Legislature(2011 - 2012)HOUSE FINANCE 519
04/06/2011 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB125 | |
| HB146 | |
| HB164 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 146 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 164 | TELECONFERENCED | |
| += | HB 125 | TELECONFERENCED | |
HOUSE BILL NO. 164
"An Act relating to insurance; relating to health care
insurance, exemption of certain insurers, reporting,
notice, and record-keeping requirements for insurers,
biographical affidavits, qualifications of alien
insurers assuming ceded insurance, risk-based capital
for insurers, insurance holding companies, licensing,
federal requirements for nonadmitted insurers, surplus
lines insurance, insurance fraud, life insurance
policies and annuity contracts, rate filings by health
care insurers, long-term care insurance, automobile
service corporations, guaranty fund deposits of a
title insurer, joint title plants, delinquency
proceedings, fraternal benefit societies, multiple
employer welfare arrangements, hospital and medical
service corporations, and health maintenance
organizations; and providing for an effective date."
3:19:18 PM
LINDA HALL, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, addressed two
areas of major concern related to HB 164. She identified
page 50, Section 79, of the legislation. She explained that
Section 79 intended to act as a disincentive for employers
to drop their group health coverage. She read Section (a),
lines 6-7, "an insurer may not issue an individual health
care insurance policy to an employee of an employer." She
related that a group plan must adhere to specific statutory
requirements that protect consumers. Guarantee issue
insurance coverage for the small group market (2 to 50
employees) provided that an insurer could not deny coverage
to small employers. She furthered that Section (b) allowed
for two exceptions. An employee and insurer may provide an
individual health insurance policy with employer funds if
the employee was eligible as defined by statute. She listed
eligible employees: part-time, temporary, and seasonal
employees not eligible for a group plan. The second
exception exempted employers that did not provide health
insurance coverage and had not within the last six months.
She elaborated that individual coverage was more
restrictive than group coverage. For example, the
individual market excluded maternity coverage; small group
plans provided it. The Division of Insurance opted to help
people denied coverage due to existing conditions in
Section 79. Employees forced to purchase individual
policies due to a dropped group plan would be underwritten
for deniable health conditions. The section would not
protect the other employees that must wait six months or
more for other health coverage.
3:23:32 PM
Vice-chair Fairclough referred to testifiers concerns that
Section 79 would severely limit employer's flexibility. Her
interpretion was that the employee received the penalty in
the event an employer can only provide individual coverage,
not the employer. The employee was left at risk. She felt
the policy decision was left open for debate.
3:28:17 PM
Ms. Hall directed attention to Section 46 (line 16, page
27) t related to surplus lines.
REPRESENTATIVE KURT OLSON, SPONSOR, spoke in support of
Section 46. He explained that the National Conference of
Insurance Legislators (NCOIL) proposed model legislation, a
national tax and collection authority that relinquished the
authority from states Division of Insurance.
He reported a conflict of interest as a member of the
Executive Committee of NCOIL and member of the Interstate
Insurance Product Review Committee (IIPRC).
Representative Olson declared that he was in wholehearted
support of Section 46. He believed that the NCOIL model
legislation was hastily crafted and not fully developed. He
believed that Section 46 was thoughtfully fashioned by the
division and conformed to the federal mandate. He noted
that 20 other states proposed legislation similar to
Section 46. The Alaska Surplus Lines Association was the
main opposition to Section 46. He concluded that the
division had the existing structure and experience to carry
out the provisions of Section 46. Passage will save the
state money and lead to faster implementation.
Vice-chair Fairclough understood that existing state
statute granted the division tax-collecting authority. The
provisions of Section 46 would enable Alaska to benefit if
particular [insurance] products were sold.
Representative Gara read page 28, lines 3-4, Section 46:
"The tax paid by the insurer under this section is in lieu
of all insurer taxes…" He wondered how the section
influenced the amount of tax the state could collect from
insurance companies. Ms. Hall replied that HB 164 did not
change the amount of taxes owed. The bill defined the
surplus lines tax rate. The only change combined a 2.7
percent tax and a 1 percent stamping fee to a single 3.7
percent tax.
3:33:03 PM
Representative Gara asked for an explanation of surplus
lines. Ms. Hall explained that surplus lines were a type of
insurance written differently than admitted insurance.
Admitted insurers must file authorizations for form and
rate approval. A class of "other" insurers underwrote more
difficult lines of insurance such as earthquake or some
marine coverage. They did not file forms and rates for
approval. The taxes were paid by surplus lines brokers as
opposed to the actual insurance company.
Ms. Hall elaborated that Section 46 introduced a new "home
state" concept based on changes in the federal law that
preempted state statutes from the type of tax collection.
The state currently collected premium taxes only on the
portion of a multi-state surplus line insurance policy with
a risk located in the state of Alaska. In compliance with
the new federal law, the state would collect 100 percent of
the tax debt if Alaska was declared the home state of the
multi-state business owner.
Vice-chair Fairclough asked how many insurers sell multi-
state surplus lines. Ms. Hall identified approximately 900
surplus lines brokers; 100 were residents of Alaska. Vice-
chair Fairclough asked whether the state stood to benefit
from Section 49 if an Alaskan surplus lines broker sold
their product in another state. Ms. Hall replied that it
did not matter where the insurer selling a product was
located; what mattered was the location of the insured
property. Vice-chair Fairclough asked how Alaska would
benefit from the statute change. Ms. Hall informed that the
provision enabled the state to continue to collect taxes on
surplus lines risk. She contended that the division could
not collect taxes on multiple state risks, estimated at
$500 thousand, if the state failed to conform to the new
federal mandate.
3:37:58 PM
Representative Gara referred to Section 64 of the bill. He
inferred that long-term care insurance could not deny
coverage for a pre-existing condition. He noted the change
in the definition of "pre-existing". He asked whether the
statute made it easier or harder to deny coverage. Ms. Hall
responded that "the intent was to take away the
subjectivity of an ordinary prudent person and instead to
rely on medical advice or treatment as opposed to the
opinion of an ordinary prudent person."
Representative Gara asked whether HB 164 made it harder or
more expensive to procure insurance or reduced coverage.
Ms. Hall answered in the negative.
Representative Wilson asked whether HB 164 was written in
response to changes in federal law. Ms. Hall responded that
only Section 46 (the section on surplus lines) was included
due to federal law. She elaborated that the legislation was
influenced by the National Association of Insurance
Commissioners (NAIC), loosely described as a trade
association of all the insurance regulators in the country.
The Association attempted to implement self-imposed
uniformity of insurance laws. The division was accredited
by NAIC and many of the changes in HB 164 were included to
maintain accreditation standards. She noted that all 50
states were accredited, which ensured financial oversight
of insurance companies.
3:41:42 PM
Representative Wilson asked if a state board of insurance
existed. Ms. Hall replied in the negative.
RICHARD BOUHAN, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF
PROFESSIONAL SURPLUS LINES OFFICES, LTD. (NAPSLO), MISSOURI
(via teleconference), spoke in opposition to the surplus
lines and tax collection provisions in HB 164. He alleged
that the legislation would not conform to the new federal
law. The legislation required the establishment of an
allocation formula for surplus lines tax collection. The
formula proposed by NAIC in their "non-admitted insurance
multi-state agreement" was burdensome to brokers and did
not simplify the tax payment process as mandated by federal
law. He opposed paying taxes to a clearinghouse that
allowed states to distribute revenue from taxes collected
on multi-state surplus lines risk policies. He felt that
the tax rates established under the structure did not
comply with federal regulations. He added that only 5 to 15
percent of surplus lines were multi-state. He was uncertain
that any state would gain revenue by entering into a multi-
state compact.
Vice-chair Fairclough asked the witness if he had contacted
any Alaskan insurers on the issue. Mr. Bouhan answered that
he contacted insurance companies and brokers dealing in
Alaska.
Vice-chair Fairclough CLOSED public testimony.
Representative Wilson MOVED to report CS HB 164 (L&C) 27-
LS0444/B out of Committee with individual recommendations
and the accompanying fiscal note.
3:50:27 PM
AT EASE
3:51:04 PM
RECONVENED
Representative Wilson WITHDREW her motion.
Representative Wilson MOVED to Adopt CS HB 164 (FIN) (27-
LS0444\I, Bailey, 4/1/11) as a working document before the
committee.
Vice-chair Fairclough OBJECTED for discussion on the
difference between the versions.
Ms. Hall reported that the CS reflected minor corrections
or formatting changes and did not contain any substantive
changes. She listed the revisions. She referenced page 38,
line 13, the addition of three words "the sum of." She
identified that page 62, line 13, corrected a repealer. She
concluded that on line 15, page 62, the number 14 replaced
13 as the correct number.
Vice-chair Fairclough REMOVED her OBJECTION. There being NO
further OBJECTION, it was so ordered.
Representative Wilson MOVED to report CSHB 164(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 164(FIN) was REPORTED out of Committee with a "no
recommendation" and with attached previously published
fiscal note: FN1, CED.
3:54:06 PM
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 146 Chronolgy Final.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |
| CSHB146 Sponsor Statement.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |
| Dec_17_RR_letter[1].pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |
| Corp_ARTA_2005_excerpt.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |
| HB 164 CS WORKDRAFT 27-LS0444-I.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 164 |
| HB 125 Kate Burkhart AMHB Testimony and responses 040611.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 125 |
| HB 125 ABC Mission.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 125 |
| HB 146 CS WORKDRAFT 27-LS0505-I.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |