Legislature(2003 - 2004)
04/22/2004 09:03 AM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 22, 2004
9:03 AM
TAPES
SFC-04 # 90, Side A
SFC 04 # 90, Side B
SFC 04 # 91, Side A
CALL TO ORDER
Co-Chair Gary Wilken convened the meeting at approximately 9:03 AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice Chair
Senator Fred Dyson
Senator Lyman Hoffman
Senator Donny Olson
Senator Ben Stevens
Also Attending: REPRESENTATIVE WEYHRAUCH; DOUG WOOLVIER introduced
his daughter MOLLY WOOLVIER, who was attending the meeting as part
of Take Your Child to Work Day; RICHARD, SCHMITZ, Staff to Senator
John Cowdery; WENDY LINDSKOOG, Director of External Affairs, Alaska
Railroad Corporation, Department of Community and Economic
Development; ERNESTA BALLARD, Commissioner, Department of
Environmental Conservation; JON TILLINGHAST, Attorney, Sealaska
Corporation; LINDA HALL, Director, Division of Insurance,
Department of Community and Economic Development; PAUL LISANKIE,
Director, Division of Workers' Compensation, Department of Labor
and Workforce Development;
Attending via Teleconference: From an offnet location: JEANNETTE
JAMES, former Alaska State legislator; PHILLIS JOHNSON, Attorney,
Alaska Railroad Corporation; ADRIAN LECORNU, Administrator,
Hydaburg Cooperative Association; CHUCK LUNDEEN, General Counsel,
Liberty Northwest Insurance; From Anchorage: LORI WING, President,
Alaska Independent Insurance Agents and Brokers; KEVIN DAUGHERTY,
Alaska Labor and Management Ad Hoc Committee; From Kenai: DENNIS
MURRAY, Administrator, Heritage Place Nursing Home, and former
president, Alaska State Hospital and Nursing Home Association; PAUL
BRENNER, Vice President, Quality Management, Central Peninsula
General Hospital
SUMMARY INFORMATION
HB 213-PROVISIONAL DRIVER'S LICENSE
The Committee heard from the sponsor. Two amendments were
considered and one was adopted. The bill moved from Committee.
SB 31-RAILROAD UTILITY CORRIDOR TO & IN CANADA
The Committee heard from the sponsor, the Alaska Railroad
Corporation and a former legislator. The bill was reported from
Committee.
SB 378-POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL
The Committee heard from the Department of Environmental
Conservation and Native Corporations. The bill was held in
Committee.
SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM
The Committee heard from the Department of Community and Economic
Development, the Department of Labor and Workforce Development,
industry representatives, the Alaska Labor and Management Ad Hoc
Committee and employers. The bill was held in Committee.
CS FOR HOUSE BILL NO. 213(FIN)
"An Act relating to a provisional driver's license and to
issuance of a driver's license; and providing for an effective
date."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken reminded that this bill, "implements a graduated
driver's license system."
REPRESENTATIVE WEYHRAUCH, Sponsor, noted he was available to answer
any questions.
Amendment #1: This amendment deletes "for the first six months
after receiving a provisional driver's license" from AS
28.15.057(b)(1) amended in Section 3 on page 2 line 20. The amended
language reads as follows.
(1) operate a motor vehicle that is carrying any
passengers
Co-Chair Wilken moved for adoption and objected for an explanation.
Representative Weyhrauch stated this is a technical amendment in
that the six-month provisional driver's license is already
addressed in Section 2.
Co-Chair Wilken removed his objection and the amendment was ADOPTED
without objection.
Amendment #2: This amendment inserts a new bill section on page 1,
following line 3 to read as follows.
Section 1. AS 28.05.095(e) is amended to read:
(e) Notwithstanding any other provision of law, a peace
officer may not stop or detain a motor vehicle to determine
compliance with (a) of this section, or issue a citation for a
violation of (a) of this section, unless
(1) the driver has a provisional license; or
(2) the peace officer has probable cause to stop or
detain the motor vehicle other than for a violation of (a) of
this section.
New Text Underlined [DELETED TEXT BRACKETED]
Senator Bunde moved for adoption.
Co-Chair Wilken objected for discussion purposes.
Senator Bunde assured this amendment is not intended to make "life
difficult" for those with provisional driver's licenses, but rather
to stress the importance of wearing seat belts and to creating
habits for rest of the driver's life.
Representative Weyhrauch did not object to the amendment.
Senator Dyson noted that a peace officer could not stop a vehicle
for this offense unless the driver has provisional driver's
license.
Senator Bunde replied that the peace officer could recognize the
younger age of the driver.
Senator Dyson surmised this would encourage profiling.
Senator Bunde remarked that if successful in increasing seatbelt
use, such profiling would be acceptable.
Senator Dyson expressed, "Pragmatists scare me."
Senator Olson predicted that the efforts required to enforce this
law could encumber peace officers, in that it would divert energy
from higher priorities.
Co-Chair Green asked if this provision would apply to all licensed
drivers in the State.
Senator Bunde replied that any driver in this age group could be
affected. He pointed out that State law requires seat belt use and
the only "nuance" is that for older drivers, seat belt violations
could only be issued as a secondary offense.
Co-Chair Green referenced other pending legislation would allow
seat belt use violations to be issued as a primary offense to all
drivers.
Senator Bunde affirmed, but noted that this other legislation has
yet to pass the House of Representatives.
Co-Chair Green asked if that legislation passes whether this
provision is necessary.
Senator Bunde answered that it would not.
Senator Olson posed a situation of an older vehicle without
installed seatbelts, and asked what assurance drivers of those
vehicles have that they would not be issued citations.
Senator Bunde remarked that Alaska law requires seatbelt use.
Senator Olson qualified that vehicles without manufacturer-
installed seatbelts are exempt.
Senator Bunde informed that 30 years ago he was able to install a
seatbelt in a vehicle and he surmised this could still be done.
Senator Olson contended that installation standards are more
stringent today than 30 years ago.
Co-Chair Wilken removed his objection to the adoption of the
amendment.
Co-Chair Green objected to the adoption of the amendment.
Senator Hoffman asked about issuing citations to a driver seven
months after receiving a driver's license, essentially one-month
after completion of the provisional driver's license term.
Senator Bunde replied that no primary citation would be issued.
Senator B. Stevens requested the sponsor's opinion on the
amendment.
Representative Weyhrauch reiterated that he would not object to the
amendment. He understood from conversations with Alaska State
Troopers that they stop teen drivers without hesitation upon
observation of driving violations. He surmised that witnessing a
young driver with several young passengers in the vehicle would be
probable cause for a peace officer to stop the vehicle and check
whether the driver has a provisional driver's license. He commented
that helmet use is required of teen drivers of motorcycles, while
not required of adult drivers, and therefore the distinction has
been established for higher safety requirements based on age.
Co-Chair Wilken understood sponsor did not oppose the amendment,
but would prefer that a Senate committee substitute be
uncontentious and receive concurrence in the House of
Representatives.
Representative Weyhrauch replied he is not concerned that adoption
of this amendment would hamper the bill's ability to pass the House
of Representatives. He explained that an amendment to allow
seatbelt violations as a primary offense for drivers of all ages
would present significant challenges with passage of this
legislation.
Co-Chair Green asked for clarification that the amendment pertained
to violation of seatbelt requirements.
Senator Bunde reported that it was discussed whether to include the
"entire seatbelt bill" in this legislation, but he agreed with the
sponsor that the provisional driver's license program is too
important to jeopardize with any opposition to the seatbelt issue.
Therefore, he pointed out this amendment only applies to holders of
a provisional driver's license.
A roll call was taken on the motion to adopt Amendment #2.
IN FAVOR: Senator B. Stevens, Senator Bunde and Co-Chair Wilken
OPPOSED: Senator Olson, Senator Dyson, Senator Hoffman and Co-Chair
Green
The motion FAILED (3-4)
The amendment FAILED to be adopted.
Co-Chair Green offered a motion to report the bill, as amended from
Committee with individual recommendations and accompanying fiscal
note.
There was no objection and SCS CS HB 213 (FIN) MOVED from Committee
with fiscal note #1 for $13,600 from the Department of
Administration.
DOUG WOOLVIER introduced his daughter MOLLY WOOLVIER, who was
attending the meeting as part of Take Your Child to Work Day. Ms.
Wooliver is seven years old, resides in Anchorage and was on her
first visit to Juneau.
CS FOR SENATE BILL NO. 31(RES)
"An Act relating to a transportation corridor for extension of
the Alaska Railroad to Canada and to extension of the Alaska
Railroad to connect with the North American railroad system."
This was the third hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill, sponsored by Senator Cowdery,
"authorizes [the] Alaska Railroad Corporation to delineate a
transportation and utility corridor from Eielson Air Force Base to
the Alaska-Canada border."
RICHARD, SCHMITZ, Staff to Senator John Cowdery, testified that no
changes have been proposed to this legislation since the previous
hearing. He stressed the importance that it passes into law,
expounding on the support and importance to establish a corridor to
extend the railroad into Canada. He reminded of the significant
discussion held in the Senate Resources Committee and efforts to
resolve certain issues. He noted that the provisions of the
legislation would not be immediately implemented, as other steps
must be first taken.
Co-Chair Wilken asked if the Alaska Railroad Corporation supports
this legislation.
WENDY LINDSKOOG, Director of External Affairs, Alaska Railroad
Corporation, Department of Community and Economic Development,
affirmed.
Senator Hoffman clarified that the Railroad supports the bill.
JEANNETTE JAMES, former Alaska State legislator, testified via
teleconference from an offnet location in her position as an
advisor to the Murkowski Administration on railroad issues, in
support of the bill. She stated that the legislation has undergone
compromises and that it should be advanced.
Co-Chair Wilken noted new fiscal zero notes being distributed to
the Committee.
Senator Bunde understood ownership of this land would be
transferred to the Railroad, which would maintain complete control
of the land and could restrict access to citizens. He questioned
how this would have cost to the State.
Mr. Schmitz replied that access to the land would not be restricted
until track is actually laid. He stated this legislation would
transfer ownership of a 200-foot corridor in locations where the
railroad would cross State-owned land. He noted that the Railroad
would be required to negotiate right of ways separately for
federally-owned land, lands owned by Native corporations and
privately-owned lands.
Senator Bunde contended that the 200-foot corridor, therefore,
could not be otherwise disposed of by the State, which would be a
financial loss.
Ms. James countered that this argument "falls on its face" because
the land would transfer from one State entity to another. She
explained that if the railroad were not constructed on the
property, ownership would transfer back to the State.
Senator Bunde remarked that this legislation would transfer
ownership from a State entity to a "quasi-private" entity, not
subject to administrative and procedures statutes. He disputed this
transfer would not have a zero fiscal impact.
Ms. Lindskoog detailed that as a compromise a 200-foot corridor
within a 500-foot corridor would be transferred to the Railroad fee
simple. She noted that the Department of Natural Resources would
reserve oil and gas mineral rights and that the State would have
control over the placement of railroad crossings. She also pointed
out that the State would have rights to utilize the property for a
natural gas pipeline. As a result of these differences, she stated
the proposed land would be unlike traditional Railroad-owned
property.
Senator Bunde informed that ownership of subsurface rights is not
transferred to any landowner and he therefore maintained his
disagreement.
Senator Olson asked how access for recreation and hunting
activities would be protected.
Ms. Lindskoog reminded that people are not allowed access to
airport runway tarmacs because of safety issues. She replied that
the Railroad and the Department of Natural Resources would review
user needs closely to determine where crossings would be located.
Senator Olson expressed concern about complaints from hunters cited
with trespassing for crossing the tracks "in the middle of
nowhere".
Ms. Lindskoog asked if Senator Olson suggests that hunters should
have a right to access the right of way.
Senator Olson "expressed discomfort" that hunters would be in
violation of trespassing laws.
Senator Dyson asked if Railroad rights of way have more access
restrictions than a highway.
Ms. Lindskoog surmised they do not. She furthered that the
Department of Natural Resources would retain significantly more
control over these lands than currently exercised with the route
between Seward and Fairbanks. She stated that if an area were
commonly used for hunting, it would likely be assumed that a
crossing would be located at the site.
Senator Dyson noted the assumption that people hunting or berry
picking would have the wherewithal to move off the highway to avoid
a passing truck. He opined that designated railroad crossings in
remote areas would be impractical.
Ms. Lindskoog informed that jaywalkers are not always ticketed. She
stressed that the trespass laws are intended for safety.
Co-Chair Wilken characterized crossing of the Railroad as potential
trespassing and pitching of a tent on the rails as trespassing.
Mr. Schmitz outlined possible signage to alert people of
trespassing laws and safety concerns. He assumed that a
"commonsense approach" would be adopted. He stated that in many
rural areas, warning signs are all that is necessary, as opposed to
a commuter train in an urban area with would likely be fenced off
Senator Bunde knew of specific duck hunters cited for trespassing
along the Railroad. He emphasized that this legislation does not
provide a "typical transfer" of property and that if undertaken the
Railroad would receive sole control over the land. He remarked that
if the decision is to "give away our natural resources" this fact
must be understood fully.
Senator Olson asked what party would retain the power of imminent
domain.
Ms. Lindskoog replied that the Railroad would have this power.
PHILLIS JOHNSON, Attorney, Alaska Railroad Corporation, testified
via teleconference from an offnet location, to affirm that the
Railroad holds the power of eminent domain just as the Department
of Natural Resources and utility corporations do for lands it
administers. However, she pointed out that the Railroad has never
exercised the power of eminent domain. She noted that in some areas
of the proposed route the entire width of the corridor is not
needed. She stated this was established as a compromise in this
legislation and that corridor width is commonly negotiated in land
transfers as a "last resort".
Ms. Johnson also commented that as a lawyer representing the
interest of the Railroad, she is always mindful of potential
litigation relating to trespassing issues. She stressed that the
transfer of title is important to the State, whether the Railroad
obtains fee simple title or "other mechanism" to utilize the land,
such as a permit from the Department of Natural Resources.
Regardless, she stressed, safety concerns would remain and the
issue of "tunneling" people must be addressed.
Senator Dyson strongly supported this bill and suggested the safety
issues could be addressed "in another forum". He viewed land owned
by the Railroad to be held in trust for the people of Alaska and
that access should not be limited. He was offended with "what the
Railroad has done in Whittier" indicating the extensive barriers
erected to prevent trespassing. He stressed that common sense is
expected when near railroad tracks and opined that most persons hit
by a train likely "deserve it." He expressed that the Railroad
should hold the land proposed in this legislation, not only for
Railroad purposes, but also for Alaskans in general.
Co-Chair Green stated that although she agreed with Senator Dyson's
comments about railroad crossings, major liability issues exist.
She spoke of "major issues" with access to Railroad property in the
Mat-Su. She spoke of attempts to change casual use at a "non-
official" crossing an established crossing through repeated use.
She stated that the Railroad insists upon involvement in these
decisions. She remarked that any land transferred to the Railroad
with the expectation that the land would be used for the benefit of
the public would not occur. Rather, this land would be utilized for
the Railroad's purpose and to generate profit for the Railroad. She
was unsure how a dividend program could be established to ensure
benefit for all Alaskans, or of a method to promise access to
everyone.
Senator Dyson offered a motion to report the bill from Committee
with individual recommendations and new fiscal notes.
Senator Bunde objected. He remarked that the zero amounts of the
fiscal notes are disingenuous. He expounded that this legislation
involves the transfer of State assets and suggested that the
legislature is "sometimes…too flexible."
A roll call was taken on the motion.
IN FAVOR: Senator B. Stevens, Senator Dyson, Senator Hoffman,
Senator Olson, Co-Chair Green and Co-Chair Wilken
OPPOSED: Senator Bunde
The motion PASSED (6-1)
CS SB 31 (RES) MOVED from Committee with three zero fiscal notes
from the Department of Natural Resources, dated 1/23/04, the
Department of Transportation and Public Facilities, dated 1/28/04,
and the Department of Community and Economic Development, Alaska
Railroad Corporation, dated 4/22/04.
SENATE BILL NO. 378
"An Act relating to regulation of the discharge of pollutants
from timber-related activities under the National Pollutant
Discharge Elimination System; relating to waste treatment and
disposal permits; making conforming amendments; and providing
for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill, sponsored by the Senate Rules
Committee at the request of the Governor, "authorizes the
Department of Environmental Conservation to administer the National
Pollutant Discharge Elimination Permit for the timber industry."
ERNESTA BALLARD, Commissioner, Department of Environmental
Conservation, informed that 21 years ago she served as the Regional
Administrator for the federal Department of Environmental
Protection Agency (EPA) and traveled to Alaska to meet with
Governor Sheffield and the commissioner of the Department of
Environmental Conservation. She reported that she recommended at
that time that to protect its waters and also allow for resource
development, the State should assume primacy on waters. However,
she remarked that the State did not and since that date, 45 other
states have done so, leaving Alaska as one of five that do not have
primacy. She told of the advantages to the states that have assumed
primacy in streamlining and establishment of state standards,
administrative procedures and appeal procedures. She stated that
because Alaska does not have primacy, the EPA writes permits and a
second process for State approval is required.
Ms. Ballard explained that this legislation would apply to timber-
related activities as a pilot project, with the intention to expand
to other development activities in the future.
JON TILLINGHAST, Attorney, Sealaska Corporation testified in
support of the bill. He commented that it is "no secret" that
Alaska's timber industry was "on the ropes" and expressed this
legislation would assist the industry and other industries in the
future.
Senator Olson surmised the witness' assertion is to the "best of
your knowledge".
Mr. Tillinghast affirmed, noting his knowledge is first hand.
ADRIAN LECORNU, Administrator, Hydaburg Cooperative Association,
testified via teleconference from an offnet location, asked whether
the assumption of partial primacy for the timber sector would
stipulate that the State would require Klukwan, Inc. to obtain a
National Pollution Discharge Elimination System (NPDES) permit.
SFC 04 # 90, Side B 09:50 AM
Mr. LeCornu continued that a Ninth Circuit Court of Appeals
opinion, issued in November 2002 relating to a case brought by the
League of Wilderness Defenders clarifies that the NPDES permitting
is required for aerial spraying of pesticides. He relayed the
Association's concerns that the consumption of partial primacy by
the State would further erode the community's "voice" as an Alaska
Native Tribe. He opined that the State has not "demonstrated a
willingness to listen" to the concerns of tribal members about
proposed pesticide spraying on Long Island.
Mr. LeCornu asserted this legislation would limit public
participation by eliminating public notice of proposed permits. He
stated that permits could be issued for spraying near Hydaburg with
no notice or opportunity for comment given to residents. He added
that public hearings located in Ketchikan, for activities proposed
for Prince of Wales Island, would present a hardship for Hydaburg
residents wishing to participate.
Co-Chair Wilken requested the Department respond to the concerns
voiced by the witness.
Ms. Ballard responded the matter to which the witness testified is
a different, pesticide program, rather than the water discharge
program addressed in this legislation. She understood that the
concerns relate to the public hearing process for a permit
application submitted by the Klukwan Corporation requesting
authority for aerial pesticide application on Long Island, near
Hydaburg. She informed that Department of Environmental
Conservation regulations require that the Klukwan Corporation must
hold public hearings, which have not been scheduled and location
has not been determined. She also noted that questions of the
Department of Environmental Conservation and the Department of
Natural Resources must be answered before the application could be
accepted.
Co-Chair Wilken requested witness contact the Department to resolve
this issue.
Mr. LeCornu agreed to do so.
Co-Chair Wilken ordered the bill HELD in Committee.
CS FOR SENATE BILL NO. 311(JUD)
"An Act providing for a special deposit for workers'
compensation insurers; relating to the board of governors of
the Alaska Insurance Guaranty Association; stating the intent
of the legislature, and setting out limitations, concerning
the interpretation, construction, and implementation of
workers' compensation laws; relating to restructuring the
Alaska workers' compensation system; eliminating the Alaska
Workers' Compensation Board; establishing a division of
workers' compensation within the Department of Labor and
Workforce Development and assigning certain Alaska Workers'
Compensation Board functions to the division and the
Department of Labor and Workforce Development; establishing a
Workers' Compensation Appeals Commission; assigning certain
functions of the Alaska Workers' Compensation Board to the
Workers' Compensation Appeals Commission and the Workers'
Compensation Hearings Board; relating to agreements that
discharge workers' compensation liability; providing for
hearing examiners and hearing panels in workers' compensation
proceedings; relating to workers' compensation awards;
relating to an employer's failure to insure and keep insured
or provide security; providing for appeals from compensation
orders; relating to workers' compensation proceedings;
providing for supreme court jurisdiction of appeals from the
Workers' Compensation Appeals Commission; providing for a
maximum amount for the cost-of-living adjustment for workers'
compensation benefits; providing for administrative penalties
for employers uninsured or without adequate security for
workers' compensation; relating to assigned risk pools and
insurers; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill, sponsored by the Senate Rules
Committee at the request of the Governor, "changes the way
workmans' compensation disputes and appeals are resolved. Under SB
311, appeals are reviewed by the newly created Workmans'
Compensation Commission, which is composed of three persons
experienced in practicing Workmans' compensation law in Alaska
instead of the Alaska Superior Court."
LINDA HALL, Director, Division of Insurance, Department of
Community and Economic Development, noted the complexity of the
legislation and testified as follows.
With this Committee previously, I have discussed the financial
crisis in the Alaska Insurance Guarantee Association. The
other area of tremendous concern to me today is the lack of a
healthy workers' compensation insurance environment. I'd like
to give a little background on the problems that we're
encountering. We have had for the past five years, a lack of
profitability in out market, which is making it unattractive
to insurers. Losses have ranged from a low of 99.9 percent to
a high of 154 percent. At that high, insurance companies are
spending $1.54 for every dollar of workers' compensation
premium they collect. Alaska carriers are loosing five percent
more money in Alaska than the national average.
The second area that has created a problem has been the cost
of workers' compensation claims. As everyone is aware, cost of
medical benefits has increased substantially over the past
several years. We have seen double-digit increases in the cost
of medical care. This is accepted and at least understood
usually in the health insurance arena, but sometimes we don't
make that connection with the cost of workers' compensation.
It does have a dramatic impact on the cost of claims.
Major cost drivers in the state of Alaska for workers'
compensation insurance are physician's fees, [which] are among
the highest in the country. We have a permanent partial cost
per case that is 40 percent higher than the countrywide
average. We have lengthening duration of claims, as we have an
aging workforce. I think maybe we heal less quickly. We have a
claim frequency in our temporary total that is total the
countrywide average. These cost drivers affect the cost of
claims, which in turn certainly impact the cost of insurance.
As I think everyone is aware, I've talked about it with this
group before, we have had substantial premium increases.
Effective January 1 of this year, the average rate increase
was 21.2 percent. As the cost of claims is increased, the
actuarial analysis of historical claims cost and projections
into the future indicated the need for that substantial rate
increase. The change was an average. We actually have seen
ranges from a 15 percent reduction in costs to a high of 57
percent increase in people's workers' compensation. We had 17
classifications that had increases in excess of 50 percent.
Combining that increase in premium with the assessments that
are occurring for the deficit in the Guarantee Association,
has combined to make dramatic increases in the cost of
workers' compensation.
The fourth factor that is impacting our workers' compensation
market is the assigned risk pool. It's another factor that has
made the Alaska marketplace increasingly unattractive. Due to
the mandatory nature of workers' compensation, we have a
mechanism called the "assigned risk pool", where, if an
employer is unable to obtain insurance in the traditional
market, they can obtain insurance in the assigned risk pool.
Currently, 17 percent of the market is in the assigned risk
pool. When the cost of claims in the assigned risk pool
exceeds the cost of the premiums collected, the difference is
charged back to insurance companies. Over the past five years,
Alaska has had the highest charge of any state for the losses
in the assigned risk pool. This charges range from four
percent to six percent. It's an additional cost to insurance
companies, comes directly out of their operating costs and
makes doing business in Alaska very expensive.
Overall, we have a workers' compensation environment that is
becoming very expensive for employers and very unattractive to
insurers.
As these issues became apparent, staff from the Division of
Insurance, the Department of Labor and Workforce Development
and the Department of Law have met to attempt to find ways to
overcome these challenges. We cannot continue to merely
increase workers' compensation premiums for employers. We must
look to find ways to stem the increasing costs of providing
benefits to workers.
We've looked at a number of options, ranging from the cost of
medical benefits, provider fee payments, definitions of
compensability, and a variety of technical terms that deal
with the benefit system.
SB 311 makes some insurance changes to enhance our marketplace
and it proposes a change in the workers' compensation
adjudicatory process that we feel will bring about more
efficiencies, more predictability. We desperately need a
healthy workers' compensation marketplace in Alaska. We need a
market that's sustainable, that will encourage companies to
continue to do business, to attract new markets. We need
compensation insurance that is available and affordable for
employers to continue to develop jobs to sustain economic
development.
This bill is fairly unique in that it's a cross departmental
effort to find solutions to the issues. I will address the
insurance pieces of the bill, Director Paul Lisankie and
Deputy Attorney General Scott Nordstrad will address the
Department of Labor, workers' compensation pieces of the bill.
Realizing that the bill is fairly long, there are only four
sections that I would like to address for insurance. Section 3
is a requirement for an increase in the deposit required of
insurance companies writing workers' compensation. This
deposit will be for the protection of Alaskans covered under
the workers' compensation system. As you've seen, and this
body has passed a bill funding the current deficit in the AIGA
[Alaska Insurance Guarantee Association] these special
deposits would go to the Guarantee Association, which would
diminish the need for assessments that we're currently facing.
Section 4 really makes that an order of priority and
bankruptcy.
Section 5 changes the composition of the Board of Governors of
the Guarantee Association. Currently, insurance - there are
seven insurance company members and two public members. The
proposal is to change that composition so that all
stakeholders have a seat at the table. We've seen what a
dramatic impact in solvencies can have on both injured workers
and on employers and I'd like to see more people at the table.
Section 105 is the other insurance section I'd like to
discuss. Section 105 repeals the 25 percent statutory cap on
surcharges on the assigned risk pool. The assigned risk pool
currently has a statutory cap of 25 percent. I feel strongly
the pool must be self-funding. Premiums have lagged well
behind the cost of claims in the pool. Nearly 6,000 of the
8,800 policies in the pool will have premiums under $3,000.
The average cost of claim in Alaska today is $19,363. So we
have an $800 premium and a $19,000 claim. That is an average.
The pool has lost money at an even more rapid rate than the
traditional insurance market. Small employers are the bulk of
these 6,000 policies. They are just as likely to have claims
even though probably not as many as larger employers. As I
described in the introduction, the financial burden on
insurance companies from the Alaska assigned risk pool, has
contributed dramatically to the overall attractiveness of
Alaska to insurers. We have a fragile insurance marketplace
and we're looking for solutions to bring about change to that
marketplace so that we can have an impact on the cost of
workers' compensation.
Co-Chair Green interrupted to question the section of the bill the
witness was explaining.
Ms. Hall corrected that Section 106 pertains to the assigned risk
pool, as she was discussion.
Co-Chair Wilken announced as much time as necessary would be
allotted for consideration of this bill due to the importance and
complexity of the matter.
PAUL LISANKIE, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development testified that
several features in bill would affect the administration of
workers' compensation insurance in Alaska. He stressed that this
bill proposes no changes to workers' compensation benefits payable
to residents of Alaska, although the calculation of rates for
nonresidents would be changed. He explained this is to prevent
injured nonresidents from receiving higher benefit payments while
residing outside the State.
Mr. Lisankie furthered this bill would formally divide the
functions of the Workers' Compensation Board into adjudication and
administration. He informed that the Division currently assists the
Board in all Board functions, although this is not required by
statute. He stressed the need to "informally" insure that claims
are not decided as a result of the current practice whereby the
Division and the Board both investigate claims, accuse parties of
wrongdoing and issue joint determinations. Due process constraints,
he specified, provide that the party charging and prosecuting
matters could not be the same party that judges upon those matters.
He noted this bill would make a formal distinction between the
Division, which would undertake administrative, investigative and
prosecutorial activities, and the Board, which would resolve any
disputes between the Division and the party.
Mr. Lisankie told of the proposed establishment of a Workers'
Compensation Appeals Commission in this legislation. He stated this
Commission would hire and retain hearing examiners, who along with
the current panel members would undertake the initial hearings in
disputed claims for benefits and accusations against employers
failing to provide insurance.
Mr. Lisankie then shared that currently, if the Division discovers
an employer failing to provide insurance, the only sanction that
could be imposed is closure of the business if such insurance is
not purchased; however, he remarked that once insurance is
purchased, no other consequences could be imposed on the employer.
He stated that this legislation would impose penalties of up to
$100 per day, per employee that the employer fails to carry
insurance. He expressed the intent is to strengthen cease and
desist orders, and to show to employers that this issue is
critical. He asserted that employers failing to carry insurance
place the physical health of employees at risk, and also provides
an unfair fiscal advantage against other employers who lawfully
purchase this insurance.
Mr. Lisankie listed the motivation behind the proposed changes is
greater consistency of decisions and predictability of decisions.
He remarked that injured workers would have more certainty of the
benefits they would receive. He gave the history of the Workers'
Compensation Board established at statehood in 1959 with three
members, with no question as to who resolved the issues. However,
he noted that with increased population in the State, the Board
membership expanded to the current seven panels, with the 14 total
members appointed by the Governor to seats designated for labor
interests and industry interests, and confirmed by the Legislature.
Each panel, he informed, independently decides how to interpret and
implement the workers' compensation laws and are not required to be
consistent with the other panels.
Mr. Lisankie noted that if a party is dissatisfied with the ruling
of a panel, they are entitled to an appeal through the Alaska
superior court, which serves as the appellate body. He remarked
that most superior court judges do not have expertise in workers'
compensation law. He furthered that the decisions of the superior
court are binding but that panels are not required to follow the
rulings in future cases.
Mr. Lisankie explained that this bill would eliminate the superior
court from the workers' compensation appeal process and establish a
commission to address appeals. This commission of three members, he
said, would issue binding decisions that would set precedence for
future cases. He qualified that the Alaska Supreme Court remains
the sole arbiter of law in the State and that final commission
decisions could be appealed to the Supreme Court. He indicated that
precedence set by the commission would continue to apply to other
ongoing cases until overturned by the Supreme Court.
Mr. Lisankie predicted that the consistency and predictability of
decisions would result in less litigation and be less costly. He
informed that the proposed changes in this legislation are similar
to the laws of some other states. He anticipated that insurance
providers currently not issuing policies in Alaska would be
encouraged to participate in the Alaska marketplace knowing that
their experiences here would be similar to those in other states.
LORI WING, President, Alaska Independent Insurance Agents and
Brokers, testified via teleconference from Anchorage and read
testimony into the record as follows.
Our association, the AIIAB represents in the insurance
marketplace employers from Ketchikan to Barrow, from Kaktovik
to Adak. Our clients are governmental entities, privately
held, and publicly traded corporations, limited liability
companies, and joint ventures. They are for-profit and not-
for-profit; they are large and small. All together they make
up the business community, the economic base of the State.
Each of these entities is required to comply with the
respective statutes that are often referred to as the "Work
Comp Act". Each of these entities contribute a significant
portion of their revenues to a work-comp program regardless of
whether they are insurers to a commercial insurance product or
self insured through an alternative risk financing technique.
The past few years, these employers, regardless of what
mechanism they have chosen to comply with the Act, have
experienced significant increased costs. The cost of
insurance, reinsurance, claims and the associated expenses;
the costs have increased. For those that have purchased a
commercial insurance product, the cost is reflected in the
insurance premium. For those self-insuring, the cost is
reflected in the direct payment of claims. Regardless, the
employer is paying the cost, the increased cost.
We, the AIIAB, as an association, agree that some of these
costs are difficult to control. Workers' compensation claims
are every bit as much subject to the increased cost of medical
care as a health or medical insurance program. But there are
some costs we think can be controlled. Costs that can be
quantified, defined, not subjected to the opinion to what is
commonly referred to as [indiscernible]. Those costs can be
controlled. Our hope is that Senate Bill 311 will allow those
costs to be quantified, defined once and for all, allowing
rate-making organizations and insurers to adequately trend and
price the cost of workers' compensation, making the recent
rate premium or claim cost, the increases or a portion of
those costs, unnecessary.
I can tell you that I personally deal with a client, a
regional hospital out in Dillingham. Their work comp this
year, based on the rate increases as of January 21st will go
from $391,000 to $524,000 without changing the payroll a
penny.
Senate Bill 311 does not limit or eliminate any benefits due
an injured worker or an injured employee, but it may help
reduce the cost of complying with the Act to employers. It may
help, and we believe it will, make those corporations,
governmental entities, and other organizations from Ketchikan
to Barrow, from Kaktovik to Adak, remain viable, profitable,
Alaskan employers.
We the AIIAB respectfully request that you the members of the
Senate Finance Committee, refer the bill on and we ask that
your colleagues, regardless of they're Republican or Democrat,
do the same. We, those that deal with the employers, the
insurers, the few that we have in this State, the adjusters
and attorneys, the employees and the claimants, are confident
that this bill will help stabilize and hopefully reduce the
costs associated with compliance with the mandates defined in
this Act. We are confident Senate Bill 311 will help those
employers that are the economic base of this State.
Senator Hoffman remarked upon the significant cost increase for the
Bristol Bay Health Corporation and asked how this bill would reduce
those costs.
Ms. Wing was unsure this legislation would affect rates in the
current year, but predicted that cost reductions would begin the
following year and continue for several years.
Senator Hoffman asked what emphasis should the State place on
reducing claims through promotion of workplace safety.
Ms. Wing admitted this is a viable component, but stressed that
regardless of how safe a workplace is, injuries occur. She noted
that all employers she works with emphasize safety.
Senator Olson asked whether the witness supports the proposed
appeals commission of three attorneys, or predicts the commission
would complicate future matters.
Ms. Wing expressed the association supports the bill as written
with the three attorney positions.
KEVIN DAUGHERTY, Alaska Labor and Management Ad Hoc Committee,
testified via teleconference from Anchorage that this bill does not
reflect the process of the Ad Hoc Committee, which has been in
place since 1981. He reminded that during the 1990s, Ad Hoc
Committee efforts reduced premiums for employers a total of 49
percent. He cited this as an example of the ability of the Ad Hoc
Committee to protect benefits and provide for a more cost effective
system. He charged that this bill departs from the actions of the
Committee and instead proposes to replace a "common-sense layman
board" with three "so-called expert" attorneys.
Mr. Daugherty remarked this would not provide better "decision
making", stressing this is not only his opinion, but also reflects
the assessment of the National Commission of Compensation Insurers
(NCCI). He relayed the process in which a Pacific Northwest panel
within the Commission reviews all proposed legislation relating to
insurance matters in the region. He pointed to the lack of
documentation in this legislation of any actual economic savings to
employers. He provided the phone number of the Commission, (503)
624-5890 to allow Members to obtain more information and he
qualified that the Commission has not taken an official position on
this bill.
Mr. Daugherty cited the 2002 Workers' Compensation Board Annual
Report, the most recent available, noting that total death benefits
paid to all survivors in Alaska was $3.2 million, compared to $7.06
million paid to attorneys representing insurance companies. He
surmised that if currently, over double the amount is paid to
attorneys than survivors, the system should be made more efficient
rather than adding more attorneys and appeals. He pointed out that
this legislation does not provide that additional benefits would be
provided for injured workers or survivors.
Mr. Daugherty next referenced a fiscal note from the Alaska Court
System projecting an implementation cost of approximately $500,000.
He also predicted the cost of a new office for the appeals
commission would be approximately $500,000, plus additional
expenses for support staff. He reiterated that no increased
benefits would be provided for injured workers or survivors and
that cost savings would not be realized for employers.
CHUCK LUNDEEN, General Counsel, Liberty Northwest Insurance,
testified via teleconference from an offnet location, that the
Oregon-based company has staff located in Anchorage and writes
workers' compensation insurance policies. He furthered that the
company insures 20 percent of Alaska's assigned risk pool and over
125 Alaskan employers on a voluntary underwriting basis. He
supports bill because it provides a "clear statement of purpose
that all parties will receive impartial fair treatment in the
dispute resolution process". He opined this is good for employers
and workers.
Mr. Lundeen further supported the bill because it streamlines the
litigation process and would produce faster results, which would
also benefit injured workers and employers and reduce costs as
well. He explained that the elimination of involvement of the
superior court would save money. He then spoke to the "precedential
value" of the decisions of the proposed appeals commission in that
they would provide to all parties understanding of Alaska law.
Mr. Lundeen was uncertain whether the NCCI had reviewed this
legislation, but he expressed intent to bring the matter to the
organization's attention. He told of his 20 years in the insurance
industry and assessed this legislation would reduce costs. He
compared it to similar legislation adopted in the state of Oregon,
which has resulted in reduced costs.
Senator Hoffman surmised the intent to streamline the process to
save premium costs, although the addition of the commission would
increase expenditures. He therefore concluded that any cost savings
must be garnered from reduced benefits. He understood that judges
must be impartial in interpreting the law and asked how the number
of claims awarded or the amount of benefits paid would be reduced
to meet the goals.
Mr. Lundeen responded that the "body of law" if adopted in this
legislation would, over time, result in claims adjustors and
attorneys representing injured workers would make better decisions
whether to litigate or settle claims. He doubted this legislation
would affect benefits or compensability standards or make it easier
to deny a claim. He predicted the cost savings would be realized as
a result of a streamlined process.
Senator Hoffman referenced Ms. Hall's presentation listing
statistics proposing that this legislation would better align the
State with the national averages and potentially result in cost
savings. He asked Mr. Lundeen's comment on this information.
Mr. Lundeen replied that this bill is a portion of the process of
reviewing and revising the workers' compensation system in Alaska
to address cost drivers. He reiterated his prediction this
legislation would reduce litigation, which is more costly. He
qualified this bill is not a "cure all" but is a "positive first
step".
Senator Hoffman again asked how this legislation would "reduce the
claims".
Mr. Lundeen responded it would not, but rather would reduce the
number of litigated claims due to consistent interpretation of the
law.
SFC 04 # 91, Side A 10:38 AM
Mr. Lundeen continued that in situations of uncertainty, attorneys
advise litigation. He remarked that current interpretations of the
workers' compensation laws are inconsistent.
DENNIS MURRAY, Administrator, Heritage Place Nursing Home, and
former president, Alaska State Hospital and Nursing Home
Association, testified via teleconference from Kenai, in support of
the bill, as proposed and recommended against adoption of proposed
amendments. He opined that the proposed amendments would not
improve the system, noting the premium increase of 160 percent for
the company. He told of a study conducted by the Association of
nursing homes in Alaska that found that workers' compensation
premiums had increased 100 percent. He relayed the Department of
Law determined this legislation is more consistent with operations
in other states.
PAUL BRENNER, Vice President, Quality Management, Central Peninsula
General Hospital, testified via teleconference from Kenai, that the
proposed amendments seem to remove the strengths of the bill would
make it ineffective. He supported the creation of the Commission,
predicting it would bring continuity to workers compensation
system. He told of the significant increase in workers'
compensation claims and the desire for resolution of the situation
and predictability of the process.
Co-Chair Wilken ordered the bill HELD in Committee.
ADJOURNMENT
Co-Chair Gary Wilken adjourned the meeting at 10:44 AM
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