Legislature(2017 - 2018)SENATE FINANCE 532
05/11/2018 10:00 AM FINANCE
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CS FOR HOUSE BILL NO. 79(FIN) "An Act relating to workers' compensation; relating to the second injury fund; relating to service fees and civil penalties for the workers' safety programs and the workers' compensation program; relating to the liability of business entities and certain persons for payment of workers' compensation benefits and civil penalties; relating to civil penalties for underinsuring or failing to insure or provide security for workers' compensation liability; relating to preauthorization and timely payment for medical treatment and services provided to injured employees; relating to incorporation of reference materials in workers' compensation regulations; relating to proceedings before the Alaska Workers' Compensation Board; relating to the authorization of the workers' compensation benefits guaranty fund to claim a lien; excluding independent contractors from workers' compensation coverage; establishing the circumstances under which certain nonemployee executive corporate officers and members of limited liability companies may obtain workers' compensation coverage; relating to the duties of injured employees to report income or work; relating to misclassification of employees and deceptive leasing; defining 'employee'; relating to the Alaska Workers' Compensation Board's approval of attorney fees in a settlement agreement; and providing for an effective date." 6:30:00 PM Vice-Chair Bishop MOVED to ADOPT proposed committee substitute for CSHB 79(FIN), Work Draft 30-GH1789\E (Wallace, 5/11/18). Co-Chair MacKinnon OBJECTED for discussion. JULI LUCKY, STAFF, SENATOR ANNA MACKINNON, discussed the changes to the bill. She explained that most of the changes to the bill were removals. She referenced an Explanation of Changes document (copy on file), and read sections of the document: The Senate Finance CS contains the sections of HB 79 that: ? Ensure Adequate Funding ? Reduce Administrative Costs ? Define Independent Contractors The SCS also creates a Legislative Workers' Compensation Working Group to act as an interim committee to continue work and develop new legislation for consideration during the 31st Alaska State Legislature. Ms. Lucky noted that the new Section 23 of the bill, which formed the Legislative Workers' Compensation Working Group, could be found on page 10, Line 12 of the bill. She relayed that the committee had been concerned about making sure the bill was balanced and ensuring there was legislative intent to discuss the issues over the interim. The working group would be comprised of six members, with three from each body. The members would consult with stakeholders from the Department of Commerce, Community and Economic Development (DCCED); the Department of Labor and Workforce Development (DLWD); the Medical Services Review Committee; organized labor; school district administrators; and the state business community. Ms. Lucky continued discussing the legislative working group proposed in the bill. The goal of the group would be to recommend improvements to the laws relating to workers' compensation and put forth a report that would be due on or before December 1, 2018. The intent was to ensure that there was adequate time for review and put forth legislation in front of the next legislature. She noted that the Explanation of Changes document showed items removed from the bill with a strikethrough, and a renumbering of those items that would remain in the bill. Ms. Lucky relayed that she had conferred with the department and there was no change to the fiscal notes. Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO further OBJECTION, it was so ordered. The CS for CSHB 79(FIN) was ADOPTED. 6:34:06 PM AT EASE 6:38:58 PM RECONVENED Co-Chair MacKinnon informed that the Committee Substitute (CS) for CSHB 79(FIN) was posted online. Co-Chair MacKinnon thanked the commissioner of DLWD for all of the work that had been done on the issue of workers' compensation. She explained that the CS was a trimmed down version of the bill. The committee had identified many issues that were important to workers; and had learned of issues to balance for employers before accommodating some of the administration's requests. She understood that the CS was not the complete package as proposed by the administration. 6:40:58 PM HEIDI DRYGAS, COMMISSIONER, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, thanked the committee for consideration of the bill. She described the bill as an "efficiencies bill." She mentioned provisions kept in the CS including funding for the Division of Workers' Compensation, electronic filing, and the definition of independent contractor. She stated that there were several things left out of the CS that would make the division work better and hoped the items would be addressed by the working group over the subsequent summer. Commissioner Drygas remarked that there had been a lengthy conversation between labor and industry about addressing substantive benefits in the interim. She thought the stakeholders were the best groups (rather than the department) to address the issues. She stated that she was eager to see how the working group came together, and that the department was ready to assist in the endeavor. She supported the bill with the understanding that there were sections the department had not supported removing. Co-Chair MacKinnon indicated that the committee understood the sentiments of the department. She discussed the challenge of passing legislation. She considered that if elected officials could hear both sides of the proposals, progress would be made. She referenced the work of Representative Josephson in his proposed legislation pertaining to damages for workers' compensation. She emphasized the importance of understanding all sides of the issue. 6:44:30 PM Senator Olson referenced the working group as proposed in the bill. He was pessimistic about making monumental changes in age-old conflicts such as workers' compensation and wondered how to make progress. Commissioner Drygas stated that the bill language did not come from the department, but she had reviewed it. She was aware that it was an election year and thought work during the interim might be difficult. She referenced a group called The Workers Compensation Ad Hoc Committee, which included stakeholders from organized labor and industry to discuss substantive benefits and reform to workers' compensation. She understood that the committee had worked very well together for many years. She hoped that the committee could be revived. She qualified that the group came from the stakeholders rather from the department. She noted that it had been 18 years since substantive benefits had been increased for workers. Co-Chair MacKinnon stated that the concept of the working group had come from her office. She referenced a working group on reducing sexual assault and noted that the legislature had since implemented every single recommendation. She referenced implementation of recommendations from an oil and gas working group. The CS proposed for the legislature to bring together stakeholders to share perspectives and subsequently elected officials would implement the recommendations. She emphasized the need for accord. Senator Olson understood that the ad hoc committee was frustrated after its recommendations were not taken. Commissioner Drygas could not recall the past actions of the ad hoc committee and outcome of its recommendations. She suspected that the work of the ad hoc committee halted because legislation it worked on was passed over in favor of legislation that did not include stakeholders. She reiterated that the events in question took place long before her tenure in the department. 6:49:24 PM Vice-Chair Bishop discussed the fiscal notes. He addressed FN 5 from the Department of Administration, a fiscal impact note that showed a cost of $40,000 in the first year and $12,900 in the out years. He read from the Analysis section on page 2 of the fiscal note: This bill will have a financial impact on the Division of Risk Management (DRM). This bill will clarify, amend, add and repeal several statutes within workers' compensation. Changes that will impact DRM include reporting changes to the Alaska Workers Compensation Board. The Board will move from a manual process to an Electronic Data Input (EDI) process, with changes to the appropriate forms used for reporting. DRM anticipates a first year cost of $40.0 for the initial implementation, including changes to the software and costs related to submitting forms via EDI. Costs are estimated at $12.9 annually in the out years. Costs will be absorbed by agencies through the annual rate process. Vice-Chair Bishop addressed FN 8 from DLWD, which was a fiscal impact note. There was an in increase the percent of fees deposited into the Workers' Safety and Compensation Administrative Account (WSCAA). The increase did not add to any premiums from any employers but was built into what was collected by the Division of Insurance. Vice-Chair Bishop addressed FN 7 from DLWD, which was a fiscal impact note. He read from the fiscal note Analysis on page 2: This legislation will sunset the Second Injury Fund (AS 23.30.040). Future claim payments will only be made on those claims accepted by the effective date. There will be no reduction in the near future in the staffing required to process these claim payments because it will likely take decades for the Fund to pay these ongoing claim obligations. Ninety-five percent of these claims are categorized as permanent total disability (PTD) benefits. PTD benefits are paid until disability ends or until death. The reduced Fund liability reflected in this fiscal note assumes the average age of the claimant at closure would be 80 years old and two to three cases would be closed per year due to the death of the claimants. The reduced revenue reflected in this fiscal note is because employer and insurance carrier contribution rates will decline over time as the Fund's liability is exhausted as prescribed in statute. Revenue to the Second Injury Fund (SIF) comes from an annual assessment on Workers' Compensation insurance providers and self-insured employers through a contribution rate that changes every year based on statute designed to ensure sufficient revenue to cover expenses. Insurance companies are able to pass this assessment on to employers through premiums. As SIF claims decline costs to insurance providers and self-insured employers will decline, including the State of Alaska through the Department of Administration's Risk Management division. In FY2017, the State of Alaska comprised 11.5 percent of total SIF revenue ($343,150 of $2,984,507). The State of Alaska could save as much as $46,000 if it represented 11.5 percent of the projected total savings of $400,000 starting FY2020, and this savings would grow incrementally in the following years. This cost savings will be passed on to all state agencies through decreased personal services benefit costs and included in future year budget salary and benefit adjustments. Vice-Chair Bishop noted that the reason that the Second Injury Fund would sunset was due to the fact that it was no longer legal to ask an employee if they had a disability. 6:54:31 PM AT EASE 6:54:57 PM RECONVENED Vice-Chair Bishop MOVED to report SCS CSHB 79(FIN) out of Committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. SCS CSHB 79(FIN) was REPORTED out of committee with a "do pass" recommendation and with three previously published fiscal impact notes: FN5(ADM), FN7(LWF), and FN8(LWF). 6:55:36 PM AT EASE 6:58:04 PM RECONVENED