HOUSE LABOR AND COMMERCE STANDING COMMITTEE March 27, 2000 3:30 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative Andrew Halcro, Vice Chairman Representative Lisa Murkowski Representative John Harris Representative Sharon Cissna Representative Jerry Sanders MEMBERS ABSENT Representative Tom Brice COMMITTEE CALENDAR HOUSE BILL NO. 376 "An Act increasing the duration of a mechanic's or materialman's lien to one year; and providing for an effective date." - HEARD AND HELD 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." - MOVED CSHB 419(L&C) OUT OF COMMITTEE PREVIOUS ACTION BILL: HB 376 SHORT TITLE: MECHANIC/MATERIALMEN LIENS Jrn-Date Jrn-Page Action 2/16/00 2209 (H) READ THE FIRST TIME - REFERRALS 2/16/00 2209 (H) L&C 2/16/00 2209 (H) REFERRED TO LABOR & COMMERCE 3/27/00 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 419 SHORT TITLE: WORKERS' COMPENSATION Jrn-Date Jrn-Page Action 2/23/00 2279 (H) READ THE FIRST TIME - REFERRALS 2/23/00 2279 (H) L&C, JUD, FIN 3/08/00 (H) L&C AT 3:15 PM CAPITOL 17 3/08/00 (H) Heard & Held 3/08/00 (H) MINUTE(L&C) 3/17/00 (H) L&C AT 3:15 PM CAPITOL 17 3/17/00 (H) Heard & Held 3/17/00 (H) MINUTE(L&C) 3/20/00 (H) L&C AT 3:15 PM CAPITOL 17 3/20/00 (H) Heard & Held 3/20/00 (H) MINUTE(L&C) 3/27/00 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER BRYAN MERRELL, State Counsel and Underwriter First American Title Insurance Company 3035 C Street Anchorage, Alaska 99503 POSITION STATEMENT: Testified on HB 376. PAUL GROSSI, Director Division of Workers' Compensation Department of Labor and Workforce Development P.O. Box 22512 Juneau, Alaska 99811 POSITION STATEMENT: Testified on HB 419. BOB LOHR, Director Division of Insurance Department of Community and Economic Development Post Office Box 110805 Juneau, Alaska 99811 POSITION STATEMENT: Testified on HB 419. MARY SHIELDS, Member Workers' Compensation Committee of Alaska 3330 Arctic Boulevard, Suite 201 Anchorage, Alaska 99503 POSITION STATEMENT: Testified on HB 419. JANET SEITZ, Staff to Representative Norman Rokeberg, Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 POSITION STATEMENT: Provided information on HB 419. ACTION NARRATIVE TAPE 00-36, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 3:30 p.m. Members present at the call to order were Representatives Rokeberg, Halcro, Murkowski and Harris. Representatives Cissna and Sanders arrived as the meeting was in progress. HB 376-MECHANIC/MATERIALMEN LIENS CHAIRMAN ROKEBERG announced the first order of business would be HOUSE BILL NO. 376, "An Act increasing the duration of a mechanic's or materialman's lien to one year; and providing for an effective date." He indicated no action would be taken on the bill today. Number 0118 BRYAN MERRELL, State Counsel and Underwriter, First American Title Insurance Company, testified via teleconference from Anchorage. He commented: Our interest in this bill simply relates to the interests of our primary customers: the real estate agents and brokers, lenders and their clients; borrowers, buyers and sellers of real estate. The extension provisions set forth in the bill would essentially double the time frame for which the mechanic's liens duration would last, and I haven't heard any of the rationale as yet for why that would be a good idea. I can certainly think of some reasons why it would not be a good idea (indisc.--loud noises) ... the whole idea behind having the mechanic's lien statute was to give contractors, or those who improve real property, the ability to lien the property without having to go through a judicial process until after the lien is of record. The process, as set up in Alaska, is meant to be a relatively quick one. That is, you get your shot at having a lien on the property, but then have to take action in a fairly short period of time in order to enforce your rights against the property. I can't think of any really good reason to extend that. It would potentially slow down real estate transactions, particularly those relating to new construction. It would affect the business of builders and of lenders in that there would be an additional period of time for which they would have to either bond around those mechanic's liens or have their transactions put on hold until those liens went away. And so many times, it seems to me, in my experience of working in the field, the liens, when they're recorded, aren't particularly well thought out and very often aren't valid necessarily, either because there really wasn't any debt that was owing or because the party that was attempting to use the mechanic's lien law simply didn't have the right to do that. So, at this time, First American, and I believe, the majority of the members of the Alaska Land Title Association - [of] which First American is a member, I'm on the Board of Directors - don't feel like that the bill is a good idea. And we're still sort of waiting to hear from someone why it's a good idea to try and extend these liens. CHAIRMAN ROKEBERG said he believes that is why the sponsor, Representative Joe Green, did not have the committee take action on the bill today. He suggested that Mr. Merrell contact Kevin Jardell, staff to Representative Green. [HB 376 was held over.] CHAIRMAN ROKEBERG called an at-ease at 3:35 p.m. and returned at 3:38 p.m. 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." [Before the committee was a proposed committee substitute (CS), Version G (1-LS1418\G, Ford, 3/7/00), adopted as a work draft on 3/08/00.] CHAIRMAN ROKEBERG noted that three people were available to answer questions: Deputy Commissioner Dwight Perkins of the Department of Labor and Workforce Development (DLWD) was in the audience, and on the teleconference line were Bob Lohr, Director, Division of Insurance, and Mary Shields, representing the Alaska Labor-Management Ad Hoc Committee on Workers' Compensation. CHAIRMAN ROKEBERG noted that previous discussion of HB 419 focused on the report issued by the Division of Legislative Audit concerning the DLWD's Division of Workers' Compensation (DWC). The committee had discussed Recommendation 1, which deals with a strategic plan, and Recommendation 2, which proposes changes in overtime and premium pay. He asked Mr. Grossi to speak to Recommendation 2. Number 0490 PAUL GROSSI, Director, Division of Workers' Compensation, Department of Labor and Workforce Development, testified by teleconference. He clarified that Alaska law now allows for the payment of temporary disability benefits if there is a dispute between or among employers regarding who is liable for the payment. However, there is no interim compensation when a claim is controverted, and there may or may not be entitlement to the benefits. The positive side is that benefits would be paid to the employee all along. The downside is if the employer and insurance company controvert the claim, and that controversion is later found to be correct, there would be no way to reimburse the employer or insurance company. This might increase the overall cost of premiums. Number 0764 MR. GROSSI explained controversion: If the employee is receiving benefits and at some point it is determined that the employee is not entitled to some or all of those benefits, the employer and/or the insurance company can controvert. Evidence is needed to do that. The evidence might come from an examination by a doctor of their choice, in which case the employee's doctor may be saying that the benefit is due and the employer's doctor saying that it is not. In that case, the employer can controvert, which would stop the benefits. The employee then has the right to make a claim to the Workers' Compensation Board, and the board would decide if there is an entitlement. During that time, the employee would be without benefits. CHAIRMAN ROKEBERG asked if the employee would be without benefits between the time there is a controversion by the employer and the time a determination is made by the board. MR. GROSSI said that is correct. CHAIRMAN ROKEBERG asked how long that time typically is. Number 0849 MR. GROSSI said it is at least six months. He explained that budget cuts in recent years have reduced the number of hearing officers, who decide those cases, to five for the whole state. CHAIRMAN ROKEBERG turned to Recommendation 3: The director of workers' compensation "should increase outreach, education, and technical assistance to injured workers with respect to their rights and responsibilities under the workers compensation laws when a disputed claim occurs." MR. GROSSI mentioned the need for more information dissemination. Currently, [the division] sends a workers' compensation brochure, which outlines in simple language much of what is in the Workers' Compensation Act. The statute and the regulations are available for people to purchase. The audit seems to be saying that there needs to be more. One of the suggestions made in the audit was to have a video that people could watch to help them understand how to proceed with their cases. The DWC is looking into possible sources of funding. He cautioned that a video would need to be updated regularly. Number 1032 CHAIRMAN ROKEBERG observed that the recommendation says the courts have stated that the board has a duty to instruct injured workers on how to proceed in claiming injured workers' rights under the law. MR. GROSSI said that was correct, as determined by a state supreme court case. CHAIRMAN ROKEBERG asked Mr. Grossi if his testimony is that more funding is needed to make a video. MR. GROSSI said the best thing would be to have more staff so that they would have the time to instruct individuals about their rights and how to proceed. He said they do fairly well with the limited staff they have, but it is a relatively small number of people. Number 1080 CHAIRMAN ROKEBERG observed that they have a brochure with step- by-step instructions. MR. GROSSI said the brochure basically outlines, in simple language, what a worker needs to do. Number 1117 REPRESENTATIVE CISSNA reiterated that the audit says there needs to be better education. She has heard about successful efforts in other departments that have had problems dealing with the customers. Little educational efforts have been very effective, she said. She mentioned a situation in which giving people good information up-front actually reduced the time workers had to spend. She said brochures alone are not sufficient because there are people who have a serious problem reading and understanding brochures. She would like to see something set up in the bill, perhaps in Section 7(r) or before that, to address the whole situation of better education. She hates to think about people being "sat down and convinced that they ought to sign a waiver," which she fears may sometimes inadvertently be done. Number 1224 MR. GROSSI asked if she could clarify the question. He understood that she was talking about outreach, but he wasn't sure if she was asking about rehabilitation, as proposed in the bill. REPRESENTATIVE CISSNA said her concern was not about outreach but about when people who have been injured come in to the system. At that point, they may not be thinking clearly. Helping them seems like a good idea, and the audit even says that. MR. GROSSI noted that the audit says they do not provide enough information. They do have information officers at the three workers' compensation offices, and one of their duties is to try to answer questions for injured workers. He thought her question was whether that is enough. REPRESENTATIVE CISSNA affirmed that. MR. GROSSI said obviously it would be better to have more of that, and "the question again comes down to resources." He agreed that it would be a good thing. Number 1394 CHAIRMAN ROKEBERG noted that the auditor "suggests you go out and the strong arm and a bite on the insurance industry" to help with the video. He asked if the division had tried that. MR. GROSSI said he has discussed it with some members of the Workers' Compensation Committee of Alaska [WCCA], and they might be willing to pay for at least the first video. He thought a video could provide enough information to make it worthwhile. Number 1441 CHAIRMAN ROKEBERG turned to Recommendation 4: "DWC's director should take proactive measures to identify and monitor uninsured employers." He cited the reference in subsection 1 that calls for eliminating the backlog that contributes to significant efficiencies, and asked Mr. Grossi about the backlog. Number 1457 MR. GROSSI said the backlog has been eliminated. It had to do primarily with the new computer system coming online and trying to work the "bugs" out of it. Some of the other questions about uninsured employers and providing a potential penalty for late filing of data would need to be legislatively addressed. Documenting "the entirety of employer enforcement correspondence" is something they are trying to develop as part of the new computer system. MR. GROSSI said it is a very good suggestion to include in business licensing procedures the notification of the need to have workers' compensation insurance for any employees. CHAIRMAN ROKEBERG asked if they had talked to the Department of Community and Economic Development. Number 1538 MR. GROSSI said not yet, but it is part of their plan for work during the interim. CHAIRMAN ROKEBERG asked how old the audit is. MR. GROSSI said they had just received it a couple of weeks ago, after work was underway on the bill. CHAIRMAN ROKEBERG asked about the recommendation of going to the legislature for some more severe penalties for [not] filing insurance and adjuster notices in a timely manner. MR. GROSSI said they tried to do that through regulation. However, they were advised by the Department of Law that they did not have the statutory authority to do so, and that it would have to be done legislatively. Number 1600 CHAIRMAN ROKEBERG turned to Recommendation 5: "The legislature should consider amending AS 23.30.075 to empower the Alaska Workers' Compensation Board (AWCB) to sanction uninsured employers." MR. GROSSI said he thought that was a good suggestion, and he encouraged the legislature to look into it. He said he thought members of Legislative Budget and Audit may be doing that because one of them had contacted him with questions concerning it. CHAIRMAN ROKEBERG noted that because of the lateness of the audit, it would be necessary to make a recommendation to the ad hoc committee to include any of these recommendations in HB 419. MR. GROSSI said he couldn't remember if he had done so or not, but he thinks the problem of uninsured employers is one of the more serious problems that they have. He noted that it is really unfair to the vast majority of employers who have coverage, because those who do not have it are competing unfairly. It is even more unfair to an employee who is injured. But, he said, it is an overwhelming job to investigate and enforce, since there is one person who investigates that for the entire state. CHAIRMAN ROKEBERG asked, "So you are saying you are short of funds?" MR. GROSSI said yes. He thinks there should be more than one person, and depending on how the budget goes, they may lose that one person, too. Number 1753 CHAIRMAN ROKEBERG asked what the sanction is now, under current statute, for uninsured employers. MR. GROSSI said it is a criminal [offense]; the uninsured employer can be prosecuted and fined up to $10,000 and imprisoned for a year. If the employee is injured, he thinks the fine can go up to $50,000 a year. It is a pretty good sanction, but the problem is actually the investigation, getting the information for the prosecuting attorneys so that they are willing to take the case. There are all sorts of criminal activities out there, and they have to make decisions based on the constraints of their budget regarding who to prosecute. CHAIRMAN ROKEBERG said in his opinion, it sounds like the need is for more manpower rather than for more criminal sanctions. MR. GROSSI agreed that would help immensely. Number 1824 CHAIRMAN ROKEBERG directed discussion to Recommendation 6: "The Department of Community and Economic Development's director of the Division of Insurance (DOI) should implement policies and procedures that ensure timely enforcement of insurer-compliance provisions of the Workers Compensation Act." Number 1842 BOB LOHR, Director, Division of Insurance, Department of Community and Economic Development, testified by teleconference. He said the division basically agrees with Recommendation 6. Current law, AS 23.30.155, says: The board shall promptly notify the Division of Insurance if the board determines that the employer's insurer has frivolously or unfairly controverted compensation due under this chapter. After receiving notice from the board, the Division of Insurance shall determine if the insurer has committed an unfair claim settlement practice under AS 21.36.125. MR. LOHR referred to the controversion process that Mr. Grossi had described. He explained that after an employer has presented its case, even if the injured worker puts on no case whatsoever to challenge the controversion, the Workers Compensation Board still could find that there was not enough evidence to support the controversion and would make a finding that the insurer had frivolously or unfairly controverted the claim, and they would refer the matter to the Division of Insurance. If they do that, the division reviews the case to determine whether there has been a violation of the insurance code. "We in the division agree that we need to do a better job of investigating those cases", he said. Four have been referred to the division since 1997, and those are all still pending. MR. LOHR noted that a problem for the division is that, under the statutes, "It takes at least 1 percent of the claims to be improperly handled by the insurance company or multiple violation of the same standard of unfair claims practice without a reasonable explanation." A single unfair controversion does not constitute a violation of AS 21.36.125. Mr. Lohr recommended that the legislature consider amending that statute to provide that a single act is a violation and, therefore, subject to administrative action by the division. That would completely solve the problem of being able to deal with a single act of frivolous controversion. He noted that SB 177, which is broader than that, has passed the Senate. Number 1978 CHAIRMAN ROKEBERG said it seemed to him appropriate to sanction an insurer if there was a pattern, but one incident did not strike him as being sufficient grounds for action. He asked if there was some discretion in the amount of fines that could be levied. MR. LOHR said there is discretion of fines up to a maximum of $2,500 for a single act. However, the division cannot fine an insurer for a single act of this type under the current statute - unlike elsewhere in AS 21, where a single act is sufficient to trigger the enforcement authority of the division. What the division is seeking through administrative action is to get the insurance company to acknowledge that there is a problem and to propose a plan to address that problem. If the plan is adequate, then there may be no fine at all. CHAIRMAN ROKEBERG asked, "So, you think the discretionary authority that would reside in your office would be enhanced by legislative authority to do that?" MR. LOHR said he believes it would, and there would be no intention at all to use that authority to penalize a single, innocent mistake. Number 2078 CHAIRMAN ROKEBERG asked if there was a definition of "multiple violation," either in the history of the division or from the attorney general's office. MR. LOHR said there is a letter from the division dated 02/25/00 at the back of the audit which describes the legal standards and court case law, as well as the National Association of Insurance Commissioner's model legislation, which was the source of the standards. CHAIRMAN ROKEBERG turned to Recommendation 7: "DWC's director should improve controls over review of insurers' annual reports." He asked Mr. Grossi what that concerns. Number 2129 MR. GROSSI said Recommendations 7, 8 and 12 all have to do with the insurance companies' filing of annual reports, which give the division information on all the compensation paid in a single year. There are penalties for late filing of these reports. Those penalties go into the general fund and into the Second Injury Fund. The recommendations involve much stricter interpretation, increased penalties, and possibly increased litigation. Mr. Grossi said they are planning to adopt Recommendation 8 and to discuss Recommendations 7 and 12 with the Attorney General, possibly seeking a legal opinion "to make sure that we are on the right track before we start into this, because it is a much stricter interpretation and could increase litigation." Number 2234 CHAIRMAN ROKEBERG observed that Recommendations 7, 8, 9 and 12 really do not relate to HB 419. MR. GROSSI agreed, explaining that they deal strictly with internal administrative matters. Number 2264 CHAIRMAN ROKEBERG asked if Recommendation 10 also was unrelated to HB 419. MR. GROSSI affirmed that. He added that there is reason to think the audit may not have been correct about Recommendation 10, which relates to a mid-1970s adjustment of compensation rates in relation to inflation. Number 2332 CHAIRMAN ROKEBERG turned to Recommendation 11: "DWC's reemployment benefits administrator should capture ineligibility determination statistics for policy makers and stakeholders." MR. GROSSI agreed that it, too, is unrelated to HB 419, but said the division thinks it is an excellent idea and that it may help the legislature with future legislation. It looks at retraining benefits to see if people are being denied retraining for statutory reasons yet still are unable to return to work. CHAIRMAN ROKEBERG invited remaining questions regarding the audit. Number 2385 REPRESENTATIVE CISSNA asked about the new subsection in HB 419 that would add to AS 23.30.041, having to do with reemployment benefits. The new language says an employee may waive at any time the benefits under this section, including the eligibility evaluation and benefits related to reemployment plans, and then it sets up how this is done. In effect, it discharges the liability of the employer for the benefits and rights contained in the section. She asked what good it would do. Number 2450 MR. GROSSI explained that it calls for a waiver on a board prescribed form. That form will indicate exactly what the employee is potentially waiving. TAPE 00-36, SIDE B MR. GROSSI said he thinks this simplifies the current process whereby an employee has go through the initial stages of the reemployment process before being eligible to go before the board and request a waiver of benefits. "Whether you believe that the employee should or should not choose that [to waive benefits], I guess that's a policy call," he said. With reemployment benefits, the employee is evaluated and then works with the rehabilitation counselor to determine what would be the most appropriate retraining plan. It may or may not be something the employee is interested in doing, but it is something that can be done with the $10,000 training benefit. The new board form [spells this out] so that the employee will have full knowledge of what he or she is potentially waiving, and could choose not to waive it. REPRESENTATIVE CISSNA noted that the committee had just been discussing problems related to having fewer and fewer staff people who are overwhelmed with too many people to help and not enough time to do it. She said when she thinks about the waiver, she remembers how she felt and how unclear her thinking was after an auto accident. She recalled that she just wanted the problem to go away, and wanted to move on to health and vitality. She is afraid the waiver is being presented too early, at a time when the client is not going to be wanting to think about rehabilitation or going back to school. It is a time when the client is potentially very vulnerable, especially if that person was a really good carpenter or skilled at some other thing for which one didn't have to be very good at reading, language skills or assertiveness. It would be easy to get "talked along" and to sign a waiver without really understanding what is being waived. MR. GROSSI said Representative Cissna may be right. Under current law, however, about 25 of 300 employees found eligible for reemployment benefits complete a plan. The vast majority settle their cases before that time. This [change] allows that to happen in a simpler fashion. He thinks retraining would be the best way to go, and they should probably choose retraining. However, he said, "I don't think that we can force them to be retrained." Number 0241 REPRESENTATIVE CISSNA asked, "They can go through that before they waive their rights; am I right?" MR. GROSSI said under the proposed bill, they can still do that. He suggested that the bill needs to be looked at in its entirety. People can choose to waive their benefits. But for those who choose not to waive them, the amount of the unemployment and partial-impairment benefits are going to be increased. He added that he did not know for sure, but he thought it was the employer side of the ad hoc committee that wanted a simpler provision for waiving benefits without the employee going through the whole initial retraining process and a board review. Number 0358 REPRESENTATIVE CISSNA asked what the difference would be if the bill did not have Section 7(r) [the waiver]. She wondered if everybody would be happy. MR. GROSSI said he could not speak for everybody. He noted that these bills [workers' compensation] reflect a balance in legislation, and sometimes when something is changed, that will take the labor or management support away from it. He thought her question would be better addressed to a member of the ad hoc committee. CHAIRMAN ROKEBERG asked Ms. Shields if she would comment on the entire bill and also speak to Representative Cissna's and the committee's concern about Section 7(r). Number 0428 MARY SHIELDS, Member, Workers' Compensation Committee of Alaska, came forward to testify on HB 419. She said if that provision is taken away, then management, the WCCA, will withdraw its support of the bill. Ms. Shield said what the ad hoc committee has tried to do with the bill is tighten up a lot of things that have been rather loosely interpreted by the courts. That loose interpretation leaves employers unable to complete their obligations to employees "unable to finalize anything." MS. SHIELDS said the provision for the waiver was intentionally phrased as "may," not "shall," so that it gives the employee the option. The employee is not required to sign off on the waiver, but those who do sign off and take a payout cannot come back a few months later determined that they do want to have rehabilitation training after all. She explained that a recent court decision has opened the way to "double dipping." In that case, an employee who had already spent the payout was then awarded rehabilitation for which the employer had to pay. Employers want to put a stop to this new problem before it gets worse. Another aspect of the issue is that some of the employees who want vocational rehabilitation would prefer to have certain kinds of training that now is not open to them under the law. In some cases, they would be able to take a lump-sum payment to use for the training they prefer. This provision, with the other increases in benefits, has been "carefully sculptured between labor and management," and is something about which the employers feel very strongly. Number 0560 REPRESENTATIVE CISSNA said her concern is with the danger that people are going to be making a significant decision too soon after the accident, and before they clearly understand [all the implications and options]. MS. SHIELDS said everything is clearly explained to employees. One of the things everyone - management, the department and employee/clients - all want to see is some type of video or film created to assist. Also, the board is not going to lightly accept the waivers. She made it very clear that it is the board that creates the waiver. It cannot be created by one of the insurance carriers. It has to be accepted by the board. It is not something that people are going to be pushed into signing, but at some time, people have to be allowed to take responsibility for their own lives and their own actions. Number 0707 REPRESENTATIVE CISSNA said she certainly agrees with the last point. However, there are times in every person's life at which he or she will be vulnerable, and this is one of those times. MS. SHIELDS said there has been an effort to allow for that and to provide appropriate protection for that. That is why it is not an open waiver, but must be drafted by the division. Number 0728 CHAIRMAN ROKEBERG asked if he correctly recalls that a person can now waive benefits after what is called "medical stability." MS. SHIELDS said that is correct. Unfortunately, she added, there have been a few cases in which clients have been given their permanent partial disabilities and [the cash-out], and then later have come back and said they had made a mistake and wanted the vocational rehabilitation. The courts have very bluntly told the insuring carriers and the employer who ultimately pays that cost that it is too bad the employee made a mistake, but he/she is not able to pay back the money and cannot support himself while taking the training, so they are going to have to pay for it. We are trying to block that loophole, she explained. CHAIRMAN ROKEBERG asked if he understood correctly that an employee can take a lump-sum settlement and agree to waive further benefits. MS. SHIELDS said that is "kind of what ends up happening." Number 0800 MR. GROSSI explained that, currently under statute, when an employee reaches medical stability, temporary total disability benefits stop. If the employee has a permanent impairment, he/she is entitled to whatever the percentage of impairment is multiplied by $135,000. If the person is not in a reemployment plan, that person is entitled to a lump-sum payment. If the person is involved in the reemployment process, that benefit is paid out in weekly increments at the temporary total disability rate (80 percent of the spendable weekly wage). If the employee waives the reemployment benefit, with a compromise in release under the current law or the board-prescribed form under the proposed law, then that person would not be entitled to reemployment benefits. CHAIRMAN ROKEBERG asked for clarification: "They're either getting it over a period of time or they can elect to take the same amount of money in a lump sum It's the same amount of money is it not?" MR. GROSSI said that is correct. CHAIRMAN ROKEBERG summarized that the choice they are making is whether to take the money up front or take it over time to get reemployment [benefits], and the problem that is occurring is that once a person has taken the lump sum and signed a waiver, then that person goes to court saying he/she wants another [chance at a] training program and the courts have said "we have to [do that and] start them on the partial-impairment weekly stipend again". He wondered if that correct. Number 0938 MR. GROSSI said no. The permanent partial impairment [payout] would be spent, gone. They would start immediately on "wages" provided under AS 23.30.041(k). Number 0972 CHAIRMAN ROKEBERG clarified that it was the "double dip" to which Ms. Shields had referred. MR. GROSSI explained that once the court returns that judgment, the board has to abide by it. He added, however, that it is not a common occurrence. CHAIRMAN ROKEBERG observed that this particular provision has created a great deal of controversy. MR. GROSSI said it is fairly rare, "but it is still out there" in about half of the country. Number 1034 REPRESENTATIVE MURKOWSKI said she would like to pick up where Representative Cissna left off. She summarized that Representative Cissna's concern was that an employee who is in a vulnerable situation is signing a waiver, and there is nothing in HB 419 to indicate that if the employee does it under any kind of duress or coercion, that the employee will have a way out after that. "If you sign the waiver, it's a done deal," she said. The employee's only protection is that the waiver is on a form drafted by the board, and she is not certain that would really help or protect the employee. She said there are no allowances being made for the fact that the employee could be mentally/unstable at that point -- not to the degree that any court would find that person incompetent, but [enough so that] the person probably should not be making this kind of decision. She asked if any consideration had been given to a waiver that is signed under duress, coercion, or mental instability. MR. LOHR said he did not know if that had been discussed, but if an employee could prove that he/she had been coerced into signing a document waiver, that waiver probably would not stand up in front of the board or in court. He suggested consulting the Attorney General's office. Number 1197 REPRESENTATIVE MURKOWSKI said she was looking at the language, which states that the employee files a statement under oath, and she assumed it would be within the terms of that oath that the person is signing it of his/her own free will, et cetera. CHAIRMAN ROKEBERG noted that "under oath" goes beyond a sworn statement, [it is not] merely a notarized thing. Number 1230 REPRESENTATIVE CISSNA said her biggest concern is about the way in which this is done. If the person aggressively looks for the opportunity for a waiver, that is one thing. If, in effect, "we are encouraging or making it easy for a person to sign a waiver," then that is another thing, "and that is the part of this that makes me really uncomfortable," she said. If someone has his act together and knows what he wants to do, then that is one thing. But the people who could really be hurt by this are those who are balking at the [proposed] training right at this minute because they are tired and they don't know whether or not they are going to look like an idiot going to school, and they're getting used to the idea, but then here is an easy way out. "I have talked to lots of folks like this who are drifting around, basically unemployable and sidelined permanently, "and I don't want to have people sidelined permanently who were state employees and doing a reasonable job." CHAIRMAN ROKEBERG asked if she is contending that free will and choice are not operative. If not, he wonders what she would suggest to replace them. REPRESENTATIVE CISSNA said the law nominally protects a person, but these people are not going to go and hire attorneys. "They're not going to have the money," she said. CHAIRMAN ROKEBERG pointed out that law is still going to be there, and that no one is changing that. REPRESENTATIVE CISSNA said she knows that, "but we want to be sensitive." CHAIRMAN ROKEBERG observed that this is a question of choice on the part of that worker. However, he said, he could be the first to understand that they might feel some pressure on the part of the employer or the insurance company to sign a waiver. Number 1424 REPRESENTATIVE HALCRO asked if there was a provision making it mandatory to disclose to the injured worker all of the choices that are afforded. Number 1442 MR. GROSSI said he thinks it is going to be necessary in the waiver form to disclose to the employees everything that they are potentially waiving. That would include the $13,300 in retraining benefits, the 70 percent stipend available after the permanent partial-impairment [benefit] runs out, the value of rehabilitation services that could amount to thousands of dollars. Those things would have to be fully outlined and disclosed in that form. That would be the protection. The question is, "Is that enough?" He thinks it is. He imagined there could be some pressure somewhere [to sign the waiver], although he suspects that would be rare. MR. GROSSI said it seems to him that employees are basically exercising the right [to choose] already. They are opting to go into the retraining process and then, for the most part, they are "penciling out" those [benefits] with a compromise and release." One other thing worth noting is that there does not appear to be anything that would preclude a client's asking for some of the other benefits in addition to a lump-sum payment. REPRESENTATIVE HALCRO said it was his understanding that before employees decide to waive any benefits or future training, they have to sign a document that clearly outlines what they are giving up, and what their choices are. MR. GROSSI confirmed that is correct. REPRESENTATIVE HALCRO said that leads back to what Chairman Rokeberg said about choice and free will. "We have waivers for everything in life, liability and all kinds of things," he said "There is a certain level of personal responsibility that I think we're overlooking." Number 1626 CHAIRMAN ROKEBERG asked if the point in time at which a waiver would be offered to an employee is not usually after the whole process of being certified as eligible. "Hasn't somebody typically been in the program and receiving benefits for literally months before they would reach this point?" he asked. MR. GROSSI said that usually is the case. The employees have to have reached medical stability. In other words, they have been paid their temporary total disability for at least a month -- and in some cases even for years, depending on the severity of the injury. They have reached medical stability and the temporary total disability payments stop, and then their rate of disability (permanent partial impairment) is determined. That is when the question of a waiver usually comes up, when they are considering whether they are able to return to their usual work. Number 1691 REPRESENTATIVE MURKOWSKI noted that Section 7(r) starts out saying that any employee may waive at any time any benefits or rights under this section. She said it appears that in practice it does not happen until quite some time into the process, although the language makes it clear a person can do it at any time. She said she thinks perhaps the committee needs to look at that language and give it more parameters. REPRESENTATIVE CISSNA asked if there could be some counseling or educational component included in the waiver process. It could be the film or video -- just some way to make sure that they understand the ramifications. Number 1824 MR. GROSSI said one thing that definitely would be on the waiver form would be the telephone numbers of the three division offices so that if somebody has questions about signing the firm, there will be someone there to answer those questions. CHAIRMAN ROKEBERG asked if the form would have an attachment clearly advising the person that his rights should be fully investigated. MR. GROSSI said they had not yet started work on the form, but that it will have to fully inform the individual of all his/her rights and if they have any questions who to call. REPRESENTATIVE CISSNA volunteered to help the board design the form. MR. GROSSI assured her that the board was going through a public process in designing the form. Number 1910 REPRESENTATIVE HALCRO noted that there was language concerning when the board shall serve the notice of the waiver. He asked, "What about having something like a seven-day grace period so you sign it on Monday and if you change your mind four or five days later, then you can cancel it?" CHAIRMAN ROKEBERG noted that a person has three days to back out of buying a house. Number 1960 REPRESENTATIVE CISSNA asked Ms. Shields what she would think of something like that. Number 1973 MS. SHIELDS said she would need to see the language. She then expressed concern that some of the questions being asked suggest that people are not reading the bill in its entirety, but looking at one section in isolation from the rest. For example, she said, someone had asked if a person signing the form might be in the hospital at the time. She said the prospective signers are a long way into the process before the issue of a waiver even comes up. The people going into rehabilitation have to have been found eligible and reached medical stability, the doctor needs to have said that they cannot go back to the former occupation and they have to have retraining, she explained. CHAIRMAN ROKEBERG said it is very common to provide a "circuit breaker" to permit people to change their minds on a very important decision. MS. SHIELDS said she couldn't speak for the entire ad hoc committee, but thought if they could see the language being proposed, they probably could come back with a very quick decision on it. CHAIRMAN ROKEBERG said he would like to see the bill get some motion today. Both he and Representative Murkowski are on the Judiciary Committee [the next committee to which HB 419 goes], and could follow through with the issue, for which he, too, expressed concern. Number 2164 REPRESENTATIVE MURKOWSKI asked Ms. Shields if there was anything in the audit the ad hoc committee feels would enhance or should be incorporated into HB 419. MS. SHIELDS explained that the ad hoc committee had completed its work before the audit was released. The audit came out after all of the ad hoc committee's recommendations had been made. For the committee to go back into the audit would mean reconstituting the committee and starting all over again. REPRESENTATIVE MURKOWSKI then asked Ms. Shields as an individual if there was anything in the audit that she would "put a star by" and say was a good idea. She said she would like to incorporate some of the more useful aspects of the audit at this time rather than trying to run through HB 419 now and then taking up the results of the audit next year. MS. SHIELDS said when those on the committee had seen the audit, they were amazed at how closely the committee had come to hitting everything discussed in the audit except for those items the committee considered to be in-house items for the Workers' Compensation Commission and for the Department of Labor and Workforce Development. She added, "To be blunt, I skimmed over the audit and then tried to get back to my real work here, and did not examine it closely." She asked what areas [of the audit] Representative Murkowski was referring to or would like to see added. REPRESENTATIVE MURKOWSKI said she had gone through the recommendations with the committee, and certainly does not come at the issue from the same perspective as those in the ad hoc committee, so she appreciated the feedback from them regarding things from the audit they thought should be included in HB 419. If there are some other things Ms. Shields and others out there think should be included, she would like to know what they are so they can be taken up either in this committee or in the next committee of referral. MS. SHIELDS said, "(Indisc.) hasn't even been discussed." REPRESENTATIVE MURKOWSKI said if Ms. Shields had time to review the audit recommendations, she would welcome [any thoughts]. TAPE 00-37, SIDE A MS. SHIELDS said they would certainly take a look at it. Number 0010 CHAIRMAN ROKEBERG said his analysis is that there are two provisions that are not addressed in HB 419: those that spoke to enhancing the department's sanctions of uninsured businesses and to enforcement. The Injured Workers Alliance suggested the audit says the department is "an administrative wreck" that needs to be worked on, and we have discussed that briefly with Mr. Grossi, who is claiming poverty [for the division], "and I can appreciate that." Number 0093 MS. SHIELDS told Chairman Rokeberg she agreed with his earlier statement when talking with Mr. Grossi. She said she agrees with Mr. Grossi. She doesn't like businesses that don't carry workers' compensation unless they have already proved to be self- insured because she cannot compete with them on a legitimate basis. And she thought a previous bill covered that. All the rules in the world won't help if they cannot be enforced. CHAIRMAN ROKEBERG said, "That's exactly the point. We already have criminal sanctions, so I don't think the legislature needs to act, and I disagree with the audit in that regard." Number 0150 MS. SHIELDS said, "I think we've tried to do that. We tried to have criminal sanctions on fraud, and we've had a very difficult time getting the enforcement we, and I know you feel is necessary," including [action] against both fraudulent claims by employees and fraudulent denials by employers. She doesn't think any more language beyond the fraud bill is going to help. CHAIRMAN ROKEBERG said he thinks HB 378, "which was to change the entire fee structure and the premium tax of workers' compensation insurance in the state of Alaska, which passed out of this committee earlier this year," is intended to provide additional funding for the Division of Workers' Compensation so that it can take a more vigorous role in enforcing the law. MS. SHIELDS emphasized that she is very much in favor of that. CHAIRMAN ROKEBERG said he supports that, and he thinks this committee and the legislature do, too. He hopes HB 419 will give the division more firepower and make it possible to retain people to enforce the law, "particularly as a it relates to the uninsured employer, who is doing great damage to the workforce of the state." CHAIRMAN ROKEBERG called attention to a letter circulated to the committee. Addressed to Mr. Grossi, and dated February 2,2000, it came from the National Council on Compensation Insurance, estimating the impact of the premium changes on businesses to be between 7.7 and 8.9 percent of the premiums in Alaska. CHAIRMAN ROKEBERG told listeners online that this was an invitation-only hearing, and that HB 419 would be heard in the House Judiciary and Finance Standing Committees. He advised those who wished to testify to contact their legislators. CHAIRMAN ROKEBERG noted that committee packets contained two amendments he wished to consider. The first amendment, G.1 [1- LS1418\G.1, Ford, 3/16/00], read: Page 1, line 16, following "employee.": Insert "This subsection may not be construed to  authorize an employer, carrier, rehabilitation  specialist, or reemployment benefits administrator to  request medical or other information that is not applicable to the employee's injury." Number 0430 JANET SEITZ, Staff to Representative Norman Rokeberg, Alaska State Legislature, explained that amendment G.1 says the only information the adjuster can request when an employee first files a request for benefits is information applicable to the employee's injury. Currently, some adjusters send a form wanting to know "everything" including the employee's educational records, employee history, military service, and medical history. This amendment would just put some sidebars on that. It does not interfere with the ability to request additional information. Number 0526 REPRESENTATIVE HALCRO made a motion to adopt amendment G.1 [text provided above], to be marked Amendment 1. He objected for the purpose of asking a question. Referring to the phrase, "that is not applicable to the employee's injury," he asked about investigative questions such as "Have you been drinking?" or "Have you done drugs?" MS. SEITZ said that probably would be applicable to the employee's injury if the employer had reason to suspect that. REPRESENTATIVE HALCRO withdrew his objection. CHAIRMAN ROKEBERG said the intent was to prevent a "fishing expedition" when an employee bumps a toe and has to give a whole life history. He indicated that there being no further objection, Amendment 1 was adopted. CHAIRMAN ROKEBERG turned attention to amendment G.2, saying the committee had heard from Mr. Dick Block regarding religious non- medical treatment. He said the amendment "is primarily for Christian Scientists." Amendment G.2 [1-LS1418\G.2, Ford, 3/20/00] read: Page 2, line 2, following "schedule;": Insert "relating to the effect of religious  nonmedical treatment on workers' compensation  coverage;" Page 12, following line 31: Insert a new bill section to read: "* Sec. 20. AS 23.30 is amended by adding a new section to read: Sec. 23.30.280. Coverage for religious nonmedical  health care services. Nothing in this chapter shall be construed to prevent an employee with an injury from relying in good faith on religious nonmedical services for healing through prayer alone or care through religious nonmedical nursing services provided by an individual, a nursing facility, or a visiting nurse service without incurring a loss or reduction of compensation or benefits due under this chapter. This section does not exempt an employee from submitting to an examination by a physician or surgeon as required under AS 23.30.095(e)." Renumber the following bill sections accordingly. Page 13, line 6: Delete "19" Insert "20" Page 13, line 7: Delete "20" Insert "21" Page 13, line 8: Delete "21" Insert "22" Number 1616 REPRESENTATIVE HALCRO made a motion to adopt amendment G.2 [text provided above], to be marked Amendment 2. There being no objection, Amendment 2 was adopted. Number 0631 REPRESENTATIVE HALCRO made a motion to move HB 419 [Version G, 1- LS1418\G, Ford, 3/7/00], as amended, out of committee with individual recommendations and the three attached fiscal notes. There being no objection, CSHB 419(L&C) moved out of the House Labor and Commerce Standing Committee. ADJOURNMENT There being no further business before the committee, the House Labor and Commerce Standing Committee meeting was adjourned at 5:15 p.m.