Legislature(2017 - 2018)BELTZ 105 (TSBldg)
02/28/2017 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB45 | |
| SB40 | |
| SB29 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 15 | TELECONFERENCED | |
| += | SB 45 | TELECONFERENCED | |
| += | SB 40 | TELECONFERENCED | |
| += | SB 29 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 40-OMNIBUS WORKERS' COMPENSATION
1:46:29 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 40. She stated that the intention is to
receive a presentation by the department, take questions, and
hold the bill for further review.
1:47:15 PM
HEIDI DRYGAS, Commissioner, Department of Department of Labor
and Workforce Development (DOLWD), stated that SB 40 will speed
up the resolution of disputes, improve the delivery of benefits
to injured employees, deter workers' compensation fraud, reduce
administrative costs, and provide adequate funding for the
administration of the system. She related that the system has
not been significantly changed in 10 years. The improvements in
the bill address rising costs, recent legal developments, and
new approaches to improve the system's efficiency and fairness.
The bill focuses on efficiency.
She advised that the department would address benefit issues
such as reemployment benefits and medical costs in another
legislative session.
MARIE MARX, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development (DOLWD), began the
introduction of SB 40 by highlighting the pillars of the Alaska
Workers' Compensation system embodied in the mission, which is
to ensure the quick efficient, fair, and predictable delivery of
benefits to workers at a reasonable cost to employers. She
explained what the Division of Workers' Compensation ensures
that both employees and employers comply with the Alaska
Workers' Compensation Act. They also conduct timely hearings
when there is a dispute, operate an appeals program, and
administer the fisherman's fund and the reemployment program.
She advised that Sections 10, 11, 12, 13, 18, 20, and 39 speed
up the dispute resolution. Sections 18 and 20 speed up and
simplify the hearing process by allowing the board to schedule a
hearing shortly after a claim is filed. Under current law the
division waits for an employee to request a hearing, which has
led to inefficiencies. Section 19 ends the practice of allowing
non-attorneys from representing parties before the board. An
individual may still be represented in board proceedings by a
parent, guardian, or court-appointed representative. An
authorized employee of an employer or medical provider currently
may be self-represented and that will not change. The Alaska
Rules of Professional Conduct currently allow a party to be
represented by an attorney or a paralegal in their employ, and
that will not change.
1:52:18 PM
SENATOR HUGHES asked who as a non-attorney would be able to
represent someone.
MS. MARX replied it could be a parent, guardian or court-
appointed representative of a minor. The division will also
continue to allow an authorized employee of a physician to
appear in board proceedings.
SENATOR HUGHES said she heard concern about this provision at a
town hall meeting in Chugiak, but that party may have been
confused.
1:53:53 PM
SENATOR GARDNER asked if excluding non-attorneys would add cost
to the person who requested the hearing.
MS. MARX explained that it actually increases costs for both
sides when people are represented by non-attorneys who are not
bound by ethical and professional rules.
SENATOR GARDNER commented that the recommendation for an IRS
audit is to send a delegate because they can't speak to another
matter the auditor may bring up.
SENATOR HUGHES asked if the division has tracked the outcomes
for people who are represented by a non-attorney.
MS. MARX said she doesn't have that data but her anecdotal
observation is that it tends to cause delays and draw out the
proceedings by months if not years.
SENATOR HUGHES asked if she had anecdotal information about
outcomes and whether or not the non-attorney was helpful.
MR. MARX said anecdotally she saw no better outcomes with non-
attorney representation. She explained that the division has
fulltime staff to provide assistance to those parties who are
unable to retain an attorney. Work comp technicians answer the
phones and help people fill out forms and a workers'
compensation officer will talk in detail about the case and
provide information about how to pursue their rights under the
Alaska Workers' Compensation Act.
1:56:46 PM
MS. MARX advised that the bill also speeds up dispute resolution
by eliminating the requirement for the board to approve
settlement agreements when the only issue is attorney fees. She
noted that when both sides are represented by an attorney the
settlement generally does not need board approval.
Sections 16, 22, 24, and 25 offer further efficiencies. First is
to streamline the process by allowing the Division of Workers'
Compensation to directly assess civil penalties against
uninsured employers instead of petitioning the board and going
to a hearing. The parties would still have the right to appeal
to the Workers' Compensation Board.
1:57:54 PM
The next efficiency is to require an employer to preauthorize or
deny medical treatment within 60 days of a medical provider's
written request.
CHAIR COSTELLO asked if there is any exception if it's an
emergency or the treatment is time sensitive.
MS MARX clarified that preauthorization is not needed for
emergency treatment. For non-emergencies, 60 days was seen as
adequate for an employer to review the medical records and
decide whether to authorize or deny the request without a
penalty.
SENATOR STEVENS expressed concern about delaying treatment after
an injury and asked for examples of medical treatment that could
be delayed 60 days without harm to the patient.
MS. MARX offered the example of an employee who needs surgery to
repair a torn rotator cuff. The employer would have a maximum of
60 days to authorize the treatment before incurring a penalty
for being untimely. She said care may be delayed by that 60-day
limit, but she isn't sure the current system provides the
benefit to an injured worker any better.
2:02:50 PM
COMMISSIONER DRYGAS explained that the original idea was that 30
days was sufficient because it's the same time as paying a
medical bill. However, some stakeholders argued persuasively
that paying a bill timely is different than going through
medical records and evaluating whether or not to authorize the
treatment. That's how the 60-day timeframe came about, but the
legislature has the prerogative to shorten it, she said.
SENATOR STEVENS continued to express reservations about
potentially waiting 60 days to receive treatment for a painful
injury.
SENATOR HUGHES asked what recourse a worker has if treatment is
denied.
MS. MARX said the injured worker could go ahead with the surgery
and potentially assume the cost if it's found to be unrelated to
work, or they could request a hearing on the preauthorization.
That is the current process and it takes longer than 60 days.
CHAIR COSTELLO asked why it takes so long.
MS. MARX replied it's largely the delay during the discovery
process.
2:05:40 PM
SENATOR HUGHES asked if the board members have the medical
expertise to make authorization decisions.
MS. MARX explained that the board doesn't make the complicated
medical evaluations, but they do weigh the expert testimony from
the medical doctors representing each side.
She returned to the discussion about improvements to the
delivery of medical care in Sections 16, 22, 24, and 25. SB 40
provides a penalty for untimely preauthorization or denial of a
request for treatment; it provides that benefits will be paid
every 21 days; and it continues payment of medical bills within
30 days.
2:07:55 PM
SENATOR STEVENS asked if the penalty for untimely
preauthorization or denial is connected to the 60-day timeline
for preauthorization or denial.
MS. MARX replied an employer or insurance company must either
pay or deny within 60 days to avoid a 25 percent penalty. The
same language currently exists for medical bills, but the
deadline is 30 days.
2:08:58 PM
She stated that the division is tackling the topic of
misclassification because: fraudulent misclassification can
result in the death or severe injury of workers; the risk of
uninsured losses can put a company out of business; and law-
abiding employers should not have to pay the price for
misclassification. She emphasized that SB 40 only addresses
independent contractors with regard to workers' compensation.
MS. MARX reviewed the fraud strengthening provisions in SB 40.
Sections 9, 11, 14, 28, 29, 31, 34-38, and 40: define
misclassification and when it amounts to fraud; impose an
affirmative duty on employees receiving workers' compensation
benefits to report work or other types of wage loss replacement
benefits; and define independent contractor and clarify the
statutory definition of employee. She noted the division met
with various stakeholder groups and is in the process of
refining the definition of independent contractor.
SB 40 also grants the Benefit Guarantee Fund the right to file a
lien to ensure that assets are available to pay the benefits for
compensation as well as civil penalties if the employer didn't
carry workers' compensation insurance. Injured workers currently
have this right.
SENATOR HUGHES asked if the definition of independent contractor
would be applicable to just these statutes.
MS. MARX confirmed it only applies to the Alaska Workers'
Compensation Act.
She said SB 40 also strengthens fraud provisions by expanding
the division's ability to assess a civil penalty to include
employers who: are under insured because they have misclassified
workers to attain artificially low workers' compensation
premiums; misrepresented the nature of their business; or
engaged in deceptive leasing practices.
SENATOR GARDNER, noting that classification can be complex,
asked if employers have an opportunity to confirm a
classification with the Department of Labor and Workforce
Development.
MS. MARX answered yes. She explained that when there is an
investigation the employer provides information about proper
codes and classification. Any penalty assessment would be based
on substantial evidence.
COMMISSIONER DRYGAS advised that there is an opportunity for
employers to contact the department if they have questions about
workers' compensation or wage and hour to ensure they are
operating correctly.
MS. MARX added that the division is very proactive in providing
help to employers to ensure they do not have uninsured losses.
The fraud provisions in SB 40 are aimed at employers who are
fraudulently trying to get lower workers' compensation premiums
to underbid a project. This creates an un-level playing field
for law-abiding employers.
SB 40 also changes the maximum civil penalty for failing to
carry workers' compensation insurance to three times the premium
the employer would have paid for each uninsured employee
workday. This reasonable deterrent will take into account the
employer's size, the nature of their business, and the financial
gain they realized by operating without full workers'
compensation insurance. The bill clarifies that civil penalties
may not be suspended, but allows for a payment plan with
interest at the state rate for judgements.
CHAIR COSTELLO asked what the interest rate is right now.
MS. MARX noted that the governing statute is AS 09.30.070(a) and
offered to follow up with the information.
2:17:42 PM
MS. MARX discussed the topic of reducing administrative costs in
Sections 2-8, 15, 17, 21, 23, 26, 27, 30, 32, and 33: employers
may pay benefits electronically, saving time and costs; the
division may prescribe the filing format of reports of injury
and compensation payments; and corporate executive officers are
no longer required to seek division approval before opting out
of workers' compensation coverage for themselves, provided they
have at least 10 percent ownership interest.
SENATOR STEVENS asked if someone could be a 10 percent owner and
still opt to carry workers' compensation insurance.
MS. MARX confirmed that anyone who isn't required to carry
coverage can always opt in. She added that is always encouraged
and more than pays for itself in the event of a catastrophic
injury.
SB 40 also reduces administrative costs by adding medical
publications to a list the department can incorporate into
regulation. The particular version of the codes for procedural
terminology book that will be used is identified through public
notice. The bill also extends to 30 days the time for insurance
companies to report initial and termination coverage to the
department, and imposes a penalty for failure to report timely.
Finally, SB 40 phases out the Second Injury Fund because its
purpose is met by the Americans with Disabilities Act. She
clarified that the fund will continue to be used to pay existing
liabilities.
SENATOR HUGHES asked how much is in the fund right now.
CHAIR COSTELLO also requested the balance in the Benefits
Guarantee Fund.
MS. MARX advised that as of FY2016 the balance in the Second
Injury Fund was $3.792 million and the balance in the Benefits
Guarantee Fund was $2.207 million.
SENATOR HUGHES asked if this will save employers money.
MS. MARX said it would be a cost saving for insurance companies
or employers who get more in reimbursement than they are paying
out.
SENATOR HUGHES asked the length of the phase-out.
MS. MARX said it could be some time because most of the payments
will go on throughout the claimants' lives. The fiscal note
assumes a life expectancy of 80 and that two or three claims
will close each year.
SENATOR HUGHES asked if it could be decades before the fund is
completely phased out.
MS. MARX answered yes.
2:27:23 PM
MS. MARX stated that the provisions in Section 1 of SB 40 ensure
adequate funding for the administration of the Workers'
Compensation Safety Administration Account. SB 40 does not
change current law that provides that insurers pay a fee of 2.7
percent of the net workers' compensation premium written. The
bill does change the amount that goes to the Workers' Safety
Compensation Administrative Account (WSCAA) from 1.82 percent to
2.5 percent. It also changes the amount that goes to the general
fund from .88 percent to .2 percent. This will replenish the
WSCAA account that has been declining since 2005 when the
Workers' Compensation Fraud Unit and the Medical Services Review
Committee were established and funded through the WSCAA account.
The bill addresses the decline by allowing the department to
receive a greater percentage of the annual service fee that
insurers pay.
2:29:02 PM
SENATOR GARDNER asked why any of the annual service fee goes to
the general fund.
MS. MARX said the previous division director told her that 1.82
percent was sufficient to cover the needs in 2000 when the WSCAA
account was established.
CHAIR COSTELLO asked if the legislation has a plan should there
be any residual funds after all the claimants have passed.
COMMISSIONER DRYGAS explained that the fund will be closed to
additional beneficiaries, but it will continue to pay out to
claimants currently receiving benefits from the fund.
CHAIR COSTELLO asked what the plan is should there be remaining
funds after all the claimants have passed.
MS. MARX said that any residual would go to the general fund,
but the idea is to adjust the contribution rate to match the
existing liabilities.
COMMISSIONER DRYGAS recounted that the formula that was devised
in 2000 didn't have an adjustment for additional
responsibilities such as the Workers' Compensation Appeals
Commission and an enhanced Workers' Compensation Fraud Unit.
2:32:44 PM
CHAIR COSTELLO thanked the presenters and opened public
testimony on SB 40.
2:33:17 PM
AVES THOMPSON, Executive Director, Alaska Trucking Association,
Anchorage, Alaska, testified in opposition to SB 40. He
expressed concern with the new language in Section 31 that
defines the tests to determine when a person is an independent
contractor for purposes of workers' compensation coverage. He
outlined the decisions that a trucking business owner/operator
makes and emphasized that the proposed changes to the workers'
compensation statute preclude the use of owner/operators in the
trucking business in a number of ways. He pointed to the
provisions in AS 23.30.230(a)(11)(A)(E) and (F) as examples that
preclude an owner/operator of a trucking business from being
recognized as an independent contractor.
He recommended providing an exemption for truck drivers from the
provisions of the Act in the same way that taxi drivers and
network transportation drivers are exempted in current law and
the proposed law under SB 14. He noted that the ATA provided
language to address this issue for trucking business
owner/operators. He also recommended adopting a distinct truck
driver independent contractor owner/operator definition instead
of tests. He noted the ATA has provided specific language to
Commissioner Drygas in that regard.
MR. THOMPSON informed the committee that the ATA has been
working with Commissioner Drygas and the Workers' Compensation
Division to address these concerns and some progress has been
made.
SENATOR HUGHES asked if he provided the suggested language to
the chair of the Labor and Commerce Committee.
MR. THOMPSON replied he would email it today.
2:39:35 PM
SHELLY ERICKSON, representing herself, Homer, Alaska, testified
in opposition to SB 40. She stated that she is a small business
owner who has a claim against her workers' compensation policy.
She maintained that the law is written in favor of the employee
regardless of the situation. She asked the committee to add a
section on employee fraud to SB 40; require new hires to release
their workers' compensation records, particularly when special
certifications are required; and rewrite the language to ensure
that boat owners aren't assumed to be negligent. She maintained
that the laws are written such that insurance companies have to
"cave" even when they know a deckhand is in a fraudulent
situation. She emphasized the importance of fair consequences
for both employers and employees if they break the law.
2:42:41 PM
BRONSON FRYE, Union Local 1959, Anchorage, Alaska, testified in
support of SB 40. He stated strong support for having clear
definitions for both "independent contractor" and
"misclassification," opining that it is particularly important
in the construction industry. He claimed that certain employers
in this industry are misclassifying their employees as
independent subcontractors and described the unfair advantage
this creates in the bidding process. He maintained that this
either forces employers out of business or causes them to adopt
this unscrupulous business model. He also pointed out how
misclassification can jeopardize the health and safety of unwary
employees. He concluded that workers' compensation insurance
protects both employees and employers when workers are correctly
classified.
2:49:23 PM
CHAIR COSTELLO closed public testimony on SB 40 and held the
bill in committee for further consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2017.02.28 - Sen L&C SB 40 Revised Presentation.pdf |
SL&C 2/28/2017 1:30:00 PM |
SB 40 |
| DOL&WD Response to Senator's Questions.pdf |
SL&C 2/28/2017 1:30:00 PM |
|
| DOL&WD Response to Senator's Questions - Budget Charts.pdf |
SL&C 2/28/2017 1:30:00 PM |
|
| SB 45 - DCCED Response to Senator's Questions.pdf |
SL&C 2/28/2017 1:30:00 PM |
SB 45 |