Legislature(2001 - 2002)

04/15/2002 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 246-OMNIBUS INSURANCE BILL                                                                                                 
                                                                                                                                
CHAIR MURKOWSKI announced  that the next order  of business would                                                               
be HOUSE  BILL NO.  246, "An Act  relating to  confidentiality of                                                               
records  and  to cease  and  desist  orders  of the  division  of                                                               
insurance,  to  insurance  company investments,  to  unauthorized                                                               
insurers,  to surplus  lines insurance,  to health  insurance, to                                                               
life  insurance,   to  annuity  insurance,  to   consumer  credit                                                               
insurance,  to  title  insurance,  and to  hospital  and  medical                                                               
service  corporations;  and  providing for  an  effective  date."                                                               
[The committee's discussion was  directed at Version 22-LS0743\J,                                                               
Ford, 2/20/02.]                                                                                                                 
                                                                                                                                
Number 2193                                                                                                                     
                                                                                                                                
BOB  LOHR,   Director,  Division  of  Insurance,   Department  of                                                               
Community  &  Economic  Development  (DCED),  specified  that  in                                                               
[Version 22-LS0743\J,  Ford, 2/20/02]  there are  two substantive                                                               
issues and  some miscellaneous provisions.   The bill  contains a                                                               
number  of  confidentiality  provisions,  which  would  basically                                                               
require the Division of Insurance  to protect the confidentiality                                                               
of insurance  examination work  papers in  order to  increase the                                                               
willingness of  insurers to  share confidential  information with                                                               
the  division during  the examination  process.   Currently,  the                                                               
division  has   the  authority  to   compel  the   production  of                                                               
documents, but  at times the  insurer will argue  that production                                                               
to the  division risks access  to those documents by  third party                                                               
litigators.    The  current protection  in  statute  is  somewhat                                                               
limited;  the  director  has  the  authority  to  make  documents                                                               
confidential when it is in the  public interest and can do so for                                                               
as  long  as  necessary  to protect  the  confidentiality.    The                                                               
statute  basically provides  for  a  situational standard  that's                                                               
designed  to be  somewhat  temporary.   This [legislation]  would                                                               
make   [confidentiality]  automatic   with  respect   to  certain                                                               
categories of  documents.  Mr.  Lohr emphasized that  this change                                                               
is  important  so  that  Alaska will  remain  accredited  by  the                                                               
National Association  of Insurance Commissioners  (NAIC), meaning                                                               
that Alaska  meets the minimum  national standards  for financial                                                               
regulation   of   insurance   companies.     Furthermore,   [this                                                               
legislation] would  make it  possible for  the division  to share                                                               
confidential information  with federal  and state  regulators and                                                               
to  receive  documents  that  other  states  and  the  NAIC  have                                                               
gathered  about  insurance  companies.   Mr.  Lohr  informed  the                                                               
committee that  the Washington State insurance  commissioner will                                                               
not  share   investigative  files   with  Alaska's   Division  of                                                               
Insurance  under  the  current  confidentiality  standards.    He                                                               
explained   that  Washington   State   wants  a   confidentiality                                                               
agreement  on  a  case-by-case basis.    Furthermore,  Washington                                                               
State wants an agreement that is  at least as protective as their                                                               
law.   Washington State wants  to avoid someone going  to another                                                               
jurisdiction, such  as Alaska, and  seek production  of documents                                                               
under  that   jurisdiction's  public   records  act   when  those                                                               
documents   weren't  available   directly   from  the   insurance                                                               
regulators in Washington State.                                                                                                 
                                                                                                                                
Number 2068                                                                                                                     
                                                                                                                                
CHAIR   MURKOWSKI  recalled   the   credit  scoring   legislation                                                               
introduced by Representative Crawford  and the question regarding                                                               
whether  aspects   or  insurers'  records  would   be  considered                                                               
confidential.    She asked  if  the  aforementioned would  be  an                                                               
example of the confidentiality provisions being discussed now.                                                                  
                                                                                                                                
MR.  LOHR  replied  no  and   pointed  out  that  the  provisions                                                               
implicated  by  Representative  Crawford's bill  deal  with  rate                                                               
making.   Within  the rate-making  statute there  is a  provision                                                               
specifying  that once  the  division has  concluded  action on  a                                                               
requested rate, all  of the supporting documents  related to that                                                               
rate request become  public.  Therefore, in order  for an insurer                                                               
to get  a credit scoring  model approved, the insurer  would have                                                               
to be  willing for that model  to become public.   That provision                                                               
wouldn't be impacted by HB 246.                                                                                                 
                                                                                                                                
Number 2011                                                                                                                     
                                                                                                                                
MR.  LOHR  returned to  [Version  J]  and the  Multiple  Employer                                                               
Welfare  Arrangements  (MEWA),  which  consists  of  a  group  of                                                               
employers that form  a pool to provide health  insurance to their                                                               
employees.   The division would  like to encourage  the formation                                                               
of  financially  sound MEWAs.      Furthermore, Alaska  wants  to                                                               
attract  additional responsible  insurers  and sound  alternative                                                               
health  insurance  arrangements to  the  state.   He  noted  that                                                               
competition in this area is  desirable.  However, the current law                                                               
requires MEWAs to  obtain a certificate of authority  as a health                                                               
insurer and thus  requires the MEWA to  maintain approximately $2                                                               
million  of capital  and surplus  and  file financial  statements                                                               
that would  be regulatory overkill,  in Mr. Lohr's opinion.   Mr.                                                               
Lohr pointed  out that [Version  J] establishes  capital surplus,                                                               
reserve standards,  financial reporting, et cetera  that are more                                                               
appropriate  to the  structure and  type of  business in  which a                                                               
MEWA engages.                                                                                                                   
                                                                                                                                
MR. LOHR turned  to the miscellaneous provisions  of [Version J].                                                               
He  noted  that  he  has  chosen only  three  examples  of  those                                                               
provisions.  One of the  provisions would establish fees for late                                                               
payment  of  premium  taxes  in order  to  encourage  the  timely                                                               
payment  of  premium  taxes, which  are  general  fund  revenues.                                                               
Another provision would  establish an annual fee to  operate as a                                                               
joint  insurance  arrangement  (JIA)   in  order  to  offset  the                                                               
division's cost  of enforcing  the provisions of  AS 21.76.   Mr.                                                               
Lohr explained  that JIAs aren't regulated  as insurance entities                                                               
under state law.   However, in order to  preserve the competitive                                                               
playing field,  each of the  JIAs have frequently  requested that                                                               
the  division  be the  "competitive  gatekeeper."   The  division                                                               
incurs  an expense  for  doing the  aforementioned  and if  those                                                               
expenses  aren't covered  by  fees  paid by  the  JIAs, then  the                                                               
expenses  would be  recovered through  the fees  to the  division                                                               
from  the licensees.   However,  the division  doesn't feel  that                                                               
it's  appropriate  to  cross  subsidize  JIA  activities  out  of                                                               
licensing  fees.    Another  provision  would  establish  minimum                                                               
attachment points consistent with  NAIC's model law for stop-loss                                                               
insurance  policies  that are  purchased  by  employers to  self-                                                               
insure their  health insurance plans.   These minimums  will help                                                               
eliminate health  insurance policies sold as  stop-loss insurance                                                               
in  order  to  avoid  compliance   with  health  insurance  laws,                                                               
including guaranty  issue, federal portability  requirements, and                                                               
benefit  mandates.    Mr.  Lohr  related  his  belief  that  this                                                               
legislation  isn't   controversial  because  the  text   of  this                                                               
legislation  has  been "shopped"  to  all  interested parties  of                                                               
which  the  division is  aware.    The division  hasn't  received                                                               
substantial  opposition  and  thus wouldn't  predict  controversy                                                               
with regard to the provisions of the legislation.                                                                               
                                                                                                                                
REPRESENTATIVE  CRAWFORD  requested   explanation  of  attachment                                                               
points and retention limits.                                                                                                    
                                                                                                                                
Number 1827                                                                                                                     
                                                                                                                                
KATIE CAMPBELL,  Actuary L/H,  Division of  Insurance, Department                                                               
of   Community  &   Economic  Development,   explained  that   an                                                               
attachment  point  is the  point  at  which the  insurance  would                                                               
actually kick  in.   Therefore, an employer  who wanted  to self-                                                               
insure   their  health   insurance   benefits  while   protecting                                                               
themselves  from  large claims  or  excessive  numbers of  claims                                                               
[would use] the attachment point.   Ms. Campbell pointed out that                                                               
a small employer who wants  to self-insure can't purchase a stop-                                                               
loss  policy with  a retention  of less  than $10,000  per claim.                                                               
Therefore,  the employer  would have  to  take the  risk for  any                                                               
amount  below $10,000,  on  an individual  claim.   Ms.  Campbell                                                               
explained that if  the [attachment point] is low  enough that all                                                               
the risk is  on the insurance company [that  is] health insurance                                                               
instead  of stop-loss  insurance.   Stop-loss insurance  policies                                                               
aren't subject  to health  insurance laws  and thus  the employer                                                               
wouldn't  have  credible  coverage.   A  stop-loss  policy  isn't                                                               
health insurance, she specified.                                                                                                
                                                                                                                                
MR. LOHR surmised that a  self-insured party isn't subject to the                                                               
insurance code in  the way that an insurer would  be.  Therefore,                                                               
if  a self-insured  party can  eliminate  all risk  to itself  by                                                               
virtue  of a  high deductible  and  a low  attachment point,  the                                                               
self-insured  is  [risk  free]  and still  isn't  treated  as  an                                                               
insurer.                                                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG  directed attention to page  12, line 25,                                                               
which  specifies the  regulated  type institutions.   "We're  not                                                               
talking about a self-insured here," he asked.                                                                                   
                                                                                                                                
MS. CAMPBELL  explained that  insurance companies  actually write                                                               
the  stop-loss  policy, and  therefore  it's  insurance, but  not                                                               
health  insurance.    The [stop-loss  insurance]  is  similar  to                                                               
employer liability  in which the  employer purchases  a stop-loss                                                               
policy to  cover any  losses incurred in  their health  plan over                                                               
the [specified] dollar amount.                                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG inquired  as to how a MEWA  would issue a                                                               
stop-loss insurance policy.                                                                                                     
                                                                                                                                
MS. CAMPBELL  clarified that  [a MEWA] would  have to  purchase a                                                               
stop-loss insurance  policy.   She related that  the goal  was to                                                               
cover  anyone who  could have  a  license to  write an  insurance                                                               
policy.   Therefore, any  stop-loss policy  issued by  anyone who                                                               
has  a  license  to  write  insurance  is  subject  to  the  same                                                               
standard, including  the MEWAs.   She agreed  with Representative                                                               
Rokeberg  that  the  self-insured  can't  be  covered  under  the                                                               
Employee Retirement and Income Security Act of 1974 (ERISA).                                                                    
                                                                                                                                
Number 1609                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI turned attention  to the sectional analysis [done                                                               
by the  Division of Insurance]  and the definition of  the health                                                               
care insurance  plan [found in  Section 36  of Version J  on page                                                               
14].   The sectional analysis  says, "The  unintended consequence                                                               
is that  individual short-term medical coverage  must comply with                                                               
health  benefit mandates."   The  sectional analysis  goes on  to                                                               
say,  "This   section  amends  the  definition   of  health  care                                                               
insurance plan  in order to exclude  short-term individual health                                                               
coverage  from  the   benefit  mandates."    She   asked  if  the                                                               
aforementioned means that under  [Version J individual short-term                                                               
medical  coverage] wouldn't  be  required to  carry coverage  for                                                               
prostrate screening and breast cancer screening.                                                                                
                                                                                                                                
MS.  CAMPBELL  replied  yes  and   explained  that  this  federal                                                               
definition  wasn't  translated into  our  laws  accurately.   The                                                               
intent  was  that it  shouldn't  apply  to individual  short-term                                                               
medical  coverage,   such  as  a   three-month  period   when  an                                                               
individual  is between  coverage.   There are  some insurers  who                                                               
actually want to market such short-term coverage.                                                                               
                                                                                                                                
Number 1526                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI surmised  then  that [Version  J] is  consistent                                                               
with  the Health  Insurance  Portability  and Accountability  Act                                                               
(HIPAA).                                                                                                                        
                                                                                                                                
MR. LOHR  agreed, adding  that HIPAA  compliance is  an important                                                               
element in keeping the federal government "off our back."                                                                       
                                                                                                                                
CHAIR MURKOWSKI  related her understanding then  that [Version J]                                                               
only takes on two policy  issues:  the confidentiality components                                                               
and the MEWA regulations.                                                                                                       
                                                                                                                                
MR. LOHR replied  yes and added that there  are other potentially                                                               
controversial provisions such as  the possibility that JIAs might                                                               
believe paying  any fee at  all is inappropriate and  thus oppose                                                               
it.   Currently, there  is an exemption  under the  surplus lines                                                               
taxation  law  for  aircraft   regularly  engaged  in  interstate                                                               
commerce.   This legislation proposes  to change the  language to                                                               
refer to "primarily engaged".                                                                                                   
                                                                                                                                
CHAIR MURKOWSKI  inquired as to  whether "primarily  engaged" has                                                               
been defined.                                                                                                                   
                                                                                                                                
MR. LOHR answered  that it isn't defined in  this legislation and                                                               
it may  be an appropriate  subject for regulation.   The division                                                               
wanted to  clarify the  statute before  taking on  the regulatory                                                               
effort.                                                                                                                         
                                                                                                                                
Number 1428                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG directed attention  to Section 35 on page                                                               
14 and inquired as to why that language was included.                                                                           
                                                                                                                                
MS. CAMPBELL  explained that the insurance  companies interpreted                                                               
the original provision  to mean that they didn't  have to provide                                                               
at least $1,500  [of coverage].  Therefore,  this language merely                                                               
clarifies the  original intent that  a health care  insurer can't                                                               
provide less than $1,500 per year.   This was discovered when the                                                               
division reviewed the contracts.                                                                                                
                                                                                                                                
REPRESENTATIVE  ROKEBERG  recalled  the  debate  on  this  matter                                                               
revolving  around why  if someone  didn't use  all their  benefit                                                               
that  they would  have to  lose their  benefit or  why would  the                                                               
insurer have to pay more if the $1,500 wasn't used.                                                                             
                                                                                                                                
CHAIR  MURKOWSKI related  her  understanding  that the  insurance                                                               
companies  interpreted the  language  to mean  that they  weren't                                                               
required to provide anything unless it was up to $1,500.                                                                        
                                                                                                                                
MS. CAMPBELL indicated that the  original language "up to $1,500"                                                               
created the problem.  The  language in [Version J] specifies that                                                               
an [insurer] has to provide up to $1,500 of benefit.                                                                            
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  if  the language  in [Version  J]                                                               
says that.                                                                                                                      
                                                                                                                                
MS. CAMPBELL said,  "So they have to provide at  least $1,500 for                                                               
a covered person."                                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG inquired  as to a situation  in which the                                                               
person doesn't want to spend $1,500.                                                                                            
                                                                                                                                
CHAIR MURKOWSKI said that the  language doesn't seem to allow for                                                               
[coverage] of less [than $1,500].                                                                                               
                                                                                                                                
Number 1256                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG turned  to  Section  41 and  interpreted                                                               
that section as  adding MEWAs to the  Alaska Comprehensive Health                                                               
Insurance Association (ACHIA).                                                                                                  
                                                                                                                                
MR.  LOHR agreed  with Representative  Rokeberg's interpretation.                                                               
He  added that  the division  is trying  to broaden  the base  of                                                               
inclusion.                                                                                                                      
                                                                                                                                
CHAIR  MURKOWSKI returned  to the  current  language relating  to                                                               
diabetes education  and pointed out  that it says,  "coverage for                                                               
the cost of  diabetes training or education is  limited to $1,500                                                               
for a covered person in a year."                                                                                                
                                                                                                                                
MS.  CAMPBELL   explained  that  the  insurance   companies  were                                                               
interpreting the  existing language  as allowing them  to provide                                                               
benefits up  to $3,000.   In other  words, the  existing language                                                               
seemed to cap the benefit.                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI recalled that the intent  was not to put in place                                                               
an unlimited requirement that an  insurer had to provide diabetes                                                               
education  and training  at an  unrestricted amount.   Therefore,                                                               
the $1,500  was a compromise.   If the insurer wanted  to provide                                                               
more   coverage,  the   existing   language   was  construed   as                                                               
restraining.                                                                                                                    
                                                                                                                                
Number 1146                                                                                                                     
                                                                                                                                
MR.  LOHR  offered the  following  language:   "The  health  care                                                               
insurer  shall provide  benefits  not to  exceed  $1,500 and  may                                                               
provide benefits in excess of this amount."                                                                                     
                                                                                                                                
MS. CAMPBELL  agreed that the  aforementioned language  might get                                                               
to  the problem.   Ms.  Campbell pointed  out that  other benefit                                                               
mandates  such  as   with  alcohol  and  drug   abuse  and  those                                                               
established  limits  haven't been  interpreted  to  mean that  if                                                               
someone didn't use it, the benefit still had to be paid.                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG  remarked that  the language  [in Section                                                               
35] isn't clear to the average person.                                                                                          
                                                                                                                                
MS. CAMPBELL  suggested that the  language [in Section  35] could                                                               
refer to "coverage" rather than "benefits".                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI  agreed  that  the change  to  "coverage"  seems                                                               
appropriate.                                                                                                                    
                                                                                                                                
MS. CAMPBELL interjected that the  term "limited" in the existing                                                               
statute seemed to cause the problem.                                                                                            
                                                                                                                                
Number 1022                                                                                                                     
                                                                                                                                
REPRESENTATIVE   ROKEBERG   moved   that  the   committee   adopt                                                               
conceptual Amendment 1, as follows:                                                                                             
                                                                                                                                
     Page 14, line 10,                                                                                                          
          Delete "benefits"                                                                                                     
          Insert "coverage"                                                                                                     
                                                                                                                                
There being no objection, conceptual Amendment 1 was adopted.                                                                   
                                                                                                                                
CHAIR MURKOWSKI noted that the  committee packet includes several                                                               
amendments [to  Version J]  and asked whether  Mr. Lohr  cared to                                                               
speak to them.                                                                                                                  
                                                                                                                                
MR. LOHR pointed out that the  legislation seems to have an error                                                               
in which "small"  and "large" are reversed and thus  there is the                                                               
need to amend that.  The  change from "large" to "small" confirms                                                               
the  lower retention  limits for  a smaller  entity.   It doesn't                                                               
make sense to  have stricter standards for the  large entity than                                                               
for  the  small entity.    For  actuarial purposes,  the  smaller                                                               
entity needs additional sidebars.    The same amendment inserts a                                                               
section that references AS 21.07,  the codified Patients' Bill of                                                               
Rights,   and  AS   21.18.080-21.18.086,  the   health  reserving                                                               
standards.   The addition  of these  references were  included to                                                               
ensure  that  the provisions  in  the  case of  hospital  medical                                                               
service corporations,  of which Blue  Cross is an  example, [were                                                               
included].    He  informed  the committee  that  the  Blue  Cross                                                               
statute includes  a provision that  other provisions of  the code                                                               
don't  apply to  them unless  explicitly listed.   Although  Blue                                                               
Cross  has  treated  the aforementioned  provisions  as  if  they                                                               
apply, a  strict reading  of the  code wouldn't  apply them  as a                                                               
matter of law.                                                                                                                  
                                                                                                                                
Number 0810                                                                                                                     
                                                                                                                                
REPRESENTATIVE HAYES moved that  the committee adopt Amendment 2,                                                               
which reads as follows:                                                                                                         
                                                                                                                                
     Page 13, line 1                                                                                                            
     replace "large" with "small"                                                                                               
                                                                                                                                
     Page 13, line 8                                                                                                            
     replace "small" with "large"                                                                                               
                                                                                                                                
     Page 29, line 27                                                                                                           
     Insert new bill section to read:                                                                                           
        *Sec. ____. AS 21.87.340 is amended by adding a                                                                       
     new paragraphs to read:                                                                                                    
               (22) AS 21.07;                                                                                                   
               (23) AS 21.18.080-21.18.086                                                                                      
                                                                                                                                
There being no objection, Amendment 2 was adopted.                                                                              
                                                                                                                                
Number 0772                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KOTT  moved  to   adopt  CSHB  246,  Version  22-                                                               
LS0743\J, Ford,  2/20/02, as the  working document.   There being                                                               
no objection, Version J was before the committee.                                                                               
                                                                                                                                
The  committee   then  proceeded  to  restate   the  motions  for                                                               
conceptual Amendment 1 and Amendment  2, which were adopted again                                                               
without objection.                                                                                                              
                                                                                                                                
Number 0708                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG moved that  the committee adopt Amendment                                                               
3 [22-LS8004\A.5,  Ford, 4/4/02], which  can be found at  the end                                                               
of this section of minutes.                                                                                                     
                                                                                                                                
REPRESENTATIVE KOTT objected for discussion purposes.                                                                           
                                                                                                                                
MR.  LOHR  explained  that Amendment  3  addresses  the  property                                                               
casualty  guaranty  fund,  which  is set  up  as  a  backstopping                                                               
mechanism to protect the consumer.   When a consumer purchases an                                                               
insurance policy,  the consumer  wants to  know that  the premium                                                               
dollars paid  to the company will  be used to provide  the claims                                                               
coverage promised.   If  the company  goes under,  this mechanism                                                               
ensures that all  other companies participate in  a guaranty fund                                                               
designed to  pay claims  against insolvent  companies.   Mr. Lohr                                                               
said  this  works  very  well  because it  provides  a  level  of                                                               
insurance  to  the insurance  system.    "Every company  that  is                                                               
participating in a line of  insurance is required, as a condition                                                               
of  that access  to that  market, to  agree to  pay its  pro rata                                                               
share  on claims  based  on  its market  share  in  that line  of                                                               
insurance,"  he  explained.     It's  very  important  that  this                                                               
amendment be in place, he said.                                                                                                 
                                                                                                                                
MR. LOHR  specified that Amendment  3 would change  the mechanism                                                               
of  calculating the  assessment.   Currently,  the assessment  is                                                               
done at the end of the year  in which the insolvency occurs.  For                                                               
example, if  a company became  insolvent August 15, 2001,  at the                                                               
end of 2001 the assessment would  be based on the market share of                                                               
each company  in the workers'  compensation or  property casualty                                                               
market  in Alaska  for that  year only.   This  legislation would                                                               
provide that one year later there  would be an adjustment of that                                                               
assessment based  on the  market share  that occurred  during the                                                               
subsequent year  [of insolvency].   He explained that  it intends                                                               
to address the current situation in  which a new entrant into the                                                               
market during  the year [of  another company's  insolvency] would                                                               
bear  no  assessment  for  the  failure  of  the  other  company.                                                               
However, the  new entrant may  inherit a  lot of business  due to                                                               
the failure  of the other  company and  thus there wouldn't  be a                                                               
level playing  field in  that market  at that time.   Based  on a                                                               
recalculation of that assessment one  year later, the new entrant                                                               
would pay  its fair share based  on its market share  at the time                                                               
of  the  insolvency  of  the  other  company.    In  response  to                                                               
Representative  Rokeberg,   the  new   entrant  would   have  its                                                               
assessment   calculated  one   year  subsequent   to  the   prior                                                               
assessment.    Mr. Lohr  commented  that  this [amendment]  would                                                               
establish  a level  playing  field that  wouldn't  allow the  new                                                               
entrant to  enter the market  for free.  Furthermore,  this would                                                               
result  in a  proportionately  lower assessment  to  each of  the                                                               
other players  in the  market and thus  the total  market doesn't                                                               
change  but rather  is reallocated.    Mr. Lohr  noted that  this                                                               
proposal  has been  submitted to  the board  of directors  of the                                                               
guaranty  fund, which  he understood  had no  opposition to  this                                                               
concept.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  KOTT asked  if  [Amendment 3]  would  be the  new                                                               
Section 50.                                                                                                                     
                                                                                                                                
MR. LOHR answered in the affirmative.                                                                                           
                                                                                                                                
Number 0288                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  asked  if  the board  of  the  guaranty                                                               
association   has  representatives   from  each   of  the   firms                                                               
participating in the association.                                                                                               
                                                                                                                                
MR. LOHR related his belief that  the members of the board of the                                                               
guaranty  association  represent  the  largest  insurers  in  the                                                               
market.   Furthermore,  he said  he believes  that the  voting is                                                               
weighted proportional  to the  member's market  share.   He noted                                                               
that he has heard no opposition  from this board and the language                                                               
was submitted  to this board.   He mentioned that he  received e-                                                               
mail  confirmation from  the  board's staff  that  the board  was                                                               
comfortable with the language.                                                                                                  
                                                                                                                                
REPRESENTATIVE KOTT withdrew his objection.                                                                                     
                                                                                                                                
Therefore, Amendment 3 was adopted.                                                                                             
                                                                                                                                
Number 0130                                                                                                                     
                                                                                                                                
REPRESENTATIVE MEYER moved that the committee adopt Amendment 4,                                                                
which reads as follows:                                                                                                         
                                                                                                                                
     Page 5, line 19:                                                                                                           
     Insert new bill section to read:                                                                                           
          *Sec.___. AS 21.09.200(a) is amended to read:                                                                       
               (a) Each authorized insurer shall annually,                                                                      
     before March 2, file with  the director or his designee                                                                
     a full  and true statement of  its financial condition,                                                                    
     transactions, and affairs as  of the preceding December                                                                    
     31.  The reporting format for  a given year is the most                                                                    
     recently  approved  National Association  of  Insurance                                                                    
     Commissioners'  annual financial  statement blank  form                                                                    
     and    instructions,   supplemented    for   additional                                                                    
     information as required by the  director.  The director                                                                    
     may  require the  statement to  be filed  on electronic                                                                    
     media.  The statement shall  be verified by the oath of                                                                    
     the   insurer's   president  or   vice-president,   and                                                                    
     secretary, or, if a reciprocal  insurer, by oath of the                                                                    
     attorney-in-fact or its like  officers if a corporation                                                                    
     unless  verification  is  waived  by  the  director  of                                                                    
     insurance.   The filing locations will  be published by                                                                
     the director at least annually.                                                                                        
                                                                                                                                
     Page 5, line 24:                                                                                                           
     Insert new bill sections to read:                                                                                          
          *Sec.___. AS 21.09.200(e) is amended to read:                                                                       
               (e) An insurer shall pay to the division                                                                         
     $100 for each day the  insurer fails to file the annual                                                                    
     statement in the form and  location required and within                                                                
     the  time established  in  (a) of  this  section.   The                                                                    
     authority of the insurer to  enter into new obligations                                                                    
     or issue new  or renewal policies of  insurance in this                                                                    
     state may  be suspended by  the director if  the annual                                                                    
     statement has not been filed by March 1.                                                                                   
          *Sec.___. AS 21.09.205(b) is amended to read:                                                                       
               (b) A quarterly financial statement, if                                                                          
     required,  is due  45 [60]  days after  the end  of the                                                                
     quarter to which it applies.                                                                                               
                                                                                                                                
     Page 8, line 15:                                                                                                           
     Insert new bill section to read:                                                                                           
          *Sec.___. AS 21.27.330(b) is amended to read:                                                                       
               (b) If a licensee that is a firm transacts                                                                       
     business at  more than one  place of business  [IN THIS                                                                    
     STATE], the licensee  shall pay a license  fee for each                                                                    
     place of business.                                                                                                         
                                                                                                                                
CHAIR MURKOWSKI objected for the purpose of discussion.                                                                         
                                                                                                                                
MR.  LOHR  explained that  that  the  amendment would  allow  the                                                               
director of the Division of  Insurance to delegate responsibility                                                               
to receive these annual statements.   Furthermore, it would allow                                                               
the division  to indicate  the location  of the  filing annually.                                                               
This  would  typically  be  done   in  the  annual  statement  of                                                               
instructions that  the division  already publishes  for insurance                                                               
companies.   The amendment  also deals with  the location  of the                                                               
filing and  amends the  deadline for  filing from  60 days  to 45                                                               
days  after the  end of  the  quarter.   Therefore, an  insurance                                                               
company has  a month-and-a-half to submit  the requirement, which                                                               
he said  he believes to  be consistent with NAIC's  standards for                                                               
quarterly reports.                                                                                                              
                                                                                                                                
TAPE 02-58, SIDE A                                                                                                              
                                                                                                                                
MR. LOHR  continued by  pointing out that  Amendment 4  inserts a                                                               
new  section that  deletes  the  language "in  this  state".   He                                                               
explained that  [the language  was deleted]  because it  has been                                                               
argued by  an outside  nonresident applicant  for a  license that                                                               
this language means  that those not located in  Alaska don't have                                                               
to pay  this license  fee.   However, the  division feels  that a                                                               
nonresident applicant should pay their fair share, he said.                                                                     
                                                                                                                                
REPRESENTATIVE MEYER asked if these are conceptual amendments.                                                                  
                                                                                                                                
CHAIR MURKOWSKI said that the drafter can work out the sections.                                                                
                                                                                                                                
Number 0069                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  turned to the last  portion of Amendment                                                               
4, which  inserts a  new bill  section on  page 8,  line 15.   He                                                               
questioned the drafting.                                                                                                        
                                                                                                                                
MR. LOHR, in response to  Representative Rokeberg, explained that                                                               
the argument is that if  a [nonresident] applicant doesn't intend                                                               
to open an  office in Alaska, those applicants  shouldn't pay any                                                               
fee at all for multiple places of business.                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG pointed out  that the current language is                                                               
more ambiguous because it says  "the licensee shall pay a license                                                               
fee for  each place  of business"  regardless of  the state.   He                                                               
recommended leaving the language "in  this state" in the bill and                                                               
including language  that specifies  that if the  licensee doesn't                                                               
have a  premise in the state,  the licensee is still  required to                                                               
purchase a license.                                                                                                             
                                                                                                                                
CHAIR MURKOWSKI  asked if the  language read "If a  licensee that                                                               
is a firm transacts business at  more than one place of business,                                                               
the licensee shall  pay a license fee for each  place of business                                                               
in this state." would address Representative Rokeberg's concern.                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG  said that  the language could  state, "A                                                               
business  that has  no premises  in the  state still  must pay  a                                                               
licensing fee."                                                                                                                 
                                                                                                                                
MR. LOHR said he  considered Representative Rokeberg's suggestion                                                               
as a friendly amendment.                                                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG  moved  that   the  committee  adopt  an                                                               
amendment to Amendment 4 that would  result in the new section to                                                               
be  inserted on  page 8,  line 15,  to read  as follows:   "If  a                                                               
licensee  that is  a firm  transacts  business at  more than  one                                                               
place of business, the licensee shall  pay a license fee for each                                                               
place of business in  this state.  If a licensee  does not have a                                                               
place of  business in this state,  he is still required  to pay a                                                               
license fee."                                                                                                                   
                                                                                                                                
REPRESENTATIVE MEYER  noted his  acceptance of that  amendment to                                                               
Amendment 4.                                                                                                                    
                                                                                                                                
MR. LOHR  said that the  person that  should be consulted  is the                                                               
director  of the  Division of  [Occupational]  Licensing and  the                                                               
licensing supervisor who suggested the  amendment.  He offered to                                                               
consult with the [licensing supervisor]  and hold that portion of                                                               
the amendment until the next committee of referral.                                                                             
                                                                                                                                
Number 0394                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  pointed out that the  amendment could be                                                               
conceptual.                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI said that she  wasn't sure she understood because                                                               
she  thought that  one  would  pay a  license  fee  based on  the                                                               
locations, although it  has been determined that  there might not                                                               
be locations within Alaska.                                                                                                     
                                                                                                                                
MR.  LOHR recommended  deleting from  Amendment 4,  the following                                                               
language:                                                                                                                       
                                                                                                                                
     Page 8, line 15:                                                                                                           
     Insert new bill section to read:                                                                                           
          *Sec.___. AS 21.27.330(b) is amended to read:                                                                       
               (b) If a licensee that is a firm transacts                                                                       
     business at  more than one  place of business  [IN THIS                                                                    
     STATE], the licensee  shall pay a license  fee for each                                                                    
     place of business.                                                                                                         
                                                                                                                                
MR. LOHR  said that  the division can  deal with  the enforcement                                                               
issue through current statute, if necessary.                                                                                    
                                                                                                                                
Number 0543                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG withdrew  his amendment  to Amendment  4                                                               
and  then  moved  to  delete  from  Amendment  4,  the  following                                                               
language:                                                                                                                       
                                                                                                                                
     Page 8, line 15:                                                                                                           
     Insert new bill section to read:                                                                                           
          *Sec.___. AS 21.27.330(b) is amended to read:                                                                       
               (b) If a licensee that is a firm transacts                                                                       
     business at  more than one  place of business  [IN THIS                                                                    
     STATE], the licensee  shall pay a license  fee for each                                                                    
     place of business.                                                                                                         
                                                                                                                                
There  being  no objection,  the  amendment  to Amendment  4  was                                                               
adopted.                                                                                                                        
                                                                                                                                
CHAIR MURKOWSKI withdrew her objection  to Amendment 4, and there                                                               
being no other objection, Amendment 4 [as amended] was adopted.                                                                 
                                                                                                                                
Number 0597                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG   remarked  that   the  July   1,  2002,                                                               
effective  date  seemed  unusual.     For  example,  the  omnibus                                                               
insurance  bill  had  different  effective  dates  for  different                                                               
sections.                                                                                                                       
                                                                                                                                
MR. LOHR  said that he  didn't believe the changes  would require                                                               
substantive  retooling by  the insurers.    Therefore, a  uniform                                                               
effective date [seems appropriate].                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG turned to  the MEWA regulations and asked                                                               
if Mr. Lohr  believes [this legislation] has  lessened the burden                                                               
of entering in this market versus the current situation.                                                                        
                                                                                                                                
MR. LOHR answered, "Most definitely."                                                                                           
                                                                                                                                
REPRESENTATIVE  ROKEBERG requested  an example  of the  amount of                                                               
money  that [an  insurer] has  to  put forth  for their  solvency                                                               
provisions upon operation.                                                                                                      
                                                                                                                                
MS. CAMPBELL  directed the  committee to the  bottom of  page 21,                                                               
which  specifies  that  $200,000   must  be  deposited  with  the                                                               
director  to cover  insolvency.   The  language  also requires  a                                                               
written  plan of  operation and  the insurer  also has  to submit                                                               
financial statements to assure stop-loss coverage.                                                                              
                                                                                                                                
MR. LOHR pointed out that  the current insolvency requirement for                                                               
insurance companies is $2 million.                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG asked if there  is a provision that would                                                               
allow the  money to be released  once the plan reached  a certain                                                               
size with a certain balance sheet.                                                                                              
                                                                                                                                
MR.  LOHR  informed  the  committee   that  the  capital  surplus                                                               
requirement for an insurance company  is a perpetual requirement.                                                               
These  requirements are  typically  maintained  on an  interstate                                                               
basis.  A multi-state insurance  company isn't required to have a                                                               
separate  dedicated  capital surplus  reserve  for  Alaska.   The                                                               
insurance  company  is  allowed   to  invest  the  aforementioned                                                               
[capital surplus  revenue].  The  capital surplus  requirement is                                                               
maintained for the life of the company.                                                                                         
                                                                                                                                
REPRESENTATIVE  ROKEBERG   asked  whether  the  money   would  be                                                               
deposited with the directors of insurance in the various states.                                                                
                                                                                                                                
MS.  CAMPBELL  explained  that the  $200,000  requirement  is  an                                                               
initial  requirement occurring  when the  [company] qualifies  to                                                               
become a MEWA.   The requirement is certified  and recommended by                                                               
a  qualified  actuary.    Ms.  Campbell  pointed  out  that  this                                                               
$200,000  is   what  the  [insurer]   is  actually   holding,  no                                                               
additional money is being given  to the director; there is merely                                                               
an initial deposit during startup.                                                                                              
                                                                                                                                
Number 0863                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG presumed  that [the  insurer] could  dip                                                               
into  the [$200,000]  fund at  a  certain point  or the  director                                                               
would allow them the use of that money.                                                                                         
                                                                                                                                
MR.  LOHR noted  that question  has come  up after  the September                                                               
11th  tragedy.   The company  must maintain  the minimum  capital                                                               
surplus requirement in  order to be in good standing.   A company                                                               
seeking a  lower level of  reserve would  have to speak  with the                                                               
regulator.   Mr.  Lohr  informed the  committee  that Ms.  Glover                                                               
should be available to discuss reserving requirements.                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG turned  to  page 23,  paragraph (5)  [of                                                               
Version J] and inquired as to what that's about.                                                                                
                                                                                                                                
MS.  CAMPBELL  answered  that  ERISA  requires  that  MEWAs  hold                                                               
fidelity bonds.  In further  response to Representative Rokeberg,                                                               
Ms. Campbell  said that the  fidelity bonds  have to do  with the                                                               
solvency  aspects.   Unlike  a  health  insurance company,  these                                                               
MEWAs aren't covered  under the guaranty fund and  thus there are                                                               
some additional requirements.                                                                                                   
                                                                                                                                
Number 1007                                                                                                                     
                                                                                                                                
MR.  LOHR noted  that there  have been  some MEWA  wannabes which                                                               
have claimed that  they are exempt from federal  law because they                                                               
are state regulated  and vice versa.  In  these situations, these                                                               
[companies]  can  be turning  premium  into  personal income  and                                                               
never pay  a claim.   It takes  vigilant review  and coordination                                                               
among state  regulators to deal with  these.  Mr. Lohr  said that                                                               
he wasn't sure that [the division]  has been able to document any                                                               
at this time,  although there have been some that  are located in                                                               
other states and have written some  business in Alaska.  This law                                                               
would assist in [enforcement].                                                                                                  
                                                                                                                                
MR. LOHR, in  response to Representative Rokeberg,  said that the                                                               
division  has  had  communications   with  the  MEWA  forming  in                                                               
Fairbanks.   At this time,  that MEWA  has been informed  that it                                                               
must  comply  with  the  full-blown   requirements  of  being  an                                                               
insurance company.   The division  has also advised this  MEWA of                                                               
HB 246.                                                                                                                         
                                                                                                                                
REPRESENTATIVE ROKEBERG  surmised then  that without  the passage                                                               
of this legislation,  the MEWA forming in Fairbanks  would be put                                                               
out of business.                                                                                                                
                                                                                                                                
MR. LOHR  agreed that without this  legislation, the requirements                                                               
would be burdensome.                                                                                                            
                                                                                                                                
Number 1164                                                                                                                     
                                                                                                                                
REPRESENTATIVE MEYER moved to report CSHB 246, Version 22-                                                                      
LS0743\J,  Ford,  2/20/02,  as  amended  out  of  committee  with                                                               
individual  recommendations  and  the  accompanying  zero  fiscal                                                               
note.  There being no  objection, CSHB 246(L&C) was reported from                                                               
the House Labor and Commerce Standing Committee.                                                                                
                                                                                                                                
The following is Amendment 3:                                                                                                   
                                                                                                                                
     Page ____, line ____:                                                                                                      
          Insert new bill sections to read:                                                                                     
        "* Sec. ___.  AS 21.80.060 is amended to read:                                                                        
          Sec. 21.80.060.  Powers and duties of the                                                                           
     association.  (a)  The association                                                                                       
               (1)  is obligated to pay covered claims                                                                          
     existing before  the order  of liquidation  and arising                                                                    
     within  30  days after  the  order  of liquidation,  or                                                                    
     before the policy expiration date  if less than 30 days                                                                    
     after the  order of liquidation, or  before the insured                                                                    
     replaces the  policy or causes its  cancellation if the                                                                    
     insured  does so  within  30 days  after  the order  of                                                                    
     liquidation,  but this  obligation  includes only  that                                                                    
     amount  of  each  covered  claim   that  is  less  than                                                                    
     $500,000,  except that  a covered  claim for  return of                                                                    
     unearned  premium  may  not  exceed  $10,000  for  each                                                                    
     policy, and  except that the association  shall pay the                                                                    
     full  amount of  any  covered claim  arising  out of  a                                                                    
     workers'  compensation policy;  the association  is not                                                                    
     obligated                                                                                                                  
               (A)  to a policyholder or claimant in an                                                                         
     amount  in excess  of the  obligation of  the insolvent                                                                    
     insurer under  the policy from which  the claim arises;                                                                    
     or                                                                                                                         
               (B)  to pay a claim filed with the                                                                               
     association after the  final date set by  the court for                                                                    
     the  filing   of  claims  against  the   liquidator  or                                                                    
     receiver of an insolvent insurer;                                                                                          
               (2)  is considered the insurer to the extent                                                                     
     of its  obligation on  the covered  claims and  to that                                                                    
     extent has  all rights, duties, and  obligations of the                                                                    
     insolvent  insurer as  if the  insurer  had not  become                                                                    
     insolvent;                                                                                                                 
               (3)  shall allocate claims paid and expenses                                                                     
     incurred  among  the  three  accounts  separately,  and                                                                    
     assess  member  insurers  separately for  each  account                                                                    
     amounts  necessary   to  pay  the  obligation   of  the                                                                    
     association under (1) of  this subsection subsequent to                                                                    
     an insolvency, the expenses  of handling covered claims                                                                    
     subsequent  to   an  insolvency,  and   other  expenses                                                                    
     authorized by this chapter; under this paragraph,                                                                          
               (A)  the assessments of each member insurer                                                                      
     must  initially be  based on  a uniform  percentage, as                                                            
     determined by  the association,  of [IN  THE PROPORTION                                                                
     THAT]  the net  direct written  premiums of  each [THE]                                                                
     member  insurer  for the  last  year  for which  annual                                                                
     statements  have been  filed  [CALENDAR YEAR  PRECEDING                                                                
     THE  ASSESSMENT]  on  the kinds  of  insurance  in  the                                                                    
     account; this  initial assessment shall be  adjusted by                                                                
     applying the same uniform  percentage as initially used                                                                
     to each  member insurer's  net direct  written premiums                                                                
     for the calendar  year following the year  in which the                                                                
     initial assessment  was issued; any  difference between                                                                
     the   initial  assessment   amount  and   the  adjusted                                                                
     assessment amount  allocated to a member  insurer shall                                                                
     be  levied  against  or credited  back  to  the  member                                                                
     insurer,  as  appropriate,   by  the  association;  the                                                                
     association shall  calculate and issue  all appropriate                                                                
     levies  and  credits as  soon  as  practical after  all                                                                
     member insurers have filed  their annual statements for                                                                
     the  calendar  year following  the  year  in which  the                                                                
     initial assessment was issued  [BEARS TO THE NET DIRECT                                                                
     WRITTEN  PREMIUMS  OF  ALL   MEMBER  INSURERS  FOR  THE                                                                    
     CALENDAR YEAR PRECEDING THE ASSESSMENT  ON THE KINDS OF                                                                    
     INSURANCE IN THE ACCOUNT; EACH  MEMBER INSURER SHALL BE                                                                    
     NOTIFIED  OF  THE ASSESSMENT  NOT  LATER  THAN 30  DAYS                                                                    
     BEFORE IT IS DUE];                                                                                                         
               (B)  on an annual basis, the association                                                                     
     shall determine if  funding is required for  any of the                                                                
     three  accounts;  based   on  this  determination,  the                                                                
     association shall, during November  of each year, issue                                                                
     initial assessments  as may be  necessary to  cover the                                                                
     projected reasonable  costs of  claims and  expenses to                                                                
     administer the association for  the following year; the                                                                
     association shall  use the  services of  an independent                                                                
     actuary to assist the association  to evaluate and make                                                                
     the projection;  an initial assessment  may be  made at                                                                
     any other  time if  the association  determines funding                                                                
     is necessary, except  that a member insurer  may not be                                                                
     assessed  initial  assessments  [IN ANY  YEAR]  on  any                                                                
     account in  an amount greater  than two percent  of the                                                                
     member insurer's  net direct  written premiums  for the                                                                    
     applicable calendar  year [PRECEDING THE  ASSESSMENT ON                                                                
     THE KINDS OF INSURANCE IN THE ACCOUNT];                                                                                    
               (C)  the association may pay claims in any                                                                       
     order  that  it  determines reasonable,  including  the                                                                    
     payment of  claims as they are  received from claimants                                                                    
     or in groups  or categories of claims;  however, if the                                                                    
     maximum assessment,  together with the other  assets of                                                                    
     the  association in  any account,  does not  provide in                                                                    
     any one  year in  any account  an amount  sufficient to                                                                    
     make  all necessary  payments  from  that account,  the                                                                    
     funds  available  shall  be prorated,  and  the  unpaid                                                                    
     portion  shall  be paid  as  soon  thereafter as  funds                                                                    
     become available;                                                                                                          
               (D)  the association may defer, in whole or                                                                      
     in part,  an assessment  of any  member insurer  if the                                                                    
     assessment  would endanger  the ability  of the  member                                                                    
     insurer   to   fulfill    the   insurer's   contractual                                                                    
     obligations  or cause  the  member insurer's  financial                                                                    
     statement  to reflect  amounts  of  capital or  surplus                                                                    
     less   than  the   minimum  amounts   required  for   a                                                                    
     certificate of  authority by any jurisdiction  in which                                                                    
     the   member   insurer   is  authorized   to   transact                                                                    
     insurance;  however, during  the  period of  deferment,                                                                    
     the   member  insurer   may   not   pay  dividends   to                                                                    
     shareholders  or policyholders;  a deferred  assessment                                                                    
     may  only be  paid  when the  payment  does not  reduce                                                                    
     capital or  surplus below minimums  required by  law; a                                                                    
     member  insurer  who  pays a  larger  assessment  as  a                                                                    
     result of  a deferment given to  another member insurer                                                                    
     shall receive a  refund when the deferment  ends or, at                                                                    
     the election  of the member  insurer, receive  a credit                                                                    
     against future assessments;                                                                                                
               (E)  each member insurer may set off against                                                                     
     an  assessment  authorized  payments  made  on  covered                                                                    
     claims and  expenses incurred in  the payment  of these                                                                    
     claims by the member insurer  if they are chargeable to                                                                    
     the account for which the assessment is made;                                                                              
               (4)  shall investigate claims brought                                                                            
     against  the association,  adjust, compromise,  settle,                                                                    
     and   pay  covered   claims  to   the  extent   of  the                                                                    
     association's  obligation, and  deny all  other claims,                                                                    
     and may review settlements,  releases, and judgments to                                                                    
     which  the  insolvent  insurer  or  its  insureds  were                                                                    
     parties to  determine the extent to  which settlements,                                                                    
     releases, and judgments may be properly contested;                                                                         
               (5)  may, subject to AS 21.89.100, appoint,                                                                      
     substitute, or  direct legal counsel retained  under an                                                                    
     insurance policy for the defense of a covered claim;                                                                       
               (6)     shall   handle  claims   through  its                                                                    
     employees  or through  one or  more  insurers or  other                                                                    
     persons   designated   as   servicing   facilities;   a                                                                    
     servicing  facility  shall  operate  and  maintain  its                                                                    
     principal  office in  this state  unless the  use of  a                                                                    
     servicing facility  located outside of the  state would                                                                    
     result  in  operating  cost  savings  of  at  least  10                                                                    
     percent  and  would not  result  in  material delay  in                                                                    
     claim payments; designation of  a servicing facility is                                                                    
     subject   to  the   approval  of   the  director,   but                                                                    
     designation may be declined by a member insurer;                                                                           
               (7)  shall  reimburse each servicing facility                                                                    
     for  obligations   of  the  association  paid   by  the                                                                    
     facility  and for  expenses  incurred  by the  facility                                                                    
     while handling claims on behalf  of the association and                                                                    
     shall  pay  the  other   expenses  of  the  association                                                                    
     authorized by this chapter.                                                                                                
          (b)  The association may                                                                                              
               (1)     employ   or   retain  those   persons                                                                    
     necessary to handle claims and  perform other duties of                                                                    
     the association;                                                                                                           
               (2)   borrow  funds necessary  to effect  the                                                                    
     purposes of  this chapter  in accord  with the  plan of                                                                    
     operation;                                                                                                                 
               (3)  sue or be sued;                                                                                             
               (4)   negotiate and  become a party  to those                                                                    
     contracts that are necessary to  carry out the purposes                                                                    
     of this chapter;                                                                                                           
               (5)   perform  all  other  acts necessary  or                                                                    
     proper to carry out the purposes of this chapter;                                                                          
               (6)     retain  amounts  excess   of  claims,                                                                
     expenses,  credits,   and  other  liabilities   in  any                                                                
     account to  be applied to reduce  future assessments in                                                                
     that  account,  except  that,  if,  in  any  year,  the                                                                
     association  determines   that  significant   funds  in                                                                
     excess  of  projected  claims, expenses,  credits,  and                                                                
     other liabilities exist in  an account, the association                                                                
     shall   return   amounts  to   policyholders,   through                                                                
     procedures established by  the association, whereby the                                                                
     association  reimburses member  insurers for  providing                                                                
     uniform credits against rates  and premiums charged for                                                                
     all policies  applicable to  the account  issued during                                                                
     the next  calendar year [REFUND TO  THE MEMBER INSURERS                                                                
     IN  PROPORTION  TO  THE  CONTRIBUTION  OF  EACH  MEMBER                                                                    
     INSURER  TO  THAT  ACCOUNT THAT  AMOUNT  BY  WHICH  THE                                                                    
     ASSETS  OF THE  ACCOUNT EXCEED  THE LIABILITIES  IF, AT                                                                    
     THE END  OF ANY CALENDAR  YEAR, THE BOARD  OF GOVERNORS                                                                    
     FINDS  THAT  THE  ASSETS  OF  THE  ASSOCIATION  IN  ANY                                                                    
     ACCOUNT  EXCEED  THE  LIABILITIES OF  THAT  ACCOUNT  AS                                                                    
     ESTIMATED  BY THE  BOARD OF  GOVERNORS  FOR THE  COMING                                                                    
     YEAR].                                                                                                                     
        * Sec. ___.  AS 21.80.070(c) is amended to read:                                                                  
          (c)  The plan of operation must                                                                                       
               (1)   establish  the  procedures whereby  all                                                                    
     the  powers   and  duties  of  the   association  under                                                                    
     AS 21.80.060 will be performed;                                                                                            
               (2)     establish  procedures   for  handling                                                                    
     assets  of the  association,  including procedures  for                                                                    
     handling  assets   received  from  the  estate   of  an                                                                    
     insolvent insurer;                                                                                                         
               (3)    establish  the amount  and  method  of                                                                    
     reimbursing  members of  the board  of governors  under                                                                    
     AS 21.80.050;                                                                                                              
               (4)   establish  procedures  by which  claims                                                                    
     may  be  filed  with   the  association  and  establish                                                                    
     acceptable forms of proof of  covered claims; notice of                                                                    
     claims to  the receiver or liquidator  of the insolvent                                                                    
     insurer is considered notice to  the association or its                                                                    
     agent,   and  a   list  of   these   claims  shall   be                                                                    
     periodically  submitted to  the association  or similar                                                                    
     organization  in  another  state  by  the  receiver  or                                                                    
     liquidator;                                                                                                                
               (5)   establish regular places and  times for                                                                    
     meetings of the board of governors;                                                                                        
               (6)   establish procedures for records  to be                                                                    
     kept of all financial  transactions of the association,                                                                    
     its agents, and the board of governors;                                                                                    
               (7)     provide   that  any   member  insurer                                                                    
     aggrieved  by  a  final  action   or  decision  of  the                                                                    
     association may  appeal to the director  within 30 days                                                                    
     after the action or decision;                                                                                              
               (8)     establish   the  procedures   whereby                                                                    
     selections of the board of  governors will be submitted                                                                    
     to the director;                                                                                                           
               (9)  provide for  a member insurer serving on                                                                    
     the  board of  governors  to appoint  an individual  to                                                                    
     represent the  member insurer  on the  board, including                                                                    
     appointment    of    an   alternate    or    substitute                                                                    
     representative for the appointed person;                                                                                   
               (10)       contain    additional   provisions                                                                    
     necessary  or proper  for the  execution of  the powers                                                                    
     and duties of the association;                                                                                         
               (11)     establish  procedures   whereby  the                                                                
     association shall,  concurrent with making  any initial                                                                
     assessments    for    the    following    year    under                                                                
     AS 21.80.060(a)(3)(B),   determine  uniform   surcharge                                                                
     percentages that  may be applied by  member insurers to                                                                
     all policies related to an account;                                                                                    
               (12)  establish procedures whereby the                                                                       
     association   shall  determine   surcharge  percentages                                                                
     related  to an  account  so  that adjusted  assessments                                                                
     match, as  closely as possible, the  amounts that would                                                                
     be collected  by member insurers, in  the aggregate, if                                                                
     the surcharge  percentages were applied to  all new and                                                                
     renewal policies  issued by member insurers  during the                                                                
     applicable  12-month period;  any  estimated or  actual                                                                
     difference   between  the   aggregate  assessment   and                                                                
     maximum  allowable  surcharge  amounts  related  to  an                                                                
     account shall be taken into  account by the association                                                                
     in determining future surcharge percentages.                                                                           
        * Sec. ___.  AS 21.80.140 is amended to read:                                                                         
     Sec.   21.80.140.     Recognition  of   assessments  in                                                                  
     surcharge rates.   The rates  and premiums  charged for                                                                
     insurance policies  to which  this chapter  applies may                                                                    
     include surcharge rates  [AMOUNTS] sufficient to offset                                                                
     the adjusted  assessments [ASSESSMENT] made  under this                                                                
     chapter  and paid  to the  association by  [THE] member                                                                    
     insurers [INSURER  LESS AMOUNTS RETURNED TO  THE MEMBER                                                                
     INSURER BY THE ASSOCIATION],  and these surcharge rates                                                                
     may not  be considered  excessive because  they contain                                                                    
     an  amount reasonably  calculated  to  offset the  full                                                                
     amounted of  adjusted assessments paid by  [THE] member                                                                
     insurers.   The association  shall notify  the director                                                                
     of   each  surcharge   percentage  determined   by  the                                                                
     association,  and this  surcharge  percentage shall  be                                                                
     the  maximum  surcharge rate  that  may  be applied  by                                                                
     member insurers related to  the assessment, except that                                                                
     a member  insurer may make application  to the director                                                                
     to  apply  a  higher  surcharge rate  [INSURER].    The                                                                
     amount  charged on  a policy  shall  be shown  separate                                                                    
     from  the  premium for  coverage  on  the policy.    [A                                                                    
     RATING ORGANIZATION  MAY MAKE  A PROVISION IN  ITS RATE                                                                    
     FILING TO RECOVER AN ASSESSMENT  UNDER THIS CHAPTER FOR                                                                    
     THE  ORGANIZATION'S  MEMBER AND  SUBSCRIBER  INSURERS.]                                                                    
     The   surcharge  rate   [ASSESSMENT   CHARGE]  is   not                                                                
     considered a premium and is  not subject to the premium                                                                    
     tax imposed under AS 21.09.210."                                                                                           

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