Legislature(2005 - 2006)BUTROVICH 205
04/06/2005 08:30 AM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB128 | |
| SB130 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 128 | TELECONFERENCED | |
| *+ | SB 135 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 130 | ||
ALASKA STATE LEGISLATURE
SENATE JUDICIARY STANDING COMMITTEE
April 6, 2005
8:37 a.m.
MEMBERS PRESENT
Senator Ralph Seekins, Chair
Senator Charlie Huggins, Vice Chair
Senator Gene Therriault
Senator Hollis French
Senator Gretchen Guess
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 128
"An Act relating to consideration by the Local Boundary
Commission of a requested borough incorporation."
HEARD AND HELD
SENATE BILL NO. 135
"An Act relating to the crimes of assault and custodial
interference; and providing for an effective date."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 130
"An Act relating to a special deposit for workers' compensation
and employers' liability insurers; relating to assigned risk
pools; relating to workers' compensation insurers; stating the
intent of the legislature, and setting out limitations,
concerning the interpretation, construction, and implementation
of workers' compensation laws; relating to the Alaska Workers'
Compensation Board; assigning certain Alaska Workers'
Compensation Board functions to the division of workers'
compensation in the Department of Labor and Workforce
Development and to that department, and authorizing the board to
delegate administrative and enforcement duties to the division;
establishing a Workers' Compensation Appeals Commission;
providing for workers' compensation hearing officers in workers'
compensation proceedings; relating to workers' compensation
medical benefits and to charges for and payment of fees for the
medical benefits; relating to agreements that discharge workers'
compensation liability; relating to workers' compensation
awards; relating to reemployment benefits and job dislocation
benefits; relating to coordination of workers' compensation and
certain disability benefits; relating to division of workers'
compensation records; relating to release of treatment records;
relating to an employer's failure to insure and keep insured or
provide security; providing for appeals from compensation
orders; relating to workers' compensation proceedings; providing
for supreme court jurisdiction of appeals from the Workers'
Compensation Appeals Commission; providing for a maximum amount
for the cost-of-living adjustment for workers' compensation
benefits; relating to attorney fees; providing for the
department to enter into contracts with nonprofit organizations
to provide information services and legal representation to
injured employees; providing for administrative penalties for
employers uninsured or without adequate security for workers'
compensation; relating to fraudulent acts or false or misleading
statements in workers' compensation and penalties for the acts
or statements; providing for members of a limited liability
company to be included as an employee for purposes of workers'
compensation; establishing a workers' compensation benefits
guaranty fund; relating to the second injury fund; making
conforming amendments; providing for a study and report by the
medical services review committee; and providing for an
effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 128
SHORT TITLE: BOROUGH INCORPORATION
SPONSOR(s): SENATOR(s) THERRIAULT
03/03/05 (S) READ THE FIRST TIME - REFERRALS
03/03/05 (S) CRA, JUD
03/21/05 (S) CRA AT 1:30 PM BELTZ 211
03/21/05 (S) Moved SB 128 Out of Committee
03/21/05 (S) MINUTE (CRA)
03/22/05 (S) CRA RPT 3DP 1NR
03/22/05 (S) DP: STEVENS G, WAGONER, KOOKESH
03/22/05 (S) NR: STEDMAN
04/06/05 (S) JUD AT 8:30 AM BUTROVICH 205
BILL: SB 130
SHORT TITLE: WORKERS' COMPENSATION
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/03/05 (S) READ THE FIRST TIME - REFERRALS
03/03/05 (S) L&C, FIN
03/08/05 (S) L&C AT 1:30 PM BELTZ 211
03/08/05 (S) Heard & Held
03/08/05 (S) MINUTE (L&C)
03/10/05 (S) L&C AT 1:30 PM BELTZ 211
03/10/05 (S) Heard & Held
03/10/05 (S) MINUTE (L&C)
03/15/05 (S) L&C AT 1:30 PM BELTZ 211
03/15/05 (S) Heard & Held
03/15/05 (S) MINUTE (L&C)
03/17/05 (S) L&C AT 1:30 PM BELTZ 211
03/17/05 (S) Heard & Held
03/17/05 (S) MINUTE (L&C)
03/22/05 (S) L&C AT 1:30 PM BELTZ 211
03/22/05 (S) Heard & Held
03/22/05 (S) MINUTE (L&C)
03/24/05 (S) L&C AT 2:00 PM BELTZ 211
03/24/05 (S) Heard & Held
03/24/05 (S) MINUTE (L&C)
03/29/05 (S) L&C AT 1:30 PM BELTZ 211
03/29/05 (S) -- Meeting Canceled --
03/31/05 (S) L&C AT 1:30 PM BELTZ 211
03/31/05 (S) Moved CSSB 130(L&C) Out of Committee
03/31/05 (S) MINUTE (L&C)
04/01/05 (S) L&C RPT CS 2DP 1NR 2AM NEW TITLE
04/01/05 (S) DP: BUNDE, STEVENS B
04/01/05 (S) NR: SEEKINS
04/01/05 (S) AM: DAVIS, ELLIS
04/01/05 (S) JUD REFERRAL ADDED AFTER L&C
04/05/05 (S) JUD AT 8:30 AM BUTROVICH 205
04/05/05 (S) Heard & Held
04/05/05 (S) MINUTE (JUD)
WITNESS REGISTER
Mr. Darroll Hargraves, Chairman
Local Boundary Commission
Department of Community & Economic Development
550 West Seventh Avenue
Anchorage, Alaska 99501-3510
POSITION STATEMENT: Testified in opposition of SB 128
Mr. Bob Hicks, Chairman
Local Boundary Commission
Department of Community & Economic Development
550 West Seventh Avenue
Anchorage, Alaska 99501-3510
POSITION STATEMENT: Testified in opposition of SB 128
Mr. Paul Lisanki, Director
Division of Worker's Compensation
Department of Labor & Workforce Development
PO Box 21149
Juneau, AK 99802-1149
POSITION STATEMENT: Commented on SB 130
Ms. Linda Hall, Director
Division of Insurance
th
550 W. 7 Ave Suite 1560
Anchorage, AK 99501
POSITION STATEMENT: Commented on SB 130
Mr. Rod Betit, President
Alaska State Hospital and Nursing Home Association
426 Main Street
Juneau, AK 99801
POSITION STATEMENT: Commented on SB 130
ACTION NARRATIVE
CHAIR RALPH SEEKINS called the Senate Judiciary Standing
Committee meeting to order at 8:37:25 AM. Present were Senators
French, Huggins, Therriault, and Chair Seekins.
SB 128-BOROUGH INCORPORATION
8:38:00 AM
MR. DAVE STANCLIFF, staff to Senator Therriault, introduced SB
128. The adjustment in statutory language is constitutional.
8:39:39 AM
MR. STANCLIFF informed currently when a group of people propose
a boundary change, the Local Boundary Commission (LBC) may or
may not consider it, but if the government proposes a boundary
change, the LBC must consider it.
8:41:15 AM
MR. STANCLIFF researched the intent back to the founders of the
Alaska Constitution.
8:43:03 AM
MR. STANCLIFF quoted from Senator Vic Fisher:
"The borough, as visualized here, is even more than just a unit
of local government; it is also a unit for carrying out what
otherwise is carried out as state functions. We (indisc)
visualize that the state will force boroughs to organize since
we feel they should be set up on such a basis that there would
be enough inducement for each to organize."
8:45:18 AM
MR. STANCLIFF asserted SB 128 does not restrict the ability of
the LBC to consider any local change brought before it.
8:47:09 AM
MR. STANCLIFF aired government should originate with the people,
and especially with regards to borough formation and boundary
changes.
8:48:38 AM
MR. DARROLL HARGRAVES, chairman, Local Boundary Commission,
testified against SB 128. The members of the LBC are not
interested in working fulltime to advocate anything. They
respond to petitions and legistrative mandates. It is not their
purpose to look for borough planning and forming. The precedent
has been set in establishing boroughs and cities and should be
protected.
8:51:23 AM
MR. HARGRAVES continued some people resist borough formation.
Most of the population is in a local borough that was mandated
by the Legislature. Delegate Barry White expressed optimism that
the State of Alaska would offer incentives for borough
formation.
8:54:13 AM
The eight boroughs of Fairbanks, Mat-Su, Anchorage, Kenai
Peninsula, Kodiak Island, Sitka, Juneau and Ketchikan take in
nearly 7 out of every 8 Alaskan citizens.
8:55:38 AM
The 1972 Legislature mandated that each second-class city with
at least 400 residents should be reclassified as a first class
city.
8:57:32 AM
MR. HARGRAVES added the LBC has concerns that SB 128 is
unconstitutional.
8:58:25 AM
SENATOR GENE THERRIAULT advised Mr. Hargraves there would still
be two methods of borough formation, the difference being
elected officials are involved in the process.
9:00:03 AM
CHAIR SEEKINS asked Mr. Hargraves to clarify his opening
remarks.
MR. HARGRAVES explained the LBC typically does not wage
campaigns in regards to legislative matters. The LBC does not
typically seek to organize boroughs. The LBC responds to
petitions by having hearings. In this case, the LBC opposes SB
128 as it is seen as a negative for statewide policy.
CHAIR SEEKINS asked whether the LBC has ever initiated a borough
formation.
MR. HARGRAVES replied no. Requests always come to them in the
form of an initiative or a local option.
9:02:28 AM
CHAIR RALPH SEEKINS expressed concern with Mr. Hargraves' use of
the words "typically" and "for the most part."
SENATOR GRETCHEN GUESS asked Senator Therriault the process for
when two communities want to form a borough and asked how SB 128
would contribute to the process.
SENATOR THERRIAULT said there are currently citizen groups in
the Delta Junction area who are using the Title 29 route.
SENATOR GUESS asked whether SB 128 would prohibit anyone from
forming a borough.
th
SENATOR THERRIAULT answered no. The April 5 opinion from Ms.
Tamara Cook says, "The bill does not prohibit the Local Boundary
Commission from considering a borough corporation requested of
it by any entity if it chooses to do so."
9:05:04 AM
SENATOR HOLLIS FRENCH asked the option for the LBC should a
member of the Department of Community & Economic Development
(DCED) come to them and suggest a location for borough
formation.
MR. STANCLIFF answered the commission would have total
discretion.
SENATOR THERRIAULT referenced a 1959 attorney general opinion
that quoted a section of statute that was repealed. "Since the
commission may consider any local government boundary or any
proposed local boundary change, it exercises other powers as
prescribed by law. It shall present proposed local government
boundaries or local government boundary changes to the
Legislature during the first ten days of every session." In
previous statute it differentiated between a local boundary and
a local boundary change. No borough has ever been formed under
Title 44 as a local boundary change. That methodology has never
been used in the State of Alaska.
9:08:04 AM
SENATOR CHARLIE HUGGINS asked Mr. Hargraves whether he was
involved in the Valdez initiative.
MR. HARGRAVES answered the LBC has not received a petition from
Valdez. Some communities in that area have petitioned to become
a borough.
SENATOR HUGGINS asked for clarification that the LBC is not
currently working on anything that would include Valdez.
MR. HARGRAVES asserted the LBC is not currently working on
anything to do with Valdez.
9:10:18 AM
CHAIR SEEKINS asked whether Mr. Hargraves knew of any activity
regarding the Valdez area.
MR. HARGRAVES answered local municipalities are always looking
at the expansion of boundaries but that doesn't become LBC
activity. There is an old petition that was presented to the LBC
but he couldn't say what has been done. Nothing is in front of
the LBC today in regards to Valdez.
9:12:17 AM
BOB HICKS, vice chair, LBC, testified in opposition of SB 128.
Local political decisions do not usually create proper
boundaries. Boundaries should be established at the state level.
Article 10 Section 12 of the Alaska Constitution implements that
policy. It creates the LBC and it devotes three sentences to
creating the legislative review process. The last sentence
provides for local option elections as an alternative method to
the legislative review.
9:14:59 AM
MR. HICKS continued the Alaska Supreme Court has ruled twice on
this in the past and they said the Section 12 legislative review
method coexists with all the other processes established by law.
Section 12 is independent of the other processes. SB 128 amends
the present statute to say that a boundary change may not be
construed to include borough incorporation for purposes of
petitions originating from any of three legal sources. That is
different from the way it was originally advertised in the press
releases. He wondered why SB 128 doesn't address all boundary
changes.
9:17:17 AM
MR. HICKS maintained SB 128 is susceptible to two different
interpretations. One is that the LBC cannot consider a borough
incorporation request. Government originates with the people. SB
128 disenfranchises every political subdivision in the state
from requesting boundary incorporation. SB 128 limits the
borough incorporation process now only to the local option
election. The Alaska Supreme Court has repeatedly recognized the
constitutional policy that local political decisions do not
create proper boundaries. SB 128 will repeal the legislative
review method. SB 128 will leave all future boundaries solely to
local elections. For these reasons, SB 128 will be declared
unconstitutional.
9:19:53 AM
SENATOR FRENCH asked Mr. Hicks his interpretation of the word
"change" in Section 12.
9:22:41 AM
MR. HICKS said creation of a borough results in a boundary
change in the same way that the two Alaska Supreme Court
decisions say that disillusion of a corporation results in a
boundary change under Section 12. A boundary change exists as
soon as an organized borough is created.
9:25:01 AM
SENATOR GUESS referenced Ms. Tamara Cook's memo, which stated
"The bill does not prohibit the LBC from considering borough
incorporation requested of it by any entity if it chooses to do
so." She asked Mr. Stancliff whether there was anything in the
current statute that instructs the commission on which petitions
to consider.
MR. STANCLIFF said the latitude constitutionally clearly rests
with the constitution to set the conditions and the standards
and the criteria. There is nothing in the Legislature that
suggests a stronger directive. He advised he has detailed email
communications from LBC staff.
9:27:32 AM
CHAIR SEEKINS asked for copies of the communication. He held SB
128 in committee.
CHAIR SEEKINS announced a brief recess at 9:28:59 AM.
CHAIR SEEKINS reconvened the meeting at 9:38:14 AM.
SB 130-WORKERS' COMPENSATION
9:38:38 AM
MS. LINDA HALL, director, Division of Insurance (DOI),
introduced herself and offered to answer questions.
SENATOR GRETCHEN GUESS asked whether there was any reason to
believe the changes in SB 130 would result in reduced rates.
MS. HALL answered she had asked for analysis from the National
Council on Compensation and there were indications of a 5 to 7
percent savings.
9:41:57 AM
MS. HALL commented she has taken many calls from employers in
panic over raised insurance premiums. It is disheartening to
listen to employers who are deciding whether they can afford to
stay in business.
9:43:09 AM
SENATOR GUESS asked Ms. Hall to review how workers compensation
insurance rates are determined.
MS. HALL answered the National Council on Compensation collects
data and is the preliminary filer of rates in 39 states. The
data is collected from all insurance companies and the aggregate
data is updated and put together along with Alaska experience by
itself. The loss cost is one component based on claims cost and
what the losses cost. The average overall rate is based on the
overall costs in Alaska. They also look at trending of
anticipated changes of the various things that go into medical
costs. Those become the filing the National Council on
Compensation makes with the Division of Insurance.
9:46:24 AM
MS. HALL continued the analysis is not a total science. The
second component of rate making is a loss cost multiplier. The
DOI approves that for each individual company. From 1999-2003,
workers compensation lines for all insurers averaged in Alaska
were unprofitable.
9:48:39 AM
MS. HALL hoped the 2004 rate changes would positively affect the
unprofitable market because that is a huge part of what is
driving insurance companies from Alaska.
SENATOR GENE THERRIAULT said he has often heard that insurance
companies are raising rates in order to compensate for September
th
11.
th
MS. HALL responded the losses suffered on September 11 sparked
a load called a "terrorism rate", which is done in all the
states.
9:50:40 AM
MS. HALL continued Alaska historically has more highly hazardous
occupations. Fishing vessel claims are typically filed under the
federal system under the Jones Act. In general the cost of
claims in Alaska are 50 percent higher than the national
average. When claims numbers go down it masks the fact that
insurance costs are going up. Medical costs in Alaska are
significantly higher than the norm. The National Council on
Compensation estimates the Alaska fee schedule can range from
250 percent of what many states have capped.
9:52:40 AM
Prescription drugs have become a major component of the cost of
claims. The work force is getting older and they take longer to
recuperate. Hospital stays are longer than they were ten years
ago.
SENATOR THERRIAULT asked Ms. Hall why she said medical claims
never close in Alaska.
MS. HALL confirmed that is not the norm around the country. The
medical benefits in Alaska are open always.
9:54:40 AM
MR. PAUL LISANKI, director, Division of Worker's Compensation,
Department of Labor and Workforce Development (DOLWD), explained
Alaska keeps the medical benefits open indefinitely following
the recommendation by the National Commission on State Worker's
Compensation Insurance. They recommended there be no limitations
on medical benefits tied to the passage of time.
9:56:32 AM
MR. LISANKI advised the United States Department of Labor took
the essential recommendations of the Commission and they track
year to year each state that follows the recommendations. There
is an annual publication, which he offered to submit to the
committee.
SENATOR GUESS asked Ms. Hall whether insurance company
investments impact the workers compensation.
MS. HALL said she did not know. She has noticed it is more
acceptable to an insurance company to have an underwriting loss
if they are making money in market.
9:59:01 AM
SENATOR GUESS asked whether the definition of "reasonable rate
of return" changes with a director change.
MS. HALL answered the DOI would not base rates on investment
income. They look at various components of individual
multiplier, which would include their level of profit.
SENATOR GUESS said listening to the business community it seems
as if there have been dramatic changes in rates due to loss
ratios.
MS. HALL said in actuality the rates were not only level but
also decreased in the mid 1990s. The rate decreases were
national and they reflected a variety of practices we don't see
today. One of those is called "schedule crediting" where
insurance companies competed for companies with good safety
records.
10:04:18 AM
SENATOR GUESS asked whether self-employed companies were
included in the data of the National Council on Compensation.
MS. HALL answered no.
SENATOR GUESS asked whether they were included in the rate
making.
MS. HALL answered no.
SENATOR HOLLIS FRENCH commented there is nothing in SB 130 that
says cost reductions to the insurance company must be passed on
to small businesses, yet the Division of Insurance seems to be
charged with making that happen. He asked Ms. Hall when she
could begin to see cost savings occur and then when would she be
able to issue a ruling to insurance companies regarding rates.
10:06:08 AM
MS. HALL replied the 2004 data will be filed end of July 2005
and will determine the 2006 rate. There will be a long wait
before an effect is seen.
SENATOR FRENCH asked whether SB 130 should contain an
accelerated rate-setting mechanism.
MS. HALL said she is not sure how that would be done. There is a
data collection process that requires time. There are timelines
in statute for both a beginning and an end so that the DOI is
allowed time to get the rates done. It is a fairly complex
process.
10:08:47 AM
SENATOR FRENCH expressed concern that a law passed in July 2005
takes until January 2007 for the small businesses to see relief.
MS. HALL replied that is a distinct possibility.
SENATOR GUESS asked whether the problem is due to the fact there
are only large companies and small companies in Alaska, and no
medium-sized companies. The large companies are mainly self-
insured.
MS. HALL deferred the question to Mr. Paul Lisanki.
MR. LISANKI said 22 percent of employees in Alaska are working
for an employer who is self-insured.
10:11:01 AM
SENATOR GUESS commented SB 130 proposes to phase out the second
injury fund. Future claims will be paid through workers
compensation. She asked whether that would result in an increase
in rates.
MS. HALL said the second injury fund assessment would continue
so long as there are claims to be reimbursed. That could put the
cost back into the system and could potentially provide for a
one percent increase.
10:14:29 AM
MR. LISANKI said the Division of Worker's Compensation
internally estimates the contribution to the second injury fund
will go down from 6 percent to 5 percent.
CHAIR SEEKINS asked Ms. Hall to comment on insurance reform.
MS. HALL said she has not heard talk of insurance reform. She
offered to provide statistics on loss data and loss ratios.
Alaska lost ratios was higher than the national average from
1998-2003. She doubts that insurance companies are making a
profit on workers compensation.
10:16:25 AM
CHAIR RALPH SEEKINS asked why Alaska is higher than the national
average.
10:18:56 AM
MS. HALL said she does not have the answer. Rates last year were
back to 1992.
10:20:24 AM
MS. HALL commented California has done major reforms that appear
to be effective but they don't have the rate regulatory to
control rates.
10:22:00 AM
SENATOR FRENCH said it is hard to believe medical costs were cut
by 30 percent between 1992 and 2000. There has to be some other
reason rates are back to 1992 in the face of increasing costs.
10:23:33 AM
MS. HALL offered to share a 15-page analysis from the rating
organization on various components that make up claim costs.
SENATOR THERRIAULT commented a combination of things like the
boom years in the stock market allowed insurance companies to
use that profit to cover losses and inadequate rates.
10:26:05 AM
CHAIR SEEKINS asked Ms. Hall whether there were structural cost
controlling changes in SB 130, which could have an effect on
premiums.
MS. HALL said the majority of SB 130 deals with the workers
compensation system, which is not her area of expertise.
10:28:30 AM
CHAIR SEEKINS asked if the costs associated with workers
compensation go down, whether that becomes a part of the DOI's
ratemaking process.
MS. HALL answered yes.
SENATOR GUESS asked the number of providers Alaska has for
workers compensation.
MS. HALL explained the DOI lists 96 licensed to write workers
compensation but only five are active. Three of them have 60
percent of the market.
10:30:44 AM
SENATOR CHARLIE HUGGINS asked Ms. Hall to comment on controlling
insurance costs.
MS. HALL said the environment was in a crisis, bordering on a
train wreck. Alaska has limited markets. Alaska is in a position
where the insurance companies support an assigned risk pool. If
there is a deficit in the assigned risk pool that burden goes
back to insurance companies. If the insurance companies decide
to pull out, the state would have to form a state fund or not
have mandatory workers compensation.
10:33:34 AM
MS. HALL referenced California where two years ago 25 percent of
the businesses were uninsured. As rates escalated businesses
opted out leaving injured workers at huge risks.
10:35:32 AM
MR. ROD BETIT, president, Alaska State Hospital Nursing Home
Association (ASHNHA), commented on SB 130. ASHNHA is concerned
that SB 130 would impose unacceptable medical practice
guidelines on physicians. ASHNHA requested to roll back to 2004
rates be replaced with a freeze at 2005 rates. ASHNHA requested
a hospital representative be included on the Review Committee.
ASHNHA requested an independent actuary do any financial
analysis provided to the Review Committee.
10:38:45 AM
CHAIR SEEKINS advised Mr. Betit the committee would consider the
advice offered by ASHNHA.
10:42:05 AM
CHAIR SEEKINS recessed the committee at 10:42:41 AM until 0800
Wednesday April 7, 2005.
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