Legislature(2021 - 2022)ADAMS 519
02/02/2022 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB187 | |
| HB64 | |
| HB30 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 30 | TELECONFERENCED | |
| + | HB 64 | TELECONFERENCED | |
| + | HB 187 | TELECONFERENCED | |
| + | TELECONFERENCED |
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."
2:51:15 PM
Co-Chair Foster moved to the last bill on the agenda and
indicated it was the bills first hearing.
REPRESENTATIVE ANDY JOSEPHSON, SPONSOR, thanked the
committee for hearing the bill. He relayed the history of
the legislation. He first took up the permanent partial
impairment bill in 2014. The bill had a hearing in 2015 and
passed out of the House in 2018. It languished in the
Senate Finance Committee. In 2019, a unique death benefit
that 12 other states had was removed. The clean bill
passed in 2020. He noted that at least four or five members
of the current committee voted in favor of the bill. He
explained that a partial impairment was an injury that was
determined by a medical doctor to be permanent and partial
related to the fact that the person was still living. The
rating the state operated under the whole body rating
while some states measured the loss by body part. The rate
was calculated by the doctor determining the percent of the
damage and the percentage was multiplied by the whole body
number. The legislation was attempting to modify the whole
body rating by increasing it from the current rate of $177
thousand, which placed the state in the bottom 5 states
nationally. He reported that the rate had not been
increased in 22 years and indicated that the bill proposed
raising it to $273 thousand. He added that factoring in for
inflation the rate should be $286 thousand. He offered that
the bill updated all matters related to permanent
impairment. Representative Josephson continued that the
bill addressed increasing the rate for the death of a
family member with dependents. The current rate was
established in 1968. He characterized the provision as
anti- elitist. He delineated that currently, financial
support was typically cut off when a dependent of a sole
surviving parent turned 19, unless the child was attending
a university until the age of 23. The bill extended the
benefits to all dependents between the ages of 19 and 23.
Representative Josephson discussed workers compensation
premiums. He observed that there was a perception that
premiums were rising. However, premiums were not increasing
but actually decreasing particularly in the category of
indemnity. He specified that indemnity meant death or
impairment and asserted that the cost of indemnity had
decreased. He pointed out that the cost of indemnity was
14.5 percent of the entire cost of premiums. Within the
portion of indemnity (14.5 percent) there were large
decreases of about 40 percent. He explained that it was due
to improved workplace safety. He emphasized that the cost
of the bill to cover all workers in the state was
approximately $4.8 million, which may seem like a lot but
was divided by hundreds of thousands of workers. He
acknowledged that the bill would increase premiums by 2
percent, but premiums had dropped 14 percent over the last
several years. He surmised that the trend line on premiums
was still decreasing. He highlighted how poorly the state
treated its injured workers. A person who lost an arm
received $106 thousand in a PPI award. In the highest state
of Pennsylvania, the person received $389 thousand. The
th
state ranked 45 in the loss of an arm and an eye. In
Maryland, if a person lost an eye at work, they were paid
over $250,000 versus in Alaska where a person would be
compensated only $44,000. He contended that the state could
and must do better.
2:59:43 PM
Co-Chair Merrick asked how many people in Alaska received a
partial impairment every year. Representative Josephson
could not recall and deferred the answer to the Department
of Labor and Workforce Development (DLWD).
3:00:13 PM
Representative Edgmon thanked the sponsor for bringing the
bill forward and felt it was highly commendable. He
mentioned the impending federal infrastructure funding and
workforce that will be necessary for building roads and
working on infrastructure projects in light of Alaska's
extreme weather events. He noted someone from his hometown
being injured on the job related to an extreme weather
event. He asked for a better sense of who the bill
pertained to. Representative Josephson responded that it
applied to every worker who was an employee; blue collar
workers, white collar workers, and those not self-employed.
He shared from personal experience that he had purchased
workers compensation for a prior campaign manager and
added that it encompassed a broad pool of workers.
3:02:29 PM
ELISE SORUM-BURKE, STAFF, REPRESENTATIVE JOSEPHSON, added
that there was a separate category for commercial fishers,
who were not covered either.
3:02:52 PM
Representative Carpenter asked that when comparing the
state to national averages or other states for
compensation, if the total compensation and other
associated costs were factored in. He noted that the state
offered retraining which added costs. He asked how Alaska
compared to other states that did not have retraining
programs or had their own retraining process instead of a
lump sum payment. Representative Josephson answered that it
would be less generous than expected. He deferred the
answer to DOL for comment. He recalled that a person only
had the option of the reward or the training but not both.
He reminded the committee that there was no way to sue
except for third party liability. He exemplified that if
the rung of a ladder was defective, the injured party could
sue the ladder company. Mostly, workers compensation was
designed to avoid litigation, but the worker likely
received less. He thought a person would be awarded much
more in personal injury court if it was not a workplace
injury. He characterized workers compensation as part of a
grand bargain that moved the process along
expeditiously and was part of a give and take. An
employer paid for the injury without explanation because it
was a no fault strict liability, however, the injured
employee would not recover as much as possible.
Co-Chair Foster invited Mr. Collins to the table.
3:06:18 PM
CHARLES COLLINS, DIRECTOR, DIVISION OF WORKERS
COMPENSATION, DEPARTMENT OF LABOR AND WORKFORCE
DEVELOPMENT, responded that he could not recall the exact
number of claims involving PPI, but remembered that in 2020
the state paid out $7.3 million for PPI. He expounded that
many claims had a number of different indemnity portions;
an injured worker could elect to also take reemployment and
rehabilitation benefits depending on each individual plan.
Some claimants might take a lump sum of PPI benefits, and
some retrain and receive their benefit as a replacement
wage until it ran out. He commented that the benefits were
very complex and varied per individual case. He requested
that the second question be repeated.
3:08:11 PM
Representative Carpenter restated his question about the
compensation and comparing the total benefit, including
retraining to national averages - he asked if they were
comparing apples-to-apples. He would argue that Alaska
would be in a top tier of compensation if retraining costs
were included with the payout. Mr. Collins replied that all
workers compensation benefits were paid by the workers
employers or their carriers, which were self-insured
entities like the state of Alaska who paid the benefits
directly rather than through an insurance company. He
delineated that reemployment payments in Alaska through AS
23.30.041 were limited in scope and amount. He explained
that the injured state worker was evaluated and if found
eligible for reemployment benefits an education plan was
developed and the most the state paid was $13.3 thousand in
reemployment benefits. The caveat was that wage replacement
called 041K derived from AS 23.30.041 (k) paid a weekly
stipend while retraining. As for other jurisdictions,
outside of Alaska, he expounded that each jurisdiction had
its own set of laws governing worker's compensation and no
two states were the same. He noted that in the state of
Washington everything was done through the state; the
insurance policy was purchased through the state and ran
the retraining programs. In Alaska, workers compensation
was run through the carriers organization and the state
was removed from the process. He recounted that in 2020,
there was more than $7 million in replacement wages paid
out on 111 active plans and the plans dated back several
years through to the present. At any given time, people
were working through the system and would accept some of
the 041K replacement wage, which was the most expensive
portion of workers compensation. He furthered that
according to AS 24.30.041 a person could take a job
dislocation settlement. Even if an injured employee took
either of the aforementioned benefits, PPI payments were
typically paid directly to the injured employee.
3:12:21 PM
Representative Carpenter understood that the injured worker
received PPI compensation and retraining. He asked if he
had made an accurate statement. Mr. Collins thought
Representative Carpenter's comments were accurate. He
qualified that if someone elected retraining before they
can collect 041K they had to utilize their PPI. If the
injured person was in a retraining program, their PPI was
paid weekly while in the retraining program. It was
possible that if a person ran out of PPI while still
retraining, they could collect more 041K wage replacements.
He noted that the individuals plans had to be approved by
the employer as well as the department and the employee.
Representative Carpenter deduced that the issue was more
complex that what he had originally thought. He thought
that the complexity made it difficult to compare merely the
PPI payments to other states. He determined that it was
necessary to compare the entire package. He was hoping
someone could provide more information regarding the cost
issue.
3:14:52 PM
Representative LeBon observed that the purpose of the bill
was to bring the benefit up to a hold harmless level for
inflation. Representative Josephson responded in the
affirmative. He referenced the statements that premiums had
decreased and wondered whether the reason was that claims
were decreasing. Representative Josephson concurred that
indemnity claims had decreased and deferred further answer
to Mr. Collins.
Mr. Collins reported that for the past 9 years the state of
Alaska actuary National Council on Compensation Insurance
(NCCI) had recommended lowering the workers compensation
rates in Alaska. The reason pertained to 2 factors; Alaska
was a safer place to work and with the adoption of a fee
schedule based on relative values versus based on the prior
usual and customary costs. The medical portion also
decreased. The lowest NCCI rates were lowered roughly 13
percent.
Representative LeBon thought it was good news. He relayed
from personal experience that early in his employment his
employer offered accidental death and disability insurance
and the premiums were shared 50 percent and 50 percent
(50/50). He noted that most of the workers took advantage
of the supplemental program over and above workers
compensation. He commented that workers compensation was
likely not as robust as it should have been.
3:18:09 PM
Representative Edgmon asked Mr. Collins about his comment
made that Alaska was one of the safest states to work in.
He deemed that Alaska was not the safest place due to
weather and other conditions. Mr. Collins answered that he
might have misspoken. He stated that he said it was
currently safer to work in Alaska than 10 to 20 years
ago. He added that the data proved the statement. There had
been less claims every year since 2015 and he attributed it
to an overall safer workplace environment. Representative
Edgmon thought he might not have heard Mr. Collins
correctly.
Representative Wool referenced the $7 million paid out in
claims. He asked whether the amount was paid expressly for
PPI. He asked about added costs. Mr. Collins replied that
the $7.3 million paid was only for PPI in 2020. The total
indemnity payments in 2020 was $57.1 million, which
included total disability payments, PPI, and other
associated benefits.
3:21:10 PM
Representative Wool deduced that if the bill were adopted
it would compensate for inflation. He asked where the PPI
payments came from. Mr. Collins answered that the portion
of PPI addressed in HB 30 was only one component but would
likely increase the payout amount substantially. However,
the premiums would rise only by about 2.9 percent.
Representative Wool remained curious about the number of
incidents the $7 million represented. He queried whether
there was a formula that established the PPI payouts and
whether the bill proposed to retain the same formula. Mr.
Collins responded that there was a formula contained in the
sixth edition of the AMA Guide, [The American Medical
Association's Guides to the Evaluation of Permanent
Impairment, 6th Edition, 2021]. He indicated he was not
qualified to confer a rating. The process was done by a
doctor that was certified to provide a PPI rating. He
warned that the process was complicated. He used the index
finger as an example. He elaborated that could equate to 11
percent of the whole body base rating of $177 thousand
established in the year 2000.
3:24:27 PM
Representative Thompson opined that the reduction in on-
site injuries was attributed to big programs in Alaska
geared towards job safety. He mentioned that apprenticeship
programs included job safety training and most companies
had yearly safety training. He thought that Alaska had
changed its way of doing business to prevent job injuries
and was pleased.
3:25:15 PM
Representative Carpenter agreed with Representative
Thompson that the work culture had changed in Alaska. He
asked about workers compensation compared to what an
employer might offer for life and disability through
private insurers and what premiums they would pay compared
to paying for workers compensation benefits.
Representative Josephson answered that he did not have any
idea. Representative Carpenter commented that it was
valuable to the conversation to know if the industry had a
comparable or less expensive way to provide it. He thought
maybe the state needed to consider handling workers
compensation differently. He wondered if there was a
comparable alternative to workers compensation that would
decrease the cost to employers without duplicating efforts.
3:27:31 PM
Representative Josephson relayed that every state had
workers compensation and either offered it or allowed
workers to sue their employers. He reiterated that it was
part of the grand bargain originally established in the
late 1800s in Germany. He informed the committee that
worker's compensation was relatively inexpensive per
individual. He surmised that it was costly for a business
with scores of workers engaged in dangerous work. He
referenced Mr. Collins statements that premiums had
decreased.
3:28:20 PM
Ms. Sorum-Burke reminded the committee that worker's
compensation was required by law for every employer, and it
was a no-fault system. She elucidated that the reason for
Worker's Compensation had to do with employer liability and
whether the employee could sue the employer. She turned to
a presentation titled HB 30 (copy on file). She addressed
Slide 8 titled The Elevator Paradigm. The slide depicted
a customer and an employee in an elevator that fell. The
paradigm asks the question regarding what damages do each
receive. The example was a single childless worker who
would only receive funeral expenses. The slide contained
the following:
What damages do they receive?
Customer:
Economic Damages
Non-Economic Damages
Pain and suffering
Loss of Consortium
Punitive damages
Up to $1.5 million
Ms. Sorum-Burke maintained that workers compensation
existed to protect employers and provided some compensation
for employees. She noted that one state allowed workers
compensation as an option, which was Texas. She stated that
the employer was opening itself up to liability if they
chose not to opt for the program in Texas.
Representative Carpenter understood the participation
requirement. He felt that the state could do something
different than workers compensation. He recalled that he
was never offered disability insurance when he began
working. If the employer was offering disability, he
wondered whether it was cheaper via a private insurer than
paying benefits through workers compensation. He was not
suggesting that liability insurance should not be provided
he questioned whether workers compensation was the least
costly way and wanted to look at the big picture and not
just throw a bunch of money and increase payments.
3:31:53 PM
Representative Thompson shared that he was on the Worker's
Compensation Board from 1984 to 1994. He recalled that the
board discovered that many employers were not carrying
workers compensation. He asked if the state was still
monitoring employers to ensure that they were not cheating
the system and driving up the costs for employers who
carried it. Mr. Collins replied that the state had 5 full-
time inspectors and less than .01 percent of employers
failed to insure. He furthered that all the fines levied
against employers that failed to insure were placed in the
Benefits Guarantee Fund, which paid for employees that
worked for an uninsured employer. The state had done an
excellent job of making sure that employers were following
the law and took care of employees that were injured who
worked for an uncovered employer. Representative Thompson
was pleased to hear of the states diligence.
Co-Chair Merrick invited Mr. Collins to review the
published fiscal note from the Department of Labor and
Workforce Development for Workers Compensation (FN 5 (LFW)
that reported changes in revenues.
Mr. Collins reported that the fiscal note showed no cost to
the state. He elaborated that Workers' Compensation
insurance premiums were paid by insurers or by self-insured
employers and were paid to the Division of Workers'
Compensation and assessed at a statutory rate of 2.9
percent. The state would gain revenue due to higher sales
of premiums, which was reflected in the fiscal note.
Co-Chair Merrick moved to the published fiscal impact
fiscal note from the Department of Administration (DOA) for
Risk Management (FN4 (ADM)
3:34:52 PM
SCOTT JORDAN, DIRECTOR, DIVISION OF RISK MANAGEMENT,
DEPARTMENT OF ADMINISTRATION, reviewed the fiscal note. He
explained that the amount proposed currently under the
Alaska Worker's Compensation Act, AS 23.30.190 (a), the
whole body rating was $177,000. The bill increased the
rating by 54.24 percent to $273,000 based on the ten year
average (FY 2012- FY 2021) of whole body Permanent Partial
Impairment (PPI). The 54.24 percent would increase the
average annual payout by $423,254 thousand. Based on the
$423,254 thousand the division anticipated an additional
payout in second injury fund fees of 6 percent or $25,395
thousand totaling $449 thousand as noted in the fiscal
note.
Co-Chair Merrick turned to the final published zero fiscal
note, Various for All Branches.
3:36:41 PM
CAROLINE SCHULTZ, POLICY ANALYST, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR (via teleconference),
reported there was a zero fiscal note for the designation
Various that represented all branches of government. She
indicated that Risk Management estimated the legislation
would increase costs by $449 thousand annually, amounting
to a roughly 2 percent average increase in risk management
costs borne by paying all agencies. The state would not be
increasing the associated budgets by the amount.
Co-Chair Merrick thanked the presenters. She reviewed the
agenda for the following day.