Legislature(2001 - 2002)
05/10/2002 05:26 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HB 246-OMNIBUS INSURANCE BILL
REPRESENTATIVE LISA MURKOWSKI, Chair of the House Labor &
Commerce Committee, sponsor of HB 246, said the majority of HB
246 was technical cleanup language. She said there were a few
policy provisions that she wanted to point out to the committee.
REPRESENTATIVE MURKOWSKI said the first policy provision related
to multiple employer welfare arrangements (MEWAs). HB 246 would
establish a more appropriate regulatory structure for MEWAs in
regard to appropriate capital, surplus reserving and financial
reporting requirements.
She said the second policy provision would establish tighter
confidentiality of records laws so that Alaska would continue to
be accredited by the National Association of Insurance
Commissioners. She said there were sharing agreements to allow
the Division of Insurance (DOI) to obtain information.
She said there would also be fees for late payment of premium
taxes. She said there was also a provision that would allow an
annual fee to operate as a joint insurance arrangement (JIA).
She said there was probably an amendment relating to that
provision.
CHAIRMAN TAYLOR asked if there were questions for Representative
Murkowski. There were none.
He moved Amendment 1 to delete Sec. 52 on page 20, lines 12-22
and renumber the remaining sections accordingly. He said Sec. 52
added a new provision that would charge a fee against the pooling
organizations created by the legislature for school districts and
municipalities. He said those were not regulated by DOI and
there was no reason for DOI to charge them a fee. He asked DOI
to provide testimony on Amendment 1.
MR. BOB LOHR, Director, DOI, Department of Community & Economic
Development, said Sec. 52 addressed a very specific situation in
which a JIA complained to DOI that the competing JIA was
operating unfairly by doing things that weren't allowed under the
JIA statutes. He said that had happened approximately four
times. He said JIAs were not normally subject to regulation. He
said DOI was being asked to be the gatekeeper for competitive
forays by each JIA into the territory of the other by using Title
21 to define the boundary. He said those JIAs should pay the
actual cost of that regulation. He said DOI was a fee-based
agency and other fee payers were paying those costs. DOI was
concerned that Sec. 52 had been drafted too broadly and he had a
more narrowly crafted amendment to offer the committee.
CHAIRMAN TAYLOR said it seemed like the JIAs were simply asking
DOI to do its job.
MR. LOHR said DOI was being asked to regulate the competitive
playing field between JIAs. He said that was beyond their scope
of regulation because they did not regulate JIAs.
CHAIRMAN TAYLOR said DOI didn't regulate JIAs but they did
regulate the insurance business. He said if somebody tried to
set up a phony insurance corporation and they received a
complaint, he assumed they would enforce the insurance laws of
the state.
MR. LOHR said that was correct.
CHAIRMAN TAYLOR thought Sec. 52 would have a chilling effect upon
anyone wanting to turn to DOI for assistance and enforcement of
the laws they were supposed to enforce.
MR. LOHR said it wasn't designed to have a chilling effect except
when one JIA wanted DOI to regulate the other's conduct.
CHAIRMAN TAYLOR said that was DOI's purpose. He said that would
be like going to the police to get a driver to slow down in a
neighborhood and being charged to lodge the complaint. He
thought that would have a tremendous chilling effect on anyone
coming to DOI. He said it would be like charging a fee to file a
complaint.
MR. LOHR said DOI didn't object to Amendment 1.
CHAIRMAN TAYLOR asked if there was any further discussion on
Amendment 1. There was none. He asked if there was any
objection to Amendment 1.
There being no objection, Amendment 1 was adopted.
CHAIRMAN TAYLOR asked Mr. Kirk Wickersham to provide testimony.
MR. KIRK WICKERSHAM said he was a lawyer and a real estate
broker. He said he was also the owner of a small title agency
called Attorneys Title Guaranty. He offered an amendment to the
committee. He said the amendment was the result of a variety of
actions related to Attorneys Title Guaranty.
He said the legislature adopted a bundle of laws governing title
insurance in 1974. He said AS 21.66.170 required title companies
to prepare a title report before issuing a title insurance
policy. He said AS 21.66.200 and AS 21.66.210 provided two
methods by which to do that. He said AS 21.66.200 required title
companies to have a title plant consisting of approximately 25
years of public records; that would equal about 11 million
documents in Anchorage. He said AS 21.66.210 allowed companies
to join together to form a joint title insurance company that
would be allowed to use the public records.
MR. WICKERSHAM said Attorneys Title Guaranty and it's
underwriter, Old Republic, formed a joint title company the
previous summer, applied for and obtained a certificate of
authority from DOI and started selling title insurance and doing
title searches using the public records. He said complaints from
other title companies resulted in a lawsuit that had been
dismissed, a license action that was still pending and a bill
that would clarify the law in the opposite direction of his
proposal.
He said his amendment would grandfather Old Republic and
Attorneys Title Guaranty to allow them to continue in the
business. He said it would foster more competition in the
industry. His company was able to offer price competition
because they didn't have to build and maintain a copy of the
public records.
CHAIRMAN TAYLOR asked how other companies could participate in
the field if the amendment was adopted.
MR. WICKERSHAM said they could join the joint title company,
which he was open to. He said he was advised not to propose an
overall policy change, which was why he presented a grandfather
amendment. He believed every skilled title examiner could do a
title search from the public records.
CHAIRMAN TAYLOR asked if the other companies would be
grandfathered in.
MR. WICKERSHAM said they would because they could either be or
become a participant in or an owner of a joint title company.
CHAIRMAN TAYLOR asked if his joint title company was the only one
that new companies could join.
MR. WICKERSHAM said that was a problem and that was why they had
to create their own joint title company. He said there were only
two joint title companies, theirs and the one owned by three of
the four other title insurance companies in Anchorage
CHAIRMAN TAYLOR said grandfathering his joint title company would
put him in a select group that had built their plants over the
years. He said there wouldn't really be another option for a
competing company to form and create a title plant in the same
manner that he did.
MR. WICKERSHAM said that would be the effect of the amendment.
He said he could also suggest a very simple amendment that would
allow any two title companies to join and form a joint title
plant.
CHAIRMAN TAYLOR asked what that would be.
MR. WICKERSHAM said the first sentence of AS 21.66.210(a)
provided that two or more title insurance companies or limited
producers could join together to form a joint title company for
the purposes of producing title searches. He said the second
sentence provided that a title insurance company or a limited
producer that belonged to a joint title company that complied
with AS 21.66.210 was in compliance with the section. He said
the amendment would simply include AS 21.66.200 in that
compliance. He said that would end the controversy and allow
anybody to form a joint title company. It would also bring
Alaska into conformance with 39 other states that did not have
title plant requirements.
CHAIRMAN TAYLOR asked Mr. Wickersham to work with Mr. Lohr and
Representative Murkowski to work out that amendment and come back
to the committee. He asked if the committee had any objection to
Mr. Wickersham's approach. He said he would rather provide a
more generic solution than try to pass an amendment that would
only take care of one operator and wouldn't provide opportunities
in the future for expansion in the field.
SENATOR ELLIS asked if the new amendment would make the one Mr.
Wickersham passed out unnecessary.
CHAIRMAN TAYLOR said it would.
MR. LOHR said there was an adjudicatory matter pending in front
of DOI in which Mr. Wickersham's company was appealing a cease
and desist order. He would be the ultimate decision-maker for
that matter. He said he needed to maintain distance from the
issue and could not work with Mr. Wickersham on the amendment.
CHAIRMAN TAYLOR said that was appropriate and apologized for
making the request. He hoped that Mr. Lohr's decision would be
easier to make if they passed the amendment.
MR. WICKERSHAM said the cease and desist order was not against
his company; it was against the underwriter.
CHAIRMAN TAYLOR said he understood that. He asked Mr. Jerry
Reinwand to provide testimony.
MR. JERRY REINWAND, Blue Cross/Blue Shield of Alaska, said he
wanted to present two technical amendments that had been worked
out between Blue Cross/Blue Shield and DOI. He said the
committee should have those amendments in their packets. He said
the first amendment dealt with AS 21.42.365(b).
MR. LOHR said the proposed amendment related to the timing of
adjusting the cost inflation factor for the statutorily described
benefits for alcoholism and drug abuse treatment services
provided under insurance plans. He said it would avoid the
problem of having to amend policies already in place to include
the increases. He said policies starting after the date of the
inflation adjustment by DOI would be affected. He said DOI
supported the amendment.
CHAIRMAN TAYLOR asked if it would make regulation easier for DOI.
MR. LOHR said it would.
MR. REINWAND said the second amendment dealt with an error that
was made in Blue Cross/Blue Shield's favor and would change the
law back to the way it was intended to be. He said they worked
with Representative Pete Kott on a bill regarding retaliatory
taxes several years ago. He said they asked for some relief for
the public entities covered by Blue Cross/Blue Shield that
shouldn't be charged retaliatory taxes. He said there was a
mistake made in the drafting of that amendment at the end of
session that expanded what was intended. He said the proposed
amendment would narrow that provision back to the intent. The
existing law could be interpreted in such a way that Blue
Cross/Blue Shield didn't have to pay retaliatory taxes.
MR. LOHR said Blue Cross/Blue Shield had acted honorably in
accord with the original intent.
CHAIRMAN TAYLOR asked if Mr. Lohr recommended the proposed
amendment.
MR. LOHR said yes.
CHAIRMAN TAYLOR said the first proposed amendment would be
Amendment 2 and the second proposed amendment would be Amendment
3.
MR. REINWAND said Blue Cross/Blue Shield and DOI were involved in
a lawsuit and the proposed amendments would not affect that
lawsuit in any way.
CHAIRMAN TAYLOR asked if Mr. Lohr agreed.
MR. LOHR said he did.
SENATOR ELLIS moved Amendment 2 to replace "January 1, 1999" with
"July 1, 2004" on page 14, lines 30-31 and add to page 15, line 4
the language, "The adjusted benefits shall be applicable to
coverage issued or renewed on or after January 1 of the calendar
year following the July 1 adjustment by the Director."
There being no objection, Amendment 2 was adopted.
SENATOR ELLIS moved Amendment 3 to replace the language on page
7, lines 19-23 with the following language:
(f) For purposes of the application of subsection (a)
of this section, a health care insurer may not include
taxes, assessments, or other similar obligations on
health care insurance premiums received from the state,
a municipality, a city or borough school district, a
regional educational attendance area, the University of
Alaska, or a community college operated by the
University of Alaska. For purposes of this paragraph,
"health care insurer" has the meaning given in AS
21.54.500.
There being no objection, Amendment 3 was adopted.
SENATOR ELLIS moved Amendment 4 to amend AS 21.66.210(a) to read:
(a) Two or more title insurance companies or two or
more title insurance limited producers, or a
combination of title insurance companies and title
insurance limited producers, may apply to the director
of insurance to form an association, corporation, or
other legal entity, for the purpose of engaging in the
business of preparing abstracts of title searches from
public records or from records to be owned by the
entity, upon the basis of which a title insurance
limited producer or a title insurance company will
issue title policies. The owners or participants are
considered to be in compliance with the provisions of
this section and AS 21.66.200 if the title plant of the
association, corporation, or other legal entity
complies with the provisions of this section. The
application must contain
(1) a copy of the proposed articles of incorporation
or association and the bylaws or agreement governing
the operation of the entity;
(2) a list of the owners or participants;
(3) the names and addresses of the persons who will
operate the entity, with a description of their
experience and qualifications;
(4) the conditions under which ownership or
participation in the entity may be sold or acquired;
(5) a statement of whether or not title information
will be compiled and sold to persons other than owners
of or participants in the entity;
(6) a pro forma balance sheet and other financial
information to indicate the sufficiency of financing
the entity.
CHAIRMAN TAYLOR asked Mr. Wickersham to explain Amendment 4.
MR. WICKERSHAM said Amendment 4 would resolve the situation he
previously described. He said AS 21.66.200 required a title
company to own a title plant while AS 21.66.210 gave title
companies the option of joining with another title company to
form a joint title company to use public records. He said the
Attorney General and DOI had taken the position that even if the
public records were used, a title company was not exempt from the
provisions of AS 21.66.200. Therefore, these companies would
still have to make a copy of the public records. He said
Amendment 4 would allow any two title companies or limited
producers, or any combination thereof, to form their own joint
title company and use public records and be in compliance with AS
21.66.200.
He thought this was good law and good public policy. He said it
would bring price competition to the field and would be good for
the consumers of Alaska.
6:55 p.m.
REPRESENTATIVE MURKOWSKI stated for the record that Amendment 4
would be a significant public policy change. She said Alaska was
a title plant state and Amendment 4 would make it a non-title
plant state. She said the discussion was very similar to the
discussion before the House Labor & Commerce Committee. She said
being a non-title plant state would open Alaska up for
competition and hopefully there would be some price reductions.
CHAIRMAN TAYLOR appreciated the background she provided. He knew
she had worked on the issue in the past and was sure that it was
a controversial issue. He asked if there was any further
discussion on Amendment 4.
SENATOR ELLIS was even more excited to be the sponsor of
Amendment 4 after hearing what Representative Murkowski had to
say. He looked forward to the committee's support.
CHAIRMAN TAYLOR said Amendment 4 had his support. He withdrew
his objection to Amendment 4.
There being no objection, Amendment 4 was adopted.
SENATOR COWDERY moved SCS CSHB 246(JUD) out of committee with
attached zero fiscal note and individual recommendations.
There being no objection, SCS CSHB 246(JUD) moved out of
committee with attached zero fiscal note and individual
recommendations.
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