03/20/2017 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HJR14 | |
| HB157 | |
| HB119 | |
| HB79 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 79 | TELECONFERENCED | |
| + | HJR 14 | TELECONFERENCED | |
| + | HB 157 | TELECONFERENCED | |
| + | HB 119 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 20, 2017
3:17 p.m.
MEMBERS PRESENT
Representative Sam Kito, Chair
Representative Adam Wool, Vice Chair
Representative Andy Josephson
Representative Louise Stutes
Representative Chris Birch
Representative Gary Knopp
Representative Colleen Sullivan-Leonard
MEMBERS ABSENT
Representative Mike Chenault (alternate)
Representative Bryce Edgmon (alternate)
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 14
Urging the Federal Communications Commission to increase the
Rural Health Care Program budget sufficiently to adjust for
inflation, advances in technology and the services available
with increased broadband, and the increase in demand for
broadband-based services and provide for any unused funds to be
carried forward to future funding years, ensuring that rural
communities in the state continue to have access to affordable
broadband telehealth services.
- MOVED HJR 14 OUT OF COMMITTEE
HOUSE BILL NO. 157
"An Act relating to the Alaska Life and Health Insurance
Guaranty Association; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 119
"An Act relating to the dividends from the Alaska Industrial
Development and Export Authority; relating to the meaning of
'mark-to-market fair value,' 'net income,' 'project or
development,' and 'unrestricted net income' for purposes of the
Alaska Industrial Development and Export Authority; and
providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 79
"An Act relating to workers' compensation; repealing the second
injury fund upon satisfaction of claims; relating to service
fees and civil penalties for the workers' safety programs and
the workers' compensation program; relating to the liability of
specified officers and members of specified business entities
for payment of workers' compensation benefits and civil
penalties; relating to civil penalties for underinsuring or
failing to insure or provide security for workers' compensation
liability; relating to preauthorization and timely payment for
medical treatment and services provided to injured employees;
relating to incorporation of reference materials in workers'
compensation regulations; relating to proceedings before the
Workers' Compensation Board; providing for methods of payment
for workers' compensation benefits; relating to the workers'
compensation benefits guaranty fund authority to claim a lien;
excluding independent contractors from workers' compensation
coverage; establishing the circumstances under which certain
nonemployee executive corporate officers and members of limited
liability companies may obtain workers' compensation coverage;
relating to the duties of injured employees to report income or
work; relating to misclassification of employees and deceptive
leasing; defining 'employee'; relating to the Workers'
Compensation Board's approval of attorney fees in a settlement
agreement; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 14
SHORT TITLE: FCC: INCREASE RURAL HEALTH CARE BUDGET
SPONSOR(s): REPRESENTATIVE(s) EDGMON
03/06/17 (H) READ THE FIRST TIME - REFERRALS
03/06/17 (H) L&C
03/15/17 (H) L&C AT 3:15 PM BARNES 124
03/15/17 (H) -- MEETING CANCELED --
03/17/17 (H) L&C AT 3:15 PM CAPITOL 106
03/17/17 (H) Heard & Held
03/17/17 (H) MINUTE(L&C)
03/20/17 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 157
SHORT TITLE: LIFE & HEALTH INSURANCE GUARANTY ASSN.
SPONSOR(s): LABOR & COMMERCE BY REQUEST
03/06/17 (H) READ THE FIRST TIME - REFERRALS
03/06/17 (H) L&C
03/13/17 (H) L&C AT 3:15 PM BARNES 124
03/13/17 (H) -- MEETING CANCELED --
03/15/17 (H) L&C AT 3:15 PM BARNES 124
03/15/17 (H) -- MEETING CANCELED --
03/20/17 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 119
SHORT TITLE: AIDEA:DIVIDEND TO STATE;INCOME;VALUATION
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/13/17 (H) READ THE FIRST TIME - REFERRALS
02/13/17 (H) L&C, FIN
03/13/17 (H) L&C AT 3:15 PM BARNES 124
03/13/17 (H) -- MEETING CANCELED --
03/20/17 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 79
SHORT TITLE: OMNIBUS WORKERS' COMPENSATION
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/25/17 (H) READ THE FIRST TIME - REFERRALS
01/25/17 (H) L&C, JUD, FIN
02/20/17 (H) L&C AT 3:15 PM BARNES 124
02/20/17 (H) Heard & Held
02/20/17 (H) MINUTE(L&C)
03/01/17 (H) L&C AT 3:15 PM BARNES 124
03/01/17 (H) <Bill Hearing Canceled>
03/06/17 (H) L&C AT 3:15 PM BARNES 124
03/06/17 (H) Heard & Held
03/06/17 (H) MINUTE(L&C)
03/08/17 (H) L&C AT 3:15 PM BARNES 124
03/08/17 (H) <Bill Hearing Canceled>
03/15/17 (H) L&C AT 3:15 PM BARNES 124
03/15/17 (H) -- MEETING CANCELED --
03/17/17 (H) L&C AT 3:15 PM CAPITOL 106
03/17/17 (H) <Bill Hearing Canceled>
03/20/17 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
TIM CLARK, Staff
Representative Bryce Edgmon
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During the hearing of HJR 14, reminded the
committee of its previous discussion.
RACHEL GEARHART
Clinical Director
Juneau Alliance for Mental Health, Inc.,
Alaska Chapter National Association of Social Workers
Juneau, Alaska
POSITION STATEMENT: During the hearing of HJR 14, offered
support for the legislation.
JENNIFER HARRISON
Eastern Aleutian Tribes
Sand Point, Alaska
POSITION STATEMENT: During the hearing of HJR 19, offered
support for the legislation.
BIANCA CARPENETTI, Staff
Representative Sam Kito
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 157 on behalf of the House
Labor and Commerce Standing Committee, Representative Kito,
chair.
LORI WING-HEIR, Director
Division of Insurance
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: During the hearing of HB 157, provided a
summary of the sectional analysis.
DONALD THOMAS, Administrator, and Counsel
Alaska Life and Health Insurance Guaranty Association
Anchorage, Alaska
POSITION STATEMENT: During the hearing of HB 157, discussed the
Alaska Life and Health Insurance Guaranty Association.
GENE THERRIAULT
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: During the hearing of HB 119, offered a
PowerPoint presentation titled, Alaska's Development Finance
Authority.
MARIE MARX, Director
Division of Workers' Compensation
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, offered a
sectional analysis of Version O.
CHARLIE YOUNG
Fairbanks, Alaska
POSITION STATEMENT: During the hearing of CSHB 70, offered
support for the legislation.
WALTER ROBINSON
Nenana, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, offered
support for the legislation.
DOUG TANSY, President
Fairbanks Central Labor Council
Fairbanks, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, offered
support for the legislation.
ERNIE EADS
Thorne Bay, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, testified.
AVES THOMPSON, Executive Director
Alaska Trucking Association (ATA)
Anchorage, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, testified.
CHRIS NETTELS, President
Geotech Alaska
Anchorage, Alaska
POSITION STATEMENT: During the hearing of CSHB 70, offered
opposition to the legislation.
MIKE McGUIRE
Anchorage, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, offered
support for the legislation.
BRONSON FRYE
Anchorage, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, offered
support for the legislation.
BRANDON McGUIRE, Representative
UA Local 367 Plumbers & Steamfitters
Anchorage, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, offered
support for the legislation.
PAT FALON
Anchorage, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, offered
support for the legislation.
RODNEY HESSON, President
Juneau Building Trades
Juneau, Alaska
POSITION STATEMENT: During the hearing of CSHB 79, offered
support for the legislation.
ACTION NARRATIVE
3:17:44 PM
CHAIR SAM KITO called the House Labor and Commerce Standing
Committee meeting to order at 3:17 p.m. Representatives Kito,
Birch, Knopp, Sullivan-Leonard, Stutes, and Wool were present at
the call to order. Representative Josephson arrived as the
meeting was in progress.
HJR 14-FCC: INCREASE RURAL HEALTH CARE BUDGET
3:18:21 PM
CHAIR KITO announced that the first order of business would be
HOUSE JOINT RESOLUTION NO. 14, Urging the Federal Communications
Commission to increase the Rural Health Care Program budget
sufficiently to adjust for inflation, advances in technology and
the services available with increased broadband, and the
increase in demand for broadband-based services and provide for
any unused funds to be carried forward to future funding years,
ensuring that rural communities in the state continue to have
access to affordable broadband telehealth services.
3:18:44 PM
TIM CLARK, Staff, Representative Bryce Edgmon, Alaska State
Legislature, advised that HJR 14 requests that the FCC raise the
budget for the Rural Health Care Universal Services Support
Program. The budget has been capped at $400 million for 20
years now, but with the increase in the exploitation of
broadband, increase of technologies available, and the increase
on the state side with using telemedicine to make more
healthcare services available at the local level, has brought
the healthcare providers close to reaching that $400 million
annual cap, and the time has come to raise that budget.
3:20:02 PM
CHAIR KITO asked whether the $400 million is nationwide.
MR. CLARK answered in the affirmative.
[Public testimony on HJR 14 had remained open from the last
hearing.]
3:20:33 PM
RACHEL GEARHART, Clinical Director, Juneau Alliance for Mental
Health, Inc., Alaska Chapter National Association of Social
Workers, advised that she is the Clinical Director for Juneau
Alliance for Mental Health, Inc., (JAMHI) which is Juneau's
community behavioral health center for adults, and it constantly
sees roughly 400 outpatients for mental health services at any
given time. The catchment area includes the small communities
of Gustavus, Tenakee Springs, and Elfin Cove, and it works with
USAK to offer tele-behavioral services to those communities, and
it also partners with the Sitka Hospital using equipment to
provide medical services to folks in those communities.
Additionally, the Juneau Alliance for Mental Health is working
with the Rural Veterans Health Access Program (RVHAP) utilizing
federal Health Resources and Services Administration (HRSA)
funds to create access to veterans across the state. Using this
tele-behavioral health equipment is extremely vital for JAMHI to
reach the many veterans spread across the state, and they are
sometimes either unwilling or unable to come into more populated
communities and access services. Particularly important for
Juneau Alliance for Mental Health (JAMHI) is that its services
are known throughout the state, and it has been able to serve
people discharged from the Alaska Psychiatric Institute after
going home to their communities. However, she said, patients
may be related to everyone at their home community clinic so
they can receive counseling from an agency in another community,
with no connection to anyone working in the clinic, using their
smart phone, or iPad. Personally, she said, as a citizen of
Juneau and a member of the mental health field, she strongly
encouraged the committee to pass this important legislation.
3:23:28 PM
JENNIFER HARRISON, Eastern Aleutian Tribes, reiterated the
testimony of the previous speaker and said its Rural Health Care
Universal. Service Support Program enables the provision of
healthcare providers in the most remote communities of Alaska
offering telehealth services that dramatically improve
(coughing). Due to telehealth behavior services they are able
to provide psychiatric services to villages with less than 100
people. Psychiatrists are rare in Alaska and child
psychiatrists are even more rare, she stressed, but Eastern
Aleutian Tribes successfully have a contract with Orion Health
to provide child psychiatric services to Alaska's smallest
villages. She reiterated the importance of this program and
offered support.
CHAIR KITO, after ascertaining no one wished to testify, closed
public testimony on HJR 14.
3:25:00 PM
REPRESENTATIVE WOOL moved to report HJR 14, Version 30-LS0422\J,
out of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, HJR 14
passed from the House Labor and Commerce Standing Committee.
3:25:23 PM
The committee took an at-ease from 3:25 p.m. to 3:30 p.m.
HB 157-LIFE & HEALTH INSURANCE GUARANTY ASSN.
3:30:05 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 157,"An Act relating to the Alaska Life and
Health Insurance Guaranty Association; and providing for an
effective date."
3:30:27 PM
BIANCA CARPENETTI, Staff, Representative Sam Kito, Alaska State
Legislature, advised that HB 157 is a House Labor and Commerce
Standing Committee bill by request of the Department of
Commerce, Community & Economic Development (DCCED). On 1/20/17,
the department presented the concept of the bill for the
committee and the committee authorized the chair to draft
legislation on behalf of the committee addressing the issues
raised by the department. The legislation updates the Alaska
Life and Health Insurance Guaranty Act and conforms to the
National Association of Insurance Commissioners, Life, and
Health Insurance Guaranty Association Model Act. It includes
the definition of an insured member of the association and the
Hospital and Medicare Service Corporations, which are entities
of active insurance companies. These changes update the Act and
improve uniformity nationwide in the administration of Life and
Health Guaranty Associations. The bill has a zero-fiscal note
from the Division of Insurance, she said.
3:32:02 PM
LORI WING-HEIR, Director, Division of Insurance, Department of
Commerce, Community & Economic Development (DCCED), advised that
HB 157 is an amendment to the Alaska Life and Health Insurance
Guaranty Association. The sectional analysis summary is mainly
conformance to the National Association of Insurance
Commissioners Model Law (NAIC), and Alaska statutes with 16
typographical errors within the statutes.
3:32:55 PM
MS. WING-HEIR began paraphrasing the sectional analysis.
3:33:08 PM
The committee took an at-ease from 3:33 p.m. to 3:34 p.m.
3:34:49 PM
MS. WING-HEIR paraphrased the sectional analysis as follows
[original punctuation provided]:
Sec. 1 AS 21.79.020(a) is amended to clarify that the
chapter applies to a nonresident who is not eligible
for coverage by a guaranty association in another
state due to the fact that the insurer was not
licensed at the time specified in the guaranty
association law of that state.
Sec. 2 AS 21.79.020(b) is amended to have AS 21.79
apply to a subscriber's contract issued by a hospital
or medical service corporation authorized under AS
21.87. The amendment also defines the terms "annuity
policy or contract" and "certificate under a direct
group life health, annuity, or supplemental policy or
contract".
3:35:09 PM
MS. WING-HEIR advised that the hospital or medical service
corporation in Alaska is Premera Blue Cross, and as was
discussed in January, it is the intent of the department to
bring Premera in to make an assessment in the event of a large
insolvency. The second portion of Sec. 2, creates consistencies
to a draft modeling in NAIC-Model.
MS. WING-HEIR advised that Sec. 3 lists exclusions to what is
not covered in this particular Guaranty Association, because
there is wording in Alaska statutes to make sure to not pick up
federal preemptions, or structured settlements or annuities that
have been sold to a third-party.
MS. WING-HEIR continued paraphrasing as follows [original
punctuation provided]:
Sec. 3 AS 21.79.020(c) is amended to make AS 21.79
inapplicable to:
1. a policy or contract providing a hospital,
medical, prescription drug, or other health care
benefit in accordance with 42 U.S.C. 1395w-21 - 1395w-
154 or federal regulations adopted under those
sections; (Medicare Choice Program and Voluntary
Prescription Drug Benefit Program)
2. a person who acquires rights to receive
payments through a structured settlement factoring
transaction as defined in 26 U.S.C. 5891(c)(3)(A),
regardless of whether the transaction occurred before
or after such section became effective.
3. structured settlement annuity benefits to
which a payee or beneficiary has transferred the payee
or beneficiary's rights in a structured settlement
factoring transaction as defined in 26 U.S.C.
5891(c)(3)(A), regardless of whether the transaction
occurred before or after 26 U.S.C. 5891(c)(3)(A)
became effective.
• Subsection (c) is also amended to add
clarifying language consistent with the National
Association of Insurance Commissioners (NAIC) Life and
Health Insurance Guaranty Association Model Act (MDL
520) (NAIC Model).
Sec. 4 AS 21.79.020(d) Non-substantive changes
are made for either consistency with the NAIC Model or
drafting conventions.
Sec. 5 AS 21.79.020(e) Non-substantive changes
made are for either consistency with the NAIC Model or
drafting conventions, and a citation correction is
made in paragraph (9).
Sec. 6 AS 21.79.025(a)
• AS 21.79.025(a)(2)(B)(ii) is amended to
clarify that the benefits for which the association
may become liable may not exceed $300,000 for long-
term care insurance as defined under AS 21.53.200.
• AS 21.79.025(a)(3) is amended to change
"contract holder" to "contract owner" to be consistent
with the NAIC Model, to clarify that the contract
refers to an unallocated annuity contract issued to or
in conjunction with a government lottery if the owner
is a resident, and to clarify that the association is
not liable to cover more than $5 million in benefits
regardless of the number of policies and contracts
held by the owner.
• AS 21.79.025(a)(4) is amended to increase
the coverage limit for net cash surrender and net cash
withdrawal values of annuities from $100,000 to
$250,000 for individuals participating in a
governmental retirement benefit plans established
under 26 U.S.C. 401, 26 U.S.C. 403(b) or 26 U.S.C. 457
and covered by an unallocated annuity contract
• AS 21.79.025(a)(5) is amended to increase
the coverage limit for net cash surrender and net cash
withdrawal values, if any, from $100,000 to $250,000
to each payee of a structured settlement annuity, or
beneficiary of the payee if the payee is deceased, in
the aggregate.
Sec. 7 AS 21.79.025(d)(2) is amended to correct a
typographical error.
Sec. 8 AS 21.79.060(a)(2) is amended to allow the
association to provide loans to assure payment of the
contractual obligations of the impaired insurer until
those obligations are guaranteed, reinsured, or
assumed.
Sec. 9 AS 21.79.060(d) AS 21.79.060(d)(1) is
amended to better track the NAIC Model organization
and language by combining existing paragraphs 1 - 3
under AS 21.79.060(d). Tracking NAIC models and
language promotes national uniformity and state-based
regulation, and ease of interpretation, compliance,
administration, enforcement, and amendment.
• AS 21.79.060(d)(1), consistent with the
addition of loans under AS 21.79.060(a)(2) under
Section 8 of the bill above, is amended to authorize
the association to utilize loans necessary to
discharge the association's duties under AS 21.79.060.
• AS 21.79.060(d)(2) is amended to better
track the NAIC Model organization and language by
placing existing subsections (e) - (j) in this
paragraph.
Sec. 10 AS 21.79.060(l) is amended to require the
association to provide a report to the liquidator
regarding the premium collected by the association if
requested by the liquidator of an insolvent insurer.
Sec. 11 AS 21.79.060(n) is amended to authorize
the association to impose a permanent policy or
contract lien under a guarantee, assumption, or
reinsurance agreement if the policy or contract lien
is approved by a court and the association finds that
the amount that may be assessed under AS 21.79 is less
than the amount needed to assure full and prompt
performance of the association's duties under the
chapter.
Sec. 12 AS 21.79.060(o) is amended to use updated
language consistent with the NAIC Model and to change
a subsection citation to conform to amendments being
made to the section.
Sec. 13 AS 21.79.060(p) is amended to change a
subsection citation to conform to amendments being
made to the section.
Sec. 14 AS 21.79.060(t) is amended to use updated
language consistent with the NAIC Model.
Sec. 15 AS 21.79.060(aa) AS 21.79.060 is amended
to add a new subsection (aa) to better track the NAIC
Model language and organization by incorporating into
the new section the provisions in existing AS
21.79.060(u) - (x).
Sec. 16 AS 21.79.070(a) is amended to require
that any assessment of association members by the
association board must be adopted by a resolution of
the board.
Sec. 17 AS 21.79.070(c) amended to increase the
amount of a non- pro rata assessment of members by the
association board from $250 per calendar year to $500
per calendar year.
Sec. 18 AS 21.79.080(c) is amended to require the
association board to adopt a plan of operation that
includes
(1) procedures for removing a member of the board
for cause, including procedures for removing a member
of the board who becomes an impair or insolvent
insurer, and
(2) policies and procedures for addressing
conflicts of interest.
Sec. 19 AS 21.79.090(c) is amended to
(1) clarify that only a final action of the board
may be appealed to the director of the division of
insurance, and
(2) increase the time by which an appeal may be
taken from 30 days to 60 days after the date the
notice of the board's action is mailed.
Sec. 20 AS 21.79.090(d) is amended to clarify
that the liquidator, rehabilitator, or conservator of
an insolvent insurer may notify all interested persons
of the effect of AS 21.79.
Sec. 21 AS 21.79.110(b) is amended to remove the
requirement that records of meetings of the
association may only be made public after an insurer
is no longer impaired or insolvent.
Sec. 22 AS 21.79.140 is amended to
(1) clarify that a cause of action may not arise
for an action or omission of the association and its
agents and employees, members of the Board of
Governors, member insurers, and agents and employees
of member insurers, and the director of the division
of insurance and the director's representatives in
performing their duties under AS 21.79, and
(2) extend the immunity to such entities'
participation in an organization of one or more state
associations of similar purposes and to that
organization and its agents or employees.
Sec. 23 AS 21.79.150 is amended to extend the
time a proceeding involving an insolvent insurer may
be stayed from 60 days to 180 days after the date of a
final order of liquidation, rehabilitation, or
conservation in order to allow the association
additional time to exercise a power or duty authorized
under AS 21.79.
Sec. 24 AS 21.79.900(5) amends the term "called"
to
(1) mean a notice has been mailed (formerly
issued) by the association to member insurers
requiring that an authorized assessment be paid within
the time set out in the notice, and
(2) include in the definition of "called" that an
authorized assessment becomes called when notice IS
mailed by the association to member insurers.
Sec. 25 AS 21.79.900(6) amends the term "contractual
obligation" to clarify that the term only applies to
an obligation under a policy, contract, or certificate
under a group policy or contract, or portion of one
for which coverage is provided under AS 21.79.020(a),
(b), (d), and (e).
Sec. 26 AS 21.79.900(7) amends the term "covered
policy" to mean a policy or contract or a portion of a
policy or contract for which coverage is provided
under AS 21.79.020(a), (b), (d) and (e).
Sec. 27 AS 21.79.900(10) amends the term "member
insurer" to include a hospital or medical service
corporation licensed under AS 21.87.
Sec. 28 AS 21.79.900(13) amends the term "plan
sponsor" to clarify that the term applies to groups of
representatives of parties similar to two or more
employers or jointly by one or more employers and one
or more employee organizations, an association,
committee, or joint board of trustees who establish or
maintain the benefit plan.
Sec. 29 AS 21.79.900(14) amends the term "premium" to
clarify that assessable premium may not be reduced on
account of AS 21.79.020(c)(4) relating to interest
limitations and AS 21.79.025(a)(2) - (5), (b), and (d)
relating to limitations with respect to one
individual, one participant, and one contract owner.
The term "premium" does not include
(1) premiums in excess of $5 million on an
unallocated annuity contract not issued under a
government retirement benefit plan or its trustee
established under 26 U.S.C. 401, 26 U/S.C. 403(b), or
26 U.S.C. 457; or
(2) with respect to multiple nongroup policies of
life insurance owned by one owner, whether the policy
holder is an individual, firm, corporation, or other
person, and whether the persons insured are officers,
managers, employees, or other persons, premiums in
excess of $5 million with respect to those policies or
contracts, regardless of the number of policies or
contracts held by the owner.
Sec. 30 AS 21.79.900(16) amends the term "resident" to
delete language considered unnecessary under state
drafting conventions.
Sec. 31 AS 21.79.900(19) amends the term "supplemental
contract" to mean a written agreement entered into for
the distribution of proceeds under life, health, or
annuity policy or contract benefits.
Sec. 32 AS 21.79.900 is amended to add new paragraphs
to define the terms "benefit plan", "election date",
and "extra contractual claim". The section is also
amended to define "published monthly average", a term
previously defined under AS 21.79.020(f).
Sec. 33 AS 21.87.340 is amended to add AS 21.79
to the list of statutory provisions which apply to
hospital and medical service corporations.
Sec. 34 Repeals the following provisions
• AS 21.79.020(f) defining "published
monthly average" as the term definition is placed
under AS 21.79.900.
• AS 21.060(c) is repealed as the provision
no longer is in the NAIC Model.
• AS 21.79.060(e) - (j) are repealed as
these provisions have been relocated to AS
21.79.060(d).
• AS 21.79.060(u) - (x) are repealed as
these provisions have been relocated to
AS21.79.060(aa).
• AS 21.79.110(e) is repealed as unnecessary
because the state has adopted Section 602 of the NAIC
Insurers Receivership Model Act (MDL 555)(AS
21.78.325).
Sec. 35 Provides for an uncodified new section
outlining the timing of when the director may adopt
regulations.
Sec. 36 Provides that section 36 of the Act takes
effect immediately under AS 01.10.070(c).
Sec. 37 Provides that except as provided in section 37
of the Act, the Act takes effect July 1, 2017.
3:42:18 PM
REPRESENTATIVE BIRCH requested a "two-minute elevator speech as
to what this actually does."
MS. WING-HEIER responded there are two Guaranty Associations in
Alaska: property and casualty, which include workers'
compensation, and life and health which does life and health
annuities. In the event an entity is a member insurer in the
State of Alaska, and holds a Certificate of Authority to Conduct
Business, it is automatically a member insurer. There is life
and there is health (coughing) within the association there are
two categories of insurers. In the event the company becomes
insolvent and cannot pay claims to its policyholders, the
association steps in, makes assessments to its member insurers,
and pays out the claims. She noted that this has happened in
both the property and casualty, and the life and health
associations.
3:43:32 PM
REPRESENTATIVE BIRCH said he noticed some of the benefit
obligations went from $100,000 to $250,000, a two and one-half
times multiplier on a benefit. This implies, he said, there is
an additional cost to someone because if the benefit is going
up, the premium would go up for someone. He asked what type of
budget this operates under, how many insurers there are, how
many are insured, and whether this involves 10 percent of the
state's population.
MS. WING-HEIER answered that there are approximately 670-member
insurers in the association. She noted that assessments are not
made unless there is an insolvency or liquidation for which
claims must be paid. The limits were raised because it had been
$100,000 for as long as the association had existed, and due to
trending and the need for the policies to perform, the limits
needed to be raised, and the higher limits are being paid in
other states. She explained that on those two or three
categories, the limits were raised from $100,000 to $250,000.
She said that $300,000 was inserted in long-term care because
the statute was unclear, and the division wanted to be certain
long-term care policies were capped at $300,000.
REPRESENTATIVE BIRCH asked what the current operating budget is.
MS. WING-HEIER replied that the association operates on a
budget, not the division. She reiterated that in the event
there is a need, the association accesses the member insurer up
to 2 percent of the premiums of that insurer. Quite honestly,
she said, the association may put the responsibility back on
policyholders depending upon who they are, or they may just pay
it directly.
3:46:15 PM
DONALD THOMAS, Administrator and Counsel, Alaska Life and Health
Insurance Guaranty Association, advised he has been the
administrator and counsel for Alaska Life and Health Insurance
Guaranty Association since 1996.
3:46:28 PM
REPRESENTATIVE BIRCH noted the jump in benefits, and said that
since the state has no liability, his primary interest is the
impact it may have on potential constituents. He asked that
with 670 insurers, what type of an annual budget he has and how
it is managed and maintained.
MR. THOMAS responded that the administrative budget is
approximately $160,000, just to participate primarily with the
national organization. The budget is funded through the Class A
assessments which have been capped at $250,000 since the 1990
inception of the Act. Given the number of members under that
cap, he said he is currently asking that the amount be increased
to $500,000. The Alaska Life and Health Insurance Guaranty
Association tries to avoid extra expenses and it tries to
perform a Class A assessment every couple of years, rather than
the expense of every year. The other side of the equation is
that because Alaska has no domestic life or health insurer,
every time a member insurer is declared insolvent, there is an
insolvency affecting Alaska policyholders, a member insurer
participates on a multi-state basis. The association works
within a taskforce among the various states to determine how the
states will collectively address the insolvency. Actuaries'
determine the share of that cost for each state and the
association receives a bill, the association accesses its
members up to statutory limits. The association does not carry
cash on hand, he advised, and it collects that money once the
insolvency had been declared, under the statute, it sends out a
30-day notice to member insurers to pay the association, and
that money is then sent to the proper location to affect the
plans of the multi-state response to the insolvency. He related
that that is one of the real reasons HB 157 [should become law]
so Alaska can attain functional consistency with the other
states of which it is always involved. He advised that 44
states have already adopted the amendments to the National
Association of Insurance Commissioners Model Law (NAIC) which
was substantially amended in 2009. Alaska is one of two states
west of Ohio that has yet to adopt these amendments, which is a
primary reason the Board of Governors of the Alaska Life and
Health Insurance Guaranty Association supports passage of HB
157, he said.
3:50:28 PM
REPRESENTATIVE KNOPP offered surprise that not many companies
suffer insolvency and that this bill is truly about consumer
protection. He asked whether the director had received any type
of opposition or comment from Premera Blue Cross, Blue Shield on
this legislation.
MS. WING-HEIER responded that the only comment she received was
from National Blue Cross, Blue Shield Association out of
Washington, D.C., was to remind her that the National
Association of Insurance Commissioners and the National
Coalition of Insurance Legislators are working on model
legislation to address long-term care, which would bring life
insurers and health insurers together to address long-term care.
"Currently, long-term care Penn Treaty is a long-term care
insurer insolvency is just health insurers," she said. There
are two accounts in the association, she reiterated, life and
health, and currently Penn Treaty will be paid out of health.
This model legislation is addressed because long-term care is
huge nationwide, it would allow for insolvencies to call from
both sets of insurers and not just in Alaska; it would have to
adopt that legislation if it ever comes into fruition. She
reiterated that the National Blue Cross, Blue Shield Association
out of Washington, D.C., reminded her of the potential model
act, and that it hoped "we would support it because there is
such a large player in the medical field here and it would be --
(indisc.) long term care, not Penn Treaty, but if there were
another one going forward that they would be expected to pay a
pretty big part of the assessment. And, they would hope we
would support bringing in the life insurers in that model
legislation and into Alaska."
REPRESENTATIVE KNOPP surmised there was no strong opposition to
HB 157.
3:53:47 PM
CHAIR KITO advised that public testimony would be left open.
HB 119-AIDEA:DIVIDEND TO STATE;INCOME;VALUATION
3:54:07 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 119, "An Act relating to the dividends from the
Alaska Industrial Development and Export Authority; relating to
the meaning of 'mark-to-market fair value,' 'net income,'
'project or development,' and 'unrestricted net income' for
purposes of the Alaska Industrial Development and Export
Authority; and providing for an effective date."
3:54:26 PM
The committee took an at-ease from 3:54 p.m. to 3:55 p.m.
3:55:51 PM
GENE THERRIAULT, Alaska Industrial Development and Export
Authority (AIDEA), advised that the PowerPoint presentation
titled, "Alaska's Development Finance Authority" discusses
problems corrected by this legislation in the calculation of the
Alaska Industrial Development and Export Authority (AIDEA)
dividend. He turned to slide 2, and explained that AIDEA is a
completely owned entity of the State of Alaska that helps with
economic investment in the state. It was capitalized in the
1980s with approximately $350 million worth of money, and AIDEA
has since paid back approximately $392 million to the state
treasury, he said.
3:57:21 PM
MR. THERRIAULT turned to slide 3, and explained that HB 119
would update statutes dictating how the dividend is calculated,
or the number taken into the dividend calculation to determine
the size of the check written to the state's general fund each
year.
MR. THERRIAULT turned to slide 4, and noted that this slide
references the calculation of the dividend, and AIDEA wants the
dividend to be based upon real transactions that either provides
or deducts a dollar from the AIDEA treasury. Also, he
explained, depreciation on assets is taken into account and
AIDEA would like to continue having those come into account
(coughing) taking into the dividend. Except, he noted, new
issues are being triggered by federal accounting rules which
cause these "mark-to-market adjustments" which, he described,
are paper adjustments that must be done in order to get the
audited financial statement. Alaska Industrial Development and
Export Authority (AIDEA), he said, will still do all of those
things in order to receive its audited financial statement, but
the legislators "get to then tell AIDEA" which of those papers
adjustments it backs out to get back to pure cash and then put
that number into the dividend calculation.
3:58:48 PM
MR. THERRIAULT turned to slide 5, and advised that the slide is
a summation of the existing dividend language. AIDEA is listed
on the second block of text, "you are supposed to take" a number
into the dividend calculation and share 25 percent to 50 percent
of the net income with the state general fund on a yearly basis.
The difficulty is, he explained, in that last block of text the
definition of net income refers to the net income as shown in
the audited financial statement under general accepted
accounting principles. He pointed out that, that is now the
area where the uncertainty comes into the calculation due to a
number of paper adjustments that must be made in order to get
that audited financial statement.
MR. THERRIAULT turned to slide 6-7, and offered that the first
problem AIDEA is trying to correct is called the "market value
adjustments." Under the "Gap Rules," a snapshot must be taken
and "book what your market value is on certain items that are in
your portfolio." When those paper adjustments are made it has
an impact on the calculation of the AIDEA dividend. Sometimes
it over-inflates the dividend and suggests that AIDEA should pay
a larger dividend on cash it did not actually make, and
sometimes it under reports net income and suggests AIDEA should
pay a lower dividend than the cash it actually has to make that
calculation ensure that money. He reiterated that AIDEA is
trying to clean up the statutes so there is clear direction to
back out those paper adjustments and get back to cash on hand
before it calculates the dividend. He explained that slide 7
depicts a snapshot of the front sheet from a personal income
tax, and for instance, the person has $100,000 of real wages, an
investment account, rental property, and a 401K, which
calculates to $109,000. The person would write a check to the
federal government for a percentage of that real cash income
that person achieved within the year.
4:01:45 PM
MR. THERRIAULT turned to slides 9-10, and said, however, if that
person had to follow all of the new Governmental Accounting
Standards Board (GASB) rules as AIDEA must in order to get its
audited financial statement, the person would have to "book
these following adjustments." He turned to slide 10, line 11,
"GASB 31" and explained the rule has been in place for some time
which causes AIDEA to basically book at the end of the fiscal
year, take a snapshot of securities it has within its overall
investment portfolio, and if the securities have appreciated
even though the enterprise has not sold them and captured that
cash, it has to book that increase in estimated value as if in
fact it achieved the cash and had sold those securities at the
end of the fiscal year. He said that line 11 suggests that if a
person had a portfolio of $250,000 and the market is up by 10
percent, that would cause a person to book an extra $25,000 of
income even though they did not sell those securities and did
not really achieve that income.
4:02:50 PM
MR. THERRIAULT referred to slide 10, line 16, "GASB rule 68" and
advised that is an adjustment for retirement or 401K. In the
event a person has investments in a 401K and the market is up,
even though the person had not sold those investments and
actually captured that, the person would book that as if it were
true income. The analogy for the state is "every year AIDEA, as
a state enterprise, has an estimation of their share of the
unfunded obligation for retirement." The enterprise then pays a
portion of money for their share, but it generally is less than
that snapshot of their share of the unfunded obligation for the
state. He advised that AIDEA would like to book those things
that actually are an increase or decrement to true income, but
back out the paper adjustments so it does not artificially over-
inflate or under-inflate the number taken into the dividend
calculation.
MR. THERRIAULT referred to slide 10, line 20a, "GASB rule 75,"
and advised that it is an adjustment for post-employment
benefits, and for the state it would be an estimation of future
health care benefits owed for state employees. For the
individual, it would cause them to actually estimate the value
of their medical coverage in the future and actually capture
that as if it were cash the person could count on right on, and
actually put it on their tax form.
4:04:41 PM
MR. THERRIAULT turned to slide 11, and said that basically,
AIDEA is asking with the passage of this legislation the paper
adjustments ...
4:04:54 PM
REPRESENTATIVE BIRCH referred to slide 10, and opined that the
"mark to market" in the banking industry was when the market was
going down, not up. Basically, he said, in the event a person
has major losses that are not yet realized and have an
obligation, the person may be in a position to make a payment,
but might not want to make a payment because they need to offset
those losses at some point.
MR. THERRIAULT answered that these adjustments are both on the
upside and downside, and the soon to be discussed slides will
show that the swings have been on both the upside of true net
income and to the downside. Alaska Industrial Development and
Export Authority (AIDEA) is trying to back them out on both
sides, get back to true net income, and then take that number
into the dividend calculation.
MR. THERRIAULT turned to slide 11, and explained that with
regard to the "fixed to the mark-to-market adjustments," AIDEA
would like to back out those paper adjustments, get back to the
true $109,000 of real income this individual made, and that is
what they would write their check to the United States
government, or AIDEA would write its check to the state general
fund treasury to share a portion of the true net income it made
in a calendar year.
4:06:39 PM
MR. THERRIAULT turned to slides 12-13, and explained that the
graph on slide 12 is AIDEA's net income over the years and it
moves up and down depending upon the economy and AIDEA's
investments. There is some volatility in the actual cash AIDEA
takes into the dividend calculation. Except, he said, slide 13
has graphed "GASB rule 31," which has been in place for a number
of years, against the true net income. He referred to the
gold/yellow line and said it has periodically spiked the net
income up in some years and has depressed it artificially down
in other years. Early on, he pointed out, the ups and downs
were not as pronounced, but in the most recent years the "zigs
and zags" up above and below the (coughing) line are getting a
bit more pronounced. He reiterated that AIDEA would like to
back those paper adjustments out, get to the green line, and pay
the dividend on that amount.
4:07:45 PM
MR. THERRIAULT turned to slide 14-15, and advised that the
second problem is the "dividend penalty" which results in times
when AIDEA receives money to investigate a project from an
outside source and invests that money when looking at a project.
Although, periodically, AIDEA may determines that a project
would not go forward, and on those occasions, the money from an
outside source, not from within AIDEA's investment portfolio,
must be written off. On those occasions, it would be taken as a
deduction against net income in that particular year. In the
event AIDEA had to show that in the dividend calculation, it
would artificially suppress the dividend in that year, and
Alaska Industrial Development and Export Authority (AIDEA)
believes it is not fair to the state treasury and; therefore,
would like to also back out those periodic, infrequent,
adjustments. He reiterated that problem 2 is a source of
outside money being written off, and if in that year AIDEA was
going to pay a dividend of 50 percent of its net income, that
means it is taking away fifty cents of a dollar that would have
been shared with the state treasury, thereby, making it a
dividend penalty. Previously, he noted, when AIDEA started
getting money from outside sources to investigate projects, the
legislature advised "as that money comes into AIDEA and gets
shown as an increase in net income to bring the money on the
books, that AIDEA was to ignore that money coming onto the books
because if it didn't, it would artificially spike net income in
that year, and then when we got to the end of year we would be
trying to then share back a 50 percent of the money that was
brought to us from an outside entity." He related that the
legislature previously said, "No, that's not what we intend."
If the state legislature gives AIDEA $1 million for a project,
it does not expect AIDEA to share one-half of that money back
with the state at the end of the year. The legislature gave the
money to AIDEA for a specific project, so AIDEA should bring it
onto the books, and shouldn't artificially inflate income in the
year that you bring it onto the books.
MR. THERRIAULT stated that the legislature did not anticipate
periodically having investigated a project. Then AIDEA might
have turned a portion of that $1 million into an asset, and now
it is carrying that work product on the books. In the event the
project did not go forward, ultimately, AIDEA must write that
asset off the books. In the event AIDEA did not also have the
right to exclude it when it comes off the books, the state would
pay a penalty for having investigated that project.
4:10:55 PM
MR. THERRIAULT turned to slide 16, and explained that the slide
takes the previous "mark-to-market adjustment" graph and added
on the dividend penalty. The numbers AIDEA used on slide 16, as
an example, are the funds given to AIDEA to investigate the
Amber Road. That project is currently going forward, and AIDEA
was given approximately $9.3 million to investigate the Amber
Road project. In the event AIDEA invested all of that money
doing work, such as an environment impact statement (EIS),
applications for permits, and turned that money all into assets,
except that ultimately the project did not go forward, AIDEA
would be carrying $9.3 million worth of investment on its books
in assets and at some point, would have to write that value off
of its books. In the event this all happened in one year and
AIDEA was anticipating (coughing) 50 percent of its net income
to the state treasury, that deduction of the $9.3 million would
artificially suppress AIDEA's dividend in that particular year
by $407 million. He advised that AIDEA was previously told that
when it receives money from an outside source to investigate a
project, AIDEA should disregard it and not over-inflate the
dividend in that year. The Alaska Industrial Development and
Export Authority (AIDEA) is basically asking that periodically,
if a dollar from such a source is ever written off the books
that AIDEA does not artificially suppress the AIDEA dividend in
that year.
4:13:10 PM
MR. THERRIAULT turned to slides 17-18, and reiterated that those
are the two issues AIDEA is trying to correct with this
legislation as it wants to remove those mark-to-market valuation
paper adjustments. Alaska Industrial Development and Export
Authority (AIDEA) will continue to "do all of those things" to
get its audited financial statement, but the legislature "gets
to tell AIDEA" what number to take into the dividend
calculation. Due to the dividend penalty, AIDEA is trying to
"levelize" the two sides of a dollar coming from an outside
source, wherein the money is eventually written off, and to not
artificially suppress the dividend in those years.
4:14:04 PM
REPRESENTATIVE KNOPP offered that he understands the intent of
this legislation, but Mr. Therriault was asking the legislature
to exempt it from the GASB rules, which makes it a policy call.
He related that his discomfort is not complying, because every
municipality in the state is complying and following the
standards.
MR. THERRIAULT responded that AIDEA would continue to follow all
of the GASB rules to receive its audited financial statement,
except there are these rules that push the net income number
around. He asked whether the committee directs AIDEA to take
the number incorporating all of those artificial ups and downs
into the dividend calculation, or whether it directs AIDEA to
back out the paper adjustments and take the true net income
number into the dividend calculation before it calculates the
check to the state treasury.
CHAIR KITO opened public testimony on HB 119, and hearing no one
that wanted to testify, left public testimony open.
4:16:46 PM
MR. THERRIAULT referred to page 2 of the color-coded copy of HB
119, and explained it is where the adjustment to the definition
on net income takes place. In response to Representative
Knopp's question, he referred to page 2, line 3, the red box
around the word "excluding," and explained that word is already
in the statutory definition. He said he believes that
highlights that previous policymakers realized there were some
things that should be backed out of the income number before
calculating the dividend. However, he noted, the last time the
adjustment was made, some of these new federal rules were not
anticipated as to how they would push around the adjusted
number. Both in the definition of net income - top portion of
page 2, and unrestricted net income - bottom of page 2, the word
"excluding" already exists in the statute.
MR. THERRIAULT explained that at the beginning page 2, line 6,
the added blue language makes adjustments for sources of non-
AIDEA revolving loan funds, and in the event those monies are
ever written off there will not be a dividend penalty. He
explained, that is where that problem is inserted into the
exclusions.
MR. THERRIAULT noted that the pink language is the mark-to-
market fair market valuation based accounting entries issues.
In the event there are unsold marketable securities and the
market is up, suggesting a paper gain, AIDEA asks to exclude
those paper gains or losses prior to beginning the dividend
calculation. He referred to the green highlighted language, and
explained they are the items adjusted for future retirement
obligations paper adjustments.
[HB 119 was held over.]
HB 79-OMNIBUS WORKERS' COMPENSATION
4:19:37 PM
CHAIR KITO announced that the final order of business would be
HOUSE BILL NO. 79, "An Act relating to workers' compensation;
repealing the second injury fund upon satisfaction of claims;
relating to service fees and civil penalties for the workers'
safety programs and the workers' compensation program; relating
to the liability of specified officers and members of specified
business entities for payment of workers' compensation benefits
and civil penalties; relating to civil penalties for
underinsuring or failing to insure or provide security for
workers' compensation liability; relating to preauthorization
and timely payment for medical treatment and services provided
to injured employees; relating to incorporation of reference
materials in workers' compensation regulations; relating to
proceedings before the Workers' Compensation Board; providing
for methods of payment for workers' compensation benefits;
relating to the workers' compensation benefits guaranty fund
authority to claim a lien; excluding independent contractors
from workers' compensation coverage; establishing the
circumstances under which certain nonemployee executive
corporate officers and members of limited liability companies
may obtain workers' compensation coverage; relating to the
duties of injured employees to report income or work; relating
to misclassification of employees and deceptive leasing;
defining 'employee'; relating to the Workers' Compensation
Board's approval of attorney fees in a settlement agreement; and
providing for an effective date."
4:20:00 PM
REPRESENTATIVE JOSEPHSON moved to adopt CSHB 79, Version 30-
GH1789\O as the working document. There being no objection,
Version O was before the committee.
4:20:23 PM
REPRESENTATIVE BIRCH referred to the Alaska Truckers Association
(ATA) proposed amendments and asked whether they found their way
into Version O.
CHAIR KITO advised that the department will explain the changes
in Version O and will address Representative Birch's question.
4:20:54 PM
MARIE MARX, Director, Division of Workers' Compensation,
Department of Labor & Workforce Development (DLWD), explained
that the changes are from Version D to Version O, and most of it
is clean up. Ms. Marx paraphrased from a document entitled,
"Summary of Changes ver D to ver O 3.14.17," included in the
committee packet as follows:
Page 2 and 21-22, Secs. 2, 4, 40, 45, and 46: Deletes
sections 2, 4, 40, 45 and 46 relating to second injury
fund transition. This allows the legislature to amend
the statutes to repeal the second injury fund after it
has been notified that all second injury fund claims
have been satisfied, rather than having the repeal
occur automatically.
4:22:03 PM
The committee took a brief at ease.
4:22:30 PM
MS. MARX explained that beginning on CSHB 79, page 2, Version O,
sections are deleted relating to the second injury fund repeal:
Sections 2, 4, 40, 45 in the previous Version D are not in
Version O. She reiterated that these sections dealt with second
injury fund statutes that would have automatically been repealed
when the bill passed. She explained that the Alaska Legislative
Council indicated that it was in the best interests of the
legislature, to let the legislature decide to repeal once all
claims had been paid. She explained that Version O did not
changed that, and on July 1, 2018, acceptance of new claims for
the second injury fund would end. She further explained that
the existing liability would be paid off over time and the fund
balance would continue until those claims were paid off. Down
the road, after all claims had been paid, the balance would go
to the general fund. She noted that most of the claims are
permanent total disability and paid through the life of the
claimant. It is all tied to the "first amendment" allowing the
legislature to amend the statutes that repeal the second injury
fund, rather than the appeal occurring automatically.
4:24:22 PM
MS. MARX continued paraphrasing as follows:
Page 11, Line 4, Sec. 21: Technical correction
changing "payment or compensation" to "payment of
compensation."
Page 11, Lines 25-26, Sec. 22: Inserts "When the
employer files a notice of controversion" to the
sentence, "The Division shall notify the employee if
an employer controverts the employee's right to
compensation."
Page 12, Lines 13-14, Sec, 23: Deletes "to the person
owed or to be reimbursed." Lines 28-31 describe more
specifically to whom the additional amount should be
paid. Stating it twice in the same subsection may open
it to inconsistent interpretations.
4:25:41 PM
MS. MARX, in response to Representative Birch's question,
advised that one of the stakeholder groups raised the issue in
Version D, referring to business licenses, permits, and
certifications. She opined that after further discussion and
reflection, it was decided that the idea is better captured in
the current language, which is that an independent contractor is
a business that has all of the business, trade, or professional,
licenses required by law. She explained that change was made
after a discussion with the stakeholder groups.
MS. MARX, in response to Representative Birch, agreed that it
was the entire section.
MS. MARX continued paraphrasing as follows:
Page 14, Lines 17-18, Sec. 26: Technical correction
reorganizing sentence so "AS 23.30.082" appears after
"fund" instead of "guaranty."
Page 16, Lines 14-16, Sec. 28: Deletes "has a license,
permit, or certification" and inserts, "has all
business, trade, or professional licenses."
Page 19, Line 26, Sec. 33: Technical correction
deleting "the."
Page 20, Line 7, Sec. 34 and Page 20, Line 28, Sec.
35: Technical correction deleting "and" and inserting
a comma.
Page 21, Line 18, Sec. 39: Technical correction
changing AS 23.30.080(8) to AS 23.30.080(g).
Page 21, Line 19, Sec. 39: Technical correction
changing AS 23.30.080(n}-(k) to AS 23 .30.080(h}-(k).
Page 21, Line 26, Sec. 39: Inserts "AS 23.30.1 lO(d),
as repealed and reenacted by sec. 17 of this Act."
This clarifies the new provision relating to
representation applies to new claims filed on or after
the effective date of the bill.
4:27:26 PM
MS. MARX advised that stakeholder groups raised the issue about
the representation provision because the previous version of the
bill would not permit non-attorneys from representing parties
before the board because non-attorneys are not bound by ethical
and professional rules. The question was raised as to whether
that applies to current ongoing claims, and she clarified that
it would apply only to new claims filed after the effective date
of this Act. She continued paraphrasing from the above-
mentioned document as follows:
Pages 21, Line 31-Page 22, Line 5, Sec. 39: Inserts a
new subsection (c) providing the new executive officer
and business entity member provisions apply to an
insurance policy or contract entered into or renewed
on or after the effective date of sec. 29, which
August 1, 2018.
MS. MARX explained that another concern raised by stakeholder
groups was with regard to rules relating to executive officers
as employees. Currently, the insurance policies may, or may
not, cover the executive officers and the concern was raised
whether the executive officers would be employees under HB 79.
Stakeholder groups also expressed concern for how insurance
policies would be affected if executive officers suddenly became
employees when they were not, or became "not employees" when
they previously were. She expressed that in order to be certain
there was not a lot of litigation or ambiguity created over
"what insurance policy these new rules regarding employee status
apply to, we made it very clear that, and we checked with the
Division of Insurance to make sure there was no concerns there,
but to make sure that the rules regarding who was an employee
and therefore who needs to be covered under their insurance
policy applies at a delayed effective date." She noted that the
bill would only apply to new policies and renewals -- not
existing ones. The division will give insurance companies one
year to update their forms, make sure they get the word out to
their new policyholders that says "you may not have needed
coverage before, but you need it now. Or, they may tell these
executive officers, you had to have coverage before, you do not
need it now. And, let them opt in if they want to opt in."
MS. MARX continued paraphrasing as follows:
Page 22, Lines 8-11, Sec. 40: Deletes "The balance of
the second injury fund created by former AS 23.30.040
shall be transferred to the general fund on the
effective date of this section" and inserts, "Subject
to appropriation, the balance of the second injury
fund created under AS 23.30.040 lapses into the
general fund when all liability for accepted claims
under AS 23.30.205 to the second injury fund and
claims ordered to be paid from that fund have been
satisfied."
Page 22, Line 18, Sec. 43: Provides Sec. 30 takes
effect July 1, 2018.
4:30:57 PM
MS. MARX referred to page 22, line [19], and said the effective
date of July 1, 2018 is for second injury fund questionnaires.
She explained that the rest of the statutes were repealed.
Except, the only statute tied to this Act that will continue to
have an effective date and go into effect at the same time, is
the second injury questionnaire an employer gives to an employee
for second injury fund claim purposes. She reiterated that on
July 1, 2018, no new claims will be accepted.
MS. MARX continued paraphrasing as follows:
Page 22, Line 20, Sec. 44: Provides Sec. 29 takes
effect August 1, 2018.
4:32:29 PM
REPRESENTATIVE JOSEPHSON surmised that an element of the second
injury fund was designed to incentivize employment of people who
were previously injured. He asked why it is acceptable to end
the second injury fund.
MS. MARX responded that when second injury funds were created,
that prior to offering an individual a job, it was permissible
to ask whether the individual had a disability. Subsequent to
the passage of the Americans with Disabilities Act (ADA), that
question became unlawful. Therefore, she said, the incentive to
hire people with pre-existing disabilities no longer exists,
although they can be asked whether they have any limitations
that would keep them from performing the essential functions of
the job without accommodations. The purpose of the fund is
served by the ADA, and the second injury fund does not now have
an ongoing purpose, she explained.
4:34:39 PM
CHAIR KITO opened public testimony on HB 79.
4:35:04 PM
CHARLIE YOUNG advised that he is a member of the International
Union of Painters and Allied Trades, a 28-year painter and
drywall finisher, and a life-long Alaskan. He said he supports
CSHB 79, and specifically the section pertaining to
misclassified workers and employees who call themselves
independent contractors. He said he has never seen the abuse of
misclassification so high as currently, and has always worked
for painting contractors who played by the rules, paid wages,
taxes, and the insurance an employee deserves. When a
contractor hires individuals as independent contractors, the
contractor is able to avoid paying payroll taxes, workers'
compensation insurance, and unemployment insurance on each
worker; therefore, the contractor can complete the job for much
less money. When projects are bid with this type of practice
used, the cheating contractors have the distinct advantage over
contractors who follow all of the rules. More often these
cheating contractors are winning the bids on projects as he
watches the amount of work for himself become less and less
every year. He asked the committee to please support CSHB 70
for the honest contractors and employees working in the building
trades across this great state.
4:37:01 PM
WALTER ROBINSON advised that he is with the International
Brotherhood of Electrical Workers Local 1547, and supports CSHB
79 because this bill addresses several problems, and helps
streamline the process for the timelines in which an employee
receives wage replacement and treatment for an injury. He said
he has personally witnessed the stress and hardship workplace
injuries put on the family dealing with the current lengthy
process, and this bill creates a more efficient process for both
the employer and employee. This legislation also addresses the
large problem of the misclassification of an employee as an
independent contractor and closes the loophole for unethical
employers.
4:38:54 PM
DOUG TANSY, President, Fairbanks Central Labor Council, advised
he is testifying in support of CSHB 79 because it protects
workers and employers who comply with the workers compensation
laws by clearly defining which workers are legally independent
contractors. He commented that employers misclassify workers as
independent contractors for financial reasons, while workers are
denied their rights under minimum wage, overtime, and other
workplace protection such as, increased tax burdens, no overtime
pay, and the workers are often ineligible for unemployment
insurance and disability compensation. Misclassification also
causes federal, state, and local government to suffer revenue
losses as employers circumvent their tax obligations.
Generally, he said, the workers must "pick up the tab for that"
so the cost is shifted from unscrupulous employers to the
worker. He asked that the committee pass this legislation.
4:40:35 PM
ERNIE EADS advised that he owns a small sawmill and is
testifying as to the misclassification of independent
contractors. He said he is the product of laws not being
enforced or being unenforceable, including workers' compensation
"in a big way," and he has a 35-year history of owning above-
board businesses, including sawmills. Due to the failed logging
and lumber business in the late 1980s in Oregon, he clearly
understands the wrath of the Internal Revenue Service (IRS),
Oregon Department of Revenue, and workers' compensation. He
then discussed the timber industry in the State of Alaska and
the effects of unethical employers. In approximately 2000-2001,
he said he began asking the Division of Workers' Compensation to
come to Prince of Wales Island and assist those who were trying
to legally operate a business in Alaska. He was advised that
the Division of Workers' Compensation had not been allotted
travel dollars and was shorthanded, yet the employees were
suffering. He said he was responsible in providing a decent
living and protection for his employees and their families for a
long time.
4:49:49 PM
AVES THOMPSON, Executive Director, Alaska Trucking Association
(ATA), said that during his testimony before this committee on
February 20, 2017, the Alaska Trucking Association (ATA) was
generally in support of the legislation. However, there were
concerns about specific provisions dealing with the definition
of independent contractors, or "owner/operators." The Alaska
Trucking Association (ATA) has been working with the Department
of Labor & Workforce Development (DLWD) to resolve these issues,
and he apologized to many individuals for the miscommunication
of ATA which had occurred.
MR. THOMPSON advised that ATA maintains its objections to the
following: page 16, lines 1-6, concerning direction and control,
and he noted that ATA has proposed language to clarify what
constitutes control; page 16, lines 7-9, responsibility for
expenses, and ATA has proposed language to clarify that
responsibility; page 16, lines 17-27, tax payments
responsibility, and ATA has proposed language clarifying that
the independent contractor is responsible pursuant to the
contract; page 17, lines 1-3, business location, and ATA has
proposed language clarifying the definition of a business
location; and page 17, lines 4-6, advertising (coughing), and
ATA has proposed language clarifying this responsibility. He
advised that more detail can be found within the package he
forwarded to the committee earlier last week. The proposed
amendments are not set in stone, he described, and ATA is
willing and able to continue discussions on compromise
positions. He said that while ATA is supportive of the bill, it
maintains its objections and hopes to find a workable solution.
The ATA has received assurances from the DLWD that it is willing
to work with ATA in the next committee of referral to resolve
its concerns. It is ATA's intent is to help develop definitions
that can be used within the Divisions of Workers' Compensation,
Wage and Hour, and Unemployment Insurance.
4:52:44 PM
CHAIR KITO commented that the committee is trying to figure out
how to move the bills in the House Labor and Commerce Standing
Committee from committee and make their way to the Senate. The
intent, he said, is to keep this bill moving and not hold it
over the summer.
4:53:35 PM
MR. THOMPSON stressed that ATA does not intend to slow down the
bill because DLWD agreed to work with ATA in the next committee
of referral. He said, ATA has no objection to moving the bill
out of the House Labor and Commerce Standing Committee.
4:54:15 PM
CHRIS NETTELS, President, Geotech Alaska, advised that he is
testifying on behalf of his company and the National Federation
of Independent Businesses (NFIB). Currently, NFIB cannot
support this legislation, specifically the definition of
contract worker and employee. He opined that as an employer it
is too detailed for the purposes of geophysical and geological
consulting, and he is afraid some these requirements could
negatively impact the ability to hire consultants and/or
professional contractors. In particular, he said that he
reviewed the Alaska Trucking Association (ATA) proposed changes
and language, and said there is the danger of unintended
consequences in the language. He referred to the testimonies
which said, "these criminals and these crooks are doing this and
that, and hiring people and calling them contractors," and he
asked what rules these people are breaking. He said they are
breaking federal IRS rules, and those federal IRS rules have
"common law rules" based on three parts: behavioral, financial,
and type of relationship. Currently, the way the language is
written in this legislation, the regulations are all over the
place. He asked to put the regulations in the same sort of
categories as the IRS regulations.
MR. NETTELS referenced the IRS' policy as to how to decide
whether someone is a contractor or employee, and he explained as
follows:
Behavioral. Does the company control or have the
right to control what the worker does and how the
worker does his or her job? I believe there is
language like that in this house bill right now.
Financial. Are the business aspects of the worker's
job controlled by the payer? These include things
like how the worker is paid, whether expenses are
reimbursed, who provides tools, supplies, et cetra.
Again, I believe that language is in this bill.
Type of relationship. Are there written contracts or
employee type benefits, i.e., pension plan, insurance,
vacation pay, et cetra? Will the relationship
continue? And, is the work performed the key aspect
of the business? Again, I think there is similar
language in this bill. They at least ... be organized
the same categories for people that are trying to make
this decision for not only the purposes of the IRS,
but now, if we are going to have this bill for the
purpose of this bill.
4:57:18 PM
MR. NETTELS expressed irritation and asked why there is an
exclusion for the real estate folks if the real estate folks can
meet these requirements. There are some problems about this
bill he said he just does not understand, and thinks that "we're
trying to make a lot more specific with the high danger of
creating problems for the sorts of folks in his same business.
4:57:56 PM
MIKE McGUIRE said he has been in the trades since the late
1970s, and his father was a sub-contractor/independent
contractor who paid taxes, hired employees, and paid benefits.
He advised that the legislature is allowing the impossibility
for honest contractors to compete with "these people." He
stated that in the construction trade misclassification has been
bad. He referenced a press release from DLWD which disclosed
details of the death of a worker who did not have the required
protections of a normal job. He remarked, "You people are not
protecting the worker, and the other businessmen and ultimately
this will lead to the loss of protection of the property owner."
He referred to the construction trade and the mess with the
independent contractor owner/operator and said, "I don't see why
they don't have to pay the taxes like everybody else."
4:59:53 PM
BRONSON FRYE advised that he is with the Painters Union Local
1959, and noted that, unfortunately, a business model had taken
root in this state in the construction industry whereby certain
employers are requiring, as a condition of employment, that
their workers get business licenses and self-perform as "so-
called owner/operators or independent sub-contractors." In
doing so, it creates an unfair playing field in the bidding
process due to the cost factor. Essentially, he explained, all
of the factors are approximately the same for everyone with the
only exception being the cost of labor, and the person who can
cut their labor costs down the most, will typically be the low
bidder and will ultimately be awarded the contract for the work.
When a company misclassifies its employees as independent sub-
contractors rather than employees, it avoids paying workers'
compensation premiums, payroll taxes, unemployment, social
security, and so forth. Thereby, he pointed out, cutting up to
30 percent of their labor costs off of the top with a tremendous
and thoroughly unfair advantage over honest, law abiding
employers whose workforce is made up of properly classified and
insured employees. This legislation creates a clear definition
of an independent contractor and misclassification with no
ambiguity, allowing everyone bidding the project through a fair
and equitable system. He referred to previous testimony
regarding the IRS and said if the IRS rules were sufficient,
then "we wouldn't have a problem." He remarked that any rule or
law is only as good as the ability of the governing body to
enforce it, so obviously the IRS rules are not sufficient, which
is why it is important to pass CSHB 79.
5:03:51 PM
REPRESENTATIVE BIRCH noted that he does not perform mechanic
work on his own vehicle, and a mechanic shop advises as to the
amount of time the work would take, and he pays that amount.
Except, what if the person performing the work finishes it in
two hours, he asked whether there is an opportunity to reward
the person who completes a job more expeditiously. He said he
understands there is a "per hour rate," but does that stymie
competition by limiting the hourly rate, and if an independent
contractor can do it twice as fast, maybe they actually end up
getting paid more.
MR. FRYE responded that the reward comes in securing the
contract for the work, and if a construction company has a crew
of employees that works more efficiently and bids the project
fairly, it is rewarded by securing the contract. He reminded
the committee that currently there is a system where people
employing an unscrupulous business model are rewarded by cutting
their labor costs and misclassifying all of their workers. He
stressed that everyone can remain competitive in an industry and
still have that industry operate in a fair manner.
5:06:24 PM
BRANDON McGUIRE, Representative, UA Local 367 Plumbers &
Steamfitters, said he is speaking on behalf of the membership of
the UA Local 367 Plumbers & Steamfitters. It supports CSHB 79
because it impacts contractors looking to skirt the edges of
ethics by calling a clear employee an independent contractor.
Across the country this has been a way for contractors to take
advantage of workers and this bill lessens the current penalty
burden on the contractor. He said that dropping the penalty
amount has a great impact when considering (coughing) current
penalties can be an astronomical amount, and when contested, the
penalties do not withstand review on appeal. This bill sets
three times what workers' compensation insurance would have
cost, and this amount would not just be determined by the amount
of money, but also by considering the employer's size, nature of
the employer's business, and financial gain the employer
realized by failing to make the proper payments. He said this
directly impacts the membership of the UA because its
contractors are bound by the bidding process that is supposed to
be fair. He advised that when it comes to bidding, the real
difference in bids is almost always the manpower, which
typically accounts for 40 percent or more of the costs on a job,
and cutting labor costs makes the bidding process completely
unfair. Often, that cost difference means the difference
between being awarded the contract, and not being awarded the
contract. In the end, he said it is the worker who suffers
because most of these young kids do not have a clue about
workers' compensation, "they just want to show up and do a good
day's work and get paid for it." Overall, he remarked that CSHB
79 is fairer to all parties involved because it lessens the
penalty on constructors while at the time strengthening the
enforcement of the penalty to a degree in which it can actually
be assessed as a damage to a contractor who is gambling on
workers not being injured.
5:09:17 PM
PAT FALON said he represents himself, and described that CSHB 79
is pro-business, and it updates workers' compensation laws.
Many Alaskans are true independent contractors, except more
outside businesses are coming to Alaska and breaking the laws
and misclassifying workers. Defining independent contractor is
a common-sense reform that will reduce the influence of
misclassification, and this legislation contains other
provisions modernizing workers' compensation as well. He said
that he appreciates Governor Bill Walker for introducing this
legislation thereby supporting Alaskan businesses and Alaskan
workers, and asked that the committee pass the legislation out
of committee.
5:10:51 PM
RODNEY HESSON, President, Juneau Building Trades, offered
support for CSHB 79, and in particular for the section defining
the terms independent contractor and misclassification. He
noted the committee understands previous testimonies as to the
unfair bidding process by misclassification. Basically, he
noted, the bill clearly defines independent contractor and
misclassification which will help put an end to the unsafe
practice of workers not being covered, and makes the employer
vulnerable to lawsuits for a possible catastrophic injury.
Overall, he noted, the bill is good and will protect and provide
coverage for more Alaskan workers in the coming years.
5:12:37 PM
REPRESENTATIVE BIRCH said he met with folks from the Alaska
Surgery Center with concerns regarding Sec. 17, and asked how
Sec. 17 was addressed in Version O.
5:13:34 PM
MS. MARX referred to Version O, Sec. 15, page 8, beginning line
10, and advised it discusses the question at issue. The concern
raised by stakeholder groups was actually on page 9, lines 15-
16, where the section references an Ambulatory Surgical Center
Payment System produced by federal Centers for Medicare and
Medicaid Services. The amendments, she explained, are adding
onto the list of reference material that arose from HB 316
[passed in the Twenty-Eighth Alaska State Legislature], which
changed the methodology, the way in which Alaska's medical fee
schedule is calculated. House Bill 316 used reference material
already out there from the American Medical Association as a
base. For example, page 8, line 14, references the Current
Procedural Terminology Codes produced by the American Medical
Association and relative values set by the Centers for Medicaid
and Medicare Services of which there are many. That legislation
re-established the Medical Services Review Committee (MSRC) and
told it to look at the fee schedule every year and update it.
The American Medical Association updates the list of materials
every year, the Centers for Medicaid and Medicare Services come
up with its values every year and usually January 1 is the
effective date.
MS. MARX advised that the division preferred automatically
incorporating them as each amended version came up, "just to
say, okay we're using the new version January 1, 2018, the new
version January 2019." The division was told it had to have
legislative permission to incorporate future amended versions
through that process, so the legislature granted permission for
the numbers in the section (1) through (9), and after using the
fee schedule for one year realized some were left off the list.
She explained that the decision as to whether to use these
materials or how they are used has been set by the legislature,
and that is how the MSRC makes the recommendations. It then
takes the recommendation to the Workers' Compensation Board and
if the board and the MSRC are in agreement, they go through the
regulatory process and are adopted. Again, she said, every year
there will be a January 1 fee schedule in effect every year. In
response to the stakeholder's concerns, she advised that this is
just a list of reference material the MSRC and board may
incorporate by reference for future amended versions as they
become available from "these entities."
5:17:04 PM
REPRESENTATIVE BIRCH surmised that this is not necessarily a
prescription of what has to be used, it is basically only a
reference.
MS. MARX responded, "Absolutely," and affirmed that that is
stated on page 8, lines 10-11, "the department may incorporate
future amended versions of a document or reference material
incorporated by reference."
5:17:35 PM
CHAIR KITO, in response to Representative Knopp, advised that
when the bill is next before the committee there will
opportunities for discussion and having the department
available.
REPRESENTATIVE KNOPP requested that someone from the Division of
Wage & Hour attend the next meeting.
MS. MARX asked for a little more information so the folks could
be prepared to answer questions.
REPRESENTATIVE KNOPP said he would have his office call Ms. Marx
regarding the information he is requesting. Representative
Knopp then referred to Chair Kato's desire to move the bill out
of committee for the sake of getting it moving, and said that
this is the committee to fix these bills, it still warrants a
lot of discussion, and he is not eager to move the bill until
the discussions are finalized. He said, for the record, this is
the place to fix the bill, and to not pass it on to the next
committee to fix the bill.
[HB 79 was held over.]
5:18:29 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:18 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR014 Supporting Documents Index 3.17.17.pdf |
HL&C 3/20/2017 3:15:00 PM |
HJR 14 |
| HJR014 Supporting Documents-Support Letters 3.17.17.pdf |
HL&C 3/20/2017 3:15:00 PM |
HJR 14 |
| HJR014 Supporting Documents-Universal Service Disbursements 2015 3.20.17.pdf |
HL&C 3/20/2017 3:15:00 PM |
HJR 14 |
| HJR014 Supporting Documents-Universal Services Fact Sheet 3.17.17.pdf |
HL&C 3/20/2017 3:15:00 PM |
HJR 14 |