Legislature(1995 - 1996)
03/15/1995 03:06 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HL&C - 03/15/95 HB 237 - WORKERS' COMPENSATION AMENDMENTS Number 397 CHAIRMAN KOTT announced the next order of business was HB 237. REPRESENTATIVE ELDON MULDER, PRIME SPONSOR OF HB 237, stated that HB 237 was a consensus piece of legislation. He explained that for seven years they have been trying to come up with a consensus package. This agreement was reached by members from the Ad Hoc Labor Management Committee on Workers' Compensation Reform. He stated Alaska was one of the few states, west of the Mississippi, that has been able to realize a reduction in Workers' Compensation Premiums. He said that there were six provisions contained within the bill. Section 2 is the contracted premium rate adjustment, which stipulates that workers' compensation premium rates cannot be determined by the amount of money you pay your employees. It's by the amount of risk. He said that Section 3 pertains to design professional construction site liability limits. This protects professional designers, engineers and architects who may map out a plan, but through the courts have been held liable through no fault of their own. Section 4, he stated, contains an element pertaining to determination of spendable weekly wages. This is in response to the Gilmore decision which the Supreme Court threw out this summer. He stated that the death benefit section is contained in Section 6. Currently in Alaska statute, for an individual killed on the job, their surviving spouse receives their benefits up to ten years. However, after five years that benefit is diminished by one-third. From five to eight years, it is diminished by half. This legislation suggests that a more appropriate course would be to extend the benefit through ten years. Number 469 CHAIRMAN KOTT asked what the rationale was behind that. REPRESENTATIVE MULDER stated that about the time the surviving spouse is about to get on their feet, presumably by going back to school to make up for the lost income, is about the time you're going to cut back on their benefits and essentially hampering their efforts. Number 480 CHAIRMAN KOTT added that the cost would be spread out so the cost to employers would be very small. REPRESENTATIVE MULDER stated that the net increase to employers would be .006 premium rate adjustment increase. He also added that there was a very small section of the employee community that is affected. REPRESENTATIVE ROKEBERG asked why they were revising the law. REPRESENTATIVE MULDER responded that when you do a workers' compensation reform package, you seek a balance between the benefits gained by management versus the benefits gained by labor, seeking to provide a level playing field so that the net impact to the rate payer will either be neutral or negative. REPRESENTATIVE MULDER continued that there were two more provisions. The Van Bene provision which provides immunity for insurance companies that provide workplace safety inspection programs. He said that the final element, contained in Section 8, is fraud. Currently, if an employer believes an employee is guilty of fraud, their only recourse is to take it to court. This would allow the employer to go before the board, which is far simpler and less expensive. Number 531 REPRESENTATIVE KUBINA asked if the department endorses the bill. CHAIRMAN KOTT stated that the department did endorse the bill as written. Number 538 DARIO NOTTI, LEGISLATIVE INTERN TO SENATOR DUNCAN, explained he was testifying on his own behalf, and asked if the employee had the right to appeal to the courts in a fraud case. REPRESENTATIVE MULDER responded they did. Number 554 MARIANNE BURKE, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, testified that the Division supports the legislation. However, Section 2 has potential impact on overall premiums. Any additional administrative costs that might be incurred would have to be shared by all of the insured. She continued that if credits were received by a portion of the group, based on an average salary and credit scale, the difference in premiums will have to be made up by the remaining group members. Number 567 REPRESENTATIVE PORTER asked for a factual example of this. MS. BURKE stated, that workers' compensation premiums start out with a manual rate. Depending on different factors, you may pay more than or less than that rate based on a percentage. If you had a good record with very few claims, you would pay a smaller percentage of the manual rates. If you had many claims, you would pay a higher percentage of manual rates. She stated the method currently structured is an open ended payroll base. The starting point for developing this premium is your total payroll. If an employer has a $10 million payroll, but you limit that payroll to the average weekly salary, the total amount of money needed to pay all claims remains the same so you must collect premiums from the remaining participants. Number 598 WILLY VAN HEMERT, CIVIL ENGINEER, MEMBER, AD HOC LABOR MANAGEMENT COMMITTEE ON WORKERS' COMPENSATION REFORM, testified via teleconference that the Ad Hoc Committee was a voluntary consensus group of both labor and management. He stated that they had attempted to eliminate third party providers, such as insurance and medical providers. He pointed out that the committee is structured through organized labor and the management side is composed of members of Workers' Compensation Committee of Alaska (WCCA). He concluded by saying that this was a consensus bill that comes as a package. TAPE 95-18, SIDE A Number 000 MR. VAN HEMERT stated that not all costs related to workers' compensation benefits are directly proportionate to wages, namely medical benefits. He said that if someone breaks their arm, the benefit cost for that arm is the same. It doesn't matter if they are making $10 an hour or $25 an hour. In some cases, there is a limit on the salary cap on benefits. He said as far as rate making is concerned, the state of Alaska uses NCCI as their rate maker. Number 027 CHAIRMAN KOTT asked what Mr. Van Hemert's role was in putting the package together. MR. VAN HEMERT responded that he was a representative for WCCA, and the co-chairperson to the Ad Hoc Committee. Number 042 CHAIRMAN KOTT stated that this proposal seemed more expansive than the original proposal that the Ad Hoc Committee had been working on. MR. VAN HEMERT responded that there were a couple of things the drafters of the bill changed. Number 068 KEVIN DOUGHERTY, General Council for Alaska Laborers, Co-Chair, Ad Hoc Labor Management Committee on Workers' Compensation Reform, testified via teleconference in support of HB 237. Number 109 CHAIRMAN KOTT closed public testimony. REPRESENTATIVE PORTER made a motion to move HB 237 from committee with individual recommendations, and zero fiscal notes. CHAIRMAN KOTT asked if there was an objection. Hearing none, HB 237 was moved out of the House Labor and Commerce Committee.
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