Legislature(2005 - 2006)BELTZ 211

03/30/2006 01:30 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
Including But Not Limited to:
+= SB 241 JOINT INSURANCE ARRANGEMENTS TELECONFERENCED
Heard & Held
+= SB 307 LANDLORD REMEDIES; LATE FEE TELECONFERENCED
Moved SB 307 Out of Committee
+= SB 309 CONSTR. TRAINING GRANT;UNEMPLOYMENT COMP. TELECONFERENCED
Bill Postponed
+= SB 272 MORTGAGE LENDING TELECONFERENCED
Heard & Held
              SB 241-JOINT INSURANCE ARRANGEMENTS                                                                           
                                                                                                                              
CHAIR CON BUNDE announced SB 241 to be up for consideration.                                                                    
                                                                                                                                
RYAN MACKINSTER,  staff to  Senator Cowdery,  sponsor of  SB 241,                                                               
explained that  it creates in  statute the ability to  have self-                                                               
insured  workers'   compensation  groups.   Currently  individual                                                               
companies  can   be  self-insured  in  Alaska   and  this  allows                                                               
companies within  the same  industry to get  together and  form a                                                               
group to  be self-insured like  the individual companies  if they                                                               
meet all the other requirements.  Several other states allow this                                                               
now.                                                                                                                            
                                                                                                                                
MR.  MAKINSTER said  that a  minimum  of five  or more  employers                                                               
would  be  needed  to  form  a  group,  but  different  types  of                                                               
companies  could not  form a  group. He  said the  CS before  the                                                               
committee was much  larger than the original bill  and that Linda                                                               
Hall,  director of  the Division  on Insurance  was concerned  it                                                               
left a  lot of the ideas  in regulation rather than  putting them                                                               
in statute so the boundaries would be clearer.                                                                                  
                                                                                                                                
1:34:32 PM                                                                                                                    
SENATOR RALPH SEEKINS moved to adopt  CSSB 241, version G, as the                                                               
working  document.  There  were  no  objections  and  it  was  so                                                               
ordered.                                                                                                                        
                                                                                                                                
MR. MAKINSTER explained that one of  the first issues was to make                                                               
sure  there were  adequate  funds for  expenses  to maintain  the                                                               
program and to pay for claims.  He said that Section 21.77.200 on                                                               
page  12  requires  the  association  to adopt  a  plan  that  is                                                               
approved by the  director that includes an advance  payment of 15                                                               
percent  with the  balance to  be  paid in  monthly or  quarterly                                                               
installments.  The   assessments  must  be  based   on  actuarial                                                               
projections  that  include  appropriate reserves  and  the  costs                                                               
associated  with  the plan.  Appropriate  reserves,  he said,  is                                                               
defined  on  page 12  in  Section  21.77.210. They  cover  actual                                                               
claims,  claims that  have  occurred but  are  not reported,  and                                                               
reserves for uncollected debts based on experience.                                                                             
                                                                                                                                
1:36:55 PM                                                                                                                    
Furthermore,  Mr.  MAKINSTER  said,  the  group  is  required  to                                                               
deposit at least 65 percent of  the money collected in an account                                                               
to pay claims or expenses  related to those claims. The remaining                                                               
35 percent would  go to paying for operating costs.  He said that                                                               
workers'  compensation  costs are  determined  by  AS 23.30,  the                                                               
workers' compensation statute.                                                                                                  
                                                                                                                                
MR. MAKINSTER  said that  what happens when  not enough  money is                                                               
collected  was a  concern  and  page 12  also  addresses that  in                                                               
Section  21.77.230.   It  requires   the  group  to   collect  an                                                               
additional  assessment to  make up  any shortfall.  It gives  the                                                               
director  the power  to decide  what  additional assessments  are                                                               
needed  if the  group  fails  to initiate  that  on  its own.  He                                                               
reminded  the  committee that  the  original  intent of  workers'                                                               
compensation was  to insure that  workers would be paid  for lost                                                               
wages, injuries and expenses incurred  if an accident happened in                                                               
exchange for not suing the employer for those costs.                                                                            
                                                                                                                                
He said another section provides  that dividends can be paid back                                                               
to the  members, which is  a provision  used in other  states. On                                                               
page 11, Section 21.77.190 requires  the approval of the director                                                               
before those dividends are paid.  The idea behind the dividend is                                                               
that if the group works together  to implement a safety plan that                                                               
will lower  risk over time for  both the system and  the workers,                                                               
it would not have to pay out  claims and there is some reward for                                                               
that.                                                                                                                           
                                                                                                                                
1:38:53 PM                                                                                                                    
MR.  MAKINSTER said  if one  member of  the group  goes bankrupt,                                                               
they are  bound together  through a  joint and  several liability                                                               
clauses to  insure that claims  are paid and bankruptcy  does not                                                               
remove  the liability  to pay  claims.  Beyond that,  there is  a                                                               
surety bond  payable to the state  in the amount required  by the                                                               
director to ensure that claims are paid.                                                                                        
                                                                                                                                
CHAIR BUNDE  asked if he had  an estimate of what  would be saved                                                               
if this were to become law.                                                                                                     
                                                                                                                                
MR. MAKINSTER replied that he didn't have a number.                                                                             
                                                                                                                                
1:40:29 PM                                                                                                                    
LINDA  HALL,  Director,  Division   of  Insurance,  directed  her                                                               
comments to  the CS. She  said the bill requires  the legislature                                                               
to make a public policy decision  and she wanted to make sure all                                                               
the potential pieces were put  before it before that decision was                                                               
made. Also,  she said she wasn't  particularly comfortable coming                                                               
before  them  with  what  they would  perceive  as  an  extremely                                                               
negative position on the bill; she didn't do it lightly.                                                                        
                                                                                                                                
MS. HALL said  she still wasn't convinced that  the bill provided                                                               
protections even though  she worked with the sponsor  group to do                                                               
that.  She said  she would  talk  about three  areas -  financial                                                               
oversight,  regulatory oversight,  and fiscal  impact -  and then                                                               
what she saw as a different solution.                                                                                           
                                                                                                                                
1:42:03 PM                                                                                                                    
MS.  HALL said  that one  of  the basic  principles of  insurance                                                               
regulation is financial oversight to  insure that claims get paid                                                               
and  while  the  CS  had detailed  requirements,  she  was  still                                                               
concerned that  it had no  liquidity requirements. It also  had a                                                               
narrow tangible net worth requirement.                                                                                          
                                                                                                                                
1:42:41 PM                                                                                                                    
CHAIR  BUNDE  asked what  amount  she  was  talking about  for  a                                                               
liquidity requirement.                                                                                                          
                                                                                                                                
MS. HALL  replied that  this bill was  modeled after  some Nevada                                                               
statutes and with Oregon statutes  that required specific working                                                               
capital  in  sufficient amounts  to  establish  the strength  and                                                               
liquidity of  the business. She  didn't favor setting  a specific                                                               
limit, but  thought it could  vary from group to  group depending                                                               
upon their  financial statements. She said  that currently, there                                                               
is  no  requirement for  individual  members  and suggested  that                                                               
higher risk occupations have greater need for more liquidity.                                                                   
                                                                                                                                
1:44:01 PM                                                                                                                    
MS.  HALL said  another  concern she  had was  that  there is  no                                                               
requirement  for individual  members  to  have audited  financial                                                               
statements,  but the  association is  required to  have one.  She                                                               
explained  that  there  is a  difference  in  general  accounting                                                               
principals  (GAP),   which  this  bill  is   predicated  on,  and                                                               
insurance  that  is  regulated  based  on  statutory  accounting;                                                               
assets are valued differently. She  said the National Association                                                               
of  Insurance Commissioners  has an  office called  the SVO  that                                                               
strictly  does asset  valuation.  A great  deal  of attention  is                                                               
given to the quality of assets  in an insurance company, which is                                                               
important; and she said there  are other assets besides liquidity                                                               
that make  up net  worth and  the department  needs to  know that                                                               
there is a real method of evaluating those.                                                                                     
                                                                                                                                
She said financial responsibility  rests with the association and                                                               
it needs  to have a  tie-in with its  members, but the  joint and                                                               
several  liability agreements  in this  bill do  not include  the                                                               
association. They do in the Nevada  bill and she thought that was                                                               
very important.                                                                                                                 
                                                                                                                                
MS. HALL  said Section 21.77.230  deals with  insufficient assets                                                               
and when an  association is insolvent, it allows  the director to                                                               
withdraw  the  certificate  of approval,  but  doesn't  say  what                                                               
happens then. Current insurance  statutes have provisions for the                                                               
Division of  Insurance, namely the  director, to become  either a                                                               
supervisor  or the  association  can go  into receivership.  This                                                               
bill does not give her authority to take over any assets.                                                                       
                                                                                                                                
1:46:30 PM                                                                                                                    
Under  regulatory  authority  to  penalize  for  violations,  she                                                               
explained that  the largest  insurance company  in the  world was                                                               
penalized  $1.6  billion  to  resolve  allegations  of  deceptive                                                               
accounting practices.  Prior to that,  she had one  subsidiary of                                                               
that company as an Alaska domestic  and had done a financial exam                                                               
and found some accounting irregularities,  which she didn't think                                                               
were  intentionally  deceptive,  but  nevertheless  were  not  in                                                               
accordance with  the state's  standard accounting  practices. The                                                               
company  was fined  $400,000. Recently,  the  division fined  the                                                               
same company $65,000 for not  getting its financial statements in                                                               
on time. She emphasized, "There needs to be a penalty!"                                                                         
                                                                                                                                
MS. HALL said that regulatory oversight  is not part of this bill                                                               
even though  a lot of  financial requirements had been  added and                                                               
it specifically says it's not  insurance and nothing else applied                                                               
except  Chapter 77,  which was  created for  self-insured groups.                                                               
Chapter  36  of  the  Insurance Title  provides  the  controlling                                                               
language for  trade practices and  frauds. It  includes oversight                                                               
of  marketing,   misrepresentation,  false   advertising,  unfair                                                               
discrimination, unfair  claims practices,  etc., and  those could                                                               
not be  applied to a  self-insured group. She thought  those were                                                               
consumer protections  and asserted  that claimants  are consumers                                                               
and they need to be protected in some instances.                                                                                
                                                                                                                                
MS. HALL said that the  division is currently conducting a market                                                               
conduct  review   of  a  claims  adjusting   company  because  of                                                               
complaints. The adjusting  company is a licensee and  she has the                                                               
authority to look at its files  and determine what they are doing                                                               
and, as  a result,  has found a  substantial number  of statutory                                                               
violations. This kind  of regulatory oversight is  not present in                                                               
CSSB 241.                                                                                                                       
                                                                                                                                
1:49:05 PM                                                                                                                    
MS. HALL  went on  to explain  that all licensees  have to  pay a                                                               
license fee and  a continuation fee. The division  operates in an                                                               
arena  where those  who  are  regulated pay  for  it  and not  by                                                               
choice. The bill  provides for a license fee only  and she wanted                                                               
a continuation  fee as well.  However, the greater issue  for the                                                               
legislature to deliberate  is the premium tax  since the entities                                                               
would no longer pay a premium  and therefore no premium tax. This                                                               
tax is  a major source  of revenue to  the general fund.  In 2004                                                               
premium  tax was  the second  largest  source of  revenue to  the                                                               
general fund.                                                                                                                   
                                                                                                                                
She  said that  probably one  group self-insured  association not                                                               
paying tax  wouldn't have  an impact,  but the  more of  that you                                                               
get, the more the impact it has on the general fund.                                                                            
                                                                                                                                
1:50:40 PM                                                                                                                    
MS.  HALL strongly  felt the  indemnity agreement  should include                                                               
the  association. Nevada  statutes require  annual assessments  -                                                               
the premium the  association would pay to an  insurance company -                                                               
of at least $300,000 or  an amount, which the director determines                                                               
to be satisfactory based on  annual review of actuarial solvency.                                                               
Each member must have a tangible  net worth of at least $250,000,                                                               
not  just an  aggregate  and  an insurance  premium  of at  least                                                               
$10,000.  It also  provides that  the director  would approve  an                                                               
annual assessment much  as rate filings are  approved today. This                                                               
means she would review the actuarial projections and reserving.                                                                 
                                                                                                                                
She said  that Nevada also  has provisions to assess  other self-                                                               
insured associations  for the claims obligations  of an insolvent                                                               
association. In  addition to the  joint and several  liability of                                                               
the group, if they became insolvent,  all of the members would be                                                               
assessed although she didn't know  if Alaska had enough bodies to                                                               
make that work.                                                                                                                 
                                                                                                                                
She  said  that   Oregon  also  has  good   ideas  like  specific                                                               
requirements  for   excess  insurance   and  working   capital  -                                                               
requirements that  are likely to improve  accident prevention and                                                               
claims handling.  It also requires irrevocable  letters of credit                                                               
for deposits.                                                                                                                   
                                                                                                                                
The last concern  Ms. Hall mentioned was in  current statutes. AS                                                               
21.75  allows for  the formation  of reciprocals,  she explained,                                                               
that are entities that are  kind of like insurance companies, but                                                               
they are limited  to trade associations. Alaska has  two that are                                                               
operating  very  successfully today  -  the  timber exchange  and                                                               
ARECA  (Alaska  Rural  Electric  Cooperative  Association).  They                                                               
operate  under  the division's  oversight  much  as an  insurance                                                               
company,  but   with  lower  requirements   -  $1.5   million  to                                                               
capitalize, which  she thought wasn't  a lot of money  for paying                                                               
workers'  compensation claims  that have  the potential  of being                                                               
expensive and long-tailed. She knew  of an insurance company that                                                               
had a reserve of $7 million.                                                                                                    
                                                                                                                                
MS. HALL  said she has yet  to hear any reason  that a reciprocal                                                               
would not be  a viable entity for the trade  associations to join                                                               
together and  set its own rates,  do its own safety  programs and                                                               
admit its own  members. She emphasized that she has  not seen any                                                               
reason  that this  already statutorily-created  entity could  not                                                               
serve  the  same  purposes  and it  comes  under  the  division's                                                               
regulatory and financial oversight.                                                                                             
                                                                                                                                
1:54:30 PM                                                                                                                    
MS. HALL  closed saying she was  very sensitive to the  high cost                                                               
of  workers'  compensation today  and  she  didn't want  to  take                                                               
people out of  the system without first looking  at improving it.                                                               
She said that  Director Lisankie provided her with  a report from                                                               
California that said  after its reforms between July  1, 2003 and                                                               
January  1, 2006,  premiums  had  gone down  by  46 percent.  She                                                               
emphasized that  there are  other ways  to help  employers reduce                                                               
costs than  by taking  them out  of the  system and  reducing the                                                               
mass in  which to  spread the  risk. She  urged the  committee to                                                               
work within the current system  to deal with escalating costs, 67                                                               
percent of which  are medical. However that is  funded, she said,                                                               
those  costs  won't change  and  she  didn't  feel she  had  seen                                                               
evidence indicating that premium would be reduced.                                                                              
                                                                                                                                
1:57:10 PM                                                                                                                    
PAUL  LISANKIE,  Director,  Division  of  Workers'  Compensation,                                                               
Department of  Labor and  Workforce Development  (DOLWD), offered                                                               
background on  the scope of  the current  self-insurance program.                                                               
Only  individual employers  can be  self-insured and  he has  the                                                               
authority for  granting or denying  applications lodged  with the                                                               
Workers' Compensation  Board. The  program is  up to  31 approved                                                               
employers.  He  said approximately  26  percent  of all  employed                                                               
Alaskans  are  working  for an  employer  that  self-insures  its                                                               
workers' compensation liability. That  means there is no guaranty                                                               
fund the way there is  for insurance companies. If a self-insured                                                               
becomes insolvent, the only recourse  for injured workers who are                                                               
getting  benefits  is bankruptcy  court.  He  suggested that  the                                                               
committee consider  that in addition  to the  large self-insureds                                                               
under his  supervision, which he  thought were  barely adequately                                                               
capitalized, that this legislation would  be opening the doors to                                                               
an  unlimited and  unknown  number of  small  employers to  self-                                                               
insure through the trade associations.                                                                                          
                                                                                                                                
MR.  LISANKIE  repeated  that  the   current  program  is  barely                                                               
adequate - partly because it  is operating under regulations that                                                               
are  23 years  old,  but  he is  the  process  of revising  those                                                               
regulations right  now. Currently there is  a minimum requirement                                                               
of  $5   million  in   tangible  assets   to  even   qualify  for                                                               
consideration as  a self-insurer;  with inflation, that  would be                                                               
about $10 million  in today's dollars and that  is probably where                                                               
the  regulations  are  going. Current  regulations  for  security                                                               
provide  for a  minimum  of  $300,000 or  125  percent of  actual                                                               
liabilities; so, that $300,000 would double to around $600,000.                                                                 
                                                                                                                                
2:01:38 PM                                                                                                                    
MR. LISANKIE closed  by saying when one looks at  the opinions of                                                               
people   who  talk   about  the   best   practices  of   workers'                                                               
compensation,  essentially they  suggest  having three  guarantee                                                               
funds. The  first is  a fund for  the insurance  companies, which                                                               
Alaska has  had for many years,  the second is a  fund for making                                                               
up benefits of  employees who are injured while  they are working                                                               
for employers who are illegally  uninsured (Alaska has this since                                                               
last year),  and a last  fund to guarantee  self-insurers because                                                               
of the  importance of the  benefits. Alaska doesn't have  this in                                                               
its current program and that  absence is reflected in the current                                                               
bill, which would be specific to group self-insurers.                                                                           
                                                                                                                                
2:02:45 PM                                                                                                                    
He underscored  Director Hall's comment  that if you look  at the                                                               
Nevada statute as  a template, it does have a  guaranty fund both                                                               
for  the individual  self-insured employers  and the  group self-                                                               
insurers - the groups that would be covered under this bill.                                                                    
                                                                                                                                
2:03:11 PM                                                                                                                    
CHAIR  BUNDE  asked if  the  state  could  be  looked at  as  the                                                               
guarantor if there would be some catastrophe under this bill.                                                                   
                                                                                                                                
MR. LISANKIE replied that he didn't know.                                                                                       
                                                                                                                                
CHAIR BUNDE  said he  also wanted  to know  what a  guaranty fund                                                               
would look  like as far as  amounts and costs to  the individuals                                                               
that would be part of the group.                                                                                                
                                                                                                                                
2:04:09 PM                                                                                                                    
SENATOR SEEKINS asked  Mr. Lisankie to explain  the guaranty fund                                                               
for self-insured companies.                                                                                                     
                                                                                                                                
MR.  LISANKIE replied  that  the fund  would be  in  place for  a                                                               
failure of  a self-insured. Now  there is no recourse  outside of                                                               
the  federal  bankruptcy system.  He  said  the assessment  would                                                               
presumably be  made every  year and  go into  a backup  fund that                                                               
would be  accessed to pay benefits  that could not be  covered by                                                               
one of the members of the group going insolvent.                                                                                
                                                                                                                                
CHAIR BUNDE said the state  has something like that for insurance                                                               
companies.                                                                                                                      
                                                                                                                                
MR.  LISANKIE  affirmed  that  and  added that  fund  had  to  be                                                               
adjusted in 2004  because of the large loss from  a few insolvent                                                               
insurers. He said:                                                                                                              
                                                                                                                                
     Frankly,  that's   part  of  the  reason   why  I'm  as                                                                    
     concerned about  this as  I am right  now -  because we                                                                    
     have this  current system in  place without  a guaranty                                                                    
     fund and  having sat through  that testimony  and lived                                                                    
     through that period, it's one  of the things that keeps                                                                    
     me awake  at night when  I'm regulating along  with the                                                                    
     panel  of the  Workers' Compensation  Board -  these 31                                                                    
     entities that are self-insured as we speak.                                                                                
                                                                                                                                
2:06:03 PM                                                                                                                    
TOM  SMITH,  President,  Alaska State  Homebuilding  Association,                                                               
supported SB  241, because  it would provide  one more  option to                                                               
any trade group,  but specifically to homebuilders,  to help with                                                               
the escalating costs of workers'  compensation insurance. He said                                                               
he  realized that  rates  wouldn't be  that  different, but  they                                                               
would have  more control over safety  by being part of  a smaller                                                               
group and members could possibly retain some of the premiums.                                                                   
                                                                                                                                
ROBERT VOGEL, ProGroup Management,  said his is an administration                                                               
company and he had worked with  the sponsors of this bill to help                                                               
them  to understand  self-insured groups.  He said  that ProGroup                                                               
has  managed  four  different self-insured  groups  for  over  10                                                               
years; one of the groups consists of homebuilders.                                                                              
                                                                                                                                
2:09:12 PM                                                                                                                    
MR. VOGEL  clarified that this law  is intended to allow  a group                                                               
of individual employers to finance  their projected losses in the                                                               
same manner  a single  self-insured entity  has done  under those                                                               
same provisions.  Employers within  the same industry  would form                                                               
an unincorporated, non-profit association  that would be owned by                                                               
its  members collectively  for the  purpose of  self-insuring its                                                               
workers'  compensation  liability,  thereby  obtaining  the  same                                                               
status  as  a  singly self-insured  employer.  This  self-insured                                                               
group is a separate distinct legal  entity and is not part of the                                                               
common  trade  association.  The   tie-in  to  the  common  trade                                                               
association is it  helps strengthen the commonality  of the risk.                                                               
You  don't  want  a restaurant  joining  a  builders  association                                                               
because  of the  different risks  involved. He  stated that  SIGs                                                               
(self insured  groups) are viable  alternatives for  employers to                                                               
improve  their  risk  management procedures,  worker  safety  and                                                               
care; they have been authorized  in 39 states, mostly recently in                                                               
Texas. They  have been in existence  for over 40 years  using the                                                               
basic  tenants outlined  in this  bill, which  stresses solvency,                                                               
owner accountability and responsibility.                                                                                        
                                                                                                                                
He said one of the requirements to  qualify to become a SIG is to                                                               
have a  minimum of  $5 million  in tangible  net worth.  He noted                                                               
that Director Lisankie  said that the minimum  tangible net worth                                                               
for individual  self-insureds in Alaska  is $10 million,  so this                                                               
would  be $10  million also.  Whatever the  self-insured law  is,                                                               
that is what these groups would follow.                                                                                         
                                                                                                                                
MR. VOGEL explained  that tangible net worth is the  net worth of                                                               
a company less its intangible  assets. The employers sign a joint                                                               
and several liability  agreements binding them to pay  all of the                                                               
claims  of this  group. That  is measured  through GAP,  the most                                                               
common method of measuring net  worth across the country. But the                                                               
law  backs away  from intangible  assets because  the idea  is to                                                               
have assets that  can be sold. He explained that  the group would                                                               
most likely have  a $350,000 to $750,000  deductible. After that,                                                               
even  if there  were  a  $7 million  claim,  an excess  insurance                                                               
company would  pay the rest. That  is why they have  to make sure                                                               
they use "A"  rated companies providing that the  group would pay                                                               
for. He  said the group would  be subject to paying  claims under                                                               
AS 23.30.                                                                                                                       
                                                                                                                                
He said  this law does  not require  each member to  have audited                                                               
financials,  but from  a liquidity  standpoint, the  group should                                                               
have GAP  audited financials. Annual  CPA audits are  required as                                                               
well as adequacy  audits by an independent actuary  who has joint                                                               
and  several liability  agreements  that  support the  liquidity.                                                               
Each  member   has  annual  payroll  audits   to  assure  correct                                                               
reporting  of collections  and the  director of  the Division  of                                                               
Insurance  can  audit  those  records   as  necessary  to  insure                                                               
compliance and solvency.                                                                                                        
                                                                                                                                
2:17:09 PM                                                                                                                    
He opined that a group  self-insured becomes a better alternative                                                               
to a  single self-insured because  if one company  goes bankrupt,                                                               
others are  there to  cover the  claims. If  a member  leaves the                                                               
group, he  still remains  bound to  it by  its joint  and several                                                               
agreements.                                                                                                                     
                                                                                                                                
MR.  VOGEL said  that Nevada  passed its  law in  1990 and  2,400                                                               
businesses have formed  13 groups there. He said  that the number                                                               
of groups  is generally  a function of  the number  of businesses                                                               
the  state has.  He thought  possibly only  a dozen  groups would                                                               
form in Alaska.                                                                                                                 
                                                                                                                                
2:23:17 PM                                                                                                                    
He concluded saying  this is not insurance,  it is self-insurance                                                               
and people should not be afraid of  it. It may cost a little more                                                               
in the  first year to start  a group, but over  a 10-year period,                                                               
savings can be  generated. Improved care of the  employees is the                                                               
first and  foremost goal  of programs like  this and  he reported                                                               
that his  homebuilders group  has saved about  20 percent  on its                                                               
premiums  since 1999  compared to  the  standard carrier  market.                                                               
Return-to-work  times and  medical  costs were  generally cut  in                                                               
half.   The  auto   dealers  retail   and  transportation   group                                                               
experienced  much the  same results  after 10  years. The  groups                                                               
have built up reserves and have continued to thrive and grow.                                                                   
                                                                                                                                
CHAIR  BUNDE thanked  Mr. Vogel  for his  comments and  said that                                                               
committee  time was  limited and  asked  testifiers to  summarize                                                               
their testimony.                                                                                                                
                                                                                                                                
2:25:40 PM                                                                                                                    
LARRY  PARTUSCH, Anchorage  Homebuilders' Association,  supported                                                               
SB 241  saying it  provides another  option for  funding workers'                                                               
compensation. He said that having  companies in the same industry                                                               
in one  group encourages them  to police their own  industry. His                                                               
experience  was that  he couldn't  get benefits  from the  use of                                                               
safety practices when he was in a big group.                                                                                    
                                                                                                                                
KENTON BRINE, Property Casualty  Insurers Association of America,                                                               
said his is  a trade association representing  about 1,000 member                                                               
insurance  companies across  the  country including  some of  the                                                               
leading  workers' compensation  insurance writers.  He understood                                                               
this  legislation   is  an  option   that  is  being   sought  by                                                               
homebuilders, in particular,  and his concern stems  from what he                                                               
heard from  the directors  of the Division  of Insurance  and the                                                               
Division  of Workers'  Compensation that  there are  not adequate                                                               
regulatory  oversights and  from  the perspective  of an  injured                                                               
worker, if an  entity becomes insolvent, it will look  a lot like                                                               
a bankrupt insurance  company and the question is how  do you get                                                               
your bills paid. He said:                                                                                                       
                                                                                                                                
     It isn't that we are  in opposition to the formation of                                                                    
     this option;  it is rather  that we are  concerned that                                                                    
     the way it  is being formulated it is going  to lead to                                                                    
     a  great  deal  of  risk to  injured  workers,  to  the                                                                    
     employers that  joined these groups and  to the broader                                                                    
     insurance marketplace.                                                                                                     
                                                                                                                                
He supported  continuing the  department's efforts  of addressing                                                               
the cost  drivers to workers'  compensation rather  than creating                                                               
other options using the same  cost structure. He also pointed out                                                               
that  the  system that  these  groups  would be  departing  would                                                               
suffer as  well. Legislators and administrators  might eventually                                                               
have to pick  up the pieces of a decimated  insurance system that                                                               
is the  result of weak regulatory  oversight as a result  of this                                                               
legislation.                                                                                                                    
                                                                                                                                
2:30:12 PM                                                                                                                    
MICHAEL BELL,  Alaska Trucking Association, supported  SB 241. He                                                               
testified  that  workers'  compensation  is one  of  the  largest                                                               
concerns for  trucking companies  in Alaska  that are  faced with                                                               
increasing  rates   that  can  only   be  attributed   to  market                                                               
increases. Customer service has been  replaced by "Pay it or find                                                               
it elsewhere"  attitude. He mentioned  that small  companies have                                                               
to cut  corners, operate without  coverage, sell off  portions of                                                               
their assets,  or close their  doors. A  change is needed  now he                                                               
said,  as some  of  his members'  rates exceed  $36  per $100  of                                                               
payroll.                                                                                                                        
                                                                                                                                
CHAIR  BUNDE said  the committee  shared his  concerns about  the                                                               
costs of workers' compensation and wanted  to do what it could to                                                               
help. He then set SB 241 aside.                                                                                                 
                                                                                                                                

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