Legislature(2005 - 2006)BUTROVICH 205

04/06/2005 08:30 AM JUDICIARY

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                    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                                                                                                           
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                                                               
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                                                               
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                                                               
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                                                               
8:57:32 AM                                                                                                                    
MR.  HARGRAVES  added  the  LBC  has  concerns  that  SB  128  is                                                               
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                                                               
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                                                               
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.                                                                                                              
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                                                               
MR.   STANCLIFF  answered   the  commission   would  have   total                                                               
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                                                               
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                                                               
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                                                               
MS. HALL responded  the losses suffered on September 11   sparked                                                               
a  load called  a  "terrorism rate",  which is  done  in all  the                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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                                                               
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-                                                               
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                                                               
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                                                               
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.                                                                                                        

Document Name Date/Time Subjects