Legislature(2003 - 2004)

02/19/2004 01:35 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
        SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM                                                                     
                                                                                                                                
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee meeting  to order  at 1:35  p.m. Present  were Senators                                                               
Gary Stevens, Ralph  Seekins, Hollis French and  Chair Con Bunde.                                                               
Senator Bettye Davis was excused.  The first order of business to                                                               
come before the committee was SB 311.                                                                                           
                                                                                                                                
MS. LINDA  HALL, Director, Division  of Insurance,  Department of                                                               
Community &  Economic Development (DCED), opened  her comments by                                                               
reiterating that  the purpose of the  bill is to create  a stable                                                               
environment  that  is  sustainable  and  will  allow  affordable,                                                               
available  workers' compensation  insurance for  employers. In  a                                                               
previous meeting, she was asked  how Oregon workers' compensation                                                               
reforms would work in Alaska and  she had discussed this with the                                                               
director  of  the  Division of  Workers  Compensation,  Mr.  Paul                                                               
Lisankie.                                                                                                                       
                                                                                                                                
     In the 15 years from  1986 until 2002, Oregon went from                                                                    
                                                    th                                                                          
     the sixth highest  premium in the country to 35.   Just                                                                    
                                             th                                                                                 
     by reference, in 2000, Alaska was the 28,   I could say                                                                    
     highest or lowest, whichever the  case may be. In 2002,                                                                    
                            th                                                                                                  
     we have  gone up  to 14   highest  premium and  I would                                                                    
     guess  with our  2004  rate  increases, we're  probably                                                                    
     higher than that.                                                                                                          
                                                                                                                                
     Oregon  did  some  reforms  that  I  think  would  have                                                                    
     potential  to look  at the  cost of  claims in  Alaska.                                                                    
     Some  of those  dealt  with requiring  safety and  loss                                                                    
     prevention  programs. That  would certainly  contribute                                                                    
     to  a  decrease in  the  number  of claims.  There  are                                                                    
     requirements that  employers with 11 or  more employees                                                                    
     have  a safety  and  health  committee. Oregon  statute                                                                    
     allows  the use  of  managed  care organizations.  They                                                                    
     have expanded  their administrative  dispute resolution                                                                    
     process;  they've   created  an  ombudsman   for  small                                                                    
     business;  they've  also   defined  the  definition  of                                                                    
     'compensability.'  In Oregon,  the injury  must be  the                                                                    
     major  contributing cause  for  the treatment  to be  a                                                                    
     covered compensable claim.                                                                                                 
                                                                                                                                
     They've created  some incentive programs  for employers                                                                    
     to  hire injured  workers and  to  get injured  workers                                                                    
     back   more  quickly.   They  have   requirements  that                                                                    
     insurance  carriers  provide loss-prevention  plans  to                                                                    
     employers and that even small  employers, if they're in                                                                    
     the top percent of lost  workday rates, are required to                                                                    
     have  a  safety  committee.  So,  the  emphasis  is  on                                                                    
     prevention and cost containment.  They have also looked                                                                    
     at  managed  care;  they've  looked  at  mandated  bill                                                                    
     reviews and  case management  provisions. I  think each                                                                    
     of these  provisions should be  explored for  Alaska. I                                                                    
     don't  know  that  in  the  remaining  months  of  this                                                                    
     legislative session  there's actually time to  do that,                                                                    
     but I think there's potential  to look at other options                                                                    
     that may  affect how we  handle claims and  what claims                                                                    
     cost in Alaska.                                                                                                            
                                                                                                                                
     With that, I would like to  go back to SB 311, which is                                                                    
     what  we're hearing  today.  Kristin  Knudsen from  the                                                                    
     Attorney General's  Office has prepared remarks  on the                                                                    
     workers' comp section of the bill.                                                                                         
                                                                                                                                
CHAIR BUNDE said  his layman's reading of the  Oregon report made                                                               
it obvious  that Alaska would want  any claims to be  based on an                                                               
injury that was principally caused by the work.                                                                                 
                                                                                                                                
MR.  CHUCK LUNDEEN,  Chief Counsel,  Liberty Northwest  Insurance                                                               
Corporation,  said  his  company   is  an  independent  operating                                                               
subsidiary of  Liberty Mutual Insurance  and has operated  in the                                                               
Northwest for the past 20 years.  It is a multi-line insurer with                                                               
workers'  compensation insurance  as  the primary  line and  does                                                               
over $400  million of premium  in Montana, Idaho, Oregon  and now                                                               
Alaska, which  totals about $23 million  total. Liberty Northwest                                                               
currently  processes over  20 percent  of Alaska's  assigned risk                                                               
pool claims  and wants to "become  a larger player in  the Alaska                                                               
market...."                                                                                                                     
                                                                                                                                
MR. LUNDEEN supported  SB 311. He noted that  the director's role                                                               
takes  over some  of  the  board's duties  and  other duties  are                                                               
shifted to the new Workers'  Compensation Appeals Commission. The                                                               
proposed  changes  will  produce a  faster,  more  cost-efficient                                                               
means to resolve  disputed claims. He recalled  that the workers'                                                               
compensation system,  unlike the tort  system, is supposed  to be                                                               
no-fault. Before Oregon  reformed its system, there was  a lot of                                                               
litigation, which takes  a long time to work  through the system.                                                               
The same thing  is happening in Alaska. SB 311  shortens the time                                                               
by eliminating  the appeal process  to the Alaska  Superior Court                                                               
where cases  now could  go to  one of  30 sitting  Superior Court                                                               
judges for a complete de novo  [a brand new look] review. It also                                                               
mandates an  experienced professional  group of  hearing officers                                                               
who will have to be  Alaska Bar members with significant workers'                                                               
compensation  experience.   Both  changes  will   produce  better                                                               
quality decisions.  Additionally, he  noted, these  officials, as                                                               
Bar  members,   would  be  subject   to  the  ethical   rules  of                                                               
professional attorney conduct.                                                                                                  
                                                                                                                                
MR.  LUNDEEN  said  this bill  contains  very  clear  legislative                                                               
intent language  that all participants in  the dispute resolution                                                               
system should receive impartial,  fair treatment. Another feature                                                               
of  the   bill  states  that   the  decisions  of   the  Workers'                                                               
Compensation  Appeal  Commission  will  have  precedential  value                                                               
whereas  decisions  currently  don't  and   may  or  may  not  be                                                               
published. This  will help system  participants to know  ahead of                                                               
time  which  way   the  commission  has  ruled   on  benefit  and                                                               
compensability   issues.   Plans   can   be   made   accordingly,                                                               
settlements will occur  with more frequency and  maybe some cases                                                               
would not go  as far down the road. Appeals  to the Supreme Court                                                               
would  be  allowed for  rules,  errors  of  law  or for  lack  of                                                               
substantial evidence.  He felt that greater  predictability makes                                                               
a healthier insurance environment.                                                                                              
                                                                                                                                
SENATOR  GARY STEVENS  asked if  cost-containment and  prevention                                                               
programs need legislation to be enacted.                                                                                        
                                                                                                                                
MS.  HALL  responded  that some  statutory  changes  are  needed.                                                               
However, insurance  companies provide  loss control  programs and                                                               
help with inspections.                                                                                                          
                                                                                                                                
CHAIR BUNDE  recognized the $380,000  fiscal note  remarking that                                                               
the commissioners  would be  substantially compensated  and asked                                                               
her to comment on that.                                                                                                         
                                                                                                                                
MS.  HALL said  Ms. Knudsen  would address  that question  in her                                                               
presentation.                                                                                                                   
                                                                                                                                
MS.  KRISTIN KNUDSEN,  Assistant Attorney  General, said  she had                                                               
been  an  assistant  attorney  general   for  15  years  and  had                                                               
approximately 20  years of experience with  workers' compensation                                                               
in  the  State  of  Alaska  in  addition  to  years  of  workers'                                                               
compensation  experience elsewhere.  She has  worked for  a labor                                                               
law firm,  on the  Alaska board  as a hearing  officer and  on an                                                               
appeals  board in  Oregon. She  has also  been a  hearing officer                                                               
with a union law firm. Since  February 1989, she has been working                                                               
almost  exclusively  on  workers'   compensation  issues  in  the                                                               
Attorney General's office.                                                                                                      
                                                                                                                                
She provided  the committee  with a  flow chart  that illustrated                                                               
how  SB  311  changes  the  system in  a  very  fundamental  way.                                                               
Currently,  it is  called  the unified  board  system, which  she                                                               
likened  to an  old-fashioned public  utility in  that the  board                                                               
does  everything,  has no  executive  director  or separation  of                                                               
functions.  All   actions  having   to  do   with  investigation,                                                               
enforcement, hearings and decisions are done by that board.                                                                     
                                                                                                                                
MS. KNUDSEN said the board  originally had three people who could                                                               
take  care of  everything,  but after  the  pipeline arrived,  it                                                               
became completely  overwhelmed and  decided to develop  panels so                                                               
that  the whole  board did  not have  to sit  at each  hearing. A                                                               
hearing   officer   from   within  the   Division   of   Workers'                                                               
Compensation would  sit with each  panel. As it  became difficult                                                               
to get  all the panel members  together, the board decided  to go                                                               
to a quorum  system and the Workers' Compensation  Board was then                                                               
changed  to six  labor members,  six management  members and  the                                                               
hearing officers.  A quorum of  at least  two people and  no more                                                               
than three was needed to have  a hearing. If a worker appeared in                                                               
front of a  panel without a labor  member on it, he  had no right                                                               
to ask  for one. The  same thing went for  an employer who  had a                                                               
quorum without a management member.                                                                                             
                                                                                                                                
     What you do have a right  to, though, and this has also                                                                    
     created some  logistical problems, is that  you do have                                                                    
     a right  to, in  any subsequent  hearings on  that same                                                                    
     case -  there will still  be a quorum and  the original                                                                    
     panel - they  will try and get the same  people on your                                                                    
     case all the way up.                                                                                                       
                                                                                                                                
     In the  current system, what  you've got is  the board,                                                                    
     whether it's through a panel  of the board or the board                                                                    
     itself, doing everything.  There's no division director                                                                    
     in   the   statute.  The   board   is   the  one   that                                                                    
     investigates;  the  board  is   the  one  that  charges                                                                    
     uninsured employers  and files notices  of accusations.                                                                    
     The board  is the one  that decides whether or  not the                                                                    
     person  has  been  uninsured   and  then  assesses  the                                                                    
     penalty.                                                                                                                   
                                                                                                                                
     What we are proposing... is  a system that is more like                                                                    
     the  systems that  you get  in the  rest of  the United                                                                    
     States. I would say  having done, now, a state-by-state                                                                    
     analysis of  all the processes  throughout the  rest of                                                                    
     the United States, we are  unique. This system moves us                                                                    
     to a  system more  like the United  States. You  have a                                                                    
     hearing division,  if you will,  you have  a completely                                                                    
     separate function  of adjudication and you  have a very                                                                    
     strong executive that goes  out there, investigates and                                                                    
     enforces the law and you  have a separate adjudication.                                                                    
     What this  is really like is  essentially... the people                                                                    
     who create the  law and determine whether  or not there                                                                    
     is probable  cause to pull  you over and who  will pull                                                                    
     you  over,  shouldn't  be  the   same  people  who  are                                                                    
     deciding whether or  not you violated the  law. It's as                                                                    
     basic a concept as that.                                                                                                   
                                                                                                                                
     So, what we've done here  in this bill is we've created                                                                    
     this commission.  Now, for administration  purposes, it                                                                    
     still  resides  in the  Department  of  Labor, but  the                                                                    
     commissioner  of [the  Department  of] Labor  is not  a                                                                    
     member of the  commission. It's kind of  just there for                                                                    
     budgetary   purposes   and  everything,   whereas   the                                                                    
     commissioner  of [the  Department of]  Labor now  has a                                                                    
     director of  Workers' Compensation, who is  going to be                                                                    
     accountable   for   the   performance  parts   of   the                                                                    
     enforcement parts  and the administration parts  of the                                                                    
     law. It's essentially kind of  separating, if you will,                                                                    
     the  policeman from  the judge.  That,  we think,  will                                                                    
     result in  a stronger  and much more  agile enforcement                                                                    
     of  the  law,  as  well  as  an  essential  element  of                                                                    
     fairness  in   the  application  and   development  and                                                                    
     interpretation of the law.                                                                                                 
                                                                                                                                
     Now, when I say an  agile enforcement, what I'm talking                                                                    
     about here  what this  bill does is,  it does  create a                                                                    
     very strong  director. They're going to  have powers to                                                                    
     act more quickly;  they're going to be able  to - there                                                                    
     are new  civil penalties to  encourage them to  be able                                                                    
     to  go  out  and  get stop  work  orders  on  uninsured                                                                    
     employers and  not just  get stop  work orders,  but be                                                                    
     able  to  assess them  a  civil  penalty, if  they  are                                                                    
     uninsured. They are going to  be able to look much more                                                                    
     closely  and  quickly  at things  like  self  insurance                                                                    
     certificates or other aspects of  the law where it's an                                                                    
     enforcement  type of  an issue....  We'll  have a  more                                                                    
     accountable  kind of  a way  of  counting just  exactly                                                                    
     what is going  on in this division,  what is happening,                                                                    
     what kind of product are  you producing in terms of the                                                                    
     people's business and the enforcement of these laws.                                                                       
                                                                                                                                
     We've  also  sped  up some  of  that  enforcement.  For                                                                    
     example,  on  a penalty,  the  director  can declare  a                                                                    
     default  after seven  days. If  they haven't  paid that                                                                    
     penalty within  seven days, they can  declare a default                                                                    
     and go  to the Superior  Court for  enforcement through                                                                    
     writ of execution.                                                                                                         
                                                                                                                                
MS.  KNUDSEN   explained  that   the  administration   wanted  an                                                               
accountable director  and more vigorous  enforcement of  the law,                                                               
but  it was  also  looking  for cohesion  in  development of  the                                                               
interpretation  of   it.  Currently,  each  panel   considers  an                                                               
individual  case and  those decisions  are not  binding on  other                                                               
panels. Instead,  parties have  to wait for  someone to  take the                                                               
issue up to the Supreme Court.  The board doesn't do it, and that                                                               
means the  action falls on  the employees and employers  who have                                                               
enough  interest vested  in an  issue to  get it  to the  Supreme                                                               
Court and  for the  Supreme Court to  recognize exactly  what the                                                               
issue  is in  terms  of  the workers'  compensation  system as  a                                                               
whole.                                                                                                                          
                                                                                                                                
The  commission  would  take appeals  from  the  hearing  officer                                                               
decisions and  those appeals  would interpret  the law  and those                                                               
decisions would  be binding in subsequent  adjudications. Instead                                                               
of waiting  three or four  years for an  answer to a  question, a                                                               
person  would get  an answer  within a  half year,  a significant                                                               
advantage to this  system. Most states have some  form of appeals                                                               
commission  and  this concept  with  the  power to  give  binding                                                               
guidance  to  the  hearing officers  below  is  not  particularly                                                               
novel.                                                                                                                          
                                                                                                                                
SENATOR RALPH  SEEKINS asked  if she  meant that  getting through                                                               
the Supreme Court  would take six months or  just getting through                                                               
the adjudication.                                                                                                               
                                                                                                                                
MS. KNUDSEN replied  that she meant the commission  would have an                                                               
answer  in approximately  six months.  Currently, Superior  Court                                                               
decisions are  not binding on  anybody other than the  parties in                                                               
that  case.  SB  311  provides  a  mechanism  for  a  system-wide                                                               
interpretation of  the law to  occur on  a quicker basis  than is                                                               
currently the standard.                                                                                                         
                                                                                                                                
     One of the other issues is  that we wanted also to make                                                                    
     sure that people understood that  there was access into                                                                    
     this system. One of the  common complaints that's often                                                                    
     heard is that  people don't have access  to appeals all                                                                    
     the  way  up.  In  other  words,  the  board  makes  an                                                                    
     astonishing  effort,   they  bend  over   backwards  to                                                                    
     provide  access to  unrepresented employees  during the                                                                    
     course  of  the initial  hearing  at  the board  level.                                                                    
     Going  up on  appeal, however,  is another  issue. And,                                                                    
     it's an  issue not  just for the  unrepresented worker,                                                                    
     it also represents a significant  cost to employers and                                                                    
     the cost of appeal is  something they have to consider.                                                                    
     In a  particular case,  the money  involved may  not be                                                                    
     worth the  cost of appeal, although  the principle may.                                                                    
     This  is  not necessarily  a  decision  that is  easily                                                                    
     made,  to go  all the  way to  the Supreme  Court on  a                                                                    
     particular principle.                                                                                                      
                                                                                                                                
     What this does is give  a less expensive alternative to                                                                    
     go  to  get  a   system-wide  interpretation  and  make                                                                    
     specific  provision  for unrepresented  employees.  The                                                                    
     director   may  file   an  appeal   on  behalf   of  an                                                                    
     unrepresented employee where  there's a unsettled issue                                                                    
     of  law....  So  this gives  something  that  increases                                                                    
     access  to  the  commission  level.  In  addition,  the                                                                    
     director  has powers  to  intervene  at the  commission                                                                    
     level in  cases that  are very important,  for example,                                                                    
     to the  administration of the  system, where  there may                                                                    
     be severe impacts  on how things are  done, say, within                                                                    
     reporting  requirements   or  numbers  of   filings  or                                                                    
     service issues or  things like that that  may have some                                                                    
     importance to the director directly.                                                                                       
                                                                                                                                
     So, in  one way  what this  bill does,  is it  tries to                                                                    
     give a voice  in adjudication to people  who don't have                                                                    
     a voice now - in this appeal process.                                                                                      
                                                                                                                                
     Now,  the bill  does represent  something that  is very                                                                    
     important, because  workers' compensation is  really an                                                                    
     incredible  industry  in  this state.  When  you  think                                                                    
     about  it,  it  was  responsible for  $210  million  of                                                                    
     transfers of payments to or  on behalf of Alaskans last                                                                    
     year. Of that,  the state, and by the state  I mean the                                                                    
     state  just  for  its executive  employees,  pays  $1.2                                                                    
     million   to  $1.5   million   a   month  in   workers'                                                                    
     compensation. That's  a lot  of money  and the  cost of                                                                    
     workers' compensation  just isn't  in the  benefits. In                                                                    
     other  words, for  the state,  it's the  people of  the                                                                    
     state, it's  in the cost  of other programs  that can't                                                                    
     be delivered  because there's  money going  to workers'                                                                    
     compensation.  But, it's  really also  the cost  of the                                                                    
     premiums -  you have to add  that in, too. It's  a very                                                                    
     large  industry.  There's  lots  of  money  that  moves                                                                    
     through   this   industry   and  as   a   result,   the                                                                    
     administration  views  this  as having  something  that                                                                    
     really  needs to  come into  a more  stable kind  of an                                                                    
     environment and  a more stable and  accountable kind of                                                                    
     system than what we have now.                                                                                              
                                                                                                                                
     Because the  bill does give  the director the  power to                                                                    
     raise  these administrative  questions,  then you  have                                                                    
     also  got some  consideration  being given  to, if  you                                                                    
     will,  the  systemic  balance in  costs  that  will  be                                                                    
     looked  at, which  now  really  doesn't occur.  There's                                                                    
     very rarely  at this  stage, in this  current system...                                                                    
     occasion  when  the  board, itself,  even  though  it's                                                                    
     technically a named party  on appeal... participates in                                                                    
     the   appeals.  The   idea  was   here  to   give  more                                                                    
     opportunity for that to happen sooner.                                                                                     
                                                                                                                                
     What the administration  is trying to do  here is bring                                                                    
     the State  of Alaska  into the  same process  format as                                                                    
     the rest of  the United States, and  because there will                                                                    
     be a familiar forum for  the resolution of disputes and                                                                    
     a more rapid resolution of  unsettled areas of the law,                                                                    
     that  there will  be developed  more  certainty in  the                                                                    
     system  and it  will be  the kind  of environment  that                                                                    
     insurance companies  are used to working  in. This will                                                                    
     increase  the global  participation in  the market,  we                                                                    
     hope; but  at the same  time, not really  impacting, we                                                                    
     hope, benefits  that are  delivered to  Alaskan injured                                                                    
     workers.                                                                                                                   
                                                                                                                                
     The administration  did not want  to look at  having to                                                                    
     address  some  of  the  kinds   of  reforms  that  have                                                                    
     occurred  in  other  states, for  example,  California,                                                                    
     which notably  just capped medical benefits  at 125% of                                                                    
     Medicaid.  Other states  have also  capped benefits  or                                                                    
     indexed them  in that way.  We first want to  give this                                                                    
     system a chance  to right itself and  develop some kind                                                                    
     of cohesion without having to  go to the idea of having                                                                    
     to look  at any kind  of benefits reduction  to Alaskan                                                                    
     workers.                                                                                                                   
                                                                                                                                
CHAIR  BUNDE said  the hearing  officers  would be  substantially                                                               
compensated  and  asked if  it  was  on  par with  the  expertise                                                               
expected of them.                                                                                                               
                                                                                                                                
MS.  KNUDSEN  replied  yes.  She explained  that  there  are  two                                                               
levels, hearing officers and commission officers.                                                                               
                                                                                                                                
     Hearing  officers in  this system  are  being asked  to                                                                    
     have a higher level of  expertise than is currently the                                                                    
     class  specification. The  range  24  class of  hearing                                                                    
     examiners of  that ilk that  we have now is  what we're                                                                    
     trying to push these  hearing officers into. We're also                                                                    
     looking  at having  a statutory  level of  expertise of                                                                    
     being admitted  to the  Alaska Bar  and those  kinds of                                                                    
     things. The commissioners - we're  asking even more of.                                                                    
     We're asking for even a higher level of expertise....                                                                      
                                                                                                                                
SENATOR  SEEKINS said  it looks  like some  hearing officers  are                                                               
being  reclassified as  administrative  law judges  and asked  if                                                               
they would be separate from the pool of hearing officers.                                                                       
                                                                                                                                
MS. KUNDSEN replied  that they are separate in  the current bill,                                                               
but in earlier versions, provisions  were made for a "flip over,"                                                               
which means the  hearing officers would go into the  pool. It was                                                               
decided  that the  legal provisions  for  the flip  over were  so                                                               
complex that the  anticipation was that the officers  would be on                                                               
the same level as the pool.                                                                                                     
                                                                                                                                
SENATOR HOLLIS FRENCH  said he understood that the  thrust of the                                                               
bill is  to reduce  the cost  of dispute  resolution, but  not to                                                               
reduce benefits.                                                                                                                
                                                                                                                                
MS. KNUDSEN  replied that  it seeks to  reduce the  overall time-                                                               
span of litigation and, hopefully,  reduce the number of cases by                                                               
having more settled questions to work from.                                                                                     
                                                                                                                                
SENATOR FRENCH  followed up asking  what it costs now  to conduct                                                               
the panel system  up to the Supreme Court and  what percentage of                                                               
a workers' compensation premium that represents.                                                                                
                                                                                                                                
MS. KNUDSEN  replied that  she could get  him information  on the                                                               
cost  of appeals  to the  State of  Alaska, but  she didn't  have                                                               
experience with the insurance premiums.                                                                                         
                                                                                                                                
SENATOR FRENCH said he just wanted  to know how much money was at                                                               
stake. He asked  who would the hearing officers in  SB 311 report                                                               
to.                                                                                                                             
                                                                                                                                
MS.  KNUDSEN replied  the  chief commissioner  would  act as  the                                                               
executive of the staff.                                                                                                         
                                                                                                                                
SENATOR  FRENCH asked  if  the  pool is  the  same  thing as  the                                                               
appeals commission.                                                                                                             
                                                                                                                                
MS. KNUDSEN replied yes.                                                                                                        
                                                                                                                                
SENATOR FRENCH asked how the commissioners would be selected.                                                                   
                                                                                                                                
MS.  KUNDSEN  replied  the commissioners  are  appointed  by  the                                                               
governor and confirmed by a  majority of the Legislature in joint                                                               
session.  That is  also the  way  the present  board members  are                                                               
selected.                                                                                                                       
                                                                                                                                
SENATOR FRENCH mused:                                                                                                           
                                                                                                                                
     It seems we  are reinventing the wheel. It  seems as if                                                                    
     one of the benefits of  this appeals commission is that                                                                    
     it is  going to have  binding precedent on  the parties                                                                    
     below  through the  power of  their opinions  that they                                                                    
     release.  But  that  does happen  now  in  the  Supreme                                                                    
     Court.   It's  not   as  if   the  panels   can  ignore                                                                    
     controlling  Supreme  Court precedent  before  them....                                                                    
     They have a  fairly big body of law  that governs where                                                                    
     they are  going. Maybe you  can help me  understand why                                                                    
     this is  such a good idea  by telling me what  sorts of                                                                    
     areas  of law  it is  that are  the most  unsettled and                                                                    
     that you think the panel members now need guidance on.                                                                     
                                                                                                                                
MS. KNUDSEN replied:                                                                                                            
                                                                                                                                
     The Supreme Court  cases do take a long time  to get an                                                                    
     announcement  and while  that's happening,  issues have                                                                    
     come  up that  need to  be resolved...  for example  of                                                                    
     something   off  the   bat,   interpretation  of   what                                                                    
     constitutes  personal attendance.  It's  an issue  that                                                                    
     there  are differing  opinions on  and  it hasn't  been                                                                    
     announced  by the  Supreme Court  - an  interpretation,                                                                    
     for  example, of  what constitutes  good  faith in  the                                                                    
     context of  a mental  stress claim. As  you may  or may                                                                    
     not be aware, one of  the 1988 amendments provided that                                                                    
     mental  stress  that is  the  result  of discipline  or                                                                    
     evaluations  or  promotions,  demotions,  transfers  or                                                                    
     other  employer  action taken  in  good  faith are  not                                                                    
     covered under the  act. So, the issue of  good faith in                                                                    
     that context  is something  that hasn't  been addressed                                                                    
     at the  Supreme Court level.  There are other  kinds of                                                                    
     issues along  that line. The Workers'  Compensation Act                                                                    
     is enormous and  it has enormous impact as  I just told                                                                    
     you.  There's hundreds  of millions  of  dollars in  it                                                                    
     every  year.  It  does   have  enormous  impacts.  This                                                                    
     process,  we   hope,  would   compress  the   time  for                                                                    
     obtaining  some  of  the  answers  to  these  kinds  of                                                                    
     questions.  I will  tell you    also, frankly,  Senator                                                                    
     French,  it may  not be  economical for  some of  these                                                                    
     small unanswered  questions to  go all  the way  to the                                                                    
     Supreme  Court  from  either parties'  point  of  view.                                                                    
     Hopefully,  they  would  be much  more  economical  for                                                                    
     obtaining commission guidance.                                                                                             
                                                                                                                                
MR. JOHN GIUCHICI, IBEW Local 1547, said he also represented                                                                    
himself as a current Workers' Compensation Board member. He                                                                     
thought Ms. Knudsen had a lot of good ideas. [END OF SIDE A]                                                                    
                                                                                                                                
TAPE 04-12, SIDE B                                                                                                            
                                                                                                                                
MR. GUICHICI explained that in 1988 and again in 2000, Workers'                                                                 
Compensation ad hoc committees, composed of 50 percent                                                                          
management and 50 percent labor,  reviewed these bills beforehand                                                               
and came up with unanimous  joint support, but that didn't happen                                                               
this  time.   However,  the  ad   hoc  committee  has   now  been                                                               
resurrected and it is going to  meet on Monday in Anchorage to go                                                               
over this legislation point by point.                                                                                           
                                                                                                                                
MR. GUICHICI thought the board should be preserved because it                                                                   
structurally guarantees that labor and management participate in                                                                
the process.                                                                                                                    
                                                                                                                                
     Having board  members from the  workplace participating                                                                    
     in  the  decision-making  process  provides  a  reality                                                                    
     check for the  whole system. We should  not remove from                                                                    
     the  decision-making process  the only  people who  are                                                                    
     enmeshed in  the workplace. The  board does have  a 45-                                                                    
     year track record and it has worked very well.                                                                             
                                                                                                                                
     A  politically  appointed appeals  commission  tribunal                                                                    
     may   not   provide   the  balance   or   fairness   or                                                                    
     consistency,  which  a  lot of  people  are  advocating                                                                    
     right now.  Even if one administration  appoints a very                                                                    
     highly qualified  appeals commission  tribunal, without                                                                    
     regard  to partisan  politics  or financial  influence,                                                                    
     there's  no  guarantee  that  the  next  administration                                                                    
     would do the same.  Predictably, the commission rulings                                                                    
     would   change   like    a   weathervane   with   every                                                                    
     administration.  Present   board  members   do  provide                                                                    
     institutional  balance.  They  are guaranteed  to  have                                                                    
     different institutional  perspectives coming  from both                                                                    
     labor  and management.  A unified  review of  all cases                                                                    
     consistent  rule  of  law is  provided  by  the  Alaska                                                                    
     Supreme  Court, which  is very  stable and  fairly well                                                                    
     protected from the winds of political change.                                                                              
                                                                                                                                
     Another  point  that  I'd  like to  make  is  that  the                                                                    
     hearing officers should not  be removed from classified                                                                    
     service.  If the  hearing officers  are made  exempt or                                                                    
     partially  exempt, they  will have  reason to  fear for                                                                    
     their  livelihood,  promotions,   etc.,  if  they  rule                                                                    
     against a  powerful or politically connected  party. At                                                                    
     present,  people who  actually  hear  the evidence  and                                                                    
     observe  the witnesses  decide what  the  facts in  the                                                                    
     case are,  if the courts  greatly defer to  the board's                                                                    
     evaluation of  the evidence. This provides  a guarantee                                                                    
     of some degree of fairness  if parties really have been                                                                    
     heard and  the people  who heard the  evidence actually                                                                    
     decide  the case.  In the  proposed legislation,  cases                                                                    
     would be heard and decided  by a single hearing officer                                                                    
     and it  allows review  of the  decisions by  an appeals                                                                    
     commission tribunal. This means  that the tribunal does                                                                    
     not have to give any  weight to the fact-finding of the                                                                    
     person  who actually  heard the  case.  I believe  this                                                                    
     undercuts the  fairness of the process.  [Indisc.] with                                                                    
     the   exception   that   anyone   who   has   political                                                                    
     connections  with  the   appointed  appeals  commission                                                                    
     tribunal may be able to  get a decision overturned by a                                                                    
     phone  call. [Indisc.]  undercuts  the actual  fairness                                                                    
     and accurateness of the process  by allowing people who                                                                    
     did not hear  or see the witnesses  to substitute their                                                                    
     judgment for  the judgment of  the person  who actually                                                                    
     did hear it and see it.                                                                                                    
                                                                                                                                
MR. GIUCHICI said this would also  be a very expensive change and                                                               
thought that  it wouldn't be  fair to  the injured worker  or the                                                               
citizens of Alaska.                                                                                                             
                                                                                                                                
MS. SYLVIA CARLSON,  Anchorage resident, said she  is currently a                                                               
claimant in the  Amchitka case that has been  before the Workers'                                                               
Compensation  Board  for  many  years.  These  cases  began  when                                                               
workers were  knowingly exposed to ionizing  radiation during the                                                               
U.S. Atomic  Energy Commission's  detonations of  nuclear devices                                                               
over  30 years  ago. Her  husband was  32 years  old when  he was                                                               
exposed  and  died when  he  was  40.  Four years  ago,  Congress                                                               
enacted a  provision that compensated workers  of nuclear weapons                                                               
productions  sites  throughout  the country.  The  Department  of                                                               
Energy (DOE) is required to  assist eligible applicants in filing                                                               
state  workers'  compensation  claims. Qualified  applicants  may                                                               
have their medical records  and supporting documentation reviewed                                                               
by a panel  of three independent physicians. The  panel applies a                                                               
federally adopted standard and issues  a determination on whether                                                               
or  not the  illness  or  death was  caused  by  exposure at  the                                                               
workplace. It also assists  applicants by instructing contractors                                                               
not to contest the state  workers' compensation claims that arise                                                               
from  a  favorable physician  panel  determination  and may  also                                                               
reimburse  or indemnify  contractors to  the full  extent of  the                                                               
claims.                                                                                                                         
                                                                                                                                
She received a positive determination  from DOE in April, but DOE                                                               
was unable  to assist her  further by instructing  the contractor                                                               
not to contest her claim or  to reimburse it for reasons that she                                                               
still   doesn't  understand.   Her  claim   under  the   Workers'                                                               
Compensation  system   is  currently   being  contested   by  the                                                               
contractor,  [indisc.] Centennial,  and two  insurance companies,                                                               
Travelers  Insurance Company  and the  Alaska Insurance  Guaranty                                                               
Association. Contractors  appealed to  the Alaska  Superior Court                                                               
to  stay the  case and  review it.  The stay  was denied  and the                                                               
review has  not been  addressed, yet.  Another decision  was made                                                               
yesterday and she  felt it, too, would be appealed  to the Alaska                                                               
Superior Court.  She felt  that the  board would  take 90  to 120                                                               
days to decide the merits of her case.                                                                                          
                                                                                                                                
     If SB  311 becomes law  by the end of  this legislative                                                                    
     session,  its   effect  on  my   case  could   be  very                                                                    
     detrimental  in that  assuming the  board finds  in her                                                                    
     favor, will their decision be  appealed to the Superior                                                                    
     Court or  to the new  Appeals Commission? Will  my case                                                                    
     have to  wait until members  of the new  commission are                                                                    
     appointed  and ready  to hear  cases? If  so, how  long                                                                    
     will the startup process take...?                                                                                          
                                                                                                                                
     There  are over  90 former  Amchitka workers  and their                                                                    
     survivors with  cases waiting to be  heard. On average,                                                                    
     the Amchitka claimants  are in their 70s  and 80s. Many                                                                    
     are very sick with cancer right  now. It seems to me it                                                                    
     would be  unreasonable to  ask them  to wait  yet again                                                                    
     while  the system  is being  revamped. I'm  asking that                                                                    
     this committee  consider the effects  the new  law will                                                                    
     have on the Amchitka cases.  Perhaps the changes can be                                                                    
     made gradually rather than immediately.                                                                                    
                                                                                                                                
MS. CARLSON recommended a mandatory  mediation process before the                                                               
case reaches the appeals stage.                                                                                                 
                                                                                                                                
CHAIR BUNDE  responded that  he was waiting  for the  director of                                                               
the Division of Insurance to get  back to him with information on                                                               
how the  pending Amchitka  claims would  be transitioned  if this                                                               
legislation would be adopted.                                                                                                   
                                                                                                                                
MS. TRENA HEIKES, defense attorney,  said she had been practicing                                                               
in workers'  compensation since 1985.  She reported  that general                                                               
views of SB  311 from others in the field  are favorable, because                                                               
it  raises  the  bar  in   experience  requirements  for  hearing                                                               
officers. Currently, they  don't even need a  license to practice                                                               
or even  a law degree.  She explained that  workers' compensation                                                               
is a "statutory creature" and  is very complex and convoluted; it                                                               
is not  taught in  law school.  She repeated  that this  issue is                                                               
well-received by attorneys on both sides of the table.                                                                          
                                                                                                                                
The appeals commission is well-received,  too, because the bar is                                                               
being  raised on  experience  for  the administrative  tribunals.                                                               
Currently, appeals  are handled at  the Superior Court  level and                                                               
from there,  go to the Alaska  Supreme Court. She didn't  know of                                                               
any  judges currently  on the  bench  who had  any experience  in                                                               
workers' compensation. That whole  appeal level slows the process                                                               
down. This  bill streamlines  that process  and puts  the initial                                                               
appellate level before attorneys  who have experience in workers'                                                               
compensation.                                                                                                                   
                                                                                                                                
     The only  negative that  we can see,  and I  think it's                                                                    
     been   expressed  before,   is   what  we   see  as   a                                                                    
     politicalization,   if  you   will,   of  the   appeals                                                                    
     commission  by a  direct appointment  by the  governor.                                                                    
     Workers' comp,  at least the board,  is an adjudicatory                                                                    
     body and  as such it  needs to maintain  a separateness                                                                    
     from  the  Legislative  branch and  the  administrative                                                                    
     branch as best  it can, understanding that  it is under                                                                    
     the administrative branch....                                                                                              
                                                                                                                                
     Instead, what I  think is being discussed  is perhaps a                                                                    
     modification   where  you   have   the  equivalent   of                                                                    
     selection  through  the  process  that  we  select  our                                                                    
     district and superior court judges,  which is some sort                                                                    
     of a  commission setup comprised  of attorneys  and lay                                                                    
     members  who interview  prospective candidates  for the                                                                    
     appeals  commission  position  and select  through  the                                                                    
     interviewing process three names  for each position and                                                                    
     submits those  to the  governor. That's  the equivalent                                                                    
     of what we  now do for our district  and superior court                                                                    
     judges.  There's also  a Bar  poll, but  I don't  think                                                                    
     that  would  be  something  that  you  would  need  for                                                                    
     workers'  compensation.   But  that   is  one   way  to                                                                    
     depoliticize that selection process.                                                                                       
                                                                                                                                
MR. DOUG WOOLIVER, Administrative Attorney, Alaska Court System,                                                                
said  the Court  doesn't take  a position  on the  merits of  the                                                               
bill,  but he  wanted to  explain the  impact that  one provision                                                               
would have. It is the provision  that allows appeals from the new                                                               
appeals commission to go directly  to the Supreme Court bypassing                                                               
the Superior Court.                                                                                                             
                                                                                                                                
     In  the past  number of  years, the  court system  as a                                                                    
     whole has seen  about 36 workers' comp cases  a year on                                                                    
     appeals from  the agency to  the Superior  Court. About                                                                    
     75 percent of those are  resolved at the Superior Court                                                                    
     level. About 25 percent of  those, or about 9 cases per                                                                    
     year, are appealed on further to the Supreme Court.                                                                        
                                                                                                                                
     The  court   doesn't  believe  that  by   changing  the                                                                    
     commission  process, they  are  likely  to reduce  very                                                                    
     much  of that  total  number  of 36  cases  a year.  We                                                                    
     believe  that  for a  couple  of  reasons. One,  you're                                                                    
     always  going  to  have  a  certain  level  of  appeals                                                                    
     anyway.  Right   now  the  board  averages   275  final                                                                    
     resolutions each  year and we  get about 13  percent of                                                                    
     those....                                                                                                                  
                                                                                                                                
     There are different  types of appeals. You  get a merit                                                                    
     appeal simply  because regardless  of how good  the new                                                                    
     expert  panel is,  they are  just  like Superior  Court                                                                    
     judges....  There will  always be  a novel  legal issue                                                                    
     that is raised  each year. Those will  continue to come                                                                    
     to the  Supreme Court.  Additionally, even  though this                                                                    
     body  seeks to  be  independent, it's  still under  the                                                                    
     administrative  proceeding.  Some people  simply  don't                                                                    
     trust administrative proceedings;  they don't trust the                                                                    
     final outcome.  It's a small percentage  of people, but                                                                    
     we're only talking about 36 cases a year.                                                                                  
                                                                                                                                
MR. WOOLIVER said that some people  want their day in court and a                                                               
certain  percentage are  tenacious and  would appeal  regardless.                                                               
"So, the  difference will be  that rather than having  75 percent                                                               
of them  resolved in Superior Court,  we will see all  36 of them                                                               
at the Supreme Court."                                                                                                          
                                                                                                                                
He said  that an important feature  of the current system  is the                                                               
attempt at balancing the interests  of labor and the interests of                                                               
management on  the panels. Nothing  in the current  bill attempts                                                               
to  strike  a balance  between  those  two, sometimes  competing,                                                               
interests. The court's concern is  there might be more appeals if                                                               
one side  or the  other feels the  commission benefits  the other                                                               
guy. The  fiscal note does  not assume that increase.  There will                                                               
be a  savings from the  25 percent  of Superior Court  cases that                                                               
are appealed  to the  Supreme Court,  because the  Superior Court                                                               
will be cut out.                                                                                                                
                                                                                                                                
He is concerned about the other  75 percent of the cases that get                                                               
resolved at the Superior Court  level, because the Superior Court                                                               
is a committee  of one while the Supreme Court  is a committee of                                                               
five. Opinions are drafted, circulated,  amended by other members                                                               
and recirculated until there is  a consensus. "You will save time                                                               
in 25  percent of  the cases,  but add  on time  to the  other 75                                                               
percent."                                                                                                                       
                                                                                                                                
MR. WOOLIVER  explained that  the fiscal note  adds staff  at the                                                               
Supreme Court  level to more  quickly resolve those cases  and to                                                               
offset  the inevitable  impact additional  cases  at the  Supreme                                                               
Court level  will have  on all  of the  other matters  before the                                                               
court.                                                                                                                          
                                                                                                                                
SENATOR FRENCH commented:                                                                                                       
                                                                                                                                
     I  would  just  remark  in your  committee  of  one  at                                                                    
     Superior Court  level, you  left out  the all-important                                                                    
     law clerk,  who actually  writes that opinion  and just                                                                    
     gets the  judge to  sign off  on it,  but I  agree that                                                                    
     they are hard-working and they get the job done.                                                                           
                                                                                                                                
SENATOR GARY  STEVENS said the proposal  seems to professionalize                                                               
the commission by bringing in more attorneys and asked:                                                                         
                                                                                                                                
     Wouldn't the  fact that precedence  is being set  and a                                                                    
     record established,  wouldn't that  ease the  number of                                                                    
     cases that  are appealed  to the  Supreme Court  in the                                                                    
     proposed structure  or do you  think they would  not be                                                                    
     of any assistance at all?                                                                                                  
                                                                                                                                
MR.  WOOLIVER replied  that  he just  didn't  think changing  the                                                               
professional  level  of  the board  would  reduce  the  caseload.                                                               
Judges have  said their view  is not  that they are  seeing cases                                                               
because they  are incompetently decided.  "They are  seeing cases                                                               
for the reasons that I've explained."                                                                                           
                                                                                                                                
MR.  DON  ETHERIDGE,  American Federation  of  Labor-Congress  of                                                               
Industrial Organizations  (AFL-CIO), asked the committee  to hold                                                               
SB 311 so that  the ad hoc committee could have  a chance to look                                                               
at its Monday meeting. He  was incensed that labor and management                                                               
had been entirely  left out of discussions on this  issue so far.                                                               
He  was also  alarmed about  the speed  with which  this bill  is                                                               
being heard.                                                                                                                    
                                                                                                                                
SENATOR  FRENCH  asked  how  long   he  anticipated  the  ad  hoc                                                               
committee would take to come to a position on the bill.                                                                         
                                                                                                                                
MR. ETHERIDGE replied that it is  meeting on Monday and he had no                                                               
idea how long it would take them to look at it.                                                                                 
                                                                                                                                
CHAIR  BUNDE  said he  hoped  the  committee would  expedite  its                                                               
review of the bill and said he would hold it for the time being.                                                                

Document Name Date/Time Subjects