).
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