Legislature(2005 - 2006)BELTZ 211
03/08/2005 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB102 || HB102 | |
| SB124 | |
| SB130 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 130 | TELECONFERENCED | |
| + | HB 102 | TELECONFERENCED | |
| *+ | SB 124 | TELECONFERENCED | |
SB 130-WORKERS' COMPENSATION
2:14:03 PM At ease 2:18:08 PM
The following is a verbatim transcript of testimony on SB 130
COMMISSIONER GREG O'CLARAY, Department of Labor and Workforce
Development(DOLWD): I'm pleased to present to you the
Administration's 2005 Alaska's Workers' Compensation Reform Act.
If I might, I have just a few visuals and I won't take too much
time. I think it's important for us to put the issue before us
into the proper context. Because you've attempted to deal with
workers' compensation reform last session and in the special
session.
I'd like to draw your attention to this graph. This is the size
of the pie of the payout in the 2003 cost and benefits. Why this
is important for the purpose of this discussion is because last
year the administration made an attempt to draw attention to the
workers' compensation system and the inherent problems of
escalating rates that employers were having to pay. There was
testimony given time after time from folks who had opposed our
bill asking us why we weren't dealing with medical costs. As a
matter of historic record, this issue was always brought to the
forefront, but never dealt with on a comprehensive basis.
Now, let me tell you briefly why workers' compensation is
important to employers and to workers, especially injured
workers. The system was set up - it actual predates statehood
and the Constitution of our United States. Workers' compensation
is one of the oldest doctrines of law in the history of our
civilization.
Workers doing the bidding of employers in order to earn a wage
to support their families were guaranteed assistance if they
became injured while they were on the job performing the work of
the employer. No one will argue that the system in place has
far-reaching effects on the workforce and on the employer force
of our state. Of recent time, the cost of premiums being paid by
the businesses in Alaska - now there's several different numbers
you'll hear from various segments of society in Alaska
identifying the size of the problem, but I would like to give
you a couple of figures to highlight why this is a concern to
Governor Murkowski.
2:20:41 PM
There are over 100,000 businesses registered through business
licenses in our state. Of those 100,000, there's some 70,000
that are deemed active by the Department of Commerce and in the
research and analysis section from the Department of Labor, we
use the solid figure of somewhat over 16,000 very active
businesses. Of those businesses, a large majority are small
businesses; they're not smokestack businesses or large groups
such as the oil companies or these large processors that process
our fish. They're small businesses of less than 100 people
involved in many cases, only half a dozen.
Escalating rates to pay statutorily required costs of workers'
compensation have gone into orbit over the last several years.
Now, many factors actually influence that and I will put before
you the experts that know more about the system than I will
probably ever learn in my tenure here. The director of Workers'
Compensation, Mr. Paul Lisankie, has a long history of knowledge
and working with the workers' comp. system. The director of
Insurance, Linda Hall, has far and wide experience within the
insurance industry. Those two witnesses will detail for you and
be able to respond to actual questions you may have. My general
comments are to focus on the situation and why it is so
important, and why the Governor chose to move quickly this year
to put a bill in front of the Legislature that is both
comprehensive and far-reaching and controversial - to the extent
that those parties that are involved in the services rendered in
making the workers' compensation system work - that's doctors,
lawyers, hospitals, health care workers, insurance companies -
all of those people involved in the delivery of services to
injured workers and to employers who pay the bills in terms of
their insurance premiums. All have an interest in what this bill
accomplishes and how it goes about it.
Probably the hardest part of this legislation and the one that
apparently you will hear the most about, the sector you will
hear the most from, I believe, is the medical community and
while some of the commissioner's comments, my comments, have
been disingenuous with respect to how many automobiles somebody
needs or doesn't need, I have to tell you that escalating costs
in medical are a global problem. They're not just an Alaska
problem.
2:24:17 PM
While we certainly used a particular procedure as an example
that doubled in cost over the course of a two or three-year
period, there may be justification for that. Certainly the cost
of medical malpractice insurance has gone through the roof as
well. You're probably going to be dealing with and you have
dealt with other tort reforms. I won't dwell on that for the
moment.
I'm sure that the medical community can justify most of those
increases that they have had to put out on the street, but my
problem as the commissioner of the Department of Labor and
Workforce Development is that we are now seeing the effects of
high premiums that are putting people on unemployment and that
we cannot stand for.
2:27:56 PM
The Governor last year asked me to approach the traditional
group that you've heard so much about - the Ad Hoc Committee on
Workers' Comp - to ask them to reconvene and address some of the
issues that were placed before you last year in the regular
session and the special session. They did so and began working
diligently some time in October. It was our intent that the
product of their work would be introduced and supported by the
administration. We had every intent of doing that until we
received the product and until the urgency of the situation with
respect to employers that were closing their doors or planning
on closing their doors began to impact our workforce. That is
when the Governor decided we needed to act now. We needed to go
to the cost factors of the system to see if we couldn't roll
back the cost of this system by some 10 percent or $24 million.
Now, in order to carve $24 million out of this particular pie,
remember you're looking at a graph that shows 2003 costs. NCCI,
which is the nationally recognized rating group that helps
states figure out what premiums they should charge, have told us
that next year in the 2004 period this particular piece of the
pie will be 62%, not 52% - as of 3/8/05 as shown here in this
chart.
Again, please don't take from my remarks that we're zeroing in
on the medical community. Theirs is the largest percent, but
they're not being the only problem here and shouldn't be the
only ones who have to bleed financially to fix it.
Probably the hardest thing you will deal with in this session is
balancing for changes in the system that will make it more
efficient, that will put workers back to work sooner or settle
their claims to get them out of the system sooner so they can
make informed decisions about their future employment.
The last thing would be what are you going to do with respect to
rates. Our goal in the administration and the reason we
submitted that bill that you're considering today, is to arrest
the escalating rates by January 1, 2007. Because of the way
rate-making occurs, it's pushed out beyond a year each time.
Right now we're talking about 2006 rates.
Let me give just a couple of small examples on my graph that
will probably get your attention. It certainly got mine. This is
a small construction, a general contractor in the State of
Alaska, operating around Sitka. In 2002 their rate was $146,950,
just under $147,000. That's a premium rate. It jumped to
$289,162 in 2003 and in 2004, went to $324,110. That's a pretty
good bite for a small contractor. That's more than double.
There's another small business here in Juneau, Copy Express.
Their rates were $5,900 in 2002 and they went to $10,232 in 2005
- again nearly double. That's in real dollars. Now they're not
the only ones to get hit. Those folks in the health care
industry were also nailed. Here's a prime example of what we're
talking about.
2:29:20 PM
Central Peninsula General Hospital, health care, in 2001, their
premium was under $400,000. In 2005, it's nearly $1 million. Do
you know who pays that bill? Any of you who go to hospitals and
seek care. You pay it, but they had to pay it up front, because
that's their premium under the law. They have to pay for this
coverage.
The last illustration I'll make is a public employer, the Kodiak
Island Borough. In 2001, their rate was $43,000. It dropped in
2002 and now it's $45,000. We are told that any new employees
hired by the Kodiak Island Borough are told they cannot work
more than 30 hours a week and will not get benefits, health
insurance or a pension because of that restriction. That's
impacted workers. I will wind up by asking you to give
consideration to this bill. Certainly to consideration of the
adjustments that may be required to make the solution a reality
and that is arresting escalating rates at their current rate by
2007, January 1. I'd be happy to answer any question by the
committee.
2:30:58 PM
CHAIR BUNDE: Thank you. Referring back to your pie chart. It
isn't your intent to just pick on the medical community, but is
there anywhere else in that pie chart where you could find a
reduction?
COMMISSIONER O'CLARAY: The lawyers.
CHAIR BUNDE: Where's Shakespeare? I know they make an easy
target, but specifically, how would we address reductions in
that arena?
2:31:32 PM
COMMISSIONER O'CLARAY: Remember the lawyers or the legal costs
are really a small piece of the pie. Last year we were somewhat
criticized because we were going after what amounts to about
4.9% of the pie and I think the criticism was correct. We were
trying to avoid dealing with the medical costs last year which
was the largest piece. Because we were going to try to do this
one piece at a time and that was we were going to deal with
litigation costs and the actual adjudicatory system last year.
The reason why I think the legal costs can be cut, but not
significantly enough to arrest rates. Every place in here can be
trimmed except the basic benefits for average weekly wage
restoration on injured workers.
The reason why streamlining the system makes sense for injured
workers is because almost on a weekly basis, I get complaints in
my office about the slowness of the system. Why does it take so
long to get a controverted claim settled so I can either decide
to go back to work, choose to take rehabilitation for a
different type of job or settle my claim and retire - whatever
the case is. So, I asked the staff of workers' comp to give me
some idea of why it takes so long to settle some of these
claims.
In our bill we ask that we do not use or put issues before the
Superior Court on appeal. The reason we ask that is because in
most cases that adds on anywhere from eight months to a year and
a half additional time - because of their calendaring and the
fact that those decisions rendered by the Superior Court do not
make law. They don't make precedent.
We also found that meeting with the lawyers from both sides -
the claimant lawyers and defense lawyers. They said, you know it
would be a lot easier if you could get a medical release filed
at the same time the action report comes in so that we could
actually get the information from the doctor on the injured
worker. It would help us move along the process to get the pre-
hearing so that they could define the issues over whatever the
award may be. The lawyers actually brought that to us. They
brought it to us on the basis that this would knock down on some
of the litigation costs.
2:33:48 PM
The second thing they did, and this came from the defense
lawyers, the insurance company lawyers, they said, 'We would
much rather deal with a claimant that was professionally
represented rather than a pro se client, because we burn up a
lot of billable hours talking to an individual injured worker
trying to educate them on the system and how it works. We prefer
that you come up with some system where you could actually fund
legal advice for injured workers to acquaint them with the
system and how it works and can work in their behalf.' That came
from the defense attorneys. So, I think they are trying to make
some cuts. They were willing to come forward to do so. But the
main piece of this pie is medical costs. Therefore, that's why
we have a proviso in the bill that rolls back the rates of
reimbursement in addition to adopting some standards of care.
2:34:55 PM
SENATOR SEEKINS: Commissioner, while I haven't been able to
determine exactly what would be a fair rate, here's my question.
Workers' Comp is a limitation. One of my employees is hurt, they
have a single source remedy - that being workers comp. They
can't sue you; they have to work within the system that's
provided for them by the state. My concern is, in terms of
rates, where do we come to a point where a doctor says, 'I will
no longer service this client because the rate doesn't
compensate me properly for the services that I render, and we
trap someone in a sole source remedy with no place to go. That's
my primary concern in how to set rates - as far as what's to be
paid to a doctor for legitimate concerns. I'm not talking
necessarily about trying to limit the number of redundant tests
or other things that may be part of the process of trying to
limit medical costs. Rates, themselves, could put that employee
in a terrible box. I wonder if you could comment on that.
COMMISSIONER O'CLARAY: We share that concern. The Workers' Comp
system cannot afford to have doctors, especially surgeons,
basically withhold their services because they can't receive
reimbursable payment that will continue to keep them in
business. But, where is the balance?
Many states adopt a Medicare base plus, a multiplier as payment
schedule. Many states also have applied standard of care.
Frankly, you must have the standard of care to go along with the
reimbursement rate. Otherwise, it would create an additional
problem.
2:37:24 PM
SENATOR SEEKINS: So the next question I come to is one of
process. Again, I don't know enough about the system here to be
terribly educated on this, but it's my understanding that there
may be because of the process pieces that we follow, we run into
costs that we may not need to incur in terms of medical expense,
such as requirement for certain exams, expert opinions,
competing opinions that we could stipulate to rather than having
to go through the process. It's my understanding, I've been told
that we don't allow that kind of stipulation in the process. Is
that true?
COMMISSIONER O'CLARAY: Mr. Chairman, Senator Seekins, I'll have
to defer to my director of Workers' Comp., but I believe that is
the case. It's also the case, I think, that the parties, that
the lawyers raised with us, is the joint stipulation on facts is
something that both sides were interested in doing. Stipulations
act to cut down the process time, but let me turn to Mr.
Lisankie, if I can, Mr. Chairman. Can you answer the senator's
question?
PAUL LISANKIE: Yes, for the record, my name is Paul Lisankie,
director of the Division of Workers' Compensation within the
Department of Labor and Workforce Development. We, too, have
heard some complaints by some of the folks that are engaged in
trying to resolve difficulties in front of the Workers'
Compensation Board that we are not accepting enough of
stipulations. We're trying to work on that internally - to allow
people that are willing to stipulate that they no longer have a
dispute about something to just move on. If we sense there is a
need for some additional legislation to make sure that happens,
I'll certainly be back to the committee.
2:39:30 PM
SENATOR SEEKINS: Mr. Chairman, Mr. Lisankie, what I kept hearing
was that maybe it's the regulation rather than the statute. That
while both parties in many cases agree that they could
stipulate, they're not allowed to by the system - either
statutorily or by regulation. I'd be very interested in finding
out how we could address that. Because if we were trying to
drive down costs legislatively, it seems to me that this could
be an area that we should be addressing.
MR. LISANKIE: I agree with you, Senator. There is one particular
part of the bill before you that expressly addresses one of the
concerns that was brought forward to us that there was not an
agreement that parties could stipulate to eligibility for your
type of benefit and that's actually in there for just that very
reason.
CHAIR BUNDE: Could you reference that section for us?
MR. LISANKIE: I can when I get my notes....
CHAIR BUNDE: Okay, that's fine. Senator Ellis had a question.
2:40:26 PM
SENATOR ELLIS: Thank you, Mr. Chairman. Commissioner, good
afternoon. I wanted to go back to something you said there at
the outset and as you surely know there are lots of upset and
demoralized people who participated in the ad hoc process on the
business and labor side and you mentioned that you were
representing the Governor and the commitments and I wanted to
get to the Governor sort of I guess - the word I'll use is -
reverse the commitment, because you said you got the product of
the ad hoc committee and that's when the governor reversed his
commitment. What about that bill was so objectionable that leads
us to discussion of this bill or your introduction and the bill
before us today?
COMMISSIONER O'CLARAY: Mr. Chairman, Senator Ellis, first of all
I would not characterize the Governor's instructions to me as
reversing a commitment. Reasonable people will disagree, but I
have to tell you that the reason why it became apparent that the
Governor needed to take action this year was because of the
potential for more businesses to close as a result of the
escalating costs of Workers' Comp. We invited the ad hoc
committee to participate in the Governor's bill, to endorse some
of the things we did. They chose to put things off for their own
reasons. We honored their autonomous stature by just asking to
reconvene. We did not give them an agenda, although Mr. Lisankie
or members of the Workers' Comp Division staff participated
mostly as an observer, the agenda was set by them. I have to
tell you that it surprised me that they didn't deal with the
medical cost piece, because in a 1995 court, which by the way,
was the last time I saw any activity by the ad hoc committee -
was in 1995 - they sent a piece of correspondence basically to
whom it may concern, that said they encouraged folks to get busy
and start working on the medical cost piece. Yet, they had not
convened that committee since then to my knowledge. In fact, it
didn't even convene last year when we introduced legislation.
So, part of the problem I have, I think, with the
characterization that the Governor retracted his word is not
exactly true. Here is where I am, through the chair, senator.
Senator Ellis, this problem is larger than any one's personal
feelings including my own.
2:43:02 PM
This problem is going to become a crisis situation for our state
if businesses continue to close their doors because of failure
of leadership in the administration and in the Legislature to
act this year to come up with a solution. It doesn't have to be
the perfect solution, but it has to come up with a solution. We
need to start turning this needle the other way.
CHAIR BUNDE: I do have a number of people who want to testify
and I'd like to get to those that have time constraints, first.
Is there anyone here in Juneau who would not be available to
testify on Thursday that would like to testify now? That being
the case, Commissioner, we appreciate your staying with us. I'm
going to attempt to take some other testimony.
COMMISSIONER O'CLARAY: Mr. Chairman, if I might beg your
indulgence, I'd like Linda Hall from the Division of Insurance
to speak briefly on the rate-making problems. She knows this
better than any of us. If you could give her a few minutes, she
could focus you on the rate problem.
CHAIR BUNDE: I'm going to grab Mr. Jordan first, because he is
not going to be in town on Thursday and then we'll talk with
Linda.
2:44:35 PM
JIM JORDAN, Executive Director of the Alaska State Medical
Association: We previously provided some written testimony. I
plan on being very brief today. I guess our concern is that we,
too, are part of the ad hoc process. We are part of the medical
community stakeholders that have the vested interest in this
particular bill and in the system. And I'd like to state that
our primary concern is that there is access to care for the
injured worker. It's not only access for the injured worker;
it's access to care for all Alaskans. Earlier today I testified
on another bill where I spoke of the concern of workforce issues
involving physicians in this state.
At this point in time we're 25-30 percent short of physicians in
this state with the specter - and I use that term purposefully -
of increasing shortages not only here, but in the rest of the
country. We're looking at potential shortages of 90 [90,000] to
200,000 physicians nationwide to a number of different reasons
and factors. And that's a concern. It's a big concern.
The one thing I will say is that the Alaska State Medical
Association has more questions than answers at this particular
point in time. Involved with the ad hoc process, as you might
guess - my constituency being physicians, are scientists. They
are data driven and we specifically were asking for information
in regards to data involving medical care. Not only just
physicians but also hospitals - go down the list and work for
the ad hoc process and we have not yet seen the data. We feel
that is very important data to have available for analysis if
we're going to talk about suggestions as to dealing with this
very complex issue.
So I guess at our urging is that you take the time to study this
issue. Have these questions answered and in the mean time we
would like to see Section 4 and Section 5 of the bill removed.
Commissioner O'Claray spoke of guidelines and I'd like to show
you the guidelines. These are the guidelines and I will admit,
we have not done extensive analysis of these guidelines but, I
can not believe that these guidelines would cover every
potential circumstance from injured workers involving their
treatment.
2:48:36 PM
The California Medical Association has done extensive analysis
of these guidelines and they have recommended and included in
the information that you've been provided, they've recommended
that in California we adopted these same guidelines about a year
ago. That additionally if there are going to be guidelines, that
the guidelines also include the guidelines developed by - and
I'm not going to read them you have them in your packet - that
there's almost two pages of national specialty society practice
guidelines.
And lastly, the California Medical Association also has
indicated in their study that 80 percent of what physicians do
are not covered in guidelines anyplace. So the question is, you
know, what will these guidelines serve? What's the savings? What
are we looking at here?
So with that, I will cease.
SENATOR BUNDE: However with your clientele, 62 percent of the
problem - I would hope that you would accept that they somehow
will have to be part of the solution as well.
2:49:42 PM
MR. JORDAN: I would hope so but, I will also mention, for the
record, the Alaska State medical Association is not in a
position where we can represent - such as a union - everyone of
our members. That should be a decision that will be made by each
individual physician that will be based upon what their current
practice situation is. Their age - I mean there's a whole
plethora of factors.
SENATOR BUNDE: Questions for Mr. Jordan? Thank you.
MR. JORDAN: Thank you for allowing me to state my questions
quickly.
2:50:11 PM
SENATOR SEEKINS: What is the purpose for the guidelines? Is it
to provide good medicine or is it cookbook medicine to be able
to answer questions when you're on the stand and having an
attorney asking, 'Why did you do that?'
MR. JORDAN: Practice guidelines are developed as an educational
tool. They're guidelines, they are not necessarily meant to be -
you know - this is the way it has to be done for every patient.
As a matter of fact, you raised the issue and the question about
does it raise the standard of care issues. It just very well
might. So in a medical injury situation, you may be faced with
saying well, you didn't follow this particular practice
algorithm on page 237. And so it raises a whole - another host
of legal issues.
CHAIR BUNDE: I have a number of people at the Anchorage LIO and
we're running short on time so I would like to go to the
Anchorage LIO and get as much testimony as we can. Linda, I'll
ask your indulgence to talk to us on Thursday.
LINDA HALL, Director, Division of Insurance: [Indisc.]
SENATOR BUNDE: Okay we'll let you rest your voice and I'm sure
we'll have an opportunity. I'm sorry. Two minutes? Two minutes?
2:52:21 PM
MS. HALL: The only piece I would like to address today are these
charts that the commissioner showed. The insurance premiums are
in my jurisdiction and I want to talk a little bit about part of
the motivation for looking at the cost of the system. You've all
heard me talk. You've heard me talk last year that in 2004 the
average rate increase was 21 percent with 17 classifications in
excess of 50 percent increases. This year we have an average
rate increase of 12 percent with 49 classifications with premium
increases in excess of 30 percent. Some of those overlap.
The ratemaking process - this is what we use. The cost of claims
which come from the system are what drives insurance rates.
Alaska experiences used when we talk about our overall rate
increase that I just gave you - national experiences used from
the rate classifications. Plus we use trend [indisc.] of a lot
of things.
When we look at the increasing cost of premiums, I'm getting a
huge number of phone calls from employers. 'Who approved these
rates?' And frankly it's not my favorite thing to do to stand up
in front of those groups and say, 'That would be me.' I'm
getting a lot of calls from employers who are looking at closing
their doors.
Something needs to happen and I think what the commissioner is
saying is we need to look at all the pieces. Last year we tried
a small piece, this year we've got another escalation in rates
and I would urge you to look at the solutions in this bill.
2:54:02 PM
SENATOR BUNDE: We have basically one carrier covering and
another who are doing business in Alaska. We have two, one who
is not sure they want to be here. Is that correct?
MS. HALL: Actually, we have a large number of carriers; they
just don't actively write. And they write national - we have
three companies right now who actively are writing business. One
has been here longer, has a larger market share. The statistics
you see are somewhat skewed because their assigned risk business
is rolled in that. We have two in addition to that who actually
have been growing their marketshare. So we have I guess I would
say, three active companies but we desperately need to keep
them.
SENATOR BUNDE: Okay, thank you. I'll go back online and ask the
people in Anchorage. We have five minutes left - we can probably
have two people testify. I'll let you decide among yourselves up
there who should go first.
2:55:13 PM
SENATOR SEEKINS: Mr. Chairman, if I could just for one second in
the note we've got here from the Alaska State Medical
Association and I think in Mr. Jordan's testimony he was talking
about Sections 4 and 5 and I believe in the version that we have
was looking at Section 24 and 25 - as far as the recommended
guidelines and fees.
SENATOR ELLIS: This letter references the House bill.
SENATOR SEEKINS: For clarification on the points, I just wanted
to make a...
CHAIR BUNDE: Again, going to Anchorage. Anchorage online?
2:55:50 PM
LAURA WALDEN: Yes. I've been before this Legislature many times
to voice my opinion on workman's comp, which has not served the
people of Alaska very well at all and the reason why I say that
[is] I'm a good example. I got injured in '93 with a chemical
injury. I have not been compensated for that; I have incurred
medical problems due to that chemical injury. Everything that
the data sheet gave, I now have four years five years later. But
the medical community, if it's not visible, you're mentally ill.
Or they put you on medication and pull you off cold turkey. If
you weren't mentally ill you will be mental ill because you
don't have the medication you need.
We do not get proper medical care when your adjusters and the
insurance company interfere with the medical treatment of the
injured worker. That insurance company or adjuster will call
your doctor - your doctor will immediately bail from taking care
of you. So where does that leave us? It leaves us with no care,
no medical, no anything. No doctor will touch you in this town
because they don't want to be a part of the long-term instrument
of workman's comp.
I am a living example of workman's comp - of what it will do to
you. You may be able to return to work if you're given the
proper medical care up front instead of - they'll give it to you
three or four months, controvert you, then you're without a
doctor, medical care for a year, two years before you can get
any kind of medical care. So what has happened? Whatever
problems you have has gotten worse instead of better because you
didn't get the proper medical care because of the insurance
companies interfering into the care of the injured worker. That
has not been corrected at all or has even been spoke upon.
Then we incur more medical problems because you, as legislators,
have not enforced anything in the federal guidelines or even in
the policies and procedures. Half of the people don't even know
what your policies and procedures say. So we're sitting passing
laws that are not helping people in the state of Alaska. So I'm
appealing to you is to look at the type of insurance company and
the misconduct and the misbehavior of the insurance company
interfering with the medical care of the injured worker. If we
don't stop that, we can't move forward.
I am a living example of that. Open-heart surgery behind a
chemical injury because I wasn't properly cared for - was turned
down, called mentally ill, crazy - whole nine yards. And once
that adjuster goes into that doctor's office, you can forget the
medical care you were getting even if it was inadequate. So we
need to look at the conduct of the insurance company as well as
the workman's comp. And I'm not going to take up a lot of time
because now I want the other person to testify today. Thank you.
CHAIR BUNDE: Thank you very much. As it is, we've run out of
committee time and we will hold this bill for further
consideration. Obviously apologize to the people.
I'm sorry, I though we had to leave at 3:00. No, we're good till
3:30 so we'll continue with the testimony. Continuing in
Anchorage, Janice Banks.
3:00:12 PM
JANICE BANKS: Good evening sir, I'm an injured worker. I've been
hurt - I got hurt in 1998. With workman's comp I have been to
several doctors with my own doctors they had diagnosed me. And
seems like workers comp they always want to controvert what your
doctor tells you what is wrong with you. I just want to
understand the process. I've been dealing with workers' comp for
like eight years. I was hurt in 1998 and I'm still - they cut my
check off in 2002. I haven't been paid - my family and I have
been living in poverty because of this. Then I had to end up
going to other agencies to provide for my family - because of
what workman's comp did to me. To this day I don't know why they
cut my checks - stopped my checks from coming to this day. So I
would not only testify, but I would like for you guys to
somebody please help me to deal with my case and end it so I can
go on and live again. Thank you.
CHAIR BUNDE: Noel McCloud.
LIO: Mr. Chairman she had to depart.
CHAIR BUNDE: Okay, Barbara Williams.
BARBARA WILLIAMS: Good afternoon. Thank you for this opportunity
to speak to you today. We've been discussing workers' issues and
assisting injured workers and their families since 1998. People
who have worked all their lives are having life changing
experiences in our Alaska Workers' Compensation System. In
reality, there are some serious choices here before us in regard
to our current Workers' Compensation system.
We've had many disadvantages already installed in the current
statute and regulation. We're at an important crossroad and
injured workers want the employer's insurance company and anyone
else who is interested to know that they are looking for
indemnity for their claim, not financial security for the rest
of their lives. They would like to move on, but without access
to information they will not be able to do so. We need to speak
to the injured workers and address their needs. I can assure you
that we won't bite, but we do need to listen. Injured workers
often get frustrated when they cannot be heard. We need to
provide adequate benefits and contain costs. We have to depart
from the bad habit of talking around the injured workers and see
to their needs.
3:02:56 PM
Here are some suggestions I think that might assist with those
problems. We need to really look at the deficiencies and learn
from them. Education should be required of all department staff
as well as insurance adjusters. Once educated, continuing
education should be made part of the curriculum. Review of the
medical system as a whole, all the way down to the fee schedule
and develop attainable requirements and enforce them. This would
include drugs and other devices that injured workers need.
Limiting health care and making drug lists are not the answer.
We need competition and choice to keep the costs down. We
already heard today from Jim Jordan of the [Alaska] State
Medical Association that we're already experiencing a shortage
of medical care providers. Starting this practice would
monopolize and compromise services already available to injured
workers that are somewhat compromised.
We agree doctors may need peer review; the Alaska Workers'
Compensation Board currently makes decisions on complex medical
issues without this expertise. We have second independent
medical evaluators, but there is no one at the board level to
decipher the information for their use or for the injured
workers. We need good programs to police and enforce uninsured
employers. At one point, around 1998, there was over 60 percent
of all Alaskan employers that were not in compliance. We also
need fair treatment of those same uninsured employers. Make it a
steps process and shut down those who continually re-offend by
being uninsured.
We need access to legal counsel. There are only eight attorneys
assisting claimants and some are choosing not to represent
injured workers in favorable profitable types of litigation. We
need to police defense costs as well as injured workers'
attorneys costs. Balance in legal fees will reduce costs.
Injured workers enjoy little or no protection of their privacy.
Releases should relate to the injury and not be a quest to
disclose all protected health information. The same information
should not be used for commercial purposes or to confuse or
intimidate injured workers at a most vulnerable time. Program
requirements and benefits available should be clear and not
based on complex legalese that most injured workers do not
understand. That's also coupled with cultural biases, language
biases, and not a lot of reasonable accommodation offered by
these workers' compensation boards. All settlements should be
reviewed by the board to ensure fairness and eliminate
improprieties. And we've had some of that in the past and that's
one of the things that it sparked - part of the need to police
those kinds of settlements.
The Division of Workers' Compensation should also be required to
work with the Division of Insurance to stop frivolous and unfair
controversions. Since 1998 no new reports have gone to the
Division of Insurance and at that time, only 11 went over. There
should be a way to complain about unpaid bills and have an
effective resolution process. The adjudicative process should be
left alone at present. We need to restore balance to the
adjudicative process and not make it more complex.
Working with non-profits to educate and assist injured workers
is a good idea, but we have to eliminate hate and bias to ensure
fairness in assistance. By working together we can accomplish
far more than if we fight about these important issues. Injured
workers are counting on you, as their legislators, and us to
help them make it through the Workers' Compensation process.
Thank you for your time and attention to this real important
matter.
CHAIR BUNDE: I neglected to ask you your affiliation.
MS. WILLIAMS: I'm Barbara Williams and I'm with the Alaska
Injured Workers Alliance and we provide education and support
services to workers all over the State of Alaska.
3:06:45 PM
MARY ELLEN FELIX: I was injured about 2 1/2 years ago on my job.
From the beginning until now it has been one nightmare after the
other. I've worked all my life and I was even unaware to fill
out a form when I was injured. I've had three operations and
still unable to move my left arm - and I just wanted to work.
The insurance company that I work through continues to interfere
with medical care, does not abide by the law - even if the law
states that if your doctor refers you to another doctor within a
certain period of time - by law they are required to. They don't
abide by that and they've stopped me getting the care that was
necessary.
If my doctor states that I can have a procedure done that might
get me out of some of the chronic pain that I'm in, they say no.
The most frustrating part of it is is had I been able to get the
care when I was first injured - it is my understanding that had
I had the surgery I needed four weeks after I got injured I
would have been back to work in four months. Instead, I ended up
hiring a lawyer and fighting for a year and a half just to win
my case to get the medical care.
It seems like there is one hurdle after another. The insurance
company continues - they will interfere with the most minute
details if they are to - I was at the Mayo Clinic for an
operation. Instead of giving me per diem, they told me they
would make arrangements with the hotel I was staying at for
meals. The meals at the hotel exceeded what they allowed.
Therefore I was unable to eat for the whole time that I was down
there and when I called and I asked them why they do not do what
they say they will do - they'll say, 'We'll send you a check.'
then they don't. Then I called and they say, 'Oh I just decided
I'm not going to do that.'
Who are they answerable to? If this is just one case - and
please understand, I just want to go back to work, but I want to
be able to use my arm and I would like to be productive in
society again. The meager amount of money that I live on - no
one in their right mind would want to stay on any kind of
workman's comp benefit.
I'm not sure if all the insurance companies are the same as
Alaska National, but who polices them? I was just offered
another procedure to help me - Alaska National gets in it again
and says no. If this is going to get me back to work, why are
they allowed to continually say no? For myself and for every
other person that is subjected to their whims, I ask for you to
please help us because I do not know anyone who does not want to
live a productive life. And that means support and work -
support ourselves, support our families and work. Please help me
get back to work.
3:11:15 PM
KEVIN DOUGHERTY: I also have with me Judy Peterson. I'm a co-
chair of the ad hoc committee. Judy is also on the ad hoc
committee with us. What I'd like to do is refer members of the
committee - hopefully in your packet have a letter dated
February 22 from the ad hoc committee. Is that hopefully
available there in Juneau?
CHAIR BUNDE: Yes we have it.
MR. DOUGHERTY: There's not a whole lot more we need to say.
We're open to questions.
For those that don't know, the ad hoc committee is comprised of
people from a broad spectrum in the business community - many
industries represented there - and also from the labor
community. We have 12 people on the committee. This particular
session - in the last year we have met probably well over 1,000
man-hours - probably over 2,000 man-hours by the 12-member
committee. We spent a lot of time working at an ad hoc committee
bill. Again I think the letter states the position we're at
today. I won't reiterate that. Secondly, I will point out we
will be meeting this Friday the 11th. At that time Dick
Cattanaugh will be back in town. Dick is the president of the
AHC.
We would like to proceed forward. We still have our hands
extended out to the Governor's Office to work together to have a
bill that would represent the best interests of the business
community and working people. So we're going to keep working in
that direction and we hope the Administration will do that
because, at this point, we do not support the Governor's bill.
Judy, is there anything you'd like to add to that?
JUDY PETERSON: No, but I think Kevin's correct. We need to
continue and there is work to be done and we will meet on Friday
to discuss the version of the bill that's before us now.
3:13:40 PM
BOB FAVRETTO: I live in Nikiski, Alaska. I actually am wearing
three hats today. I myself am a private business owner in the
State of Alaska. I have businesses in Kenai, Soldotna, and
Juneau. I'm the twice-past chair of the Kenai Chamber of
Commerce and I'm also on the Alaska State Chamber of Commerce
Board - in which one of our top priorities is workman's comp
reform.
I'm here to give you some numbers and statistics on behalf of
seven businesses - and I have polled many more. I went out and
asked these businesses questions about issues that they have
within the state - specifically workman's comp and insurance.
The first business is a hotel/restaurant property management
business in Kenai. In the year 2000 - and this business
throughout this period of time through 2004 - the last five
years they've employed approximately 40 people. Their workman's
comp in 2000 was just over $16,000. Their workman's comp in '04
was just over $36,000 - and it will continue to escalate in '05
as well.
The second business is a local machine shop that employs - in
'00 employed 25 people and in '04 had 36 employees. In '00 their
comp premiums were $40,000, in '04 they were well over $100,000.
The third business - and Scott sitting here with me - Scott
Cunningham owns all the McDonald's franchises on the Kenai
Peninsula. In '01 - his average employees range from 130 to 145
of which 60 to 65 percent of those employees are part-time so -
I mention that so it doesn't skew the numbers when it comes to
the comp premiums. He averages somewhere between 130 and 145
employees a year. In '01 his workman's comp premiums were
$24,000, his projected comp premiums in '05 are over $130,000.
The next business queried was a seafood processor that's been
here a long time. In '00 he had 233 employees probably 220 plus
are part-time employees because it's a very seasonal industry.
His premiums in 2000 were a little over $31,000. In '04 he was
cut back to 136 employees and his premiums went to a little over
$78,000. In '05 his premium quotes will exceed $148,000.
My businesses, the automobile businesses, in Kenai, Soldotna and
Juneau - I employed 47 people in 2000 and my premiums in 2000
for the two stores then were a little over $29,000. In '04 - one
because of an acquisition of two additional businesses - I have
95 employees in the year 2004. My workman's comp premiums were
in excess of $220,000.
None of the businesses I spoke to had any catastrophic losses or
serious work related injuries that would probably significantly
help drive up the premiums. But as a businessman and the
business people I'm here to speak on behalf of, I personally
applaud the Governor and the Administration for getting at this
today and not waiting until tomorrow. And I would just ask that
you move this in a meaningful and an expeditious manner. Thank
you.
3:18:41 PM
CHAIR BUNDE: Thank you. You answered my most pressing question
which what was the loss rate when these premiums had such
astronomical changes.
3:19:02 PM
CONNIE LIVSEY: I am an attorney of about 20 years duration here
in Alaska practicing workers' compensation law and I'm presently
employed as in-house litigation staff by Liberty Northwest
Insurance Corporation.
I would like to testify in favor of SB 130 and its House
counterpart. There are several aspects of this proposed
legislation that I believe, based on my experience practicing in
front of the board, would be very beneficial.
Commissioner O'Claray in his remarks spoke about the efforts
last year to streamline the adjudication process and the
creation of a workers' comp appeals commission - that's set out
in, I believe, Section 10 of this bill - would be a very welcome
change that would streamline the process quite a bit.
Presently the decisions of the Workers' Compensation Board are
appealed to the Alaska Superior Court. It is a full-blown appeal
with briefing and oral argument and quite commonly that process
takes between nine months and a year and a half. I presently,
personally, have two appeals in my collection of cases that have
gone on considerably longer than that. A Superior Court decision
is then appealed to the Alaska Supreme Court and by case law,
the Alaska Supreme Court gives no deference to the Superior
Court's decision. So the party unhappy with the Superior Court
outcome has every incentive to appeal.
The entire appeal process is expensive, it is very lengthy, it
doesn't serve employees or employers well. And the creation of
an appeals commission that would hear appeals instead of the
Superior Court would probably shorten the entire process by at
least a year and would significantly reduce the cost to both
parties.
We also believe that Section 24 and the following section that
speaks to adoption of the ACOEM medical treatment guidelines
would be a very beneficial change in the law. Medical costs as
Ms. Hall and Mr. O'Claray testified, are the most visible cost
driver. They're the most expensive part of the workers'
compensation process. They're also the aspect of compensation
benefits that are accelerating in cost most visibly.
This is a hard problem to tackle. There is no easy answer. As
Commissioner O'Claray indicated, some states have gone to a
Medicare plus ten percent or Medicare plus 20 percent cost cap
approach. That's pretty harsh on the physician community. The
physicians I've spoken with are strongly opposed to that
approach and we believe adoption of treatment guidelines is
probably a wiser, fairer, and more targeted approach. This
particular set of guidelines was written by occupational
medicine physicians for other occupational medicine physicians.
Yes it is something that can perhaps be criticized as a cookie
cutter approach, but it is at least directed at occupational
medicine. It is based on data and it is targeted at treatment
norms rather than the sort of blunt instrument of payment caps.
Commissioner O'Claray in his remarks also spoke to - and so did
Director Lisankie - a couple of aspects of the bill that would
allow for parties to stipulate to certain things. One in
particular - this is in Section 14 of the bill - allow parties
to stipulate that an injured worker is eligible for re-
employment benefits.
3:23:49 PM
In instances where the parties can agree that an injured worker
meets the test to be eligible - I can think of no earthly reason
why the parties shouldn't be allowed to stipulate. That would
save probably a couple thousand dollars in rehab costs right off
the bat. It would streamline the vocational re-training process
by likely two, three or four months and there simply is no good
reason not to adopt that kind of change. Similarly, we discussed
at the bar association workers' comp section meeting just last
Friday, the cumbersome process that's presently in place when
parties want to stipulate to the amount of attorney fees that
should be paid by an insurance company to an injured workers'
attorney.
3:24:56 PM
When the two attorneys can agree, it doesn't seem to be any good
reason why there should be a cumbersome approval process before
the board.
There are some other positive changes in this legislation -
Section 16 of the bill would allow for some changes to the voc
rehab process. Probably second to medical costs - I think
employers think the voc rehab process contains too much delay
and too much expense in exchange for the actual benefit to
workers.
Significant sums of money are involved in the voc rehab process.
This is a benefit that can easily cost $60,000, $70,000, $80,000
per case. The statistics for the workers' comp board indicate
that very few injured workers actually complete a retraining
plan and go to work in their new field. For the money spent
we've simply got to come up with a better approach to retraining
and Section 16 of the bill offers one such approach.
We believe medical costs are the single biggest part of the
workers' comp process that needs reform and it is admittedly
going to cause some very difficult trade offs. In general, SB
130 may not be perfect but it offers some much needed reforms
and we urge its passage. Thank you.
3:26:36 PM
STEVEN CONSTANTINO: I'm an attorney. I've been an attorney in
Alaska for 24 years. I've served on the Alaska Workers'
Compensation Board and for the past six years I've been
representing injured workers.
I'm concerned about this legislation. First of all, I'm
concerned that the Governor's invoked the stakeholder process -
the ad hoc committee process, which has served this state well
in the past - and then has decided to go off on his own tangent.
I believe that management and labor have a significant role to
play in reaching the consensus that is necessary for genuine
reform.
I'm concerned that the Governor has taken a meat axe approach to
medical costs and proposed rolling back medical reimbursements
to 1999 levels. Clearly, injured workers are not going to have
access to medical care at 1999 reimbursement levels. One thing
that Mr. Jordan said that struck me was that there are more
questions than answers in the data that is provided. I would
like to echo that. A lot of decisions today is you're being
asked to make decisions based upon data that nobody can verify.
In the ad hoc process the insurers were asked to provide
information that could be analyzed concerning where those costs
in the medical system are coming from. And to date that's not
been provided. That information is available. Medical billing is
all by codes - we don't know where the costs are coming from.
Are those costs reflective of better outcomes? Do we have
healthier workers, more functional workers as a result of these
increased costs?
Rolling back reimbursements to 99 levels is certain to cause
constriction to access to care. I can't go in and buy a product
in the supermarket at '99 prices. They just won't sell it to me.
Physicians in the state are being asked to roll back their
prices to treat injured workers. That simply is not going to
work and there is simply no evidence in front of you for you to
analyze where those costs are coming from. What is the role of
new procedures, what is the role of enhanced diagnostic tools?
We just don't know.
3:29:44 PM
I am concerned that at this moment, the Governor's bill is not
scheduled for hearings in front of the Judiciary Committee. I
believe it is a sweeping change of the law. It changes a 50 year
adjudicatory process and yet the Senate apparently doesn't think
that the committee that deals with the affect of legislation on
the laws should be brought into this process.
The Governor has proposed his appeals commission again. The
fiscal notes that are published are not very revealing although
last year we learned that it was about $1 million. In effect,
the Governor proposes to make a new $1 million bureaucracy to
handle 36 cases a year. As the Court System testified last year,
the Supreme Court is anticipating that every one of those 36
cases is now going to appear on its docket.
For the price of this new administrative agency, we could fund
two new Superior Court positions for true judicial officers to
handle comp appeals. I note that the decision making limitations
that are set out in the new statute would require - if you only
allow 30-60 days for briefing in front of the new commission and
oral argument - it's 7 months. You're asked to put up a new
bureaucracy costing $1 million to save, at most, one month from
what both Commissioner O'Claray and Ms. Livsee just said was the
expected turn around rate for an appellate decision. I believe
that the new appellate commission will drive up the cost of
litigation, will increase the amount of litigation and that's
because unlike the jurisdiction that's exercised by the Superior
Court or the Supreme Court, this new commission is going to have
the power to review and reweigh evidence. It's a second bite at
the apple. What losing party doesn't want to take a second bite
at the apple? That's a seven month process to get your second
bite. That's a delay that injured workers simply can't survive.
I'm concerned that we've changed rehabilitation from a voluntary
system to a mandatory system under the new statute. And we have
included in there - the Governor has a buyout provision. If you
have a five percent permanent partial impairment rating, you can
get $8,000 for a claim that Ms. Livsee just told you is worth
$60[,000] $70[,000], $80,000. This comes along when the injured
workers' claim is controverted. They don't have access to
benefits and they are going sinking into debt. It's a buyout
that in the long run is going to injure our state because those
people are either going to not be employed, are going to be put
on the social welfare system, or they're going to look for some
other way to survive and get training.
I believe that the committee should return to the stakeholder
process, should get the information that it needs to analyze the
changes that are being recommended and that the Governor should
go in front of the people next election year on this issue
rather than asking the members of the committee and the
Legislature to take the heat for it.
CHAIR BUNDE: We are obviously going to continue our work on this
bill. It will be up again our next meeting, which is Thursday.
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