HB 346-WORKERS' COMPENSATION ADVISORY BOARD  3:55:50 PM CHAIR OLSON announced that the next order of business would be HOUSE BILL NO. 346, "An Act establishing the Workers' Compensation Advisory Board; and providing for an effective date." 3:56:19 PM REPRESENTATIVE NEUMAN made a motion to adopt Amendment 1, labeled 26-LS1447\R.1, Bailey, 2/15/10, as follows: Page 1, line 1: Delete "Board" Insert "Council, and abolishing the Medical  Services Review Committee" Page 1, line 5: Delete "Board" Insert "Council" Page 1, line 6: Delete "Board" Insert "Council" Delete "board" Insert "council" Page 2, line 10: Delete "board" Insert "council" Page 2, line 13: Delete "board" Insert "council" Page 2, line 16: Delete "board" both places Insert "council" both places Page 2, line 17: Delete "board" Insert "council" Page 2, line 19: Delete "board" Insert "council" Page 2, line 20: Delete "board" Insert "council" Page 2, following line 23: Insert new bill sections to read:  "* Sec. 2. AS 23.30.095(j) is repealed.  * Sec. 3. AS 23.30.275, enacted by sec. 1 of this Act, is repealed June 30, 2015.  * Sec. 4. Section 82, ch. 10, FSSLA 2005, is repealed." Renumber the following bill sections accordingly. Page 3, line 8: Delete all material. Renumber the following bill section accordingly. 3:56:55 PM REPRESENTATIVE HOLMES objected for purpose of discussion. 3:57:05 PM KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State Legislature, paraphrased from the sponsor's statement, inserted, as follows [original punctuation provided]: Since the mid-1980's an informal workers' compensation advisory committee has operated in Alaska. This "Ad- Hoc" committee was comprised of representatives from organized labor and from the Workers' Compensation Committee of Alaska - an industry group organized to lobby for changes to Alaska's Workers' Compensation Act. The Ad-Hoc Committee was instrumental in effecting the huge changes made to the Act in 1988. However, since then, the committee has been unable to achieve any success in large part due to their lack of any statutory legitimacy. In 2005, the legislature amended AS 23.30.095 to create a Medical Services Review Committee to advise the commissioner of the Department of Labor and Workforce Development in the area of medical costs and related services in workers' compensation. In November 2009, the Committee issued its final report and recommendations. One of the recommendations was the establishment by statute of a Workers' Compensation Advisory Council to advise the commissioner and legislature in the area of workers' compensation. Similar councils have been created and operate quite effectively in other states. These councils are charged with recommending statutory changes to the legislature as well as regulations to departments in the area of workers' compensation. The purpose of the council is to improve workers' compensation systems by drawing together representatives from all workers' compensation stakeholders who gather and analyze data and information, discuss and debate options and make recommendations regarding problems facing the effectiveness of workers' compensation systems. This bill creates a council similar to that found in many other western and mid-western states. The Council is comprised of 11 voting and 5 non-voting members: four voting members drawn from organized labor, four voting members drawn from various employer groups, and three voting members from the various medical societies. Non-voting members provide expertise and are drawn from the insurance industry (2 members) and the legislature (one from each legislative body). MR. JACKSON remarked that in the haste to have the bill drafted the council was inadvertently named a board. Amendment 1 would correct that discrepancy. He referred to page 2, lines 18 - 20, of Amendment 1, and noted one additional change in Sections 2 - 4, repeal the Medical Services Review Committee, since it is replaced by this new council. 3:58:49 PM REPRESENTATIVE NEUMAN asked for the purpose of the Medical Services Review Committee. MR. JACKSON explained that in 2005, the legislature amended AS 23.30.095 to create a Medical Services Review Committee (MSRC), whose purpose was to advise the commissioner of the Department of Labor and Workforce Development (DLWD) in the area of medical costs and related services in workers' compensation. REPRESENTATIVE NEUMAN restated that the committee reviewed medical services. Thus, if a person was injured on the job, the MSRC would determine whether treatment is necessary. MR. JACKSON related that the MSRC does not review cases on a case-by-case basis, but the committee would review items such as the entire medical fee schedule. 4:01:21 PM REPRESENTATIVE T. WILSON asked whether the composition of the board is well rounded or if it should be changed. MR. JACKSON explained that during the course of the MSRC meetings, the Alaska State Medical Association and others provided input as interested parties. He offered his view that the recommendations seem fairly balanced, and although the final composition may not be perfect, the larger a council or a board becomes the more cumbersome it also becomes. The proposed Workers' Compensation Advisory Council (WCAC) would be comprised of 11 voting members, which seemed to be a reasonable size. A number of ex-officio members can also provide input. The WCAC's meetings are public so people will have an opportunity to make comments at the regular WCAC meetings. 4:02:53 PM CHAIR OLSON explained that it has taken four and a half years to arrive at this point and a significant amount of work was accomplished in the past six months. 4:03:03 PM REPRESENTATIVE LYNN referred to page 2, line 4, of HB 346 to the two members of the legislature that would be appointed to the WCAC. He asked whether it would be useful to have a minority and majority viewpoint on the WCAC, and select members that have garnered the most votes and the least number of votes in the election process. MR. JACKSON answered that the MSRC recommended that the leadership from each body of the legislature make appointments for membership serving on the proposed WCAC. REPRESENTATIVE LYNN suggested again that perhaps both political parties should be represented. 4:04:37 PM REPRESENTATIVE NEUMAN recalled that typically the leadership from each body of the legislature makes appointments for membership serving on councils, boards, or task forces. REPRESENTATIVE LYNN maintained his concern. MR. JACKSON agreed it is a policy call. CHAIR OLSON recalled that the Ethics Committee is the only committee he is aware of that makes that distinction. REPRESENTATIVE LYNN expressed interest in hearing the viewpoint from other committee members. 4:06:02 PM REPRESENTATIVE BUCH related that if the sponsor was amenable, that he would not oppose the change. CHAIR OLSON remarked that he would need to consult with the legislative legal drafters as to the appropriateness. 4:07:00 PM LINDA HALL, Director, Division of Insurance, explained the history of the advisory committees on workers' compensation. She related that the committee members received some letters and the sponsor statement also references an ad hoc committee. The ad hoc committee produced numerous proposals for workers' compensation reform in the late 1980s. The past few years the ad hoc committee has had difficulty in reaching agreement to address workers' compensation issues. When the MSRC met this summer, it tried a different approach to find ways to improve the workers' compensation system, particularly since it had difficulty in reaching a good outcome. She recalled other states have had similar success, such as in Oregon. While Oregon's committee composition is a little different, some of their members have advised the Alaska legislature on their success in working on workers' compensation issues. 4:09:11 PM MS. HALL said that it seemed to her a body with some statutory authority might bring a different level of credibility to the process. She offered her support for the composition of the proposed WCAC and for establishing this type of an advisory council. 4:09:42 PM TRENA HEIKES, Director, Division of Workers Compensation, Department of Labor & Workforce Development, stated that she is also speaking as Chair of the Medical Services Review Committee (MSRC). She stated the bill is much needed. She restated background information, relating that HB 346 came out of the recommendations made by the MSRC. In November 2009, the MSRC submitted its final report to the Department of Labor & Workforce Development (DLWD). The MSRC recommendations contained cost containment measures, as well as recommending the creation of the Workers' Compensation Advisory Council (WCAC). Since the mid-1980's an informal Workers' Compensation Ad Hoc Committee has operated in Alaska in an advisory capacity This "Ad Hoc" Committee, without any statutory authority, was comprised of representatives from organized labor and from the Workers' Compensation Committee of Alaska - an industry group organized to lobby for changes to Alaska's Workers' Compensation System. Thus, out of "labor" and the WCCA came the ad-hoc committee, which was instrumental in effecting the huge changes made to the Workers' Compensation Act in 1988. Since then the committee has been unable to achieve any success in large part due to inadequate public input. She surmised that likely happened due to the lack of any statutory legitimacy for the Ad Hoc Committee. The meetings were not public, generally were held behind closed doors, and consequently lack public input. During her time as a workers' compensation attorney, she assisted in making proposed changes to the workers' compensation laws. Although little was accomplished, some of what surfaced got passed into law since labor and industry both supported the legislation. 4:13:33 PM MS. HEIKES offered her belief that at least one administration ignored the ad hoc committee since it was not formalized in statute. Thus, the need arose to formalize the MSRC. In 2005, the legislature amended AS 23.30.095 to create a Medical Services Review Committee to advise the Department of Labor and Workforce Development's Commissioner in the area of medical costs and related services in workers' compensation. MS. HEIKES stated that this past summer and fall larger issues loomed and the MSRC began to examine councils in ten other Western states to view how their councils functioned and to review their respective statutes. She reiterated Ms. Hall's comments, that these councils were comprised of labor and management with the rest acting in an advisory capacity. They work very effectively in "drilling down" into workers' compensation issues and making recommendations to the legislature. She thought they were successful because once the issues passed through the council, both labor and industry put their "stamp of approval" on the issues. Generally these councils have been successful, she remarked. The proposed WCAC is most closely based on the Wisconsin model. She referred to a letter in members' packets from Frances Huntley-Cooper of the International Association of Industrial Accident Boards and Commissions (IAIABC), describing how the Wisconsin model operates. The MSRC drew from that model as well as from Oregon, Washington, and Montana, compiling recommendations that may work well in Alaska. The intent of the MSRC was to gather workers' compensation stakeholders together to analyze data and information, discuss and debate options, and make recommendations to transform Alaska's Workers' Compensation System into a first-class system. MS. HEIKES stated that the MSRC did not want to include people with a specific agenda since committees comprised of single agenda members do not work well. Instead, it is desirable to have people serve who possess a single goal of working to improving the workers compensation system, healing the injured worker, and returning the worker to a productive life as soon as possible, to minimize the impact on their lives. MS. HEIKES stated that under HB 346, the proposed WCAC would be comprised of 11 voting and 5 non-voting members: 4 voting members drawn from organized labor, 4 voting members drawn from various employer groups, and three voting members from the various medical societies. Non-voting members would provide expertise and were drawn from the insurance industry. In fact, every council the MSRC reviewed had industry as a non-voting participant. One member from the DLWD and one from each legislative body would also serve on the proposed WCAC. The primary purpose of legislative membership would be to apprise the legislature on matters, such as on issues being reviewed by the WCAC. She related the MSRB expressed concern about voting members and committee members should have received letters to that effect. 4:17:32 PM MS. HEIKES related that of the 10 states examined, only employees and employers were given a vote on the council. Doctors were members but were non-voting members. This bill is different, since the MSRB voted by a slim majority to give doctors a vote. The MSRB took the view that doctors should have a vote since workers' compensation comes down to a "three-legged stool" consisting of employers, employees, and doctors, due to the personal injury aspect. The MSRC expressed concern that if doctors did not have a vote, they would just not show up, and obtaining their perspective is important. She pointed out that the insurance industry was not given a vote, although their expert assistance will also be required, but no other state council gave them a vote. She said that they really "don't have a dog in the fight." She recalled one MSRB member stating that the industry just passes the savings on to the system. She remarked that the insurance industry also did not specifically request a vote on the proposed WCAC. She concluded that this bill creates a WCAC that has been needed in Alaska for some time, and through the proposed WCAC, the state may be able to garner more public input to a degree never experienced in Alaska. She urged members to vote in support of HB 346. 4:19:43 PM MS. HEIKES, in response to Chair Olson, said she leaves it up to the legislature as to whether it wants a bi-partisan council. She stated that these members really serve as messengers to the legislature to inform them of emerging issues. CHAIR OLSON remarked he is unaware of any party affiliation on other boards. MS. HEIKES agreed that the remaining seats are not examined by party affiliation. 4:21:09 PM KENTON BRINE, Northwest Regional Manager; Assistant Vice- President, Property Casualty Insurance Association of America (PCI), thanked the industry members and the MSRC for their recommendations. He stated that Alaska has the highest workers' compensation rate in the nation, which is driven in large part by medical costs. In Alaska, medical costs represent about 72 percent of workers' compensation losses, in comparison to the national average of 58 percent. He offered PCI's support for HB 346. He suggested the committee may wish to consider the make- up of the proposed council. The Oregon system is a little different, he stated. The Oregon Workers' Compensation System was engaged in a major overhaul in 1990. One critical outcome has been that employers have seen workers' compensation insurance rates decline, in every year except one, since enactment of the laws about 20 years ago. In comparison, Washington State has a state run monopoly and the costs for workers' compensation and the rates paid by employers have increased almost every year. The state auditor predicts that without higher rates or serious benefit cuts, the fund to pay for injured workers will go broke in two to five years. One feature unique to Oregon is that its advisory board, called a Management Labor Advisory Committee (MLAC), is a 10-member committee comprised of 5 representatives of organized labor, and 5 representatives from management or the employers. There is no tie-breaking vote and no other entities are allowed into the advisory committees. It is simply "the two sides battling it out." He related that the tacit agreement by the legislature and the governor's office is that unless a major piece of legislation relating to Workers' Compensation benefits or procedures has the MLAC seal of approval, the legislature will not pass it and the governor will not sign it. 4:25:34 PM MR. BRINE continued. He stated that this is an important tool to be certain that fairness is had in terms of changing public policy related to Workers' Compensation claims and benefits. He suggested that members consider balancing out the current makeup of the voting members of the proposed council. He said he does not want to suggest, necessarily that insurers should have votes on proposed council. However, he understood the rationale for the voting and non-voting members. He reviewed the 11 members, of which 4 are employers, noting the other 7 members may have a different interest, which might be to expand benefit levels to injured workers or the amount of money available for their care. He offered his belief that this may not have the effect of lowering the ever-increasing medical costs. He offered to provide language if the committee is interested in doing so. With those changes to HB 346, his organization could wholeheartedly support the bill. Otherwise, he said, they would have some concerns, but would still like to see HB 346 move forward. 4:27:56 PM VINCE BELTRAMI, President, American Federation of Labor and Congress of Industrial Organizations (AFL/CIO), stated that he has served as one of the members of the MSRC for the past six months. He affirmed the MSRC's unanimous support to establish a Workers' Compensation Advisory Council (WCAC), which is relatively consistent with the proposal contained in HB 346. He stated that creation of the proposed WCAC will place into statute a function that the Ad Hoc Committee has had limited success in performing. This proposed WCAC will resolve some conflicts encountered in the Ad Hoc Committee process and will consolidate the function of the Ad Hoc Committee and the MSRC. It should streamline issues to have all the parties at the table in a construct that should properly serve the two principal interests, the injured workers and their employers. This should eliminate some perceived profit motive from the process, he stated. The MSRC reviewed the models from several other states as Ms. Heikes mentioned, and uses one most similar to the Wisconsin model, which have resulted in greater efficiencies for Workers' Compensation Systems in other states by reducing costs, improving protection for the injured worker, and setting policies to return workers back to their jobs more quickly. He agreed with the basic structure of the composition. He related that the MSRC held considerable debate on who should have voting rights. One member from the medical care providers was adamant about doctors having voting rights. He stated that other states had limited their voting rights, and although he expressed some concern, he offered a willingness to hear the doctors make their case, and acknowledged that doctors provide a key component to the system. 4:31:21 PM MR. BELTRAMI expressed concern with the language on page 1, lines 9 - 11, of HB 346 on the make-up of the employer representatives. It is conceivable that the oil industry could occupy all four employer positions since some general contractors perform oil field work. He suggested amending the language to assure a more diverse pool of employers. He also would not object to language that also diversified the organized labor pool, as well, perhaps a certain number of building trades. While he did not object to partisan representation, he thought since the legislative representatives are ex officio, and provide an advisory role to the legislative bodies. He strongly urged adoption of HB 346, with some clarifying amendments that insure Alaska's injured workers will be treated fairly and in the most efficient manner. 4:33:05 PM REPRESENTATIVE HOLMES related that all of the members except the legislators are appointed by the DLWD commissioner. She asked whether that was acceptable. MR. BELTRAMI recalled some discussion by the MSRC. The MSRC thought the appointment process might be less politicized than a Governor's appointment. He recalled the MSRC agreed uniformly that the appointment method was adequate. 4:34:16 PM PATRICIA WILSON, Workers Compensation Committee of Alaska, stated that the committee submitted written comments. She offered that the WCCA does not disagree with the council approach. She related that she spent time at the MSRC meetings this past year and was impressed with their report and recommendations. In workers compensation, the "players" are the employees, the injured workers, and their employers. While other parties with financial interests, ranging from vocational rehabilitation counselors, medical providers, and attorneys, However, she offered her belief that the interested parties should not be voting members. Instead, those with the ultimate interest, the employees and employers, should be involved since they are directly affected. She recalled that the MSRC worked on cost containment issues with very difficult concepts that required outside expertise and testimony. This type of format allows for subject matter experts and the medical community serves a valuable role. However, the voting members should be restricted to the employers and the employees. She suggested that the management appointments be recommended by a group that can draw from a pool of people specifically experienced in Workers' Compensation issues, which is a fairly arcane system with many nuances. 4:38:42 PM CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on HB 346. REPRESENTATIVE HOLMES removed her objection. There being no further objection, Amendment 1 passed. 4:39:07 PM The committee took an at-ease from 4:39 p.m. to 4:43 p.m. 4:43:51 PM CHAIR OLSON stated the amended bill is now before the committee. REPRESENTATIVE T. WILSON moved to report HB 346, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, the CSHB 346(L&C) was reported from the House Labor and Commerce Standing Committee. The committee took an at-ease from 4:43 p.m. to 4:47 p.m. 4:47:10 PM