Legislature(2011 - 2012)BELTZ 105 (TSBldg)

04/12/2011 02:00 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Bills Previously Heard/Scheduled:
+= SB 115 PORTABLE ELECTRONICS INSURANCE TELECONFERENCED
Moved CSSB 115(L&C) Out of Committee
+= HB 24 EXTEND REGULATORY COMM. OF ALASKA SUNSET TELECONFERENCED
Moved CSHB 24(FIN) Out of Committee
+= HB 130 RESIDENTIAL SPRINKLER SYSTEMS TELECONFERENCED
Moved CSHB 130(L&C) Out of Committee
+ SB 74 INS. COVERAGE: AUTISM SPECTRUM DISORDER TELECONFERENCED
Scheduled But Not Heard
+ HB 164 INSURANCE: HEALTH CARE & OTHER TELECONFERENCED
Heard & Held
+ HB 155 PUBLIC CONSTRUCTION CONTRACTS TELECONFERENCED
Scheduled But Not Heard
+ HB 188 INTEREST RATES TELECONFERENCED
Scheduled But Not Heard
+ HB 87 ANTITRUST VIOLATION PENALTIES TELECONFERENCED
Scheduled But Not Heard
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         April 12, 2011                                                                                         
                           2:08 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Dennis Egan, Chair                                                                                                      
Senator Joe Paskvan, Vice Chair                                                                                                 
Senator Linda Menard                                                                                                            
Senator Bettye Davis                                                                                                            
Senator Cathy Giessel                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 115                                                                                                             
"An Act  defining portable electronics insurance  and authorizing                                                               
the director of insurance to  issue a limited producer license to                                                               
a person that sells portable electronics insurance."                                                                            
                                                                                                                                
     - MOVED CSSB 115(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                                
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 24(FIN)                                                                                 
"An  Act  extending  the  termination   date  of  the  Regulatory                                                               
Commission of Alaska; and providing for an effective date."                                                                     
                                                                                                                                
     - MOVED CSHB  24(FIN) OUT OF COMMITTEE                                                                                     
                                                                                                                                
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 130(L&C)                                                                                
"An  Act relating  to municipal  building  code requirements  for                                                               
fire sprinkler systems in certain residential buildings."                                                                       
                                                                                                                                
     - MOVED CSHB 130(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                                
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 164(FIN)                                                                                
"An Act relating  to health care insurance,  exemption of certain                                                               
insurers, reporting, notice,  and record-keeping requirements for                                                               
insurers,  biographical   affidavits,  qualifications   of  alien                                                               
insurers  assuming   ceded  insurance,  risk-based   capital  for                                                               
insurers,   insurance  holding   companies,  licensing,   federal                                                               
requirements for  nonadmitted insurers, surplus  lines insurance,                                                               
insurance fraud,  life insurance policies and  annuity contracts,                                                               
rate filings  by health care insurers,  long-term care insurance,                                                               
automobile  service corporations,  guaranty  fund  deposits of  a                                                               
title insurer,  joint title plants, fraternal  benefit societies,                                                               
multiple  employer  welfare  arrangements, hospital  and  medical                                                               
service  corporations,  health   maintenance  organizations,  and                                                               
alternate forms  of payment to  policyholders; and  providing for                                                               
an effective date."                                                                                                             
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 74                                                                                                              
"An  Act   requiring  insurance  coverage  for   autism  spectrum                                                               
disorders,  describing  the  method for  establishing  a  covered                                                               
treatment  plan for  those disorders,  and  defining the  covered                                                               
treatment  for those  disorders; and  providing for  an effective                                                               
date."                                                                                                                          
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
CS FOR HOUSE BILL NO. 155(L&C)                                                                                                  
"An Act  relating to the  applicability of prevailing  wage rates                                                               
to  public construction  contracts;  and, with  regard to  public                                                               
construction  contracts,   relating  to   notifications,  bonding                                                               
notifications,  filings,  notices,   primary  contractors,  final                                                               
payments,   penalties,    advertised   specifications,   required                                                               
contract   provisions,    terminations,   lists    of   violating                                                               
contractors, and remedies."                                                                                                     
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
CS FOR HOUSE BILL NO. 87(L&C)                                                                                                   
"An Act  relating to civil  and criminal penalties  for antitrust                                                               
violations."                                                                                                                    
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 115                                                                                                                  
SHORT TITLE: PORTABLE ELECTRONICS INSURANCE                                                                                     
SPONSOR(s): LABOR & COMMERCE                                                                                                    
                                                                                                                                
03/25/11       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/25/11       (S)       L&C, FIN                                                                                               
04/07/11       (S)       L&C AT 2:00 PM BELTZ 105 (TSBldg)                                                                      
04/07/11       (S)       Heard & Held                                                                                           
04/07/11       (S)       MINUTE(L&C)                                                                                            
04/12/11       (S)       L&C AT 2:00 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
BILL: HB  24                                                                                                                  
SHORT TITLE: EXTEND REGULATORY COMM. OF ALASKA SUNSET                                                                           
SPONSOR(s): OLSON                                                                                                               
                                                                                                                                
01/18/11       (H)       PREFILE RELEASED 1/7/11                                                                                
01/18/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/18/11       (H)       L&C, FIN                                                                                               
03/16/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/16/11       (H)       Moved CSHB  24(L&C) Out of Committee                                                                   
03/16/11       (H)       MINUTE(L&C)                                                                                            
03/18/11       (H)       L&C RPT CS(L&C) 7DP                                                                                    
03/18/11       (H)       DP:    CHENAULT,   THOMPSON,    SADDLER,                                                               
                         JOHNSON, HOLMES, MILLER, OLSON                                                                         
03/22/11       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/22/11       (H)       Moved CSHB  24(FIN) Out of Committee                                                                   
03/22/11       (H)       MINUTE(FIN)                                                                                            
03/23/11       (H)       FIN RPT CS(FIN) 8DP 2NR                                                                                
03/23/11       (H)       DP:    FAIRCLOUGH,   T.WILSON,    JOULE,                                                               
                         COSTELLO,   EDGMON,   DOOGAN,   STOLTZE,                                                               
                         THOMAS                                                                                                 
03/23/11       (H)       NR: GUTTENBERG, GARA                                                                                   
03/28/11       (H)       TRANSMITTED TO (S)                                                                                     
03/28/11       (H)       VERSION: CSHB 24(FIN)                                                                                  
03/30/11       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/30/11       (S)       L&C, FIN                                                                                               
04/07/11       (S)       L&C AT 2:00 PM BELTZ 105 (TSBldg)                                                                      
04/07/11       (S)       Heard & Held                                                                                           
04/07/11       (S)       MINUTE(L&C)                                                                                            
04/12/11       (S)       L&C AT 2:00 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
BILL: HB 130                                                                                                                  
SHORT TITLE: RESIDENTIAL SPRINKLER SYSTEMS                                                                                      
SPONSOR(s): LABOR & COMMERCE                                                                                                    
                                                                                                                                
01/28/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/28/11       (H)       CRA, L&C                                                                                               
02/08/11       (H)       CRA AT 8:00 AM BARNES 124                                                                              
02/08/11       (H)       Moved Out of Committee                                                                                 
02/08/11       (H)       MINUTE(CRA)                                                                                            
02/09/11       (H)       CRA RPT 6DP                                                                                            
02/09/11       (H)       DP: AUSTERMAN, CISSNA, DICK, FOSTER,                                                                   
                         GARDNER, MUNOZ                                                                                         
02/14/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/14/11       (H)       Moved CSHB 130(L&C) Out of Committee                                                                   
02/14/11       (H)       MINUTE(L&C)                                                                                            
02/16/11       (H)       L&C RPT CS(L&C) NT 7DP                                                                                 
02/16/11       (H)       DP: THOMPSON, SADDLER, JOHNSON, HOLMES,                                                                
                         SEATON, MILLER, OLSON                                                                                  
03/11/11       (H)       TRANSMITTED TO (S)                                                                                     
03/11/11       (H)       VERSION: CSHB 130(L&C)                                                                                 
03/14/11       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/14/11       (S)       CRA, L&C                                                                                               
03/22/11       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
03/22/11       (S)       Scheduled But Not Heard                                                                                
03/29/11       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
03/29/11       (S)       Moved CSHB 130(L&C) Out of Committee                                                                   
03/29/11       (S)       MINUTE(CRA)                                                                                            
03/30/11       (S)       CRA RPT 3DP 1NR                                                                                        
03/30/11       (S)       DP: KOOKESH, MENARD, WAGONER                                                                           
03/30/11       (S)       NR: OLSON                                                                                              
04/07/11       (S)       L&C AT 2:00 PM BELTZ 105 (TSBldg)                                                                      
04/07/11       (S)       Heard & Held                                                                                           
04/07/11       (S)       MINUTE(L&C)                                                                                            
04/12/11       (S)       L&C AT 2:00 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
BILL: HB 164                                                                                                                  
SHORT TITLE: INSURANCE:  HEALTH CARE & OTHER                                                                                    
SPONSOR(s): LABOR & COMMERCE                                                                                                    
                                                                                                                                
02/18/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/18/11       (H)       L&C, FIN                                                                                               
02/21/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/21/11       (H)       Heard & Held                                                                                           
02/21/11       (H)       MINUTE(L&C)                                                                                            
02/23/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/23/11       (H)       Heard & Held                                                                                           
02/23/11       (H)       MINUTE(L&C)                                                                                            
02/28/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/28/11       (H)       Scheduled But Not Heard                                                                                
03/07/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/07/11       (H)       Moved CSHB 164(L&C) Out of Committee                                                                   
03/07/11       (H)       MINUTE(L&C)                                                                                            
03/09/11       (H)       L&C RPT CS(L&C) NT 4DP 2NR                                                                             
03/09/11       (H)       DP: THOMPSON, HOLMES, MILLER, OLSON                                                                    
03/09/11       (H)       NR: CHENAULT, JOHNSON                                                                                  
03/09/11       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/09/11       (H)       <Bill Hearing Canceled>                                                                                
03/22/11       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/22/11       (H)       Heard & Held                                                                                           
03/22/11       (H)       MINUTE(FIN)                                                                                            
03/30/11       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/30/11       (H)       Scheduled But Not Heard                                                                                
04/06/11       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
04/06/11       (H)       Moved CSHB 164(FIN) Out of Committee                                                                   
04/06/11       (H)       MINUTE(FIN)                                                                                            
04/07/11       (H)       FIN RPT CS(FIN) NT 3DP 6NR 1AM                                                                         
04/07/11       (H)       DP: GARA, HAWKER, DOOGAN                                                                               
04/07/11       (H)       NR:    GUTTENBERG,   T.WILSON,    JOULE,                                                               
                         COSTELLO, EDGMON, STOLTZE                                                                              
04/07/11       (H)       AM: FAIRCLOUGH                                                                                         
04/08/11       (H)       TRANSMITTED TO (S)                                                                                     
04/08/11       (H)       VERSION: CSHB 164(FIN)                                                                                 
04/11/11       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/11/11       (S)       L&C                                                                                                    
04/12/11       (S)       L&C AT 2:00 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE KURT OLSON                                                                                                       
State Capitol Bldg.                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT: Sponsor of HB 24, and chair of the House                                                                  
Labor and Commerce Committee, sponsor of HB 130 and HB 164.                                                                     
                                                                                                                                
LINDA HALL, Director                                                                                                            
Division of Insurance                                                                                                           
Department of Commerce, Community and Economic Development                                                                      
(DCCED)                                                                                                                         
Juneau, AK                                                                                                                      
POSITION STATEMENT: Supported HB 164.                                                                                         
                                                                                                                                
JOSHUA KORVER                                                                                                                   
Insurance Center                                                                                                                
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Had concerns with HB 164.                                                                                 
                                                                                                                                
GARY SLEEPER                                                                                                                    
Denali Alaskan Federal Credit Union                                                                                             
POSITION STATEMENT: Had concerns with section 79 of HB 164.                                                                   
                                                                                                                                
STEVE STEPHAN, Director                                                                                                         
Governmental Relations                                                                                                          
National Association of Professional Surplus Lines Offices                                                                      
POSITION STATEMENT: Had concerns about HB 164.                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
2:08:03 PM                                                                                                                    
CHAIR DENNIS EGAN  called the Senate Labor  and Commerce Standing                                                             
Committee  meeting  to  order  at  2:08  p.m.  Senators  Paskvan,                                                               
Giessel, Davis, and Egan were present at the call to order.                                                                     
                                                                                                                                
             SB 115-PORTABLE ELECTRONICS INSURANCE                                                                          
                                                                                                                                
2:10:17 PM                                                                                                                    
CHAIR EGAN  announced SB 115,  sponsored by the Senate  Labor and                                                               
Commerce  Committee, to  be up  for consideration.  He asked  his                                                               
staff, Dana Owen, to come forward for questions.                                                                                
                                                                                                                                
SENATOR MENARD remarked  that Asurian had testified  on this bill                                                               
and it had been well-vetted.                                                                                                    
                                                                                                                                
2:10:22 PM                                                                                                                    
SENATOR  PASKVAN moved  to  report CSSB  115  (L&C), labeled  27-                                                               
LS0609\I  from  committee  with  individual  recommendations  and                                                               
attached fiscal note(s).  There were no objections and  it was so                                                               
ordered.                                                                                                                        
                                                                                                                                
2:10:46 PM                                                                                                                    
At ease from 2:10 to 2:12 PM.                                                                                                   
                                                                                                                                
        HB  24-EXTEND REGULATORY COMM. OF ALASKA SUNSET                                                                     
                                                                                                                                
2:12:17 PM                                                                                                                    
CHAIR  EGAN announced  HB 24  to  be up  for consideration  [CSHB                                                               
24(FIN) was before the committee].                                                                                              
                                                                                                                                
REPRESENTATIVE KURT  OLSON, sponsor of  HB 24, said  this measure                                                               
would extend the  Regulatory Commission of Alaska  (RCA) one year                                                               
to  allow   them  to   deal  with   some  of   their  outstanding                                                               
recommendations as per the Legislative Audit.                                                                                   
                                                                                                                                
SENATOR PASKVAN  moved to report  CSHB 24(FIN), version  \B, from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note. There were no objections and it was so ordered.                                                                           
                                                                                                                                
2:13:48 PM                                                                                                                    
At ease from 2:13 to 2:15 PM.                                                                                                   
                                                                                                                                
              HB 130-RESIDENTIAL SPRINKLER SYSTEMS                                                                          
                                                                                                                                
2:15:16 PM                                                                                                                    
CHAIR EGAN  announced HB  130, sponsored by  the House  Labor and                                                               
Commerce Committee,  to be up  for consideration  [CSHB 130(L&C),                                                               
27-LS0332\B was before the committee].                                                                                          
                                                                                                                                
REPRESENTATIVE  OLSON,  chair of  the  House  Labor and  Commerce                                                               
Committee, said he had no further comments on this measure.                                                                     
                                                                                                                                
SENATOR  PASKVAN moved  to report  CSHB (L&C),  version \B,  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note. There were no objections and it was so ordered.                                                                           
                                                                                                                                
2:16:01 PM                                                                                                                    
At ease from 2:16 to 2:17 PM.                                                                                                   
                                                                                                                                
             HB 164-INSURANCE: HEALTH CARE & OTHER                                                                          
                                                                                                                                
2:17:30 PM                                                                                                                    
CHAIR EGAN  announced HB  164, sponsored by  the House  Labor and                                                               
Commerce  Committee, to  be up  for consideration  [CSHB 164(FIN)                                                               
was before the committee].                                                                                                      
                                                                                                                                
REPRESENTATIVE OLSON, chair, House  Labor and Commerce Committee,                                                               
sponsor of  HB 164, asked  the committee  to allow Linda  Hall to                                                               
present the  bill so they  wouldn't be presenting it  twice. Then                                                               
he would like to comment on the two contentious sections.                                                                       
                                                                                                                                
2:18:48 PM                                                                                                                    
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce, Community  and Economic  Development (DCCED),  said the                                                               
bill is lengthy and involves a  number of issues. Seven tabs deal                                                               
with a particular  piece of change to Alaska's  statutes that she                                                               
thought would  enhance her division's regulatory  ability and the                                                               
overall marketplace in Alaska.                                                                                                  
                                                                                                                                
She  explained that  in sections  2 -  21, pages  1-15, the  term                                                               
"managed care"  is changed  to "health care".  Today the  term is                                                               
used only  in AS 21.07 and  it's not consistent with  the rest of                                                               
their title.                                                                                                                    
                                                                                                                                
2:20:53 PM                                                                                                                    
The actual  substantive changes are  under the  Financial heading                                                               
(pages  15-22) and  are predominantly  changes  to meet  national                                                               
models to enhance  her solvency oversight, what she  views is the                                                               
primary  mission of  her division.  Companies  doing business  in                                                               
Alaska must  have adequate funds  to pay claims,  she elaborated,                                                               
and   insurance   companies   are  being   required   to   submit                                                               
biographical  affidavits   so  she  knows  who   is  running  the                                                               
companies   and   to   submit  electronic   addresses   to   make                                                               
communication more  efficient. She  said it's fairly  standard to                                                               
adopt  reinsurance  and other  kinds  of  model laws  across  the                                                               
country.                                                                                                                        
                                                                                                                                
MS.  HALL  said the  next  tab  is  "Licensing" and  proposes  to                                                               
streamline their  entire agent licensing  process. They  would no                                                               
longer   have   individual-in-a-firm   licenses,  but   just   an                                                               
individual  license  that is  actually  more  portable. They  are                                                               
trying to  make sure that the  employee in a firm  can take their                                                               
license  and move  to another  firm,  but that  they can  operate                                                               
under  the  firm  appointments   with  insurance  companies.  She                                                               
elaborated that the firm's records  are considered their records;                                                               
the  fiduciary  accounts  are  considered   the  records  of  the                                                               
individual.  This  leads to  the  requirement  for an  employment                                                               
contract. She  said this type  of concept has been  discussed for                                                               
several  years and  she believes  that agents  are supportive  of                                                               
these kinds of  changes. It will streamline the  process for both                                                               
agents and her division.                                                                                                        
                                                                                                                                
CHAIR EGAN objected for questions.                                                                                              
                                                                                                                                
SENATOR  PASKVAN asked  her  to explain  the  trust accounts  and                                                               
licensing going to the individual again.                                                                                        
                                                                                                                                
MS.  HALL explained  that under  this legislation  the individual                                                               
employee in a firm would have  his own license; today it's called                                                               
"an individual in a firm." They  could leave employment in firm A                                                               
and go to firm  B. Because the license is no  longer tied to that                                                               
firm, provisions were  made that the firms  keep the appointments                                                               
with  insurance  companies  and   the  fiduciary  accounts.  That                                                               
individual is allowed  to operate under all of  those things. The                                                               
individual is  not being required  to maintain  extensive records                                                               
and  have their  own appointments  by insurance  companies, which                                                               
would add a burden they don't have today.                                                                                       
                                                                                                                                
2:25:03 PM                                                                                                                    
SENATOR  PASKVAN  asked if  this  promotes  the mobility  of  the                                                               
individual.                                                                                                                     
                                                                                                                                
MS. HALL responded that's correct.                                                                                              
                                                                                                                                
SENATOR  MENARD  said so  you  have  State  Farm and  Mat  Valley                                                               
Federal  Credit  Union  and  she  is  working  in  the  insurance                                                               
division at that bank, which  has a trust department, and Senator                                                               
Paskvan has  given her to  manage his  trust papers. Now  she has                                                               
decided  to leave  that company;  her  license is  still good  at                                                               
State  Farm,   but  is  she   free  to  move   Senator  Paskvan's                                                               
information over to State Farm?                                                                                                 
                                                                                                                                
MS. HALL replied  that typically the client  information would be                                                               
addressed   in   her   employment   contract;   generally,   that                                                               
information  is considered  to be  proprietary and  owned by  the                                                               
firm  - in  Senator Menard's  case the  Federal Credit  Union. It                                                               
becomes  a  contractual  matter,   not  an  insurance  regulatory                                                               
matter. Her  division just sets  out certain things that  must be                                                               
addressed,  the  three  that she  has  mentioned.  The  fiduciary                                                               
accounts  are short  term money  accounts  where Senator  Paskvan                                                               
paid Senator  Menard his premium,  and she  put it in  an account                                                               
that is considered a trust account,  but it's not a "trust" as in                                                               
long term trust, but probably a checking account.                                                                               
                                                                                                                                
SENATOR  MENARD  said her  late  husband's  dental records  still                                                               
belong to Wasilla  Palmer Dental Center. If a  patient leaves the                                                               
practice, their records still belong to her corporate structure.                                                                
                                                                                                                                
MS.  HALL said  that was  correct, but  it would  be part  of the                                                               
employment contract between the firm (ABC).                                                                                     
                                                                                                                                
REPRESENTATIVE  OLSON  added  that  he considers  himself  to  be                                                               
knowledgeable on surplus lines; a number  of years ago he and Ms.                                                               
were surplus  lines brokers in  Anchorage while at the  same time                                                               
serving on the  Board of the State Surplus  Lines Association. He                                                               
is currently  on the Executive  Board of the National  Council of                                                               
Insurance Legislators  (NCOIL). The reason  he brings this  up is                                                               
because NCOIL has  a different approach that the  State of Alaska                                                               
is attempting  to pursue of  setting up  a clearing house  run by                                                               
industry  to collect  the surplus  lines taxes.  He believes  the                                                               
division would  be giving up  the right  and duty to  handle that                                                               
function via the Division of  Insurance. Coincidentally the model                                                               
they  are  using   for  that  is  from   an  organization  called                                                               
"Interstate Insurance  Product Review Committee" and  it consists                                                               
of eight  state regulators  such as  Ms. Hall.  That organization                                                               
has  nothing to  do with  the  collection of  taxes; they  review                                                               
life, health and  long term care policies so a  standard form can                                                               
be  used for  the  whole  country to  provide  for people  moving                                                               
around. It  has no bearing on  taxes and he didn't  know why that                                                               
is being used as a model.                                                                                                       
                                                                                                                                
2:31:34 PM                                                                                                                    
SENATOR PASKVAN  asked what Alaska  gains or loses when  it can't                                                               
regulate a nonadmitted  insurer (it says Alaska will  not be able                                                               
to  tax or  regulate under  the surplus  lines) compared  to what                                                               
happens now.                                                                                                                    
                                                                                                                                
MS. HALL answered that she wasn't  sure what he was referring to,                                                               
but the division  is not giving up control  of regulating surplus                                                               
lines insurers.  Today the department has  a different regulatory                                                               
authority ability over surplus lines  insurers who don't file for                                                               
certificate  of authority.  They are  merely listed  on a  "white                                                               
list" and authorized to do  business here. They don't undergo the                                                               
same financial  scrutiny; they don't  file their forms  and rates                                                               
for approval.                                                                                                                   
                                                                                                                                
She  stated  that  this  bill  does  not  change  the  division's                                                               
regulatory authority. One  of the two things it does  change is a                                                               
portion  of state  law to  meet a  federal law  that specifically                                                               
preempts state law,  and that is effective in  July 2011. Instead                                                               
of collecting  taxes on  these particular  types of  accounts the                                                               
way it is done today, it  would mandate that the division adopt a                                                               
definition  of  "home  state,"  which is  a  principle  place  of                                                               
business,  and then  collect 100  percent of  the home  state tax                                                               
instead  of  just the  piece  they  collect  today (part  of  the                                                               
federal  law). And  it also  prohibits  a state  from having  its                                                               
surplus lines  agent follow laws of  a state unless they  are the                                                               
home state. So, they don't have  to follow laws of five different                                                               
states for the same actual policy placement.                                                                                    
                                                                                                                                
She recapped that  they are asking first to  bring Alaska statute                                                               
into compliance with the federal  law. Second, there are two ways                                                               
to  proceed  after  that  is changed.  The  division  will  still                                                               
collect taxes;  today she collects  approximately $50  million in                                                               
premium  tax today.  What  this  piece of  HB  164  does is  they                                                               
collect  approximately $3.5  million  in taxes  on surplus  lines                                                               
coverage.  It  really only  changes  the  way they  tax  accounts                                                               
(policies) that cover things in  multiple states, probably a very                                                               
small  portion  of  the  surplus  lines  (maybe  a  half  million                                                               
dollars). It will  change how it is collected and  whether or not                                                               
the division  allocates it  back to the  state where  it properly                                                               
belongs,  because  that  is  where  the  risk  is.  The  National                                                               
Association of Insurance Commissioners  (NAIC), through the state                                                               
regulators, have voted on a simple  clearing house to do that and                                                               
that is  why this section has  the authority for the  director to                                                               
join in  an agreement that  can collect  and allocate out  to the                                                               
states where the risk belongs.  It doesn't change the amount they                                                               
are taxed; it  doesn't change the tax on an  Alaskan account, but                                                               
it does  collect differently and  allocate differently  than what                                                               
is done  today. She said  the other way to  do that is  through a                                                               
much more  complex formalized  compact that  Representative Olson                                                               
just addressed.                                                                                                                 
                                                                                                                                
SENATOR PASKVAN  asked if the  regulator process  for nonadmitted                                                               
insurers remains the same.                                                                                                      
                                                                                                                                
MS. HALL replied yes.                                                                                                           
                                                                                                                                
2:36:23 PM                                                                                                                    
She went  on to  the "Miscellaneous"  tab on  page 37;  there she                                                               
pointed out  a new consumer  protection in section 59  that would                                                               
require an insurer to provide  a notice to the covered individual                                                               
45  days before  the  date  of cancellation.  Today  there is  no                                                               
requirement for that.                                                                                                           
                                                                                                                                
She said section  60 would make no sense to  them on the surface,                                                               
because it's  a bunch of  numbers and letters. So,  she described                                                               
what  it did.  This section  deals with  fraud and  the insurance                                                               
code and the criminal code.  Under the current insurance code the                                                               
Division  of  Insurance  has  the  authority  to  bring  criminal                                                               
charges. The  division has a  part time dedicated  prosecutor and                                                               
fraud investigators who are law  enforcement people. This removes                                                               
one piece  from the criminal code  and makes it a  Class B felony                                                               
in  the  insurance  code instead.  The  language  actually  says:                                                               
"Knowingly  issues a  forged certificate  of  insurance or  other                                                               
document relating to insurance."                                                                                                
                                                                                                                                
MS.  HALL explained  that the  criminal code  requires intent  to                                                               
defraud  insurance   code  and   prosecutes  felonies.   This  is                                                               
critically important to them, because  they had an incident about                                                               
a year ago  when an individual issued  certificates of insurance,                                                               
but did  not collect money  and never  placed the coverage.   The                                                               
first time she  heard this, the division had a  complaint from an                                                               
individual  who owned  two tour  buses and  had a  certificate of                                                               
insurance showing  that he had  coverage, but his two  tour buses                                                               
were out on the road full of tourists and he had no insurance.                                                                  
                                                                                                                                
Right now  the division  has no  ability to  criminally prosecute                                                               
this individual  because he  didn't collect  any money.  She said                                                               
they have jail sentences for agents  who collect money and use it                                                               
for their  own purposes and don't  place coverage. But this  is a                                                               
case  where there  is no  money involved,  and that  needs to  be                                                               
changed so that issuing false documents becomes an offense.                                                                     
                                                                                                                                
SENATOR  PASKVAN  asked  how  the  person  found  out  he  wasn't                                                               
covered.                                                                                                                        
                                                                                                                                
MS. HALL  answered that he didn't  get a bill and  finally called                                                               
the insurance company that had  supposedly issued the certificate                                                               
to ask about his coverage  and found it didn't exist. Ultimately,                                                               
she sent  a team to the  particular Southeast town to  go through                                                               
files; they  found several instances of  false certificates being                                                               
issued and  to the best  of their  knowledge they found  them all                                                               
and there was never an unpaid claim.                                                                                            
                                                                                                                                
2:40:21 PM                                                                                                                    
SENATOR MENARD asked  if she had vetted this  with the Department                                                               
of  Law  (DOL)  and  if   had  been  reviewed  in  the  Judiciary                                                               
Committee.                                                                                                                      
                                                                                                                                
MS. HALL replied yes; this  has been carefully vetted through the                                                               
department,  her  criminal  prosecutor  and  through  Legislative                                                               
Legal Services  and she hadn't  had any push  back on it.  No, it                                                               
hasn't been through the Judiciary Committee.                                                                                    
                                                                                                                                
She said the last section under  "Miscellaneous" is new and it is                                                               
also  a new  concept in  Alaska. It  would give  the Division  of                                                               
Insurance  oversight  of  premium rates  charged  for  individual                                                               
health insurance plans today. Now  they only have prior review of                                                               
rates before they are used  for Premera Insurance. While they are                                                               
the largest of the state's  health insurers with about 73 percent                                                               
of  the  market, rating  standards  are  used  for the  other  27                                                               
percent  of  the  market.  If  she gets  a  complaint,  they  are                                                               
entitled to  look at the  company's actuarial  justification, but                                                               
they don't  have an  opportunity to review  it before  it's used.                                                               
The same  provision is used  later in  the bill for  group health                                                               
insurance review.                                                                                                               
                                                                                                                                
2:43:13 PM                                                                                                                    
MS. HALL  said the long  term care section  goes from page  39 to                                                               
48. The  current long  term care  statutes are  20 years  old and                                                               
don't reflect  the products that  are sold today. Here  they seek                                                               
to adopt  the NAIC model and  to have approval of  long term care                                                               
rates,  which  they  don't  have  today.  A  number  of  consumer                                                               
protections are in  this section: section 68  says, for instance,                                                               
if you  return your  policy within  30 days  of purchase  you can                                                               
have a  refund. Companies are also  required to give you  a clear                                                               
outline  of  coverage; they  are  required  to give  you  written                                                               
reason for a claim denial.                                                                                                      
                                                                                                                                
It also  changes some  provisions for benefits  if you  drop your                                                               
coverage  after paying  for it  for  a number  of years,  because                                                               
maybe  you couldn't  afford the  rate increases.  Today you  lose                                                               
that coverage, but under this  bill the insurer would be required                                                               
to provide  some benefit. It's  called "nonforfeiture"  - getting                                                               
something for money put in over the years.                                                                                      
                                                                                                                                
SENATOR PASKVAN asked what that something might be.                                                                             
                                                                                                                                
MS. HALL  replied that that  is left fairly  open; it could  be a                                                               
much  smaller but  paid up  benefit -  so you  haven't just  lost                                                               
everything. A  couple of years  ago, a company had  dramatic rate                                                               
increases;  people   just  couldn't   afford  them   anymore  and                                                               
forfeited the money they had put in it.                                                                                         
                                                                                                                                
SENATOR PASKVAN  asked if it could  be similar to the  cash value                                                               
of a whole life policy.                                                                                                         
                                                                                                                                
MS. HALL answered yes.                                                                                                          
                                                                                                                                
SENATOR MENARD asked why she didn't specifically state that.                                                                    
                                                                                                                                
MS.  HALL replied  that an  individual  doesn't have  to buy  the                                                               
benefit; the  insurer may  offer a  nonforfeiture benefit  in the                                                               
form of  a rider  to the  policy. Language on  page 44,  line 14,                                                               
says:                                                                                                                           
                                                                                                                                
     If a  policyholder declines the  nonforfeiture benefit,                                                                    
     the  insurer shall  provide a  contingent benefit  upon                                                                    
     lapse that is available for  a specified period of time                                                                    
     following a substantial increase in premium rates.                                                                         
                                                                                                                                
She  explained  that  the  change   is  adopted  an  in  statute,                                                               
additional detail would be provided in regulations.                                                                             
                                                                                                                                
SENATOR MENARD said she wanted  some assurance that when Ms. Hall                                                               
is gone,  that there would  be enough specifics for  someone else                                                               
to follow.                                                                                                                      
                                                                                                                                
MS. HALL  answered that  the language  has enough  specificity to                                                               
adopt the regulations that go  through the public hearing process                                                               
and it is difficult to manipulate that process.                                                                                 
                                                                                                                                
SENATOR  MENARD said  she was  somewhat uncomfortable  going down                                                               
this path, but would rely on the wisdom of the committee.                                                                       
                                                                                                                                
SENATOR PASKVAN  asked if there  could be some  annual disclosure                                                               
in, maybe, the premium notice  of what the accumulated forfeiture                                                               
might be.                                                                                                                       
                                                                                                                                
2:50:21 PM                                                                                                                    
MS. HALL  said that not  all long  term care policies  would have                                                               
this benefit;  it would  be offered  as a  rider. A  person could                                                               
choose  to purchase  a policy  without it,  but she  assumes that                                                               
there would be a charge for  that benefit. But a disclosure makes                                                               
sense.                                                                                                                          
                                                                                                                                
2:50:51 PM                                                                                                                    
She left the long term care issue  and went to section 77 on page                                                               
49, the filing  and approval of group insurance  rates that would                                                               
be the same as she discussed for the individual rates.                                                                          
                                                                                                                                
The only other section that she  wanted to comment on was section                                                               
79. She explained  that about a year and a  half ago the division                                                               
got a  consumer complaint  from a woman  who had  been terminated                                                               
from employment  and sought to  get COBRA benefits. She  was told                                                               
she could not  get them, because the employer did  not have group                                                               
health insurance  any longer. She  had a friend who  still worked                                                               
at this place  of employment and she still  had health insurance.                                                               
What had occurred  was a group health policy  had been terminated                                                               
and  instead  the employer  was  helping  the employees  purchase                                                               
individual policies. But,  any time the employer  puts money into                                                               
a single plan,  it becomes a group plan.  Alaska statutes provide                                                               
a  number  of  protections  for group  plans.  Among  those,  and                                                               
probably the most  important, is the guarantee issue.  If you are                                                               
a small  employer with 2  to 50  employees, you can  buy coverage                                                               
for your group even  if you have an employee with  some type of a                                                               
health condition.                                                                                                               
                                                                                                                                
She  explained  that  individual policies  are  underwritten  for                                                               
health  conditions  and include  charges  for  them. In  a  group                                                               
market,  those charges  for health  conditions are  limited. What                                                               
she saw  happening was  a circumvention of  the group  health law                                                               
protections. So, they have proposed  language, but she said it is                                                               
clearly a  policy call,  indicating in  (a) on  page 50,  line 6,                                                               
that a  person may not  sell, solicit or negotiate  an individual                                                               
health care  policy to an employee  or an insurer may  not issue.                                                               
In  (b) some  conditions are  provided saying  that you  could do                                                               
that  (line 14)  "if the  employee is  not an  eligible employee"                                                               
meaning those  who would not  normally fall under  the definition                                                               
of "group"  like part  time or  seasonal employees.  The employer                                                               
could contribute to an individual health policy.                                                                                
                                                                                                                                
However, Ms. Hall said, (2) on  line 16 is a disincentive because                                                               
you  could  not  cancel  a  group  policy  and  offer  individual                                                               
policies if  your plan has been  without a waiting period  of six                                                               
months.  Ms.  Hall  said  it is  critically  important  that  the                                                               
ability  to   keep  group  coverage   continue  because   of  the                                                               
protections in  small group law. This  proposed six-month waiting                                                               
period  protects employees  with health  conditions and  the only                                                               
other  choice  for them  would  be  a high  risk  pool  - and  it                                                               
protects premiums with a limit  for increases. The other thing it                                                               
does  is  put  individual  employees  who  don't  have  a  health                                                               
condition for  that six  months at risk.  The individual  can buy                                                               
insurance  or supplemental  insurance with  their own  money, but                                                               
the  employer cannot  contribute  to an  individual  plan for  at                                                               
least six months after the dropping group coverage.                                                                             
                                                                                                                                
She  said the  employer  can do  things  like investigate  higher                                                               
deductibles  or do  HSAs and  help fund  those deductibles.  They                                                               
could  negotiate   a  different  level  of   payment  with  their                                                               
insurance  company where  instead of  paying 80  percent of  your                                                               
health  insurance  today, they  only  pay  50 percent.  So,  when                                                               
premiums get unaffordable, which they  are today, there are other                                                               
avenues an  employer can explore  and they propose that  there be                                                               
some kind of a disincentive for canceling that policy.                                                                          
                                                                                                                                
2:56:16 PM                                                                                                                    
SENATOR MENARD said  that COBRA is federal and it  applies for 18                                                               
months after a  person is terminated and it's  very expensive. Do                                                               
the individual polices have the COBRA option?                                                                                   
                                                                                                                                
MS. HALL replied that she believed so.                                                                                          
                                                                                                                                
CHAIR  EGAN asked  if  there  is a  concern  that  this piece  of                                                               
legislation passes the legislature this session.                                                                                
                                                                                                                                
MS.  HALL answered  that not  necessarily for  the surplus  lines                                                               
piece and the mechanisms used  to collect and allocate taxes, but                                                               
the conformance with  federal law goes into effect  on July 2011.                                                               
It's important to  bring state statutes in  conformance with that                                                               
or the  division stands  to lose its  ability to  collect premium                                                               
taxes in the way that is mandated  by the federal law on July 21,                                                               
2011.                                                                                                                           
                                                                                                                                
CHAIR EGAN  informed the committee  that this legislation  had no                                                               
further referrals.                                                                                                              
                                                                                                                                
SENATOR  DAVIS  asked  how  many  states  have  already  met  the                                                               
requirement.                                                                                                                    
                                                                                                                                
MS.  HALL   answered  that  some   type  of  legislation   is  in                                                               
approximately 40  states; about 5  have legislation just  to meet                                                               
the federal mandate;  about 20 states have passed and  3 have put                                                               
in place this  type of mechanism. Approximately  10 have proposed                                                               
the  other type  of compact;  2 have  actually signed  those into                                                               
statute. About 5  states have both versions  in their legislature                                                               
and she  wasn't sure what they  were doing. She pointed  out that                                                               
some states don't meet every year,  so about 10 states may not be                                                               
doing anything.                                                                                                                 
                                                                                                                                
2:59:17 PM                                                                                                                    
SENATOR PASKVAN asked what is attributable to the surplus lines.                                                                
                                                                                                                                
MS.  HALL replied  that $3.5  million is  surplus lines  and it's                                                               
really a rough estimate based on reviewing forms.                                                                               
                                                                                                                                
REPRESENTATIVE OLSON  said he thought  about 21 states  are going                                                               
in this bill's direction.                                                                                                       
                                                                                                                                
3:00:24 PM                                                                                                                    
JOSHUA  KORVER,  Insurance Center,  Anchorage,  said  they are  a                                                               
local Managing General  Agents' Office (MGA), which  puts them in                                                               
the wholesale spot within the  stream of getting people insurance                                                               
coverage.  He  raised  two  issues  on HB  164;  one  deals  with                                                               
licensing.  He  knows  that  they are  trying  to  meet  national                                                               
standards with this legislation and  his concern is that the goal                                                               
of being able to have a license  that goes with a person from one                                                               
office to another, while laudable,  might not be most efficiently                                                               
accomplished  with the  mechanism of  an employment  contract and                                                               
its cost might be difficult for some people.                                                                                    
                                                                                                                                
He  said that  employment law  controls employment  contracts and                                                               
it's fairly specific  on what a contract needs. It  has to have a                                                               
term, responsibilities,  benefits, reasons for termination  and a                                                               
dispute resolution processes. A lot  of the independent agents in                                                               
Alaska  are  going  to  have  to  hire  attorneys  to  put  these                                                               
agreements together  and that will require  a significant upfront                                                               
cost which smaller  agents might not be able to  afford. A person                                                               
has to work the  term of their contract so he  didn't know how it                                                               
could be that more mobile.                                                                                                      
                                                                                                                                
Using employment  contracts moves you from  an at-will employment                                                               
scenario to an  employment contract scenario and  Mr. Korver said                                                               
"You  can't  use  the  handbook   anymore;  you've  got  to  have                                                               
everything spelled  out in a person's  employment contract." This                                                               
seems to  go against  the goal,  which is to  allow people  to be                                                               
more mobile. One of the  big things about employment contracts is                                                               
term and the  reasons for termination. A  person under employment                                                               
contract can't  just pack  up and  leave; they  have to  work the                                                               
term of the  contract. So, again, he didn't see  how it makes one                                                               
more mobile.                                                                                                                    
                                                                                                                                
MR.  KORVER  said employment  contracts  must  specify lines  and                                                               
classes  of  authority  and  "authority"  is a  term  of  art  in                                                               
insurance; it is  something that is usually granted  by a carrier                                                               
and their  ability to  write. An  authority can  be at  the class                                                               
level, but  it's impossible  to list  those. A  general liability                                                               
policy can  have hundreds of classes  and to be able  to list out                                                               
for a  particular individual based  on all the carriers  that you                                                               
may have  an affiliation with  as an individual  insurance office                                                               
is an  exercise in "absolute  futility" because it's too  much to                                                               
keep track of.  He has never heard of  employment contracts being                                                               
legislatively mandated.                                                                                                         
                                                                                                                                
3:06:00 PM                                                                                                                    
MR.  KORVER said  his  second issue  concerns  the surplus  lines                                                               
allocation  method.  He knows  there  is  a  deadline to  do  100                                                               
percent taxation  on the  premium, but a  lot of  industry people                                                               
disagree that  this approach  is the  best method  to go  with. A                                                               
better way  to go is the  compact method, which even  though it's                                                               
complex in  its legislation,  is easy  in its  implementation. He                                                               
concluded by  asking them  to not move  this forward  too quickly                                                               
without looking at what the rest of the country is doing.                                                                       
                                                                                                                                
3:08:09 PM                                                                                                                    
GARY  SLEEPER,  Denali Alaskan  Federal  Credit  Union, said  his                                                               
testimony will  deal with section  79 of  HB 164 that  deals with                                                               
the sale  of individual  health insurance  policies to  the group                                                               
market. In  general, section 79  would do  two things -  first it                                                               
would  prohibit an  insurance agent  from  selling an  individual                                                               
health  insurance  policy  to  an   employee  if  the  employee's                                                               
employer  offers  a  group  plan.   It  would  also  prohibit  an                                                               
insurance  company from  issuing an  individual health  insurance                                                               
policy to an employee whose  employer offers a group plan. Denali                                                               
Alaska opposes  passage of section  79, because it  believes this                                                               
section limits  both an  employee's and  an employer's  choice of                                                               
health insurance  coverage. Under section  79, if an  employee is                                                               
covered under a group policy  but wants to purchase an individual                                                               
health insurance  policy even  if the employee  has opted  out of                                                               
the group  policy, the  employee can't do  this. That  is because                                                               
even  though  the employee  may  want  the coverage,  section  79                                                               
prohibits  an insurance  company  from issuing  a  policy if  the                                                               
employer offers a group plan.                                                                                                   
                                                                                                                                
He  said that  section 79  is so  broadly drafted  that it  would                                                               
prohibit an  insurance agent from  even discussing the  merits of                                                               
individual  policies  with an  employee  or  an employer.  Denali                                                               
believes that Alaskans  should be allowed to  freely choose which                                                               
type  of  health insurance  coverage  they  want and  section  79                                                               
doesn't give them that choice.                                                                                                  
                                                                                                                                
MR.  SLEEPER said  even if  they were  to support  the policy  of                                                               
section 79,  they believe  the statute may  have been  drafted in                                                               
such a  way as  to create an  unintended consequence.  It appears                                                               
under  certain   circumstances  the  statute  would   prevent  an                                                               
individual from  having any health insurance  coverage whatsoever                                                               
for what could be an extended period of time.                                                                                   
                                                                                                                                
He explained  that section  79 contains  an absolute  ban against                                                               
marketing   an  individual   insurance  policy   or  issuing   an                                                               
individual  health  insurance  policy   to  an  employee  if  the                                                               
employer offers a  group plan. As the director  pointed out there                                                               
are  only  two exceptions  to  this  ban.  The first  allows  the                                                               
marketing or  sale of an  individual insurance policy to  a part-                                                               
time  employee. The  second allows  the marketing  or sale  of an                                                               
individual policy to employees, but  only so long as the employer                                                               
does not offer a  group plan and has not offered  a group plan in                                                               
the last six months. This  is where the problem arises. Sometimes                                                               
employers  have  no  choice  but to  cancel  their  group  health                                                               
insurance plans because they can't afford them.                                                                                 
                                                                                                                                
His concern was that under  the language of the proposed statute,                                                               
if an  employer voluntarily terminates its  group plan, employees                                                               
may not  be able to  purchase their  own health insurance  for at                                                               
least  six  months. This  is  because  the statute  prohibits  an                                                               
insurance  company from  issuing a  policy even  if the  employee                                                               
asks for one  unless the employer hasn't  offered group insurance                                                               
for at least six months. So, a  person may be left with no health                                                               
insurance coverage  whatsoever for  a substantial period  of time                                                               
even if the person wants to buy his own policy.                                                                                 
                                                                                                                                
He remarked that the director  said the statute wouldn't preclude                                                               
an individual  from purchasing  their own  policy, just  that the                                                               
employer could  not make  any contribution  towards that.  But he                                                               
didn't see the language that would  allow that to happen. He said                                                               
a person  with a  health issue  might have  no insurance  for six                                                               
months and it  could be even worse if there  was a waiting period                                                               
for the person to get his own coverage.                                                                                         
                                                                                                                                
3:12:44 PM                                                                                                                    
SENATOR PASKVAN said  he understood the purpose of  section 79 to                                                               
be that  as long as  the employer continues with  group coverage,                                                               
then the former employee would  obtain coverage under COBRA. Does                                                               
that make sense?                                                                                                                
                                                                                                                                
MR.  SLEEPER replied  that  section 79  deals  more with  current                                                               
employees. If  the employer has  a group  plan in place  when the                                                               
employee terminates  and if they  are subject to COBRA  (you need                                                               
20  or  more  employees  to   be  subject  to  COBRA),  then  the                                                               
terminated employee would  be able to get  insurance coverage for                                                               
18  months.  Section  79  deals  with  current  employees  of  an                                                               
employer. It  says an  insurance company  cannot simply  issue an                                                               
individual health  policy to an  employee if the  employer offers                                                               
group  coverage.  One of  the  points  they  are making  is  that                                                               
sometimes  there  may  be  benefits  to  individual  policies  as                                                               
opposed to  group policies.  They are  portable, for  example, or                                                               
you may  be working  for an employer  who offers  group coverage,                                                               
but it  may have a huge  deductible and huge co-payment  and they                                                               
want to  buy their own  because they  could take the  policy with                                                               
when they  leave. You  can't do  that if you're  part of  a group                                                               
policy and  don't have COBRA  right; if  you leave you  lose your                                                               
coverage.                                                                                                                       
                                                                                                                                
The way  the statute is drafted,  it simply says the  agent can't                                                               
even  talk  to the  employee  or  the employer  about  individual                                                               
policies because  it says  you can't  sell, solicit  or negotiate                                                               
and  then it  goes on  to say  that an  insurance company  cannot                                                               
issue a  policy. So it completely  precludes individual employees                                                               
from purchasing their  policies if their employer  offers a group                                                               
policy. The  problem is compounded  because if the  employer were                                                               
to terminate  their group coverage  on January 1,  the individual                                                               
employees of  that employer  cannot purchase  individual policies                                                               
for six months, because the  insurance companies are precluded by                                                               
this statute from issuing the policy.                                                                                           
                                                                                                                                
3:15:48 PM                                                                                                                    
STEVE   STEPHAN,  Director,   Governmental  Relations,   National                                                               
Association  of  Professional  Surplus  Lines  Offices,  said  he                                                               
wanted  to  address a  clause  in  the  surplus lines  bill  that                                                               
authorizes the commissioner to enter  into a compact or agreement                                                               
for the allocation  of taxes. His first point is  that nothing is                                                               
mandated in  the federal bill  regarding the allocation  of taxes                                                               
and  nothing has  to  happen  today. The  exact  language in  the                                                               
federal bill says  that the states "may" enter into  a compact or                                                               
agreement to  allocate among  the states  the premium  taxes. The                                                               
word  "may"  was  inserted  intentionally   after  a  meeting  in                                                               
Washington where they discussed whether  it would be mandatory or                                                               
voluntary and  they decided  to make it  a voluntary  tax sharing                                                               
arrangement if the states decided they wanted to share taxes.                                                                   
                                                                                                                                
MR. STEPHAN said he didn't think  they had enough facts to make a                                                               
decision today. They don't know if  the state would make money on                                                               
surplus lines  taxes or lose  money; Alaska would be  required to                                                               
send some of that  money to the other states. He  had not seen an                                                               
estimate of  how much that  would be.  The other issue  with this                                                               
model is that taxes will have  to be raised on some Alaska policy                                                               
holders and  the whole idea  of that  agreement is that  you will                                                               
charge the tax rate on the  location based on some other criteria                                                               
such  as  sales. So,  if  an  Alaskan  corporation had  sales  in                                                               
Florida or Mississippi or Alabama,  you would need to charge much                                                               
higher tax rates,  which are frequently in the  10 percent range.                                                               
So, an Alaskan  policy holder would be charged a  higher rate for                                                               
the purpose  of sending that  money to those other  states. Those                                                               
clearly are legislative issues and  he thought those decisions by                                                               
were being delegated to the  director of revenue. He said another                                                               
clause  would also  impose  a surcharge  on  policy holders,  but                                                               
again, that surcharge is not specified.                                                                                         
                                                                                                                                
3:20:20 PM                                                                                                                    
CHAIR EGAN found no more comments and closed public testimony.                                                                  
                                                                                                                                
MS.  HALL   commented  that   she  really   thinks  there   is  a                                                               
misinterpretation  of what  is called  the  NEMA proposal,  which                                                               
this is, that  it is more complex and  burdensome. There wouldn't                                                               
be an  increase on  Alaskan policy holders.  The taxes  that they                                                               
would pay  are the same taxes  they pay today, and  besides that,                                                               
she  wouldn't likely  propose something  that increases  taxes on                                                               
Alaskans.                                                                                                                       
                                                                                                                                
The  allocation method  is  not specified  in  statute, but  that                                                               
would  be done  by  regulations  and it  is  under discussion  by                                                               
regulators  and industry  today. She  is  the vice  chair of  the                                                               
National  Association of  Insurance Commissioner's  Surplus Lines                                                               
Task Force  and is highly  involved on  a national level  on this                                                               
issue. As she said earlier, 20  plus states are pursuing the same                                                               
path.                                                                                                                           
                                                                                                                                
SENATOR DAVIS asked her to  comment specifically on Mr. Sleeper's                                                               
comments about section 79.                                                                                                      
                                                                                                                                
MS. HALL said she actually looked  at the language and they fully                                                               
believe that  it would allow  an individual to buy  an individual                                                               
policy with their  own money, not with an  employer's money. They                                                               
certainly  don't want  to preclude  an individual  from buying  a                                                               
policy with their own money.                                                                                                    
                                                                                                                                
SENATOR  PASKVAN   said  the  first  witness   talked  about  the                                                               
increased cost between the employer  and employee and he asked if                                                               
that was accurate.                                                                                                              
                                                                                                                                
MS. HALL  replied that had  been taken  out of context.  They are                                                               
proposing a contract,  but not an employment  contract that would                                                               
disrupt  any at-will  employment or  for a  particular period  of                                                               
time; it's a contract that  would allow certain things to happen.                                                               
She worked with  the Agents Association on this  and they support                                                               
this bill. They  think this language is a good  thing for them to                                                               
have;  it's  good  business  practice   and  this  is  the  first                                                               
criticism she has heard.                                                                                                        
                                                                                                                                
SENATOR  PASKVAN  said  he  was   wondering  if  he  was  missing                                                               
something.                                                                                                                      
                                                                                                                                
MS. HALL responded that she didn't believe so.                                                                                  
                                                                                                                                
REPRESENTATIVE OLSON  commented that  he has participated  in the                                                               
National  Conference of  Insurance  Legislators  (NCOIL) for  the                                                               
last  five  years  and  it   is  one  of  the  most  professional                                                               
organizations he has  participated in. When you  are talking with                                                               
all  the  states,  trust territories,  and  Washington,  industry                                                               
people  and consumer  groups, it  takes  three to  five years  to                                                               
develop  a model  law; it  gets thoroughly  vetted. This  one has                                                               
been  around for  one year  and some  people don't  have all  the                                                               
information.  He  thought  the collection  authority  on  surplus                                                               
lines taxes should stay with the state.                                                                                         
                                                                                                                                
3:25:50 PM                                                                                                                    
CHAIR  EGAN said  HB  164 would  be held  for  the next  meeting.                                                               
Finding  no further  business to  come before  the committee,  he                                                               
adjourned the meeting at 3:26 p.m.                                                                                              
                                                                                                                                
                                                                                                                                

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