Legislature(2017 - 2018)BELTZ 105 (TSBldg)
04/02/2018 09:00 AM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB112 | |
| SB38 | |
| SB205 | |
| HB79 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 112 | TELECONFERENCED | |
| += | SB 38 | TELECONFERENCED | |
| += | HB 170 | TELECONFERENCED | |
| += | SB 205 | TELECONFERENCED | |
| + | HB 79 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 79-OMNIBUS WORKERS' COMPENSATION
10:07:22 AM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of HB 79. [CSHB 79(FIN) was before the committee
and this is the first hearing.]
10:10:40 AM
HEIDI DRYGAS, Commissioner, Department of Labor and Workforce
Development (DOLWD), Juneau, Alaska, said HB 79 improves the
department's ability to administer the Workers' Compensation
Division. Last year they presented companion bill SB 40 to the
committee. Since then HB 79 made its way through the House and
has seen changes and improvements. It is an efficiencies bill.
It modernizes the system, which has not been significantly
reformed in more than 10 years. It speeds up the resolution of
disputes, improves the delivery of benefits to injured
employees, deters workers' compensation fraud, reduces
administrative costs, and provides adequate funding for the
administration of the workers' compensation system. HB 79 was
well vetted and passed in the House with support from the
minority and majority.
10:11:55 AM
MARIE MARX, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development (DOLWD), Juneau,
Alaska, said she always starts with the department's mission
when she presents on workers' compensation. It is to ensure the
quick, efficient, fair, and predictable delivery of benefits to
injured workers at a reasonable cost to employers. She directed
attention to the slide showing the other pillars that guide the
division's administration of Alaska's Workers' Compensation Act.
The governor's bill focuses on the fairness, quickness, and
efficiency of the workers' compensation process.
MS. MARX said she would present the bill by topic instead of
numerical order. Each section is listed by topic and she would
refer to page numbers as they work through HB 79, version N.
MS. MARX first addressed the topic of speeding up dispute
resolution. She said HB 79 simplifies and quickens the hearing
process by letting the board schedule a hearing shortly after a
claim is filed instead of waiting until one of the parties
requests a hearing, which can be many years down the road.
MS. MARX said it changes who may represent a claimant in a
workers' compensation hearing. Now a non-attorney may represent
parties. The bill proposes that anyone authorized by regulation
of the board may represent parties. They have had instances
where non-attorneys who were not bound by ethical and
professional rules represented someone, such as a brother or
spouse, before the board. Often, that person's assistance is not
helpful but delays outcomes for injured workers. At first the
bill said non-attorneys may not represent parties, but through
the hearing process, this was changed.
She said HB 79 streamlines settlement agreements by eliminating
a requirement that the board approve attorney fees if fees are
the only issue that requires board approval. It also streamlines
the process of imposing civil penalties against an uninsured
employer by allowing the division to assess the penalty directly
rather than petitioning the board to set the penalty. An
employer may appeal the penalty before the board.
MS. MARX addressed the second topic of improving the delivery of
medical care. She said currently no language addresses if and
when a provider's written request for medical care, usually for
surgery, must be preauthorized. The bill requires an insurance
company or self-insured employer to preauthorize or deny medical
treatment within 60 days of a medical provider's written
request. This gap has led to a lot of litigation and delayed the
delivery of care to injured workers. The bill does not change
the requirement that medical bills must still be paid within 30
days.
10:16:21 AM
SENATOR GARDNER said 60 days seems like a long time to wait for
surgery. She asked why 60 days was selected.
MS. MARX said the only duty the employer has now is to pay a
medical bill within 30 days of receiving it. By the time the
medical bill is received by the self-insured employer or
insurance company, the care has already happened. They have
already had the opportunity for one of their doctors to evaluate
the injured worker. It is different for preauthorization of
surgery, which is generally very expensive surgery. Sixty days
would give time the employer or insurance company time to refer
to the worker to a physician of their choice and get the medical
records from the doctors. At times it's difficult to get medical
records within 45 days. Now the injured worker needs surgery and
the doctor won't move forward without the certainty of being
paid. The worker doesn't want to be on the hook either. Sixty
days was a compromise to balance the injured worker's need for
care and efficiency and reasonable cost for the employer.
10:18:24 AM
MS. MARX addressed the issue of misclassification before moving
on. She said not tackling misclassification is a great
disservice to workers and law-abiding businesses. When workers
are fraudulently misclassified, workers die or are severely
injured and huge uninsured losses can put a company out of
business. They must keep workers safe and law-abiding employers
should not have to pay the price for misclassification.
She then took up the third topic, strengthen fraud provisions.
She said HB 79 strengthens fraud provisions by defining
misclassification and when it amounts to fraud.
She said there is no affirmative duty to report work or wage-
loss benefits. If asked, workers cannot misrepresent that, but
there is not an affirmative duty to tell an insurance company or
self-insured company that they are receiving benefits. HB 79
does impose an affirmative duty on the injured worker to report
their injury.
MS. MARX said currently a loophole exists where LLCs [limited
liability companies] escape liabilities for benefits and civil
penalties because the act was created when corporations were in
existence. The bill will make LLCs that operate without
insurance just as liable as corporate officers for uninsured
injuries and penalties.
She said the bill defines independent contractor, which is the
biggest change since the committee heard SB 40. This definition
is the result of working with many stakeholder groups who
initially vehemently opposed the original definition. This
definition is a result of collaboration between stakeholders and
the department. The definition will accomplish the mission of
preventing fraud and misclassification while also ensuring that
bona fide independent contractors continue to operate and
flourish.
She said HB 79 allows the Benefits Guaranty Fund, which is the
injured workers fund, to file a lien for compensation and civil
penalties. The Benefits Guaranty Fund pays a claim when an
employer does not carry insurance. Then the fund has to be
reimbursed by the uninsured employer. By the time that happens,
the assets are gone. An injured worker already has the right to
file a lien.
10:22:07 AM
MS. MARX said HB 79 expands the division's ability to asses a
civil penalty to include employers who are underinsured because
they have misclassified workers in a variety of ways. Now the
division only has the ability to assess a penalty for failing to
carry any insurance. The bill changes the calculation and the
maximum civil penalty. The maximum penalty now is $1,000 for
each uninsured employee workday, which has resulted in
astronomically high penalties that employers cannot pay. The
calculation of these penalties doesn't survive appeal and has
led to a lot of litigation. The employers who do not keep
records on the number of employers they have are rewarded.
She said the maximum penalty in HB 79 is three times the premium
an employer should have paid. HB 79 a simpler calculation
because it only requires the employer's overall payroll data.
The new penalty will result in a reasonable deterrent that takes
into account the employer's size, the nature of the business,
and the financial gain the employer realized by not paying the
full workers' compensation insurance. She provided an example.
Their hope is that if penalties are more in line with reality,
the division will be able to collect more. These penalty amounts
go to the injured worker fund. With HB 79, penalties may not be
suspended in full or in part. Right now, the board has suspended
penalties, which is arbitrary. The board can always reduce or
reverse a penalty. HB 79 allows employers to establish a payment
plan, so they won't go out of business.
10:25:27 AM
MS. MARX addressed the fourth topic, reducing administrative
costs. She said current law says the employer must pay by check.
Times have changed, so the bill does not prescribe a specific
method of payment. Currently, the division may not require
electronic filing. The bill says the division may prescribe the
filing format. The division has moved almost completely to
electronic filing except for a few things that must be done by
paper. The bill will modernize that.
She said there is a corporate executive officer workers'
compensation coverage opt out, which involves a lot of paperwork
that must be submitted. The bill streamlines that. If someone
has at least 10 percent ownership, that is enough to say that
person is not an employee and does not need workers'
compensation insurance. The division has a great database that
makes verifying that easy.
10:26:58 AM
SENATOR MICCICHE asked if simplifying the corporate opt out
would result in a significant change in the numbers opting out
or would it be close to what it is now.
MS. MARX said its difficult to tell how many officers would
then be considered non-employees. Now there are many corporate
officers who have no ownership in the business and are added.
Corporations change that makeup of their officers every few
months. She guessed the bill would make sure that those who
legitimately have an interest in the company would be exempted.
SENATOR MICCICHE said it's more black and white criteria. He
asked if there was another reason a corporate executive could
opt out.
MS. MARX agreed that it is very black and white, which was the
intent. She answered no to the second question. She added that
HB 79 is not a bill that deals with substantive benefits. It is
an efficiencies bill that seeks to make things clearer for the
public.
10:29:02 AM
MS. MARX continued to review administrative efficiencies. She
said the Medical Services Review Committee looks at different
publications to come up with a medical fee schedule. More
publications are added to that list.
MS. MARX said there is currently no consequence if insurers do
not meet the deadline to tell them when an employer has coverage
or not. By granting a 30-day deadline (instead of ten) with a
penalty, they hope that will reduce wasted effort for
investigating failure-to-insure cases. The bill also phases out
the Second Injury Fund, which reduces costs for the department
and employers. The fund's purpose is to encourage employers to
hire or retain disabled individuals, but the purpose is moot
with the Americans with Disabilities Act and other laws that bar
employment discrimination. As claims are paid out, the
employers' contribution will drop to zero. These claims are for
permanent disability. The fiscal note estimates the average age
of claimants will be 80 and two to three will be phased out each
year.
10:32:10 AM
MS. MARX addressed the final topic, ensure adequate funding for
the Workers' Safety and Compensation Administration Account
(WSCAA) in Section 1. She said the WSCAA balance is rapidly
declining. In 2005, the Alaska Legislature added programs funded
by WSCAA, but no increase in the WSCAA service fee rate was made
for the increased costs to operate these programs. The bill does
not increase the service fees companies pay, but more of the fee
will be allocated to the department. That is a difference of
$1.8 million. If the change is not implemented, WSCAA will have
a shortfall in 2020.
10:33:49 AM
CHAIR COSTELLO opened public testimony on HB 79.
10:34:13 AM
BRONSON FRYE, Painters Union Local 1959, Anchorage, Alaska,
testified in support of HB 79. He said he was just appointed to
the Workers' Compensation Board. Unscrupulous contractors are
requiring as a condition of employment that their workers get
business licenses and work as independent subcontractors. These
are not legitimate independent subcontractors. An entire crew of
workers working on a singular job on a singular project are all
classified as independent subcontractors. He gave the example of
the drywall workers for the Dena'ina Center. Because workers'
compensation premiums are so high in the inherently dangerous
construction industry, they can account for up to 30 percent of
labor cost. If an employer misclassifies workers, he can lower
labor costs and have a competitive advantage in the bidding
process against honest, law-abiding employers. This is a
fairness-in-contracting issue. Also, liability for injury at
work is shifted to the worker with independent contractor
misuse. Workers' compensation exists for a reason. HB 79 has a
multifactor test to determine a true independent contractor. It
will reduce workers' compensation fraud, create fairness in
contracting in the construction industry, and protect workers.
10:37:58 AM
LAURA BONNER, representing self, Anchorage, Alaska, testified in
support of HB 79. She said her husband suffered a debilitating
injury years ago. HB 79 allows better and quicker access to
medical care and quicker resolution of disputes. This is
important to the injured worker and their families who are
dealing with the stress of the injury. She expressed pleasure
with the language defining an independent contractor and
strengthening the fraud provisions. She has served on the
Workers' Safety Advisory Council because safety and injured
workers have been a concern of hers. She urged the committee to
pass HB 79 from committee. It is better than the bill passed
earlier today.
10:40:25 AM
DON ETHERIDGE, Lobbyist, Alaska AFL-CIO, Juneau, Alaska,
testified in support of HB 79. He said any efficiencies should
be made. Alaska AFL-CIO was involved in the working group to
define independent contractors and is happy with the result. He
related how difficult it can be for injured workers to receive
their compensation checks by mail. The bill makes improvements.
10:42:33 AM
CHRIS DIMOND, Organizer, Pacific Northwest Regional Council of
Carpenters, Juneau, Alaska, testified in support HB 79. He said
making government more efficient is always a move in the right
direction. The definition of independent contractor is a long
overdue reform. He related cases in Juneau of fraud. HB 79
protects workers' rights and safety. It will keep contractors
working more fairly.
10:44:39 AM
CHAIR COSTELLO closed public testimony on HB 79.
SENATOR MEYER asked about the change on slide 4 of the
presentation that states HB 79 will allow persons authorized by
regulation of the board to represent parties. He asked if the
bill would prevent an injured person using his cousin to
represent him.
MS. MARX said the bill would allow the board to develop, through
the regulatory process, a list of the parties who can represent
parties before the board. The board serves two functions, to
make regulation and to hear claims. The hearing panel is in the
best position to know the type of individual who is able to
represent injured workers. Through the public process, there
will be a list created. She noted that she served as a hearing
officer for six years. She gave anecdotal experience to
illustrate problems that can arise.
SENATOR MEYER asked if the names on the list would be primarily
attorneys.
MS. MARX said the 18-member Workers' Compensation Board would
come up with the list. She envisions that besides Alaska
attorneys, the list could contain perhaps outside counsel,
retired attorneys, paralegals, medical billing specialists, and
others. The list would be appropriate to create through
regulation rather than statute.
SENATOR MEYER asked if she anticipated a long list.
MS. MARX said yes and very specific and detailed to provide
clarity.
CHAIR COSTELLO said that Senator Meyer made a good point. They
are hoping for common sense and flexibility with this list.
COMMISSIONER DRYGAS said the initial draft said no non-attorneys
for a lot of reasons. This is a compromise where it would make
sense for non-attorneys to represent.
SENATOR MEYER said he wanted to ensure that the injured worker
has choices.
10:51:47 AM
SENATOR GARDNER asked if the department has the resources to
look into possible cases of fraud when they hear stories like
the ones Mr. Dimond referenced.
COMMISSIONER DRYGAS said yes and no. The fraud unit will
investigate if they hear something. Right now, the test of being
an independent contractor versus an employee is cumbersome,
which is why they are changing it in law. The department is
cash-strapped currently. Next year, FY2020, WISCA funding will
be depleted.
10:53:26 AM
SENATOR MICCICHE said he had the same concern as Senator Meyer.
Another concern is with Section 7 that redefines LLC. He
questioned whether a Workers' Compensation bill was the right
place to do that.
MS. MARX clarified it does not redefine an LLC. Right now, there
is a loophole. Under the current Workers' Compensation Act,
employers must have workers' compensation for employees. If they
don't, the employer and those in charge of the business are
responsible for uninsured claims. LLCs do not have the same
liability. Those LLC members who run the corporation, even if it
is one member, completely escape the liability that corporations
have for uninsured injuries. This levels the playing field for
all members. There is a need to close the loophole of companies
to escape liability.
SENATOR MICCICHE said he understands the intent but would rather
it be dealt with in a section of law that defines what an LLC
can do with that limit of liability rather than eliminating the
loophole in this bill. He said it needs to be dealt with more
comprehensively.
COMMISSIONER DRYGAS said it's there to maintain consistency in
the statute. The corporate section is already in the statute,
which is why they addressed the LLC there. She acknowledged that
one could argue both sides.
10:58:23 AM
SENATOR MEYER moved to report HB 79, version N, from committee
with individual recommendations and attached fiscal note(s).
10:58:45 AM
CHAIR COSTELLO announced that without objection, CSHB 79(FIN)
moved from the Senate Labor and Commerce Standing Committee.