Interim Joint Committee on Labor and Industry


Minutes of the<MeetNo1> 3rd Meeting

of the 2005 Interim


<MeetMDY1> August 25, 2005


The<MeetNo2> 4th meeting of the Interim Joint Committee on Labor and Industry was held on<Day> Thursday,<MeetMDY2> August 25, 2005, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Senator Alice Kerr, Co-Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Alice Kerr, Co-Chair; Representative J R Gray, Co-Chair; Senators Julian M Carroll, Julie Denton, Brett Guthrie, Jerry P Rhoads, and Jack Westwood; Representatives Denver Butler, Bill Farmer, Charlie Hoffman, Dennis Horlander, Thomas Kerr, Charles Miller, Russ Mobley, Rick G Nelson, Jim Stewart III, and Brent Yonts.


Guests:  Bill Emrick, Executive Director, Office of Workers’ Claims, Department of Labor; Tim George, Director, Division of Workers’ Compensation Funds, Department of Labor; Jon Nielson, Executive Director, Kentucky Workers’ Compensation Funding Commission.


LRC Staff:  Linda Bussell, CSA; Betty Davis; Adanna Hydes, Melvin LeCompte; and Ashli Schmidt, Committee Assistant.


Co-Chair Kerr welcomed the committee and guests and recognized several former legislators in the audience, including former Representatives Ratliff, LeMaster and Zimmerman, and former Senators Nelson, and O’Daniel. Co- Chair Kerr then asked for a motion to approve the minutes from the July meeting. Following the motion by Co-Chair Gray, which was seconded by Sen. Rhoads, the minutes were approved without objection.


Co-Chair Kerr reminded members of the September 14 committee meeting to be held in conjunction with the Labor Management Conference at Kentucky Dam Village. Co-Chair Kerr also noted that the October meeting will be held in Lexington and informed the members they will be notified of the date and arrangements when those are finalized.


Co-Chair Kerr said the first item on the agenda was a report and update on black lung under HB 348. She introduced Bill Emrick, Executive Director, Office of Workers’ Claims. Mr. Emrick thanked the committee for inviting him. He also expressed appreciation to Governor Fletcher for having the confidence to put him in the position of executive director shortly after the AIK COMP situation occurred. Mr. Emrick also thanked the legislators for enacting SB 86 which assisted in dealing with the issues relating to AIK COMP.


Mr. Emrick introduced Sheila Lowther, Chief Administrative Law Judge in the Office of Workers' Claims, and Bob Whittaker, an attorney with the Division of Workers' Compensation Funds. Mr. Emrick presented a Power Point report on coal workers’ pneumoconiosis and the impact of HB 348 enacted in 2002. To put the black lung situation in context, Mr. Emrick reviewed statistics from the National Institute of Occupational Safety and Health (NIOSH) which showed the decline in the number of coal miners nationally and the lower incidence of black lung nationwide. He also said the award rate for black lung on the federal level was 8.3%. Mr. Emrick called on Judge Lowther to continue the presentation.


Judge Lowther presented a report on HB 348 and said that legislation governs three types of coal workers' pneumoconiosis claims: claims with dates of last exposure after July 14, 2002; claims with last exposure before December 12, 1996; and, claims with last exposure occurring between December 12, 1996 and July 14, 2002. In addition, HB 348 established a new procedure for determining the presence or absence of coal workers' pneumoconiosis. This is the consensus process which is used for interpretation of x-rays and the statute provides that the consensus reading is presumed to be correct unless it is overcome by clear and convincing evidence.


Mr. Emrick presented statistics relating to the claims filed under HB 348. He said 1,347 claims have been filed. He said 425 claims are currently being held in abeyance at the administrative law judge level because of a pending court decision that challenged the consensus procedure. There are 226 claims on appeal under HB 348. Mr. Emrick said he would be looking at these statistics within the next few weeks as he considers the need to fill four administrative law judge positions that will become vacant in the near future.


Discussing key court decisions relating to coal workers’ pneumoconiosis since enactment of HB 348 in 2002, Mr. Emrick commented on the Hunter Excavating v. Bartrum case which is still pending and is the case on which the cases are being held in abeyance. He said in that case a worker was denied coal workers' pneumoconiosis benefits. The Court of Appeals reversed the decision. On appeal, the Supreme Court held that the consensus procedure did not violate the miner's due process rights, but the administrative regulations prohibiting submission and consideration of additional x-ray reports violated the statute. A rehearing has been requested. If the decision is upheld, Mr. Emrick said the administrative regulations will be revisited. Mr. Emrick said a final decision in that case is expected in the fall.


Mr. Emrick presented statistics that showed the B reader panel reached consensus in 1,159 out of the total 1,347 claims filed which implied that the consensus procedure is working well. The consensus was negative for the disease in 1000 of the cases. In terms of decisions on claims, 86.3 % were negative and approximately 17% or 18% were awards. Mr. Emrick said the statistics indicate that there is a higher award rate for state black lunch benefits than exists in the black lung federal system.


Judge Lowther presented additional statistics for 729 claims filed under HB 348 and adjudicated at the administrative law judge level. Of these cases, 56 have been settled, 93 resulted in benefit awards, and 580 were dismissed. Of the 93 awards, five were for permanent total disability, 48 were for permanent partial disability, and 40 were for retraining incentive benefits(RIB).


Mr. Emrick introduced Bob Whittaker to present an overview of the Kentucky Coal Workers’ Pneumoconiosis (CWP) Fund and its liabilities. Mr. Whittaker explained that the fund was created in 1996 under HB 1 to pay 50% of the liability for black lung benefits for exposure occurring after December 12, 1996. Mr. Whittaker said the CWP fund has participated in 141 black lung awards since 1996. Of those awards, 121 resulted from HB 348. The undiscounted liability of those awards total about $6.8 million, excluding the liability for retraining incentive benefits which is estimated to be another $1.5 million for 18 individuals who have actually participated in retraining.


Co-Chair Gray asked what percentage of claims are denied when a consensus is not reached. Judge Lowther responded that a fairly small number of claims result in no consensus, and that approximately seventy five percent of claims where there is no consensus resulted in an award.


Sen. Rhoads asked if the consensus reading primarily dictates the outcome of the case since clear and convincing evidence is required to overcome the consensus reading. Mr. Emrick said that would be a fair statement. Sen. Rhoads referred to a slide that showed 1000 negative consensus readings out of the 1,159 cases which resulted in consensus, and asked if those 1000 cases resulted in denial of benefits. Judge Lowther responded that approximately 79% of the cases were dismissed which is a lower percentage than the total negative consensus(89.6%) ratio. She said this suggests that there are some awards even when there is a negative consensus. Sen. Rhoads also asked how many cases filed under HB 348 have actually resulted in payment of benefits, excluding retraining incentive benefits. Mr. Emrick said the number was about 149 out of 1,347 claims filed, excluding those cases held in abeyance. Sen. Rhoads asked if there were any other provisions of the workers' compensation law that required a worker to attend school or retraining to receive benefits. Mr. Emrick said there weren't any other provisions. Sen. Rhoads asked how many miners have received monetary benefits under retraining incentive benefit awards. Mr. Whittaker said the number was thirty.


Sen. Rhoads then commented that there is a serious problem dealing with medical fee disputes and requested that this problem be further pursued at a future meeting. Mr. Emrick agreed with the Sen. Rhoads' comments and said he is looking into all aspects of this issue.


Co-Chair Kerr departed from the agenda to cover a few housekeeping items. She commented on the AIK COMP situation and informed the members that the issue isn't on the agenda today because of the upcoming September 14 court hearing. She said she and Co-Chair Gray did not include AIK COMP on the agenda today because they did not want to do anything or entertain testimony that might inadvertently or unintentionally affect the outcome of the upcoming court hearing. She said this committee will revisit this issue and afford all affected parties an opportunity to express their concerns at a future meeting. She also noted that there is a letter in members' folders from the Office of Insurance to AIK COMP members.


Regarding unemployment insurance, Co-Chair Kerr said she and Co-Chair Gray are continuing discussions with agency officials to determine the next course of action necessary to address the financial problems with the unemployment insurance trust fund.


Next, Co-Chair Kerr introduced Les Renke, General Counsel, Kentucky Labor Department, who addressed the issue of a mailing sent out by the Kentucky Labor Law Poster Service to employers in the Commonwealth. Mr. Renke said this is not a mailing of the Labor Department. He said this was a non-governmental business trying to market labor law posters, when these posters are available free of charge from the Department of Labor.


At this time, Co-Chair Gray introduced the next speaker on the agenda. He welcomed Jon Nielsen, Executive Director, Kentucky Workers’ Compensation Funding Commission. Mr. Nielsen introduced Frank Dickerson, the General Counsel and Louie Hord, the Director of Fiscal Operations. Mr. Nielsen reviewed a handout that contained a historical review of the assessment rates for the Special Fund and the Coal workers’ Pneumoconiosis Fund. Before that, however, Mr. Nielsen commented on questions previously asked by Rep. Yonts as to whether sufficient funds were available in the CWP Fund to pay black lung claims. He said the missing piece to this question relates to incurred but not reported claims. He said the potential liability of the CWP Fund is probably around $16 million and there is approximately $20 million currently in that fund.


Mr. Nielsen said from 1997 to 2001, the all employer assessment rate for the Special Fund was held at nine percent. The CWP fund rate is required to be set to fund and prefund black lung liabilities. Currently, there is a surplus in the CWP fund but the Funding Commission has to determine actuarially the liabilities for each year and the board of directors has to make a judgement on what the future rates should be to fund those liabilities. He said the board has scaled back the CWP assessments since 1997. In 2004, the CWP fund collected a little more than $1 million. In 2005, collections are estimated to be less than $1 million. The current assessment is one-half percent on premium and one-quarter cent per ton of coal severed. He said this is about the lowest assessment possible without totally suspending the assessment. The board of directors considered suspending the assessment but decided to continue assessing at the lower rates. He said the board will have to make the same judgement on the assessment at the October meeting.


Sen. Rhoads asked how long the CWP fund could pay benefits without additional assessments on coal employers. Mr. Nielsen responded that the fund could probably pay benefits for approximately three to four years.


In response to a question from Sen. Rhoads concerning suspended severance tax allocations to the Special Fund required under HB 1. Mr. Dickerson responded that three or four severance tax installments have been received since fiscal year 2001. Those funds, however, have been returned to the General Fund pursuant to finally enacted budgets, so approximately $76 million in severance tax installments have not been received for the Special Fund. Sen. Rhoads asked if the targeted payoff date for the Special Fund has been delayed because the severance tax installments have not been received. Mr. Nielsen responded that the targeted payoff date is still 2018 which means that additional collections in terms of higher assessment rates from employers would be necessary to meet the 2018 payoff date.


There being no further business, the meeting was adjourned.