04/10/2017 09:00 AM Senate LABOR & COMMERCE

         HB 157-LIFE & HEALTH INSURANCE GUARANTY ASSN.                                                                      
                                                                                                                                
9:33:07 AM                                                                                                                    
CHAIR COSTELLO announced the consideration of HB 157.                                                                           
                                                                                                                                
9:33:34 AM                                                                                                                    
REPRESENTATIVE SAM  KITO, Alaska State Legislature,  Chair, House                                                               
Labor and Commerce  Committee, introduced HB 157  speaking to the                                                               
following sponsor statement:                                                                                                    
                                                                                                                                
     House  Bill  157 updates  the  Alaska  Life and  Health                                                                    
     Insurance  Guaranty   Act  (Act)  to  conform   to  the                                                                    
     National  Association of  Insurance Commissioners  Life                                                                    
     and  Health Guaranty  Model Act.  These changes  update                                                                    
     the  Act  and  improve  uniformity  nationwide  in  the                                                                    
     administration   of    life   and    health   guarantee                                                                    
     associations.                                                                                                              
                                                                                                                                
     The   Alaska  Life   and  Health   Insurance  Guarantee                                                                    
     Association (Association)  is composed of  insurers who                                                                    
     transact   life   insurance,   health   insurance,   or                                                                    
     annuities in Alaska. The purpose  of the Association is                                                                    
     to  guarantee that  residents and  certain nonresidents                                                                    
     will continue to  receive benefits in the  event one of                                                                    
     the members becomes impaired or  insolvent. In order to                                                                    
     accomplish this,  the Act directs the  insurers to form                                                                    
     a  board and  collect assessments  from members  to pay                                                                    
     for the  operations of the Association  and obligations                                                                    
     of insolvent or impaired members.                                                                                          
                                                                                                                                
     House Bill  157 amends  terms for consistency  with the                                                                    
     model  act,   raises  payment  limits,   adds  language                                                                    
     clarifying  what  products  are included  and  excluded                                                                    
     from the  protections under the Act,  and adds language                                                                    
     clarifying   that   medical    and   hospital   service                                                                    
     corporations  and their  products  are  subject to  the                                                                    
     provisions  of  the  Act. House  Bill  157  amends  the                                                                    
     powers  and  duties  section  for  the  Association  to                                                                    
     follow the model act, authorizes  the board to increase                                                                    
     assessments,  grants  the  Association the  ability  to                                                                    
     develop  procedures to  remove an  Association governor                                                                    
     for cause, and adds new definitions.                                                                                       
                                                                                                                                
9:34:49 AM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce,  Community  and  Economic Development  (DCCED),  stated                                                               
that there  are two insurance  guarantee associations  in Alaska.                                                               
One was formed  for property and casualty and one  was formed for                                                               
life   and  health.   She  agreed   with  Representative   Kito's                                                               
explanation that  if an insurance company  becomes insolvent, one                                                               
of the associations steps in  and assesses the member insurers up                                                               
to two percent to pay the  claims that have been presented to the                                                               
insolvent insurer.                                                                                                              
                                                                                                                                
She advised that  about three weeks ago a  long-term care insurer                                                               
went insolvent nationwide  and about 36 consumers  in Alaska were                                                               
at  risk of  not having  their  claims paid.  The claims  totaled                                                               
about $2 million. The association  sent out assessment letters to                                                               
collect the  money and they  will hold it  and pay the  claims as                                                               
they  are  presented. She  reported  that  this has  happened  to                                                               
workers' compensation insurers and  property insurers in the past                                                               
even though the Division of  Insurance closely monitors insurance                                                               
company financials. She summarized  that, "These two associations                                                               
are  the protections  that  stop consumers  from  not having  any                                                               
recourse  from  which  to  collect   the  claims  they  may  have                                                               
presented to the insurance company prior to the insolvency."                                                                    
                                                                                                                                
MS. WING-HEIER  said SB 157 does  two things. It updates  the Act                                                               
to  conform with  the current  National Association  of Insurance                                                               
Commissioners (NAIC)  model law,  and it brings  hospital medical                                                               
service corporations in  as member insurers. She  noted that most                                                               
of  the changes  are technical  and offered  to walk  through the                                                               
sectional analysis.                                                                                                             
                                                                                                                                
9:37:52 AM                                                                                                                    
SENATOR HUGHES joined the committee.                                                                                            
                                                                                                                                
SENATOR  GARDNER   asked  what   the  hospital   medical  service                                                               
corporations think of the bill.                                                                                                 
                                                                                                                                
MS.  WING-HEIER said  Premera  Blue Cross  is  the only  hospital                                                               
medical service  corporation in  Alaska and  their representative                                                               
is  on  line  to  comment  on   the  bill.  She  added  that  the                                                               
representative will probably say  Premera doesn't oppose the bill                                                               
entirely, but would  like to wait for the new  model law that has                                                               
not  been released.  It  brings in  life  insurance companies  to                                                               
address  long term  care, which  is a  problem nationwide.  These                                                               
claims   are  huge   and  health   care  insurers   alone  cannot                                                               
sufficiently address these policies.                                                                                            
                                                                                                                                
9:40:38 AM                                                                                                                    
CHAIR COSTELLO opened public testimony on HB 157.                                                                               
                                                                                                                                
SENATOR STEVENS joined the committee.                                                                                           
                                                                                                                                
9:40:48 AM                                                                                                                    
SHEILA  TALLMAN, Senior  Manager of  Legislative Policy,  Premera                                                               
Blue Cross,  Seattle, Washington, stated that  Premera recognizes                                                               
that the instability in health  care and long-term care insurance                                                               
markets is occurring and solvency  is a concern. She advised that                                                               
the National  Association of  Insurance Commissioners  (NAIC) has                                                               
been  discussing  this  issue  since   early  this  year  and  is                                                               
considering   updates  to   their  life   and  health   guarantee                                                               
association  models to  respond to  the changing  marketplace for                                                               
life,  health,  and  long-term   care  policies  and  to  address                                                               
insolvencies. Premera is working with  Blue plans in other states                                                               
and  with  the Blue  Cross  Blue  Shield Association  to  provide                                                               
comments on new approaches that  will not negatively impact costs                                                               
to consumers.                                                                                                                   
                                                                                                                                
She said it  is Premera's view that some of  the changes in House                                                               
Bill  157 would  negatively impact  Premera customers  through an                                                               
assessment and increased rates when there is an insolvency.                                                                     
                                                                                                                                
MS.  TALLMAN urged  the committee  to consider  the work  NAIC is                                                               
doing right now  before making any changes  to Alaska's guarantee                                                               
association  that  may not  be  consistent  with the  forthcoming                                                               
model.  She opined  that  there  may be  other  ways of  tackling                                                               
insolvency  issues,   particularly  in   a  state   with  limited                                                               
competition in  the health care  market when the policies  at the                                                               
crux of the  issue typically are not offered  by health insurance                                                               
companies.                                                                                                                      
                                                                                                                                
She concluded  advising that  the new  administration in  D.C. is                                                               
open to  new ideas that  offer long term solutions  and increased                                                               
competition in  insurance markets  and Premera  urges legislators                                                               
to take time before implementing new ideas there too.                                                                           
                                                                                                                                
SENATOR GARDNER asked if she has  a sense of the timeline for the                                                               
new model through NAIC.                                                                                                         
                                                                                                                                
MS.  TALLMAN said  she  has  heard that  the  intent  is to  have                                                               
something ready by the end of 2017.                                                                                             
                                                                                                                                
9:43:58 AM                                                                                                                    
CHAIR COSTELLO  noted that  David Phifer  and Donald  Thomas were                                                               
available to answer questions.                                                                                                  
                                                                                                                                
SENATOR  GARDNER asked  Mr.  Phifer or  Mr.  Thomas would  advise                                                               
waiting until the model law is released or moving forward now.                                                                  
                                                                                                                                
9:44:31 AM                                                                                                                    
DONALD  THOMAS,  Executive  Director,   Alaska  Life  and  Health                                                               
Insurance  Guarantee  Association,  Anchorage, said  he  was  not                                                               
aware  until  this  hearing  that  a  new  model  law  was  being                                                               
prepared.  The association  administers  the law  and he  doesn't                                                               
have a feel for the timeline.                                                                                                   
                                                                                                                                
9:45:44 AM                                                                                                                    
CHAIR COSTELLO  closed public  testimony on HB  157 and  held the                                                               
bill in committee for further consideration.