Legislature(2003 - 2004)
03/31/2004 09:05 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 357(L&C)
"An Act relating to the regulation of insurance, insurance
licenses, qualifications of insurance producers, surplus
lines, fraud investigations, electronic transactions, and
compliance with federal law and national standards; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill, sponsored by the Senate Labor and
Commerce Committee, "is known as the insurance omnibus bill and
contains numerous to insure that State statutes are consistent with
federal law, model act standards and guidelines."
LINDA HALL, Director, Division of Insurance, Department of
Community and Economic Development, deferred to Senator Bunde to
introduce the bill.
Senator Bunde testified that the Senate Labor and Commerce
Committee sponsored this bill at the request of the Murkowski
Administration. He also characterized this legislation as an
insurance omnibus bill and a "technical clean-up" bill that
proposes numerous changes to Title 21 of Alaska Statutes. He
explained this bill would insure that the State is consistent with
federal law and the National Association of Insurance Commissioners
model act standards and guidelines. He noted this legislation would
update procedures and transactions within the Division of
Insurance.
Senator Bunde listed six key elements of the bill as follows.
1. provides for electronic communication
2. provides for changes in the reinsurance capabilities in
Alaska
3. implements recommendations for licensing revisions as
suggested by National Association of Insurance Commissioners
4. makes changes in the liability for civil damages when
filing a report concerning fraudulent acts
5. contains provisions that clarify that a guarantee fund
deposit is required for title insurance companies
6. makes changes to taxes and late penalties to be more
consistent with Department of Revenue statutes.
Senator Bunde summarized this bill would "promote consistency
between Alaska and other states, should promote more efficient
operation."
Amendment #1: This amendment inserts a new bill section on page 2,
following line 11 to read as follows.
Sec. 2. AS 21.07.010(b) is amended to read:
(b) A contract between a participating health care
provider and a managed care entity that offers a group managed
care plan may not contain a provision that
(1) has as its predominant purpose the creation of
direct financial incentives to the health care provider for
withholding covered health care services that are medically
necessary; nothing in this paragraph shall be construed to
prohibit a contract between a participating health care
provider and a managed care entity from containing incentives
for efficient management of the utilization and cost of
covered health care services;
(2) requires the provider to contract for all
products that are currently offered or that may be offered in
the future by the managed care entity; or [AND]
(3) requires the health care provider to be
compensated for health care services performed at the same
rate as the health care provider has contracted with another
managed care entity.
New Text Underlined [DELETED TEXT BRACKETED]
Co-Chair Wilken moved for adoption. He announced that this bill
would not be reported from Committee at this hearing.
Senator Dyson relayed his understanding that significant cost
shifting occurs by health care providers. He exampled that
hospitals are unable to recover expenses incurred from surgery
procedures and subsequently charges higher amounts for other
services, which are ultimately shifted to third-party payers. He
asked if the State has a responsibility to ensure that insurers are
only paying for costs actually incurred and not for providers'
unrecoverable debts from other services.
Ms. Hall replied this is a philosophical question she was not
currently prepared to answer. She assured she would discuss the
matter with Division staff responsible for primary oversight of the
health insurers and undertake additional research.
Senator Dyson commented this would be a wise choice.
Senator Dyson remarked on the "unfortunate" circumstances whereby
third party payers, large insurance carriers and self insured
negotiate with providers for lower rates, while requiring uninsured
patients to pay 100 percent. He also stated that some patients must
pay the cost recovery of other services offered by the provider. He
wanted to ensure that self-payers get same discount as third party
payers.
Ms. Hall responded that she would further discuss this matter with
Senator Dyson.
Ms. Hall testified on the bill as follows.
The purpose of the bill is to make some changes that are
required in the accreditation process that the Division of
Insurance goes though with the National Association of
Insurance Commissioners. It also makes some changes to
correspond with some of the national producer licensing
requirements.
There's six major areas of change. One, as Senator Bunde has
pointed out is electronic communication; the ability to allow
various communications for the services we provide to be
preformed electronically. We have financial forms that are
filed electronically and we're trying to gradually increase
the ability to communicate with our public in that manner.
Second area is late tax payments. Currently we have some
fairly high penalties that are mandatory for late payments.
There are four sections in the bill that revise the penalties
to make them more consistent with the Department of Revenue.
We also add a new section that is up to $10,000 penalties for
willful late payments of taxes.
The reinsurance piece of the bill is probably the most
complex. It is the only area of the bill that I've received
any comments from industry on. There are two sections. One is
reflected in Version "H", it is a c.s. Originally, the bill
proposed that the Division of Insurance must approve
reinsurance treaties that insurance companies entered into
with reinsurance insurers. We have changed that merely to
require that they file their signed agreements with us. In
some financial examinations, we've had difficulty getting
signed reinsurance agreements and we want to be sure we have
those available for our review when we're reviewing our
domestic insurance companies.
The forth area of the bill makes some changes in licensing to
be consistent with the Producer License Model Act and federal
law. We've eliminated some training licensing; we've added
crop insurity licenses. We have removed some language on
limited lines that made it more difficult - they made barriers
for Alaskans to have licenses. We have required that surplus
lines brokers also be licensed as producers. These license
agreements don't have any particularly strong impact on our
current group of agents but they do bring us more into
compliance with federal national areas.
The fifth area that I'd like to address briefly is the surplus
lines area. There are several sections dealing with the
surplus lines and without going into a lot of technical
discussion, I would like to point out that these are based on
a task force that met over the summer. We had a group of
surplus lines brokers, both from Alaska and from out of state,
come in and work with the Division staff and each other to
streamline the process of surplus lines. Basically a surplus
lines company is a company that is not under a requirement to
file their forms and taxes. We talked about document coverage,
what types of documents needed to be given to the consumer. We
placed some additional responsibility on brokers to make sure
the consumer receives notice of their responsibility. There
are certain-what we call disclosures, given in the surplus
lines arena, which require surplus lines brokers to make sure
the consumer understands the nature of a surplus lines
placement that is not subject to form and rate filing, it also
is not covered by the guarantee association. And that is a
requirement in current statute that we want to make sure stays
there and we've added another layer to that.
The last major section I'd like to address deals with
fraudulent activity. Section 40 of the bill provides that a
person involved in the prevention and detection of fraudulent
acts would not be subject to civil liability when filing a
report or furnishing information to others also involved in
prevention and detection of insurance fraud. This addition to
the current statute would allow fraud investigators from
insurance companies to communicate with each other. Currently,
fraud investigators from one insurance company can't
communicate with fraud investigators from a second insurance
company without fear of some kind of prosecution. They end up
doing that through our office. Company "A" comes to us, thinks
that there's fraud involved in a policy, [and] asks that we
get information from Company "B". We'd like to facilitate
communication to help prevent fraud in insurance in Alaska.
Those are the six major areas. As I said, I won't go through
all 28 pages. I would be happy to entertain questions. But the
general overview of the entire bill is to bring Alaska more in
line with the NAIC requirements and model regulations.
Senator Olson questioned, if this is "cleanup" legislation, why it
was not submitted prior to the current gubernatorial
administration.
Ms. Hall clarified the bill is "cleanup" in that it is intended to
conform to national changes. She was unable to speak to actions of
the prior administration, although she noted that changes to the
NAIC reinsurance language were recent, as well as new areas
identified that need additional oversight. She also stated that
changes to federal regulations must be complied with. She informed
that this legislation would provide "a more stable, stronger
oversight ability."
Senator Olson asked whether any opposition has been voiced to this
legislation.
Ms. Hall told of the two hearings this bill received in the Senate
Labor and Commerce Committee in which no one appeared to testify
and noted the absence of any testifiers at the present hearing. She
relayed she has received two "areas" of comments, one which
resulted in the committee substitute and the other matter, which
she determined should remain in the legislation as it would
strengthen the Division's oversight and ability to ensure solvency
in reinsurance agreements.
Senator Olson clarified that industry is not in opposition to this
bill.
Ms. Hall qualified that parties have not "jumped up and down" in
support of the legislation, but none have objected or testified
against it or contacted her to voice concern.
Senator Olson referenced concerns with insurance companies
discontinuing operations in Alaska and asked if any provision of
this bill would give incentive to insurance companies to do
business in Alaska.
Ms. Hall replied she was unaware of any. She stressed the need to
attract more insurance companies to do business in Alaska.
Senator Dyson asked the extent of insurance fraud committed in
Alaska. He assumed most fraudulent activity is committed by
providers rather than insurance companies.
Ms. Hall informed that the Division receives three to four new
reports of activities each month. She told of the fraud
investigators operating within the Division. She stated that most
cases involve consumers, and exampled claims for damage to a
vehicle that occurred prior to the purchase of a policy. She
asserted that fraud affects the rates charged to other consumers.
Senator Dyson asked if the Division therefore does not experience
many fraud cases involving providers.
Ms. Hall affirmed, noting that it is a small percentage.
Co-Chair Green commented on the timeliness of this bill. She
extolled Ms. Hall's many years of experience in the insurance
industry stating she is likely the most qualified Division director
to serve in the position.
Co-Chair Green told of expanded fraud investigation efforts of the
past several years at the national level involving a consortium of
huge corporations and the Federal Bureau of Investigations. She
predicted these efforts could impact Alaska, although not directed
at this State.
Co-Chair Wilken objected to adoption of Amendment #1 for
clarification. He noted it is drafted to the original legislation
and asked if it is applicable to the Senate Labor and Commerce
committee substitute.
JANET SIETZ, Staff to Representative Norm Rokeberg, testified the
amendment applies to the committee substitute. She stated that the
change of "and" to "or" in the existing statutory language of AS
21.07.010(b) would clarify that none of the three provisions are
allowable. She noted that current language could be construed to
imply that so long as all three provisions are not present, one or
two would be allowed.
Co-Chair Green asked the definition "participating health care
provider" and "managed care entity" stated in the amendment.
Ms. Sietz exampled that a doctor or dentist would qualify as a
provider and stated that managed care entity would include the
organization that provides vision care services to the State of
Alaska.
Co-Chair Green asked what other parties are managed care entities.
Ms. Sietz replied that insurance contracts where the provider is
signing up to participate in program that offers patients certain
benefits. This, she said, prevents the provider from being forced
by the managed care entity to accept all the products offered by
the provider. She stated this gives health care providers a choice
in what services it would provide.
Co-Chair Green asked if this relates to the preferred provider
organization (PPO).
Senator Olson asked if the language would pertain to health
management organizations (HMO).
Ms. Sietz replied that no HMOs operate in Alaska.
Senator Olson asked if this would change in the future and HMOs
would begin to operate in the State.
Ms. Sietz characterized "managed care entity" as a "term of art"
utilized in the language of this bill.
Co-Chair Green asked if "managed care entity" is defined in
statute.
Ms. Hall relayed that as she discussed Amendment #1 with the
Division's lead life and health actuary staff, it was agreed that
the intent was to attempt to stipulate that the contracts would not
be required of providers. She noted the specific instance that
prompted this amendment related to a vision plan. She stressed the
Division does not support requiring a provider to provide all
available services in order to have a contract with an insurer.
Co-Chair Wilken asked if the Division supports or opposes the
amendment.
Ms. Hall answered that the she supports the amendment.
Ms. Sietz cited the definition of managed care in AS 21.07.090(10)
as "…includes insurer, hospital, medical service organization,
health maintenance organization, employer or employee health care
organization, managed care contractor that operates a managed care
plan, or a person who has a financial health care services provided
to an individual."
Senator Olson asked if any input has been received from health care
providers on this amendment, as he perceived this to offer
protection to health care providers.
Ms. Sietz replied this amendment was submitted at the request of
some health care providers. She referenced a letter from Dr.
Faulkner [copy not provided,] indicating that the current language
is onerous.
Senator Olson wanted a more specific example of organizations such
as the dental society, Alaska State Medical Association, nurse
practitioner group, etc.
Ms. Sietz informed that Dr. Falkner is Executive Director of the
Alaska Optometric Association.
Co-Chair Wilken withdrew his objection to the adoption of the
amendment and it was ADOPTED.
Co-Chair Wilken ordered the bill HELD in Committee.
| Document Name | Date/Time | Subjects |
|---|