Legislature(2001 - 2002)

04/22/2002 01:43 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 246 - OMNIBUS INSURANCE BILL                                                                                               
                                                                                                                                
Number 1900                                                                                                                     
                                                                                                                                
CHAIR ROKEBERG  announced that the  next order of  business would                                                               
be HOUSE  BILL NO.  246, "An Act  relating to  confidentiality of                                                               
records  and  to cease  and  desist  orders  of the  division  of                                                               
insurance,  to  insurance  company investments,  to  unauthorized                                                               
insurers,  to surplus  lines insurance,  to health  insurance, to                                                               
life  insurance,   to  annuity  insurance,  to   consumer  credit                                                               
insurance,  to  title  insurance,  and to  hospital  and  medical                                                               
service  corporations;  and  providing for  an  effective  date."                                                               
[Before the committee was CSHB 246(L&C).]                                                                                       
                                                                                                                                
Number 1889                                                                                                                     
                                                                                                                                
AMY  ERICKSON,  Staff  to Representative  Lisa  Murkowski,  House                                                               
Labor and Commerce Standing  Committee, Alaska State Legislature,                                                               
said,  on behalf  of the  sponsor, the  House Labor  and Commerce                                                               
Standing   Committee,  that   HB   246   makes  corrections   and                                                               
clarifications to the insurance statutes.  She elaborated:                                                                      
                                                                                                                                
     The main areas addressed  are:  regulatory structure of                                                                    
     multiple   [employer]  welfare   arrangements  [MEWAs];                                                                    
     confidentiality of  records; late payments  for premium                                                                    
     taxes;   annual  fees   to   operate  joint   insurance                                                                    
     arrangements;  revisions to  property-casualty guaranty                                                                    
     fund  assessments; and  stop-loss insurance  standards.                                                                    
     This is  non-controversial; we've had no  opposition in                                                                    
     the process, and the Division  of Insurance can testify                                                                    
     to that as well.                                                                                                           
                                                                                                                                
CHAIR  ROKEBERG  noted  that  there   is  a  proposed  amendment,                                                               
hereafter known as Amendment 1,  which read [original punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     Page 9, Line 6:                                                                                                            
     Insert a new bill section to read:                                                                                         
          *SEC. 23. AS 21.27.330(b) is amended to read:                                                                       
               (b) If a licensee that is a firm transacts                                                                       
     business at more  than one place of  business, [IN THIS                                                                    
     STATE], the  licensee shall pay  a license fee  or each                                                                    
     place  of  business  that transacts  business  in  this                                                                
     state or relative to a  subject resident, located or to                                                                
     be performed in this state.                                                                                            
                                                                                                                                
Number 1849                                                                                                                     
                                                                                                                                
KATIE  CAMPBELL,   Actuary  L/H,  Central  Office,   Division  of                                                               
Insurance,  Department   of  Community  &   Economic  Development                                                               
(DCED),  said that  [Amendment 1]  corrects a  drafting error  in                                                               
legislation passed  last year, clarifying that  any branch office                                                               
that  is actually  transacting  business in  Alaska  shall pay  a                                                               
licensing fee.                                                                                                                  
                                                                                                                                
CHAIR ROKEBERG noted  that [Amendment 1] will  affect the statute                                                               
related to the Gramm-Leach-Bliley Act (GLBA).                                                                                   
                                                                                                                                
MS.  CAMPBELL  confirmed  this,  adding  that  last  year's  bill                                                               
changed  the provision  so that  instead of  every single  branch                                                               
location being  licensed, it would  just be the main  office that                                                               
receives a license, and then the  branch offices would pay a fee.                                                               
The intent  was to not  change the  fee structure, but  the words                                                               
"in  this state"  were mistakenly  added, and  this created  some                                                               
interpretation problems; [Amendment 1] removes that language.                                                                   
                                                                                                                                
CHAIR ROKEBERG  asked Ms.  Campbell to  explain to  the committee                                                               
what a MEWA  is and why there is  substantial language pertaining                                                               
to MEWAs.                                                                                                                       
                                                                                                                                
MS. CAMPBELL said:                                                                                                              
                                                                                                                                
     A multiple  employer welfare arrangement [MEWA]  is ...                                                                    
     defined  under ...  federal ERISA  [Employee Retirement                                                                    
     and  Income  Security  Act  of  1974]  laws,  and  it's                                                                    
     basically  [when]   two  or  more  employers   can  get                                                                    
     together and  form a  pool for  purposes of  issuing or                                                                    
     offering health insurance  coverage to their employees.                                                                    
     And  under  our  current  regulatory  structure,  those                                                                    
     [MEWAs]  would   have  to  be  licensed   as  insurance                                                                    
     companies, and  there's quite onerous  standards there:                                                                    
     they'd have to have $2  million in capital and surplus,                                                                    
     which  is  quite   high;  there's  financial  reporting                                                                    
     requirements; reserving  requirements; and  things that                                                                    
     just don't  make sense  for that entity.   And  so what                                                                    
     this bill does is it  sets up an appropriate regulatory                                                                    
     structure  for them,  to encourage  them to  operate in                                                                    
     the state and  provide a little bit  of competition and                                                                    
     ability for the employers to pool for health insurance                                                                     
     purposes.                                                                                                                  
                                                                                                                                
Number 1729                                                                                                                     
                                                                                                                                
REPRESENTATIVE JAMES  asked Ms.  Campbell if  she is  saying that                                                               
these employers come together and become the insurer.                                                                           
                                                                                                                                
MS. CAMPBELL  said that if  [employers] self fund, that  is true;                                                               
they form  these arrangements  and they become  an insurer.   She                                                               
noted  that  some  employers  actually go  out  and  purchase  an                                                               
insurance policy to cover the plan.                                                                                             
                                                                                                                                
REPRESENTATIVE  JAMES  opined that  being  an  insurer is  a  lot                                                               
different  than purchasing  something  from  a licensed  insurer.                                                               
She asked why  these employers that become insurers  don't need a                                                               
license, since [regular] insurers must be licensed.                                                                             
                                                                                                                                
MS. CAMPBELL said:   "They would need a license,  and that's what                                                               
this is setting up; it's a  separate chapter that deals with that                                                               
specific type of business that they're engaging in."                                                                            
                                                                                                                                
CHAIR ROKEBERG  mentioned that  there is a  MEWA being  formed in                                                               
Fairbanks now.  What this is,  he added, is a group of businesses                                                               
getting  together and  becoming, basically,  an underwriter,  and                                                               
"we  would  like  to  be  able to  encourage  that";  thus  these                                                               
provisions  have been  included in  HB 246.   Unfortunately,  the                                                               
division currently  has to  look at  this group as  if it  were a                                                               
full-blown  insurance underwriter,  which  requires meeting  very                                                               
high  solvency  standards.   He  asked  whether the  Division  of                                                               
Insurance is going  to be promulgating regulations, or  if HB 246                                                               
contains the standards.                                                                                                         
                                                                                                                                
MS. CAMPBELL said that the standards would be in the bill.                                                                      
                                                                                                                                
CHAIR  ROKEBERG  mentioned that  the  solvency  standard will  be                                                               
lowered to $200,000, which is  a huge difference, with the intent                                                               
of encouraging  MEWAs to  form and  essentially become  their own                                                               
underwriters.                                                                                                                   
                                                                                                                                
REPRESENTATIVE JAMES  mentioned that she would  like to encourage                                                               
that  as well;  "we have  a real  struggle with  people not  even                                                               
being insured at  all."  However, she remarked,  she doesn't know                                                               
where  the  controls  are for  the  financial  requirements  that                                                               
determine whether  a group can  function as  a MEWA.   She opined                                                               
that there ought to be some  requirement that a group show it can                                                               
follow through with the plan it engages in.                                                                                     
                                                                                                                                
Number 1618                                                                                                                     
                                                                                                                                
MS. CAMPBELL said  that the provisions in proposed  AS 21.85 will                                                               
create  a  new chapter  in  statute  for  MEWAs.   This  proposed                                                               
chapter lays out very  specific requirements regarding licensing,                                                               
financing, certification by an  actuary, stop-loss insurance, and                                                               
financial reporting.                                                                                                            
                                                                                                                                
REPRESENTATIVE  COGHILL  asked   about  the  provision  regarding                                                               
membership  for  MEWAs  in  the  Comprehensive  Health  Insurance                                                               
Association.                                                                                                                    
                                                                                                                                
MS. CAMPBELL  said that that  provision was added because  "if we                                                               
have a separate license for  [MEWAs], they wouldn't be considered                                                               
a member as an insurer, so  we have to mention them separately as                                                               
a member."   Thus MEWAs  would be assessed for  the Comprehensive                                                               
Health Insurance Association as well, she added.                                                                                
                                                                                                                                
CHAIR  ROKEBERG referred  to the  stop-loss insurance  provisions                                                               
[Section  35] located  on page  13.   He asked  why the  entities                                                               
listed therein may  not issue a stop-loss  insurance policy "that                                                               
has  an  annual attachment  point  of  claims incurred  for  each                                                               
individual that is lower than $10,000".                                                                                         
                                                                                                                                
MS. CAMPBELL replied:                                                                                                           
                                                                                                                                
     If you  have a self-funded or  a self-insured employer,                                                                    
     and  they're  taking the  risk  and  paying for  health                                                                    
     claims directly, they  will go out and  buy a stop-loss                                                                    
     insurance  policy  to  cover  excess  losses.    So  if                                                                    
     there's  excessively large  claims,  or [an]  excessive                                                                    
     number  of   claims,  they  have  insurance   to  cover                                                                    
     themselves....   This  is  saying,  for any  particular                                                                    
     individual,  if  they have  a  loss  over $10,000,  the                                                                    
     insurance  would  kick  in   to  protect  the  employer                                                                    
     because  they don't  want to  take as  much risk.   And                                                                    
     when  that drops  down too  low,  you end  up having  a                                                                    
     situation   where  it's   basically  health   insurance                                                                    
     they're purchasing instead of excess loss insurance.                                                                       
                                                                                                                                
Number 1476                                                                                                                     
                                                                                                                                
CHAIR ROKEBERG  said:  "But  you could have  a plan ...  that ...                                                               
didn't kick in until [$5,000] or  $10,000, if you offered that as                                                               
part of your menu selection  to employees, for example, where you                                                               
had  a deductible  that was  [$5,000  or $10,000],  to lower  the                                                               
cost."                                                                                                                          
                                                                                                                                
MS. CAMPBELL  indicated that situation  would not be  affected by                                                               
the provision in Section 35.                                                                                                    
                                                                                                                                
CHAIR  ROKEBERG  remarked that  about  the  only way  people  can                                                               
afford to have insurance anymore is to have high deductibles.                                                                   
                                                                                                                                
REPRESENTATIVE JAMES,  referring to lines  18 and 19 of  page 13,                                                               
asked  whether there  are  any  health maintenance  organizations                                                               
licensed under AS 21.86.                                                                                                        
                                                                                                                                
MS. CAMPBELL said  that currently there are none,  but noted that                                                               
the statutory  language is in place  should any ever form  in the                                                               
future.                                                                                                                         
                                                                                                                                
CHAIR  ROKEBERG  remarked  that  so  much  legislation  has  been                                                               
adopted regarding HMOs (health  maintenance organizations), it is                                                               
unlikely that  any ever will form  in Alaska.  He  added, "I wish                                                               
we had an  HMO as another alternate form of  health care services                                                               
in the state."                                                                                                                  
                                                                                                                                
REPRESENTATIVE JAMES indicated  that she is not in  favor of HMOs                                                               
because of their behavior.                                                                                                      
                                                                                                                                
CHAIR ROKEBERG said:                                                                                                            
                                                                                                                                
     They're ...  not all  bad guys.   Let's blame  the U.S.                                                                    
     Congress  for our  health  care  problem, because  they                                                                    
     won't reimburse  Medicare and Medicaid to  a reasonable                                                                    
     point, and that's what's called  the phantom health tax                                                                    
     in  this  country,  and  that's  the  problem  in  this                                                                    
     country; it's not  so much the HMOs or  the health care                                                                    
     providers - it's our politicians.                                                                                          
                                                                                                                                
Number 1352                                                                                                                     
                                                                                                                                
BRUCE GALE, Employee Benefit Consultant,  Willis of Alaska, Inc.,                                                               
testified via teleconference.  He said:                                                                                         
                                                                                                                                
     I would  like to  talk to  the committee  about, first,                                                                    
     the provisions concerning  stop-loss insurance, on page                                                                    
     13.    And I  believe  the  aggregate attachment  point                                                                    
     requirements  in  today's  hard  stop-loss  market  are                                                                    
     somewhat unrealistic.   For the past two  years, it has                                                                    
     been almost impossible to  find an aggregate attachment                                                                    
     point  of 120  percent, for  any large  employer.   The                                                                    
     lowest we have  been able to obtain  in the marketplace                                                                    
     is 120 percent.  And  I notice that [paragraph (3)] for                                                                    
     a large employer is lower  than 110 percent of expected                                                                    
     claims.   We have not  been able to obtain  those kinds                                                                    
     of  aggregate  attachment  points for  the  last  three                                                                    
     years in the stop-loss market.                                                                                             
                                                                                                                                
     The  number of  carriers  that  are offering  stop-loss                                                                    
     insurance,  both specific  and aggregate  - nationwide,                                                                    
     not  just in  the state  of  Alaska -  to employers  of                                                                    
     under  1,000 lives,  has  shrunk  considerably.   Those                                                                    
     insurance   carriers   that  are   offering   stop-loss                                                                    
     insurance to these types of  MEWA arrangements are very                                                                    
     few.   Right now I  believe we have two  alternatives -                                                                    
     ...  possibly three  -  in the  state,  where we  could                                                                    
     approach  them   for  such   insurance  coverage.     I                                                                    
     appreciate that  the legislature  or the  [Division] of                                                                    
     Insurance is  trying correct  some deficiencies  ... in                                                                    
     earlier drafted legislation.                                                                                               
                                                                                                                                
     I  would like  to remind  the committee  that there  is                                                                    
     current Alaskan  insurance law that allows  for banding                                                                    
     together of  various groups  or employers  strictly for                                                                    
     the purpose  of insurance  to be  outside the  law, ...                                                                    
     [but]  there must  be some  other commonality  in those                                                                    
     groups  - an  association, a  professional association,                                                                    
     et cetera.  I would also  like to state that in most of                                                                    
     the  MEWA arrangements  that I  have been  involved in,                                                                    
     these  arrangements are  operated  through a  501(c)(9)                                                                    
     trust,  which  is  a tax-exempt  trust  under  the  IRS                                                                    
     [Internal Revenue  Service] regulations.   These trusts                                                                    
     are governed by a board of  trustees that are held to a                                                                    
     fiduciary requirement -  or standard - by  ERISA.  They                                                                    
     purchase ERISA-required bonding.   They are required to                                                                    
     provide an annual statement -  certified statement - by                                                                    
     an auditor.  They hire, as  a matter of course, a trust                                                                    
     auditor, a trust attorney, and a trust consultant.                                                                         
                                                                                                                                
Number 1190                                                                                                                     
                                                                                                                                
MR. GALE referred to proposed SEC. 21.85.060 found on page 30,                                                                  
line 29, which read in part:                                                                                                    
                                                                                                                                
     Investments.   A multiple employer  welfare arrangement                                                                    
     shall maintain an  amount at least equal  to 85 percent                                                                    
     of  net unpaid  claim  liability in  ...  cash and  ...                                                                    
     equivalents;  ...  fully  insured  portion  of  a  bank                                                                    
     deposit  when the  insurance is  provided by  a solvent                                                                    
     agency  of the  United  States government  ...; a  bank                                                                    
     certificate of deposit ...; ... savings account...."                                                                       
                                                                                                                                
MR. GALE said,  "I believe what we're talking about  here is what                                                               
in  the industry  is known  as 'incurred  but no  reported claims                                                               
liability (IBNR),'"  defined as  those claims that  were incurred                                                               
prior to the termination date  of the coverage, but presented for                                                               
payment  afterwards;  those  claims  would  be  covered  by  this                                                               
reserving.   Referring to  line 27  of page  30, which  says, "30                                                               
percent of unpaid claim liability", he stated:                                                                                  
                                                                                                                                
     I don't quite understand what  that means.  I believe a                                                                    
     sufficient IBNR  reserve should  be in  the area  of 25                                                                    
     percent of  annual health  claims.   And even  that, in                                                                    
     today's   market,   would   be  considered   a   rather                                                                    
     conservative reserving amount, as  today claims tend to                                                                    
     turn much  quicker than they have  in the past.   But I                                                                    
     would  like   some  clarification  of  the   amount  of                                                                    
     reserves  to be  established  and the  85  percent.   I                                                                    
     assume  what  the  [division] would  like  to  have  is                                                                    
     confirmation that,  in fact, these cash  reserves exist                                                                    
     and are available to the trust.                                                                                            
                                                                                                                                
CHAIR ROKEBERG referred back to  the stop-loss provisions on page                                                               
13.   He asked Mr.  Gale if the 120  percent and the  110 percent                                                               
were the  only figures that he  took issue with, and  if he could                                                               
recommend any other percentages instead.                                                                                        
                                                                                                                                
MR. GALE said:  "I would  change those numbers to '125 percent of                                                               
expected claims', for both line 27 and line 31."                                                                                
                                                                                                                                
CHAIR ROKEBERG  requested confirmation that this  suggestion "has                                                               
to  do  with  attainability  and you're  having  difficulty  even                                                               
getting those numbers."                                                                                                         
                                                                                                                                
MR.  GALE  said yes;  "I  would  state  that  that is  almost  an                                                               
impossibility  in   today's  marketplace   as  opposed   to  just                                                               
difficult," he added.                                                                                                           
                                                                                                                                
CHAIR ROKEBERG  asked Mr. Gale  whether he had any  problems with                                                               
the other provisions regarding the "attachment point numbers."                                                                  
                                                                                                                                
Number 1003                                                                                                                     
                                                                                                                                
MR. GALE said:                                                                                                                  
                                                                                                                                
     I would have to work  those out.  Four thousand dollars                                                                    
     seems, just  as a gut  reaction, to be  relatively low.                                                                    
     In  Alaska, our  costs  tend to  run  higher than  most                                                                    
     states in the Lower 48.   The $20,000, of course, would                                                                    
     depend upon the number of  people covered by the trust,                                                                    
     and I would venture to  say that a $20,000 figure might                                                                    
     be adequate  for three  or four people.   And  the cost                                                                    
     associated with  establishing and maintaining a  MEWA -                                                                    
     that's a totally unrealistic figure, in my opinion.                                                                        
                                                                                                                                
CHAIR ROKEBERG asked Mr. Gale to clarify which figure he is                                                                     
referring to regarding MEWAs.                                                                                                   
                                                                                                                                
MR. GALE said:                                                                                                                  
                                                                                                                                
     The figure  on line 29 [of  page 13], the   $20,000 for                                                                    
     [an]  expected claim  figure, which  I  assume is  what                                                                    
     that number refers to.   Mr. Chairman, it appears to me                                                                    
     ... the regulations for the  proposed bill [are] trying                                                                    
     to say  ... that  the aggregate attachment  point would                                                                    
     be $4,000  times the  number of  individuals -  my copy                                                                    
     has a  typo; I assume  that's "of", not "if"  - covered                                                                    
     under  the health  benefit plan.   In  other words,  we                                                                    
     would have a hard-dollar  figure for the maximum claims                                                                    
     paid  per individual  per year  under  the policy,  and                                                                    
     that  number would  depend entirely  upon the  benefits                                                                    
     that are actually covered by the aggregate insurance.                                                                      
                                                                                                                                
     Some self-funded  clients elect  to cover  only medical                                                                    
     and  prescription  drugs,  while others  would  include                                                                    
     medical, prescription drugs,  dental and vision claims,                                                                    
     so that number would be  suspect.  And I believe, since                                                                    
     that would  result to  less than some  $350 -  $375 per                                                                    
     employee  per  month, that  appears  low  to me.    The                                                                    
     number  shown  under  [subparagraph]  (C)  in  line  29                                                                    
     appears  to   be  an   alternative,  saying   that  the                                                                    
     aggregate  stop-loss attachment  point,  overall for  a                                                                    
     year for  a group,  would be $20,000.   This  again, to                                                                    
     me,  would be  an  extremely low  number, and  probably                                                                    
     there should not  be a reference to  an overall minimum                                                                    
     or maximum because this would  depend entirely upon the                                                                    
     number of people covered by that policy.                                                                                   
                                                                                                                                
Number 0877                                                                                                                     
                                                                                                                                
MS. CAMPBELL, in response, said:                                                                                                
                                                                                                                                
     These are actually minimums, so  if the availability in                                                                    
     the market  is that  you can't  get anything  under 125                                                                    
     [percent], this  is not  saying that  you have  to have                                                                    
     these.   This is  just saying, if  you could  get that,                                                                    
     you can't get any lower  than what is here; it's trying                                                                    
     to  prevent something  from becoming  health insurance.                                                                    
     The other  point is  that these  figures ...  and these                                                                    
     provisions are  based off of a  National Association of                                                                    
     Insurance  Commissioners'  model   law,  and  that  was                                                                    
     highly debated on the national  level, and there was an                                                                    
     actuarial firm  that they  had hired  to look  at these                                                                    
     limitations  to make  sure that  they were  reasonable.                                                                    
     And when you have, in  the first part, a small employer                                                                    
     - ... someone  with 2 to 50 employees -  you could have                                                                    
     a small group  out there with 2 employees.   And that's                                                                    
     why  there's a  $20,000  minimum,  because it  wouldn't                                                                    
     make any sense to say $4,000  times 2 and say you could                                                                    
     have [an]  $8,000 aggregate stop-loss  limit.   So, ...                                                                    
     it's the [lower] of the greater of all of those.                                                                           
                                                                                                                                
CHAIR ROKEBERG asked Ms. Campbell to comment on Mr. Gale's                                                                      
remarks regarding pages 30 and 31.                                                                                              
                                                                                                                                
MS. CAMPBELL said:                                                                                                              
                                                                                                                                
     In  [regard]   to  the  30  percent   of  unpaid  claim                                                                    
     liability in the minimum reserving  section on page 30,                                                                    
     line  27, there's  ... an  "or"  there to  allow for  a                                                                    
     different amount  if it's certified by  an actuary that                                                                    
     that's the appropriate reserve level.   So we felt like                                                                    
     we've covered that; that 30  percent may be ... perhaps                                                                    
     more  conservative  than  25  [percent],  but  if  it's                                                                    
     certified  by an  actuary that  you can  have something                                                                    
     less than  that and  that's appropriate, then  it would                                                                    
     be okay.   The investment  section is  basically saying                                                                    
     what types  of securities  you have  to put  your money                                                                    
     in,  so that  you can  feel safe  that you're  actually                                                                    
     going to have the money if ... and when you need it.                                                                       
                                                                                                                                
Number 0731                                                                                                                     
                                                                                                                                
REPRESENTATIVE  BERKOWITZ,  referring   to  the  minimum  reserve                                                               
provision, noted that  reserves must equal the  greater of either                                                               
30  percent  of   the  unpaid  claim  liability   or  the  amount                                                               
recommended and certified by a qualified actuary.                                                                               
                                                                                                                                
MS.  CAMPBELL indicated  that  she stands  corrected;  it is  the                                                               
greater of those two amounts, rather than the lower.                                                                            
                                                                                                                                
CHAIR ROKEBERG suggested changing the  amount [on line 27 of page                                                               
30] to  25 percent,  as recommended  by Mr. Gale.   He  asked Ms.                                                               
Campbell to comment.                                                                                                            
                                                                                                                                
REPRESENTATIVE  BERKOWITZ noted  that  this recommendation  comes                                                               
from only one person.                                                                                                           
                                                                                                                                
MS.  CAMPBELL said  that  according to  her  understanding, on  a                                                               
nationwide basis, a lot of  MEWAs have struggled financially, and                                                               
that  is why  the states  have been  given specific  authority to                                                               
regulate them; it's because they  have gone under and left people                                                               
without health  insurance and with  unpaid claims.   The reserves                                                               
are intended as a safety valve,  she explained, to make sure that                                                               
MEWAs have the money necessary to pay claims.                                                                                   
                                                                                                                                
REPRESENTATIVE  BERKOWITZ  noted,  "It  seems to  me  [that]  the                                                               
consequence ... of not having ...  [reserves] at all, is that ...                                                               
then you run the risk of ... not having any insurance at all."                                                                  
                                                                                                                                
CHAIR ROKEBERG  asked:   "Why not  allow for  a small  section of                                                               
equity investments in their whole portfolio?"                                                                                   
                                                                                                                                
MS.  CAMPBELL  pointed  out that  proposed  Sec.  21.85.060  only                                                               
specifies  how  85  percent  of net  unpaid  claim  liability  is                                                               
invested;  the  other  15  percent of  that  liability  could  be                                                               
invested in other ways.                                                                                                         
                                                                                                                                
REPRESENTATIVE BERKOWITZ asked why is  it 85 percent?  Where does                                                               
this [number] come from?                                                                                                        
                                                                                                                                
MS. CAMPBELL said,  "Much of this is based off  of existing state                                                               
laws that have  MEWA laws on the books, and  that provision - ...                                                               
that percentage -  came from Montana; ... they've  had ... [MEWA]                                                               
laws on  their books  for some  time and  haven't had  any issues                                                               
with it."                                                                                                                       
                                                                                                                                
CHAIR ROKEBERG  asked if the  division stipulates  the percentage                                                               
of investment  and the method  of investment for  other regulated                                                               
insurers.                                                                                                                       
                                                                                                                                
Number 0557                                                                                                                     
                                                                                                                                
MS.  CAMPBELL said,  "Yes,  we do;  in fact,  ...  last year  the                                                               
legislature  passed HB  184, and  then  regulations were  adopted                                                               
specifically  to  insurance  company  investments,  telling  them                                                               
where they can put their money."                                                                                                
                                                                                                                                
REPRESENTATIVE  BERKOWITZ said  that  it seem  to  him that  "the                                                               
lower you  go, the more people  get insured; ... the  lower these                                                               
numbers are, the more MEWAs could exist."                                                                                       
                                                                                                                                
MS.  CAMPBELL asked  Representative  Berkowitz if  he is  talking                                                               
about the reserving levels.                                                                                                     
                                                                                                                                
REPRESENTATIVE BERKOWITZ said yes.                                                                                              
                                                                                                                                
MS. CAMPBELL replied:  "It's just  the lower amount of money they                                                               
actually have to have sitting there  to pay claims when they need                                                               
it.  I  don't know that that means that  more people could afford                                                               
it."                                                                                                                            
                                                                                                                                
CHAIR ROKEBERG said:   "This is the degree [of]  risk you want to                                                               
have on ... the retained capital base."                                                                                         
                                                                                                                                
REPRESENTATIVE  BERKOWITZ offered  that he  did not  know whether                                                               
"this is  as low [or  as high] as you  can prudently go,  for the                                                               
degree of risk."                                                                                                                
                                                                                                                                
CHAIR ROKEBERG indicated that he  is surmising from the testimony                                                               
that the  department is taking  a conservative stance  because of                                                               
the failure rate of the MEWAs.   On the other hand, he added, "we                                                               
want to try to encourage them too."                                                                                             
                                                                                                                                
Number 0420                                                                                                                     
                                                                                                                                
REPRESENTATIVES  BERKOWITZ  and  JAMES  made a  motion  to  adopt                                                               
Amendment 1.  There being no objection, Amendment 1 was adopted.                                                                
                                                                                                                                
Number 0413                                                                                                                     
                                                                                                                                
REPRESENTATIVE JAMES  moved to report CSHB  246(L&C), as amended,                                                               
out  of   committee  with  individual  recommendations   and  the                                                               
accompanying zero  fiscal note.   There being no  objection, CSHB                                                               
246(JUD)  was   reported  from   the  House   Judiciary  Standing                                                               
Committee.                                                                                                                      
                                                                                                                                

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