Legislature(2015 - 2016)BELTZ 105 (TSBldg)

04/11/2015 11:00 AM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Public Testimony --
Moved HB 149 AM Out of Committee
Moved CSSB 58(L&C) Out of Committee
Heard & Held
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
         SB 107-INSURANCE; RISK MG'T; HOLDING COMPANIES                                                                     
1:07:04 PM                                                                                                                    
CHAIR  COSTELLO   reconvened  the   meeting  and   announced  the                                                               
consideration of SB  107. "An Act relating to insurance; relating                                                               
to  risk  based  capital  for  domestic  insurers  and  fraternal                                                               
benefit  societies,  including  provisions  related  to  insurers                                                               
subject   to  risk   based  capital   and   action  level   event                                                               
requirements; relating to review by  the director of insurance of                                                               
an   insurer's    risk   based   capital   plan;    relating   to                                                               
confidentiality and  sharing of certain information  submitted to                                                               
the director  of insurance; relating  to evaluating  an insurance                                                               
holding company and the acquisition  of control of or merger with                                                               
a  domestic  insurer;  relating   to  risk  based  capital,  risk                                                               
management, and  own risk and  solvency assessments  of insurers;                                                               
clarifying  provisions  related  to  risk  based  capital  plans;                                                               
relating to exemptions  by the director of  insurance for certain                                                               
domestic   and  casualty   insurers  from   risk  based   capital                                                               
requirements; relating to  insurance holding companies, including                                                               
filing   requirements,   divestiture,  content   of   statements,                                                               
notifications,   and    hearings;   relating    to   registration                                                               
requirements  of insurers;  relating  to  transactions within  an                                                               
insurance  holding company  system  or  transactions involving  a                                                               
domestic  insurer;  relating  to management  and  examination  of                                                               
domestic insurers that  are part of an  insurance holding company                                                               
system;  adding  provisions  relating  to  participation  by  the                                                               
director  of  insurance in  a  supervisory  college; relating  to                                                               
civil  and  criminal penalties  for  violations  by insurers  and                                                               
individuals; relating  to provisions for risk  management and own                                                               
risk and solvency assessments by  insurers; relating to operating                                                               
requirements  for controlling  insurance  producers; relating  to                                                               
producer-controlled  insurers;  adding and  amending  definitions                                                               
related to  insurers; and providing  for an effective  date." She                                                               
noted that this was the first hearing.                                                                                          
1:07:40 PM                                                                                                                    
WESTON EILER, Aide to the Senate Labor and Commerce Committee,                                                                  
introduced SB 107 on behalf of the Labor and Commerce Committee                                                                 
speaking briefly to the following sponsor statement:                                                                            
     The  primary  focus  of  the  finance  section  of  the                                                                    
     Division of  Insurance is  the financial  regulation of                                                                    
     domestic  and  foreign  insurers for  the  benefit  and                                                                    
     protection  of Alaska  policyholders. Requirements  for                                                                    
     financial  supervision of  insurers licensed  in Alaska                                                                    
     are imposed  by Alaska  statutes and  regulations. Much                                                                    
     of the statutory framework  governing this effort comes                                                                    
     from model  laws passed by the  National Association of                                                                    
     Insurance Commissioners  (NAIC). The  financial section                                                                    
     is unique  in the  Division as it  is the  only section                                                                    
     that  is  accredited  by the  NAIC.  The  accreditation                                                                    
     program provides a  process whereby solvency regulation                                                                    
     of multi-state insurance companies  can be enhanced and                                                                    
     adequately monitored with an emphasis on:                                                                                  
         · Adequate solvency laws and regulations in each                                                                       
           accredited state to protect consumers and                                                                            
           guarantee funds;                                                                                                     
         ·  Effective and efficient financial analysis and                                                                      
           examination processes;                                                                                               
         ·  Appropriate   organizational    and    personnel                                                                    
           practices; and                                                                                                       
         ·  Effective and efficient process regarding the                                                                       
           review of organization, licensing and change or                                                                      
           control of domestic insurance.                                                                                       
     Being accredited provides a  means whereby other states                                                                    
     will  accept the  examinations of  Alaska's multi-state                                                                    
     insurers; and  that we can  accept the  examinations of                                                                    
     non-domestic insurers  licensed to sell in  Alaska from                                                                    
     other accredited  states without having to  perform our                                                                    
     own  examinations. Alaska  has seven  domestic insurers                                                                    
     and approximately 1,100 foreign insurers.                                                                                  
     Finally,  the  importance  of accreditation  cannot  be                                                                    
     understated as  respects our commitment  to state-based                                                                    
     regulation.  Title  V  of the  Dodd-Frank  Wall  Street                                                                    
     Reform  and  Consumer  Protection Act  of  2010  (Dodd-                                                                    
     Frank),  provided  for  the  creation  of  the  Federal                                                                    
     Insurance  Office  (FIO).  The FIO's  is  charged  with                                                                    
     monitoring the  insurance industry (with  the exception                                                                    
     of   the    health   insurance    industry)   including                                                                    
     identifying  activities  within  a  sector  that  could                                                                    
     potentially  contribute to  a  systemic  crisis to  the                                                                    
     broader financial  system, the  extent to  which under-                                                                    
     served communities have  access to affordable insurance                                                                    
     products  and  the  sector's  regulation.  The  FIO  is                                                                    
     authorized to receive and  collect data and information                                                                    
     on   the  insurance   industry  and   can  enter   into                                                                    
     information sharing  agreements with  state regulators.                                                                    
     They also have  the authority to require  an insurer to                                                                    
     submit data to its office.                                                                                                 
     In 2013, the FIO released  a mandated study titled "How                                                                    
     to  Modernize  and  Improve  the  System  of  Insurance                                                                    
     Regulation   in   the   United  States".   The   report                                                                    
     acknowledges  many  of the  strengths  as  well as  the                                                                    
     successes   of    state-based   insurance   regulation.                                                                    
     Nonetheless,  the framework  has been  set for  federal                                                                    
     regulation if  state-based regulation were to  fail. It                                                                    
     is  not thought  that federal  oversight of  Alaska, or                                                                    
     any other states,  will be in the best  interest of the                                                                    
     states. However,  the states are  continually monitored                                                                    
     for adoption  of and  compliance of  statutes regarding                                                                    
     financial  solvency and  other regulations  promoting a                                                                    
     sound  insurance industry  that protects  consumers. An                                                                    
     accredited  state meets  the criteria  set by  the NAIC                                                                    
     and accepted by the FIO.                                                                                                   
MR. EILER  deferred further introduction and  explanation to Lori                                                               
1:09:16 PM                                                                                                                    
At ease                                                                                                                         
1:11:06 PM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community and Economic  Development (DCCED), stated she                                                               
would go  through a  PowerPoint presentation  to frame  the issue                                                               
addressed in  SB 107. She said  the issue of the  bill relates to                                                               
the mission  of the Division  of Insurance, which is  to regulate                                                               
the insurance  industry to protect Alaskan  consumers. The intent                                                               
of  the bill  is to  ensure  that the  insurance companies  doing                                                               
business in  Alaska are solvent  and whole and  Alaskan consumers                                                               
are protected.                                                                                                                  
1:12:33 PM                                                                                                                    
MS. WING-HEIER spoke to the following points regarding state-                                                                   
based regulation:                                                                                                               
     Unlike any  other major industry, the  individual state                                                                    
     governments are the primary  regulators of the business                                                                    
     of  insurance and  are responsible  for the  safety and                                                                    
     soundness of the U.S. insurance system.                                                                                    
         ·  In 1945, Congress passed the McCarran-Ferguson                                                                      
           Act (15  U.S.C. 1011 - 1015)  which exempted: the                                                                    
           business   of   insurance   from   most   federal                                                                    
           regulation. The  Act provided  that "[n]o  Act of                                                                    
           Congress  shall   be  construed   to  invalidate,                                                                    
           impair,  or supersede  any law  by any  State for                                                                    
           the  purpose   of  regulating  the   business  of                                                                    
           insurance,  or which  imposes a  fee or  tax upon                                                                    
           such  business,  unless   such  Act  specifically                                                                    
           relates to the business of insurance."                                                                               
         ·  In the Act, Congress made clear its intent                                                                          
           stating  that   "the  continued   regulation  and                                                                    
           taxation by  the several  States of  the business                                                                    
           of  insurance  is  in the  public  interest,  and                                                                    
           silence  on the  part  of Congress  shall not  be                                                                    
           construed   to   impose   any  barrier   to   the                                                                    
           regulation or  taxation of  such business  by the                                                                    
           several States."                                                                                                     
         ·  Through  the   years,   Congress   has   enacted                                                                    
           legislation  specifically  related  to  insurance                                                                    
           including   flood   insurance,  crop   insurance,                                                                    
           terrorism    protection    insurance,    producer                                                                    
           licensing  uniformity  and  reciprocity,  uniform                                                                    
           standards for  surplus lines eligibility  and the                                                                    
           creation  of the  Federal Insurance  Office (FIO)                                                                    
           which  is, for  the most  part, a  non-regulatory                                                                    
         ·  One of the reasons why the state-based system of                                                                    
           insurance  regulation continues  is  that it  has                                                                    
         ·  For example, during the 2007 - 2009 financial                                                                       
           crisis  which  hit  hard the  financial  services                                                                    
           industry  of  which  insurance  is  a  part,  the                                                                    
           United  States Government  Accountability Office,                                                                    
           in  a  2013  report  to  Congress,  noted  "[t]he                                                                    
           effects of  the financial crisis on  insurers and                                                                    
           policyholders were generally  limited, with a few                                                                    
               ·     The  Independent   Insurance  Agents  &                                                                    
               Brokers of America  (IIABA) agreed stating in                                                                    
               a 2011  letter to  the FIO: "Even  during the                                                                    
               most  tumultuous  of times,  state  insurance                                                                    
               regulators ensure that  insurers are solvent,                                                                    
               that claims are paid,  and that consumers are                                                                    
               protected.   IIABA   remains   dedicated   to                                                                    
               preserving state insurance regulation."                                                                          
MS.   WING-HEIER  said   the   McCarran-Ferguson   Act  put   the                                                               
transaction of  insurance under the  states, taking it  away from                                                               
federal  regulation. State-based  regulation holds  today because                                                               
it works.  An important fundamental of  state-based regulation is                                                               
accreditation, which  is looking for reciprocity  in the solvency                                                               
standards  amongst  insurance  companies that  are  domiciled  in                                                               
Alaska and  doing business outside Alaska  or insurance companies                                                               
domiciled  outside and  doing business  in Alaska.  They are  all                                                               
judged by  the same standard.  What this model  legislation seeks                                                               
to ensure is that there is  reciprocity among the statutes in the                                                               
other  55  jurisdictions  -  the  states,  territories,  and  the                                                               
District of Columbia.                                                                                                           
1:15:49 PM                                                                                                                    
SENATOR ELLIS joined the committee.                                                                                             
SENATOR STEVENS  asked if  the division  ensures that  claims are                                                               
MS. WING-HEIER answered yes; insurance  companies report in their                                                               
financials what they expect to pay and what they have paid.                                                                     
She  discussed  the  following points  related  to  the  National                                                               
Association of Insurance Commissioners:                                                                                         
         ·  The   National    Association    of    Insurance                                                                    
           Commissioners  (NAIC)   is  the   U.S.  standard-                                                                    
           setting   and  regulatory   support  organization                                                                    
           created  and  governed  by  the  chief  insurance                                                                    
           regulators from  the 50  states, the  District of                                                                    
           Columbia and five U.S. territories.                                                                                  
         ·  Through the NAIC, state insurance regulators                                                                        
           establish standards  and best  practices, conduct                                                                    
           peer  review,  and  coordinate  their  regulatory                                                                    
           oversight.  NAIC   members,  together   with  the                                                                    
           central resources of the  NAIC, form the national                                                                    
           system  of  state-based insurance  regulation  in                                                                    
           the U.S.                                                                                                             
         ·  While much of the business of insurance is local                                                                    
           in nature  due to  differences of risk  and other                                                                    
           factors particular  to a local area,  the elected                                                                    
           or  appointed  state   government  officials  who                                                                    
           oversee  the  regulation of  insurance  companies                                                                    
           and  producers in  their respective  jurisdiction                                                                    
           (the members of the  NAIC), recognize there often                                                                    
           is   a  need   for   national  standards   and/or                                                                    
         ·  The   NAIC    promotes    national    standards,                                                                    
           uniformity, reciprocity,  and consistency  at the                                                                    
           national level  through the development  of model                                                                    
           laws and regulations.                                                                                                
MS. WING-HEIER said the only time a state is required to adopt a                                                                
model is for an accreditation.                                                                                                  
1:17:43 PM                                                                                                                    
CHAIR COSTELLO asked when the state last went through the                                                                       
accreditation process.                                                                                                          
MS. WING-HEIER replied it was in 2012 and the next accreditation                                                                
will be in 2017. A report is due in June, 2015 as to                                                                            
accreditation status on the adoption of model laws.                                                                             
She discussed the following points on the NAIC Model Law                                                                        
        · Much of the work of the NAIC is conducted through                                                                     
          its  committees, task  forces, working  groups, or                                                                    
          subgroups  and it  is here  where discussion  most                                                                    
          likely begins in the consideration  of a new model                                                                    
          law.  However,  these   entities  may  not  devote                                                                    
          resources  to the  actual development  or drafting                                                                    
          of a  model law unless  it is determined  that the                                                                    
          subject of  the model  law necessitates  a minimum                                                                    
          national   standard  and/or   requires  uniformity                                                                    
          amongst all states.                                                                                                   
        · It also must be determined that the NAIC members                                                                      
          are  committed to  devoting significant  regulator                                                                    
          and association resources  to educate, communicate                                                                    
          and support a  model that has been  adopted by the                                                                    
        · Only model laws mandated by federal law are                                                                           
          exempt from these determinations.                                                                                     
        · The model law development and drafting procedure                                                                      
          entails  a rigorous  process providing  notice and                                                                    
          opportunity  for consumer  groups and  industry to                                                                    
        · Both the parent committee with oversight for the                                                                      
          subject  area  of  a  model  law  and  the  entire                                                                    
          membership  of the  NAIC must  adopt any  proposed                                                                    
          model law by a two-thirds majority vote.                                                                              
        · The process of creating a national standard,                                                                          
          however,  does not  stop  there.  The decision  to                                                                    
          implement   each   standard   remains   with   the                                                                    
          individual states.                                                                                                    
        · Adoption of certain model laws are required if a                                                                      
          state  insurance   regulatory  agency  is   to  be                                                                    
          accredited  under  the NAIC  financial  regulation                                                                    
          standards & accreditation program.                                                                                    
MS.  WING-HEIER relayed  that  Alaska sits  on  the Property  and                                                               
Casualty  Committee  and  the   Market  Regulation  and  Consumer                                                               
Affairs  Committee. It  also sits  on 14  task forces,  3 liaison                                                               
committees and numerous working  groups. She also vice-chairs the                                                               
American  Indian and  Alaska Native  Liaison  Committee. It's  in                                                               
these  committees that  discussions  come forward  about what  is                                                               
best for  regulation. Once the  laws come forward they  have been                                                               
well vetted by  all jurisdictions. They are brought  out for both                                                               
industry and public comment.                                                                                                    
1:19:03 PM                                                                                                                    
CHAIR COSTELLO asked how much  time the division dedicates to the                                                               
efforts related to the NAIC.                                                                                                    
MS.  WING-HEIER  replied  the  division  tries  to  attend  three                                                               
meetings  a year.  Additionally  there are  a  lot of  conference                                                               
committee calls and  on occasion she'll send staff  to the Kansas                                                               
City office if a new subject is coming out.                                                                                     
CHAIR COSTELLO asked how many  other states have gone through the                                                               
process that Alaska is currently undertaking.                                                                                   
MS. WING-HEIER  answered that  all states  have gone  through the                                                               
1:20:18 PM                                                                                                                    
MS. WING-HEIER explained  that the mission of  the NAIC financial                                                               
regulation standards  and accreditation  program is  to establish                                                               
and  maintain   state  regulator   standards  to   promote  sound                                                               
insurance  company  financial  solvency  regulation.  This  is  a                                                               
critical function  for consumer  protection because  an insurance                                                               
company  that   isn't  financially   solvent,  cannot   meet  its                                                               
contractual policy  obligations to pay  claims in the event  of a                                                               
She  said   the  regulation  and  accreditations   standards  are                                                               
important  because Alaska  has  about  1,100 insurance  companies                                                               
that  do business  in  the  state. She  continued  to review  the                                                               
following points:                                                                                                               
        · The accreditation program provides a process                                                                          
          whereby   solvency   regulations  of   multi-state                                                                    
          insurance   companies   can    be   enhanced   and                                                                    
          adequately monitored.                                                                                                 
        · This is important, particularly for a small state                                                                     
          such  as Alaska,  because if  another state  meets                                                                    
          the  accreditation  standards  of the  NAIC,  then                                                                    
          Alaska  can  have  the confidence  that  insurance                                                                    
          companies operating here  but domiciled in another                                                                    
          state   are   being   adequately   regulated   for                                                                    
          financial solvency by the domiciliary state.                                                                          
        · Similarly, if Alaska is not accredited, other                                                                         
          states   can  no   longer  rely   on  examinations                                                                    
          performed  by the  division on  insurers domiciled                                                                    
          here.  Those  insurers  would  become  subject  to                                                                    
          examinations  by  all  states  in  which  they  do                                                                    
          business  which would  be a  significant financial                                                                    
        · Alaskan consumers could be negatively impacted as                                                                     
          companies may decide not to  operate in Alaska due                                                                    
          to the  duplicative examination costs  incurred by                                                                    
          operating in a non-accredited state.                                                                                  
1:21:22 PM                                                                                                                    
MS.  WING-HEIER explained  that  accreditation process  is for  a                                                               
five-year  period  and  the division's  next  full  accreditation                                                               
review  will  be  in  2017.  A key  component  of  the  financial                                                               
solvency regulation  accreditation review  is a  determination by                                                               
the  NAIC  accreditation  review  team that  the  state  has  the                                                               
necessary solvency laws and regulations  to protect consumers and                                                               
guarantee funds.                                                                                                                
She stated  that the first part  of the bill is  about risk-based                                                               
capital (RBC), which is a  method of measuring the minimum amount                                                               
of capital  that is appropriate  to support an  insurer's overall                                                               
business operations.  This surplus capital provides  a cushion to                                                               
an  insurer against  insolvency. It  is also  referred to  as the                                                               
insurance  company's elastic  measure. RBC  limits the  amount of                                                               
risk a  company can  take so  a company with  a higher  amount of                                                               
risk has to hold a higher amount of capital.                                                                                    
Risk-based capital  has two main  components: 1) it is  a formula                                                               
with an  established hypothetical  minimum capital level  that is                                                               
compared to an  insurance company's actual capital  level; and 2)                                                               
the model law  grants automatic authority to  the state insurance                                                               
regulator  to  take  specific  actions  based  on  the  level  of                                                               
impairment. The  model addresses insurer  reporting requirements,                                                               
the hearing  process, and  confidentiality concerns.  It includes                                                               
provisions  for exemptions,  foreign insurers  and immunity.  The                                                               
division  is   updating  the  risk-based  capital   and  the  new                                                               
standards are effective January 1,  2016. These changes appear in                                                               
the first eight pages of the bill and amend chapter 14 in AS 21.                                                                
1:23:20 PM                                                                                                                    
MS.  WING-HEIER said  the second  part  of the  bill updates  the                                                               
insurance holding company chapter in  AS 21 to reflect the status                                                               
or organizational structure of holding  companies, and looking at                                                               
what a holding company may  have besides an insurance company. If                                                               
there  is more  than one  insurance company  within that  holding                                                               
company,  it  would be  possible  to  see  the finances  of  each                                                               
company  to  see that  each  can  stand on  its  own  and is  not                                                               
subsidized  by   another  company.  She  displayed   and  briefly                                                               
reviewed the following points:                                                                                                  
   · Prior to the 2010 model revisions, the model law focused on                                                                
     protecting  the solvency  of  insurers  within an  insurance                                                               
     holding company  system, by monitoring  transactions between                                                               
     insurers  and   their  affiliates,  dividends   declared  by                                                               
     insurers and acquisitions of insurers.                                                                                     
   · The model pertains to subsidiaries of insurers, acquisition                                                                
     of control  or merger  with domestic  insurers, acquisitions                                                               
     involving  insurers not  otherwise covered,  registration of                                                               
     insurers, and standards and management  of an insurer within                                                               
     a holding company system.                                                                                                  
   · The model revisions are aimed at assessing the "enterprise                                                                 
     risk"  within the  entire insurance  holding company  system                                                               
     (including the  risk caused  by non-insurer  affiliates) and                                                               
     determining the  impact of  such risk  upon the  solvency of                                                               
     insurers within the insurance group.                                                                                       
   · To accomplish this goal, the revisions enhance a chief                                                                     
     insurance  regulator's ability  to  supervise the  insurance                                                               
     group by  mandating reporting  of information  regarding the                                                               
     solvency  and risk  of an  insurer's non-insurer  affiliates                                                               
     and allowing examination of such entities.                                                                                 
   · This portion of the bill incorporates changes made to Model                                                                
     Law 440, Model Insurance Holding Company System Regulatory                                                                 
CHAIR COSTELLO asked if the  information about companies within a                                                               
holding  company  is  sent  to  the  division  in  hard  copy  or                                                               
available online.                                                                                                               
MS. WING-HEIER  replied there  are some aspects  that have  to be                                                               
reported to the division. With  the amendments, insurers will now                                                               
have  to  report  to  the  division  through  a  risk  management                                                               
framework called  an own  risk solvency.  The division  also does                                                               
physical financial examinations of its insurers each year.                                                                      
1:24:44 PM                                                                                                                    
MS. WING-HEIER discussed risk management  and owner risk solvency                                                               
assessment outlined  in the new  chapter AS 21.23.  She explained                                                               
that it  puts the onus  on the  insurance companies to  report to                                                               
the division  on confidential matters involving  their enterprise                                                               
risk management. She reviewed the following points:                                                                             
   · This new model requires insurers to maintain a risk                                                                        
     management framework and complete an ORSA Summary Report to                                                                
     be filed with the chief insurance regulator of the                                                                         
     domiciliary state, unless exempt.                                                                                          
   · The confidential filing summarizes the insurer's or group's                                                                
     risk management framework, assessment of risk exposures,                                                                   
    group risk capital and prospective solvency assessment.                                                                     
   · These reports represent a proactive approach by providing                                                                  
     chief insurance regulators with an additional tool to                                                                      
     evaluate the prospective solvency of an insurer.                                                                           
   · This portion of the bill adopts Model Law 505, Risk                                                                        
     Management And Own Risk And Solvency Assessment Model Act.                                                                 
CHAIR  COSTELLO  asked  if  she   and  the  division  staff  sign                                                               
confidentiality agreements.                                                                                                     
MS. WING-HEIER  answered that confidentiality  is built  into the                                                               
insurance  statutes  in AS  21.06.060.  The  bill references  the                                                               
current standards.                                                                                                              
CHAIR  COSTELLO  asked  how  that  applies  to  individual  state                                                               
MS. WING-HEIER  replied it  would apply  to all  employees within                                                               
the division and all division contractors.                                                                                      
She reviewed the updates in  chapter 27 relating to the operating                                                               
requirements for  controlling insurance producers.  She explained                                                               
that it  sets out the  parameters for  the owner of  an insurance                                                               
company  who  is also  selling  the  insurance of  the  insurance                                                               
company. The  amendments dictate  when to  draw the  line between                                                               
the owner  and agent of  an insurance company. She  displayed the                                                               
following points:                                                                                                               
   · There are situations in which a producer soliciting,                                                                       
     negotiating or procuring the making of an insurance                                                                        
     contract on behalf of an insured also controls directly or                                                                 
     indirectly the insurance company.                                                                                          
   · In such situations, additional guidelines for business                                                                     
     between controlled insurers and controlling producers are                                                                  
     necessary for fiduciary and oversight reasons.                                                                             
   · This model requires specific contract provisions to be                                                                     
     contained   in   controlling   producer/controlled   insurer                                                               
   · This portion of the bill incorporates amendments to Model                                                                  
     Law 325, Business Transacted With Producer Controlled                                                                      
     Property/Casualty Insurer Act.                                                                                             
SENATOR STEVENS  asked if she  can deny insurance  companies from                                                               
doing business in Alaska.                                                                                                       
MS. WING-HEIER answered yes.                                                                                                    
SENATOR STEVENS referenced  her duty to protect  the consumer and                                                               
asked  if she  looks at  more than  just solvency  in determining                                                               
whether or not an insurance company can do business in Alaska.                                                                  
MS.  WING-HEIER  explained  that  for  a  company  to  receive  a                                                               
certificate of  authority to conduct  business within  the state,                                                               
it has to meet certain  financial solvency requirements. After it                                                               
is allowed to  do business, it is monitored by  best practices to                                                               
ensure that consumers are treated fairly.                                                                                       
CHAIR COSTELLO  asked for  the rationale  for including  the NAIC                                                               
model Risk  Management and Own  Risk and Solvency  Assessment Act                                                               
in a  new chapter.  She asked  if it  was uncommon  to add  a new                                                               
chapter and questioned whether it was needed.                                                                                   
MS.  WING-HEIER explained  that the  NAIC model  law provides  an                                                               
opportunity  for  the  division  as  financial  examiners  to  be                                                               
proactive looking forward 3-5 years  at what an insurance company                                                               
may be planning regarding  acquisitions, corporate governance and                                                               
potential  growth.  Under  the current  procedure  the  financial                                                               
examination is looking back, which  only allows an opportunity to                                                               
be reactive. She  acknowledged that while it's rare to  add a new                                                               
chapter, it's not unheard of.                                                                                                   
CHAIR COSTELLO  asked if a particular  situation precipitated the                                                               
MS. WING-HEIER  answered no  and added that  the new  chapter was                                                               
created  because it  didn't particularly  fit within  any of  the                                                               
existing chapters.                                                                                                              
1:31:49 PM                                                                                                                    
SENATOR ELLIS asked her position  on rate review authority by the                                                               
Division of Insurance.                                                                                                          
MS.  WING-HEIER replied  the division  has rate  review authority                                                               
over most  insurance products that  come into the state  and they                                                               
take  this  seriously. They  have  a  consulting actuary  and  an                                                               
actuary  on  staff.  The  reviews are  done  very  carefully  and                                                               
according to a standard to  ensure that the consumer isn't paying                                                               
too much or  too little. "[The rate] has to  come through so many                                                               
days  in advance,  we respond,  they cannot  be inadequate,  they                                                               
cannot be excessive and they  cannot be unfairly discriminatory."                                                               
Some people  think these terms  are ambiguous because  it depends                                                               
on perspective,  but when  she looks  at a  rate she  follows the                                                               
statute and  is looking at  whether it makes the  company solvent                                                               
without being excessive.                                                                                                        
SENATOR ELLIS  discussed the sentiment among  some legislators in                                                               
years past that previous directors  of insurance did just cursory                                                               
reviews  of the  filings and  requests from  insurance companies,                                                               
particularly  with regard  to health  insurance. He  related that                                                               
several years ago he was  confounded when then insurance director                                                               
Linda Hall  turned down federal  funds to allow states  to figure                                                               
out why  consumers were  being charged  certain rates  for health                                                               
insurance. He said  she may have been acting at  the direction of                                                               
the governor,  but it was  almost willful ignorance to  turn down                                                               
the ability to dig into the facts  and come up with an answer for                                                               
consumers.  He encouraged  Ms. Wing-Heier  take advantage  of any                                                               
opportunity to learn  the facts about why  health insurance costs                                                               
in Alaska are so high.                                                                                                          
MS. WING-HEIER said the point is well taken.                                                                                    
1:37:36 PM                                                                                                                    
SENATOR  MEYER  asked  if  the  insurance  market  in  Alaska  is                                                               
MS.  WING-HEIER  replied  it  is competitive  in  some  lines  of                                                               
business such as  auto and homeowner, but not  others. The market                                                               
in health care is limited and it is not competitive.                                                                            
SENATOR  MEYER  asked if  she  gives  approval when  one  company                                                               
transfers its customers  to another because of  bankruptcy, or if                                                               
it happens automatically.                                                                                                       
MS. WING-HEIER replied  the matter goes through  the division but                                                               
they  don't  approve  it.  The   claims  go  through  either  the                                                               
guarantee  association  for  life  and health  or  the  guarantee                                                               
association for  property and  casualty. The  insurance companies                                                               
and  the consumers  end up  paying  the claims  of the  insolvent                                                               
insurers. These provisions are in the insurance statutes.                                                                       
1:39:38 PM                                                                                                                    
SENATOR GIESSEL asked  her thoughts as to whether  it would lower                                                               
health insurance costs if Alaskans  were able to buy their health                                                               
insurance across state lines or  if insurance rates are set based                                                               
on cost.                                                                                                                        
MS. WING-HEIER  said she  has been  involved in  several meetings                                                               
with  the  Department  of  Health  and  Social  Services  (DHSS),                                                               
Department of  Labor and Workforce  Development (DOLWD),  and the                                                               
Department  of Administration  to look  at  the issue  in a  more                                                               
global  way because  it is  an issue  that the  state faces  as a                                                               
whole. It  is not a  silo. The cost of  health care in  Alaska is                                                               
very high  and someone is  paying for  it through one  program or                                                               
1:41:57 PM                                                                                                                    
SENATOR ELLIS  requested the committee  keep track of  this issue                                                               
and have  an ongoing  dialog with the  director because  this has                                                               
been a topic  of concern for many years. He  asked Ms. Wing-Heier                                                               
if  it is  her view  that health  insurers do  not want  to write                                                               
business in  Alaska because  it is  a very  small market  and the                                                               
cost of health  care is so high  it is out of line  with the rest                                                               
of the country.                                                                                                                 
MS.  WING-HEIER agreed  that Alaska  is  a small  market and  the                                                               
costs of health care are very high.                                                                                             
SENATOR  ELLIS reiterated  his request  that  the committee  work                                                               
with the director  to examine the reasons for  the exorbitant and                                                               
escalating health care costs in  Alaska that are driving both the                                                               
private market and public budgets.                                                                                              
CHAIR  COSTELLO said  she  took  note of  the  request and  would                                                               
follow up.                                                                                                                      
SENATOR GIESSEL asked  Ms. Wing-Heier if she  was also partnering                                                               
with the  health care commission,  which has done studies  on the                                                               
topic of health care in Alaska.                                                                                                 
MS. WING-HEIER answered yes through  the Department of Health and                                                               
Social Services.                                                                                                                
1:44:18 PM                                                                                                                    
CHAIR COSTELLO  asked if transparency  can be legislated  so that                                                               
consumers will  know the cost  of health care services  when they                                                               
are shopping.                                                                                                                   
MS.  WING-HEIER replied  the Affordable  Care Act  has provisions                                                               
where  the costs  have  to be  public now.  By  statute rates  in                                                               
Alaska have to be public the day they are effective.                                                                            
1:46:47 PM                                                                                                                    
CHAIR COSTELLO  related her experience calling  different doctors                                                               
in Fairbanks  and Anchorage  to find  out what  it would  cost to                                                               
treat  a broken  arm.  The estimates  ranged  widely. She  voiced                                                               
frustration  on behalf  of Alaskans  who  have no  idea what  the                                                               
final cost  will be for a  procedure and they keep  getting bills                                                               
from people they didn't know had a role in the process.                                                                         
MS. WING-HEIER said she'd take that under advisement.                                                                           
CHAIR  COSTELLO  asked  if  she   would  provide  a  color  coded                                                               
sectional  showing  the  new chapter,  the  sections  needed  for                                                               
accreditation, the  model legislation,  and a combination  of the                                                               
MS. WING-HEIER agreed.                                                                                                          
1:47:50 PM                                                                                                                    
CHAIR COSTELLO found no public testimony and closed it.                                                                         
1:48:07 PM                                                                                                                    
CHAIR COSTELLO announced that she  would hold SB 107 in committee                                                               
for further consideration.                                                                                                      

Document Name Date/Time Subjects
CSSB 58 - Version N.pdf SL&C 4/11/2015 11:00:00 AM
SB 58
CSSB 58 Version N sponsor statement.pdf SL&C 4/11/2015 11:00:00 AM
SB 58
CSSB 58 Version N sectional.pdf SL&C 4/11/2015 11:00:00 AM
SB 58
SB 107.PDF SL&C 4/11/2015 11:00:00 AM
SB 107
SB 107 - Sponsor Statement.pdf SL&C 4/11/2015 11:00:00 AM
SB 107
SB 107 - Sectional Analysis.pdf SL&C 4/11/2015 11:00:00 AM
SB 107
SB 107 - Presentation.pdf SL&C 4/11/2015 11:00:00 AM
SB 107
SB 107 - Accreditation Brief.PDF SL&C 4/11/2015 11:00:00 AM
SB 107
SB 107 - NAIMC Support.PDF SL&C 4/11/2015 11:00:00 AM
SB 107
SB 107 - Financial Regulation Standards & Accreditation Program.pdf SL&C 4/11/2015 11:00:00 AM
SB 107