Legislature(2017 - 2018)BARNES 124

03/20/2017 03:15 PM LABOR & COMMERCE

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

Document Name Date/Time Subjects
HJR014 Supporting Documents Index 3.17.17.pdf HL&C 3/20/2017 3:15:00 PM
HJR 14
HJR014 Supporting Documents-Support Letters 3.17.17.pdf HL&C 3/20/2017 3:15:00 PM
HJR 14
HJR014 Supporting Documents-Universal Service Disbursements 2015 3.20.17.pdf HL&C 3/20/2017 3:15:00 PM
HJR 14
HJR014 Supporting Documents-Universal Services Fact Sheet 3.17.17.pdf HL&C 3/20/2017 3:15:00 PM
HJR 14