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March 10, 2005

Alaska Needs Workers’ Compensation Reform Now

An editorial by Commissioner Greg O’Claray
Alaska Department of Labor and Workforce Development

Alaska’s workers’ compensation system is broken, and we all have to pitch in to fix it if we want to keep Alaskans working.

When it is working right, our workers’ compensation system offers safeguards to both employees and employers. If employees get hurt on the job, they get cash benefits while they can’t work, medical services to help them recover, and if necessary, retraining for a new job.

Employers can protect their employees and remain in business by sharing the risk of providing these expensive services with others across their industry.

But our workers’ compensation system is broken.

The costs employers pay for insurance in Alaska are skyrocketing out of control, increasing in each of the past five years and rising an average of 36 percent in the past two years alone. Only California pays higher rates, pushing their legislature to pass its own reform bill last year. Alaska could soon have the worst score in the nation on this important test of business friendliness.

A few examples: Juneau’s Copy Express has seen its workers’ compensation costs rise from $5,900 in 2002, to $10,232 in 2005. Costs for McGraw’s Custom Construction in Sitka rose from $146,950 in 2002 to $315,110 in 2004. The Kodiak Island Borough paid $43,275 in 2001, but $95,234 in 2005. Kenai’s Central Peninsula General Hospital has seen its costs more than double, from $390,566 in 2001 to $984,833 in 2005.

Why are rates rising so much? The main reason is higher medical expenses. The cost for a common knee reconstruction surgery, for example, has nearly doubled from $5,225 in 1999 to $10,697 in 2004. Similarly, a common back surgery to repair a ruptured disc went from $5,617 to $6,947 in the same period.

The system’s problems extend beyond cost. Outdated appeals procedures can leave workers lost in a procedural maze that can unreasonably delay their return to work. There’s even the hidden risk that insurance companies may give up on Alaska, leaving the state holding the bag for providing coverage and diverting scarce public dollars to expand the bureaucracy.

These problems affect all Alaskans. As rates rise, employers must choose between paying ever-higher workers’ compensation costs or cutting jobs. Some employers, like the popular LaMex restaurant in downtown Anchorage, are shutting their doors entirely. Simply put, Alaska’s high workers’ compensation costs mean fewer job opportunities for workers, continued burdens on employers, and diminished service for everyone.

Governor Frank H. Murkowski is working to fix these problems. He has introduced the “2005 Alaska Workers’ Compensation Reform Act” to make the system work better - more efficient for workers and less expensive for employers. We must act now to stabilize insurance rates as soon as possible.

Introduced as House Bill 180 and Senate Bill 130, this legislation seeks to:

• Cap medical fees paid for injured workers’ services at December 1999 levels
• Adopt national peer-reviewed medical treatment guidelines, so workers know their care meets national standards
• Let employers use preferred medical providers and require providers to use generic drugs, so workers get quality care at an affordable price
• Establish an Appeals Commission to provide faster, more consistent decisions of appeals
• Resolve disputes faster and more easily by removing the full Workers’ Compensation Board from the settlement process; letting some injured workers opt for cash instead of retraining benefits; and getting faster answers to injured workers hoping to get retrained
• Protect workers against unscrupulous employers without insurance by using fines collected from such violators to fund a pool to pay uncovered workers’ benefits
• Allow injured workers easier access to state-funded legal representation
• Make sure nonresident workers who file claims don’t get paid higher rates than Alaskans

Jobs are Alaska’s future, and the governor’s legislation plays a critical role in protecting that future by making sure injured workers get timely, high-quality benefits while helping employers pay lower rates so they can remain in business.

This issue affects us all, whether as workers, employers, customers, clients or taxpayers. I encourage all Alaskans to ask your legislators to work together with the administration and with the business and labor communities to pass workers’ compensation reform legislation this session.

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News Media Contact:
Dan Saddler, Special Assistant/Communications, 907-632-1776