The 2nd meeting of the Interim Joint Committee on Labor and Industry was held on Thursday, August 10, 2006, at 10:00 AM, in Room 171 of the Capitol Annex. Representative J R Gray, Co-Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Alice Forgy Kerr, Co-Chair; Representative J R Gray, Co-Chair; Senators Julian M Carroll, Julie Denton, Denise Harper Angel, Jerry P Rhoads, Richie Sanders Jr, Katie Stine, and Jack Westwood; Representatives John A Arnold Jr, Joe Bowen, C B Embry Jr, Charlie Hoffman, Dennis Horlander, Joni L Jenkins, Charles Miller, Russ Mobley, Rick G Nelson, Jim Stewart III, and Brent Yonts.
Guests: Tom Barnes, Office of Housing, Building and Construction; Tim House, Office of Housing, Building and Construction; David Reicheri, Office of Housing, Building and Construction; Clyde Caudill, Jefferson County Public Schools; Mike Ridenour, Kentucky Chamber of Commerce; Julie McPeak, Executive Director, Office of Insurance; Carla Montgomery, General Counsel, Office of Workers' Claims; Phil Harmon, Office of Workers' Claim.
LRC Staff: Linda Bussell, CSA; Adanna Hydes; Melvin LeCompte; Ashli Schmidt, Committee Assistant.
Co-Chair Gray welcomed the committee and asked for a motion for approval of the minutes. Sen. Carroll motioned to approve the minutes, and Rep. Miller seconded the motion. Co-Chair Gray then reminded members that the September committee meeting will be held at Kentucky Dam Village on September 12, at 2:30 Central Time, in conjunction with the annual Labor Management Conference. He noted that if the members desire to attend they must receive approval from either the President of the Senate, or the Speaker of the House. Co-Chair Gray also thanked the members for taking the action to encourage the Labor-Management Board to reconsider their decision to move the conference to another location. He noted that the committee’s action was instrumental in having the conference return to Kentucky Dam Village.
At this time, Linda Bussell, Committee Staff Administrator, explained the contents of the members’ folders. Rep. Gray also noted that the registration form for the Labor Management Conference was in the folders and members should register before leaving for the NCSL conference.
Co-Chair Gray then introduced Julie McPeak, Executive Director of the Kentucky Office of Insurance. Ms. McPeak stated that she has recently rejoined the Office of Insurance after leaving the office in December to work for the Personnel Cabinet. She stated that she was before the committee with good news concerning the National Council on Compensation Insurance (NCCI). She announced that this is the largest decrease in the NCCI recommended rates for workers’ compensation since 1997. She then directed members to their handouts. Ms. McPeak stated that the recommended decrease for the year was 9.3% for industrial classes and 4.5% for coal classes. She noted again that this is the largest decrease in workers compensation rates since September 1, 1997. Ms. McPeak also reviewed the recommended decreases for individual employmet classes. The recommended decrease was 9.4% for office and clerical workers; 14.8% for contractors; 6.3% for manufacturing; 8.1% for goods and services; and 10.1% for miscellaneous classes. In the coal classes, the NCCI filing recommended a decrease of 6.6% for underground mining, but an increase of 3.4% for surface mining, however the average overall recommended decrease for coal was 4.5%.
Ms. McPeak then summarized the review and approval process for the NCCI Loss Cost Filing. She stated that the filing was received on June 30, 2006 and that the Kentucky Office of Insurance (KOI) has 30 days to review the filing. The review period can be extended for an additional 30 days (KRS 304.13-051), and that this extension is already in place. The filing must be approved or disapproved by August 30, 2006. She stated that an independent actuary is reviewing the filing.
The effective date of the NCCI Loss Cost Filing will be October 1, 2006 to allow insurers sufficient time for implementation and Ms. McPeak reminded members that adoption of NCCI’s recommended rates is voluntary for workers’ compensation insurance carriers. Ms. McPeak stated that there are three factors contributing to the decrease in loss costs. The first is that there is a higher than expected decline in claim frequency. Secondly, increases in medical and indemnity costs are flattening. Lastly, there is a decline in loss development factor patterns. This could be caused by the reduction of severity in the claims, or the leveling off of attorney involvement in claims.
Sen. Carroll asked if the Office of Insurance has considered employing its own actuary. He stated that independent actuaries represent numerous agencies and that this may result in a conflict of interest. Sen. Carroll noted that during his administration as Governor, he hired an actuary to review with the state health care plan. He suggested that the Office of Insurance employ its own actuary to avoid a potential conflict of interest. Sen. Carroll then inquired about the percentage of claims filed and approved since the 1996 Workers’ Compensation law? He said he expected that there was a major reduction.
Ms. McPeak stated that she did not have the exact percentages or figures, but could get those to the members.
Co-Chair Gray then noted that under the Ford and Carroll administrations, Kentucky workers had the privilege of receiving good workers’ compensation benefits. He noted that over the years there has been a conscious effort to reduce benefits. He questioned whether the current proposed reduction in workers’ compensation rates is due to workers becoming discouraged by the low benefit levels and do not file claims because they have given up hope. He then noted that Kentucky’s workers’ compensation law is in the bottom 25% in the nation.
Co-Chair Gray continued to state that many workers’ compensation lawyers have chosen other fields or decided to practice out of state. He stated that Ms. McPeak’s “good news” has probably been prompted by “bad news” for injured workers. Co-Chair Gray then made the comparison of oil companies only seeking profit and not being concerned about the safety of workers being much like that of the insurance companies.
Ms. McPeak responded that she would provide the data from insurance companies for the committee.
Rep. Yonts asked what has changed in the last 12 months to justify the workers’ compensation decrease? Continuing, Rep. Yonts then mentioned that in 2003, the committee was told that rates would need to be increased 20%, but 13% increase was ultimately approved. He questioned if the new rates were simply statistical? Ms. McPeak stated that she was fairly comfortable with the figures, but the final decision has not been made.
Co-Chair Kerr then introduced Carla Montgomery and Phil Harmon to discuss the administrative regulation s on the agenda for review and that would become effective on adjournment of the committee meeting. Ms. Montgomery stated that 803 KAR 25:021 was simply a housekeeping regulation for the Office of Workers’ Claims that dealt with workers’ compensation individual self-insurance.
Co-Chair Kerr then introduced Tommy Barnes, Office of Housing, Building, and Construction to explain 815 KAR 20:030. Mr. Barnes stated that the regulation was simply a clean up regulation relating to fees for plumbing licenses.
Rep. Yonts noted that in Section 1 of the regulation, a $150 fee was required to take the plumbing exam and after passing the exam, the fee would be $250 to get a Master’s license.
Mr. Barnes noted that these fees had always been the same, they simply weren’t in the regulation.
Co-Chair Gray then asked how many plumbers are in Kentucky. Mr. Barnes replied there were approximately 9100 plumbers, 2200 Master plumbers and 7000 Journeymen in Kenucky. He then noted that the total fees collected for one year produce $880,000 in revenue. Co-Chair Gray asked if any excess revenue would go into the state’s general fund? Mr. Barnes stated that $1.4 million had been taken out of the Department of Plumbing and put into the General Fund.
Co-Chair Kerr reminded members of the September 12 meeting at Kentucky Dam Village, as well as the October meeting to held in Lexington.
Co-Chair Gray motioned to adjourn. Rep. Yonts seconded the motion. There being no further business, the meeting was adjourned.