Legislature(2003 - 2004)

02/26/2004 01:37 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 announced SB 311 to be up for consideration.                                                                    
                                                                                                                                
MS. LINDA  HALL, Director, Division  of Insurance,  Department of                                                               
Community &  Economic Development  (DCED), said she  would answer                                                               
questions that  had been  asked in  the last  couple of  days and                                                               
that   first,    Director   Lisankie,   Division    of   Workers'                                                               
Compensation,  would explain  the transition  process for  people                                                               
currently  in  the  system.  She   would  address  Chair  Bunde's                                                               
question  about  the cost  of  attorney  fees and  litigation  in                                                               
relation  to   premium  and  then   she  would  comment   on  the                                                               
appointment process.                                                                                                            
                                                                                                                                
MR. PAUL  LISANKIE, Director, Division of  Workers' Compensation,                                                               
Department of Labor and  Workforce Development (DOLWD), addressed                                                               
the question about  a woman who gets  workers' compensation based                                                               
on her spouse's  work experience with atomic  testing in Amchitka                                                               
in the 1970s. She was having  a hearing before the board in March                                                               
and wanted to know how SB  311 would affect her claim because its                                                               
effective date is  July 1, 2004 and provides  that anything being                                                               
heard  before the  board as  of that  date would  continue to  be                                                               
heard  until 45  days afterwards.  He did  not believe  her claim                                                               
would be affected.                                                                                                              
                                                                                                                                
     If  she  wished to  appeal,  she  would appeal  to  the                                                                    
     Superior  Court. The  only thing  I  would add  is...if                                                                    
     there was  someone else  who had a  claim based  on the                                                                    
     Amchitka testing and if  their hearing wasn't concluded                                                                    
     under the  current law before  July 1, then  they would                                                                    
     be susceptible  to the changes  just like  anybody else                                                                    
     would. There  is nothing specific to  an Amchitka claim                                                                    
     that would affect it.                                                                                                      
                                                                                                                                
SENATOR HOLLIS  FRENCH asked if  the Amchitka claim  person would                                                               
operate under  the old system  for 45 days or  to the end  of her                                                               
claim.                                                                                                                          
                                                                                                                                
MR. LISANKIE clarified:                                                                                                         
                                                                                                                                
     The  45  days  is  just a  closeout  period  after  the                                                                    
     effective date so  that anything that was  heard by the                                                                    
     effective  date   by  the   existing  board   would  be                                                                    
     determined by  the existing board.  They would  have 45                                                                    
     days after the  effective date to wrap  up any decision                                                                    
     they hadn't gotten  out by then. So,  it would continue                                                                    
     in the current system. It would not change.                                                                                
                                                                                                                                
SENATOR FRENCH  pointed out  if further  fact finding  or another                                                               
hearing was  necessary, she might not  have a board to  appear in                                                               
front of if the commission had started functioning.                                                                             
                                                                                                                                
MR. LISANKIE  responded that his  answer would only apply  to her                                                               
current claim. If a hearing  took place after the effective date,                                                               
the new provisions would apply.                                                                                                 
                                                                                                                                
SENATOR FRENCH  said this woman does  not have a new  claim; it's                                                               
just taking a long time to resolve.                                                                                             
                                                                                                                                
MR.  LISANKIE said  he understood  Senator French's  question now                                                               
and answered:                                                                                                                   
                                                                                                                                
     I  believe you're  correct that  the hearing  that took                                                                    
     place would be  resolved in the current  system, but if                                                                    
     for  some reason  another hearing  was to  be scheduled                                                                    
     after the  effective date, then  it would be  under the                                                                    
     new system.                                                                                                                
                                                                                                                                
CHAIR BUNDE reminded  the committee that he had  a question about                                                               
the appointment process  and asked if the  commissioners would be                                                               
appointed and confirmed.                                                                                                        
                                                                                                                                
MS. HALL replied:                                                                                                               
                                                                                                                                
     Generally,  the appointment  process  in  this bill  is                                                                    
     exactly the same as the  current appointment process is                                                                    
     for the board. They would  be nominated by the governor                                                                    
     and  confirmed by  the Senate....  The change  is these                                                                    
     would now become fulltime  positions, but there's still                                                                    
     an executive  position for a limited  term. They're not                                                                    
     court  positions;  they're   administrative  law  judge                                                                    
     positions,  which  normally  aren't  vetted  through  a                                                                    
     third party screening process. One  of the things we've                                                                    
     talked  about  after  the question  came  up  is  there                                                                    
     are...not  large   numbers  of   workers'  compensation                                                                    
     attorneys. So, it's a fairly  small pool and experience                                                                    
     and reputations  are not as  well-known as  other types                                                                    
     of attorneys tend to be....  So, we have a concern that                                                                    
     a judicial  council would even have  sufficient numbers                                                                    
     of  people  to   interview  and  make  recommendations.                                                                    
     Generally,  my comment  on that  is that  nothing would                                                                    
     prohibit   a   governor   from   seeking,   informally,                                                                    
     recommendations from various  organizations and I would                                                                    
     anticipate that  that would occur. It  does, typically,                                                                    
     today in board positions.                                                                                                  
                                                                                                                                
CHAIR BUNDE said the ad hoc group wanted to have input and he                                                                   
asked how long this bill had been in the public domain and if                                                                   
any attempt had been made to share it with that group.                                                                          
                                                                                                                                
MS. HALL replied that the ad hoc committee was not consulted in                                                                 
the process of this particular bill.                                                                                            
                                                                                                                                
     The  bill genesis  came from  primarily me  - not  that                                                                    
     piece of it. But, primarily  the pieces I have proposed                                                                    
     in  legislation and  administratively are  dramatically                                                                    
     increasing  the  cost   of  workers'  compensation  for                                                                    
     employers. I've  made a proposal, as  you're all aware,                                                                    
     because we've  heard it in this  committee, to increase                                                                    
     assessments  for the  Guaranty Fund.  Effective January                                                                    
     1, the rate approval done  by the Division of Insurance                                                                    
     averaged  22 percent.  We have  an  increasing cost  of                                                                    
     claims and, as I put  forth legislation that I know has                                                                    
     an impact on the  availability of workers' compensation                                                                    
     the goal was to find a  way to, frankly, put a light at                                                                    
     the  end of  the tunnel,  to  attempt to  find ways  to                                                                    
     start to get some control  over the claim costs. I will                                                                    
     talk about litigation also and  to find ways to do that                                                                    
     without reducing benefits to  workers. I think that was                                                                    
     an important element of what  we looked at. This was, I                                                                    
     think,  in our  minds a  systemic change  to streamline                                                                    
     and bring predictability into  the appeals process, not                                                                    
     to change benefits.                                                                                                        
                                                                                                                                
     I  think  there  are  very   important  issues  and  we                                                                    
     discussed  them  a little  bit  when  we discussed  the                                                                    
     Oregon system.  I think there  are issues that  need to                                                                    
     be  addressed that  could affect  benefits, that  could                                                                    
     affect  reemployment benefits,  various things,  that I                                                                    
     think are  very appropriate  for a  group of  labor and                                                                    
     management to get  together and discuss and  to work on                                                                    
     and have  input.... I think,  if that sheds  any light,                                                                    
     the short answer was no, we didn't take it to them.                                                                        
                                                                                                                                
SENATOR   RALPH  SEEKINS   said   he  felt   it  incumbent   upon                                                               
legislators, since they  have made this the  exclusive remedy, to                                                               
make sure  that worker's compensation claims  are resolved fairly                                                               
and in a timely fashion. At  the same time, they should make sure                                                               
the compensation is  adequate and fair to the  injured worker. He                                                               
asked her  if this legislation  meets those hurdles and  what are                                                               
the major  benefits to  the state  and the  workers that  she has                                                               
laid out in the bill.                                                                                                           
                                                                                                                                
MS. HALL replied:                                                                                                               
                                                                                                                                
     To  me the  major  benefit is  a  more efficient,  more                                                                    
     predictable  system  -  that  as  cases  are  heard  by                                                                    
     hearing officers or the appeals  commission, there is a                                                                    
     precedent  set  that  can   then  allow  other  injured                                                                    
     workers or employers  who take exception to  a ruling -                                                                    
     maybe  to  a  decision  of  an  insurance  company,  to                                                                    
     wherever that dispute comes from  - that allows that to                                                                    
     be adjudicated more quickly  and more efficiently. But,                                                                    
     we  have  a precedent  so  that  we have  something  to                                                                    
     evaluate. Do I  have a claim? Has this  case been heard                                                                    
     and a  definitive type  of answer  given as  to whether                                                                    
     this  is   compensable  or   not,  whether   these  are                                                                    
     appropriate benefits.  That is  the advantage I  see to                                                                    
     the system. [END OF SIDE A]                                                                                                
                                                                                                                                
TAPE 04-15, SIDE B                                                                                                            
                                                                                                                                
MS. HALL continued:                                                                                                             
                                                                                                                                
     In 2002, for  example, we had $202  million of workers'                                                                    
     compensation premium; $11 million  of that was expended                                                                    
     in  attorney   fees,  approximately  5   percent;  $1.2                                                                    
     million in  actual litigation costs, about  .6 percent.                                                                    
     I did that for five  years. The percentages of attorney                                                                    
     fees  ranged from  a high  in  1998 of  7.8 percent  of                                                                    
     actual premium  dollar to a  low in 2002 of  5 percent.                                                                    
     So, they  have been  going down  - not  steadily; there                                                                    
     are  jagged peaks.  Litigation costs  have gone  from a                                                                    
     high of 1.7 percent of earned  premium to - 2002 was .6                                                                    
     percent,  a   little  bit  higher  than   the  2001  .5                                                                    
     percent.... Attorney fees range from  5 to 7 percent of                                                                    
     the cost of premium.                                                                                                       
                                                                                                                                
CHAIR BUNDE asked what the total premium is.                                                                                    
                                                                                                                                
MS. HALL answered the total premium was $202 million in 2002. In                                                                
1998, it was $132 million.                                                                                                      
                                                                                                                                
CHAIR BUNDE announced that it was not his intention to move the                                                                 
bill today in order to have further input.                                                                                      
                                                                                                                                
MR. JIM ROBISON, Alaska resident for 58 years, said he is a 55-                                                                 
year member of Laborers Local 331, a former president of the                                                                    
AFL-CIO, a former workers' compensation board member and a                                                                      
former commissioner of the Department of Labor. He said:                                                                        
                                                                                                                                
     I've been  involved with  workers' compensation  a long                                                                    
     time.  The   Workers'  Compensation  Act  has   been  a                                                                    
     political  football  ever  since Governor  J.P.  Strong                                                                    
     spoke  to the  1915 Territorial  Legislature about  the                                                                    
     need to cover the injured  worker. In 1981, in order to                                                                    
     get  rid  of the  politics  as  much as  possible,  the                                                                    
     Alaska AFL-CIO  and the Associated  General Contractors                                                                    
     of  Alaska agreed  to a  workers'  compensation ad  hoc                                                                    
     committee to  review the  Workers' Compensation  Act to                                                                    
     see if any  changes were needed and  it jointly lobbied                                                                    
     the  governor and  the Legislature  on any  agreed-upon                                                                    
     legislation to improve the act.                                                                                            
                                                                                                                                
     We convene  this committee  as needed.  In the  past 23                                                                    
     years, we  have had  the support  of the  governors and                                                                    
     the Legislature  in our efforts.  At the  present time,                                                                    
     the  ad hoc  committee represents  the employer  and is                                                                    
     comprised  of Vic  Kattenaugh,  Judith Peterson,  April                                                                    
     Wiley, Laura  Jackson and John Garrett.  And for labor,                                                                    
     the representatives  are Kevin Dougherty,  myself, Dave                                                                    
     Ford,  John Giuchici  and  Barbara Huff-Tuckness.  This                                                                    
     committee will meet  on March 2 to  review and consider                                                                    
     SB  311  and  I'll   convey  the  timeframes  you  have                                                                    
     outlined so that we can  jointly give our views on this                                                                    
     bill.                                                                                                                      
                                                                                                                                
     Mr.  Chairman, I'm  not here  representing  the ad  hoc                                                                    
     committee, I'm  only representing  myself, but  this is                                                                    
     an important  bill and  I thank you  for holding  it in                                                                    
     committee  to  receive  the  input   from  the  ad  hoc                                                                    
     committee.                                                                                                                 
                                                                                                                                
SENATOR  SEEKINS wondered  why the  scope of  people who  want to                                                               
comment  on  this   bill  had  not  been   broadened  beyond  the                                                               
Association of General  Contractors to the rest  of the employers                                                               
in the State of Alaska.                                                                                                         
                                                                                                                                
MR. ROBISON explained  that the Chamber of Commerce  was asked by                                                               
the employer group to become involved,  but it didn't want to and                                                               
he didn't know why.                                                                                                             
                                                                                                                                
MS.  PAM LABOLLE,  President, Alaska  State Chamber  of Commerce,                                                               
supported  SB  311.  Members  feel  that  elements  in  it  favor                                                               
improvement of the system.                                                                                                      
                                                                                                                                
MS.  PATRICIA WILSON,  Harbor Adjustment  Services, supported  SB                                                               
311 and echoed previous comments  about how it would increase the                                                               
efficiency  and  predictability   of  the  workers'  compensation                                                               
system. The  current system is  frustrating for both  the injured                                                               
workers and the people who handle their claims.                                                                                 
                                                                                                                                
MS.  SUSAN   DANIELS,  Vice  President,   Workers'  Compensation,                                                               
Northern Adjusters, said it inherited  the 700 Fremont insolvency                                                               
claims in July 2003 and they  are in all different stages of this                                                               
process. She supported SB 311 and said:                                                                                         
                                                                                                                                
     I  think   the  underlying  premise  is   important  to                                                                    
     recognize that the legislative  intent and the workers'                                                                    
     comp laws don't  seem to be our  major stumbling block,                                                                    
     but rather  the adjudication  process, the  delays, the                                                                    
     lack of a simple speedy  remedy for the injured workers                                                                    
     and  people involved  in the  decision making  on these                                                                    
     cases.  It's become  very complicated  and the  law, in                                                                    
     terms   of   paying   or  denying   claims,   is   very                                                                    
     inconsistent. So, many times  adjusters were faced with                                                                    
     the  decision of  whether  a claim  is  covered or  not                                                                    
     based on  a substantial  amount of grey  area -  end up                                                                    
     having to refer  a lot more cases  to defense attorneys                                                                    
     for a legal  opinion, which is not  only increasing the                                                                    
     cost of the attorney fee  end, but, short of that, more                                                                    
     claims  are being  paid  than  perhaps the  legislative                                                                    
     intent of the law intended to be covered.                                                                                  
                                                                                                                                
MR. MIKE  KLAWITTER, Director, Risk Management,  Anchorage School                                                               
District, said his district has  about 6,500 employees and is one                                                               
of the largest  self-insurers in the state. He thought  SB 311 is                                                               
a  positive step  for  workers' compensation  in  Alaska for  the                                                               
reasons already stated, particularly efficiency and consistency.                                                                
                                                                                                                                
MS. CONSTANCE  LIVSEY, Anchorage attorney,  said the bulk  of her                                                               
practice   is   representing   employers  before   the   Workers'                                                               
Compensation Board.  She supported SB  311 and wanted  to clarify                                                               
two aspects of it.                                                                                                              
                                                                                                                                
     First, this  bill does not  in any way remove  or alter                                                                    
     the presumption  of compensability in favor  of injured                                                                    
     workers. That  presumption, for those  of you  who like                                                                    
     to  thumb  through  the legislation,  is  found  in  AS                                                                    
     23.30.120. The  bill does  not alter  that in  any way.                                                                    
     This is purely  a matter of procedure and  not a matter                                                                    
     of  substance. The  bill  is also  not  the product  of                                                                    
     collaboration  between  the   administration  and  WCCA                                                                    
     [Workers'  Compensation Committee  of Alaska].  We were                                                                    
     not involved in the drafting  of the bill and, in fact,                                                                    
     WCCA  first  got  a  copy  of the  bill  after  it  was                                                                    
     generally  available on  the  street  sometime in  late                                                                    
     January.                                                                                                                   
                                                                                                                                
     Let me  speak to a  couple aspects  of the bill  that I                                                                    
     believe  will  significantly improve  the  adjudication                                                                    
     process  for the  contested or  litigated workers  comp                                                                    
     claims.  The two-tier  system proposed  in the  bill to                                                                    
     create both a hearing  officer level and a commissioner                                                                    
     level would  significantly accelerate  the adjudication                                                                    
     process.  In fact,  that two-tier  system  is far  more                                                                    
     common around the country than  the system we now have.                                                                    
     The proposed  structure, I  believe, would  elevate the                                                                    
     qualifications  of   the  decision-makers   and  that's                                                                    
     significant  because workers'  compensation  is a  very                                                                    
     arcane  area of  the law.  It's a  unique set  of laws;                                                                    
     it's  a unique  body of  procedure. It's  not something                                                                    
     you wake up in the morning knowing how to do.                                                                              
                                                                                                                                
     If    we   have    decisions   made    by   experienced                                                                    
     practitioners,  I'm  convinced  you'll have  a  process                                                                    
     that is  fairer, that  is faster  and that  offers more                                                                    
     certainty.  Surely, that  benefits all  parties. As  it                                                                    
     stands  now, one  board panel  can  reach a  conclusion                                                                    
     different  from that  reached by  another board  panel.                                                                    
     One superior  court judge can  reach a  conclusion that                                                                    
     is  different than  that  reached  by another  superior                                                                    
     court judge. And so, as  Ms. Daniels testified, you end                                                                    
     up  with  a great  deal  of  inconsistencies that  cost                                                                    
     litigation.  That  benefits  no  one....  The  superior                                                                    
     court appeals  process is lengthy. It  commonly takes a                                                                    
     year or  a year and  a half  to get the  matter briefed                                                                    
     and decided. You can get,  as I mentioned, inconsistent                                                                    
     rulings  that have  no  binding  precedential value  on                                                                    
     other  cases. And  quite  frankly,  the superior  court                                                                    
     judges  are primarily  trial court  judges, not  appeal                                                                    
     judges. I don't  get the impression that  they have any                                                                    
     significant   experience   in   workers'   compensation                                                                    
     matters and  it simply  is a  disfavored area  of their                                                                    
     workload.                                                                                                                  
                                                                                                                                
     Finally, a  superior court  decision carries  no weight                                                                    
     at  [indisc].  It's an  odd  rule  and one  with  which                                                                    
     people may not be generally  familiar, but in an appeal                                                                    
     from  the administrative  agency  decision, the  Alaska                                                                    
     Supreme  Court  gives  no   deferential  value  to  the                                                                    
     superior court's decision. In  other words, they simply                                                                    
     directly review  the decision of the  board. Simply put                                                                    
     then,  the  entire year,  year  and  a half,  worth  of                                                                    
     superior court  process lends  nothing to  the ultimate                                                                    
     decision. For  all of those reasons  and several others                                                                    
     I probably don't have time for  today, I urge a vote in                                                                    
     favor or this bill.                                                                                                        
                                                                                                                                
CHAIR BUNDE asked for any other comments and upon hearing none,                                                                 
set the bill aside.                                                                                                             

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