Legislature(2003 - 2004)

04/19/2004 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                                    
     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                                                               
     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                                                                    
      (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                                                                         
   (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                                                                    
     (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                                                               
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                                                               
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                                                               
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.                                                                  

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