Legislature(2003 - 2004)

04/05/2004 08:00 AM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
        SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM                                                                     
                                                                                                                                
CHAIR SEEKINS  informed members  that the  Department of  Law and                                                               
some representatives of  labor have done a lot of  work on SB 311                                                               
and produced a draft committee substitute (CS), labeled 23-G2.                                                                  
                                                                                                                                
SENATOR THERRIAULT  moved to adopt  version 23-G2 as  the working                                                               
document before the committee.                                                                                                  
                                                                                                                                
CHAIR SEEKINS  noted without objection, version  23-G2 was before                                                               
the  committee.  He  then  announced his  intention  to  ask  Mr.                                                               
Nordstrand and  Mr. Dougherty  to provide  the committee  with an                                                               
explanation  of the  changes  made  in the  bill  since the  last                                                               
meeting. He noted he is aware  of one proposed amendment that the                                                               
committee will address  after it reviews the changes  made to the                                                               
CS.                                                                                                                             
                                                                                                                                
MR.  SCOTT  NORDSTRAND,  Deputy Attorney  General  of  the  Civil                                                               
Division, Department of Law, distributed  a handout comparing the                                                               
existing   workers'  compensation   program  with   the  proposed                                                               
program.                                                                                                                        
                                                                                                                                
MR. KEVIN DOUGHERTY, Alaska Laborers'  Union, told members he had                                                               
not spoken with Mr. Nordstrand for a  few days so he did not feel                                                               
up to speed on the changes made to the bill.                                                                                    
                                                                                                                                
CHAIR SEEKINS said he spoke with  Mr. Jim Sampson on Friday night                                                               
to explain the protocol about how  he planned to proceed with the                                                               
legislation.  He   asked  Mr.  Nordstrand   to  begin   with  the                                                               
explanation of the changes.                                                                                                     
                                                                                                                                
MR. NORDSTRAND asked to explain  the process that has occurred so                                                               
far on SB  311. He noted the handout has  three columns comparing                                                               
the  original   workers'  compensation  act  with   the  original                                                               
versions of SB  311 and HB 450, as proposed  by the governor, and                                                               
the  proposed  committee substitute  (23-G2).  He  then said  the                                                               
Governor's Office  asked representatives  from the  Department of                                                               
Law,  Ed Fisher,  the Deputy  Commissioner of  the Department  of                                                               
Labor  and Workforce  Development,  Linda Hall,  Director of  the                                                               
Division  of  Insurance,  and  Paul  Lisankie,  Director  of  the                                                               
Division of  Workers' Compensation, to meet  with representatives                                                               
of  labor  who were  appointed  by  Mr.  Sampson -  Barbara  Huff                                                               
Tuckness,  Don  Etheridge,  Kevin  Dougherty,  John  Giuchici,  a                                                               
member of  the Workers'  Compensation Board,  and Jim  Robison of                                                               
the  AFL-CIO,  to  attempt  to   compromise  on  a  new  workers'                                                               
compensation system for the State of Alaska. He continued:                                                                      
                                                                                                                                
     The essential sticking point, I  think it's safe to say                                                                    
     for all  parties, was that  under our  proposed system,                                                                    
     there would not  be lay board members  hearing cases. I                                                                    
     think  most  of the  disputes  involve  that issue,  at                                                                    
     least at that  time. And so what we did  was we met and                                                                    
     we  then  came  back,  the  Administration  went  back,                                                                    
     rewrote the  bill, and  integrated a new  - we  sort of                                                                    
     took our system  and the old system and meshed  it in a                                                                    
     way and  that's what's on  the top sheet here.  You can                                                                    
     see this  is the proposed  CS essentially. I  think the                                                                    
     easiest thing  to do without going  through each system                                                                    
     - the current, the proposed,  and then this one is just                                                                    
     walk through this  so you can see what it  is that this                                                                    
     will do.                                                                                                                   
                                                                                                                                
     At the  top of the  chart is the commissioner  of labor                                                                    
     and  workforce  development.   The  commissioner  would                                                                    
     have,  within the  Department  of  Labor, two  separate                                                                    
     entities dealing with  workers' compensation; one would                                                                    
     be   the  director   of   the   division  of   workers'                                                                    
     compensation  and the  division  itself.  As you  know,                                                                    
     we've talked  before, there is no  division of workers'                                                                    
     compensation in  the current act, there  is no director                                                                    
     in the current  act. The board does  everything so this                                                                    
     is a  new concept  and this list  of authority  for the                                                                    
     director of the division is  an attempt to separate the                                                                    
     administrative  function  in  workers'  comp  from  the                                                                    
     adjudicative   function  -   the   advocacy  from   the                                                                    
     deciding, so  to speak.  That hadn't  been done  in our                                                                    
     system in the past.                                                                                                        
                                                                                                                                
     So you can see that the  director has a certain list of                                                                    
     authority  there and  that  was all  part  of what  the                                                                    
     existing  workers'  comp  board has  now.  That's  been                                                                    
     segregated off  as an  administrative function  for the                                                                    
     director.                                                                                                                  
                                                                                                                                
     On the  other side, on  the left, you see  the workers'                                                                    
     compensation  appeals   commission  and   our  original                                                                    
     commission  still exists  here from  the original  bill                                                                    
     with a couple  of changes. One, we've  changed the term                                                                    
     of office  to five years.  That was proposed  by labor.                                                                    
     We  thought that  was a  good idea.  It actually  might                                                                    
     encourage more  folks to  apply if  they could  vest in                                                                    
     PERS or  something after  one term  so we  thought that                                                                    
     would be  a good idea.  We also  agreed to have  one of                                                                    
     the members  designated as a person  who is experienced                                                                    
     in employee representation and  one employer. It's sort                                                                    
     of  like the  current workers'  comp panel  theory, and                                                                    
     then one undesignated. It could  be either. It could be                                                                    
     both.  It  doesn't matter  as  long  as they  meet  the                                                                    
     minimum criteria  under the  statute, which  requires a                                                                    
     certain  level of  experience in  workers' compensation                                                                    
     and having practiced law for  five years. And then much                                                                    
     of  the rest  of  this is  the very  same  as from  our                                                                    
     original bill. It didn't change.                                                                                           
                                                                                                                                
     Underneath that,  this is where  the meshing  shows up.                                                                    
     We  created  what  we   call  a  workers'  compensation                                                                    
     hearing   board.  Now   this   is   not  the   workers'                                                                    
     compensation  board,  as we  know  it  now. It  has  no                                                                    
     administrative  functions. In  fact, there's  no reason                                                                    
     for it  to ever meet as  a group. It is  simply a panel                                                                    
     from which  hearing officers  will be  drawn to  sit in                                                                    
     the  familiar  one  labor, one  industry,  one  hearing                                                                    
     officer configuration  under this  plan, just  like the                                                                    
     existing system  with some modifications. And  the same                                                                    
     folks who  are on  the board  now would  be transferred                                                                    
     over on to this board and it would just continue on.                                                                       
                                                                                                                                
     The difference  is that this  hearings board,  or these                                                                    
     panel members,  when they're setting up  - pretend Kris                                                                    
     is  the  hearing  examiner,  I'm  an  industry  member,                                                                    
     there's  a  labor  member  over  here.  The  labor  and                                                                    
     industry  member  would  not  be  in  the  business  of                                                                    
     deciding  what the  law is.  They would  not be  in the                                                                    
     business of  deciding what evidence should  come before                                                                    
     the  particular  panel.  They   would  not  be  in  the                                                                    
     business of presiding over  or conducting the procedure                                                                    
     of the hearing. And  frankly, from our discussions with                                                                    
     labor, that's  basically the way  it works  now anyway.                                                                    
     This  is   just  essentially  codifying   the  existing                                                                    
     circumstance.  And  so  the hearing  officer  would  do                                                                    
     that,  would sit  with these  panels,  and actually  we                                                                    
     reached  agreement that  the type  of hearing  officer,                                                                    
     which we've  changed in this bill  to hearing examiner,                                                                    
     and we  just changed the name  because there's actually                                                                    
     a  thing  in  state   government  known  as  a  hearing                                                                    
     examiner that  fits where we  needed them to be  on the                                                                    
     range  and  step  salary  structure,  but  anyway,  the                                                                    
     hearing examiner  will sit with  these folks  and they,                                                                    
     too, will have to be a  member of the Alaska Bar, as we                                                                    
     had  suggested  in  the last  bill  and  certain  other                                                                    
     requirements,  to  make  sure   we  have  high  quality                                                                    
     hearing examiners available to sit on these boards.                                                                        
                                                                                                                                
     That  was all  acceptable to  labor. We  haven't talked                                                                    
     about  anything here  yet  that  was unacceptable.  The                                                                    
     only thing  at the  end of  the day  that we  could not                                                                    
     agree  on, the  one issue  in a  60-some whatever  page                                                                    
     bill, was  the relationship  between the  hearing panel                                                                    
     and the  commission. Essentially  that's what  you have                                                                    
     in front  of you  in the form  of that  amendment. What                                                                    
     we've done  in the CS  is this is  the Administration's                                                                    
     position of  what this bill  should look like.  This is                                                                    
     our  best  compromise we  could  reach  to achieve  the                                                                    
     results that we desire.                                                                                                    
                                                                                                                                
CHAIR SEEKINS distributed the proposed amendment, which reads as                                                                
follows.                                                                                                                        
                                                                                                                                
                                                            23G-2                                                               
                                                         4/2/2004                                                               
                                                        (1:51 PM)                                                               
                                                                                                                                
                      A M E N D M E N T  1                                                                                  
                                                                                                                                
OFFERED IN THE SENATE                        BY_________________                                                                
   JUDICIARY COMMITTEE                                                                                                          
     TO: Proposed CSSB 311(JUD)(23-G2)                                                                                          
                                                                                                                                
Page 38, lines 2-4:                                                                                                             
     Delete "testimony presented by a witness who appears in a                                                                  
hearing.  When  credibility  is  disputed,  the  hearing  panel's                                                               
determination  of  credibility  must  be  supported  by  specific                                                               
findings."                                                                                                                      
                                                                                                                                
     Insert "a witness. A finding by the hearing panel                                                                          
concerning  the  weight to  be  accorded  a witness's  testimony,                                                               
including medical  testimony and  reports, is conclusive  even if                                                               
the   evidence  is   conflicting  or   susceptible  to   contrary                                                               
conclusions. The  findings of  the hearing  panel are  subject to                                                               
the  same standard  of  review as  a jury's  finding  in a  civil                                                               
action."                                                                                                                        
                                                                                                                                
Page 41, line 4:                                                                                                                
     Delete ", hearing panel,"                                                                                                  
                                                                                                                                
Page 41, lines 5-10:                                                                                                            
                                                                                                                                
     Delete "Unless not supported by specific findings, a                                                                       
hearing panel's  findings regarding the credibility  of testimony                                                               
of  a witness  who  appeared in  the hearing  is  binding on  the                                                               
commission, but  all other findings,  including the weight  to be                                                               
accorded medical testimony  and reports, may be set  aside by the                                                               
commission. The findings  of the hearing panel, if  not set aside                                                               
by the commission, are conclusive."                                                                                             
                                                                                                                                
     Insert "When reviewing decisions of a hearing panel, the                                                                   
commission  shall  use  the  same  standard  of  review  as  that                                                               
established by the Alaska Supreme  Court in workers' compensation                                                               
cases."                                                                                                                         
                                                                                                                                
MR.  NORDSTRAND explained  that the  DOL representatives  drafted                                                               
the  proposed  amendment  because  he  received  from  the  labor                                                               
representatives  a list  of  10  changes to  the  bill that  they                                                               
wanted. The group  reviewed those changes and, at the  end of the                                                               
day,  they could  not reach  agreement  on two  of those  issues,                                                               
which are included  in the amendment. He indicated,  "So you have                                                               
the distinction in view between labor and the Administration, as                                                                
we know it, on the workers' compensation bill."                                                                                 
                                                                                                                                
MR.    NORDSTRAND    described    the   distinction    and    the                                                               
Administration's position as follows.                                                                                           
                                                                                                                                
     The  relationship  issue  here really  is,  should  the                                                                    
     commission have the power  to review the determinations                                                                    
     of a hearing  panel - this new hearing  panel, de novo,                                                                    
     not that they  must, but should they have  the power if                                                                    
     that were to be appropriate in a particular case.                                                                          
                                                                                                                                
     There  also is  a provision  here that  has to  do with                                                                    
     what deference will  be given to the - you  can see the                                                                    
     very  first  part of  this  amendment  has to  do  with                                                                    
     credibility of  witnesses. It's sort  of the  flip side                                                                    
     of this.  What deference do  you give and on  the other                                                                    
     side  of that  is  what power  does  the hearing  panel                                                                    
     have. It's kind of the same question.                                                                                      
                                                                                                                                
     The reason we believe that  de novo review is essential                                                                    
     -  there's a  couple of  reasons. First  of all,  we've                                                                    
     heard some discussion, I think,  through the process of                                                                    
     the  origination of  this bill  started, I  guess, with                                                                    
     the  Council of  State Governments'  draft legislation.                                                                    
     Point one is, and we've tried  to stay close to some of                                                                    
     the concepts  here. Point one  is in this bill,  it was                                                                    
     recommended  that there  be de  novo review  within the                                                                    
     agency by an appeals board.  That's key to this concept                                                                    
     - review in  the agency, not at the  court level, there                                                                    
     shouldn't  be  de  novo review  there  but  within  the                                                                    
     agency.   That   particular   view  was   based   upon,                                                                    
     originated  in  the  National  Commission  of  Workers'                                                                    
     Compensation  Report in  1972 that  also said  the very                                                                    
     same  thing -  within the  agency, there  should be  de                                                                    
     novo review  to essentially even out  the discrepancies                                                                    
     between decisions to make for greater predictability.                                                                      
                                                                                                                                
     There is a  concept, and I think  you've probably heard                                                                    
     of it, that  courts generally should defer  in some way                                                                    
     to agency expertise because those  are the experts. The                                                                    
     courts aren't  the experts in everything  and therefore                                                                    
     there should  be some deferral to  the decisions below.                                                                    
     We think that's  an accurate concept and  we think that                                                                    
     should  apply  to  the  courts.  We  think  within  the                                                                    
     agency,  now  think about  this,  we're  going to  put,                                                                    
     theoretically, the  best workers'  compensation lawyers                                                                    
     we can  find on  this commission. These  hopefully will                                                                    
     be the best and the  brightest in the system. Those are                                                                    
     the experts. It would not  make sense for them to defer                                                                    
     their views  to those who,  in fact,  in the case  of a                                                                    
     hearing  examiner, are  the folks  who  work for  them.                                                                    
     It's  simply  to  us  not  a  matter  of  deferring  to                                                                    
     expertise below,  it's a matter  of letting all  of the                                                                    
     experts come  with the best  result out of  the agency,                                                                    
     which would then be reviewed.                                                                                              
                                                                                                                                
     Let  me say  just one  last thing.  The reason  this is                                                                    
     essential, and  this issue is  essential, we  could not                                                                    
     compromise on  it is  the whole point  of this  bill in                                                                    
     large measure  is to  create greater  predictability in                                                                    
     outcomes in  the workers' compensation system.  We have                                                                    
     now  combinations  of  panels  that  could  be  dozens,                                                                    
     depending  on  how  you structure  them,  you  know,  a                                                                    
     hearing officer  and 14  different panel  members. They                                                                    
     can reach  ... inconsistent results, regardless  of the                                                                    
     fact that there is a body  of case law from the Supreme                                                                    
     Court that  they can rely  upon. All questions  are not                                                                    
     answered,  as  we know.  And  so  they reach  differing                                                                    
     results in different cases, with  similar facts, and it                                                                    
     frustrates  the  system   -  insurers,  employers,  and                                                                    
     others, in trying  to get what will be the  result in a                                                                    
     particular   case.   Uncertainty   breeds,   I   think,                                                                    
     increased  rates  in  insurance. Over  time  it  simply                                                                    
     must.   Certainty    breeds   predictability    and   a                                                                    
     predictability in rates. And  so, we think that without                                                                    
     some control,  some ability  to reign  in the  odd case                                                                    
     that  may  be off  the  mark,  that  we will  lose  the                                                                    
     ability to  create that silo  effect we're  looking for                                                                    
     of having a relationship  between the Supreme Court and                                                                    
     the  commission   and  these  ...   originally  hearing                                                                    
     officers, but now board members or panels.                                                                                 
                                                                                                                                
     I think  we went as far  as we could go  and we're left                                                                    
     with  this one  issue,  Mr. Chairman.  We really  can't                                                                    
     compromise on that  in our view and that's  all I have.                                                                    
     If there are questions...                                                                                                  
                                                                                                                                
CHAIR SEEKINS asked Mr. Nordstrand to describe the exact changes                                                                
made in the proposed CS.                                                                                                        
                                                                                                                                
MR. NORDSTRAND asked members to take a look at the chart. The                                                                   
Division of Workers' Compensation will continue to run the                                                                      
system, in terms of record keeping and enforcement functions.                                                                   
                                                                                                                                
While  awaiting  transmission  of  a   copy  of  the  chart,  MR.                                                               
DOUGHERTY told members that the process  left a lot to be desired                                                               
and has caused the labor  representatives to be cautious. He only                                                               
received the proposed CS this morning. He said:                                                                                 
                                                                                                                                
     And I think  if we were to contrast the  system that we                                                                    
     are  working   under  now  compared   to  the   ad  hoc                                                                    
     committee, which operated for 23  years, and on that ad                                                                    
     hoc  committee process  we had  employers from  the oil                                                                    
     industry,  construction,  airline  industry,  the  list                                                                    
     goes  on  and  on,  and  we had  labor  as  well,  that                                                                    
     committee gave  us the opportunity to  reflect and make                                                                    
     sure we  didn't make mistakes that  hurt good employers                                                                    
     and hurt  good employees  who would  be covered  by the                                                                    
     system so  this is not  the best way  to do it.  I will                                                                    
     accept that that  may be the [indisc.] and  we can live                                                                    
     with it. I  think we all need to be  very cautious this                                                                    
     morning  and as  we proceed  forward. I  don't want  to                                                                    
     detract from  the fact  that we may  be there  - that's                                                                    
     fine. If we  come to an agreement I think  we've made a                                                                    
     lot of progress and I'm thankful for that.                                                                                 
                                                                                                                                
CHAIR SEEKINS  said he  has no intention  of throwing  caution to                                                               
the wind.                                                                                                                       
                                                                                                                                
MR. NORDSTRAND  told members the  group had one  full-day meeting                                                               
where DOL took  input and turned it into an  original CS that was                                                               
presented  to the  labor group.  That  group came  back with  two                                                               
typewritten pages of  ten proposed changes to  be considered. The                                                               
entire  group  then met  again  and  considered all  ten  issues.                                                               
According to  John Guichici, the  only two issues that  could not                                                               
be agreed upon were the proposed  changes numbered 5 and 9. Those                                                               
two changes are now the substances of the proposed amendment.                                                                   
                                                                                                                                
CHAIR  SEEKINS  said people  from  the  Alaska State  Chamber  of                                                               
Commerce,  VECO, and  ABC  of  Alaska want  to  weigh  in on  the                                                               
proposed  CS and  that both  John Guichici  and Jim  Sampson were                                                               
listening online. He  then said he would review  the sections and                                                               
would ask the members of the ad hoc group whether all agree.                                                                    
                                                                                                                                
He began with the first item  on the chart regarding who runs the                                                               
system. Hearing  no comment, he  moved on  to the second  item on                                                               
the chart, regarding who makes the regulations.                                                                                 
                                                                                                                                
MR. NORDSTRAND told  members that item 2  remained unchanged from                                                               
the original SB 311.                                                                                                            
                                                                                                                                
CHAIR SEEKINS affirmed  there was no disagreement  on that point.                                                               
He then moved  to item 3, regarding who  investigates and accuses                                                               
uninsured employers and who decides the case against uninsureds.                                                                
                                                                                                                                
MR. NORDSTRAND again said no changes  were made to that item from                                                               
the original bill.                                                                                                              
                                                                                                                                
MR. DOUGHERTY agreed.                                                                                                           
                                                                                                                                
CHAIR  SEEKINS  moved to  item  4,  which  pertains to  where  an                                                               
injured  worker  or  confused   employer  would  go  for  general                                                               
information.                                                                                                                    
                                                                                                                                
MR.  NORDSTRAND  said that  item  did  not  change from  the  new                                                               
Division of Workers' Compensation and was agreed to.                                                                            
                                                                                                                                
MR. DOUGHERTY agreed.                                                                                                           
                                                                                                                                
CHAIR SEEKINS  asked about item 5,  which is where the  notice of                                                               
injury gets filed.                                                                                                              
                                                                                                                                
MR. NORDSTRAND  said it would  be filed  in the new  division and                                                               
all agreed to that.                                                                                                             
                                                                                                                                
CHAIR SEEKINS asked  about item 6, who does  the informal dispute                                                               
resolution.                                                                                                                     
                                                                                                                                
MR.  NORDSTRAND  said  Division of  Workers'  Compensation  staff                                                               
would do it and all agreed.                                                                                                     
                                                                                                                                
CHAIR SEEKINS asked  about item 7, which pertains  to who decides                                                               
if a medical examination is needed before a hearing.                                                                            
                                                                                                                                
MR. NORDSTRAND  said the  director of the  division would  do it,                                                               
which is the case in both bills, and all agreed.                                                                                
                                                                                                                                
MR. DOUGHERTY  said he believes that  is the case but  would like                                                               
more time to double-check.                                                                                                      
                                                                                                                                
MR. NORDSTRAND said nothing mentioned  in the 10 proposed changes                                                               
had anything to do with item 7.                                                                                                 
                                                                                                                                
CHAIR  SEEKINS  moved  to  item  8,  regarding  who  schedules  a                                                               
hearing.                                                                                                                        
                                                                                                                                
MR. NORDSTRAND said the only  difference in the original bill and                                                               
the  proposed CS  is the  name change  from "hearing  officer" to                                                               
"hearing examiner" and that was agreed to.                                                                                      
                                                                                                                                
MR. DOUGHERTY affirmed that is correct.                                                                                         
                                                                                                                                
CHAIR SEEKINS asked about item 9, regarding protective orders.                                                                  
                                                                                                                                
MR. NORDSTRAND  said all  agreed to item  9, which  MR. DOUGHERTY                                                               
affirmed.                                                                                                                       
                                                                                                                                
CHAIR  SEEKINS  asked about  item  10,  regarding who  decides  a                                                               
worker's claim or employer's petition.                                                                                          
                                                                                                                                
MR.  NORDSTRAND  replied,  "As  you know,  originally  it  was  a                                                               
hearing officer.  In the  new bill  it would  be a  hearing panel                                                               
with  the two  members plus  the  hearing examiner  and that  was                                                               
agreed to."                                                                                                                     
                                                                                                                                
MR. DOUGHERTY  commented, "The  answer is  yes, but  obviously we                                                               
need  to have  the  [amendment]. The  one-page [amendment]  would                                                               
assure that that hearing panel  had the proper respect. With that                                                               
I think we're there."                                                                                                           
                                                                                                                                
CHAIR SEEKINS questioned the agreement  on item 11, regarding who                                                               
the board members are.                                                                                                          
                                                                                                                                
MR.  NORDSTRAND said  it goes  from no  board under  SB 311  to a                                                               
workers' compensation  hearings board,  which would  be comprised                                                               
of the same  members of the current  workers' compensation board.                                                               
He added that all agreed on that item.                                                                                          
                                                                                                                                
MR. DOUGHERTY  said that is the  case as long as  the [amendment]                                                               
is adopted.                                                                                                                     
                                                                                                                                
CHAIR  SEEKINS asked  about item  12,  regarding the  requirement                                                               
that all hearing officers be attorneys.                                                                                         
                                                                                                                                
MR. NORDSTRAND  said there was  no change  between the CS  and SB                                                               
311 and all agree, which Mr. Dougherty confirmed.                                                                               
                                                                                                                                
SENATOR FRENCH  asked if the  model act allows  grandfathering in                                                               
of existing [hearing  officers] when a new  regime is instituted,                                                               
whether  the ad  hoc group  discussed  that matter  and why  this                                                               
legislation did not follow the model act.                                                                                       
                                                                                                                                
TAPE 04-34, SIDE B                                                                                                            
                                                                                                                                
MR.  NORDSTRAND   explained  that  the  bill   has  a  transition                                                               
provision  that  allows  the  chair   to  essentially  relax  the                                                               
requirement that hearing  examiners be members of  the Alaska Bar                                                               
for a period  of up to 18 months. Therefore,  if existing hearing                                                               
officers apply  to become hearing  examiners, the fact  that they                                                               
may not  be members of  the Alaska Bar  will not be  held against                                                               
them. He noted  the ad hoc group compromised on  that item. DOL's                                                               
original proposal  was to  allow that  requirement to  be relaxed                                                               
for 12 months while the labor group requested two years.                                                                        
                                                                                                                                
SENATOR  FRENCH  asked if  the  hearing  examiner would  have  18                                                               
months to pass the Alaska Bar.                                                                                                  
                                                                                                                                
MR. NORDSTRAND clarified that the  hearing examiner would have to                                                               
be a  bar member within  18 months of  the effective date  of the                                                               
bill.                                                                                                                           
                                                                                                                                
CHAIR SEEKINS  moved to  item 13, which  pertains to  how hearing                                                               
officers are paid.                                                                                                              
                                                                                                                                
MR. NORDSTRAND said item 13  was changed. DOL's original proposal                                                               
was that hearing officers would  be partially exempt and excluded                                                               
from PERA,  so they  could not  organize in a  union. The  ad hoc                                                               
group  compromised so  that hearing  officers  would be  excluded                                                               
from PERA  but be in  classified service.  The pay range  did not                                                               
change.                                                                                                                         
                                                                                                                                
MR. DOUGHERTY affirmed that is correct.                                                                                         
                                                                                                                                
CHAIR  SEEKINS asked  if the  workers' compensation  act contains                                                               
provisions about impartiality and disqualification.                                                                             
                                                                                                                                
MR. DOUGHERTY responded:                                                                                                        
                                                                                                                                
     There were some  but, of course, the prior  SB 311 only                                                                    
     concerned  hearing officers  at that  level so  what we                                                                    
     did when we  added the hearing panels  and the workers'                                                                    
     compensation  hearings board,  we  put  in a  provision                                                                    
     that talks  about how to  tell when there's  a conflict                                                                    
     for a lay  board member, which we don't  have now. That                                                                    
     was agreed to by labor as well.                                                                                            
                                                                                                                                
MR. DOUGHERTY affirmed that is correct.                                                                                         
                                                                                                                                
CHAIR SEEKINS moved to item  15, relating to whether the director                                                               
of the  Division of  Workers' Compensation  can be  a party  in a                                                               
case.                                                                                                                           
                                                                                                                                
MR.  NORDSTRAND  said  the  director  can  and  that  is  a  vast                                                               
improvement over  the current  system under both  SB 311  and the                                                               
CS.                                                                                                                             
                                                                                                                                
MR. DOUGHERTY agreed.                                                                                                           
                                                                                                                                
CHAIR SEEKINS asked about item 16.                                                                                              
                                                                                                                                
MR.  NORDSTRAND said  originally the  hearing officer  would have                                                               
been the  sole deciding  officer so would  have decided  the law.                                                               
Under  the new  panel system,  the hearing  examiner will  decide                                                               
what the  law is and instruct  the lay board members,  similar to                                                               
the way a judge instructs a jury.                                                                                               
                                                                                                                                
MR. DOUGHERTY affirmed that all agreed to that item.                                                                            
                                                                                                                                
CHAIR SEEKINS referred to item 17.                                                                                              
                                                                                                                                
MR. NORDSTRAND  explained that  at a hearing,  under SB  311, the                                                               
hearing officer would  decide the facts. Under the  CS, the three                                                               
members would decide the facts.                                                                                                 
                                                                                                                                
SENATOR  THERRIAULT asked  if that  is similar  to the  judge and                                                               
jury  system in  that the  judge  directs how  the law  is to  be                                                               
interpreted  but  the  other  members  come  in  when  there  are                                                               
questions of facts.                                                                                                             
                                                                                                                                
MR. NORDSTRAND  said the easiest way  to envision the new  set up                                                               
is to  recognize that  the only  distinction between  the hearing                                                               
panel and a normal  jury would be that when the  jury goes to the                                                               
jury room to deliberate, under the  CS the judge would go with it                                                               
and vote as one of three.                                                                                                       
                                                                                                                                
CHAIR  SEEKINS  asked  about  item   18:  If  an  employee  wants                                                               
something that the workers' compensation  law doesn't cover, must                                                               
we still have a hearing on the merits?                                                                                          
                                                                                                                                
MR. NORDSTRAND explained  that right now there is no  good way to                                                               
stop short of a hearing on a lot  of cases where there might be a                                                               
legal impediment  to going  to a  hearing. Under  SB 311  and the                                                               
proposed CS,  summary judgment would  be a possibility.  The only                                                               
distinction between  the two  is who decides.  Under SB  311, the                                                               
hearing officer would  decide; under the proposed  CS the hearing                                                               
panel would  decide. He  noted that labor  agreed to  the hearing                                                               
panel.                                                                                                                          
                                                                                                                                
MR. DOUGHERTY affirmed that is correct.                                                                                         
                                                                                                                                
CHAIR  SEEKINS  took   up  item  19:  What  if   a  person  wants                                                               
reconsideration?                                                                                                                
                                                                                                                                
MR. NORDSTRAND said reconsideration was  a good idea added to the                                                               
original  bill.  That provision  is  identical  in the  committee                                                               
substitute and no one objected, which Mr. Dougherty affirmed.                                                                   
                                                                                                                                
MR.  NORDSTRAND then  addressed  item  20 and  said  there is  no                                                               
difference in where the appeal  goes. The only difference is whom                                                               
one could  appeal from.  A person could  appeal from  the hearing                                                               
panel rather than  the hearing officer. He added on  the issue of                                                               
de novo, the group did not reach agreement.                                                                                     
                                                                                                                                
MR. DOUGHERTY stated,  "Yes, so as Mr. Nordstrand  just said, the                                                               
de  novo issue  was  hanging out  and  not agreed  to  but it  is                                                               
critical  that   the  one-page  [amendment]   before  you   -  we                                                               
understand that that  was part of the agreement that  we came to,                                                               
that we had to do that one pager."                                                                                              
                                                                                                                                
CHAIR SEEKINS moved to item 20.                                                                                                 
                                                                                                                                
MR.  NORDSTRAND said  item  20, whether  the  appeal decision  is                                                               
binding  on the  board,  is the  same in  both  versions and  was                                                               
agreed upon, which Mr. Dougherty confirmed.                                                                                     
                                                                                                                                
SENATOR FRENCH asked how the model act handles that question.                                                                   
                                                                                                                                
MR. NORDSTRAND  said he  did not  know the  exact answer  but the                                                               
model  act  does  have  an  appeals  board  from  which  original                                                               
hearings  are appealed.  He said  he  could not  conceive of  any                                                               
other way  to do it than  to have the hearing  panel have control                                                               
and precedent over those below.                                                                                                 
                                                                                                                                
SENATOR  FRENCH  indicated that  under  the  current system,  the                                                               
Superior  Court  decision  is not  binding;  only  Supreme  Court                                                               
decisions are. He continued, "So  as the appeals commission is an                                                               
intermediary court,  the way the  system works now, is  you don't                                                               
have  binding  decisions and  I  think  the  model act  does  not                                                               
envision  binding decisions  either  by  the appeals  commission.                                                               
That's my reading of the model act."                                                                                            
                                                                                                                                
MR.  NORDSTRAND asked  if  it  would not  be  binding within  the                                                               
agency.                                                                                                                         
                                                                                                                                
SENATOR FRENCH said that is correct.                                                                                            
                                                                                                                                
MR. NORDSTRAND offered to look at  that but said he cannot fathom                                                               
a system that  could function effectively that way.  He said that                                                               
Superior Court  decisions are  not binding  because they  are not                                                               
reported or  consistent and  no single point  of view  can emerge                                                               
since there  are 30 or  40 Superior Court  judges. He said  it is                                                               
practical for  one commission  that sits unified  to say  this is                                                               
the  law for  everything below,  much the  way the  Supreme Court                                                               
says that to the Superior Court.                                                                                                
                                                                                                                                
CHAIR SEEKINS brought up item 22:  An employee can't get a lawyer                                                               
to appeal, but the case is novel. Can the division help?                                                                        
                                                                                                                                
MR.  NORDSTRAND responded  under  both  SB 311  and  the CS,  the                                                               
director can act  on the employee's behalf to  resolve this novel                                                               
question. That is not the case in the present system.                                                                           
                                                                                                                                
MR. DOUGHERTY said all agreed on that issue.                                                                                    
                                                                                                                                
CHAIR SEEKINS moved to item 23, the next level of appeal.                                                                       
                                                                                                                                
MR. NORDSTRAND  said the next level  of appeal is to  the Supreme                                                               
Court, which is unchanged.                                                                                                      
                                                                                                                                
MR. DOUGHERTY said that is correct.                                                                                             
                                                                                                                                
CHAIR  SEEKINS moved  to  item  24: If  an  insurer wants  second                                                               
injury fund reimbursement, who decides who pays?                                                                                
                                                                                                                                
MR. NORDSTRAND  said this  change owes  its existence  to hearing                                                               
panels -  it was changed from  the director to the  hearing panel                                                               
without objection.                                                                                                              
                                                                                                                                
MR. DOUGHERTY agreed.                                                                                                           
                                                                                                                                
CHAIR   SEEKINS    asked   about   the    reemployment   benefits                                                               
administrator.                                                                                                                  
                                                                                                                                
MR.  NORDSTRAND  said in  both  SB  311  and the  committee,  the                                                               
reemployment  benefits   administrator  is  a   partially  exempt                                                               
employee of the director.                                                                                                       
                                                                                                                                
MR. DOUGHERTY affirmed he had no objection.                                                                                     
                                                                                                                                
CHAIR SEEKINS asked  about item 26, which is  whether an employee                                                               
needs approval to settle her case.                                                                                              
                                                                                                                                
MR.  NORDSTRAND  explained  that  the  employee  would  not  need                                                               
approval  by  the  workers'  compensation  board  if  an  Alaskan                                                               
attorney represents the person and no one objected.                                                                             
                                                                                                                                
MR. DOUGHERTY affirmed that is correct.                                                                                         
                                                                                                                                
MR. NORDSTRAND  said one  other issue was  an area  of compromise                                                               
that  is not  on the  chart. The  bill contained  intent language                                                               
that was an  area of consternation. DOL was  attempting to codify                                                               
what  it thought  was fair  and reasonable  workers' compensation                                                               
intent  language. Labor  objected and  requested that  DOL simply                                                               
restate that language used in  prior uncodified legislation (1988                                                               
amendments) as  the intent language.  DOL took the  language from                                                               
those amendments and put that in.                                                                                               
                                                                                                                                
MR. DOUGHERTY said that is correct.                                                                                             
                                                                                                                                
CHAIR SEEKINS said  it appears the issue of de  novo has not been                                                               
agreed  upon.  Before  addressing   the  proposed  amendment,  he                                                               
decided to take public testimony  and asked testifiers to comment                                                               
on the proposed CS and the proposed amendment.                                                                                  
                                                                                                                                
MS.  PAM  LABOLLE,  President  of the  Alaska  State  Chamber  of                                                               
Commerce [the  Chamber], told  members the  Chamber has  not seen                                                               
the  proposed CS  or  the  chart, and  was  not  included in  the                                                               
discussions. She noted the Chamber  represents 700 businesses and                                                               
that the three parties most  concerned with workers' compensation                                                               
issues are business,  labor and a third party.  She protested the                                                               
fact that this bill was taken  out of the public process and that                                                               
all of  the agreements  were made between  two of  those parties.                                                               
She told members  that on Friday afternoon, she  and Thyes Schaub                                                               
of  the National  Federation  of  Independent Businesses  (NFIB),                                                               
were invited to a briefing  during which Mr. Nordstrand explained                                                               
what  had been  negotiated  and decided.  She  remembered at  the                                                               
hearing  on SB  311 last  week,  both Senators  French and  Ellis                                                               
expressed   concern  that   the   meetings   would  include   all                                                               
stakeholders. When she called to find  out what was going on, she                                                               
was told the meeting was in  progress and was assured the Chamber                                                               
would be brought into the loop. It was, but after the fact.                                                                     
                                                                                                                                
MS. LABOLLE expressed  concern that this process  is becoming the                                                               
preferred  method  of  operation   among  the  labor  unions.  It                                                               
marginalizes the  parties that the  unions don't want  to discuss                                                               
the  issues with  by taking  it out  of the  public process.  She                                                               
noted the issues are determined  by the labor unions and whomever                                                               
the labor unions  want to negotiate with and then  brought to the                                                               
legislature. She cautioned that process  is getting away from the                                                               
legislative  system  of   public  negotiation,  decision  making,                                                               
record keeping and documentation.                                                                                               
                                                                                                                                
MS.  LABOLLE  said  one  item   that  the  Chamber  feels  was  a                                                               
significant  compromise was  that the  hearing panel  will change                                                               
from  a fully  professional,  unbiased combination  of people  to                                                               
determine issues  to lay  people. She  said business  didn't mind                                                               
giving up its  lay representative on the board but  now it's back                                                               
to the  original system. She said  she has yet to  see a document                                                               
but,  from  what  she  can  tell, the  Chamber  agrees  with  the                                                               
positions  put forth  by Mr.  Nordstrand and  believes DOL  did a                                                               
pretty  good  job  of  representing  what  would  have  been  the                                                               
Chamber's position.  She maintained that the  Chamber agreed with                                                               
the original SB 311.                                                                                                            
                                                                                                                                
Regarding  the  de  novo  issue, MS.  LABOLLE  said  the  Chamber                                                               
supports  the   Administration's  viewpoint.  She   repeated  the                                                               
Chamber essentially agrees with what  has been done but would not                                                               
have agreed with the lay  panel. However, she emphasized that the                                                               
Chamber is very dissatisfied with the process.                                                                                  
                                                                                                                                
CHAIR SEEKINS  said he is  partially to  blame. He noted  that SB                                                               
311 is the  Governor's bill and during  the original presentation                                                               
before  the   committee,  many  points  of   disagreement  became                                                               
evident.  The committee  did not  want  to work  through each  of                                                               
those  points  of  disagreement  individually  so  he  asked  the                                                               
Governor to work  with others and bring a proposed  CS before the                                                               
committee  that would  not consume  as much  committee time.  The                                                               
public process will  start now. He pointed out  the committee was                                                               
not involved  in the original  drafting of SB 311.  He instructed                                                               
the  Governor and  the  members  of labor  who  had the  greatest                                                               
points  of disagreement  to bring  the  committee a  CS that  the                                                               
committee could work from. He noted:                                                                                            
                                                                                                                                
     I understand  that there's been  an ad hoc  process and                                                                    
     that  this process  has  gone on  for  all these  other                                                                    
     years.  I  can understand  how  people  should work  on                                                                    
     that.  That is  not a  function of  the committee.  The                                                                    
     function of the committee to me  was to bring to us for                                                                    
     consideration a bill that came  - that we would be able                                                                    
     to work  on without having  to decide all  the disputes                                                                    
     between  these  two  major  parties  but,  without  any                                                                    
     opportunity  for you  to comment  -  no. You'll  recall                                                                    
     that the  Chairman called you and  said I have a  CS, I                                                                    
     have a proposed amendment and I  need you to be able to                                                                    
     provide testimony on that as  well. The Chairman didn't                                                                    
     ignore  the  State Chamber  of  Commerce  and you  know                                                                    
     that. Nor would  I try to ignore  other business groups                                                                    
     that  are  out  there.  I think  their  input  is  very                                                                    
     important  and now  we're in  that  process. We're  not                                                                    
     railroading this  bill. We're  not intending for  it to                                                                    
     get out of  committee today as we go  forward but we're                                                                    
     much closer  than we were before  without the committee                                                                    
     having  to do  a  lot of  the work.  And  that was  the                                                                    
     intent of  the Chair when  I asked those people  to get                                                                    
     together and,  within a week,  bring us back a  CS that                                                                    
     we  could work  with without  taking  up a  lot of  our                                                                    
     time. So I  don't think that there's any  intent for us                                                                    
     to go outside  of any public process.  We're now diving                                                                    
     headfirst into it, in my opinion.                                                                                          
                                                                                                                                
MS. LABOLLE  said she appreciated  the chair's point of  view and                                                               
position, however there  are three major players in  the arena of                                                               
workers' compensation, it  seems strange to her that  only two of                                                               
those were notified and involved in the ad hoc group.                                                                           
                                                                                                                                
CHAIR SEEKINS said he appreciates Ms. LaBolle's point.                                                                          
                                                                                                                                
9:15 a.m.                                                                                                                       
                                                                                                                                
MS. LABOLLE  repeated that the  Chamber agrees with most  of what                                                               
was determined and is willing to  move ahead because it wants the                                                               
workers'  compensation system  to be  reformed. The  Chamber does                                                               
not want to  see the bill delayed and would  prefer that the bill                                                               
move ahead as quickly as possible.                                                                                              
                                                                                                                                
CHAIR  SEEKINS said  he wants  to do  that but  does not  want to                                                               
throw caution to the wind. He  asked that she bring up any points                                                               
of value to the business community.                                                                                             
                                                                                                                                
MS.  LABOLLE  said  she  hopes  to  see  the  proposed  committee                                                               
substitute, the amendment, and the chart shortly.                                                                               
                                                                                                                                
MR. NORDSTRAND offered to provide Ms.  LaBolle with a copy of the                                                               
CS.                                                                                                                             
                                                                                                                                
CHAIR SEEKINS continued taking public testimony.                                                                                
                                                                                                                                
MR.  JOHN GUICHICI  of Fairbanks  told members  the heart  of the                                                               
reform of  the workers' compensation  system in this bill  is the                                                               
creation  of a  three-person appeals  committee that  will bypass                                                               
the  Superior Court,  where many  people feel  the decisions  are                                                               
inconsistent. However, the bill actually  goes a lot further than                                                               
that  in that  it reduces  the role  of the  three-person hearing                                                               
panel  that  hears disputed  cases.  The  reality of  creating  a                                                               
three-person appeals commission to deal  with the 36 appeals each                                                               
year on  average that the  Superior Court hears  at a cost  of $1                                                               
million to  the state, does not  seem worthwhile. He said  he has                                                               
spent  a lot  of time  talking to  employer attorneys,  insurance                                                               
carriers,  Representatives and  assistant attorneys  general, and                                                               
no one can give any estimate  of premium reductions or savings to                                                               
employers.  Usually when  a reform  of this  nature is  proposed,                                                               
someone is  able to identify  some savings. Language in  the bill                                                               
that  is problematic  is  addressed in  the  amendment. It  would                                                               
guarantee that  any decision of  the hearing panel that  does not                                                               
favor the  carriers would be  advanced to the  appeals commission                                                               
with no  weight given to  the hearing panel's decision.  Once the                                                               
appeal is  at the  commission level, the  testimony of  a witness                                                               
who  appeared before  a hearing  panel  would be  binding on  the                                                               
commission.  All  other   findings,  including  depositions  from                                                               
claimant doctors  and medical  reports, may be  set aside  by the                                                               
commission,  the  critical  point  being  that  rarely  does  the                                                               
claimant  have a  live medical  witness, as  that is  costly. The                                                               
live  witness for  the  carrier usually  doesn't  have an  active                                                               
practice. Those witnesses are hired  and paid for by the carriers                                                               
to express their opinions.                                                                                                      
                                                                                                                                
MR.  GUICHICI  informed  members  that this  proposed  bill  also                                                               
removes the  standards of review  that courts are held  to, which                                                               
is unfair to  the claimant. This new system will  not be good for                                                               
the State  of Alaska,  injured workers  or the  employers without                                                               
the amendment. The  only ones who will benefit  from the proposed                                                               
CS  are a  few  carrier  attorneys who  want  to  see their  work                                                               
percentages increase. They  currently win over 60  percent of the                                                               
cases.  He said  he does  not like  the bill  at all  without the                                                               
amendment as  he believes  it will come  back to  bite employers,                                                               
injured workers, and the state.                                                                                                 
                                                                                                                                
MS. NICHOLA  LIENHART, VECO Corporation,  stated support  for the                                                               
proposed  CS  as described  by  Mr.  Nordstrand. The  bill  would                                                               
increase   both  the   efficiency   and   fairness  of   workers'                                                               
compensation  hearings, which  will  benefit  both employers  and                                                               
employees. VECO believes it is  important to bring consistency to                                                               
decisions.                                                                                                                      
                                                                                                                                
MR. DOUG  WOOLIVER, Alaska Court  System, told members  the court                                                               
system  takes no  position on  SB 311  but he  would explain  the                                                               
impact of  one section  of the  bill on  the court.  That section                                                               
provides  for direct  appeals to  the Supreme  Court. He  said as                                                               
mentioned  earlier, an  average of  36  cases come  to the  court                                                               
system from the  workers' compensation board each  year. About 27                                                               
of those are resolved at  the Superior Court level. The remaining                                                               
25 percent go on to the  Supreme Court. The court system does not                                                               
believe the changes the bill makes  are likely to have any impact                                                               
on the number of cases that come  to the court for a few reasons.                                                               
First, the court  system already hears a small  percentage of the                                                               
total  workers' compensation  claims, and  a small  percentage of                                                               
the board's  decisions are appealed  to the court  system. People                                                               
appeal for  a variety  of reasons.  Some appeal  on the  basis of                                                               
merit,  as they  believe  the appeals  commission  simply got  it                                                               
wrong.  The  Supreme  Court applies  a  deferential  standard  of                                                               
review;  reasonable   minds  will  always  differ   on  what  was                                                               
supported  and reasonable.  Second, every  year the  court system                                                               
sees a handful of novel  legal issues. Those issues will continue                                                               
to come  to the Supreme Court  because that is the  body that can                                                               
finally resolve those  issues. Third, a certain  number of people                                                               
who  do not  trust administrative  agencies and  will appeal  any                                                               
decision  to get  out of  the  agency setting.  Finally, a  small                                                               
number of people are simply tenacious  and will not give up until                                                               
their cases  are heard in court.  He said one reason  some people                                                               
appeal directly to the Supreme Court  is to cut down the delay in                                                               
the court process. That will be  the result of this bill in about                                                               
25  percent  of  the  cases.  For each  one  of  those  cases,  a                                                               
considerable amount  of time will  be saved because  the Superior                                                               
Court process  will be  bypassed. The  court system's  concern is                                                               
the other cases  that are currently heard by  the Superior Court.                                                               
If they are  bypassed, they are likely to take  more time because                                                               
a Superior  Court judge can decide  a case more quickly  than the                                                               
Supreme Court.  The Superior Court  judge is a committee  of one.                                                               
The Supreme  Court is a  more deliberative  body with a  panel of                                                               
five people.  Opinions are drafted,  circulated for  comment, and                                                               
redrafted.  He  explained that  the  court  system's fiscal  note                                                               
reflects its  desire to  add staff  to the  Supreme Court  to not                                                               
only resolve the workers' compensation  cases more quickly but to                                                               
enable the Supreme  Court to address its increased  caseload in a                                                               
timely fashion.                                                                                                                 
                                                                                                                                
MR. WOOLIVER  commented that in  the original version of  SB 311,                                                               
the court  system assumed it would  not see new cases  but it was                                                               
concerned about  the lack  of balance  on the  appeals commission                                                               
between labor  and employers.  Its concern was  that the  lack of                                                               
balance might lead to an  increased caseload in the court system.                                                               
He  noted  the proposed  CS  provides  for  some balance  on  the                                                               
appeals commission and alleviates that concern.                                                                                 
                                                                                                                                
9:30 a.m.                                                                                                                       
                                                                                                                                
SENATOR THERRIAULT asked if part  of Mr. Wooliver's concern about                                                               
an  increase in  the court's  caseload will  be mitigated  by the                                                               
fact that there will be a  narrowing of the interpretation of the                                                               
law early on in the system.  He explained that right now there is                                                               
no  narrowing in  the administrative  process. One  takes a  case                                                               
before one  of 30 or  40 Superior  Court judges so  the narrowing                                                               
does not  occur until one  gets to  the Supreme Court.  That way,                                                               
people will know exactly how the law is going to be applied.                                                                    
                                                                                                                                
MR. WOOLIVER  replied that over time  that may be the  result but                                                               
it will be hard to tell  initially. He reminded members that only                                                               
a  certain  percentage  of  cases   that  are  fact-specific  are                                                               
appealed because people have the  right to do so. Therefore, even                                                               
if  the  commission helps  the  Supreme  Court narrow  the  legal                                                               
issues, that  must be balanced by  the concern that a  new system                                                               
will initially lead to more appeals.                                                                                            
                                                                                                                                
MR. CHANCY CROFT,  testifying on his own behalf,  told members he                                                               
is an attorney  who has only represented injured  workers for the                                                               
past  25 years  with one  exception. He  owns two  businesses and                                                               
employs on average  10 people per year. He suggested  that he may                                                               
be  the  only witness  who  has  policies  with the  two  largest                                                               
workers' compensation carriers in Alaska.   He made the following                                                               
points.                                                                                                                         
                                                                                                                                
     There are some provisions in  this bill that are needed                                                                    
     and  even  desirable  and  I   urge  the  committee  to                                                                    
     separate those out and to  pass them immediately. There                                                                    
     are  others   that  are  going  to   make  a  difficult                                                                    
     situation worse that could  be solved by administrative                                                                    
     action but  instead you are  being asked to  assume the                                                                    
     responsibility for what could  be done very quickly and                                                                    
     efficiently  by the  administration. You  have heard  a                                                                    
     lot  about the  price  of uncertainty  in the  workers'                                                                    
     compensation  system and  how a  tribunal appointed  by                                                                    
     the Governor without  any review of its  members by the                                                                    
     judicial  council will  somehow provide  certainty. But                                                                    
     you have  not been  given one single  case in  the last                                                                    
     five years,  for that  matter even  longer, which  is -                                                                    
     because  of the  uncertainty  had caused  an impact  on                                                                    
     premiums and the board took  it up to the Supreme Court                                                                    
     to get a decision on it - not one.                                                                                         
                                                                                                                                
     So you  are being asked  to spend a million  dollars to                                                                    
     solve a problem that  basically doesn't exist and could                                                                    
     be  resolved by  the  administration if  it wanted  to.                                                                    
     Every time  somebody appeals to  the Superior  Court or                                                                    
     to the  Supreme Court,  and I've  handled more  than 50                                                                    
     cases in the Alaska  Supreme Court, there's a provision                                                                    
     for the  board to participate.  They get a copy  of all                                                                    
     of  the  proceedings.  And if  there  is  an  important                                                                    
     issue,  they can  go to  the  Supreme Court  to get  it                                                                    
     resolved if  that's necessary. The  last time  that was                                                                    
     done, to  my knowledge,  was in  Frasier. I  know about                                                                    
     that because that was my  case. It's more than 10 years                                                                    
     ago and  the board  did present a  brief in  that case.                                                                    
     But  I don't  know of  any  other case  in the  Supreme                                                                    
     Court  where  the  board has  presented  a  brief,  and                                                                    
     certainly in the last five  years, and you haven't been                                                                    
     presented  with any  indication that  it was  important                                                                    
     enough for  the board  or the administration  that they                                                                    
     told the  board to file  a brief  in that case  or take                                                                    
     that case on up to the Supreme Court.                                                                                      
                                                                                                                                
     As far as obtaining  any predictability out of Superior                                                                    
     Court   decisions,  the   commissioner  of   labor  and                                                                    
     workforce   development  could   simply   say  to   his                                                                    
     appointees, the  hearing officers, follow  the opinions                                                                    
     of the Superior  Court in any case in which  there is a                                                                    
     Superior   Court   decision  unless   those   decisions                                                                    
     conflict,  and  in  the  one   where  there  is  now  a                                                                    
     conflict, appeal  that decision  to the  Supreme Court.                                                                    
     So this  could be  resolved without a  million dollars,                                                                    
     hiring a dozen or more people.                                                                                             
                                                                                                                                
     But my concern  is that the solution is  going to cause                                                                    
     delay. It's  going to  cause a delay  in a  system that                                                                    
     only works  if it works quickly.  Workers' compensation                                                                    
     premiums  are going  up and  so something  needs to  be                                                                    
     done.  One of  the  reasons they're  going  up is  that                                                                    
     medical  costs  are  going  up.  This  year  nationwide                                                                    
     medical costs will go up 14  percent and that is one of                                                                    
     the reasons  why the cost  of workers'  compensation is                                                                    
     going up.  In Alaska, medical  costs are 50  percent of                                                                    
     the payout  in workers' compensation benefits.  For the                                                                    
     first time in our history  it's been going up each year                                                                    
     for the last 10 years but  in 2002, the latest year for                                                                    
     which we  have statistics, for  the first time  it went                                                                    
     over  50   percent.  Two-thirds   of  the   claims  now                                                                    
     basically  involve  medical  benefits  only,  not  time                                                                    
     lost,  not  permanent impairment,  not  rehabilitation,                                                                    
     not anything else like that  but medical benefits only.                                                                    
     In the  last 10  years, the  cost of  providing medical                                                                    
     benefits  has increased  75 percent.  In the  last five                                                                    
     years  alone, it's  increased 50  percent. The  cost of                                                                    
     providing medical benefits  is now approximately $4,000                                                                    
     a claim  on average  just to provide  medical benefits.                                                                    
     This  bill  does  absolutely nothing  about  that  even                                                                    
     though  people   that  had   been  involved   from  the                                                                    
     employers'  point  of  view  had  asked  that  that  be                                                                    
     addressed. It's not in any place in this bill.                                                                             
                                                                                                                                
     The second  issue is the  insolvency of  some companies                                                                    
     triggered in some  part by 911, where  there were small                                                                    
     companies  that  were impacted  by  the  claims or  the                                                                    
     awesome  reinsurance  because  of  911  and,  in  other                                                                    
     cases, by  allowing insurance companies,  as California                                                                    
     did, from coming in and  offering premiums at too low a                                                                    
     rate. Now  that's a  dangerous thing to  say -  no, no,                                                                    
     no.  We're going  to insist  that you  charge employers                                                                    
     more premiums  and California didn't  do that.  It said                                                                    
     okay,  whatever  the  lowest   bidder  is,  that's  the                                                                    
     premium in effect.  And so a lot of  the companies that                                                                    
     have  gone bankrupt  have been  California companies  -                                                                    
     Superior and Paula and recently Freemont.                                                                                  
                                                                                                                                
     Superior  and Paula  didn't  affect us.  It  had a  big                                                                    
     impact  on   California  but  our  rates   of  workers'                                                                    
     compensation  are somewhat  artificial  here. They  are                                                                    
     not measured  against actual experience. We're  a small                                                                    
     state and  so we're kind  of the tail that  gets wagged                                                                    
     by  the  dog. We  do  have  one  advantage. We  have  a                                                                    
     company,  and  have  for   25  years,  Alaska  National                                                                    
     Insurance,  that is  the largest  work comp  carrier in                                                                    
     the  state, has  been  for years,  writes a  tremendous                                                                    
     amount more  than - you have  to add up the  next three                                                                    
     or  four, maybe  ten,  to get  the  volume that  Alaska                                                                    
     National writes.  Alaska National is doing  quite well.                                                                    
     In 2001  and 2002 it paid  out a dividend that  was the                                                                    
     highest  in its  history.  I say  more  power to  them.                                                                    
     They're tough  adversaries. When they tell  you they're                                                                    
     going to fight you they  do. When they tell you they're                                                                    
     going  to pay,  you  can count  on  the check.  They're                                                                    
     highly competent  and they're  doing quite well  in the                                                                    
     existing system.                                                                                                           
                                                                                                                                
     But there is this problem  with the fact that Freemont,                                                                    
     which was writing 20 or  25 percent, maybe even as high                                                                    
     as  27  percent when  it  stopped  writing here  -  the                                                                    
     policies in Alaska, was doing  it on the cheap. And you                                                                    
     could tell  it was  doing it on  the cheap  because you                                                                    
     couldn't get  the claims  adjusted. Nobody  should have                                                                    
     been  surprised that  Freemont was  going  to go  under                                                                    
     because you could not get a  hold of an adjuster to get                                                                    
     a  claim  resolved,  even  when   they  got  a  defense                                                                    
     attorney. The  defense attorney couldn't get  a hold of                                                                    
     the adjuster.  It was  a terribly  run company.  It had                                                                    
     banked  on  building  up  a  huge  volume  of  workers'                                                                    
     compensation cases  so it got  its premiums and  it was                                                                    
     going to  make its money,  like everybody does,  in the                                                                    
     stock  market and  with its  investments. And  when the                                                                    
     stock market  tanked, Freemont, it was  inevitable that                                                                    
     it  was  going  to  go under  because  it  had  written                                                                    
     policies at  a rate  that it  could not  sustain itself                                                                    
     without tremendous investment anyhow.                                                                                      
                                                                                                                                
     So I  urge you to do  the first five sections,  pages 2                                                                    
     through  4,  Sections  1 through  5,  of  the  Guaranty                                                                    
     Association  and   then  the  two  that   are  kind  of                                                                    
     technical,  6  and  7,  that  relate  to  the  workers'                                                                    
     compensation  board, to  get  the Guaranty  Association                                                                    
     healthy again here.  I don't think we  have much choice                                                                    
     and  I think  it's important  to  do that  and I  don't                                                                    
     think we should wait on these other things to do it.                                                                       
                                                                                                                                
     But there's one thing that's  not fair in that. I don't                                                                    
     represent insurance companies and  I don't care usually                                                                    
     which insurance company pays as  long as my client gets                                                                    
     paid.  But there's  a real  unfairness  about what  the                                                                    
     administration  is proposing  here. To  those companies                                                                    
     that  write premiums  in Alaska,  like Alaska  National                                                                    
     ... [END OF TAPE]                                                                                                          
                                                                                                                                
TAPE 04-35, SIDE A                                                                                                            
                                                                                                                                
MR. CROFT CONTINUED:                                                                                                            
                                                                                                                                
     ... of the  benefits that are paid out are  paid out by                                                                    
     self insurers,  the biggest  of which  is the  State of                                                                    
     Alaska. If  it were an  insurance company, it  would be                                                                    
     the  second  largest  insurance company  in  the  state                                                                    
     given the  volume of its  clients. The  Municipality of                                                                    
     Anchorage  and  the  Anchorage School  Board  are  also                                                                    
     self-insured. Big  companies are  self-insured, British                                                                    
     Petroleum  and the  like, and  what happens  with self-                                                                    
     insurance is  the cream of  the insurance  premiums are                                                                    
     removed.  That goes to  - they often have low incidence                                                                    
     rates, low severity  rates, that's the cream  of it and                                                                    
     so what's  left for Alaska  National and the 160  or 70                                                                    
     other  workers' compensation  carriers  is the  tougher                                                                    
     ones.  And  what  does  that  do?  That  impacts  small                                                                    
     businesses who cannot  become self-insurers, generally.                                                                    
     And  yet   when  it  comes   to  saving   the  Guaranty                                                                    
     Association,  which ensures  that  all injured  workers                                                                    
     are   going  to   get  their   benefits  but,   equally                                                                    
     important, that  the employers  that have  been insured                                                                    
     by  a defaulted  insurance  company that  has now  been                                                                    
     declared insolvent  in California  are not going  to be                                                                    
     forced  by people  like myself  and other  attorneys to                                                                    
     pay benefits to injured  workers where those companies,                                                                    
     those small businesses felt that  they were going to be                                                                    
     covered by  insurance and  had in  good faith  bought a                                                                    
     policy  of  insurance,  if there  isn't  money  in  the                                                                    
     Guaranty Association  to make  those payments,  you can                                                                    
     bet employers are  going to wind up being  sued to make                                                                    
     those payments.                                                                                                            
                                                                                                                                
     So  I  urge  you  to consider  that  the  self-insureds                                                                    
     should  contribute to  the insolvency  of the  Guaranty                                                                    
     Association  on the  same basis,  the same  percentage,                                                                    
     that  all  of  the   work  comp  carriers  who've  been                                                                    
     standing  up there  and taking  the  tougher cases  and                                                                    
     making sure that small businesses  can get insurance to                                                                    
     make  sure that  the  burden doesn't  fall entirely  on                                                                    
     them when insurance companies go  bankrupt. Now that is                                                                    
     an  example -  insurance guaranty  is an  example of  a                                                                    
     model  act because  throughout  the  nation, there  are                                                                    
     states  that have  adopted an  insurance guaranty  act.                                                                    
     There is  no model workers' compensation  act. There is                                                                    
     not an  act like the Uniform  Child Support Enforcement                                                                    
     Act or the Uniform Commercial  Code or any of that that                                                                    
     applies like  a workers' compensation act  would. There                                                                    
     is no such  thing as a model act. The  Council of State                                                                    
     Governments  for more  than 30  years  has been  saying                                                                    
     here is a  good act. No state, at least  checking it on                                                                    
     the  Internet  yesterday,  has  adopted  all  of  those                                                                    
     recommendations.  Alaska  has  adopted many,  is  above                                                                    
     half the states  but is below about 20  in adopting all                                                                    
     of the 19 recommendations  and the reason is businesses                                                                    
     have  continually objected  to  the  model act  because                                                                    
     they say it's going to make it more expensive.                                                                             
                                                                                                                                
     So I don't think there is  a model act. The intent, and                                                                    
     the  reason  the  intent, people  wanted  to  keep  the                                                                    
     intent in Section  8 on page 5, is that  it says quick,                                                                    
     efficient, fair  and predictable delivery  of services.                                                                    
     I don't  think this bill  is going  to be quick.  It is                                                                    
     going to cause  delay. It puts in a whole  new level of                                                                    
     litigation in this case, trials  de novo, so that there                                                                    
     is  no predictability  by injured  workers and  I think                                                                    
     it's a bad idea. But I  have taken some time. There are                                                                    
     other people wanting to testify.                                                                                           
                                                                                                                                
     I have about  10 sections of the bill that  I think are                                                                    
     particularly bad. Let  me tell you just one  that I was                                                                    
     extremely disappointed  that labor signed off  on. It's                                                                    
     on the second - it's on  the third page, the bottom. An                                                                    
     employee  wants  to  settle her  case,  does  she  need                                                                    
     approval. Under  the present system  yes but  under the                                                                    
     two systems  that are proposed,  the original  bill and                                                                    
     the committee  substitute, if you're represented  by an                                                                    
     attorney, you  don't have to  have approval.  I haven't                                                                    
     checked it  this morning, but  the latest  case decided                                                                    
     by  the  Alaska  Workers'  Compensation  Board,  unless                                                                    
     there was  one that came  in this morning,  was decided                                                                    
     at 3:32  Friday afternoon.  It's a case  called Adepoju                                                                    
     out of Fairbanks.  Mr. Adepoju had a long  history of a                                                                    
     workers'  compensation  claim.  He  finally  agreed  to                                                                    
     settle for  a lump sum  settlement, which he  wrote. He                                                                    
     didn't agree with  a lot of it but he's  signing it and                                                                    
     he  wanted the  board  to approve  it.  The board  said                                                                    
     well, we think there's  some real problems here because                                                                    
     he's waiving  all of  his right  to any  future medical                                                                    
     benefit. The board exercised its  authority to order an                                                                    
     independent medical  evaluation, not a  hearing officer                                                                    
     but  the  board   did  it.  They  sent   him  to  Bruce                                                                    
     McCormick,  a  neurosurgeon  in  San  Francisco,  whose                                                                    
     report  came back  -  this guy's  got  problems and  is                                                                    
     likely going  to need medical treatment  in the future.                                                                    
     And  Friday  afternoon,  the  board  said  we  are  not                                                                    
     approving that  compromise in release because  it's not                                                                    
     in his best interest.                                                                                                      
                                                                                                                                
     What  does  that have  to  do  with this  section?  Mr.                                                                    
     Adepoju was  represented by an attorney  and that's why                                                                    
     it's  a good  idea  to  have the  board  look at  these                                                                    
     because otherwise  there's going  to be a  real erosion                                                                    
     of the  employee's negotiating  position. When  a check                                                                    
     for $20 or $30 or $40,000  is dangled in front of them,                                                                    
     they  haven't gotten  any compensation  for  a year  or                                                                    
     two, they've gone to the  hearing panel and the hearing                                                                    
     panel said  yes but the  tribunal said no,  we're going                                                                    
     to  do a  trial de  novo, they're  about to  lose their                                                                    
     house or  have lost it,  they don't have money  for the                                                                    
     kids  to go  to school  that year,  they can't  pay the                                                                    
     utilities and so  are they going to  settle their claim                                                                    
     for $20,  $30,000 to  simply make  ends meet?  Yes. And                                                                    
     that's why  Arthur Larson,  if you  want to  talk about                                                                    
     model  suggestions,  is  so opposed  to  any  lump  sum                                                                    
     settlement  but it  would  be a  travesty  to allow  it                                                                    
     whether  you're  represented  by  an  attorney  or  not                                                                    
     without board approval.                                                                                                    
                                                                                                                                
     I  don't  want to  take  time  from other  people.  I'm                                                                    
     willing  to  testify  later   because  there  are  many                                                                    
     sections -  I haven't  even gotten to  the ones  that I                                                                    
     think are most important.                                                                                                  
                                                                                                                                
CHAIR SEEKINS  asked Mr. Croft  to provide a [written]  review of                                                               
the other sections, which would be distributed to all members.                                                                  
                                                                                                                                
MR.  CROFT said  one question  he has  is why  would there  be no                                                               
judicial  review  for  the  appeal   commission,  when  Title  43                                                               
requires all of the judges for  the tax court to undergo judicial                                                               
review. This  would be the  first time in Alaska's  history where                                                               
the state has  given the authority to someone who  is not a judge                                                               
to  make binding  precedent. He  offered  to testify  again at  a                                                               
later date.                                                                                                                     
                                                                                                                                
SENATOR  OGAN  asked Mr.  Croft  if  he  had any  suggestions  in                                                               
relation  to his  statement that  this  bill will  do nothing  to                                                               
remedy the rise in medical costs.                                                                                               
                                                                                                                                
MR. CROFT said  that Judy Peterson, who was the  president of the                                                               
WCAA  board  of directors,  provided  some  suggestions from  the                                                               
business sector  in November to remedy  increasing medical costs.                                                               
Those suggestions  relate to the  approval of payment  of medical                                                               
benefits and what  types of treatments are  authorized. He opined                                                               
that area  is difficult in that  costs can't be kept  so low that                                                               
people can't get  medical treatment. However, on  the other hand,                                                               
simply paying  whatever amount is charged  is unacceptable. Until                                                               
the question of medical costs is  addressed, there will be no big                                                               
savings in any workers' compensation bill.                                                                                      
                                                                                                                                
CHAIR  SEEKINS  thanked  Mr.  Croft  and  called  Ms.  Larson  to                                                               
testify.                                                                                                                        
                                                                                                                                
MS. EDEN  LARSON, president  and CEO  of Associated  Builders and                                                               
Contractors of Alaska  (ABCA), told members ABCA  is comprised of                                                               
161 companies that employ about  5,000 workers throughout Alaska.                                                               
She pointed  out her testimony  is largely anecdotal in  that she                                                               
heard earlier today  that the system is not  broken. According to                                                               
her membership, the system is  very broken in that employers find                                                               
it very  difficult to  encourage their  insurers to  appeal. ABCA                                                               
supports a restructuring of the  workers' compensation system. It                                                               
feels  the  proposed  CS  is  a  step  in  the  right  direction.                                                               
Regarding the  amendment, the ABCA  believes the CS  provides for                                                               
accountability and checks  and balances for the  hearing panel in                                                               
that it requires  it to determine credibility  based on documents                                                               
of fact.  The ABCA will  not support the  CS if the  amendment is                                                               
incorporated.                                                                                                                   
                                                                                                                                
CHAIR SEEKINS said  he would set the bill aside  at this time for                                                               
further consideration.  He encouraged  all interested  parties to                                                               
review the  proposed CS, labeled  23-G2, 4/2/04. He  asked anyone                                                               
interested in  viewing the amendment  to call his staff.  He then                                                               
took up CSHB 230(STA).                                                                                                          

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