Legislature(2001 - 2002)

04/20/2001 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 184-INSURANCE CODE AMENDMENTS                                                                                              
[Contains discussion of HB 106]                                                                                                 
CHAIR MURKOWSKI announced that the  final order of business would                                                               
be  HOUSE BILL  NO.  184, "An  Act relating  to  the business  of                                                               
insurance, including  changes to the insurance  code to implement                                                               
federal financial services reforms  for the business of insurance                                                               
and to  authorize the  director of  insurance to  review criminal                                                               
backgrounds for  individuals applying  to engage in  the business                                                               
of insurance;  amending Rule 402,  Alaska Rules of  Evidence; and                                                               
providing for an effective date."                                                                                               
Number 2360                                                                                                                     
REPRESENTATIVE  HALCRO  made  a  motion  to  adopt  the  proposed                                                               
committee substitute (CS) for HB  184, version 22-GH1025\F, Ford,                                                               
4/19/01, as  a work draft.   There being no objection,  Version F                                                               
was before the committee.                                                                                                       
BOB  LOHR,   Director,  Division  of  Insurance,   Department  of                                                               
Community &  Economic Development,  came forth and  explained the                                                               
changes between  the original  version and the  proposed CS.   He                                                               
stated that  on page  2, line  2, the  word "otherwise"  has been                                                               
deleted.   On page  4, paragraph (9),  lines 14 to  21, is  a new                                                               
paragraph that  says it is  OK for managerial  and administrative                                                               
employees of a  company to operate without  an insurance license.                                                               
He remarked  that on page  18, lines 24 to  27, is a  new section                                                               
that  allows commission-sharing  overrides.   He noted  that this                                                               
language  was  in the  NAIC  (National  Association of  Insurance                                                               
Commissioners)  model bill  dealing  with the  Gramm-Leach-Bliley                                                               
Act (GLBA),  but it was  not in the  original version of  HB 184.                                                               
On page 23, after line 8,  Section 39 was added, which deals with                                                               
surplus lines  bonding.  Currently,  he said, a bond  of $200,000                                                               
is required of a surplus lines  broker.  According to [GLBA], any                                                               
additional requirements  placed on an insurance  sales person, an                                                               
agent,  or broker  that are  not placed  on residents  could mean                                                               
that a state would not be reciprocal.                                                                                           
TAPE 01-63, SIDE B                                                                                                              
Number 2484                                                                                                                     
MR. LOHR  stated that  the [division]  feels there  are important                                                               
consumer  protections in  the  bonding  requirements for  surplus                                                               
lines, and  would like to  do anything possible to  maintain that                                                               
requirement  and make  the argument  at the  national level  that                                                               
this is a  legitimate consumer protection that should  not make a                                                               
state  nonreciprocal.    In  the event  that the  argument fails,                                                               
this  change  would  allow  the  director  to  have  the  bonding                                                               
requirement by regulation, but would  not require it.  Therefore,                                                               
the effect  of the  change in  the proposed CS  would be  to make                                                               
optional the requirement for the surplus lines bond.                                                                            
CHAIR  MURKOWSKI  asked  how [the  bonding  requirement]  can  be                                                               
optional if it is required.                                                                                                     
MR. LOHR  responded that  currently, under  law, it  is required.                                                               
With this  amendment, proposed in  the CS on  lines 10 and  11 of                                                               
page  23, it  would  say that  "if required  by  the director  by                                                               
regulation",  then  the  bond  would  be  maintained  in  a  form                                                               
acceptable to the director.   He explained that if [the division]                                                               
adopted a regulation by the  effective date of this section, then                                                               
the  requirement   for  the  bond   would  continue.     If  [the                                                               
department]  didn't  adopt  a regulation  requiring  the  surplus                                                               
lines  bond by  that  deadline, then  the  requirements would  no                                                               
longer be there.                                                                                                                
MR. LOHR continued, stating that on  page 25, line 14, the phrase                                                               
"or insured" has been deleted from  two places.  It has also been                                                               
deleted from  line 17.   On the  same page, line  31, there  is a                                                               
correction to the citation.   The original bill said "provided in                                                               
15 U.S.C  6801-6805" and  has been corrected  to read  "15 U.S.C.                                                               
6801-6809".   He  noted that  that  is the  correct citation  for                                                               
Title  V  of  GLBA,  and   is  the  privacy  provision  for  that                                                               
REPRESENTATIVE ROKEBERG  asked whether  there is a  definition of                                                               
"personal information records" within the bill.                                                                                 
MR.  LOHR  responded that  there  is  a definition  of  "personal                                                               
information" in GLBA.                                                                                                           
Number 2336                                                                                                                     
KATIE CAMPBELL,  Life and Health Actuary,  Division of Insurance,                                                               
Department of Community and Economic  Development, came forth and                                                               
stated that "personal  information" is a defined  term within the                                                               
federal bill - GLBA - and is broad.                                                                                             
REPRESENTATIVE  ROKEBERG asked  whether there  is an  issue about                                                               
what can and cannot be disclosed.                                                                                               
MR. LOHR answered that the approach  in the bill is to direct the                                                               
division  to come  up  with  regulations on  privacy.   The  NAIC                                                               
model,  which  was  a  previous reference  point  for  what  [the                                                               
division] should do, has been changed  in the bill to a reference                                                               
to GLBA - on  page 26, line 8, of the bill.   He added that GLBA,                                                               
Title V  is the privacy provision  of that Act and  is a starting                                                               
point for regulations.   In  either case, federal law under Title                                                               
V,  of  GLBA clearly  allows  states  to  go beyond  the  privacy                                                               
provisions adopted by  federal regulators, if that's  the wish of                                                               
a  state.    If  [a  state] does  so,  unlike  for  most  federal                                                               
preemption law, the state provision  will be upheld.  A stronger,                                                               
more protective  privacy provision in a  state regulation adopted                                                               
under GLBA  will be upheld if  it is found to  be more protective                                                               
of  privacy  than  an  equivalent  provision  under  the  federal                                                               
regulations that have been adopted under the same title.                                                                        
REPRESENTATIVE ROKEBERG  stated that  because of the  adoption of                                                               
the so-called  Alaska patients'  bill of  rights [HB  211], there                                                               
are  strong   and  restrictive   abilities  to   release  medical                                                               
information.    He  asked,  when  that  was  passed  [during  the                                                               
previous session],  whether a de  facto opt-in situation  was set                                                               
MR.  LOHR answered  that the  provision  in HB  211, which  takes                                                               
effect  July  1, 2001,  goes  beyond  opt-in by  prohibiting  the                                                               
sharing of financial information.   Therefore, it is inconsistent                                                               
with the  kinds of  approaches that have  been discussed  in both                                                               
the banking bill and the  insurance bill with respect to privacy,                                                               
and  the kind  of provisions  found in  the national  models that                                                               
deal with privacy.                                                                                                              
REPRESENTATIVE ROKEBERG  remarked, "Albeit, it's  more consistent                                                               
with our state's constitution."                                                                                                 
MR. LOHR responded that he believes that's correct.                                                                             
REPRESENTATIVE  ROKEBERG  asked  whether  HB  211  will  be  more                                                               
restrictive than anything else [the committee] will adopt.                                                                      
MR. LOHR  answered that  he believes that's  the case,  but would                                                               
like  to double-check  with counsel,  since HB  211 predated  the                                                               
application  of   GLBA  -  it   was  there  before   the  federal                                                               
regulations were  adopted.   He remarked that  there is  a timing                                                               
question in his  mind, but in terms  of the thrust of  Title V of                                                               
GLBA upholding  stronger privacy  provision, he said  he believes                                                               
Representative Rokeberg's assessment is correct.                                                                                
Number 2082                                                                                                                     
REPRESENTATIVE ROKEBERG  asked, since [the legislature]  is going                                                               
to grant  [the division]  the ability  to draft  the regulations,                                                               
how  [the division]  will handle  taking  policy directions  from                                                               
this legislation and the existing statutes.                                                                                     
MR. LOHR  replied that the  primary guidance would come  from [HB                                                               
184]; however, the fact that  this bill directs [the division] to                                                               
adopt regulations would  not in any way  authorize [the division]                                                               
to adopt a regulation inconsistent with existing statute.                                                                       
REPRESENTATIVE  ROKEBERG  remarked  that that  is  precisely  his                                                               
point.   When [the division]  is formulating the  regulations, he                                                               
said  it seems  to him  that  it will  have  to take  the HB  211                                                               
requirements into consideration.  He  asked whether those need to                                                               
be looked at.                                                                                                                   
MR. LOHR responded that [the  division] has given some thought to                                                               
the  question  of  how  to   deal  with  the  existing  statutory                                                               
provision  and how  to interpret  it.   He said  that's something                                                               
that would be suitable for discussion in the committee.                                                                         
REPRESENTATIVE ROKEBERG  stated that this is  a situation whereby                                                               
[the  committee] is  giving the  division  preauthority to  draft                                                               
regulations.   If  there  are existing  statutes  in place,  [the                                                               
division]   will  obviously   review  those   in  light   of  the                                                               
regulations.    He said  he  thinks  that militates  toward  some                                                               
extraordinary, tight privacy  regulations.  He stated  that he is                                                               
wondering whether that needs to be lightened up.                                                                                
Number 1942                                                                                                                     
REPRESENTATIVE HALCRO asked  Mr. Lohr whether he  is getting some                                                               
feedback from  people in the  insurance industry similar  to what                                                               
[the  committee] is  getting  from the  banking  people with  the                                                               
banking side of the bill -  that they view GLBA as an opportunity                                                               
to loosen some of the state's privacy regulations.                                                                              
MR. LOHR  responded that  [the division] is  not hearing  that as                                                               
much  as  how  the  industry would  like  a  consistent  national                                                               
REPRESENTATIVE  CRAWFORD stated  that he  doesn't understand  why                                                               
[the committee] would  want to put this in regulation  and not in                                                               
statute,  if the  next insurance  commissioner could  rewrite the                                                               
regulation.  He asked whether it  is not written in stone when it                                                               
is put in regulation.                                                                                                           
MR. LOHR  responded that that's correct;  however, the regulation                                                               
[the new  commissioner] would  have to rewrite  would have  to be                                                               
consistent  with, but  no less  restrictive  than, GLBA,  because                                                               
those are statutory standards.                                                                                                  
REPRESENTATIVE  CRAWFORD stated  that  this bill  gets away  from                                                               
what originally was in statute, as  far as opt-in and opt-out, by                                                               
having a less restrictive point of view.                                                                                        
MR.  LOHR  remarked  that  the  current  state  of  the  law  for                                                               
insurance  code  is  that  there is  no  protection  for  privacy                                                               
whatsoever.   From that  perspective, any  effort to  establish a                                                               
regulatory  process  or  a  statutory  standard,  which  protects                                                               
financial privacy  and health privacy  in the hands  of insurance                                                               
companies, would be a major step forward.                                                                                       
Number 1753                                                                                                                     
REPRESENTATIVE  ROKEBERG stated  that  he thinks  because of  the                                                               
Administrative Procedure  Act, those regulations are  law and are                                                               
hard  to  change.    Nevertheless,  he  asked  whether  there  is                                                               
anything in the  bill that gives [the  division] policy direction                                                               
on that particular level of privacy.                                                                                            
MR. LOHR  responded that the  closest he  could come is  with the                                                               
"consistent with,  but no  less restrictive  than, GLBA  Title V"                                                               
language.    That sets  a  floor,  but  is essentially  what  the                                                               
federal regulations already provide.   It could go anywhere above                                                               
that, up to and including the  absolute prohibition that is in HB                                                               
211,  in terms  of sharing.    He stated  that if  there were  no                                                               
legislative action  taken this year  in Alaska, then  the default                                                               
standard would be  that of the federal regulations,  and would be                                                               
opt-out for financial information.                                                                                              
REPRESENTATIVE ROKEBERG asked  whether there is no  opt-in in the                                                               
default standard in the personal information area of insurance.                                                                 
MS.  CAMPBELL  responded that  in  the  preamble to  the  federal                                                               
regulation, regulators  considered any information that  a person                                                               
provides in  his or her application  in the process of  getting a                                                               
financial product  to be considered  within the purview  of GLBA.                                                               
That would include health and financial information.                                                                            
REPRESENTATIVE  ROKEBERG  asked  whether   that  is  shared  with                                                               
MS. CAMPBELL  answered that under  GLBA sharing  among affiliates                                                               
is  not restricted  - it  is restricted  for nonaffiliated  third                                                               
REPRESENTATIVE ROKEBERG  stated that he is  concerned with giving                                                               
[the division]  a "blank  check" and  not giving  [the committee]                                                               
some policy direction.                                                                                                          
Number 1611                                                                                                                     
CHAIR MURKOWSKI  remarked that  Mr. Lohr  had indicated  that the                                                               
goal is to get  all of the states at the same  level.  She stated                                                               
that if  [the committee]  gives the  director authority  to adopt                                                               
that, with  this minimum threshold  that it has to  be consistent                                                               
with, but  no less restrictive  than, GLBA, [the  division] could                                                               
essentially  have  an opt-in  provision  that  puts Alaska  at  a                                                               
different place than the other states.                                                                                          
MR. LOHR remarked that he thinks  she is correct.  He stated that                                                               
if HB  211 were not amended  as part of this  privacy process, he                                                               
thinks the  division would take  that as guidance of  the highest                                                               
possible privacy  standard that  had been established  for health                                                               
information.   Unlike  the financial  information, where  there's                                                               
been some debate on the health  side as being an opt-in provision                                                               
as discussed  in the NAIC  model, there's been  relatively little                                                               
debate about whether  that's appropriate.  Most  people, he said,                                                               
seem to agree with the opt-in standard.                                                                                         
REPRESENTATIVE CRAWFORD  stated that it  seems to him  that there                                                               
are  bound to  be  other  meetings going  on  around the  country                                                               
asking similar  questions.  He  said if the  idea here is  to get                                                               
into compliance  with GLBA, but there  is still the option  to be                                                               
stricter, he  thinks there will be  a lot of states  with varying                                                               
degrees  of regulation.   He  said he  thinks it  is going  to be                                                               
difficult  to  adopt  a  nationwide standard  that  has  so  much                                                               
Number 1412                                                                                                                     
REPRESENTATIVE HALCRO asked what HB 211 is.                                                                                     
REPRESENTATIVE  ROKEBERG  responded  that  it  is  the  so-called                                                               
patients' bill  of rights [passed last  year].  He said  it had a                                                               
small provision  on privacy,  and he thinks  there was  a consent                                                               
MS. CAMPBELL  remarked that there are  several conditions whereby                                                               
health information can be released.   One of them is with written                                                               
consent.  Another  one is research - if it's  needed to reimburse                                                               
for a claim.                                                                                                                    
REPRESENTATIVE  ROKEBERG added  that there  were provisions  that                                                               
allowed for  a day-to-day course  of activities, but  it strictly                                                               
prohibits the release  of information without the  consent of the                                                               
patient.   He  suggested that  [the committee]  send a  letter of                                                               
intent to  providing policy guidance  to the division as  to what                                                               
direction [the committee] wants the regulations to go.                                                                          
CHAIR MURKOWSKI asked Mr. Lohr whether there are more changes.                                                                  
Number 1263                                                                                                                     
MR.  LOHR responded  that on  page 27,  lines 3  through 10,  the                                                               
proposed   CS  deletes   the  privacy   standard  from   consumer                                                               
protections  for banking,  because it's  already covered  by GLBA                                                               
through the privacy provision on page 26.                                                                                       
CHAIR  MURKOWSKI   asked  whether  this  gives   some  additional                                                               
guidance in terms of privacy for financial information.                                                                         
MR. LOHR answered that the  specific applicability of the deleted                                                               
section,  on page  27, referred  to banking  institutions selling                                                               
insurance.  Those institutions would  be within the definition of                                                               
what  is covered  by the  privacy regulation  under GLBA.   Other                                                               
than the  fact that  it singles  out that one  group, he  said he                                                               
doesn't believe it  would be any more restrictive  or provide any                                                               
additional guidance  from the legislature  to the  division about                                                               
the privacy provisions.                                                                                                         
CHAIR  MURKOWSKI  asked  how  this interrelates  to  HB  106  and                                                               
privacy provisions  that [the committee] is  wrestling with, with                                                               
financial institutions.                                                                                                         
MS. CAMPBELL  responded that this  provision deals with  the sale                                                               
of insurance by these financial  institutions, while banking only                                                               
deals with  the financial product.   He  said it was  very common                                                               
for  banks  in  the  past   to  issue  credit  insurance.    This                                                               
particular provision is  on real property used  as collateral for                                                               
a loan.                                                                                                                         
Number 1116                                                                                                                     
REPRESENTATIVE  HALCRO  asked  Mr. Lohr  whether  [the  division]                                                               
deleted the  language because  of the reference  to GLBA  in this                                                               
bill or in HB 106.                                                                                                              
MR. LOHR answered that [the  division] has added the reference to                                                               
GLBA in  this bill on page  26, and has deleted  the reference in                                                               
this bill to  the model privacy regulations adopted by  NAIC.  He                                                               
noted  that [the  division] has  not proposed  any changes  to HB                                                               
REPRESENTATIVE HALCRO asked whether he  is correct in saying that                                                               
this doesn't tie in to what is being discussed with HB 106.                                                                     
MR. LOHR answered that he was correct.                                                                                          
REPRESENTATIVE  ROKEBERG  stated that  he  thinks  they are  tied                                                               
together by  GLBA, and the fact  is that now [the  committee] has                                                               
the  phenomenon   of  bundling  affiliations   between  insurance                                                               
companies and banking institutions.                                                                                             
REPRESENTATIVE  HALCRO  remarked  that   that  is  his  question,                                                               
because [the committee] is considering  removing the reference to                                                               
GLBA in the banking bill.                                                                                                       
REPRESENTATIVE  ROKEBERG remarked  that  these bills  have to  be                                                               
MR.  LOHR stated  that  in  terms of  the  relationship with  the                                                               
bills,  [the division]  has tried  to coordinate  with Mr.  Elder                                                               
[Director of the Division of  Banking, Securities & Corporations]                                                               
in terms of the content of  his bill and the approach to privacy.                                                               
He added that the GLBA reference  in HB 184 was suggested to [the                                                               
division]  by  industry;  they  felt   strongly  that  it  was  a                                                               
preferable reference to the NAIC model.                                                                                         
REPRESENTATIVE  HALCRO  commented  that  the  bankers  want  GLBA                                                               
because it's far more lenient than existing state statutes.                                                                     
MR.  LOHR  noted that  in  [the  division's]  case, there  is  no                                                               
standard;  therefore, the  adoption of  a standard  would advance                                                               
the cause considerably.                                                                                                         
Number 0903                                                                                                                     
REPRESENTATIVE  ROKEBERG  remarked that  he  thinks  a letter  of                                                               
[intent] could  stipulate as  to the consistency  of both  of the                                                               
bills  and the  fact  that [the  committee]  wants a  regulations                                                               
policy adopted  by both  departments.   He said he  has a  lot of                                                               
concern about bundling services.                                                                                                
REPRESENTATIVE CRAWFORD  stated that  he doesn't  want to  get to                                                               
the  point at  which the  bank is  the insurance  company, and  a                                                               
person couldn't buy  car insurance because the  bank doesn't like                                                               
his or  her credit  report.  He  said he would  like to  put some                                                               
"firewalls" in between these businesses.                                                                                        
MR.  LOHR  continued, stating  that  on  page  30, line  3,  [the                                                               
division] added  the reference  to credit  union and  the federal                                                               
citation, because when credit unions  are selling insurance it is                                                               
important  to make  sure  that  "financial institution"  includes                                                               
them  as  well in  the  definition.   On  lines  11  and 12  [the                                                               
division] added,  "'financial institutions'  does not  include an                                                               
insurer".    That was  always  understood,  but  now it  is  made                                                               
explicit.   He  stated  that on  lines 29  and  30, the  language                                                               
concerning  domestic violence  has  been amended  to capture  the                                                               
compromise  that was  reached  a  number of  years  ago when  the                                                               
original insurance  domestic violence provision was  adopted, and                                                               
to make sure there was  not substantive change accomplished by HB                                                               
184.  Finally,  he said a proposed amendment would  deal with the                                                               
effective date clause on the  surplus lines provision.  Currently                                                               
it is listed as taking effect July  1, 2001, on page 32, line 12.                                                               
The  [division]  would  recommend  that  the  committee  consider                                                               
making that one year later, or July 1, 2002.                                                                                    
CHAIR MURKOWSKI remarked  that the last time  the committee heard                                                               
this, there was testimony from  folks within the industry who had                                                               
concerns  with  some of  the  issues.    She asked  whether  [the                                                               
changes from the division] are what industry has also agreed to.                                                                
MR. LOHR  responded that all of  the amendments were done  at the                                                               
behest  of  industry  representatives.     He  said  it  is  [the                                                               
division's]   understanding  that   each  group   that  expressed                                                               
concerns previously is satisfied with the version of the bill.                                                                  
Number 0540                                                                                                                     
JOHN  GEORGE, Lobbyist,  came  forth on  behalf  of the  American                                                               
Council of Life Insurance (ACLI),  American Family Life Insurance                                                               
Company   (AFLAC),  and   National  Association   of  Independent                                                               
Insurers (NAII).   He said they have worked  extensively with the                                                               
Mr.  Lohr, have  come up  with compromises,  and are  prepared to                                                               
support the bill.                                                                                                               
CHAIR  MURKOWSKI  stated  that  during  the  last  go-around  Mr.                                                               
George's  major concern  was  with the  privacy  provision.   She                                                               
asked whether  he is  comfortable with  allowing the  director to                                                               
implement it by regulation.                                                                                                     
MR.  GEORGE  responded that  the  compromise  was to  allow  [the                                                               
director] to do it by regulation,  and to allow [ACLI, AFLAC, and                                                               
NAII] to make arguments during  the regulatory process as opposed                                                               
to setting  the NAIC  [standard] as  a floor.   He added  that if                                                               
regulations are  adopted and they  find that they don't  work, it                                                               
is a  lot easier to  go back and change  a regulation than  to go                                                               
through the legislative process.                                                                                                
REPRESENTATIVE CRAWFORD agreed that it  is a lot easier to change                                                               
regulations  than  it  is  to  change statutes.    He  said  [the                                                               
legislature] is  just trusting that  the current  commissioner is                                                               
going to be looking out for  the interest of the consumer and the                                                               
interest of the industry on an equal basis.                                                                                     
Number 0403                                                                                                                     
MR. GEORGE  responded that it  is the purview of  the legislature                                                               
to set policy, and there are  a number of standards that could be                                                               
put  on as  sideboards, such  as  having a  total prohibition  of                                                               
release of information,  using the NAIC standard  or the National                                                               
Conference  of  Insurance  Legislators  [standard],  or  adopting                                                               
regulations not more restrictive than GLBA.                                                                                     
CHAIR MURKOWSKI remarked that [the  committee] was just handed an                                                               
article  from BNA's  Banking  Report dated  April  16 that  talks                                                               
about the Gramm-Leach-Blily privacy  deadline and what states are                                                               
doing.  It  says many states appear to be  moving toward adoption                                                               
of the  NAIC model  regarding privacy.   She  said 23  states are                                                               
leaning this way, including Alaska.                                                                                             
MR. LOHR responded  that he believes that would  reflect a survey                                                               
that was done based on the original version of HB 184.                                                                          
REPRESENTATIVE ROKEBERG  referred to  HB 211  and stated  that it                                                               
does  have  a provision  that  says  "it's confidential  and  not                                                               
subject to public  disclosure -  that's any  medical or financial                                                               
information."   He said one  exception is the written  consent by                                                               
the individual.   He  asked how the  HCFA (Health  Care Financing                                                               
Administration)  privacy  regulations  fit   in  with  the  whole                                                               
Number 0141                                                                                                                     
MS.  CAMPBELL   responded  that  the  federal   regulations  will                                                               
actually go  into effect in  2002, and the health  care providers                                                               
and  health  care  insurers  will   have  to  comply  with  those                                                               
regulations.  She said they  are opt-in, but there are exceptions                                                               
where the  information could be released  for marketing purposes.                                                               
She  added  that  if  a  state has  a  stronger  standard,  those                                                               
regulations would not preempt it.   Regardless, she said, that is                                                               
the  floor   for  health  information  privacy   for  all  health                                                               
REPRESENTATIVE  ROKEBERG   commented  that  there  are   so  many                                                               
regulations and laws.                                                                                                           
MR. LOHR responded  that it is a complex picture,  but the bottom                                                               
line is  that privacy  is of  widespread concern.   A lot  of the                                                               
regulations are  coordinated with each  other.  For  example, the                                                               
NAIC model  regulations provide  that if  [a company]  is meeting                                                               
the HCFA regulations for privacy, then that's adequate.                                                                         
TAPE 01-64, SIDE A                                                                                                              
REPRESENTATIVE  ROKEBERG stated  that this  would affect  all the                                                               
major insurance underwriters in the state.                                                                                      
Number 0032                                                                                                                     
MS.  CAMPBELL  responded  that  it isn't  going  to  affect  life                                                               
insurers  and   property  and  casualty   insurers.     The  HCFA                                                               
regulations  do not  touch the  health information  that property                                                               
and  casualty insurers  or life  insurers gather.   She  remarked                                                               
that  it  is  really  just touching  the  health  insurance  HMOs                                                               
(health maintenance organization) and health insurance market.                                                                  
MR.  LOHR stated  that  one  reason there  are  so  many sets  of                                                               
regulations  is  that each  one  covers  those institutions  over                                                               
which they  have authority.   Unless they  are put together  as a                                                               
package,  there are  gaps and  overlaps.   On the  gaps, he  said                                                               
there is definitely  a need for a set of  regulations that covers                                                               
life  insurance,  and  it  would  not  be  covered  by  the  HCFA                                                               
regulation as currently drafted.                                                                                                
REPRESENTATIVE  ROKEBERG remarked  that  for purposes  of a  life                                                               
insurance  examination and  the  release of  that information,  a                                                               
person would  not be  covered by  HB 211, unless  it was  under a                                                               
managed care entity.                                                                                                            
MR. LOHR said that's correct.                                                                                                   
Number 0271                                                                                                                     
REPRESENTATIVE HAYES asked if the amendments would be addressed.                                                                
CHAIR MURKOWSKI  responded that she  is not prepared to  move the                                                               
bill.   She said there are  sufficient concerns in her  mind that                                                               
[the committee]  know what  they are  doing with  this particular                                                               
legislation  in relation  to how  GLBA is  relating to  financial                                                               
institutions.    She  stated  that she  is  concerned  that  [the                                                               
committee]  may be  going in  different  directions when  talking                                                               
about  banks versus  insurance  as well  as  privacy issues  that                                                               
relate to  either financial concerns  or the  health information.                                                               
She  remarked that  she thinks  there  needs to  be a  relatively                                                               
consistent policy.                                                                                                              
REPRESENTATIVE MEYER  remarked that  he shares the  same concerns                                                               
and suggested having a spreadsheet comparing the two.                                                                           
Number 0447                                                                                                                     
KATHERINE  ALTENEDER testified  via teleconference.   She  stated                                                               
that her comments are focused on  three main issues:  the privacy                                                               
matter, a private  right of action for Alaskans in  order to have                                                               
some  recourse should  information be  disclosed in  violation of                                                               
the law, and  a review of some of the  antitying provisions.  She                                                               
     Today  you  are  considering  massive  changes  to  the                                                                    
     insurance Act.   And  the decisions  you make  about HB                                                                    
     184 and HB  106 are going to affect not  only a limited                                                                    
     number  of businesses  operating  in  Alaska, but  most                                                                    
     definitely  ever single  Alaskan's right  and how  they                                                                    
     have  control  over  their very  personal  and  private                                                                    
     information.  ...  Representative Kott:    particularly                                                                    
     I'm  addressing my  comments to  you because  you're my                                                                    
     elected representative,  and it's  my hope  that you'll                                                                    
     represent my  interest and  the interest  of individual                                                                    
     Alaskans. ...  I was  listening before  to some  of the                                                                    
     questions  and  things that  were  being  heard by  the                                                                    
     committee, and I have to  say as a citizen [I'm] really                                                                    
     confused.    I'm  feeling  like   I'm  listening  to  a                                                                    
     committee that's  operating for  industry.   I've heard                                                                    
     nothing  about what  would be  good for  Alaskans; I've                                                                    
     heard  nothing  about  input from  consumers,  and  I'm                                                                    
     deeply,  deeply troubled  by that.    Right now  you've                                                                    
     only  had the  input  of the  banks  and the  insurance                                                                    
     industry, and I think you  need to hear from consumers,                                                                    
     which are [all] Alaskans.                                                                                                  
     Looking  at  the  right   of  privacy,  obviously  it's                                                                    
     particularly  important   to  Alaskans.    We   have  a                                                                    
     fundamental right as included  in our constitution.  It                                                                    
     makes sense that  when you're given the  chance to act,                                                                    
     you  should act  in a  way that's  consistent with  our                                                                    
     constitution.  As  I think everybody is kind  of on the                                                                    
     same page now  and understanding that if  you don't act                                                                    
     ... at all, the federal  law will preempt entirely, and                                                                    
     you will  have given up  Alaska's right to defend.   If                                                                    
     you   accept   Gramm-Leach-Bliley,   you're   basically                                                                    
     handing  on  a  silver  platter to  them  the  [federal                                                                    
     government's] complete  run on how things  are going to                                                                    
     be done in Alaska.   We typically don't like that here,                                                                    
     and you  guys have  fought really hard  in the  past to                                                                    
     prevent that,  and reassure Alaskans, and  that you, as                                                                    
     our  representatives, are  able to  control the  issues                                                                    
     that you  can. ...   I think  this goes also  to issues                                                                    
     between state powers  and federal powers.   If you just                                                                    
     let  Gramm-Leach-Bliley   be  the  ploy,   you're  just                                                                    
     handing it all over to the [federal government]. ...                                                                       
Number 0697                                                                                                                     
MS. ALTENEDER continued, stating:                                                                                               
     Through,  I think,  Representative Crawford's  office I                                                                    
     have some  handouts that I  might refer to.   The first                                                                    
     one ...  I want to  cite as privacy being  important to                                                                    
     Alaskans. ...  There's been a number  of national polls                                                                    
     that  have shown  that privacy  is important  to people                                                                    
     across  America.   And now  I'm referring  to a  Gallup                                                                    
     survey  summary  sheet  and a  bar  chart.  ...  Across                                                                    
     America people  are very concerned about  their medical                                                                    
     privacy  in   particular,  but  also   their  financial                                                                    
     privacy. ... 84 percent  of people consider the privacy                                                                    
     of  their  financial  information  very  important;  78                                                                    
     percent  believe that  medical record  privacy is  very                                                                    
     important.  ... There's  been a  lot of  discussion of,                                                                    
     "Why not just turn it  over to the regulatory process?"                                                                    
     That's  totally passing  the buck.   You  guys are  our                                                                    
     elected  legislators.   ...  The  very   dedicated  and                                                                    
     intelligent and  good professional civil  servants that                                                                    
     run the agency, nonetheless,  they are employees of the                                                                    
     state; they are  not the people who represent  us - you                                                                    
     are.   We  need  you to  pass laws  that  are going  to                                                                    
     protect  us.   In that  regard,  I really  want you  to                                                                    
     think about how overwhelming  ... nationally the desire                                                                    
     of people,  not business ...  is to have  their privacy                                                                    
     When  the  [federal   government]  passed  Gramm-Leach-                                                                    
     Bliley ... they only allowed  a few areas for states to                                                                    
     act;   otherwise,  it   would  be   entirely  federally                                                                    
     preempted.    One  of  the  reasons  they  allowed  the                                                                    
     privacy arena  to be  a place the  states could  act is                                                                    
     that they knew that every  state had a different notion                                                                    
     of  what  the privacy  provisions  or  desires of  that                                                                    
     population  is.   In  this case,  the  ... reason  [the                                                                    
     federal  government] didn't  act is  because they  said                                                                    
     you, the legislators, ... represent  the people; you do                                                                    
     what your people want. ...   There's also been a lot of                                                                    
     discussion  today about  the NAIC  model rule.  ... You                                                                    
     had a  lot of industry  officials standing up  in front                                                                    
     of you today saying, "Well, this  is what we want."  In                                                                    
     fact, the  sort of think tank  ... for that has  put up                                                                    
     an opt-in, and  I think that's a  really critical thing                                                                    
     to  think  about.  ... I  haven't  heard  any  credible                                                                    
     evidence ... that would prove  that it would harm their                                                                    
     business  in any  way not  to  share this  information.                                                                    
     Making that  blanket assertion without any  evidence is                                                                    
     troubling to me.                                                                                                           
Number 1014                                                                                                                     
REPRESENTATIVE HALCRO  said to Ms.  Alteneder that he  thinks she                                                               
misunderstood some  of the discussion  that has gone  on, because                                                               
[the   committee]  is   referencing   another   bill  and   other                                                               
discussions.   He  stated that  he believes  every member  on the                                                               
committee is a  strict advocate of the opt-in rule,  and a strict                                                               
advocate of maintaining Alaska's privacy clauses.                                                                               
REPRESENTATIVE  CRAWFORD asked  Ms. Alteneder  whether she  wants                                                               
privacy of  financial and  medical records.   He also  asked what                                                               
her suggestion is for [the committee].                                                                                          
MS. ALTENDER responded  that [that is what she wants].   She said                                                               
she has been  looking at the [draft] of the  bill that references                                                               
Gramm-Leach-Bliley  as before;  there  is  nothing about  opt-in.                                                               
She said she  would recommend an opt-in  provision, a restriction                                                               
on  transferred  personal  information,  for  customers  to  have                                                               
access to their  file, limits on the reuse  of information, state                                                               
enforcement against  offenders, and  that individuals be  able to                                                               
bring a legal  action against an entity  for improper disclosure.                                                               
She  stated  that  this  last  point is  a  critical  element  to                                                               
provide,  otherwise  there  is nobody  watch-dogging  what  these                                                               
companies are doing.  She asked  whether there is a modified bill                                                               
that would include an opt-in requirement for insurance.                                                                         
CHAIR MURKOWSKI  answered that nothing  has been decided  at this                                                               
MS. ALTENEDER explained  that an opt-out for  an average American                                                               
family  with  two  parents  and  two kids  who  have  a  checking                                                               
account, a savings  account, a credit union  account, a mortgage,                                                               
two  car  loans,  car insurance,  life  insurance,  three  credit                                                               
cards,  two  retirement  accounts,  college  fund  accounts,  and                                                               
insurance would have at least 25  accounts they would have to opt                                                               
out of.                                                                                                                         
Number 1330                                                                                                                     
REPRESENTATIVE  ROKEBERG stated  that he  believes there  is some                                                               
truth to that,  with how [the committee] is going  to handle this                                                               
with the regulatory policy.                                                                                                     
REPRESENTATIVE HAYES  remarked that  the only  concern he  has is                                                               
that he  doesn't want to  do something that would  make [Alaskan]                                                               
businesses noncompetitive with other businesses in the country.                                                                 
CHAIR MURKOWSKI responded  that it was her hope that  with HB 106                                                               
and HB 184 [the committee] could  get to the point where everyone                                                               
could weigh in on  all of the side issues and  make sure that the                                                               
points of controversy are cleared up,  so that it would come down                                                               
to the policy consideration of  opt-in or opt-out.  Insurance and                                                               
banking  are   not  so  separate   anymore,  but  there   can  be                                                               
differences.   She said she  doesn't want [the committee]  to get                                                               
"cross waves"  between insurance and financial  institutions when                                                               
it comes to dealing with the privacy component.                                                                                 
REPRESENTATIVE ROKEBERG  asked Mr. Lohr  why he deleted  the NAIC                                                               
Number 1535                                                                                                                     
MR. LOHR responded  that by substituting Title V of  GLBA for the                                                               
NAIC  model   privacy  regulations,   there  is   no  substantive                                                               
difference.  It  increases the range of options  available to the                                                               
division  because it  sets GLBA  as  the floor,  but clearly  the                                                               
provision in  GLBA that allows  [the division] to go  beyond what                                                               
the federal  regulations do and  be upheld is  plenty sufficient.                                                               
He remarked that  if the proposed CS passes,  his intention would                                                               
be  to  promulgate the  NAIC  model  privacy regulations  as  the                                                               
starting  point of  discussion.   In  order  to accommodate  some                                                               
industry concerns,  [the division] was  quite happy to  propose a                                                               
different floor, knowing that the  model privacy regulations were                                                               
well within that  floor.  He added that if  nothing passes, there                                                               
is  no standard  at  all in  current state  law  with respect  to                                                               
insurance privacy.                                                                                                              
MR. GEORGE  responded that  [the NAIC model  was deleted]  at the                                                               
request  of some  of his  clients who  would probably  prefer the                                                               
statute say  that the  director can issue  a regulation  not more                                                               
restrictive than  GLBA.   He added that  [ACLI, AFLAC,  and NAII]                                                               
recognize that  there is no ceiling  and that the floor  has been                                                               
lowered substantially, which leaves a  great area for them to put                                                               
their arguments forward.                                                                                                        
REPRESENTATIVE CRAWFORD stated that  that is where the discussion                                                               
on the regulations starts, but when  it starts it will be between                                                               
[Mr. George]  and the industry.   The  consumers weigh in  at the                                                               
legislature;   he said it  is the  legislators' job to  make sure                                                               
that they are represented.   If this leaves [the legislature] and                                                               
goes to the  regulations point, then [the  legislators] no longer                                                               
enter  into it.    After that,  he said,  there  will be  another                                                               
insurance commissioner  down the road  who may be  more favorable                                                               
to the  industry.  He  remarked that he  believes there can  be a                                                               
healthy  industry  with privacy,  but  these  things need  to  be                                                               
decided before they leave the legislature.                                                                                      
REPRESENTATIVE ROKEBERG  remarked that  [the committee]  needs to                                                               
give the division more direction.   Even the prior bill [HB 211],                                                               
he said,  with the  reference to the  NAIC model,  gives adequate                                                               
direction.  He  added that he thinks it is  the consensus of most                                                               
members of the  committee and the state  constitution that opt-in                                                               
should be in the statute.                                                                                                       
REPRESENTATIVE   HAYES   commented   that   he   disagrees   with                                                               
Representatives Rokeberg and  Crawford.   He said  he thinks [the                                                               
legislature]  has more  than enough  opportunity to  oversee this                                                               
issue as it goes through the process.                                                                                           
Number 1878                                                                                                                     
MR. LOHR  remarked that the  NAIC model regulations  provide opt-                                                               
out  for financial  information held  by insurance  companies and                                                               
opt-in for health information.                                                                                                  
REPRESENTATIVE  ROKEBERG  stated  that  he thinks  it  should  be                                                               
CHAIR MURKOWSKI  stated that Mr. Lohr  brings up a good  point in                                                               
that as  far as insurance  goes, it  is both opt-in  and opt-out,                                                               
whereas with financial  institutions, it's one or the  other.  If                                                               
the  full  committee  is  in  support  of  an  opt-in,  the  full                                                               
committee  needs to  understand that  the NAIC  model is  not 100                                                               
percent opt-in.                                                                                                                 
[HB 184 was held over.]                                                                                                         

Document Name Date/Time Subjects