HB 30-WORKERS' COMP: DEATH; PERM PARTIAL IMPAIR  6:44:37 PM CO-CHAIR SPOHNHOLZ announced that the next order of business would be HOUSE BILL NO. 30, "An Act relating to notice of workers' compensation death benefits; relating to the payment of workers' compensation benefits in the case of permanent partial impairment; relating to the payment of workers' compensation death benefits; and providing for an effective date." 6:44:45 PM REPRESENTATIVE ANDY JOSEPHSON, Alaska State Legislature, as prime sponsor, presented HB 30. He stated that the proposed bill is fairly straightforward. He shared that the catalyst for the bill originally was his learning about a young woman who had died in an electrical accident, and since she did not have a spouse or have children, there was no one to sue on her behalf. He explained that there was no workers' compensation remedy under title AS 23. This situation made him interested in worker's compensation and researching AS 23. He shared that when he began investigating this seven or eight years ago, he discovered that Alaska's permanent partial impairment rating had not been updated since the year 2000, and it still has not been updated to this day. He explained that a permanent partial impairment rating refers to situations in which a person lives through an injury, but has a permanent disability rating due to a body part no longer functioning properly because of permanent injuries sustained from the accident. REPRESENTATIVE JOSEPHSON continued by sharing the formula for what he referred to as the "whole body number" which is multiplied by the percentage of disability. He cited Section 2 of HB 30 on page 2: * Sec. 2. AS 23.30.190(a) is amended to read: (a) In case of impairment partial in character but permanent in quality, and not resulting in permanent total disability, the compensation is $273,000 [$177,000]multiplied by the employee's percentage of permanent impairment of the whole person. The percentage of permanent impairment of the whole person is the percentage of impairment to the particular body part, system, or function converted to the percentage of impairment to the whole person as provided under (b) of this section. The compensation is payable in a single lump sum, except as otherwise provided in AS 23.30.041, but the compensation may not be discounted for any present value considerations. REPRESENTATIVE JOSEPHSON shared that the impact of amending this legislation is that Alaska would move from "something like the forty-fifth [most generous] state" in terms of workers' compensation, with only four states less generous than Alaska, "to the middle of the pack." He reiterated that the key component of the bill is to update permanent partial impairment. 6:48:07 PM REPRESENTATIVE JOSEPHSON explained that he had originally proposed a death benefit to be included in the bill for individuals such as the previously mentioned woman who died childless and without a spouse; however, that addition was met with objection during the drafting of the bill and was removed. He emphasized that the bill in its current state is "almost strictly" an inflation adjustment that updates various numbers in workers' compensation law. He noted that he said "almost strictly" because the bill also creates notice requirements for death benefits and also for the process of getting grievance counseling. REPRESENTATIVE JOSEPHSON continued that the theory behind the bill is the following: if an unmarried and childless 18-year- old person died on a construction worksite, the person's parents would have no remedy to the individual's death because they couldn't sue in personal injury. He shared his thought process that the employer should notify their employees that workers' compensation will not provide anything in the case of the employees' death, and that the employees should get life insurance to be fully covered. REPRESENTATIVE JOSEPHSON directed attention to page 3 of HB 30 and shared that the bill would update funeral costs from $10,000 to $12,000. It would also update an amendment that was last adjusted in 1968 by increasing compensation for individuals that were dependent upon a deceased individual, but do not qualify as direct descendants, from $20,000 to $150,000. 6:50:25 PM REPRESENTATIVE JOSEPHSON then directed attention to Section 5 of the bill. He said currently when a parent dies and leaves a child with no other parent providing for the child, under law, the child would receive workers' compensation benefits though age 19 and then would get benefits for another four years if attending vocational school or college. Under Section 5, that benefit would extend to individuals who might be in the military instead of vocational school or college. He added that the bill has two fiscal notes, which net out to around $270,000 as a cost to the state. REPRESENTATIVE JOSEPHSON concluded that his office received a letter from the Alaska Municipal League (AML) in opposition to the bill; however, he noted that the last paragraph of the letter states that the key feature of the bill, the permanent partial impairment rating, should be changed. Not only that, he added, but the letter states that the rating should be inflation proof, which is a suggestion that is more extensive than what is being proposed under HB 30. 6:53:14 PM ELISE SORUM-BIRK, Staff, Representative Andy Josephson, Alaska State Legislature, offered a PowerPoint presentation on HB 30 on behalf of Representative Josephson, prime sponsor. She began on slide 2 of her presentation, "Four Major Goals," and listed the goals, which read as follows [original punctuation provided]: • To adjust Permanent Partial Impairment (PPI) rates for inflation • To adjust rates for funeral expenses and death benefits for inflation • To ensure that workers are made aware of the disparity in benefits for single and childless workers • to clarify the law relating to benefit payments for orphan children after age 19 MS. SORUM-BIRK proceeded to slide 3, "Permanent Partial Impairment (PPI) rates have not been adjusted for inflation since 2000," and reiterated that PPI is based on percentage of the whole body. She summarized the slide and explained that the method of calculating PPI was established in 1988 and has only been updated once since then in the year 2000. She shared that HB 30 adjusts the $177,000 PPI rate established in 2000 to $273,000 to account for inflation. 6:55:49 PM MS. SORUM-BIRK continued to slide 4, "'How much is a limb worth -ProPublica,'" which included a graphic from a report done by ProPublica showing the comparison of how much a limb is worth in Alaska compared to the national average based off PPI rates. She shared that the graphic is customizable and committee members can go to the website to see how Alaska compares to other states. MS. SORUM-BIRK moved on to slide 5, "The death benefit paid to non-child dependents has not been adjusted in over 50 years," and said that other than PPI rates, the bill would also update some death benefit rates. She summarized the slide, which read as follows [original punctuation provided]: • Under AS 23.20.215(a)(4) the death benefit paid to a dependent father, mother, grandchild, brother or sister is a maximum of only $20,000 • This amount was set in 1968 • HB 30 amends this statute to adjust for inflation and sets new amount at $150,000 MS. SORUM-BIRK advanced to slide 6, "Lump sum amounts for funeral expenses and one-time payments to widow or widower are updated," and explained that there are two more updated dollar amounts outlined in Section 4 of the bill, which are lump sum amounts for funeral expenses and one-time payments to a widow or widower of the deceased. She gave examples from the slide, which read as follows [original punctuation provided]: • Under AS 23.30.215(a)(1) the cap amount for funeral expenses is set at a maximum of $10,000 - HB 30 sets new amount at $12,000 • Under AS 23.30.215(a)(5) the lump sum amount given to a widow/widower (or child if no surviving spouse) expenses is set at $5,000 - HB 30 adjusts this amount to $8,000 • The current rates for both benefits were established in 2000. MS. SORUM-BIRK continued to slide 7, "Definition of 'child,'" and shared that a child is defined differently for workers' compensation purposes. She read the definition from the slide, which read as follows [original punctuation provided]: • AS 23.30.395(8) includes • "persons who are under 19" • "persons who, though 19 years of age or over, are wholly dependent upon the deceased employees and incapable of self-support by reason of mental or physical disability" • "persons of any age while they are attending the first four years of vocational school, trade school, or college" • "persons of any age while attending high school" • HB 30 creates a new subsection AS 23.30.215(j)that extends the payment for "dependent children" (whose single parent died at work) to age 23 across the board. 6:59:42 PM MS. SORUM-BIRK proceeded to slide 8, "The Elevator Paradigm," and explained that it shows how few benefits a single and childless worker would receive compared to their married counterpart with children. The slide read as follows [original punctuation provided]: What damages do they receive? Customer- • Economic damages • Non-economic damages • Pain and Suffering • Loss of Consortium • Punitive • Up to $1.5 million Single childless worker - • Funeral Expenses MS. SORUM-BIRK moved on to slide 9, "The parent or estate of a single worker with no dependents who dies on the job has no remedy," and shared that Section 1 of HB 30 addresses providing notice to employees about the available death benefits and how those benefits differ for single childless workers. She emphasized the importance of single childless workers being made aware of the difference in benefits. The slide read as follows [original punctuation provided]: • Under current law single workers without dependents are the only class of worker who receives only funeral expenses • Parents cannot collect worker's compensation • HB 30 does not add a new benefit for this class of workers like previous iterations of this legislation have • HB 30 adds a new section AS 23.10.435 to provide all employees with notice of a death benefits and to make them aware of the lack of benefits for single workers without dependents 7:01:51 PM REPRESENTATIVE MCCARTY asked what the increases in workers' compensation have been over the years. REPRESENTATIVE JOSEPHSON interjected that he believes workers' compensation has decreased, not increased. 7:02:43 PM MS. SORUM-BIRK responded that between 2004 and 2017 there was a 27 percent decline in the amount spent by businesses on workers' compensation related to total wages paid. Comparatively, indemnity benefits decreased from $0.65 to $0.38 per $100 spent on wages between 2004 and 2017. Overall, indemnity benefits shrunk by 40.8 percent during that time period. 7:03:51 PM CO-CHAIR FIELDS added that workers' compensation rates have decreased by more than 50 percent in the last four years, which has been driven by a decline in on-the-job injuries. He shared that Alaska is now tenth in the nation whereas a few years ago, Alaska was first. 7:04:20 PM REPRESENTATIVE KAUFMAN stated that he just performed an online search and shared that the search shows Alaska as having the highest workers' compensation rate. CO-CHAIR SPOHNHOLZ asked for his source. REPRESENTATIVE KAUFMAN said that the website he found, "howmuch.com, understanding money," used the workers' compensation information sourced from the National Academy of Social Insurance in 2017. 7:05:40 PM CO-CHAIR FIELDS shared that the number Representative Kaufman found was correct years ago but is not correct anymore. He said that he would be happy to follow up on this and get Representative Kaufman the correct figures. 7:05:58 PM REPRESENTATIVE JOSEPHSON explained that part of what Representative Kaufman may be referring to is the high cost of medical care. He said that HB 30 does not concern the cost of health care, it concerns situations of death. Some of the factors that contribute to the higher costs of workers' compensation in Alaska wouldn't apply in this situation, he explained. He added that this bill should cost the state some money since the purpose of it is to increase the amount of money paid to people who are permanently disabled. He continued with an example, sharing that if a person in Alaska lost an index finger while working, the person would only get about $5,000 in compensation. If an individual were to lose an arm in Nevada, that person would get $800,000, while in Alaska the benefit is just over $100,000. The median in the country for a lost arm is $170,000, he said. He reiterated that the intended purpose is to address permanent disability or death. 7:08:06 PM CO-CHAIR SOHNHOLZ thanked Representative Josephson for the important clarification. 7:08:36 PM REPRESENTATIVE NELSON asked what the impact to premiums would be for workers' compensation. MS. SORUM-BIRK responded that that information is included in the fiscal note from the Department of Labor & Workforce Development that is in the packets that members received. 7:09:34 PM CHARLES COLLINS, Director, Division of Workers' Compensation, shared that the National Council of Commercial Insurance (NCCI) - the actuarial for the State of Alaska - did a workup on HB 30 and found that rates would increase by 2.9 percent if the bill were implemented January 1, 2022. He noted that on January 1, 2021, insurance rates had been lowered for the eighth year in a row by 14 percent. 7:10:59 PM CO-CHAIR SPOHNHOLZ announced HB 30 was held over.