HB 419-WORKERS' COMPENSATION CHAIRMAN ROKEBERG announced the next order of business would be HOUSE BILL NO. 419, "An Act relating to the weekly rate of compensation and minimum and maximum compensation rates for workers' compensation; specifying components of a workers' compensation reemployment plan; adjusting workers' compensation benefits for permanent partial impairment, for reemployment plans, for rehabilitation benefits, for widows, widowers, and orphans, and for funerals; relating to permanent total disability of an employee receiving rehabilitation benefits; relating to calculation of gross weekly earnings for workers' compensation benefits for seasonal and temporary workers and for workers with overtime or premium pay; setting time limits for requesting a hearing on claims for workers' compensation, for selecting a rehabilitation specialist, and for payment of medical bills; relating to termination and to waiver of rehabilitation benefits, obtaining medical releases, and resolving discovery disputes relating to workers' compensation; setting an interest rate for late payments of workers' compensation; providing for updating the workers' compensation medical fee schedule; and providing for an effective date." REPRESENTATIVE HALCRO made of motion to adopt a proposed committee substitute (CS) for HB 419, Version G [1-LS1418\G, Ford, 3/7/00] as a working draft. There being no objection, it was so ordered. [Chairman Rokeberg handed the gavel over to Vice Chairman Halcro.] Number 2275 PAUL GROSSI, Director, Division of Workers' Compensation, Department of Labor, came forward to testify on HB 419, Version G. He commented that the department supports the bill. He said it is a compromise bill that was agreed upon by the AFL-CIO and members of the WCAA [Workers' Compensation Association of Alaska]. He explained that the bill provides needed increases in benefits for injured employees. It has been approximately 12 years since there have been any increases in benefits. Version G provides for an increase in permanent-partial impairment benefits from $135,000 to $177,000. There would also be an increase in both the minimum and maximum compensation rates. The amount available for retraining would be increased from $10,000 to $13,300. Widows' and orphans' benefits are also increased. The calculation for overtime payment is included for the determination of a compensation rate. MR. GROSSI continued. Version G provides for seasonal and temporary workers' compensation to be calculated on wages at the time of injury. Compensation to be repaid during rehabilitation would be at 70 percent of the expendable wage as opposed to 60 percent. There are also a few provisions for employers. These provisions help expedite the reemployment benefits process as well as clarifying some of the benefits and issues in that process. Included is a simple method for employees to waive retraining benefits any time during the process. It increases the time for employees to give notice to employers of the election of a benefit from 10 days to 15 days. MR. GROSSI continued. Version G also provides for benefits to cease if there is a failure to provide that notice. The provisions clarify that permanent total disabilities are not due while a person is in the retraining process. They also require that if a permanent partial impairment is paid in a lump sum then the employer will obtain a credit for those benefits paid. A two year statute of limitations is established on the reemployment claims. There is a two-year time line for the request of a hearing on a claim. The time line for the payment of medical bills is increased from 14 days to 30 days. It changes the interest rate to the court rate, which is 2 percent above the prime, and establishes a simple summary process for employees to obtain reasonable medical releases. He further stated: I don't know whether this is an employer or an employee issue, but it provides for an annual update of the usual customary reasonable fee schedule. This determines the amount that's paid for medical benefits on each type of treatment and, right now, there's not a specific requirement for that to be updated yearly, it will be under this amendment. ... In this bill, there's something for both sides. There's also something for both sides to be against ... [ends midspeech because of tape change]. TAPE 00-28, SIDE B ...diverging interests and it was an agreement among other employers and the employees...I did include...a side-by-side sectional [analysis] and it says what the bill does and what the current law does. I would suggest that you look at that because it is a pretty good analysis of what this bill does. Number 0035 REPRESENTATIVE SANDERS referred to page 3, line 30, of Version G, which read: (7) the estimated time of medical stability as predicted by a treating physician or by a physician who  has examined the employee at the request of the  employer or the board, or by referral of the treating physician; He said it seems convoluted and asked who makes the decision. MR. GROSSI answered that it could be any of those which are listed that make the prediction. REPRESENTATIVE SANDERS wondered what happens if all of them make a different prediction. MR. GROSSI said if that occurred, the division would handle it. He explained: The reason for this is, if a physician makes the prediction, currently only the treating physician can make that prediction. And so if there are other physicians that examine,... you'd have to go back to the treating [physician].... If any doctor makes that prediction, then you can start into the process. There has to be a prediction that there's a permanent impairment that precludes you from going back to your job (indisc.). REPRESENTATIVE SANDERS asked if Mr. Grossi would have a problem with an amendment that said "at the request of the employer and the board". He is concerned with an employer becoming inappropriately involved. MR. GROSSI replied that he would like a little time to consider that amendment. Number 0124 VICE CHAIRMAN HALCRO asked Mr. Grossi whether, in his capacity as an administrator, he feels this is the fairest compromise that could have been reached. MR. GROSSI said he believes it is the best that could be reached under the current climate. He pointed out that arguments could be made both ways depending on the perspective. He suggested that those types of questions be deferred to the Alaska Labor- Management Ad Hoc Committee on Workers' Compensation. VICE CHAIRMAN HALCRO stated: Last week I think we had a ... workers' comp[ensation] bill, and the testimony was that workers' comp[ensation] rates have actually gone down or stayed pretty level, so you're talking about employers taking a 7 or 8 percent hit, but, as competitive as the workers' comp[ensation] insurance market is, it's still going to be okay. You're not going to have people out there falling off the wagon. MR. GROSSI said that is correct. Since 1989 the workers' compensation premium rate has decreased by approximately 40 percent. This would probably add an additional 7 to 9 percent premium cost. He said he thinks workers' compensation, considered in its entirety, is still a pretty good deal compared to the way it was in 1988. Number 0217 WILLIE VAN HEMERT, Owner, CRW Engineering Group, and Co-chair, Alaska Labor-Management Ad Hoc Committee on Workers' Compensation, testified via teleconference from Anchorage. He stated: I'm not an expert on workers' comp[ensation]. As a matter of fact, I probably know more about workers' comp[ensation] now than I ever wanted to know. But I'd like to tell you a couple of things about the, first of all, about the WCCA as a management group...WCCA supports this bill. I think Mr. Grossi said it was a compromise bill. It resolves, from the management point of view, or the employers' side, it resolves some potential litigation issues. I think it also brought some reasonable time frames to keep lingering cases from extending on. We thought that was important. From the benefits side for the injured worker, ironically, we made increases in almost all of the areas that were identified by the audit. We did not have that audit [Department of Labor and Workforce Development, Division of Workers' Compensation, Audit Report by the Division of Legislative Audit, October 31, 1999] information until actually, I think it was released just a couple of days ago, but it addressed increases in PPI [Permanent Parted Impairment]. It identified increases in the death benefit and also it increased the maximum wage. Number 0279 I'd also like to talk to you just a little bit ... about the process as to how we got to some of these increases. A couple things that we looked at was the Consumer Price Index [CPI], which I know has been referred to in the audit. We also looked at the average weekly wage of employees in Alaska. That's gone up about 20 percent during that time frame. We also looked at what other states have and what we ended up using as our guideline, is we added up all the increases, the percentage increases, that was available in the way of data between 1988 and 1998 which was 31 percent approximately. That was the guide that we used. Now, the benefits that you see in the revised bill, to give you an example or put that in perspective of other states, the maximum weekly wage, I think there are only four states that have a higher maximum weekly wage, once this bill is put into place. The PPI I think is in the top 25 percent. I think it's even higher than that, but PPI is calculated in different ways in a number of states. The death benefits is probably the highest of any state just because we've gone back up to the full benefit for the death benefit. Most of them are in the 66 to 80 percent range. So, we feel good about the numbers that we utilized. That just gives you a little basis for where they came from. Number 0350 We're very much in support of the committee substitute. We only have one comment and that is, I think it may be an oversight, but this is on page 9, section 16 at the bottom of the page, line 29, we need a definition of "average weekly wage" and what we had recommended be included there, which is also on the Senate bill, it would...[mean] that the average annual wage is computed by the Department of Labor and Workforce Development.... This also puts the maximum wage with an index of the average weekly wage that's computed by the Department of Labor, that number will adjust itself annually. I want to talk real briefly about the comment by Representative Sanders that was made from page 3. I think that was very worthwhile noting that and I would be concerned, too, even as an employer. The thing, however, that this only refers to is the completion of the reemployment plan a rehabilitation specialist. And the reason that was added is because often times a treating physician is not willing for whatever reason, just by the way he operates,...[to give] information on medical stability until maybe a year later or two years later. That prevents the vocational rehabilitation specialist from completing the plan for the voc-rehab. And it's kind of one of these real vicious circles. This has nothing to do with any other benefits, it's just for the completion of the plan. If you can't complete the plan, then there's a fine because the plan's not completed in time and it kind of keeps going around and around, but it only refers to the vocational rehabilitation plan itself. Number 0443 VICE CHAIRMAN HALCRO pointed out that the reason the definition for an average annual wage calculation is not included because the bill drafter felt it would be redundant. He referred to page 9, lines 25 through 27, of Version G. He explained that it specifies how the commissioner determines the average weekly wage. MR. VAN HEMERT said: I see what you're saying, too. It's just that there's an annual wage that's calculated. I don't know. Not everyone views that as being done by the department, but we'll leave that to your discretion at this time. Number 0483 MARY SHIELDS, Member, Workers' Compensation Committee of Alaska, testified via teleconference from Anchorage. She said, as the manager for Northwest Technical Services, that she has had the opportunity to watch claims come and go. She also sits on the Denali Safety Council, as well, and has had several discussions on how claims are handled. One concern revolves around the lengthy amount of time spent trying to resolve issues. She explained: One of the reasons that management, in their negotiations with Labor [Department of Labor and Workforce Development], accented those resolutions including the changes in getting the vocational rehabilitation program moving forward and getting it completed and getting it done, is because we were ending up with claims going on and on with no resolution. That's detrimental to both the employer and the employee, and by tightening that down by setting absolutes, and this is why we were very concerned about the intent language and very pleased with it. By setting absolutes and making it very, very clear to the courts and to the board that this it really what you all need, we feel that we can change some of that and get some of that locked back into place. As you know, anytime you work a compromised bill you go through, you have a whole bunch of things come in, you throw a whole bunch of things out before you get to the final resolve. I believe we're both pleased with this. Labor did recognize the fact that they are not just representing AFL-CIO, but they were also representing the balance of the employees in Alaska, and they took that as their charge. So, yes, I strongly support the bill as presented with this amendment. Number 0573 GENEVA HULSEY testified via teleconference from Anchorage. She stated: I am an injured worker. I urge you, in the strongest terms, to reject HB 419 because it appears to be to favor insurance companies and discriminate against workers at the same time. I endorse the findings recently released by the Division of Legislative Audit, which highlights the many shortcomings of the workers' compensation process. These are the kind of things that need to be implemented in HB 419, not the ones that are currently in the bill. The system is already extremely difficult to deal with and injured workers don't need additional restrictions or cuts in benefits. For example, there has been no cost of living allowance for many years. Please read the full audit report. One in eight [who] work in Alaska will be affected by the legislation. I am forwarding to you a summary of high points in the audit report, as well as a letter from attorney Michael Jensen [letter dated February 18, 2000, included in the bill packet], who points out some of the legislation's shortcomings. A copy of the report is available on the web at http//www.legislative.state.alaska.us/legaud/web/pages/ digests/2000/4601dig.htm or from [Legislative] Budget and Audit. Thank you for the opportunity for having me testify today, and I hope you will implement the recommendations of Budget and Audit Report by amending the legislation. Number 0676 [Representative Rokeberg resumed chairing the committee.] JUDY PETERSON, Northwest Technical Services, and, Member, Workers' Compensation Committee of Alaska, testified via teleconference from Anchorage. She commented: I have overseen workers' compensation at Northwest Technical for the last 15 years, but I have never been actively involved in a process like the one we went through on the committee [Ad Hoc Committee]. We met for several months, at least once a week, and towards the end, more than that. I think that we came up with a proposal, with the agreement of management and Labor, that increases the benefits for the employees because they certainly haven't had very many of those since '88, but it also contains the cost for us as employers because our costs have been reduced which was the whole point of the '88 bill. I personally support it [HB 419] and it's supported by the WCCA. CHAIRMAN ROKEBERG asked if Ms. Peterson is the proprietor of a business. MS. PETERSON indicated she is the personal administrator for Northwest Technical Services. Number 0759 KEVIN DOUGHERTY, Co-Chair, Alaska Labor-Management Ad Hoc Committee on Workers' Compensation, came forward to testify on HB 419, Version G. He also works for the Alaska State District Council of Laborers. He explained that the committee met in order to resolve a number of workers' compensation issues. After working on HB 419 for several months, the committee unanimously agrees with the content of the bill as well as Version G. He said it does represent a balanced bill, but does not have all of the issues for everyone. He thinks it represents a positive move forward for both the management and the employees. He said: From the employees' side, we had benefits that we wanted to increase for widows and dependent children in the event of a death. For injured workers, we were able to get the combined agreement from the management reps for the employers in this state to make some appreciable benefit increases that would benefit those injured workers, but yet, within the confines of the affordability, that the employers at the table voiced quite well for us. ... We worked hard on the bill. We appreciate your support for the bill. We would like to get this done with respect to something positive to get done this year that will address both management concerns and litigation ... but also try to get some of the benefits improved since we haven't addressed those since 1988. Number 0900 REPRESENTATIVE SANDERS asked if Mr. Dougherty has an opinion on his suggested amendment. MR. DOUGHERTY agreed with the testimony by Mr. Van Hemert for two reasons. He commented: I honor the employer's issues and have to stick with that and they likewise do the same thing for them. This issue was one that the employers came to us with in the current language, Representative Sanders, and that current language was to assure that the voc[ational] rehab[ilitation] plans didn't just get hung up because sometimes the doctors don't get their paperwork done. .. and they can't get the voc[ational] rehab[ilitation] plan to go forward until they get that medical stability paperwork. So, if that doctor's not available or doesn't do the paperwork or they're out of town, we have a fall back to go to number 2, which would be the employer's physician ... or, third, the board's physician. ... We wouldn't want to drop the ability to have a back-up with the employer and the board. I don't think the employers would agree, and I would stand with them. REPRESENTATIVE SANDERS said, "So, there's a sequence to it, it's not an arbitrary, we're going to pick one of them?" MR. DOUGHERTY said he believes there is a sequence. He suggested that it may be worthwhile to confer with Mr. Van Hemert on that subject. Number 1010 VALERIE BUFFONE, Member, Alaska Workers' Compensation Board, came forward to testify in favor of HB 419, Version G. She thinks the bill represents the areas of concern from both management and injured workers that she has heard through the public hearings the Board has held. It is her opinion the bill goes a long way towards addressing some of the areas with shortcomings in the current workers' compensation statute. MS. HULSEY wondered if the committee took into consideration the audit report before drafting HB 419. CHAIRMAN ROKEBERG answered, "We're just about to put the Director of Workers' Compensation on the audit hot seat here?" MS. HULSEY asked, "Did you say you're just about to, but you haven't looked into?" CHAIRMAN ROKEBERG responded that is not entirely true. He explained the bill was drafted with the audit report in mind. He said the committee will be taking those issues up specifically. He added: The bill came from the ad hoc committee, but the final report on the audit was not received until after the bill was drafted. That's why we're not moving the bill today... He asked Mr. Grossi to explain Recommendation 1 [page 41, Legislative Budget and Audit Report]. Number 1163 MR. GROSSI explained that Recommendation 1 pertains to the development of a strategic plan and the elimination of a manual process. CHAIRMAN ROKEBERG wondered if the issues are mostly administrative. MR. GROSSI affirmed this. CHAIRMAN ROKEBERG suggested moving on to Recommendation 2. MR. GROSSI commented that fixed benefit amounts have not kept pace with inflation and cost of living. He said: That is one of the areas that is being addressed...with raising the permanent partial impairment benefits, the reemployment benefits level, the widows' benefits, the maximum compensation rate, minimum compensation rate. It even has an indexing element to the maximum and minimum compensation rates in that it's adjusted to the Alaska average weekly wage. I will say this, in here they have $135,000 would equal $189[,662] and this bill, for permanent partial impairment, it's $177,000, but I believe...they use the Anchorage CPI as the number to adjust the permanent partial impairment. There's probably other economic indicators that [are] calculated differently...Second section, overtime and premium pay is excluded in the determination of spendable weekly wage. Well, this is including the overtime and premium pay. It's in there. CHAIRMAN ROKEBERG asked if this issue is controversial in Alaska. MR. GROSSI affirmed that. He explained: I think it was controversial both ways. I don't know that employers necessarily wanted to back in because, of course, that could increase the benefit level. Employees felt that it was unfair because their pay is based on; a lot of them work regular overtime and their pays are based on that. CHAIRMAN ROKEBERG wondered, "But this puts that back in?" MR. GROSSI replied that it does. CHAIRMAN ROKEBERG asked if the rationale is, because Alaska has a large number of seasonal workers that rely on overtime to make a yearly living wage. MR. GROSSI answered yes. He pointed out there are seasonal workers, construction workers and workers on the North Slope who regularly work overtime. CHAIRMAN ROKEBERG wondered if Mr. Grossi is familiar with the Anchorage Police Department who get paid for "overtime and then they get paid for more overtime". He said, "Apparently they didn't catch the change in the Wage and Hour Act that this committee sponsored and passed last year." He indicated some concerns have been expressed that by including overtime this would not necessarily be fair. He asked, "From your understanding, is there any balance made here on this issue about inclusion of this [overtime] or not?" MR. GROSSI asked, "Balance in the sense of ...?" CHAIRMAN ROKEBERG said he means a balance in the sense of the "whole package". He stated, "I mean we have the delicate balance here of the ad hoc committee. So, is there any trade-offs made because of that?" MR. GROSSI explained that one trade-off is that the employee is not entitled to collect permanent total disability during the reemployment process. There is also a section which states that if an employee is paid a lump sum of permanent partial impairment benefits prior to becoming eligible for reemployment, then the employer is entitled to a credit for that period of time. MR. DOUGHERTY referred to a letter date February 1, 2000, from the Alaska Labor-Management Ad Hoc Committee on Workers' Compensation [included in the bill packet]. The letter provides a comparison of management versus labor issues in HB 419. CHAIRMAN ROKEBERG said Mr. Grossi has provided a side-by-side analysis of the old bill versus the new bill. He indicated it is important to understand the perspective on both sides of the bargaining unit. MR. DOUGHERTY agreed. He explained that management had some good points for streamlining and addressing litigation problems that were costing them money. The ad hoc committee agreed to work with management because it would keep attorney fees down. He referred to the comparison of issues in the letter and said that medical bill payments will be made within 30 days as opposed to 14 days. This allows more deliberation on whether or not an employer will controvert a medical bill. There is also a clarification of time limits for bringing a claim under AS 23.30.110(c). He noted there were some unanswered questions under the current law in this section. HB 419, Version G, gives some definition to this so that both management and labor have a time limitation. He stated: The interest rate will be the same one which is used for other administrative bodies in the state which is, I guess, two percent above the prime. So, that's a concession that the employers requested so that they weren't paying higher than other parties in a case. There was a need by employers to have a system of assuring they got the medical releases so that they can defend their cases. So, for example, an employer needs to know the medical status in relation to work comp claim to find out whether or not it's work-related or not. There's always been a system in place under section 107 of the act [AS 23.30.107]. There's always been a system where employees have to provide that document to release to the employer, but yet there were "teeth" in that requirement. So, the law said you had to require it, provide it, but it didn't say what would happen if you didn't. We have a system with full notice to the employees and a system to oppose, if the release is too broad and it's not fair, there's a system to go to the board and argue about that, but if it's reasonable to suspend the benefits until somebody finally signs that release, if they need that information. In the voc[ational] rehab[ilitation] process, most of what we did was update some of the benefits and increase the stipend that was paid. But there are a couple items, again employers came to us with that were reasonable and fair and that we agreed with. CHAIRMAN ROKEBERG said, "You kind of looked at this kind of holistically when I asked about what was the benefit of the trade off between this one provision. So, you looked at the whole bargain as a whole." MR. DOUGHERTY said that is fair to say. CHAIRMAN ROKEBERG asked who the other co-chair was for the ad hoc committee. MR. DOUGHERTY replied that it was Mr. Van Hemert. Number 1844 CHAIRMAN ROKEBERG asked Mr. Van Hemert to address the overtime premium pay exclusion provisions. MR. VAN HEMERT agreed with Mr. Dougherty's analysis of the issue as being holistic. He said the overtime issue is indeed controversial on both sides. He stated: I think where the discrepancies came in is for slope [North Slope] workers who regularly were paid overtime and yet that time was only calculated as regular time, and, yet, their whole basis of whether they were a week on, week off, or two on, two off, was really predicated on them getting overtime pay. So, for them, this is a much more fair proposition. Some of the employers are opposed to this, obviously, because maybe they have someone who is in the relatively short time frame, has a peak experience, we look back at the last 13 weeks of earnings to determine the average weekly wage for that individual. So, there can be some discrepancies. As far as seasonal and temporary workers, by definition, overtime is already included in their determination because we have a one- year look back period for seasonal and temporary so it has no impact on them. Number 1942 CHAIRMAN ROKEBERG asked: The formula is for a 13-week "lookback" now, including the overtime, and that's the issue, unless they are a seasonal worker, then you look at the whole year. Is that kind of the simplistic break down of it? MR. GROSSI answered that it is a little more complicated, but that is basically it. CHAIRMAN ROKEBERG referred back to Recommendation 1 because he does not entirely understand the formulation. He asked, "We made a percentage differential here, would be to increase it from, what, 60 percent to 70 percent?" MR. GROSSI said yes. This refers to the weekly payments that are made to an employee during a reemployment benefits plan. CHAIRMAN ROKEBERG wondered, "Which is the typical claimant, isn't it?" MR. GROSSI said he was unsure about delving into that. CHAIRMAN ROKEBERG stated that he would like Mr. Grossi to. MR. GROSSI explained: You're injured, and you have medical benefits and also if you're disabled, you're entitled to what's called temporary total disability benefits, it's sort of a wage loss benefit, and that's 80 percent of the spendable weekly wage. It's calculated on basically what Norm [Chairman Rokeberg] was talking about on the 13 weeks. You receive that up until the time you become medically stable. Once you become medically stable, one of two things happen, you can receive a permanent partial impairment; well, if you're medical stable and you're able to go back to work and you don't have a permanent partial impairment, you're basically just released to go back to work and compensation stops. But if you're injured and you are permanently impaired, you're unable to go back to work -- let's start with permanent impaired. You're permanently impaired, you might be entitled to a permanent partial impairment...say you have a disability and it causes 10 percent whole person disability, then that 10 percent becomes the multiplier on, right now it's $135,000, as proposed it would be $177,000, so, you'd be entitled to $17,000 in permanent partial impairment. If you're unable to return to work and you need retraining, you may be entitled to this reemployment benefit program which gives you the $10,000 right now, but $13,300, in the proposed bill, of retraining benefits. If you need that, then your permanent partial impairment benefits are paid out in weekly increments at your temporary total disability rate or 80 percent of the spendable. If that runs out, then you're entitled to, right now, 60 percent of your spendable weekly wage,... CHAIRMAN ROKEBERG interjected and asked if there is a cap for the payout. MR. GROSSI replied, "It's for two years." CHAIRMAN ROKEBERG commented, "We're making ten grand a week, but you're limited to how much you can get. Is there a ceiling on the thing?" MR. GROSSI responded that there is not, with respect to total benefits. A person can only receive the benefits for two years. He stated, "The 60 percent of the spendable or the 70 percent as proposed." Number 2266 An unidentified speaker interjected and explained: There is a cap on that weekly wage, however, that you get reimbursed,... approximately $700, and we're proposing that that would be based on an index of 120 percent of the average weekly wage. MR. GROSSI apologized and said he did not initially understand the question. He said: You're asking if there's a cap on your temporary total disability or your various compensation rates, and, yes, there is. Currently it's $700. It will move to 122 percent of the average weekly wage ... every year that'll be recalculated. ... I think you were going to ask this question: how much does that mean? ... It's approximately $780. CHAIRMAN ROKEBERG requested that Mr. Grossi provide the committee with the dollar formula at the next meeting. MR. GROSSI said he believes the average weekly wage is $644. This number is multiplied by 120. CHAIRMAN ROKEBERG wondered, "You have a 1.2 integer on a multiplier, so you're paying 20 percent over what they're making?" MR. GROSSI replied no and stated that it is simply an average. He said the average weekly wage is every wage and salary in the Alaska. [HB 419 was held over.]