04/01/2014 03:30 PM LABOR & COMMERCE
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ALASKA STATE LEGISLATURE SENATE LABOR AND COMMERCE STANDING COMMITTEE April 1, 2014 3:33 p.m. MEMBERS PRESENT Senator Mike Dunleavy, Chair Senator Peter Micciche, Vice Chair Senator Johnny Ellis MEMBERS ABSENT Senator Donald Olson Senator Bert Stedman COMMITTEE CALENDAR SENATE BILL NO. 214 "An Act relating to insurance adjuster licensing." - HEARD & HELD CS FOR SS FOR HOUSE BILL NO. 204(FIN) "An Act relating to a product development tax credit for certain salmon and herring products; and providing for an effective date." - HEARD & HELD HOUSE BILL NO. 141 "An Act setting the fee for medical treatment or services performed outside the state under the Alaska Workers' Compensation Act, requiring a provider of medical treatment or services under the Alaska Workers' Compensation Act to submit bills for treatment or services to employers within 180 days after the date the treatment or services are rendered, and limiting the time for appealing an employer's denial or reduction of a bill; and providing for an effective date." - HEARD & HELD PREVIOUS COMMITTEE ACTION BILL: SB 214 SHORT TITLE: INSURANCE ADJUSTER LICENSING SPONSOR(s): LABOR & COMMERCE 03/21/14 (S) READ THE FIRST TIME - REFERRALS 03/21/14 (S) L&C 04/01/14 (S) L&C AT 3:30 PM BELTZ 105 (TSBldg) BILL: HB 204 SHORT TITLE: SALMON & HERRING PRODUCT DEV'T TAX CREDIT SPONSOR(s): AUSTERMAN 04/11/13 (H) READ THE FIRST TIME - REFERRALS 04/11/13 (H) FSH, FIN 02/05/14 (H) SPONSOR SUBSTITUTE INTRODUCED 02/05/14 (H) READ THE FIRST TIME - REFERRALS 02/05/14 (H) FSH, FIN 02/06/14 (H) FSH AT 10:00 AM CAPITOL 120 02/06/14 (H) Heard & Held 02/06/14 (H) MINUTE(FSH) 02/13/14 (H) FSH AT 10:00 AM CAPITOL 120 02/13/14 (H) Moved Out of Committee 02/13/14 (H) MINUTE(FSH) 02/14/14 (H) FSH RPT 4DP 02/14/14 (H) DP: FEIGE, KREISS-TOMKINS, OLSON, SEATON 02/27/14 (H) FIN AT 1:30 PM HOUSE FINANCE 519 02/27/14 (H) Heard & Held 02/27/14 (H) MINUTE(FIN) 02/28/14 (H) FIN AT 9:30 AM HOUSE FINANCE 519 02/28/14 (H) Moved CSSSHB 204(FIN) Out of Committee 02/28/14 (H) MINUTE(FIN) 03/03/14 (H) FIN RPT CS(FIN) 7DP 2NR 03/03/14 (H) DP: GUTTENBERG, HOLMES, EDGMON, MUNOZ, T.WILSON, COSTELLO, AUSTERMAN 03/03/14 (H) NR: NEUMAN, STOLTZE 03/14/14 (H) TRANSMITTED TO (S) 03/14/14 (H) VERSION: CSSSHB 204(FIN) 03/17/14 (S) READ THE FIRST TIME - REFERRALS 03/17/14 (S) L&C 03/26/14 (S) FIN REFERRAL ADDED AFTER L&C 04/01/14 (S) L&C AT 3:30 PM BELTZ 105 (TSBldg) BILL: HB 141 SHORT TITLE: WORKERS' COMPENSATION MEDICAL FEES SPONSOR(s): LABOR & COMMERCE 02/25/13 (H) READ THE FIRST TIME - REFERRALS 02/25/13 (H) L&C 01/31/14 (H) L&C AT 3:15 PM BARNES 124
01/31/14 (H) -- MEETING CANCELED -- 02/03/14 (H) L&C AT 3:15 PM BARNES 124 02/03/14 (H) Moved Out of Committee 02/03/14 (H) MINUTE(L&C) 02/05/14 (H) L&C RPT 5DP 1NR 02/05/14 (H) DP: MILLETT, HERRON, REINBOLD, SADDLER, OLSON 02/05/14 (H) NR: JOSEPHSON 02/10/14 (H) TRANSMITTED TO (S) 02/10/14 (H) VERSION: HB 141 02/12/14 (S) READ THE FIRST TIME - REFERRALS 02/12/14 (S) L&C 04/01/14 (S) L&C AT 3:30 PM BELTZ 105 (TSBldg) WITNESS REGISTER STEVE RICCI, Aide Senate Labor & Commerce Committee POSITION STATEMENT: Introduced SB 214 on behalf of the committee. PAUL FASSBENDER, Director Public Policy and Economic Development Asurion Nashville, Tennessee POSITION STATEMENT: Testified in support of SB 214. STEPHEN MCDANIEL, Outside Regulatory Counsel Asurion POSITION STATEMENT: Provided supporting information for SB 214. MARTY HESTER, Deputy Director Division of Insurance Department of Commerce, Community and Economic Development (DCCED) Juneau, Alaska POSITION STATEMENT: Commented on SB 214. ASTRID ROSE, Staff Representative Alan Austerman Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Introduced HB 204 on behalf of the sponsor. MICHAEL KAZMAC, Tax Auditor Tax Division Department of Revenue (DOR) Juneau, Alaska POSITION STATEMENT: Answered questions related to HB 204. VINCE O'SHEA, Vice President Pacific Seafood Processors Association (PSPA) Juneau, Alaska POSITION STATEMENT: Testified in support of HB 204 and HB 141. JOE PLESHA, Chief Legal Officer Trident Seafoods Seattle, Washington POSITION STATEMENT: Testified in support of HB 204. MARK PALMER, President and CEO Ocean Beauty Seafood, Inc. Seattle, Washington POSITION STATEMENT: Testified in support of HB 204. JOE JACOBSON, Director Division of Economic Development Department of Commerce, Community and Economic Development (DCCED) POSITION STATEMENT: Delivered a PowerPoint in support of SB 214. ANNA LATHAM, Staff Representative Kurt Olson Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Introduced HB 141 on behalf of the sponsor. SALLIE STUVEK, Human Resources Director Fairbanks North Star Borough Fairbanks, Alaska POSITION STATEMENT: Testified in support of HB 141. ACTION NARRATIVE 3:33:41 PM CHAIR MIKE DUNLEAVY called the Senate Labor and Commerce Standing Committee meeting to order at 3:33 p.m. Present at the call to order were Senators Micciche, Ellis, and Chair Dunleavy. SB 214-INSURANCE ADJUSTER LICENSING 3:34:12 PM CHAIR DUNLEAVY announced the consideration of SB 214. "An Act relating to insurance adjuster licensing." This was the first hearing. 3:34:28 PM STEVE RICCI, Aide, Senate Labor & Commerce Committee, introduced SB 214 on behalf of the committee. He spoke to the following sponsor statement: The product that is at the heart of this bill is an insurance program that protects a consumer's investment in their wireless communications device by insuring it against loss, theft, damage, and internal malfunction of the device. The bill provides for a claims adjusting structure that efficiently meets the needs of consumers of this product and maintains the Division of Insurance's proper regulatory authority. As wireless devices have become an integral part of our everyday lives their functionalities have expanded exponentially and with these developments the cost of these devices has also risen. Portable electronics insurance not only ensures that a consumer's investment in such a device is protected, but also ensures that a consumer receives quick service by getting a pre-programmed phone or other portable electronic device in the consumer's hands often times the very next day after a claim has been made. The bill creates a regulatory framework tailored to portable electronics insurance adjusting in Alaska. The approach set forth in this important piece of legislation ensures a balanced regulatory structure that would avoid the need to license every individual who takes claims calls from Alaska consumers while insisting on a supervisory structure of insurance producers or adjusters to ensure proper oversight. Because a consumer's device is critical to their everyday life, it is critical that portable electronics insurance claims be handled efficiently and swiftly. Recognizing this, the portable electronics insurance industry utilizes automated claims adjudication systems to ensure expedient resolution to claims to ensure a replacement phone reaches the consumer as quickly as possible. This legislation authorizes the use of such a system while also ensuring that it is developed to comply with Alaska law governing claims handling. The bill also amends state law to further clarify how a nonresident adjuster is licensed in Alaska by utilizing a designated home state, a concept embraced by the National Association of Insurance Commissioners. This model proposed in this legislation is consistent with the national trend to the regulation of this product as it creates an efficient and fair licensing framework, and gives regulators the authority they need to effectively oversee these activities. Legislation similar to this has been enacted into law in twenty-eight states including Texas, Florida, Hawaii, Washington, Oregon, and Michigan. In summary, this is a good bill not only for insurers offering portable electronics insurance but also for the consumers of Alaska. The bill creates a regulatory structure suitable for this product which allows the Division of Insurance regulatory oversight to ensure that claims made by Alaska consumers are handled in the right way. MR. RICCI advised that a committee substitute was forthcoming and noted the individuals who were available to answer questions. 3:36:34 PM PAUL FASSBENDER, Director, Public Policy and Economic Development, Asurion, Nashville, Tennessee, stated that his company provides insurance for portable electronics, primarily phones. He explained that SB 214 adds to legislation passed last year that established standards for adjusting portable electronic insurance claims. It will remove the gray areas in these claim adjustments and provide stability for operating in a regulated environment. 3:38:00 PM STEPHEN MCDANIEL, Outside Regulatory Counsel, Asurion, offered to answer questions. CHAIR DUNLEAVY opened public testimony. 3:38:46 PM SENATOR ELLIS asked the subject of the new language in the forthcoming CS that Mr. Ricci mentioned. MR. RICCI explained that the Division of Insurance noticed the need to make technical changes related to the home state where adjusters are registered and whether or not the company has a physical presence in that state. He deferred further explanation to the Division of Insurance. SENATOR ELLIS asked if the industry or the Division of Insurance brought this up. MR. RICCI replied the industry brought it up and Senator Dunleavy's office has been working with the Division of Insurance on the language. MR. FASSBENDER added that the issue is a consequence of a virtual marketplace. Insurance adjusters supervise clerical staffs that take claims nationwide and they apply for nonresident adjuster licenses in various states. The technical issue relates to whether the adjuster needs to have a brick and mortar facility or be a resident of a state in order to claim it as a home state. When states drafted their insurance laws they didn't necessarily take into account Asurion's business model. CHAIR DUNLEAVY asked Mr. Hester to supplement the record regarding the reason for the technical language change in the anticipated committee substitute. 3:41:14 PM MARTY HESTER, Deputy Director, Division of Insurance, Department of Commerce, Community and Economic Development (DCCED), Juneau, Alaska, explained that Alaska is one of the states that requires a license for this particular type of insurance and a physical storefront. The language in the forthcoming committee substitute would allow a company doing virtual claims to operate from the state that they're currently licensed out of. 3:43:05 PM CHAIR DUNLEAVY announced he would keep public testimony open and hold SB 214 in committee for further consideration. 3:43:15 PM At Ease HB 204-SALMON & HERRING PRODUCT DEV'T TAX CREDIT 3:44:02 PM CHAIR DUNLEAVY reconvened the meeting and announced the consideration of HB 204."An Act relating to a product development tax credit for certain salmon and herring products; and providing for an effective date." He noted that this was the first hearing. [CSSSHB 204(FIN) was before the committee.] 3:44:20 PM ASTRID ROSE, Staff, Representative Alan Austerman, introduced HB 204 on behalf of the sponsor. She spoke to the following sponsor statement: [Original punctuation provided.] The Alaska Salmon Product Development Tax Credit has been in place since 2003 and is widely credited as a major factor of the increase in commercial value of Alaska salmon. The ASDTC is currently scheduled to sunset on December 31st, 2015. There have been positive trends since this bill was enacted in 2003. We have seen increased product diversity, increased state revenues from the fisheries business tax and increased permit prices. The current tax credit applies to investment in new property that meets a requirement for creating a value added salmon product. House Bill 204 extends the ability of industry to use this credit until 2020 and expands the credit for herring value-added processing. Herring is an established fishery in Alaska and is a prime candidate to start utilizing more fully. If we expand out of the roe fishery and into the food fishery, there are significant economic development opportunities that will be developed. Up until now, the herring fishery has been an underutilized fishery where only about 10 percent of the fish is utilized and 90 percent has very little value. Another impending burden to industry is the Environmental Protection Agency's efforts to force industry to eliminate seafood discharges containing solids into near shore waters. Many salmon processing facilities in Alaska currently grind and pump discharge. HB 204 would incentivize investment in equipment that would reduce the waste stream from salmon and herring processing thereby alleviating the pressure to comply with these burdensome mandates. Currently, statute only allows investment in pop-top cans. HB 204 also provides industry the necessary flexibility to respond to changing market demands for can sizes. This bill responds to this limitation by expanding the credit to any new equipment to herring and also to produce can sizes other than 14.75 ounces or 7.5 ounces. The continued growth of the Alaska seafood market is vital to increased revenues from our fisheries. House Bill 204 will further encourage in-state processing and expand market opportunities to processors. The extension of the tax credit will continue to spur economic development opportunities and create quality Alaska products. MS. ROSE noted that the packets contain a document that tells what the Environmental Protection Agency (EPA) is proposing for processing facilities to comply with the discharge requirements, letters of support, information on the expenditures and credits taken for the last three years, and a sheet showing what equipment is allowed under the salmon product development tax credit. 3:48:06 PM MS. ROSE reviewed the major changes in statute. · The term herring is added in all sections of the bill. · On page 3, "qualified investment" includes new parts necessary for or costs associated with converting a canned salmon line to produce can sizes other than the 14.75 ounce and 7.5 ounce cans. It also adds freezing, scaling, grinding meat and bone separation to what already qualifies for the tax credit. · On page 4, lines 11-12, say that equipment used to transport salmon or herring byproduct that is discarded as waste and unsalable product would now be a qualified investment. 3:49:57 PM SENATOR ELLIS directed attention to the list of disqualified equipment for the tax credit and asked for a definition of "dud detector." MS. ROSE deferred the question to the Department of Revenue. 3:51:06 PM MICHAEL KAZMAC, Tax Auditor, Tax Division, Department of Revenue (DOR), explained that a dud detector is a device that detects a defective vacuum seal on a finished can of salmon. 3:51:55 PM VINCE O'SHEA, Vice President, Pacific Seafood Processors Association (PSPA), Juneau, Alaska, stated that he was speaking on behalf of the PSPA members that collectively operates about 18 salmon processing plants in Alaska. He summarized that HB 204 allows processers to take a credit against the fishery business tax they pay on fish they buy to offset purchases of new equipment that would add value to products they're making. In the past the credit has gone to things like fillet machines, ice makers, and centrifuges to convert fish oil into a product that could be made into fish capsules. The intention is to expand the product line from cans to items that generate a greater return. He noted that he submitted written testimony and it points out that extending the tax credit for five years would give stability to the industry and would allow it to take advantage of new technology and new markets. 3:54:32 PM JOE PLESHA, Chief Legal Officer, Trident Seafoods, Seattle, Washington, testified in support of HB 204. He advised that Alaska is the only state that allows seafood waste to be ground and discarded, and that may not be allowed once the EPA concludes the review of its effluent limitation guidelines. The general belief is that most of the communities in Alaska will have to screen their waste and then handle it in some manner. The most obvious use of the waste is to produce some sort of product and HB 204 is a step in that direction. 3:56:03 PM MARK PALMER, President and CEO, Ocean Beauty Seafood, Inc., Seattle, Washington, testified in support of HB 204. He discussed the history of the legislation and explained that HB 204 encourages market diversification beyond just two product forms, which will help right size the markets. He also discussed the value of extending the development tax credit and expanding it to herring. To date it has stimulated investment in the industry and brought revenue to the state. SENATOR MICCICHE said he supports the bill because of all the Europeans he's seen adding finishing value to Alaska salmon. He asked for assurance that this tax credit will be used to employ more Alaskans in the finishing of Alaskan seafood. MR. PALMER described the current European market for boneless sockeye salmon fillets and the expectation that there would be a market for frozen chum this year both of which have created jobs in Alaska. He added that there were also opportunities for machinist positions to operate and maintain this very sophisticated machinery. SENATOR MICCICHE asked about the current herring market and if there was demand for gourmet human food. MR. PALMER said Ocean Beauty produced a small amount of canned herring fillets last year and expects to produce more this year. The target market is food aid programs and the product has been well received. Ocean Beauty also produces and sells a large volume of pickled herring and they have customers that are interested in test marketing that product with Alaska herring on the label. SENATOR MICCICHE asked if packaging is limited or wide open. MR. PALMER replied the packaging options are wide open but the bill does allow the tax credit to apply to smaller can sizes, which will help the industry because that's what consumers want. 4:05:28 PM SENATOR MICCICHE asked if there are options for other markets like fish meal, animal food, and organic fertilizer. MR. PALMER said they do oil recovery at the Excursion Inlet facility that's used for supplements for pet food, but the refining isn't sophisticated enough for human consumption. He suggested Mr. Plesha describe Trident's markets. MR. PLESHA explained that Trident is encapsulating salmon oil for human consumption, they produce a liquid fertilizer, and they produce fish meal which is increasingly used as a protein source. SENATOR MICCICHE repeated a joke from Clem Tillion and expressed hope that the bill would help develop some of the products in this state that for years have largely gone to waste. 4:08:50 PM ANNA KIM, Chief of Revenue Operations, Tax Division, Department of Revenue (DOR), introduced herself and offered to answer questions. JOE JACOBSON, Director, Division of Economic Development, Department of Commerce, Community and Economic Development (DCCED), introduced himself. 4:09:28 PM At Ease 4:12:29 PM CHAIR DUNLEAVY reconvened the meeting and invited Mr. Jacobson to give a presentation. MR. JACOBSON delivered a PowerPoint in support of HB 204. He reminded the committee that while Alaska is a huge seafood state, it only produces only one-third of the global wild salmon supply. He said that the only way to increase value to Alaska fishermen is by increasing the value of the product. Recently there have been strong runs, but production won't always be this high so investing in value-added products is very important for the state. He noted that his prior job was international director with the Alaska Seafood Marketing Institute. He discussed that a key benefit of the product development tax credit is product diversity. Just as it's not wise to be dependent on any one market, it's likewise not wise to be dependent on any one product form. When the industry was exclusively headed and gutted and canned salmon, the commodity was much more susceptible to the whims of the market. By increasing value in the product and having different products for different markets worldwide, the Alaskan fisherman is generally benefitted. Focusing on underutilized species like herring and the waste byproduct provides a huge opportunity for the state to take what may be a problem for the industry and use it to generate revenue. For canned salmon there's incentive for new production with smaller size cans. MR. JACOBSON displayed a graph to illustrate that the price of canned salmon prices since 2005 has doubled. With few exceptions, the predominant can sizes are 7.5 ounces and 14.75 ounces, but consumers want smaller sizes. The number of herring permits has dropped precipitously in recent years so anything that can be done to stimulate the herring fisheries, especially in Western Alaska, would be very beneficial. This could be through food aid or innovation that could generate another consumer product. 4:16:32 PM CHAIR DUNLEAVY asked if the issue with herring is that the roe is going to Japan. MR. JACOBSON said the market in Japan has softened. Although it's a traditional product, the younger generations aren't consuming the same quantities and aren't willing to pay the prices they used to. Speaking generally, he said that a lot of production is geared predominantly for roe and those prices have dropped such that they don't support harvesting the fish just for roe. CHAIR DUNLEAVY asked if that was why the number of permit holders was dropping. MR. JACOBSON answered yes. SENATOR MICCICHE asked what the favored gear type is for food- quality products. MR. JACOBSON said he wasn't sure. He continued the presentation explaining that the largest challenge with the EPA is that non-remote seafood processing centers will be required to go to a zero discharge on any waste products. This means they'll need to screen and transfuse the product into a saleable good or collect the waste and barge it to an offload site. The costs are dependent on location, but it could be $0.20 per pound or more and that would come out of the fisherman's pocket. The waste byproduct opportunities include fish meal, fish oil, and protein isolates. He emphasized that key marketing, investing in quality, and the diversification of products has been a key element of increasing the value of the industry to the state. Whether it's permit holders or crew, the participation in Alaska fisheries has increased significantly in recent years. The difference between what it costs the state and the revenue generated from the fisheries business tax clearly demonstrates that there is a good return on investment. 4:21:23 PM CHAIR DUNLEAVY held HB 204 in committee for further consideration. Public testimony was open. 4:21:49 PM At Ease HB 141-WORKERS' COMPENSATION MEDICAL FEES 4:22:34 PM CHAIR DUNLEAVY reconvened the meeting and announced the consideration of HB 141."An Act setting the fee for medical treatment or services performed outside the state under the Alaska Workers' Compensation Act, requiring a provider of medical treatment or services under the Alaska Workers' Compensation Act to submit bills for treatment or services to employers within 180 days after the date the treatment or services are rendered, and limiting the time for appealing an employer's denial or reduction of a bill; and providing for an effective date." He noted that this was the [first] hearing. 4:22:52 PM ANNA LATHAM, Staff, Representative Kurt Olson, Alaska State Legislature, Juneau, Alaska, introduced HB 141 on behalf of the sponsor. She explained that the bill sets the fee schedule for workers' compensation claims treated outside Alaska and establishes billing timelines for medical providers. Providing some background, she said the state has used a usual, customary, and reasonable fee schedule for workers' compensation that is reflective of the costs and geographic area where services are rendered. Services have been billed at the 90th percentile for the past ten years. In 2011, the legislature passed House Bill 13, which extended the current fee schedule but what it failed to do was to set parameters for where the fee schedule could be used. She reported that Alaska has the highest workers' compensation premiums in the nation. The Oregon Department of Business and Consumer Services conducts a biennial study of workers' compensation rates that is considered the industry standard. For the past ten years, Alaska has ranked in either the first or second place for the highest workers' compensation insurance premium rates in the nation. 4:24:19 PM MS. LATHAM provided examples of some discrepancies between the rates in Alaska and other western states. She directed attention to the top 25 surgery procedure code fee comparison charts in the bill packets. It shows that Alaska's costs are substantially higher that those for Washington, Oregon, and Idaho. She drew attention to page 40, chart 30, of the report entitled, "Medical Data Report for the state of Alaska dated September 2013." This chart ranks the top ten diagnostic codes by total claim payments. It shows that the average payment in Alaska for treating a diagnosis of a ruptured disc is $31,177 compared to $17,049 nationwide. That's 182 percent higher in Alaska. MS. LATHAM said there is nothing in statute from preventing workers' compensation claims treated in the Lower 48 from being billed at Alaska's higher rates. HB 141 changes that. Medical services treated in-state would still be charged using the UCR fee schedule that was established in 2011, and medical services provided outside Alaska could not exceed the charges set by the statute in the state where the services are rendered. The bill also establishes billing timelines. It requires a provider to submit bills within 180 days after the services are rendered and limits the time for appealing an employer's denial or reduction of a bill to 60 days. The effective date is immediate and there is a retroactivity clause that includes transitional language. The transition language allows medical providers to submit bills for service within 180 days of the effective date, irrespective of the date of service, and allows providers to submit an appeal for denied payment within 60 days of the effective date, irrespective of the date of the disputed payment. She summarized that HB 141 sets reasonable time limits to provide certainty for the employer and the insurer as they budget for the future. CHAIR DUNLEAVY opened public testimony. VINCE O'SHEA, Vice President, Pacific Seafood Processors Association (PSPA), Juneau, Alaska, testified in support of HB 141. He reported that PSPA has over 27,000 workers in seafood processing plants across the state and the high workers' compensation rates need to be addressed. This will eliminate the abuse and unnecessary expenses related to treatment, he said. 4:29:35 PM SALLIE STUVEK, Human Resources Director, Fairbanks North Star Borough (FNSB), Fairbanks, Alaska, said she oversees risk management, which handles workers' compensation for the FNSB and the FNSB School District (FNSBSD). She reported that the FNSB spends about $1.1 million on workers' compensation benefits each year. FNSB continues to see medical costs rising and believes that the resolution adopted by the workers' compensation board 1301 dated September 27, 2013 is a positive step to address these costs. The FNSB assembly passed a resolution on February 13, 2014 in support of continuing to pursue this legislation. SENATOR MICCICHE stated support for the legislation and commented that it might cut back on medical tourism. 4:31:18 PM CHAIR DUNLEAVY held HB 141 in committee for further consideration. Public testimony was open. 4:32:29 PM There being no further business to come before the committee, Chair Dunleavy adjourned the Senate Labor and Commerce Committee meeting at 4:32 p.m.