Legislature(2003 - 2004)
02/26/2004 01:37 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.