SB 130-WORKERS' COMPENSATION  CHAIR CON BUNDE announced SB 130 to be up for consideration. BARBARA HUFF-TUCKNESS, Alaska Labor Management Ad Hoc Committee, referenced its letter in the committee packets. The Ad Hoc Committee wanted her to explain 13 concerns regarding SB 130. 2:24:16 PM Many of the Ad Hoc ideas are in SB 130, many other items are included also that it has great concerns with. The first is reimbursement of medical costs. The administration proposes to roll back rates to 1999 rates. "We do not believe this is reasonable." Medial costs are the largest driving factor in workers' comp costs. The Ad Hoc Committee requested information from both insurance companies regarding the medical costs in November and have not received that information and, therefore, can't make a reasonable recommendation and deferred the issue until next year. Language in SB 130 would impact the medical community in such a way that physicians might decide to no longer serve injured workers. 2:26:28 PM The second letter had to do with the ACOM guidelines. The committee decided it needed more information on this issue as well. What little information it has received came from California that recently adopted ACOM guidelines. There are problems with how insurance companies are applying the guidelines and denying medical claims. Either they are not being clearly defined or are not being addressed at all. 2:28:01 PM The third item is voc rehab and it is another issue the committee did not receive information on. It is a huge cost factor within the workers' comp system. Members discussed turning it into a return to work program, but didn't receive available information. 2:29:20 PM Item four addresses the return to work program that she mentioned in conjunction with the voc rehab. The committee was looking at it in conjunction with deleting the second injury fund. It did not believe the fund services the employer and believes that there needs to be a truly responsive return to work program for injured people. 2:30:03 PM CHAIR BUNDE asked her to flesh that out. 2:30:13 PM MS. HUFF-TUCKNESS responded that some states actually have a return to work program. Some employers within the state of Alaska have established a return to work program or modified work within their own corporate structure. Some states have formalized those programs with their workers' comp programs. 2:31:29 PM She went on to item 5 that did not have much discussion in the Ad Hoc Committee. But there is some concern that this would actually increase costs to the Workers' Comp program even though it addresses hiring attorneys to represent the injured workers. The committee has not seen any statistical information that would prove that one way or the other. 2:32:46 PM The sixth item deals with the commission and the de novo review. The committee has concerns with replacing the superior court with a new layer of bureaucracy. A less costly idea the Ad Hoc Committee had is having a super-senior workers' comp board consisting of two labor and two management with a Workers' Comp hearing officer. They would hear the appeals of decisions from the Workers' Comp Board and would have the ability to decide questions limited to specific issues of law. The senior members of the board would have more knowledge of the law and would follow the intent of the statutes without adding the cost of the bureaucracy. 2:35:08 PM CHAIR BUNDE asked about item 7, the fraud statute. MS. HUFF-TUCKNESS didn't think the fraud language went far enough. The department has never followed up on fraud that had proof. Ad Hoc wanted greater enforcement. 2:38:06 PM She said the temporary seasonal definition, item 8 in the letter, affects employers around the state, but affects construction workers the most. She noted that Ad Hoc language in the letter was fair for the injured worker as well as the business. 2:38:54 PM She said she looked forward to working with the committee and administration. 2:40:17 PM PAUL LISANKIE, Director, Division of Workers' Compensation, Department of Labor and Workforce Development (DOLWD), had no further remarks. CHAIR BUNDE asked him to comment on the fraud provisions in item 7 of the Ad Hoc Committee letter. He also asked to know if the return to work program was successful in other states. 2:41:43 PM SENATOR DAVIS said she wanted to know if other states had set up a commission to bypass the superior court. MR. LISANKIE replied that he has looked at other states' statutes and some have an executive branch committee that hears appeals of workers' compensation matters. He is not sure any have precisely the type of proposal the Ad Hoc Committee envisioned. That is more of a reconsideration by a different group of the same board that made the original decision as opposed to sending the decision to separate entity like an appeals commission. The major difference is that under SB 130, the appeals commission would take the place of Superior Court and he believed that would be somewhat quicker. 2:43:56 PM KEVIN SMITH, Executive Director, Alaska Municipal League Joint Insurance Association (AMLJIA), said it represents 140 different municipalities and school districts in Alaska. It permits those public entities to self-insure as a group when they may not have the resources to self-insure as individual entities. He said: As far as risk financing mechanisms go, being able to self insure as a group is a fairly efficient way to do this. Essentially, to pay the cost of losses and pay the cost of reinsurance and pay the cost of overhead, that's about what goes into calculating rates. So, there's no shareholder profit necessary as you get in a commercial insurance arrangement. The AMLJIA has a $300,000 self-insured retention. So, for every workers' compensation loss that we have, we have to fund enough to cover at least the first $300,000 of the loss. Above and beyond that, we purchase reinsurance or insurance for insurance companies to make sure that if somebody is seriously injured, that there's adequate resources to cover it. But despite the efficiencies in the system, itself, the costs continue to rise for the public sector in Alaska just as they have risen for the private sector in Alaska. The Workers' Compensation system from our perspective is broken and needs to be fixed. The cost has gotten to a point where a number of municipalities can't afford to purchase the insurance any more. With the PERS TRS problems on their plate, lack of municipal assistance and revenue sharing, increased fuel costs, utility costs, the increased demands essentially on the public coffers with less resources have forced me to cancel at least 10 municipalities in December from coverage for Workers' comp for property and for liability and I have canceled several more since then.... It's a serious situation. He said that SB 130 is a step in the right direction for containing the increasing costs for Workers' Compensation. Some of the positives are the ability to stipulate to agreements when both parties are represented without getting board approval, streamlining the voc rehab process and having a preferred provider list for employers that is voluntary for employees. Generic drugs are a good thing and guidelines for medical care is a positive step. Some offset for PERS and TRS or occupational disability is another good idea as well as phasing out the second injury fund. 2:47:40 PM CHAIR BUNDE asked what the public entities who are going without workers' comp doing. MR. SMITH replied that some of them are bending state law, but most are scrambling to find the resources to get back into the program. "A number of the communities have gotten to the point where there's not a lot of employees getting hurt." 2:49:29 PM CHAIR BUNDE reflected that no one is happy with the current situation and he hopes to find something to make it better. COMMISSIONER GREG O'CLARAY, Department of Labor and Workforce Development (DOLWD), thanked the chair for having hours of testimony on this issue. CHAIR BUNDE said he hoped to have a CS next week. He adjourned the meeting at 2:52:16 PM.