Legislature(2017 - 2018)BARNES 124
03/14/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB126 | |
| SB80 | |
| HB403 | |
| HB401 | |
| Presentation: Update of the 2020 Census Operations | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 403 | TELECONFERENCED | |
| *+ | HB 401 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | SB 80 | TELECONFERENCED | |
| += | SB 126 | TELECONFERENCED | |
HB 403-LIFE & HEALTH INSURANCE GUARANTY ASSN.
3:50:31 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 403, "An Act relating to the Alaska Life and
Health Insurance Guaranty Association; and providing for an
effective date."
3:50:29 PM
SORCHA HAZELTON, Staff, Representative Sam Kito, presented HB
403 on behalf of House Labor and Commerce Standing Committee,
prime sponsor. She gave some background on HB 403. She
paraphrased the sponsor statement [included in committee
packet], which reads as follows [original punctuation provided]:
House Bill 403 updates the Alaska Life and Health
Insurance Guaranty 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.
House Bill 403 incorporates changes made by the
National Association of Insurance Commissioners to the
Life & Health Insurance Guarantee Association Model
Act (MDL 520) in December 2017, after House Bill 157
had been introduced. These changes added health
maintenance organizations (HMOs) as members of the
association, providing HMO coverage, and addressing
long-term care insolvencies. With the substantial
number of changes made, HB 403 was introduced to help
explain these changes, though few are substantive.
Throughout, numerous conforming changes are made to AS
21.79 consistent with the model law, most of which do
not substantively change the bill.
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 403 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 403 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.
3:52:09 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community & Economic Development (DCCED), testified in
the hearing on HB 403. She said long term care insurance has
been around for many years, but there has been a concern about
the solvency of insurers. She explained the National
Association of Insurance Commissioners (NAIC) took action to
address those insurers. Previously, those insolvencies would
have been covered only by healthcare insurers. She indicated
the bill would bring in life insurers and split potential
insolvencies evenly. She stated the division was still asking
hospital services medical associations to participate. She
mentioned Primera is the only provider and they have not been a
member before. She added the update to the NAIC model also
brought in health maintenance organizations (HMOs). She
remarked the cost of health care is being discussed throughout
the legislature.
3:54:33 PM
MS. WING-HEIER summarized the sectional analysis [included in
committee packet], which reads as follows [original punctuation
provided]:
Sec. 1 AS 21.79.010 is amended to conform to National
Association of Insurance Commissioners' (NAIC) Life
and Health Insurance Guaranty Association Model Act
(MDL 520) model language and clarifies protections
that apply to the failure in performance of
contractual obligation because of the impairment or
insolvency of the member insurer.
Sec. 2 AS 21.79.020(a) is amended to clarify that
applicability includes a nonresident who is not
eligible for coverage by a guaranty association in
another state because the insurer was not licensed at
the time specified in the guaranty association law of
that state.
Sec. 3 AS 21.79.020(b) is amended to have AS 21.79
apply to a contract issued by a hospital or medical
service corporation and defines the terms "annuity
policy or contract" and "certificate under a direct
group life health, annuity, or supplemental policy or
contract". This section also includes health
maintenance organizations (HMOs) in the definition of
"health insurance," for the purposes of AS 21.79.
Sec. 4 AS 21.79.020(c) is amended to make AS 21.79
inapplicable to:
1. a policy or contract providing a hospital,
medical, prescription drug, or other health care
benefit in accordance with 42 U.S.C. 1395w-
211395- w154 or federal regulations adopted under
those sections; (Medicare Choice Program and
Voluntary Prescription Drug Benefit Program)
2. a person who acquires rights to receive
payments through a structured settlement
factoring transaction as defined in 26 U.S.C.
5891(c)(3)(A), regardless of whether the
transaction occurred before or after such
section became effective.
3. structured settlement annuity benefits to
which a payee or beneficiary has transferred the
payee or beneficiary's rights in a structured
settlement factoring transaction as defined in 26
U.S.C. 5891(c)(3)(A), regardless of whether the
transaction occurred before or after 26 U.S.C.
5891(c)(3)(A)
became effective.
• Subsection (c) is also amended to add clarifying
language consistent with the model language and
provide exceptions to the above inapplicability.
Sec. 5 AS 21.79.020(d) Non-substantive changes are
made for either consistency with the NAIC Model or
drafting conventions.
Sec. 6 AS 21.79.020(e) Non-substantive changes made
are for either consistency with the NAIC Model or
drafting conventions, with a citation correction in
paragraph (9).
Sec. 7 AS 21.79.025(a)
• AS 21.79.025(a)(2)(B)(ii) is amended to clarify
that the benefits for which the association may
become liable may not exceed $300,000 for long-
term care insurance as defined under AS
21.53.200. Conforms to model language by
replacing "basic hospital, medical, and surgical
insurance or major medical insurance" with the
term "health benefit plans."
• AS 21.79.025(a)(3) is amended to change "contract
holder" to "contract owner" to be consistent with
the NAIC Model, to clarify that the contract
refers to an unallocated annuity contract issued
to or in conjunction with a government lottery if
the owner is a resident, and to clarify that the
association is not liable to cover more than $5
million in benefits regardless of the number of
policies and contracts held by the owner.
• AS 21.79.025(a)(4) is amended to increase the
coverage limit for net cash surrender and net
cash withdrawal values of annuities from $100,000
to $250,000 for individuals participating in a
governmental retirement benefit plans established
under 26 U.S.C. 401, 26 U.S.C. 403(b) or 26
U.S.C. 457 and covered by an unallocated annuity
contract
• AS 21.79.025(a)(5) is amended to increase the
coverage limit for net cash surrender and net
cash withdrawal values, if any, from $100,000 to
$250,000 to each payee of a structured settlement
annuity, or beneficiary of the payee if the payee
is deceased, in the aggregate.
Sec. 8 AS 21.79.025(c) is amended to not require the
association to reissue the contractual obligations of
an insolvent or impaired insurer under a covered
policy or contract when the obligations do not
materially affect the economic values or economic
benefits of the covered policy or contract.
Sec. 9 AS 21.79.025(d) is amended to correct a
typographical error, to replace "basic hospital,
medical, and surgical insurance or major medical
insurance" with the term "health benefit plans," and
to add the word "contract" as is consistent with the
model language.
Sec. 10 AS 21.79.025 is amended to add a new
subsection: long-term care rider benefits to a life
insurance policy or contract are considered to be the
same type of benefits as the basic life insurance
policy or contract to which it relates.
Sec. 11 AS 21.79.040(a) is amended to require a
hospital or medical service corporation business and
an HMO business to become members of an association.
Sec. 12 AS 21.79.050(a) is amended to increase the
number of representatives on the Board of Governors of
a guaranty association to 7-11 from 5-9.
Sec. 13 AS 21.79.060(a) is amended to allow the
association to provide loans to assure payment of the
contractual obligations of the impaired insurer until
those obligations are guaranteed, reinsured, or
assumed; also gives authority to reissue policies or
contracts if the member insurer is impaired.
Sec. 14 AS 21.79.060(d) AS 21.79.060(d)(1) is amended
to better track the model language by combining
existing paragraphs 1 3 under AS 21.79.060(d).
Tracking NAIC models and language promotes national
uniformity and state-based regulation, and ease of
interpretation, compliance, administration,
enforcement, and amendment.
• AS 21.79.060(d)(1), consistent with the addition
of loans under AS 21.79.060(a)(2) under Section
13 above, is amended to authorize the association
to utilize loans necessary to discharge the
association's duties under AS 21.79.060.
• AS 21.79.060(d)(2) is amended to better track the
model language by placing existing subsections
(e) (j) in this paragraph. This subsection also
adds the terms "contract," "enrollee," and HMOs,
as is consistent with the model language.
Sec. 15 AS 21.79.060(k) is amended to conform with the
model language by adding the word "contract."
Sec. 16 AS 21.79.060(l) is amended to require the
association to provide a report to the liquidator
regarding the premium collected by the association if
requested by the liquidator of an insolvent insurer.
Sec. 17 AS 21.79.060(n) is amended to authorize the
association to impose a permanent policy or contract
lien under a guarantee, assumption, or reinsurance
agreement if approved by a court and the association
finds that the amount that may be assessed is less
than the amount needed to assure full and prompt
performance of the association's duties.
Sec. 18 AS 21.79.060(o) is amended to conform to the
model language and change a subsection citation to
conform with amendments being made.
Sec. 19 AS 21.79.060(p) is amended to change a
subsection citation to conform to amendments being
made to the section.
Sec. 20 AS 21.79.060(s) is amended to conform to the
model language by adding the words "policies,"
"contracts," and "enrollee."
Sec. 21 AS 21.79.060(t) is amended to conform to model
language and to allow the association to file rate and
premium increases with the director for policies or
contracts.
Sec. 22 AS 21.79.060 adds a new subsection (aa) to
better track the model language by incorporating the
provisions in existing AS 21.79.060(u) (x).
Sec. 23 AS 21.79.070(a) is amended to require that any
assessment of association members by the association
board must be adopted by a resolution of the board.
Sec. 24 AS 21.79.070(c) is amended to increase the
amount of a non-pro-rata assessment of from $250 per
calendar year to $500 per calendar year. It also
amends the class B assessment to include pro-rata
assessments related to long-term care insurance, as
well as changing the manner in which Class A and Class
B assessments are made.
Sec. 25 AS 21.79.070(f) is amended to conform to the
model language by adding the term "member insurer" in
place of "insurer."
Sec. 26 AS 21.79.070(j) is amended to conform to the
model language by adding the term "member insurer" in
place of "insurer."
Sec. 27 AS 21.79.070(k) is amended to allow hospital
and medical service corporations and HMOs to consider
the amount necessary to meet its assessment
obligations when determining its premium rates and
policy owner dividends.
Sec. 28 AS 21.79.070(l) is amended to conform to model
language by adding the term "member insurer."
Sec. 29 AS 21.79.080(c) is amended to require the
association board to adopt a plan of operation that
includes
(1) procedures for removing a member of the board for
cause, including procedures for removing a member of
the board who becomes an impair or insolvent insurer,
and (2) policies and procedures for addressing
conflicts of interest.
Sec. 30 AS 21.79.090(b) is amended to conform to the
model language by replacing the term "insurance" with
the term "business."
Sec. 31 AS 21.79.090(c) is amended to (1) clarify that
only a final action of the board may be appealed, and
(2) increase the time by which an appeal may be taken
from 30 days to 60 days after the date the notice of
the board's action is mailed.
Sec. 32 AS 21.79.090(d) is amended to clarify that the
liquidator, rehabilitator, or conservator of an
insolvent insurer may notify all interested persons of
the effect of AS 21.79.
Sec. 33 AS 21.79.100(a) is amended to require the
director to notify other insurance regulatory
officials in the country when issuing orders for the
security of contract owners and certificate holders.
Sec. 34 AS 21.79.100(e) is amended to allow the
director to seek the association board's advice and
recommendations as to the financial condition of
hospital and medical service corporations and HMOs.
Sec. 35 AS 21.79.100(f) is amended to enable the
association board to make reports and recommendations
to the director relating to the solvency of hospital
and medical service corporations and HMOs.
Sec. 36 AS 21.79.100(h) is amended to conform to model
language by using the term "member insurer."
Sec. 37 AS 21.79.110(c) is amended to add the words
"or contract," as is consistent with the model
language.
Sec. 38 AS 21.79.110(d) is amended to expand the list
of those situations where the court may or must
consider the contributions of the parties when
distributing ownership rights.
Sec. 39 AS 21.79.110(e) is amended to conform to model
language by using the term "member insurer."
Sec. 40 AS 21.79.110(f) is amended to conform to model
language by using the term "member insurer," and
adding the words "or contract" after "policy."
Sec. 41 AS 21.79.140 is amended to (1) clarify that a
cause of action may not arise for an action or
omission of the association and its agents and
employees, members of the Board of Governors, member
insurers, and agents and employees of member insurers,
and the director of the division of insurance and the
director's representatives in performing their duties
under AS 21.79, and (2) extend the immunity to such
entities' participation in an organization of one or
more state associations of similar purposes and to
that organization and its agents or employees.
Sec. 42 AS 21.79.150 is amended to extend the time a
proceeding involving an insolvent insurer may be
stayed from 60 days to 180 days after the date of a
final order of liquidation, rehabilitation, or
conservation in order to allow the association
additional time to exercise a power or duty authorized
under AS 21.79.
Sec. 43 AS 21.79.160(a) is amended to clarify that the
section does not apply to entities that do not sell or
solicit coverage by a hospital or medical service
corporation or coverage by an HMO; conforms to model
language by replacing the term "insurer" with "member
insurer."
Sec. 44 AS 21.79.160(b) is amended to conform to model
language by including the terms "member," "policy
owner," "contract owner," "certificate holder," and
"enrollee."
Sec. 45 AS 21.79.160(c) is amended to conform to model
language by including the words "member," "policy
owner," "contract owner," and "certificate owner."
Prohibits hospital or medical service corporations or
HMOs from using the existence of the association for
sales, solicitation, or inducement to purchase
insurance.
Sec. 46 AS 21.79.900(5) amends the term "called" to
(1) mean a notice has been mailed by the association
to member insurers requiring that an authorized
assessment be paid within the time set out in the
notice, and (2) include that an authorized assessment
becomes "called" when notice is mailed by the
association.
Sec. 47 AS 21.79.900(6) amends the term "contractual
obligation" to clarify that the term only applies to
an obligation for which coverage is provided under AS
21.79.020(a), (b), (d), and (e).
Sec. 48 AS 21.79.900(7) amends the term "covered
policy" to include "covered contract."
Sec. 49 AS 21.79.900(10) amends the term "member
insurer" to include a hospital or medical service
corporation licensed under AS 21.87, and includes even
those whose license or certificate of authority has
been suspended, revoked, not reviewed, or voluntarily
withdrawn.
Sec. 50 AS 21.79.900(12) is amended to conform to
model language by changing the term "owner" in regard
to a policy or contract to "policyholder," "policy
owner," and "contract owner."
Sec. 51 AS 21.79.900(13) amends the term "plan
sponsor" to clarify that the term applies to groups of
representatives of parties, similar to two or more
employers, or jointly by one or more employers and one
or more employee organizations, an association,
committee, or joint board of trustees who establish or
maintain the benefit plan.
Sec. 52 AS 21.79.900(14) amends the term "premium" to
clarify that assessable premium may not be reduced
on account of AS 21.79.020(c)(4) relating to interest
limitations and limitations with respect to one
individual, one participant, and one contract owner.
Sec. 53 AS 21.79.900(15) conforms to model language by
amending the definition of "receivership court" and
uses the term "member insurer" in place of "insurer."
Sec. 54 AS 21.79.900(16) amends the term "resident" to
delete language considered unnecessary under state
drafting conventions.
Sec. 55 AS 21.79.900(19) amends the term "supplemental
contract" to mean a written agreement entered into
for the distribution of proceeds under life, health,
or annuity policy or contract benefits.
Sec. 56 AS 21.79.900 is amended to add new paragraphs
to define the terms "health benefit plan", "election
date" and "extra contractual claim". The section is
also amended to define "published monthly average",
previously defined under AS 21.79.020(f).
Sec. 57 AS 21.86.260(a) is amended to apply AS 21.79
to HMOs.
Sec. 58 AS 21.87.340 is amended to add AS 21.79 to the
list of statutory provisions which apply to hospital
and medical service corporations.
Sec. 59 Repeals the following provisions
• AS 21.79.020(f) defining "published monthly
average" as the definition is moved under AS
21.79.900.
• AS 21.060(c) is repealed as the provision no
longer is in the model language.
• AS 21.79.060(e) (j) are repealed as these
provisions have been relocated to AS
21.79.060(d).
• AS 21.79.060(u) (x) are repealed as these
provisions have been relocated to
AS21.79.060(aa).
• AS 21.79.110(e) is repealed as unnecessary
because the state has adopted Section 602 of the
NAIC Insurers Receivership Model Act (MDL 555)(AS
21.78.325).
Sec. 60 Provides for an uncodified new section
outlining the timing of when the director may adopt
regulations.
Sec. 61 Provides that section 60 of the Act takes
effect immediately.
Sec. 62 Provides a July 1, 2018 effective date.
3:57:02 PM
REPRESENTATIVE SULLIVAN-LEONARD referred to Section 7 and asked
about the liability amount.
MS. WING-HEIER answered the liability amount is $300,000 for
disability income as defined, and $300,000 for long-term care is
new. She said it was clarifying that the limit is specific to
long-term care. She added the last two limits are increasing
from $100 [thousand] to $250 [thousand], which is what a
consumer could collect, provided as funded if their policy were
with an insolvent insurer.
CHAIR KITO summarized that the aim is to catch up with late
adopted changes to the model law. He added long-term care
insolvency is a big issue.
4:08:39 PM
DONALD THOMAS, Administrator and Counsel, Alaska Life and Health
Insurance Guarantee Association, testified in the hearing on HB
403. He said that during the past 8 years, he has been engaged
in efforts to have the Guarantee Association's Organic Act
updated. He explained HB 403 would give the board of governors
the tools to affect the purposes of the Association's Act. He
underlined the board is operating under outdated rules and has
had to incur expenses that could have been avoided had it not
been operating under an outdated system. He said HB 403 would
ensure functional consistency within the nationwide state-based
guarantee system. He added it is important as presently there
is no health or life insurance domesticated in Alaska. He said
with HB 403 there is an increased likelihood that Alaska law
will be applied to Alaska policyholders.
4:10:59 PM
JANA-LEE PRUITT, Regional Vice President, American Council of
Life Insurers (ACLI), testified in support of HB 403. She
stated the American Council of Life Insurers (ACLI) is a
national trade association representing around 290 companies
which offer life insurance annuities, long term care insurance,
disability income insurance, and reinsurance. She added ACLI
has 219 members licensed to do business in Alaska, and 96
percent of all life insurance and annuity payments to Alaska
citizens are made by ACLI member companies. She stated ACLI
supports the bill. She informed HB 403 would better protect
insured residents of Alaska in the unlikely event of an insurer
insolvency by amending the Alaska Life and Health Insurance
Guaranty Association Act to incorporate amendments made to the
National Association of Insurance Commissioners ("NAIC") Life &
Health Insurance Guaranty Association Model Act, upon which the
Alaska Act is based.
MS. PRUITT said HB 403 would increase coverage limits for
individuals covered by unallocated annuity contracts and
structured settlement annuities from $100,000 to $250,000 and
make the Alaska Act functionally consistent with the NAIC Model
Act. Forty-five states have already amended their guaranty
association laws to achieve functional consistency, which is
critical to ensuring multi-state insolvencies are handled as
quickly and efficiently as possible and policyholder claims are
treated similarly, regardless of a policyholder's state of
residence. She underlined that lack of consistency among state
guaranty association statutes has led to unnecessary and
expensive litigation in the past, which can delay claim payments
and divert resources from protecting policyholders.
MS. PRUITT stated HB 403 would also help ensure the continued
sustainability of the state-based guaranty association system in
the event of the insolvency of a carrier that writes long-term
care insurance. She said the current assessment formula for
long-term care insurance insolvencies is not sustainable. The
newly-revised NAIC Model Act and HB 403 would distribute the
assessments for long-term care insurance insolvencies among
companies writing life, health, annuity products. Regulators,
insurers, consumer representatives and experts in the insurance
receivership community worked together for over a year to make
these critical changes to the NAIC Model Act. She added HB 403
would help ensure the Alaska Act which was created to protect
consumers and act as a safety net in the event of an insurer
insolvency remains stable, fair, and sustainable through
sufficient assessment capacity.
MS. PRUITT said there are a few minor revisions required and
ACLI is in discussion with Ms. Wing-Heier and her staff to make
sure the revisions comply with Alaska's legislative drafting
conventions.
4:14:28 PM
CHAIR KITO opened testimony on HB 403.
CHAIR KITO held over HB 403.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB80 Ver O.pdf |
HL&C 3/14/2018 3:15:00 PM |
SB 80 |
| HB 401 Transmittal Letter 3.6.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
HB 401 |
| HB 401 Fiscal Note-DCCED DOI 3.6.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
HB 401 |
| HB 401 ver A 3.6.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
HB 401 |
| HB 401 Sectional 3.6.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
HB 401 |
| HB157-403 Summary of Changes 3.13.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
HB 157 |
| HB403 Sectional Analysis 3.13.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
HB 403 |
| HB403 Sponsor Statement 3.13.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
HB 403 |
| HB403 Fiscal Note DCCED DOI 3.9.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
HB 403 |
| HB403 version D.PDF |
HL&C 3/14/2018 3:15:00 PM |
HB 403 |
| HB403 Sponsor Statement 3.13.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
HB 403 |
| HLAC Update on 2020 Census Operation 3.12.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
Presentation Census |
| SB080 Letters of Support 3.15.18.pdf |
HL&C 3/14/2018 3:15:00 PM |
SB 80 |