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Workers' Compensation Bill Offers Needed Reform
Legislation Addresses Skyrocketing Costs of Employee Insurance


February 24, 2005

Juneau, Alaska - Reforms aimed at streamlining the delivery of workers' compensation benefits to injured workers, and easing the cost burden on Alaska businesses, will be sent to the Legislature this week by Governor Frank H. Murkowski.

"Workers' compensation rates in Alaska are the second-highest in the nation, imposing an unnecessary burden on our economy," said Greg O'Claray, commissioner of the Alaska Department of Labor & Workforce Development, which is taking the lead on the issue. "The reforms in this bill will make the workers' compensation system less expensive for employers and more efficient for workers."

State law requires employers to provide workers' compensation insurance so those injured on the job can get disability benefits while they recover, receive medical care and rehabilitation, and, if necessary, get retrained for a new line of work.

Private insurance companies base their rates on each industry's expense history, but in recent years rates have skyrocketed, increasing 36 percent on average over the past two years alone. Only California has seen rates increase higher than Alaska, increases that recently drove it to pass its own reform legislation, the governor said.

"We must act now to halt this dangerous trend in our state," Murkowski said. "It's clear the present system doesn't serve injured workers or employers as the original law intended. With legislative approval of my bill we could stabilize insurance rates by January 1, 2007. The longer we delay taking action, the more costs spin out of control."

O'Claray said costs for specific medical procedures demonstrate the trend. The cost for knee reconstruction surgery has nearly doubled from $5225 in 1999 to $10,697 in 2004, and back surgery to repair a ruptured disk has risen from $5,617 to $6,947 in the same period, according to information compiled in state medical fee schedules.

O'Claray presented details of the legislation at Copy Express, a small duplication and office supply business in Juneau, which he called one of the many Alaska enterprises being squeezed by steep rate increases. The company's workers' compensation costs have risen from $5,900 in 2002, to $10,232 in 2005.

Labor Department records show similar rates of increase for other industries. Costs for McGraw's Custom Construction, a Sitka construction company, have risen from $146,950 in 2002 to $315,110 in 2004. Costs for the Kodiak Island Borough have more than doubled from $43,275 in 2001 to $95,234 in 2005. At Central Peninsula General Hospital in Kenai, costs have more than doubled, from $390,566 in 2001 to $984,833.

"By dealing with these increases, and making other needed improvements to the system, the governor's bill will keep Alaska's workers' compensation insurance system affordable for employers, effective for employees and efficient for the entire state," O'Claray said.

The bill's key elements include:

  • Capping medical fees paid for injured worker services at the December 1999 level, and calling for a medical review committee to study the medical delivery system for workers' compensation and report to the labor commissioner by March 1, 2007
  • Helping employers reduce medical costs by authorizing them to use a list of preferred providers and allowing employers to negotiate fee rate, while still letting employees choose providers outside the preferred list
  • Adopting national peer-reviewed medical treatment guidelines
  • Requiring physicians to use generic drugs - but allowing exemptions for medical reasons - and authorizing use of a preferred drug list
  • Establishing an Appeals Commission to provide quicker, more consistent decisions of appeals than the Superior Court offers under current law
  • Preventing workers from receiving more in combined disability benefits than they would earn if still on the job
  • Streamlining the claim settling process by allowing parties to settle claims without requiring Workers' Compensation board approval, letting claimants opt for cash benefits instead of retaining benefits, and reducing delays in determining eligibility for retraining benefits
  • Protecting workers against unscrupulous employers who fail to carry insurance coverage, by using fines collected from such violators to fund a pool to pay benefits to workers left uncovered
  • Helping injured workers return to productive work more quickly

"The best workers' compensation is a good paying job on an accident-free workplace," Murkowski said. "But if someone is injured, these reforms provide needed help quickly and effectively. I encourage everyone interested in a healthy Alaska economy to work together with Commissioner O'Claray to craft a timely solution to a problem that has gone unresolved for far too long."

jpg chart where your benefits go


Synopsis of 2005 Workers' Compensation Reform Act

The Murkowski Administration's workers' compensation reform legislation addresses five major elements of the system:

Medical Costs and Benefits

  • Rolls back state rates for reimbursement of medical services to injured workers to December 1999 levels, pending a medical review committee's study of the medical delivery system for workers' compensation to be delivered to the labor commissioner by March 1, 2007
  • Reduces medical costs by authorizing employers to use preferred providers and allowing employers to negotiate fee rates - while still letting employees choose providers outside the preferred list
  • Requires physicians treating injured workers to take advantage of the cost savings from generic prescription drugs - but allows exceptions for medical reasons
  • Authorizes physicians to prescribe from a preferred drug list, to obtain the same system-wide cost reductions that such a list provides to the Alaska Department of Health and Social Services
  • Adopts national peer-review medical treatment guidelines established by the American College of Occupational and Environmental Medicine

Workers' Rights

  • Protects workers against unscrupulous employers who fail to offer insurance coverage, by using fines collected from such violators to fund a pool to pay benefits to workers left uncovered
  • Eases worker access to legal advice, by allowing private attorneys to collect minimal fee ($300) to advise clients with workers' compensation issues
  • Authorizes state to contract with non-profit organizations to provide legal assistance to worker claimants and receive reimbursement from state

Workers' Compensation System

  • Establishes Appeals Commission to provide state-wide consistency in workers' compensation claim decisions, while preserving Workers' Compensation Board hearing process to speed resolution of contested claims
  • Eliminates Second Injury Fund, an indemnification mechanism no longer necessary to protect once-injured employees against hiring discrimination from subsequent employers
  • Reduces delays in determining workers' eligibility for retraining benefits
  • Allows injured workers the option to quickly receive cash benefits in lieu of retraining benefits
  • Streamlines claim process by requiring immediate release of treatment records to employers
  • Eases resolution of many claims by allowing parties with attorneys to settle cases without requiring review by workers' compensation board
  • Protects worker and employer privacy, and system integrity by banning commercial use of workers' compensation division's records
  • Speeds shut-down of uninsured employers by eliminating requirement for hearing before workers' compensation board
  • Increases fines against employers that fail to provide insurance
  • Combats insurance fraud by authorizing Division of Workers' Compensation to investigate fraud, and to refer violators for prosecution under an improved criminal statute


  • Prevents workers from earning more in benefits than wages, by allowing coordination of benefits between employer-funded disability insurance and total disability compensation
  • Caps compensation to nonresident workers at rate paid in Alaska, to Alaskans

Insurance System

  • Improves robustness of state workers' compensation insurance system by requiring insurers to create bonding pool to protect against individual firms' insolvency
  • Clarifies that employees of limited liability corporations may opt into state workers' compensation system

Source of News:

Office of the Governor
Web Site


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