04/11/2009 09:00 AM House FINANCE

HOUSE BILL NO. 175                                                                                                            
                                                                                                                                
     "An  Act relating  to insurance,  including treating  as                                                                   
     confidential   certain  information  submitted   to  the                                                                   
     director  of insurance  by the  National Association  of                                                                   
     Insurance Commissioners;  clarifying conditions  for the                                                                   
     release of  insurer deposits; defining  travel insurance                                                                   
     that  may  be  sold under  a  travel  insurance  limited                                                                   
     producer  license; establishing  criteria for  licensing                                                                   
     of   nonresident  independent   adjusters  as   resident                                                                   
     adjusters;  exempting rewards  under a wellness  program                                                                   
     from treatment as insurance  discrimination or rebating;                                                                   
     making certain  insurance required of  the Comprehensive                                                                   
     Health  Insurance  Association  permissive  rather  than                                                                   
     mandatory;  providing  for  the administration  of  loss                                                                   
     reimbursement   policies   and  payments   to   guaranty                                                                   
     associations   during  insolvency  proceedings;   making                                                                   
     certain   provisions    relating   to    statements   on                                                                   
     applications and guaranteed  renewability for individual                                                                   
     health  insurance  applicable  to hospital  and  medical                                                                   
     service  corporations; making  public certain  forms and                                                                   
     related documents  filed for  approval by a  hospital or                                                                   
     medical  service corporation  after  the filing  becomes                                                                   
     effective; relating to deposits  of self-funded multiple                                                                   
     employer  welfare arrangements;  repealing reasons  that                                                                   
     the director  of insurance may  use to deny or  revoke a                                                                   
     license; and providing for an effective date."                                                                             
                                                                                                                                
9:10:55 AM                                                                                                                    
                                                                                                                                
JENNIFER SENETTE, STAFF, REPRESENTATIVE  KURT OLSON, SPONSOR,                                                                   
explained that  the bill  was offered at  the request  of the                                                                   
director of the Division of Insurance.                                                                                          
                                                                                                                                
LINDA HALL,  DIRECTOR, DIVISION  OF INSURANCE, DEPARTMENT  OF                                                                   
COMMERCE,  COMMUNITY AND  ECONOMIC  DEVELOPMENT, provided  an                                                                   
overview of the legislation using  a sectional analysis (copy                                                                   
on file).  She explained that  the changes are needed  by the                                                                   
Department  of Commerce, Community  and Economic  Development                                                                   
(DCCED)  in  order  to  effectively  regulate  the  insurance                                                                   
industry.   The  division's  overall   goals  are   solvency,                                                                   
oversight, consumer  protection, and  making sure there  is a                                                                   
healthy and competitive marketplace.                                                                                            
                                                                                                                                
Ms.  Hall  pointed out  several  sections  in the  bill  that                                                                   
streamline the division's processes:                                                                                            
                                                                                                                                
   · Section 10: Allows the division to issue a license to a                                                                    
     non-resident adjuster  whose own state does  not license                                                                   
     adjusters.                                                                                                                 
   · Section 12: Provides for third-party administrators.                                                                       
   · Section 18: Allows acceptance of another regulator's                                                                       
     evaluation of a nonresident with a felony conviction.                                                                      
                                                                                                                                
9:14:53 AM                                                                                                                    
                                                                                                                                
Ms. Hall  informed the  committee that  the division's  agent                                                                   
licensing  processing  is  done   electronically,  which  has                                                                   
greatly streamlined the process.                                                                                                
                                                                                                                                
Ms. Hall turned to sections with clarifying language:                                                                           
                                                                                                                                
   · Sections 5 and 6: Tighten language and clarify how                                                                         
     deposits of both domestic and other state insurers are                                                                     
     treated and when the deposits are given to guarantee                                                                       
     funds.                                                                                                                     
   · Section 29: Defines "working day" uniformly throughout.                                                                    
                                                                                                                                
Ms.  Hall  pointed out  sections  of  the bill  that  provide                                                                   
uniformity with national standards.  She explained that state                                                                   
regulators have been concerned  with a major push for federal                                                                   
regulation of  insurance; the more uniform  state regulations                                                                   
are, the less likely that is to happen.                                                                                         
                                                                                                                                
   · Section 1: Allows for analysis ratios and examinations                                                                     
     submitted to the director from the National Association                                                                    
     of Insurance Commissioners (NAIC) to be confidential.                                                                      
   · Section 8: A uniformity standard saying that a                                                                             
     compliance officer for an insurance agency does not                                                                        
     have to be licensed in all the lines of business that                                                                      
     the agency does.                                                                                                           
   · Section 9: Updates products that can be sold under a                                                                       
     limited travel licensee.                                                                                                   
                                                                                                                                
9:17:15 AM                                                                                                                    
                                                                                                                                
Ms. Hall  approached new  issues covered  by Section  11. She                                                                   
believed  the  section  was a  policy  call  the  legislature                                                                   
needed to  make. The  section permits a  director to  order a                                                                   
summary  suspension  of a  producer  license  if there  is  a                                                                   
finding that  suspension is necessary  for the  protection of                                                                   
the  public  in  an  emergency   action.  She  described  two                                                                   
instances  of agent behavior  that needed  to be  immediately                                                                   
stopped. In normal circumstances,  the department would issue                                                                   
a letter  of accusation and get  a request for a  hearing and                                                                   
begin a process  that has taken up to a year  and a half. She                                                                   
reported  the   worst  instance  of  agent  behavior   as  an                                                                   
individual who took  premium money from 72 victims;  the case                                                                   
is pending with 32 felony counts.                                                                                               
                                                                                                                                
Ms. Hall  emphasized the importance  of immediate  action. In                                                                   
the  example,   the  adjuster  voluntarily   surrendered  his                                                                   
license. Had  he not, the  department would have  been forced                                                                   
to allow  him to  continue his  business practices  until the                                                                   
hearing.  The department  does  not believe  that waiting  in                                                                   
certain  circumstances  would  be  in the  best  interest  of                                                                   
consumers.                                                                                                                      
                                                                                                                                
9:20:07 AM                                                                                                                    
                                                                                                                                
Ms. Hall  described another incident  in which  premium trust                                                                   
money had been  taken from an employer. The  employer brought                                                                   
the  employee  to  the  division  offices  to  surrender  the                                                                   
license. She noted that other states had the provision.                                                                         
                                                                                                                                
Representative  Fairclough stated  that  she was  comfortable                                                                   
with  the first  component of  page  8, section  11, lines  3                                                                   
through  17.   She  was  not  comfortable  with   the  second                                                                   
component requiring  the appeal to  go to the  same director.                                                                   
She had  questions about due  process. Ms. Hall  replied that                                                                   
other  sections  provide  for  due process  in  hearings.  In                                                                   
addition, anything a director  does is subject to overview in                                                                   
superior court. She emphasized  the need to use the authority                                                                   
in special circumstances, especially urgent ones.                                                                               
                                                                                                                                
Representative  Fairclough   commended  the   department  and                                                                   
acknowledged  the  difficulty.  She stated  concerns  that  a                                                                   
director could  be unduly burdened  or could use  the measure                                                                   
to punish individuals.                                                                                                          
                                                                                                                                
9:23:27 AM                                                                                                                    
                                                                                                                                
Ms. Hall thought  there were adequate protections  built into                                                                   
the system. She  noted that discussion about  the process had                                                                   
taken place in the Labor and Commerce Committee.                                                                                
                                                                                                                                
Representative  Crawford  pointed  to  Section  10  regarding                                                                   
licensing  of out-of-state  adjustors and  queried the  level                                                                   
and circumstances  of need. Ms. Hall opined that  there was a                                                                   
shortage of adjusters.  She cited an emergency  provision for                                                                   
disasters  and described independent  agencies whose  trained                                                                   
adjustors have left Alaska but  still work long-distance. The                                                                   
department wants the adjusters to have a resident license.                                                                      
                                                                                                                                
Representative  Crawford  stated   concerns  about  adjustors                                                                   
moving from Alaska.  He thought it was important  for them to                                                                   
stay in the state. Ms. Hall replied  that there were a number                                                                   
of non-resident adjustors and  a large number of non-resident                                                                   
licensees; out  of approximately 38,000 insurance  adjusters,                                                                   
34,000 are non-residents.                                                                                                       
                                                                                                                                
Ms.  Hall  agreed  with  Representative   Crawford  that  the                                                                   
numbers  were  overwhelming.  She  explained  that  insurance                                                                   
company call  centers license  all their  people on  the off-                                                                   
chance that they might take a  call from an Alaskan consumer.                                                                   
She did not think there was enough  insurance business in the                                                                   
state to warrant 38,000 licensees.                                                                                              
                                                                                                                                
9:27:57 AM                                                                                                                    
                                                                                                                                
Ms.  Hall  turned  to  Section   17,  which  would  allow  an                                                                   
insurance  company  to  offer  an incentive  for  a  wellness                                                                   
program  without  considering  the incentive  a  rebate.  The                                                                   
department  feels   built-in  incentives  that   meet  Health                                                                   
Insurance   Portability   and  Accountability   Act   (HIPAA)                                                                   
requirements are a good idea.                                                                                                   
                                                                                                                                
Ms. Hall explained  Section 23, which changes  the definition                                                                   
of  "resident"  to  mirror  the  permanent  fund  eligibility                                                                   
definition for a high-risk pool.                                                                                                
                                                                                                                                
Ms.  Hall  continued  that  Section   28  would  add  deposit                                                                   
administration  for  self-funded healthcare  entities,  which                                                                   
are small  employer, single-industry  groups called  multiple                                                                   
employer welfare arrangements.  The division had an entity in                                                                   
the recent  past that was insolvent  and worked with  them to                                                                   
make sure claims were paid.                                                                                                     
                                                                                                                                
Ms. Hall discussed  Section 26, which makes  statutes dealing                                                                   
with  hospital medical  service  corporations  have the  same                                                                   
requirements as  other companies with regard  to applications                                                                   
and  the guaranteed  renewability  of  individual  healthcare                                                                   
plans.                                                                                                                          
                                                                                                                                
Representative  Gara  asked  whether  out-of-state  adjusters                                                                   
were charged a fee so that the  state did not lose money. Ms.                                                                   
Hall  responded  that  out-of-state  adjusters  were  charged                                                                   
double.                                                                                                                         
                                                                                                                                
Representative  Gara  asked if  money  was lost  through  the                                                                   
regulatory  process related  to  out-of-state adjusters.  Ms.                                                                   
Hall did  not think there were  a significant number  of out-                                                                   
of-state  residents; the  numbers  used  previously were  not                                                                   
licensees who adjust claims.                                                                                                    
                                                                                                                                
Representative  Gara   asked  for  clarification.   Ms.  Hall                                                                   
responded that the 38,000 agents  sell insurance. She did not                                                                   
have the number of adjusters.                                                                                                   
                                                                                                                                
9:31:36 AM                                                                                                                    
                                                                                                                                
Representative  Fairclough referred  to the state's  wellness                                                                   
survey with  a $100  incentive. She  wondered how the  survey                                                                   
information was kept confidential.  Ms. Hall replied that the                                                                   
state select benefits plan does  not come under the oversight                                                                   
of  Title  XXI, so  the  division  does not  have  regulatory                                                                   
oversight  of  the  plan.  She  referred  to  identity  theft                                                                   
legislation.  She  informed  the   committee  that  insurance                                                                   
entities  have  very specific  confidentiality  and  personal                                                                   
information  protection   provisions  in  both   statute  and                                                                   
regulation; the provisions to  not apply to the state benefit                                                                   
plan.                                                                                                                           
                                                                                                                                
Representative Fairclough  asked whether state  was exempt or                                                                   
if the $100  was considered a rebate. Ms. Hall  answered that                                                                   
the state was exempt.                                                                                                           
                                                                                                                                
9:33:32 AM                                                                                                                    
                                                                                                                                
Representative Kelly referred  to a constituent complaint and                                                                   
asked whether  the state had  implemented a survey  of people                                                                   
who had  complaints. Ms. Hall  responded that the  survey was                                                                   
implemented  in 2007 and  was still  being used. The  summary                                                                   
result of the surveys was available.                                                                                            
                                                                                                                                
Co-Chair Stoltze referred to a zero note with a narrative.                                                                      
                                                                                                                                
Representative  Fairclough  asked whether  "foreign  insurer"                                                                   
was  defined in  statute.  Ms.  Hall answered  that  "foreign                                                                   
insurer" meant anything in another  state, "domestic insurer"                                                                   
meant  domiciled  in the  state,  and "alien  insurer"  meant                                                                   
domiciled in another country.                                                                                                   
                                                                                                                                
9:36:07 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  MOVED  to  report CS  HB  175(L&C)  out  of                                                                   
Committee   with    individual   recommendations    and   the                                                                   
accompanying fiscal  note. There  being NO OBJECTION,  it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CS  HB 175(L&C)  was REPORTED  out  of Committee  with a  "do                                                                   
pass" recommendation  and with attached fiscal note  1 by the                                                                   
Department of Commerce, Community and Economic Development.