Legislature(2005 - 2006)CAPITOL 17
03/22/2005 01:00 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB120 | |
| HB190 | |
| HB180 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 120 | TELECONFERENCED | |
| *+ | HB 190 | TELECONFERENCED | |
| = | HB 180 | ||
HB 180-WORKERS' COMPENSATION CHAIR ANDERSON announced that the final order of business would be HOUSE BILL NO. 180, "An Act relating to a special deposit for workers' compensation and employers' liability insurers; relating to assigned risk pools; relating to workers' compensation insurers; stating the intent of the legislature, and setting out limitations, concerning the interpretation, construction, and implementation of workers' compensation laws; relating to the Alaska Workers' Compensation Board; establishing a division of workers' compensation within the Department of Labor and Workforce Development, assigning certain Alaska Workers' Compensation Board functions to the division and the department, and authorizing the board to delegate administrative and enforcement duties to the division; establishing a Workers' Compensation Appeals Commission; providing for workers' compensation hearing officers in workers' compensation proceedings; relating to workers' compensation medical benefits and to charges for and payment of fees for the medical benefits; relating to agreements that discharge workers' compensation liability; relating to workers' compensation awards; relating to reemployment benefits and job dislocation benefits; relating to coordination of workers' compensation and certain disability benefits; relating to division of workers' compensation records; relating to release of treatment records; relating to an employer's failure to insure and keep insured or provide security; 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; relating to attorney fees; providing for the department to enter into contracts with nonprofit organizations to provide information services and legal representation to injured employees; providing for administrative penalties for employers uninsured or without adequate security for workers' compensation; relating to fraudulent acts or false or misleading statements in workers' compensation and penalties for the acts or statements; providing for members of a limited liability company to be included as an employee for purposes of workers' compensation; establishing a workers' compensation benefits guaranty fund; relating to the second injury fund; making conforming amendments; providing for a study and report by the medical services review committee; and providing for an effective date." 2:16:19 PM MICHAEL J. JENSEN, Attorney at Law, Law Offices of Michael J. Jensen, informed the committee that [the committee packet should include] a letter dated March 16, 2005, from himself and Joseph Kalamarides, Chancy Croft, Steve Constantino, and William Soule. He explained that he and the aforementioned attorneys exclusively represent injured workers and workers' compensation cases. Mr. Jensen said that he would limit his comments to the creation of the commission and the concern the governor has raised regarding premium increases. The statistics used to justify HB 180 specify the following: overall benefits have only increased 7 percent; the number of injuries have decreased; the vocational rehabilitation costs have decreased; time loss claims have decreased; indemnity benefits have decreased; legal expenses of the plaintiff's lawyer have decreased; defense legal expenses have increased; and medical benefits have increased 8 percent. Therefore, Mr. Jensen opined that it's difficult to understand how employers can face premium increases of 400 percent. He offered an analogy in which natural gas prices increase 7 percent, but the electric user has a rate increase of 400 percent. The natural inclination is to ask the regulator of the utility why the electric users would be charged 400 percent [more] when the gas prices have only risen by 7 percent. However, when dealing with injured workers, the solution seems to be to go after the workers and the physicians. MR. JENSEN opined that HB 180 doesn't address the legitimate concerns of Alaskan employers. Although Alaskan employers are experiencing a dramatic increase in premiums, it's not explained by the relatively modest increase in benefit costs. In fact, the commission created by HB 180 will increase the cost to workers and physicians in litigating claims. This seems to create a court and judges without calling them such. "For the first time in Alaska's history, judges will be near political appointees not subject to the standards of judicial conduct, preemption would not be allowed, the commission would not be subject to the present standards of judicial review; it will decide cases de novo and the judges will never be evaluated for their ability or fairness." He highlighted that the power of the board to determine credibility of medical reports will be taken away by this Act. "The board's determination of credibility will be exclusively limited to testimony presented by a witness at hearing," which will increase the cost of litigation to employers and employees alike, he pointed out. Mr. Jenson further pointed out that [AS 23.30.128] clarifies that the commission will review de novo all prior board decisions; permit parties to present new or additional evidence; permit easier granting of stays without surety bonds; and ensure that all adverse board decisions will appealed by the party who lost at the board level. He opined that all of the aforementioned will greatly increase litigation costs as well as medical costs because physicians will now have to wait one to two years for the litigation to be concluded at the commission level. He noted that every party that lost before the board will be compelled to appeal for a chance "at two bites of the apple." "We simply don't see how the governor's proposal to create this commission will save ... costs ..., time, and will make the system fairer for injured workers and employers alike," he opined. REPRESENTATIVE ROKEBERG suggested that Mr. Jensen should be invited back at another time because he represents four other counselors who represent the plaintiff's bar. Representative Rokeberg said he would like to hear suggestions regarding a solution from Mr. Jensen. Representative Rokeberg expressed concern that Mr. Jensen admits that there's a 400 percent premium increase, but denies what's causing it. MR. JENSEN said that he and his colleagues have addressed what they believe would be better solutions, and certainly much cheaper and speedier solutions. He said that he and his colleagues have some suggestions regarding the medical issues. In regard to the premium increases, the statistics from the Division of Workers' Compensation show that the cost of benefits have only increased by 7 percent. Therefore, there seems to be a disconnect between what employers are being charged in premiums and what those premiums are purchasing, he opined. No one is addressing the aforementioned concern, he highlighted. Mr. Jensen claimed that HB 180 won't save employers 400 percent in premium increases. BOB FAVRETTO, Business owner; Board Member, Alaska State Chamber of Commerce, informed the committee that he's the twice past president of the Kenai Chamber of Commerce. Mr. Favretto relayed that a hotel/restaurant/property management business in the area had workers' compensation premiums in the amount of about $16,000 in 2000, which increased to about $36,000 in 2004. Those premiums are estimated to increase another 20-30 percent in 2005. He then turned to attention to a local machine shop that employs approximately 36 individuals and had $40,000 in [workers' compensation] premiums in 2001, which will increase to in excess of $100,000 this year. Mr. Favretto highlighted that in 2001 the McDonald's franchises on the Kenai Peninsula employed approximately 130 employees of which he estimated 65 percent to be part-time employees. In 2001, the workers' compensation premium was $24,000 and in 2005 the premiums are projected to be in excess of $133,000. Mr. Favretto then turned to a local fish processing plant that had 233 employees in the year 2000 of which 90-95 percent are part-time employees. In 2000, the local fish processing plant's workers' compensation premiums were a little over $31,000. In 2005, this fish processing plant will employ less than 130 employees, but the workers' compensation premium will exceed $148,000. 2:28:04 PM MR. FAVRETTO then related similar information regarding his own business. He noted that in any of the aforementioned businesses he highlighted, there were no catastrophic injuries to cause the [workers' compensation] premiums to rise to the levels specified. The rise in workers' compensation premiums causes employers to reduce benefits and employees and require participation of employees and their families to subsidize the premiums. In fact, small businesses are borrowing money to pay for their workers' compensation premiums, which he characterized as destined for failure. In conclusion, Mr. Favretto encouraged the committee to pass HB 180 out of committee and address this matter this session. REPRESENTATIVE CRAWFORD informed the committee that the [workers' compensation] premium for one of his rental properties was $197 per year and it had no claims against it. However, two years later the premium increased to $856, although there still had been no claim. He related that he has heard that costs are increasing by 7-15 percent a year, although premiums have increased approximately 400 percent in that same timeframe. He asked if this is different from workers' compensation. He also asked if [the legislature] should also go after insurance companies for increasing the insurance rates on homeowners' insurance. He asked if another factor could be at play, such as the loss of $7 trillion in the stock market. 2:31:17 PM MR. FAVRETTO empathized with Representative Crawford as a business owner and commented that everyone is experiencing the same thing. He acknowledged that there is a lack of carriers, but expressed the need to do what's possible to correct as much as can be corrected. JOHN DAVID RAGAN suggested that premium rate increases in Alaska aren't being driven by cost increases in Alaska. Rather, insurance companies paid out massive claims after the terrorist attacks of September 11, 2001 and suffered massive investment losses due to the stock market crash. Furthermore, companies insuring in Alaska have also had serious financial problems in other states. Therefore, cutting costs in Alaska may not actually impact those premiums, he opined. As a firefighter and a laborer, Mr. Ragan said that firefighters and emergency medical technicians (EMTs) deserve the best possible care available when injured in the line of duty, which falls under workers' compensation. Mr. Ragan characterized the freezing of the medical reimbursement rates that physicians can charge for specific injuries as a major problem. The aforementioned is a very bad idea, which he predicted would produce poor or second- rate medical care for workers' compensation patients because many physicians will simply choose not to take workers' compensation patients as is often done with Medicare patients. Mr. Ragan emphasized that "fixing up" workers and getting them back to work after being injured on the job is merely part of the cost of the job and part of the cost of doing business, which is what workers' compensation is about. MR. RAGAN urged the committee to provide workers' compensation patients the best medical care possible by opposing this medical reimbursement cap at the 1999 level. He characterized the aforementioned as the smart thing to do because second-rate medical care will increase medical and nonmedical costs. He informed the committee that almost all of the studies performed, including one performed by the International Brotherhood of Electrical Workers (IBEW), have concluded that the most cost effective way to deal with workers' compensation is to provide the injured worker the best medical care available and get the worker back to work as quickly as possible. Therefore, this legislation, which caps the medical reimbursement cap at the 1999 level, doesn't make sense. Furthermore, the legislation deducts pension money from workers' compensation payments. 2:36:04 PM MR. RAGAN maintained that personal assets, such as an employee's pension, shouldn't be attacked because of the employee's accident. He stressed that it's not appropriate to punish those who have prudently set aside money in a pension plan. Furthermore, it's not [appropriate] to punish those who, after retirement, stay productive by getting another job. In conclusion, Mr. Ragan related his understanding that there was a very good, bipartisan, ad hoc committee consisting of representatives of employees and laborers who made some excellent suggestions. However, somehow those suggestions were brushed aside and HB 180 was introduced. He characterized HB 180 as a "knee-jerk punitive approach". Mr. Ragan suggested that HB 180 be killed and the committee return to the ad hoc committee's recommendations. He further suggested that if the desire is to cut costs, it should be done with massive emphasis on safety in the workplace and training. Current law, he charged, doesn't do enough to reward safe employers. MARJORIE LINDER, Rehabilitation Counselor, expressed concern with HB 180, which seems to take out the profit margin that the insurance companies want. She related her belief that the reemployment benefit is being amended based on erroneous, unreliable, and unverifiable data. The data is filled with nonrehabilitation related costs, such as settlement inducements so that employers can avoid paying a 6 percent assessment into the second injury fund. The reemployment benefits administrator can only find one-third of the cost reported by the carriers for claimants under the program he administers. 2:39:14 PM MS. LINDER said that this faulty data is being used to raise rates for employers and reduce benefits for employees. She noted that the committee should have her testimony and exhibits illustrating this faulty data. She informed the committee that her fees were reported to be $75,761 one year when in fact she was paid $43,478. Some carriers have reported paying rehabilitation providers over $20,000 for an eligibility evaluation, which typically cost $1,500 to $2,000. She then turned attention to exhibits two and three, which are examples of different reporting practices for the sample carriers. The overall benefit is 7.4 percent, although she mentioned that the aforementioned figure can't be trusted because they are so disparately reported. However, when one reviews Freemont, which contributed to the situation in which Alaska finds itself today, the data specifies it paid 15.45 percent in rehabilitation costs [of the eligibility costs]. The reason the aforementioned is reported is because the insurance carrier can avoid paying a 6 percent assessment on rehabilitation costs into the second injuries fund, and therefore non-rehabilitation costs are characterized as rehabilitation costs. 2:42:33 PM MS. LINDER turned attention to Wausau (ph), which reported paying 5.1 percent of its claim dollar to monitor rehabilitation plans for which it paid no one to write. Furthermore, Lieberman's Mutual reported paying .45 percent for plan costs that it paid no one to write. Still, these companies have large amounts in 041k, which is typically a waste basket for placing settlement inducements. Although the aforementioned money is characterized as rehabilitation costs, it isn't. Ms. Linder said that if she were an employer, she would be very concerned because the Division of Vocational Rehabilitation is making these insurers report costs under the correct column. However, these are used to raise rates on employers and now to cut benefits. These costs aren't real, she emphasized. Ms. Linder directed attention to exhibits 4 and 5, which illustrate that overall rehabilitation costs have decreased from 2002 to 2003, yet [insurers] are acting as if rehabilitation costs are rising and out of control and the reason for this 400 percent increase. She highlighted exhibit 6, which notes Commissioner O'Claray's written comment that he has found 155 people in 2002 who were paid rehabilitation costs but weren't even eligible for the benefit. Exhibits 7 and 8 illustrate that the reemployment benefit administrator who administrates the program can only find one-third of the costs reported by the carrier in the legitimate program that the administrator administers. MS. LINDER suggested that the committee ensure that insurers report their costs accurately and in a standardized fashion. Furthermore, she suggested that the Division of Workers' Compensation and the Insurance Commission ensure that the costs are reported correctly before making more problems. 2:46:20 PM MS. LINDER announced that she has three amendments that she would propose and fax to the committee. 2:47:23 PM CHAIR ANDERSON announced that he intended to review the physician issues brought up by Mr. Ragan as well as the recommendations of the ad hoc committee in order to develop some amendments. Chair Anderson expressed his desire to hear more testimony and entertain amendments next Wednesday. However, he noted that there is other legislation that the committee [needs to hear as well]. 2:47:57 PM REPRESENTATIVE GUTTENBERG highlighted that there are people who have been waiting to testify for four days, and therefore it might be prudent to have a meeting dedicated to taking public testimony on HB 180 only. CHAIR ANDERSON clarified that that's the [tentative] plan for next Wednesday. 2:49:01 PM. REPRESENTATIVE GUTTENBERG pointed out that there is concern from small businesses regarding increased [workers' compensation] rates. However, he said that he didn't get a sense that small business [owners] understand HB 180 and its complexity, rather they merely want relief. Representative Guttenberg related his perspective that HB 180 "doesn't get there" with regard to lower [workers' compensation] rates. [HB 180 was held over.]
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