Legislature(2017 - 2018)GRUENBERG 120

03/31/2017 01:00 PM JUDICIARY

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01:05:30 PM Start
01:06:09 PM Confirmation Hearing: Select Committee on Legislative Ethics
01:17:28 PM HB79
03:05:47 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Confirmation Hearing: Select Committee on TELECONFERENCED
Legislative Ethics
+ HB 79 OMNIBUS WORKERS' COMPENSATION TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
              HB 79-OMNIBUS WORKERS' COMPENSATION                                                                           
                                                                                                                                
1:17:28 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced that the  final order of business would be                                                               
HOUSE BILL  NO. 79,  "An Act  relating to  workers' compensation;                                                               
repealing  the second  injury fund  upon satisfaction  of claims;                                                               
relating to  service fees  and civil  penalties for  the workers'                                                               
safety programs  and the workers' compensation  program; relating                                                               
to the liability  of specified officers and  members of specified                                                               
business entities  for payment of workers'  compensation benefits                                                               
and   civil   penalties;   relating  to   civil   penalties   for                                                               
underinsuring  or  failing  to insure  or  provide  security  for                                                               
workers'  compensation  liability; relating  to  preauthorization                                                               
and timely  payment for medical  treatment and  services provided                                                               
to  injured employees;  relating  to  incorporation of  reference                                                               
materials  in  workers'  compensation  regulations;  relating  to                                                               
proceedings  before the  Workers'  Compensation Board;  providing                                                               
for  methods  of  payment  for  workers'  compensation  benefits;                                                               
relating  to the  workers'  compensation  benefits guaranty  fund                                                               
authority  to claim  a  lien;  excluding independent  contractors                                                               
from   workers'    compensation   coverage;    establishing   the                                                               
circumstances   under   which   certain   nonemployee   executive                                                               
corporate  officers and  members of  limited liability  companies                                                               
may  obtain  workers'  compensation  coverage;  relating  to  the                                                               
duties of  injured employees to  report income or  work; relating                                                               
to   misclassification  of   employees  and   deceptive  leasing;                                                               
defining  'employee';  relating   to  the  Workers'  Compensation                                                               
Board's approval of attorney fees  in a settlement agreement; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
1:18:36 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  HEIDI  DRYGAS,  Department  of  Labor  &  Workforce                                                               
Development  (DLWD),   advised  that  the  bill   will  speed  up                                                               
resolution  of  disputes, improve  the  delivery  of benefits  to                                                               
injured  workers,  deter   workers'  compensation  fraud,  reduce                                                               
administrative  costs,  and  provide  adequate  funding  for  the                                                               
administration  of   the  workers'  compensation  system.     The                                                               
legislature  has consistently  endeavored  to  create a  workers'                                                               
compensation system that  delivers benefits quickly, efficiently,                                                               
fairly, and predictably, to injured  workers at a reasonable cost                                                               
to  employers as  mandated by  statute, and  this system  has not                                                               
been  significantly  reformed  in  more  than  ten  years.    The                                                               
improvements  in this  bill address  rising  costs, recent  legal                                                               
developments,  and  new  approaches  in  improving  the  system's                                                               
efficiency,  fairness, and  modernization.   Commissioner  Drygas                                                               
advised that  the department does recognize  that benefit issues,                                                               
such  as   reemployment  benefits  and  medical   costs,  require                                                               
attention  and the  department is  committed to  addressing those                                                               
issues  in another  legislative  session.   This legislation  has                                                               
undergone improvements since its  introduction after working with                                                               
many  stakeholders  to  clarify  the  definition  of  independent                                                               
contractor  which, she  remarked,  is a  critical  piece of  this                                                               
legislation, and  it aims  to provide a  level playing  field for                                                               
employers to operate and provide fairness to workers.                                                                           
                                                                                                                                
1:20:23 PM                                                                                                                    
                                                                                                                                
MARIE MARX, Director,  Workers' Compensation Division, Department                                                               
of  Labor &  Workforce Development  (DLWD), offered  a PowerPoint                                                               
sectional presentation titled "Workers'  Compensation: HB 79" and                                                               
read as follows [original punctuation provided]:                                                                                
                                                                                                                                
          Good   afternoon   Chair  Claman   and   committee                                                                    
     members.  For the record, my  name is Marie Marx, and I                                                                    
     am   the  Director   of   the   Division  of   Workers'                                                                    
     Compensation.                                                                                                              
          I want  to start  with the intent  of the  Act set                                                                    
     out  in  statute and  highlight  again  the pillars  of                                                                    
     Alaska's workers' compensation system.                                                                                     
          As the  Commissioner stated, it  is to  ensure the                                                                    
     quick,  efficient, fair,  and  predictable delivery  of                                                                    
     benefits  to injured  workers at  a reasonable  cost to                                                                    
     employers.                                                                                                                 
          Balancing of  these pillars guides  the Division's                                                                    
     administration.                                                                                                            
          CORE SERVICES:                                                                                                        
          Ensure compliance  with the  Workers' Compensation                                                                    
     Act                                                                                                                        
          Conduct workers' compensation hearings                                                                                
          Operate an appeals program                                                                                            
          Process Fisherman's Fund claims                                                                                       
          Administer  a  vocational rehabilitation  benefits                                                                    
     and training program for injured workers                                                                                   
          As  the Commissioner  stated, the  Governor's bill                                                                    
     addresses all of the  statutory pillars, but especially                                                                    
     focuses on  fairness, quickness  and efficiency  in the                                                                    
     workers' compensation process.                                                                                             
          Because   the  Governor's   workers'  compensation                                                                    
     "efficiencies"  bill is  a large  one with  changes for                                                                    
     each  topic  made throughout  the  bill,  I thought  it                                                                    
     would be  more helpful  to the  committee members  if I                                                                    
     instead  conducted  the  sectional  analysis  by  topic                                                                    
     instead of in numerical order.                                                                                             
                                                                                                                                
1:21:47 PM                                                                                                                    
                                                                                                                                
MS. MARX turned to slide 4, and read follows [original                                                                          
punctuation provided]:                                                                                                          
                                                                                                                                
          Sections  8-10, 16-18,  and  36  speed up  dispute                                                                    
     resolution in various ways.                                                                                                
          HB 79 simplifies and  quickens the hearing process                                                                    
     by letting  the Board schedule a  hearing shortly after                                                                    
     a claim  is filed, instead  of waiting for  an employee                                                                    
     to request a hearing                                                                                                       
          It  also  ends  the practice  of  permitting  non-                                                                    
     attorneys, who  are not bound  by rules of  ethical and                                                                    
     professional conduct, from  representing parties before                                                                    
     the Alaska Workers' Compensation Board                                                                                     
          I  would like  to  clarify a  parent  of a  minor,                                                                    
     guardian, or  other court-appointed  representative may                                                                    
     still represent a party in Board proceedings.                                                                              
          Additionally, the Board  will continue to consider                                                                    
     a  company, employer  or medical  provider to  be self-                                                                    
     represented   when   acting   through   an   authorized                                                                    
     employee,  a   member,  a   partner,  or   a  corporate                                                                    
     executive officer.                                                                                                         
          This change  does not affect a  party's ability to                                                                    
     be represented by an  attorney, including an attorney's                                                                    
     ability  to  employ  the  services  of  paralegals  and                                                                    
      delegating functions to them in accordance with the                                                                       
     Alaska Rules of Professional Conduct.                                                                                      
       However, any other non-attorney may not represent                                                                        
     a party in matters before the Board                                                                                        
                                                                                                                                
1:23:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD   requested  clarification  as   to  her                                                               
statement that "non-attorneys may  not represent parties" because                                                               
it sounded like there were exceptions.                                                                                          
                                                                                                                                
MS. MARX clarified that this  PowerPoint presentation was offered                                                               
as a guide  without much detail, and  Representative Reinbold was                                                               
correct  in that  currently non-attorneys  can represent  parties                                                               
before  the  Alaska Workers'  Compensation  Board.   This  change                                                               
reads that  non-attorneys may  not represent  parents, guardians,                                                               
or court conservators of a minor.                                                                                               
                                                                                                                                
1:24:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX asked that as  the law currently stands, is                                                               
there  a  prohibition  on  payment   for  the  services  of  non-                                                               
attorneys.                                                                                                                      
                                                                                                                                
MS. MARX responded that the  Alaska Rules of Professional Conduct                                                               
(ARPC) guide what is the unauthorized  practice of law, and it is                                                               
a matter  for the Alaska  Bar Association  (ABA) as to  whether a                                                               
non-attorney  representing   a  party  was  practicing   law  and                                                               
receiving  fees.    Under Alaska  Statutes,  only  attorneys  can                                                               
receive attorney's  fees and be  paid for  representing claimants                                                               
before the Alaska  Workers' Compensation Board.   That board must                                                               
approve  attorney's   fees  and  in  the   event  a  non-attorney                                                               
represents a claimant, nothing is  submitted to the board and she                                                               
did not know  whether they received attorney's fees.   She opined                                                               
it was  an unauthorized practice of  law issue, and not  an issue                                                               
for the Alaska Workers' Compensation Board.                                                                                     
                                                                                                                                
1:25:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  pointed out  that  there  are few  Alaska                                                               
attorneys  practicing workers'  compensation  law,  at least  for                                                               
claimants, and she offered concern  that the bill may possibly be                                                               
lessening  the  number of  options  for  injured workers  with  a                                                               
claim.                                                                                                                          
                                                                                                                                
MS.  MARX  opined that  the  bill  improves  the number  of  good                                                               
options, and when  she served as a  workers' compensation hearing                                                               
officer,  her experience  was that  the claimants  represented by                                                               
non-attorneys, who are  not bound by ethical rules  or the Alaska                                                               
Professional Rules of  Conduct, did not make  their cases proceed                                                               
more efficiently  or have  better outcomes.   The  department has                                                               
workers'  compensation officers  specifically  trained to  assist                                                               
unrepresented  claimants and  employers by  providing information                                                               
about the Workers'  Compensation Act, the duties  of all parties,                                                               
and how  to pursue  their right to  compensation.   She explained                                                               
that   most  parties   appearing  before   the  Alaska   Workers'                                                               
Compensation  Board are  unrepresented as  it is  meant to  be an                                                               
informal process  which is  why the  department provides  so much                                                               
assistance  to  unrepresented parties.    She  opined that  [non-                                                               
attorney  representation] is  not a  better option  or is  in the                                                               
best interests of the claimants or employers.                                                                                   
                                                                                                                                
1:28:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  argued that  the statement,  "it's going                                                               
to  be cheaper,  et  cetra,  you know,  bring  down costs,"  with                                                               
regard to  non-attorney not being  allowed to  represent parties,                                                               
because in her opinion, attorneys  almost always "end up adding a                                                               
lot more  money to  the process."   Representative  Reinbold said                                                               
possibly her next comment would be snarky, but ...                                                                              
                                                                                                                                
CHAIR  CLAMAN advised  that if  she wanted  to describe  it as  a                                                               
"snarky comment" he wouldn't argue with her.                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  further argued  that if  injured workers                                                               
are forced to  hire an attorney, it's only fair  that all lawyers                                                               
post their  fees at the  door, "and  the state collect  all their                                                               
fees and post  them as well," so people can  shop around "because                                                               
litigation  is  one of  the  biggest  problems  we have  in  this                                                               
state."                                                                                                                         
                                                                                                                                
1:29:25 PM                                                                                                                    
                                                                                                                                
MS. MARX  pointed out that  the high  cost of attorney's  fees is                                                               
absolutely an issue  being addressed in this bill.   For example,                                                               
rather than letting  the parties dictate when they  are ready for                                                               
a hearing  after two-three  years of  litigation, the  bill reads                                                               
that at  the time the  parties appear before the  Alaska Workers'                                                               
Compensation Board, the board will  set a scheduling order, as is                                                               
done in  the trial courts  and other administrative  agencies, to                                                               
rein in some of the high costs associated with these cases.                                                                     
                                                                                                                                
1:30:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN  referred  to  the  statement  "improving                                                               
options  for claimants,"  and asked  whether she  meant the  bill                                                               
decreases bad options.                                                                                                          
                                                                                                                                
MS.  MARX agreed  that  stating the  bill  decreases bad  options                                                               
would have been better.                                                                                                         
                                                                                                                                
1:30:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  whether  the workers'  compensation                                                               
fee schedule was set by statute.                                                                                                
                                                                                                                                
MS. MARX answered  there is not a fee schedule  [in statute], and                                                               
in  most  cases  all  attorneys   fall  into  full,  actual,  and                                                               
reasonable,  attorney's fees  related  to the  issues upon  which                                                               
they prevail,  while another provision  allows 10 percent  of the                                                               
benefits  received.   There  is  not  a  cap set  under  statute,                                                               
although,  some states  have done  so and  one court  ruled those                                                               
types  of caps  unconstitutional  because the  Supreme Court  has                                                               
jurisdiction to regulate  caps on attorney's fees,  and so forth,                                                               
she offered.                                                                                                                    
                                                                                                                                
1:31:53 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  DRYGAS  added that  the  department  would like  to                                                               
create  costs containment  in  addressing  the rising  litigation                                                               
costs which are driven up by delays.                                                                                            
                                                                                                                                
1:32:31 PM                                                                                                                    
                                                                                                                                
MS.  MARX   continued  the  presentation  as   follows  [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
          Additionally,   HB   79   streamlines   settlement                                                                    
     agreements by eliminating a  requirement that the Board                                                                    
     approve  attorney   fees  as   part  of   a  settlement                                                                    
     agreement,  when  fees  are   the  only  issue  in  the                                                                    
     settlement that requires Board approval.                                                                                   
          HB  79 also  streamlines the  process of  imposing                                                                    
     civil   penalties   against  uninsured   employers   by                                                                    
     allowing  the  Division  of  Workers'  Compensation  to                                                                    
     assess   the  civil   penalty  directly,   rather  than                                                                    
     petitioning the Board to set  the penalty.  An employer                                                                    
     who  disputes the  assessed penalty  may challenge  the                                                                    
     assessment before the board.                                                                                               
                                                                                                                                
1:33:09 PM                                                                                                                    
                                                                                                                                
MS. MARX turned to slides 5-6, and continued the presentation as                                                                
follows [original punctuation provided]:                                                                                        
                                                                                                                                
          Sections  14, 20,  22-23 improve  the delivery  of                                                                    
     medical care by:                                                                                                           
          requiring  employers   to  preauthorize   or  deny                                                                    
     medical  treatment upon  a  medical provider's  written                                                                    
     request,  and  providing  a  reasonable  timeframe  (60                                                                    
     days) for  an employer  to respond without  incurring a                                                                    
     penalty                                                                                                                    
          Currently  there   is  no  language  in   the  Act                                                                    
     specifically addressing a  request for preauthorization                                                                    
     of medical treatment.                                                                                                      
          This has  led to  much litigation and  delayed the                                                                    
     delivery of medical care to injured workers.                                                                               
          The last  bullet point is to  clarify that medical                                                                    
     bills must  still be paid  within 30 days,  because the                                                                    
     Division has received questions on this issue                                                                              
                                                                                                                                
          Misclassification  is  a  topic  the  Division  is                                                                    
     committed to  addressing on behalf of  both workers and                                                                    
     law-abiding businesses                                                                                                     
          We are  doing a great  disservice to both  when we                                                                    
     do not tackle misclassification head on                                                                                    
          When   workers  are   fraudulently  misclassified,                                                                    
     workers  die  or  are severely  injured  and  uninsured                                                                    
     losses can put a company out of business                                                                                   
          HB   79   does   not  prevent   true   independent                                                                    
     contractors from existing and flourishing                                                                                  
          It is  also important  to clarify HB  79 addresses                                                                    
     independent  contractor  status   only  in  regards  to                                                                    
     workers'  compensation.     It  does  not   change  the                                                                    
     definition   of   independent  contractor   for   other                                                                    
     purposes  such as  IRS  status  and other  non-workers'                                                                    
     compensation laws; it is a narrow application                                                                              
          We   must  keep   workers  safe   and  law-abiding                                                                    
     employers  should  not  have   to  pay  the  price  for                                                                    
     misclassification                                                                                                          
                                                                                                                                
1:35:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  referred to  slide 5, and  read "There's                                                               
going to be  a penalty for untimely  preauthorization or denial,"                                                               
and asked who  is penalized and to  describe the preauthorization                                                               
process.                                                                                                                        
                                                                                                                                
CHAIR  CLAMAN asked  whether Representative  Reinbold was  saying                                                               
that preauthorization  was a nightmare for  the medical providers                                                               
because they keep waiting to hear from the insurance company.                                                                   
                                                                                                                                
REPRESENTATIVE REINBOLD responded, "Oftentimes yes."                                                                            
                                                                                                                                
MS. MARX  answered, the  current statute  states that  upon being                                                               
presented  with a  medical bill,  an employer  or insurer  has 30                                                               
days to  either pay  that bill  or controvert the  bill.   In the                                                               
event they do not do either  one of those two options within that                                                               
30 day  period, they owe  a 25 percent  penalty on the  amount of                                                               
money they  should have paid.   This bill reads that  an employer                                                               
or insurer  has 60 days to  either preauthorize or deny  the bill                                                               
offering a  little more time to  review the medical records.   In                                                               
the event they  don't preauthorize or deny the  bill within those                                                               
60 days, a 25  percent penalty is due on the  amount of the bill,                                                               
subject to  the Alaska Medical Fee  Schedule.  She noted  that as                                                               
Representative Reinbold stated, a  preauthorization can be just a                                                               
phone call away.                                                                                                                
                                                                                                                                
1:37:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD asked what entity receives the penalty.                                                                 
                                                                                                                                
MS. MARX  advised that  it is  either the  self-insured employer,                                                               
the uninsured employer, or the insurance company.                                                                               
                                                                                                                                
REPRESENTATIVE  EASTMAN  noted  that Alaska  has  limited  health                                                               
insurance options,  and offered concern  that if the  employer or                                                               
the  insurance company  can  avoid a  penalty  by simply  denying                                                               
coverage, wouldn't that be an incentive to deny coverage.                                                                       
                                                                                                                                
MS. MARX replied that what happens  currently is not better.  For                                                               
example, a treating  physician is reluctant to go  forward with a                                                               
knee surgery  unless they  know it will  be authorized  and paid.                                                               
The injured worker  does not necessarily want to  go forward with                                                               
that cost  if they think  they will have to  pay the bill  if the                                                               
injury is  later found  not to  be work  related.   The insurance                                                               
company or the  self-insured employer says, "My  only duty, under                                                               
statute, is  to pay a  bill - so  you go  get the care  and we'll                                                               
tell you  after you  get it,  and incur  the fees,  whether we'll                                                               
will pay  for it or not."   Currently, she explained,  an injured                                                               
worker  attends a  hearing before  the  board, it  can take  much                                                               
longer than  60 days to  receive an answer  as to whether  or not                                                               
that bill should be paid.   This proposed change, she related, is                                                               
the  result  of  litigation  from a  recent  Supreme  Court  case                                                               
highlighting  this issue,  it  led to  litigation  because it  is                                                               
ambiguous, and the goal is to  provide clarity which is why it is                                                               
addressed here.                                                                                                                 
                                                                                                                                
COMMISSIONER DRYGAS clarified for  Representative Eastman that if                                                               
a  self-insured employer  or insurer  denies  coverage, at  least                                                               
then the worker  has an answer and they can  appeal that decision                                                               
to  the Alaska  Workers'  Compensation Board,  or  live with  the                                                               
decision.  She described this as a key provision in the bill.                                                                   
                                                                                                                                
REPRESENTATIVE EASTMAN agreed it is  a key provision of the bill,                                                               
but  he  was  slightly  skeptical because  having  been  a  state                                                               
employee  and   considering  that   some  of  these   issues  are                                                               
unresolved more  than a year  after he left state  employment, 30                                                               
days may be premature and  he was unsure implementing that policy                                                               
would necessarily solve the problem.                                                                                            
                                                                                                                                
1:40:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX referred  to  preauthorization, and  noted                                                               
that 60  days is a  long time to either  approve or deny,  and if                                                               
the employer  was not controverting  that the injury  happened at                                                               
work, why would the insurance company  need 60 days.  She related                                                               
that she has state insurance and  if she needed a knee operation,                                                               
she  assumed the  doctor would  get preauthorization  which would                                                               
simply require  a telephone call,  so why would  the self-insured                                                               
employer or insurer need 60 days.                                                                                               
                                                                                                                                
COMMISSIONER  DRYGAS  explained  there is  a  difference  between                                                               
reviewing  a  bill  and  deciding  whether  someone  should  seek                                                               
treatment for  an injury because it  is more intensive as  far as                                                               
fact  finding.   She offered  that it  requires a  review of  the                                                               
medical  records  to  determine  treatment  thus  far,  what  has                                                               
worked,  what hasn't  worked, and  whether it  was work  related,                                                               
which more intensive  than simply paying a bill so  they chose 60                                                               
days.                                                                                                                           
                                                                                                                                
1:42:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  who receives  the penalty  after 60                                                               
days.                                                                                                                           
                                                                                                                                
MS. MARX advised  that the penalty is due to  whoever is owed the                                                               
money, whoever  should have  been paid and  wasn't paid  on time.                                                               
In the  event the self-insured  employer, uninsured  employer, or                                                               
insurance company, should  have paid the bill, they  must pay the                                                               
penalty to  the [medical] provider  if the [medical]  provider is                                                               
the entity with the unpaid bill.   In the event the claimant paid                                                               
it  out-of-pocket, submitted  a bill  for reimbursement,  and the                                                               
bill wasn't paid on time, the penalty is due to the claimant.                                                                   
                                                                                                                                
1:43:33 PM                                                                                                                    
                                                                                                                                
MS.  MARX returned  the committee  to slide  5, and  the language                                                               
"Benefits, except  medical, paid  every 14-days with  7-day grace                                                               
period,"  and said  the  bill  language is  calling  "a spade,  a                                                               
spade" by  saying the  benefits, except  medical, are  paid every                                                               
21-days.                                                                                                                        
                                                                                                                                
1:43:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX   advised  that  the  injured   worker  is                                                               
supposed to live on the benefits or payments.                                                                                   
                                                                                                                                
MS. MARX agreed, and said it is called indemnity, lost wages.                                                                   
                                                                                                                                
REPRESENTATIVE LEDOUX  remarked that she  has a problem  with 21-                                                               
days,  or even  the  14-days with  a 7-day  grace  period.   Most                                                               
people have jobs that pay every  two weeks or bi-monthly and, she                                                               
asked  why shouldn't  an injured  worker, who  is supposed  to be                                                               
receiving indemnity,  be paid  within the  14-day period  with no                                                               
grace period, and  with a penalty if their indemnity  is not paid                                                               
within 14-days.                                                                                                                 
                                                                                                                                
COMMISSIONER DRYGAS  advised that the department  decided to make                                                               
it abundantly  clear that  rather than  the statute  reading that                                                               
medical  payments are  paid  every 14-days  with  a 7-days  grace                                                               
period,  to  just   change  it  to  21-days.     She  noted  that                                                               
Representative LeDoux's point  was not addressed in  the bill and                                                               
it is a policy call.                                                                                                            
                                                                                                                                
1:45:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  asked whether the department  would oppose                                                               
or concur with an amendment addressing that issue.                                                                              
                                                                                                                                
COMMISSIONER DRYGAS  said she  did not see  a problem  with that,                                                               
but  the question  was for  the stakeholders  in the  business of                                                               
paying indemnity benefits.                                                                                                      
                                                                                                                                
REPRESENTATIVE LEDOUX  pointed out that employers  do not receive                                                               
a 7-day grace period when paying  a salary, they must pay on time                                                               
or run afoul of both federal and state statutes.                                                                                
                                                                                                                                
COMMISSIONER  DRYGAS noted  that some  employers pay  individuals                                                               
differently,  not every  single employer  has to  pay people  bi-                                                               
weekly as it varies as long as there is a regular pay period.                                                                   
                                                                                                                                
1:46:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  agreed that  it is  different, but  of all                                                               
the employers  she has had in  her life, it's always  been either                                                               
weekly, bi-weekly,  or a semi-monthly  pay period.   Whereas, she                                                               
noted,  a   monthly  pay  period   might  be,  for   example,  an                                                               
independent  contractor working  on a  consulting contract.   She                                                               
remarked that  it is uncommon for  an actual employee to  be paid                                                               
monthly.                                                                                                                        
                                                                                                                                
1:47:43 PM                                                                                                                    
                                                                                                                                
MS.  MARX commented  that because  there  is no  grace period  it                                                               
would be  in the  best interests of  those making  those payments                                                               
that they would  go out every 14-days to insure  they are timely,                                                               
and  explained  that the  department  was  simply saying  21-days                                                               
because that had become the practice.                                                                                           
                                                                                                                                
REPRESENTATIVE LEDOUX  said she understands that,  her suggestion                                                               
was that  payments should  be within 14-days,  with a  penalty if                                                               
payments are made after 14-days.                                                                                                
                                                                                                                                
1:48:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD said  she disagrees  with Representative                                                               
LeDoux because this is beyond  reasonable and the grace period is                                                               
necessary.                                                                                                                      
                                                                                                                                
1:49:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  commented that  the committee  should not                                                               
be  encouraging  benefits  to  not  be  paid  until  21-days,  if                                                               
anything to  encourage the payments earlier,  but this [language]                                                               
seems to be encouraging the opposite.                                                                                           
                                                                                                                                
1:50:45 PM                                                                                                                    
                                                                                                                                
MS.  MARX   continued  the  presentation  as   follows  [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
         Sections 7, 9, 11-12, 25-26, 28, 31-35, and 37                                                                         
     strengthen provisions to prevent workers' compensation                                                                     
     fraud by employers and employees                                                                                           
          It  defines when  an employer's  misclassification                                                                    
     of  employees   amounts  to  fraud  under   the  Alaska                                                                    
     Workers' Compensation Act                                                                                                  
          It  imposes  an   affirmative  duty  on  employees                                                                    
     receiving  workers'  compensation  benefits  to  report                                                                    
     work   and  receipt   of  other   types  of   wage-loss                                                                    
     replacement benefits                                                                                                       
          It  defines  independent   contractor  instead  of                                                                    
     relying on  a convoluted multi-factor test  of employee                                                                    
     status                                                                                                                     
          HB 79 grants  the Division the ability  to claim a                                                                    
     lien on behalf of the  Benefits Guaranty Fund, which is                                                                    
     the  injured  worker  Fund, for  compensation  benefits                                                                    
     paid and for an assessed civil penalty.                                                                                    
          HB 79  expands the Division's ability  to assess a                                                                    
     civil   penalty   to    include   employers   who   are                                                                    
     underinsured  because they  have misclassified  workers                                                                    
     in a variety  of ways that results  in artificially low                                                                    
     workers'  compensation   premiums,  misrepresented  the                                                                    
     nature  of  their  business, or  engaged  in  deceptive                                                                    
     leasing practices                                                                                                          
          It also changes the  calculation and maximum civil                                                                    
     penalty   for  a   failure  to   insure  for   workers'                                                                    
     compensation liability. The  current maximum penalty of                                                                    
     $1,000 for  each uninsured employee workday  has led to                                                                    
     two unintended consequences.                                                                                               
          First, the  calculation results  in astronomically                                                                    
     high penalties  that do not withstand  review on appeal                                                                    
     and  that   increase  litigation  costs   and  employer                                                                    
     defaults.                                                                                                                  
          Second,   uninsured   employers  that   have   not                                                                    
     maintained  required records  frequently are  penalized                                                                    
     less  severely than  similar employers  that have  kept                                                                    
     records because  of the difficulty of  establishing the                                                                    
     number of uninsured employee workdays without records.                                                                     
          The  bill  corrects  these  issues  by  setting  a                                                                    
     maximum   penalty   of   three   times   the   workers'                                                                    
     compensation insurance premium  that the employer would                                                                    
     have  paid if  the  employer had  properly insured  its                                                                    
     employees.                                                                                                                 
          This  calculation is  simpler because  it requires                                                                    
     only the employer's overall  payroll data calculated as                                                                    
     if  it had  properly classified  its employees  and the                                                                    
     Division  of Insurance's  assigned risk  rates for  the                                                                    
     nature of the employer's business.                                                                                         
          The  new  penalty  will  result  in  a  reasonable                                                                    
     deterrent that takes into  account the employer's size,                                                                    
     the  nature   of  the  employer's  business,   and  the                                                                    
     financial  gain  the  employer  realized  by  operating                                                                    
     without  paying,  in  full or  in  part,  for  workers'                                                                    
     compensation insurance.                                                                                                    
          HB 79  clarifies that civil  penalties may  not be                                                                    
     suspended.    The  Alaska Workers'  Compensation  Board                                                                    
     often suspends penalties in full  or in part to address                                                                    
     an employer's  ability to  pay the  astronomically high                                                                    
     penalties   resulting   from  the   current   statutory                                                                    
     calculation. However, the  penalty suspensions resulted                                                                    
     in   assessments   without   sideboards.      The   new                                                                    
     calculation  addresses this  by  putting sideboards  on                                                                    
     the assessment,  changes the calculation so  that it is                                                                    
     tied to an  employer's size, type of  business, and the                                                                    
     financial  gain  the  employer  realized  by  operating                                                                    
     without paying.                                                                                                            
          The  bill  allows  an employer  to  enter  into  a                                                                    
     payment plan to pay  the civil penalty in installments,                                                                    
     to ensure an  employer is not put out of  business by a                                                                    
     civil penalty assessment.                                                                                                  
          HB  79  requires  interest to  be  paid  on  these                                                                    
     plans, at  the state rate for  judgments, for judgments                                                                    
     entered in 2017, this rate is 4.25%.                                                                                       
                                                                                                                                
1:54:45 PM                                                                                                                    
                                                                                                                                
MS. MARX turned to slides 9-10, and continued the presentation                                                                  
as follows [original punctuation provided]:                                                                                     
                                                                                                                                
          Sections 2-6,  13, 15, 19,  21, 24, 27,  29-30, 38                                                                    
     and 40 reduce administrative costs                                                                                         
          Does not  prescribe a  specific method  of payment                                                                    
     of  benefits, allowing  employers  to  pay benefits  by                                                                    
     such means as  electronically, both delivering benefits                                                                    
     to workers faster and saving costs                                                                                         
          allowing the Division  of Workers' Compensation to                                                                    
     prescribe the  filing format of  reports of  injury and                                                                    
     compensation  payments, including  requiring electronic                                                                    
     filing                                                                                                                     
          eliminating    a   requirement    that   corporate                                                                    
     executive officers seek  the division's approval before                                                                    
     opting  out  of   workers'  compensation  coverage  for                                                                    
     themselves                                                                                                                 
          Corporate executive  officers and members  have at                                                                    
     least 10%  ownership interest are not  employees of the                                                                    
     business so do not need workers' compensation coverage                                                                     
          But they may opt in to coverage                                                                                       
          Insurers  may just  look to  corporations database                                                                    
     or corporate or LLC documents.                                                                                             
          HB  79 adds  medical  publications to  a list  the                                                                    
     Department  of  Labor  and  Workforce  Development  may                                                                    
     incorporate,  including future  amended versions,  into                                                                    
     regulation                                                                                                                 
          providing  a penalty  for  insurers and  employers                                                                    
     that fail to  timely submit proof of  coverage in order                                                                    
     to reduce  the Division's wasted  efforts investigating                                                                    
     insured  employers that  neglected to  report insurance                                                                    
     coverage                                                                                                                   
          phasing  out   the  second  injury   fund,  saving                                                                    
     administrative  costs for  the Department  and reducing                                                                    
     costs for  employers, which are required  to contribute                                                                    
     to the fund                                                                                                                
                                                                                                                                
1:57:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD asked  Ms.  Marx to  explain the  second                                                               
injury fund.                                                                                                                    
                                                                                                                                
MS. MARX  explained that the  second injury fund's purpose  is to                                                               
encourage  employers  to  hire or  retain  disabled  individuals,                                                               
although, the  fund is  no longer necessary  with the  passage of                                                               
the Americans With  Disability Act (ADA) and other  laws that bar                                                               
employment discrimination.  Currently,  she said, before offering                                                               
someone a  job, the  potential employee  cannot be  asked whether                                                               
they have a pre-existing disability.   The purpose of the fund is                                                               
served by  the ADA, 19  states have  phased out these  funds, and                                                               
she described it as an  administrative fund that no longer serves                                                               
its purpose.                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD asked how much  money is in that fund and                                                               
where the money would move.                                                                                                     
                                                                                                                                
MS. MARX  stated the second injury  fund balance for FY  2016 was                                                               
$3,792,900, and the  fund revenue comes in  through an assessment                                                               
against   self-insured   employers   and   insurance   companies.                                                               
Currently,  she  advised,  they  pay  6  percent  of  non-medical                                                               
benefits into  this fund, and  then qualifying insurers  or self-                                                               
insured employers can  be reimbursed from that fund  if they hire                                                               
someone  with a  pre-existing  disability that  has a  subsequent                                                               
injury.   All self-insured employers and  insurance companies pay                                                               
into  the  fund   regardless  of  whether  they   would  ever  be                                                               
reimbursed, and  she asked whether  she should explain  the phase                                                               
out process.                                                                                                                    
                                                                                                                                
1:59:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD asked  that  she explain  the phase  out                                                               
process,  and  commented that  it  appear  employers "would  love                                                               
this."  She  further asked the location of where  the money would                                                               
move.                                                                                                                           
                                                                                                                                
MS.  MARX responded  that the  phase out  includes a  finite date                                                               
wherein no  further claims for  reimbursement would  be accepted.                                                               
At  that point,  the  department  would know  the  amount of  the                                                               
existing  liability, and  she  offered that  most  of the  second                                                               
injury fund claims  are for permanent and total  disability.  She                                                               
explained that [reimbursement]  is for the life  of the claimant,                                                               
which  may be  difficult to  estimate, but  the department  would                                                               
have only a  certain number of claimants.   She further explained                                                               
that as  those claims  are paid  off over  time less  money would                                                               
need to  be collected, the  fiscal note estimates an  average age                                                               
of 80-years  for each  claim to  be phased  out.   Therefore, the                                                               
phase out  would not be completed  for decades, which is  why the                                                               
department wants  to start now.   Decades from now,  she advised,                                                               
if the  process is  accomplished correctly,  the amount  of money                                                               
taken  in  will  slowly  decrease  over  time  as  the  liability                                                               
shrinks, and if  the department works it out  just right, decades                                                               
from  now it  will almost  perfectly  match the  amount of  money                                                               
being taken  in and given out.   She referred to  Version O, Sec.                                                               
40, page 22, lines 8-11, which read as follows:                                                                                 
                                                                                                                                
          TRANSITION:  SATISFACTION  OF SECOND  INJURY  FUND                                                                    
     CLAIMS.   Subject to appropriation, the  balance of the                                                                    
     second injury  fund created  under AS  23.30.040 lapses                                                                    
     into the  general fund when all  liability for accepted                                                                    
     claims  under AS  23.30.205 to  the second  injury fund                                                                    
     and claims ordered  to be paid from the  fund have been                                                                    
     satisfied.                                                                                                                 
                                                                                                                                
2:01:38 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN surmised  that it will takes years  before the draws                                                               
on the  second injury fund are  depleted with the idea  to adjust                                                               
what was collected based on the estimate of need.                                                                               
                                                                                                                                
MS. MARX answered in the affirmative.                                                                                           
                                                                                                                                
2:01:56 PM                                                                                                                    
                                                                                                                                
MS. MARX  turned to slide  11, and continued the  presentation as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
          Section  1   ensures  adequate  funding   for  the                                                                    
     administration of the  Workers' Safety and Compensation                                                                    
     Administrative Account (WSCAA)                                                                                             
          WSCAA balance is rapidly declining                                                                                    
          In  2005,   the  Alaska   Legislature  established                                                                    
     programs such as the  Workers' Compensation Fraud Unit.                                                                    
     These programs  are funded by  WSCAA, but there  was no                                                                    
     increase in the  WSCAA service fee rate  to account for                                                                    
     the increased costs to operate these programs.                                                                             
          The  bill  allows  the  Department  of  Labor  and                                                                    
     Workforce Development  to receive a  greater percentage                                                                    
     of the annual service fees that insurers pay                                                                               
          The  bill does  not increase  the service  fee for                                                                    
     workers'  compensation   insurers  or   employers,  but                                                                    
     allocates more  of the insurers' annual  service fee to                                                                    
     the  Department,  which  would   otherwise  go  to  the                                                                    
     general fund.                                                                                                              
                                                                                                                                
MS. MARX  explained that currently, the  insurers' annual service                                                               
fee  is 2.7  percent  of the  net  workers' compensation  premium                                                               
written, and  the bill allocates  more of that percentage  to the                                                               
department which  would otherwise  go to the  general fund.   She                                                               
further explained that  rather than the current  1.82 percent, it                                                               
would be 2.5 percent.                                                                                                           
                                                                                                                                
2:03:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  asked the  amount the 2.5  percent would                                                               
be on an annual basis.                                                                                                          
                                                                                                                                
MS. MARX stated that it equates to approximately $1.89 million.                                                                 
                                                                                                                                
COMMISSIONER DRYGAS  added that  the department's  budget leader,                                                               
Paloma Harbour,  is attending another  hearing, and in  the event                                                               
there are  additional budget questions, Ms.  Harbour could assist                                                               
[at  a later  time].    She noted  that  the department  received                                                               
concerns from  the Alaska Trucking  Association and a  few others                                                               
regarding  the proposed  independent contractor  provision.   The                                                               
department  worked  with  the   Alaska  Trucking  Association  to                                                               
address   those  concerns   and,  yesterday,   they  reached   an                                                               
agreement,  and she  said she  is hopeful  those changes  will be                                                               
included in a committee substitute next week.                                                                                   
                                                                                                                                
2:05:20 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  said, in terms  of the independent  contractor, the                                                               
current  language in  the  bill is  not  what the  administration                                                               
recommends.                                                                                                                     
                                                                                                                                
COMMISSIONER DRYGAS answered that  the proposed two minor changes                                                               
to HB 79 are  as follows:  Sec. 28, page 17,  lines 1-3, and also                                                               
page 17, lines 4-6 would read as follows:                                                                                       
                                                                                                                                
                    (ii)  the  person maintains  a  business                                                                  
     location or  a business  mailing address  separate from                                                                  
     the location of the individual  for whom, or the entity                                                                  
     for which, the services are performed;                                                                                   
                                                                                                                              
                    (iii) the person engages  in any kind of                                                                  
     business advertising, solicitation,  or other marketing                                                                  
     efforts reasonably  calculated to obtain  new contracts                                                                  
     to provide similar services;                                                                                             
                                                                                                                                
2:08:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD noted  there has  been pushed  back with                                                               
the  National  Federation  of  Independent  Business  (NFIB)  and                                                               
medical  offices,  and  that  she  will  offer  amendments  after                                                               
working with the sponsors of the bill.                                                                                          
                                                                                                                                
2:09:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE    LEDOUX    referred     to    [Sec.    28.    AS                                                               
23.30.230(a)(11(H)(i)],  page  16,  lines  29-31  which  read  as                                                               
follows:                                                                                                                        
                                                                                                                                
                         (i) the  person maintains liability                                                                  
     insurance  or  other  insurance policies  necessary  to                                                                  
     protect   the  employees,   financial  interests,   and                                                                  
     customers of the person's business.                                                                                      
                                                                                                                                
REPRESENTATIVE LEDOUX noted  that a person can  obtain a personal                                                               
liability policy with  a rider that will  cover anything relating                                                               
to the  business a person may  own, and asked whether  that would                                                               
achieve the desired result.                                                                                                     
                                                                                                                                
MS. MARX responded that it would.   These are common indictors of                                                               
independent contractors, and an  independent contract is a person                                                               
or  entity that  protects  its business  assets.   Representative                                                               
LeDoux  is  correct  that  a   liability  insurance  policy  that                                                               
protects its business assets would meet this (indisc.).                                                                         
                                                                                                                                
2:10:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX asked whether such a policy exists.                                                                       
                                                                                                                                
MS.  MARX responded  that the  Division of  Insurance would  best                                                               
discuss insurance policies.                                                                                                     
                                                                                                                                
2:10:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN  referred to  slide 11, and  asked whether                                                               
less funds would  be going to the general fund,  and whether that                                                               
had been incorporated into the governor's budget.                                                                               
                                                                                                                                
MS. MARX explained that the net  change to the State of Alaska is                                                               
zero,  and even  though it  is  $1.8 million,  it would  go to  a                                                               
dedicated fund rather  than the general fund.  She  added that if                                                               
he  was asking  something specific,  she  could bring  it to  Ms.                                                               
Harbour's attention.                                                                                                            
                                                                                                                                
REPRESENTATIVE   EASTMAN  said   that   the   slide  would   say,                                                               
"Currently, under  current law, .88  percent goes to  the general                                                               
fund, now  we're changing  that to  only .2  percent goes  to the                                                               
general  fund," and  he would  like to  understand any  impact on                                                               
future budgets.                                                                                                                 
                                                                                                                                
COMMISSIONER DRYGAS  responded that they  will follow up  with an                                                               
answer.                                                                                                                         
                                                                                                                                
2:12:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EASTMAN referred to the  bottom of slide 9 and the                                                               
language "Division approval  not required; not an  employee if at                                                               
least  10 percent  ownership interest,"  and  asked whether  that                                                               
would have an impact on  sole proprietorships which, for example,                                                               
under current law are eligible for workers' compensation.                                                                       
                                                                                                                                
MS. MARX explained  that sole proprietors are full  owners of the                                                               
business   and  they   are  not   required   to  carry   workers'                                                               
compensation  insurance.   She  further  explained that  worker's                                                               
compensation is  an insurance program that  covers employees, and                                                               
a sole  proprietor is an owner  and not an employee.   Under this                                                               
proposed law, a sole proprietor  is not required to have workers'                                                               
compensation insurance.                                                                                                         
                                                                                                                                
REPRESENTATIVE  EASTMAN  offered  that   under  current  law,  AS                                                               
23.30.239,  sole  proprietors,  and partners  as  employees,  are                                                               
permitted to apply  for workers' compensation.   He asked whether                                                               
Ms. Marx  was saying that  this law prohibits them  from applying                                                               
for workers' compensation.                                                                                                      
                                                                                                                                
MS.  MARX clarified  that no  change  was made  to AS  23.30.239;                                                               
therefore, it does not prohibit  sole proprietors from opting in,                                                               
and the department encourages them to  do so because the cost may                                                               
be worth the risk of a huge  uninsured loss.  The bill changes it                                                               
with regard  to certain business  entities, such  as corporations                                                               
and limited  liability companies because, for  example, a limited                                                               
liability company may  have one member who is  100 percent owner,                                                               
but also puts on five members  who have no ownership interest for                                                               
the  purposes of  avoiding workers'  compensation coverage.   She                                                               
opined that  most employers abide  by the  laws and do  not abuse                                                               
the system,  except a loop  hole was created that  the department                                                               
is  trying  to close.    She  reiterated  that  10 percent  is  a                                                               
sufficient  investment  in a  company  to  not be  considered  an                                                               
employee  and;  therefore,  not be  required  to  carry  workers'                                                               
compensation coverage.                                                                                                          
                                                                                                                                
CHAIR CLAMAN advised  for informational purposed, in  the event a                                                               
sole  proprietor  buys  workers'  compensation  insurance  it  is                                                               
fairly common  for the carrier  or broker  to ask whether  or not                                                               
they want an employer's policy.                                                                                                 
                                                                                                                                
2:15:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  referred to a letter  from a constituent                                                               
independent contractor who  runs a quilt shop, and  an issue came                                                               
up about  small mom and  pop type  business out of  their garages                                                               
who  have gone  out  of  business due  to  some  of the  workers'                                                               
compensation issues.   She said  she wants  to know how  the bill                                                               
will impact a small business run out of a home.                                                                                 
                                                                                                                                
COMMISSIONER  DRYGAS  asked   whether  Representative  Reinbold's                                                               
question  was  whether  the   department  was  reducing  workers'                                                               
compensation  premiums, and  she advised  that the  department is                                                               
attempting to  do so, primarily through  the department's medical                                                               
services review committee  work, but that issue  is separate from                                                               
this  bill.   She  said  she  was  unclear as  to  Representative                                                               
Reinbold's constituent's  specific concerns  with the bill  as it                                                               
relates to their small business.                                                                                                
                                                                                                                                
2:17:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  advised that  small business  owners are                                                               
concerned  that  it  adds  new   definitions  intended  to  force                                                               
workers' compensation  coverage on independent contractors.   She                                                               
related that Alaska  is number two in the nation  for the highest                                                               
costs and  issues surrounding  workers' compensation  are killing                                                               
Alaska's small businesses.                                                                                                      
                                                                                                                                
2:18:37 PM                                                                                                                    
                                                                                                                                
MS.  MARX answered  that this  bill should  lower costs  to small                                                               
businesses because it  will level the playing field  to make sure                                                               
everyone  that should  be paying  into  workers' compensation  is                                                               
actually  paying into  workers' compensation,  thereby, spreading                                                               
the risk  of those injuries  and hopefully bringing down  some of                                                               
those  workers' compensation  costs.   She stated  that the  bill                                                               
does  not  make  people  independent  contractors  who  were  not                                                               
independent contractors.   What  has happened, she  explained, is                                                               
that  some   employers  abuse  the  system,   although  far  more                                                               
employers generally  believe that by  giving someone a  Form 1099                                                               
and calling  them an independent  contractor is  sufficient under                                                               
current law,  except that  is not  true.   Regrettably, employers                                                               
are then shocked  when their injured worker is  suddenly found to                                                               
be an  employee and now  the employer  has a huge  uninsured loss                                                               
that may put  them out of business.   She pointed out  that HB 79                                                               
will protect those small business from going out of business.                                                                   
                                                                                                                                
MS. MARX related that the  following incident illustrates how the                                                               
department is  attempting to protect  small businesses  from huge                                                               
uninsured losses.  There had  been an Alaska industry practice of                                                               
calling  helicopter  ski  guides  independent  contractors,  even                                                               
though  the helicopter  ski company  controls  their hours,  when                                                               
they  work,  provides the  helicopter,  and  the guides  ski  the                                                               
clients down the  mountain.  She remarked that a  broken leg came                                                               
to the division's attention so it  worked hard to educate and not                                                               
penalize these small  businesses.  The goal was  to educate these                                                               
small businesses  that they needed to  have workers' compensation                                                               
insurance on the  guides because they were  opening themselves up                                                               
to  huge  uninsured  losses.    She  advised  that  most  of  the                                                               
companies came into compliance except  one person, in particular,                                                               
was upset  and said that  the division  would cause him  to incur                                                               
higher business  expenses, but he  finally came  into compliance.                                                               
One year later,  a guide died tragically in  an avalanche working                                                               
for  that company,  and the  owner thanked  the division  for his                                                               
education  and helping  him realize  the  ramifications of  going                                                               
without  workers' compensation  insurance because  that loss  was                                                               
covered by the insurance company.                                                                                               
                                                                                                                                
2:21:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  surmised that  the intention was  not to                                                               
drive  costs   up  for   small  businesses.     She   then  asked                                                               
Commissioner Drygas  to address  the 2/17/17 letter  addressed to                                                               
Representative  Sam   Kito  from   the  National   Federation  of                                                               
Independent Business (NFIB).                                                                                                    
                                                                                                                                
COMMISSIONER DRYGAS  advised that Ms.  Marx and she had  met with                                                               
the NFIB  a number of times  and they will continue  to meet with                                                               
the NFIB addressing their concerns.                                                                                             
                                                                                                                                
2:22:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD surmised  that nothing  has been  agreed                                                               
upon at this time.                                                                                                              
                                                                                                                                
CHAIR CLAMAN  pointed out that  he had received a  similar letter                                                               
and also had  conversations with Dennis DeWitt,  lobbyist for the                                                               
NFIB.    He   referred  to  [HB  79,  Version  O,   Sec.  27.  AS                                                               
23.30.205(a)(11)(H)],  page  16,  beginning  line  28,  regarding                                                               
meeting  three of  the five  criteria,  and advised  of the  NFIB                                                               
belief  that the  section should  be  removed because  it is  not                                                               
necessary or  serving its purpose.   Representative  Reinbold, he                                                               
opined, would like the division to address those concerns.                                                                      
                                                                                                                                
2:23:19 PM                                                                                                                    
                                                                                                                                
MS.  MARX  responded that  the  independent  contractor and  this                                                               
classification  issue  started  one  year  ago  with  legislation                                                               
brought  forward by  Representative Gabrielle  LeDoux.   Concerns                                                               
were  raised  and  further  work  was  performed  to  refine  the                                                               
independent  contractor   definition  to  the  point   where  the                                                               
division appreciated  the language when  [HB 79] dropped.   Since                                                               
that time,  different stakeholder  groups expressed  concerns and                                                               
rather than implementing a 12  multi-factor test where the person                                                               
must meet all 12 factors, it  was refined to read that the person                                                               
must  meet seven  of  the  requirements, and  three  of the  five                                                               
options.    She  explained  that concern  were  expressed  as  to                                                               
whether it was  possible to meet all of those  factors, so it was                                                               
changed to three out of five  options.  The goal of the division,                                                               
she  expressed, was  to be  sure it  captured a  true independent                                                               
contractor,  and not  prevent true  independent contractors  from                                                               
operating.                                                                                                                      
                                                                                                                                
2:25:21 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  offered that the independent  contractor definition                                                               
begins on HB 79, Version O, page 15, line 29, as follows:                                                                       
                                                                                                                                
            (11) a person employed as an independent                                                                        
     contractor; a person is an independent contractor for                                                                  
     the purposes of this chapter only if the person                                                                        
                                                                                                                                
CHAIR CLAMAN  surmised that for  a person  to be qualified  as an                                                               
independent contractor they must  satisfy subparagraphs A through                                                               
G, and  under subparagraph H  the person  must meet three  out of                                                               
five  options.    Therefore,  he  pointed  out,  rather  than  12                                                               
requirements,  the  first seven  plus  these  five, the  division                                                               
reduced it to satisfying 10 of the 12 requirements.                                                                             
                                                                                                                                
MS.  MARX  advised  that   the  department  removed  requirements                                                               
different stakeholder groups had  described as problematic, those                                                               
requirements  were replaced  with requirements  that are  easy to                                                               
verify, such as advertising and a bank account.                                                                                 
                                                                                                                                
2:26:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD commented  that  she  weighs the  issues                                                               
raised with the  NFIB and small businesses carefully  and this is                                                               
an area she will focus on heavily.                                                                                              
                                                                                                                                
2:28:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  noted  that   if  someone  doesn't  carry                                                               
workers' compensation insurance  and there is an  injury with any                                                               
negligence involved,  workers' compensation benefits  are limited                                                               
compared to  the benefits someone may  be able to obtain  if they                                                               
sued at common law.  She continued  that in the event there is no                                                               
workers' compensation insurance and  a jury finds them negligent,                                                               
the damages can be "absolutely huge."                                                                                           
                                                                                                                                
2:29:08 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  related an  incident wherein  an employer  owned an                                                               
aircraft company,  and a pilot  went down  and the pilot  did not                                                               
survive  the  crash.   The  owner  of  the aircraft  company  was                                                               
someone  one  would  think  knew  all of  the  reasons  to  carry                                                               
workers'  compensation  insurance.   He  related  that the  first                                                               
proceeding was  a lawsuit, immediately  followed by  a bankruptcy                                                               
proceeding.                                                                                                                     
                                                                                                                                
2:29:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOPP inquired  as to  how this  bill impacts  the                                                               
average skipper/deck hand relationship  in the commercial fishing                                                               
industry.                                                                                                                       
                                                                                                                                
MS.  MARX answered  that fishermen  crew members  fall under  the                                                               
Fishermen's  Fund,  which  is  a  separate  statutory  scheme  to                                                               
provide  benefits  and  does  not   impact  the  Alaska  Workers'                                                               
Compensation Act.                                                                                                               
                                                                                                                                
CHAIR CLAMAN commented that the  Fishermen's Fund is a small part                                                               
of a deck  hand's remedies compared to the Jones  Act and various                                                               
maritime law doctrines.                                                                                                         
                                                                                                                                
2:30:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP  referred to  Sec. 15  [HB 79,  AS 23.30.098,                                                               
page  8, beginning  line 9]  and noted  that new  references were                                                               
added  wherein it  becomes unnecessary  to publish  updates every                                                               
year.  In 2014, [the  28th Alaska State Legislature] passed House                                                               
Bill 314, which  required annual public notice and  review of any                                                               
new  regulations  promulgated  having   to  do  with  pricing  or                                                               
workers'  compensation rates.    He  commented, by  incorporating                                                               
these references  into this statute,  it appears "we are  kind of                                                               
doing an end run around that requirement."                                                                                      
                                                                                                                                
MS.  MARX  responded that  [the  28th  Alaska State  Legislature]                                                               
changed  the way  the Alaska  Workers' Compensation  Fee Schedule                                                               
maximum  allowable  reimbursement  was calculated  by  setting  a                                                               
groundwork  to  use, to  which  the  division applies  its  state                                                               
specific multiplier.   That groundwork,  she explained, is  a lot                                                               
of reference materials, many of which  are listed in Sec. 15, and                                                               
the statute  was passed  with most  of those  intact there.   The                                                               
division used  the relative values established  by organizations,                                                               
such as the Centers for  Medicaid and Medicare Services (CMS) and                                                               
the  American  Medical Association  (AMA),  to  establish a  base                                                               
value -  a number for a  procedure, such as a  physician provided                                                               
procedure.    She  explained  that  "We  do  not  apply  Medicare                                                               
multiplier  to that,  we  do  not, we  apply  our state  specific                                                               
multiplier to  come up with a  maximum dollar amount."   Ms. Marx                                                               
referred  to [Sec.  15, AS  23.30.098] page  8, lines  14-15, and                                                               
said  the American  Medical Association  (AMA), on  January 1  of                                                               
every year, publishes  a new book with current  CPT codes, titled                                                               
Procedural  Terminology  Codes.    The  Medical  Services  Review                                                             
Committee   (MSRC)  is   tasked  with   providing  fee   schedule                                                               
recommendations  and  presenting  those to  the  Alaska  Workers'                                                               
Compensation  Board,  and if  the  board  is in  agreement,  they                                                               
become regulation.  She pointed out  that the MSRC and the Alaska                                                               
Workers' Compensation Board include  reference materials, such as                                                               
the  current  Procedural  Terminology Codes,  and  the  reference                                                             
materials added in HB 79.                                                                                                       
                                                                                                                                
MS. MARX  explained that the  January 1 version had  gone through                                                               
the  Centers  for Medicare  &  Medicaid  Services (CMS)  and  the                                                               
federal  register  public  comment  period.    Subsequently,  she                                                               
further explained, when the version  comes into play the division                                                               
can then publish notice advising the  public to use the January 1                                                               
version.   The  Alaska  Administrative Procedures  Act allows  an                                                               
agency to  use future amended  versions of reference  material as                                                               
long  as it  has statutory  authority  to do  so, otherwise,  the                                                               
division   wouldn't  be   able  to   make  it   effective  until,                                                               
potentially, 2018.                                                                                                              
                                                                                                                                
2:34:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KOPP  commented  that the  Medicaid  compensation                                                               
rates  are  challenging for  the  business  community, and  asked                                                               
[technical difficulties] kind of came up  with a base rate off of                                                               
Medicaid  and Medicare  versus commercial  insurance.   He opined                                                               
that Medicaid  and Medicare are  for the elderly, the  frail, and                                                               
the infirmed, and those people  can have very high rates, whereas                                                               
commercial insurance  for Medicare  is basically for  people hurt                                                               
on the job and are otherwise  healthy people.  It appears if that                                                               
is being used  as a base, it  will drive rates up  higher than if                                                               
using a market commercial insurance rate, he remarked.                                                                          
                                                                                                                                
2:36:09 PM                                                                                                                    
                                                                                                                                
MS. MARX continued as follows:                                                                                                  
                                                                                                                                
     I  think I'll  probably just  clarify that  we are  not                                                                    
     using  Medicare   rates.    It  is   a  relative  value                                                                    
     established  a committee,  it's  called,  I think,  the                                                                    
     Relative Value Unit Committee  involved of members from                                                                    
     the American  Medical Association and members  from the                                                                    
     Centers for  Medicaid and Medicare Services.   And they                                                                    
     come in and assign a value  to a procedure based on the                                                                    
     expertise,  geographic location,  and so  forth.   They                                                                    
     assigned a  number, and  let's say  that number  is 10.                                                                    
     Medicare  will apply  their own  multiplier to  that to                                                                    
     get a maximum.  So,  Medicare may apply a multiplier of                                                                    
     20. So, 20 times 10, maximum of $200.                                                                                      
                                                                                                                                
     We apply our  Alaska multiplier and let's  say it's 80.                                                                    
     So, we  take relative value  of 10, but we  would apply                                                                    
     our   state   specific    multiplier   to   take   into                                                                    
     consideration  those  types  of   issues,  and  have  a                                                                    
     maximum reimbursable, for  example, of 800.   And so it                                                                    
     does not  -- I just  want to make  sure that I  am very                                                                    
     clear --  we are  not using  Medicare rates.   It  is a                                                                    
     value established  by the American  Medical Association                                                                    
     and  Centers   from  Medicaid  and   Medicare  Services                                                                    
     committee that come up with  these values, for example,                                                                    
     for physician services to which  we apply our own state                                                                    
     specific rules.   So,  we have the  MSRC and  the board                                                                    
     has  carved   out  exceptions  when  the   rules  don't                                                                    
     necessarily work  for Alaska, and they  have carved out                                                                    
     -- they've absolutely carved out exceptions.                                                                               
                                                                                                                                
MS. MARX  offered that  the division  encourages parties  to come                                                               
before  the Medical  Services Review  committee that  meets every                                                               
year to hear  the public's comments and concerns.   The committee                                                               
is chaired  by Ms. Marx  as the  director, and comprised  of four                                                               
public members  and four  members from  the medical  community to                                                               
take  public comments.   She  offered that  the committee  should                                                               
start up sometime  in June of 2017, with the  goal of determining                                                               
new recommendations effective  January 1, so that  everyone is on                                                               
the same page  with an annual update  on January 1 on  all of the                                                               
rules and guidelines.                                                                                                           
                                                                                                                                
2:38:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOPP referred  to HB 79, Version O,  page 9, lines                                                               
13-16, with read as follows:                                                                                                    
                                                                                                                                
               (15) Hospital  Outpatient Prospective Payment                                                                
     System, produced  by the  federal Centers  for Medicare                                                                
     or Medicaid Services; or                                                                                               
               (16)   Ambulatory  Surgical   Center  Payment                                                                
     System, produced  by the  federal Centers  for Medicare                                                                
     and Medicaid Services.                                                                                                 
                                                                                                                                
REPRESENTATIVE KOPP  noted that it incorporates  by reference the                                                               
Hospital Outpatient  Perspective Payment  System (HOPPS)  and the                                                               
Ambulatory  Surgical Center  Payment  System (ASC),  and the  CMS                                                               
reviews those and updates those  reimbursement rates annually for                                                               
each one of  those.  The Hospital  Outpatient Perspective Payment                                                               
System  (HOPPS) has  a  market-based review  whereas  the ASC  is                                                               
based on  the Consumer  Price Index (CPI)  so those  two payments                                                               
will diverge remarkably over time.   In fact, he commented, there                                                               
is  over 40  percent  divergence and  what  "you're eligible  for                                                               
reimbursements," and  described it as  a real challenge.   At the                                                               
Ambulatory Surgical  Center, "let's say Alaska  Surgery Center is                                                               
getting  reimbursed   at  48  percent  less   than  the  hospital                                                               
outpatient" there could be some  friction there, and he asked how                                                               
the division was addressing that issue.                                                                                         
                                                                                                                                
2:39:55 PM                                                                                                                    
                                                                                                                                
MS. MARX  replied that  she believes that  she read,  on average,                                                               
the   Ambulatory  Surgery   Center  Payment   System  (ASC)   was                                                               
approximately 65 percent less.  She continued as follows:                                                                       
                                                                                                                                
     So,  the MSRC,  the Medical  Services Review  Committee                                                                    
     ... and  the board said, "We  are not going to  pay the                                                                    
     amounts,  the relative  values  to Ambulatory  Surgical                                                                    
     Centers, the ACS  values, and we're not  going to apply                                                                    
     a  separate  conversion  factor."   They  decided,  and                                                                    
     that's currently  in statute  -- or in  regulation, and                                                                    
     is  not  changed  by  this,  that  Ambulatory  Surgical                                                                    
     Centers  get the  same  conversion  factor of  hospital                                                                    
     outpatients, and use the same  relative values just for                                                                    
     that reason.                                                                                                               
                                                                                                                                
REPRESENTATIVE KOPP noted that her response was good to know.                                                                   
                                                                                                                                
MS. MARX advised that the dispute  lies in the billing rules that                                                               
go along with that, how things  are bundled and coded.  While she                                                               
said she does not  pretend to be an expert, opined  that it is in                                                               
those details along  that way that the  Ambulatory Surgery Center                                                               
Payment  System   has  its  own   payment  system   for  hospital                                                               
outpatient,  and  it  doesn't  quite  work  with  the  Ambulatory                                                               
Surgical Centers.  Although, at the  end of the day, they use the                                                               
same  type of  base  values  and they  have  the same  conversion                                                               
factor, she said.                                                                                                               
                                                                                                                                
2:41:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN   surmised  that  the   government  could                                                               
educate the private sector in  offsetting a workers' compensation                                                               
claim that could  drive them out of business, but  it appears the                                                               
government  helps   the  private  sector  cut   costs  by  adding                                                               
regulations, and  if the regulations  are not complied  with they                                                               
could  be  prosecuted  for  fraud.     He  then  pointed  to  [AS                                                               
23.30.230(a)(11)(H)(i-v)],  page 16,  lines  28-31  and page  17,                                                               
lines  1-13,  referencing that  three  out  of five  options  are                                                               
necessary in  order to qualify,  and requested a black  and white                                                               
definition for  an independent contractor, at  least for purposes                                                               
of avoiding prosecution  for fraud.  He related  that when moving                                                               
into the  gray area of  meeting three  out of five  options, this                                                               
legislation will  raise costs for those  small businesses because                                                               
"now more  people have to  come up under providing  and producing                                                               
insurance."    He  then referred  to  AS  23.30.230(a)(11)(H)(v),                                                               
which read as follows:                                                                                                          
                                                                                                                                
                    (v)  the  person  engages  in  a  trade,                                                                
     occupation,   profession,   or  business   to   provide                                                                
     services that are outside the  usual course of business                                                                
     for the individual  for whom, or the  entity for which,                                                                
     the services are performed.                                                                                            
                                                                                                                              
REPRESENTATIVE EASTMAN asked  whether consultants are independent                                                               
contractors.                                                                                                                    
                                                                                                                                
2:45:25 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  DRYGAS answered  that Representative  Eastman would                                                               
probably hear from stakeholders in  the room and others that they                                                               
do  not  want  a  black  and  white,  bright  line  test  because                                                               
flexibility is important.  Circumstances  change from employer to                                                               
employer, and  if there was a  black and white, bright  line test                                                               
it would become  unworkable despite the fact that  a worker could                                                               
be a true independent contractor.                                                                                               
                                                                                                                                
COMMISSIONER  DRYGAS referred  to  his  question regarding  small                                                               
businesses, and responded that small  businesses want clarity and                                                               
better  notice  as  to  whether  they  have  an  employee  or  an                                                               
independent contractor,  and that's  what this  legislation does.                                                               
Currently in  statute is the  "Relative Nature of the  Work Test"                                                               
to determine  whether someone  is an  employee or  an independent                                                               
contractor and,  unfortunately, she described, the  test is vague                                                               
and difficult to quantify, with a  lack of clarity.  The division                                                               
is  not trying  to cast  a  wider net,  but rather  is trying  to                                                               
provide  clarity for  employers,  workers, and  the division,  to                                                               
truly understand who  is an independent contractor and  who is an                                                               
employee.   After pulling  state laws from  all of  the different                                                               
states,  she   stated  that  this   is  the  best  test.     This                                                               
classification  is a  problem throughout  the country  because it                                                               
takes advantage of unknowing workers  and law abiding businesses.                                                               
She  pointed out  that the  division received  positive responses                                                               
from folks it didn't anticipate,  and this is better than current                                                               
law.                                                                                                                            
                                                                                                                                
2:47:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN argued  that  the  stakeholders he  spoke                                                               
with prefer that the [definition]  be black and white and clearly                                                               
identify the workers' compensation  requirements so that the risk                                                               
of fraud  is limited.  That  is how to help  the small businesses                                                               
because the  bill tries to catch  three out of five  options, and                                                               
it  catches   people  that  are   not  clearly  outside   of  any                                                               
independent  contractor category.   He  opined that  the division                                                               
says, "Well  you don't  qualify as  an independent  contractor so                                                               
now you're going to get caught up with everybody else."                                                                         
                                                                                                                                
REPRESENTATIVE CLAMAN advised that  public testimony will be open                                                               
on HB  79 on 4/5/17,  and stakeholders would have  an opportunity                                                               
to testify.                                                                                                                     
                                                                                                                                
2:50:16 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  DRYGAS reiterated  that  the goal  of  the test  is                                                               
clarity.  She then spoke to  representatives in the room that had                                                               
served  for years  and asked,  "How often  we can  see things  in                                                               
black and white  when we're passing legislation, I  would love to                                                               
hear  it."   This  legislation attempts  to  provide clarity  and                                                               
notice to employers  and workers whether they  are an independent                                                               
contractor or  an employee  and, she  stated, this  definition is                                                               
far above the language in current law.                                                                                          
                                                                                                                                
2:51:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KREISS-TOMKINS   referred   to  Sec.   28,   [AS                                                               
23.30.230(a)],  and  advised  he  is looking  forward  to  public                                                               
testimony and is  interested in how one crafts  the best possible                                                               
test  definition  of an  independent  contractor.   He  suggested                                                               
looking at the IRS definition  of independent contractor, what it                                                               
is, and how it differs from this legislation.                                                                                   
                                                                                                                                
MS. MARX  advised there  are many different  tests in  law across                                                               
the  board identifying  an independent  contractor because  there                                                               
different goals are  reached through that test.  The  IRS test is                                                               
a  20   multi-factor  balancing  test   and  no  one   factor  is                                                               
determinative  and,  she  described  it as  simply  a  subjective                                                               
weighing  test  with the  goal  to  obtain  money from  the  IRS.                                                               
Whereas,  the Workers'  Compensation  Act is  to protect  workers                                                               
from  severe  injury  or  death,   protect  employers  from  huge                                                               
uninsured  losses,  and  ensures  that  benefits  flow  smoothly.                                                               
Those are  completely different goals,  which is why  other tests                                                               
do   not  work   for  workers'   compensation,  and   a  workers'                                                               
compensation test  would not necessarily  work in other  areas of                                                               
the law.   She offered that states found  that these multi-factor                                                               
subjective  balancing  tests do  not  work  and lead  to  rampant                                                               
fraudulent  misclassification, and  opined  that  23 states  have                                                               
started  moving   toward  defining  independent   contractor  and                                                               
providing clarity in that respect.                                                                                              
                                                                                                                                
2:53:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS  speculated that  possibly  states                                                               
used  that   20  multi-factor  non-determinative   definition  of                                                               
independent   contractor    for   the   purposes    of   workers'                                                               
compensation,  and asked  whether the  proposed five  factor test                                                               
has precedence.                                                                                                                 
                                                                                                                                
MS. MARX clarified  that some states still use,  and other states                                                               
may have  generally used, a  multi-factor balancing  test similar                                                               
to  the IRS  test, and  she was  unaware whether  any states  had                                                               
adopted  the 20  multi-factor  balancing test.    The IRS  multi-                                                               
factor  balancing  test  has  a   different  goal  than  workers'                                                               
compensation, she reiterated.                                                                                                   
                                                                                                                                
MS. MARX referred  to his second question as to  how the division                                                               
came up  with this refinement,  and answered that in  response to                                                               
the stakeholder groups, the division  staff went back through its                                                               
list  with her  and read  and re-read  statutes in  other states.                                                               
They found there  were four other states with  a similar optional                                                               
type of two-part  test, Florida, Maine, Nevada, and  Oregon.  The                                                               
division  believes it  allows flexibility  in addressing  some of                                                               
the concerns raised  while at the same time  providing clarity on                                                               
the independent contractor definition, she explained.                                                                           
                                                                                                                                
2:57:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KREISS-TOMKINS   referred   to   Sec.   29   [AS                                                               
23.30.240], page 17,  lines 14-31, and asked for  more context or                                                               
the  value  the division  sees  in  this clarification  of  chief                                                               
executive  officers   potentially  being  exempt   from  workers'                                                               
compensation versus the status quo.                                                                                             
                                                                                                                                
MS. MARX explained that currently  certain executive officers may                                                               
exempt themselves  from workers' compensation coverage  through a                                                               
lengthy  application   process  the  division   administers,  the                                                               
Executive Officer Waiver Program.   She explained that a division                                                               
staff member  accepts applications,  reviews them,  and maintains                                                               
them,  plus  it  also  receives  many  inquiries  from  insurance                                                               
companies asking whether  that executive officer has  a waiver in                                                               
place.   She described  this and  an administrative  and resource                                                               
expenses so  the division streamlined  the process by  allowing a                                                               
person with a 10 percent interest  in a company to waive workers'                                                               
compensation coverage.  In that  manner, the information would be                                                               
available  through the  Division  of  Corporation's database  for                                                               
business records, she explained.                                                                                                
                                                                                                                                
2:59:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS asked  that in  the event  Sec. 29                                                               
becomes law, whether she anticipates  an operating budget savings                                                               
or the continued need for a  full time equivalent (FTE) to manage                                                               
this program.                                                                                                                   
                                                                                                                                
MS.   MARX  answered   there  are   many  efficiencies   in  this                                                               
legislation, and  the fiscal note estimated  that the department,                                                               
beginning FY 2019,  would be able to reduce by  one position with                                                               
a cost savings of $59,300.                                                                                                      
                                                                                                                                
3:00:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD commented  that Commissioner  Drygas and                                                               
Ms.  Marx do  not have  to answer  her next  question today,  and                                                               
asked whether  they anticipate  bringing down  Alaska's statistic                                                               
of  number  two in  workers'  compensation  costs throughout  the                                                               
nation, and where  they anticipate Alaska's rank would  be in the                                                               
next five and ten years amongst other states.                                                                                   
                                                                                                                                
3:01:28 PM                                                                                                                    
                                                                                                                                
COMMISSIONER DRYGAS  responded that she  does not have  a crystal                                                               
ball and could not say where  Alaska will rank, but she could say                                                               
that medical costs are driving  workers' compensation costs which                                                               
must   be   addressed.     This   legislation   will  save   some                                                               
administrative costs for  the department and, she  noted, it aims                                                               
to reduce  attorney's fees for  workers and employers  by setting                                                               
schedules  and  penalties  directly, without  going  through  the                                                               
Workers' Compensation Board process.                                                                                            
                                                                                                                                
3:02:52 PM                                                                                                                    
                                                                                                                                
CHAIR  CLAMAN asked  for  clarification  about companies  selling                                                               
workers' compensation insurance because  it was his understanding                                                               
that because  Alaska is a mandatory  workers' compensation state,                                                               
that in  addition to the  limited number of  companies officially                                                               
in Alaska  selling, there  is this whole  pool of  companies that                                                               
are not  in the  state but nevertheless  coverage is  placed with                                                               
them  through the  insured  risk  pool.   He  asked  Ms. Marx  to                                                               
explain how  that works because  employers are never at  risk for                                                               
being unable to  get coverage, although, it may be  that they are                                                               
covered by a workers' compensation  company that may, or may not,                                                               
have offices in  Alaska.  Chair Claman asked her  to also explain                                                               
how that  dynamic works in terms  of both companies that  are, in                                                               
theory,  in state  and have  offices here.   For  example, Alaska                                                               
National, and then  there are all these other  companies that are                                                               
part of a mandatory pool, he said.                                                                                              
                                                                                                                                
3:03:48 PM                                                                                                                    
                                                                                                                                
MS. MARX  advised that the  Division of Insurance is  the expert,                                                               
but she could  say there is a residual market  of last resort, of                                                               
which insures  that all  employers have  some means  of procuring                                                               
workers'  compensation insurance.    Many states  have created  a                                                               
residual market of last resort  and small employers that may have                                                               
a hard  time obtaining  insurance, possibly the  company is  in a                                                               
high  risk industry,  can obtain  insurance in  that manner,  she                                                               
said.  She doesn't  have the details as to how  it works, but she                                                               
opined that the ones who are  part of that assigned risk rate are                                                               
insurance  companies assigned  to  take those  and  they have  to                                                               
cover  those policies.   In  the event  the insurance  company is                                                               
part of  that pool, as these  policies come in they  have to take                                                               
them,  and they  alternate as  to who  will take  and cover  that                                                               
policy.  She  commented that these are not big  money makers, but                                                               
that is part  of the privilege of operating and  being a workers'                                                               
compensation insurance  company in Alaska.   She said  she agrees                                                               
that  all  employers  have  some   means  of  procuring  workers'                                                               
compensation insurance.                                                                                                         
                                                                                                                                
[HB 79 was held over.]                                                                                                          

Document Name Date/Time Subjects
Select Committee on Legislative Ethics-Lee Holmes Resume 3.29.17.pdf HJUD 3/31/2017 1:00:00 PM
HB079 ver O 3.27.17.pdf HJUD 3/31/2017 1:00:00 PM
HJUD 4/5/2017 1:00:00 PM
HJUD 4/13/2017 5:30:00 PM
HB 79
HB079 Transmittal Letter 3.27.17.pdf HJUD 3/31/2017 1:00:00 PM
HJUD 4/5/2017 1:00:00 PM
HJUD 4/13/2017 5:30:00 PM
HB 79
HB079 Sectional Analysis ver O 3.27.17.pdf HJUD 3/31/2017 1:00:00 PM
HB 79
HB079 Letters Index.pdf HJUD 3/31/2017 1:00:00 PM
HB 79
HB079 Supporting Document-Letters of Support 3.27.17.pdf HJUD 3/31/2017 1:00:00 PM
HB079 Opposing Document-Letters of Opposition 3.27.17.pdf HJUD 3/31/2017 1:00:00 PM
HB079 HJUD Slide Presentation 3.31.17.pdf HJUD 3/31/2017 1:00:00 PM
HJUD 4/5/2017 1:00:00 PM
HB 79
HB079 Fiscal Note DOA-DRM 3.27.17.pdf HJUD 3/31/2017 1:00:00 PM
HJUD 4/5/2017 1:00:00 PM
HJUD 4/13/2017 5:30:00 PM
HB 79
HB079 Fiscal Note DOLWD-WC 3.28.17.pdf HJUD 3/31/2017 1:00:00 PM
HJUD 4/5/2017 1:00:00 PM
HJUD 4/13/2017 5:30:00 PM
HB 79
HB079 Fiscal Note DOLWD-SIF 3.27.17.pdf HJUD 3/31/2017 1:00:00 PM
HJUD 4/5/2017 1:00:00 PM
HJUD 4/13/2017 5:30:00 PM
HB 79