Legislature(2003 - 2004)
04/19/2004 03:25 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 540-WORKERS' COMPENSATION INSURANCE RATES CHAIR ANDERSON announced that the final order of business would be HOUSE BILL NO. 540, "An Act relating to workers' compensation insurance rates; and providing for an effective date." Number 2354 LINDA HALL, Director, Division of Insurance, Department of Community and Economic Development, explained Amendment [k] to HB 540. TAPE 04-45, SIDE B Number 2326 MS. HALL explained that Amendment k from the Division of Insurance is more like a proposed committee substitute (CS) because it makes numerous changes to the bill. She said that in previous testimony on HB 540 she noted that the procedures in the bill were cumbersome and the timelines were not adequate to produce timely filings to let employers know what the workers' compensation costs would be for the coming year. Typically, rate changes are effective on January 1, and the division has tried diligently this year when there was an average 22 percent rate increase to get those out to employers in time to budget and to bid on projects, she reported. She continued: What we've done here, and we have worked with the original proposer of this concept, is to take the same concept, but to start from a very different position. The original bill had a 60-day period for review of the filings, not only by the Division of Insurance, but all interested parties and insurance companies. What we've done is move that way to the beginning. This version of the bill would have the filing done by the rating organization 125 days before the proposed effective date. In reality, that's toward the end of August. Within 20-25 days after receipt of that filing, the Division of Insurance would hold a hearing and at the top of page 2 of this k version, goes through the various things that would occur in that hearing. Most importantly, I think, is number 2, that an interested party, whether that is an insurance company or - interested party's defined at the very end - an employer association, employee, or labor association, etc. We'd have an opportunity to inspect the filing, to examine witnesses, to present witnesses, to present testimony and ... after that hearing there would be a 10-day period when the hearing would remain open for comments, other interrogatories. All of this is designed to bring more input to the Division of Insurance in our review of filings for workers' compensation lost costs. We're looking to have an opportunity to hear what insurance companies have to say in addition to the rating organization, to take that under consideration, then the division would have 15 days to the day of filing, which could be extended for an additional 15 days to request further information, to do further review based on the testimony at hearing, at which point then, the division would render a decision - an approval or disapproval or modification of the filing - and would be required under this bill to provide reasons for that. And all of that information will become part of the public hearing process, become part of the filing so that insurance companies and any other interested party would have access to that. Number 2197 MS. HALL stated that this is a version that the Division of Insurance's lead property casualty actuary, who does the reviews and makes recommendations, has worked with and is comfortable with. She requested that the committee adopt the proposed Conceptual Amendment 1 [k] CHAIR ANDERSON asked if labor or anyone else wanted to testify. Number 2166 CRAIG NODTVEDT, Agent, Alaska National Insurance, stated his support for HB 540, including proposed [Conceptual Amendment 1]. Number 2142 REPRESENTATIVE ROKEBERG moved to adopt Conceptual Amendment 1, labeled k, which, when combined with HB 540, would constitute a committee substitute, and which read [original punctuation provided]: Section 1. AS 21.39.030(a) is amended to read: (a) Rates, including prospective loss costs under AS 21.39.043 or any other provision of law, shall be made in accordance with the following provisions … (no changes to the rest of the section) Section 2. AS 21.39.040(d) is amended to read: (d) Subject to the exception specified in (e) of this section and not including workers' compensation prospective loss cost filings and workers' compensation assigned risk pool rates by a rating organization under AS 21.39.043, each filing shall be on file for a waiting period of 15 days … (no changes to rest of section) Section 3. AS 21.39 is amended by adding a new section to read: Sec. 21.39.043. Worker's compensation prospective loss cost filings. (a) On at least an annual calendar year basis, a rating organization shall make a workers' compensation prospective loss cost filing and an assigned risk pool rate filing, even if the rating organization determines that no change in the prospective loss costs or rates is indicated. (b) A rating organization shall submit a prospective loss cost filing and an assigned risk rate filing to the director not less than 125 days before the proposed effective date of each filing. (c) At the time a prospective loss cost filing and assigned risk rate filing are submitted to the director under (b) of this section, the rating organization shall make available to any member or subscriber that may be affected by the filings a complete copy of the filings, together with the materials, aggregate data, and other information submitted in support of the filings. The prospective loss cost and assigned risk rate filings, and supporting information, will be available for public inspection. Prior to the hearing under section (d), members and subscribers may submit interrogatories to the rating organization, including requests for additional supporting information concerning the filings. (d) The director shall hold an administrative hearing on whether a prospective loss cost filing meets the requirements of this chapter and whether the filing should be approved, disapproved, or modified, in whole or in part. The director shall hold the hearing not earlier than 20 days and not later than 25 days after the date of receipt of the prospective loss cost filing by the director. The director may adopt regulations governing the conduct of the hearing, subject to the following: (1) the director shall sit in a quasi-judicial capacity; (2) an interested party may (A) have a reasonable opportunity to inspect the filing and supporting information and to examine witnesses, including the designated actuary and other witnesses of the rating organization; (B) present witnesses, oral and written testimony, and documentary evidence; and (C) apply for subpoenas to be issued by the director to compel attendance of witnesses and the production of evidence on the interested parties' behalf; (3) evidence and testimony from interested parties shall be limited to matters relevant to a determination of whether the filing's prospective loss costs meet the requirements of this chapter and may include a recommendation for approval, disapproval, or modification of the prospective loss cost filing; (4) the director shall record the hearing; (5) formal rules of pleading or evidence need not be observed; (6) the director may conduct part or all of a hearing by teleconference and allow a witness to testify telephonically; and (7) the director shall leave the hearing record open for 10 days after the date of the hearing, during which time interested parties may submit additional written testimony and documentary evidence concerning the prospective loss cost filing to the director subject to the limitations of paragraph (3), and during which time members and subscribers may submit to the rating organization and to the director proposed modifications to the prospective loss cost filing accompanied by the information upon which the member or subscriber supports the modification. (e) The director shall review the prospective loss cost filing and the evidence presented through the hearing process within 15 days after the hearing. The review period may be extended for an additional 15 days if the director gives written notice within the waiting period to the rating organization that additional time for consideration of the filing is required. If under (d)(7) evidence is provided to support a modification and the rating organization does not include the requested modification in the filing, the director shall require that the rating organization rebut the evidence to show why the modification should not be included. The director may request that the rating organization (1) provide additional supporting information for the filing, or (2) modify the filing based upon evidence provided through the hearing process. (f) If evidence or information is requested under section (e), the rating organization shall respond to the director's interrogatories within 15 days of receipt of the interrogatory unless additional time is allowed by the director. The director shall review the rating organization's responses to the director's interrogatories within 15 days after receipt of the response. The review period may be extended for an additional 15 days if the director gives written notice within the waiting period to the rating organization that additional time for consideration of the filing is required. (g) Subject to AS 21.06.060(f), all communications under this section among the director, the rating organization and any interested party concerning a prospective loss cost filing, including the director's interrogatories, the rating organization's written responses, modified filings and all supporting information, except for information related to a particular insured, are part of the filing record and shall be made available for public inspection. (h) The rating organization shall make available to a member or subscriber all information that is available for public inspection under this subsection as soon as possible after issuance or receipt by the director. Other interested parties may obtain copies of public documents from the director. (i) The director shall issue a written order approving or disapproving the prospective loss cost filing and the assigned risk rate filing. The order shall include details of the director's reasoning for approving or disapproving the filings (j) A separate prospective loss cost filing submitted solely to address an amendment to AS 23.30 is not subject to the procedures of this section, but shall be reviewed and approved or disapproved by the director in accordance with AS 21.39.040(d). The filing under this subsection, together with all supporting information and communications between the director and the rating organization, will be available for public inspection. (k) A written order of the director under this section is subject to review by appeal to the superior court. An appeal under this section shall be filed with the court within 30 days after the date of the written order. The court shall determine whether the filing of the appeal will operate as a stay of the order. (l) A filing made under this section is subject to all other provisions of this chapter except to the extent they are inconsistent with this section. AS 21.39.080 does not apply to a prospective loss cost filing by a workers' compensation rating organization. (m) In this section (1) "interested party" means (A) an employer association (B) an employee or labor association; (C) producer; (D) a producer association; (E) an insurer member or subscriber of the rating organization; and (F) other persons who are substantially affected by the loss cost filing. (2) "prospective loss cost filing" means the historical aggregate losses and loss adjustment expenses upon which a portion of a rate is based, adjusted through trending to a future point in time, but does not include expenses, other than loss adjustment expenses, or profit. CHAIR ANDERSON asked whether there was any objection to adopting Conceptual Amendment 1. There being no objection, it was so ordered. Number 2109 CHAIR ANDERSON discussed the fiscal note from the [Department of Community & Economic Development] stating that it totals between $7,300 and $8,200 over the next six years, and the total department budget for FY 04 is about $5,217,000, which calculates out to about .0013 percent of the department's budget. This fiscal note appears to fall within the normal operating variances, he said. He opined that a zero fiscal note could easily be adopted because of the small amount. REPRESENTATIVE ROKEBERG commended Ms. Hall for all of her work on this legislation and the cooperative process used. Number 2066 REPRESENTATIVE GUTTENBERG mentioned that the department has so few general fund dollars that small impacts create ripples. CHAIR ANDERSON repeated his belief that the dollar amount in this bill is so negligible that it wouldn't have a huge impact on the department. Number 2024 REPRESENTATIVE ROKEBERG asked Ms. Hall if the department is generating in excess of $35,000,000 a year in general fund revenue. MS. HALL replied that the department is pushing approximately $40 million in premium taxes, which all goes to the general fund. The Division of Insurance is operated as a receipts-based agency for the fees that are charged to those regulated by the division. For operational purposes, nothing is taken from the general fund, she noted. REPRESENTATIVE ROKEBERG supported the idea of a zero fiscal note. Number 1987 CHAIR ANDERSON [moved to adopt a zero fiscal note from the Department of Community & Economic Development]. There being no objection, a zero fiscal note was adopted. Number 1983 REPRESENTATIVE ROKEBERG moved to report HB 540, as amended, out of committee with individual recommendations and the attached zero fiscal notes. There being no objection, CSHB 540(L&C) was reported from the House Labor and Commerce Standing Committee.