Legislature(2011 - 2012)BELTZ 105 (TSBldg)

03/15/2012 01:30 PM LABOR & COMMERCE

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01:48:56 PM Start
01:49:34 PM Presentation: "how Equality Policies Work to Strengthen Economies and the Labor Force."
02:05:47 PM SB28
02:29:26 PM HB267
02:37:27 PM SB116
03:02:06 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Special Presentation: "How Equality Policies TELECONFERENCED
Work to Strengthen Economies and the Labor
Uniform Rule 23 Waived
Moved 2d CSHB 267(JUD) Out of Committee
Bills Previously Heard/Scheduled
Heard & Held
Moved SB 28 Out of Committee
        SB 116-WORKERS' COMP.: COLL BARGAINING/MEDIATION                                                                    
2:37:27 PM                                                                                                                    
CHAIR EGAN  announced the  consideration of SB  116. He  said the                                                               
committee would consider an amendment by Senator Giessel.                                                                       
SENATOR  GIESSEL  explained  that  the  proposed  amendment  [27-                                                               
LS0549\X.1]  would allow  individuals to  choose his  or her  own                                                               
health  care provider  rather than  bargaining away  that patient                                                               
2:38:40 PM                                                                                                                    
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce, Community  and Economic Development  (DCCED), commented                                                               
that she  had done a lot  of work with the  Workers' Compensation                                                               
system  as it  affects  insurance costs  in  particular. She  was                                                               
concerned they were looking at a  new system that will only apply                                                               
to  employers and  employees  that are  engaged  in a  collective                                                               
bargaining   arrangement.  Approximately   25   percent  of   the                                                               
workforce would be impacted by this  bill - if they choose to and                                                               
they  may not.  Some provisions  could be  advantageous to  other                                                               
employers and she wasn't sure  why they would adopt something for                                                               
less than 25 percent of the state's workforce.                                                                                  
2:40:28 PM                                                                                                                    
MS. HALL said that supporters of  HB 116 have alleged there would                                                               
be cost  savings, but  in working with  the Division  of Workers'                                                               
Compensation, she hadn't  found a study supporting  that claim. A                                                               
University of California Berkeley  Study of California carve-outs                                                               
since 1993 concluded  that, "Overall carve-outs do  not appear to                                                               
harm  employees,  sometimes  they  help." Data  analysis  of  one                                                               
carve-out  showed that  it  had  no effect  on  costs in  dispute                                                               
She said  Alaska's costs are  driven by  the high cost  of health                                                               
care.  Currently, 76  percent  of  the costs  of  our system  are                                                               
driven by  medical costs  in comparison to  a 59  percent average                                                               
nationwide. So  if lawmakers allow  a deviation from  the current                                                               
system  that  has any  potential  to  reduce medical  costs,  she                                                               
thought it  should be something  that all employers  could engage                                                               
MS. HALL  said she  had heard  this system  could cause  a single                                                               
employer  to simultaneously  run  multiple workers'  compensation                                                               
systems. The  Municipality of Anchorage, for  instance, has about                                                               
seven collective  bargaining units. If  they each decided  to set                                                               
up  some type  of  this arrangement,  the  municipality would  be                                                               
running eight different systems  (including the state system). It                                                               
would be a "system run amuck."                                                                                                  
2:43:18 PM                                                                                                                    
She said these are general  thoughts she has had. Another concern                                                               
was that  that they were  considering implementing a  new program                                                               
and yet  the Medical Service  Review Committee, a group  that was                                                               
formed by this  legislature, had made an extensive  report with a                                                               
lot of recommendations for changes in  the system as a whole, and                                                               
she hadn't  seen any real debate  of any of those  measures. This                                                               
committee spent months studying new  systems, new ways to develop                                                               
fee schedules  and had a  number of recommendations that  were in                                                               
HB  12. It  proposed the  adoption  of an  advisory committee  to                                                               
serve  as  a  sounding  board   for  the  legislature  to  review                                                               
proposals and  make recommendations for various  types of changes                                                               
in an open and transparent environment.                                                                                         
MS.  HALL said  a  number  of options  had  been  put forward  to                                                               
improve  our system  including medical  treatment guidelines  and                                                               
utilization guidelines. It appears, and  it has been stated, that                                                               
the  administration  of  this  new  exemption  program  would  be                                                               
through  some kind  of trust.  But the  bill doesn't  mention the                                                               
trust or  how it would be  funded. With today's system  costs and                                                               
with Montana's reforms, she worried  that Alaska would be back in                                                               
first place as having the  highest workers' compensation premiums                                                               
in the country - and that is not a place we want to be.                                                                         
2:45:07 PM                                                                                                                    
MS. HALL  said that SB  116 also provides for  the identification                                                               
of   medical   treatment   providers,  medical   evaluators   and                                                               
vocational rehabilitation specialists who  would be the exclusive                                                               
source  of  treatment,  but  there   weren't  any  principles  or                                                               
guidelines. So  there is  a potential for  a multitude  of little                                                               
groups  without any  consistency, and  that concerned  her in  an                                                               
area as critical as workers'  compensation. Basically, she wanted                                                               
to see  a system whose emphasis  is on getting an  injured worker                                                               
back to work and didn't see this doing that.                                                                                    
CHAIR EGAN asked if she had comments on the amendment.                                                                          
MS. HALL answered no.                                                                                                           
2:46:22 PM                                                                                                                    
PAUL  GROSSI,  lobbyist,  Pipefitters   and  Iron  Workers,  said                                                               
adopting the amendment  to SB 116 would  eliminate potential cost                                                               
savings and they wouldn't be able to support it any longer.{                                                                    
SENATOR PASKVAN asked what he  thought of the director's concerns                                                               
about limited application.                                                                                                      
MR. GROSSI responded that her  concern was that all employers and                                                               
employees wouldn't be  affected, which is true,  but that doesn't                                                               
mean  it shouldn't  be tried.  It could  potentially be  a "pilot                                                               
project" from which  things could be extrapolated  for the larger                                                               
population. So that is not a reason to stop it.                                                                                 
He said the director's concern  about it leading to two different                                                               
systems  isn't really  accurate,  because if  an employer  thinks                                                               
this is  not effective  for them  they could choose  to not  be a                                                               
part of  it. No  one is  being forced into  this system.  This is                                                               
just enabling language.                                                                                                         
SENATOR PASKVAN  asked his understanding of  competing physicians                                                               
being able to meet and communicate.                                                                                             
2:50:55 PM                                                                                                                    
MR. GROSSI  replied that  he is  not  an expert  on this  type of                                                               
system, but  to him it means  that doctors would be  permitted by                                                               
law to form groups  to bid on these types of  systems to get this                                                               
SENATOR GIESSEL said a 2009  report from the Minnesota Department                                                               
of  Labor indicated  that  the  costs have  actually  gone up  in                                                               
Minnesota  where this  system is  used over  the past  few years.                                                               
Alaska  has an  even smaller  pool of  health care  providers and                                                               
although it's similar  to Minnesota in that Minnesota  is kind of                                                               
rural, it  has the Mayo  Clinic and some large  universities. She                                                               
asked if he had run any numbers as far as costs.                                                                                
MR.  GROSSI  answered no;  Director  Hall  talked about  a  small                                                               
California study but  he wasn't sure if it  was accurate. Getting                                                               
back to Minnesota, he said you  have to look at costs relative to                                                               
the rest of  the system. He guessed that costs  would still go up                                                               
in Alaska,  but they  might not  go up as  much. While  he didn't                                                               
have any  numbers on workers'  compensation, itself, some  of the                                                               
labor groups and their employers  have formed similar systems for                                                               
their health care benefits that have shown a savings.                                                                           
SENATOR  GIESSEL  asked  if  overall  he  regarded  the  existing                                                               
workers' compensation  system as  broken -  excessively expensive                                                               
and slow to settle claims.                                                                                                      
MR. GROSSI replied  that he wouldn't couch it as  broken yet, but                                                               
it  is becoming  more expensive,  and most  of it  is because  of                                                               
rising health  care costs  along with  some litigation.  At least                                                               
there is the potential to  improve by trying something different.                                                               
The  "broken" term  could be  used in  the near  future, if  they                                                               
don't  start  doing  something.  They  should  consider  Director                                                               
Hall's  suggestions, too,  because this  measure is  not the  one                                                               
answer to fix the system.                                                                                                       
2:55:53 PM                                                                                                                    
MIKE  MONAGLE,  Director,   Division  of  Workers'  Compensation,                                                               
Department of  Labor and Workforce Development  (DOLWD), observed                                                               
that Director  Hall had  mentioned the cost  of benefits  and how                                                               
Alaska has  been going back and  forth with the State  of Montana                                                               
for  the last  10 years  on  who is  number  one and  two in  the                                                               
country on  workers' comp costs.  Last year, Montana  put serious                                                               
reforms  for  medical  costs  in  place, and  as  a  result,  the                                                               
National  Council on  Compensation  Insurance,  Inc. (NCCI),  the                                                               
rating organization  that also rates Alaska,  lowered the premium                                                               
costs in  Montana by  25 percent,  and he had  no doubt  when the                                                               
premium studies  come out  this year that  Alaska will  take over                                                               
the number one spot on workers' comp costs again.                                                                               
He also  observed that  as the director,  he often  gets comments                                                               
from injured  workers that  the system  is difficult  to navigate                                                               
and complex and he fears  that adding carve outs would complicate                                                               
it more.                                                                                                                        
2:57:59 PM                                                                                                                    
MR.  MONAGLE said  as far  as  the selection  of medical  doctors                                                               
goes, he didn't see any incentive  to bring costs down under this                                                               
process.  The Health  Care Commission's  study noted  the biggest                                                               
cost driver to  the system was lack of  competition. Just because                                                               
you  have a  list of  doctors who  step forward  to say  they are                                                               
interested in participating, that  doesn't equate to an incentive                                                               
to  reduce their  fees. And  unless something  is done  to reduce                                                               
fees,  he didn't  see any  changes to  the medical  costs in  the                                                               
workers' comp system.                                                                                                           
Finally,  Mr. Monagle  said part  of the  legislation presupposes                                                               
that a carve-out  will reduce costs, but the  2002 Berkeley study                                                               
mentioned  by Director  Hall  and the  2012  State of  California                                                               
study  found  no  significant differences  between  rates  for  a                                                               
carve-out employer  and the  rates for  an employer  who received                                                               
their benefits  through the insurance marketplace.  He had looked                                                               
extensively and hadn't found a  single study that said carve-outs                                                               
will, in fact, reduce workers' comp rates.                                                                                      
SENATOR PASKVAN said  if you can reduce just  the mediation costs                                                               
(resolution  without  using  lawyers)   and  the  employer  isn't                                                               
required to  use the new system,  there is a chance  that medical                                                               
costs could be reduced a little bit, too.                                                                                       
MR.  MONAGLE  referenced  the  California  study  that  found  no                                                               
difference in  the number  of disputes  in the  carve-out process                                                               
versus disputes  under the workers'  comp claim system.  He said,                                                               
although  it's   not  in  statute,  the   division  already  does                                                               
mediations;  he did  60  last year.  One of  the  things that  is                                                               
concerning about  the process is  that although the  bill doesn't                                                               
mandate mediation,  it does say  once you choose to  mediate, and                                                               
once that process is broken off  either by the hearing officer or                                                               
the  parties, it  must go  to arbitration.  That process  doesn't                                                               
simplify the system, but it does add costs to it.                                                                               
3:01:13 PM                                                                                                                    
MR. MONAGLE  explained that the  prior version  of SB 116  had an                                                               
appellate provision  saying that the arbitrator's  decision could                                                               
be  appealed to  the  Workers' Comp  Appeals  Commission, but  he                                                               
didn't see  that in  the CS,  where it would  seem as  though the                                                               
arbitrator's decision would be final,  and that could potentially                                                               
lead to some additional administrative costs.                                                                                   
CHAIR EGAN said  the committee still had  questions about Senator                                                               
Giessel's amendment. He held SB 116 in committee.                                                                               

Document Name Date/Time Subjects
SB 116 lttr opposing, WCCommittee of AK 030512.pdf SL&C 3/15/2012 1:30:00 PM
SB 116