Legislature(2017 - 2018)SENATE FINANCE 532
04/13/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB236 | |
| HB79 | |
| HB287 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 176 | TELECONFERENCED | |
| += | HB 213 | TELECONFERENCED | |
| += | HB 215 | TELECONFERENCED | |
| += | HB 236 | TELECONFERENCED | |
| += | HB 79 | TELECONFERENCED | |
| += | HB 287 | TELECONFERENCED | |
CS FOR HOUSE BILL NO. 79(FIN)
"An Act relating to workers' compensation; relating to
the second injury fund; relating to service fees and
civil penalties for the workers' safety programs and
the workers' compensation program; relating to the
liability of business entities and certain persons 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 Alaska Workers' Compensation
Board; relating to the authorization of the workers'
compensation benefits guaranty fund 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 Alaska Workers' Compensation Board's approval of
attorney fees in a settlement agreement; and providing
for an effective date."
9:35:45 AM
Co-Chair MacKinnon REOPENED and CLOSED public testimony.
She disclosed that her family was involved in this
legislation.
9:37:08 AM
HEIDI DRYGAS, COMMISSIONER, DEPARTMENT OF LABOR AND
WORKFORCE DEVELOPMENT, agreed to address concerns. She
deferred to Ms. Marx to address the Sectional Analysis.
Vice-Chair Bishop wondered whether Commissioner Drygas had
read the letters highlighting some concerns. Commissioner
Drygas replied that she had received a copy of the letter
from the Worker's Compensation Committee of Alaska. She
stated that she had seen the other letters, but did not
receive copies. She remarked that some concerns had been
addressed, and other concerns were new concerns. She stated
that she was prepared to address those concerns.
Co-Chair MacKinnon wondered whether Commissioner Drygas had
a copy of the letter from the Worker's Compensation
Committee of Alaska. Commissioner Drygas replied in the
affirmative.
9:39:09 AM
MARIE MARX, DIRECTOR, DIVISION OF WORKERS COMPENSATION,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, discussed
the Sectional Analysis (copy on file):
Section 1: Amends AS 23.05.067(a), by allowing the
department of labor and workforce development to
receive a greater percentage of the annual service
fees that insurers pay.
Senator von Imhof wondered how the increase would "trickle"
down to employers or employees. Ms. Marx replied that there
would be no fiscal impact on the insurers and self-insured
employers, because there was no additional money to be
collected. She stated that the current fee was 2.7 percent,
and it would not change. She explained that, of that 2.7
percent, the division only received 1.82 percent of that.
The rest went to the Alaska Comprehensive Health Insurance
Fund. She stated that the money was no longer needed in
that fund, so the money would be diverted the general
treasury.
Co-Chair MacKinnon wondered whether the percentage was 2.7
or 2.9. Ms. Marx replied that the fee that insurers paid
was 2.7 percent. The fee that self-insured employers paid
was 2.9 percent. She stated that HB 79 did not address the
fee paid by the self-insured.
Co-Chair MacKinnon asked whether there was a graph that
would show the contributions to the fund and the total
value of the fund. Ms. Marx replied that it was attached to
the fiscal note, dated February 21, 2018. The chart
attached showed the balance through the years, revenue,
appropriations, and the shortfall.
Co-Chair MacKinnon queried the OMB component number of the
fiscal note. Ms. Marx replied that it was 344.
Co-Chair MacKinnon requested a high overview of the numbers
beginning in FY 19. Ms. Marx responded that on page 3 of
the fiscal note it showed for FY 19 the available balance
of approximately $10 million. The appropriations was $9
million. She explained that it showed that there would be a
carry-forward balance of approximately $1 million at the
end of FY 19. She looked at FY 20, which had an available
balance of $7.9 million; the appropriation would be $9
million; and the shortfall would be $1.1 million.
Co-Chair MacKinnon wondered what was affecting the revenue.
Ms. Marx responded that worker's compensation premiums were
decreasing, which was a good thing. She remarked that it
was due to lower injury rates and the work of the Medical
Services Review Committee. She noted that because they were
funded by a percentage of worker's compensation premiums,
so there was less money coming into the division to
operate.
Vice-Chair Bishop recalled that during his time in the
department there was work with safety.
9:45:44 AM
Co-Chair MacKinnon noted that costs were increasing in the
expense line of the fiscal note. She wondered whether those
increased costs were related to medical expenses. Ms. Marx
responded that worker's compensation benefits costs were
not paid for by the division. Those were paid by insurance
companies and self-insured employers to the injured worker.
The costs were for divisions' operations. She agreed that
the costs had increased. She shared that, in 2005, the
legislature added a fraud investigation unit and the
appeals commission. The commission was approximately
$500,000 per year. She remarked that no additional funding
was given, so the operation costs had increased due to
increased salaries and expenses.
Co-Chair MacKinnon wondered whether the fraud unit was
successful. Ms. Marx replied in the affirmative.
Co-Chair MacKinnon asked whether the investigations was for
one-year or the ten-year life. Ms. Marx replied that it was
for FY 2017.
Co-Chair MacKinnon understood the desire to provide
resources into the Injured Workers Fund. She wondered why
there was a deposit into that fund at the same time of an
increased request. Ms. Marx replied that the fraud unit was
set up at the same time as the Injured Workers Fund. She
explained that the fund was a way for injured workers to
receive benefits when the employer failed to be insured as
required by law. The fraud unit's collections went into the
fund. The money was not used for division operations. She
stressed that the division's operations relied on the
percentage from insurance companies and from self-insured
employers. She stressed that the expenses were absorbed in
the operations.
9:51:04 AM
Co-Chair MacKinnon understood the past legislative intent
of setting up a funding stream.
Vice-Chair Bishop queried a number of the penalties
assigned and collected money. Ms. Marx replied that, in FY
17, the amount assessed by the Workers Compensation Board
was $3.1 million. She explained that there were arbitrary
reasons for the suspended amounts. She furthered that the
amount actually needed to be paid was approximately $2.2
million; of that the division collected approximately $1
million in FY 17.
Co-Chair MacKinnon asked that the numbers be repeated. She
explained that bills provided lessons on some of the
issues. Ms. Marx replied that in FY 17 the division
collected just over $1 million of money that went into the
benefits guarantee fund.
Senator Stevens looked at the Fisherman's Fund, and
understood that there was a desire to increase the
reimbursement for injuries to the owners of fishing
vessels. He asked for more information, and asked whether
there was objection to increasing the $5000 reimbursement.
Ms. Marx replied that Senator Stevens may have been
referencing HB 379, which was a bill that would increase
the amount of the deductible reimbursed to vessel owners.
She stated that the Fisherman's Fund was separate from the
Worker's Compensation Unit. She stated that the fund was
administered by the department, but was not part of the
worker's compensation program. She further explained the
Fisherman's Fund. She stated that currently a vessel owner
could be reimbursed up to 50 percent of their deductible or
$5000. She explained that HB 379 would increase it to 100
percent of the deductible, but keep the $5000 limit. She
stated that there would be an increase of $18,900, but the
fund had sufficient revenue to cover that additional
expense. The department had no position on that bill.
9:55:27 AM
Senator Stevens wondered whether it would be inappropriate
to include the subject into the current bill. Ms. Marx
deferred to the Department of Law (LAW).
9:55:52 AM
Commissioner Drygas stated that LAW should look at that
subject. She remarked that workers compensation was broad,
and the fisherman's fund was administered by the division.
Co-Chair Hoffman queried the qualifications to qualify for
the fisherman's fund. He wondered whether one must have a
commercial fishing license. Ms. Marx replied in the
affirmative. She stated that one must be a crew member with
an injury or illness directly related to operations as a
commercial fisherman. She stated that a fisherman claim
required a valid commercial fishing license or a limited
entry permit. She stated that the initial treatment must be
received within sixty days of the injury; and the
application for reimbursement must be submitted within one
year after the initial treatment. The treatment must be
documented by medical notes. The injury must have occurred
in Alaska or Alaskan waters.
Co-Chair Hoffman wondered whether the injury must be
incurred while fishing. Ms. Marx responded that it must be
connected with the commercial fishing job.
Senator von Imhof wondered whether the bill would eliminate
the injured workers fund. Ms. Marx replied that the bill
did not address that fund.
Commissioner Drygas furthered that injured workers fund was
the same thing as the benefits guaranteed fund.
Co-Chair MacKinnon stated that "if something's too heavy,
it might sink."
Ms. Marx continued with the Sectional Analysis:
Section 2: Amends AS 23.05.067(e), by clarifying that
penalties for late-filed reports accrue to the
workers' safety and compensation administration
account.
Section 3: Amends AS 23.30.070(a), by making technical
changes to allow electronic filing of documents.
Section 4: Amends AS 23.30.070(b), by making technical
changes to allow electronic filing of documents.
Section 5: Amends AS 23.30.070(d), by allowing the
division director to prescribe the format for
reporting injuries to the division.
Section 6: Amends AS 23.30.070(f), by making technical
changes to allow electronic filing of documents.
Section 7: Amends AS 23.30.075(b), by expanding
personal liability for workers' compensation benefits
and civil penalties to owners of more types of
employing business entities if the business fails to
carry workers' compensation insurance.
Section 8: Amends AS 23.30.080(e), by moving the
failure to insure process from the board to the
division.
Section 9: Amends AS 23.30.080(f), by allowing the
division to assess a civil penalty directly rather
than petitioning the board to set the penalty,
simplifying the calculation and maximum civil penalty
for a failure to insure for workers' compensation
liability, and allowing the division to assess a civil
penalty against employers who have engaged in
misclassification of workers for the purpose of
evading full payment of workers' compensation
insurance premiums.
10:01:42 AM
Senator Micciche felt like there was much opposition to
Section 9. He felt that some might believe that the
government was "getting out of its lane." He asked for
further comment about Section 9. Ms. Marx pointed out that
Section 9 was also related to Section 35. She shared that
in 2005, the legislature tasked the fraud unit with
investigating fraud, including misclassification. She
stated that the problem was the misclassification was not
defined. Therefore, it was difficult to ensure that
employers were in compliance and to incentivize compliance.
She stated that the bill defined misclassification. She
stated that currently the division could only go after
someone criminally only. That should not be the only
option, so there should be a lesser penalty of a civil
penalty.
Senator Micciche felt that individuals did not interpret
the section. She wondered whether there could be a response
to the Workers Compensation Committee of Alaska. Ms. Marx
replied that the concern was that insurance companies
conducted payroll audits. She stated that some of the
comments felt that the work was duplicative. She asserted
that the work was not duplicative. She explained that a
payroll audit was a true up on an employers payroll, staff,
and business. The insurance company would fix the code. The
insurance company would not incentivize employers to follow
the law or deter fraud.
10:05:06 AM
Co-Chair MacKinnon agreed that it was the department's
assertion.
Co-Chair MacKinnon remarked that Sections 9 and 35 assumed
that all misclassifications were intentional. Ms. Marx
disagreed. She furthered that the division was aware that
there may be inadvertent misclassification, just as there
was inadvertent failure to insure. She stated that the
statute set out the maximum, but that maximum was not
imposed in most cases. That maximum was for the most
egregious cases. She stated that regulation set out a
sliding scale.
Co-Chair MacKinnon stated that some of the testimony stated
that government did not always adequately handle penalties.
She shared that she had attended seminars about the
misclassification issue. She was torn about the requested
control and providing safeguards against governments
limiting their ability to compete. She shared that there
was an issue of the territory of work. She remarked that
there could be misclassifications that cause the department
and employer additional costs. She recalled that there was
a conversation about the independent contractor, and not
contributing to the system; versus one that complies with
the existing laws. Commissioner Drygas replied that the
topic was confusing, because there was a problem of
classifying workers as independent contractors. She shared
that many employers do it inadvertently and also to avoid
paying premiums. She explained that there was also small
misclassifications.
10:12:53 AM
Co-Chair MacKinnon remarked that there was overwhelming
opposition to the language. She stressed that there was a
desire for safe work environments, but there should be a
balance without creating uncertainty in business management
costs.
Vice-Chair Bishop felt that there was a desire to change a
criminal penalty to a civil penalty. Ms. Marx agreed.
Vice-Chair Bishop stated that intentional negligence would
result in a criminal penalty depending on the egregiousness
of a workplace accident. Ms. Marx replied that it would be
up to the Office of Special Prosecution.
10:15:27 AM
Senator Micciche noted that Section 35 allowed for a civil
penalty. He wondered whether there was a belief that the
department had a lower burden of proof, and used at an
earlier stage of investigation. Ms. Marx surmised that the
concern was about whether there was a lower standard of
proof for civil penalties versus criminal, and she agreed
with that summation. She stated that the division would
meet the same current standard in investigating failure to
insure cases.
Senator Micciche wondered whether a theft conviction was
more difficult to obtain than the support for the civil
penalty. Ms. Marx replied in the affirmative.
Senator Micciche stressed that the concern was about
eliminating the current standard. He felt that civil
penalties could be used as a method of control with a far
lower burden of proof.
Vice-Chair Bishop wondered what would occur with a possible
ad hoc with those in the industry.
Co-Chair MacKinnon thanked Vice-Chair Bishop for the
solution. She stated that they were at a friction point.
Commissioner Drygas stated that it was an interesting
concept. She stated that the former committee had worked
together to come up with solutions.
10:21:24 AM
Commissioner Drygas addressed the penalties.
Senator von Imhof noted a letter. She remarked that
creating an independent contractor definition was
important. She queried any incorporations about that
definition. Commissioner Drygas replied that she was no
aware of a request to examine that definition.
Senator von Imhof stressed that she assumed that it was
only two months prior, but it was a year prior. Ms. Marx
explained that she had a brief discussion, and there was no
objection to the definition.
Co-Chair MacKinnon wondered if they were in support of the
bill. Commissioner Drygas replied that they were not in
opposition.
10:25:45 AM
Co-Chair MacKinnon noted the dated letter that stated that
there was not opposition to the bill.
Senator von Imhof wondered whether there should be an
updated letter.
Co-Chair MacKinnon agreed, and noted that a lobbyist could
update the letter.
Senator von Imhof remarked that there were letters of
support, but specific components with issue. Commissioner
Drygas replied that she believed that there were answers to
most of the concerns that were addressed the year prior.
She shared that the sectional analysis was intended to
address some of the issues.
Ms. Marx furthered that there were some comments that were
solved in the House Judiciary Committee.
10:30:28 AM
Ms. Marx continued to discuss the Sectional Analysis:
Section 10: Amends AS 23.30.080(g), by extending from
7 days to 30 days for an employer to pay an assessed
penalty.
Section 11: Adds new subsections to AS 23.30.080,
providing for penalties for failure to produce records
legally required to be kept, providing a process for
an employer to dispute a civil penalty assessment,
allowing an employer to pay an assessed civil penalty
by payment plan, requiring that employers who agree to
a payment plan pay interest, and clarifying penalties
may not be suspended.
Co-Chair MacKinnon wondered whether it was a revenue
generator from the department's perspective. Ms. Marx
replied that the section corrected a gap in the statute,
where an employer who refused to provide records was
frequently penalized less severely than an employer who
kept legally required records.
Ms. Marx continued with the Sectional Analysis:
Section 12: Amends AS 23.30.082(a), by providing
interest on civil penalties and other civil penalties
under the Workers' Compensation Act (Act) accrue to
the workers' compensation benefits guaranty fund.
Senator von Imhof stated that she was not able to judge.
10:34:43 AM
Co-Chair MacKinnon stated that the slow process was to gain
all the information necessary.
Vice-Chair Bishop explained that the history and subject
was complicated.
Co-Chair MacKinnon recalled a letter from the Senate Labor
and Commerce Committee chair. Commissioner Drygas replied
that there was only one meeting.
Co-Chair MacKinnon felt that the Senate Labor and Commerce
Committee had moved many bills to the Senate Finance
Committee. Commissioner Drygas asserted that the bill was
extremely balanced.
10:41:37 AM
Co-Chair MacKinnon remarked that there was some fear in the
industry of retaliation when commenting against the
government.
Ms. Marx continued with the Sectional Analysis.
Co-Chair MacKinnon asserted that there were multiple ways
that a business could be fined. She asked for further
comment. Ms. Marx replied that the policies were getting to
the insurance companies. She stated that once the policy
arrived, it was not reported to the division, because there
was no consequence.
Co-Chair MacKinnon asked for confirmation about the issue.
10:45:33 AM
Senator von Imhof remarked that many of the letters had
targeted specific sections. She wondered whether it would
be prudent to issue a written response for each of those
issues. Commissioner Drygas agreed to provide a written
response.
Ms. Marx continued with the Sectional Analysis:
Section 14: Amends AS 23.30.097(d), by clarifying when
an employer must preauthorize or deny a provider's
written request for medical treatment.
Section 15: Amends AS 23.30.098, by adding
publications to a list the department of labor and
workforce development may incorporate, including
future amended versions, into regulation.
Section 16: Amends AS 23.30.100(a), by making
technical changes to allow electronic filing of
documents.
Section 17: Amends AS 23.30.100(b), by making
technical changes to allow electronic filing of
documents.
Section 18: Amends AS 23.30.100(c), by making
technical changes to allow electronic filing of
documents.
Section 19: Amends AS 23.30.110(c) by requiring the
board to schedule a prehearing conference not later
than 30 days after a claim is filed, and at the
prehearing conference set discovery deadlines and a
hearing date, rather than waiting for an employee to
request a hearing.
Co-Chair MacKinnon noted that there was an elimination of
the statute of limitations.
Senator von Imhof requested the perspective on the section,
and address the concerns about why the bill would improve
the concerns.
Co-Chair MacKinnon felt that not including the elimination
of the statute of limitations in the sectional analysis was
disingenuous. Commissioner Drygas replied that there was
not a statute of limitations with respect to the issue. She
stated that it was a "time bar." She stated that the
elimination of the time bar was because the board would
schedule a prehearing conference.
Ms. Marx furthered the workers compensation hearing system
was currently inefficient, and had led to high attorney
fees.
10:51:46 AM
Co-Chair MacKinnon queried the definition of a time mark.
Ms. Marx replied that after a claim was denied, an injured
worker had two years to request. She stated that the
requirement would be eliminated.
Co-Chair MacKinnon wondered whether the injured employee
currently had a two year time mark with workers
compensation, and whether that was eliminated in the bill.
Ms. Marx replied that the two years was to request a
hearing, not to file a claim.
Co-Chair MacKinnon surmised that filing a claim was
different than requesting a hearing. Ms. Marx agreed.
Co-Chair MacKinnon wondered whether there was distinction
between filing a claim and requesting a hearing. Ms. Marx
clarified that the time bar only applied to requesting a
hearing, or more time for a hearing.
Senator von Imhof wondered what would occur when someone
lets the two years lapse. Ms. Marx informed that if an
employee did nothing after two years, the claim would be
barred by law.
Co-Chair MacKinnon asked if the bill took away the limit
for requesting a hearing. Ms. Marx replied that the board
would schedule the hearing, rather than requiring the
claimant to request a hearing.
Co-Chair MacKinnon asked if everyone would be given a
hearing.
Commissioner Drygas stated that the department saw a
problem with protracted litigation, which led to increased
litigation fees. The bill sought to ensure that a hearing
be scheduled.
10:55:46 AM
Co-Chair MacKinnon surmised that the change allowed for
everyone to file a claim. Ms. Marx replied that there were
approximately 20,000 reports of injury filed every year.
She stated that only approximately 1200 a year resulted in
claims. The only time a worker filed a claim was when they
were not receiving the benefits they believed that they
were entitled. The claim demands that action be taken. She
stated that the other claims were resolved.
Senator von Imhof wondered whether there was a statute of
limitations for filing a claim. She did not want employees
filing a claim after much time had passed. Ms. Marx replied
that there was a statute of limitations of two years, and
the bill did not change that statute of limitations.
Senator Micciche understood that it was easy to confuse the
claim and request for hearing. He stated that he had filed
controversial bills.
Co-Chair MacKinnon stated that there was a hope to bring
all parties together to hear all the perspectives.
11:01:16 AM
Commissioner Drygas believed that there would be resolution
through work with the stakeholders and addressing their
concerns.
Co-Chair MacKinnon appreciated the advocacy for the
employees of the state.
DENNY DEWITT, STATE DIRECTOR, NATIONAL FEDERATION OF
INDEPENDENT BUSINESSES, introduced himself.
Co-Chair MacKinnon queried comments on the position on the
bill. Mr. Dewitt replied that the primary focus was the
independent contractor issue, and that issue was resolved.
He remarked that there were many technicalities in the
bill. He did not support or oppose other aspects of the
bill.
Co-Chair MacKinnon queried the reason for the opposition.
Mr. Dewitt replied that it was found that the initial
language inhibited many contractors ability to continue to
work as independent contractors. He worked with the
department to articulate the definition of an independent
contractor, and their ability to work as independent
contractors.
Vice-Chair Bishop queried the relationship with the
department. Mr. Dewitt responded that there was resolution
after a complicated process.
CSHB 79(FIN) was HEARD and HELD in committee for further
consideration.
11:05:11 AM
AT EASE
11:10:48 AM
RECONVENED