Legislature(2005 - 2006)

2005-02-25 House Journal

Full Journal pdf

2005-02-25                     House Journal                      Page 0429
HB 180                                                                                            
HOUSE BILL NO. 180 by the House Rules Committee by request of                                       
the Governor, entitled:                                                                             
     "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; establishing a division of workers' compensation within the                             
     Department of Labor and Workforce Development, assigning                                       
     certain Alaska Workers' Compensation Board functions to the                                    
     division and the 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                               

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     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."                                                          
was read the first time and referred to the Labor & Commerce,                                       
Judiciary, and Finance Committees.                                                                  
The following fiscal note(s) apply:                                                                 
1.  Zero, Dept. of Commerce, Community, & Economic Development                                      
2.  Indeterminate, Dept. of Administration                                                          
3.  Fiscal, Dept. of Law                                                                            
4.  Fiscal, Dept. of Labor & Workforce Development                                                  
The Governor's transmittal letter dated February 24, 2005, follows:                                 
"Dear Speaker Harris:                                                                               
Under the authority of article III, section 18, of the Alaska                                       
Constitution, I am transmitting a bill related to the workers'                                      

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compensation system.  This bill proposes discrete improvements to the                               
current system.  The goal of these changes is to increase the efficiency                            
and flexibility of the current system, and significantly reduce some of                             
its costs, in order to ensure that benefits will continue to be available                           
in substantially the same form they are today without stifling                                      
employment opportunities.                                                                           
The Legislature has consistently striven to have our workers'                                       
compensation system quickly and efficiently deliver fair and                                        
predictable benefits to injured workers at a reasonable cost to their                               
employers.  Despite those efforts, the current system has not kept pace                             
with the pressures caused by a growing, ever-changing workforce and                                 
rising medical costs.  In response to complaints regarding delays in                                
resolution of claims and the increasing costs of maintaining the current                            
system, the enclosed bill proposes improvements to several areas.                                   
A significant change proposed in this bill is the creation of a workers'                            
compensation appeals commission.  Currently, appeals from Alaska                                    
Workers' Compensation Board decisions are heard on a rotating basis                                 
by individual superior court judges.  The bill proposes to have appeals                             
heard by a five-member commission.  This commission, like the board                                 
itself, would consist of both lay members representing workers and                                  
employers as well as a chair with legal training and workers'                                       
compensation experience.  Appeals would be heard by a panel both                                    
knowledgeable in workers' compensation matters and available to                                     
produce consistent, legally precedential decisions in an expeditious                                
The bill also places increased responsibility for oversight of the system                           
in the hands of the workers' compensation division.  The bill would                                 
increase the division's ability to investigate fraudulent claims, pursue                            
employers who fail to provide coverage for their employees, and                                     
oversee medical costs.  Under the current system the division must                                  
refer suspected fraudulent claims to other state agencies for                                       
investigation.  Under this bill, the division would be able to investigate                          
fraudulent claims on its own.  The bill would also allow the division to                            
investigate and quickly close down employers who attempt to operate                                 
without workers' compensation coverage.  The board is then                                          
empowered to assess fines for failing to insure and the bill creates a                              

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fund to receive those fines and use them to pay benefits to injured                                 
workers whose employers failed to insure.                                                           
In addition, the bill gives the division additional authority to address                            
medical costs that are now approaching 60 percent of every workers'                                 
compensation benefit dollar paid in Alaska.  Under this bill, the                                   
Commissioner of the Department of Labor and Workforce                                               
Development is authorized to empanel a medical services committee.                                  
The committee will review the medical benefit delivery system                                       
including current charges, as well as the causes for the sharp rise in                              
charges and possible solutions, and make recommendations for                                        
appropriate improvements.  The committee is charged with reporting                                  
its findings and recommendations by March 1, 2007; sufficient time                                  
for a thorough study of the costs and appropriateness of the delivery                               
To address the immediate impacts of the recent premium increases and                                
rising direct costs to self-insured businesses, the bill "rolls back"                               
maximum payments to those under the medical fee schedule in effect                                  
on December 15, 1999.  The bill also authorizes the division to                                     
develop a preferred drug list and establishes a statutory preference for                            
generic drugs unless a worker's physician specifies a name brand drug                               
for medical reasons.                                                                                
The division is assisted in this endeavor by input from employers,                                  
insurers, providers, and the use of national, peer-reviewed medical                                 
treatment guidelines.  Under the current bill, employers, insurers, and                             
providers may agree to charges for services in advance.  Workers                                    
would be under no obligation to select a physician from this preferred                              
provider list but the rates for these providers' services would be                                  
established by contract with the insurer or employer.                                               
The bill also provides the division with guidance in overseeing the                                 
efficacy of the medical benefits system.  The bill would adopt the                                  
American College of Occupational and Environmental Medicine's                                       
Occupational Medicine Practice Guidelines as a benchmark for                                      
medical treatment.  The Guidelines provide for quality care while                                 
promoting some standardization of medical services.  However, if a                                  
condition is not addressed by the Guidelines or the worker's physician                            

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recommends alternative treatment, the physician has the opportunity to                              
provide medical justification for treatment outside the Guidelines.                               
In addition, the bill provides workers and employers greater flexibility                            
over certain portions of the worker's claim.  Currently, parties may not                            
settle any portion of a worker's claim without board approval.  The bill                            
would allow parties represented by legal counsel to more quickly                                    
resolve a worker's claim by agreement without board approval, thereby                               
freeing the board to focus on settlements needing more scrutiny such                                
as those involving minors or workers unrepresented by counsel.  It                                  
would also allow the parties to stipulate to a worker's eligibility for                             
reemployment benefits without the expense and delay of a                                            
reemployment eligibility evaluation while also making it easier to                                  
exchange unwanted reemployment benefits for a limited cash benefit.                                 
This greater flexibility will make the reemployment process more                                    
efficient and satisfactory to both parties.                                                         
The bill further enhances the efficiency of the current system by                                   
expanding workers' access to legal counsel and including a limited                                  
release of medical information on the report of injury form.  The bill                              
allows the division to contract with non-profit organizations to provide                            
legal services to injured workers unable to obtain private legal                                    
counsel.  It also provides a limited medical release for medical records                            
of treatment for the reported injury on the initial report of injury form.                          
This second change is aimed at reducing unnecessary delays in                                       
payment resulting from a lack of supporting medical documentation                                   
for an injured worker's claim.                                                                      
The bill also reduces insurers' costs by phasing out contributions to the                           
Second Injury Fund.  That Fund represents a limited mechanism for                                   
reducing impediments to the hire of workers with certain listed                                     
physical limitations.  That mechanism has become outmoded due to                                    
developments in contemporary employment standards including the                                     
Americans with Disabilities Act.  The Second Injury Fund will not                                   
accept new claims and will be phased out as currently accepted claims                               
are paid.                                                                                           
The bill would increase the coordination of benefits between the                                    
workers' compensation system and other disability systems.  This                                    
would minimize the instances where double compensation results in a                                 

2005-02-25                     House Journal                      Page 0434
worker receiving combined disability benefits that exceed their take                                
home pay.  Finally, the bill would also cap the compensation rates of                               
workers residing outside the State of Alaska to bring them in line with                             
that paid to Alaska resident workers.                                                               
This bill represents a major step in bringing the existing system up to                             
date with the current State of Alaska's work force.  These changes to                               
specific parts of the existing law are vital to the continuing survival of                          
the workers' compensation system and the availability of a full range                               
of benefits for injured workers in the future.                                                      
I urge your prompt and favorable action on this matter.                                             
                                Sincerely yours,                                                    
                                Frank H. Murkowski