Legislature(2017 - 2018)GRUENBERG 120
04/05/2017 01:00 PM House JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| HB79 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 79 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 79-OMNIBUS WORKERS' COMPENSATION
2:04:06 PM
CHAIR CLAMAN announced that the only order of business would be
HOUSE BILL NO. 79, "An Act relating to workers' compensation;
repealing the second injury fund upon satisfaction of claims;
relating to service fees and civil penalties for the workers'
safety programs and the workers' compensation program; relating
to the liability of specified officers and members of specified
business entities for payment of workers' compensation benefits
and civil penalties; relating to civil penalties for
underinsuring or failing to insure or provide security for
workers' compensation liability; relating to preauthorization
and timely payment for medical treatment and services provided
to injured employees; relating to incorporation of reference
materials in workers' compensation regulations; relating to
proceedings before the Workers' Compensation Board; providing
for methods of payment for workers' compensation benefits;
relating to the workers' compensation benefits guaranty fund
authority to claim a lien; excluding independent contractors
from workers' compensation coverage; establishing the
circumstances under which certain nonemployee executive
corporate officers and members of limited liability companies
may obtain workers' compensation coverage; relating to the
duties of injured employees to report income or work; relating
to misclassification of employees and deceptive leasing;
defining 'employee'; relating to the Workers' Compensation
Board's approval of attorney fees in a settlement agreement; and
providing for an effective date."
CHAIR CLAMAN opened public testimony on HB 79.
2:05:31 PM
STEVEN CONSTANTINO, Attorney, advised he has been in the private
practice of law representing injured workers for the last 20
years. He then commended Governor Bill Walker, Commissioner
Heidi Drygas, and Director Marie Marx for their efforts in
modernizing and streamlining the Workers' Compensation Act in
its much needed reform. There are several good parts of this
bill, he commented, and Sec. 14 addresses the problem of
employees being left in limbo when an employer does not
authorize medical care or controvert the care. The Supreme
Court's decision in M-K Rivers v. Harris, 325 P.3d 510 (2014)
(cited in Governor Walker's 01/24/17 transmittal letter) and a
later decision in Bockus v. First Student Services, 384 P.3d 801
(Alaska 2016), suggest that, in some circumstances it may be an
insurer's duty to authorize uncontroverted care, but it was not
a specific duty and had no time limits. This bill clarifies the
law by providing that when a medical provider seeks
authorization, the insurer has 60 days to either authorize or
controvert the medical care, and failure to authorize would be a
controversion.
2:06:52 PM
MR. CONSTANTINO noted concern that in order to trigger the 60
days, the provider must submit a written statement or estimate
of cost within the Workers' Compensation Board's maximum pay
schedule. He represented that when looking at his medical bills
from providers and what the insurance companies pay, medical
providers often have retail charges well in excess of what his
insurer pays and what would be payable under the Workers'
Compensation Act. Most providers know they cannot collect more
fees than is payable under the Workers' Compensation Act;
therefore, the provision of the estimate of fees is unnecessary,
he pointed out.
MR. CONSTANTINO referred to Sec. 20 [AS 23.30.155(b), page 10,
lines 12-19] which read as follows:
(b) The first installment of compensation,
excluding medical benefits, shall be paid [BECOMES
DUE] on or before the 21st [14TH] day after the
employer has knowledge of the injury or death. [ON
THIS DATE ALL COMPENSATION THEN DUE SHALL BE PAID.]
Subsequent compensation, excluding medical benefits,
shall be paid in installments, every 21 [14] days,
except where the board determines that payment in
installments should be made monthly or at some other
period. Medical benefits shall be paid in accordance
with AS 23.30.095 and 23.30.097.
2:08:51 PM
MR. CONSTANTINO noted that HB 79 changes the compensation rate
payment cycle from 14 days to 21 days, and that he heard the
administration's reasoning. However, he pointed out, this
presents a significant problem to injured workers as most people
live paycheck-to-paycheck. In the event a person is on workers'
compensation, he advised, the person does not receive a full
paycheck, and in fact, receives 20 percent less than their
spendable weekly wage at a minimum, a high wage earner can
receive less than one-half of their spendable weekly wage.
People have bills to pay and in the event insurers have a 21 day
time limit, they are certain to delay until the 21st day, he
remarked.
MR. CONSTANTINO expressed that he has strong feelings about
Secs. 31, 32, and 33, [pages 18-19] in making it a criminal
fraud to fail to report a material fact even though a material
fact changes with whatever benefits are at stake. He related
that making it a criminal act to fail to report a material fact
is void for vagueness and is unconstitutional.
2:09:14 PM
MR. CONSTANTINO responded to Representative Reinbold that he had
referred to the fraud sections, Secs. 31, 32, and 33, which
makes it both a crime and a civil action to knowingly fail to
report a material fact. He then referred to Sec. 33, and
advised that it defines some material facts as collecting
workers' compensation and working "that's obvious," but it also
read that the collection of disability benefits while working is
a material fact. Disability benefits, he opined, alludes to
social security for which insurers have an offset, but it also
could include private disability insurance which is not subject
to any offset. Finally, he explained, employment is defined as
including employment for which there is no pay, so in other
words, he questioned whether, in the event a minister noticed
someone was out-of-work and asked the person to teach Sunday
school, would the person have to report that fact, who do they
report it to, and when do they report.
2:11:01 PM
MR. CONSTANTINO, in response to Representative Reinbold's
request, advised he was in the process of putting his remarks in
writing and would forward it to the committee.
2:11:22 PM
CHAIR CLAMAN advised that his office would distribute the 4/3/17
letter from Joseph Kalamarides and 3/31/17 letter from Michael
Jensen concerning these topics, specifically Secs. 31, 32, and
33. He advised that the two letters were written by two
workers' compensation attorneys who work for claimants, and
addressed the issues Mr. Constantino raised.
2:13:06 PM
AVES THOMPSON, Executive Director, Alaska Trucking Association,
read his testimony into the record as follows:
Mr. Chairman and members of the committee, I'm Aves
Thompson, Executive Director of the Alaska Trucking
Association. The Alaska Trucking Association is a
statewide organization representing the interests of
our nearly 200 member companies from Barrow to
Ketchikan.
I testified before this committee on March 29,
generally in support of this bill; however, with some
concerns about specific provisions of the paragraph
dealing with definitions of independent contractors,
or as we call them in the trucking business,
owner/operators. We've worked with the Department of
Labor & Workforce Development to resolve these issues.
In meetings with Commissioner Drygas and Director Marx
we came to agreement with two minor changes in CSHB
79, specifically Sec. 28, [AS 23.30230(a)(11)(H)(ii),
page 17, lines 1-3] dealing with business location on
page [17] on line 1. We have agreed to add a phrase
"or a business mailing address" after the word
"location". The new language will read: "the person
maintains a business location or a business mailing
address separate from the location of the individual
for whom, or the entity for which, the services are
performed.
2:14:31 PM
In this section, business location or business mailing
address is given wide latitude to thought -- to define
a location or office. Long term, the public cannot
rely on the assurance of the DLWD [Department of Labor
& Workforce Development] personnel that this will be
broadly interpreted. Small and mobile contractors
need certainty that they will not be deemed
misclassified or put out of business simply because
their work does not require, or is too small to
support a separate physical office or location. Thus,
the use of either location or mailing address.
Sec. 28, [AS 23.30230(a)(11)(H)(iii), page 17, lines
4-6] dealing with advertising or marketing, starting
on page [17] line 4, we agreed to add the phrase "any
kind of" after the word "in" on line 4. The new
language will read: "the person engages in any kind of
business advertising, solicitation, or other marketing
efforts reasonably calculated to obtain new contracts
to provide similar services." The intent is that this
paragraph be interpreted in its broadest sense. In
many situations advertising may include many different
forms of advertising or marketing. Some examples
might be word of mouth, in person meetings, or other
direct communication with potential customers,
business card exchange, social media, posting of
flyers, and solicitation letters. Thus, the phrase
"any kind of".
We support this bill, we thank Commissioner Drygas and
Director Marx for their willingness to work with us to
find a workable solution. It is our intent to develop
a set of definitions that, to the largest extent
possible in the future, can be used within the three
divisions within the department, workers'
compensation, wage and hour, and unemployment
insurance. And, I'll be happy to try to answer any
questions, Mr. Chairman.
CHAIR CLAMAN noted that his office worked with the department to
prepare Amendment 1, addressing those issues.
2:17:12 PM
DON ETHRIDGE, American Federation of Labor and Congress of
Industrial Organizations (AFL-CIO), advised he is testifying on
behalf of the American Federation of Labor and Congress of
Industrial Organizations (AFL-CIO) Alaska, and it fully supports
this legislation. An important aspect of the bill to the AFL-
CIO Alaska is [Sec. 28, AS 23.30.230(a)(11), beginning page 15]
the independent contractor definition because for over 20 years,
in this building, it fought to come up with a longstanding
definition of independent contractor that could be a true test,
rather than the 20 point test. He related that the AFL-CIO
believes this bill accomplishes a well-defined definition, and
it is fully supportive of Sec. 28. He related there has been a
problem for years wherein someone was injured, had been
classified as an independent contractor, and yet it was later
determined they were an employee and fell under workers'
compensation. Many unscrupulous people try to get by with
[classifying a worker as an independent contractor] because they
can save money and bid lower jobs. However, he pointed out,
when a worker is injured [and the worker is actually an
employee] the employer can lose their business in a lawsuit, and
their insurance costs will skyrocket. Not only is the employer
responsible for the cost of the insurance, but there are also
penalties, he advised.
2:19:17 PM
TINA KING, Alpine Surgery Center, advised that she has been
involved in billing, coding, and the management of surgery
centers for 25 plus years. She then referred to [Sec. 15. AS
23.30.098(a)(15-16), page 9, lines 13-16], which read as
follows:
(15) Hospital Outpatient Prospective Payment
System, produced by the federal Centers for Medicare
and Medicaid Services; or
(16) Ambulatory Surgical Center Payment
System, produced by the federal Centers for Medicare
and Medicaid Services.
MS. KING requested that lines 13-16 be removed from HB 79. She
then explained that it becomes confusing when attempting to
apply a payment system designed for folks over the age of 65
years, to a younger population. The payment system (technical
difficulties) there is some intention to co-mingle those two
systems which would make things far more confusing for, not only
the providers, but payers in the state to interpret.
2:21:03 PM
ERNIE EADS advised that he submitted written comments to the
committee, and that he supports HB 79 as "it is one of those
things that does get done"
REPRESENTATIVE KREISS-TOMKINS asked Mr. Eads to explain his
support of the legislation.
MR. EADS responded that "I've been beat to death and back,
actually right on my last leg as far as wanting to stay in
business," and it had been almost eight years since he bought a
timber (indisc.). Although, he explained, he's been a high
bidder and has bid on many timber sales, but he is not a
competitive bidder due to his higher wages and higher costs.
This bill appears to give workers' compensation some teeth, he
described, and "I'm hoping that they can get funded to do their
job."
2:22:28 PM
ELLIOTT DENNIS, Attorney, advised he has practiced workers'
compensation law and personal injury law for over 40 years. He
related that it could not be emphasized enough that delay is the
enemy of an injured worker because an injured worker is no
longer earning money, they are in pain, not able to pay their
bills, not able to take care of life, and they are scared.
There are many good things in this bill from the standpoint of
clarification but, he stressed, anything adding more time to the
process and causing a delay to an injured worker receiving
compensation is not appropriate. He referred to Mr.
Constantino's testimony regarding the change from 14 to 21 days,
and noted it is harmful to real life people and their families
and that it does not appear to be necessary. He stressed that
with respect to Sec. 14, [AS 23.30.097(d)] allowing an employer
or insurer 60 days to either authorize or controvert a procedure
is far too much time. For example, after an injured worker is
referred to a specialist by their treating physician, it can
take over six to eight weeks to get into see the specialist who
then determines whether the injured worker requires surgery. In
the event the specialist determines the person does need
surgery, the practitioner then makes a statement to the insurer,
and if the insurer had 60 more days that would be "120 days
before the procedure was just approved" and that's not even
getting into the surgery schedule, he pointed out. The time
period should be trimmed down as there is not a real reason for
it, he stressed, other than convenience toward the insurers
while being harmful to injured workers.
2:25:59 PM
CHAIR CLAMAN asked whether he typically represents the employer
or the employee when involved in workers' compensation cases.
MR. DENNIS answered that, typically these days, he represents
injured workers. For many years he practiced insurance defense
law representing insurance companies in tort cases, and for
several years has practiced some defense work for employers, so
he has seen this issue from both sides of the equation, he
remarked.
2:26:57 PM
REPRESENTATIVE KREISS-TOMKINS referred to [Sec. 15, AS
23.30.098] and asked his perspective as to the inclusion of the
various medical entities' documents and the potential to effect
medical reimbursement rates.
MR. DENNIS replied that he does not know enough about that
aspect to offer any guidance.
REPRESENTATIVE LEDOUX commented that she was opposing counsel to
Mr. Dennis in a case about 35 years ago, and said hello.
MR. DENNIS responded that he still recalls sitting in
Representative LeDoux's office in Kodiak and opined that he
represented the defense at that time.
2:28:27 PM
COLBY SMITH, Attorney, Griffin & Smith, advised he is with the
law firm of Griffin & Smith, is not testifying on behalf of any
of his clients, and that for the last 15 years he has
exclusively represented employers with workers' compensation
issues. He described the bill as courageous and commended
everyone's efforts with so much being in this bill. He referred
to Sec. 17 [AS 23.30.110(c), page 9, lines 25-28] and noted it
changes the current statutory allowance for non-attorneys to
handle workers' compensation issues. Speaking from his
perspective, he has seen non-attorneys put injured workers in
the position of no remedy because a non-attorney missed a
statutory deadline, for example, they have no recourse to handle
that issue, or are given bad advice.
2:29:48 PM
MR. SMITH pointed to an unintended consequence of this bill as
currently written, [Sec. 17. AS 23.30.110(d), page 9, lines 26-
28] and suggested an amendment that would read as follows:
(d) At the hearing, each party may present
evidence with respect to the claim and may be self-
represented, or supervised by an attorney license to
practice law in this state,
MR. SMITH explained that the suggested amendment would
essentially allow a paralegal to attend various proceedings,
which they do currently, and allows that paralegals would not be
practicing the unauthorized practice of law, and this provision
is still effectuating and accomplishing the bill's intended
goal. He then referred to Sec. 31, [AS 23.30.250(b)], and the
previously testified concerns, and suggested an amendment, and
then said, "a person ... if an amendment says an employee in
dealing with the fraud aspect of this, I think it will solve a
large number of the concerns that were coming in." Basically,
he noted, since 2010 and once again in 2013 there were two
Alaska Supreme Court cases where the issue of fraud made its way
all the way to the Supreme Court. In 2010, Shehata v. Salvation
Army, 225 P.3d 1106 (Alaska 2010), dealt with an injured worker
being paid by the employer, who constantly called the adjuster
advising he could not work because he was completely disabled
and he needed his checks. Surveillance was performed and the
person was filmed making a phone call to the adjuster and then
walked into their place of employment. The employer pursued the
former statute of fraud because the person collected time loss
benefits and was working.
CHAIR CLAMAN advised Mr. Smith to please start wrapping up his
testimony, and noted there is an amendment dealing with that
topic and the Shehata case is on the list for discussion.
MR. SMITH noted that he knows Shehata well because he
represented the Salvation Army. Essentially, he advised, it was
determined that it was not fraud up until the telephone call, so
even though he worked and received workers' compensation
benefits, no fraud had been committed. The other case is
Cummings v. ASRC, 295 P.3d 916 (Alaska 2013), which was a
similar case where someone was working and the person said they
were volunteering even though they were signing checks saying
they were not accepting any income. He opined that the attempt
of this statute is to broaden the fraud statute to enclose that
because in both cases the Supreme Court indicated that unless it
was legislatively changed, these actions would not be considered
fraud.
2:33:38 PM
BRONSON FRYE, Painters Union, advised he is a representative of
the Painters Union, and a lifelong Alaskan and painter by trade.
On behalf of the International Union of Painters and Allied
Trades endorsed HB 79, due specifically to the definition of
independent sub-contractor and misclassification. He described
it as relevant in the Alaska construction industry because a
business model had taken root whereby certain unscrupulous
construction employers required, as a condition of employment,
that their workers obtain business licenses and perform as "so
called independent sub-contractors or owner/operators."
Oftentimes up to 13 individual so called independent contractors
perform one task, such as drywall finishing on one building on
one job, he explained. This is such a detriment to the
construction industry, he described, due to the bidding process
employers use to be awarded contracts. When a construction
contractor sits down to bid a job they calculate the cost of
materials, overhead, the time it takes to look at prints, work
up the numbers, and process the percentage they put into their
pockets at the end, which are all fixed costs that are about the
same for every employer, he explained. The labor costs are the
only real variable in the equation and the person with low labor
costs oftentimes has the low bid and is awarded the job. In the
event an employer chooses to misclassify their workers as
independent sub-contractors rather than employees, they are no
longer required to pay workers' compensation premiums or
associated payroll taxes. Construction work is inherently
dangerous and workers' compensation is expensive and up to 30
percent of labor costs can be cut by simply miss-classifying
employees as independent contractors, thereby, giving the
employer a substantial advantage over the competition. The
reality is a fairness in contracting issue because honest
employers are forced to either adopt this unscrupulous business
model themselves, or simply be forced out of business
completely. He expressed that employers who lawfully profit by
classifying their workers as employees cannot get their
contracts for work through the construction bidding process
because they are competing against dishonest employers who game
the system by misclassifying their workers in order to cut labor
costs. He stressed that HB 79 will rectify this problem by
creating a clear definition of an independent contractor so
there is no ambiguity in the law and everyone bidding the
project will be doing so in a fair and equitable manner.
2:37:23 PM
CHRIS NETTLES, President, GeoTek Alaska, advised he is
testifying on behalf of the National Federation of Independent
Businesses (NFIB) and as president of his company, GeoTek
Alaska. He explained that his company mostly engages in
drilling for environmental geotechnical projects statewide, and
has also worked for the State of Alaska. On the basis of
geophysical consulting, he referred to [Sec. 28. AS
23.30.230(a)(11), beginning page 15, beginning line 29], the
definition between a contractor and an employee, and offered
concern about unintended consequences because these are "pretty
specific definitions." The NFIB could "probably live with
this," he opined, if subparagraph (H) was removed, having to do
with setting up a business and its due diligence because it does
not necessarily define whether a person is an employee or an
[independent] contractor. Down the road, he speculated, a
regulator could get "pretty tough" with someone in the
consulting business who doesn't have their own tools and such,
and commented that these definitions appear to be written toward
the construction business to specifically define employee from
an [independent] contractor, as well as the business of real
estate. The real estate business located in [Sec. 28. AS
23.30.230(a)(10), page 15, lines 23-28] receives an exclusion
from this and a realtor is automatically defined as an
independent contractor. In the event realtors can meet all of
the definitions of paragraph (11), he asked why realtors need an
exclusion. Also, he opined, that when making these specifics
for the construction industry, there are problems with the
language on the consulting side. He then provided brief
background information regarding a snowcap skiing business he
owned in Hatcher Pass, and expressed that he is not in favor of
the bill as currently written, and noted that compromises can be
reached.
2:41:31 PM
KEVIN BARRY, Administrator/CEO, Alaska Surgery Center, Alaska
Spine Center, advised that adopting the federal guidelines for
Medicare and applying them to medical services for injured
workers will create confusion for both the medical providers and
insurers as Medicare patients and injured workers are two
different and distinct types of patients. The billing and
coding procedures within the federal reference guidelines
conflict with commercial insurance processes for workers'
compensation. As a medical practitioner, he offered concern
about the future ability of injured workers to receive the care
they need if these federal reference guidelines are adopted into
law without a more meaningful opportunity to discuss the impacts
with a both a legislator and the administration. He asked that
the committee remove the two medical reference guides for
Hospital Outpatient Prospective Payment System (OPPS) and
Ambulatory Surgery Center Payment System from HB 79. He noted
his understanding that Representative Kopp has an amendment
regarding this issue and asked the committee to support the
amendment.
2:43:11 PM
CHAIR CLAMAN listed the people available to answer questions.
CHAIR CLAMAN closed public testimony on HB 79, after
ascertaining no one further wished to testify.
2:44:11 PM
REPRESENTATIVE FANSLER moved to adopt Amendment 1, labeled 30-
GH1789\O.4, which read as follows:
Page 17, line 1, following "location":
Insert ", or a business mailing address,"
Page 17, line 4, following "in":
Insert "any kind of"
REPRESENTATIVE KREISS-TOMKINS objected for purposes of
discussion.
2:44:57 PM
MARIE MARX, Director, Division of Workers' Compensation,
Department of Labor & Workforce Development (DLWD), in
addressing concerns from the Alaska Trucking Association,
explained that Amendment 1 clarifies that the business location
would include a business mailing address to support the evidence
of a separate business location, and clarifies the advertising
requirement provision that it is any type of advertising within
[Sec. 28. AS 23.30.230(a)(11)(H)(iii)]. She referred to her
past testimony and said there was concern that the provision may
be interpreted narrowly, and Amendment 1 confirms that the
advertising prong is interpreted broadly.
2:46:11 PM
REPRESENTATIVE LEDOUX asked whether that would include someone
orally holding themselves out as someone who does something,
such as at a rotary meeting.
MS. MARX responded that "any kind of" is fairly broad and the
Alaska Workers' Compensation Board, the entity tasked with
weighing and evaluating facts, would look at all of the
evidence. Evidence of oral comments is something the board
would review to determine whether it was sufficient, it's up to
the board to determine so she was hesitant to answer. Although,
she said the Alaska Workers' Compensation Board can consider
hearsay if it is collaborated by other evidence, and that type
of evidence is something the board would review and interpret
when looking at any type of advertising.
2:47:19 PM
REPRESENTATIVE KREISS-TOMKINS withdrew his objection to
Amendment 1.
2:47:25 PM
REPRESENTATIVE EASTMAN objected.
CHAIR CLAMAN advised Representative Eastman that upcoming
Amendment 5, offered by Representative Reinbold would actually
remove these subparagraphs and in the event Amendment 5 was
adopted, this would become a non-issue.
REPRESENTATIVE EASTMAN argued that this does not resolve his
concern as the committee is creating broad definitions to offset
the fact that it is adding to laws and regulations, and making
previously legal issues illegal.
2:48:23 PM
A roll call vote was taken. Representatives Kopp, Kreiss-
Tomkins, LeDoux, Fansler, Claman voted in favor of the adoption
of Amendment 1. Representative Eastman voted against it.
Therefore, Amendment 1 was adopted by a vote of 5-1.
2:49:00 PM
REPRESENTATIVE LEDOUX moved to adopt Amendment 2, labeled 30-
GH1789\O.2, which read as follows:
Page 10, line 14:
Delete "21st [14TH]"
Insert "14th"
Page 10, line 17:
Delete "21 [14]"
Insert "14"
Page 10, line 18, following "period.":
Insert "If an installment of compensation due
under this subsection is not paid within 14 days, a
grace period will not be allowed and an additional
amount will become due under (e) of this section."
REPRESENTATIVE FANSLER objected for purposes of discussion.
2:49:10 PM
REPRESENTATIVE LEDOUX explained that Amendment 2 eliminates the
grace period for insurers, discussed at the 3/31/17 hearing,
which the Division of Workers' Compensation has given with
respect to workers' compensation payments that are supposed to
be paid within 14 days. The grace period allows the insurer to
make payments to the injured worker within 21 days, and she
opined that the division was trying to put into law the fact
that insurers actually pay within 21 days, including the grace
period. She explained that Amendment 2 requires a hard 14 days
for workers' compensation payment and if the insurer doesn't pay
within 14 days, the penalties go into play.
2:50:24 PM
MS. MARX referred to Amendment 2, and explained that it was
changed from 14 days, with a 7 day grace period, to 21 days to
"call a spade a spade." For efficiency purposes, the division
thought to just call it 21 days, and it did not intend to
shorten that timeframe from 21 days to 14 days. Therefore, she
related, the department is neutral on that issue.
2:51:28 PM
REPRESENTATIVE EASTMAN asked whether Amendment 2 would install a
penalty for compensation determined to be eligible
retroactively. He clarified his question and asked that if
there was a determination that hadn't yet been made on whether
or not compensation was appropriate, and [then later] upon that
eligibility determination whether penalties would be applied to
that compensation.
MS. MARX said she was unclear what Representative Eastman was
asking, and explained that Amendment 2 changes an installment of
compensation due, meaning time lost wages benefits. Currently,
an employer has a duty to pay or controvert within the
timeframes provided by statute, and in the event they do not
perform one of those two requirements, a penalty is due
regardless of whether, ultimately, they are responsible for that
care. The purpose, she explained, is that there is some
certainty as to whether the medical care will be paid.
Although, if the employer denies that coverage within the
timeframe and has a basis to deny the coverage, no penalty is
due. She explained that it is when no action was taken that a
penalty would be due.
2:53:05 PM
REPRESENTATIVE FANSLER withdrew his objection to Amendment 2,
there being no objection, Amendment 2 was adopted.
2:53:21 PM
REPRESENTATIVE KOPP moved to adopt Amendment 3, labeled 30-
GH1789\O.7, which read as follows:
Page 9, line 10, following "Services;":
Insert "or"
Page 9, lines 12 - 16:
Delete ";
(15) Hospital Outpatient Prospective
Payment System, produced by the federal Centers for
Medicare and Medicaid Services; or
(16) Ambulatory Surgical Center Payment
System, produced by the federal Centers for Medicare
and Medicaid Services"
REPRESENTATIVE FANSLER objected for purposes of discussion.
2:53:25 PM
REPRESENTATIVE KOPP related that the committee received
approximately 15 letters from ambulatory surgical centers and
independent practitioners that may or may not perform surgery,
voicing concerns. The first concern was that the state had
recently adopted new medical reimbursement regulations that they
were just beginning to understand and implement. This
legislation adopts federal reference guides for Medicare and
applies them to medical services for injured workers, which
creates confusion in the law for both medical providers and
insurers because they are two distinct types of patients, one
being the elderly and the infirmed, and the other injured
workers on the job. It does conflict with commercial insurance
regulations currently applicable, he related. Another concern
was that these two standards currently in the law, Hospital
Outpatient Prospective Payment System and Ambulatory Surgical
Center Payment System, reimburse at significantly different
rates. They are based on Centers for Medicare and Medicaid
Services, and the rates are biased toward larger payments to
hospitals, and a reduced payment for the surgical centers. He
advised that surgical centers do see Medicare patients but
almost as "mission work, because they are already getting their
reduced rate." Adopting this standard will further decrease
incentive and a center to see Medicare patients, which includes
access to the care that Medicare patient's need, which currently
largely entails choosing between large hospitals rather than the
further option of outpatient medical surgical centers. He
related that the letters indicate that if the legislature's goal
is cost containment of health care costs, then they asked for
time to engage the legislature and the administration on what it
means to be reimbursed under these two different rates.
Removing these references from the bill would promote a better
health care policy, he explained, allow access to care
facilities, and an opportunity to see how the current medical
regulations impact its ability to deliver care. He did speak
with the governor's administration about this issue and it is
supportive of Amendment 3, he advised.
2:56:32 PM
REPRESENTATIVE KREISS-TOMKINS referred to the list of medical
publications the department can reference in amending
regulations, and asked the implications of new publications
being added to this list.
MS. MARX replied that the removal of the entities listed in
Amendment 3, are not critical because all of the substantive
decisions regarding what reference materials to incorporate are,
by statute, made through the Medical Service Review Committee
(MSRC) and the Workers' Compensation Board through regulation.
The list of reference materials is procedural to advise that
future amended versions of the reference material already being
used can be updated as they become available. In the event the
two are removed, the remainder of the reference material already
being used will be updated January 1, 2018, except those two
will be one year behind. She reiterated that the administration
does not object to this amendment because it is not critical and
does not affect the substance of the medical fee schedule
because that is decided at the MSRC and Workers' Compensation
Board level.
2:58:47 PM
REPRESENTATIVE KREISS-TOMKINS asked that if Amendment 3 is non-
critical, why is there such a negative response from the
surgical community toward the inclusion of these two references.
CHAIR CLAMAN said he would let Ms. Marx answer, but advised
Representative Kreiss-Tomkins that it would be speculation as to
their objections.
MS. MARX offered concern that she may misstate public testimony
and other's positions, and said she would speak from her
understanding and not put words into the mouths of stakeholder
groups. She opined that ultimately, the concerns are with
regard to the continued struggle to balance the high costs of
medical costs and bringing those down, against injured workers'
rights and medical providers providing care. The division is
working hard to strike the right balance and stakeholder groups
expressed frustration as to cost containment efforts. She
related that the division met with medical providers who
expressed frustration that the cost containment measures are
directed toward the medical community; the division met with
injured worker groups who expressed frustration that cost
containment is on the backs of injured workers; and the division
met with insurer and employer groups who all are similarly
frustrated. She described it as a balancing system, and noted
that the objections to its inclusion in HB 79 stem from overall
frustration with the cost containment measures the legislature
directed the department to take regarding cost containment of
medical bills.
3:00:54 PM
REPRESENTATIVE KREISS-TOMKINS said he was unsure whether anyone
was available to answer his question, it was determined that Ms.
King could respond, and she asked him to repeat his question.
REPRESENTATIVE KREISS-TOMKINS referred to Amendment 3, and asked
that if these two reference materials are not substantive or
critical to the bill, why do they elicited such a strong
negative response from the medical community. He further asked
her opinion as to the inclusion of these two reference
materials.
MS. KING responded that it is more substantive than the Workers'
Compensation Board may realize with its unintended consequences
as they are already using both of these documents in the
Workers' Compensation Fee Schedule, effective April 1, 2017.
She described confusion and opined that she is correct in saying
that "we're" just getting used to the payment system established
in December 2015, and that adding this extra layer comingling
the two separate payments systems, is very confusing. She
pointed out the importance of offering the vast differences in
the payment system between an outpatient department of a
hospital (HOPD), and an ambulatory surgery center (ASC), and
Centers for Medicare and Medicaid (CMS). The two payment
systems are vastly different, she explained, and "we" are paid
at a much lower rate than the ASC's are paid. She reiterated
that she has been in medical billing for greater than 20 years
and she cannot interpret this new payment system, and if she
can't understand it then certainly small insurance companies
will not be able to figure how to pay "us," and that currently
they are not even being paid correctly. Insurance companies are
not on board with the system put in place in December 2015, she
pointed out, and this will make it much more for difficult for
insurance companies to interpret and try to make payments. She
continued that a federal register is being incorporated within
HB 79, and there are hundreds and hundreds of pages so this
ability for them to incorporate, at any time or amend the
payment system at any time, within those hundreds of pages
without any kind of oversight or conversation or anything for
the insurance companies, the state, and the providers, is
concerning to her.
3:06:18 PM
REPRESENTATIVE LEDOUX asked whether the coding system offered by
the American Medical Association (AMA) is no longer relevant,
and further asked whether all coding is done by the Centers for
Medicare and Medicaid Services (CMS). She then referred to
[Sec. 15. AS 23.30.098(a)(2)] page 8, lines 16-18, which read as
follows:
(2) Healthcare Common Procedure Coding System,
produced by the federal Centers for Medicare and
Medicaid Services [AMERICAN MEDICAL ASSOCIATION];
MS. KING answered that the AMA applies a list of rules and
regulations for every group of CPT codes, and those rules and
regulations are expected to be followed. The CMS then compounds
the rules and regulations for each and every CPT code.
Therefore, she said, when she bills an insurance company she
follows the rules of the AMA, and when billing to Medicare or
Medicaid she follows the Medicare rules and guidelines.
3:08:08 PM
REPRESENTATIVE LEDOUX offered that she does not understand why
Medicare and Medicaid are written into this bill because people
billing workers' compensation are supposed to use the procedure
code of the AMA, and commented that she doesn't know what
Medicare and Medicaid have to do with this issue.
MS. MARX answered that when House Bill 316 [passed in the 28th
Alaska State Legislature], it completely changed the methodology
and changed how maximum reimbursement is calculated under the
Alaska Workers' Compensation Fee Schedule. She explained that a
base value is established by the Centers for Medicaid and
Medicare Services, and to that base value, Alaska, through the
Medical Services Review Committee (MSRC) and the Workers'
Compensation Board, determine a multiplier. The MSRC's
recommendation in the report was that they now had the codes,
they needed some rules and guidelines around implementing this
system. She explained that rather than reinventing the wheel, a
call was made that there are many codes and rules out there
being used by both the American Medical Association and Centers
for Medicaid and Medicare Services, systems across the nation
that people are familiar with. The MSRC recommended and the
board adopted the recommendation agreeing to spend money coming
with a completely new book of rules and guidelines, and rather,
would use what was already in existence. When it doesn't make
sense for Alaska, she offered, parties can go to the Medical
Services Review Committee (MSRC) to explain their concerns, the
MSRC can then carve out an Alaska exception, which has been done
in multiple instances.
3:10:27 PM
MS. MARX offered that chiropractor stakeholder groups went
before the MSRC and raised concerns that the guidelines for
Centers for Medicare and Medicaid Services didn't allow
reimbursement of services, such as electrical stimulation.
The MSRC agreed to allow that the service to be reimbursable and
carved out something specific for Alaska. She offered her
understanding that at one point, before she was its director,
the division contracted to determine its own fee schedule and it
cost the division about $20,000 to $30,000 per year. She
remarked that when there is a conflict between the rules of the
American Medical Association and the rules of the Centers for
Medicaid and Medicare Services, regulation read that the
American Medical Association has control.
3:11:39 PM
REPRESENTATIVE LEDOUX commented that she did not want to follow
up because it is "about as clear as mud right now."
CHAIR CLAMAN noted that when the bill was passed a few years ago
there was a recognition that both employees and employers wanted
to get better control on costs for medical services. Therefore,
there was an effort to determine a reasonable price to pay in
Alaska.
MS. MARX responded that the methodology was chosen because the
existing one was inherently inflationary as it paid the 90th
percent of whatever the 90th percentile was of doctors' charges.
3:12:26 PM
CHAIR CLAMAN noted that the committee was created to actually
look at prices and come up with a basis to determine a
reasonable price to pay in Alaska, and it realized that the
Medicare and Medicaid rates were, on a national level, much
lower than what doctors were paid in Alaska for private services
and by insurance companies. Rather than determining it would
just adopt the Medicare and Medicaid rates, it noted that many
doctors won't take Medicare and Medicaid patients. He surmised
that it decided to start with the Medicare or Medicaid rate, and
use a multiplier to determine the Alaska rate which, hopefully,
pushes down some of the inflationary concern Ms. Marx addressed.
He then referred to all of the referenced materials, and offered
that they are not meant to set the price per se, but they are
the basis upon which the multiplier is applied, and this
commission then decides the right multiplier to apply to the
Medicare and Medicaid rates.
3:13:31 PM
MS. MARX related that he was mostly correct, and said she would
go farther to say that the committee actually decides "which of
these" it wants to use initially and "which of these" it wants
to change, which is why Amendment 3 is not critical. The
Medical Services Review Committee (MSRC) agreed that it chooses
the multiplier, makes recommendations on the rules, and what to
use in reference material. She remarked that the committee
makes recommendations annually, per statute, and it goes to the
board for approval or non-approval, and it addresses more than
just the amounts. Based upon public comment, she explained, the
committee can decide to not use the outpatient system for
ambulatory surgical centers, or adopt the ambulatory surgical
payment system set of rules and coding guidelines for ambulatory
surgical centers, which is within purview of the Medical
Services Review Committee (MSRC).
3:14:34 PM
CHAIR CLAMAN surmised that by adopting Amendment 3, "we would
essentially be saying to the committee" it can use all of the
current version of these different guidelines listed on pages 8-
9 of the bill, but will have to use the older versions of the
Hospital Outpatient Prospective Payment System, and the
Ambulatory Surgery Care Payment System in making its decision.
He related, "That information will be there from prior years,
but not for the most current year. And so, that's mostly what
this amendment does is take out the most current year's
information on those rates from the CMS."
MS. MARX said he was correct, they just wouldn't be updated by
telling people "We're using the most current version," as it
would go through the regulatory process which takes about one
year. She reiterated that those two references would be
approximately one year behind if the MSRC preferred to use the
most current version.
3:15:36 PM
REPRESENTATIVE REINBOLD asked Ms. Marx to identify the
individuals on the Medical Services Review Committee (MSRC).
MS. MARX responded that currently, under AS 23.30.095(j), the
commissioner appoints members of the committee to determine a
fee schedule, and nine members are appointed by the commissioner
of the Department of Labor & Workforce Development (DLWD). She
described that one member is affiliated with the Alaska State
Medical Association, one member affiliated with the Alaska
Chiropractic Society, one member affiliated with the Alaska
State Hospital and Nursing Home Association, and one member is a
health care provider, together with four public members not
within the definition of a health care provider. She further
explained with regard to the public members "that has been one
member from labor, and some people from -- who have billing
expertise from the industry adjusters, and from Alaska Timber
Insurance Exchange, Alaska National Insurance provide some
billing expertise." One member designated by the commissioner
to serve as chair, which is Ms. Marx as director of the Division
of Workers' Compensation, she related.
3:17:03 PM
REPRESENTATIVE KREISS-TOMKINS related that it appears removing
the two references will simply set the division back one year,
and looking at these documents will make it more
administratively complex.
3:17:35 PM
REPRESENTATIVE KOPP noted that House Bill 316 required the
Department of Labor and Workforce Development (DLWD) to annually
review and evaluate the medical fee schedules it publishes, and
this adopts them automatically by reference. In the event a
person is a provider "and the reimbursement rate that you are
getting, you forfeit that opportunity to engage in a public
process, to give comment on the record about the fee schedule as
it's happening." He related that when something is
automatically incorporated by reference, it does save time by
simply appropriating it by reference. Society is going through
a "see change" in the community of medicine currently, and a lot
of it has to do with "how are we getting reimbursed, and -- and
what is the government appropriately picking winners and losers,
and right now the ambulatory surgery centers feel they are
providing an effective return on investment for every dollar,
and they feel that the tipping -- that -- that there is a
balance that is inappropriately tipped toward large hospitals."
Therefore, he said, it is asking for transparency in this
process. The fact that "We only have every single one telling
us not to do this, we -- I think we should give some deference
to that -- those providers."
3:19:39 PM
REPRESENTATIVE KREISS-TOMKINS surmised that the inclusion of
these reference materials has the consequence of fee schedules
being set by reference, noting that he did not pick that up from
the division's testimony, and commented that Amendment 3 would
be a substantive change.
3:20:03 PM
MS. MARX responded that the fee schedule uses reference
material, "and it adopts the reference material already, this
would allow future amended versions of -- of material already
being used, to use the most current version." She asked for
clarification of the question.
REPRESENTATIVE KREISS-TOMKINS said he was lost.
3:20:48 PM
REPRESENTATIVE REINBOLD advised that she sponsored Amendment 4
which is identical to Amendment 3, and withdrew Amendment 4 [not
yet moved for adoption], and asked that her name be added to
Amendment 3 as a co-sponsor.
REPRESENTATIVE REINBOLD said she understands adopting by
reference, and adopting the federal reference guidelines for
Medicare and applying them to medical services is creating
confusion for medical providers and insurers. Therefore, she
said, she believes all stakeholders, including medical providers
and the Department of Labor & Workforce Development (DLWD) need
better time to understand the new provisions adopted within the
past year. The reason she brought this forth was because it
increases local control, it empowers "you guys to not just
automatically do it," but that it is a well thought out process,
she said.
3:22:19 PM
REPRESENTATIVE FANSLER withdrew his objection to Amendment 3.
REPRESENTATIVE EASTMAN commented that when his personal surgeon
called him and advised that this was a bad portion of the bill
it meant the administration had not performed its due diligence
in working out issues with affected parties. He suggested that
before the administration proposes such a bill, that it spend
more time talking with folks to determine its impact, and he
concluded that if this language was to be "let in," the
committee would be deferring to federal standards perhaps more
than it needs to be for Alaskans. Also, he said, the committee
would potentially have the result of a less diverse health care
option in Alaska, and that is not what was wanted at this point.
3:23:38 PM
CHAIR CLAMAN stated there being no objection, Amendment 3 was
adopted.
[CHAIR CLAMAN announced that HB 79 would be held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB079 ver O 3.27.17.pdf |
HJUD 3/31/2017 1:00:00 PM HJUD 4/5/2017 1:00:00 PM HJUD 4/13/2017 5:30:00 PM |
HB 79 |
| HB079 Transmittal Letter 3.27.17.pdf |
HJUD 3/31/2017 1:00:00 PM HJUD 4/5/2017 1:00:00 PM HJUD 4/13/2017 5:30:00 PM |
HB 79 |
| HB079 Sectional Analysis ver O 3.27.17.pdf |
HJUD 4/5/2017 1:00:00 PM HJUD 4/13/2017 5:30:00 PM |
HB 79 |
| HB079 Letters Index 4.4.17.pdf |
HJUD 4/5/2017 1:00:00 PM |
HB 79 |
| HB079 Supporting Document-Letters of Support 4.3.17.pdf |
HJUD 4/5/2017 1:00:00 PM HJUD 4/13/2017 5:30:00 PM |
|
| HB079 Opposing Document-Letters of Opposition 4.4.17.pdf |
HJUD 4/5/2017 1:00:00 PM |
HB 79 |
| HB079 HJUD Slide Presentation 3.31.17.pdf |
HJUD 3/31/2017 1:00:00 PM HJUD 4/5/2017 1:00:00 PM |
HB 79 |
| HB079 Additional Document-Sponsor's Reply to House Judiciary Committee Questions 4.5.17.pdf |
HJUD 4/5/2017 1:00:00 PM HJUD 4/13/2017 5:30:00 PM |
HB 79 |
| HB079 Fiscal Note DOA-DRM 3.27.17.pdf |
HJUD 3/31/2017 1:00:00 PM HJUD 4/5/2017 1:00:00 PM HJUD 4/13/2017 5:30:00 PM |
HB 79 |
| HB079 Fiscal Note DOLWD-WC 3.28.17.pdf |
HJUD 3/31/2017 1:00:00 PM HJUD 4/5/2017 1:00:00 PM HJUD 4/13/2017 5:30:00 PM |
HB 79 |
| HB079 Fiscal Note DOLWD-SIF 3.27.17.pdf |
HJUD 3/31/2017 1:00:00 PM HJUD 4/5/2017 1:00:00 PM HJUD 4/13/2017 5:30:00 PM |
HB 79 |
| HB079 Amendments #1-7 4.4.17.PDF |
HJUD 4/5/2017 1:00:00 PM |
HB 79 |