Legislature(2009 - 2010)BELTZ 105 (TSBldg)
04/08/2010 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB110 | |
| HB314 | |
| HB245 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 314 | TELECONFERENCED | |
| + | HB 245 | TELECONFERENCED | |
| + | HB 110 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 314-WORKERS' COMPENSATION
2:19:22 PM
CHAIR PASKVAN called the meeting back to order and announced HB
314 to be up for consideration [CSHB 314(FIN) was before the
committee].
SENATOR BUNDE joined the committee.
2:19:59 PM
REPRESENTATIVE KURT OLSON, sponsor of HB 314, said this bill
represents the recommendations of the Workers' Compensation
Legislative Task Force and the Medical Service Review Committee.
Getting to this point has been a four-year process and involved
a significant amount of support from the Department of Labor and
Workforce Development (DOLWD).
2:21:49 PM
CONRAD JACKSON, staff to Representative Olson, said he hoped to
relay to them the details and importance of this bill. He
explained that last year the cap on medical services fees was
extended, but it expires at the end of this year. He said this
bill updates the fee schedule in a way that stakeholders are
happy with.{
2:23:25 PM
LINDA HALL, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), reviewed
that the fee schedule was inadvertently left out of the
revisions that were made in 2005 to the Workers' Compensation
Act. But the expectation was that by the end of 2007 there would
be a new fee schedule. That did not occur and as a result, the
fees were frozen until August 2007. Subsequently they have done
two "CPI-type" increases, but the fee schedule has remained the
same and it expires on December 31, 2010, which means there
would be no caps on fees at all for providers.
She included charts that were self explanatory, but she wanted
to show that Alaska already has the highest percentage of
medical costs. They showed that the cost of the Workers'
Compensation system in most states is 58 percent and in Alaska
it is 72 percent. In other words 72 cents of every dollar that
goes for system costs is in medical care.
2:25:10 PM
SENATOR THOMAS joined the committee.
She said her concern with that is as the cost of medical care
goes up the subsequent cost of claims go up and that drives the
compensation premiums. Chart 3 showed the average cost of a
claim country wide versus Alaska. Average country wide cost of a
claim is $26,000 and in Alaska the average cost is $40,000. The
last chart showed that Alaska ranks number one on the premium
rate ranking chart - not a place she wants to be.
The reason she brought these charts to their attention was to
stress the importance of having a fee schedule that is
sustainable. This bill will replace the current fee schedule
with an up-to-date methodology. To date 2,000 procedure codes
are missing because the schedule has not been updated. Those
missing codes are paid at 100 percent. So, those will be subject
to billable charges in the 90th percentile. She said this is not
a fix or going to lower premiums, but it gives the state a
complete medical fee schedule with all the terminology and the
procedure codes. The schedule will be developed by a vendor, and
Engenics as that is the only one she is aware of.
MS. HALL said the other section of the bill updates the fraud
prosecution language. Workers' Compensation fraud adds to the
cost of the system. The investigative and prosecution authority
was added to the workers' comp code in 2005, but recent
experience has shown that the language is insufficient to
actually prosecute. So this bill also contains language to allow
prosecution of workers' comp fraud where it exists.
Section 1 of HB 314 is the actual fee schedule language. It
provides a base fee schedule that is still based on usual,
customary and reasonable charges. It requires that that fee
schedule be based on statistically credible profile bill
charges. These charges are actually based on Alaska charges. The
only vendor they are aware of is called Engenics and they
currently provide fee schedules for many of the health insurers.
They use Alaska data and base it on geographical areas; today
there are three different geographical areas that reflect cost
differences. The fee schedule is based at the 90th percentile of
those charges.
2:28:35 PM
She said the bill also requires for the first time inclusions of
procedure codes for medical supplies including emergency
transportation, an area where a real cost increase is being seen
in both health care and workers' compensation.
MS. HALL stated that Section 2 clarifies that a crime of
knowingly making false benefit statements, assisting in making
false submissions, misclassifying employees is prosecuted under
AS 11 (criminal code). The prior language had a mixture of civil
and criminal liability in the same paragraph which was what
caused one of the problems with prosecution. The civil liability
remains and was clarified in the Judiciary CS. It provides the
civil action; there can be an award of three times the
compensatory damages and reasonable attorney fees. One section
is criminal and one section is civil she summarized.
SENATOR BUNDE asked if the workers' comp premiums in Alaska are
approximately double what they are in the Lower 48.
2:31:19 PM
MS. HALL replied that she thought he was referring to a Division
of Insurance study comparing costs for specific procedures
between Washington and Alaska, and they found some vastly
varying charges. Those same types of things are found in
workers' compensation, but the premium chart indicates other
pieces to the system cost. So Alaska's premiums are not double
exactly, but the index rate indicates it is four times as much
as North Dakota, for instance.
2:32:13 PM
SENATOR BUNDE asked if travel cost is a major factor in a state
as large as Alaska.
MS. HALL answered that the transportation costs she was
referring to can be just within Alaska or out of state depending
on the nature of an injury. They are seeing increases even in
land transportation. But in general, emergency transportation is
increasing.
SENATOR BUNDE suggested that perhaps because of Alaska's
geography, travel is a factor.
MS. HALL responded that she really didn't know that.
SENATOR MEYER asked if this statute was last changed in 2005.
MS. HALL answered yes.
SENATOR MEYER asked if they did that because workers' comp costs
were high and businesses were complaining. He also asked if
anything had been done to reduce workers' comp costs.
MS. HALL replied back in 2005 some changes were made that were
intended to have some effect on system cost over time. That was
when the Appeals Commission was created in lieu of going to
Superior Court as the beginning step of appealing a Workers'
Compensation Board decision. The impetus for much of that is the
cost of the system. She approved significant premium increases
based on what she saw in loss ratios. At the time that work was
started she saw a loss ratio in excess of 150 percent, at times.
She approved fairly significant premium increases to accommodate
that. She explained that they have seen a tremendous decrease in
claims and a much greater emphasis on safety in the work place,
which is what they wanted to see. This has helped lower claims
cost, and rates have decreased over the last three years. She
couldn't anticipate that would continue, but it has resulted in
a safer environment which has allowed the system to absorb the
increases in the cost per claim by the fact that there are fewer
claims. At some point that will balance out.
2:36:46 PM
SENATOR MEYER asked if she supported this bill.
MS. HALL answered yes.
SENATOR THOMAS commented that a lot of work has been done on
safety programs and that Alyeska had zero accidents for the last
million man hours. He asked if rates had been reduced or
flattened out.
MS. HALL answered that rates have decreased. They went from an
overall 22 percent increase and double-digit increases for two
years after that, but for the last three years the rates have
decreased. Today the comp rates on average are probably
equivalent to where they were in the early 1990s. They are still
high as can be seen from her information. Alaska also has the
highest health insurance premiums in the country. The cost of
health care drives both.
SENATOR THOMAS said part of his question was the correlation
between various things, and he asked if she had a chart showing
the cost of health care versus the number of accidents per
classification of worker.
MS. HALL answered that her statistical agent, the National
Council on Compensation, keeps an incredible amount of data.
They make the original rate filing and it takes a variety of
things into consideration and is based on actuarial analysis.
She offered to provide that kind of detail that correlates with
age of work force, average salaries, and how that inter relates
with workers comp claims. It's all reviewed very carefully,
because it impacts every employer in the state. It is the only
insurance rate for which they have public rate hearings.
2:43:16 PM
FRED BROWN, Executive Director, Health Care Cost Management
Corporation of Alaska, Fairbanks, said he was not concerned
about the medical fee schedule language, but he was concerned
with the proposed fraud language because it expands the
language. He thought the consequence would be further cost
shifting. He thought that costs could be better contained by
reducing the complexity of the system; his organization had
specific ideas on this topic and he looked forward to working
with Ms. Hall and the legislature on specific remedies.
2:44:39 PM
MR. BROWN said before becoming the executive director in
February 2009 he was a hearing officer for the Alaska Workers'
Compensation Board since 1984. He said that Mano Fry, a long-
time president of the Alaska AFL-CIO, is the co-founder of his
organization and helped them develop their current mission
statement, which is to ensure that workers and their families
have access to value and quality based health care benefits and
service. His organization covers about 26 member funds most of
which are in Alaska, some are in the Pacific Northwest. They
represent about 10 percent of the population in Alaska. Most of
their members are union related health care buyers and pay the
highest rates in the nation. Typically their trust funds are the
first to pay medical bills in the case of an on-the-job injury
and, accordingly, they hold a subrogation interest hoping to be
reimbursed later by the injured employee's workers' compensation
insurance carrier.
He said each time a change is implemented in Alaska's workers'
compensation law, the system becomes more complex, expenses
increase and the process of adjudication is slowed. These
changes add to the delay before their trust funds are reimbursed
their subrogation claims. Also, workers' compensation insurers
gain additional leverage in negotiating a settlement with
injured workers and then the percentage of reimbursement paid to
their trust fund is reduced. This is why he is particularly
concerned about the provision in HB 314 which threatens
additional criminal penalties on injured workers who file
claims. He said he personally believes the proposed changes in
HB 314 make the system more complex. Instead they should focus
on making the system less complex and remove all medical codes
to the fee schedule.
2:47:08 PM
CHAIR PASKVAN said AS 11.46.120-150 are being replaced with
simply AS 11 and asked what his concern was specifically with
that change.
MR. BROWN replied that previously the focus was solely on
matters having to do with theft by deception. Now the CS
incorporates all of Title 11, which is all of criminal law. If
you focus on Chapter 46 of Title 11 there are 50 ways you can be
prosecuted. Of that list of 50, only one is theft by deception.
His concern is that by opening it up to all of Title 11 there
are any number of ways by which one can "hammer" upon on injured
worker for not filing a claim form correctly and reducing a
settlement which would otherwise be owed not only to the injured
worker but to their trust funds through the subrogation process.
2:48:39 PM
SENATOR BUNDE asked if it is necessary to separate the criminal
from the civil. Is there a lot of fraud?
MS. HALL answered that she didn't have the fraud statistics, and
thought the Department of Labor and Workforce Development
(DOLWD), would have those, but all suspected fraud that occurs
with a benefit claim to an insurance company is originally
reported to the Division of Insurance by statute. They in turn
refer those to the Division of Workers' Compensation
Investigative team. She thought there was an average of 5-8
referrals per year.
SENATOR BUNDE said he was pleased to hear we didn't have a high
rate.
2:51:13 PM
SUSAN MCCLAIN, Director, Criminal Division, Department of Law
(DOL), said she also supervises the Office of Special
Prosecutions which is the office that handles criminal
prosecutions under Workers' Compensation fraud. She was
mystified by Mr. Brown's concern. She explained for someone to
be prosecuted - an employer a medical provider or an employee
who is making dishonest statements - they have to prove beyond a
reasonable doubt that what they did was fraudulent either
knowingly or intentionally. They weren't talking about simply
not filling out forms correctly, but about their burden of
proving beyond a reasonable doubt that someone tried to take
money one way or another that they were not entitled to.
The former statute limited prosecutions to the crime of theft by
deception, but not everything people do that is dishonest falls
within the definition of theft by deception. It might be another
Title 46 crime, like falsification of business records by a
doctor or theft by failure to make disposition of funds, if it
was an employer who took money but didn't contribute as an
employer should to the fund. It limits them into a situation
where if you can't prove the elements of theft by deception,
then you can't file a charge.
MS. MCCLAIN explained further that under Title 11.46 when the
state charges theft, it isn't necessary for them to specify a
theory of theft - even though they usually do. But often there
is more than one theory and it's not necessary to be limited to
one.
2:54:07 PM
The other problem with that statute is that the dishonest
conduct may fall within a different criminal statute in theft
for which the mental state was "knowingly." The purpose of the
criminal statute is to address those people who are not being
honest on purpose.
2:55:30 PM
CHAIR PASKVAN asked if she supported this bill as written.
MS. MCCLAIN answered absolutely.
SENATOR BUNDE asked if probable cause before bringing action
still applied in this section of law in regards to the concern
about using the law to harass people who made a claim - whether
they are workers or business owners.
MS. MCCLAIN answered yes, and the standard is proof beyond a
reasonable doubt. "It's not a goal of criminal prosecution to
harass people."
SENATOR BUNDE asked if the threshold for criminal prosecution is
higher than for civil.
MS. MCCLAIN answered yes.
2:56:50 PM
MICHAEL JENSEN, Law Offices of Michael Jensen, Anchorage, said
he had practiced in Alaska for 25 years representing injured
Alaska workers exclusively. Prior to that he was a prosecutor in
the Army for three years. In his role as representing Alaskan
workers he had first a concern regarding Section 1 because it
will affect a worker's ability to get medical care. One way they
have seen to save money is simply to slash the amount of
treatment that a worker can obtain. Medicare uses the same
approach that this act envisioned, and it has saved money by not
allowing doctors to recoup even the basic cost of their
overhead. And when a person over 65 wants to find a doctor in
Alaska they simply can't. Section 1, in its zeal to save money,
may have the unintended effect of making it more difficult for
workers to obtain medical care.
He said it was stated that the Medical Services Review Committee
supported this bill, but he had a copy of a February 2, 2010
letter sent by three doctors to the legislature stating that it
is unfortunate that none of the committee's recommendations were
included in it. The Alaska State Medical Association on February
1, 2010 also wrote to the legislature stating that they opposed
the adoption of HB 314. Not everyone was happy with it. In fact,
in HB 346 the Department of Labor and Workforce Development
(DOLWD) seeks to abolish the Medical Services Review Committee.
MR. JENSEN focused on Sections 2 and 3 saying that he didn't
think they should be part of a fee schedule bill. Those sections
should be referred to Judiciary so that the consequences of the
changes could be more fully studied. There is no cost for the
new anticipated prosecutions through the DOL; and in particular
Section (a)(4) is vague. He couldn't comprehend who it applies
to and it was adding 49 potential offenses to the current
offense of theft by deception. Do doctors and therapists risk
prosecution or civil action if they make the mistake of
believing their patients and encourage them to file for
benefits? Do employers risk prosecution or civil action if they
encourage one of their employees to file for workers'
compensation benefits if the employer feels the worker suffered
an injury at work? Do lawyers who believe their clients and
pursue the claim on their behalf risk prosecution or civil
action?
3:03:09 PM
STEVEN CONSTANTINO, private practitioner representing injured
workers in workers' compensation cases, said he is former
hearing officer on Alaska worker's Compensation Board. He didn't
agree with Mr. Jensen on the first section. He noted this change
just takes them back to the old system where they actually had
an Alaskan schedule of fees based on Alaska charges, and he
wanted the public to have access to the fee schedule once it is
created. In the past this information was treated as proprietary
and special coding companies bought it. Insurance companies
submitted their bills to the coding company, but injured workers
didn't have access to the fee schedule.
His primary concern related to section 2(a)(4) - the same as Mr.
Jensen - that changes theft by deception to the entirety of
Title 11. He thought the existing language vague and he didn't
understand what it meant.
He agreed with Ms. Hall's statement that Alaska's fraud rate is
very low. Everyone agrees that fraud is reprehensible and should
be prohibited, but the legislature needs to know that the
current fraud statutes are being used as a way to intimidate
workers from pursuing legitimate claims. He was acutely
concerned for the unrepresented workers that account one-third
of the litigants in the workers' compensation system. He knew
from personal and anecdotal experience from his colleagues that
fraud is being alleged to basically intimidate injured workers
from bringing legitimate claims. He encouraged them to move very
cautiously in amending the fraud provisions. And he echoed Mr.
Jensen's comments that Section (4) could be applied to doctors
and other medical providers acting in good faith who are taking
their patients at face value.
MR. CONSTANTINO was also concerned that they have a standard now
called theft by deception and theft has been a concept in the
common law for a thousand years. They know what it means. When
it gets opened up to Title 11 crimes like unsworn falsification,
he didn't know how upholding what his client tells him is the
truth will be viewed. He urged that the criminal provisions go
through the Judiciary Committee where the expertise exists to
analyze them.
SENATOR DAVIS wanted a response from the department.
3:10:46 PM
TRINA HIEKUS, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development (DOLWD), said by
way of background she had spent 25 years on the other side of
the table from Mr. Jensen representing insurance carriers and
employers in workers' compensation cases and, in fact, had tried
cases in front of Fred brown.
SENATOR DAVIS said she was interested in her thoughts on whether
doctors might inadvertently face criminal charges.
MS. HIEKUS said she also spent two years as a public defender
and didn't think a prosecutor would take something on with that
weak of an evidentiary stream if the physician stated that he
had no knowledge that the claim itself or the injury report was
fabricated. It would be pretty difficult to prove beyond a
reasonable doubt.
SENATOR DAVIS asked if she had heard anything in the previous
testimonies that she didn't agree with.
3:12:19 PM
MS. HIEKUS pointed out that before she took this job in December
2008 the division had never prosecuted anyone under AS
23.32.250(a), which has existed since 2005. Last spring they met
with a special prosecutor in the Attorney General's (AG) Office
to get someone designated to take their cases.
She explained that in 2005 a special investigations unit was
created that was charged with reviewing cases and forwarding
them on to the AG's office for prosecution. They have received
cases from the Division of Insurance and from employers and
their carriers. The prosecuting attorney's concern was that it
was difficult, if not impossible, to prosecute under the current
statute because it has two different intents. She explained that
every crime has to have an intent as an element. Now, when a
person knowingly does something - that is the intent element.
But at the end of the statute as it currently reads they are
guilty of theft by deception, which is a completely different
intent. It means someone actually intended the consequences of
an action. This is a much more difficult standard to meet than
to show knowingly, and that is the problem they wanted to clean
up with this revision.
When it was presented to the Department of Law, she said, they
recognized a civil liability in the same criminal statute, and
the department wanted that pulled out. They created AS
23.30.250(c). They also questioned limiting a crime to just
theft by deception when there are a number of other crimes that
could fit this conduct - be it by an employer an employee or an
insurance company.
CHAIR PASKVAN asked how many cases would arise in a year that
might be subject to Section 2 criminal prosecution.
MS. HIEKUS replied the head of the unit is a former police
officer who does a thorough investigation and if it meets her
standard, they would forward on probably about 5-10 cases per
year.
CHAIR PASKVAN said the legislature would want information in the
future on this.
SENATOR BUNDE asked if she generally agreed with the previous
Deputy Attorney General who supported this bill.
MS. HIEKUS answered yes.
3:17:15 PM
CHAIR PASKVAN closed public testimony.
3:17:24 PM
SENATOR BUNDE moved to report CSHB 314(FIN) from committee with
individual recommendations and attached fiscal note(s). There
were no objections and it was so ordered.
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