HB 419-WORKERS' COMPENSATION REPRESENTATIVE NORM ROKEBERG, sponsor of HB 419, gave the following explanation of the bill. HB 419 is a major rewrite of the workers' compensation statute of 1988. This bill raises benefits to the workers and, as a result, raises premiums to employers. Premiums will increase from 7.7 percent to 8.7 percent to help defer the cost of the additional benefits provided to workers. This increase is long overdue. HB 419 was put together by the Ad Hoc Committee on Workers' Compensation, organized labor, the workers and business of the state and himself. HB 419 strikes a delicate balance therefore he counsels against making major changes to the bill. The House held substantial hearings on this bill and the Legislative Audit Division recently audited the Workers' Compensation Division. HB 419 contains the recommendations from that audit except one that would provide for stiffer penalties for underinsured employers. MR. PAUL GROSSI, Director of the Division of Workers' Compensation in the Department of Labor and Workforce Development (DOLWD) informed committee members that the department supports HB 419. It provides much needed increases in workers' compensation benefits which have not increased for 12 years. The bill also contains provisions for employers that pertain to procedures. It contains a simple method for waiving retraining benefits, it streamlines timelines, and it clarifies what benefits are paid during the rehabilitation process. It also increases the timeline for paying medical bills, it provides a two year timeline for hearing requests, it establishes a simple process to obtain medical releases and it provides for an annual update of usual and customary fees. MR. WILLY VAN HEMERT made the following comments. He is a representative of the Workers' Compensation Committee of Alaska and he co-chaired the Ad Hoc Committee. He supports HB 419 as a balanced package. It contains some reasonable increases in benefits. It currently benchmarks the maximum and minimum weekly wage which will increase from $700 to $773, the fifth highest in the United States. It also increases the death benefit to 100 percent of spendable up to the maximum weekly wage. That will make Alaska the only state that pays above 85 percent. It addresses all of the issues in the Workers' Compensation Division audit that related to legislative action. He offered to answer questions. MR. MATT O'BRIEN, President of the Alaska AFL-CIO, said without the Ad Hoc Committee system in which management and labor can work together to negotiate a settlement, opposing parties would have offered conflicting legislation that would have gone nowhere. Even with a cooperative effort, it has taken 12 years to adjust and correct some of the problems that occurred in 1988. Legislation passed in 1991 but it was vetoed by the Governor. CHAIRMAN TAYLOR announced that HB 419 was again before the committee. MR. KEVIN DOUGHERTY, Co-Chair of the Ad Hoc Committee on Workers' Compensation, informed committee members that he represented the labor side during the negotiations. He supports the bill as it represents a consensus on items that the committee agreed to. REPRESENTATIVE ROKEBERG asked that any proposed amendments be faxed to the Legislative Information Offices. SENATOR DONLEY moved to adopt Amendment 1, labeled 1-LS1418\M.13. Amendment 1 reads as follows. 7/19/:0 A M E N D M E N T 1 OFFERED IN THE SENATE BY SENATOR DONLEY TO: CSHB 419(RLS) Page 3, line 31, following ";": Delete "and" Insert "[AND]" Page 4, line 3, following "plan": Insert "; and (10) a provision requiring that, after a person has been assigned to perform medical management services for an injured employee, the person shall send written notice to the employee, the employer, and the employee's physician explaining in what capacity the person is employed, whom the person represents, and the scope of the services to be provided" SENATOR DONLEY explained that Amendment 1 would require a person who is assigned to perform medical management services for injured workers to send a full disclosure notice to the injured worker and his or her physician stating who that person is representing and the scope of the services that person is to provide. CHAIRMAN TAYLOR objected to the motion for the purpose of discussion. He stated that he has encountered this problem in the past when representing people. He noted the biggest problem he has with the bill is that he cannot find an attorney to represent anyone because the attorneys fees were stripped from the bill during the last rewrite. Number 2061 MR. GROSSI commented that some employers and insurance companies employ medical management people who are usually nurses and who are assigned to a case. They review the medical records and talk with the injured employee. Often they will schedule medical evaluations and then advise the employer on the injury. The Workers' Compensation Board also has rehabilitation counselors who determine eligibility for re-employment benefits. Mr. Gross said the Department of Labor has no problem with Amendment 1. MR. VAN HEMERT asked if there will be adequate time to notify the employee, employer, and the employee's physician if the injury is serious. He said on the face of it, he does not see Amendment 1 as a problem. There being no further discussion or objection to Amendment 1, CHAIRMAN TAYLOR announced that it was adopted. SENATOR DONLEY moved to adopt Amendment 2 which reads as follows. A M E N D M E N T OFFERED IN THE SENATE BY SENATOR DONLEY TO: CSHB 419(RLS) Page 8, line 25: Delete "a new subsection" Insert "new subsections" Page 8, following line 28: Insert a new subsection to read: "(q) Unless compensation due the employee under this chapter is paid by negotiable instrument that can be cashed not more than three business days after being issued, the employer shall increase the weekly rate of compensation due the employee under AS 23.30.175 by two percent." SENATOR DONLEY explained that this provision was included in the workers' compensation bill that was passed by the legislature in 1991 but was vetoed by the Governor. It requires that when the insurance company pays compensation to an injured employee, it pay with a negotiable instrument that can be cashed no more than three days after being issued. One company paid injured workers with checks issued from the Bahamas and the workers had to wait several weeks for the checks to clear. CHAIRMAN TAYLOR objected for the purpose of discussion. Number 1713 MR. DOUGHERTY stated that both Amendments 1 and 2 are good in substance to consider long term and that those two issues were part of the 1991 bill but all participants have a commitment to stick with the bill sent to the Senate Judiciary Committee for several reasons. He suggested the Ad Hoc Committee review the proposed amendments during the summer rather than adopt them now and slow the bill down. REPRESENTATIVE ROKEBERG pointed out that the three day limit in Amendment 2 pertains to banking law, not workers' compensation. He suggested removing the three day limit and instead requiring that the negotiable instrument must be drawn on a state or federally insured financial institution. MR. GROSSI indicated that right now payments must be made within 14 days by an instrument that is negotiable in the State of Alaska. He was not sure whether Amendment 2 is more or less than current statute. MR. VAN HEMERT stated WCCA opposes Amendment 2. He added that Amendment 2 also removes Section 14 of the bill which was an issue related to the payment of interest. SENATOR DONLEY asked how much time the Ad Hoc Committee spent examining the 1991 bill that passed the legislature and why the Committee did not incorporate any of those provisions. MR. VAN HEMERT said he was not involved in 1991 but he was involved in the 1995 Ad Hoc Committee. For good or bad, labor and management bring issues to the table and that issue was not brought forward by either side. SENATOR DONLEY said he was surprised because in communications with members on the committee when it was first forming, he suggested using the 1991 amendments as the starting point. He asked Mr. Van Hemert if the Ad Hoc Committee ever considered any of those amendments. MR. VAN HEMERT said he did not have the 1991 amendments when the committee was confering. SENATOR DONLEY remarked that illustrates the weaknesses in the ad hoc process. Back in 1988, the legislature was promised that committee would continue. Many commitments were made at that time which have not been kept. When he was asked early on in the process what kinds of things the committee should look at, he suggested the 1991 bill but it was never discussed. He expressed concern about deferring to a group that was not elected to make public policy. He said he is willing to continue to work on Amendment 2 with Representative Rokeberg. He then withdrew Amendment 2. CHAIRMAN TAYLOR cited AS 21.89.030 which provides that, "an insurance company doing business in this state may not pay a judgment or settlement of a claim in this state for a loss incurred in this state with an instrument other than a negotiable bank check payable on demand and bearing even date with the date of writing or by electronic funds transfer." Number 1381 SENATOR DONLEY moved to adopt Amendment 3 which reads as follows. A M E N D M E N T 3 OFFERED IN THE SENATE BY SENATOR DONLEY TO: CSHB 419(RLS) Page 3, line 31, following ";": Delete "and" Insert "[AND]" Page 4, line 3, following "plan": Insert "; and (10) a provision relating to health insurance benefits that complies with AS 23.30.047" Page 5, following line 32: Insert a new bill section to read: "* Sec. 8. AS 23.30 is amended by adding a new section to read: Sec. 23.30.047. Benefits for health insurance. (a) An employer who pays compensation to an injured employee under AS 23.30.041(k), 23.30.180, 23.30.185, 23.30.190, 23.30.200, or 23.30.215 and who provided health insurance to the employee at the date of injury shall also reimburse the employee for health insurance coverage for the employee and covered dependents, as provided in this section. (b) Payment required under this section is equal to the employer's current contribution for health insurance or the amount paid by the employee for replacement coverage, whichever amount is less. Payment required under this section commences when the employee's health insurance provided by the employer's contribution ceases and shall continue until the employee is no longer receiving compensation described in (a) of this section, or for 18 months, whichever period is shorter. (c) Payment is not required under this section until the employee provides proof of health insurance coverage. In this subsection, "health insurance" includes (1) an individual policy of health insurance; or (2) a notice of self-payment for continuance of coverage required under 29 U.S.C. 1161 (Consolidated Omnibus Budget Reconciliation Act of 1985) or under a union health or welfare trust agreement. (d) If benefits required under this section are not paid within 30 days after the employer receives a request for payment, the employer shall pay a penalty equal to 25 percent of the amount due." Renumber the following bill sections accordingly. Page 12, line 28: Delete "2 - 19" Insert "2 - 20" Page 12, line 29: Delete "20" Insert "21" Page 12, line 30: Delete "21" Insert "22" SENATOR DONLEY explained that Amendment 3 picks up a provision that were in the 1991 legislation. That provision dealt with a situation when a worker loses a job due to an injury and collects workers' compensation whether insurance coverage provided by that employer will still be available for the worker's family members. CHAIRMAN TAYLOR asked if Amendment 3 would provide such coverage for 18 months. He thought some rights and benefits would be available under COBRA although the premium would be paid by the employee. MR. GROSSI stated the value of the health insurance can be calculated into the workers' compensation rate itself and used toward health insurance coverage. CHAIRMAN TAYLOR asked if the bill needs an offset for that calculation. MR. GROSSI said it probably does. Number 1164 SENATOR DONLEY stated the benefits are a percentage of the weekly wage so it is still at a percentage of what the total compensation package would be, evening including the health care. MR. GROSSI said it is at 80 percent of the spendable weekly wage which is 80 percent of the net. That would also include the value of the benefit. SENATOR DONLEY stated even if it is rolled in, it is discounted by 20 percent. He asked if the COBRA insurance is available at the same rate as if it had been paid for by the employer and whether the same insurance has to be made available. MR. FREY replied COBRA plans can be incrementally higher but the difference is only slightly higher than the regular premium. CHAIRMAN TAYLOR commented that under today's system, the injured employee who receives workers' compensation but is no longer employed, receives, as part of the compensation, an amount to pay for health coverage. He asked if the 80 percent net pay, with health care costs factored in, is based on the full cost of the premium or the amount that the employer contributed toward the premium, for example 80 percent. MR. FREY replied it is based on the full amount of the monthly premium. SENATOR DONLEY asked if COBRA requires coverage to be provided by the same company that was providing the coverage prior to the injury. Mr. FREY explained that COBRA is a federal law. In his experience as a trustee for the laborers' health care trust fund, the Union must offer comparable insurance upon certain triggering events. He was not certain whether the coverage must be identical but it does have to be comparable. MR. BOB LOHR, Director of the Division of Insurance, asked that Dan Brow, the Consumer Services Specialist, to address that question. MR. BROW stated that under the federal guidelines for COBRA, the insurance plan for the former employee is allowed to continue as indicated under specific circumstances. However, the ability to continue that plan is contingent upon the insurance plan remaining in existence. If an employee elected COBRA coverage, with the termination of the employer's plan, the COBRA coverage would terminate. CHAIRMAN TAYLOR commented that the COBRA coverage will remain in effect for 18 months as long as the premium is paid. He noted the insurance coverage will cost a little more while the worker's income stream will be discounted by about 20 percent because of the workers' compensation calculation. He thought this bill might have a major financial impact. SENATOR DONLEY remarked, "Mr. Chairman, now that we've created a record that shows that the public policy call is - what we really want is workers to be covered. We want their families to remain to be covered for a reasonable period of time. It is really terrible public policy that somebody injured on the job would lose their health benefits. The workers' comp system is supposed to be designed to make people whole, not to make them less than whole. If they were working, they would have this coverage. But I think, now that we've established on the record that the existing system provides 80 percent of this coverage, I'd be willing to withdraw this amendment only with that understanding, that the existing system is at least providing 80 percent of this very important valuable coverage for Alaskan families and injured workers. If it wasn't for that, then I think that this would be an absolute essential to place in this bill. So with that I'd go ahead and withdraw Amendment 3." CHAIRMAN TAYLOR announced that Amendment 3 was withdrawn with no objection. SENATOR DONLEY proposed Amendment 4 which would change, on page 10, line 8, the funeral expense provision. That provision was last set in 1982. The bill proposes to adjust the amount for inflation since 1988. He has received numerous communications from families in tragic situations over the last decade where a worker in the family has died. The families have complained about the terrible inadequacy of the $2500 funeral expense coverage. He does not believe $3300 goes far enough. He stated this should not have much of an effect actuarially because the number of workers who die on the job is small. He moved to adopt Amendment 4 to change the $3300 amount to $10,000. Number 594 MR. GROSSI estimated that 20 to 30 Alaskan workers suffer this tragedy. CHAIRMAN TAYLOR objected for the purpose of discussion. REPRESENTATIVE ROKEBERG stated that the amount is for funeral expenses and that $4500 to $6,000 should be adequate. SENATOR DONLEY agreed that the cost of a funeral is probably between $4,000 and $6,000 which makes him question why the bill only contains $3,300 for a person who is killed in the workplace. He pointed out there are other intangible costs associated with the death of the major breadwinner of a family which are very stressful for the family. He thought to pay $10,000 for the 20 or 30 Alaskan families who suffer such a loss is reasonable. CHAIRMAN TAYLOR thought $10,000 was a bit high and said he would compromise at $5,000. SENATOR DONLEY said he appreciates the committee's consideration of this issue because although it effects only a few folks, their letters are very touching. CHAIRMAN TAYLOR maintained his objection to adopt Amendment 4. AN UNIDENTIFIED SPEAKER said he agrees in principle with Senator Donley. He noted that 17 states provide $5,000 and only five states provide more than $5,000. He added the basic charge for a funeral with full services is $4,700. A roll call vote was taken on the motion to adopt Amendment 4. That amendment failed with Senators Ellis and Taylor voting "nay" and Senator Donley voting "yea." CHAIRMAN TAYLOR moved to change, on page 10, line 8, the amount of $3,300 to $5,000. There being no objection, the motion carried. REPRESENTATIVE ROKEBERG suggested changing Amendment 2 to read: (q) Unless compensation due the emmployee under this chapter is paid by negotiable instrument that is drawn on a state or federal financial institution, the employer shall increase the weekly rate of compensation due the employee under AS 23.30.175 by two percent. REPRESENTATIVE ROKEBERG noted that "a state or federal financial institution" is defined in statute. He thought that language addresses Senator Donley's concern with offshore trust-checks that are slow to clear. SENATOR DONLEY moved to adopt Amendment 2. CHAIRMAN TAYLOR objected and asked if Senator Donley intended to move Amendment 2 as amended. SENATOR DONLEY renewed his motion to adopt Amendment 2 containing the language as proposed by Representative Rokeberg. TAPE 00-25, SIDE A Number 0000 There being no further discssion, CHAIRMAN TAYLOR announced that Amendment 2 as amended was adopted. He stated his only frustration with this legislation is that the Ad Hoc Committee did not address the issue of attorney's fees and whether or not injured workers in this state would have improved representation. He believes that is one of the most serious defects in the law. There may be no incentive on the part of employees to worry about it but injured workers have difficulty finding an attorney to represent them and if that occurs, most of the great laws that are passed do not count for much. It has caused the State board to reach out beyond its authority to compensate people and it has caused some insurance companies to misuse and abuse employees. SENATOR DONLEY stated that he examined that question extensively in 1988 and he found that the defense attorney costs were in some cases four or five times the costs of the workers' attorneys. The insurance companies were spending a tremendous amount of money to defend cases while it was very difficult for injured workers to find anyone to represent them. He agreed with Chairman Taylor on that issue and added that is another weakness of the ad hoc process. While the ad hoc process has benefits from not including the actual people who represent the parties on either side, it also fails to draw from their knowledge about the specific types of things that are going wrong. REPRESENTATIVE ROKEBERG commented that Senator Donley made a good point. He suggested involving legislative Labor and Commerce Committee members or their designees in the ad hoc committee process in the future. SENATOR DONLEY moved SCS CSHB 419(JUD) from committee with individual recommendations. There being no objection, the motion carried.