Legislature(1999 - 2000)
04/14/1999 03:26 PM House L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HB 158 - NOTICE OF INS. CANCELLATION TO ELDERLY
Number 0065
CHAIRMAN ROKEBERG announced the committee's first order of business
is HB 158, "An Act relating to the annual report of the director of
the division of insurance and to notice of cancellation of personal
insurance." The chairman requested staff to explain the changes in
the proposed Version H committee substitute (CS).
Number 0083
REPRESENTATIVE HALCRO made a motion to adopt the proposed CS for HB
158, Version H, as a working document. Version H is labeled
1-LS0128\H, Ford, 4/13/99. There being no objection, Version H was
before the committee.
Number 0102
JANET SEITZ, Legislative Assistant to Representative Norman
Rokeberg, Alaska State Legislature, came forward to explain the
changes in Version H as aide to the House Labor and Commerce
Standing Committee. Version H incorporates the amendment that was
adopted at the previous hearing [April 9, 1999]. It can be found
on page 2, lines 11 to 13, of the proposed CS, regarding sold or
terminated and proprietary information. This language appears as
Section 1, subsection (7) of Version H:
(7) statistical information regarding health
insurance, including the number of individual and group
policies sold or terminated in the state; this paragraph
does not authorize the director to require an insurer to
release proprietary information; and
MS. SEITZ noted "less than 70 years of age" on page 2, line 19, is
new. She indicated that all of subsection (2) of Section 2,
beginning on page 2, line 27, through the end of the bill, is new
language. It sets out that a written notice of cancellation can be
mailed to the named insured and to a designee, if the insured has
requested that a designee also receive a copy of the (indisc.)
notice.
CHAIRMAN ROKEBERG confirmed from Ms. Seitz that was for all three
notices. He indicated, then, the insured would designate the third
party to receive notice, but the insured would receive notice as
well, so there would be two sets of notices sent.
MS. SEITZ answered in the affirmative. She noted the mailing
schedule has been changed from the 60 days in the original bill
back to the existing 30-day, 20-day, and 10-day mailing schedule.
Number 0242
REPRESENTATIVE HALCRO asked the reason for raising the age from 67
to 70.
CHAIRMAN ROKEBERG indicated it was an issue of driving records.
There were statistics regarding ages of registered drivers from the
Department of Motor Vehicles and some information on the estimated
prevalence of ADRD [Alzheimer's Disease and Related Disorders]
related to age groups from the Commission on Aging in the bill
packet. The chairman indicated a slight raise in age would reduce
the number of people involved and that the biggest incident of
ADRD-type manifestations appear after age 70, getting progressively
worse.
REPRESENTATIVE HALCRO questioned if these were statewide figures.
CHAIRMAN ROKEBERG answered in the affirmative, noting the chart in
the bill packet was provided by the Department of Motor Vehicles.
He commented page 4 of the chart shows there are 403,304 automobile
passenger car licenses and only some 16,000 [16,803] licensees are
over age 70. The chairman indicated this, combined with the
medical evidence regarding ADRD-type diseases, was the reason for
the age change. The chairman invited Mr. Lessmeier [lobbyist for
State Farm Insurance Company] forward. Noting there was another
issue, the chairman commented he has been working with the industry
on this issue. One of the major concerns he has been trying to
address is the return receipt requested. This provision has been
removed from the bill by adding the additional notification to a
third party. Chairman Rokeberg drew the committee's attention to
the possible H.1 amendment, which he designated as Amendment 1.
Amendment 1, labeled 1-LS0128\H.1, Ford, 4/14/99, read:
Page 3, line 6, following "cancellation":
Insert "; an insurer who provides a personal
insurance policy to an insured who is 70 years of age or
older shall give written notice to the insured of the
insured's right to have a designee receive notice as
provided in this paragraph"
CHAIRMAN ROKEBERG explained the amendment mandates that the insurer
tell people they have the ability to designate a third party. The
chairman asked Mr. Lessmeier if it was his interpretation of
Version H that there would be two notices sent on the 30, 20[, 10]
mailing schedule, if the insured selects the designee option.
Number 0532
MICHAEL LESSMEIER, Lobbyist for State Farm Insurance Company (State
Farm), answered that was correct.
CHAIRMAN ROKEBERG questioned how this compared regarding cost to
the certified mail standpoint.
MR. LESSMEIER replied that this was proposed as a way of meeting
the chairman's concerns to give meaningful notice to the insured
and, if the insured is not someone who can receive meaningful
notice, giving notice to someone else. This is what State Farm
thinks would be the most effective way to accomplish this in terms
of giving that notice, as well as the most efficient way for them
to do so. He noted it would be the easiest and have the least
impact from an expense viewpoint.
CHAIRMAN ROKEBERG expressed his concern is that this is three
additional pieces of first class postage, plus accompanying forms,
versus one return receipt request cost element. He asked Mr.
Lessmeier to explain why the industry would prefer the first
method.
Number 0629
MR. LESSMEIER responded their first concern is of effectiveness.
If the intent is to ensure that the person receiving the notice
actually understands it, in their view it would not be more
effective to send more mailings to the same person. Their belief
is that it would be better to provide the option for the insured to
designate another responsible person. The second concern is that
if they make it "on request," it is being done for those people who
recognize they need this. It is being done in a specific situation
and no one's resources are being wasted. Thirdly, under AS
21.36.260 they are still required to provide a certificate of
mailing from the post office in order for the notice to be
effective; therefore, they think they will have given meaningful
and effective notice to two parties. Under that circumstance, they
cannot see what would be gained by going the additional step of
requiring return receipt requested, which would impose a cost that
this would not. Mr. Lessmeier noted he could not estimate that
cost, but indicated he felt the cost would be imposed for something
that probably would not be of much benefit. Mr. Lessmeier
indicated there was a proposed amendment to Version H which would
require certified return receipt mailing.
CHAIRMAN ROKEBERG questioned if Mr. Lessmeier's calculation was
based on the probability factor that a majority of people over 70
would not want a designee.
MR. LESSMEIER answered that he had not done any calculations. He
indicated he doesn't know how many people would choose the designee
option; the issue is what would be gained as a result of sending
certified return receipt requested. If two mailings are being done
to begin with, State Farm's view is that that is effective notice
and little, if anything, would be gained by requiring certified
return receipt requested, which would have an attached cost.
Number 0779
CHAIRMAN ROKEBERG stated the committee has Amendment 1 before it,
mandating that the insurance industry inform people of their right
to make the designation. He asked if Mr. Lessmeier had any
objections.
MR. LESSMEIER answered he did not, but he would like to "run this
by our folks." Mr. Lessmeier recognized it was the chairman's
desire to move the legislation and he indicated they would just
continue to work on the bill as it proceeded. The issue is whether
it would be the desire to have the industry, for example, include
this information in the mailing at the time of every premium
renewal so that it is done semi-annually. He does not think this
would be a problem but he would like to confirm that. Mr.
Lessmeier expressed his support for notifying people, if this
option is made available, to ensure the option's effectiveness.
CHAIRMAN ROKEBERG commented that this is a mandate for the
insurance industry to notify [insureds of the designee option]; it
does not mandate a periodic notice or anything like that. The
chairman confirmed Mr. Lessmeier would not like to see some
periodic mandate to assist the company in doing this. The chairman
questioned if the notice would be something placed in the policy
boilerplate or an endorsement.
MR. LESSMEIER commented they would probably just put a mailer in
the premium statement.
Number 0883
REPRESENTATIVE HALCRO gave the example that he turns 70, receives
his renewal policy in the mail with the notice and pays his bill.
He asked if this meant the information had to be included in every
renewal notice he was sent now that he is 70, or if one
notification would be sufficient.
CHAIRMAN ROKEBERG indicated he was wondering if that should be a
mandate requirement on an annual renewal.
MR. LESSMEIER said he would not think it would be a problem to do
this on an annual basis.
REPRESENTATIVE HALCRO asked about those customers who paid monthly
or quarterly.
MR. LESSMEIER noted he would want to check with their technical
people in this area, but he still does not think it would be a
problem to do this perhaps once a year.
CHAIRMAN ROKEBERG commented they could probably amend the amendment
by specifying language to the effect of "annual notice" or
"annually notice". He indicated this would avoid mandating this
information to be sent every time for a shorter periodic renewal.
The chairman invited Mr. Ference forward.
Number 0987
JOHN FERENCE, Deputy Director, Division of Insurance, Department of
Commerce and Economic Development, came forward.
CHAIRMAN ROKEBERG confirmed Mr. Ference has seen Version H and
Amendment 1. The chairman asked Mr. Ference for his comments and
how he thought the industry would react.
MR. FERENCE did not foresee any problems and had no recommendations
other than ensuring that if there were to be a requirement for
return receipt, it be clearly specified.
CHAIRMAN ROKEBERG noted return receipt was currently not being
discussed. The chairman referred to the actual notice and the
period notification [of the designee option].
MR. FERENCE commented he did not see any problem at all.
CHAIRMAN ROKEBERG questioned if there were any requirements in
other areas of the insurance law that mandate occasional
informational notification to insureds.
MR. FERENCE answered there are similar requirements for periodic
notice in different circumstances. For example, the division deals
with Civil Rule 82. The division requires that liability policy
holders be advised of their obligations or risks relative to Civil
Rule 82. In response to the chairman's comment, Mr. Ference said
that is every time a policy is issued.
Number 1087
MR. LESSMEIER noted there is a similar requirement for offers of
uninsured and under-insured motorist coverage on automobile
policies. He believes these [notices] need to be made every six
months or at the time of renewal.
MR. FERENCE said it is when the policy is issued.
CHAIRMAN ROKEBERG indicated the existence of policies of varying
periods, with the customer selecting the period. He asked what
then constitutes a renewal.
MR. LESSMEIER recommended not going more than annual, because this
will apply to both automobile and homeowners' insurance. Most of
time, in his experience, homeowners' insurance is an annual
premium.
CHAIRMAN ROKEBERG commented, then, the issue is whether the
committee wishes to mandate "on renewal" or "annually". The
chairman noted Mr. Lessmeier's testimony that he prefers "annually"
over "renewal". Chairman Rokeberg asked Mr. Ference if he had a
recommendation to the committee regarding this type of
notification.
MR. FERENCE answered he believes annual notice would be sufficient;
if he were to recommend anything, he would recommend annual notice.
Mr. Ference informed the committee there is a provision in this
section of Chapter 36 dealing with cancellation notices that says
a policy period is a 12-month period, cycling from the anniversary
date.
Number 1178
REPRESENTATIVE HALCRO noted a letter of opposition in the bill
packet mentioned that homeowners' policies make no reference to the
age of the insured because that is irrelevant [Alliance of American
Insurers, 4/7/99]. He asked how they would track someone's age
regarding homeowners' policies if that information is not gathered
at the time of initial application.
MR. LESSMEIER replied he thinks this information is gathered at the
time of initial application, although he is not 100 percent sure.
Mr. Lessmeier said he thinks the easiest way to do this would be to
send a notice to all insureds on an annual basis which says, "'If
you're over 70 years of age, you have the right to make this
request.'"
CHAIRMAN ROKEBERG indicated this would be appreciated as a matter
of public education. The chairman confirmed there were no further
questions for Mr. Lessmeier or Mr. Ference. He asked if Mr. George
wished to comment.
Number 1259
JOHN GEORGE, Lobbyist for the National Association of Independent
Insurers (NAII); Lobbyist for the American Council of Life
Insurance, concurred on behalf of NAII that annual [notice] would
be sufficient. He indicated he supported the idea of notifying all
insureds regarding this option.
Number 1292
REPRESENTATIVE HALCRO moved Amendment 1 to the proposed Version H
CS for HB 158.
CHAIRMAN ROKEBERG objected for discussion. He commented he would
entertain an amendment for annualizing the notice.
REPRESENTATIVE HALCRO moved to amend Amendment 1 by inserting
"annual" after "give" on line 3 of Amendment 1 ["give" appeared
line 3 of written amendment]. There being no objection, the
amendment to the amendment was adopted. Amendment 1 as amended
read:
Page 3, line 6, following "cancellation":
Insert "; an insurer who provides a personal
insurance policy to an insured who is 70 years of age or
older shall give annual written notice to the insured of
the insured's right to have a designee receive notice as
provided in this paragraph"
CHAIRMAN ROKEBERG removed his objection to Amendment 1. There
being no further objection, Amendment 1 as amended was adopted.
Number 1358
CHAIRMAN ROKEBERG referred to the other portion of the bill
regarding statistical information. He asked Mr. Ference if he (the
chairman) had previously asked him about the language, "this
paragraph does not authorize the director to require an insurer to
release proprietary information; and".
MR. FERENCE confirmed the chairman had previously asked him about
that language. The division's recommendation would be that that
provision dealing with proprietary information not be existent.
However, the division does not believe it will be a significant
problem if it remains. If it is not there, however, it prevents
this from ever being a question.
CHAIRMAN ROKEBERG indicated that if the division did not receive
the requested information if this legislation passed, it could
always be amended. The chairman questioned if the division feels
this would allow the collection of the desired information in terms
of "uninsured individual and group plans that are non-ERISA."
MR. FERENCE replied he thought this was broad enough. It will
allow the division to identify who is insured and, by default, that
will identify who falls outside the scope of insurance treatments.
In response to the chairman's comment, Mr. Ference confirmed it
would be both for covered bodies and policy numbers.
Number 1437
REPRESENTATIVE HALCRO asked Mr. George what kinds of information
the industry would consider proprietary.
MR. GEORGE answered, on behalf of the American Council of Life
Insurance, that he is unsure. He indicated he deals more with the
life insurance side as opposed to health insurance. He supposes
the names of the groups on group policies, those types of things,
to avoid giving competitors a list of a company's clients, might be
considered proprietary. He didn't see a problem with releasing the
actual numbers, noting he thinks that is the information being
sought. As long as it doesn't include names of clients or names of
insured individuals, Mr. George said he thinks they are probably
okay with that. He commented he is speaking off the top of his
head.
REPRESENTATIVE HALCRO asked if pricing structures, et cetera, would
be considered proprietary.
MR. GEORGE replied it would be, but he doesn't think that is the
type of information being requested.
CHAIRMAN ROKEBERG said, "That's published information (indisc.)
premium tax (indisc.)?"
MR. FERENCE responded in health insurance policies it is not, only
for Blue Cross and Blue Shield.
REPRESENTATIVE HALCRO commented he doesn't want there to be a
future debate over what is proprietary and what is not, noting that
is the reason for his questions.
MR. GEORGE indicated he does not think there is a problem with the
information this legislation is seeking to get. He further
indicated this section could be used in the future to gather other
information, at which point the industry could say that is
proprietary.
Number 1548
CHAIRMAN ROKEBERG stated his view of this amendment [adopted April
9, 1999] is that it was a fence around which the fishing expedition
of the division would be restricted. The chairman indicated the
intention was that the division collect this specific information,
not have untrammeled rights to obtain information.
MR. FERENCE agreed with the chairman's comments.
REPRESENTATIVE BRICE asked, regarding the statistical health
insurance information, if that would be the specific services which
are covered, like the level of copayment and the deductibles. He
asked if that would include, for example, whether or not the policy
has mental health coverage as well.
MR. GEORGE said he assumes Representative Brice is interested in
finding out who is treating mental health coverage with parity and
who is not, referring to the mental health parity legislation.
REPRESENTATIVE BRICE indicated he was interested in simply who is
providing that coverage.
MR. GEORGE said it is probably not proprietary if it is being
examined generically and statistics are desired. A particular
company might have problems sharing its information publicly.
Number 1645
REPRESENTATIVE BRICE questioned if that is something the department
can work on.
MR. FERENCE answered he doesn't see a reason why they couldn't.
Statistical information, in a sense, is very broad; it is anything
that can be counted. It could be extended to count different
policies on (indisc.) basis, if the division chose to do that.
However, the reality is the division is not interested in "fishing"
either because of the time and expense. He indicated the more
detailed the examination, the more probability the division would
run into proprietary problems and objections from industry over the
cost to provide the information.
REPRESENTATIVE BRICE noted, on the balance of that, he is glad to
see this section is being included, because, as policy makers, the
legislature needs to have some understanding of the real world
impacts of various mandates or various disparities amongst
coverages.
MR. GEORGE commented that people covered under ERISA [Employee
Retirement and Security Act] will not be captured by this,
indicating that is the major section.
CHAIRMAN ROKEBERG said they want to know the other people. He
indicated he doesn't know why this doesn't say non-ERISA.
Number 1713
MR. FERENCE pointed out he doesn't see why there is any reason the
division, under this legislation, could not ask insurers to
identify stop-loss policies that are sold to protect ERISA plans
and solicit statistics on the number of participants protected
under those stop-loss programs.
CHAIRMAN ROKEBERG said it would be his intention that the division
obtain that information also. He commented the Department of
Health and Social Services is also always looking for the numbers
of insureds. The chairman confirmed Mr. Walsh [John Walsh,
lobbyist for the Alaska Association of Independent Agents and
Brokers] did not wish to testify. The chairman closed the public
testimony on HB 158 after confirming no one else wished to testify.
The chairman noted he would not be offering the other amendment
[labeled 1-LS0128\H.2, Ford, 4/14/99, adding certified mail
requirements].
Number 1797
REPRESENTATIVE HALCRO made a motion to move CS for HB 158 [Version
H], as amended, out of committee with individual recommendations
and the attached zero fiscal note. There being no objection, CSHB
158(L&C) moved out the House Labor and Commerce Standing Committee.
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