Legislature(2003 - 2004)

02/16/2004 03:20 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 403-ALASKA INSURANCE GUARANTY ASSOCIATION                                                                                  
                                                                                                                                
Number 0042                                                                                                                     
                                                                                                                                
CHAIR ANDERSON announced  that the first order  of business would                                                               
be HOUSE BILL  NO. 403, "An Act relating to  the Alaska Insurance                                                               
Guaranty  Association; relating  to joint  insurance arrangements                                                               
and assessments  to the  association; relating  to the  powers of                                                               
the   Alaska   Industrial   Development  and   Export   Authority                                                               
concerning  the  association;  and  providing  for  an  effective                                                               
date."                                                                                                                          
                                                                                                                                
Number 0097                                                                                                                     
                                                                                                                                
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Community &  Economic Development,  noted that she  had presented                                                               
HB 403  originally  and would  explain  changes  in the  proposed                                                               
committee  substitute  (CS)   [Version  D,  labeled  23-GH2105\D,                                                               
Bullock,  2/11/04, which  there  was  a motion  to  adopt at  the                                                               
February 11 hearing].                                                                                                           
                                                                                                                                
MS. HALL  told members  the most controversial  part of  the bill                                                               
had been  removed, the assessments  against entities  not covered                                                               
by the Alaska Insurance Guaranty  Association (AIGA).  It removes                                                               
all  references   to  assessments  on  self-insurers   and  joint                                                               
insurance arrangements  (JIAs) because  funds generated  by those                                                               
assessments would  be a  minimal part of  the funds  generated by                                                               
other types of assessments.                                                                                                     
                                                                                                                                
Number 0186                                                                                                                     
                                                                                                                                
CHAIR ANDERSON announced that Representative  Lynn had joined the                                                               
meeting.   Returning to  the testimony, he  asked who  had wanted                                                               
those references removed.                                                                                                       
                                                                                                                                
MS.  HALL  replied  that representatives  from  both  the  Alaska                                                               
Municipal  League Joint  Insurance  Association and   the  Alaska                                                               
Public Entity  Insurance (APEI), as  well as at least  two school                                                               
districts,  had testified  that additional  assessments would  be                                                               
injurious to their budgets.                                                                                                     
                                                                                                                                
Number 0230                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked for  clarification of  the whole                                                               
bill, with the changes.                                                                                                         
                                                                                                                                
MS. HALL  explained that the  bill proposes to generate  a stream                                                               
of  revenue to  cure  the  deficit in  the  [AIGA] fund  through,                                                               
first,  an increase  in the  assessment on  the line  of business                                                               
where  the insolvency  occurs; second,  assessing  the other  two                                                               
accounts  in the  fund, the  auto  and the  "other"; and,  third,                                                               
allowing   AIDEA  [Alaska   Industrial  Development   and  Export                                                               
Authority] to guarantee  a loan on behalf of [AIGA]  if there are                                                               
insufficient funds to pay claims through the assessment process.                                                                
                                                                                                                                
Number 0310                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked if the self-insurers  were taken                                                               
out statewide.                                                                                                                  
                                                                                                                                
MS. HALL responded that it was all self-insurers.                                                                               
                                                                                                                                
CHAIR ANDERSON remarked  that Ms. Hall in the past  had said this                                                               
process wouldn't be very appealing  because it would raise rates.                                                               
He said it was tough to do, but needed to be done.                                                                              
                                                                                                                                
MS.  HALL agreed.   She  characterized  the bill  as painful  and                                                               
unpopular,  and  said  it  does  increase  assessments  on  other                                                               
policies  and policyholders.   Saying  the  alternative of  doing                                                               
nothing would be more painful, she continued:                                                                                   
                                                                                                                                
     It  will give  the  injured workers  who are  currently                                                                    
     receiving  benefits  at  least  probably  a  period  of                                                                    
     disruption of  their benefits.   In  the long  run, the                                                                    
     obligation for workers'  compensation insurance is that                                                                    
     of the employer.                                                                                                           
                                                                                                                                
     We have  380 employers  with claims of  their employees                                                                    
     in the  [fund] today.   These claims would  revert back                                                                    
     to   those   employers   who   purchased   a   workers'                                                                    
     compensation  policy to  satisfy  that obligation,  and                                                                    
     now they would get  that financial obligation back with                                                                    
     probably  little awareness  or  financial planning  for                                                                    
     that burden.                                                                                                               
                                                                                                                                
Number 0424                                                                                                                     
                                                                                                                                
REPRESENTATIVE DAHLSTROM  moved to  report CSHB 403,  Version 23-                                                               
GH2105\D,  Bullock, 2/11/04,  out  of  committee with  individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no objection,  CSHB 403(L&C)  was reported  from the  House Labor                                                               
and Commerce Standing Committee.                                                                                                
                                                                                                                                
HB 450-INSURANCE & WORKERS' COMPENSATION SYSTEM                                                                               
                                                                                                                                
[Contains discussion of HB 403]                                                                                                 
                                                                                                                                
Number 1325                                                                                                                     
                                                                                                                                
CHAIR ANDERSON announced  that the final order  of business would                                                               
be HOUSE  BILL NO. 450, "An  Act providing for a  special deposit                                                               
for  workers' compensation  insurers;  relating to  the board  of                                                               
governors of the Alaska  Insurance Guaranty Association; relating                                                               
to  covered  workers'  compensation  claims paid  by  the  Alaska                                                               
Insurance  Guaranty  Association;  stating   the  intent  of  the                                                               
legislature,   and  setting   out  limitations,   concerning  the                                                               
interpretation,  construction,  and  implementation  of  workers'                                                               
compensation laws; relating to  restructuring the Alaska workers'                                                               
compensation    system;   eliminating    the   Alaska    Workers'                                                               
Compensation   Board;  establishing   a   division  of   workers'                                                               
compensation  within  the  Department   of  Labor  and  Workforce                                                               
Development  and assigning  certain Alaska  Workers' Compensation                                                               
Board functions to  the division and the Department  of Labor and                                                               
Workforce  Development;  establishing   a  Workers'  Compensation                                                               
Appeals  Commission; assigning  certain functions  of the  Alaska                                                               
Workers' Compensation Board to  the Workers' Compensation Appeals                                                               
Commission;  relating  to   agreements  that  discharge  workers'                                                               
compensation  liability;   providing  for  hearing   officers  in                                                               
workers'   compensation   proceedings;   relating   to   workers'                                                               
compensation awards; relating to  an employer's failure to insure                                                               
and keep insured or provide  security; providing for appeals from                                                               
compensation   orders;   relating    to   workers'   compensation                                                               
proceedings; providing for supreme  court jurisdiction of appeals                                                               
from the Workers' Compensation  Appeals Commission; providing for                                                               
a maximum amount for the  cost-of- living adjustment for workers'                                                               
compensation  benefits;  providing for  administrative  penalties                                                               
for  employers   uninsured  or  without  adequate   security  for                                                               
workers'  compensation;  relating  to  assigned  risk  pools  and                                                               
insurers; and providing for an effective date."                                                                                 
                                                                                                                                
Number 1348                                                                                                                     
                                                                                                                                
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Community &  Economic Development, presented HB  450, noting that                                                               
she  would  provide  introductory comments  prior  to  addressing                                                               
specific  provisions in  the  bill.   She  reminded members  that                                                               
about three weeks  ago she'd done a presentation with  two of her                                                               
colleagues on  the workers'  compensation environment  in Alaska.                                                               
One piece  of that presentation  was the deficit in  the guaranty                                                               
fund, which relates to HB 403.  She continued:                                                                                  
                                                                                                                                
     There is  an additional  area of concern  of a  lack of                                                                    
     healthy  workers' compensation  environment in  Alaska.                                                                    
     To  outline and  briefly indicate  the problems  we are                                                                    
     encountering in that marketplace:   one problem is lack                                                                    
     of profitability in the  workers' compensation lines of                                                                    
     business in Alaska.                                                                                                        
                                                                                                                                
     From 1997 to 2002,  losses in workers' compensation for                                                                    
     carriers  ranged from  99.9 percent  to a  high of  154                                                                    
     percent.    At  that  high,  insurance  companies  were                                                                    
     spending $1.54 for every  $1 of [workers' compensation]                                                                    
     premium  collected.     Alaska  in  that   time  period                                                                    
     averaged  123.7  percent  losses  per  dollar  premium,                                                                    
     while  the national  average for  that time  period was                                                                    
     118.8  percent.    What  that  translates  to  is  that                                                                    
     carriers  are losing  5 percent  more  money in  Alaska                                                                    
     than the national average.                                                                                                 
                                                                                                                                
Number 1425                                                                                                                     
                                                                                                                                
MS.  HALL  said a  second  factor  in the  workers'  compensation                                                               
environment today is the cost  of medical benefits, which - along                                                               
with prescription  drug costs - have  seen double-digit increases                                                               
in the past several years.  She told members:                                                                                   
                                                                                                                                
     We  tend to  accept  a correlation  between the  rising                                                                    
     cost of health insurance  and increased cost of medical                                                                    
     care,   but  we   generally   don't   make  that   same                                                                    
     association  with  the  cost of  workers'  compensation                                                                    
     claims.   A  big  portion right  now, approximately  55                                                                    
     percent,  of workers'  compensation premium  is due  to                                                                    
     the increased cost of medical care.                                                                                        
                                                                                                                                
     Frequency  of claims  over the  last several  years has                                                                    
     declined.  This  is a good thing; it  indicates we have                                                                    
     safer work  environments, fewer  injured workers.   But                                                                    
     that  decrease in  the number  of claims  has begun  to                                                                    
     level out,  and it tended  to mask the increase  in the                                                                    
     costs of  those individual  claims.   So, we  have seen                                                                    
     for several years  that we haven't seen the  need for a                                                                    
     premium increase ....                                                                                                      
                                                                                                                                
     The third area that's  creating a difficult environment                                                                    
     for   employers  are   the   premium  rate   increases.                                                                    
     Effective January  1 [2004], the average  rate increase                                                                    
     is  21.2  percent.   As  the  historical loss  cost  of                                                                    
     claims has increased,  actuarial analysis of historical                                                                    
     claims  data and  projection for  the  future costs  of                                                                    
     claims indicate  a need for substantial  rate increase,                                                                    
     and that was approved. ...                                                                                                 
                                                                                                                                
     This rate change ranged from  a 15 percent reduction to                                                                    
     a   57  percent   increase.     Thirty  classifications                                                                    
     received reductions in their  rates, while 17 different                                                                    
     workers' comp  classifications  will see rate increases                                                                    
     in excess of 50 percent in 2004.                                                                                           
                                                                                                                                
     The current  cash deficit  in the  guaranty association                                                                    
     has already  resulted in a  2 percent  assessment being                                                                    
     made  on each  workers' compensation  policy.   And the                                                                    
     legislation  that we  propose  to fund  that stream  of                                                                    
     payments,  to fund  the guaranty  fund, would  increase                                                                    
     those assessments.  Between the  rate increases and the                                                                    
     assessments, we're  seeing dramatic costs  in increases                                                                    
     in  the cost  of workers'  compensation for  employers,                                                                    
     both large and small.                                                                                                      
                                                                                                                                
Number 1533                                                                                                                     
                                                                                                                                
MS. HALL continued:                                                                                                             
                                                                                                                                
     The fourth factor  I'd like to discuss  is the assigned                                                                    
     risk pool.  This is  another factor in the increasingly                                                                    
     unattractive environment  in Alaska today.   Due to the                                                                    
     mandatory   nature  of   workers'  compensation,   when                                                                    
     employers  are unable  to obtain  workers' compensation                                                                    
     insurance in the  traditional voluntary marketplace, we                                                                    
     have  an assigned  risk pool  where  all employers  can                                                                    
     obtain insurance.                                                                                                          
                                                                                                                                
     Currently,  17  percent  of the  workers'  compensation                                                                    
     premium in  Alaska is in that  pool.  When the  cost of                                                                    
     claims  in   that  pool  exceeds  the   premium  dollar                                                                    
     collected, the  difference is charged to  all insurance                                                                    
     companies who write business in Alaska.                                                                                    
                                                                                                                                
     Currently, Alaska  has the highest charge  of any state                                                                    
     for losses in the assigned  risk pool.  That charge has                                                                    
     ranged from  4 to  6 percent over  the past  six years.                                                                    
     This additional cost to  insurance companies comes from                                                                    
     their  operating  cost  and  makes  doing  business  in                                                                    
     Alaska very expensive.                                                                                                     
                                                                                                                                
     Overall,  we have  a workers'  compensation environment                                                                    
     that's becoming  very expensive for employers  and very                                                                    
     unattractive [for]  insurers.   As these  issues became                                                                    
     apparent,  ... staff  from the  Division of  Insurance,                                                                    
     from   the    Department   of   Labor    [&   Workforce                                                                    
     Development],   the   Department   of  Law,   and   the                                                                    
     administration met  and struggled  to try to  find ways                                                                    
     to overcome these challenges.                                                                                              
                                                                                                                                
     We   cannot  continue   to  merely   increase  workers'                                                                    
     compensation payment  for employers.   We must  look to                                                                    
     find  ways to  stem  the increasing  cost of  providing                                                                    
     benefits.   We've looked at many  options, ranging from                                                                    
     the  cost  of  medical  befits  and  the  provider  fee                                                                    
     payments,  to  the  definition of  compensability,  the                                                                    
     value of the  whole man - that's a  technical work comp                                                                    
     term - ... and the reemployment retraining program.                                                                        
                                                                                                                                
     I  would submit  to you  that House  Bill 450  makes no                                                                    
     changes  to  benefit levels  other  than  a small  COLA                                                                    
     [cost of living allowance]  adjustment, which I believe                                                                    
     Director Lisankie  addressed last week.   It proposes a                                                                    
     change  in the  workers' compensation  system which  we                                                                    
     feel  will  bring  about efficiency,  consistency,  and                                                                    
     predictability.                                                                                                            
                                                                                                                                
Number 1622                                                                                                                     
                                                                                                                                
MS. HALL continued:                                                                                                             
                                                                                                                                
     We  need a  healthy workers'  compensation marketplace.                                                                    
     We need a stable  environment that is sustainable, that                                                                    
     will  encourage current  companies  to  continue to  do                                                                    
     business  in Alaska  and to  attract new  markets.   We                                                                    
     need worker's compensation  insurance that is available                                                                    
     and  affordable for  employers to  continue to  develop                                                                    
     jobs and sustain economic development.                                                                                     
                                                                                                                                
     This  environment depends  on four  factors:   adequate                                                                    
     rates;  a self-funding,  assigned  risk  plan; a  sound                                                                    
     regulatory   environment;   and   a   viable   workers'                                                                    
     compensation system.                                                                                                       
                                                                                                                                
     House  Bill  450 is  fairly  unique,  as it  is  cross-                                                                    
     departmental.   It's an  effort to  find a  solution to                                                                    
     the issues at  hand.  I will address for  you today the                                                                    
     insurance  pieces  of  House   Bill  450.    I  believe                                                                    
     Director  Lisankie, who  is  also  here for  questions,                                                                    
     addressed   the  workers'   compensation  pieces   last                                                                    
     Wednesday [February 11] in hearing.                                                                                        
                                                                                                                                
     While  we all  recognize  that a  55-page  bill is  not                                                                    
     attractive to anybody  - I believe you  called it "less                                                                    
     than riveting" last  week - I would like  to briefly go                                                                    
     through [it].   There are  only ... five  sections that                                                                    
     deal with insurance.                                                                                                       
                                                                                                                                
     Section 3  adds a  requirement for  an increase  in the                                                                    
     deposit   required  of   insurance  companies   writing                                                                    
     workers' compensation  in Alaska.   This  deposit would                                                                    
     be  for  the  protection   of  Alaskans  covered  under                                                                    
     workers' compensation.   Section  4 ties in  with that,                                                                    
     and  makes   the  deposit   subject  to   the  guaranty                                                                    
     association,  and the  first order  of priority  before                                                                    
     the courts in delinquency proceedings.                                                                                     
                                                                                                                                
     The  second  concept in  this  bill  is to  change  the                                                                    
     composition of  the board of governors  of the guaranty                                                                    
     association.    Insurance company  representatives  are                                                                    
     important members of  the board.  Today  there are nine                                                                    
     seats on  that board,  seven or  which are  filled with                                                                    
     insurance company  representatives.  Two are  set aside                                                                    
     for public  members; there's only currently  one public                                                                    
     member,  who  I  appointed  in  November.    This  bill                                                                    
     proposes to  change that composition to  four insurance                                                                    
     company   representatives,  two   representatives  from                                                                    
     labor,  two  representatives  from employers,  and  one                                                                    
     representative from the agent world.                                                                                       
                                                                                                                                
     I think that  there are a lot of  stakeholders in these                                                                    
     issues.   [It] particularly  became apparent  this year                                                                    
     when  we  started  to  talk  about  prorating  workers'                                                                    
     compensation claims  and where those  obligations would                                                                    
     go.  I'd like those stakeholders  to have a seat at the                                                                    
     table during those discussions.                                                                                            
                                                                                                                                
Number 1739                                                                                                                     
                                                                                                                                
MS. HALL continued:                                                                                                             
                                                                                                                                
     Section  6 is  a net-worth  exclusion.   This provision                                                                    
     excludes from  coverage under the  guaranty association                                                                    
     if the  net worth of  the insured exceeds  $25 million.                                                                    
     Thirty-two  other  states  have this  provision  today,                                                                    
     with exclusion amounts ranging from  $10 million to $50                                                                    
     million,  but  $25 million  is  kind  of an  in-between                                                                    
     number.   It is the  one most typically found  in other                                                                    
     states' legislation.                                                                                                       
                                                                                                                                
     The purpose here is to ...  provide some kind of cap on                                                                    
     the cost  of claims in  the guaranty fund.   Other than                                                                    
     workers' compensation, claims in  the guaranty fund are                                                                    
     capped  at  $500,000.   Only  one  other state  has  it                                                                    
     capped that high.  Many  states cap claims at $300,000.                                                                    
     Alaska  has seen  fit to  do  a larger  cap.   Workers'                                                                    
     compensation claims are not capped,  but this would cap                                                                    
     coverage  for an  employer. ...  An employer  whose net                                                                    
     worth exceeded  $25 million would not  receive benefits                                                                    
     of the  guaranty fund  for the  claims of  an insolvent                                                                    
     insurer.                                                                                                                   
                                                                                                                                
Number 1787                                                                                                                     
                                                                                                                                
MS. HALL continued:                                                                                                             
                                                                                                                                
     The last  section that deals  with insurance  is almost                                                                    
     at  the end,  ...  Section 105,  ... another  important                                                                    
     piece  of  this  bill   concerned  with  insurance  and                                                                    
     availability of  insurance.   This repeals  the current                                                                    
     25  percent  statutory cap  on  the  surcharges of  the                                                                    
     assigned risk pool and the  exclusion for surcharges on                                                                    
     policies under $3,000.                                                                                                     
                                                                                                                                
     As I've indicated before, the  assigned risk pool needs                                                                    
     to be  self-funding.  Premiums have  lagged well behind                                                                    
     the costs of  claims.  Today, nearly  6,000 policies of                                                                    
     the  8,800  policies in  the  assigned  risk pool  have                                                                    
     premiums  under $3,000,  and  the  average premium  for                                                                    
     these policies is $864.   Small employers are likely to                                                                    
     have claims, even if they  don't have as many claims as                                                                    
     larger employers.   But these  claims can be  as costly                                                                    
     as  the claims  of a  large  employer.   At an  average                                                                    
     premium of $864, a single  claim can offset the premium                                                                    
     of several hundred policies, which  is one of the basic                                                                    
     reasons the pool has become very unprofitable.                                                                             
                                                                                                                                
     As  I  described  in the  introduction,  the  financial                                                                    
     burden  on  the  insurance companies  from  the  Alaska                                                                    
     assigned   risk  pool   contributes   to  the   overall                                                                    
     unattractiveness  of Alaska  to  insurers.   We face  a                                                                    
     fragile  insurance  marketplace.     We  need  to  find                                                                    
     solutions  that  bring  about  change  in  the  way  we                                                                    
     currently  operate.     We   need  to   have  insurance                                                                    
     companies  here so  that employers  have a  sustainable                                                                    
     source   of   the   mandatory  coverage   of   workers'                                                                    
     compensation.                                                                                                              
                                                                                                                                
Number 1877                                                                                                                     
                                                                                                                                
REPRESENTATIVE DAHLSTROM  asked Ms.  Hall if, indeed,  Alaska had                                                               
the highest risk  of loss in the U.S.  from workers' compensation                                                               
claims.  She also  asked if studies had been done  on why this is                                                               
so.                                                                                                                             
                                                                                                                                
MS. HALL replied:                                                                                                               
                                                                                                                                
     For  the period  from 1997  through 2002,  the cost  of                                                                    
     claims  averaged 5  percent  higher  than the  national                                                                    
     average.  Generally, the  increases are attributable to                                                                    
     higher  costs  of medical  care  in  Alaska.   We  have                                                                    
     remote  sites  where you  have  to  Medivac people,  so                                                                    
     there's a higher cost of medical benefits.                                                                                 
                                                                                                                                
     Typically, many of the  high-risk employments in Alaska                                                                    
     are  not   covered  in  the   traditional  marketplace.                                                                    
     Fishing  fleets,  for  example,  are  covered  under  a                                                                    
     different system.   Some of  the larger  contractors in                                                                    
     the oil  field are self-insured,  so I don't  think the                                                                    
     high-risk occupations tends to skew those rates.                                                                           
                                                                                                                                
REPRESENTATIVE DAHLSTROM asked for more information about the                                                                   
$864 average premium.                                                                                                           
                                                                                                                                
MS. HALL replied:                                                                                                               
                                                                                                                                
     The $864 is the average  premium for the 6,000 policies                                                                    
     that are under  $3,000 in premium in  the assigned risk                                                                    
     pool.   A  very large  number  of the  policies in  the                                                                    
     assigned risk pool  are for small employers.   And it's                                                                    
     not cost-effective, typically, for  an $864 policy, for                                                                    
     a traditional  insurer to write that,  because even the                                                                    
     investigation at that point would put them at a loss.                                                                      
                                                                                                                                
Number 1976                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD asked, "How does an insurance company                                                                   
stay in business year after year when they have ... losses of                                                                   
123 percent?  What is it that I'm not understanding?"                                                                           
                                                                                                                                
MS. HALL replied:                                                                                                               
                                                                                                                                
     Typically,  an  insurance  company  doing  business  in                                                                    
     Alaska -  not all of  them, but  a large number  - will                                                                    
     write other  lines of business.   They may be  making a                                                                    
     profit in  another state;, they  may write  other lines                                                                    
     of business;  and in some  periods in the  economy they                                                                    
     certainly had investment income,  which made up for the                                                                    
     underwriting loss.   That's  certainly not  true today.                                                                    
     Right now,  the workers' compensation line  of business                                                                    
     is being judged on its  own merits from an underwriting                                                                    
     standpoint, which means the  losses are being evaluated                                                                    
     as the premiums [are] taken in.                                                                                            
                                                                                                                                
REPRESENTATIVE CRAWFORD asked again:                                                                                            
                                                                                                                                
     Why would any insurance  business get into the workers'                                                                    
     comp line across the nation  if the nation averages 118                                                                    
     percent losses?  Wouldn't they  just say, "Let somebody                                                                    
     else  do that,  if we  know  that we're  going to  lose                                                                    
     money on it  each and every year?"  There  must be some                                                                    
     profit  in   it,  or  people  wouldn't   get  into  the                                                                    
     business.                                                                                                                  
                                                                                                                                
MS. HALL responded:                                                                                                             
                                                                                                                                
     I  think,  as  we  look around  the  country,  Alaska's                                                                    
     certainly not unique in having  this [problem].  I read                                                                    
     headlines today:   in California, the  ... new governor                                                                    
     ...  has proposed  sweeping reforms  of their  workers'                                                                    
     compensation system  because they  are in  a comparable                                                                    
     problem.   About 50 percent of  the California workers'                                                                    
     compensation is written  in a state plan.   Some states                                                                    
     have formed  plans because  the ...  voluntary insurers                                                                    
     are not willing to write those lines of business.                                                                          
                                                                                                                                
     Utah is  a state  I've done a  lot of  discussion with.                                                                    
     Sixty-five  percent of  the Utah  workers' compensation                                                                    
     premium is in their state fund.   What that does is put                                                                    
     the state  in competition with private  enterprise.  It                                                                    
     certainly  takes  out  free-market  competitive  forces                                                                    
     that  tend to  do good  things for  insurance lines  of                                                                    
     business.   And this  is not  a unique  Alaska problem.                                                                    
     ...  I think  there are  at  least 10  states who  have                                                                    
     major  workers'   compensation  reform  done,   in  one                                                                    
     fashion or another.                                                                                                        
                                                                                                                                
Number 2091                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD noted that he was sure she was correct                                                                  
or there wouldn't be an average 118 percent loss across the                                                                     
nation.  He continued:                                                                                                          
                                                                                                                                
     I  just don't  understand why  anybody would  choose to                                                                    
     get into  that business if  they ... know  that they're                                                                    
     going to  lose money.   I  know I'm  missing something,                                                                    
     somewhere.    There  has  to be  a  profit  motive  for                                                                    
     private  business  to get  into  it,  in some  form  or                                                                    
     fashion, I would think."                                                                                                   
                                                                                                                                
REPRESENTATIVE CRAWFORD also asked if any states made a profit                                                                  
on workers' compensation.                                                                                                       
                                                                                                                                
MS. HALL responded:                                                                                                             
                                                                                                                                
     That's one  of the reasons I'm  here:  to make  sure we                                                                    
     have available  insurers that would  do some  things in                                                                    
     our environment  to start to  make it  more attractive.                                                                    
     I'm very concerned  that we will lose  the markets that                                                                    
     we have currently writing business.                                                                                        
                                                                                                                                
     We are in the process of  looking at states.  There are                                                                    
     states that have, certainly,  better losses than Alaska                                                                    
     has right  now.   And there are  states that  have done                                                                    
     reform  in  the  past,  and we  are  working  with  the                                                                    
     Division  of  Workers'  Compensation to  look  at  ways                                                                    
     workers' compensation  has been changed and  the effect                                                                    
     that  that may  have had  on  the premium,  to find  if                                                                    
     there are  ways, in addition  to what we  are proposing                                                                    
     here, to make changes in the system.                                                                                       
                                                                                                                                
Number 2152                                                                                                                     
                                                                                                                                
DOUG WOOLIVER, Administrative Attorney, Administrative Staff,                                                                   
Office of the Administrative Director, Alaska Court System                                                                      
(ACS), testified:                                                                                                               
                                                                                                                                
     As is our practice, the court  does not take a stand on                                                                    
     the  merits of  this  law.   I'm  sure  that there  are                                                                    
     problems  with the  workers'  compensation system,  but                                                                    
     we'll  leave the  resolution of  those  problems up  to                                                                    
     you.  My only purpose  for testifying is to explain the                                                                    
     impact that  we've seen one  provision of the  bill may                                                                    
     have  on the  court, in  Section  65 of  the bill,  the                                                                    
     provision that  says that appeals from  the agency will                                                                    
     bypass  the  superior  court and  go  directly  to  the                                                                    
     supreme court.                                                                                                             
                                                                                                                                
     For the last  several years, the court  system has seen                                                                    
     about  an average  of 36  workers' comp  cases a  year.                                                                    
     Right now, they're filed in  the superior court, as are                                                                    
     all  other  agency appeals,  and  about  75 percent  of                                                                    
     those  36 are  resolved  at the  superior court  level.                                                                    
     About nine  cases a year  go ... under appeal  again to                                                                    
     the supreme court.                                                                                                         
                                                                                                                                
     Our concern is that even  with passage of the bill, the                                                                    
     total  number of  cases that  come into  court are  not                                                                    
     likely  to change  much.   We will  probably still  see                                                                    
     about 36  cases a year.   The difference will  be, they                                                                    
     will all come to the  supreme court, rather than having                                                                    
     75 percent  of them,  anyway, resolved by  the superior                                                                    
     court.                                                                                                                     
                                                                                                                                
     There are  several reasons we  don't think we'll  see a                                                                    
     decrease.   The  first is  that you  will always  see a                                                                    
     certain  number  of  appeals, regardless  of  what  the                                                                    
     issue is.   It doesn't  matter whether it's  a superior                                                                    
     court decision or  a court of appeals  decision.  Every                                                                    
     year  you   always  see  a  certain   number  of  cases                                                                    
     appealed,  simply because  reasonable minds  can differ                                                                    
     on the  outcome of a  case. ... Another group  of cases                                                                    
     that we  will see  every year  are [those  where] novel                                                                    
     legal issues  are raised, ...  and those  will continue                                                                    
     to come to the supreme court for final resolution.                                                                         
                                                                                                                                
     Additionally, there's  a certain  number of  people who                                                                    
     will never trust  an agency decision.   They don't like                                                                    
     administrative  agencies;  they   don't  think  they're                                                                    
     fair.   What they want  is "their  day in court."   You                                                                    
     will continue  to see a  certain number of  those every                                                                    
     year.                                                                                                                      
                                                                                                                                
     Finally, another group of  litigants that we anticipate                                                                    
     are the  tenacious, some people that  simply never give                                                                    
     up.    And we'll  continue  to  see  those.   The  only                                                                    
     difference will  be that the  number of cases  now will                                                                    
     all come to the supreme court. ...                                                                                         
                                                                                                                                
     Remember,  there are  ...  thousands  of workers'  comp                                                                    
     claims  are   filed  every   year,  somewhere   in  the                                                                    
     neighborhood of  25,000 to 30,000.   We only get  36 at                                                                    
     the superior court  level.  It is  ... already whittled                                                                    
     down to  a fraction  of a percentage.   We  don't think                                                                    
     that fraction is likely to fall any further.                                                                               
                                                                                                                                
Number 2263                                                                                                                     
                                                                                                                                
MR. WOOLIVER continued:                                                                                                         
                                                                                                                                
     But  there's also  the potential,  with  the number  of                                                                    
     appeals that we  see, ... that there's likely  to be an                                                                    
     increase, perhaps  increase significantly.  One  of the                                                                    
     important features of the current  board system is that                                                                    
     each   of  the   panels   is  comprised   of  a   labor                                                                    
     representative,  a  management  representative,  and  a                                                                    
     hearing officer.  That gives  the perception of balance                                                                    
     and  fairness  to the  system,  to  both employers  and                                                                    
     employees.   Neither  side has  reason to  believe that                                                                    
     the other side has the advantage in that makeup.                                                                           
                                                                                                                                
     There  is  no  such  requirement  for  balance  in  the                                                                    
     current appeals commission  that's contemplated in this                                                                    
     bill.  If  either employers or employees  feel that the                                                                    
     board of  this new  commission is  stacked in  favor of                                                                    
     the other  guy, we're likely  to see far  more appeals,                                                                    
     ... not fewer, and not the same as we see now.                                                                             
                                                                                                                                
     However, we have a fiscal  note with the bill; usually,                                                                    
     I will  discuss this with  the finance committee.   Our                                                                    
     fiscal  note   doesn't  assume  an  increase.     We're                                                                    
     assuming that  we'll see the  same number ...  of cases                                                                    
     that we've  always seen  in the  past.   The difference                                                                    
     will be that they'll all come to the supreme court.                                                                        
                                                                                                                                
     Now,  one of  the  reasons for  bypassing the  superior                                                                    
     court  is that  ... you  save time.   And  while that's                                                                    
     true  for a  certain number  of cases,  for those  nine                                                                    
     cases  each  year  that typically  go  to  the  supreme                                                                    
     court, you  will save  time because  you will  have cut                                                                    
     out an  intermediate opinion.   You  will save  all the                                                                    
     time that the  superior court would have  spent on that                                                                    
     case.                                                                                                                      
                                                                                                                                
     Remember, those nine cases represent  25 percent of the                                                                    
     cases that go  to the court.  The other  75 percent are                                                                    
     resolved  at the  superior court  level  and are  never                                                                    
     further appealed.  Those cases  are likely to take much                                                                    
     more  time  under  this proposal  because  the  supreme                                                                    
     court simply  doesn't decide cases  as quickly  as does                                                                    
     the superior court.                                                                                                        
                                                                                                                                
     A  superior court  judge is  a committee  of one.   The                                                                    
     judge  ...  makes his  or  her  decision on  the  case,                                                                    
     writes  the opinion,  and that's  the end  of it.   The                                                                    
     supreme  court,  of course,  is  a  committee of  five.                                                                    
     Opinions are drafted, they  are circulated for comment,                                                                    
     those comments  lead to amendments,  it's recirculated.                                                                    
     It's a  ... slower, more  deliberative process.   So by                                                                    
     bypassing the superior court, you  will save time on 25                                                                    
     percent of  the cases that  come to the court,  but you                                                                    
     will add time to 75 percent of those cases.                                                                                
                                                                                                                                
Number 2350                                                                                                                     
                                                                                                                                
MR. WOOLIVER continued:                                                                                                         
                                                                                                                                
     Now,  ... part  of  the reason  for  bypassing is  this                                                                    
     concern with  delay.  So  what our fiscal note  does is                                                                    
     to  assume  to  hire  a  central  staff  attorney  with                                                                    
     expertise  in  this area  to  help  prep all  of  these                                                                    
     cases,  and  some  clerical  staff  to  help  move  the                                                                    
     paperwork through. ...  Hopefully, with that additional                                                                    
     staff,  ... the  provision that  bypasses the  superior                                                                    
     court  won't be  the  clog that  slows  down the  whole                                                                    
     process.  This  won't ... lead to as much  delay in the                                                                    
     cases.   And, of  course, every  time you  increase the                                                                    
     supreme  court's caseload,  you  still  only have  five                                                                    
     justices.    If you  increase  the  caseload, you  will                                                                    
     inevitably have an  impact on the other  cases that are                                                                    
     before the court as well.                                                                                                  
                                                                                                                                
TAPE 04-13, SIDE B                                                                                                            
Number 2366                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  asked  Mr. Wooliver  if  the  supreme                                                               
court, in general,  reviews cases and decides which  ones merit a                                                               
hearing.                                                                                                                        
                                                                                                                                
MR. WOOLIVER responded:                                                                                                         
                                                                                                                                
     Not in general, not in ...  civil cases.  Cases that go                                                                    
     to the court of appeals,  criminal cases that go to our                                                                    
     criminal  court of  appeals, then  they  can; it's  the                                                                    
     discretion of  the court to  hear those further.   Your                                                                    
     ...  appellate  right ends,  though,  at  the court  of                                                                    
     appeals.  But for cases  like this, the court must hear                                                                    
     all of those.                                                                                                              
                                                                                                                                
Number 2325                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  said  in  the  restructuring  of  the                                                               
current board, he  believes some of these  cases require specific                                                               
knowledge about  certain things such as  workers' compensation or                                                               
OSHA  [Occupational   Safety  and  Health   Administration],  for                                                               
example.   He asked, "Was  that what  you were referring  to, ...                                                               
more appeals  and novel  legal cases  where the  hearing officers                                                               
weren't competent to hear an issue?"                                                                                            
                                                                                                                                
MR. WOOLIVER replied:                                                                                                           
                                                                                                                                
     No,  as far  as I  know, there  isn't ...  a competency                                                                    
     question.  It's  just that, like in all  other civil or                                                                    
     criminal  cases, interesting  legal issues  arise every                                                                    
     year, in these cases and in  any other.  So those won't                                                                    
     stop simply  because you  have the  expertise.   Or the                                                                    
     legal issues always, inevitably, arise.                                                                                    
                                                                                                                                
Number 2269                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked if a claimant could base an                                                                     
appeal on a perceived imbalance in the board membership.                                                                        
                                                                                                                                
MR. WOOLIVER responded:                                                                                                         
                                                                                                                                
     They'll  still have  to have  reasons to  appeal.   The                                                                    
     only reason  that the court envisions  a greater number                                                                    
     of  appeals  from this  is  that  people -  either  the                                                                    
     employers or the employees, depending  on how the board                                                                    
     is constituted  - will feel  they haven't  been treated                                                                    
     fairly.   They'll think  there's a  bias in  the system                                                                    
     itself. ... And even if  that isn't the case, if that's                                                                    
     the perception, I think we'll see more appeals.                                                                            
                                                                                                                                
     We're  ... taking  a  conservative  assumption that  we                                                                    
     won't see any.  We  think it's a very real possibility.                                                                    
     But   we   try   to    write   these   [fiscal]   notes                                                                    
     conservatively.  At the very  least, we're going to see                                                                    
     about the same  number we have always seen.   But there                                                                    
     is the  risk that we  will see considerably more.   Our                                                                    
     note  assumes the  conservative  assumption, which  is,                                                                    
     we'll stay about the same.                                                                                                 
                                                                                                                                
Number 2229                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD said he had lots of questions and didn't                                                                
understand the reasoning behind this.  He continued:                                                                            
                                                                                                                                
     It doesn't  seem to me  we are talking about  a savings                                                                    
     here.  ...  Those  36  [cases]  that  are  appealed  to                                                                    
     superior  court, what  would  the  typical question  be                                                                    
     there? ...  Is it a  constitutional question?   What is                                                                    
     it  that they  can't work  out in  those 36  cases each                                                                    
     year?                                                                                                                      
                                                                                                                                
MR. WOOLIVER responded:                                                                                                         
                                                                                                                                
     The only  cases that I've looked  at, specifically, are                                                                    
     the supreme court cases, because  they're the ones that                                                                    
     are public.   In those  cases, there are any  number of                                                                    
     issues. ...  Right now  ... the standard of review that                                                                    
     the court applies to board  decisions - how closely are                                                                    
     they going  to look  at what  the board  did -  this is                                                                    
     called  the  "substantial   evidence  standard,"  which                                                                    
     means as  long as  there's substantial evidence  in the                                                                    
     record, that the  board made the right  decision on the                                                                    
     issues  of  fact, then  the  court  will defer  to  the                                                                    
     board.                                                                                                                     
                                                                                                                                
     An  example might  be -   and  these are  the types  of                                                                    
     cases  we would  see -  one doctor  testified that  the                                                                    
     injury was permanent and  another doctor testified that                                                                    
     the injury wasn't  permanent.  And then  the board will                                                                    
     have  made  their  decision,  one  way  or  the  other.                                                                    
     Someone will  appeal, and there was  almost no evidence                                                                    
     that   it  wasn't   permanent.      All  the   evidence                                                                    
     [indicated] this one doctor  testified for five minutes                                                                    
     and  the other  doctor  testified for  a  day. ...  The                                                                    
     evidence  was not  sufficient  to  support the  board's                                                                    
     file.  That would be one type of appeal.                                                                                   
                                                                                                                                
     Other  types of  appeals are  over somewhat  peripheral                                                                    
     issues, [for example], when  the statute of limitations                                                                    
     began to  run - a  legal question.  How  the attorney's                                                                    
     fees  should have  been  apportioned  would be  another                                                                    
     question.   There  ...  are questions  of  law in  some                                                                    
     cases,  and questions  of fact  in  others.   A lot  of                                                                    
     these questions  are easily  subject to  appeal, simply                                                                    
     because  you've  got  dueling doctrines  in  a  lot  of                                                                    
     cases.  If  you lose, it may be a  significant issue to                                                                    
     you.  So they'll appeal  those cases, but 75 percent of                                                                    
     those  are  resolved by  the  superior  court in  trial                                                                    
     court, probably.                                                                                                           
                                                                                                                                
Number 2121                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD asked if Mr. Wooliver could see a reason                                                                
for moving away from the present system.                                                                                        
                                                                                                                                
MR. WOOLIVER replied:                                                                                                           
                                                                                                                                
     I don't  know whether  it works or  not, at  the agency                                                                    
     level.  I'm  sure that the administration has  a lot of                                                                    
     reasons for introducing this bill.   It's not a problem                                                                    
     for us, but  we're not operating ... in that  area.  We                                                                    
     ... take appeals  that come to us, but in  terms of how                                                                    
     the  boards are  constituted,  we don't  really have  a                                                                    
     view  on  that,  other  than  if  there's  a  perceived                                                                    
     balance,  we're probably  less  likely  to see  appeals                                                                    
     than if there's a perceived bias.                                                                                          
                                                                                                                                
CHAIR ANDERSON asked:                                                                                                           
                                                                                                                                
     You talked  about the  difference between  superior and                                                                    
     supreme court.   And  isn't it true,  if you  take away                                                                    
     from the  superior court  - which  is far  more compact                                                                    
     with  cases ...  compared to  the supreme  court -  ...                                                                    
     won't it free  up time in superior court?   Is that one                                                                    
     benefit?  You can argue both sides.                                                                                        
                                                                                                                                
MR. WOOLIVER replied:                                                                                                           
                                                                                                                                
     In our fiscal  note, too, I mentioned the  fact that it                                                                    
     will free  up some  time at  the superior  court level,                                                                    
     but we  have 30 some  superior court judges and  we get                                                                    
     36 appeals.  Each judge,  right now, handles an average                                                                    
     caseload  of   five  to  six  hundred   cases  a  year.                                                                    
     Reducing that by one each will  free up a little bit of                                                                    
     time, but it's out of  a caseload of 36 cases statewide                                                                    
     - it's not a very significant change.                                                                                      
                                                                                                                                
Number 2045                                                                                                                     
                                                                                                                                
CHAIR ANDERSON  asked Mr. Wooliver  if there were not  more staff                                                               
at the supreme court level, and  if this bill wouldn't force them                                                               
to expedite their deliberations.                                                                                                
                                                                                                                                
MR. WOOLIVER answered:                                                                                                          
                                                                                                                                
     It  still does  take longer  to get  any type  of case,                                                                    
     with the  exception of perhaps  of ...  election cases,                                                                    
     which  have to  be decided  in a  matter of  days.   In                                                                    
     general, it  just takes ...  longer for five  people to                                                                    
     decide than one.                                                                                                           
                                                                                                                                
REPRESENTATIVE  GUTTENBERG asked  if  this bill  would require  a                                                               
court  rule change  in procedure,  since  the jurisdiction  would                                                               
change.                                                                                                                         
                                                                                                                                
MR. WOOLIVER said  he didn't believe so; rather,  he believed the                                                               
bill drafters did a competent job  in drafting this bill and that                                                               
there  were no  indications  a  change in  court  rules would  be                                                               
necessary.  He  admitted he could be mistaken and  that this is a                                                               
fair question for the drafters to review.                                                                                       
                                                                                                                                
Number 1926                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD asked Ms. Hall:                                                                                         
                                                                                                                                
     Speaking to Mr. Wooliver's  contention that ... there's                                                                    
     a  perception   of  balance   now  with   the  workers'                                                                    
     compensation  appeal  board,  because we've  got  three                                                                    
     people, one  ... supposedly a neutral  party, why would                                                                    
     we  go  away   from  that  and  go   to  one  political                                                                    
     appointee, if  ... that's going  to probably  make more                                                                    
     appeals rather than less appeals?                                                                                          
                                                                                                                                
MS. HALL deferred to Director Lisankie, Division of Workers'                                                                    
Compensation.                                                                                                                   
                                                                                                                                
Number 1857                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD asked whether this bill would make it                                                                   
more profitable for insurance companies to have these changes.                                                                  
                                                                                                                                
MS. HALL replied:                                                                                                               
                                                                                                                                
     I think the changes that  are going to affect insurance                                                                    
     companies,  they   affect  the   workers'  compensation                                                                    
     system  as it  affects  employers and  employees.   The                                                                    
     insurance company  ends up paying  the cost  of claims.                                                                    
     It  is my  understanding  that the  theory behind  this                                                                    
     change in the board is  to bring about more consistency                                                                    
     and predictability.                                                                                                        
                                                                                                                                
     The  current decisions  rendered by  the ...  potential                                                                    
     300  combination  of  panels that  would  comprise  the                                                                    
     workers' compensation  board ... do not  set precedent.                                                                    
     They're not public,  so if a decision is  rendered in a                                                                    
     case in Kodiak, it  doesn't necessarily have any impact                                                                    
     on  the   decision  -  interpretation   of  law   -  in                                                                    
     Fairbanks.                                                                                                                 
                                                                                                                                
     It's that  lack of precedent that's  currently missing,                                                                    
     that  we're looking  to  find  more predictability  and                                                                    
     more  consistency in  the system,  with the  idea that,                                                                    
     with predictability  and consistency, there's  a better                                                                    
     ability to project costs.                                                                                                  
                                                                                                                                
CHAIR ANDERSON turned the gavel over to Vice Chair Gatto.                                                                       
                                                                                                                                
Number 1787                                                                                                                     
                                                                                                                                
DON ETHERIDGE, Lobbyist for Alaska State AFL-CIO [American                                                                      
Federation of Labor and Congress of Industrial Organizations],                                                                  
testified:                                                                                                                      
                                                                                                                                
     We have one  request for this, and that's  to send this                                                                    
     bill  before the  ad hoc  committee.   For the  last 23                                                                    
     years on  all workers' comp  issues that have  been out                                                                    
     there, labor  and management have got  together and ...                                                                    
     formed an ad hoc committee to work on these.                                                                               
                                                                                                                                
     We've always  stepped up to the  plate, when necessary,                                                                    
     to  make cuts  to the  system.   The system  is ...  as                                                                    
     important to us as it is  to anybody else out there, as                                                                    
     far as for injured workers.   And we would like to have                                                                    
     the  opportunity  to  look at  this  bill  before  it's                                                                    
     passed.                                                                                                                    
                                                                                                                                
     There's  a  lot to  that  bill.    We're told  that  it                                                                    
     doesn't change  benefits, except for a  couple of small                                                                    
     areas.  Well, we'd like  to have an opportunity to look                                                                    
     at that  through the ad  hoc committee, and  ... figure                                                                    
     that out and  ... see if there is anything  that we can                                                                    
     do to recommend changes.                                                                                                   
                                                                                                                                
     When the workers' comp rates  were skyrocketing back in                                                                    
     the '80s, we  stepped up to the plate and  we made cuts                                                                    
     to  the  system  at  that  time,  through  the  ad  hoc                                                                    
     committee  with  labor  and management,  and  put  cuts                                                                    
     [such] that  we still  are not  up to  that rate  as we                                                                    
     were in 1988. ...                                                                                                          
                                                                                                                                
     Labor has  made appointments to the  ... committee, and                                                                    
     the  WCCA [Workers'  Compensation Committee  of Alaska]                                                                    
     has  made their  appointments,  and  they're trying  to                                                                    
     schedule  to get  together and  start  looking at  this                                                                    
     piece  of   legislation.    We'd   like  to   have  the                                                                    
     opportunity to comment on it before it's passed.                                                                           
                                                                                                                                
VICE CHAIR GATTO asked if Mr. Etheridge was saying there's a                                                                    
standing ad hoc committee.                                                                                                      
                                                                                                                                
Number 1693                                                                                                                     
                                                                                                                                
MR. ETHERIDGE explained that for the past 23 years, two groups                                                                  
appointed by the AFL-CIO and the WCCA have looked at proposed                                                                   
legislation and made recommendations.                                                                                           
                                                                                                                                
[Vice Chair Gatto returned the gavel to Chair Anderson.]                                                                        
                                                                                                                                
CHAIR  ANDERSON asked  what recommendations  Mr. Etheridge  would                                                               
make in the current bill.                                                                                                       
                                                                                                                                
MR. ETHERIDGE said he couldn't  recommend changes, but the ad hoc                                                               
committee  could.   He surmised  there will  be appeals  if there                                                               
isn't balanced  representation.  He  is not opposing  anything in                                                               
the  bill  at  this  time,  he said,  but  again  asked  for  the                                                               
opportunity for  the ad hoc committee  to look at the  bill, make                                                               
recommendations, and present another view  other than that of the                                                               
administration.                                                                                                                 
                                                                                                                                
Number 1583                                                                                                                     
                                                                                                                                
REPRESENTATIVE GATTO  asked if Mr.  Etheridge was not  aware that                                                               
the bill was being developed.                                                                                                   
                                                                                                                                
MR. ETHERIDGE  replied that he had  heard of it, but  had no idea                                                               
of the content.  He said:                                                                                                       
                                                                                                                                
     It was being kept guarded,  secret.  We were told there                                                                    
     was a 100-page bill a couple  of times, ... were told a                                                                    
     lot  of  different  stories, but  we  haven't  had  any                                                                    
     information of  what the bill actually  did until after                                                                    
     you guys got  it. ...  Nine days ago,  we had a 58-page                                                                    
     bill  dropped on  us that  we'd never  seen before.   I                                                                    
     would have expected to have  enough time to have the ad                                                                    
     hoc committee involved  with it, and have  them look at                                                                    
     this on an objective basis.                                                                                                
                                                                                                                                
Number 1527                                                                                                                     
                                                                                                                                
CHAIR  ANDERSON  asked Mr.  Etheridge  if  he  could think  of  a                                                               
timeline in terms  of the ad hoc committee.   He stated, "I can't                                                               
keep holding the bill  too long.  I know I will  get tripped if I                                                               
keep delaying too long."                                                                                                        
                                                                                                                                
MR. ETHERIDGE announced that the  ad hoc committee was scheduling                                                               
a meeting for Friday [February 20, 2004].                                                                                       
                                                                                                                                
CHAIR  ANDERSON responded  that part  of the  reason for  urgency                                                               
came from the collapse of Fremont Insurance in California.                                                                      
                                                                                                                                
MR. ETHERIDGE replied:                                                                                                          
                                                                                                                                
     That  was the  reason  for the  earlier  bill that  you                                                                    
     passed out,  in order  to cover  that. ...  Anything in                                                                    
     here,  I don't  see, at  this point,  cuts the  cost of                                                                    
     workers' comp.   With the  ad hoc committee  sitting on                                                                    
     it and  looking at it -  we've done that in  the past -                                                                    
     we've always been able to cut  the cost.  ... In '88 we                                                                    
     cut  the cost  down; we're  not  even back  up to  that                                                                    
     point.   We've always  been willing to  step up  to the                                                                    
     plate and  do what we have  got to do to  make it work,                                                                    
     because this workers' comp system  is more important to                                                                    
     the working  people, in  the long run,  than it  is ...                                                                    
     [to] most anybody else.                                                                                                    
                                                                                                                                
Number 1410                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked for clarification for the 1988                                                                  
incident that Mr. Etheridge had referred to.                                                                                    
                                                                                                                                
MR. ETHERIDGE responded:                                                                                                        
                                                                                                                                
     In '88,  ... like  we are now,  the prices  of workers'                                                                    
     comp continually rose  and rose and rose,  to the point                                                                    
     where people were  about ... to go out  of business, or                                                                    
     they were going  to lose the workers' comp  system.  So                                                                    
     the ad hoc  committee got together.  They  sat down and                                                                    
     they went  through the workers' comp  and cut benefits.                                                                    
     ... We  haven't even  got back to  that point  from all                                                                    
     the cuts that were made at that time.                                                                                      
                                                                                                                                
Number 1341                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked if the ad hoc committee had ever                                                                
been involved in the drafting of legislation so that there would                                                                
be representatives from both sides involved.                                                                                    
                                                                                                                                
MR. ETHERIDGE responded:                                                                                                        
                                                                                                                                
     There  was  usually a  bill  drafted,  and the  ad  hoc                                                                    
     committee came along  and went through it,  and ... had                                                                    
     a CS [committee substitute] ready  to go.  The last go-                                                                    
     round ...  was three  or four  years ago  ....   We had                                                                    
     Senators that were  trying to add to  the employee side                                                                    
     of things on  the ad hoc committee, and  labor came out                                                                    
     in opposition to  ... approving for the  benefit of the                                                                    
     worker, because it was the  agreement between that this                                                                    
     was what  it was  going to  be.  So,  we had  to oppose                                                                    
     what  was  being  offered  by  the  Senators  here,  to                                                                    
     improve the system for the  workers.  It wasn't part of                                                                    
     the deal, so we ... backed off of it.                                                                                      
                                                                                                                                
CHAIR ANDERSON noted that a letter  in support of HB 450 had been                                                               
distributed; it  was dated February  13, 2004, from  Kevin Smith,                                                               
Executive  Director,  Alaska  Municipal  League  Joint  Insurance                                                               
Association.                                                                                                                    
                                                                                                                                
Number 1269                                                                                                                     
                                                                                                                                
PAMELA LaBOLLE, President, Alaska State Chamber of Commerce,                                                                    
testified:                                                                                                                      
                                                                                                                                
     We  represent approximately  700  business members  who                                                                    
     employ approximately  7,000 Alaskans.  And  we are here                                                                    
     to support  House Bill  450.  We  think that  we really                                                                    
     are  in a  time  of crisis  when it  comes  to our  ...                                                                    
     association  fund   of  the  workers'   comp  insurance                                                                    
     association fund.   And we appreciate  the efforts that                                                                    
     the Division of Insurance has  made to try to alleviate                                                                    
     the crisis,  and to look  toward the future  for making                                                                    
     sure that we don't get into this situation ... again.                                                                      
                                                                                                                                
     The 21 percent  average increase in rates  ... that was                                                                    
     dropped  on employers  in January  was  quite a  wakeup                                                                    
     call.  We  had ... Ms. Hall speak to  us at the chamber                                                                    
     lunch last  week, and I asked,  before introducing her,                                                                    
     who all was  aware of it, ... thinking  that perhaps it                                                                    
     hadn't reached everyone's' radar  screen.  I do believe                                                                    
     it was  100 percent  of hands raised  in this  group of                                                                    
     ...  75 or  80 people.   It's  definitely on  the front                                                                    
     burner - top importance to the business community.                                                                         
                                                                                                                                
     And so the  efforts to make sure  that the insolvencies                                                                    
     don't  impact (indisc.),  and we  support that  part of                                                                    
     the  bill.   Regarding the  ... change  in the  appeals                                                                    
     commission, we  also think  this is  a very  good idea.                                                                    
     This group of professional  people, who ... are trained                                                                    
     and  knowledgeable in  workers' compensation  law, will                                                                    
     have  greater expertise  than  ...  [a] labor's  panel.                                                                    
     They would ...  have a better opportunity  to build the                                                                    
     kind of case law that will  help the process as it goes                                                                    
     through the appeals court, and  through the ... supreme                                                                    
     court.  There will be  quicker resolution of the cases,                                                                    
     ... we  believe, especially as  time goes by  and their                                                                    
     expertise is ... honed.                                                                                                    
                                                                                                                                
     And  the  one thing  that  we  disagree with,  previous                                                                    
     testimony,  we don't  think  -- and  from  my point  of                                                                    
     view, there is no perception  of ... fairness right now                                                                    
     because even though there's one  labor and one business                                                                    
     representation  on the  board,  the  hearing officer  -                                                                    
     they  are (indisc.).   And  so that  does not  give the                                                                    
     feeling that there is equal balance.                                                                                       
                                                                                                                                
     I  understand that  the hearing  officers have  a union                                                                    
     that they  are part of,  and so  they are of  the union                                                                    
     thinking, ... where business is not.                                                                                       
                                                                                                                                
MS. LaBOLLE  commented that the  present panels are  perceived to                                                               
be imbalanced  and that  HB 450 would  improve the  system, would                                                               
bring payments to injured workers,  and would resolve issues more                                                               
quickly and with greater feelings of fairness.                                                                                  
                                                                                                                                
Number 1067                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG said:                                                                                                 
                                                                                                                                
     You just stated ..., to  my amazement, that somebody in                                                                    
     a union cannot be fair.   I'm trying to scratch my head                                                                    
     about that.   These are professional  hearing officers.                                                                    
     Let's leave that  lie.  I've been trying  to find where                                                                    
     in this  there are  qualifications for the  new hearing                                                                    
     officer.  All I've been able  to find, and I can't find                                                                    
     it again,  is that  the director shall  appoint hearing                                                                    
     officers.  And I don't  see any qualifications for that                                                                    
     hearing  officer.   I  don't know  who  they would  be,                                                                    
     where  they would  come  from,  or what  qualifications                                                                    
     they would have.                                                                                                           
                                                                                                                                
MS.  LaBOLLE  replied,  "It's my  understanding  that  the  three                                                               
members of the field's commission  would be members of the Alaska                                                               
bar, and  ... there  are qualifications in  this legislation.   I                                                               
can't cite it for you.  Perhaps back to the director ..."                                                                       
                                                                                                                                
CHAIR ANDERSON clarified:                                                                                                       
                                                                                                                                
     There's an  analysis by the  governor's office,  and it                                                                    
     states that a single  hearing officer would replace the                                                                    
     three-member  board  panel.    And I  think  what  [Ms.                                                                    
     LaBolle]  was saying  was, of  that three-member  board                                                                    
     panel,   there's  a   hearing   officer,  an   employer                                                                    
     representative,   and   an   employee   representative.                                                                    
     Employee representative  is considered  labor; employer                                                                    
     representative,  ...  which   she  represents  -  she's                                                                    
     chamber [of  commerce] - she's  just saying,  ... "Hey,                                                                    
     we want it fair and we need to analyze."                                                                                   
                                                                                                                                
     And I  agree, she's  saying, in actuality,  the hearing                                                                    
     officer is part  of a union, too, so to  an extent that                                                                    
     person, he  or she, is also  labor-represented, because                                                                    
     they are in a union,  whereas chances are, the business                                                                    
     representative isn't  [in] a  union.   So, if  you just                                                                    
     looked  at that  construct  of three  people -  there's                                                                    
     really two labor  and one employer -  [it] doesn't mean                                                                    
     it's impartial  or partial, or she's  not commenting on                                                                    
     that.  Is that accurate?                                                                                                   
                                                                                                                                
Number 0937                                                                                                                     
                                                                                                                                
MS. LaBOLLE replied that was accurate and further said:                                                                         
                                                                                                                                
     If   I   may   respond   to  the   one   statement   of                                                                    
     Representative Guttenberg:  I did  not, at all, mean to                                                                    
     imply that labor can't be  fair and that they didn't be                                                                    
     fair.   It  is the  perception ...,  just as  labor has                                                                    
     just argued,  that they  felt ... it  was fair  that it                                                                    
     was one  of each.   And this impartial person,  we have                                                                    
     concern that  if it came  down to concerning a  ... new                                                                    
     organized-labor  aspect   of  an  issue   versus,  say,                                                                    
     management aspect  of an issue,  anyone belonging  to a                                                                    
     union is more inclined to  be in the favor of organized                                                                    
     labor, which is what unions are about.                                                                                     
                                                                                                                                
Number 0885                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD remarked:                                                                                               
                                                                                                                                
     That really just takes my  breath away in that, because                                                                    
     of me being  in a union, Representative  Gatto being in                                                                    
     the  union,  Representative  Guttenberg  being  in  the                                                                    
     union, that  we can't be  fair and impartial  here. ...                                                                    
     I'm  absolutely  amazed.   I  think  that we  have  the                                                                    
     ability  to make  a fair  and impartial  decision, even                                                                    
     though I've been  a union member for 32 years.   But to                                                                    
     imply  that  I can't  go  with  what  I feel  is  right                                                                    
     because  I have  an allegiance  to  a union  is --  I'm                                                                    
     shocked.                                                                                                                   
                                                                                                                                
MS. LaBOLLE responded:                                                                                                          
                                                                                                                                
     I am sorry to have shocked  you.  However, I think that                                                                    
     what I find  shocking is that it  isn't understood that                                                                    
     labor and  management have differing viewpoints  ... in                                                                    
     a great many areas.  I  am not implying at all that you                                                                    
     cannot  be [impartial]  or Representative  Gatto cannot                                                                    
     be [impartial], or anyone else  on this panel cannot be                                                                    
     impartial.                                                                                                                 
                                                                                                                                
     What I am saying is that  there is a perception that we                                                                    
     want  total impartiality,  and  no representation  from                                                                    
     one  side or  the other.    And regarding  this ad  hoc                                                                    
     group,  now,  I'm  just  about   to  have  my  eleventh                                                                    
     anniversary as  the head  of the  state chamber,  and I                                                                    
     have to say  I have no idea who's on  the ad hoc group.                                                                    
     I  think that  they ...  may be  a very  knowledgeable,                                                                    
     well-recognized  group of  individuals.    But who  are                                                                    
     they?   And  what role  do they  have of  replacing the                                                                    
     public process  of bringing legislation before  the ...                                                                    
     legislature, before a  committee, everyone having total                                                                    
     access to speaking to the legislation?                                                                                     
                                                                                                                                
Number 0748                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD responded:                                                                                              
                                                                                                                                
     Some  of the  management  people on  the  ad hoc  group                                                                    
     would be Dick Cattanach  of the AGC [Associated General                                                                    
     Contractors].  There were a  number of people there ...                                                                    
     that represented the management  side on this question.                                                                    
     And my next  question was going to be:   Would you have                                                                    
     thought  that  it   was  a  good  idea   for  the  last                                                                    
     administration,  or the  next possible  administration,                                                                    
     to  rewrite the  workers' comp  laws without  ... input                                                                    
     from the business  side on the ad hoc  group, that they                                                                    
     just came and presented this without your input?                                                                           
                                                                                                                                
     I  assume that  what  you're saying  is  that the  last                                                                    
     administration was  ... anti-business  and this  one is                                                                    
     pro-business, so  that you get  your ... kind  of folks                                                                    
     on the workers' comp board.                                                                                                
                                                                                                                                
MS. LaBOLLE replied:                                                                                                            
                                                                                                                                
     I am confused.   I don't believe I  said anything about                                                                    
     the  last administration  or any  future administration                                                                    
     ....   Regarding how I  would feel about  somebody just                                                                    
     presenting this  without ...  having management  ... or                                                                    
     business  input, well,  guess  what:   we  didn't.   We                                                                    
     weren't part of writing this bill. ...                                                                                     
                                                                                                                                
     As I've  said, you've  mentioned one  person on  the ad                                                                    
     hoc committee.   I  am completely  sincere when  I tell                                                                    
     you I have no idea  who comprises the ad hoc committee.                                                                    
     Now, it's  possible that  because not  a great  deal of                                                                    
     workers'  compensation insurance  issues  have come  up                                                                    
     before the legislature in the  last 11 years - although                                                                    
     there  was something  passed  probably  about my  third                                                                    
     year in  this job,  and I  had heard  there was  such a                                                                    
     group, I  still do not  know who  it is, what  they are                                                                    
     about, what their goal is.                                                                                                 
                                                                                                                                
REPRESENTATIVE CRAWFORD replied, "Maybe it's about time you                                                                     
started looking into it."                                                                                                       
                                                                                                                                
Number 0592                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GATTO said  he is  a member  of two  chambers [of                                                               
commerce] and  that he  could be  considered unreasonable  by the                                                               
unions.    In  addition,  he  stated, he  was  a  member  of  the                                                               
Firefighters and Paramedics'  Union for 20 years, so  he could be                                                               
considered "unreasonable" by the chambers.  He continued:                                                                       
                                                                                                                                
     Yet, I  don't consider myself biased  in any direction.                                                                    
     I  really am  very much  interested in  the facts,  and                                                                    
     when  I  hear of  an  ad  hoc  committee, even  if  the                                                                    
     committee was composed of just  "some people," I really                                                                    
     want to hear their side.                                                                                                   
                                                                                                                                
     I would  hope that you  would take the effort  also, to                                                                    
     scrutinize this bill and say,  "The concerns I have are                                                                    
     very, very serious and here  they are on this page, ...                                                                    
     and that page,"  because that's what we  will hear from                                                                    
     the other side.  By getting  both sides in the mix like                                                                    
     that, I have to applaud you  if you'll do that.  And if                                                                    
     you won't, then you deserve what you get.                                                                                  
                                                                                                                                
     So, I  expect you to be  involved, as ... I  expect Mr.                                                                    
     Etheridge is interested in being  involved, and kind of                                                                    
     objected when  he felt  that he  wasn't involved.   And                                                                    
     hopefully I would  find you objecting in  the same way,                                                                    
     that, "Gee,  I don't feel  that I was  involved enough,                                                                    
     and  perhaps  is this  an  opportunity  for me  to  get                                                                    
     involved."  I  think we'll reach a  very good consensus                                                                    
     if we get people from both sides.                                                                                          
                                                                                                                                
MS. LaBOLLE responded:                                                                                                          
                                                                                                                                
     I  so appreciate  Representative Gatto's  comments, and                                                                    
     the only  thing is that I'm  only doing what I  know to                                                                    
     do,  and that  is to  look  at a  piece of  legislation                                                                    
     that's  been  introduced  from   the  viewpoint  of  my                                                                    
     members, the business  community.  And ...  we have not                                                                    
     been  invited to  participate.  ...  However, I'm  just                                                                    
     doing what  I know, and that's  to look ... at  a piece                                                                    
     of legislation and give our  comments on it, as we have                                                                    
     always done.   And we know that they  will be addressed                                                                    
     with  impartiality from  them all,  because we  are all                                                                    
     working for  what's best for  Alaska, for  its workers,                                                                    
     and  for  the  business  people who  keep  the  economy                                                                    
     going.                                                                                                                     
                                                                                                                                
Number 0413                                                                                                                     
                                                                                                                                
CHAIR ANDERSON told the committee:                                                                                              
                                                                                                                                
     The  amendments  don't change  the  type  or amount  or                                                                    
     computation  of benefits,  as  currently  written.   It                                                                    
     does  change outside  residents  - it  caps  them at  a                                                                    
     certain rate.  And it's  noted by the governor's office                                                                    
     that  there's  an  active, accountable,  and  effective                                                                    
     division director. ...                                                                                                     
                                                                                                                                
     It's  contended  that  the enforcement  tools  will  be                                                                    
     better.   It also ... stated  that there's consistency,                                                                    
     ... predictability  in the process.   Whether you agree                                                                    
     completely, partly, or not at  all with that, it sounds                                                                    
     like  where   we  don't  have   consensus  is   on  the                                                                    
     reorganization.                                                                                                            
                                                                                                                                
     The   sponsor  says   it's   a   streamlining  of   the                                                                    
     adjudicative and  appeals process - basically,  how you                                                                    
     go through  the system.   I  don't want  to get  into a                                                                    
     labor/business  argument.     I'm  as  pro-labor,  pro-                                                                    
     business  --  I hope  ...  all  members are,  at  least                                                                    
     currently present.   I just want to remind  you that if                                                                    
     we can  fix this as  the makers of public  policy, it's                                                                    
     important.                                                                                                                 
                                                                                                                                
     I have  had constituents write  me over the  last week;                                                                    
     I've had labor  say, please allow the  ad hoc committee                                                                    
     to analyze it.   I've had other individuals  write me -                                                                    
     business people -  saying, "Every time I  go here, it's                                                                    
     about pulling  out my wallet  and paying,  because I've                                                                    
     never  won  in  any  sense." ...  So  there's  still  a                                                                    
     dilemma, and  I think  we have to  meet in  the middle.                                                                    
     ...  [Ms.  LaBolle]  talked  about  and  Mr.  Etheridge                                                                    
     talked about if we can  have this ad hoc committee meet                                                                    
     - I mean, want to work with you.                                                                                           
                                                                                                                                
     We certainly don't want a  split vote on the committee.                                                                    
     I  love to  see ...  uniformity and  agreement, and  we                                                                    
     can't  always reach  that, but  if  you could  expedite                                                                    
     that.  ...  We've  talked  about  nine  days,  and  you                                                                    
     haven't looked at it, but the  other side of it is, not                                                                    
     to you but  to your members, start  looking, because we                                                                    
     have to hurry in terms of fixing some these aspects.                                                                       
                                                                                                                                
     The  things   I  talked  about  -   not  affecting  the                                                                    
     computation,    giving   better    accountability   and                                                                    
     effectiveness    for   the    director,   looking    at                                                                    
     streamlining, predictability in  the process so there's                                                                    
     consistency  and there's  fairness  -  those things,  I                                                                    
     would hope, we all want.                                                                                                   
                                                                                                                                
     And  so with  that being  said, I'm  going to  hold the                                                                    
     bill.  And  I hope everyone agrees; it  sounds like you                                                                    
     do. ...  On Friday, we  can get communication  from Mr.                                                                    
     Etheridge to let  us know, ... and that  would give you                                                                    
     Friday  and Monday,  at  least, to  look  and maybe  to                                                                    
     involve the  chamber so we  don't have a  debate again.                                                                    
     If that's not  the case, then just be  prepared to have                                                                    
     a little  more testimony,  and I  have to  afford that,                                                                    
     after you bring back what  your amendments might be, or                                                                    
     if you like the bill, or if you have revisions.                                                                            
                                                                                                                                
Number 0215                                                                                                                     
                                                                                                                                
CHAIR ANDERSON announced that public testimony would remain open                                                                
and that HB 450 would be held over.                                                                                             

Document Name Date/Time Subjects