HB 314 - WORKERS' COMPENSATION  1:08:25 PM CHAIR RAMRAS announced that the first order of business would be HOUSE BILL NO. 314, "An Act relating to fees and charges for medical treatment or services, the crime of unsworn falsification, investigations, and penalties as they relate to workers' compensation; and providing for an effective date." 1:09:09 PM KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State Legislature - on behalf of the sponsor, the House Labor and Commerce Standing Committee, which is chaired by Representative Olson - offered his understanding that HB 314 addresses the issue of fraud and a small portion of the recommendations outlined in a report produced by the Medical Services Review Committee (MSRC) as it pertains to the medical services fee schedule; and that a forthcoming amendment also addresses the issue of fraud. 1:11:12 PM CHAIR RAMRAS made a motion to adopt Amendment 1, labeled 26- LS1354\A.3, Bailey, 2/17/10, which read: Page 1, lines 1 - 2: Delete "the crime of unsworn falsification" Insert "civil damages" Page 1, lines 5 - 9: Delete all material. Page 1, line 10: Delete "Sec. 2" Insert "Section 1" Renumber the following bill sections accordingly. Page 2, lines 15 - 16: Delete "usual, customary, and reasonable" Page 2, lines 17 - 21: Delete "include the most recent Current  Procedural Terminology codes for both category I and  category II medical treatment or other services  published by the American Medical Association;  notwithstanding AS 44.62.010 - 44.62.290, the board  shall update the schedule annually by order" Insert "be based on statistically credible data,  including charges for the most recent category I, II,  and III medical services maintained by the American  Medical Association and the Health Care Procedure  Coding System for medical supplies, injections,  emergency transportation, and other medically related  services, and must result in a schedule that (i)  reflects the cost in the geographical area where  services are provided; and (ii) is at the 90th  percentile" Page 2, line 26, through page 3, line 2: Delete all material and insert:  "* Sec. 2. AS 23.30.250(a) is amended to read: (a) A person who (1) knowingly makes a false or misleading statement, representation, or submission related to a benefit under this chapter; (2) knowingly assists, abets, solicits, or conspires in making a false or misleading submission affecting the payment, coverage, or other benefit under this chapter; (3) knowingly misclassifies employees or engages in deceptive leasing practices for the purpose of evading full payment of workers' compensation insurance premiums; or (4) employs or contracts with a person or firm to coerce or encourage an individual to file a fraudulent compensation claim is guilty of workers'  compensation fraud, which may be punished under  AS 11.46.120 - 11.46.150, and may also be guilty of  perjury and related offenses under AS 11.56.200 -  11.56.230 [CIVILLY LIABLE TO A PERSON ADVERSELY AFFECTED BY THE CONDUCT, IS GUILTY OF THEFT BY DECEPTION AS DEFINED IN AS 11.46.180, AND MAY BE PUNISHED AS PROVIDED BY AS 11.46.120 - 11.46.150].  * Sec. 3. AS 23.30.250(c) is repealed and reenacted to read: (c) In addition to criminal penalties under this section, a person who violates this chapter is liable in a civil action brought by or on behalf of a person who suffers economic damages as a result of the violation for an award of three times the amount of compensatory damages resulting from the violation, subject to adjustment under AS 09.17, and an award of reasonable attorney fees." Renumber the following bill sections accordingly. Page 3, line 19: Delete all material. Renumber the following bill section accordingly. REPRESENTATIVE HOLMES objected for the purpose of discussion. 1:13:19 PM LINDA HALL, Director, Division of Insurance, Department of Commerce, Community, & Economic Development (DCCED), indicated that HB 314 would address some concerns that have arisen [with regard to current statute]. She recounted that in 2005, the legislature amended the Alaska Workers' Compensation Act, but in so doing inadvertently deleted the basis for the Workers' Compensation Board to adopt a fee schedule, though there was an expectation at the time that the stakeholders would propose legislation before August 1, 2007, to address that issue. When that didn't occur, medical fees were frozen until August 1, 2007, and the division subsequently provided for two Consumer Price Index (CPI) increases - one in 2006 and one in 2009 - with the existing extension due to expire on December 31, 2010, though the medical fee schedule is currently missing approximately 2,000 procedure codes. Once that last extension expires, there will be no cap of any kind on medical fees [related to workers' compensation]. MS. HALL noted that a chart in members' packets illustrates that in 2008, medical expenses made up 58 percent of the workers' compensation benefit system in all states for which National Council on Compensation Insurance, Inc. (NCCI), provides ratemaking services. Another chart illustrates that in Alaska, in 2008, medical expenses made up 72 percent of the workers' compensation benefit system, though in 1988 and 1998, it made up only 52 percent and 63 percent respectively. In response to questions, she surmised that the entire cost of Alaska's workers' compensation benefit system has probably grown due to Alaska having a larger premium base - though the actual incident rate has decreased substantially - and it is the aforementioned growth in medical expenses which illustrates the importance of implementing a new medical fee schedule, as HB 314 is proposing to do. MS. HALL noted that yet another chart illustrates the average yearly medical cost per case in Alaska - from 2004 through 2008 - versus the average yearly medical cost per case in the rest of the country; for example, in the rest of the country, the average yearly medical cost per case is $26,000, whereas in Alaska, it's $40,000 - substantially higher. Members' packets also include a handout illustrating workers' compensation premium rate rankings for all 50 states plus the District of Columbia; Alaska, for example, is ranked number one with an index rate of 3.97. Costs drive premiums, and the major costs of Alaska's workers' compensation benefit system are those pertaining to medical care. For these reasons, she remarked, "We need this fee schedule to be in place." 1:19:48 PM MS. HALL acknowledged, however, that HB 314 is not a fix for Alaska's workers' compensation system, and won't lower premiums. Instead, HB 314 would provide for a sustainable fee schedule that could be renewed each year using data collected from individual vendors that collect "bill/charge" data. A fee schedule based on the CPI is simply not sustainable, whereas the methodology that was in place in 2004 - which HB 314 proposes to revert back to - is. She then noted that in addition to the provisions that address Alaska's workers' compensation fee schedule, other provisions of HB 314 would update the statutes pertaining to the prosecution of workers' compensation fraud, which, obviously, adds costs to the system. In the aforementioned 2005 legislation, authority to investigate and prosecute workers' compensation fraud was granted, but recent experience has shown that clarification of those statutes is warranted in order for the State to successfully prosecute such fraud. MS. HALL explained that by changing the title and deleting the bill's proposed change to AS 11.56.205(a) - existing Section 1 - Amendment 1 would remove from the bill language regarding the crime of unsworn falsification. Amendment 1 would also provide more specificity to proposed AS 23.30.097(a)(1)(D) such that the fee schedule must be based on statistically credible data and must result in a schedule that reflects the cost in the geographical area where the services are provided, and is at the 90th percentile. She predicted that Amendment 1's proposed change to AS 23.30.097(a)(1)(D) would provide for a more accurate fee schedule. In response to a question, she said that passage of Amendment 1 wouldn't lower medical costs or workers' compensation insurance premiums; passage of Amendment 1 would, instead, merely provide a methodology for establishing a fee schedule, a methodology that could stay in place until an alternative is developed. MS. HALL, in response to another question, noted that establishing a more permanent fee schedule is dependent upon the will of the legislature, and is clearly a policy call. 1:27:11 PM CHAIR RAMRAS questioned what would occur with regard to injured workers, workers' compensation insurance premiums, and employers if Amendment 1 is adopted but a permanent solution is not then forthcoming. MS. HALL opined that with regard to injured workers, having a fee schedule that is reflective of the average fees in a particular geographical area - and currently there are three such areas [in Alaska] - would allow injured workers access to medical care, thus addressing one of the division's primary concerns, particularly given that adopting "multiples of Medicare, for example," is not likely to occur in Alaska and, in any case, would not be in the best interest of injured workers attempting to access medical care. She surmised that employers, too, want their injured employees to have access to medical care so that they can come back to work. Again, the methodology proposed by Amendment 1 is sustainable and has already been proven to work, though it won't control costs or premiums. CHAIR RAMRAS asked whether the cost of medical care is different for injuries that occur on the job than it is for injuries that don't occur on the job. MS. HALL said that the cost of the medical care wouldn't be different, though what the medical care provider ultimately gets paid by the person, or his/her health insurance company, or the workers' compensation benefit system could vary depending on the situation. CHAIR RAMRAS questioned what would result if Amendment 1 were to be amended such that in its change to proposed AS 23.30.097(a)(1)(D), the words, "90th percentile" were replaced with the words, "70th percentile". MS. HALL, acknowledging that a 90th percentile is high, cautioned that in deciding what constitutes an acceptable reimbursement rate, the committee should keep in mind that ensuring injured workers have access to medical care is the primary goal. 1:34:35 PM MR. JACKSON, in response to a question, offered his understanding that the words, "90th percentile" came from regulation. MS. HALL concurred, adding that the medical fee schedule in the workers' compensation regulations has been at the 90the percentile for a significant number of years, and that's why the division is seeking to include that percentile in statute. CHAIR RAMRAS expressed dissatisfaction with that rationale, and questioned whether reducing the percentile to an 80th percentile would both reduce workers' compensation insurance rates and ensure that injured workers have access to medical care. MS. HALL said she is unable to predict whether such a change would still ensure that injured workers have access to medical care, surmised that medical care providers would be harmed by establishing the fee at an 80th percentile, but acknowledged that such a change might eventually translate into a benefit for employers because the division bases its premiums on the historical cost of claims. Various studies, she noted, conflict with regard to whether changing a fee schedule has resulted in a significant impact on the states that did so. CHAIR RAMRAS offered his belief that reducing the percentile would be of benefit to employers, and said he would be seeking to amend Amendment 1 to that effect. MR. JACKSON, in response to questions, said that there have been two CPI increases to the existing fee schedule, and that the bill doesn't contain a sunset provision. REPRESENTATIVE GRUENBERG indicated that he would prefer to see the percentile increased to a 95th percentile, and would therefore be opposing a reduction to an 80th percentile. [Chair Ramras turned the gavel over to Representative Herron.] MS. HALL, in response to a question, explained that prior to the statutory change that occurred in 2005, the fee schedule was updated annually, and that such updates have not occurred since. REPRESENTATIVE GRUENBERG asked for further information about the criminal provisions of the bill, of Amendment 1, and of existing statute. MS. HALL indicated that the DOL found that the "fraud prosecution language" of existing AS 23.30.250(a) was insufficiently clear for prosecuting cases of fraud; that the language contained in the bill appears to address fraud only from a civil standpoint and then only as perpetrated by the employee; and that Amendment 1 would allow all those who commit fraud to be subject to both criminal and civil prosecution. [Representative Herron returned the gavel to Chair Ramras.] REPRESENTATIVE GRUENBERG offered his understanding that in cases involving fraud, changing current statute [as both the bill and Amendment 1 propose] would result in less civil damages being awarded. MS. HALL concurred with that summation. 1:48:45 PM ERIN POHLAND, Assistant Attorney General, Labor and State Affairs Section, Civil Division (Anchorage), Department of Law (DOL), also concurred. REPRESENTATIVE GRUENBERG questioned who would benefit by such a change. MS. POHLAND indicated that such a change wouldn't benefit anyone in particular. 1:51:32 PM DON ETHERIDGE, Lobbyist, Alaska American Federation of Laborers - Congress of Industrial Organizations (Alaska AFL-CIO), relayed that although the Alaska AFL-CIO has a concern about the fraud provisions of HB 314, Amendment 1 would address that concern by making those provisions applicable to all who commit fraud. In response to a question, he indicated that at this time, changing the percentile listed in Amendment 1 won't alter the Alaska AFL- CIO's position on either the bill or Amendment 1, and that in addition to having its concern regarding fraud addressed, the Alaska AFL-CIO simply wants to ensure that injured workers would still be covered and still have access to medical care. 1:53:31 PM KENTON BRINE, Assistant Vice President, State Government Relations, Property Casualty Insurers Association of America (PCIAA), indicated that the PCIAA supports HB 314, though has not yet had a chance to review Amendment 1. He noted that medical expenses are higher in Alaska than in other states, and constitute a larger percentage of "lost cost" related to workers' compensation than in other parts of the country. He said he believes that the fraud provisions of the bill will help insurers control costs while still providing adequate protection for injured workers. 1:55:29 PM STACY ALLAN, Officer, Laborers' Local 341, relayed that Laborers' Local 341 appreciates Amendment 1, which addresses concerns regarding the fraud provisions of the bill. She offered her hope that the legislature would continue to address the issues pertaining to workers' compensation and the effect that system has on injured workers. In response to a question, she indicated that the percentile provided for in Amendment 1 is not of concern to Laborers' Local 341. 1:57:53 PM BARBARA HUFF TUCKNESS, Director, Governmental and Legislative Affairs, Teamsters Local 959, said that Teamsters Local 959 supports HB 314. She indicated, though, that arbitrarily lowering the percentile currently provided for in Amendment 1 would give Teamsters Local 959 great concern, because such a change could result in physicians refusing to provide medical care to injured workers, and could create some of the same problems that have arisen with regard to Medicare/Medicaid. 2:03:47 PM KEVIN B. DOUGHERTY, General Counsel, Alaska District Council of Laborers, noted that 8 A.A.C. 45.082(i)(3) uses the words "90th percentile"; that that percentile has been in place for at least 20 years; that his organization would have to conduct more research before it could speak to whether it would support lowering that number; and that it would be hard to say what percentile would start to impact service, which would be of concern. In conclusion, he asked the committee to be cautious when considering changing the percentile, and suggested that the issue warrants further study. CHAIR RAMRAS, after ascertaining that no one else wished to testify, closed public testimony on HB 314. 2:05:23 PM CHAIR RAMRAS made a motion to amend Amendment 1 such that in its proposed change to AS 23.30.097(a)(1)(D), the words, "90th percentile" would be replaced with the words, "85th percentile". REPRESENTATIVE GRUENBERG objected. CHAIR RAMRAS explained that he is interested in striking the right balance between medical care for the injured worker and compensation for the medical community, and employer costs. REPRESENTATIVE GRUENBERG said he opposes the amendment to Amendment 1, and pointed out that it has not yet been fully vetted with regard to how it would affect injured workers. REPRESENTATIVE HOLMES agreed that the amendment to Amendment 1 merits further discussion, and relayed that absent that discussion, she is reluctant to vote for the amendment to Amendment 1. REPRESENTATIVE HERRON questioned whether anyone has ever considered providing for a different percentile. MS. HALL indicated that the division's focus has instead been to get a fee schedule in place to replace the one that's due to expire at the end of the year, and thereby prevent further increases in "the system costs (indisc.) premiums for employers." CHAIR RAMRAS characterized the amendment to Amendment 1 as a provocative change, and questioned why the committee shouldn't adopt it if doing so might lower employer costs. REPRESENTATIVE LYNN, commenting that the committee has not yet heard why the percentile is currently set at a 90th percentile, characterized an 85th percentile as just an arbitrary number that was picked simply because it sounded good. REPRESENTATIVE GRUENBERG again expressed a preference for not adopting the amendment to Amendment 1. CHAIR RAMRAS withdrew the amendment to Amendment 1. 2:13:46 PM CHAIR RAMRAS then made a motion to adopt a conceptual amendment to Amendment 1 such that in its proposed change to AS 23.30.097(a)(1)(D), the words, "is at the 90th percentile" would be replaced with the words, "the amount paid by the preferred provider network of insurers is not to exceed the 90th percentile". REPRESENTATIVE GRUENBERG objected for the purpose of discussion. MS. HALL cautioned against using that language, because there are a lot of preferred provider networks as well as what she called "rented networks." CHAIR RAMRAS questioned whether that issue could be resolved by specifying that it would be the average amount paid by the top five preferred provider network of insurers. He expressed a preference for changing the language of Amendment 1 to address what he called ever-increasing workers' compensation insurance premiums. MS. HALL explained that the division only collects information about billed charges, not paid charges, and surmised, therefore, that using such information in the calculation would present a big task. CHAIR RAMRAS relayed that HB 314 would be set aside with the motion of whether to adopt the conceptual amendment to Amendment 1, and the motion of whether to adopt Amendment 1, left pending.