Legislature(2003 - 2004)
2004-02-09 House Journal
Full Journal pdf2004-02-09 House Journal Page 2542 HB 450 HOUSE BILL NO. 450 by the House Rules Committee by request of the Governor, entitled: "An Act providing for a special deposit for workers' compensation insurers; relating to the board of governors of the Alaska Insurance Guaranty Association; relating to covered workers' compensation claims paid by the Alaska Insurance Guaranty Association; stating the intent of the legislature, and setting out limitations, concerning the interpretation, construction, and implementation of workers' compensation laws; relating to restructuring the Alaska workers' compensation system; eliminating the Alaska Workers' Compensation Board; establishing a division of workers' compensation within the 2004-02-09 House Journal Page 2543 Department of Labor and Workforce Development and assigning certain Alaska Workers' Compensation Board functions to the division and the Department of Labor and Workforce Development; establishing a Workers' Compensation Appeals Commission; assigning certain functions of the Alaska Workers' Compensation Board to the Workers' Compensation Appeals Commission; relating to agreements that discharge workers' compensation liability; providing for hearing officers in workers' compensation proceedings; relating to workers' compensation awards; 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; providing for administrative penalties for employers uninsured or without adequate security for workers' compensation; relating to assigned risk pools and insurers; and providing for an effective date." was read the first time and referred to the Labor & Commerce and Finance Committees. The following fiscal note(s) apply: 1. Zero, Dept. of Community & Economic Development 2. Zero, Dept. of Law 3. Fiscal, Dept. of Labor & Workforce Development The Governor's transmittal letter dated February 6, 2004, follows: "Dear Speaker Kott: Under the authority of article III, section 18, of the Alaska Constitution, I am transmitting a bill relating to the workers' compensation system. This bill relieves employers and employees of the "administrative burden" present in our workers' compensation system. The current accumulation of rules, procedures, and appeal processes increases costs for employers and insurers, delays resolution of claims for employees, and makes the Alaska workers' compensation 2004-02-09 House Journal Page 2544 insurance market difficult for existing insurers and unattractive to new insurers. A recent Alaska Supreme Court case illustrates the problem. It took 1,400 days from filing of the claim to a decision by the Alaska Supreme Court in Bradbury v. Chugach Electric Assn., No. S-10532 (Alaska 6/20/2003). This is far too long to wait for resolution of a claim. This bill reduces the administrative burden of the system by eliminating the present system of hearings and appeals. For years, there have been concerns that hearings before the Alaska Workers' Compensation Board (Board) are not accomplished quickly or consistently. The Legislature has been forced to take a number of steps, including: increasing the number of members of the Board; increasing the number of panels actually hearing cases (composed of one appointee representing labor, one appointee representing management, and a hearing officer); and increasing the number of hearing officers. The current size of the Board with 14 members and the commissioner of the Department of Labor and Workforce Development far outstrips the single three-member Board originally created by the Legislature and makes assembly as a body (for purposes of meetings and approving regulations) difficult. While I recognize and appreciate the dedication, public service, and hard work the Board members provide, many members lack even a general legal training and background, much less specialized knowledge of workers' compensation law. Similarly, over the years the number of Board hearing panels have steadily increased in order to partially address concerns about their availability for frequent hearings. The unwanted side effect is a lack of consistency and predictability of decisions. Currently, there are more than 300 combinations of panel members and hearing officers deciding claims. On appeal, any one of the numbers of superior court judges assigned to hear workers' compensation appeals would rule on the relevant panel's decision. The losing party may then appeal to the Alaska Supreme Court as a matter of right and no deference is given to the Superior Court's decision. These sources of variation in the interpretation of the Alaska Workers' Compensation Act have multiplied in the last years, and have led to inconsistent, unpredictable 2004-02-09 House Journal Page 2545 rulings. There is no doubt. Alaska needs a consistent and predictable system for resolving disputed workers' compensation claims. This bill replaces the old system with three new components, all of which will bring more predictability and consistency to the system: (1) a Workers' Compensation Appeals Commission (Commission); (2) experienced hearing officers; and (3) additional administrative authority and duties vested in the director of the division. In fact, the only change to benefits made in the entire bill is "capping" out-of-state claimants' benefits to the amount received by in-state claimants. Under current statutes, if a claimant resides out of state, the claimant's compensation rate would be adjusted upward or downward based on the cost of living where the claimant resides. The bill "caps" the cost- of-living adjustment for those claimants residing in a locality that has a higher cost of living than does Alaska. Under the bill, if a claimant resides in a higher cost-of-living locality, the claimant would receive the same benefits that the claimant would have received if the claimant resided in Alaska. Otherwise, no attempt is made to alter benefits available to injured workers or to disrupt the delivery of benefits. The Commission replaces the Superior Court at the appellate level. The Commission would be composed of three attorneys who are members in good standing of the Alaska Bar Association. These individuals would have significant experience in Alaska workers' compensation law and their sole job would be to decide workers' compensation claims. The Commission will produce decisions that will be legal precedent until and unless overturned on appeal by the Alaska Supreme Court. Initial hearings on disputed claims would be conducted by hearing officers. Hearing officers would be attorneys licensed to practice in Alaska with significant experience in workers' compensation law. These hearing officers would have the benefit of some minor procedural improvements designed to aid the parties in reaching a prompt adjudication of the claims. Costs currently associated with continuing to a hearing in cases that ought to be dismissed or summarily decided will be reduced. Consistency and predictability in the system will be improved. Costs and delays in resolving employees' claims are reduced without changing benefits available to injured workers. 2004-02-09 House Journal Page 2546 This bill also brings new duties and accountability to the administration of the system by the department. Currently, the director has little authority to act since all power rests in the Board. This bill would establish a Division of Workers' Compensation in the department. The director, (appointed by the commissioner) would be personally accountable for the performance of the division. The director would have expanded authority to administer the second injury fund (AS 23.30.040), obtain stop-work orders, investigate uninsured employers, seek civil penalties for an employer's failure to insure workers, propose regulations to the commissioner, intervene in cases and file appeals, supervise rehabilitation of injured workers, and administer the Alaska Workers' Compensation Act. The director's formal decisions may be appealed to the Commission. The bill also provides a powerful tool to further the department's current approach of "zero tolerance" for employers that fail to carry legally required workers' compensation liability insurance. Under this bill, the department gains authority to levy civil penalties against employers whose choice to operate without the required insurance coverage places their employee's financial and physical well-being at risk. They also gain an unfair competitive advantage over the employers who act responsibly by complying with the law and purchasing the necessary insurance. The bill would also revise AS 21, the insurance code, regarding how the state regulates the insurance industry in the provision of workers' compensation insurance. Under the bill, insurers that transact workers' compensation insurance in this state would be required to maintain in the state a special deposit of cash or securities for the protection of persons in this state covered under workers' compensation insurance. This revision would provide additional financial protection for Alaskan workers in the event that workers' compensation insurer becomes insolvent and unable to pay claims. The composition of the Board of Governors of the Alaska Insurance Guaranty Association would be modified under the bill to include representatives from management, labor, and insurance licensees. This change would expand the expertise of the Board of Governors to 2004-02-09 House Journal Page 2547 better address workers' compensation issues. The bill provides transition provisions to allow for the initial appointment of members to meet the new statutory standards. Finally, the bill would repeal AS 21.39.155(c), to ensure that the assigned risk pool for workers' compensation operates as a self-funded mechanism. Under existing law, the pool is not fully self-funded. This additional burden on insurance companies is a factor making the Alaska workers' compensation insurance market unattractive to insurers. Eliminating the cap on the assigned risk pool surcharge may improve the deposit of cash or securities for the protection of persons in this Alaska market for companies and ensure consumers have access to insurance coverage. This bill represents a major step forward to addressing the significant workers' compensation crisis in Alaska. The bill would rationalize the process for making workers' compensation decisions in this state. This should make Alaska more attractive for businesses to remain here or to relocate their operations to this state. I urge your prompt and favorable action on this measure. Sincerely yours, /s/ Frank H. Murkowski Governor"