Legislature(2001 - 2002)
04/20/2001 03:25 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 20, 2001
3:25 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 128
"An Act relating to employment of certain minors in
agriculture."
- HEARD AND HELD
HOUSE BILL NO. 184
"An Act relating to the business of insurance, including changes
to the insurance code to implement federal financial services
reforms for the business of insurance and to authorize the
director of insurance to review criminal backgrounds for
individuals applying to engage in the business of insurance;
amending Rule 402, Alaska Rules of Evidence; and providing for
an effective date."
- HEARD AND HELD
HOUSE BILL NO. 106
"An Act relating to the authorizations for state financial
institutions; relating to confidential financial records of
depositors and customers of certain financial institutions;
relating to the Alaska Banking Code, Mutual Savings Bank Act,
Alaska Small Loans Act, and Alaska Credit Union Act; and
providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 128
SHORT TITLE:EMPLOYMENT OF MINORS IN AGRICULTURE
SPONSOR(S): REPRESENTATIVE(S)OGAN
Jrn-Date Jrn-Page Action
02/14/01 0317 (H) READ THE FIRST TIME -
REFERRALS
02/14/01 0317 (H) L&C
02/14/01 0317 (H) REFERRED TO LABOR & COMMERCE
03/26/01 (H) L&C AT 3:15 PM CAPITOL 17
03/26/01 (H) Heard & Held; Assigned to
Subcommittee
MINUTE(L&C)
04/20/01 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 184
SHORT TITLE:INSURANCE CODE AMENDMENTS
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
03/14/01 0588 (H) READ THE FIRST TIME -
REFERRALS
03/14/01 0588 (H) L&C, JUD
03/14/01 0589 (H) FN1: ZERO(CED)
03/14/01 0589 (H) GOVERNOR'S TRANSMITTAL LETTER
04/04/01 (H) L&C AT 3:15 PM CAPITOL 17
04/04/01 (H) Heard & Held
MINUTE(L&C)
04/20/01 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
RICHARD MASTRIANO, Director
Division of Labor Standards & Safety
Department of Labor & Workforce Development
PO Box 107021
Anchorage, Alaska 99510
POSITION STATEMENT: Testified on HB 128.
REPRESENTATIVE SCOTT OGAN
Alaska State Legislature
Capitol Building, Room 108
Juneau, Alaska 99801
POSITION STATEMENT: Testified as sponsor of HB 128.
BOB LOHR, Director
Division of Insurance
Department of Community & Economic Development
3601 C Street
Anchorage, Alaska 99503
POSITION STATEMENT: Explained the changes made in the proposed
CS for HB 184.
KATIE CAMPBELL, Life and Health Actuary
Division of Insurance
Department of Community and Economic Development
PO Box 110805
Juneau, Alaska 99503
POSITION STATEMENT: Answered questions on HB 184.
JOHN GEORGE, Lobbyist
3328 Fritz Cove Road
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the American Council
of Life Insurance, American Family Life Insurance Company, and
National Association of Independent Insurers on HB 185.
KATHERINE ALTENEDER
(No address provided)
Eagle River, Alaska 99577
POSITION STATEMENT: Testified on behalf of herself on HB 184.
ACTION NARRATIVE
TAPE 01-63, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:25 p.m. Members
present at the call to order were Representatives Murkowski,
Halcro, Meyer, Kott, and Rokeberg. Representatives Crawford and
Hayes joined the meeting as it was in progress.
HB 128-EMPLOYMENT OF MINORS IN AGRICULTURE
CHAIR MURKOWSKI announced that the first order of business would
be HOUSE BILL NO. 128, "An Act relating to employment of certain
minors in agriculture."
Number 0073
REPRESENTATIVE ROKEBERG made a motion to adopt the proposed
committee substitute (CS) for HB 128, version 22-LS0373\J,
Cramer, 4/6/01, as a work draft. There being no objection,
Version J was before the committee.
REPRESENTATIVE ROKEBERG, speaking as the chair of the
subcommittee assigned to work on HB 128, explained that the
proposed CS provides for a method [referenced on page 2,
paragraph (1)] advancing the approval by the Department of Labor
& Workforce Development to meet the requirements. [Paragraph
(2)] allows an employer to hire a minor with a written consent
from the parents or guardian within three days after [the minor]
begins working. He noted that the department had come up with
substitute language [included in packets, most of which are
incorporated in Version J].
Number 0303
RICHARD MASTRIANO, Director, Division of Labor Standards &
Safety, Department of Labor & Workforce Development, testified
via teleconference. He stated that the department's proposed
language makes it mandatory [under paragraph (1)] for the
employer to inform the department of the job duties the minor
would be performing, and gives the employer seven days in which
to file the written consent from the parents. He explained that
[the department] could then make the employer aware if he or she
is employing a child in something that may be considered
hazardous or may cause a problem for the employer, particularly
with the hours of work or number of days the child may be asked
to work. [The department's proposed language] eliminates
paragraph (2) from the original bill by saying it is mandatory
that [the employer] notify the department in order to track the
job duties the [department] has approved.
MR. MASTRIANO stated that the second change is that employers
need to submit written consent for minors working in the
physical presence of the parents; however, the employer should
still contact the department to ensure that the employee can
actually perform the duties. He said [the department's] concern
is that parents may allow kids to do some work without the
knowledge that it may be a violation of either state or federal
law. He remarked that the third change from is that written
consent from a parent or legal guardian filed under (c) of
Section 2 is valid as long as the minor performs the duties that
had been approved by the employer. Originally, he said, [it was
valid] for one year; however, most kids don't stay at a job for
a year. [Version J] has also changed the requirement that both
parents must sign [the consent] to one parent or one legal
guardian. He noted that the custodial parent and a court-
appointed legal guardian can sign for the child. [The
department] will have to devise some sort of tracking system for
approved job duties and approved employers. Once an employer
has gotten a job approved, the only thing he or she would have
to do is send in the parental consent form within seven says.
REPRESENTATIVE ROKEBERG stated that during the subcommittee
meeting a draft fiscal note of $214,000 was submitted by the
department. He asked Mr. Mastriano whether adopting the
department's changes would bring the fiscal note down to zero.
MR. MASTRIANO responded that [the fiscal note] would not be
small, because one of the problems inherent in the proposed
system is that there would be more field enforcement, and [the
department] would have to develop a tracking system. Right now
[the department] tracks minors by taking a copy of the work
permit and, if available, the minor's proof of age. For
example, an investigator could receive a call from an employee,
parent, or the general public saying, "We've seen a kid [who]
looks awfully young working at this particular establishment.
Do you know if they have a work permit?" [The department] could
then pull up the permit and see the age of the kid. He stated
that there would be an investigator at each one of the regional
offices.
Number 0942
REPRESENTATIVE HALCRO stated that this is a huge jump. [The
committee] started with a bill that would have allowed certain
minors to work in agriculture. At that point [the committee]
heard testimony from one man who said his main problem was that
he didn't have a decent fax line; therefore, he couldn't get the
reports back and forth. Representative Halcro asked Mr.
Mastriano whether he had met with the group of farmers.
MR. MASTRIANO responded that he talked with [representatives of
nine to ten farms] with regard to that [committee meeting]. Two
farmers expressed that they didn't realize they were even
required to have a work permit, and asked that permits be
forwarded to them. The individual who expressed concern at the
[committee meeting] said it was his intent to continue using the
work permit form, but would not have it approved prior to the
minor's starting to work. Mr. Mastriano said he is concerned
that by doing that, the man could leave himself liable, since
there are a lot of duties that fall under hazardous orders,
particularly for minors 14 and 15 years old.
REPRESENTATIVE HALCRO asked whether the same farmer who gave
testimony in support of the bill was the only one who said he
had a problem with the current system.
MR. MASTRIANO said he was correct. He noted that the man was
the chairman of the meeting. He added that work-permit
requirements probably were not of major concern to [the
farmers], because most were trying to deal with hoof and mouth
disease.
REPRESENTATIVE HALCRO asked Mr. Mastriano how he currently
handles work permits for industries other than agriculture, and
what the turnaround time [of approving the work permits] is for
the other industries.
Number 1188
MR. MASTRIANO answered that he uses the same method of work
permits for other industries. As to the turnaround time, he
stated that ordinarily [the department] can turn them around in
one to three hours. In a busy time, it can be done within 24
hours. For example, in the summertime when the fish processors
start hiring, kids tend to jump from job to job, and the
[department] gets a lot of faxes overnight. [The department]
can turn those around by the close of business that day.
REPRESENTATIVE ROKEBERG asked Mr. Mastriano what the fiscal note
requirement would be. He stated that the provisions of the
proposed CS as well as the suggestions [from the department]
were in part designed to save the department money. He said he
agrees that having field inspection would perhaps provide a
higher level of protection, but the bill doesn't require more
field instructors.
MR. MASTRIANO responded that the current work permit indicates
to [the department] the rate of pay, the hours the child is
going to work, and the duties. He stated that if the consent
form were to have all of this information on it, then there
wouldn't be a large fiscal impact, other than [the department's]
approving all of it.
Number 1434
CHAIR MURKOWSKI asked Mr. Mastriano whether he is suggesting
that before the department grants the approved job duties for
there would be a site inspection.
MR. MASTRIANO answered that she was correct. He said usually
before a child starts working [the department] checks the work
permit, and if the duties are something that the child of a
particular age is not allowed to do, the work permit is denied
or the employer is contacted. Currently, the child is not
supposed to start working until the [employer] gets the approved
work permit back. As for the inspection, the only time [the
department] would [do a site inspection] is when it got the
consent forms saying what the individual kids would be doing.
CHAIR MURKOWSKI remarked that it really doesn't make any sense
to give the advanced approval if [the department] is still going
to do an on-site enforcement making sure the kids are doing what
the employer said they were doing.
REPRESENTATIVE ROKEBERG stated that he assumed there would only
be an inspection if there was some hazardous duty and/or
material being used. He asked, if he owned a restaurant and was
going to hire a kid to flip hamburgers, whether [the department]
would inspect the premises.
MR. MASTRIANO answered yes.
REPRESENTATIVE ROKEBERG asked whether that happens now.
MR. MASTRIANO answered yes.
REPRESENTATIVE ROKEBERG asked why, then, there is a fiscal note.
MR. MASTRIANO explained that [the department] is familiar with
fast-food restaurants and knows that [the employer] is going to
list the hours the individual works, the amount of money being
paid, and the equipment that is going to be used. However, if a
15-year-old is going to work at a private business, [the
department] needs to go out and make sure that the 15-year-old
is cooking in plain view of the public so that it's not
considered a hazardous order.
Number 1625
REPRESENTATIVE SCOTT OGAN, Alaska State Legislature, sponsor of
HB 128, testified via teleconference. He stated that he is
perplexed because there are 11,000 faxes that [the department]
gets, and they have the same amount of information. He said
this looks to him like an opportunity for the Department of
Labor and Workforce Development to grab a few extra positions.
He noted that this is one of the pieces of legislation that the
Alaska's Farmer Association requested.
REPRESENTATIVE ROKEBERG stated that this is a problem for every
employer in the state and every person trying to get a job.
REPRESENTATIVE CRAWFORD remarked that he was leaning toward
favoring the bill when it talked about family farms. However,
this has been expanded to all sorts of industries, and there are
a lot of dangerous jobs out there that parents and other people
are having kids do. He shared that he used to flip burgers.
When he was 16 years old, the nephew of his boss was draining
the grease one night and dropped the pan. It burned his feet
and he was crippled for life. He said he had an ironworker
friend who had his two boys, ages 16 and 15, put up a pole
building. One boy fell off the apex of the building onto the
concrete and "scrambled" his brains for the rest of his life.
He stated that the reason there are child labor laws is because
kids were getting hurt. He said he heard earlier that there
were 66,000 kids who were injured in the line of work last year.
He remarked that he is now opposed to this bill.
REPRESENTATIVE HAYES stated that he thinks the bill takes back
all the child welfare laws. He remarked that from the research
and the testimony received in the committee, this bill is
centered on a fax machine. He said he doesn't feel comfortable
rewriting all the statutes and regulation over that type of
testimony.
Number 1866
REPRESENTATIVE HALCRO asked Mr. Mastriano what would happen with
a company that does not have preapproval on file with [the
department].
MR. MASTRIANO responded that if [the department] received the
notification, an investigator would be sent out to ensure that
the individual is not in a hazardous occupation, and discern
what he or she is being paid and how many hours he or she is
working to make sure the [employer] is complying with the law.
REPRESENTATIVE HALCRO stated that it seems to him that [the
department] is going to make that trip either way, whether or
not [the employer] has preapproval. He remarked that if there
are companies that are preapproved and [the department] has
already gone out and inspected the worksite, that is a trip [the
department] will not have to make once the application comes in
and is approved. Therefore, only those that don't get
preapproval will have to be inspected.
REPRESENTATIVE ROKEBERG suggested that there is going to be a
lot more safety for kids if preapproval does take place.
REPRESENTATIVE HALCRO commented that when [the department]
arrives at a business requesting preapproval, the inspector can
then point out possible occupations where minors are working
that are not safe, and therefore make recommendations for the
workplace to be even safer.
Number 2012
REPRESENTATIVE HAYES stated that he doesn't understand the
preapproval. He asked if that means employees are already in
place.
REPRESENTATIVE ROKEBERG responded that with a preapproved site,
every time someone is hired [the employer] has to submit the
form back to the department. Rather than have the department to
get the commissioner to sign it, it will be file, unless the
form shows that there is a duty that needs to be followed up on.
Right now, if there is a problem that comes up on the permit,
[the department] denies the permit. He submitted that that is
what's clouding the system.
REPRESENTATIVE MEYER asked which version the fiscal note goes
to, because what Representative Rokeberg is suggesting would
actually reduce the fiscal note.
REPRESENTATIVE ROKEBERG responded that the fiscal note is for
Version J. He stated that [the department] wants to hire three
more inspectors.
REPRESENTATIVE HALCRO stated:
Let's say that I owned a fast-food restaurant. I'm
going to be in a position to hire ... minors. So they
come out and take a look at my facility and say, "All
right, you can have minors working at the cash
register, at the drive-through window, you can even
have them work at the shake machines, but you cannot
have them at the fryer or the deep fryer. ... So then,
as an employer, I know upfront ... what positions I
can put these minors in. In addition, I've also been
warned about those positions that I cannot. And it
makes me a better operator, because then I have a
better grasp of the law in what my limits are. And
they don't have to show up again, unless, God forbid,
I have an accident.
Number 2181
MR. MASTRIANO remarked that the way to eliminate the situation
is when the employer calls in for a job approval. If the
employer says that this job will only be done by 14- and 15-
year-olds, and the [the department] approves the job, it would
go back to the present system. If [an employer] says he or she
wants to hire minors to cook hamburgers, the [department] will
approve that, but won't know whether the kids will be 14 years
old or 17 years old. He stated that if [the committee] wants to
tie the job positions to age limits, the [department] doesn't
have a problem doing that. The fiscal note would be reduced
substantially, but the duties performed for the various age
limits are one of the things [the department] looks at.
REPRESENTATIVE HALCRO stated that as he understands the process,
that is already on the work permit. He asked whether [the
employer] has to clearly define what the minor is going to be
doing and what equipment he or she would be working around.
MR. MASTRIANO answered that he was correct. He said that saves
[the department] from going out on a more frequent basis,
because once [the department] does an inspection, it knows, for
example, what the various jobs are and whether a 14- or 15- or
17-year-old can perform those types of [duties].
Number 2236
REPRESENTATIVE CRAWFORD remarked that currently, the kids come
into the Department of Labor and Workforce Development and apply
for the work permit; therefore, the [department] knows the age
of the kid.
CHAIR MURKOWSKI remarked that [the committee] had been working
on the bill for almost an hour, and she does not think they have
made any headway. She said she is going to give it back to
Representative Rokeberg, the chair of the subcommittee, to see
whether he can work it through a little more based on the
comments from the department.
[HB 128 was held over.]
HB 184-INSURANCE CODE AMENDMENTS
[Contains discussion of HB 106]
CHAIR MURKOWSKI announced that the final order of business would
be HOUSE BILL NO. 184, "An Act relating to the business of
insurance, including changes to the insurance code to implement
federal financial services reforms for the business of insurance
and to authorize the director of insurance to review criminal
backgrounds for individuals applying to engage in the business
of insurance; amending Rule 402, Alaska Rules of Evidence; and
providing for an effective date."
Number 2360
REPRESENTATIVE HALCRO made a motion to adopt the proposed
committee substitute (CS) for HB 184, version 22-GH1025\F, Ford,
4/19/01, as a work draft. There being no objection, Version F
was before the committee.
BOB LOHR, Director, Division of Insurance, Department of
Community & Economic Development, came forth and explained the
changes between the original version and the proposed CS. He
stated that on page 2, line 2, the word "otherwise" has been
deleted. On page 4, paragraph (9), lines 14 to 21, is a new
paragraph that says it is OK for managerial and administrative
employees of a company to operate without an insurance license.
He remarked that on page 18, lines 24 to 27, is a new section
that allows commission-sharing overrides. He noted that this
language was in the NAIC (National Association of Insurance
Commissioners) model bill dealing with the Gramm-Leach-Bliley
Act (GLBA), but it was not in the original version of HB 184.
On page 23, after line 8, Section 39 was added, which deals with
surplus lines bonding. Currently, he said, a bond of $200,000
is required of a surplus lines broker. According to [GLBA], any
additional requirements placed on an insurance sales person, an
agent, or broker that are not placed on residents could mean
that a state would not be reciprocal.
TAPE 01-63, SIDE B
Number 2484
MR. LOHR stated that the [division] feels there are important
consumer protections in the bonding requirements for surplus
lines, and would like to do anything possible to maintain that
requirement and make the argument at the national level that
this is a legitimate consumer protection that should not make a
state nonreciprocal. In the event that the argument fails,
this change would allow the director to have the bonding
requirement by regulation, but would not require it. Therefore,
the effect of the change in the proposed CS would be to make
optional the requirement for the surplus lines bond.
CHAIR MURKOWSKI asked how [the bonding requirement] can be
optional if it is required.
MR. LOHR responded that currently, under law, it is required.
With this amendment, proposed in the CS on lines 10 and 11 of
page 23, it would say that "if required by the director by
regulation", then the bond would be maintained in a form
acceptable to the director. He explained that if [the division]
adopted a regulation by the effective date of this section, then
the requirement for the bond would continue. If [the
department] didn't adopt a regulation requiring the surplus
lines bond by that deadline, then the requirements would no
longer be there.
MR. LOHR continued, stating that on page 25, line 14, the phrase
"or insured" has been deleted from two places. It has also been
deleted from line 17. On the same page, line 31, there is a
correction to the citation. The original bill said "provided in
15 U.S.C 6801-6805" and has been corrected to read "15 U.S.C.
6801-6809". He noted that that is the correct citation for
Title V of GLBA, and is the privacy provision for that
legislation.
REPRESENTATIVE ROKEBERG asked whether there is a definition of
"personal information records" within the bill.
MR. LOHR responded that there is a definition of "personal
information" in GLBA.
Number 2336
KATIE CAMPBELL, Life and Health Actuary, Division of Insurance,
Department of Community and Economic Development, came forth and
stated that "personal information" is a defined term within the
federal bill - GLBA - and is broad.
REPRESENTATIVE ROKEBERG asked whether there is an issue about
what can and cannot be disclosed.
MR. LOHR answered that the approach in the bill is to direct the
division to come up with regulations on privacy. The NAIC
model, which was a previous reference point for what [the
division] should do, has been changed in the bill to a reference
to GLBA - on page 26, line 8, of the bill. He added that GLBA,
Title V is the privacy provision of that Act and is a starting
point for regulations. In either case, federal law under Title
V, of GLBA clearly allows states to go beyond the privacy
provisions adopted by federal regulators, if that's the wish of
a state. If [a state] does so, unlike for most federal
preemption law, the state provision will be upheld. A stronger,
more protective privacy provision in a state regulation adopted
under GLBA will be upheld if it is found to be more protective
of privacy than an equivalent provision under the federal
regulations that have been adopted under the same title.
REPRESENTATIVE ROKEBERG stated that because of the adoption of
the so-called Alaska patients' bill of rights [HB 211], there
are strong and restrictive abilities to release medical
information. He asked, when that was passed [during the
previous session], whether a de facto opt-in situation was set
up.
MR. LOHR answered that the provision in HB 211, which takes
effect July 1, 2001, goes beyond opt-in by prohibiting the
sharing of financial information. Therefore, it is inconsistent
with the kinds of approaches that have been discussed in both
the banking bill and the insurance bill with respect to privacy,
and the kind of provisions found in the national models that
deal with privacy.
REPRESENTATIVE ROKEBERG remarked, "Albeit, it's more consistent
with our state's constitution."
MR. LOHR responded that he believes that's correct.
REPRESENTATIVE ROKEBERG asked whether HB 211 will be more
restrictive than anything else [the committee] will adopt.
MR. LOHR answered that he believes that's the case, but would
like to double-check with counsel, since HB 211 predated the
application of GLBA - it was there before the federal
regulations were adopted. He remarked that there is a timing
question in his mind, but in terms of the thrust of Title V of
GLBA upholding stronger privacy provision, he said he believes
Representative Rokeberg's assessment is correct.
Number 2082
REPRESENTATIVE ROKEBERG asked, since [the legislature] is going
to grant [the division] the ability to draft the regulations,
how [the division] will handle taking policy directions from
this legislation and the existing statutes.
MR. LOHR replied that the primary guidance would come from [HB
184]; however, the fact that this bill directs [the division] to
adopt regulations would not in any way authorize [the division]
to adopt a regulation inconsistent with existing statute.
REPRESENTATIVE ROKEBERG remarked that that is precisely his
point. When [the division] is formulating the regulations, he
said it seems to him that it will have to take the HB 211
requirements into consideration. He asked whether those need to
be looked at.
MR. LOHR responded that [the division] has given some thought to
the question of how to deal with the existing statutory
provision and how to interpret it. He said that's something
that would be suitable for discussion in the committee.
REPRESENTATIVE ROKEBERG stated that this is a situation whereby
[the committee] is giving the division preauthority to draft
regulations. If there are existing statutes in place, [the
division] will obviously review those in light of the
regulations. He said he thinks that militates toward some
extraordinary, tight privacy regulations. He stated that he is
wondering whether that needs to be lightened up.
Number 1942
REPRESENTATIVE HALCRO asked Mr. Lohr whether he is getting some
feedback from people in the insurance industry similar to what
[the committee] is getting from the banking people with the
banking side of the bill - that they view GLBA as an opportunity
to loosen some of the state's privacy regulations.
MR. LOHR responded that [the division] is not hearing that as
much as how the industry would like a consistent national
standard.
REPRESENTATIVE CRAWFORD stated that he doesn't understand why
[the committee] would want to put this in regulation and not in
statute, if the next insurance commissioner could rewrite the
regulation. He asked whether it is not written in stone when it
is put in regulation.
MR. LOHR responded that that's correct; however, the regulation
[the new commissioner] would have to rewrite would have to be
consistent with, but no less restrictive than, GLBA, because
those are statutory standards.
REPRESENTATIVE CRAWFORD stated that this bill gets away from
what originally was in statute, as far as opt-in and opt-out, by
having a less restrictive point of view.
MR. LOHR remarked that the current state of the law for
insurance code is that there is no protection for privacy
whatsoever. From that perspective, any effort to establish a
regulatory process or a statutory standard, which protects
financial privacy and health privacy in the hands of insurance
companies, would be a major step forward.
Number 1753
REPRESENTATIVE ROKEBERG stated that he thinks because of the
Administrative Procedure Act, those regulations are law and are
hard to change. Nevertheless, he asked whether there is
anything in the bill that gives [the division] policy direction
on that particular level of privacy.
MR. LOHR responded that the closest he could come is with the
"consistent with, but no less restrictive than, GLBA Title V"
language. That sets a floor, but is essentially what the
federal regulations already provide. It could go anywhere above
that, up to and including the absolute prohibition that is in HB
211, in terms of sharing. He stated that if there were no
legislative action taken this year in Alaska, then the default
standard would be that of the federal regulations, and would be
opt-out for financial information.
REPRESENTATIVE ROKEBERG asked whether there is no opt-in in the
default standard in the personal information area of insurance.
MS. CAMPBELL responded that in the preamble to the federal
regulation, regulators considered any information that a person
provides in his or her application in the process of getting a
financial product to be considered within the purview of GLBA.
That would include health and financial information.
REPRESENTATIVE ROKEBERG asked whether that is shared with
affiliates.
MS. CAMPBELL answered that under GLBA sharing among affiliates
is not restricted - it is restricted for nonaffiliated third
parties.
REPRESENTATIVE ROKEBERG stated that he is concerned with giving
[the division] a "blank check" and not giving [the committee]
some policy direction.
Number 1611
CHAIR MURKOWSKI remarked that Mr. Lohr had indicated that the
goal is to get all of the states at the same level. She stated
that if [the committee] gives the director authority to adopt
that, with this minimum threshold that it has to be consistent
with, but no less restrictive than, GLBA, [the division] could
essentially have an opt-in provision that puts Alaska at a
different place than the other states.
MR. LOHR remarked that he thinks she is correct. He stated that
if HB 211 were not amended as part of this privacy process, he
thinks the division would take that as guidance of the highest
possible privacy standard that had been established for health
information. Unlike the financial information, where there's
been some debate on the health side as being an opt-in provision
as discussed in the NAIC model, there's been relatively little
debate about whether that's appropriate. Most people, he said,
seem to agree with the opt-in standard.
REPRESENTATIVE CRAWFORD stated that it seems to him that there
are bound to be other meetings going on around the country
asking similar questions. He said if the idea here is to get
into compliance with GLBA, but there is still the option to be
stricter, he thinks there will be a lot of states with varying
degrees of regulation. He said he thinks it is going to be
difficult to adopt a nationwide standard that has so much
leeway.
Number 1412
REPRESENTATIVE HALCRO asked what HB 211 is.
REPRESENTATIVE ROKEBERG responded that it is the so-called
patients' bill of rights [passed last year]. He said it had a
small provision on privacy, and he thinks there was a consent
provision.
MS. CAMPBELL remarked that there are several conditions whereby
health information can be released. One of them is with written
consent. Another one is research - if it's needed to reimburse
for a claim.
REPRESENTATIVE ROKEBERG added that there were provisions that
allowed for a day-to-day course of activities, but it strictly
prohibits the release of information without the consent of the
patient. He suggested that [the committee] send a letter of
intent to providing policy guidance to the division as to what
direction [the committee] wants the regulations to go.
CHAIR MURKOWSKI asked Mr. Lohr whether there are more changes.
Number 1263
MR. LOHR responded that on page 27, lines 3 through 10, the
proposed CS deletes the privacy standard from consumer
protections for banking, because it's already covered by GLBA
through the privacy provision on page 26.
CHAIR MURKOWSKI asked whether this gives some additional
guidance in terms of privacy for financial information.
MR. LOHR answered that the specific applicability of the deleted
section, on page 27, referred to banking institutions selling
insurance. Those institutions would be within the definition of
what is covered by the privacy regulation under GLBA. Other
than the fact that it singles out that one group, he said he
doesn't believe it would be any more restrictive or provide any
additional guidance from the legislature to the division about
the privacy provisions.
CHAIR MURKOWSKI asked how this interrelates to HB 106 and
privacy provisions that [the committee] is wrestling with, with
financial institutions.
MS. CAMPBELL responded that this provision deals with the sale
of insurance by these financial institutions, while banking only
deals with the financial product. He said it was very common
for banks in the past to issue credit insurance. This
particular provision is on real property used as collateral for
a loan.
Number 1116
REPRESENTATIVE HALCRO asked Mr. Lohr whether [the division]
deleted the language because of the reference to GLBA in this
bill or in HB 106.
MR. LOHR answered that [the division] has added the reference to
GLBA in this bill on page 26, and has deleted the reference in
this bill to the model privacy regulations adopted by NAIC. He
noted that [the division] has not proposed any changes to HB
106.
REPRESENTATIVE HALCRO asked whether he is correct in saying that
this doesn't tie in to what is being discussed with HB 106.
MR. LOHR answered that he was correct.
REPRESENTATIVE ROKEBERG stated that he thinks they are tied
together by GLBA, and the fact is that now [the committee] has
the phenomenon of bundling affiliations between insurance
companies and banking institutions.
REPRESENTATIVE HALCRO remarked that that is his question,
because [the committee] is considering removing the reference to
GLBA in the banking bill.
REPRESENTATIVE ROKEBERG remarked that these bills have to be
coordinated.
MR. LOHR stated that in terms of the relationship with the
bills, [the division] has tried to coordinate with Mr. Elder
[Director of the Division of Banking, Securities & Corporations]
in terms of the content of his bill and the approach to privacy.
He added that the GLBA reference in HB 184 was suggested to [the
division] by industry; they felt strongly that it was a
preferable reference to the NAIC model.
REPRESENTATIVE HALCRO commented that the bankers want GLBA
because it's far more lenient than existing state statutes.
MR. LOHR noted that in [the division's] case, there is no
standard; therefore, the adoption of a standard would advance
the cause considerably.
Number 0903
REPRESENTATIVE ROKEBERG remarked that he thinks a letter of
[intent] could stipulate as to the consistency of both of the
bills and the fact that [the committee] wants a regulations
policy adopted by both departments. He said he has a lot of
concern about bundling services.
REPRESENTATIVE CRAWFORD stated that he doesn't want to get to
the point at which the bank is the insurance company, and a
person couldn't buy car insurance because the bank doesn't like
his or her credit report. He said he would like to put some
"firewalls" in between these businesses.
MR. LOHR continued, stating that on page 30, line 3, [the
division] added the reference to credit union and the federal
citation, because when credit unions are selling insurance it is
important to make sure that "financial institution" includes
them as well in the definition. On lines 11 and 12 [the
division] added, "'financial institutions' does not include an
insurer". That was always understood, but now it is made
explicit. He stated that on lines 29 and 30, the language
concerning domestic violence has been amended to capture the
compromise that was reached a number of years ago when the
original insurance domestic violence provision was adopted, and
to make sure there was not substantive change accomplished by HB
184. Finally, he said a proposed amendment would deal with the
effective date clause on the surplus lines provision. Currently
it is listed as taking effect July 1, 2001, on page 32, line 12.
The [division] would recommend that the committee consider
making that one year later, or July 1, 2002.
CHAIR MURKOWSKI remarked that the last time the committee heard
this, there was testimony from folks within the industry who had
concerns with some of the issues. She asked whether [the
changes from the division] are what industry has also agreed to.
MR. LOHR responded that all of the amendments were done at the
behest of industry representatives. He said it is [the
division's] understanding that each group that expressed
concerns previously is satisfied with the version of the bill.
Number 0540
JOHN GEORGE, Lobbyist, came forth on behalf of the American
Council of Life Insurance (ACLI), American Family Life Insurance
Company (AFLAC), and National Association of Independent
Insurers (NAII). He said they have worked extensively with the
Mr. Lohr, have come up with compromises, and are prepared to
support the bill.
CHAIR MURKOWSKI stated that during the last go-around Mr.
George's major concern was with the privacy provision. She
asked whether he is comfortable with allowing the director to
implement it by regulation.
MR. GEORGE responded that the compromise was to allow [the
director] to do it by regulation, and to allow [ACLI, AFLAC, and
NAII] to make arguments during the regulatory process as opposed
to setting the NAIC [standard] as a floor. He added that if
regulations are adopted and they find that they don't work, it
is a lot easier to go back and change a regulation than to go
through the legislative process.
REPRESENTATIVE CRAWFORD agreed that it is a lot easier to change
regulations than it is to change statutes. He said [the
legislature] is just trusting that the current commissioner is
going to be looking out for the interest of the consumer and the
interest of the industry on an equal basis.
Number 0403
MR. GEORGE responded that it is the purview of the legislature
to set policy, and there are a number of standards that could be
put on as sideboards, such as having a total prohibition of
release of information, using the NAIC standard or the National
Conference of Insurance Legislators [standard], or adopting
regulations not more restrictive than GLBA.
CHAIR MURKOWSKI remarked that [the committee] was just handed an
article from BNA's Banking Report dated April 16 that talks
about the Gramm-Leach-Blily privacy deadline and what states are
doing. It says many states appear to be moving toward adoption
of the NAIC model regarding privacy. She said 23 states are
leaning this way, including Alaska.
MR. LOHR responded that he believes that would reflect a survey
that was done based on the original version of HB 184.
REPRESENTATIVE ROKEBERG referred to HB 211 and stated that it
does have a provision that says "it's confidential and not
subject to public disclosure - that's any medical or financial
information." He said one exception is the written consent by
the individual. He asked how the HCFA (Health Care Financing
Administration) privacy regulations fit in with the whole
equation.
Number 0141
MS. CAMPBELL responded that the federal regulations will
actually go into effect in 2002, and the health care providers
and health care insurers will have to comply with those
regulations. She said they are opt-in, but there are exceptions
where the information could be released for marketing purposes.
She added that if a state has a stronger standard, those
regulations would not preempt it. Regardless, she said, that is
the floor for health information privacy for all health
insurers.
REPRESENTATIVE ROKEBERG commented that there are so many
regulations and laws.
MR. LOHR responded that it is a complex picture, but the bottom
line is that privacy is of widespread concern. A lot of the
regulations are coordinated with each other. For example, the
NAIC model regulations provide that if [a company] is meeting
the HCFA regulations for privacy, then that's adequate.
TAPE 01-64, SIDE A
REPRESENTATIVE ROKEBERG stated that this would affect all the
major insurance underwriters in the state.
Number 0032
MS. CAMPBELL responded that it isn't going to affect life
insurers and property and casualty insurers. The HCFA
regulations do not touch the health information that property
and casualty insurers or life insurers gather. She remarked
that it is really just touching the health insurance HMOs
(health maintenance organization) and health insurance market.
MR. LOHR stated that one reason there are so many sets of
regulations is that each one covers those institutions over
which they have authority. Unless they are put together as a
package, there are gaps and overlaps. On the gaps, he said
there is definitely a need for a set of regulations that covers
life insurance, and it would not be covered by the HCFA
regulation as currently drafted.
REPRESENTATIVE ROKEBERG remarked that for purposes of a life
insurance examination and the release of that information, a
person would not be covered by HB 211, unless it was under a
managed care entity.
MR. LOHR said that's correct.
Number 0271
REPRESENTATIVE HAYES asked if the amendments would be addressed.
CHAIR MURKOWSKI responded that she is not prepared to move the
bill. She said there are sufficient concerns in her mind that
[the committee] know what they are doing with this particular
legislation in relation to how GLBA is relating to financial
institutions. She stated that she is concerned that [the
committee] may be going in different directions when talking
about banks versus insurance as well as privacy issues that
relate to either financial concerns or the health information.
She remarked that she thinks there needs to be a relatively
consistent policy.
REPRESENTATIVE MEYER remarked that he shares the same concerns
and suggested having a spreadsheet comparing the two.
Number 0447
KATHERINE ALTENEDER testified via teleconference. She stated
that her comments are focused on three main issues: the privacy
matter, a private right of action for Alaskans in order to have
some recourse should information be disclosed in violation of
the law, and a review of some of the antitying provisions. She
stated:
Today you are considering massive changes to the
insurance Act. And the decisions you make about HB
184 and HB 106 are going to affect not only a limited
number of businesses operating in Alaska, but most
definitely ever single Alaskan's right and how they
have control over their very personal and private
information. ... Representative Kott: particularly
I'm addressing my comments to you because you're my
elected representative, and it's my hope that you'll
represent my interest and the interest of individual
Alaskans. ... I was listening before to some of the
questions and things that were being heard by the
committee, and I have to say as a citizen [I'm] really
confused. I'm feeling like I'm listening to a
committee that's operating for industry. I've heard
nothing about what would be good for Alaskans; I've
heard nothing about input from consumers, and I'm
deeply, deeply troubled by that. Right now you've
only had the input of the banks and the insurance
industry, and I think you need to hear from consumers,
which are [all] Alaskans.
Looking at the right of privacy, obviously it's
particularly important to Alaskans. We have a
fundamental right as included in our constitution. It
makes sense that when you're given the chance to act,
you should act in a way that's consistent with our
constitution. As I think everybody is kind of on the
same page now and understanding that if you don't act
... at all, the federal law will preempt entirely, and
you will have given up Alaska's right to defend. If
you accept Gramm-Leach-Bliley, you're basically
handing on a silver platter to them the [federal
government's] complete run on how things are going to
be done in Alaska. We typically don't like that here,
and you guys have fought really hard in the past to
prevent that, and reassure Alaskans, and that you, as
our representatives, are able to control the issues
that you can. ... I think this goes also to issues
between state powers and federal powers. If you just
let Gramm-Leach-Bliley be the ploy, you're just
handing it all over to the [federal government]. ...
Number 0697
MS. ALTENEDER continued, stating:
Through, I think, Representative Crawford's office I
have some handouts that I might refer to. The first
one ... I want to cite as privacy being important to
Alaskans. ... There's been a number of national polls
that have shown that privacy is important to people
across America. And now I'm referring to a Gallup
survey summary sheet and a bar chart. ... Across
America people are very concerned about their medical
privacy in particular, but also their financial
privacy. ... 84 percent of people consider the privacy
of their financial information very important; 78
percent believe that medical record privacy is very
important. ... There's been a lot of discussion of,
"Why not just turn it over to the regulatory process?"
That's totally passing the buck. You guys are our
elected legislators. ... The very dedicated and
intelligent and good professional civil servants that
run the agency, nonetheless, they are employees of the
state; they are not the people who represent us - you
are. We need you to pass laws that are going to
protect us. In that regard, I really want you to
think about how overwhelming ... nationally the desire
of people, not business ... is to have their privacy
protected.
When the [federal government] passed Gramm-Leach-
Bliley ... they only allowed a few areas for states to
act; otherwise, it would be entirely federally
preempted. One of the reasons they allowed the
privacy arena to be a place the states could act is
that they knew that every state had a different notion
of what the privacy provisions or desires of that
population is. In this case, the ... reason [the
federal government] didn't act is because they said
you, the legislators, ... represent the people; you do
what your people want. ... There's also been a lot of
discussion today about the NAIC model rule. ... You
had a lot of industry officials standing up in front
of you today saying, "Well, this is what we want." In
fact, the sort of think tank ... for that has put up
an opt-in, and I think that's a really critical thing
to think about. ... I haven't heard any credible
evidence ... that would prove that it would harm their
business in any way not to share this information.
Making that blanket assertion without any evidence is
troubling to me.
Number 1014
REPRESENTATIVE HALCRO said to Ms. Alteneder that he thinks she
misunderstood some of the discussion that has gone on, because
[the committee] is referencing another bill and other
discussions. He stated that he believes every member on the
committee is a strict advocate of the opt-in rule, and a strict
advocate of maintaining Alaska's privacy clauses.
REPRESENTATIVE CRAWFORD asked Ms. Alteneder whether she wants
privacy of financial and medical records. He also asked what
her suggestion is for [the committee].
MS. ALTENDER responded that [that is what she wants]. She said
she has been looking at the [draft] of the bill that references
Gramm-Leach-Bliley as before; there is nothing about opt-in.
She said she would recommend an opt-in provision, a restriction
on transferred personal information, for customers to have
access to their file, limits on the reuse of information, state
enforcement against offenders, and that individuals be able to
bring a legal action against an entity for improper disclosure.
She stated that this last point is a critical element to
provide, otherwise there is nobody watch-dogging what these
companies are doing. She asked whether there is a modified bill
that would include an opt-in requirement for insurance.
CHAIR MURKOWSKI answered that nothing has been decided at this
point.
MS. ALTENEDER explained that an opt-out for an average American
family with two parents and two kids who have a checking
account, a savings account, a credit union account, a mortgage,
two car loans, car insurance, life insurance, three credit
cards, two retirement accounts, college fund accounts, and
insurance would have at least 25 accounts they would have to opt
out of.
Number 1330
REPRESENTATIVE ROKEBERG stated that he believes there is some
truth to that, with how [the committee] is going to handle this
with the regulatory policy.
REPRESENTATIVE HAYES remarked that the only concern he has is
that he doesn't want to do something that would make [Alaskan]
businesses noncompetitive with other businesses in the country.
CHAIR MURKOWSKI responded that it was her hope that with HB 106
and HB 184 [the committee] could get to the point where everyone
could weigh in on all of the side issues and make sure that the
points of controversy are cleared up, so that it would come down
to the policy consideration of opt-in or opt-out. Insurance and
banking are not so separate anymore, but there can be
differences. She said she doesn't want [the committee] to get
"cross waves" between insurance and financial institutions when
it comes to dealing with the privacy component.
REPRESENTATIVE ROKEBERG asked Mr. Lohr why he deleted the NAIC
model.
Number 1535
MR. LOHR responded that by substituting Title V of GLBA for the
NAIC model privacy regulations, there is no substantive
difference. It increases the range of options available to the
division because it sets GLBA as the floor, but clearly the
provision in GLBA that allows [the division] to go beyond what
the federal regulations do and be upheld is plenty sufficient.
He remarked that if the proposed CS passes, his intention would
be to promulgate the NAIC model privacy regulations as the
starting point of discussion. In order to accommodate some
industry concerns, [the division] was quite happy to propose a
different floor, knowing that the model privacy regulations were
well within that floor. He added that if nothing passes, there
is no standard at all in current state law with respect to
insurance privacy.
MR. GEORGE responded that [the NAIC model was deleted] at the
request of some of his clients who would probably prefer the
statute say that the director can issue a regulation not more
restrictive than GLBA. He added that [ACLI, AFLAC, and NAII]
recognize that there is no ceiling and that the floor has been
lowered substantially, which leaves a great area for them to put
their arguments forward.
REPRESENTATIVE CRAWFORD stated that that is where the discussion
on the regulations starts, but when it starts it will be between
[Mr. George] and the industry. The consumers weigh in at the
legislature; he said it is the legislators' job to make sure
that they are represented. If this leaves [the legislature] and
goes to the regulations point, then [the legislators] no longer
enter into it. After that, he said, there will be another
insurance commissioner down the road who may be more favorable
to the industry. He remarked that he believes there can be a
healthy industry with privacy, but these things need to be
decided before they leave the legislature.
REPRESENTATIVE ROKEBERG remarked that [the committee] needs to
give the division more direction. Even the prior bill [HB 211],
he said, with the reference to the NAIC model, gives adequate
direction. He added that he thinks it is the consensus of most
members of the committee and the state constitution that opt-in
should be in the statute.
REPRESENTATIVE HAYES commented that he disagrees with
Representatives Rokeberg and Crawford. He said he thinks [the
legislature] has more than enough opportunity to oversee this
issue as it goes through the process.
Number 1878
MR. LOHR remarked that the NAIC model regulations provide opt-
out for financial information held by insurance companies and
opt-in for health information.
REPRESENTATIVE ROKEBERG stated that he thinks it should be
consistent.
CHAIR MURKOWSKI stated that Mr. Lohr brings up a good point in
that as far as insurance goes, it is both opt-in and opt-out,
whereas with financial institutions, it's one or the other. If
the full committee is in support of an opt-in, the full
committee needs to understand that the NAIC model is not 100
percent opt-in.
[HB 184 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:35 p.m.
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