Legislature(2003 - 2004)
02/26/2004 01:37 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM
CHAIR CON BUNDE announced SB 311 to be up for consideration.
MS. LINDA HALL, Director, Division of Insurance, Department of
Community & Economic Development (DCED), said she would answer
questions that had been asked in the last couple of days and
that first, Director Lisankie, Division of Workers'
Compensation, would explain the transition process for people
currently in the system. She would address Chair Bunde's
question about the cost of attorney fees and litigation in
relation to premium and then she would comment on the
appointment process.
MR. PAUL LISANKIE, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development (DOLWD), addressed
the question about a woman who gets workers' compensation based
on her spouse's work experience with atomic testing in Amchitka
in the 1970s. She was having a hearing before the board in March
and wanted to know how SB 311 would affect her claim because its
effective date is July 1, 2004 and provides that anything being
heard before the board as of that date would continue to be
heard until 45 days afterwards. He did not believe her claim
would be affected.
If she wished to appeal, she would appeal to the
Superior Court. The only thing I would add is...if
there was someone else who had a claim based on the
Amchitka testing and if their hearing wasn't concluded
under the current law before July 1, then they would
be susceptible to the changes just like anybody else
would. There is nothing specific to an Amchitka claim
that would affect it.
SENATOR HOLLIS FRENCH asked if the Amchitka claim person would
operate under the old system for 45 days or to the end of her
claim.
MR. LISANKIE clarified:
The 45 days is just a closeout period after the
effective date so that anything that was heard by the
effective date by the existing board would be
determined by the existing board. They would have 45
days after the effective date to wrap up any decision
they hadn't gotten out by then. So, it would continue
in the current system. It would not change.
SENATOR FRENCH pointed out if further fact finding or another
hearing was necessary, she might not have a board to appear in
front of if the commission had started functioning.
MR. LISANKIE responded that his answer would only apply to her
current claim. If a hearing took place after the effective date,
the new provisions would apply.
SENATOR FRENCH said this woman does not have a new claim; it's
just taking a long time to resolve.
MR. LISANKIE said he understood Senator French's question now
and answered:
I believe you're correct that the hearing that took
place would be resolved in the current system, but if
for some reason another hearing was to be scheduled
after the effective date, then it would be under the
new system.
CHAIR BUNDE reminded the committee that he had a question about
the appointment process and asked if the commissioners would be
appointed and confirmed.
MS. HALL replied:
Generally, the appointment process in this bill is
exactly the same as the current appointment process is
for the board. They would be nominated by the governor
and confirmed by the Senate.... The change is these
would now become fulltime positions, but there's still
an executive position for a limited term. They're not
court positions; they're administrative law judge
positions, which normally aren't vetted through a
third party screening process. One of the things we've
talked about after the question came up is there
are...not large numbers of workers' compensation
attorneys. So, it's a fairly small pool and experience
and reputations are not as well-known as other types
of attorneys tend to be.... So, we have a concern that
a judicial council would even have sufficient numbers
of people to interview and make recommendations.
Generally, my comment on that is that nothing would
prohibit a governor from seeking, informally,
recommendations from various organizations and I would
anticipate that that would occur. It does, typically,
today in board positions.
CHAIR BUNDE said the ad hoc group wanted to have input and he
asked how long this bill had been in the public domain and if
any attempt had been made to share it with that group.
MS. HALL replied that the ad hoc committee was not consulted in
the process of this particular bill.
The bill genesis came from primarily me - not that
piece of it. But, primarily the pieces I have proposed
in legislation and administratively are dramatically
increasing the cost of workers' compensation for
employers. I've made a proposal, as you're all aware,
because we've heard it in this committee, to increase
assessments for the Guaranty Fund. Effective January
1, the rate approval done by the Division of Insurance
averaged 22 percent. We have an increasing cost of
claims and, as I put forth legislation that I know has
an impact on the availability of workers' compensation
the goal was to find a way to, frankly, put a light at
the end of the tunnel, to attempt to find ways to
start to get some control over the claim costs. I will
talk about litigation also and to find ways to do that
without reducing benefits to workers. I think that was
an important element of what we looked at. This was, I
think, in our minds a systemic change to streamline
and bring predictability into the appeals process, not
to change benefits.
I think there are very important issues and we
discussed them a little bit when we discussed the
Oregon system. I think there are issues that need to
be addressed that could affect benefits, that could
affect reemployment benefits, various things, that I
think are very appropriate for a group of labor and
management to get together and discuss and to work on
and have input.... I think, if that sheds any light,
the short answer was no, we didn't take it to them.
SENATOR RALPH SEEKINS said he felt it incumbent upon
legislators, since they have made this the exclusive remedy, to
make sure that worker's compensation claims are resolved fairly
and in a timely fashion. At the same time, they should make sure
the compensation is adequate and fair to the injured worker. He
asked her if this legislation meets those hurdles and what are
the major benefits to the state and the workers that she has
laid out in the bill.
MS. HALL replied:
To me the major benefit is a more efficient, more
predictable system - that as cases are heard by
hearing officers or the appeals commission, there is a
precedent set that can then allow other injured
workers or employers who take exception to a ruling -
maybe to a decision of an insurance company, to
wherever that dispute comes from - that allows that to
be adjudicated more quickly and more efficiently. But,
we have a precedent so that we have something to
evaluate. Do I have a claim? Has this case been heard
and a definitive type of answer given as to whether
this is compensable or not, whether these are
appropriate benefits. That is the advantage I see to
the system. [END OF SIDE A]
TAPE 04-15, SIDE B
MS. HALL continued:
In 2002, for example, we had $202 million of workers'
compensation premium; $11 million of that was expended
in attorney fees, approximately 5 percent; $1.2
million in actual litigation costs, about .6 percent.
I did that for five years. The percentages of attorney
fees ranged from a high in 1998 of 7.8 percent of
actual premium dollar to a low in 2002 of 5 percent.
So, they have been going down - not steadily; there
are jagged peaks. Litigation costs have gone from a
high of 1.7 percent of earned premium to - 2002 was .6
percent, a little bit higher than the 2001 .5
percent.... Attorney fees range from 5 to 7 percent of
the cost of premium.
CHAIR BUNDE asked what the total premium is.
MS. HALL answered the total premium was $202 million in 2002. In
1998, it was $132 million.
CHAIR BUNDE announced that it was not his intention to move the
bill today in order to have further input.
MR. JIM ROBISON, Alaska resident for 58 years, said he is a 55-
year member of Laborers Local 331, a former president of the
AFL-CIO, a former workers' compensation board member and a
former commissioner of the Department of Labor. He said:
I've been involved with workers' compensation a long
time. The Workers' Compensation Act has been a
political football ever since Governor J.P. Strong
spoke to the 1915 Territorial Legislature about the
need to cover the injured worker. In 1981, in order to
get rid of the politics as much as possible, the
Alaska AFL-CIO and the Associated General Contractors
of Alaska agreed to a workers' compensation ad hoc
committee to review the Workers' Compensation Act to
see if any changes were needed and it jointly lobbied
the governor and the Legislature on any agreed-upon
legislation to improve the act.
We convene this committee as needed. In the past 23
years, we have had the support of the governors and
the Legislature in our efforts. At the present time,
the ad hoc committee represents the employer and is
comprised of Vic Kattenaugh, Judith Peterson, April
Wiley, Laura Jackson and John Garrett. And for labor,
the representatives are Kevin Dougherty, myself, Dave
Ford, John Giuchici and Barbara Huff-Tuckness. This
committee will meet on March 2 to review and consider
SB 311 and I'll convey the timeframes you have
outlined so that we can jointly give our views on this
bill.
Mr. Chairman, I'm not here representing the ad hoc
committee, I'm only representing myself, but this is
an important bill and I thank you for holding it in
committee to receive the input from the ad hoc
committee.
SENATOR SEEKINS wondered why the scope of people who want to
comment on this bill had not been broadened beyond the
Association of General Contractors to the rest of the employers
in the State of Alaska.
MR. ROBISON explained that the Chamber of Commerce was asked by
the employer group to become involved, but it didn't want to and
he didn't know why.
MS. PAM LABOLLE, President, Alaska State Chamber of Commerce,
supported SB 311. Members feel that elements in it favor
improvement of the system.
MS. PATRICIA WILSON, Harbor Adjustment Services, supported SB
311 and echoed previous comments about how it would increase the
efficiency and predictability of the workers' compensation
system. The current system is frustrating for both the injured
workers and the people who handle their claims.
MS. SUSAN DANIELS, Vice President, Workers' Compensation,
Northern Adjusters, said it inherited the 700 Fremont insolvency
claims in July 2003 and they are in all different stages of this
process. She supported SB 311 and said:
I think the underlying premise is important to
recognize that the legislative intent and the workers'
comp laws don't seem to be our major stumbling block,
but rather the adjudication process, the delays, the
lack of a simple speedy remedy for the injured workers
and people involved in the decision making on these
cases. It's become very complicated and the law, in
terms of paying or denying claims, is very
inconsistent. So, many times adjusters were faced with
the decision of whether a claim is covered or not
based on a substantial amount of grey area - end up
having to refer a lot more cases to defense attorneys
for a legal opinion, which is not only increasing the
cost of the attorney fee end, but, short of that, more
claims are being paid than perhaps the legislative
intent of the law intended to be covered.
MR. MIKE KLAWITTER, Director, Risk Management, Anchorage School
District, said his district has about 6,500 employees and is one
of the largest self-insurers in the state. He thought SB 311 is
a positive step for workers' compensation in Alaska for the
reasons already stated, particularly efficiency and consistency.
MS. CONSTANCE LIVSEY, Anchorage attorney, said the bulk of her
practice is representing employers before the Workers'
Compensation Board. She supported SB 311 and wanted to clarify
two aspects of it.
First, this bill does not in any way remove or alter
the presumption of compensability in favor of injured
workers. That presumption, for those of you who like
to thumb through the legislation, is found in AS
23.30.120. The bill does not alter that in any way.
This is purely a matter of procedure and not a matter
of substance. The bill is also not the product of
collaboration between the administration and WCCA
[Workers' Compensation Committee of Alaska]. We were
not involved in the drafting of the bill and, in fact,
WCCA first got a copy of the bill after it was
generally available on the street sometime in late
January.
Let me speak to a couple aspects of the bill that I
believe will significantly improve the adjudication
process for the contested or litigated workers comp
claims. The two-tier system proposed in the bill to
create both a hearing officer level and a commissioner
level would significantly accelerate the adjudication
process. In fact, that two-tier system is far more
common around the country than the system we now have.
The proposed structure, I believe, would elevate the
qualifications of the decision-makers and that's
significant because workers' compensation is a very
arcane area of the law. It's a unique set of laws;
it's a unique body of procedure. It's not something
you wake up in the morning knowing how to do.
If we have decisions made by experienced
practitioners, I'm convinced you'll have a process
that is fairer, that is faster and that offers more
certainty. Surely, that benefits all parties. As it
stands now, one board panel can reach a conclusion
different from that reached by another board panel.
One superior court judge can reach a conclusion that
is different than that reached by another superior
court judge. And so, as Ms. Daniels testified, you end
up with a great deal of inconsistencies that cost
litigation. That benefits no one.... The superior
court appeals process is lengthy. It commonly takes a
year or a year and a half to get the matter briefed
and decided. You can get, as I mentioned, inconsistent
rulings that have no binding precedential value on
other cases. And quite frankly, the superior court
judges are primarily trial court judges, not appeal
judges. I don't get the impression that they have any
significant experience in workers' compensation
matters and it simply is a disfavored area of their
workload.
Finally, a superior court decision carries no weight
at [indisc]. It's an odd rule and one with which
people may not be generally familiar, but in an appeal
from the administrative agency decision, the Alaska
Supreme Court gives no deferential value to the
superior court's decision. In other words, they simply
directly review the decision of the board. Simply put
then, the entire year, year and a half, worth of
superior court process lends nothing to the ultimate
decision. For all of those reasons and several others
I probably don't have time for today, I urge a vote in
favor or this bill.
CHAIR BUNDE asked for any other comments and upon hearing none,
set the bill aside.
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