Legislature(2017 - 2018)BELTZ 105 (TSBldg)

04/02/2018 09:00 AM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time & Date --
Moved CSSSSB 112(L&C) Out of Committee
Moved CSSB 38(L&C) Out of Committee
Scheduled but Not Heard
Heard & Held
Moved CSHB 79(FIN) Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
              HB  79-OMNIBUS WORKERS' COMPENSATION                                                                          
10:07:22 AM                                                                                                                   
CHAIR  COSTELLO   reconvened  the   meeting  and   announced  the                                                               
consideration of  HB 79. [CSHB  79(FIN) was before  the committee                                                               
and this is the first hearing.]                                                                                                 
10:10:40 AM                                                                                                                   
HEIDI  DRYGAS, Commissioner,  Department of  Labor and  Workforce                                                               
Development  (DOLWD), Juneau,  Alaska,  said HB  79 improves  the                                                               
department's  ability  to  administer the  Workers'  Compensation                                                               
Division. Last  year they presented  companion bill SB 40  to the                                                               
committee. Since  then HB 79 made  its way through the  House and                                                               
has seen  changes and improvements.  It is an  efficiencies bill.                                                               
It  modernizes  the  system, which  has  not  been  significantly                                                               
reformed in  more than 10 years.  It speeds up the  resolution of                                                               
disputes,   improves  the   delivery  of   benefits  to   injured                                                               
employees,   deters   workers'    compensation   fraud,   reduces                                                               
administrative  costs,  and  provides adequate  funding  for  the                                                               
administration  of the  workers' compensation  system. HB  79 was                                                               
well  vetted  and passed  in  the  House  with support  from  the                                                               
minority and majority.                                                                                                          
10:11:55 AM                                                                                                                   
MARIE   MARX,  Director,   Division  of   Workers'  Compensation,                                                               
Department of  Labor and  Workforce Development  (DOLWD), Juneau,                                                               
Alaska,  said she  always starts  with  the department's  mission                                                               
when she presents  on workers' compensation. It is  to ensure the                                                               
quick, efficient,  fair, and predictable delivery  of benefits to                                                               
injured workers at  a reasonable cost to  employers. She directed                                                               
attention to the  slide showing the other pillars  that guide the                                                               
division's administration of  Alaska's Workers' Compensation Act.                                                               
The  governor's  bill focuses  on  the  fairness, quickness,  and                                                               
efficiency of the workers' compensation process.                                                                                
MS. MARX  said she  would present  the bill  by topic  instead of                                                               
numerical order.  Each section is  listed by topic and  she would                                                               
refer to page numbers as they work through HB 79, version N.                                                                    
MS.  MARX  first  addressed  the topic  of  speeding  up  dispute                                                               
resolution. She  said HB 79  simplifies and quickens  the hearing                                                               
process by letting  the board schedule a hearing  shortly after a                                                               
claim  is filed  instead  of  waiting until  one  of the  parties                                                               
requests a hearing, which can be many years down the road.                                                                      
MS.  MARX said  it  changes who  may represent  a  claimant in  a                                                               
workers' compensation  hearing. Now a non-attorney  may represent                                                               
parties. The  bill proposes that anyone  authorized by regulation                                                               
of  the board  may  represent parties.  They  have had  instances                                                               
where   non-attorneys  who   were  not   bound  by   ethical  and                                                               
professional  rules represented  someone,  such as  a brother  or                                                               
spouse, before the board. Often,  that person's assistance is not                                                               
helpful but  delays outcomes  for injured  workers. At  first the                                                               
bill said  non-attorneys may not  represent parties,  but through                                                               
the hearing process, this was changed.                                                                                          
She said  HB 79 streamlines settlement  agreements by eliminating                                                               
a requirement  that the board  approve attorney fees if  fees are                                                               
the only issue that requires  board approval. It also streamlines                                                               
the  process of  imposing  civil penalties  against an  uninsured                                                               
employer by allowing the division  to assess the penalty directly                                                               
rather  than  petitioning  the  board  to  set  the  penalty.  An                                                               
employer may appeal the penalty before the board.                                                                               
MS. MARX addressed the second  topic of improving the delivery of                                                               
medical care.  She said  currently no  language addresses  if and                                                               
when a provider's  written request for medical  care, usually for                                                               
surgery, must  be preauthorized.  The bill requires  an insurance                                                               
company or self-insured employer  to preauthorize or deny medical                                                               
treatment  within  60  days  of   a  medical  provider's  written                                                               
request. This gap has led to  a lot of litigation and delayed the                                                               
delivery of  care to  injured workers. The  bill does  not change                                                               
the requirement that  medical bills must still be  paid within 30                                                               
10:16:21 AM                                                                                                                   
SENATOR GARDNER said  60 days seems like a long  time to wait for                                                               
surgery. She asked why 60 days was selected.                                                                                    
MS. MARX  said the  only duty the  employer has now  is to  pay a                                                               
medical bill  within 30  days of  receiving it.  By the  time the                                                               
medical  bill  is  received  by   the  self-insured  employer  or                                                               
insurance  company,  the care  has  already  happened. They  have                                                               
already had the opportunity for  one of their doctors to evaluate                                                               
the  injured  worker. It  is  different  for preauthorization  of                                                               
surgery, which  is generally very  expensive surgery.  Sixty days                                                               
would give time  the employer or insurance company  time to refer                                                               
to the worker to a physician  of their choice and get the medical                                                               
records from the doctors. At  times it's difficult to get medical                                                               
records within 45 days. Now  the injured worker needs surgery and                                                               
the  doctor won't  move forward  without the  certainty of  being                                                               
paid. The  worker doesn't want  to be  on the hook  either. Sixty                                                               
days was  a compromise to  balance the injured worker's  need for                                                               
care and efficiency and reasonable cost for the employer.                                                                       
10:18:24 AM                                                                                                                   
MS. MARX  addressed the issue of  misclassification before moving                                                               
on.  She   said  not  tackling   misclassification  is   a  great                                                               
disservice to  workers and  law-abiding businesses.  When workers                                                               
are  fraudulently  misclassified,  workers die  or  are  severely                                                               
injured  and huge  uninsured  losses  can put  a  company out  of                                                               
business. They  must keep workers safe  and law-abiding employers                                                               
should not have to pay the price for misclassification.                                                                         
She then  took up the  third topic, strengthen  fraud provisions.                                                               
She  said   HB  79  strengthens  fraud   provisions  by  defining                                                               
misclassification and when it amounts to fraud.                                                                                 
She said  there is no  affirmative duty  to report work  or wage-                                                               
loss benefits.  If asked, workers  cannot misrepresent  that, but                                                               
there is not an affirmative duty  to tell an insurance company or                                                               
self-insured  company that  they  are receiving  benefits. HB  79                                                               
does impose an  affirmative duty on the injured  worker to report                                                               
their injury.                                                                                                                   
MS. MARX  said currently  a loophole  exists where  LLCs [limited                                                               
liability companies]  escape liabilities  for benefits  and civil                                                               
penalties because the  act was created when  corporations were in                                                               
existence.  The   bill  will  make  LLCs   that  operate  without                                                               
insurance  just as  liable as  corporate  officers for  uninsured                                                               
injuries and penalties.                                                                                                         
She said  the bill defines  independent contractor, which  is the                                                               
biggest change since  the committee heard SB  40. This definition                                                               
is  the  result  of  working with  many  stakeholder  groups  who                                                               
initially  vehemently  opposed   the  original  definition.  This                                                               
definition is a result of  collaboration between stakeholders and                                                               
the  department. The  definition will  accomplish the  mission of                                                               
preventing fraud  and misclassification while also  ensuring that                                                               
bona  fide  independent  contractors   continue  to  operate  and                                                               
She said  HB 79 allows the  Benefits Guaranty Fund, which  is the                                                               
injured workers fund,  to file a lien for  compensation and civil                                                               
penalties.  The  Benefits Guaranty  Fund  pays  a claim  when  an                                                               
employer  does not  carry  insurance.  Then the  fund  has to  be                                                               
reimbursed by the  uninsured employer. By the  time that happens,                                                               
the assets are  gone. An injured worker already has  the right to                                                               
file a lien.                                                                                                                    
10:22:07 AM                                                                                                                   
MS. MARX  said HB 79  expands the  division's ability to  asses a                                                               
civil penalty  to include employers who  are underinsured because                                                               
they have  misclassified workers  in a variety  of ways.  Now the                                                               
division only has the ability to  assess a penalty for failing to                                                               
carry any  insurance. The  bill changes  the calculation  and the                                                               
maximum  civil penalty.  The maximum  penalty now  is $1,000  for                                                               
each   uninsured  employee   workday,  which   has  resulted   in                                                               
astronomically  high penalties  that  employers  cannot pay.  The                                                               
calculation  of these  penalties doesn't  survive appeal  and has                                                               
led  to a  lot  of  litigation. The  employers  who  do not  keep                                                               
records on the number of employers they have are rewarded.                                                                      
She said the maximum penalty in  HB 79 is three times the premium                                                               
an  employer  should  have  paid. HB  79  a  simpler  calculation                                                               
because  it only  requires the  employer's overall  payroll data.                                                               
The new penalty will result  in a reasonable deterrent that takes                                                               
into account  the employer's  size, the  nature of  the business,                                                               
and the  financial gain the  employer realized by not  paying the                                                               
full workers'  compensation insurance.  She provided  an example.                                                               
Their hope  is that if penalties  are more in line  with reality,                                                               
the division will be able  to collect more. These penalty amounts                                                               
go to the  injured worker fund. With HB 79,  penalties may not be                                                               
suspended in full or in part.  Right now, the board has suspended                                                               
penalties, which  is arbitrary.  The board  can always  reduce or                                                               
reverse a penalty. HB 79  allows employers to establish a payment                                                               
plan, so they won't go out of business.                                                                                         
10:25:27 AM                                                                                                                   
MS.  MARX addressed  the  fourth  topic, reducing  administrative                                                               
costs. She said current law says  the employer must pay by check.                                                               
Times have  changed, so  the bill does  not prescribe  a specific                                                               
method  of  payment.  Currently,  the division  may  not  require                                                               
electronic filing. The  bill says the division  may prescribe the                                                               
filing  format.  The  division has  moved  almost  completely  to                                                               
electronic filing  except for a few  things that must be  done by                                                               
paper. The bill will modernize that.                                                                                            
She  said  there  is  a   corporate  executive  officer  workers'                                                               
compensation coverage opt out, which  involves a lot of paperwork                                                               
that must  be submitted.  The bill  streamlines that.  If someone                                                               
has at  least 10 percent  ownership, that  is enough to  say that                                                               
person  is   not  an   employee  and   does  not   need  workers'                                                               
compensation insurance.  The division  has a great  database that                                                               
makes verifying that easy.                                                                                                      
10:26:58 AM                                                                                                                   
SENATOR  MICCICHE  asked if  simplifying  the  corporate opt  out                                                               
would result  in a significant  change in the numbers  opting out                                                               
or would it be close to what it is now.                                                                                         
MS.  MARX said  its  difficult  to tell  how many  officers would                                                               
then be  considered non-employees.  Now there are  many corporate                                                               
officers who  have no  ownership in the  business and  are added.                                                               
Corporations  change  that makeup  of  their  officers every  few                                                               
months.  She guessed  the bill  would  make sure  that those  who                                                               
legitimately have an interest in the company would be exempted.                                                                 
SENATOR  MICCICHE said  it's more  black and  white criteria.  He                                                               
asked if  there was  another reason  a corporate  executive could                                                               
opt out.                                                                                                                        
MS. MARX  agreed that it is  very black and white,  which was the                                                               
intent. She  answered no to  the second question. She  added that                                                               
HB 79 is  not a bill that deals with  substantive benefits. It is                                                               
an efficiencies  bill that seeks  to make things clearer  for the                                                               
10:29:02 AM                                                                                                                   
MS.  MARX continued  to review  administrative efficiencies.  She                                                               
said  the Medical  Services Review  Committee looks  at different                                                               
publications  to  come  up  with a  medical  fee  schedule.  More                                                               
publications are added to that list.                                                                                            
MS. MARX  said there is  currently no consequence if  insurers do                                                               
not meet the deadline to tell  them when an employer has coverage                                                               
or not.  By granting a  30-day deadline  (instead of ten)  with a                                                               
penalty,   they  hope   that  will   reduce  wasted   effort  for                                                               
investigating failure-to-insure  cases. The bill also  phases out                                                               
the Second  Injury Fund, which  reduces costs for  the department                                                               
and employers.  The fund's purpose  is to encourage  employers to                                                               
hire  or retain  disabled individuals,  but the  purpose is  moot                                                               
with the Americans with Disabilities  Act and other laws that bar                                                               
employment   discrimination.  As   claims  are   paid  out,   the                                                               
employers' contribution will  drop to zero. These  claims are for                                                               
permanent disability.  The fiscal note estimates  the average age                                                               
of claimants will be 80 and two  to three will be phased out each                                                               
10:32:10 AM                                                                                                                   
MS. MARX addressed  the final topic, ensure  adequate funding for                                                               
the  Workers'  Safety  and  Compensation  Administration  Account                                                               
(WSCAA)  in Section  1. She  said  the WSCAA  balance is  rapidly                                                               
declining. In 2005, the Alaska  Legislature added programs funded                                                               
by WSCAA, but no increase in  the WSCAA service fee rate was made                                                               
for the increased costs to  operate these programs. The bill does                                                               
not increase the service fees companies  pay, but more of the fee                                                               
will  be allocated  to the  department. That  is a  difference of                                                               
$1.8 million. If  the change is not implemented,  WSCAA will have                                                               
a shortfall in 2020.                                                                                                            
10:33:49 AM                                                                                                                   
CHAIR COSTELLO opened public testimony on HB 79.                                                                                
10:34:13 AM                                                                                                                   
BRONSON  FRYE,  Painters  Union Local  1959,  Anchorage,  Alaska,                                                               
testified in support  of HB 79. He said he  was just appointed to                                                               
the  Workers' Compensation  Board.  Unscrupulous contractors  are                                                               
requiring as  a condition  of employment  that their  workers get                                                               
business licenses  and work as independent  subcontractors. These                                                               
are not legitimate independent subcontractors.  An entire crew of                                                               
workers working on  a singular job on a singular  project are all                                                               
classified as independent subcontractors.  He gave the example of                                                               
the  drywall workers  for the  Dena'ina Center.  Because workers'                                                               
compensation  premiums are  so high  in the  inherently dangerous                                                               
construction industry, they  can account for up to  30 percent of                                                               
labor cost.  If an employer  misclassifies workers, he  can lower                                                               
labor  costs and  have  a competitive  advantage  in the  bidding                                                               
process  against   honest,  law-abiding  employers.  This   is  a                                                               
fairness-in-contracting  issue.  Also,  liability for  injury  at                                                               
work  is  shifted  to  the  worker  with  independent  contractor                                                               
misuse. Workers'  compensation exists for  a reason. HB 79  has a                                                               
multifactor test  to determine a true  independent contractor. It                                                               
will  reduce  workers'  compensation fraud,  create  fairness  in                                                               
contracting in the construction industry, and protect workers.                                                                  
10:37:58 AM                                                                                                                   
LAURA BONNER, representing self,  Anchorage, Alaska, testified in                                                               
support of  HB 79. She  said her husband suffered  a debilitating                                                               
injury  years ago.  HB 79  allows  better and  quicker access  to                                                               
medical  care  and  quicker  resolution   of  disputes.  This  is                                                               
important  to  the injured  worker  and  their families  who  are                                                               
dealing with  the stress  of the  injury. She  expressed pleasure                                                               
with  the   language  defining  an  independent   contractor  and                                                               
strengthening  the  fraud  provisions.  She  has  served  on  the                                                               
Workers'  Safety  Advisory  Council because  safety  and  injured                                                               
workers have been  a concern of hers. She urged  the committee to                                                               
pass HB  79 from  committee. It  is better  than the  bill passed                                                               
earlier today.                                                                                                                  
10:40:25 AM                                                                                                                   
DON   ETHERIDGE,  Lobbyist,   Alaska  AFL-CIO,   Juneau,  Alaska,                                                               
testified in  support of HB  79. He said any  efficiencies should                                                               
be  made. Alaska  AFL-CIO was  involved in  the working  group to                                                               
define independent contractors  and is happy with  the result. He                                                               
related how  difficult it can  be for injured workers  to receive                                                               
their compensation checks by mail. The bill makes improvements.                                                                 
10:42:33 AM                                                                                                                   
CHRIS DIMOND,  Organizer, Pacific  Northwest Regional  Council of                                                               
Carpenters, Juneau, Alaska,  testified in support HB  79. He said                                                               
making government  more efficient is  always a move in  the right                                                               
direction.  The definition  of independent  contractor is  a long                                                               
overdue  reform. He  related  cases  in Juneau  of  fraud. HB  79                                                               
protects  workers' rights  and safety.  It will  keep contractors                                                               
working more fairly.                                                                                                            
10:44:39 AM                                                                                                                   
CHAIR COSTELLO closed public testimony on HB 79.                                                                                
SENATOR  MEYER  asked  about  the   change  on  slide  4  of  the                                                               
presentation that states  HB 79 will allow  persons authorized by                                                               
regulation of  the board  to represent parties.  He asked  if the                                                               
bill  would  prevent  an  injured  person  using  his  cousin  to                                                               
represent him.                                                                                                                  
MS. MARX said the bill would  allow the board to develop, through                                                               
the regulatory process,  a list of the parties  who can represent                                                               
parties  before the  board. The  board serves  two functions,  to                                                               
make regulation and  to hear claims. The hearing panel  is in the                                                               
best  position to  know the  type of  individual who  is able  to                                                               
represent  injured workers.  Through  the  public process,  there                                                               
will be  a list created. She  noted that she served  as a hearing                                                               
officer  for   six  years.  She  gave   anecdotal  experience  to                                                               
illustrate problems that can arise.                                                                                             
SENATOR MEYER asked  if the names on the list  would be primarily                                                               
MS.  MARX said  the 18-member  Workers' Compensation  Board would                                                               
come  up  with  the  list.  She  envisions  that  besides  Alaska                                                               
attorneys,  the  list  could  contain  perhaps  outside  counsel,                                                               
retired attorneys,  paralegals, medical billing  specialists, and                                                               
others.  The   list  would  be  appropriate   to  create  through                                                               
regulation rather than statute.                                                                                                 
SENATOR MEYER asked if she anticipated a long list.                                                                             
MS.  MARX said  yes and  very  specific and  detailed to  provide                                                               
CHAIR COSTELLO  said that Senator  Meyer made a good  point. They                                                               
are hoping for common sense and flexibility with this list.                                                                     
COMMISSIONER DRYGAS said the initial  draft said no non-attorneys                                                               
for a  lot of reasons. This  is a compromise where  it would make                                                               
sense for non-attorneys to represent.                                                                                           
SENATOR MEYER  said he wanted  to ensure that the  injured worker                                                               
has choices.                                                                                                                    
10:51:47 AM                                                                                                                   
SENATOR  GARDNER asked  if the  department has  the resources  to                                                               
look into  possible cases  of fraud when  they hear  stories like                                                               
the ones Mr. Dimond referenced.                                                                                                 
COMMISSIONER  DRYGAS  said  yes  and  no.  The  fraud  unit  will                                                               
investigate if they hear something.  Right now, the test of being                                                               
an  independent  contractor  versus an  employee  is  cumbersome,                                                               
which  is why  they are  changing it  in law.  The department  is                                                               
cash-strapped currently.  Next year,  FY2020, WISCA  funding will                                                               
be depleted.                                                                                                                    
10:53:26 AM                                                                                                                   
SENATOR MICCICHE said  he had the same concern  as Senator Meyer.                                                               
Another  concern  is  with  Section  7  that  redefines  LLC.  He                                                               
questioned  whether a  Workers' Compensation  bill was  the right                                                               
place to do that.                                                                                                               
MS. MARX clarified it does not  redefine an LLC. Right now, there                                                               
is  a  loophole. Under  the  current  Workers' Compensation  Act,                                                               
employers must have workers' compensation  for employees. If they                                                               
don't,  the employer  and those  in  charge of  the business  are                                                               
responsible  for uninsured  claims.  LLCs do  not  have the  same                                                               
liability. Those LLC members who  run the corporation, even if it                                                               
is one member, completely escape  the liability that corporations                                                               
have for  uninsured injuries. This  levels the playing  field for                                                               
all members. There  is a need to close the  loophole of companies                                                               
to escape liability.                                                                                                            
SENATOR MICCICHE said he understands  the intent but would rather                                                               
it be  dealt with in  a section of law  that defines what  an LLC                                                               
can do with  that limit of liability rather  than eliminating the                                                               
loophole in  this bill. He  said it needs  to be dealt  with more                                                               
COMMISSIONER DRYGAS  said it's there  to maintain  consistency in                                                               
the statute.  The corporate  section is  already in  the statute,                                                               
which is why they addressed  the LLC there. She acknowledged that                                                               
one could argue both sides.                                                                                                     
10:58:23 AM                                                                                                                   
SENATOR MEYER  moved to report  HB 79, version N,  from committee                                                               
with individual recommendations and attached fiscal note(s).                                                                    
10:58:45 AM                                                                                                                   
CHAIR  COSTELLO announced  that without  objection, CSHB  79(FIN)                                                               
moved from the Senate Labor and Commerce Standing Committee.                                                                    

Document Name Date/Time Subjects
CS SSSB112 (L&C) Ver. S.pdf SL&C 4/2/2018 9:00:00 AM
SB 112
CS SSSB112 (L&C) Explanation of Changes Ver. L to S.pdf SL&C 4/2/2018 9:00:00 AM
SB 112
CS SB38 (L&C) Ver. D.pdf SL&C 4/2/2018 9:00:00 AM
SB 38
CS SB38 (L&C) Explanation of Changes Ver. A to D.pdf SL&C 4/2/2018 9:00:00 AM
SB 38
CS SB205(L&C) Ver. U.pdf SL&C 4/2/2018 9:00:00 AM
SB 205
CS SB205(L&C) Sectional Analysis 4.2.18.pdf SL&C 4/2/2018 9:00:00 AM
SB 205
CS SB205(L&C) Explanation of Changes Ver. D to U.pdf SL&C 4/2/2018 9:00:00 AM
SB 205
ACS Support Letter for SB 205.pdf SL&C 4/2/2018 9:00:00 AM
SB 205
SB 205 RCA letter to Senator Kelly.pdf SL&C 4/2/2018 9:00:00 AM
SB 205
SB 205 RCA Staff Analysis Public Meeting Memorandum and exhibits.pdf SL&C 4/2/2018 9:00:00 AM
SB 205
CS HB79(FIN) Ver. N.PDF SL&C 4/2/2018 9:00:00 AM
HB 79
CS HB79(FIN) Summary of Changes ver A to ver N.PDF SL&C 4/2/2018 9:00:00 AM
HB 79
CS HB79(FIN) Sectional Analysis ver N.PDF SL&C 4/2/2018 9:00:00 AM
HB 79
HB79CS(JUD)-DOLWD-SIF-02-14-18.pdf SL&C 4/2/2018 9:00:00 AM
HB 79
HB79-OOG-OMB-02-13-18.pdf SL&C 4/2/2018 9:00:00 AM
HB 79
HB079CS(FIN)-DOLWD-WC-02-16-18.pdf SL&C 4/2/2018 9:00:00 AM
HB 79
HB079CS(JUD)-DOA-DRM-02-09-18.pdf SL&C 4/2/2018 9:00:00 AM
HB 79
CS HB79(FIN) Ver. N DOLWD Presentation 3.29.18.pdf SL&C 4/2/2018 9:00:00 AM
HB 79