03/03/2004 01:58 PM House JUD
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ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
March 3, 2004
1:58 p.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative Tom Anderson, Vice Chair
Representative Jim Holm
Representative Dan Ogg
Representative Ralph Samuels
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Donny Olson
COMMITTEE CALENDAR
CONFIRMATION HEARING
Violent Crimes Compensation Board
David G. Ingraham, M.D. - Anchorage
- CONFIRMATION ADVANCED
HOUSE BILL NO. 403
"An Act relating to the Alaska Insurance Guaranty Association;
relating to joint insurance arrangements and assessments to the
association; relating to the powers of the Alaska Industrial
Development and Export Authority concerning the association; and
providing for an effective date."
- MOVED CSHB 403(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 472
"An Act relating to claims for personal injury or wrongful death
against health care providers; and providing for an effective
date."
- HEARD AND HELD
HOUSE BILL NO. 468
"An Act relating to the amount of the bond required to stay
execution of a judgment in civil litigation involving a
signatory, a successor of a signatory, or an affiliate of a
signatory to the tobacco product Master Settlement Agreement
during an appeal; amending Rules 204 and 205, Alaska Rules of
Appellate Procedure; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 424
"An Act relating to review of regulations under the
Administrative Procedure Act by the Legislative Affairs Agency;
and providing for an effective date."
- MOVED CSHB 424(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 334
"An Act relating to unlawful exploitation of a minor."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 403
SHORT TITLE: ALASKA INSURANCE GUARANTY ASSOCIATION
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
01/28/04 (H) READ THE FIRST TIME - REFERRALS
01/28/04 (H) L&C, JUD, FIN
02/09/04 (H) L&C AT 3:15 PM CAPITOL 17
02/09/04 (H) Heard & Held
02/09/04 (H) MINUTE(L&C)
02/11/04 (H) L&C AT 3:15 PM CAPITOL 17
02/11/04 (H) Heard & Held
02/11/04 (H) MINUTE(L&C)
02/16/04 (H) L&C AT 3:15 PM CAPITOL 17
02/16/04 (H) Moved CSHB 403(L&C) Out of Committee
02/16/04 (H) MINUTE(L&C)
02/18/04 (H) L&C RPT CS(L&C) NT 5NR
02/18/04 (H) NR: LYNN, GATTO, DAHLSTROM,
02/18/04 (H) GUTTENBERG, ANDERSON
02/26/04 (H) FIN AT 1:30 PM HOUSE FINANCE 519
02/26/04 (H) <Bill Hearing Postponed>
03/03/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 472
SHORT TITLE: CLAIMS AGAINST HEALTH CARE PROVIDERS
SPONSOR(S): REPRESENTATIVE(S) ANDERSON
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) JUD
02/25/04 (H) JUD AT 1:00 PM CAPITOL 120
02/25/04 (H) Heard & Held
02/25/04 (H) MINUTE(JUD)
03/03/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 468
SHORT TITLE: APPEAL BONDS: TOBACCO SETTLEMENT PARTIES
SPONSOR(S): LABOR & COMMERCE
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) JUD
03/01/04 (H) JUD AT 1:00 PM CAPITOL 120
03/01/04 (H) Heard & Held
03/01/04 (H) MINUTE(JUD)
03/03/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 424
SHORT TITLE: REGULATION REVIEW
SPONSOR(S): REPRESENTATIVE(S) HOLM
02/02/04 (H) READ THE FIRST TIME - REFERRALS
02/02/04 (H) ARR, JUD
02/02/04 (H) ARR REFERRAL REMOVED
02/25/04 (H) JUD AT 1:00 PM CAPITOL 120
02/25/04 (H) Scheduled But Not Heard
02/27/04 (H) JUD AT 1:00 PM CAPITOL 120
02/27/04 (H) Heard & Held
02/27/04 (H) MINUTE(JUD)
03/03/04 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
LINDA HALL, Director
Division of Insurance
Department of Community & Economic Development (DCED)
Anchorage, Alaska
POSITION STATEMENT: Presented HB 403 on behalf of the
administration.
ROLAND GOWER, M.D.
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of HB
472 and responded to questions.
PHILIP R. HINDERBERGER, Senior Vice President & General Counsel
Assistant Corporate Secretary
NORCAL Mutual Insurance Company ("NORCAL")
San Francisco, California
POSITION STATEMENT: Provided Comments during discussion of HB
472 and responded to questions.
EMILY NENON, Alaska Advocacy Director
American Cancer Society (ACS)
Anchorage, Alaska
POSITION STATEMENT: Provided comments and posed questions
during discussion of HB 472.
CARMEN E. CLARK
Anchorage, Alaska
POSITION STATEMENT: Provided comments and responded to
questions during discussion of HB 472.
LES SYREN
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of HB
472.
JAMES JORDAN, Executive Director
Alaska State Medical Association (ASMA)
Anchorage, Alaska
POSITION STATEMENT: Responded to questions during discussion of
HB 472.
BARBARA COTTING, Staff
to Representative Jim Holm
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions on behalf of the sponsor
of HB 424, Representative Holm.
DEBORAH BEHR, Assistant Attorney General
Legislation & Regulations Section
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Provided a sectional analysis of CSHB 424,
Version S.
KARLA SCHOFIELD, Deputy Director
Legislative Administrative Services
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Explained the fiscal note on HB 424.
ACTION NARRATIVE
TAPE 04-33, SIDE A
Number 0001
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at 1:58 p.m. Representatives
McGuire, Anderson, Samuels, Gara, and Gruenberg were present at
the call to order. Representatives Holm and Ogg arrived as the
meeting was in progress.
^CONFIRMATION HEARING
^Violent Crimes Compensation Board
Number 0203
CHAIR McGUIRE announced that the committee would first consider
the appointment of David G. Ingraham, M.D., to the Violent
Crimes Compensation Board.
Number 0246
REPRESENTATIVE SAMUELS made a motion to advance from committee
the nomination of David G. Ingraham, M.D., as appointee to the
Violent Crimes Compensation Board. There being no objection,
the confirmation was advanced from the House Judiciary Standing
Committee.
HB 403 - ALASKA INSURANCE GUARANTY ASSOCIATION
[Contains mention that SB 276, the companion bill to HB 403,
would be heard by the House Judiciary Standing Committee at a
later date.]
Number 0265
CHAIR McGUIRE announced that the next order of business would be
HOUSE BILL NO. 403, "An Act relating to the Alaska Insurance
Guaranty Association; relating to joint insurance arrangements
and assessments to the association; relating to the powers of
the Alaska Industrial Development and Export Authority
concerning the association; and providing for an effective
date." [Before the committee was CSHB 403(L&C).]
Number 0265
LINDA HALL, Director, Division of Insurance, Department of
Community & Economic Development (DCED), explained that HB 403
is intended to address a funding shortage in the Alaska
Insurance Guaranty Association [Fund]. She said:
The [Alaska Insurance Guaranty Association] was formed
under statute, and its members are insurance companies
who write business in Alaska. The purpose of the
[Alaska Insurance Guaranty Association] is to minimize
financial loss to both policyholders and claimants;
they provide payment of claims - step in place of an
insolvent insurer. Assessments are made to provide
the funds to pay those claims. In July of 2003,
Fremont Indemnity Company ["Fremont"] was declared
insolvent by the Los Angeles superior court, and while
they had not actively written business since early in
2001, they left behind estimated claim reserves, over
a period of time, of $60 million. When they were an
active insurer they wrote 27 percent of the Alaska
workers' compensation market, so it was [a] very large
percentage of our market.
At the time they were declared insolvent, there were
two other insolvent workers' compensation insurers in
the [Alaska Insurance Guaranty Association]: Reliance
Insurance Company, which was domiciled in
Pennsylvania, the largest insolvency of [an] insurance
carrier ever to occur in this country; and Paula
Insurance [Company], also domiciled, as was Fremont,
in California. The magnitude, however, of the Fremont
insolvency far surpassed any prior insolvency, and
exceeded the resources of the [Alaska Insurance
Guaranty Association]. The assessments of the [Alaska
Insurance Guaranty Association] currently are capped
in statute at 2 percent. That 2 percent raises $4.2
million on an annual basis; November, December,
January claim payments were ranging from $1.7 million
to $2.1 million per month, so you can see the size of
the gap.
Number 0439
We have had insolvencies in Alaska for probably 20
years. We've always been able to cover them; this
safety net provided for policyholders when we have
insolvencies. In this particular case, we're dealing
with workers' compensation. When there are
insufficient funds in the [Alaska Insurance Guaranty
Association], statute allows a prorating of claim
payments. In August I received, as the director of
the Division of Insurance, a letter from the [Alaska
Insurance Guaranty Association] indicating it was
their intent to begin prorating claims because they
could see they were not going to have sufficient
money. This seemed to all of us to be an absolutely
unacceptable solution, as it would mean injured
workers would start receiving partial weekly wage
benefits, and partial payments would go to medical
providers. We felt the impact on claimants would be
disastrous.
MS. HALL also said:
To give you an idea of the magnitude, on February 2 of
this year there were 598 open claims for injured
workers; that's from four insolvent carriers. On the
other side of that lack of payment to claimants, we
have where that obligation would go next - the next
place that obligation will go will be to employers.
Workers' compensation is an obligation of the
employer, typically satisfied by the purchase of a
workers' compensation policy. When we have the
scenario that developed, ... we now have that
obligation going back to an employer - an employer
who, in good faith, purchased an insurance policy, who
felt they had taken care of their obligation, [and]
who ... [now has] an unanticipated financial
obligation back.
We have 380 Alaskan employers who have injured workers
whose claims are currently being funded through the
[Alaska Insurance Guaranty Association]. Those claims
for those 380 employers, or the 598 injured workers,
can range from very minimal amounts up to ... one
claim that's reserved at $5 million. We're talking
[about a] substantial financial obligation potentially
faced by Alaskan employers. It's our concern, it's my
concern, that this unanticipated additional cost could
truly stretch small businesses to the point where they
could no longer stay in business - they could be
forced to file bankruptcy or to, at minimum, ... have
no assets to function their business.
Number 0607
[Chair McGuire turned the gavel over to Vice Chair Anderson.]
MS. HALL continued:
The potential for a prorating of claims was averted in
the end of 2003 through a series of, first, loans from
the California liquidator. The [Alaska Insurance
Guaranty Association] received $5 million from the
California liquidator, [$4.5 million] from the estate
of Fremont, $500,000 from the Paula [Insurance
Company] estate, [and at] the end of December, we
received $2.6 million from the Pennsylvania department
of insurance from the estate of Reliance [Insurance
Company]. So sufficient funds came in, along with the
assessments that were done, to allow the [Alaska
Insurance Guaranty Association Fund] to pay claims
through the end of the year and they have continued to
pay claims.
Anticipated date, currently, that the [Alaska
Insurance Guaranty Association Fund] will run out of
money is probably the end of May - we will run out of
money this year - there will be no money to pay claims
at that rate. ... The funding proposal here is
proposed to find a steam of funds without requesting
what I would call a bailout of the industry by state
funds. With the fiscal issues being faced by Alaska,
it seemed [inappropriate] to ask for money from the
state, so we chose instead to present a proposal
[such] that all employees and employers across the
state who are involved in the insurance world of
workers' compensation would be assessed ..., as they
are today, for the cost of this insolvency.
Using the basic principles of insurance, we've ...
tried to spread the risk so the cost of the funding
would go across the workers' compensation environment.
There is little question in my mind that the proposed
solutions are not popular; at first consideration I
don't know anybody who's going to stand up and say,
"Oh, let me pay" - it doesn't usually work that way.
The [Alaska Insurance Guaranty Association Fund] is a
safety net. Not only did this legislature create
that, but every other state has a similar guaranty
fund. It's been a public policy adoption that we need
a mechanism to provide this safety net.
Number 0719
MS. HALL added:
In the [Alaska Insurance Guaranty Association Fund]
there are three types of accounts, and I do want to
describe this so that some of ... the provisions of
the bill will make a little more sense. There are
three what I would refer to as buckets: there is a
workers' compensation bucket; there is an auto bucket;
and there is an "other" [bucket, which] ... includes
everything except workers' compensation and auto.
There are also a few coverage lines that are not
covered by the [Alaska Insurance Guaranty Association
Fund] such as surety coverage and fidelity coverage.
But generally it will include homeowner's coverage,
commercial property, commercial liability, boats,
anything that's not auto and [workers' compensation].
Today, when we have an insolvency, we assess only the
line of business, the account, that has the
insolvency; in a particular case, we are only
assessing today the workers' compensation account for
the insolvent workers' compensation carriers. The
bill proposes to change that to allow, instead of the
current 2 percent cap, ... that assessment to be
increased to 4 percent for the account in which there
is an insolvency. The second step in the process
would be to allow an assessment of the other two
remaining buckets - the auto bucket and the "other"
bucket. Doing that is not unprecedented, either
around the country or in Alaska; 18 states have
structured their guaranty association so that there is
a single account, so any insolvency is spread across
all lines of business.
In our particular situation, today in Alaska, there is
[a] guaranty fund assessment in that "other" account
of one half of 1 percent [.5 percent] which is now
being applied, or can be applied, to (indisc. -
coughing) your homeowner's policy, commercial property
policies, whatever falls in that "other" account, and
it's done primarily due to the insolvency of a medical
malpractice carrier. So right now, today, your
homeowner's policy is likely being assessed at [.5
percent] to pay for a medical malpractice insolvency.
That principle, to me, I find we should be able to
[carry] that out and assess across those lines; I
think we already do it with two exceptions, [so] I'm
not sure why we need to make exceptions for the auto
and the [workers' compensation] accounts either. So I
don't think this is an unprecedented action.
Number 0914
[Vice Chair Anderson returned the gavel to Chair McGuire.]
MS. HALL went on to say:
The third step of the current bill would be to allow
[the Alaska Industrial Development and Export
Authority (AIDEA)] to provide guarantees for the
[Alaska Insurance Guaranty Association] to obtain
loans to meet their cash requirements should
assessments not be enough. We're looking at plugging
a current hole, but I'm also looking for a mechanism
[such] that we never get here again; I would like to
make sure that we're never faced with this prorating
of claims. The [Alaska Insurance Guaranty
Association] currently has the statutory authority to
borrow money, but they are not a viable commercial
loan prospect - they don't have any assets, ... they
don't accumulate a bank of money.
This is called a "post loss assessment." Only when
they have a need for funds do they make an assessment
on an annual basis; in November of last year, they
determined they needed their assessment for 2004 and
they made that assessment. If they, in fact, would
run out of money, we would like them to be able to
borrow. They have no assets; the only asset they have
is this stream of assessments that currently is being
used, up until about 2010. Commercial banks aren't
really likely to look at you and say, "Oh, it's okay,
you don't have to pay me back for another six years."
The maximum principal outstanding balance at any one
time would be capped at $30 million.
Generally I've worked with financial experts; ... the
current chairman of AIDEA, Mike Barry, worked with me
diligently. We looked at various bond possibilities,
various types of loans, looking for the most efficient
effective way to borrow money, and this seemed to be
the best way. This is the best proposal we came up
with; this is a backstop. Hopefully, through the
process of assessments, we would never get here, but,
again, it provides a final safety net.
Number 0986
MS. HALL concluded:
I would close by saying [that HB 403] provides some
what I would consider to be painful, somewhat
expensive, very unpopular provisions. I do, however,
believe that the provisions are not nearly as painful
as the consequences of no action. I would urge you to
think about ..., at a minimum, temporary interruption
of benefits for 598 injured Alaskan workers [and]
financial obligation going back to 380 employers. ...
This is safety net, it's been a public policy for a
number of years in most all states, and ... I would
urge [your] support for the bill.
CHAIR McGUIRE mentioned that the Senate companion bill [SB 276]
would be heard by the committee at a later date, and suggested
that members limit debate on HB 403 and save the bulk of their
questions for the hearing on the Senate bill.
REPRESENTATIVE GARA asked how much money is needed this year to
make the [Alaska Insurance Guaranty Association] whole.
MS. HALL said it would take approximately $5.8 million, since
there is a balance left over from last year and the $4.2 million
assessment has already been made for 2004.
REPRESENTATIVE GARA asked why, under current law, the
assessments can't be made large enough to raise the money that's
needed.
MS. HALL replied:
The current statute has a 2 percent cap. That 2
percent cap, in the workers' compensation line, only
raises $4.2 million. And that has already been
assessed for 2004. There was approximately [a] $6
million balance brought forward from last year through
the loans and the early distribution from
Pennsylvania, and we have done the $4.2 million
assessment already.
REPRESENTATIVE GARA asked who can currently be assessed up to
that 2 percent cap.
Number 1141
MS. HALL said that currently, only the workers' compensation
line can be assessed that 2 percent. She went on to say, "Some
carriers - Reliance [Insurance Company], for example - wrote all
three lines; they wrote workers' compensation, they wrote auto,
they wrote liability, and so all three lines are being assessed
based on the premium volumes in their particular lines of
business." In response to a further question, she reiterated
that if nothing is done, the projection is that the [Alaska
Insurance Guaranty Association] would run out of money at the
end of May, and this means that there would be no claims paid
for the rest of the year - June through December. The next
assessment that would be available would be in January of 2005.
She said that according to her understanding of interpretations
of statute, that January '05 assessment would go towards paying
what wasn't paid in '04; in other words, there would be no money
with which to pay claims in '05.
REPRESENTATIVE GARA asked whom would the [Alaska Insurance
Guaranty Association] be able to assess if this legislation
passes and what would the percentage of that assessment be.
MS. HALL said that the workers' compensation assessment would go
up to 4 percent for this year, and that although the [Alaska
Insurance Guaranty Association] has asked for the ability to
assess auto and "other" lines up to 2 percent, the latter actual
calculated assessment today is .19 percent for '04 and then
there would be an additional 2 percent. She went on to say, "In
2005, just to give you an example of where that goes, we would
again assess 4 percent in the workers' compensation line, and
[.47 percent] in the other two lines, so we're talking about [.5
percent] on auto [and .5 percent] on the policies that are in
the 'other' bucket." She reiterated that the policies in the
"other" bucket include "homeowner's, commercial property,
commercial liability, boats" - everything except auto and
workers' compensation.
REPRESENTATIVE GARA asked what would the percentage have to be
raised to if they only wanted to assess workers compensation
lines.
MS. HALL said she had not yet calculated what that percentage
would have to be, but noted that the workers' compensation line
is the smallest with regard to premium volume. The workers'
compensation line raises roughly $4 million, whereas the other
two lines raise roughly $15 million. This means that if the
other two lines were assessed an additional .5 percent, it would
amount to an additional "2 percent minimally, so somewhere [in
the range of] 6 to 7 percent."
Number 1304
REPRESENTATIVE SAMUELS asked if the percentages will drop as the
money isn't needed any more.
MS. HALL said yes, but noted that if the legislation is passed,
the ability to assess up to the aforementioned percentages will
still be there should a similar situation arise again. She went
on to say:
Frankly, today, we only have three companies who have
a market share that could even potentially put us in
this crises situation. ... I have no indication that
we have any possibility of that, but I would never say
never anymore. ... To carry out my ... rough
calculations that I presented a minute ago, the
assessments for the "other" and the auto accounts
would totally go away in 2006, and the [workers'
compensation] assessment would then drop to 3.37
[percent] in that year and subsequently it would
continue to drop. So they would not stay at these
levels for an extended period of time. ...
I would say there have been insolvencies; ... we had a
fifth insolvency in the workers' compensation arena on
February 12. ... Protective National [Insurance
Company of Omaha] has not had a certificate of
authority to operate here since 1991, so we're talking
13 years ago since this company wrote business, and as
of their 2002 yearend financial statement they had
$1.6 million in outstanding Alaska claims. And that
gives you an idea of the long "tail" on those claims.
So ... I think we need to have a structure that
anticipates insolvencies. We also, in ... [another]
bill, have tried to do some other things to bring
about some changes.
REPRESENTATIVE SAMUELS asked whether money recovered from
insolvent companies would automatically flow into the [Alaska
Insurance Guaranty Association] Fund.
MS. HALL said yes, but noted that it generally takes a couple of
years before money recovered from insolvent companies is
distributed. In response to a question, she said that "self
insureds" are not covered by the [Alaska Insurance Guaranty
Association] Fund, nor are they assessed by the [Alaska
Insurance Guaranty Association].
Number 1500
REPRESENTATIVE SAMUELS moved to report CSHB 403(L&C) out of
committee with individual recommendations and the accompanying
fiscal notes.
CHAIR McGUIRE, after noting that there were still questions for
Ms. Hall, asked that the motion be voided.
REPRESENTATIVE GRUENBERG asked how AIDEA came to be selected.
MS. HALL explained that AIDEA was selected because it was
willing and would be acceptable to commercial lenders. In
response to a further question, she said that the cumulative
maximum deficit is now estimated at $20 million.
Number 1559
REPRESENTATIVE SAMUELS again moved to report CSHB 403(L&C) out
of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, CSHB
403(L&C) was reported from the House Judiciary Standing
Committee.
REPRESENTATIVE GARA noted that he did not want to slow the bill
down and doesn't have a problem with moving it from committee.
However, he does have a concern, he said, about passing the
additional costs onto consumers of unrelated lines of insurance.
He added:
My preference would be to fund that extra amount,
which would probably be ... in the [$1 million to $2
million] range. We're $5 million short right now, but
they're raising the assessment on workers'
[compensation] ratepayers from 2 percent to 5 percent,
so that $5 million may ... [still be $2 million]
short. I'd be much more in favor of just paying that
through the general fund [GF]. ... It does sort of
stick me wrong as charging just a certain class of
consumers to pay for an unrelated class of problems.
... I mean, if it's something that society should pay
for, society pay for it, and that's the general fund.
...
CHAIR McGUIRE said that is a fair argument, and offered her
understanding that at least as of today, the Senate version of
the bill does contain a provision whereby funds would come from
the general fund.
REPRESENTATIVE GARA suggested that if other members share his
view, an option would be to hold HB 403 in committee and wait
for the Senate version to come before the committee.
CHAIR McGUIRE suggested instead that they report HB 403 from
committee and debate the Senate version when it comes before
them, adding that the Speaker has indicated that the Senate
version will be the vehicle that moves through the process.
Therefore, when SB 276 comes before the committee, members can
review whether it still contains the general-fund language and
debate the issue at that time.
[HB 403(L&C) was reported from committee.]
HB 472 - CLAIMS AGAINST HEALTH CARE PROVIDERS
Number 1670
CHAIR McGUIRE announced that the next order of business would be
HOUSE BILL NO. 472, "An Act relating to claims for personal
injury or wrongful death against health care providers; and
providing for an effective date."
Number 1720
ROLAND GOWER, M.D., said that issues surrounding medical
liability reform are very important issues for the state of
Alaska and consumers of health care. He went on to say:
My history in Alaska goes back to 1975, when I came
here in the military, and that was about the time of
the last liability medical insurance crises when the
state formed MICA [Medical Indemnity Corporation of
Alaska]. I never purchased insurance from MICA; at
that time I was moonlighting in the emergency room as
a contract physician and my malpractice was furnished
by a group out of California. But I did go into
private practice in Anchorage in the fall of 1977, at
which time there was insurance available through MICA.
... [But] I elected not to purchase malpractice
insurance ... and essentially went without medical
liability insurance for four or five years until after
incorporating my practice and being advised over and
over again by my attorney ... that this was something
that I needed to do.
And when I married and started a family and had
children and [had] assets to lose, it became obvious
that I needed to purchase insurance. I have only been
with one insurance company ... since 1982 ... and
that's with MIEC [Medical Insurance Exchange of
California] .... My initial policy, [which] was for
relatively low limits, was markedly inexpensive in
view of today's cost - somewhere in the range of
[$3,000 or $4,000] - but slowly, over a period of five
to six years to the late '80s, my premiums rose to
nearly $100,000 .... Those were grim days in Alaska
as far as medical liability insurance was concerned.
And then, whatever drives forces like this, things
have changed over the last number of years to where,
up to three years ago, my premiums had dropped for a
policy that was double what it was in the late '80s in
coverage, to in the range of $20,000.
Number 1861
Over the last three years my rates have gone up 108
percent, and there's every indication that they're
going to continue to go up - they had doubled in that
period of time - and this can be looked at as a cost
of doing business. ... Any physician practicing ...
could absorb this cost, but ... what frequently
happens ... is [that] it can be passed on to the
consumer, which sets up a new set of problems of
increasing the cost of medical care. I'm not saying
that that's what will happen in this instance, but it
certainly is a solution for the physicians. But what
also is going to happen, as I see, if we follow what's
going on in the rest of the United States and the
crises that are developing in other [states], is the
availability of the insurance.
DR. GOWER continued:
And once it becomes not available, it becomes a
personal problem for me, especially at [this] stage of
my career; there was a point in time where I was
willing to go bare, [I] didn't have much to lose, I
was in my early 30s and could recover if I did lose,
but nowadays - with the situation of medical liability
and personal assets on the line, a family that I need
to think about, kids that expect me to send them to
college - I probably would quit practicing medicine or
at least modify what I do. There are certain areas of
practice of general surgery that are extremely high
exposure in liability, and one is treatment of breast
cancer.
And I'm one the physicians in the state who treats
breast cancer - anywhere from 40 to 60 cases a year,
probably in the range of a quarter of the ones that
[are] treated in ... Alaska - and it would be a real
risk for me to do that without liability insurance
because the statistically most likely area that I
would get sued in would be treating breast cancer
patients and failure to diagnose. So, the non-
availability issue is a very personal issue for me,
and it would make ... me face a decision whether I
could continue to practice medicine or not. I think
that there are a lot of physicians in ... Alaska right
now - where we already have, in some areas, ...
availability problems of specialists or whatever - ...
who would make similar decisions; I cannot speak for
them, but I think that there's a lot of people in that
boat.
Number 1959
Statistics say that over half of the physicians in ...
Alaska are over 50, and ... there would be, I think, a
certain amount of manpower ... that's providing care
now ... [that] would probably not be willing to risk
our life's work and our personal assets without the
availability of malpractice insurance. The
doctor:patient ratio in Alaska ... [is] in the lower
quarter of the United States as far as the number of
doctors who practice here; at one time we had a very
young population [and so] that didn't seem to matter
so much, but our population is aging, which means more
health problems and actually a greater need for more
physicians.
With the unavailability of insurance in Alaska and the
malpractice climate that is not favorable, it is hard
to recruit and attract people here. And I would
maintain that if this legislative body could find some
solutions to the medical liability crisis in Alaska,
then we might be able to solve some of our problems
with recruiting young physicians; if it was attractive
to come here and practice in a place that looked like
it was going to be stable in this area, I think it
would be easier for us to bring young doctors to
Alaska that are specialty trained and also who provide
primary care.
DR. GOWER added:
... As a general surgeon I started off doing lots of
things including vascular surgery, which is a very
high liability area. It was an area that I didn't
have as much interest in as say breast cancer, and a
lot of us in general surgery - and this [is] true in
cardiology and whatever - have not only been able to
specialize but to ultra-specialize. And so somebody
who treats 50 to 100 cases of breast cancer a year is
going to be a lot better than the general practitioner
who has the opportunity to treat only five or ten, and
that is something that might change in the
demographics of the physicians in Alaska if ...
there's not a solution reached to this problem.
Number 2068
Doctors are consumers of medical care also. One of
the things that will happen to you and your
constituents, and to physicians in this state, is the
availability of certain specialty care and high-risk
care if something is not resolved or done about the
availability of malpractice insurance and the
affordability. I am very acquainted with a surgeon
who recently has been unable to get a procedure that
is a high-risk procedure involving injection of
steroids around the spinal column because of a "nerve-
root disk" problem that he has. He'd had four
previous injections over the last eight years without
having surgery to his back; they work if they're done
and put in the proper space by skilled people.
The skilled physicians who ... do this have just
recently lost their medical liability coverage to
perform this procedure because of its high risk and
because of the experience with this procedure in
Alaska over the last 10 years: there have been at
least five [cases] that have settled for $1 million-
plus for mal-occurrences or injuries or whatever that
occur [with] this procedure. It's probably still
safer than surgery, it works, but in order to get that
treatment now there is maybe one other doctor left
doing it in Anchorage who has been there a very short
period of time. This physician would have to travel
out of state, to Seattle, to get it. So not only is
it affecting your constituents, our fellow Alaskans,
and perhaps some of you eventually, it affects the
medical community too.
DR. GOWER concluded:
So I think that there is a crisis looming in Alaska.
As you are aware, all but two companies that are
writing medical malpractice insurance have left the
state; both of these are mutual doctor-owned companies
... [and], at the present time, they are limiting in
some areas the specialties that they are writing
insurance for and also the limits of the policies of
which they are writing. So I don't think that we have
a full-blown crisis today, but every indication is
that Alaska is heading in the direction of states like
New York, Ohio, Florida, et cetera.
So I would appeal to you that this is a problem that
faces all Alaskans, not only ... raising the cost of
medical care the consumer will have to pay, but ...
the availability of medical care. And I think there
are some things that we have been used to, of getting
quality care in Alaska, that are ... going to go away;
there are just not going to be specialists here who
are willing to give it.
Number 2197
REPRESENTATIVE GARA said that he recognizes that malpractice
insurance is high, that there are only two carriers in Alaska,
and that Alaska only trains about eight new doctors a year
through the Washington, Wyoming, Alaska, Montana, Idaho Medical
Education (WWAMI) Program. He asked Dr. Gower whether he could
think of any other options that could be used to bring new
physicians to Alaska besides cutting the amount of damages
people can receive if they are harmed.
DR. GOWER replied:
I think to expect Alaska ... [to] train more doctors
... is not realistic. ... We are a small community
when you look at places like Seattle and Portland ...
where there are large medical schools. ... There are
never going to be a lot of physicians trained in
Alaska, ... there is just not the ... population base
here to do that - we don't have a medical school and
we never will have one - it's just not an economically
feasible thing. So I think ... the more realistic
thing is to attract people to come here and practice,
... but the solution is not to train more people here
in Alaska, because you'll never train specialists
here; even if you train primary-care doctors, you're
not going to train cardiologists and you're not going
to train surgeons and you're not going to train
neurosurgeons. It's never going to happen.
So something needs to be done to stabilize the climate
that makes it attractive for somebody to come here and
practice. Alaska has been one of the most attractive
places for the last eight [to] ten years, I think, as
far as medical liability goes and also as far as a
place to practice without interference from [health
maintenance organizations (HMOs)] et cetera. But the
medical liability issue ..., I'm predicting it's going
to get a lot worse, and what we have we're going to
lose plus not have the ability to attract anybody new.
Number 2297
The other part of your question that maybe you're
referring to ..., there are other ways to approach
medical liability insurance and stabilize the cost.
... I don't have the wherewithal to say whether it's
exactly the right thing to limit noneconomic damages
or not, it appears to be something that works in other
states in stabilizing the availability and the cost of
medical liability insurance, but I can tell you, some
of the other solutions are going to be very expensive.
It is my understanding that Ohio, in the last week,
has just established a state-run insurance company
because they have the concern that the underwriters of
... medical malpractice insurance are going to
withdraw. ...
DR. GOWER concluded:
It hasn't happened, nor has it happened in Alaska, but
there are some indications that that could happen, and
that is going to be [an] immediate crisis. So, ... if
we can't stabilize the insurance - [if it is] not the
wisdom of this body to help with this problem, either
with noneconomic damages or many other things that
could be done - then maybe there should be some
consideration to set up a failsafe program, that if
medical malpractice insurance goes away, that the
state's going to have to go back into the insurance
business, because there are going to be a lot of us
that will not risk our life's work and our personal
assets to practice bare.
REPRESENTATIVE GARA said:
One of the reasons I'm skeptical is, we already
limited noneconomic damages in 1997. We limited them
to $400,000 - except if it's a very serious injury, $1
million. And those numbers can go up ... for people
with very long life expectancies, and [in] those cases
they can go up ... to $2 million, but the general cap
is $400,000 and $1 million. But you testified that in
the last few years your insurance rates skyrocketed
....
DR. GOWER interjected to say: "I testified that my insurance
[rates were the lowest that they have been] in '97 and '98 and
'99." [The previously bracketed portion was taken from the
Gavel to Gavel recording on the Internet.]
TAPE 04-33, SIDE B
Number 2393
DR. GOWER went on to say: "It's '99 that they have started
going back up, and ... it's the last three years that they have
been stable up through I guess 2000. ... [So] the lowest I ever
paid was in 1999."
REPRESENTATIVE GARA remarked: "But even with these damage caps,
you said they've skyrocketed in the last couple of years,
though, right?"
DR. GOWER replied:
Well, you know, $1 million is a significant amount of
money, and there are multiple claims that have been in
multimillion-dollar settlements, I think, over the
last several years. These probably are questions
better for the insurance company than for me, but I do
know that the overall number of claims have more or
less stabilized if not [gone] down, but the awards
have gone significantly higher. That is my
understanding from my insurance company that they're
paying much larger awards in the last four or five
years, and that's what drives the claims experience.
I think there's a lot of difference between $250,000
and $1 million, and actually ... I think if you
calculate it out from a baby injured at birth and a
severe injury/disfigurement, I think it can be $2
million if they live to be 60 years old.
REPRESENTATIVE GARA offered, "Yeah, that's what I meant to say.
REPRESENTATIVE HOLM asked Dr. Gower whether he has seen a
significant difference in his "liability" since [the terrorist
attacks of September 11, 2001 ("9/11")].
DR. GOWER replied: "Well, yes; I mean my liability insurance
has doubled since year 2000, so that's since 9/11, but I don't
know whether those are cause and effect. They may be
coincidences, and I think they probably are because what has ...
driven it is the increased awards ...."
REPRESENTATIVE HOLM mentioned that all of his insurance rates
have gone up, and remarked that perhaps rates have gone up
because the insurance companies are trying to "spread the
wealth" so that they can manage what they're having to pay,
instead of rate increases being a function of liability limits.
He added, "Just as an observation it seems to me like [they're]
spreading it over a lot of industries that have no real
liability, but they can spread that cost."
Number 2241
DR. GOWER noted that the companies that offer medical liability
insurance in Alaska are "exclusive medical liability coverage
companies" and are "not-for-profit." In response to comments by
Representative Ogg, Dr. Gower indicated that primary care
physicians in family practice residencies could be trained in
Alaska, but mentioned that demographics suggest that Alaska is
short over 200 primary care physicians. He remarked that Alaska
is ranked the 12th worst in the nation with regard to a
physician:patient ratio, even though the trend now seems to be
that more physicians are going into family practice, rather than
the specialty areas of medicine.
REPRESENTATIVE OGG suggested that higher insurance rates might
simply be a result of insurance companies investing in the stock
market and then attempting to recover their losses via premium
rate increases.
DR. GOWER opined that because the two insurance companies that
provide medical malpractice insurance are "mutual no-stock-
holder" companies, it is the claims experience that drives up
medical malpractice insurance rates. In response to a question,
he offered his belief that those companies do have to have a
certain amount of funds in reserve.
REPRESENTATIVE GARA remarked that historically, Alaska has never
had enough doctors, even though according to a report from
Legislative Legal and Research Services, the number of
"nonfederal" physicians in Alaska has more than doubled since
1990. "We still don't have a great doctor:patient ratio," he
remarked, adding that in 1990 it was 1.88:1,000 and today it is
3.24:1,000. He went on to say:
I was left with the impression the other day that
doctors were fleeing the state, and what struck me was
actually it's going the other way around. And there
was also a newspaper article that said Alaska has one
of the four highest [increases] in doctors-per-capita
rates in the country at this point. And ... I guess
if that's the case, I'm ... just wondering what the
relevance of Alaska's malpractice [insurance] rates
are to the doctor:patient ratio in this state. It
just seems to suggest to me that there's something
different going on, but it's not rates.
Number 1848
PHILIP R. HINDERBERGER, Senior Vice President & General Counsel,
Assistant Corporate Secretary, NORCAL Mutual Insurance Company
("NORCAL"), relayed that NORCAL is the successor to MICA, which
was the company established by the legislature after the
"malpractice crisis" in 1975. Since 1991, NORCAL has ensured
literally hundreds of physicians and, during that time, NORCAL
has seen several efforts to reform Alaska's medical liability
laws in an attempt to bring them into parity with other states.
Unfortunately, these efforts have not had the desired effect.
He said it is the belief of NORCAL that HB 472 is necessary to
accomplish what other efforts have failed to do, for example,
"the 1997 effort to limit noneconomic damages." He relayed that
NORCAL has been settling claims and going to court since 1991;
in 1996 and 1997, NORCAL's average indemnity payment was in the
range of $60,000, and "right after this legislation passed it
jumped up to $380,000 and in 1999 it went to $588,000."
MR. HINDERBERGER noted that NORCAL underwrites less than half of
Alaska's physicians, and opined that Alaska is now one of the
costliest states to do business in. He offered his belief that
Alaska's expensive medical liability premiums are the result of
high jury awards and settlements. The average medical liability
payment in Alaska in 2001 was $308,476, and this average payment
is the 14th highest in the country. He noted that in
comparison, California's average payment was $178,000. Alaska's
physicians pay an average $30,627 per year, and this is the 8th
highest average medical malpractice insurance cost in the
country. In comparison, California's physicians pay an average
of $14,564 per year.
MR. HINDERBERGER said that over the years, Alaska has
experienced some of the most dramatic increases in the cost of
medical liability insurance in the country, and only seven
states have had higher increases. Numerous studies have been
conducted to determine the cause of higher insurance premiums,
larger awards, and more dramatic year-to-year increases; he said
that the studies have informally found that medical liability
reform is the single most important factor in controlling
medical liability premiums and loses. For example, California's
Medical Injury Compensation Reform Act (MICRA), which has a cap
of $250,000 on noneconomic damages, has been identified, he
relayed, as the best of the efforts undertaken to control the
cost of medical liability insurance. He said, "We believe the
$250,000 cap on noneconomic damages contained in House Bill 472
will go a long way towards bringing the costs of Alaska's
medical liability insurance in line with national averages."
Number 1604
MR. HINDERBERGER, in response to questions, offered his belief
that the standard of medical practice in Alaska is comparable to
that in California; therefore, there seems to be no
ascertainable reason, relating to medicine, for the vast
difference, between California and Alaska, in the average size
of award. Alaskan juries are very generous with regard to
awarding noneconomic damages, he opined. He also offered his
observation that the doctors at the medical clinic in the
Aleutian Islands can get a patient off a fishing boat and onto a
jet and down to the Lower 48 in the same time it can take
doctors in California to transport patients; an extensive
patient transfer system in Alaska sometimes take the place of
"high tech" medical facilities and on-site specialists when
those facilities and specialists are not available.
MR. HINDERBERGER, in response to a further question, relayed
that MICRA was enacted in 1975 but was held up in court until
1986. A couple of years after that, once California's judges
and lawyers became "comfortable" with MICRA's provisions,
"losses plummeted," he remarked. He offered an example of the
difference in insurance premium costs between now and the mid-
'80s, adding his belief that MICRA has dramatically changed the
claims' environment without taking any "economic dollars" out of
the pocket of plaintiffs. He also opined that "these soft
dollars that are capped off" are resulting in "the big, high-
dollar verdicts that drive companies out of business." He went
on to say, "$250,000 of noneconomic damages added to a $500,000
economic-damage award is still a big verdict, and $250,000 is a
lot of money; it's not an onerous limitation, I don't think, on
the process."
CHAIR McGUIRE agreed that $250,000 is a lot of money.
REPRESENTATIVE GARA noted that although MICRA passed in 1975,
insurance rates skyrocketed between 1975 and 1986, and were
still rising in 1987 even after the court case over MICRA was
settled. He suggested that the reduction in insurance rates
that began to occur after 1987 was due not to MICRA but instead
to the fact that in 1988, California voters got fed up with
increasing insurance rates and so they put an initiative on the
ballot - Proposition 103 - that gave the state the right to
reduce and limit insurance rates.
Number 1190
MR. HINDERBERGER pointed out, however, that like MICRA, it took
several years for California's courts to approve Proposition
103, and offered his belief that the proposition had no impact
on NORCAL's pricing of insurance. Instead, he offered, the
reduction in insurance rates was due to the fact that in 1991,
NORCAL and a few other physician owned [insurance] companies
went to "the commissioner" and said, "Look, we are seeing huge,
huge savings in our loses and we're returning this money whether
Prop 103 is upheld or not, and what we'd like to do is
voluntarily settle up our obligations under Prop 103, and we
will characterize these payments that we're making as our
rollback obligation," and this was agreed to by "the
commissioner."
MR. HINDERBERGER went on to say, "We paid about $30 million, I
think, in 1991 in dividends to our policy holders, [and] about
$28 million of it was characterized as our rate rollback
obligation; the commissioner never asked us to roll our rates
back, and during that period of time our rates were pretty
stable anyway." Over that period, he relayed, "we paid back
about $250 million in dividends to our policy holders." In
response to a question he explained that "after the rebates, we
actually credit the dividend against the premiums that are due,
so the numbers that we're giving you are the net premiums for
the actual doctor payments." In response to a further question,
he said that it is his experience that since 1991, NORCAL's
premiums in Alaska have gone up at a higher rate than they have
in California.
REPRESENTATIVE OGG asked how many actual court judgments are
included in the amount of payments made in Alaska.
MR. HINDERBERGER said he didn't have those numbers readily
available, but relayed that members could get more detailed
statistics from the "national practitioner databank" web site.
REPRESENTATIVE GARA said he wonders whether the number of annual
claims a company experiences can be statistically relevant. He
asked Mr. Hinderberger what the average number of claims NORCAL
has paid out in the last five years is.
MR. HINDERBERGER said that NORCAL typically pays out
approximately 20 cases a year. In response to a request for
more statistical information, he again suggested that members
could find such information on the aforementioned web site.
Number 0871
EMILY NENON, Alaska Advocacy Director, American Cancer Society
(ACS), said that the ACS does not have a position on HB 472.
However, she went on to say:
What I wanted to bring forward to you all was just a
few questions. ... [I'm] sorry Representative Anderson
is not here to hear me ... compliment him on what I
believe is the intent of the bill, which is to make it
easier for doctors to practice medicine in Alaska.
That is certainly something that the [ACS] supports in
terms of ... access to and quality of health care. So
with that, I just have three questions I want to raise
before the committee for your consideration as you
move forward. One ... of the questions that was asked
- and I'd like some information and follow-up - of Mr.
Hinderberger: Will this bill actually reduce premiums
for malpractice insurance? Is this really going to
get at part of what's the problem with malpractice
insurance rates in Alaska?
He referenced some independent studies on this issue -
I would certainly be interested in getting more
information on that. As I said before, we certainly
have an interest in seeing that people are able to get
access to health care and [that] doctors are able to
practice in Alaska. The other question I have is,
with the limit proposed in this legislation, I have a
question about patients who may be moving forward on
malpractice cases [but] who may not have the money up
front to pay an attorney and have to hire an attorney
on contingency. ... Some question has been raised
about a decrease in the interest of attorneys to take
on these cases if they know they may not be able to
recoup their costs in the end for taking these all the
way through.
CHAIR McGUIRE interjected to say: "Their costs or their profit?
They clearly recoup their costs at 40 percent."
REPRESENTATIVE GARA offered: "Often, [Chair] McGuire, and often
they lose their shirts."
MS. NENON said that the real question she has is, "Would this
legislation have any effect of foreclosing access to the court
system?"
CHAIR McGUIRE said, "Good question."
Number 0697
MS. NENON said that the final question she has is, "What exactly
falls under noneconomic damages." She concluded, "Those are the
three questions I have, both in terms of protecting our doctors
and their ability to practice in Alaska [and] protecting our
patients, and then just some final clarification about what the
bill actually does."
CHAIR McGUIRE indicated that she would pass those questions on
to Representative Anderson, and offered that noneconomic damages
are defined in statute and involve items that are not
compensatory such as loss of wages, medical bills, "and things
like that." Noneconomic damages can also include things like
loss of consortium.
REPRESENTATIVE GARA added that noneconomic damages can also
include pain and suffering and loss of enjoyment of life;
basically, the changes in someone's life that don't necessarily
have an easy dollar value. For example, how does one put value
on an inability to walk or an inability to carry a child.
CHAIR McGUIRE offered that another category of damages are
punitive, which are meant to punish. She relayed that according
to the sponsor's testimony, one of the reasons he introduced the
bill is because the Alaska State Medical Association and other
entities came to him and told him that Alaska has a potential
looming crisis. She offered her understanding that other
testimony has indicated that if HB 472 passes, although there
may not actually be a reduction in rates, it might increase the
availability of medical malpractice insurance in Alaska without
Alaska having to revert back to a MICA-like system. She
acknowledged that there has also been testimony that passage may
affect whether attorneys will be willing to take on medical
malpractice cases, but noted that the legislature will have to
weigh this issue with the issue of whether doctors will continue
to have access to medical malpractice insurance.
Number 0338
CARMEN E. CLARK, after noting that she is a criminal defense
lawyer in Anchorage, indicated that HB 472 will have an impact
on those people who are hurt by the mistakes that doctors make.
She went on to say:
The most important thing that I've learned is to have
confidence [in] our judicial system. And what you're
essentially doing, if you pass this bill, is saying
you don't believe in the jury system, that you don't
think that people who take an oath to listen to a case
and decide it fairly can come up with a fair result.
... You took an oath to uphold the constitution, and I
did when I was a prosecutor, and the right to trial by
jury is such an important right, and I see this bill
as truly gutting that. And then you can't imagine, I
don't think any of us can, all the situations where
people might be injured by doctors. I don't think,
before it happened, that anyone imagined that someone
like Doctor Ake (ph), who sexually assaulted his
patients, (indisc. - coughing) happen to her, but it
did. And this $250,000 limit hurts the people who ...
actually have a worse injury, and I think that there
should be more flexibility for people, particularly
juries, to determine who's really injured and who's
really not.
... I heard the [representative] from the American
Cancer Society ask what are these things we're talking
about. And essentially they're quality-of-life
issues, and when we talk about putting a limit on
them, I think everyone should say: "How much would I
sell my eye for? How much money would it take for me
to be willing to wear a colostomy bag for the rest my
life? How much money would it be worth for me to
never be able to enjoy sex again?" Those are the type
of damages that people bring into court. ... The
question here is about what's fair, ... and if you're
going to set a cap, then I'd like you to be realistic
about it.
Number 0161
From my perspective $400,000 is too low, but it should
at least remain there. ... And these are the reasons
why. First, the people who are injured, they're going
to pay their lawyers, (indisc.) contingency fee, and
whether you agree with that as a system or not, it
does allow some people to get into court. But in
order to successfully follow up on a medical
malpractice case usually you have to hire an expert,
and this ... legislative body can't do anything about
how much that costs, but these people are paying their
experts, who often charge ... [$50,000] or $60,000, to
come and (indisc.) on the record. They pay those
experts out of this money that they recover, not from
their compensatory damages because they're already
paying those to doctors who gave them follow up care.
MS. CLARK added:
... [Although] $250,000 ... [is] more than many people
make in a year, [it] isn't a lot of money spent over
someone's lifetime and it's significantly less than
most doctors make in six months. ... The other reason
that I think is really important is, if any of you
there have ever tried to buy life insurance or
insurance of any type, the amount of difference that
you pay for a premium that's $400,000 - from $250,000
- is about $300 a year. So for $300 a year we ought
to be able to provide enough protection to people to
get $400,000. So we're not taking about being able to
reduce insurance rates by any significant amount, but
we are talking about reducing the amount of money that
someone can get - for being blinded or having their
baby die - by almost half. Now I want to make some
comments about the things I heard. First is the
question of will this [affect our insurance rates.]
[The previous and following bracketed portion was
taken from the Gavel to Gavel recording on the
Internet.]
TAPE 04-34, SIDE A
Number 0001
MS. CLARK continued:
[There's] no reason to believe that. Ohio passed
this, and the doctor who testified earlier made a
point about Ohio set up it's own insurance board.
They did, after they made up their own review of how
insurance rates were expanding in ... Ohio, and they
found that there was no connection between damage caps
and insurance premiums. What they found instead was
that there was a significant connection between
insurance rates and how much money the insurance
companies lost in the stock market. So they did
create their own Ohio insurance board [that] provides
the insurance for doctors, but they did so, so that
the doctors would not be at the mercy of the profit
demand of CEOs of insurance companies.
And you can find that study [not on tape, but taken
from the Gavel to Gavel recording on the Internet,
was: online, and I strongly advocate that you should
read that. In the bottom, there was no change, and in
fact, if you go to the doctors' web site -
wwwdoctorsno.us (ph) - you will find on the very front
page that they say they're (indisc.) cap to try and
change the insurance premiums for doctors has been,
quote, "colossal failure." And here we've seen no
connection between this $400,000 cap that we've put in
place and] insurance premiums at all. In fact, as
both the doctor and the insurance [representative]
testified, instead they'd gone up.
So (indisc.) I heard the doctor testify earlier that
his insurance rates went up in 1999. That kind of
surprised me because [in] 1999, he paid a $250,000
settlement for the alleged negligent transection of a
[common] bile duct; in 1992, he also paid $15,000 for
alleged negligence of laparoscopic cholecystectomy
.... The point I want to make is that if you want to
know how (indisc.) juries are in Alaska, you can go to
the [Alaska State] Medical Board [and] they will give
you a 16-page printout of every single reported
settlement that a doctor has made. And in fact, I
have it in front of me .... The high 2001 average
that we have is completely related to a $572,798
settlement against Dr. Peter Hansen for the negligent
prescription of medication.
Number 0200
MS. CLARK relayed:
That's what's (indisc.) our record up, it's that one
bad doctor. But what I'd like you to know is that
wasn't following a jury trial; he settled that case
prior to even a compliant being filed. His insurance
company had to pay it, but it wasn't the result of a
jury. And the other big myth that you all have been
told here is that there are multimillion-dollar
lawsuits handed out by juries in Alaska. It's not
true. Or, if it is true, they're not being (indisc.)
to the medical board, because I have them in front of
me. There are only five settlements ... since 1982
greater than $700,000.
And this is what they are: in 1988, Dr. Owen Bell
paid out $750,000 for failure to treat sepsis in a
pregnant woman who later died - he paid that out
[with] no jury trial; in 1999, $800,000 [from] Dr.
John Muffoletto for negligent hernia repair - was
there a trial, no, a jury didn't [award] ... that
money; in 1995, $725,000 [from] Dr. Duane Odland for
failure to monitor anticoagulant in a heart valve that
resulted in a significant heart attack - jury trial,
no; in 1986, $800,000 payout by Dr. James Scully for
surgery errors that resulted in the death of a patient
- trail, no; $750,000 in 1994 for brain damages caused
by negligent treatment by Dr. Stephens - jury trial,
no.
So it is absolutely false if people have come in front
of you and said that there [are] these multimillion
dollar settlements that are driving up medical
malpractice [insurance rates] in ... Alaska, because
there haven't been any. Or, if [there] have, doctors
haven't reported them as they are required to do so by
law. So, what I think that you should see here is
that no state that has done a significant look at the
relationship between insurance premiums and jury
awards ... [has found] that jury awards were what
drives insurance premiums. But even if there were
such a connection, there isn't in ... Alaska.
Number 0349
MS. CLARK concluded:
The report that I have goes back to 1982, and it shows
that from 1982 until now, there have only been 280
lawsuits filed against doctors. That's not a
significant number, that is not a significant payout
that insurance companies have been doing, and for then
to be raising the rates for doctors by this amount
that they're talking about here - 1,000 times - cannot
possibly be related to the amount of money that they
are paying out by the state of Alaska. So, in my
final point, what I'd like to say is, caps don't seem
to be fair, they don't seem to be trustworthy to
juries. [And] ... at the same ... [time], it doesn't
appear that there is a crises of money being paid out
by insurance companies that ought to have this
legislative body pass a law to take the (indisc.) from
the person who does it, onto the innocent person who
goes to them for treatment.
That is fundamentally unfair, and thus I'm asking you
to table the debate, look at these web sites, [and]
... see whether or not the information you've been
given by doctors and insurance agents is really
correct, because I think you'll find that the $400,000
cap (indisc.) fair, but ... there hasn't been enough
of a connection for people to be going and reducing
that to $250,000 - particularly not when the cost of
buying a $400,000 policy, as opposed to a $250,000
policy, is practically nothing.
CHAIR McGUIRE asked about the possibility of paying expert
witnesses out of the fees being paid to the plaintiff's
attorneys.
MS. CLARK said that no one knows what it will cost to hire an
expert witness ahead of time, and that to do as Chair McGuire
suggests would create a conflict of interest for the doctor.
REPRESENTATIVE GARA said that it would be illegal for a lawyer
to tell a client that he/she is paying for the expert witness,
because doing so would be interpreted as enticing a client, by
paying the client, to let the lawyer take a case.
CHAIR McGUIRE asked why, if plaintiffs' lawyers purportedly care
so much about their clients, don't they just reduce their
contingency fees in such cases.
MS. CLARK replied:
Two reasons: one, there are extreme costs and
overhead associated with practicing law - we have our
own ... malpractice premiums to pay - but the other
thing is ..., if everyone claims to care so much, why
aren't doctors doing the initial work for free. The
fact of the matter is, everybody expects to be paid a
fair wage for what they do, and that includes the
experts. Many doctors who ... find themselves being
pariahs for testifying against other doctors in
medical malpractice [suits] raise those fees.
Number 0659
MS. CLARK, in response to further questions, said that her
yearly income is significantly less than the amount being
proposed as a cap, and then provided information about the
Alaska State Medical Board's report and agreed to fax it to the
committee.
REPRESENTATIVE SAMUELS posited that one of the reasons for an
increase in insurance payments, for all industries, is that many
cases are simply settled out of court; rarely do cases actually
go to trial.
MS. CLARK said she agrees that few cases actually go to trial.
She remarked, however, that many times when medical malpractice
cases are settled out of court it is because there is actually
medical evidence showing that a mistake has been made, and so
the amounts being paid out are not deemed to be excessive when
considering the type of problems that are resulting because of
those mistakes. She offered her belief that when insurance
companies get involved in these claims, they are capable of
determining what would be considered a fair settlement. She
noted that when she sees her employee health care payments go up
600 percent a year she doesn't think that increase is tied to
giant lawsuits either. "I think that's just the way the
insurance [industry] works, and if we want to be able to have
good insurance as well as reasonably priced insurance, the
answer is to regulate the insurance [industry], not to ... to
take away the right of other people to decide how much damage
has really occurred," she concluded."
REPRESENTATIVE SAMUELS mentioned insurance availability as being
a problem.
REPRESENTATIVE HOLM noted that some of the settlement amounts
Ms. Clark referred to were above the current $400,000 cap.
MS. CLARK replied:
The damage cap you're talking about for noneconomic
stuff is $250,000, [whereas] the settlements that I
were talking about include those (indisc.) as well as
future medical costs [and] actual medical costs. It's
a complete settlement, it covers everything, not just
the quality of life issues that we're talking about
with this cap.
REPRESENTATIVE HOLM offered his belief that in other industries,
insurance companies simply look at their exposure risk and then
from that decide to "just pay it off." He indicated that he is
not convinced that caps are linked with either the cost of
insurance premiums or the amount of insurance payouts.
Number 1212
LES SYREN mentioned that he is a plaintiffs' attorney and that
he likes doctors even though they make mistakes. He said that
philosophically, his problem with caps is the idea of prejudging
a case. He elaborated:
Imagine if ... you went into court with your
particular case and one of the people on the jury
said: "You know what? I haven't heard a single fact
about your case, haven't looked at any of the
evidence, but there's one thing I sure know - it could
never be worth more than $250,000." I think that kind
of ... person would never be allowed to serve on a
jury, and that ... just kind of strikes me as little
bit unfair that we're going to institutionalize
prejudging a case.
The second point I'd like to make is, ... I like the
idea of individual responsibility; ... we need more
responsibility ... and I think that applies to
everybody - doctors too. If you break something, you
pay for it. If you walk into a store and you knock
something over, you break it you bought it. It's just
kind of that simple it seems to me. ... It's
irresponsible for a doctor ... to cut off the wrong
foot, and just say, "Well, don't look at me."
So we have four groups, it seems to me, here. First
we have the insurance companies; they want profits,
... they don't particularly care to pay claims,
they're just interested in profits. We've got
doctors, and they want profits too, like Dr. Gower,
... and ... there's nothing wrong with that. ...
There's nothing sinful about profits in and of
themselves, and I'm sure Dr. Gower wants to help
people. ... We've got attorneys on both sides - those
who defend the doctors and ... those who sue the
doctors - and they want profits too, and like the
doctors they want profits but they want to help people
as well. And then we have my clients. Mrs. "X" -
I'll call her - and Mrs. "Y," and these are real
cases.
Mrs. X had some sort of stomach surgery and it was
supposed to fix things, and ... about two weeks ...
after the surgery she really started to have some ...
exquisite pain in her abdomen. So she goes back to
... the same doctor that did the initial surgery; he
looks at her and takes some x-rays and says, "Well, we
need to do surgery right now." She didn't even have
time to call her husband, she was (indisc.) surgery
immediately. After the surgery's over, he comes in
and has a little chit chat and says, "Oh, by the way,
we had to take a sponge out of your abdomen that we
left there two weeks ago." ...
Number 1421
Now we have Mrs. Y. She goes to the doctor because
she has fibroids on her uterus, a kind of ... scaring
that occurs, and the doctor takes a look at her and
says, "Okay, well, ... why don't we do a
hysterectomy?" And he makes the initial incision and
notes in his medical records that the uterus was ...
larger than normal and boggy, and that should have
tipped him off that she was pregnant. And as it
turned out, she was pregnant. There was a hemoglobin
blood test that he could have [given] her, that he
didn't, and so they didn't catch the fact that she was
pregnant. And she was there for fibroids.
MR. SYREN concluded:
Ironically, one of the best treatments for fibroids is
to have a child. So this woman will never hear the
words, "Mommy, can I go outside to play?" She'll
never hear the words, "Mom, I heard from the college;
I got accepted." She'll never hear the words, "Mom,
we're having a baby; you're going to be a
grandmother." So out of these four groups - the
insurance companies, the doctors, the lawyers, and
client X and client Y - who should bear the burden?
Thank you.
CHAIR McGUIRE noted that she's heard similar arguments before
and does not think them to be unfounded. There is still the
issue, however, of trying to make sure that malpractice
insurance remains available to doctors in Alaska. She remarked
that she would hate to be the one to have to decide what amount
is enough in the two aforementioned examples.
REPRESENTATIVE GRUENBERG said, "It sounds to me like Ohio did
something that might be worth looking at, regardless of what
[we] do with this bill." He asked for clarification regarding
what Ohio did.
MS. CLARK said that Ohio created a special committee to do a
study, and ultimately decided that the choices were to cap
damages, cap premiums, or create "their own insurance company."
The latter is essentially what Ohio did.
REPRESENTATIVE GRUENBERG suggested that perhaps a similar study
should be done in Alaska.
Number 1684
JAMES JORDAN, Executive Director, Alaska State Medical
Association (ASMA), said that according to his understanding,
Ohio "began a joint underwriting association, and that was a
residual market mechanism ... that provided coverage for
physicians that could not get coverage ... in other elements
[for example] if there wasn't availability." That joint
underwriting association ceased doing business in 1981, he
relayed, "but still had liability attached." What then occurred
in the early 1990s was that $40 million was extracted by the
Ohio legislature and put into the general fund; this left the
joint underwriting association with about $12 million to take
care of the remaining existing claims. The recent issue of
insurance availability in Ohio has brought forth, again, the
idea of a joint underwriting association.
REPRESENTATIVE GRUENBERG asked Mr. Jordan whether the ASMA
thinks it would be worthwhile for the legislature to look into
"creative, out-of-the-box solutions" such as the possibility of
establishing a joint underwriting association.
MR. JORDAN said that such would certainly be a noble endeavor.
He relayed that the state medical association in Ohio is
recommending that at least $50 million be added to the joint
underwriting association. He mentioned that according to his
understanding, the problem Ohio faces today is one of
affordability rather than availability.
REPRESENTATIVE GRUENBERG replied, "Cutting to the chase, though,
what say we look at it and see what we can come up with."
CHAIR McGUIRE told Mr. Jordan that anything he could provide on
the subject would be helpful. She remarked that one of the
biggest problems with the Ohio approach, in terms of applying
something similar in Alaska, is that it requires state money.
REPRESENTATIVE GRUENBERG pointed out that establishing a joint
underwriting association is simply one possibility, and what he
is proposing is to take a look to see what other possibilities
they could come up with.
CHAIR McGUIRE, after ascertaining that no one else wished to
testify, closed public testimony on HB 472. She then noted that
some amendments had been provided earlier by Representative
Anderson.
REPRESENTATIVE GARA offered his belief that one of the
aforementioned amendments proposes a significant change in "the
law of noneconomic damages," adding that he would like some time
to do some research regarding what current law is. He mentioned
that his staff has provided members with an additional packet of
information that includes information about MICRA and
Proposition 103, a copy of the aforementioned Legislative Legal
and Research Services report, various newspaper articles, and a
comparison study between states with caps - and their insurance
premiums - and states without caps - and their premiums. He
offered that this comparison study indicates that imposing a cap
doesn't necessarily result in a reduction in insurance premiums.
Number 1988
CHAIR McGUIRE noted that the packet Representative Gara is
referring to has as its first page an Anchorage Daily News
article from the Internet titled, "Patient Power." She observed
that Representative Gara has made some really good points, but
suggested that the question is whether Alaska can expect to keep
the insurance providers and doctors that it already has and what
the state can do to attract new providers and doctors. She went
on to list some of the issues raised, in this and earlier
hearings, regarding the factors that influence whether someone
will come to Alaska to practice medicine.
REPRESENTATIVE GARA mentioned that at the bill's next hearing he
would like to offer an amendment that would establish "a two-
tiered hard-cap system," with $250,000 being the low cap. Such
a system would allow people with grievous injuries - people who
have been permanently and severely injured - to recover at least
a fair amount of partial compensation for pain and suffering,
and would also recognize that the legislature wants to adopt a
policy wherein "you don't get very much money, in ... terms of
pain and suffering, if you don't have a serious injury. He
opined that this might address the issue of insurance premiums,
and mentioned that he would be amenable to either a sunset
provision that would put some pressure on the insurance industry
to actually lower rates, or a clause which says that a cap won't
go into effect without a commitment from the insurance industry
that it will lower rates. "I'm not comfortable giving insurance
companies this blank check, which is, 'Here, we'll increase your
profits and you don't have to do anything in return'; I'm just
not comfortable with that," he concluded.
REPRESENTATIVE GRUENBERG mentioned that he might look into the
possibility of offering a conceptual amendment that would
establish some sort of group that could look at all the issues
raised and that would submit a report, at the beginning of the
next legislative session, suggesting possible long-term
solutions.
Number 2292
REPRESENTATIVE ANDERSON made a motion to adopt Amendment 1,
which read [original punctuation provided]:
Page 2, Line 11-16 Delete all language
Insert:
(c) In an action to recover damages for personal
injury or wrongful death based upon the provision
of services by a health care provider, damages
shall include both economic and non economic
damages. Damage claims for non economic losses
shall be limited to compensation for pain,
suffering, inconvenience, physical impairment,
mental anguish, disfigurement, loss of enjoyment
of life, loss of society and companionship, loss
of consortium, injury to reputation, and other
non pecuniary damage.
Page 4, Line4, after "*Sec.6." insert:
AS 09.55.560 is amended by adding a new
subsection to read:
(6) "Economic damages" means objectively
verifiable monetary losses incurred as a result
of the provision of, use of or payment for (or
failure to provide, use or pay for) health care
services or medical products, such as past and
future medical expenses, loss of past and future
earnings, cost of obtaining domestic services,
loss of employment, and loss of business or
employment opportunities. All other damages are
"non economic" damages.
Renumber language in old Section 6 accordingly.
Number 2297
REPRESENTATIVE GRUENBERG objected.
REPRESENTATIVE ANDERSON said that Amendment 1 is necessary to
clearly establish legislative policy with regard to defining the
terms "economic" and "noneconomic" as they pertain to the bill.
It has been the experience in other states that confusion with
regard to these terms in judicial proceedings has led to a
gradual erosion of legislative intent, he opined.
MR. JORDAN said it's his understanding that currently, there is
no statutory definition of "economic damages". Therefore, it
seems logical to put a definition in statute. He noted that the
language in Amendment 1 comes from federal legislation that was
passed by the House of Representatives this year.
REPRESENTATIVE GARA said:
There are very well-accepted pattern jury instructions
in Alaska that define what noneconomic damages are,
that define what economic damages are, what the burden
of proof is, how much proof has to be offered. And
I've never heard anybody complain ... about them
before.
TAPE 04-34, SIDE B
Number 2384
REPRESENTATIVE GARA said he didn't know why they should add a
statutory definition when the current pattern jury instructions
aren't being objected to. He suggested that perhaps Amendment 1
fixes a problem that doesn't exist.
REPRESENTATIVE GRUENBERG asked that [Amendment 1] be tabled
until the bill's next hearing.
The committee took an at-ease from 4:20 p.m. to 4:30 p.m.
Number 2361
REPRESENTATIVE ANDERSON withdrew Amendment 1, adding that he
would offer it again at the bill's next hearing.
REPRESENTATIVE OGG asked whether other states have adopted the
definitions proposed in Amendment 1. He posited that everyone
wants a little certainty, and offered his interpretation of the
comments made and issues raised thus far. He said that he has a
sense that a reasonable cap would be higher than the proposed
cap of $250,000.
CHAIR McGUIRE asked members to have proposed amendments in
writing by the bill's next hearing.
REPRESENTATIVE OGG offered his belief that a cap will not cause
insurance rates to go down, adding that such would be hard to
prove anyway.
REPRESENTATIVE ANDERSON reiterated his intent behind offering HB
472.
CHAIR McGUIRE announced that HB 472 would be held over.
HB 468 - APPEAL BONDS: TOBACCO SETTLEMENT PARTIES
Number 2125
CHAIR McGUIRE announced that the next order of business would be
HOUSE BILL NO. 468, "An Act relating to the amount of the bond
required to stay execution of a judgment in civil litigation
involving a signatory, a successor of a signatory, or an
affiliate of a signatory to the tobacco product Master
Settlement Agreement during an appeal; amending Rules 204 and
205, Alaska Rules of Appellate Procedure; and providing for an
effective date."
CHAIR McGUIRE relayed that HB 468 would be held over in order to
allow Jennifer App, American Heart Association, to put together
a proposal.
HB 424 - REGULATION REVIEW
Number 2108
CHAIR McGUIRE announced that the final order of business would
be HOUSE BILL NO. 424, "An Act relating to review of regulations
under the Administrative Procedure Act by the Legislative
Affairs Agency; and providing for an effective date."
Number 2068
BARBARA COTTING, Staff to Representative Jim Holm, Alaska State
Legislature, informed the committee that Ms. Behr, from the
Department of Law, helped craft Version 23-LS0732\S, Cook,
3/2/04, which is in members' packets.
Number 2061
DEBORAH BEHR, Assistant Attorney General, Legislation &
Regulations Section, Department of Law (DOL), informed the
committee that she has been the regulations attorney for 13
years. She explained that she was asked to provide technical
assistance in drafting legislation establishing a framework for
legislative branch oversight of executive branch regulations.
It is intended that this aforementioned oversight is to be done
in a constitutional manner that meets separation of powers
constraints because the legislature has the ability, under the
constitution, to review regulations. Therefore, this
legislation establishes the checks and balances of such
oversight. She further explained that another goal she was
given has been to minimize the fiscal impact of the legislation,
and this has led to prioritization of certain types of
regulation reviews in order to maximize the dollars and the cost
of the attorney time.
MS. BEHR provided the following sectional analysis of Version S.
She explained that Section 1, subsection (a) recognizes the
already-existing statutory authority of the Legislative Affairs
Agency to review any regulation. She highlighted that Section
1, subsection (a), also specifies that the review will be done
by an attorney in order to provide clarity. Therefore, one
would want to ensure that attorneys are reviewing things that
make the most cost-effective sense to review, rather than the
policy decisions that are appropriate for the legislators to
review. With the aforementioned in mind, a priority order of
reviews was established in Section 1, subsection (b). She
pointed out that Section 1, subsection (b)(1), avoids the review
of routine regulations. Section 1, subsection (b)(2), focuses
on regulations the legislature has decided implicates major
policy development. She explained that an example of the
aforementioned would be that a standing committee, the Joint
Committee on Administrative Regulation Review, or Legislative
Council would indicate to Legislative Legal and Research
Services that specific regulations would be appropriate to
review with regard to major policy development.
Number 1937
MS. BEHR continued with Section 1, subsection (c), explaining
that state agencies will send electronic copies of regulations
to those entities specified in Section 1, subsection (c)(1)-(4).
She explained that if HB 424 passes, she will talk with the
director of the Legislative Affairs [Agency] with regard to
setting up designated mail boxes for certain regulations, and
the state agencies will then be informed of the address for
particular regulations. Ms. Behr turned to Section 1,
subsection (d), and explained it with the following example. If
the legislature prefers to have a special session and have staff
working on legislation, the legislature can do so. In such a
situation, legal counsel would say that the regulation review is
of a lower priority for the time period. The phrase on page 2,
line 11, allows the priorities to be set. On page 2, lines 14-
18, is [a provision] that avoids attorneys getting involved in
policy reviews. Also, the list doesn't include the revising of
regulations.
MS. BEHR moved on to Section 1, subsection (e). She explained
that the sponsor and his staff indicated the need for a dialogue
in doing regulations and only issuing something in writing if
there is a disagreement on the legal standards to be used or if
the regulation doesn't meet the standards in the legislation.
Therefore, if Legislative Legal and Research Services doesn't
believe there is a problem with the regulation, then there won't
be a written document. Furthermore, if Legislative Legal and
Research Services does raise a legal concern and the [Department
of Law] agrees that there is a legal concern and changes the
regulation in question, then there is no written document.
However, if there is a disagreement [between Legislative Legal
and Research Services and the Department of Law], there will be
a written document that is sent to the Department of Law, the
impacted state agency, the Joint Committee on Administrative
Regulation Review, the President of the Senate, and the Speaker
of the House.
Number 1805
MS. BEHR continued with Section 1, subsection (f), which
specifies that if the assigned attorney finds that the [proposed
regulation] may be inconsistent with legislative intent and thus
it would be appropriate to have additional oversight hearings,
the attorney will notify the Joint Committee on Administrative
Regulation Review, the President of the Senate, and the Speaker
of the House. She stated that the legislative oversight could
result in oversight hearings and a more detailed review by the
staff of the Joint Committee on Administrative Regulation
Review. Section 1, subsection (g), places a limit on the
Legislative Affairs Agency with regard to the release of any
information. The aforementioned addresses the fact that because
Legislative Legal and Research Services doesn't have an
attorney-client relationship with executive branch staff, there
is an argument that anything drafted by Legislative Legal and
Research Services would come out into the public forum.
However, since the intent is to have an informal dialogue and
correct errors before regulations are finalized, the goal of
Section 1, subsection (g), is that information wouldn't be
released by Legislative [Legal and Research Services].
MS. BEHR turned to Section 1, subsection (h), which was prompted
by concerns regarding whether the process has to be stopped or
suspended while waiting for the Legislative Legal and Research
Services' review. This subsection clarifies that there is no
suspension of the regulation process. Ms. Behr highlighted the
second sentence in Section 1, subsection (h), which says
"Suggestions for changes to a proposed regulation made by the
Legislative Affairs Agency are not binding on a state agency."
The aforementioned language recognizes that there is a
separation of powers issue and if [the legislature] decides to
go a different way, the legislature always has the option of
passing a statute to say that the regulation is inappropriate.
Ultimately, the legislature has power over any state regulation,
she said. Section 1, subsection (i), addresses a situation in
which the Legislative Legal and Research Services can't conduct
a legal review due to staffing issues or because of special
session priorities. In such cases, no one can challenge the
failure of the agency to conduct a legal review.
MS. BEHR pointed out that Section 1, subsection (j), doesn't
include the Board of Fisheries and the Board of Game in the
expedited priority review because of the unique processes of the
two. She highlighted that the public process of the Board of
Fisheries and the Board of Game is one in which any person can
place a proposal before the board. Section 1, subsection (k),
is merely a definitions section.
MS. BEHR moved on to Section 2, which addresses the Public
Records Act. She explained that Section 2 basically specifies
that if there is written notification or e-mail correspondence
between the Department of Law and Legislative Legal and Research
Services regarding the process, the public can't obtain a copy
of that notification through a public records request. She
likened this to the protections the legislature has with
Legislative Council. She reiterated that if a regulation still
has problems, legislation can still be passed to change it. She
then turned to Section 3, which pertains to the Administrative
Procedure Act (APA). Section 3 requires state agencies to send
the electronic documents indicated. She highlighted that the
important part of this section is that the review will begin
concurrently with the public comment period. The aforementioned
was done as a cost-containment measure. Ms. Behr noted that the
fiscal note for this legislation has decreased considerably due
to the changes encompassed in [Version S].
Number 1563
REPRESENTATIVE HOLM, speaking as the sponsor, explained that his
goal is to reestablish oversight of the rulemaking process. He
highlighted that [Version S] specifies that it is the last
iteration [of a regulation] that will go to the public for
comment. He characterized the aforementioned as a good step
toward minimizing complaints about regulations. Representative
Holm offered his belief that it's important for the legislature
to continue to maintain its legislative oversight of laws that
are drafted, including those that are promulgated by regulation.
REPRESENTATIVE HOLM then asked why the review response isn't
going to the sponsor of the legislation.
MS. BEHR recalled that one of the work drafts did include
notification of the sponsor of the legislation.
MS. COTTING informed the committee that Representative Ogg had
suggested that consultation with the legislation's sponsor isn't
permissible. She noted that Tamara Cook, Director, Legislative
Legal and Research Services, agreed and suggested that that
reference be removed.
REPRESENTATIVE OGG explained that when the courts review
regulations or statute, the written record is reviewed. The
written record reports when the intent is narrowed. However, if
the sponsor is talked to after the fact, the sponsor is looking
at it with different eyes, and so the subjectiveness of the
review process is lost.
[Chair McGuire turned the gavel over to Representative Samuels.]
MS. COTTING relayed that Ms. Cook informed her that once
legislation is submitted to Legislative Legal and Research
Services, it's no longer the property of the sponsor. However,
Ms. Cotting pointed out that nothing in this CS prohibits the
sponsor from having input in the process along the way.
Number 1353
REPRESENTATIVE HOLM moved to adopt the proposed committee
substitute (CS) for HB 424, Version 23-LS0732\S, Cook, 3/2/04,
as the work draft. There being no objection, Version S was
before the committee.
REPRESENTATIVE GRUENBERG directed attention to page 2, lines 23-
26, and page 2, lines 28-29. He noted that in the interim, when
there is an election year, things are in total disarray and the
Speaker of the House and the President of the Senate are likely
to change. He mentioned that AS 24.20.065 requires legislative
legal counsel to annually examine administrative regulations.
Therefore, there is already a process. Representative Gruenberg
recalled from his past tenure with the legislature that
Legislative Legal and Research Services annually published a
book that was provided to the House Judiciary Standing
Committee. Every year the House Judiciary Standing Committee
would have a hearing and review the cases [dealing with statute
and regulations]. Sometimes, he relayed, legislation would
result from that review. Representative Gruenberg asked if Ms.
Behr would have a problem with that provision into HB 424.
MS. BEHR noted that although she hasn't spoken with the sponsor
on this matter, it is her impression that AS 24.20.065 comes
later in the process, after the courts have reviewed [the
statute or regulation]. This [legislation], however, proposes a
review much earlier in the process. She noted her hope that the
legal opinions from Legislative Legal and Research Services
would come out during the public comment period so that the
regulations could be improved.
REPRESENTATIVE GRUENBERG inquired as to how this process would
unfold in the interim of an election year.
MS. BEHR said that sending the information to the Department of
Law is absolutely necessary because it provides legal advice to
the state agency, which needs the information in order to fix
the regulation. She pointed out that the Joint Committee on
Administrative Regulation Review is a joint committee of both
bodies and is staffed during the interim. Additionally, Ms.
Behr remarked, the President of the Senate and the Speaker of
the House are probably the two most active positions in the
legislature during the interim. With regard to including
Legislative Council, Ms. Behr said that she didn't have a legal
problem with that but would have to discuss it with the sponsor.
REPRESENTATIVE GRUENBERG turned attention to page 2, line 18,
and pointed out that often a regulation is promulgated pursuant
to several statutes. Therefore, he suggested changing the
language to refer to "the applicable statutes".
MS. BEHR remarked that the committee might want to talk with its
legislative legal counsel, which took care in reviewing the
current language to ensure that the standards [the Department of
Law uses] match the standards specified. Furthermore, there is
already statute that specifies that singular equals plural and
plural equals singular.
Number 1030
REPRESENTATIVE GRUENBERG moved Conceptual Amendment 1, as
follows:
Page 2, line 18,
Delete "statute"
Insert "applicable statutes"
REPRESENTATIVE GRUENBERG noted that he is offering Conceptual
Amendment 1 subject to review of Legislative Legal and Research
Services.
REPRESENTATIVE OGG objected.
REPRESENTATIVE HOLM said that he had no opinion on Conceptual
Amendment 1, but mentioned that per Ms. Behr's comments
Conceptual Amendment 1 seems redundant.
REPRESENTATIVE GRUENBERG indicated that the caveat regarding the
Legislative Legal and Research Services review of Conceptual
Amendment 1 includes, "if it's in order, they can change it, and
if it's redundant, they can drop it out."
REPRESENTATIVE OGG withdrew his objection.
REPRESENTATIVE SAMUELS asked whether there were any further
objections to Conceptual Amendment 1. There being none,
Conceptual Amendment 1 was adopted.
Number 0984
REPRESENTATIVE GRUENBERG turned to Amendment 2, which read
[original punctuation provided]:
Page 1, line 3: After "Act;" insert the following:
repealing obsolete provisions of law concerning
legislative annulment of regulations and review;
Page 3, Line 19: Insert new bill section 5 and
renumber sections accordingly:
*Sec. 5. AS 44.62.320 is repealed.
REPRESENTATIVE GRUENBERG informed the committee that AS
44.62.320(a) is unconstitutional per the A.L.I.V.E. Voluntary
case. Representative Gruenberg explained that originally he was
going to repeal AS 44.62.320(a). However, upon learning from
Ms. Cotting that AS 44.62.320(b) isn't observed, he decided to
repeal that subsection as well.
MS. COTTING said she'd discussed this repeal with Dave
Stancliff, Staff to Representative Gene Therriault, Chair, Joint
Committee on Administrative Regulation Review, who'd said that
repealing all of it would be fine because it's unconstitutional.
She confirmed that AS 44.62.320(b) isn't observed.
REPRESENTATIVE GRUENBERG interjected that there is a conforming
title amendment.
MS. BEHR said that she has no legal objection to Amendment 2 as
it clarifies the statutes. However, she remarked, whether this
matter should be dealt with in this legislation or in the
revisor's bill is something upon which she couldn't comment.
Number 0850
REPRESENTATIVE SAMUELS, although no formal motion was made, upon
determining that there were no objections to Amendment 2,
announced that Amendment 2 was adopted.
Number 0839
REPRESENTATIVE GRUENBERG moved to report the proposed CS for HB
424, Version 23-LS0732\S, Cook, 3/2/04, as amended, out of
committee [with individual recommendations and the accompanying
fiscal notes].
REPRESENTATIVE GARA asked about the fiscal notes.
REPRESENTATIVE HOLM relayed that one of the fiscal notes is for
$98,000.
Number 0817
REPRESENTATIVE GARA expressed the need to ensure that the
Legislative Affairs Agency has the power to perform this
regulatory review. However, he also wanted to ensure that when
the workload of Legislative Legal and Research Services is heavy
with other priorities, then reviewing regulations wouldn't be
[required]. Representative Gara suggested that that fiscal note
could be lowered to zero if, on page 2, line 12, the word
"shall" is changed to "may". The current language requires that
at least one attorney be assigned to review regulations.
REPRESENTATIVE SAMUELS pointed out that on page 1, line 6-7, the
legislation specifies, "The Legislative Affairs Agency may
review ...." Therefore, there is no [mandate] to review the
regulations and, thus, if there is no review, there would be no
attorney time used.
MS. COTTING offered her belief that with Representative Gara's
proposed language change, there would be an indeterminate fiscal
note. She said that an indeterminate fiscal note is even more
difficult for the House Finance Committee to address.
Number 0711
KARLA SCHOFIELD, Deputy Director, Legislative Administrative
Services, Legislative Affairs Agency, explained that after
reviewing the legislation with Legislative Legal and Research
Services and the executive director of the Legislative Affairs
Agency, it was determined that there isn't enough staff to
review more than perhaps one regulation a year. Because the
legislature could want a review of more than one regulation a
year, the fiscal note reflects the cost of the addition of one
attorney who could be assigned regulations review.
REPRESENTATIVE GARA maintained his belief that use of "shall" on
page 2, line 12, requires a certain amount of regulation review
when perhaps the agency should be given discretion [in
reflection of its workload].
REPRESENTATIVE SAMUELS expressed concern that if Legislative
Council says there is the need to re-prioritize, then it should
be allowed.
REPRESENTATIVE OGG opined that it is only once the "may"
language on page 1, line 7, is triggered that the mandatory
language comes into play. Furthermore, on page 2, lines 11-13,
the caveat of "Within available staff resources and priorities
set by the legislative council" comes previous to the "shall"
language. Therefore, Representative Ogg said that he didn't see
the need for Representative Gara's suggested change.
REPRESENTATIVE HOLM indicated agreement with Representative Ogg.
REPRESENTATIVE GARA withdrew his suggested change.
Number 0539
REPRESENTATIVE OGG moved to report the proposed CS for HB 424,
Version 23-LS0732\S, Cook, 3/2/04, as amended, out of committee
with individual recommendations and the accompanying fiscal
[notes]. There being no objection, CSHB 424(JUD) was reported
from the House Judiciary Standing Committee.
ADJOURNMENT
Number 0521
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 5:15 p.m.
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