Legislature(2005 - 2006)SENATE FINANCE 532
04/11/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB130 | |
| HB67 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 66 | TELECONFERENCED | |
| + | HB 67 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 130 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 130(JUD)
"An Act relating to a special deposit for workers'
compensation and employers' liability insurers; relating to
assigned risk pools; relating to workers' compensation
insurers; stating the intent of the legislature, and setting
out limitations, concerning the interpretation, construction,
and implementation of workers' compensation laws; relating to
the Alaska Workers' Compensation Board; assigning certain
Alaska Workers' Compensation Board functions to the division
of workers' compensation in the Department of Labor and
Workforce Development and to that department, and authorizing
the board to delegate administrative and enforcement duties to
the division; providing for workers' compensation hearing
officers in workers' compensation proceedings; relating to
workers' compensation medical benefits and to charges for and
payment of fees for the medical benefits; relating to
agreements that discharge workers' compensation liability;
relating to workers' compensation awards; relating to
reemployment benefits and job dislocation benefits; relating
to coordination of workers' compensation and certain
disability benefits; relating to division of workers'
compensation records; relating to release of treatment
records; relating to an employer's failure to insure and keep
insured or provide security; relating to workers' compensation
proceedings; providing for a maximum amount for the cost-of-
living adjustment for workers' compensation benefits; relating
to attorney fees with respect to workers' compensation;
providing for the department to enter into contracts with
nonprofit organizations to provide information services and
legal representation to injured employees; providing for
administrative penalties for employers uninsured or without
adequate security for workers' compensation; relating to
fraudulent acts or false or misleading statements in workers'
compensation and penalties for the acts or statements;
providing for members of a limited liability company to be
included as an employee for purposes of workers' compensation;
establishing a workers' compensation benefits guaranty fund;
making conforming amendments; providing for a study and report
by the medical services review committee; establishing the
Task Force on Workers' Compensation; and providing for an
effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
SENATOR RALPH SEEKINS introduced the bill as chair of the Senate
Judiciary Committee. The Judiciary Committee, indicating the effort
invested, considered approximately 22 amendments to this bill. The
Judiciary Committee discovered the volatility of the issue though
the receipt of many telephone calls from small business operators.
The increasing insurance costs have become too high for many
businesses.
Senator Seekins reported that Alaska companies pay the second
highest rates in the nation for workers compensation insurance,
following the state of California. The medium premium index is
approximately two percent compared to the rates assessed in Alaska
of 4.6 percent. The index for businesses operating in the state of
North Dakota is the lowest in the nation at 1.08 percent. This
demonstrates the higher cost to do business in Alaska.
Senator Seekins remarked that Alaska has approximately the same
"score" as North Dakota and asserted, "Something is terribly wrong
with the system."
9:16:47 AM
Senator Seekins qualified that the matter could not be fully solved
at this time, but would rather require a continuing effort. This
legislation provides that a task force would be formed over the
following legislative interim charged with identifying additional
cost savings. The task force would be comprised of an "optimum
number of members" to allow for a "workable task force". However he
envisioned additional professional input from non-voting
participants would be encouraged.
9:18:49 AM
Senator Seekins understood concerns would be raised, but assured
the most important intent is to address needs of those injured
workers.
9:20:45 AM
Senator Olson pointed out that the language of the bill does not
provide for a timeframe in which recommendations would be reported
by the task force.
9:21:02 AM
PAUL LISANKIE, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development, replied that the
report and any recommendations would be due by December 1, 2005.
9:21:41 AM
GREG O'CLARAY, Commissioner, Department of Labor and Workforce
Development, testified that the Murkowski Administration is
"pleased" with the progress made with this legislation.
9:22:11 AM
Co-Chair Wilken asked for an overview of the differences between
this bill and SB 360 of the previous legislative session.
9:22:27 AM
Mr. Lisankie replied that beyond the intent of reforming the
workers' compensation insurance system, the two bills are
significantly different. The earlier bill, SB 360, dealt almost
exclusively with procedural changes to solving disputes. This
current bill attempts to make the process more efficient in an
effort to save money.
9:23:04 AM
Co-Chair Green asked the condition of the workers' compensation
insurance system in Alaska and the consequences of making no
changes.
9:23:32 AM
Mr. O'Claray reported that three underwriters ceased offering
insurance in Alaska, two of which are major underwriters.
Escalating premium rates are putting pressure on small businesses
and requiring owners to make decisions about providing this
insurance. Some businesses are laying off workers or closing.
Pressure has recently been placed on the Division of Insurance to
reduce or freeze rates. If this occurs, the State would be in
danger of loosing the remaining three underwriters operating in
Alaska and would force the State to provide workers' compensation
insurance. The Murkowski Administration is against assuming
additional bureaucracy.
9:24:59 AM
Senator Hoffman noted the language of Section 21 of the bill
relating to penalties or fines for employers who fail to carry
workers' compensation insurance. He asked the comparison of the
proposed consequences with the current penalties and fines. He
asked the implications to employers and their businesses that are
unable to obtain the insurance.
9:25:41 AM
Mr. Lisankie replied that the language of Section 21 is a new
provision. Currently, no fines could be assessed. This provision
would give the Division a method for enforcement.
9:26:16 AM
Senator Hoffman posed a scenario in which drastic changes in the
marketplace occur and an employer is subsequently unable to secure
adequate coverage for its workers. In this event, he understood
that business would be shut down under the provision of Section 21.
9:26:48 AM
Mr. Lisankie affirmed clarifying that current statute stipulates
such business closures for an employer's failure to obtain adequate
insurance.
9:27:07 AM
Senator Hoffman asked if the Division would investigate emergency
measures to allow businesses to continue operation if the employer
was unable to obtain insurance between now and the date this
legislation was enacted.
9:28:00 AM
Mr. Lisankie responded that this has not been considered. The
intent is to contain costs. Workers' compensation insurance is
available to employers, albeit at a high cost.
9:28:20 AM
Senator Hoffman predicted a probability that some employers would
be unable to acquire the insurance coverage. He asked what actions
the Division would take to assist these businesses.
9:28:40 AM
Mr. O'Claray interjected that the purpose of this legislation is to
implement changes that would contain costs. Statutory requirements
exist that require businesses employing workers to carry workers'
compensation insurance. The cost of this insurance is the current
concern. The study is requested to provide lead time" to examine
the data maintained by underwriters. This data would be analyzed to
identify changes that would address costs. No exemptions are
provided to allow an employer to not secure this insurance.
9:29:55 AM
Senator Stedman remarked that additional efforts should be made to
attract more underwriters to offer coverage within the State. He
noted the deficit in the "pool" and asked how it would be
addressed.
9:31:00 AM
Mr. O'Claray told of the limited number of underwriters. The major
concern of underwriters considering offering insurance in Alaska is
the appeals commission. The Division has received complaints from
employers asserting that cases are "skewed against them" and
therefore appeals are not pursued. Another complaint is the
inconsistency with the law. The current system involves a three-
person panel that hears a claim and makes a determination, which
could be appealed in superior court. If the inconsistency between
decisions were eliminated, claims could be settled faster. This
would allow those workers to make decisions sooner about whether to
remain in their current career or to change professions.
9:33:17 AM
LINDA HALL, Director, Division of Insurance, Department of
Community and Economic Development, introduced herself for the
record.
9:33:44 AM
Senator Stedman inquired about the impending deficit in the event
the current system was not restructured.
9:34:01 AM
Ms. Hall clarified the deficit in question related to the guarantee
association and was addressed in legislation passed the previous
session. Reassessment of the situation revealed that the changes
were successful and that a deficit no longer exists. Workers and
employers are no longer at risk of unpaid claims. The intent of the
bill currently before the Committee is to implement reforms to
reduce the cost of claims. Until the overall cost of claims is
reduced, premiums would continue to rapidly increase.
9:35:13 AM
Ms. Hall referenced an annual report issued by the Division, the
latest of which identified 96 insurance providers approved to write
claims in Alaska. Of those only five seek to write claims in the
State. If premium rates are not sufficient to cover the cost of
claims, the potential exists that insurance companies would not
offer policies. "Extremely" high claim costs have been incurred in
the last five years with insurances companies paying out $1.54 in
claims for every $1 collected in premium. An assigned risk plan is
the "last resort".
9:37:41 AM
Senator Stedman noted the proposed fine of $1,000 per day that an
employer fails to carry workers' compensation insurance. He asked
if a subcontractor on a project were found to be without coverage,
what party would be responsible for payment of the fine: the
subcontractor, the general contractor or another party. He also
asked whether the fine would be imposed on each project an employer
is working.
9:38:24 AM
Mr. Lisankie replied that the subcontractor would be fined a
maximum of $1,000 per day per employee. The proposed board would be
given discretion to determine the circumstances and whether the
full amount would be levied. For example, an employer who
inadvertently allowed the policy to lapse would be fined less than
an employee identified as a repeat offender.
9:39:13 AM
Senator Olson asked if any small businesses have been denied
workers' compensation insurance coverage.
9:39:27 AM
Ms. Hall explained the "assigned risk pool", which requires
insurers to offer coverage to all employers. The only reason an
employer did not have this insurance would be from a failure to pay
the premium
9:39:48 AM
Senator Olson asked the number of employers included in the risk
pool.
9:39:50 AM
Ms. Hall answered that approximately 9,000 employers are included
in the assigned risk pool.
9:40:00 AM
Senator Olson asked the number of employers that did not pay their
premium or were unable to secure the insurance.
9:40:08 AM
Ms. Hall was unaware of any. She qualified that some disputes over
eligibility for coverage did occur.
9:40:25 AM
Senator Olson told of a medical field pool utilized to provide
opportunity for physicians to obtain malpractice insurance. He
asked if such an arrangement had been considered for the workers'
compensation insurance system to make premiums more affordable.
9:40:57 AM
Ms. Hall replied that the matter has been discussed. The
aforementioned medical pool for doctors was purchased by a company
and no longer qualified for tax-exempt status. As a result, the
program has been discontinued. She reiterated that until the cost
of claims is reduced, the basic cost of providing workers'
compensation insurance would not decrease. Some states, including
California and Utah have a high percentage of state-provided
coverage. However, the intent for Alaska is to establish a
"healthy" competitive marketplace, which a state-provided system
would not accomplish.
9:42:06 AM
Senator Olson surmised this legislation attempts to decrease
premium amounts; however if a worker is injured, the system must
still have the ability to compensate that worker.
9:42:45 AM
Ms. Hall stressed that the provisions in this legislation would not
change benefits as to do so is not the intention. Providing medical
care and prescription drug costs in Alaska is the second highest in
the nation. Every employer would be required to maintain a minimum
level of benefits. The intent is to provide good medical care for
injured workers to allow them to return to work.
9:43:46 AM
Senator Olson asked if unions and employees would agree that
adoption of this legislation would not result in decreased
benefits.
9:44:09 AM
Mr. Lisankie qualified that some changes would be made to the
maximum reimbursement amount allowed for certain procedures. This
could be considered as affecting benefits. However, the basic
underlying structure would not be "radically" changed.
9:44:56 AM
Co-Chair Wilken shared his experience with the business he owns
that employs 23 people. The cost of his workers' compensation
premium rose 23 percent in the past year, 20 percent the previous
year and 20 percent the year before that. The total cost of his
premium is "up to six figures". This funding must be taken from the
company's "bottom line".
Co-Chair Wilken stressed that this legislation is an attempt to
"stop that hemorrhage", which affects the "backbone of our economy"
i.e. small businesses. Premium rates are assessed based on claim
experience with the rates of an "unsafe shop" higher; however,
discounts for infrequent claims have been eliminated as well as the
option of employing an agent provider to "shop around" for the best
policy at the lowest cost is no longer viable due to the lack of
competition. This affects business operations and causes managers
to delay purchase of inventory, new equipment and to increase
wages, which contribute to a successful business. Instead these
funds must be utilized to pay the workers' compensation insurance
premium.
Co-Chair Wilken remarked upon the continued testimony received
emphasizing, "the worker does not get hurt" as a result of the
provisions proposed in this legislation, as well as the statutory
changes enacted after the previous legislative session. The bill
before the Committee however, would make the workers' compensation
program more "rigorous". Therefore, he concluded that this
legislation would have no negative impact, while not changing the
current system would result in "damage."
9:48:31 AM
Amendment #1: This amendment deletes the language of Section 34 on
page 21, lines 7 through 11, which reads as follows.
Sec. 34. AS 23.30.205 is amended by adding a new
subsection to read:
(g) Claims for reimbursement may not be submitted to the
fund after September 1, 2005. The fund shall continue to make
reimbursement payments on claims accepted before July 1, 2006,
or ordered by the board, until the fund's liabilities for the
claim are extinguished.
Co-Chair Green explained that department representatives proposed
this amendment as a correction to changes made by the Senate
Judiciary Committee.
Co-Chair Wilken moved for adoption.
The amendment was ADOPTED without objection.
9:49:20 AM
DR WILLIAM PFIEFER, Alaska Chiropractic Society, testified via
teleconference from an offnet location to four proposed amendments
that the Society requests be adopted. The first relates to the lack
of a chiropractic professional in the membership of the proposed
task force on workers' compensation. Senator Seekins announced in
the Senate Judiciary Committee that chiropractic care would be a
major focus of the task force. However, Dr. Phiefer noted certain
injuries that chiropractors treat comprise a large portion of the
number of workplace injuries. The Society requests that a seat on
the task force be designated for a chiropractor and be granted full
voting privileges.
Dr. Phiefer next addressed the proposed medical services review
study and requested that the review committee include the
professionals who provide chiropractic services. The study should
also include data collection of valid and detailed information in
which recommendations could be based. Without accurate data,
recommended changes to the workers' compensation program would be
of "little value." He told of the access the Society and the
American Chiropractic Association have to research scientists and
study results.
Dr. Phiefer opposed the guidelines proposed for inclusion in this
legislation, as they have been proven to be inaccurate and not
comprehensive. The guidelines are narrow in scope and lack complete
analysis of the current research. The conclusions do not reflect
the studies listed in the bibliography. The Society recommends a
compromise to allow for the Workers' Compensation Board to adopt
regulations and new that reflect the most recent research findings
when appropriate. The proposed guidelines should not be specified
in statute. He understood the intent of the legislative committees
hearing this bill to establish that treatment be in accordance with
standards based on scientific and evidence-based medicine.
Dr. Phiefer requested that "major" be replaced with "significant"
in reference to "the aggravation question". This would reflect the
status quo. The definition of major requires at least a 51 percent
burden and such determination should not be made at this time.
Another option would be consideration of imposing a higher burden
in the determination of "disability" for preexisting conditions.
9:54:27 AM
Co-Chair Wilken offered a motion to report CS SB 130 (JUD), as
amended, from Committee with individual recommendations and new and
accompanying fiscal notes.
There was no objection and CS SB 130 (FIN) MOVED from Committee
with zero fiscal note #5 from the Alaska Court System, zero fiscal
note #7 from the Department of Commerce, Community and Economic
Development, a new zero fiscal note dated 4/11/05 from the
Legislative Affairs Agency and a fiscal note of $420,000 dated
4/9/05 from the Department of Labor and Workforce Development.
AT EASE 9:55:05 AM/10:03:01 AM
Co-Chair Wilken chaired the remainder of the meeting
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