SB 29-REPEAL WORKERS' COMP APPEALS COMMISSION  2:1229:35 PM CHAIR COGHILL announced the consideration of SB 29 and stated his intention to take public testimony. He asked Commissioner Drygas if the bill has a companion. 2:20:25 PM HEIDI DRYGAS, Commissioner, Department of Labor and Workforce Development (DOLWD), Juneau, Alaska, said the House Judiciary Committee passed a committee substitute (CS) at the request of the Court System. The changes were technical in nature. SENATOR MEYER asked if the $443,000 savings reflected in the fiscal note is a savings to the designated general fund. COMMISSIONER DRYGAS said that's correct; the money would remain in the Workers' Safety Compensation Administration Account (WSCAA). It is a designated general fund account that funds several of the department's programs for workers' compensation and occupational safety and health. SENATOR MEYER observed that this would not have any impact on the budget. COMMISSIONER DRYGAS said it should not impact the undesignated general fund budget, but it will save the state money because the department will spend $440,000 less. The Court System submitted a zero fiscal note indicating that it could absorb the additional caseload. She noted that the WSCAA account is being drained at a faster rate than it is being replenished due to the programs the legislature tasked the department to run without additional funding. The workers' compensation fraud unit is an example. SENATOR MEYER commented that this change gives the department $440,000 to use elsewhere. COMMISSIONER DRYGAS said that's correct but it must be used for workers' safety programs. She added, "If we were to deplete our WSCAA funding, we wouldn't have to augment that funding with undesignated general fund monies." SENATOR MEYER asked how the WSCAA account is funded and who pays for it. COMMISSIONER DRYGAS deferred budget questions to Paloma Harbour. 2:27:18 PM PALOMA HARBOUR, Director, Division of Administrative Services, Department of Labor and Workforce Development, Juneau, Alaska, explained that funding the Workers' Safety Compensation Administration Account is part of the workers' compensation costs for an employer. Payments are based on a percentage of the workers' compensation premiums written from insurance companies and self-insured employers. Responding to an additional question she said that freeing up this money will help the WSCAA fund last longer. SENATOR MEYER said he initially thought this would show as a savings to the overall budget. SENATOR WIELECHOWSKI pointed out that the costs to run the commission will go away if appeals are returned to the superior court. Those monies can then be used for things within the Department of Labor and Workforce Development (DOLWD) or go back to the general fund. MS. HARBOUR said in FY2013 the department moved some of the workers' safety programs onto unrestricted general funds because of a fund insufficiency in the WSCAA account. Doing away with the commission will prevent the department from having to do that in the future. "We're looking at a three-year cliff before we're out of balance in this account and unable to support the other programs." COMMISSIONER DRYGAS added that when the commission was created in 2005, the department was required to use existing funds to stand up that component as well as the fraud unit. It has been a significant drain on the WSCAA funds. 2:31:44 PM CHARLES L. BRADY, President, Workers' Compensation Committee of Alaska; and Workers' Compensation Manager, Arctic Slope Regional Corporation, Anchorage, Alaska, said he is testifying in opposition to SB 29 and he submitted written testimony to that effect on behalf of WCCA in March. The foremost concern is that returning appeals to the superior court would result in significant delays. The assumption is that workers' compensation cases would be given lower priority than all other cases. He estimated it could take up to 18 months to get a case heard and that the litigation would be a long, drawn-out process. He opined that the cases would ultimately end up in the Alaska Supreme Court. 2:35:03 PM DAVID HALE, representing Hale and Associates and Alaska Independent Insurance Agents and Brokers, Anchorage, Alaska, said he is testifying in opposition to SB 15. He said he has been in the insurance business for more than 30 years and his recollection is that before the commission was created the process was cumbersome for both the employer and the insurance carrier. He said if the current process satisfies 50 percent of the cases it's worth keeping. He suggested tweaking the current process so that 75 percent of the claimants are satisfied. He predicted that returning the appeals to the superior court would add costs and time delays to both the carrier and the employer. The time delay of up to 18 months would also disadvantage the employee. He concluded saying, "I'd hate to see us go back to where we were prior to '05." CHAIR COGHILL asked if he said that part of the workers' compensation assessment is designated for workers' compensation issues. MR. BRADY said yes; the tax on each premium goes to the state. "That's where this funding comes from for that $440,000." CHAIR COGHILL commented that that is the designated general fund Senator Meyer spoke of. MR. BRADY agreed. SENATOR MEYER asked how long it takes under the current process to get a case resolved. MR. BRADY replied it depends of the availability of the committee, but it can be one or two months. 2:38:18 PM CONSTANCE LIVSEY, Attorney, Burr Pease & Kurtz, Anchorage, Alaska, said she is speaking in opposition to SB 29 and in support of maintaining the commission. She said she has practiced workers' compensation law in Alaska since 1988. She has experience with both the superior court and the appeals commission process and the latter has far more advantages for practitioners. Specifically, the advantages are knowledge, experience, and consistency. The commissioners know this area of law, whereas superior court judges do not. "This is terra incognita to them." The results under the former process were inconsistent and non-precedential and appeals to the Alaska Supreme Court were much more inevitable. MS. LIVSEY opined that the projected cost savings in the bill is an illusion because there will be more appeals to the Alaska Supreme Court. She noted that Ms. Meade testified in the other body that this would be an added workload for the superior court and these cases would not take precedence. She opined that the precedential value of the appeals commission decisions over time create a body of law that helps make cases before the board more predictable, helps employees and employers understand the law, and has generally brought about a more efficient, economical, and streamlined adjudication process. CHAIR COGHILL, noting that superior court decisions do not have precedential value, asked her to comment of the value precedence. MS. LIVSEY said the fact that commission decisions are precedential adds consistency to the body of law and adds consistency and predictability to the proceedings at the board level. CHAIR COGHILL asked how often there were preemptory challenges prior to 2005 and if that accounted for the lengthier process. MS. LIVSEY said she does not recall a lot of preemptory challenges of judges; the delays were a matter of the workload and the fact that the cases can be complex. 2:45:56 PM CHARLES MCKEE, representing himself, Anchorage, Alaska, testified in opposition to SB 29. He read excerpts of the 10 page document he wrote. He characterized himself as a victim and debt slave. He asserted that the conversion is unlawful because it is done without full disclosure. 2:49:39 PM ANDREW HEMENWAY, representing himself, Anchorage, Alaska, advised that he is speaking on SB 29 on his own behalf as the former chair of the Workers' Compensation Appeals Commission. He noted that the testimony in support of the bill has been based on the financial benefits and the notion that the commission decisions tended to favor one party over the other. He suggested that a possible solution is to place the workers' compensation appeals in the Office of Administrative Hearings. That body conducts hearings at the trial level like the Workers' Compensation Board. It has a good reputation for fairness and impartiality. That is one way to address the fairness concerns in the workers' compensation community. He said that can be addressed in several ways some of which would entail restructuring the commission. Providing preemptory challenges to the administrative law judge (ALJ) assigned to the case would provide an outlet for people who feel that one side or the other is being favored. Regarding impacts on the process, he said it is generally recognized that the court system will not be able handle these appeals as quickly as the appeals commission. That will have an impact on all the parties. Also, because it is common for pro se litigants to appear before the appeals commission, they will receive more help from staff there than from the superior court. He said the consistency that was mentioned in previous testimony is the result of the appeals commission having precedential value. That is an important aspect that would be lost if the appeals are returned to superior court. The last point is regarding the lay commissioners. They are not attorneys, so they are not as knowledgeable about the arcane intricacies of the law, but they provide valuable insights and a common sense approach. MR. HEMENWAY suggested the legislature consider the alternative approach of sending the appeals to a forum in the Office of Administrative Hearings. If the legislature instead decides to send these appeals back to the superior court, the legislation should include a provision that gives the decisions of a superior court judge the same degree of precedential value for administrative proceedings that the appeals commission has now. 2:55:47 PM SENATOR COSTELLO asked what percentage of the appeals commission cases are reversed by the Alaska Supreme Court. MR. HEMENWAY recalled that of 250 published decisions by the Alaska Workers' Compensation Appeals Commission, about 100 have gone to the Alaska Supreme Court. About 30 of those cases were the subject of an Alaska Supreme Court opinion and about half were reversed. Initially, the court reversed quite a few of the appeals commission decisions, but in more recent years they have been upheld more often than not. He added that the record shows that when the superior court was the initial appellate body it had a similar track record; of the cases that were the subject of a decision, 10-15 percent of the decisions were reversed on appeal. 2:58:26 PM SENATOR WIELECHOWSKI asked how many cases the appeals commission hears each year. MR. HEMENWAY estimated 15 to 20 per year. SENATOR WIELECHOWSKI calculated the cost under the current process. "So, we're doing 15-20 per year and we're paying nearly $0.5 million for that when the superior court could be doing it for nothing; and there is roughly a 50 percent reversal rate." He asked if that's accurate. MR. HEMENWAY clarified that the reversal rate is calculated on the total body of decisions. That is about 10-15 percent. Of the cases that were decided by the Alaska Supreme Court, both the superior court and the appeals commission were reversed about half the time. He added that most of the cases are settled or dismissed before a final decision and in that situation the appeals commission decision stands. SENATOR WIELECHOWSKI asked if it's common for administrative law judges to hear appeals of lower body decisions. MR. HEMENWAY said no; their function is largely equivalent to the Workers' Compensation Board. CHAIR COGHILL held SB 29 in committee for further review.