Legislature(2005 - 2006)CAPITOL 17

04/04/2005 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled But Not Heard
Moved Out of Committee
Scheduled But Not Heard
Moved Out of Committee
Bills Previously Heard/Scheduled
Heard & Held
HB 180-WORKERS' COMPENSATION                                                                                                  
4:14:37 PM                                                                                                                    
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."                                                                                                                
PAUL  LISANKIE,  Director,  Division  of  Workers'  Compensation,                                                               
Department of Labor and Workforce  Development, said Section 2 of                                                               
the bill  "is a change of  the benefit payments from  an insurers                                                               
insolvency by  requiring instate  deposits to back  the insurers'                                                               
loss reserves."  He said the  section is designed "to have actual                                                               
assets  deposited instate  so that  if we  have another  untoward                                                               
incident like we  did with 'Freemont,' where we did  have to come                                                               
to the  legislature last  session and  ask for  a special  fix to                                                               
bail  out the  guarantee association,  that there  would, in  any                                                               
future  insolvency,  be  these deposits  instate  that  would  be                                                               
available  and would  be  keyed  to the  next  section, which  is                                                               
Section 3."   He  said Section  3 refers  to the  deposits, which                                                               
would be releasable by the  Director of the Division of Insurance                                                               
to  the Alaska  Insurance Guarantee  Association--the group  that                                                               
pays the  benefits to injured  workers whose  employers insurance                                                               
has "gone under."                                                                                                               
4:16:30 PM                                                                                                                    
REPRESENTATIVE  LEDOUX asked  to  go  back to  Section  22 as  it                                                               
relates to Section  2.  Section 22 sets up  a different guarantee                                                               
fund for  uninsured employers, she  noted, and she said  it might                                                               
make  sense to  put  the money  from the  fines  into the  Alaska                                                               
Insurance Guarantee Association.  "Then  you wouldn't have to set                                                               
up another fund and you would  avoid the question of what happens                                                               
if there  wasn't enough in  the fund," she  said.  She  asked the                                                               
number of these instances and the amount of money.                                                                              
MR. LISANKIE  said he  doesn't have  a firm number.   He  said he                                                               
believes  there were  25 injuries  that  involved companies  that                                                               
were  not  properly insured,  but  he  said  he didn't  know  the                                                               
severity  of the  injuries and  what a  reasonable reserve  might                                                               
have been.                                                                                                                      
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce, Community, & Economic  Development, said the purpose of                                                               
the  guarantee fund  is to  protect  claimants and  policyholders                                                               
from  insolvency of  an  insurer.   The cost  is  passed back  to                                                               
policyholders.    There  is a  situation  today  "where  workers'                                                               
compensation policy  holders are paying a  four percent surcharge                                                               
to  make up  for the  insolvent insurers'  claims, and  to add  a                                                               
whole other  burden to  Alaska policy  holders could  create some                                                               
REPRESENTATIVE ROKEBERG said  if Representative LeDoux understood                                                               
the guaranteed fund better, she  would understand why it couldn't                                                               
be combined  with the  other fund.   It  covers all  property and                                                               
casualty  policies in  the entire  state, he  said.   "We made  a                                                               
significant  policy  change  last  year by  using  that  fund  to                                                               
entirely finance the stop gap  requirements for the insolvency of                                                               
the Freemont situation," he added.                                                                                              
MS.  HALL said  there were  four insolvent  workers' compensation                                                               
insurers,  and  the  largest  was Freemont,  who  had  about  $60                                                               
million in outstanding claims reserves.   She said the assessment                                                               
is made  annually to  insurance companies to  put funds  into the                                                               
guarantee association to ensure that claims are paid.                                                                           
4:23:08 PM                                                                                                                    
MS.   HALL  said   the  assessments   can  be   passed  back   to                                                               
policyholders.  In extreme situations,  "we could have a personal                                                               
auto  policy  assessed  for a  workers'  compensation  claim,  or                                                               
whatever it  might be."   She said her  concern is that  it gives                                                               
employers the idea  that they don't need to  buy coverage because                                                               
their workers are going to be covered someplace else.                                                                           
REPRESENTATIVE ROKEBERG  agreed that  it would be  a disincentive                                                               
to insure, and "you would have socialized state insurance."                                                                     
REPRESENTATIVE LEDOUX  thought there were criminal  penalties for                                                               
failing to have insurance.                                                                                                      
MR. LISANKIE said it can be a criminal offense.                                                                                 
4:25:21 PM                                                                                                                    
REPRESENTATIVE  ROKEBERG asked  how the  four percent  assessment                                                               
will work.                                                                                                                      
MS.  HALL said  several  states require  additional deposits  for                                                               
workers' compensation.   It  is intended  to protect  against the                                                               
insurers' piece  of the  assigned risk pool,  as well,  she said.                                                               
She added  that the bill has  been through the Department  of Law                                                               
and she is unaware of any legal problems.                                                                                       
4:26:56 PM                                                                                                                    
REPRESENTATIVE ROKEBERG asked  Ms. Hall to explain  the impact on                                                               
the high-risk pool.                                                                                                             
MS.  HALL said,  "When the  premiums collected  for the  assigned                                                               
risk pool are  less than the claims paid out,  that difference is                                                               
a direct assessment  on insurance companies.   That assessment is                                                               
not given  back to the  policyholder, but  is a direct  offset to                                                               
the profits  of an insurance company.   When Freemont, who  had a                                                               
large  market  share,  became insolvent,  their  share  of  those                                                               
losses  was reallocated  out among  the  insurance companies  who                                                               
were remaining in our marketplace.   So in addition to having ...                                                               
the highest  assigned risk  burden given  back to  insurers, that                                                               
added  even more  to that  burden,  making our  market even  less                                                               
attractive to insurance companies."                                                                                             
MR.  LISANKIE said  Section  42 is  designed  to quickly  resolve                                                               
disputed benefits and  allows a fee of  up to $300 to  be paid to                                                               
an attorney.   He noted that  currently it is illegal  for anyone                                                               
to accept  an attorney's fee  for a workers'  compensation matter                                                               
unless  the  board approves  the  payment  first.   That  stifled                                                               
getting basic legal advice, he said.                                                                                            
4:30:16 PM                                                                                                                    
MR. LISANKIE said Section 42 will  allow in statute what is being                                                               
done by many people now under the board's regulations.                                                                          
REPRESENTATIVE  ROKEBERG asked  if  the source  of  funds is  the                                                               
actual  claim that's  paid.   Is that  where the  $300 is  coming                                                               
from? he asked.                                                                                                                 
4:31:17 PM                                                                                                                    
MR. LISANKIE said initially the source  of funds is the pocket of                                                               
the  injured worker  who  is asking  for legal  advice.   If  the                                                               
attorney takes the worker on as a  client, he or she will be paid                                                               
if the case is successful.                                                                                                      
4:32:06 PM                                                                                                                    
MR.  LISANKIE said  the statute  now says  no one  can pay  a fee                                                               
unless it  is approved by  the board  in advance, and  this would                                                               
cut that out, he said.                                                                                                          
MR. LISANKIE explained that Section 9  has two parts.  "It allows                                                               
the  Department of  Labor and  Workforce Development  to contract                                                               
with  a  nonprofit  organization  in order  to  seek  to  provide                                                               
information  and  legal assistance  to  injured  workers who  are                                                               
unable to  obtain private council."   He said this is  an attempt                                                               
to address the  disputed claims of people who are  turned down by                                                               
every attorney.  He said  it would give the department discretion                                                               
to seek such a contract on a limited basis to see if it works.                                                                  
4:35:38 PM                                                                                                                    
CHAIR  ANDERSON noted  that Representatives  Lynn, Kott,  LeDoux,                                                               
Rokeberg,   and  Anderson   were  present,   and  Representatives                                                               
Crawford and Guttenberg left for a minority caucus.                                                                             
REPRESENTATIVE ROKEBERG asked about a fiscal note for Section 9.                                                                
MR.  LISANKIE said  it is  about  $75,000 for  the first  partial                                                               
year,  and $50,000  for the  fraction of  the second  year.   The                                                               
nonprofit would  have to have  an attorney to  actually represent                                                               
people, he added.   It is designed  to get an attorney  if one is                                                               
not available elsewhere.  A worker  can get other advice, to some                                                               
degree, from the division, he said.                                                                                             
4:37:16 PM                                                                                                                    
MR. LISANKIE  said, "Section 11  would allow injured  workers who                                                               
are  represented  by attorneys  who  are  licensed in  Alaska  to                                                               
settle  their  claims  without  having  review  by  the  Workers'                                                               
Compensation  Board."   The board  would then  continue to  focus                                                               
reviews  on  settlements  of workers  who  are  unrepresented  by                                                               
council,  minors,   incompetent,  and  others  that   need  extra                                                               
scrutiny to their settlements, he explained.                                                                                    
4:37:56 PM                                                                                                                    
MR. LISANKIE  said people  who have  licensed attorneys  will "be                                                               
able to just sign and resolve their disputes."                                                                                  
4:38:17 PM                                                                                                                    
MR.  LISANKIE said  Section 7  allows  the state  to use  hearing                                                               
officers.  Current statute requires  that the commissioner is the                                                               
chair of  each hearing, but  the volume of hearings  requires the                                                               
use of  hearing officers, and  this has  been done for  nearly 25                                                               
years,  he  said.    Section  7  includes  conflict  of  interest                                                               
4:40:08 PM                                                                                                                    
CHAIR ANDERSON  said that labor  interests feel that  the hearing                                                               
officer being designated  by the commissioner lent a  bias to the                                                               
process.  He asked how the panel will be comprised.                                                                             
MR. LISANKIE said the panels  are still comprised of three people                                                               
representing  labor, management,  and the  hearing officer.   The                                                               
bill doesn't change that, he said.                                                                                              
REPRESENTATIVE LEDOUX asked if there  are any general regulations                                                               
regarding ethics for board members.                                                                                             
4:41:18 PM                                                                                                                    
MR. LISANKIE said  yes but this would give the  board the ability                                                               
to set its own standards.                                                                                                       
REPRESENTATIVE LEDOUX asked if there have been problems.                                                                        
MR. LISANKIE  said two claims, which  involved ex-party contacts,                                                               
ended up in the supreme court.                                                                                                  
4:42:09 PM                                                                                                                    
REPRESENTATIVE KOTT asked  if the commissioner isn't  part of the                                                               
panel, why does the language say "commissioner".                                                                                
MR. LISANKIE  said he  didn't know  but perhaps  the commissioner                                                               
would like to  be able to join  the panel in some  instances.  It                                                               
hasn't happened in recent memory, he noted.                                                                                     
4:43:58 PM                                                                                                                    
MR.  LISANKIE  said  there  are  a  number  of  fulltime  hearing                                                               
officers, and the department rarely uses contractors.                                                                           
4:44:15 PM                                                                                                                    
REPRESENTATIVE LEDOUX asked if the hearing officers are exempt.                                                                 
MR. LISANKIE said the current hearing officers are represented.                                                                 
4:45:48 PM                                                                                                                    
MR.  LISANKIE  said page  3,  Section  2,  proposes to  cap  non-                                                               
resident compensation rates to the same rates as Alaska's.                                                                      
4:48:46 PM                                                                                                                    
MR.  LISANKIE  said Section  36  calls  for the  coordination  of                                                               
payments  between workers'  compensation benefits  and disability                                                               
benefits that  are paid under  a plan  to which the  employer has                                                               
already contributed.   The goal of  this section is to  make sure                                                               
that the  employee doesn't get  more than regular  take-home pay.                                                               
He said  he erroneously stated  in another hearing that  it would                                                               
offset a  private disability  benefit, but this  is tied  only to                                                               
the benefits that an employer contributes to, he clarified.                                                                     
4:51:30 PM                                                                                                                    
CHAIR ANDERSON said the committee is a third through HB 180.                                                                    
4:52:08 PM                                                                                                                    
REPRESENTATIVE ROKEBERG  said there are modifications  being made                                                               
to HB 180, and he would like to see what those are.                                                                             
CHAIR ANDERSON asked Mr. Lisankie to keep the committee abreast.                                                                
[HB 180 was held over.]                                                                                                         

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