Legislature(2005 - 2006)SENATE FINANCE 532
05/07/2006 01:00 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB51 | |
| HB485 | |
| HB190 | |
| HB150 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 51 | TELECONFERENCED | |
| + | HB 190 | TELECONFERENCED | |
| + | HB 485 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 150 | ||
MINUTES
SENATE FINANCE COMMITTEE
May 7, 2006
1:14 p.m.
CALL TO ORDER
Co-Chair Lyda Green convened the meeting at approximately
1:14:18 PM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Fred Dyson
Senator Bert Stedman
Also Attending: MICHAEL PAWLOWSKI, Staff to Representative
Kevin Meyer; RAY HICKLE, President, Anchorage Homebuilders
Association; PAUL LISANKIE, Director, Workers' Compensation
Division, Department of Labor and Workforce Development; LINDA
HALL, Director, Division of Insurance, Department of Commerce,
Community and Economic Development; JANET CLARKE, Assistant
Commissioner, Department of Health and Social Services; SHARLEEN
GRIFFIN, Director, Division of Administrative Services,
Department of Corrections; PAUL LABOLLE, Staff to Representative
Richard Foster; HEATHER BRADY, Staff to Representative Harry
Crawford; DOUG WOOLIVER, Administrative Attorney, Alaska Court
System; HEALTH HILYARD, Staff to Representative Tom Anderson;
Attending via Teleconference: From an offnet location: ROBERT
VOGEL, Vice President of Operations, Pro Group Management,
representing Anchorage Home Builders Association; DAVE KESTER,
Workers' Compensation Committee of Alaska; MIKE COMBS,
President, Alaska Independent Insurance Agent Association;
KENTON BRINE, Property Casualty Insurance Association; From
Anchorage: DUANNE BANNOCK, Director, Division of Motor Vehicles,
Department of Administration.
SUMMARY INFORMATION
HB 51-EMPLOYER ASSN FOR WORKERS' COMP INS
The Committee heard from the sponsor, the Department of Labor
and Workforce Development, the Department of Commerce, Community
and Economic Development, representatives of the construction
and insurance industries, and a workers' compensation
organization. The bill was held in Committee.
HB 485-STATE PHARMACISTS/DOCTORS: EXEMPT SERVICE
The Committee heard from the Department of Health and Social
Services and the Department of Corrections. The bill was
reported from Committee.
HB 190-REQUIRED ID FOR PURCHASING ALCOHOL
The Committee heard from the sponsors, the Alaska Court System
and the Department of Administration. The bill was held in
Committee.
HB 150-LICENSING RADIOLOGIC TECHNICIANS
The Committee heard from the sponsor. A motion to report the
bill from Committee failed 5-2, and the bill was held in
Committee.
1:14:41 PM
CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 51(FIN)
"An Act relating to associations of self-insured employers
for purposes of providing workers' compensation coverage
and allowing employers who are members of the same trade to
form associations for providing self-insurance for workers'
compensation coverage; and providing for an effective
date."
This was the first hearing for this bill in the Senate Finance
Committee.
MICHAEL PAWLOWSKI, Staff to Representative Kevin Meyer,
testified that a single employer is currently allowed to self-
insure for workers' compensation obligations, provided they meet
certain requirements.
This bill would allow a group of smaller employers to cooperate
with each other to meet the same requirements to self-insure
their workers' compensation commitments.
Co-Chair Green moved for adoption of SCS HB 51 24-LSO233\R as a
working document, and objected for explanation.
Mr. Pawlowski continued that the proposed committee substitute
would "close loopholes" in the bill. A provision was deleted to
clarify that the association of businesses was considered an
insurer, not an employer.
Mr. Pawlowski located another change in subsection (b)(7) of
Sec. 21.77.040. Board of directors; members; duties; prohibited
acts., added by Section 1 on page 5 lines 11-12, which required
that insurance claims adjusters employed by the association be
residents of the State. That provision was added to address
"oversight" concerns voiced by the Division of Insurance.
Mr. Pawlowski informed that an additional modification was made
at the suggestion of the Division of Insurance, inserting
language to provide a mechanism to "unwind" the association and
go into receivership, and provides a guarantee mechanism. Mr.
Pawlowski opined that the new provisions, coupled with the
requirement of surety and solvency bonds, auditing assessments,
and other financial controls in the bill render this a "policy
decision".
Mr. Pawlowski noted that to conform to the intent of the Senate
Labor and Commerce Committee, page 16 of the proposed committee
substitute contained an amendment adopted by that committee to
the companion bill SB 241.
Mr. Pawlowski concluded that the bill does not address larger
issues with workers compensation, but would assist smaller
employers by allowing them to "bind their businesses together"
to self-insure for workers' compensation obligations.
1:19:18 PM
ROBERT VOGEL, Vice President of Operations, Pro Group
Management, representing Anchorage Home Builders Association,
testified via teleconference from an offnet location that he was
available to respond to questions. He spoke to the proposed
legislation and its relation to a similar practice in the state
of Nevada.
1:20:39 PM
Senator Bunde understood the program worked well in Nevada, and
asked if the bill under consideration incorporated all the
provisions of the Nevada law.
1:21:07 PM
Mr. Vogel responded that 37 states have comparable laws, and
while there are slight variations between states, he considered
the bill a good "fit" within the framework of Alaska law.
Senator Bunde questioned in any provisions of "substantial
benefit" may have been omitted.
1:22:02 PM
Mr. Vogel did not believe so.
1:22:07 PM
Senator Stedman requested population comparisons, as Nevada and
Alaska have different demographics.
1:22:29 PM
Mr. Vogel replied that when the law was initially passed in
Nevada in 1993, the population was approximately 800,000. When
New Mexico passed a corresponding law in 1991, that state's
population was less than 1 million. Nevada currently has 13
self-insured groups, including auto dealers, home builders,
trucking groups, and municipalities. New Mexico has
approximately 14 groups of similar businesses. By comparison,
California passed its version of the law in the early 1990s, but
had no self-insured groups form until 2000. Since that time,
California has instituted workers' compensation reform bills,
and now has over 20 self-insured groups, with approximately 40
additional groups in the process of forming.
1:24:41 PM
Senator Bunde voiced concern that self-insured groups may become
insolvent, despite the best intentions of those involved. He
inquired if any of the groups in other states had become
insolvent, and if so, who was ultimately responsible for a
workplace injury claim.
1:25:19 PM
Mr. Vogel reported that none of the groups in Nevada have become
insolvent; conversely they have "done very well", generating a
"healthy" surplus over a period of ten years. Likewise, self-
insured groups in New Mexico and California recount no incidence
of insolvency. If a group did become insolvent, an injured
worker would be covered by the group's tangible net worth,
required by the Alaska law to be at least $10 million. The net
worth requirement is the strength and credibility of that group.
Additionally, every group has excess insurance to protect
against catastrophic losses. He offered the example of a worker
injured in fire, one of the most expensive types of claims. In
that case, the qualified excess insurer would protect the group,
requiring perhaps a $500,000 deductible. Furthermore, groups
would be required to post solvency bonds, security bonds or a
letter of credit in the event the group was not able to meet
their obligations.
1:28:25 PM
Senator Bunde expressed concern over the possibility of "cherry
picking" whereby employers with low rates of workers'
compensation claims would bind together to self-insure their
obligations. This would leave the higher-risk employers in the
traditional workers' comp insurance pool, relative injury rates
would increase, and rates would increase accordingly. He asked
if workers' compensation costs had increased in states that
allow groups to self-insure.
Mr. Vogel responded that California experienced an approximate
40 percent decrease in workers' compensation insurance costs
since reforms were instituted. The advent of self-insured groups
in New Mexico served to help strengthen the market. While
insurance rates had been increasing, the introduction of the
self-insured group option functioned to stabilize the market,
prompting insurers to reenter the market with lower insurance
rates. Similarly, Nevada's workers' compensation arena had been
a monopolistic system with rising rates, but in the several
years since the law was enacted, rates had decreased an average
of two to three percent per year.
1:31:42 PM
DAVE KESTER, Workers' Compensation Committee of Alaska,
testified via teleconference from an offnet location in
opposition to the bill. He described the bill as unnecessary,
because regulations currently exist to allow for the formation
of "reciprocal insurance arrangements" for groups of employers.
He exampled the Alaska Timber Exchange, the Alaska Municipal
League Joint Insurance Association, and the Alaska Rural
Electric Cooperative Association as groups that have been formed
and successfully operate under current regulations.
1:33:43 PM
Mr. Kester observed that the bill is designed to exempt self-
insured groups from the necessary regulation and financial
oversight of the Division of Insurance. Without this oversight
an injured worker could experience insolvency of the group and
not receive adequate payment of the workers' compensation claim.
He also spoke to the "inadequate guarantee mechanisms" within
the bill, and was troubled by the prospect of significant
financial burden forcing a small member employer in to
bankruptcy.
Mr. Kester continued that the proposed legislation did not have
the support of the Director of the Division of Insurance, Linda
Hall. Her lack of support should alert members to problems with
the bill.
1:37:37 PM
MIKE COMBS, President, Alaska Independent Insurance Agents &
Brokers Incorporated, testified via teleconference from an
offnet location that the association did not support the bill.
The legislature adopted significant reforms to workers'
compensation insurance in a recent special session and the
impacts of those changes have not had adequate time to present
themselves.
Mr. Combs furthered that while the proposed legislation
contained joint and several liabilities, there was no provision
for personal indemnification. Therefore, only business assets
would be available to an injured worker seeking relief under a
workers' compensation claim, and business assets could be
protected through actions such as incorporation. In contrast,
under the "cross liability" provision of standard workers'
compensation insurance plans, if one employer becomes insolvent,
the other employers within the state are responsible for payment
of the claim.
Mr. Combs voiced concern regarding the manner in which insurance
rates would be established, as it appeared that none of the
self-insured groups were members of the National Council on
Compensation Insurance, and would therefore not have access to
those rates. He preferred reciprocal insurance arrangements.
1:41:35 PM
KENTON BRINE, Property Casualty Insurers Association, testified
via teleconference from an offnet location in Olympia,
Washington, in opposition of the bill. He referenced a single
claim in the State of Alaska that had warranted a $7.7 million
"set-aside" reserve in anticipation of final settlement. He
offered the $7.7 million claim by a single injured worker as
evidence that the $10 million guarantee provided for in the bill
was inadequate. While he was not opposed to the formation of
self-insured groups, he desired stronger financial protections
and regulation. He appreciated and supported reforms made to
workers' compensation the prior legislative session, and
encouraged the Committee to continue in that direction by
rejecting the proposed bill.
1:45:27 PM
RAY HICKLE, President, Anchorage Homebuilders Association,
testified in Juneau in support of the bill. He stated that
homebuilders need some "relief" to the workers' compensation
issues, as insurance rates for carpenters and roofers are too
high. He spoke to the Association's willingness to work with the
Committee to revise the bill to address any concerns of the
members.
1:46:44 PM
Senator Dyson asked the witness's response to the statement that
this type of an association is already permissible under state
law, and the proposed legislation is unnecessary.
1:47:09 PM
Mr. Hickle replied that "reciprocals are top heavy and they
waste money."
1:48:11 PM
Senator Dyson asked regarding the statement that, as proposed,
this bill would not provide adequate financial strength of the
self-insured groups to address claims that would arise.
1:48:30 PM
Mr. Hickle responded that self-insured groups would have
"reinsurance" with joint and several liabilities for
catastrophic events. Currently, the requirements for a single
company to acquire reinsurance include assets of $5 million and
one hundred employees.
1:49:13 PM
PAUL LISANKIE, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development, testified in
Juneau that the Department was not opposed to the basic premise
of self insurance for workers' compensation liability. He
informed that the State has had a self-insurance program in
operation for 47 years, which his Department administers. He
characterized the Department's program as "successful".
1:50:32 PM
Mr. Lisankie identified "distinctions" between the State's
current self-insurance program and the proposed legislation.
While the current program requires a minimum net asset value of
$5 million, the Department's primary focus, by statute, is the
financial ability to pay of the business wanting to self-insure.
He considered the $5 million net asset requirement a "basic
qualification" of the program, not a guarantee that the business
would be approved for self-insurance. Therefore, the current
regulation provision should be considered as a basic component
of any proposal. He noted that the current program also contains
an "excess insurance" stipulation to limit the company's
exposure in the case of an extremely large workers' compensation
settlement, such as a permanent total disability case. His
research revealed several self-insured entities had gone out of
business for reasons unrelated to their workers' compensation
liability. This is illustrative of the risks involved in
allowing a business to self-insure. A company that is currently
financially strong and meets the requirements for self-insurance
of workers' compensation obligations could stop operating for
any number of reasons. This could render an injured worker
unable to collect their permanent total disability payments. He
urged the Committee to consider all risks associated with self-
insurance of workers' compensation liability.
1:53:53 PM
Mr. Lisankie told of a case involving Wein Airlines and an
injured worker. Wein was a self-insured company that had gone
out of business. The Division had to undertake great effort to
secure the pass-through funding to provide to this injured
worker. The benefits were paid for many years until the former
worker passed away, and Mr. Lisankie used this case to
illustrate how important it is for a self-insured company to be
able to pay long-term benefits to injured workers, regardless of
the health of the company.
1:55:45 PM
Senator Stedman recalled an earlier comment that rates for self-
insurance were approximately 30 to 40 percent of the cost of
traditional workers' compensation insurance, and earlier
testimony that 13 businesses in Nevada had opted out of normal
workers' compensation to form their own self-insured
association. He wondered if Alaska would be faced with an
adverse selection of traditional workers compensation
participants, thus compounding the difficulties already facing
the workers' compensation system.
1:56:37 PM
Mr. Lisankie replied that such a scenario is a viable concern,
considering Alaska's large area and small population. He
reviewed other states in similar situations. Of the seven states
with comparable populations of fewer than one million, four of
those states do not allow self insurance groups, with Idaho
allowing only electrical utility companies to self-insure. Two
of the states that allow for self-insurance of workers'
compensation have established either a guarantee "fund" or
"mechanism". He cited only one state similar in population to
Alaska that allowed self-insurance without a guarantee mechanism
of some form.
1:57:53 PM
Senator Stedman recounted significant workers' compensation
reforms made by the legislature, and understood these reforms
had only recently been implemented and their effects were not
yet tangible.
1:58:19 PM
Mr. Lisankie shared his observation that "things are starting to
improve." He considered the reforms initiated by the legislature
as the beginning of the improvement process, but agreed that
they had not had adequate time to manifest themselves.
1:58:51 PM
Senator Olson commented that while businesses may "come and go",
that is also true of insurance companies.
1:59:13 PM
Mr. Lisankie agreed. However, insurance companies are heavily
regulated, and the State has a guarantee fund. He opined that
insurance companies offer more security.
2:00:02 PM
Senator Olson asked the number of self insurance certificates
granted by the State.
2:00:14 PM
Mr. Lisankie responded that a total of 31 entities are self-
insured in Alaska, and of those, 23 were private companies and
eight were public agencies, governments and school districts.
2:00:37 PM
Senator Olson asked the discrepancy between the $5 million and
$10 million tangible net worth requirements.
2:00:57 PM
Mr. Lisankie had not fully reviewed the proposed committee
substitute, and presumed the differences were a technical
drafting error.
2:01:21 PM
LINDA HALL, Director, Division of Insurance, Department of
Commerce, Community and Economic Development, testified in
Juneau to her "strong" opposition to this legislation. Her
statement was as follows.
The opposition is not just from the Division of Insurance.
Mr. Lisankie from the Department of Labor and Workforce
Development has also evidenced that, as have some other
groups. It's been an uncomfortable position to be in to be
in strong opposition to legislation proposed by members of
this body. It's not something I've done often, and I don't
do it lightly. It is a public policy decision and I'd like
to share some thoughts with you.
As the lead regulator of the insurance industry in Alaska,
it is the mission of the Division of Insurance to do three
things: one is to enforce insurance statutes, second is to
protect the consumer, third is to enhance the business
environment. I think this legislation violates two of those
things: consumer protection, and I will speak to both
these, and the enhancement of the insurance business in our
state.
I speak before you today to present my analysis of a
proposal that I think is not good public policy. I had not
seen the CS until I came here today, I had not asked for a
CS to be done in the Senate. I have certainly made my
concerns about the bill known from the time it started last
year, and as I have worked with one of the major sponsoring
groups over the course of the summer. The concerns that I
have as we've gone through various committees, as I've
voiced those concerns repeatedly, changes have been made.
I'm not sure, today I have not had a chance to look at
this, to have an idea if my concerns are met or not. I'm
going to address those concerns. It would appear from the
testimony some are met, some are not.
I will talk about my four major concerns. One is liquidity.
I'm looking for real money to pay real claims. We have
certainly increased from $5 million to $10 million a
tangible net worth requirement for these groups. It's left
up to the Director to define "tangible net worth." As I
understand, tangible means thing you can touch, things you
can see. I'm assuming when some director who follows me
makes this definition it will include buildings, CATs
[Caterpillar equipment], trucks, whatever the tangible net
worth is. We can't pay work comp claims with buildings. We
would guarantee a business would go out of business if they
had to liquidate their assets to pay work comp claims. So
I'm not today convinced that tangible net worth gives us
the protection we're looking for. One of the, and I
certainly will address one of the comments asked earlier
about reciprocals and why I advocated that early in the
process.
Guarantee fund is my second concern. I do understand that
the CS that I haven't read contains a provision for the
guarantee fund. I've been in front of this body looking for
solutions to an insolvent insurance company. There is a
mechanism and it's worked. I will address that later in my
comments also. The licenses that are required I believe are
in the CS. I have made that an issue as I've talked. It's
disturbing to me that I've had to go till the third to the
end day of session and numerous committee hearings to have
somebody now, at the last minute, bring these to the table.
Process to deal with an insolvent group, the version I
prepared my comments on had an ability for the Director if
an association was insolvent, to withdraw their
certificate. It had no process to do that. Insurance
statutes clearly, in chapter 78, set out both
rehabilitation and liquidation provisions. There needs to
be a mechanism, whether this bill now includes that I
really don't know.
I would like to address some of the comments that have been
made as I have made my opposition known. There's been an
indication from a number of people to me that, "Well, you
have the authority to decline applications. If one of these
associations comes to you and presents the application you
can decline it." I think it is my obligation under Alaska
statute to try to implement the things that this body
passes. I can't imagine any director looking at
applications and being able to deny that application
because you didn't think, you didn't like, the provisions
of this particular chapter. I don't operate that way and I
can't imagine you would tolerate anyone operating that way.
There are numerous financial requirements as I've mentioned
before. The most important element to me today is
liquidity. A number of other states who allow self-
insurance associations do have working capital
requirements. There needs to be money. The excess insurance
is certainly there. Again, there is authority in this
legislation for the Director to make a determination of the
level of excess insurance. You heard testimony earlier of
an insurance company having a single claim reserved at $7.7
million. If in fact I were the director requiring an
applicant to provide me evidence of insurance of $10, $15,
$20 million excess insurance, I think I would probably get
push back that those were excessive, we don't need those,
our claims won't be that big. So there's a lot of balancing
here.
I would also present to you that I don't think this bill
does what it's purported to do. We're looking at small
employers. In this bill there is a minimum $10,000
assessment from each member, so when you put five members
together there's an aggregate assessment of $300,000 to
have a sufficient size to begin to work. But each
individual member must have a minimum of a $10,000
assessment, and because it's self-insurance we don't call
it "premium" we call it "assessments." Many of our small
businesses who are looking for relief, and I will certainly
grant they need relief, are not going to be helped by this.
They can't pay $10,000. That's what we're looking for is
ability to find options for those types of businesses. This
is not going to do that.
So what we're doing is benefiting larger groups and leaving
those that I see in this point, most vulnerable to still be
in the system that, admittedly even by the sponsor
statements, I'm sorry, not the sponsor statements, the
proponent statements, is a broken system.
My other major area of concern is my marketplace. I'm
responsible for the insurance marketplace. Is it working
wonderfully? Of course not. But am I seeing good things
happen? I am. And I'd like to detail some of those.
We have a small marketplace. That's been alluded to,
questions about population. As we allow more and more
groups to opt out of that marketplace, our market becomes
less and less attractive. We don't have people in here
trying to compete for the business. There isn't enough
business here for them to truly be able to use their assets
and really get a return on those. I believe the term has
already been used and I've used it. There is certainly an
ability to do "cherry picking". I've heard testimony that
"Well, we will only take the best groups to do this." What
does that mean to an employer who's had a couple losses?
And maybe isn't one of the best groups?
There's an ability to do safety programs today. I think,
"Shame on any employer who doesn't have a safety program."
That is the best thing to do for workers' compensation. I
looked at someone's individual experience this week, a
member of this body who had, it's called… an "experience
modification" that gave him a thirteen percent credit on
his business because he had good claims experience as an
individual. Those things can happen, and they are an
impact. There is today legislation that mandates premium
credits for safety programs. So when we allow groups to
pick off the best accounts we're spreading the risk over a
lesser group of employers who, maybe by no reason of their
own have a bad accident. I've insured employers, worked
with employers, for 20 years in Alaska. I've seen some
incredibly serious claims. When a steel erector with an
employee-fall off a roof, that's a bad experience. Didn't
mean they didn't have safety programs. They did. But they
happen. Claims happen. It's very unfortunate.
I'm going to give you some regulatory examples that I've
gotten from people around the country who sit in my role
that show some need for oversight and a different kind of
protection. Recently in Kentucky, a self-insured group
became insolvent. Court-ordered $90.7 million assessment,
they were able to collect $68 million in cash and notes
from the group members. There's a $22 million gap there. I
don't know where that comes from. I understand all
employers in Kentucky are being assessed for that. Ohio had
a scandal. Fifty million dollars in work comp money was
invested in rare coins. There was also a theft of over a
million dollars. We regulate the kinds of investments
groups can make. New York has 62 workers self-insured
trusts, work comp trusts. In October the workers'
compensation board in New York acknowledged that at least
half were operating under-funded, and at least were
assessing members to reduce shortfalls that were running as
high as $15 million per trust, $163 million in aggregate.
Kansas recently, documents came out of the 11 self-insured
funds, five either lost money or had negative fund
balances.
Self-insurance can work, but it has the same problems as
insurance. The costs are high. The cost of systems, the
cost of the benefits, are high. I have seen in the three
years I've been in this position starting little glimmers
of hope in our system. We have an assigned risk pool. It is
supported solely by insurance companies. It has been a
deterrent in our marketplace of competition. In the last
eight years Alaska, for the first time in 2005, had, did
not lose money in the assigned risk pool. That makes it a
more attractive place for insurance companies to do
business. Our market shares in the pool in 2003 were 20
percent. Twenty percent of our premium was in the assigned
risk pool. 2005, we've dropped that to 15 percent. More
accounts are being written outside of that pool in a
traditional market.
Our guarantee fund, I mentioned that earlier, for me it was
probably the thing I would point to most since I've been
coming before this legislature, the ability to find a fix
for a huge hole that left over 800 injured workers with no
benefits. It left over 400 Alaskan employers with a
financial responsibility they never expected to have. This
legislature worked with me to find a solution. We did
increase assessments; it has increased the cost of workers'
comp for the last couple years. 2006 those assessments were
no longer made. That fix has worked, and that guarantee
association has recouped money from other insolvent
insurance company estates. I've worked with them diligently
to try to do that. We've seen that work.
I'm seeing expansions of insurance companies in our state.
I've watched two insurance companies who had one adjuster
operating out of their home open claims offices, increase
their staff, sign long-term leases. Are they writing tons
of business yet? No. But they are really looking at our
market and they're having an increased renewed interest in
expanding what they're doing here.
A member of the House of Representatives, just this week,
told me a story of a constituent that I would like to relay
to you. He had a constituent who was complaining about
having to close his business. He could no longer afford
workers' compensation. You hear those comments from
constituents. I hear those comments from employers. This
gentleman told him that after we did reforms, this year he
had bids from three insurance companies, reduced his cost
by $50,000. Some of the prior speakers are correct: we
haven't yet the chance to see the full effects of reform,
but I'm seeing signs in our workplace that this can work.
California, from July of 2003 to January 2006, has seen a
46 percent decrease in their premiums, based on the
California work comp study. They also indicate in that same
study that without the reform, that actually would have
been a 60 percent decrease over what they would have
expected. Pennsylvania, rates have dropped $100 million due
to reforms.
We have tried to do reform. We did reform last year. We've
tried to do more. I'm really disappointed. There are a
number of groups who have signed on to support this bill
that did not become involved in the system reforms we did
last year, and now they're looking for "carve out". We can
do a better job. I really think it's not a level playing
field to let them out of a system that they don't want to
help work with. I prepared, I believe in Senate Labor &
Commerce, even, although they looked at me like I was nuts
now. Not the first time. We have [indiscernible]
guidelines. If we're going to look at something, we need to
help our system. We need to do something about the cost. It
really doesn't matter who writes that claim check if the
system costs are X. I've heard comments about reciprocals
being top heavy, charging too much. If you look at this
bill, 35 percent is allowed there for administrative fees.
That leaves 65 percent to pay claims. I don't think that's
really any different than any system I see. I see the
filings from insurance companies. We're seeing the same
expense ratios at the top; what it costs to administer,
what it costs to do things. This isn't that different. I'm
not sure there's any savings here.
I will wrap up, thank you for your patience. Self-
insurance, in itself, works well in some circumstances if
safeguards in place. I would really like to work with our
system. I think it's broken. Director Lisankie and I have
worked relentlessly for two years to work in that system. I
have sat in this chair and proposed solutions. I don't
think the solution is to let more groups opt out. If Alaska
addresses the issues of cost, it too will see a reduction
in premiums. If we just think changing the entity that
writes the checks will bring down costs, I think we're
mistaken. If we think claims can be controlled better by
changing the entity that handles them, I'm thinking we're
facing potential harm to injured workers.
We have standards that have to be met. There are standards
that are not in this bill where, in my department, we have
what are called "unfair trade practices." That includes
handling claims. I have today in my office a very serious
allegation against a company who's handling claims. They
are probably, right now, subject to several hundred
thousand dollars worth of fines for the way they handle
claims. I want to make sure that I still have that ability.
I want to make sure that those injured workers are treated
according to our statutes. I certainly mean no disrespect
for the sponsors of this bill, but I really would urge you
to consider the pitfalls, and to oppose it.
2:18:18 PM
Senator Dyson recalled conversations he had with Ms. Hall
several years prior regarding methods of reducing costs in the
health insurance arena. He summarized those exchanges as
indicating that increased numbers of self-insured individuals
had the effect of making the health insurance industry in Alaska
less attractive to insurance companies, and wondered if the same
was true for workers' compensation insurance companies.
2:19:15 PM
Ms. Hall affirmed. She explained that the same dynamics and
"cost drivers" apply with fewer participants in a system.
Approximately 67 percent of workers' compensation expenses are
medical costs, an increase from 40 percent five years ago. The
increases in both fields are due to increased self-insurance and
lack of regulation and oversight.
2:20:09 PM
Senator Stedman understood Ms. Hall had testified that workers'
compensation issues appear to be improving, and more insurers
are considering entering the market place.
2:20:34 PM
Ms. Hall clarified that she did not know of new companies
entering the marketplace, but those that currently write
policies in Alaska are looking to expand their businesses and
increase investment in the State. She expected changes to be
positive and gradual. She divulged that her office was working
with one new health insurance company, something she considered
"a wonderful step", and something that had not happened before
statutory and regulatory changes occurred.
2:21:41 PM
Senator Stedman had surmised the Department did not support this
bill.
2:22:04 PM
Ms. Hall agreed that was an "accurate assessment".
2:22:22 PM
Senator Stedman offered that when both the State's regulatory
department and the independent insurance association oppose a
bill affecting the industry, the legislature must proceed with
caution.
2:22:59 PM
Co-Chair Green ordered the bill HELD in Committee.
2:23:07 PM
HOUSE BILL NO. 485 am
"An Act amending the State Personnel Act to place in the
exempt service pharmacists and physicians employed in the
Department of Health and Social Services or in the
Department of Corrections; and providing for an effective
date."
This was the first hearing for this bill in the Senate Finance
Committee.
JANET CLARKE, Assistant Commissioner, Department of Health and
Social Services, testified that this bill would transfer the
pharmacist job class into exempt status from the current
placement in classified status. Currently ten positions in the
Department of Health and Social Services and the Department of
Corrections would be affected by this legislation. The
Department of Health and Social Services is advocating the
passage of this bill in an attempt to address difficulties in
recruiting for these positions. Pharmacist positions in both
departments require specific training. For example, the
positions within the Department of Health and Social Services
call for specialized medical credentials, with the pioneers'
homes necessitating geriatric experience and credentials.
Due to the specialized nature of these positions, the Department
requested they be transferred from the classified status to
exempt status, as they are more similar to other exempt
positions in the Department of Health and Social Services.
2:24:52 PM
Senator Dyson asked about bargaining unit issues related to the
bill.
2:25:07 PM
Ms. Clarke reported that the affected individuals would move
from their current bargaining unit participation.
Co-Chair Green had heard from State departments about the "great
need" for pharmacists and the difficulties in hiring under the
current job classification.
2:25:40 PM
Co-Chair Wilken noted the seven fiscal notes accompanying the
bill, of which six were zero, with the Department of Corrections
fiscal note was $30,000. The other departments would absorb the
additional costs into their budgets and he asked why the
Department of Corrections would not be able to do so as well.
2:26:08 PM
Ms. Clarke related that the Department of Health and Social
Services had agreed in hearings before the House Finance
Committee to a zero fiscal note, as the Department has many more
appropriation components from which to absorb costs than does
the Department of Corrections.
2:26:20 PM
SHARLEEN GRIFFIN, Director, Division of Administrative Services,
Department of Corrections, testified that the Department has
only one budget component for pharmacy costs. The previous two
years witnessed supplemental appropriation requests for that
component. The State's unhealthy inmate population makes
absorbing additional personnel costs unfeasible.
2:27:39 PM
Co-Chair Wilken offered a motion to report the bill from
Committee with individual recommendations and accompanying
fiscal notes.
Without objection, HB 485 am, was MOVED from Committee with
fiscal note #3 for $30,700 from the Department of Corrections,
and the following zero fiscal notes: #1 from the Department of
Commerce, Community and Economic Development; #8 from the House
Finance Committee for the Department of Health and Social
Services, Public Health Results Delivery Unit (RDU); #9 from the
House Finance Committee for the Department of Health and Social
Services, Behavioral Health RDU; #10 from the House Finance
Committee for the Department of Health and Social Services,
Health Care Services RDU; #11 from the House Finance Committee
for the Department of Health and Social Services, Alaskan
Pioneer Homes RDU; and #12 from the House Finance Committee for
the Department of Revenue, Tax and Treasury RDU.
2:28:01 PM
SENATE CS FOR CS FOR HOUSE BILL NO. 190(JUD)
"An Act relating to the purchase of alcoholic beverages and
to access to licensed premises; relating to civil liability
for certain persons accessing licensed premises; requiring
driver's licenses and identification cards to be marked if
a person is restricted from consuming alcoholic beverages
as a result of a conviction or condition of probation or
parole and relating to fees for the marked license; and
requiring the surrender and cancellation of driver's
licenses under certain circumstances."
This was the first hearing for this bill in the Senate Finance
Committee.
PAUL LABOLLE, Staff to Representative Richard Foster, testified
that this bill would attempt to reduce incidents of Driving
Under the Influence (DUI). Although Alaska currently has strict
DUI statutes, approximately 30 percent of motor vehicle
fatalities involve a DUI. This bill would prohibit those
convicted of a DUI from consuming alcohol as a term of
sentencing and probation. The term Restriction on Consumption
(ROC) would appear on their drivers' license. The bill would not
require an alcohol vendor to card every customer, but the bill
includes a provision allowing for a $1000 civil penalty to be
levied by a vendor that found an individual to be in violation
of the restriction while attempting to purchase alcohol.
2:30:18 PM
Senator Bunde explained the civil penalty provision as it
related to selling alcohol to a minor. In that case, a vendor
who determines an individual attempting to purchase alcohol is
not of age may assess a $1000 trespass fee. The method had
worked well to discourage attempts by minors to purchase alcohol
in Anchorage.
2:31:13 PM
Co-Chair Green asked if the display of "ROC" on the drivers'
license is currently allowed.
Mr. Labolle replied that this bill would allow for the display.
2:31:30 PM
Senator Bunde was willing to support the bill, but anticipated
that older DUI offenders were unlikely to be carded when
purchasing alcohol. He supposed the threat of a $1000 fine could
provide enough of a deterrent effect to discourage DUI offenders
from attempting to procure alcohol.
2:32:39 PM
Co-Chair Green asked if Members supported the ROC designation on
an offender's drivers' license.
2:32:40 PM
Senator Dyson commented on the "significant" and possibly
"radical" measures contained in the bill. He expressed concern
regarding the indeterminate fiscal note, and asked if the
anticipated cost to the Division of Motor Vehicles (DMV) was
known.
2:33:32 PM
Mr. Labolle responded that the DMV had testified that
implementation of this program is within its capability and
"easy to do". The fiscal note assigns all costs and fess
associated with the printing of the ROC designation to the DUI
offender.
2:34:06 PM
Senator Dyson continued, asking if it would be the
responsibility of the DUI offender to go to the DMV and request
that the ROC designation be printed on their license.
2:34:40 PM
Mr. Labolle affirmed.
2:34:56 PM
Co-Chair Green asked if the courts currently restrict
consumption.
Mr. Labolle replied positively.
2:35:11 PM
Senator Dyson recalled previous technical complications with
relaying information between the courts and the DMV, and asked
if their computer systems were now compatible.
2:35:52 PM
Mr. Labolle deferred to the Alaska Court System or the DMV for a
response.
2:36:06 PM
Co-Chair Wilken referenced a letter from the president of the
Cabaret, Hotel, Restaurant and Retailers Association (CHARR)
[copy not provided] that claimed the bill "will require bars and
liquor stores to purchase expensive electronic equipment and
hire personnel to operate that equipment." He asked regarding
this "equipment".
Mr. Labolle understood the letter was out of date.
2:37:04 PM
HEATHER BRADY, Staff to Representative Harry Crawford, testified
that CHARR had misunderstood the provisions. While the bill
requires the DMV to make the ROC restriction a "scanable" item
when possible, it would also require a visual display of the
restriction on the license, so no additional equipment would be
necessary.
2:37:54 PM
Co-Chair Wilken spoke to a memorandum from legislative legal
council dated May 3, 2006 [copy not provided] that questioned,
and possibly challenged, the bill itself. He requested a
response to that letter.
2:38:21 PM
Mr. Labolle advised that the concerns addressed in the
memorandum related to a drafting disagreement between Division
of Legal and Research Services and the Department of Law. He
deferred to Doug Wooliver.
2:39:04 PM
DOUG WOOLIVER, Administrative Attorney, Alaska Court System, had
not seen the memorandum in question. He understood the drafter's
concern to "capture municipal ordinances". Nearly half of all
misdemeanor DUIs are charged under Anchorage municipal code, not
under State statutes.
2:40:09 PM
Co-Chair Green suggested the memorandum asked how the Department
of Administration would garner all information on previous DUIs
from other states, and how the Department would identify those
on probation and implement the provisions.
2:40:36 PM
Mr. Wooliver was not aware of how the DMV learns of DUIs
committed in other states.
2:41:02 PM
Mr. Wooliver responded to an earlier question regarding an
electronic connection to relay judgments between the Alaska
Court System and the DMV. He informed that the two agencies did
not currently have such a system, but were working on a
multiple-agency connection so the courts could share information
with other affected departments more readily.
2:41:45 PM
Senator Dyson summarized the current method of transferring
information in which one agency must print out the information
and the receiving agency then must reenter the information into
a separate system. This information is of high importance to the
DMV as well as police officers, who may need to know as quickly
as possible if a warrant has been issued for a person, if a home
has a foster child, or other important factors in law
enforcement. He asked if a computerized system to facilitate
information sharing was "months or years away".
2:43:11 PM
Mr. Wooliver estimated the State was years away from
implementing the ideal system, although each year saw
improvements. It is a very costly project, and all departments
involved must receive upgrades. For example, while the Court's
computer system has been improved, the receiver must also have
upgrades to take delivery of this information.
2:44:09 PM
Senator Dyson asked if completion of the upgrades was two, five,
or ten years away.
2:44:24 PM
Mr. Wooliver projected conclusion within a five year range.
However, other needs and priorities, such as bail conditions and
collections issues, would continue to be identified and
addressed.
2:44:54 PM
Senator Bunde clarified the process by which a person would
obtain an ROC designated drivers' license. If, during
sentencing, a restriction on consumption was placed on an
individual, that person must surrender their license in court
upon sentencing. That person must then go to the DMV within two
days and apply for a new, restricted license. The process was
not as "voluntary" as it may have been portrayed.
Senator Bunde asked about the provisions inserted by the House
Judiciary Committee that had caused concern to members of the
Division of Legal and Research Services.
2:45:57 PM
Mr. Labolle located the language in subsection (a) of
Sec.04.16.160. Privilege to purchase alcoholic beverages., added
by Section 2 on page 2, lines 9 and 10, and in AS 28.15.191(g)
added by Section 7 on page 4, lines 5 through 7. A sponsor
amendment was offered during a hearing in the Senate Judiciary
Committee, and the adopted amendment was an attempt to broaden
the language to include as many violations as possible.
2:47:06 PM
Senator Bunde asked the sponsor's opinion regarding the ability
to enforce the sections described in the memorandum.
Mr. Labolle had not received the memorandum.
Senator Bunde was inclined to support the bill, and asked if
deleting the provisions in question would remove the requirement
for a concurrence vote.
Mr. Labolle assumed the deletion would remove the requirement
for concurrence, but would exclude approximately 50 percent of
DUI convictions, those charged under the Anchorage ordinance,
which are included under the current language.
2:48:09 PM
Senator Bunde suggested removing only the portion of the
provision that referred to out-of-state convictions, as it would
be easier to facilitate communications between the State DMV and
the Municipality of Anchorage than between states.
2:48:27 PM
Mr. Labolle would not oppose the language, and had prepared a
draft of the amendment.
2:49:05 PM
DUANNE BANNOCK, Director, Division of Motor Vehicles, Department
of Administration, testified via teleconference from Anchorage,
that the Division struggles with both "practical" and
"philosophical" issues. He explained that he could not avoid
preparing an indeterminate fiscal note, as he did not know the
number of drivers who would be affected by the proposed
regulation.
Mr. Bannock was also concerned that the definition of the
"restriction on consumption" was not clear in the bill, and
enforcement could be an issue. He asked if the ROC designation
would prohibit a person from both entering a licensed
establishment and purchasing alcohol, or if the restriction
would be solely on the consumption of alcohol.
2:53:03 PM
Mr. Bannock directed attention to Sections 4 and 6, which
instruct the DMV to cancel the drivers' license or
identification card of a person charged with a DUI offense upon
notification from the court. He stated that the bill was unclear
as to whether the license was to be surrendered to the arresting
officer, the court, or simply cancelled in the DMV database.
After the required cancellation, the bill did not specify the
terms of the cancellation, or if that affected a person's
driving privilege. The bill also failed to address other aspects
of licensing, and he exampled a case of a person who retained
their original "canceled" license, and asked if it would be the
responsibility of the DMV to monitor the length of the ROC, then
"uncancel" a license upon expiration of that period. This would
be a burdensome requirement of the Division.
2:55:31 PM
Mr. Bannock was "worried" that the DMV would not be able to
satisfy the intent of the bill, which he understood to be the
reduction of "death and injury caused by drunk drivers." He
opined that the proposed legislation would not stop lawbreakers
from obtaining and consuming alcohol. It would only provide a
visual notice of the court order. Most adults are not carded
when purchasing alcohol. He therefore had no expectation that
the proposed legislation would accomplish the bill's intended
goals.
2:56:31 PM
Senator Bunde asked if it was a crime to drive with a revoked
license.
2:57:03 PM
Mr. Bannock clarified that the language speaks to "cancellation"
of a license, not revocation. His concern in that regard
involved a situation in which a person's license was cancelled
and they never went to the DMV to get their restricted ROC-
imprinted license. If the period of revocation had expired but
that individual had not gone in to the DMV to get a new license,
was that person driving with a cancelled license in violation of
the law?
Mr. Bannock continued that in every other scenario in which the
DMV becomes involved, there is an action the driver must take at
the DMV that triggers reinstatement of driving privileges. For
example, if a person is involved in an accident that impacts
their legal ability to drive, they must present the DMV with
proof of insurance, restitution or other documentation before
their driving privileges are reinstated. This bill does not have
a requirement for such action, so the burden would be on the DMV
to monitor restrictions and their expirations.
2:59:13 PM
Senator Olson realized the complexity related to this bill and
the burden to the Division. He asked if Mr. Bannock anticipated
a reduction in DUI offenses if this bill became law.
2:59:46 PM
Mr. Bannock responded that he "regretfully" did not expect the
proposed legislation would reduce DUIs. Discussions within the
Department did not identify any strong correlation between the
restrictions in the legislation and a reduction of DUIs.
3:00:20 PM
Senator Olson did not agree.
3:00:23 PM
Senator Bunde asked if the restriction on consumption would
appear only on the physical drivers' license or if it would also
be in the database used by police officers during routine stops.
3:01:06 PM
Mr. Bannock replied that he assumed the restriction would appear
in both locations. This would be an important factor in the
legislation, as he anticipated many people would not be
compliant with this law. Therefore, only law enforcement
personnel would have access to the computerized information, and
any purveyor of alcohol would have to rely on the printed ROC on
the identification.
3:01:53 PM
Senator Bunde remarked that the bill in its current form has
potential positive effects. If a person with an ROC designated
license happened to be carded when purchasing alcohol, they
would be subject to a $1000 fine. Additionally, if a person who
failed to go to the DMV and apply for their ROC license was
stopped while driving, they would be subject to arrest for
driving without a valid license.
Mr. Bannock agreed, a driver could be arrested for failing to
obtain an ROC license, even if the restriction period had ended.
3:02:41 PM
Co-Chair Wilken aligned himself with Mr. Bannock's concerns
about the bill. He continued that the legislation needed
refining and further efforts to ensure it would accomplish its
goals before it became law. He would not support the bill in its
current form, but encouraged continued efforts on the part of
the sponsor.
3:03:30 PM
Senator Dyson identified with Co-Chair Wilken comments. He was
uncomfortable with the access issues the proposed legislation
raised. He identified the goal of the legislation as preventing
a person who was restricted from drinking from consuming
alcohol, not necessarily restricting them from the premise where
alcohol is served. He contended the bill did not address his
concern.
3:05:02 PM
Senator Bunde wanted to support this bill, but understood the
will of the Committee
The bill was HELD in Committee.
3:05:35 PM
SENATE CS FOR CS FOR HOUSE BILL NO. 150(L&C)
"An Act requiring licensure of occupations relating to
radiologic technology, radiation therapy, and nuclear
medicine technology; and providing for an effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
HEALTH HILYARD, Staff to Representative Tom Anderson, testified
that he was available to answer questions.
3:06:22 PM
Senator Bunde noted that approximately equal numbers of his
constituents support or oppose this bill. He was concerned that
the bill would increase bureaucracy by creating another board.
He went on record in opposition of expanded bureaucracy.
3:07:12 PM
Senator Stedman recalled testimony one day prior that the
legislation was unnecessary.
3:07:39 PM
Co-Chair Wilken asked what "problem" the legislation was
attempting to resolve. He characterized the bill as "feel good
legislation" with more potential to harm rural communities than
to improve their health and safety. He considered the bill
unnecessary and would not support it.
3:08:16 PM
Senator Dyson was of the opposite opinion. This bill makes
allowances to get the level of training and supervision
necessary in remote areas. Dr. Mandsager had successfully
explained the need for this legislation due to the potential
harm from overexposure to radiation.
3:09:06 PM
Senator Hoffman opposed this bill, as he surmised it would only
cause "additional harm to Rural Alaska".
3:09:21 PM
Senator Olson commented that he supported education and training
for medical workers, but considered this legislation "a step too
far". The bill would cause a strain in Rural Alaska.
3:10:40 PM
Senator Dyson offered a motion to report the bill from Committee
with individual recommendations and accompanying fiscal note.
Senator Hoffman objected.
A roll call was taken on the motion.
IN FAVOR: Senator Bunde and Senator Dyson.
OPPOSED: Senator Hoffman, Senator Olson, Senator Stedman, Co-
Chair Wilken and Co-Chair Green.
The motion FAILED (2-5).
The bill was HELD in Committee.
ADJOURNMENT
Co-Chair Lyda Green adjourned the meeting at 3:12:33 PM
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