Legislature(2003 - 2004)

04/23/2004 09:06 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     CS FOR SENATE BILL NO. 311(JUD)                                                                                            
     "An  Act   providing  for  a   special  deposit  for   workers'                                                            
     compensation  insurers; relating  to the board of governors  of                                                            
     the Alaska  Insurance Guaranty Association; stating  the intent                                                            
     of  the legislature,  and setting out  limitations,  concerning                                                            
     the  interpretation,   construction,   and  implementation   of                                                            
     workers'  compensation  laws;  relating  to  restructuring  the                                                            
     Alaska  workers' compensation  system;  eliminating the  Alaska                                                            
     Workers'   Compensation  Board;  establishing   a  division  of                                                            
     workers'  compensation  within  the  Department  of  Labor  and                                                            
     Workforce  Development  and assigning  certain Alaska  Workers'                                                            
     Compensation   Board   functions  to   the  division  and   the                                                            
     Department  of Labor and Workforce Development;  establishing a                                                            
     Workers'  Compensation  Appeals Commission;  assigning  certain                                                            
     functions  of the  Alaska Workers'  Compensation  Board to  the                                                            
     Workers'  Compensation  Appeals  Commission  and  the  Workers'                                                            
     Compensation   Hearings  Board;  relating  to  agreements  that                                                            
     discharge   workers'  compensation  liability;   providing  for                                                            
     hearing examiners  and hearing panels in workers'  compensation                                                            
     proceedings;   relating   to  workers'   compensation   awards;                                                            
     relating  to an employer's failure  to insure and keep  insured                                                            
     or provide  security; providing  for appeals from compensation                                                             
     orders;   relating   to  workers'   compensation  proceedings;                                                             
     providing  for supreme court  jurisdiction of appeals  from the                                                            
     Workers'  Compensation  Appeals  Commission;  providing  for  a                                                            
     maximum amount  for the cost-of-living adjustment  for workers'                                                            
     compensation  benefits; providing for administrative  penalties                                                            
     for  employers  uninsured  or  without  adequate  security  for                                                            
     workers'  compensation;  relating  to assigned  risk pools  and                                                            
     insurers; and providing for an effective date."                                                                            
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
DOUG   WOOLIVER,    Administrative    Attorney,   Office    of   the                                                            
Administrative Director,  Alaska Court System informed the Committee                                                            
that the  Court System's  testimony, rather  than commenting  on the                                                            
merits of  the bill, would  focus on how the  Court System  would be                                                            
impacted by  the portion of the bill  that would allow appeals  from                                                            
the Workers' Compensation  Appeals Commission (Commission) to bypass                                                            
the State's  Superior Court  and go directly  to the Alaska  Supreme                                                            
Court. He stated  that, on average,  27 of the 36 WC cases  that are                                                            
appealed  to the Alaska  Superior Court annually  are resolved.  The                                                            
remaining  nine, he  stated,  are further  appealed  to the  Supreme                                                            
Court.  Furthermore,  he  commented,   the  Court  System  does  not                                                            
anticipate that the changes  proposed in this legislation would have                                                            
"much impact  on the total  number of cases  that come to the  Court                                                            
System as a whole"  because rather than appeals resulting  from such                                                            
things as agency  competency, they are the result  of such things as                                                            
"reasonable  minds  disagreeing  on  a  individual  case,"  or  that                                                            
"either side could have  won and the losing side decides to appeal,"                                                            
or that "a  unique situation" might  arise that must be resolved  by                                                            
the Supreme Court. He also  noted that oftentimes, people "just want                                                            
their day in Court" or "don't trust the administrative process."                                                                
Mr. Wooliver  expected, therefore,  that even were this legislation                                                             
adopted, the number  of cases being appealed would  remain constant.                                                            
He stressed  that were it adopted,  all of the appealed cases  would                                                            
be heard by the Supreme Court rather than the Superior Court.                                                                   
Mr. Wooliver  noted the argument that  bypassing the Superior  Court                                                            
would  save time  in getting  a final  resolution to  an appeal.  He                                                            
pointed  out that for  the nine cases,  or 25  percent of the  total                                                            
average of  36 cases per year that  normally advance to the  Supreme                                                            
Court, this  would be true  as those cases  would skip the  Superior                                                            
Court action.  However, he calculated  that time would increase  for                                                            
the balance,  or 75  percent, of  the cases which  typically  do not                                                            
advance  beyond  the  Superior  Court.  He shared  that  under  this                                                            
legislation,  those 75 percent would  require more time because,  he                                                            
attested, the  Superior Court resolves  cases more quickly  than the                                                            
Supreme Court, as it is  "a committee of one" wherein a single judge                                                            
makes a determination  as opposed  to the Supreme Court which,  as a                                                            
committee of  five, conducts a more  deliberative process,  in which                                                            
opinions are drafted  and deliberated. "That process  by design", he                                                            
shared,  "takes  more  time."  Therefore,  he  concluded,  while  25                                                            
percent  of the cases  would require  less time,  75 percent  of the                                                            
cases would  incur more  time. He  reiterated that  while the  Court                                                            
system is not  objecting to the process,  as reflected in  the Court                                                            
System's  fiscal  note #5,  it is  requesting  additional  resources                                                            
including:  a  staff attorney  with  WC  expertise;  one  additional                                                            
clerk;  and an  administrative  assistant,  in order  to handle  the                                                            
additional caseload that the Supreme Court would absorb.                                                                        
Mr. Wooliver  stressed that, currently,  the Superior Court,  as the                                                            
first recourse  for appeals, serves "to weed out cases."  Therefore,                                                            
he communicated,  were this  and any future  legislation to  produce                                                            
more appeals,  they, in  their entirety,  would advance directly  to                                                            
the Supreme Court.                                                                                                              
Senator  Dyson  asked   whether  Superior  or  Supreme   Court  case                                                            
decisions  are  "precedent  setting" and  would,  therefore,  "guide                                                            
policy  and  practice for  the  [WC]  Board or  Commission"  in  the                                                            
Mr. Wooliver qualified  that Supreme Court decisions  "set precedent                                                            
in any  area where they  solve a dispute"  while Superior Courts  do                                                            
not.  However, he  noted, the  majority of  the WC  cases at  either                                                            
level "are  not establishing  unique new  legal rules" because  they                                                            
are  "fact specific  and  they're not  really  usually establishing                                                             
useful precedent."                                                                                                              
Senator Dyson  asked for further information regarding  the term "de                                                            
novo" and its implications.                                                                                                     
Mr. Wooliver explained  that the Supreme Court "reviews de novo" the                                                            
Superior  Court's opinion in  a WC case.  He further explained  that                                                            
"it is like the  Superior Court's decision never happened"  as it is                                                            
not deferred  to. He pointed  out, however,  that the Supreme  Court                                                            
would consider and defer  to an agency's decision and fact-findings,                                                            
as  agencies  must adhere  to  a "substantial   evidence  standard."                                                            
Therefore,  he summarized that  what is reviewed  de novo are  legal                                                            
issues rather than factual findings.                                                                                            
Senator Bunde  understood the term to mean, "to go  back to step one                                                            
and start all over again."                                                                                                      
Mr. Wooliver,  while concurring, clarified  that "no new  testimony"                                                            
would be  considered,  as the information  would  be limited  to the                                                            
record that was established.                                                                                                    
Senator Dyson asked for a definition of the term.                                                                               
Mr. Wooliver  responded  that  it is a  Latin term  that  "basically                                                            
means to re-look  and reweigh all of the evidence"  and, rather than                                                            
deferring  to a  lower  court's "interpretation  of  the  evidence,"                                                            
determine the ruling based on the evidence provided.                                                                            
Senator Dyson  asked how the "new evidence" presented  by a person's                                                            
condition  deteriorating   during  the  time  between  hearings  and                                                            
thereby "substantiating" the WC claim," would be considered.                                                                    
Mr.  Wooliver  stated   that  the  Department  of   Law  could  more                                                            
appropriately  respond to that question. While he  stated that, as a                                                            
general rule,  new evidence would  not be considered, he  noted that                                                            
there might be  some "escape mechanism" in the case  of a compelling                                                            
situation or new evidence.                                                                                                      
Senator Dyson  asked why new evidence is not typically  permissible.                                                            
Mr. Wooliver responded  that this policy is similar  to that of most                                                            
appeals' processes, as  he specified, the appeal process determines,                                                            
"based on the  evidence that was available at the  time, whether the                                                            
lower  body made  an error."  Furthermore,  he clarified  that  "the                                                            
appeal itself is not a  trial type setting" in which new evidence or                                                            
witnesses are  heard or the case is re-tried, but  it is a review of                                                            
the record  to determine  whether the lower  court made a "legal  or                                                            
factual" mistake.                                                                                                               
Senator Olson  asked for  an overview of the  steps involved  in the                                                            
appeals process.                                                                                                                
Mr. Wooliver  explained that,  in this legislation,  the WC  Board's                                                            
decision would  be appealed to the  WC Appeals Commission  within an                                                            
agency, and  an appeal of  that determination  would advance  to the                                                            
Supreme Court.                                                                                                                  
Senator  Bunde  noted  that  the Department  of  Law  would  further                                                            
explain the process during its testimony.                                                                                       
Senator  Olson opined  that  the Alaska  Court System  is  currently                                                            
"clogged"  and therefore, he  asked how this  change in the  appeals                                                            
process would affect the Supreme Court.                                                                                         
Mr. Wooliver responded  that this is a concern, as  this legislation                                                            
would increase  the number of cases presented to the  Supreme Court.                                                            
He  reiterated  that  the  Court System  has,  in  fiscal  note  #5,                                                            
requested  additional staff  in order "not  to create too much  of a                                                            
backlog." However, he stated,  "in the end, we still have cases that                                                            
the  Supreme  Court is  going  to have  to  decide that  they  would                                                            
otherwise not have to decide."                                                                                                  
Senator Olson  asked why the Court  of Appeals that was established                                                             
after Statehood is not included in this process.                                                                                
Mr. Wooliver responded  that the Court of Appeals addresses criminal                                                            
rather than civil  cases. He informed that there is  no intermediate                                                            
court of appeals for civil cases.                                                                                               
Senator  Hoffman  asked  regarding  the costs  associated  with  the                                                            
aforementioned   annual   number  of   cases  that   are   appealed,                                                            
specifically  the costs  associated  with the 25-percent  of the  WC                                                            
cases that advance  to the Supreme Courts as opposed  to the cost of                                                            
the 75-percent that are settled at the Superior Court level.                                                                    
Mr. Wooliver replied  that the exact expense amount  is unavailable;                                                            
however,  he stated  that  were this  legislation  adopted, all  the                                                            
cases would be heard at  the Supreme Court level. Thus, he attested,                                                            
additional staff would  be required in order to handle the increased                                                            
workload and not impede other Supreme Court cases.                                                                              
Senator Hoffman opined  that because the Supreme Court is limited in                                                            
the number of cases that  it could address, a decision might be made                                                            
to handle more cases of one type and less of another.                                                                           
Mr.  Wooliver  clarified that,  unlike  the  US Supreme  Court,  the                                                            
State's  Supreme   Court  is  unable  to  refuse  cases,   with  the                                                            
exception,  he noted of criminal appeals,  which are handled  by the                                                            
Court  of  Criminal  Appeals.  Therefore,  he  continued,  were  the                                                            
caseload  to  increase,  the  Supreme Court  would  be  required  to                                                            
address them, as there is "no option to turn them away."                                                                        
STEVE CONSTANTINO,  Attorney, testified  via teleconference  from an                                                            
offnet  site and  informed  the  Committee  that he  had  previously                                                            
served  as a hearing  officer  on the  WC Board  and now  represents                                                            
injured workers  before the WC Board and the Courts.  He stated that                                                            
he supports  the bill's  proposals  that address  the Guaranty  Fund                                                            
"crisis" and the upgrade  of hearing officer positions as this would                                                            
attract and  retain qualified individuals.  However, he opposed  the                                                            
proposed process  for handling WC  claims, specifically the  de novo                                                            
review provision.  He characterized that Senator Hoffman's  question                                                            
concerning the costs incurred  from changing the appeals process was                                                            
"on  target,"  as  Governor  Frank Murkowski's   Administration  and                                                            
business community  representatives'  answers to this question  are,                                                            
"we hope  it saves  costs, we expect  it to save  costs, and  it may                                                            
save costs."  However,  he opined,  that rather  than saving  money,                                                            
this legislation  would increase costs to the State,  to businesses,                                                            
and  to insurers.  He voiced  support  for Mr.  Wooliver's  comments                                                            
substantiating  the Court System's  increase in expenses,  which, he                                                            
surmised, might be "under-stated."  Through experience, he attested,                                                            
people trust the  Superior Court system and want their  review heard                                                            
there. He stated that while  he does not support the implication, it                                                            
has been implied  that the Supreme Court, in addition  to not having                                                            
expertise in WC cases, "gives short shrift" to them.                                                                            
Mr. Constantino  opined that this  proposal would not streamline  WC                                                            
cases  and that  instituting "a  new de  novo review  through a  new                                                            
bureaucracy would actually  increase" the expense associated with WC                                                            
cases. He stated that while  the bill would not allow "the appellate                                                            
Commission"  to take new testimony,  it would "allow the  Commission                                                            
to reweigh the testimony"  and evidence that was taken. Furthermore,                                                            
he  attested,  any  litigant,  who feels  that  he  did not  get  an                                                            
adequate  hearing, would  appeal were  this bill  enacted. This,  he                                                            
attested,  would result in  "a dramatic increase"  in the number  of                                                            
appeals  from the WC  Board as compared  to the  current process  in                                                            
which  the Board  makes the  final decision  based  on evidence  and                                                            
testifier credibility.  This legislation,  he declared, would  allow                                                            
"the  bureaucracy to  reweigh  the evidence  and  reach a  different                                                            
decision without ever hearing the evidence."                                                                                    
Mr. Constantino  addressed the question  regarding how new  evidence                                                            
might be introduced,  by sharing that  the Superior Court  currently                                                            
has the  ability to conduct  de novo review  and take new  evidence.                                                            
However, he communicated  that these abilities are  rarely exercised                                                            
due  to  thoroughness  of the  current  WC  Hearing  Review  Board's                                                            
evidence.  The  new  process,  he stated,  would  not  provide  this                                                            
"safety value."                                                                                                                 
Mr.  Constantino  declared  that,  "the  current   institutions  are                                                            
serving our State  well." Furthermore, he argued,  the objectives of                                                            
streamlining  the  process  and  providing  consistency  in  the  WC                                                            
decision-making,  could be accomplished  by requiring the  WC Review                                                            
panels to adhere  to the law established by the Courts.  Continuing,                                                            
he opined that  this would be a "simple  matter" to accomplish  were                                                            
the  Commissioner   of  the  Department   of  Labor  and   Workforce                                                            
Development to  instruct his hearing officer designees,  "who sit as                                                            
one of three  members on the hearing  panel and who's role  it is to                                                            
advise the  lay members on  the law," to  follow Superior Court  and                                                            
Supreme Court decisions.  He stated that there would always be cases                                                            
in  which  "disputed  issues  of  law  are  decided  differently  by                                                            
different Superior  Court judges,  and he continued, currently  "the                                                            
board participates and  has a right to participate in every appeal."                                                            
This ability,  he declared, provides the WC Board  with the ability,                                                            
in  disputed   cases  wherein   two  Superior   Court  judges   rule                                                            
differently  regarding  what  the law  is  on a  segment  of WC,  to                                                            
"instruct  the attorney  general  who represents  the  WC Board,  to                                                            
appeal that decision to  the Superior Court and get it resolved." He                                                            
asserted that  "all the mechanisms  are in place to achieve  all the                                                            
goals  that the  legislation  is purported  to achieve  without  any                                                            
additional  costs," or  creation of  a new bureaucracy,  or  without                                                            
distorting the decision making process.                                                                                         
Mr.  Constantino  voiced  support  for Amendment  #1,  sponsored  by                                                            
Senator Hoffman,  as it  would upgrade the  current hearing  officer                                                            
position.  Otherwise, he  declared that the  current mechanisms  are                                                            
adequate,  and  that  this  legislation  would  not  result  in  any                                                            
significant savings  to business, injured workers,  or to the State.                                                            
Senator Bunde asked how WC attorneys are compensated.                                                                           
Mr. Constantino stated  that WC attorneys "are prohibited by statute                                                            
from  accepting  money  from  an  injured  worker."  Continuing,  he                                                            
explained that  fees are paid contingently  and "only if  the client                                                            
prevails," and that while  there are provisions to allow for minimum                                                            
statutory fees and reasonable  fees, their amounts are controlled by                                                            
the WC Board. He noted  that this system would not be altered by the                                                            
proposed legislation.                                                                                                           
Senator Olson  understood therefore that, with the  exception of the                                                            
de novo provision,  Mr. Constantino is in favor of  the legislation.                                                            
Mr. Constantino affirmed.                                                                                                       
JOHN  GIUCHII,  testified via  teleconference  from  Fairbanks,  and                                                            
voiced concurrence  with Mr. Constantino's  comments. He  noted that                                                            
either  the  Attorney  General's  Office,   employer  attorneys,  or                                                            
insurance carriers  have been able to provide information  regarding                                                            
whether  this  legislation  would  result  in  employer  WC  premium                                                            
reductions. In addition,  he stressed that it would be inappropriate                                                            
for Commission  members,  who would  be appointed  without  Judicial                                                            
Council referral  as is the norm for Superior Court  judges, to have                                                            
more power than  a Superior Court judge. He stated  that the ability                                                            
of the Appeals Commission  "to substitute personal judgment in place                                                            
of facts that the Board  finds during their hearings," does not seem                                                            
fair; specifically, he  attested, in light of the fact that were the                                                            
Supreme Court to hear an  appeal, they would be limited to reviewing                                                            
the actions  of the Appeals Commission  rather than what  transpired                                                            
at the WC Board level.                                                                                                          
Mr. Giuchii voiced  that while the bill's drafters  profess that the                                                            
provisions  in the bill were  drafted upon  the national Model  Act,                                                            
there  is a  multitude  of new  language  in the  bill  that is  not                                                            
reflected in  the Act. Furthermore,  he attested that the  Model Act                                                            
is mismatched and unproven.                                                                                                     
Mr. Giuchii avowed that  only two percent of the State's appealed WC                                                            
cases "ever  get changed."  Therefore, he  stated that to  implement                                                            
this bill  to address  that limited  number "does  not make  sense."                                                            
However, he voiced support  for Sections 1 - 7, which address the WC                                                            
Guaranty Association as  well as those sections that would institute                                                            
a  penalty  for  employers  who  do  not  carry   WC  insurance.  He                                                            
reiterated  that he  does not  support  the creation  of an  Appeals                                                            
Senator  Bunde asked  whether Mr.  Giuchii would  support  increased                                                            
penalties for WC fraud.                                                                                                         
Mr. Giuchii replied yes.                                                                                                        
JOE KALAMARIDES,  Attorney,  testified  via teleconference  from  an                                                            
offnet  site, and  informed the  Committee that  he has represented                                                             
injured workers  before the WC Commission in excess  of 27 years. He                                                            
stated  that according  to  the [unspecified]  2001  annual  report,                                                            
there were  28,174 reported WC injuries.  This number, he  attested,                                                            
is consistent  with  the previous  ten years'  levels, which  ranged                                                            
from 28,000 to 30,000 injuries  per year. Furthermore, he noted that                                                            
claims  filed with  the  Board contesting  the  amount  paid for  an                                                            
injury amounted to approximately  1,198 claims, or five percent, per                                                            
year.   Continuing,    his   calculations,   he   proclaimed    that                                                            
approximately  one-eighth  of one  percent  of the  actual  reported                                                            
injuries reach  the Superior Court with approximately  25 percent of                                                            
those proceeding  to the  Supreme Court.  Therefore, he opined  that                                                            
were the current system,  which costs the State "virtually nothing,"                                                            
revised as specified  in this legislation, the $566,600  expense, as                                                            
denoted in  the bill's  accompanying fiscal  notes, would amount  to                                                            
approximately $15,738 per  appeal based on traditional case numbers.                                                            
He declared  that the appeal  changes proposed  in this legislation                                                             
are unnecessary,  as the current system "resolves  approximately 99-                                                            
percent of the reported  injuries by the time it gets to the Board."                                                            
PAM LABOLLE, President,  Alaska State Chamber of Commerce, testified                                                            
in Juneau  in favor  of the  bill. She  declared that  WC is one  of                                                            
businesses  largest expenses, and  she stated that both the  actions                                                            
of the  State and  the design  of the  WC system  could control  the                                                            
associated expenses.  She disclosed that the State  of California is                                                            
being required  to rework  its WC system because  it's system  is so                                                            
unwieldy  that other states  are wooing  California businesses  with                                                            
claims that  their WC expenses are  more conducive to business.  She                                                            
stressed  that Alaska must  avoid a similar  fate to California.  In                                                            
this regard, she  disclosed that one Alaska State  Commerce business                                                            
member, with  a workforce of 50, pays  $98,000 annually for  WC. She                                                            
avowed that  State businesses do not  believe the current  system is                                                            
fair  as  when  there   is  no  consistency  in  decisions   and  no                                                            
predictability, "insurance  companies choose to cut their losses and                                                            
not  appeal   because  of  the  time-consuming   efforts"   and  the                                                            
associated costs  of an unknown chance of prevailing  in a decision.                                                            
Furthermore,  she stated that  WC costs get  passed onto  businesses                                                            
via  WC  insurance  policy premiums.  She  declared  that  the  most                                                            
negative affect  of the problem is  that the number of WC  insurance                                                            
carriers  willing to do business  in the  State is being  negatively                                                            
affected. Therefore, she  attested, it is "critical" that the system                                                            
be viewed as  fair, predictable, and  reasonable. She declared  that                                                            
the previsions proposed  in this legislation address these concerns.                                                            
Ms.  LaBolle voiced  strong  support for  language  in the  original                                                            
version of  the bill that replaced  the layperson review  panel with                                                            
professionals  knowledgeable  in  WC law.  In addition,  she  voiced                                                            
support for  the de novo  review process  at the Appeals  Commission                                                            
Senator Hoffman  inquired to the methodology  used to determine  the                                                            
business support position as stated by the Chamber.                                                                             
Ms. LaBolle responded that  a poll of Chamber members was conducted.                                                            
Senator  Hoffman understood  therefore that  the poll was  conducted                                                            
with Chamber businesses rather than businesses in general.                                                                      
Ms.  LaBolle  expressed  that  the Chamber,  with  a  wide  business                                                            
representation, represents 700 businesses throughout the State.                                                                 
Senator  Hoffman  asked  how this  legislation  would  provide  more                                                            
Ms. LaBolle  responded  that predictability  would  be accomplished                                                             
"through the precedent-setting  decisions that are  possible through                                                            
the Appeals Commission"  component in the law as it  would establish                                                            
case  law.  Currently,  she  noted,   there  is  no  consistency  or                                                            
predictability  as there "are over  300 combinations for  a hearing"                                                            
and no consistency  in decisions.  She noted that, currently  when a                                                            
case is  appealed to the  Supreme Court, the  judges might  hear the                                                            
case without  information  regarding decisions  that have been  made                                                            
regarding  cases with  similar  circumstances.  This, she  declared,                                                            
offers no predictability.                                                                                                       
Senator  Hoffman  stated  that the  three  attorneys  who  testified                                                            
indicate  that, in their  experience, this  legislation would  incur                                                            
more appeals and thereby, more expense.                                                                                         
SFC 04 # 92, Side B 09:53 AM                                                                                                    
Senator Hoffman surmised  therefore, that the attorneys' position is                                                            
that as  more appeals and  more cases go to  the Supreme Court,  the                                                            
result might be less predictability.                                                                                            
Ms. LaBolle  responded that  the attorneys  who testified  represent                                                            
workers rather than business  entities. She countered that testimony                                                            
from  attorneys  presenting  businesses  might present  a  differing                                                            
point of view. She pointed  out that "the point of law is be provide                                                            
rules that everyone"  adheres to and "to provide consistency  to the                                                            
actions of our  society." She stated that developing  a professional                                                            
realm in which there is  consistency and understanding in regards to                                                            
what  rules were  followed, from  one court  to the  next, would  be                                                            
Senator  Hoffman inquired  as  to why  no business'  attorneys  have                                                            
Ms. LaBolle responded  that she is speaking on behalf  of businesses                                                            
and has no control regarding who testifies.                                                                                     
AT EASE: 9:55 AM / 9:58 AM                                                                                                      
BARBARA  HUFF-TUCKNESS,  Director  of Governmental  and Legislative                                                             
Relations, Teamster  Local 959, voiced, for the record,  her concern                                                            
that the full  Committee is not currently in attendance  during this                                                            
"very important testimony,"  as she asserted, "that this is probably                                                            
one of  the most important  pieces of legislation,  I believe,  that                                                            
has been introduced  in the State of Alaska in at  least fifty years                                                            
in respect to injured workers  and the potential impact." She stated                                                            
that  while the  bill  has undergone  various  revisions  that  have                                                            
served to  make "a very bad  bill" better,  Local 959 is opposed  to                                                            
the  legislation  "in its  current form."  Nonetheless,  she  voiced                                                            
appreciation for  the time that has been allotted  to addressing the                                                            
concerns of interested parties.                                                                                                 
Ms.  Huff-Tuckness   assured  that  people  are  conscious   of  the                                                            
increasing  costs of WC insurance,  and she shared that her  remarks                                                            
on  behalf  of  Local  959,  an  employer  as  well  as  a  workers'                                                            
representative,  are relative  to both the  perspectives of  injured                                                            
workers and  employers. She reviewed  that WC was created  to assist                                                            
workers injured on the  job, and, she continued that, as a result of                                                            
that insurance  arrangement, injured workers revoked  their right to                                                            
take their  particular claim  to court. She  reminded the  Committee                                                            
that  "the basic  objectives"  of WC  was "to  provide  a swift  and                                                            
certain income" as well  as medical benefits to the victim of a work                                                            
accident or  income benefits to their  dependents, in the  case of a                                                            
work-related  death. The  process,  she continued,  would provide  a                                                            
single  remedy and  reduce court  costs  and delays  arising out  of                                                            
personal injury litigation.                                                                                                     
Ms. Huff-Tuckness  stated that, while  some attest that "the  system                                                            
is broken,"  no statistics  support  this claim.  She exampled  that                                                            
from 1999 to 2003,  the current WC Board issued 1,363  decisions and                                                            
orders (DMOs) with 189  of those, or 13.2 percent, being appealed to                                                            
the Superior  Court and 25, or 1.8  percent, being further  appealed                                                            
to the Supreme  Court. Furthermore, she shared; of  the 25 cases the                                                            
decision  was  "50-50   decision  injured  worker  decision   verses                                                            
employer decision."  She stressed that, from a statistical  point of                                                            
view,  the numbers  do  not support  the claim  that  the system  is                                                            
Ms. Huff-Tuckness  qualified  that the first  seven sections  of the                                                            
bill are "good improvements"  that would enhance the solvency of the                                                            
Alaska Insurance  Guaranty  and increase  qualifications of  hearing                                                            
officers  by  mandating  that they  be  members  of the  Alaska  Bar                                                            
Association.  She stated that hearing  officers would be  "tasked to                                                            
instruct the hearing panel  members" as to particular points of law,                                                            
"in a similar  manner as a judge would instruct a  jury." She stated                                                            
that Local 959  supports this even though it would  remove the power                                                            
of the  Board by instilling  hearing officer  authority, similar  to                                                            
that of the  Courts, at an early level.  Continuing, she  noted that                                                            
while  the provisions  of the  bill might  remove the  power of  the                                                            
Board, the proposed  hearing officer salary increase  would serve to                                                            
promote  continuity,  consistency, and  staff longevity  that  would                                                            
enhance the WC  decision making process. She voiced  support for the                                                            
provision stating  that the three  member Hearing panel,  consisting                                                            
of two  members of  the WC Board  and one hearing  officer,  must be                                                            
present when  a hearing  is conducted; however,  she suggested  that                                                            
consideration  be provided  to  allowing a  member of  the panel  to                                                            
participate telephonically.                                                                                                     
Ms.  Huff-Tuckness  also noted  that  the  bill would  separate  the                                                            
adjudicative and administrative  functions within the department and                                                            
would  formally recognize  a WC  division within  the Department  of                                                            
Labor and Workforce Development.  She stated that it would also fine                                                            
employers  who do  not purchase  WC insurance.  She  noted, for  the                                                            
record, that the cost of  Local 959's WC insurance is less expensive                                                            
than  its medical  insurance  expense.  However,  she  noted,  while                                                            
businesses  could opt  not to provide  medical  insurance, they  are                                                            
required to pay WC insurance.                                                                                                   
Ms. Huff-Tuckness  pointed out that  Local 959 does not support  the                                                            
Appeals  Commission  issue in  that the  Commission  would, in  this                                                            
bill,  replace  the  functions  of the  Superior  Court.  This,  she                                                            
attested, would  create an additional  layer of bureaucracy  with an                                                            
expense projected to range  between $500,000 and one million dollars                                                            
to provide  for the three attorneys,  appointed by the Governor,  to                                                            
hear  cases. She  noted  that  the recommendation  that  the  "three                                                            
member quasi  judicial type  commission" whose  members would  serve                                                            
five-year staggered terms,  be appointed through the Judicial Review                                                            
Council  was  rejected  with the  argument  that  this would  be  an                                                            
administrative  Appeals Commission and therefore not  subject to the                                                            
appointment process.                                                                                                            
Ms. Huff-Tuckness  also stated  that the de  novo review process  at                                                            
the Appeals  Commission level  makes no "logical  sense at  all," as                                                            
hearing  officers  have  more  experience  in WC  than  the  members                                                            
appointed to the  Commission. She argued that the  Commission should                                                            
be eliminated  as  other "very  positive changes  have already  been                                                            
made to the  panel process function"  in this legislation,  and that                                                            
an appeal  of a hearing  officer panel decision  could proceed  from                                                            
the panel  to the  Supreme  Court as  opposed to  proceeding to  the                                                            
Commission  and then to  the Supreme Court.  However, she  attested,                                                            
were  one million  dollars available  to  fund this  extra layer  of                                                            
State government  bureaucracy, Local 959 would ask  that the de novo                                                            
review be removed from the Commission process.                                                                                  
Ms. Huff-Tuckness  reiterated that  Local 959 does not support  this                                                            
legislation  in its  current form,  as it would  not benefit  either                                                            
injured workers or employers.                                                                                                   
AT EASE 10:15 AM / 10:16 AM                                                                                                     
SCOTT NORDSTRAND,  Deputy Attorney  General, Civil Division,  Office                                                            
of  the  Attorney  General,  Department   of  Law  shared  with  the                                                            
Committee  the  process  that  occurred  to  develop  the  committee                                                            
substitute  before the Committee.  He stated that the Department  of                                                            
Law, the  Department  of Labor  and Workforce  Development, and  the                                                            
Division of  Insurance in the Department  of Community and  Economic                                                            
Development in response  to concern drafted the original legislation                                                            
regarding the  increase in WC rates, as well as the  need to provide                                                            
funds  for  the  Insurance  Guaranty   Fund.  In  this  process,  he                                                            
attested, it  was determined that  improving the process  and making                                                            
the system more predictable,  responsive, and reasonable in order to                                                            
provide insurance companies  with assurances required in determining                                                            
rates would  assist in controlling  WC expenses, without  negatively                                                            
affecting  benefits. He noted  that the option  of reducing  medical                                                            
payments  rates  was  also  reviewed;  however,   he  attested,  the                                                            
associated consequences  were undesirable. Therefore, he stated, the                                                            
goal  was  to develop  a  "benefit  neutral  bill."  This  bill,  he                                                            
declared, is benefit-neutral,  with the lone exception  of the cost-                                                            
of-living-allowance provision for out-of-State residents.                                                                       
Mr. Nordstrand  pointed out that the original bill  was discussed by                                                            
an  ad  hoc  labor  and  management  group  whose   conclusions  are                                                            
presented in the March 5, 2004 letter titled "Alaska Labor-                                                                     
Management  Ad Hoc  Committee on  Workers' Compensation,"  [copy  on                                                            
file] from  Kevin Daugherty  and addressed  to the Senate  President                                                            
and Speaker  of the House. The letter,  he pointed out, states  that                                                            
while the ad hoc  group had not addressed procedural  issues before,                                                            
they concurred  with certain  sections of the  bill such as  placing                                                            
some  administrative  responsibilities,  formerly vested  in the  WC                                                            
Board,  with a WC  Division director,  "and  replacing the  Superior                                                            
Court with an  Appeals Commission." He noted that  members of the ad                                                            
hoc group included Barbara Huff-Tuckness and John Guichii.                                                                      
Senator  Olson  asked  whether  the  members  of the  ad  hoc  group                                                            
unanimously supported the recommendations.                                                                                      
Mr.  Nordstrand  understood  that  it  was  unanimous;  however,  he                                                            
continued,  due   to  the  fact  that  the  Department   was  not  a                                                            
participant, he was unsure of the exact vote tally.                                                                             
Mr.  Nordstrand  shared  that  the  Department  learned  that  labor                                                            
continued to have concerns  regarding such things as the elimination                                                            
of  lay WC  Board members.  He  stated that  in the  original  bill,                                                            
professional   hearing  officers   would  hear   cases,  and   their                                                            
decisions,  he noted, if appealed,  would proceed to the  WC Appeals                                                            
Commission,  and  then to  the Supreme  Court.  In addition  to  the                                                            
concern regarding  lay Board  members, there  was concern about  the                                                            
composition  of the  Commission.  He stated  that  to address  these                                                            
concerns, representatives  of the Murkowski Administration  met with                                                            
representatives,  over a several day  period, to attempt  to reach a                                                            
Senator  Bunde requested  that Mr. Nordstrand,  in consideration  of                                                            
time,  continue his  testimony after  the forthcoming  Senate  floor                                                            
Senator  Hoffman   noted  that  one  of  primary  reasons   for  the                                                            
introduction of this legislation  was to address the increased costs                                                            
of WC.  Therefore,  he inquired  as to  the amount  of savings  that                                                            
would be anticipated.                                                                                                           
Mr. Nordstrand responded  that the savings have not been calculated.                                                            
Senator Hoffman  asked in the case where costs remained  constant or                                                            
increased,  whether it would  be appropriate  to have a termination                                                             
date associated  with this  legislation in  order to further  review                                                            
Mr. Nordstrand  responded that were  rates not lowered over  time or                                                            
were  the participants  in  the  system to  determine  that  further                                                            
revisions might  be required, he would encourage the  Legislature to                                                            
revisit the  process, as he continued,  incorporating a termination                                                             
date  at this time  would  be "bad public  policy."  He stated  that                                                            
provisions  in the  bill  would require  the  Chair  of the  Appeals                                                            
Commission to present an  annual report regarding such things as the                                                            
success  of  moving cases  more  quickly  and  whether the  kind  of                                                            
results that have  transpired are good public policy.  He encouraged                                                            
Legislators  to review  that  report  to determine  whether  further                                                            
adjustments  should  be  made, were  this  legislation  enacted.  He                                                            
stated that  the uncertainty instilled  by a termination  date would                                                            
be a negative factor.                                                                                                           
Senator  Hoffman stated  that as  a businessman,  rather than  being                                                            
worried about  any uncertainty instilled  by a termination  date, he                                                            
would be worried  about WC expenses, as he reiterated  that reducing                                                            
the costs of the program is the goal of developing the bill.                                                                    
RECESS TO CALL OF THE CHAIR 10:26 AM / 1:40 PM.                                                                                 
[NOTE:  Co-Chair   Green  chaired  the  remaining   portion  of  the                                                            
CHANCY CROFT, Attorney,  testified via teleconference from an offnet                                                            
site and  voiced that this  bill "is important  not only for  its WC                                                            
implication,  but  also for  its  impact"  on the  State's  judicial                                                            
system. He shared that  the type of judicial system the State should                                                            
incorporate  was  a "heated  topic"  at the  State's Constitutional                                                             
Convention. He  reminded that a unified Court System  was adopted in                                                            
which  rules  would apply  to  all courts  and  to which  a  unified                                                            
authority  would  administer  the system  in  an efficient  and  un-                                                            
cumbersome manner to allow,  for instance, cases from a court with a                                                            
heavy caseload  to be transferred to one with a lesser  caseload. He                                                            
stated that,  rather than judges being  elected, they are  appointed                                                            
by the governor  from a list of those "determined  most qualified by                                                            
the  Judicial Council."  He  noted, however,  that,  aside from  the                                                            
Court System,  a special Tax Court does exist within  the Department                                                            
of Revenue because it handles "confidential matters."                                                                           
Mr. Croft continued that  this legislation "is the worst solution to                                                            
a problem that  does not exist" in that it would allow  the Governor                                                            
to appoint  people to  an appeals  tribunal who,  while not  judges,                                                            
would have  as much or more  power that a  Superior Court judge.  He                                                            
stated that this is contrary  to the selection process for judges as                                                            
determined at  the Constitutional Convention. He declared  that this                                                            
would be a "real mistake."  He argued against "the justification for                                                            
this is to bring predictability  and uniformity to Board decisions,"                                                            
by declaring  that he has  "only experienced"  one situation  in his                                                            
numerous  years of WC  experience  that was important  enough  to be                                                            
appealed  to the Supreme  Court. Therefore,  he stated that,  due to                                                            
limited  conflict,  there  is  no  need  to create  a  new  wing  of                                                            
Mr.  Croft  declared  that currently  there  is  uniformity  in  the                                                            
State's WC cases as a Superior  Court legal ruling "is recognized as                                                            
precedent  and would be followed  until it  were changed by  another                                                            
Superior  Court or  by the  Supreme  Court." He  characterized  this                                                            
legislation  as being "unprovoked  bad because it is going  to delay                                                            
justice,  its  going  to delay  resolution  of  claims  for  injured                                                            
workers." He voiced  that it might be argued, "that  if the tribunal                                                            
could  have a trial  de novo,  why is  that any  different than  the                                                            
Superior  Court doing a trial  de novo." He  stated that the  simple                                                            
answer  is  that Superior  Courts  do  not  do trials  de  novo.  He                                                            
restated  a  previous testifier's   comment that  the  Superior  and                                                            
Supreme Courts'  action on  an appeal was  to determine whether  the                                                            
Board's decision  was supported by substantial evidence.  If that is                                                            
found to  be the case,  he continued,  the Court  has to accept  the                                                            
Board's  decision. He  quoted State  Statute, AS  2330122, which  he                                                            
attested, was  adopted by the Legislature in 1982  at the request of                                                            
State's business community,  who "wanted finality to Board decisions                                                            
and who did not want "a  sympathetic court" to reweigh the evidence.                                                            
The  current process  has,  he attested,  ensured  finality and  has                                                            
established a standard from which few appeals are generated.                                                                    
Mr. Croft stated  that, because of the limited number  of appeals of                                                            
Board's decision,  the Superior  Court is  able to currently  handle                                                            
appeals at  no additional cost. Furthermore,  he noted that  because                                                            
the Court's  administrators  could adjust  workloads,  the 30  to 40                                                            
Superior  Court judges  average one  WC appeal  annually. He  stated                                                            
that  were  the Superior  Court  removed  from  the WC  process,  no                                                            
savings  would  result,  as  currently  the cases,  per  judge,  are                                                            
factored in as part of the workload.                                                                                            
Mr. Croft informed the  Committee that there is only one other state                                                            
that  has  a  system  similar  to  that  being   proposed,  and,  he                                                            
continued,  the others, perhaps with  the exception of one,  have WC                                                            
systems similar to what  is currently in affect in Alaska. He voiced                                                            
concern that the proposed  system would cause delay by the fact that                                                            
a new hearing  could be requested to reweigh all of  the evidence in                                                            
addition to stays  being granted. He attested that  a State's system                                                            
works  well if  it works  promptly, as,  he declared,  studies  have                                                            
shown that "when there  is a delay in determining whether people are                                                            
entitled  to compensation,  a  lot  of people"  might  be forced  to                                                            
borrow money,  go on welfare, lose  their home, or face bankruptcy.                                                             
Furthermore, he pointed  out that when these WA cases finally do get                                                            
a hearing, the injured worker prevails 80 percent of the time.                                                                  
Mr. Croft considered  Sections 1 through  7 to be good proposals  in                                                            
that  they  would  assist  the  solvency  of  the  Alaska  Insurance                                                            
Guaranty Fund, would charge  a penalty to those employers who do not                                                            
carry WC insurance,  and would elevate pay for hearing  officers. He                                                            
noted that  while he supports the  provision in the bill  that would                                                            
require all three hearing  board members to be present at a hearing,                                                            
AS 44.62.600 and  AS 44.62.635 of the Administrative  Procedures Act                                                            
allows   for  teleconference   participation   by   Board   members.                                                            
Therefore,  he suggested  that a  language change  be considered  as                                                            
omission  of  this  language  would result  in  further  delays  and                                                            
increased costs as such  things as incumbent weather might prevent a                                                            
member from being present.                                                                                                      
Mr.  Croft  voiced,  in reference  to  questions  regarding  the  WC                                                            
Board's member  balance, that according  to Department of  Labor and                                                            
Workforce Development  statistics, the fact that the  WC Board ruled                                                            
in  favor of  an  employer  approximately  40  percent of  the  time                                                            
supports the position that the Board is balanced.                                                                               
Co-Chair  Green   asked  for  further   information  regarding   the                                                            
provision requiring all Board members be present at a hearing.                                                                  
Mr. Croft identified the  language in question to be located in Sec,                                                            
10, subsection  Sec. 23.30.006(g) on page eight, lines  14 & 15 that                                                            
reads as follows.                                                                                                               
     …A hearing may not proceed in the absence of a board member.                                                               
Mr. Croft stated that this  language differs from that specified for                                                            
the  Appeals   Commission   as  located  in   Sec.  10,   subsection                                                            
Sec.23.30.007(e)  on page  nine, lines  17 & 18  that reads  that "A                                                            
majority of the members  of the commission constitutes a quorum." as                                                            
well as language  in Sec. 58, Sec. 23.30.113 on page  36, lines 11 -                                                            
14 that reads  "In proceedings before hearing examiners  and hearing                                                            
panels,  the administrative   adjudication  procedures  of AS  44.62                                                            
(Administrative   Procedure  Act)  do  not  apply,  except  that  AS                                                            
44.62.410(b),  44.62.460(a) - (d), 44.62.470, 44.62.480,  44.62.510,                                                            
and 44.62.590  shall apply  to proceedings  under this chapter."  He                                                            
declared that  AS 44.62.600 and AS  44.62.635 should be included  in                                                            
this listing.                                                                                                                   
Mr. Croft pointed  out that another technical problem  with the bill                                                            
is that currently  were an injured worker to desire  to settle their                                                            
claim  and  waive  their  rights,  the WC  Board  must  approve  the                                                            
agreement  in order to protect  the injured  worker. He avowed  that                                                            
this is  a good provision,  as, he informed,  30 percent of  injured                                                            
workers do not have attorney representation.                                                                                    
SFC 04 # 93, Side A 01:55 PM                                                                                                    
Mr. Croft  continued;  however, that  language located  in Sec.  12,                                                            
beginning on  line 19, page 13 of  this legislation would,  provided                                                            
the  worker's  attorney  agreed  to the  settlement,  allow  for  an                                                            
"automatic discharge of  the liability on the part of the employer."                                                            
He stated  that this is "a  terrible idea,"  as the "it would  allow                                                            
insurance companies to take advantage of injured workers."                                                                      
Mr.  Croft  continued  that trial  de  novo  is  a new  concept,  as                                                            
currently this  option does not exist  at the Superior Court  level.                                                            
Continuing,  he voiced  support for  the bill's  intent language  as                                                            
denoted in  Sec. 8, page  five of the bill;  although he noted  that                                                            
some of the language already exists in other legislation.                                                                       
Co-Chair  Green asked  whether Mr.  Croft had  testified during  the                                                            
Judiciary Committee hearing on this legislation.                                                                                
Mr.  Croft responded  that  he had  testified before  the  Judiciary                                                            
Committee as well as at earlier hearings.                                                                                       
Co-Chair  Green asked  for further  information  regarding the  work                                                            
group that had evolved during the Judiciary Committee hearings.                                                                 
Mr. Croft  responded  that "a select  few" had  participated  in the                                                            
drafting of the original  version of the bill; and he continued that                                                            
during the  Judiciary Committee hearings  on the bill, "there  was a                                                            
delay" while labor  representatives met with the Attorney  General's                                                            
office. He noted that this  was not a public meeting or "broad based                                                            
discussion  or analysis  of the bill."  He stated  that while  there                                                            
were "superficial  changes"  such  as reinstatement  of the  Hearing                                                            
panel,  the  bill  retained  the authority  regarding  the  de  novo                                                            
hearing process.                                                                                                                
Co-Chair Green  asked whether the  testifier preferred the  original                                                            
version of the bill to  the Judiciary Committee version of the bill.                                                            
Mr. Croft responded  that the Judiciary  committee substitute  is an                                                            
improvement  over the  original  version of  the  bill; however,  he                                                            
supported  the  "complete elimination"   of the  Appeals  Commission                                                            
rather  than  simply   eliminating  the  de  novo   process,  as  he                                                            
contended,  the addition of the Commission  would add another  layer                                                            
of bureaucracy  and increase expenses. He insisted  that there is no                                                            
guarantee that  the members of the Commission would  be as qualified                                                            
as the current  system's participants. Therefore,  he concluded that                                                            
while the Judiciary committee  substitute is an improvement over the                                                            
original version of the  bill, adopting this legislation "would be a                                                            
big mistake."                                                                                                                   
Senator  Hoffman  asked whether  the  current  WC Board  feels  that                                                            
changes are necessary.                                                                                                          
LINDA  HALL,   Director,  Division   of  Insurance,  Department   of                                                            
Community  and Economic  Development, testified  via teleconference                                                             
from an offnet  site, and stated that she is unaware  of the Board's                                                            
KRISTIN  KNUDSEN, Assistant  Attorney  General,  Torts and  Worker's                                                            
Compensation    Section,   Department   of   Law,   testified    via                                                            
teleconference from an  offnet site, and noted that she was involved                                                            
in  the drafting  of  the bill  and  would  be available  to  answer                                                            
technical questions.                                                                                                            
DAVE FLOERCHINGER,  Attorney, testified  via teleconference  from an                                                            
offnet site and  shared that he has been involved  in WC cases since                                                            
1977 and is  in favor of the bill,  as he believes "it would  result                                                            
in a more rapid and efficient  delivery of benefits and a more rapid                                                            
resolution  of  disputes."  He  opined,  "that the  concept  of  the                                                            
Appeals  Commission  would  address  the  problem  of inconsistence                                                             
rulings"  by various  WC panels and  the Superior  Courts and  would                                                            
result  in  a reduction  of  expenses  to  employers  and  insurance                                                            
carriers.  He  reiterated  that  he  is  in favor  of  bill,  as  he                                                            
contended that  insurance carriers,  employers, and employees  would                                                            
be provided "some predictability  of outcome," were this legislation                                                            
Senator Hoffman  noted that conflicting testimony  has been received                                                            
in regards  to whether this legislation  would enhance or  delay the                                                            
WC hearing  process. Therefore,  he asked  the testifier whether  he                                                            
would support  imposing a  termination date  on this legislation  in                                                            
order to readdress it were it to negatively affect the process.                                                                 
Mr. Floerchinger responded  that a termination date provision on the                                                            
legislation would not be  "advisable" as the goal of the legislation                                                            
is to  try and develop  a body of  law. He opined  that while  there                                                            
might initially  be  delays, they  would not be  expected to  exceed                                                            
those currently  experienced by the  appeals to the Superior  Court;                                                            
specifically  that the current  system is delayed  due to delays  in                                                            
generating  and  furthering  records  of proceedings  at  the  Board                                                            
CONSTANCE  LIVSEY, Attorney,  testified via  teleconference  from an                                                            
offnet site  in favor of  the committee substitute.  She noted  that                                                            
she has been practicing  WC cases, primarily representing  employers                                                            
and insurance  carriers, since  1984. She also  noted that she  is a                                                            
member  of the  Worker's  Compensation  Committee of  Alaska  (WCCA)                                                            
Board. She  stated that, as a member  of the WCCA subcommittee  that                                                            
has been  reviewing this  legislation, she  has kept abreast  of the                                                            
original bill's  language and the subsequent changes  that have been                                                            
incorporated.   She  opined  that   the  creation  of  the   Appeals                                                            
Commission  would   be  beneficial  to  the  process   for,  in  her                                                            
experience,  the  current  appeal  process  is prone  to  delay  and                                                            
inefficiencies,  particularly at the Superior Court  level where she                                                            
has experienced  such things  as transmittal  of record delays  from                                                            
the WC Board process to the Court.                                                                                              
Ms. Livsey expected that  these types of delays would not exist were                                                            
an Appeals Commission established,  as it would address appeals in a                                                            
more efficient  and consistent manner.  Furthermore, she  contended,                                                            
"the costs  of appeals are disproportionately  borne by employers,"                                                             
as she  exampled  that were  an employee  to loose  an appeal,  they                                                            
would not  required to pay  a portion of  employer's appeals  costs;                                                            
however, she  continued, were an employer  to appeal and  lose, they                                                            
would be  required to  pay a portion  of the  employee's costs.  She                                                            
stated that this places  a burden on employers, and that the Appeals                                                            
Commission,  being  more  efficient  and quicker,  would  assist  in                                                            
keeping the cost  of an appeal to a minimum as well  as resulting in                                                            
more consistency.  She urged the Committee to support  the Judiciary                                                            
committee substitute.                                                                                                           
Senator Bunde asked whether  she, as a practicing WC attorney, would                                                            
support there being additional penalties in place for WC fraud.                                                                 
Ms. Livsey voiced  that, "there is a sense on the  part of employers                                                            
and insurance  carriers"  that it  would be  beneficial to  increase                                                            
fines  and stiffer  penalties,  as she  contended  that the  current                                                            
provisions are not strong enough to discourage WC fraud.                                                                        
Senator  Bunde asked  that she  provide his  office with  additional                                                            
comments and suggestions regarding how to address WC fraud.                                                                     
TRINA HEIKES, Attorney,  testified via teleconference from an offnet                                                            
site and informed  the Committee that  she has been working  with WC                                                            
cases since  1983. Additionally, she  noted that she is a  member of                                                            
the WCCA Board and its  subcommittee that reviewed this legislation.                                                            
She commented  that, "industry has not put forth any  input" in this                                                            
bill;  however,  she  noted  that  labor   did  negotiate  with  the                                                            
Murkowski Administration.  The committee substitute,  she contended,                                                            
is the result  of those discussions.  She stated that there  are two                                                            
good things  about the  committee substitute:  the first being  that                                                            
while "it does  not change any substantive law," it  reorganizes the                                                            
way  in which  the  board  operates;  and secondly,  it  raises  the                                                            
experiences and  qualifications of the hearing officers.  Currently,                                                            
she stated  hearing  officers are  not required  to be licensed  and                                                            
practicing   attorneys  or   to  be  members   of  the  Alaska   Bar                                                            
Association.   This  bill,  she  attested,  requires   that  hearing                                                            
officers  be licensed attorneys  who have  experience before  the WC                                                            
Board and  who are members  of the Alaska  Bar Association.  Another                                                            
positive  result of this  legislation, she  continued, would  be the                                                            
creation  of the  WC  Appeals  Commission,  whose members  would  be                                                            
required  to  have  five-years  of WC  experience  and  be  licensed                                                            
attorneys.  She stressed  that  this  would be  beneficial  because,                                                            
currently "there  is not one sitting  Superior Court judge"  who had                                                            
WC experience before being appointed to the Bench.                                                                              
Ms. Heikes reviewed  some of the appeals delays she  has experienced                                                            
in the  current process,  and she stressed  that the creation  of an                                                            
Appeals  Commission would  reduce delays,  because, she exampled,  a                                                            
legal brief  would not  be required.  She noted  that developing  an                                                            
appeals'  legal  brief  could   cost  up  to $10,000.   The  Appeals                                                            
Commission,  she declared, could simply  review the record  and may,                                                            
if desired,  request oral arguments,  and then decide the  case. She                                                            
declared  that  the proposed  process  would  be quicker  and  "less                                                            
costly to the parties involved."                                                                                                
Ms. Heikes  pointed out,  in response to  the concerns regarding  de                                                            
novo hearings,  that  AS 22.10.020,  subsection (d)  deals with  the                                                            
jurisdiction of the Superior  Court in that "hearings on appeal from                                                            
a final order  or judgment of a subordinate court  or administrative                                                            
agency  shall be  on the  record,  unless a  Superior  Court in  its                                                            
discretion,  grants   a trial   de novo."   She  noted,  that  while                                                            
initially  surprised that  the Appeals Commission  would be  able to                                                            
grant a trail  de novo, she, upon research, found  that the Superior                                                            
Court  currently has  "the same  level of discretion."  She  assured                                                            
that  the   de  novo  process  would   allow  sufficient   time  for                                                            
preparation  and would  be  decided based  upon a  full evidentiary                                                             
In summary, Ms. Heikes  urged the Committee to support the committee                                                            
substitute,  as  it  would increase  the  level  of  experience  and                                                            
professionalism,  and would, therefore,  enhance the quality  of the                                                            
decision-making  process  and  quicken the  appellate  process.  She                                                            
stressed  that currently  when a case  is appealed  to the  Superior                                                            
Court and  then to the  Supreme Court, the  Supreme Court "gives  no                                                            
deference  to the opinion  of the Superior  Court." She stated  that                                                            
the current process is time-consuming and therefore, expensive.                                                                 
ROBERT LOHR  testified via  teleconference  from an offnet  site and                                                            
informed  the Committee  that  while  he is  speaking  on behalf  of                                                            
himself,  he is a former  director of the  Division of Insurance  in                                                            
the Department  of  Community and  Economic Development.  He  stated                                                            
that the  Division of  Insurance is  required to  produce an  annual                                                            
report  to notify  the Legislature  about the  affect previous  tort                                                            
reform legislation has  had on the cost of insurance. He shared that                                                            
during his  years as director, "no  savings was attributable  to the                                                            
tort reform  process," and he surmised  that this legislation  would                                                            
likely  have  the  same result.  Continuing,  he  opined  that  "the                                                            
savings from  this radical  reform" of the  WC process would  be "at                                                            
best, speculative." He  stated that he has been following the bill's                                                            
committee   hearing   process,  and,   noting   the  Department   of                                                            
Administration's  February  9, 2004  indeterminate  fiscal note,  he                                                            
declared  that while it is  argued that the  proposed process  would                                                            
save money, "no  one has yet quantified what those  savings would be                                                            
even  on  an estimated  basis."  He  "suspected"  that  rather  than                                                            
savings,   there  would   be  "real  costs"   associated  with   the                                                            
legislation.   He  stated  that  the   accompanying  fiscal   notes,                                                            
including  the  one  from the  Department  of  Labor  and  Workforce                                                            
Development  and the Court System,  amount to $700,000 per  year. He                                                            
stated  that insurance  companies  are  unwilling to  calculate  any                                                            
savings or when they might  occur. Furthermore, he stated that while                                                            
"the bill  might speed  up the  process through  the Superior  Court                                                            
level," it would  "bottleneck" and increase expenses  at the Supreme                                                            
Court level.                                                                                                                    
Mr.  Lohr voiced  support  for Mr.  Croft's concerns  regarding  the                                                            
contemplation  of  the  "special  treatment  of  any administrative                                                             
agency  of  appeals   in  the  Court  system,"  and   he  urged  the                                                            
Legislature  to thoroughly  investigate  whether this  would be  the                                                            
appropriate action to take.                                                                                                     
Mr. Lohr  opined that the  current system  produces clear  precedent                                                            
setting decisions  at the Supreme  Court level, and furthermore,  he                                                            
continued,  confusion in  this regard,  at the lower  levels  of the                                                            
process, "would  not be significantly improved by  this legislation.                                                            
He  also  stated  that  actions  should  be  taken  to  ensure  that                                                            
significant  opportunity be  provided to prosecute  WC fraud,  as he                                                            
shared  that  the  State's  "excellent  team  of  investigators  for                                                            
insurance fraud  … used to tear their hair out at  the difficulty of                                                            
making a case  on Worker's Compensation because of  the vagueness of                                                            
the criminal standards for WC fraud."                                                                                           
In  conclusion,  he  echoed  others' testimony  in  support  of  the                                                            
Insurance Guaranty Fund provision.                                                                                              
Mr.  Nordstrand  continued  his  earlier  testimony   regarding  the                                                            
process  that was undertaken  to achieve  "negotiated middle  ground                                                            
with labor on this bill."  He reiterated that a labor and management                                                            
ad  hoc   committee  met   to  review  the   bill  and  that   their                                                            
aforementioned  letter   denoted  that  the  contents  of  the  bill                                                            
addressed things  that they had not  ere considered, but  supported,                                                            
such  as replacing  the  WC Board  with  an Appeals  Commission  and                                                            
allowing  a WC  director  to  assume some  of  the responsibilities                                                             
currently assigned to the WC Board.                                                                                             
Mr. Nordstrand  voiced surprise that some of the members  of that ad                                                            
hoc group  had testified  against  the establishment  of an  Appeals                                                            
Commission today.                                                                                                               
Mr. Nordstrand  stated  that  while the  bill was  in the  Judiciary                                                            
Committee,  the  Department  of  Law met,  for  several  days,  with                                                            
representatives  of  labor both  in  person and  telephonically,  in                                                            
order to better understand  what issues in the bill were or were not                                                            
supported.  He stated  that  one of  the  issues that  surfaced  was                                                            
labor's concern that a  layperson was not a member of the WC Hearing                                                            
board.  He stated  that the Department  understood  the concern  and                                                            
agreed to address  it. Continuing he noted that another  concern was                                                            
that  the  Appeals  Commission  itself  might  require  some  member                                                            
Mr.   Nordstrand   stated   that   following   those   meetings   an                                                            
Administrative  "team" sat down and  drafted a committee  substitute                                                            
containing  changes and  compromises  to address  labor's  concerns.                                                            
Concerns   addressed,  he   continued,  included   such  things   as                                                            
increasing the terms of  office from four to five years. That draft,                                                            
he continued,  was presented to the ad hoc committee,  who responded                                                            
with a list of ten concerns  [copy on file] titled "Proposed Changes                                                            
Discussed at March 31, 2004 Teleconference."                                                                                    
Mr. Nordstrand stated that  the Administration reviewed the list and                                                            
was able to compromise  or agree on eight of the ten concerns, which                                                            
were incorporated  into a committee  substitute. The two  that could                                                            
not  be  agreed   upon,  proposed   Changes  Five  and  Nine,   were                                                            
incorporated  into  an  amendment  to  that  committee  substitute.                                                             
Adoption  of the amendment,  he continued,  would  result in  a bill                                                            
that labor would accept.                                                                                                        
Co-Chair   Green  asked   for  clarification   that  the   amendment                                                            
incorporated language pertaining to Changes Five and Nine.                                                                      
Mr.  Nordstrand  concurred  that those  two  changes were  put  into                                                            
amendment form.                                                                                                                 
Co-Chair  Green understood  therefore that  the other eight  changes                                                            
were incorporated into the draft committee substitute.                                                                          
Mr.  Nordstrand   concurred,  and   reiterated  that  the   proposed                                                            
amendment addressed the other two concerns.                                                                                     
Mr. Nordstrand  referred the Committee  to a handout titled  "What's                                                            
the Difference?  Comparison  in Question &  Answer Format"  [copy on                                                            
file} that  compares the  current system to  that being proposed  in                                                            
the original  bill  and in the  Judiciary committee  substitute.  He                                                            
stated that the Judiciary  committee's desire was that the Judiciary                                                            
committee substitute would  address concerns and be agreeable to the                                                            
involved   parties.  He   communicated  that   the  lone  point   of                                                            
disagreement was  the proposed de novo review process  identified in                                                            
the comparison chart's column titled "Where does an appeal go?".                                                                
Mr.  Nordstrand stated  that  following debate  on  the matter,  the                                                            
Judiciary committee  determined that the de novo review  process was                                                            
critical to the  process, and the committee substitute  was reported                                                            
from  committee  with that  process  included.  He stated  that  the                                                            
Administration  worked  hard to  address the  concerns  and reach  a                                                            
solution. "All in all,"  he concluded, while the original bill was a                                                            
clean bill,  the committee substitute  is a compromise bill  that he                                                            
is proud of.  He noted that some of  the changes the Administration                                                             
conceded  to, such as the  specifics of the  WC Hearing panel,  were                                                            
major concessions.                                                                                                              
Senator Bunde  understood  that there is  specific concern  that the                                                            
make-up of  the Hearing panel might  be weighted in favor  of labor.                                                            
Mr.  Nordstrand  stated  that  language  in  the  bill specifically                                                             
mandates   that  each  Hearing   panel  consist   of  one   industry                                                            
representative,  one  labor  representative,  and a  "new  upgraded"                                                            
hearing officer,  all of  whom must be present  when the hearing  is                                                            
conducted.  He continued that the  question as to whether  the panel                                                            
could participate  telephonically would be "troubling"  and contrary                                                            
to the hearing panel's  ability to judge, in person, the credibility                                                            
of   a  witness.   Additionally,   he   stated  that   the   panel's                                                            
determination  of a  witness'  credibility  is important  as not  to                                                            
undermine  "review  from  above."   He understood   that  labor  was                                                            
agreeable with  the concept of having  all three members  physically                                                            
be in attendance. He assured that the panel would be balanced.                                                                  
Mr. Nordstrand also noted  that there was agreement to the fact that                                                            
the Appeals  Commission would consist  of at least one commissioner                                                             
with experience  in representing employees,  one with experience  in                                                            
representing employers, and one who could be either or both.                                                                    
Senator Bunde  asked how  the State could  more aggressively  pursue                                                            
the WC fraud issue.                                                                                                             
Mr. Nordstrand replied  that WC fraud is an issue of concern for the                                                            
State  as  well as  for  lawyers,  and  he noted  that  the  concern                                                            
includes the  standards that must  be met to prosecute WC  fraud. He                                                            
stated  that the Department  would  be happy to  assist in  drafting                                                            
legislation to address this issue.                                                                                              
Senator   Bunde  asked  whether   the  WC   fraud  issue  could   be                                                            
incorporated into this bill.                                                                                                    
Mr. Nordstrand  responded that it would not be appropriate,  at this                                                            
stage of the  Legislative session,  to include that language  in the                                                            
bill,  as he asserted  that  careful thought  should  be devoted  to                                                            
determine  how to  address  the issue.  He  suggested  that this  be                                                            
furthered during  the interim between  this Legislative session  and                                                            
the next.                                                                                                                       
Co-Chair  Green inquired  to the identity  of the  ad hoc  committee                                                            
members appointed during the Senate Judiciary committee hearing.                                                                
Mr. Nordstrand stated that  the members included: Kevin Dougherty of                                                            
Alaska Laborers;  Don Etheridge with  Operating Engineers  Local 71;                                                            
Barbara Huff-Tuckness  of Teamsters  Local 959; Jim Robison,  former                                                            
Commissioner of Labor and  former WC Board member; John Guichii, IBW                                                            
representative  and  current  WC  Board  member;   himself,  Kristin                                                            
Knudsen,  Department of Law;  Paul Lisankie,  Director, Division  of                                                            
Worker's   Compensation,   Department   of   Labor   and   Workforce                                                            
Development;  Ed Fisher,  Deputy Commissioner,  Department of  Labor                                                            
and Workforce  Development;  and Linda Hall,  Director, Division  of                                                            
Insurance, Department of Community and Economic Development.                                                                    
Co-Chair Green asked Mr.Nordstrand  whether he was encouraged by the                                                            
outcome of the ad hoc committee meeting.                                                                                        
Mr.  Nordstrand   responded   that  the   Administration  was   both                                                            
encouraged  that so much had been  accomplished and disappointed  by                                                            
the fact  that the labor  representatives'  position was "that  they                                                            
would oppose the  entire bill" were the one issue  regarding de novo                                                            
review "not to go their way."                                                                                                   
SFC 04 # 93, Side B 02:42 PM                                                                                                    
Mr. Nordstrand  stated that the Administration  could not,  "in good                                                            
conscience, agree  to the change because to agree  to not allow this                                                            
commission  to review de  novo," not as incorrectly  referred  to in                                                            
testimony  today as  "trial de  novo,"  and "review  the record  and                                                            
reweigh  the evidence,  and to smooth  out the  edges of cases  that                                                            
should have been decided  another way, so that there is a uniformity                                                            
and a predictability  of outcome on  its way to the Supreme  Court."                                                            
He  reiterated   that   this  could   not  be  agreed   to  by   the                                                            
Administration.  Continuing,  he concurred  that the Administration                                                             
had veered  from  some of  the provisions  of the  Council on  State                                                            
Governments'  Model  Act  because  changes were  required  to  align                                                            
procedures  with the  State's system.  However, he  stated that  one                                                            
clear provision  specified  in the Model Act  is de novo review.  He                                                            
stressed that de novo review  "is the standard, the norm among other                                                            
Mr. Nordstrand  referred the Committee  to a chart, provided  by the                                                            
Administration,  titled  "Workers  Compensation  Organization  under                                                            
CSSB  311(JUD)" [copy  on  file] which  he expressed,  denotes  that                                                            
general  courts defer  to agencies  because of  "agency expertise."                                                             
Continuing,  he argued that  to support labor's  position would  "be                                                            
folly"  in that it  would allow  for the experienced  and  qualified                                                            
members  of the WC  Commission to  defer to  other qualified  people                                                            
whom they  "hire and fire."  He stated that  in the current  system,                                                            
Superior  Court   judges,  while   capable,  "are  not  necessarily                                                             
qualified  in  WC  law."  Therefore,   he  stressed  that  there  is                                                            
deference  to the  expertise within  the agency.  He concluded  that                                                            
this,  therefore,  is  the  source  of  the  de  novo  idea  as  the                                                            
information provided to  the Court should be of the highest caliber.                                                            
Co-Chair  Green asked  for an  explanation  on how  to decipher  the                                                            
information on the aforementioned chart.                                                                                        
Mr. Nordstrand  explained  that the information  on the chart  flows                                                            
upward  from the  Workers  Compensation  Hearing  Panel information                                                             
located on  the bottom of the page.  Continuing, he stated  that the                                                            
WC process  would  start with the  three-person  Hearing Panel,  and                                                            
were its decision  unacceptable to  any of the parties, it  would be                                                            
appealed to  the WC Appeals Commission.  Continuing, he stated  that                                                            
were the Commission's  decision also unacceptable,  the appeal would                                                            
continue on to the Supreme Court.                                                                                               
Co-Chair Green asked what occurs after Supreme Court hearing.                                                                   
Mr. Nordstrand  replied that the Supreme  Court could either  make a                                                            
decision or "remand" the  case back down the Appeals Commission with                                                            
an  order  to  take  certain  action.  He  noted  that  the  Appeals                                                            
Commission could also remand a case back to the Hearing panel.                                                                  
Co-Chair  Green asked  whether the  Supreme Court  could remand  the                                                            
case back to either the Appeals Commission or the Hearing panel.                                                                
Mr. Nordstrand  clarified that the Supreme Court could  remand it to                                                            
the  Appeals Commission,  whose  action  they would  have  reviewed.                                                            
Similarly, he continued,  the Appeals Commission could remand a case                                                            
back to the Hearing panel.                                                                                                      
Co-Chair Green asked for  confirmation that in the current system, a                                                            
case would proceed from  the WC Board to the Superior Court and then                                                            
to the Supreme  Court. Continuing, she noted that  the Supreme Court                                                            
would, rather than deferring  to the decision of the Superior Court,                                                            
defer to the WC Board.                                                                                                          
Mr. Nordstrand concurred.                                                                                                       
In response to a question  from Senator Bunde, Mr. Nordstrand stated                                                            
that in  the current system,  the decision  of the WC Board  "is the                                                            
final agency  decision" and then it  would proceed, if appealed,  to                                                            
the Courts. Continuing,  he stated that in the proposed  system, the                                                            
decision  made  by the  Hearing  panel  would  be furthered  to  the                                                            
Appeals Commission.                                                                                                             
Senator Hoffman understood  therefore that under the current system,                                                            
were no  appeal forthcoming,  the WC Board's  decision would  be the                                                            
final decision.                                                                                                                 
Mr. Nordstrand affirmed.                                                                                                        
Senator  Hoffman  asked  for  confirmation   that  approximately  80                                                            
percent of the WC Board's decisions are not appealed.                                                                           
Mr. Nordstrand  responded  that while  not familiar  with the  exact                                                            
statistics, this percentage  might be true. However, he advised that                                                            
under the proposed  system, the decision of the Hearing  panel could                                                            
also be final.                                                                                                                  
Senator Hoffman  voiced confusion  therefore as to why the  proposed                                                            
system is described "as a two-tiered system."                                                                                   
Mr. Nordstand  responded that  it would be  considered a  two-tiered                                                            
system because  there are two tiers of authority within  the agency.                                                            
Ms. Hall clarified, in  regards to the WC rate setting process, that                                                            
NCCI  Holdings,  Inc.,  the nation's  largest  database  of  workers                                                            
compensation  insurance information,  does not  set rates,  as their                                                            
role is  to develop loss-cost  analysis which  is the determination                                                             
"of the  amount of money  required to pay  claims." She stated  that                                                            
this determination  of "only a portion of the final  rate charged to                                                            
employers." Continuing,  she shared that the loss-cost determination                                                            
is sent  to the  Division of  Insurance who  upon further  analysis,                                                            
"approves,   approves  with   modification,   or  disapproves   that                                                            
determination."  Furthermore,  she  noted  that  insurance  carriers                                                            
review the  determination and either  adopt it or file a  deviation,                                                            
as individual  insurance  companies  are able to  compute their  own                                                            
factors into the rate structure.  Therefore the rate making process,                                                            
she professed, is a computation of a multitude of factors.                                                                      
Ms. Hall acknowledged  testimony noting  that NCCI has not  provided                                                            
insurance cost or premium  saving projections that might result from                                                            
this  bill. In  this regard,  she  commented that  "typically"  NCCI                                                            
provides  estimates regarding  the  effect of  benefit changes.  She                                                            
exampled that  "were the value of the whole person  to change," then                                                            
there would be  an affect on the amounts paid out  for injuries. She                                                            
clarified,  therefore, that  this bill is  "a system change"  rather                                                            
than a benefit  change, and, she continued, it is  not considered to                                                            
be, at this point, "particularly quantifiable."                                                                                 
Ms. Hall continued that  because the legislation did not incorporate                                                            
benefit  changes,  it was  not  initially  provided  to the  ad  hoc                                                            
committee.   She  stated  that  in   order  to  address   employers'                                                            
increasing WC  premiums, the focus of the legislation  was to modify                                                            
the system  to make it "more efficient  and more predictable"  prior                                                            
to making  any changes  to benefits.  She noted  that at one  point,                                                            
language  was being considered  to "tie physician  fee schedules  to                                                            
the Medicare schedule."  She stated that this approach  has recently                                                            
been implemented  in California, and were it enacted  in Alaska, she                                                            
stated,  the Division  has  determined  that the  resulting  savings                                                            
would amount to approximately  $50 million. However, she noted, this                                                            
would be "a dramatic change  in the way benefits would be paid," and                                                            
"out of  concern to  its affect  on injured  workers," the  Division                                                            
removed the language from  consideration. Therefore, she shared that                                                            
the  focus   shifted  to   changes  other   than  benefit   changes.                                                            
Continuing, she stated  that this bill, while not addressing all the                                                            
cost drivers,  is a beginning to making  changes without  a complete                                                            
"revamping" of the WC system.                                                                                                   
In response to a question  from Co-Chair Green, Ms. Hall stated that                                                            
she could  not comment on  Mr. Luhr's testimony  as they "have  very                                                            
different perspectives on this bill."                                                                                           
Mr. Nordstrand  informed the Committee  that letters of endorsement                                                             
are included in Members' packets.                                                                                               
Co-Chair  Green stated  that the  sheet providing  the side-by-side                                                             
comparison  of  the  three bill  versions  was  helpful.  She  asked                                                            
whether there were continuing concerns that should be addressed.                                                                
Mr. Croft  asked that the  concern involving  the automatic  release                                                            
upon compromise,  were an individual represented by  an attorney, be                                                            
further addressed.                                                                                                              
There being  no further testimony,  Co-Chair Green ordered  the bill                                                            
HELD in Committee.                                                                                                              

Document Name Date/Time Subjects