03/21/2000 01:37 PM Senate L&C

                                                                                                                                
                                                                                                                                
               SB 272-WORKERS COMP AND WORKER SAFETY                                                                        
                                                                                                                                
MR. PAUL GROSSI, Director  of the Division of Workers' Compensation,                                                            
stated changes  have been made to address concerns  of the industry.                                                            
                                                                                                                                
CHAIRMAN  MACKIE stated  the intent was  not to move  SB 272  out of                                                            
committee,  but to have  a hearing  and let the  House version  come                                                            
over  to the  Senate.   Chairman  Mackie  expressed  concerns  about                                                            
municipalities and timber industry self-insured groups.                                                                         
                                                                                                                                
MR. GROSSI  said SB 272 will eliminate  the premium tax on  workers'                                                            
compensation insurance,  enact the user fee, and establish a special                                                            
account for funding workers'  compensation and Occupational Safety &                                                            
Health Administration  (OSHA).   Employers  must cover workers  with                                                            
workers'   compensation   in  three   ways;  purchase   a   workers'                                                            
compensation  insurance policy,  certify they  are self-insured,  or                                                            
become a member of the Joint Insurance Association (JIA).                                                                       
                                                                                                                                
SB 272 is an  attempt to establish  that all employers pay  the same                                                            
rate  based  on  the  number  of claims  filed.    The  more  claims                                                            
submitted,  the more employers will  pay, and less claims  will mean                                                            
lower payments.   SB 272  will promote  safer working environments,                                                             
allow all  employers to pay  at the same  rate, and will  eventually                                                            
eliminate  reliance  on the  general  fund.   Mr. Grossi  stated  16                                                            
states use an approach  similar to that in SB 272.  OSHA needs to be                                                            
ruled by the State and  not be taken over by the federal government.                                                            
                                                                                                                                
CHAIRMAN  MACKIE asked if  Mr. Grossi had  seen correspondence  from                                                            
the Alaska  Forest Association and  Sealaska regarding self-insured                                                             
agencies that are concerned about SB 272.                                                                                       
                                                                                                                                
MR. GROSSI said no.                                                                                                             
                                                                                                                                
MR. MICHAEL HINCHEN, General  Manager of the Alaska Timber Insurance                                                            
Exchange (ATIE),  stated ATIE was founded in 1980  by members of the                                                            
Alaska  Loggers Association  and  is owned  by its  policy  holders.                                                            
Workers'  compensation   insurance  costs  have  been   reduced  and                                                            
improved  workplace  safety  has resulted  for  workers.   ATIE  has                                                            
concerns  about SB 272  and HB 378,  the companion  bill to  SB 272.                                                            
The new user fee results  in double taxation.  Workers' compensation                                                            
insurance premiums pay  for losses, claims administration costs, and                                                            
other administrative expenses.                                                                                                  
                                                                                                                                
Lost  payments  make up  50-70  percent  of the  premiums  that  are                                                            
collected for any given  policy year.  ATIE and other insurers would                                                            
be  taxed on  lost payments  that  have already  been  subject to  a                                                            
premium  tax.  Mr.  Hinchen referred  to AS 21.09.210.   The  double                                                            
taxation  will have an adverse  financial impact  on ATIE and  other                                                            
insurance companies.                                                                                                            
                                                                                                                                
If SB  272 does  pass, ATIE  will need  to accrue  an expense  and a                                                            
liability  for future  user  fee payments  that  are  based on  lost                                                            
reserves that  relate to 1999 and prior policy lost  reserves.  ATIE                                                            
policy  holder surplus  will  be reduced  by $417,000.   The  policy                                                            
holder surplus  is the owners' equity  portion that these  employers                                                            
in the  State  and the  timber companies  have  put up  to fund  the                                                            
exchange.   This would  reduce the  surplus by  eight percent.   The                                                            
projected  net income  for  the year  2000 would  be  reduced by  13                                                            
percent,  and the substitution  of user fees  for premium taxes  for                                                            
claims occurring  during 2000 would reduce the projected  net income                                                            
by 15 percent.                                                                                                                  
                                                                                                                                
SB 272 is bad  public policy because the control of  the funding for                                                            
OSHA and the  Division of Workers'  Compensation will be  taken away                                                            
from  the  legislature.    Funding  for  the  Division  of  Workers'                                                            
Compensation  (DWC)  would be  spent  on workers'  compensation  and                                                            
benefit  payments.  Pressure  for the Alaska  Workers' Compensation                                                             
Board to rule  against an employer when a claim is  heard before the                                                            
board would increase.                                                                                                           
                                                                                                                                
Number 844                                                                                                                      
                                                                                                                                
MR. DWIGHT PERKINS,  Deputy Commissioner of the Department  of Labor                                                            
(DOL), stated  the legislature does have power over  appropriations,                                                            
and that will  not change.  No input about double  taxation has been                                                            
received from companies.                                                                                                        
                                                                                                                                
MR. DON SHANNON,  Alaska Safety Advisory  Council, stated  if SB 272                                                            
will force  companies to "beef up"  safety programs, that  is a good                                                            
thing.  Mr. Shannon stated support for SB 272.