Legislature(2005 - 2006)CAPITOL 17

03/09/2005 03:15 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 171 OVERTIME WAGES FOR FLIGHT CREW TELECONFERENCED
Moved Out of Committee
*+ HB 180 WORKERS' COMPENSATION TELECONFERENCED
Heard & Held
Bills Previously Heard/Scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         March 9, 2005                                                                                          
                           3:51 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Tom Anderson, Chair                                                                                              
Representative Pete Kott                                                                                                        
Representative Bob Lynn                                                                                                         
Representative Harry Crawford                                                                                                   
Representative David Guttenberg                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Gabrielle LeDoux                                                                                                 
Representative Norman Rokeberg                                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 171                                                                                                              
"An   Act  relating   to   the   retrospective  application   and                                                               
applicability of  the overtime compensation exemption  for flight                                                               
crew members; and providing for an effective date."                                                                             
                                                                                                                                
     - MOVED HB 171 OUT OF COMMITTEE                                                                                            
                                                                                                                                
HOUSE BILL NO. 180                                                                                                              
"An Act relating  to a special deposit  for workers' compensation                                                               
and  employers' liability  insurers;  relating  to assigned  risk                                                               
pools; relating  to workers'  compensation insurers;  stating the                                                               
intent  of   the  legislature,   and  setting   out  limitations,                                                               
concerning the  interpretation, construction,  and implementation                                                               
of workers'  compensation laws; relating  to the  Alaska Workers'                                                               
Compensation   Board;  establishing   a   division  of   workers'                                                               
compensation  within  the  Department   of  Labor  and  Workforce                                                               
Development,  assigning  certain   Alaska  Workers'  Compensation                                                               
Board  functions   to  the  division  and   the  department,  and                                                               
authorizing the board to  delegate administrative and enforcement                                                               
duties  to the  division;  establishing  a Workers'  Compensation                                                               
Appeals Commission;  providing for workers'  compensation hearing                                                               
officers  in  workers'   compensation  proceedings;  relating  to                                                               
workers'  compensation medical  benefits and  to charges  for and                                                               
payment of fees for the  medical benefits; relating to agreements                                                               
that  discharge  workers'  compensation  liability;  relating  to                                                               
workers' compensation  awards; relating to  reemployment benefits                                                               
and  job  dislocation  benefits;   relating  to  coordination  of                                                               
workers' compensation  and certain disability  benefits; relating                                                               
to  division  of  workers'   compensation  records;  relating  to                                                               
release of  treatment records; relating to  an employer's failure                                                               
to insure  and keep  insured or  provide security;  providing for                                                               
appeals   from   compensation   orders;  relating   to   workers'                                                               
compensation   proceedings;    providing   for    supreme   court                                                               
jurisdiction of  appeals from  the Workers'  Compensation Appeals                                                               
Commission;  providing  for a  maximum  amount  for the  cost-of-                                                               
living  adjustment for  workers' compensation  benefits; relating                                                               
to  attorney fees;  providing for  the department  to enter  into                                                               
contracts  with nonprofit  organizations  to provide  information                                                               
services   and  legal   representation   to  injured   employees;                                                               
providing  for administrative  penalties for  employers uninsured                                                               
or without adequate security  for workers' compensation; relating                                                               
to fraudulent acts or false  or misleading statements in workers'                                                               
compensation and penalties for the  acts or statements; providing                                                               
for members of  a limited liability company to be  included as an                                                               
employee for  purposes of  workers' compensation;  establishing a                                                               
workers'  compensation benefits  guaranty fund;  relating to  the                                                               
second injury  fund; making conforming amendments;  providing for                                                               
a study and report by  the medical services review committee; and                                                               
providing for an effective date."                                                                                             
                                                                                                                              
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 171                                                                                                                  
SHORT TITLE: OVERTIME WAGES FOR FLIGHT CREW                                                                                     
SPONSOR(S): REPRESENTATIVE(S) KELLY                                                                                             
                                                                                                                                
02/24/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/24/05       (H)       L&C, FIN                                                                                               
03/09/05       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
                                                                                                                                
BILL: HB 180                                                                                                                  
SHORT TITLE: WORKERS' COMPENSATION                                                                                              
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/25/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/25/05       (H)       L&C, JUD, FIN                                                                                          
03/09/05       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
HEATH HILYARD, Staff                                                                                                            
to Representative Mike Kelly                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Presented HB 171 on behalf of Representative                                                                
Kelly.                                                                                                                          
                                                                                                                                
TOM DANIEL, Partner                                                                                                             
Perkins Coie Law Firm                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of HB 171.                                                                             
                                                                                                                                
MIKE HAGELAND, Owner                                                                                                            
Hageland Aviation                                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of HB 171.                                                                             
                                                                                                                                
MIKE BERGT, General Manager                                                                                                     
Alaska Central Express                                                                                                          
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of HB 171.                                                                             
                                                                                                                                
BRUCE MCGLASSON, President and Owner                                                                                            
Grant Aviation                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of HB 171.                                                                             
                                                                                                                                
RICHARD CLARK, Pilot                                                                                                            
Hageland Aviation                                                                                                               
POSITION STATEMENT: Testified in support of HB 171.                                                                             
                                                                                                                                
IGNATIUS BEANS, Safety Check Pilot                                                                                              
Hageland Aviation                                                                                                               
POSITION STATEMENT: Testified in support of HB 171.                                                                             
                                                                                                                                
KAREN CASANOVAS, Executive Director                                                                                             
Alaska Air Carriers Association                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified in support of HB 171.                                                                             
                                                                                                                                
MARK JOHNSON, Pilot                                                                                                             
Hageland Aviation                                                                                                               
POSITION STATEMENT: Testified in support of HB 171.                                                                             
                                                                                                                                
MICHAEL CHARLIE, Pilot                                                                                                          
Hageland Aviation                                                                                                               
POSITION STATEMENT: Testified in support of HB 171.                                                                             
                                                                                                                                
GREG O'CLARAY, Commissioner                                                                                                     
Department of Labor and Workforce Development                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Testified in support of HB 180.                                                                             
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR TOM ANDERSON  called the House Labor  and Commerce Standing                                                             
Committee meeting to order at  3:51:29 PM.  Representatives Lynn,                                                             
Kott,  Crawford, Guttenberg,  and  Anderson were  present at  the                                                               
call to order.                                                                                                                  
                                                                                                                                
HB 171-OVERTIME WAGES FOR FLIGHT CREW                                                                                         
                                                                                                                                
CHAIR ANDERSON announced  that the first order  of business would                                                               
be  HOUSE BILL  NO. 171,  "An Act  relating to  the retrospective                                                               
application  and  applicability   of  the  overtime  compensation                                                               
exemption  for   flight  crew  members;  and   providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
HEATH HILYARD,  Staff to Representative Mike  Kelly, Alaska State                                                               
Legislature,  said   HB  171  clarifies  legislative   intent  by                                                               
retroactively removing  flight crews from the  scope of statutory                                                               
overtime  compensation required  under the  Alaska Wage  and Hour                                                               
Act.   It will  apply to  work performed on  or after  January 1,                                                               
2000, he said.                                                                                                                  
                                                                                                                                
3:52:47 PM                                                                                                                    
                                                                                                                                
MR. HILYARD  said the Department  of Labor has had  an uncodified                                                               
policy to  apply an exemption,  but recent class  action lawsuits                                                               
created   confusion.      In  the   Twenty-Third   Alaska   State                                                               
Legislature, Senate  Bill 54  codified the  informal policy.   HB
171 will provide even better clarity, he said.                                                                                  
                                                                                                                                
TOM DANIEL,  Partner, Perkins Coie  Law Firm, Anchorage,  said he                                                               
is an attorney concentrating on  labor and employment law, and he                                                               
is in favor  of HB 171.  He said  he represents Hageland Aviation                                                               
in  a class  action lawsuit  brought against  Hageland by  pilots                                                               
claiming overtime.   The  lawsuit is  occurring because  the 2003                                                               
law was not retroactive, and there  are claims being made for the                                                               
time period  before 2003, when  an explicit exemption  for pilots                                                               
was passed,  he said.  Since  1949, pilots have been  exempt from                                                               
overtime under  federal law,  and under Alaska  law there  was no                                                               
explicit  exemption.   In  the  1980s,  the Attorney  General  of                                                               
Alaska issued  an opinion that  pilots are exempt  from overtime.                                                               
In 1986,  the Alaska  Department of  Labor sent  a letter  to the                                                               
Alaska Air  Carriers Association stating that  pilots who carried                                                               
passengers or mail were exempt from  overtime law.  For almost 20                                                               
years, air  carriers have  operated on  the assumption  that they                                                               
did not have to pay pilots overtime,  he said.  In the late 1990s                                                               
a few  attorneys started seeing  a possible  way to sue  in court                                                               
because  courts  don't  have  to  follow  an  attorney  general's                                                               
opinion.                                                                                                                        
                                                                                                                                
3:57:12 PM                                                                                                                    
                                                                                                                                
MR. DANIELS said  there are three lawsuits  pending against small                                                               
air carriers in  Alaska claiming overtime for flight  crews.  The                                                               
2003 law  to exempt flight crews  from overtime pay was  not made                                                               
retroactive.   He said  the Hageland lawsuit  was initiated  by a                                                               
single  pilot who  had  lost  his job  at  Hageland  and filed  a                                                               
complaint  alleging  age  discrimination--not a  complaint  about                                                               
pay.     The  Alaska  Human   Rights  Commission   dismissed  his                                                               
complaint, Mr.  Daniels continued,  so the  pilot found  a lawyer                                                               
who told him  he didn't have much of an  age discrimination claim                                                               
but  he might  have  an  overtime claim.    That  same pilot  had                                                               
already stated that he was fairly  paid.  His case became a class                                                               
action  suit  on behalf  of  all  present  and former  pilots  of                                                               
Hageland  Aviation, which  totals 82  people.   Mr. Daniels  said                                                               
that  60 of  those 82  pilots  have affirmatively  chosen not  to                                                               
participate in the lawsuit.                                                                                                     
                                                                                                                                
MR. DANIELS said  Hageland Aviation is a true  success story, and                                                               
he described the  start-up and growth of the company.   He opined                                                               
that this lawsuit threatens the  viability of the business, which                                                               
is  one of  the best  in  the region  and pays  its pilots  well.                                                               
Hageland pays pilots  on a daily rate, which means  they get paid                                                               
even if  weather or  mechanical problems  keep them  from flying.                                                               
This  system benefits  the pilot  and the  safety of  passengers.                                                               
The end  result of  this lawsuit,  he said,  is bankruptcy  for a                                                               
business  that pays  its pilots  well and  provides an  essential                                                               
service to  a region, all due  to a technical violation  of a law                                                               
that was never intended to apply, he said.                                                                                      
                                                                                                                                
4:02:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOTT asked  why the  date, January  1, 2000,  was                                                               
inserted.                                                                                                                       
                                                                                                                                
MR.  DANIELS  said  he  thinks  it  is  because  the  statute  of                                                               
limitations is two years, but  moving the date back further would                                                               
be fine.                                                                                                                        
                                                                                                                                
REPRESENTATIVE CRAWFORD  said he  remembers working on  this bill                                                               
and there  was concern  that the  legislation could  affect court                                                               
cases, and  he was  assured that  it wouldn't.   It's  bad public                                                               
policy to interfere with court cases, he said.                                                                                  
                                                                                                                                
MR. DANIELS said he was  not involved in last year's legislation,                                                               
and did not give that assurance.                                                                                                
                                                                                                                                
REPRESENTATIVE  CRAWFORD put  it on  the record  that there  were                                                               
many   legislators  that   understood  that   it  would   not  be                                                               
retroactive and that it was not a mistake or an oversight.                                                                      
                                                                                                                                
4:05:07 PM                                                                                                                    
                                                                                                                                
MR.  DANIELS  said the  law  should  be retroactive  because  air                                                               
carriers have operated  on a 20-year policy of  the Department of                                                               
Labor.  It  is unfair to them  to be told they don't  have to pay                                                               
overtime to pilots,  and all of a sudden they  are being sued, he                                                               
said.                                                                                                                           
                                                                                                                                
REPRESENTATIVE CRAWFORD  said this was  a difficult vote  for him                                                               
and he  understands that the  Department of Labor and  the courts                                                               
came  up with  different  interpretations.   He  said he  doesn't                                                               
think  it is  a good  idea  for the  legislature to  go back  and                                                               
change what  the courts have  done.   He added that  he generally                                                               
has faith in the courts in rendering a good decision.                                                                           
                                                                                                                                
MIKE HAGELAND, Owner, Hageland Aviation,  said the lawsuit is not                                                               
for pilots,  because only  one pilot  sued.   The lawyer  sued on                                                               
behalf of  other pilots,  most of  who opted  out of  the lawsuit                                                               
within 60  days.  Only one  pilot has come forward  to state that                                                               
he wants to be part of this  lawsuit.  It's about the lawyers, he                                                               
said, they are the ones who stand to gain.                                                                                      
                                                                                                                                
CHAIR  ANDERSON  said it  is  also  about consistency  in  public                                                               
policy.                                                                                                                         
                                                                                                                                
MR. HAGELAND said  the pilots are still being paid  the same way,                                                               
and they are happy.                                                                                                             
                                                                                                                                
MIKE  BERGT, General  Manager, Alaska  Central Express,  said his                                                               
company is  a cargo carrier  based in Anchorage, and  the company                                                               
supports HB 171.   He said the company has been  sued by a former                                                               
pilot in July 2004  based on a loophole.  The  pilot is trying to                                                               
seek a  windfall, he added.   Mr. Bergt said he  didn't think the                                                               
legislature intended  to open  a two-year  window for  pilots and                                                               
attorneys to seek a windfall.                                                                                                   
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked  Mr. Bergt if he  had assumed the                                                               
overtime  policy  was  in  place,  would he  have  been  able  to                                                               
schedule pilots workably.                                                                                                       
                                                                                                                                
MR. BERGT  said the company would  have altered the pay  scale so                                                               
that overtime would  have been taken into  consideration, and pay                                                               
would have been similar.  In  the end pilots would have been paid                                                               
the same.                                                                                                                       
                                                                                                                                
BRUCE  MCGLASSON, President  and Owner,  Grant Aviation,  said he                                                               
employs  about 120  people, and  44 are  pilots.   Grant Aviation                                                               
pays  its  pilots the  same  kind  of  daily rate  that  Hageland                                                               
Aviation does.   It does it  for safety reasons because  it gives                                                               
no  incentive  for pilots  to  fly  in  unsafe conditions.    Mr.                                                               
Hageland is  a direct  competitor, and  Grant Aviation  stands to                                                               
gain  a lot  if Hageland  went out  of business,  but he  doesn't                                                               
think the  lawsuit is  fair.   He said that  his company  has not                                                               
been  sued, but  because of  the law,  it is  vulnerable to  such                                                               
lawsuits.                                                                                                                       
                                                                                                                                
4:14:10 PM                                                                                                                    
                                                                                                                                
RICHARD  CLARK, Pilot,  Hageland  Aviation, said  the company  is                                                               
fair, honest, and generous.  He  said he opted out of the lawsuit                                                               
because it was unfair.                                                                                                          
                                                                                                                                
CHAIR ANDERSON asked if Mr. Clark was content with his salary.                                                                  
                                                                                                                                
MR. CLARK  said he always  has been,  and the company  has always                                                               
been fair.                                                                                                                      
                                                                                                                                
IGNATIUS BEANS,  Safety Check Pilot,  Hageland Aviation,  said he                                                               
was  born and  raised in  Mountain Village,  where Mike  Hageland                                                               
started  his business.   He  said  he has  flown commercially  in                                                               
western Alaska  for ten  years.   He has  known Mr.  Hageland for                                                               
more than  20 years, and  he is fair and  honest.  "When  I heard                                                               
about a  lawsuit, I was  really discouraged."  He  encouraged the                                                               
committee to pass HB 171.                                                                                                       
                                                                                                                                
KAREN   CASANOVAS,  Executive   Director,  Alaska   Air  Carriers                                                               
Association, said the association  represents over 67 carriers in                                                               
Alaska.  The failure of this  legislation would have a direct and                                                               
profound  impact  on  small  carriers,   which  are  critical  to                                                               
Alaskans  around the  state.   The companies  are abiding  by the                                                               
Department of Labor policy.                                                                                                     
                                                                                                                                
4:19:39 PM                                                                                                                    
                                                                                                                                
MS.  CASANOVAS said  the lawsuits  are not  typically covered  by                                                               
insurance in  Alaska.  Small carriers  provide transportation for                                                               
Alaskans, and a  class action lawsuits will put many  of them out                                                               
of  business, she  added.   The Alaska  Air Carriers  Association                                                               
overwhelmingly supports HB 171.                                                                                                 
                                                                                                                                
4:21:14 PM                                                                                                                    
                                                                                                                                
MARK JOHNSON, Pilot, Hageland Aviation,  said his job is the best                                                               
he has ever had,  and the pay is more than fair.   He said in the                                                               
early eighties pilots  were paid by the flight hour,  and it is a                                                               
very dangerous way to pay pilots.   The fairest and safest way to                                                               
pay pilots is the way Mike Hageland pays, he said.                                                                              
                                                                                                                                
CHAIR ANDERSON asked if there  are any witnesses that are opposed                                                               
to HB 171.  [None came forward.]                                                                                                
                                                                                                                                
MICHAEL CHARLIE,  Pilot, Hageland  Aviation, said if  the lawsuit                                                               
is successful  it will hurt  staff and  the whole economy  of the                                                               
region.                                                                                                                         
                                                                                                                                
4:26:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOTT said  it  is unfortunate  that  the bill  is                                                               
before the  legislature, which should have  addressed the problem                                                               
a few  years ago.   Everyone  would have been  much happier.   He                                                               
added that the  bill does have judicial impact, and  it should be                                                               
looked at in the House Judiciary Standing Committee.                                                                            
                                                                                                                                
CHAIR ANDERSON said,  "So your motion is to move  the bill out of                                                               
committee.   I'll  object to  note that  I will,  as chairman  of                                                               
labor and  commerce, recommend that  it be referred  to judiciary                                                               
and stricken from  being referred to the finance  committee."  He                                                               
withdrew his objection  and hearing no further  objection, HB 171                                                               
was  passed  out  of  the   House  Labor  and  Commerce  Standing                                                               
Committee.                                                                                                                      
4:28:32 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:28 to 4:30.                                                                                
                                                                                                                                
4:30:23 PM                                                                                                                    
                                                                                                                                
HB 180-WORKERS' COMPENSATION                                                                                                  
                                                                                                                                
CHAIR ANDERSON announced  that the final order  of business would                                                               
be HOUSE BILL NO. 180, "An  Act relating to a special deposit for                                                               
workers'   compensation   and  employers'   liability   insurers;                                                               
relating   to  assigned   risk   pools;   relating  to   workers'                                                               
compensation  insurers; stating  the intent  of the  legislature,                                                               
and  setting  out  limitations,  concerning  the  interpretation,                                                               
construction, and  implementation of workers'  compensation laws;                                                               
relating to the Alaska  Workers' Compensation Board; establishing                                                               
a  division of  workers'  compensation within  the Department  of                                                               
Labor  and   Workforce  Development,  assigning   certain  Alaska                                                               
Workers'  Compensation Board  functions to  the division  and the                                                               
department, and authorizing the  board to delegate administrative                                                               
and enforcement  duties to the division;  establishing a Workers'                                                               
Compensation   Appeals   Commission;   providing   for   workers'                                                               
compensation   hearing   officers    in   workers'   compensation                                                               
proceedings; relating  to workers' compensation  medical benefits                                                               
and to charges for and payment  of fees for the medical benefits;                                                               
relating  to  agreements  that  discharge  workers'  compensation                                                               
liability; relating to workers'  compensation awards; relating to                                                               
reemployment benefits  and job dislocation benefits;  relating to                                                               
coordination  of  workers'  compensation and  certain  disability                                                               
benefits; relating to division  of workers' compensation records;                                                               
relating  to  release  of  treatment   records;  relating  to  an                                                               
employer's  failure  to  insure   and  keep  insured  or  provide                                                               
security;  providing   for  appeals  from   compensation  orders;                                                               
relating  to  workers'  compensation proceedings;  providing  for                                                               
supreme  court   jurisdiction  of   appeals  from   the  Workers'                                                               
Compensation Appeals  Commission; providing for a  maximum amount                                                               
for  the  cost-of-living  adjustment  for  workers'  compensation                                                               
benefits;   relating  to   attorney  fees;   providing  for   the                                                               
department to  enter into contracts with  nonprofit organizations                                                               
to  provide  information  services and  legal  representation  to                                                               
injured  employees; providing  for  administrative penalties  for                                                               
employers  uninsured or  without adequate  security for  workers'                                                               
compensation; relating to fraudulent  acts or false or misleading                                                               
statements in  workers' compensation  and penalties for  the acts                                                               
or  statements;  providing for  members  of  a limited  liability                                                               
company to  be included as  an employee for purposes  of workers'                                                               
compensation;  establishing  a   workers'  compensation  benefits                                                               
guaranty  fund;  relating  to  the  second  injury  fund;  making                                                               
conforming amendments;  providing for a  study and report  by the                                                               
medical  services   review  committee;   and  providing   for  an                                                               
effective date."                                                                                                                
                                                                                                                                
GREG O'CLARAY,  Commissioner, Department  of Labor  and Workforce                                                               
Development (DOL),  said HB 180  is a  composite of hard  work by                                                               
members  of the  ad hoc  committee on  workers compensation,  DOL                                                               
staff, and  various other constituencies  in the state.   He said                                                               
2003 workers'  compensation costs were $23  million.  Legislation                                                               
last  year  concentrated  on readjustments  to  the  adjudicatory                                                               
system.  "It  really only dealt with about $11  million in costs,                                                               
or what turned out to be about 4.9 percent of the pie."                                                                         
                                                                                                                                
4:32:24 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  O'CLARAY   said  testimony  last  year   asked  the                                                               
department why  it was not  examining medical costs, which  is 52                                                               
percent  of the  problem.   In  2004, medical  costs  will be  61                                                               
percent, he  noted.  He  said the  governor chose to  depart from                                                               
the ad  hoc two-year plan,  and present his  bill now.   He noted                                                               
that the ad hoc committee  is a volunteer citizen's committee and                                                               
has worked on workers' compensation issues for many years.                                                                      
                                                                                                                                
4:35:17 PM                                                                                                                    
                                                                                                                                
COMMISSIONER   O'CLARAY   said   it    is   important   for   the                                                               
administration  to have  a bill  this  year because  "we're in  a                                                               
situation where if  we are allowed to go  beyond this legislative                                                               
session,  that the  rate increases  and  premiums that  employers                                                               
will be  looking at next  year, will force more  small businesses                                                               
to close  their doors and  put more workers  on the street."   He                                                               
said the  administration feels that  it is  near crisis.   Of the                                                               
16,000  active businesses  that  are reported  by  DOL, "I  would                                                               
venture  to  say,  I  don't  know of  one  that  wasn't  impacted                                                               
adversely by workers' comp rates."                                                                                              
                                                                                                                                
4:36:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LYNN  asked about  the ad hoc  committee meetings,                                                               
and  why Commissioner  O'Claray said  the committee  has not  met                                                               
lately except for this past interim.                                                                                            
                                                                                                                                
COMMISSIONER  O'CLARAY asked,  "Where have  they been  since 1995                                                               
when this problem was continuing to loom?"                                                                                      
                                                                                                                                
REPRESENTATIVE LYNN said,  "But they did meet this  time, is that                                                               
correct?"                                                                                                                       
                                                                                                                                
4:38:07 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  O'CLARAY  said  they   did,  and  "frankly,  I  was                                                               
pleased."  They  put a lot of time in  examining issues that need                                                               
to be  dealt with.  They  wanted to meet because  they recognized                                                               
the problems  with workers' compensation  insurance rates.   They                                                               
worked very  hard and Commissioner  O'Claray said he  was pleased                                                               
with the progress they made, "to a point."                                                                                      
                                                                                                                                
4:38:52 PM                                                                                                                    
                                                                                                                                
COMMISSIONER O'CLARAY  said, "When we received  the product [from                                                               
the  ad  hoc committee],  they  had  apparently made  a  decision                                                               
fairly early  in the process, that  they would not deal  with any                                                               
issues that either  the labor side or the  management side raised                                                               
or took  issue with."   The main issue  they decided not  to deal                                                               
with was medical  costs.  He read the last  paragraph of a letter                                                               
from the ad hoc committee:                                                                                                      
                                                                                                                                
     We would  also like  to point out  that there  are more                                                                    
     issues involving workers' compensation  that we will be                                                                    
     addressing in  the future.   These include  group self-                                                                    
     insurance, medical  cost containment (the  medical cost                                                                    
     portion  of workers'  compensation  payments in  Alaska                                                                    
     have  more than  doubled  between 1988  and 1992,  from                                                                    
     approximately  $20   million  to   in  excess   of  $50                                                                    
     million), review of  presumption of compensability, and                                                                    
     review of  benefits including health insurance.   These                                                                    
     issues will take  further research and a  great deal of                                                                    
     discussion with various groups,  but they must be dealt                                                                    
     with  to  ensure  that Alaska's  workers'  compensation                                                                    
     system  adequately   protects  injured   workers  while                                                                    
     maintaining an equitable program for employers.                                                                            
                                                                                                                                
4:41:09 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  O'CLARAY  said  he  is pleased  the  committee  has                                                               
reconvened, but  the governor was  not pleased with the  result -                                                               
"not because  they didn't work  hard, but because it  didn't meet                                                               
his goal of  trying to arrest the escalating rates."   He said he                                                               
informed  the committee  of the  decision the  governor made  and                                                               
invited members to participate in  the drafting process "over the                                                               
weekend."                                                                                                                       
                                                                                                                                
COMMISSIONER  O'CLARAY said  when  the ad  hoc committee  members                                                               
began discussing  strategy about their  own bill, they  asked the                                                               
DOL person to leave the room.                                                                                                   
                                                                                                                                
REPRESENTATIVE  LYNN  said  the  governor  drafted  his  bill  in                                                               
February  and asked  how  long it  was worked  on  before it  was                                                               
introduced.                                                                                                                     
                                                                                                                                
COMMISSIONER O'CLARAY said  "We started working on,  I believe it                                                               
was  Sunday morning,  and we  worked through  the night  into the                                                               
next  day, which  was  a  state holiday  for  everyone  else.   I                                                               
believe  we  had  an  actual bill  completed,  that  we  actually                                                               
presented, first to the advocates...on  Wednesday.  Then we had a                                                               
press conference on February 21."                                                                                               
                                                                                                                                
REPRESENTATIVE  LYNN asked  how  many working  days  it took  the                                                               
governor to prepare his bill.                                                                                                   
                                                                                                                                
COMMISSIONER O'CLARAY  said, "Well, state employee  working days,                                                               
at seven and a  half hours a day, probably six,  within a two and                                                               
a half day period, because we worked around the clock."                                                                         
                                                                                                                                
REPRESENTATIVE  LYNN asked  how many  days the  ad hoc  committee                                                               
worked on its bill.                                                                                                             
                                                                                                                                
4:45:18 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  O'CLARAY said  he doesn't  know, but  he does  know                                                               
they spent  a lot of  time on it.   "Remember, they had  given us                                                               
the results  of their particular  fruits of their  labor...and we                                                               
used a major portion of that  information in our bill," he added.                                                               
He said he  got input from consultants and  state underwriters as                                                               
well.                                                                                                                           
                                                                                                                                
4:46:00 PM                                                                                                                    
                                                                                                                                
COMMISSIONER O'CLARAY gave  an example of a  health facility that                                                               
doubled its premium rate.   "Obviously their charge-out rates had                                                               
to go  up as well.   The statute requires that  employers provide                                                               
that particular insurance,"  he added.  He then  gave the example                                                               
of a  business of less than  25 people, where premium  rates went                                                               
from $5,900 to  $10,232.  A small general  contractor business in                                                               
Sitka had premiums in 2002 of  $146,950, and in 2004 it jumped to                                                               
$314,110.                                                                                                                       
                                                                                                                                
4:47:07 PM                                                                                                                    
                                                                                                                                
COMMISSIONER O'CLARAY then  gave an example of  the Kodiak Island                                                               
Borough where  workers' compensation  rates went from  $24,000 in                                                               
2002 to $95,234 in 2005.                                                                                                        
                                                                                                                                
4:47:57 PM                                                                                                                    
                                                                                                                                
                                                                                                                                
COMMISSIONER O'CLARAY said  new hires in Kodiak  have been placed                                                               
on a  maximum of a  30-hour week to  save on costs,  which denies                                                               
workers access to benefits.                                                                                                     
                                                                                                                                
4:48:30 PM                                                                                                                    
                                                                                                                                
COMMISSIONER O'CLARAY  referred to a newspaper  article about the                                                               
closure of an  Anchorage restaurant, and the owner  said that she                                                               
could not afford workers' compensation insurance.                                                                               
                                                                                                                                
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce, Community,  and Economic  Development, said  last year,                                                               
when  workers' compensation  rates increased  by 21  percent, she                                                               
got angry calls  from employers.  Later, she  received calls from                                                               
employers telling  her they were  at the  verge of having  to cut                                                               
health insurance  because they could  not afford to  provide both                                                               
that and  workers' compensation.   Now calls are coming  in about                                                               
employers contemplating closure of  their businesses.  "These are                                                               
wrenching calls  for me to  deal with," she  said.  She  said she                                                               
wants to  be able to  tell people that  the state is  trying stop                                                               
the increase in insurance rates.                                                                                                
                                                                                                                                
REPRESENTATIVE  LYNN  said  workers'  compensation  needs  to  be                                                               
controlled, and the question is how.                                                                                            
                                                                                                                                
4:52:47 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  O'CLARAY said  the governor's  bill deals  with the                                                               
rollback of  the reimbursement  rates for  medical costs  on page                                                               
18, line 30.                                                                                                                    
                                                                                                                                
4:54:19 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  O'CLARAY said  he  wants to  explain the  rationale                                                               
behind  the  fee  reimbursement  rollback to  the  December  1999                                                               
reimbursement  rate.   "The medical  reimbursement schedule  that                                                               
the Division uses to pay  claims for various procedures...whether                                                               
it  be surgical,  whether  it be  pharmaceutical,  whether it  be                                                               
hospital  care, is  published in  a rather  large...book, and  it                                                               
details the  rate of reimbursement  that is  paid out."   He then                                                               
noted  comparison  to  other northwestern  states,  and  he  said                                                               
Oregon's reimbursement rate of $1,500  for arthroscopy is half as                                                               
much   Alaska's  1999   rate.     Oregon  uses   a  Medicare-plus                                                               
multiplier, and Alaska considered  doing that but decided against                                                               
it.                                                                                                                             
                                                                                                                                
COMMISSIONER O'CLARAY said  the 2004 rate for  the same procedure                                                               
in Alaska is $3,800, and the 2005  rate is $4,100.  "This kind of                                                               
gives  you  some  idea  of the  increases  in  Alaska's  workers'                                                               
compensation  charges and  reimbursement rates  between 2000  and                                                               
2005 - a 27-percent increase," he said.                                                                                         
                                                                                                                                
4:56:55 PM                                                                                                                    
                                                                                                                                
COMMISSIONER O'CLARAY  said there  is lack of  real data.   There                                                               
are unchallengeable  conclusions, he said,  but does not  want to                                                               
wait another year  for more data.  The bill  suggests rolling the                                                               
reimbursement rates back and requires  a study to be completed by                                                               
2007.    That will  provide  the  data  to determine  the  proper                                                               
schedule of reimbursement, he said.                                                                                             
                                                                                                                                
4:59:21 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  O'CLARAY  said he  hopes  for  assistance from  the                                                               
medical  community.   He  said he  is  concerned about  specialty                                                               
surgeons deciding on their own to deny service.                                                                                 
                                                                                                                                
REPRESENTATIVE LYNN said he shares that concern.                                                                                
                                                                                                                                
COMMISSIONER O'CLARAY said the workers'  compensation system is a                                                               
sole  remedy  system; an  injured  worker  must go  through  this                                                               
particular system, and workers cannot sue their employers.                                                                      
                                                                                                                                
REPRESENTATIVE  LYNN  said  workers'  compensation  came  to  his                                                               
rescue when he was an injured police officer.                                                                                   
                                                                                                                                
5:03:20 PM                                                                                                                    
                                                                                                                                
COMMISSIONER O'CLARAY  said we cannot  afford to let  this system                                                               
break down.  We  need to act on reforms this year,  he said.  The                                                               
governor's  bill  creates  an appeals  panel  consisting  of  one                                                               
professional  hearing  officer,  one layperson  representing  the                                                               
employee, and one person representing the employer.                                                                             
                                                                                                                                
5:04:43 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  O'CLARAY  said  the   issue  of  predictability  is                                                               
important.   Certain  types  of  injuries will  be  awarded at  a                                                               
certain level, he said.                                                                                                         
                                                                                                                                
5:05:18 PM                                                                                                                    
                                                                                                                                
COMMISSIONER O'CLARAY said  without this, one side  or other will                                                               
try to push  the decision to their benefit.   The governor's bill                                                               
uses an  in-house "super panel," and  from there the cases  go to                                                               
the supreme court.   The appeals panel will be  empowered to make                                                               
legal precedent.                                                                                                                
                                                                                                                                
5:06:24 PM                                                                                                                    
                                                                                                                                
COMMISSIONER O'CLARAY  said access  to the superior  court delays                                                               
settlement of  cases up  to a year  and a half.   The  two things                                                               
that  the  bill  concentrates  on   is  making  the  system  more                                                               
efficient and  more reactive to  injured workers'  concerns about                                                               
early settlement, and  making the system more  affordable for the                                                               
employer.                                                                                                                       
                                                                                                                                
5:07:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked the administration to  create an                                                               
organizational chart of the new structure.                                                                                      
                                                                                                                                
REPRESENTATIVE LYNN  asked for a  side-by-side comparison  of the                                                               
governor's bill the ad hoc bill.                                                                                                
                                                                                                                                
COMMISSIONER O'CLARAY said yes to both.                                                                                         
                                                                                                                                
5:08:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CRAWFORD  said he  has  worked  under the  Oregon                                                               
system, and  it is not very  good.  People do  the dangerous work                                                               
for  us, putting  their lives  at risk,  and we  need a  workers'                                                               
compensation system that takes care of these people, he said.                                                                   
                                                                                                                                
REPRESENTATIVE LYNN said he agrees.                                                                                             
                                                                                                                                
5:11:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG brought  up job  safety, and  wondered                                                               
what the state was doing.                                                                                                       
                                                                                                                                
COMMISSIONER O'CLARAY  said the existing rate  structure does not                                                               
provide an incentive  to employers to have  good safety programs.                                                               
He  said  a sawmill  in  Ketchikan  paid  well over  $400,000  to                                                               
workers' compensation  and it  had less  than $50,000  in claims.                                                               
Some  businesses  have  zero  claims,  and  he  suggested  having                                                               
incentive for a great record.                                                                                                   
                                                                                                                                
REPRESENTATIVE LYNN said  everyone in the room  agrees that there                                                               
is a  serious problem with  the workers'  compensation situation.                                                               
He quoted the bible that says, "Come let us reason together."                                                                   
                                                                                                                                
COMMISSIONER O'CLARAY said  the governor is the kind  of man that                                                               
likes to come out with a solution.   He said this bill is not the                                                               
perfect  solution; it  is subject  to  the deliberative  process.                                                               
The administration is able to work on it this session.                                                                          
                                                                                                                                
[HB 180 was held over.]                                                                                                         
                                                                                                                                
5:16:15 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
5:16 p.m.                                                                                                                       

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