HOUSE BILL NO. 30 "An Act relating to the exclusiveness of liability of an employer in the case of death; relating to the payment of workers' compensation benefits in the case of permanent partial impairment; relating to notice of workers' compensation death benefits; relating to the payment of workers' compensation death benefits payable to a child of an employee where there is no surviving spouse; relating to the payment of workers' compensation death benefits for an employee without a surviving spouse or child; and providing for an effective date." 2:00:24 PM Co-Chair Johnston invited the bill sponsor to the table. REPRESENTATIVE ANDY JOSEPHSON, SPONSOR, asked if the chair wanted a reintroduction to the bill. Co-Chair Johnston responded in the affirmative. Representative Josephson explained that when a person was partially injured at work, a doctor declared whether or not they had a degree of disability. Sometimes a disability was obvious to the eye and, sometimes further study was necessary. For example, a back injury might require additional assessment. The state had a permanent-partial impairment (PPI) rating and a whole-body multiplier. The bill changed the whole-body multiplier which had not been adjusted in 20 years. Alaska ranked between 40th and 50th place amongst the 50 states in terms of impairment ratings. The legislation would result in Alaska moving up to 26th place in ranking in the United States. The bill deleted a category of death benefit for the single childless worker and replaced it with a requirement that a new worker in Alaska received notice of their Worker's Compensation benefits. The bill was designed to put people who were single and childless on notice that they might want to purchase life insurance, as there was no remedy for their family if they were to pass away. Representative Josephson indicated the bill made one other provision change for a child whose parent died at work. Currently, the child would have 4 years of medical coverage through Worker's Compensation beginning at age 19 as long as they were enrolled at a vocational school or college. The bill removed the provision of having to be enrolled in school. He provided a couple of examples. He suggested that by removing the school stipulation, the provision was more equitable because it captured all different kinds of people between the ages of 19 and 23. 2:04:55 PM Representative Wool asked if the purpose of the initial provision was to help a person up to 23 years of age, essentially a dependent, while they were attending school and not earning money. He wondered if there was a distinction between a person in school and a person in the workforce relating to their status as a dependent. Representative Josephson indicated that the language in AS 23.33.95 was odd and, he was not suggesting making a change to it. However, the way the statute was written, it seemed to infer that a dependent could be 40 years old. If their 65-year-old father died in the workplace because of a work-related accident, they could be eligible for the benefit. However, the language suggested the survivor had to be enrolled in school at the moment of their parent's death. Instead of making a change to the language, the bill was stipulating that the benefit would be available from ages 19-23. Representative Wool asked for clarification about a 40-year-old dependent who lived with their parents, and could not live on their own. Representative Josephson reminded members they were referring to current law. He opined that it did not require that a person live with their parent. However, he agreed that there was a category of dependents who were either cognitively or physically disabled and could receive their weekly allowance for a significant amount of time. It would remain the same under the legislation. Vice-Chair Ortiz recalled the bill sponsor reporting that the passage of the bill would place Alaska in the middle of the ranking of the rest of the United States for compensation for death. Representative Josephson responded that he was not talking about compensation for death, which was a different matter. The bill was talking about compensation for a permanent injury. He reported that the Department of Labor and Workforce Development (DOL) two years prior reported that for the loss of an arm from the shoulder down Alaska was 32nd in payment rankings. He furthered that Alaska ranked 33rd in compensation for the loss of a hip, 35th for the loss of an eye, 33rd for the loss of an ear. He believed Alaska's rankings were worse because there were about 10 or 11 states that had a different way of calculating loss. He referred to an information sheet which he held up from DOL that showed the loss of 1 eye at work Alaska was not on the page. The page had to be flipped to find Alaska. If a person lost an eye at work in Maryland, the Worker's Compensation Plan would pay just over $250,000. If a person were to lose their eye at work in Alaska, they would receive $44,000 or less than 20 percent of what they would receive in Maryland. ELISE SORUM-BIRK, STAFF, REPRESENTATIVE ANDY JOSEPHSON, noted the number used in the bill was based on inflation. Co-Chair Johnston invited Mr. Mitchell to discuss the fiscal notes. 2:10:14 PM GREY MITCHELL, DIRECTOR, DIVISION OF WORKERS' COMPENSATION, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT (via teleconference), relayed that the department had 2 fiscal notes. The first dealt with the Worker's Compensation component. The fiscal note illustrated a revenue increase associated with increasing the permanent-partial impairment benefits. The revenue increase was estimated to be $110,000 per year. The fiscal note showed an increase of $55,000 for FY 21 and an increase of $110,000 per year from FY 22 through FY 26. The amount was based on a 44 percent increase in PPI benefits. He elaborated that the reason the revenue increased to the division was because there were 2 taxes. The first tax was collected by the Division of Insurance on all premiums issued. The increase of 44 percent was expected to increase premiums in a like amount. The other revenue source was a service fee placed on self- insured employers such as the State of Alaska and other large employers that had the resources to self-insure. The insurers were required to pay 2 percent of all the indemnity benefits they paid out over the year. Mr. Mitchell reviewed the second fiscal note which dealt with the Second Injury Fund. He explained that in Alaska there was a fund that paid benefits for workers who had pre-existing conditions and who had claims that met certain conditions. In order to pay the claims, there was an assessment against of all of the indemnity benefits that were paid out over a year by all employers. He expounded that the assessment was based on the amount of revenue in the account at a given time over the year. The claims that were charged against the account determined a reserve rate. He reported in the previous year the reserve rate was set at 5 percent. He suggested that for every dollar of indemnity benefit payment, an employer was required to submit 5 percent to the Second Injury Fund. The increase was based on an estimate of an increase of $4.2 million in indemnity payments. He continued that the amount was based on indemnity payments that were made in 2018 multiplied by 44 percent. The estimated amount of the increase was $105,000 in FY 21 and $210,000 each year for FY 22 through FY 26. 2:14:52 PM Representative Wool referred to language on the second page of the fiscal note which stated: "Studies indicate that significant benefit increases are typically accompanied by changes in claimant behavior. Changes in claimant behavior might result in an increased number of PPI claims." Representative Wool asked if more people would claim they lost their eye because they would receive additional money. He did not see how extra claims would result. He suggested the loss of a limb would be difficult to fake. Mr. Mitchell responded that Representative Wool's statement was true. The National Council of Compensation Insurance (NCCI) had done an extensive evaluation based on the previous year's version of HB 30. The language was in the previous year's analysis. He suggested that changing the benefits to such a large amount, 44 percent, in a single year might influence claimant behavior. It was a consideration. He agreed that no one would fake the loss of an eye or a similar injury. He reported that because the language was included in the NCCI analysis, the division included it in the fiscal note explanation. Representative Wool just wanted to point it out. Mr. Mitchell clarified that Mr. Jordan had a separate fiscal note from the Department of Administration to review. The fiscal note showed the effect the bill would have on an employer. The note showed the cost to the state related to increasing the PPI benefit amount. 2:17:11 PM SCOTT JORDAN, DIRECTOR, DIVISION OF RISK MANAGEMENT, DEPARTMENT OF ADMINISTRATION, reported that the department's fiscal note reflected the 44 percent increase on what the state paid out for the PPI rating. The fiscal note reflected a 10-year average of what it paid out which was $979,286 per year. The amount fluctuated from year-to- year. He continued that the 44 percent increase would increase the amount by $434,313 and the fee that Director Mitchell had mentioned was also included for $26,059. The fiscal note for FY 21 was half of the amount because the effective date would be half of the year or $230,200. In the out years from FY 22 through FY 26 the amount would be $460,400 per year. Representative Josephson wanted to see a fiscal note because the point of the bill was to provide more benefit. He noted that in the Worker's Compensation Annual Report from 2018 showed total compensation payments statewide had decreased from $292 million in 2015 to $225 million in 2018. He was unclear the reason for the change. The decrease was about $70 million in indemnity and medical benefit payments. Co-Chair Johnston reported the amendments were due by March 9, 2020 at 5:00 PM. She relayed the agenda for the following day. HB 30 was HEARD and HELD in committee for further consideration.