Legislature(2007 - 2008)BELTZ 211
05/08/2007 01:30 PM LABOR & COMMERCE
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CSHB 228(L&C)-WORKERS' COMP. MEDICAL TREATMENT FEES 2:05:20 PM CHAIR ELLIS announced CSHB 228 (L&C) to be up for consideration. DEREK MILLER, staff to Representative Kelly, sponsor of HB 228, said in 2005 the Alaska Legislature passed SB 130, which was a major rewrite of the Workers' Compensation statutes. As a part of that, medical payments were frozen at the 2004 fee schedule so that a review could be done to find the underlying reasons for premium increases. This review was to be jointly done by a special workers' compensation legislation task force in concert with the Department of Labor and Workforce Development (DOLWD) Medical Review Committee. The task force was to develop recommendations to moderate program increases in the future as part of the conditions of this medical rate freeze and to complete its work by February of 2006. The rate freeze would sunset in August 2007 and a plan is not yet in place for the post rate freeze sunset period and that is why this legislation was introduced. MR. MILLER said under HB 228 the medical rate freeze would be extended for two years to allow time for recommendations to be developed and it also implements an annual rate increase based on the medical component of the consumer price index (CPI). In closing, he said this is not meant to be a long-term fix, but a stop-gap measure. 2:07:36 PM He said this bill is supported by the Alaska State Hospital and Nurses Home Association, the Alaska Physicians and Surgeons, the Alaska State Medical Association, the Alaska Municipal League Joint Insurance Agency, the State Chamber of Commerce, the Department of Labor and Workforce Development (DOLWD), the Division of Insurance and Bradner's Alaska Legislative Digest that on page 6 said this bill is a "must have" for the Palin administration. 2:07:56 PM LINDA HALL, Director, Division of Insurance, Department of Commerce, Community & Economic Development (DCCED), said she supported HB 228 and that she wanted to highlight some of its points. She stated with the freeze having been in place, Attachment 1 shows the portion of workers' compensation system cost nationally is 58 percent - comprised of medical expenses. In Alaska, that percentage is at 69 percent and rising. System cost means what is paid out for treatment of injured workers and indemnity as lost wages. They are not the same thing as premium, but they are a component of premium. MS. HALL explained that in her premium calculations that she ultimately approves through public rate hearings, she looks at historical system costs and their trending. For example, if she charged $10 for a single workers' compensation claim today and trended that over the next 10 years, potentially it would likely to trend up to $15 or $20. On top of that, she explained, insurance companies have what is called an "expense factor" that they put on top of that. 2:10:12 PM MS. HALL urged them to look at Exhibit 4 and said as of October 2006, an Oregon study shows that the workers' compensation rates in Alaska are the highest in the country - and they might climb even higher unless some better controls on medical expenses are found. This is not to imply that people are necessarily charging too much; medical costs in Alaska are higher than in the rest of the country, also. This is seen in all the state's systems. 2:11:38 PM The last attachment in her presentation she said is a review and evaluation of this bill by the National Counsel on Compensation Insurance. The second paragraph predicts what would occur without this legislation and it projects a 4.5 to 5.8 percent increase in system costs overall. HB 228 holds it at a minimal 1.3 percent. Ms. Hall said the system costs are compounded by other parts of the rate making process. So, it is critical to look at this additional freeze. 2:12:50 PM SENATOR BUNDE said she mentioned the medical costs were around 60 percent in Alaska and lower in other states and asked if that is a factor of the cost of the medical procedures in Alaska or does something else in the system make that percentage higher. MS. HALL responded that she just recently reviewed a two-year National Counsel on Compensation Insurance study on that and found that, in general, the cost of doing business in Alaska is more expensive than in other areas of the country. SENATOR BUNDE recalled seeing something recently saying that the cost of living in Anchorage is probably less than it is in Portland and Seattle and yet the cost of medical treatment is so much higher. A chart showed that a colonoscopy costs $2,500 in Alaska and $1,400 in the Lower 48. He found it hard to believe that the cost should be that much higher in Alaska. MS. HALL said she didn't disagree with that. CHAIR ELLIS said he shared that concern and he hoped to get to the bottom of that. He asked if building inflation-proofing into the bill was reasonable MS. HALL replied that it was an objective way to make an increase and she didn't think it appropriate or fair to continue to freeze the medical fee schedule at the December 2004 level. To use objective criteria is the most appropriate way to do that. CHAIR ELLIS asked Senator Bunde if the base is fair and the mechanism is reasonable, could he support inflation proofing so the legislature didn't have to spend time revisiting it. SENATOR BUNDE said it's hard to find doctors for Medicare patients because of the federally mandated level of reimbursement. He asked if she could envision injured workers having problems with finding someone to treat them at these rates. 2:17:06 PM MS. HALL replied that her division hadn't received a complaint about access to medical care and she didn't envision this legislation having an impact on people getting medical care. MIKE HOGAN, Executive Director, Alaska Physicians and surgeons, supported HB 228. 2:18:45 PM SENATOR STEVENS moved to pass CSHB 228(L&C) from committee with individual recommendations and attached fiscal notes. There were no objections and it was so ordered.