Legislature(2015 - 2016)BARNES 124

03/25/2015 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 114 WORKERS' COMPENSATION: DEATH BENEFITS TELECONFERENCED
Heard & Held
*+ HB 164 INSURANCE; RISK MG'T; HOLDING COMPANIES TELECONFERENCED
Moved HB 164 Out of Committee
<Uniform Rule 23(a) Waived>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         March 25, 2015                                                                                         
                            3:18 p.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Shelley Hughes, Vice Chair                                                                                       
Representative Jim Colver                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Cathy Tilton                                                                                                     
Representative Andy Josephson                                                                                                   
Representative Sam Kito                                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 114                                                                                                              
"An  Act relating  to  the  calculation  and payment  of  workers'                                                              
compensation   benefits   in  the   case  of   permanent   partial                                                              
impairment; relating  to the calculation  and payment  of workers'                                                              
compensation  death benefits  payable to  a child  of an  employee                                                              
where there  is no surviving  spouse; relating to  the calculation                                                              
and  payment  of  workers'  compensation  death  benefits  for  an                                                              
employee without a  surviving spouse or child;  relating to notice                                                              
of  workers' compensation  death  benefits; and  providing for  an                                                              
effective date."                                                                                                                
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 164                                                                                                              
"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 for evaluating  insurance                                                              
holding companies,  risk based capital,  risk management,  and own                                                              
risk and  solvency assessments;  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,   and   hearings;    relating   to   registration                                                              
requirements;  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   of  provisions  related  to                                                              
insurance  holding  companies;  relating to  provisions  for  risk                                                              
management  and own  risk and  solvency  assessments; 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."                                                                                                                          
                                                                                                                                
     - MOVED HB 164 OUT OF COMMITTEE                                                                                            
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 114                                                                                                                  
SHORT TITLE: WORKERS' COMPENSATION: DEATH BENEFITS                                                                              
SPONSOR(s): REPRESENTATIVE(s) JOSEPHSON                                                                                         
                                                                                                                                
02/18/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/18/15       (H)       L&C, FIN                                                                                               
03/25/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB 164                                                                                                                  
SHORT TITLE: INSURANCE; RISK MG'T; HOLDING COMPANIES                                                                            
SPONSOR(s): LABOR & COMMERCE                                                                                                    
                                                                                                                                
03/23/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/23/15       (H)       L&C                                                                                                    
03/23/15       (H)       L&C WAIVED PUBLIC HEARING NOTICE, RULE                                                                 
                         23(A)                                                                                                  
03/25/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
LEASA DAVIS, Risk Manger                                                                                                        
Division of Risk Management                                                                                                     
Department of Administration (DOA)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and answered questions on HB 114.                                                              
                                                                                                                                
LORI WING-HEIER, Director                                                                                                       
Division of Insurance                                                                                                           
Department of Commerce, Community,  & Economic Development (DCCED)                                                              
Anchorage, Alaska, Alaska                                                                                                       
                                                                                                                                
POSITION STATEMENT:   Testified and answered questions  during the                                                            
discussion of HB 114.                                                                                                           
                                                                                                                                
MICHAEL MONAGLE, Director                                                                                                       
Central Office                                                                                                                  
Division of Workers' Compensation                                                                                               
Department of Labor & Workforce Development (DLWD)                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified and answered questions  during the                                                            
discussion of HB 114.                                                                                                           
                                                                                                                                
MARIANNE BURKE                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the discussion of HB 114.                                                               
                                                                                                                                
LORI WING-HEIER, Director                                                                                                       
Division of Insurance                                                                                                           
Department of Commerce, Community,  & Economic Development (DCCED)                                                              
Anchorage, Alaska, Alaska                                                                                                       
POSITION  STATEMENT:     Presented   a  PowerPoint  and   answered                                                            
questions discussion of HB 164.                                                                                                 
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:18:16 PM                                                                                                                    
                                                                                                                                
CHAIR  KURT OLSON  called the  House Labor  and Commerce  Standing                                                            
Committee meeting  to order at 3:18 p.m.   Representatives Tilton,                                                              
Kito, Colver,  LeDoux, Josephson,  and Olson  were present  at the                                                              
call to order.   Representative Hughes arrived as  the meeting was                                                              
in progress.                                                                                                                    
                                                                                                                                
3:18:37 PM                                                                                                                    
                                                                                                                                
          HB 114-WORKERS' COMPENSATION: DEATH BENEFITS                                                                      
                                                                                                                                
3:18:40 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON announced that the first order of business would be                                                                 
HOUSE  BILL NO.  114,  "An Act  relating  to the  calculation  and                                                              
payment  of  workers'   compensation  benefits  in   the  case  of                                                              
permanent  partial impairment;  relating  to  the calculation  and                                                              
payment  of workers'  compensation  death  benefits  payable to  a                                                              
child  of  an  employee  where  there   is  no  surviving  spouse;                                                              
relating to the  calculation and payment of  workers' compensation                                                              
death  benefits for  an  employee without  a  surviving spouse  or                                                              
child;  relating   to  notice   of  workers'  compensation   death                                                              
benefits; and providing for an effective date."                                                                                 
                                                                                                                                
3:18:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON,  speaking as  sponsor of HB  114, stated                                                              
that  the  first  thing  HB  114  does  is  to  increase  the  PPI                                                              
[permanent  partial   impairment]  amount,  which   has  not  been                                                              
changed since  2000.   The second  part would  offer a  remedy for                                                              
the  estates of  workers  who  have been  killed  or  died at  the                                                              
workplace.                                                                                                                      
                                                                                                                                
3:20:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  said this bill  was about a  policy call                                                              
under  the Alaska  Supreme  Court decision  related  to AS  23.30,                                                              
Ranney  v. Whitewater  Engineering,  122 P.3d  214 (Alaska  2005).                                                            
In the  foregoing case,  Ms. Ranney,  was unmarried  with a  long-                                                              
time  live-in boyfriend,  Gary Stone  and argued  that she  should                                                              
receive death  benefits when Mr.  Stone died.  The  Alaska Supreme                                                              
Court unanimously  ruled  that she  should not  receive them.   It                                                              
held that  the legislature had  undertaken some "line  drawing" in                                                              
the  workers'  compensation  code.    It  noted  that  legislators                                                              
frequently  engage  in  line  drawing.    He  suggested  that  the                                                              
legislature needs to redraw some of the lines.                                                                                  
                                                                                                                                
3:21:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  stated   that  HB  114  would  ask  the                                                              
legislature  to  reconsider  redrawing  some  of the  lines.    He                                                              
related  that numerous  single childless  people  live in  Alaska.                                                              
He further  stated that if a  single person dies at  the workplace                                                              
with  no  obvious  third-party  liability,  for  example,  if  the                                                              
person falls off  a ladder and dies, the remedy would  be in Title                                                              
[AS] 23.   Although he said he  was not a personal  injury lawyer,                                                              
he suggested  if the ladder  had a bad  rung and the  person fell,                                                              
the state  might sue the manufacturer  of the ladder.   Typically,                                                              
workplace  deaths  are due  to  a  generally unsafe  workplace  or                                                              
employee negligence  and in  instances in  which an employee  dies                                                              
and  is childless,  AS 23  provides  the estate  with $10,000  for                                                              
funeral expenses and nothing more.                                                                                              
                                                                                                                                
3:22:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  offered  that  the  employer  might  be                                                              
subject  to  some  occupational safety  violations  when  a  death                                                              
occurs, but there  wouldn't be any incentive to  improve workplace                                                              
safety.  In  the specific case that  led to him filing  this bill,                                                              
an   OSHA   [Occupational  Safety   and   Health   Administration]                                                              
investigation  occurred.   Overall, current  law lacks any  remedy                                                              
for  single people  who die  in the  workplace,  and often  people                                                              
postpone marriage  or having children.   He offered his  view that                                                              
this  issue  needs   reform.    In  instances   in  which  nothing                                                              
malfunctions  in the  workplace  or was  tortuously  manufactured,                                                              
such as  a badly designed product  that exploded, Alaska  does not                                                              
allow  the estate  to  sue for  wrongful death  nor  is there  any                                                              
remedy  other  than  the  $10,000   funerary  expenses  previously                                                              
mentioned.                                                                                                                      
                                                                                                                                
3:24:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  referred to  Section  1,  which was  an                                                              
uncodified provision  that requests the Act be  called the Abigail                                                              
Caudle  Act,  to reference  an  employee  who  was killed  in  the                                                              
workplace in  2011.  At  the time, Ms.  Caudle was working  for an                                                              
electrical  contractor at  a midtown  Anchorage  branch of  Alaska                                                              
USA and  she suffered an  electric accident,  fell, and died  as a                                                              
result of those injuries.                                                                                                       
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  stated that  Section  2 would  increase                                                              
the permanent  partial impairment  (PPI) rating,  noting that  the                                                              
PPI amount  has not  been increased  from a  whole body  figure of                                                              
$177,000.   This language  would increase  the rating to  $255,584                                                              
to reflect  today's figures.  He  said that a doctor could  find a                                                              
person suffered a  partial permanent injury and if  so, the system                                                              
has scales for this depending on the loss.                                                                                      
                                                                                                                                
3:26:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  said   that  Section  3  would  provide                                                              
notice of  death benefits  so it  is very clear  to the  estate of                                                              
the  deceased what  the remedies  are, including  that the  estate                                                              
can hire an attorney,  seek grief counseling, and  other things an                                                              
employer should provide.                                                                                                        
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  referred  to  Section  4,  noting  that                                                              
current law  provides for funeral  expenses.  He  provided details                                                              
of the  progression of  spendable weekly  wages a widow,  widower,                                                              
child,  or  children  will  receive   ranging  from  zero  to  100                                                              
percent,  depending on  the number  of  surviving family  members.                                                              
In response  to Representative LeDoux  he agreed this  was current                                                              
statute.   He  continued,  noting  that an  only  child without  a                                                              
surviving spouse would receive 100 percent of the benefits.                                                                     
                                                                                                                                
REPRESENTATIVE  JOSEPHSON expressed  concern that  a teenager  may                                                              
receive  only a  few months  of financial  assistance and  funeral                                                              
expenses  if  his/her parent  died  in  the workplace,  since  the                                                              
support would  end at either age 18  or 19 - he wasn't  certain of                                                              
the age  limit; however,  under the  bill payments would  continue                                                              
for five  years.  He characterized  current law as  constituting a                                                              
lack of generosity  in the system.   He reviewed paragraph  (3) of                                                              
existing law, pertaining  to a surviving spouse  who remarries and                                                              
benefits are  ceased after two years.   Paragraph (4) [on  page 3,                                                              
lines 12-17]  would increase the  amount from the  $20,000 allowed                                                              
for people  dependent  on the person  who died  in the  workplace,                                                              
such as an  elderly parent or  siblings, to the whole  body amount                                                              
of  $177,000  or potentially  $255,000  if  the PPI  is  increased                                                              
under the bill.                                                                                                                 
                                                                                                                                
3:32:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX   related  her  understanding   that  under                                                              
current law if  the decedent was supporting relatives,  they could                                                              
receive  $20,000, but  a  child over  18 years  of  age would  not                                                              
receive anything  unless  they supported a  grandchild, who  could                                                              
receive benefits.                                                                                                               
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  answered  yes.    He  referred  to  the                                                              
language in [paragraph]  (4), stating that a son who  was 18 and a                                                              
half years old  could receive an additional 6  months in benefits,                                                              
but the  person's grandchild,  as a  dependent could receive  more                                                              
as a  percentage of  the deceased's  spendable  weekly wages.   In                                                              
response to Representative  LeDoux, he answered that  existing law                                                              
limited the support  to $20,000.  He surmised the  theory was that                                                              
the nuclear  family gets less important  outside the ring  of [the                                                              
immediate family such as] parents or children.                                                                                  
                                                                                                                                
3:35:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX   expressed  concern  since   many  parents                                                              
currently support their children through college.                                                                               
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  said  this  bill  would  allow  for  an                                                              
extension.  He referred  to [page 3, line 25]  to proposed Section                                                              
5, which would  extend the death  benefits paid to a child  to age                                                              
24 to  allow death benefits  to continue and  not stop at  age 19,                                                              
and  it would  continue  as a  fraction  of the  spendable  weekly                                                              
allowance,  presumably to get  the child  of the deceased  through                                                              
college.                                                                                                                        
                                                                                                                                
3:36:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  directed attention to a  final scenario,                                                              
which  brings Ms.  Burke to  Juneau.   He  indicated the  deceased                                                              
worker  was single  without any  dependents.   This bill  proposes                                                              
the  estate would  receive half  of  the whole  body allowance  in                                                              
death  benefits,  which  is approximately  half  of  the  $177,000                                                              
[PPI] under  current  law or $88,000.   He  directed attention  to                                                              
the fiscal  note impact due  to changes in  the PPI, he said.   He                                                              
acknowledged  that Chair Olson  has his own  bill related  to PPI,                                                              
which has  not been  increased since 2000  and should  be adjusted                                                              
to reflect the 2015 value.                                                                                                      
                                                                                                                                
3:38:01 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON commented that the fiscal note was significant.                                                                     
                                                                                                                                
REPRESENTATIVE  JOSEPHSON said  he  also had  questions about  the                                                              
fiscal note.                                                                                                                    
                                                                                                                                
3:38:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   JOSEPHSON  referred   to  [paragraph]   (6),  and                                                              
questioned  differentiating  between  the  estate  of  the  single                                                              
person with  or without children.   He suggested that  the figures                                                              
used  were   half  the   amount  available   under  the   modified                                                              
[paragraph] (4),  or half of $177,000.   Proposed Section  5 would                                                              
adjust the  amount based on  the Consumer  Price Index (CPI).   He                                                              
offered his  belief that the  benefits of  passing HB 114  is that                                                              
that it improve  workplace safety, although it  would be difficult                                                              
to  quantify; and  it  would reflect  the  PPI; and  fundamentally                                                              
would confirm  that just because  a person  is single and  dies in                                                              
the  workplace doesn't  mean the  individual's estate  is not  due                                                              
any settlement.                                                                                                                 
                                                                                                                                
3:41:08 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  asked whether the fiscal  note applies only  to state                                                              
employees.                                                                                                                      
                                                                                                                                
LEASA   DAVIS,  Division   of  Risk   Management,  Department   of                                                              
Administration (DOA)  answered yes;  stating that the  fiscal note                                                              
was based  on the AWCB [Alaska  Workers' Compensation  Board] data                                                              
for the past  five years.   She related her calculation,  based on                                                              
the  PPI [permanent  partial  impairment ratings]  benefit  payout                                                              
multiplied by  45,000.   She said she  reviewed the claim  history                                                              
and reported  that one  person died  in the  line of duty  without                                                              
leaving a  family or dependents and  the death benefit  amount was                                                              
averaged over five years.                                                                                                       
                                                                                                                                
3:42:20 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON asked  whether  the private  sector  would have  more                                                              
fatalities than the state.                                                                                                      
                                                                                                                                
MS.  DAVIS  answered  that more  fatalities  happen  with  certain                                                              
industries,  such  as  high  risk  occupations,  including  public                                                              
safety or those individuals who fly as part of their job duties.                                                                
                                                                                                                                
3:42:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked  for further  clarification  on  the                                                              
fiscal  note.   She asked  whether  these changes  would cost  the                                                              
state $291 million.                                                                                                             
                                                                                                                                
MS. DAVIS  explained that she  inadvertently listed  whole numbers                                                              
of $291,632  for six  months and  $583,263 for a  full year.   She                                                              
apologized for the error.                                                                                                       
                                                                                                                                
3:43:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO directed  attention to  the fourth  paragraph                                                              
of the fiscal  note analysis that indicated the  bill could result                                                              
in a yearly  average increase of  $23,585.40.  He  questioned this                                                              
figure since  there has only  been one instance  in the  past five                                                              
years.   He  asked for further clarification on the  basis for the                                                              
$291,000 and $500,000 projections.                                                                                              
                                                                                                                                
MS. DAVIS explained  the formula she used to arrive  at the fiscal                                                              
note  figures.   The  fiscal  note was  based  on the  annual  PPI                                                              
[permanent partial  impairment] payout over five  years multiplied                                                              
by  the increase  of  the  percentage of  44  percent.   She  also                                                              
reviewed the  six percent  second injury  fund amount and  records                                                              
to  discover  only one  individual  died  due  to  an on  the  job                                                              
fatality  without  any dependents.    She averaged  the  foregoing                                                              
death benefits over five years.                                                                                                 
                                                                                                                                
3:45:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO  asked whether most of the  increased costs in                                                              
the  fiscal  note were  due  to  the consumer  price  index  (CPI)                                                              
increase.                                                                                                                       
                                                                                                                                
MS. DAVIS  answered that  she did  not include  the CPI  since the                                                              
state  is entering  a deflationary  period so  the future  figures                                                              
are unknown.   She  explained that  the bulk of  costs are  due to                                                              
the actual  PPI rate increase itself  since the department  sees a                                                              
large number of PPI ratings for state employees.                                                                                
                                                                                                                                
REPRESENTATIVE KITO  related his  understanding that it  was based                                                              
on the historic catch up costs.                                                                                                 
                                                                                                                                
3:45:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER related  his understanding  that the  state                                                              
entity is  self-insured.  He asked  whether there was any  type of                                                              
reinsurance or umbrella policy for these kinds of claims.                                                                       
                                                                                                                                
MS. DAVIS answered  no.  She stated that the state  was completely                                                              
self-insured.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  COLVER  suggested  that  in  his  experience  most                                                              
government  entities have another  level of  insurance as  well as                                                              
reinsurance.                                                                                                                    
                                                                                                                                
CHAIR  OLSON  suggested   that  he  was  referring   to  liability                                                              
insurance, and this  bill relates to workers'  compensation, which                                                              
has an exclusive remedy.                                                                                                        
                                                                                                                                
REPRESENTATIVE  COLVER said  he was  seeking a  way to reduce  the                                                              
state's exposure.                                                                                                               
                                                                                                                                
3:46:52 PM                                                                                                                    
                                                                                                                                
LORI WING-HEIER,  Director, Division  of Insurance, Department  of                                                              
Commerce,  Community &  Economic  Development  (DCCED), said  that                                                              
according to  the National Council  on Compensation Insurance  - a                                                              
statistical rating  organization that sets  rates in Alaska  - the                                                              
bill could possibly have a 4 percent impact on rates.                                                                           
                                                                                                                                
3:47:51 PM                                                                                                                    
                                                                                                                                
MS.  WING-HEIER,  in response  to  Representative  Colver,  agreed                                                              
self-insured  entities  frequently  have  a  stop-loss  or  excess                                                              
workers' compensation  policy, typically in excess  of $500,000 or                                                              
$1  million,  which  is common  for  large  employers.    Further,                                                              
larger employers  often do not have  policies because of  the high                                                              
cost.   If  entities don't  purchase the  insurance, the  division                                                              
refers  to  the  amount  as  the  "burn  layer."    Basically,  if                                                              
entities  do not exceed  the costs  very often,  it is  frequently                                                              
better to save the  [insurance fees] and use the  money for claims                                                              
expenses.    She  offered  her belief  that  was  what  the  state                                                              
decided to do.                                                                                                                  
                                                                                                                                
3:48:34 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  commented that if  HB 114 were  to pass, the  bulk of                                                              
the claims would  fall under private policyholders  rather than on                                                              
the state.                                                                                                                      
                                                                                                                                
MS.  WING-HEIER added  that most  large employers  may have  small                                                              
claims of $20,000  to $100,000 with an occasional  large claim due                                                              
to a significant injury or fatality.                                                                                            
                                                                                                                                
3:49:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COLVER asked for the average fatality rate.                                                                      
                                                                                                                                
MS. WING-HEIER deferred  to the Division of  Workers' Compensation                                                              
to respond.                                                                                                                     
                                                                                                                                
3:49:53 PM                                                                                                                    
                                                                                                                                
MICHAEL MONAGLE,  Director, Central  Office, Division  of Workers'                                                              
Compensation,   Department  of  Labor   &  Workforce   Development                                                              
(DLWD),  responded to  an earlier  question, noting  that a  child                                                              
dependent was  a child up  to age of  19, with an  additional four                                                              
more years if they  were attending college.  In  addition, he read                                                              
a portion of the  definition of "child" in existing  law [under AS                                                              
23.30.395 (8)]  as follows,  " ... are  wholly dependent  upon the                                                              
deceased  employee ...."   Thus  the death  benefits can  continue                                                              
beyond the  age of 19  if the child  is dependent on  the deceased                                                              
employee.   He  clarified  that the  benefit  was  not limited  to                                                              
grandchildren, grandparents, or parents.                                                                                        
                                                                                                                                
3:51:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX related  a scenario  in which the  decedent                                                              
died  while a  child  was  a sophomore  in  high school,  went  to                                                              
college, but decides  to go to medical school.   She asked whether                                                              
the workers' compensation would cover it.                                                                                       
                                                                                                                                
MR. MONAGLE  answered no, since  it says  the first four  years of                                                              
college and  the statute doesn't  anticipate graduate school.   He                                                              
read  additional  language for  the  definition of  "child"  which                                                              
read, "  ... are wholly dependent  upon the deceased  employee and                                                              
incapable  of  self-support  by   reason  of  mental  or  physical                                                              
disability, [and persons  of any age while they  are attending the                                                              
first four years  of vocational school, trade school,  or college,                                                              
and persons  of any age while  they are attending  high school;"].                                                              
In response to  Representative Josephson, he offered  the citation                                                              
for the definition as AS 23.30.395 (7).                                                                                         
                                                                                                                                
3:52:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES asked for  more of  a foundation  since she                                                              
was not  familiar with workers'  compensation.  She  recalled that                                                              
the rates  for the  private sector  might increase  by 4  percent.                                                              
She suggested  that was an  automatic payment, but  she understood                                                              
that the surviving family members often file lawsuits.                                                                          
                                                                                                                                
MR. MONAGLE  answered that it depends.   He informed  members that                                                              
workers'  compensation is  an exclusive  liability,  in fact,  you                                                              
cannot  bring a  separate action  against employers  even if  they                                                              
are  negligent;  however, there  is  a third-party  exposure,  for                                                              
example, if a rung  of a ladder or other machinery  was defective.                                                              
Since  the  exclusive  liability  does not  extend  to  the  third                                                              
party, a lawsuit  could be filed.  However,  workers' compensation                                                              
law provides for  an offset so the survivor would  not receive the                                                              
full death  benefit plus the  full third-party recovery  since the                                                              
employer would be allowed to reduce their benefit payments.                                                                     
                                                                                                                                
3:54:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked whether  the third-party  recovery                                                              
was from the second injury fund.                                                                                                
                                                                                                                                
MR. MONAGLE  answered no.   He explained  a separate  provision in                                                              
law allows  an employer  to offset any  third-party recovery.   He                                                              
explained  that the  second injury  fund  was established  through                                                              
assessments  against  employer  indemnity  benefits.   The  second                                                              
injury  fund would  be  used in  instances  in  which an  employer                                                              
hires a  person with  a qualifying  preexisting condition  and the                                                              
employee  has a  subsequent  workplace injury  made  worse by  the                                                              
pre-existing  condition.    If  an  employer  hires  an  employee,                                                              
knowing  the employee  has had  a lot  of back  injuries, but  the                                                              
employee  is subsequently  injured,  the fund  will reimburse  the                                                              
employer for  the indemnity benefit  payments so long as  it meets                                                              
all the requirements for second injury fund reimbursement.                                                                      
                                                                                                                                
3:55:23 PM                                                                                                                    
                                                                                                                                
MARIANNE BURKE began her testimony, as follows:                                                                                 
                                                                                                                                
     You have no  idea what I've gone through  to this point.                                                                   
     This  is bittersweet  - to talk  to you  - I'm  excited,                                                                   
     but  I'm saddened  for the  reason I  stand before  you.                                                                   
     My  daughter   [Abigail  Caudle]   was  killed   in  the                                                                   
     workplace  and no value  at all - zero  - was given  for                                                                   
     her  life.   When  you talk  about different  money  and                                                                   
     stuff in the  workplace environment - there  was nothing                                                                   
     given for  her life, but the  funeral costs.   That's it                                                                   
     -  because  she   had  no  dependents.     There  is  no                                                                   
     liability  to the  employer.   Nothing  happened to  the                                                                   
     employers  whatsoever because  of "no fault"  insurance.                                                                   
     Nothing  happens.     If  there   is  any  payout,   the                                                                   
     insurance pays  it - and I'll  get to that in  a minute.                                                                   
     I  just want  to  emphasize those  two  points before  I                                                                   
     start.                                                                                                                     
                                                                                                                                
3:57:07 PM                                                                                                                    
                                                                                                                                
MS. BURKE continued her testimony, as follows:                                                                                  
                                                                                                                                
     My daughter was  the second child of four  children, two                                                                   
     boys  and two  girls.   Her  sister and  she would  play                                                                   
     dolls  growing  up.   She  enjoyed  soccer,  basketball,                                                                   
     babysitting, day  care - she worked at Home  Depot.  She                                                                   
     volunteered  at ChangePoint  church  doing lighting  for                                                                   
     all  of their  services  for three  years.   She  helped                                                                   
     with the youth group at ChangePoint.                                                                                       
                                                                                                                                
MS. BURKE paused to show photographs of her daughter.                                                                           
                                                                                                                                
MS. BURKE continued.  She said:                                                                                                 
                                                                                                                                
     My daughter  was a  new apprentice  with Raven  Electric                                                                   
     so she was  not with the unions.  The private  sector is                                                                   
     not  as "up"  as  the unions  are  sometimes.   She  was                                                                   
     [indisc.]  with a live  wire.  They  were working  on an                                                                   
     open  junction box  in a  bank remodel  job taking  down                                                                   
     lights.   The journeyman  did not  turn off the  circuit                                                                   
     breaker or  lock and tag  as he was  supposed to.   This                                                                   
     was because  he wasn't planning  on doing that  lighting                                                                   
     that night.   Usually he  would bring temporary  lights,                                                                   
     but he  wasn't planning  on doing  that work that  night                                                                   
     so  they  used  the  lights that  were  there  and  just                                                                   
     turned off  light switches.   Abigail had an  inadequate                                                                   
     non-contact  tester.  It  did not  clamp onto the  wire;                                                                   
     it  just went  near the  wire so  it did  not sense  the                                                                   
     live wire.   She tried it twice.  It showed  green, safe                                                                   
     or to  go.  And  she touched the  live wire; got  locked                                                                   
     up.   Her coworkers  tried to  get her  off the  ladder.                                                                   
     They  couldn't.   They finally  kicked  the ladder  real                                                                   
     hard  and she  fell off  to the  floor.   She went  into                                                                   
     seizures.   The others  told that  about 440 volts  that                                                                   
     went  through her  body.   She  [indisc.]  defibrillator                                                                   
     and she  was taken to  the hospital.   She was 26  years                                                                   
     old and  she died on June 21,  2011.  I cannot  tell you                                                                   
     how much  we miss  Abigail [indisc.].   Her sister  does                                                                   
     not have a  sister anymore.  Her brothers do  not have a                                                                   
     sister  that  they  had  anymore to  talk  with  and  be                                                                   
     support with.  Thank you.                                                                                                  
                                                                                                                                
3:59:32 PM                                                                                                                    
                                                                                                                                
MS.  BURKE  said that  about  three  months after  her  daughter's                                                              
death she  called numerous lawyers,  but none would  represent her                                                              
since  her  daughter's  death fell  under  workers'  compensation.                                                              
She said  the lawyers  she contacted informed  her they  would not                                                              
win the case and  that similar cases had been taken  to the Alaska                                                              
Supreme Court  and the plaintiff  did not  prevail.  In  fact, she                                                              
couldn't  even get  any lawyer  to take  the case  pro bono.   Two                                                              
years after her  daughter's death she began fighting  - by herself                                                              
- for  death benefits  for  her daughter   She could  not sue  the                                                              
employer,  she  said,  due  to House  Bill  323  that  passed  the                                                              
legislature  in 2004.    Since her  daughter's  death  was a  work                                                              
related death  she also could not  file a civil lawsuit  or obtain                                                              
any type  of justice.   Subsequently,  the legislature  considered                                                              
House Bill 303,  which would have allowed wrongful  death cases to                                                              
be filed civilly,  but that bill  did not pass, in part,  since it                                                              
was opposed by the business sector.                                                                                             
                                                                                                                                
4:00:49 PM                                                                                                                    
                                                                                                                                
MS.  BURKE declared  that  workers'  compensation  laws give  zero                                                              
value to  people like  her daughter, a  single worker  without any                                                              
dependents,  except for  funeral  costs.   Although the  employer,                                                              
[Raven  Electric]  received  five  citations  from  OSHA  [the  US                                                              
Department    of   Labor,   Occupational    Safety   and    Health                                                              
Administration],  in  which  four violations  were  determined  to                                                              
contribute  to  her  daughter's   death,  the  company  only  paid                                                              
$11,000  to OSHA.   In  fact, OSHA  advised her  that after  three                                                              
years  the  employer's  slate  will  be  wiped  clean.    She  was                                                              
astonished   at   this   outcome  since   her   daughter's   death                                                              
constituted  gross negligence  by the  employer.   As the  sponsor                                                              
said earlier,  the Abigail  Caudle Act would  update the  value of                                                              
an  employee's  life  by increasing  the  PPI  [permanent  partial                                                              
impairment]  amount  to $256,000,  noting  the  PPI has  not  been                                                              
adjusted in 15 years.                                                                                                           
                                                                                                                                
4:01:41 PM                                                                                                                    
                                                                                                                                
MS. BURKE stated  that if the PPI figures were updated  all of the                                                              
people  who  are  injured  will   receive  compensation  based  on                                                              
today's  wages.   Survivors of  workers  killed on  the job  would                                                              
receive  something, describing  her  feelings  as hollow  feelings                                                              
since  nothing   was  given   for  her   daughter's  life.     She                                                              
recommended the statute  of limitations should be  raised from one                                                              
year to  four years.   She  reported that  California has  a four-                                                              
year statute  of limitation  in wrongful  deaths, and even  though                                                              
she recognizes that  this bill pertains to  workers' compensation,                                                              
the  statute  of limitation  still  needs  to  be raised  to  four                                                              
years.  She  explained that two  years passes by quickly  during a                                                              
period of grief  when losing a loved  one and one year  was simply                                                              
insufficient.                                                                                                                   
                                                                                                                                
4:02:47 PM                                                                                                                    
                                                                                                                                
MS.  BURKE  said  that  this  issue  is  a  bipartisan  issue  and                                                              
although   she  her   political  affiliation   is  Republican,   a                                                              
Democrat, Representative  Josephson, stepped up to help  her.  She                                                              
stressed that  this issue adversely  affects families.   She urged                                                              
the legislature  to pass HB  114.  Even  though the bill  may need                                                              
additional  work  and  businesses  don't  want  to  pay  more  for                                                              
workers' compensation,  perhaps businesses could elect  to provide                                                              
a life  insurance policy  for their employees  or require  them to                                                              
obtain  life insurance.    Most  importantly, under  current  law,                                                              
employers  can avoid purchasing  safety equipment  since they  are                                                              
not held  accountable and  lawsuits can't  be filed against  them.                                                              
She  felt  it was  crucial  that  the law  recognizes  that  every                                                              
person  has   value.     She  said   one  problem  with   workers'                                                              
compensation  was   due  to  "no   fault"  insurance,   which  she                                                              
characterized as being a nationwide problem.                                                                                    
                                                                                                                                
4:04:23 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON stated  that having  an exclusive  remedy means  that                                                              
workers'  compensation will  pay immediately,  whether or  not the                                                              
claim is perceived  as legitimate and it could  be controverted if                                                              
issues arise.                                                                                                                   
                                                                                                                                
MS.   BURKE  offered   his   belief,   shared  by   the   workers'                                                              
compensation staff she  spoke to, that when a death  occurs in the                                                              
workplace  it should  cease to  be a  workers' compensation  case.                                                              
This  was especially  true  in instances  in  which employers  are                                                              
negligent, which  was the case in  her daughter's death  since the                                                              
employees   did  not  lock   and  tag,   the  employees   did  not                                                              
communicate, and the  employer failed to do a number  of things it                                                              
should have  done.  In fact,  Abigail was a new  apprentice, brand                                                              
new, trusting  her journeymen  that she was  safe, she said.   Her                                                              
daughter's  journeymen   weren't  even   in  the  room   when  the                                                              
electrical  accident occurred.    In closing  she emphasized  that                                                              
when  deaths occur,  the  matter should  not  fall under  workers'                                                              
compensation  to  allow  for  justice.  She  thanked  members  for                                                              
allowing her to testify.                                                                                                        
                                                                                                                                
[HB 114 was held over.]                                                                                                         
                                                                                                                                
4:06:23 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
         HB 164-INSURANCE; RISK MG'T; HOLDING COMPANIES                                                                     
                                                                                                                                
4:07:16 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the final  order of business  would be                                                              
HOUSE BILL  NO. 164,  "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  for                                                              
evaluating insurance  holding companies, risk based  capital, risk                                                              
management,  and own  risk  and solvency  assessments;  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,  and  hearings; relating  to                                                              
registration  requirements;  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   of  provisions                                                              
related  to insurance  holding companies;  relating to  provisions                                                              
for  risk  management  and  own  risk  and  solvency  assessments;                                                              
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."                                                                                                                
                                                                                                                                
4:07:50 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:07 p.m. to 4:12 p.m.                                                                       
                                                                                                                                
4:12:21 PM                                                                                                                    
                                                                                                                                
LORI WING-HEIER,  Director, Division  of Insurance, Department  of                                                              
Commerce,  Community, &  Economic Development  (DCCED), began  her                                                              
PowerPoint on HB  164, related to insurance.  She  stated that the                                                              
mission  of  the   Division  of  Insurance  is   to  regulate  the                                                              
insurance industry to protect Alaskan consumers [slide 1].                                                                      
                                                                                                                                
4:13:48 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  stated that individual  state governments  are the                                                              
primary regulators  of insurance.  In Alaska,  the state regulates                                                              
seven  domestic  insurance  companies,  including  Alaska  Vision,                                                              
Sunderland  Insurance  Services,  Inc.,  Alaska  Timber  Insurance                                                              
Exchange that  are domiciled  in Alaska.   The division  regulates                                                              
close to 1,100 foreign insurance companies.                                                                                     
                                                                                                                                
CHAIR  OLSON interjected  that  foreign insurance  companies  does                                                              
not mean outside the country, but outside Alaska.                                                                               
                                                                                                                                
MS. WING-HEIER  agreed.  She named  a few major  foreign insurance                                                              
companies,  including  State  Farm, Geico,  Safeco,  Premera,  and                                                              
Aetna  qualify but  they  are not  domiciled  in the  state.   She                                                              
indicated   it  was   due   to  the   way   these  companies   are                                                              
incorporated.   The ones [HB  164 would address]  under discussion                                                              
today are those domiciled within the state.                                                                                     
                                                                                                                                
MS. WING-HEIER  said that in  1945, Congress passed  the McCarran-                                                              
Ferguson  Act  (15  U.S.C.  1011   -  1015)  which  exempted:  the                                                              
business of  insurance from most  federal regulation, and  to this                                                              
date  insurance  has been  regulated  by states,  and  state-based                                                              
regulation works [slide 3].                                                                                                     
                                                                                                                                
MS. WING-HEIER  said that 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 ...."   However,  in 2010, Congress  passed                                                              
Dodd-Frank  with a  provision establishing  the federal  insurance                                                              
office.   Although it  was currently  set up  as a  non-regulatory                                                              
agency,  it  is  poised  to step  in  and  take  over  state-based                                                              
regulation.  She  acknowledged that this wasn't  something that is                                                              
being  addressed every  day; however,  the division  is very  much                                                              
aware of  its existence and the  authorization it could  hold over                                                              
the states  with federal regulation  of insurance.   Again, state-                                                              
based regulation has been very successful for over 100 years.                                                                   
                                                                                                                                
4:15:55 PM                                                                                                                    
                                                                                                                                
MS.  WING-HEIER  directed  attention  to  slide  4,  stating  that                                                              
during  the  2007-2009   financial  crisis  which   hit  hard  the                                                              
financial  services industry  of which  insurance is  a part,  the                                                              
insurance industry was  held as a shining example  of what worked.                                                              
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.  The IIABA  remains dedicated  to preserving  state                                                              
insurance  regulation."     She  said  that  this   statement  was                                                              
powerful  enough   that  the  federal  Government   Accountability                                                              
Office put it in its 2013 report to Congress.                                                                                   
                                                                                                                                
4:16:53 PM                                                                                                                    
                                                                                                                                
MS.  WING-HEIER  directed  attention   to  slide  5,  stating  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,  of the protocols of the  insurance companies,                                                              
the  producers, the  brokers,  and the  adjustors.   Through  peer                                                              
review, the division  monitors companies, brokers,  and ourselves,                                                              
she said.                                                                                                                       
                                                                                                                                
MS.  WING  HEIER  acknowledged  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  that  there                                                              
often is a need for national standards and uniformity.                                                                          
                                                                                                                                
4:17:41 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  said the NAIC,  working with regulators,  promotes                                                              
national standards,  uniformity,  reciprocity, and consistency  at                                                              
the  national level  through  the development  of  model laws  and                                                              
regulations.                                                                                                                    
                                                                                                                                
MS. WING-HEIER  said much  of the  work of  the NAIC is  conducted                                                              
through   its  committees,   task  forces,   working  groups,   or                                                              
subgroups.    Alaska sits  on  two  subcommittees:   Property  and                                                              
Casualty  Insurance, and  Market Regulation  and Consumer  Affairs                                                              
C&D)  committee,  and  14  task   forces,  3  liaison  committees,                                                              
including   the  American   Indian  and   Alaska  Native   Liaison                                                              
Committee,  which she chairs;  and numerous  working groups.   The                                                              
committee  level is  where the  discussion most  likely begins  in                                                              
the consideration of a new model law.                                                                                           
                                                                                                                                
MS.  WING-HEIER  said the  NAIC  members dedicate  significant  to                                                              
educating consumers  and the industry to support a  model that has                                                              
been  adopted  by the  membership.  Model  laws are  developed  by                                                              
drafting  procedures  that  entail a  rigorous  process  providing                                                              
notice  and  opportunity  for  consumer  groups  and  industry  to                                                              
comment.   She said  they take years  to develop  to the  point at                                                              
which they are presented to groups such as this committee.                                                                      
                                                                                                                                
MS. WING-HEIER  said that both the  parent committee, such  as the                                                              
Property  and  Casualty  Committee,   Finance  Committee,  or  the                                                              
Health 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  state in                                                              
most cases  is not required to adopt  the model law except  in the                                                              
circumstances  such as  the one today,  which  is the adoption  of                                                              
the NAIC  financial regulation  standards & accreditation  program                                                              
[slide 6].                                                                                                                      
                                                                                                                                
4:20:07 PM                                                                                                                    
                                                                                                                                
MS.  WING-HEIER   said  the  mission   of  the  NAIC's   financial                                                              
regulation standards  & accreditation program is  to establish and                                                              
maintain  state regulator  standards  to promote  sound  insurance                                                              
company  financial solvency  regulation  [slide 7].   Although  it                                                              
seems simple, but  the state has seven domestic  and 1,100 foreign                                                              
insurance  companies it  monitors.   The  Department of  Commerce,                                                              
Community  & Economic  Development  is a  rather small  department                                                              
and with that  many insurers, the  state needs to be able  to rely                                                              
on its counterparts  in other states to ensure  that the insurance                                                              
companies who are  coming to Alaska to sell insurance  to Alaskans                                                              
meet a  certain standard  of financial solvency.   In  turn, other                                                              
insurance commissioners  or directors must  be able to  trust that                                                              
insurance  companies who  are domiciled in  Alaska doing  business                                                              
in the  Lower 48  are also  to financially  solvent.  Lastly,  but                                                              
equally  important is  consumer  protection  because an  insurance                                                              
company  must  be  financially solvent  to  meet  its  contractual                                                              
policy obligations  to pay claims  in the event  of a loss  to pay                                                              
claims.                                                                                                                         
                                                                                                                                
4:21:39 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  directed attention to  slide 8, and said  that the                                                              
accreditation   program  provides   a  process  whereby   solvency                                                              
regulations  of multi-state  insurance companies  can be  enhanced                                                              
and adequately monitored.   As mentioned earlier,  it is important                                                              
for a small state  that the insurance companies  domiciled here or                                                              
those  operating here  but domiciled  in another  state are  being                                                              
adequately  regulated for  financial solvency  by the  domiciliary                                                              
state.                                                                                                                          
                                                                                                                                
4:22:16 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  said that  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.  Thus,  if Alaska  loses its  accreditation                                                              
and  companies had  to  bear the  expense  of  having every  state                                                              
conducting  an examination  of their financial  records and  could                                                              
not accept  theirs, they  could elect  to not  to be domiciled  in                                                              
Alaska, which  would reduce  the number  of insurers, a  reduction                                                              
in employment and in premium taxes paid to the state.                                                                           
                                                                                                                                
4:23:04 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON asked  how much  income the  division generates  each                                                              
year.                                                                                                                           
                                                                                                                                
MS.   WING-HEIER    answered   that    the   division    generates                                                              
approximately $55  million plus $7 million in  fees collected from                                                              
producers in  the insurance companies.   In further response  to a                                                              
question,  she  said last  year  the  division's budget  was  $7.5                                                              
million and  that the  division is  receipt-supported by  the fees                                                              
collected from insurance companies.                                                                                             
                                                                                                                                
4:23:48 PM                                                                                                                    
                                                                                                                                
MS.  WING-HEIER  stated the  accreditation  was  for a  five  year                                                              
period.   One  of the  key components  of  the financial  solvency                                                              
regulation  accreditation review  will be  a determination  by the                                                              
NAIC accreditation  review team that  the state has  the necessary                                                              
solvency laws and  regulations to protect consumers  and guarantee                                                              
funds [slide  9].  She reported that  the division was  due for an                                                              
interim audit  in June  2015.   She feared  the division  will not                                                              
pass, which was why HB 164 is important.                                                                                        
                                                                                                                                
4:24:43 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  felt responsible  for three  provisions in  HB 164                                                              
that should  have been addressed two  or three years ago,  but she                                                              
was not  certain why  the division  did not  request the  changes.                                                              
She  referred to  pages 2-8  to AS  21.14, related  to risk  based                                                              
capital in  the bill.  Basically,  this language would  change the                                                              
method  of measuring  the minimum  amount  of capital  appropriate                                                              
for  an insurer  to  support its  overall  business operations  in                                                              
consideration of  its size and risk  profile.  Capital  provides a                                                              
cushion to  an insurer against insolvency  and RBC will  limit the                                                              
amount of  risk a  company can  take.   Thus these provisions  all                                                              
pertain to  solvency.   She said this  should have been  effective                                                              
January 1,  2015.  She acknowledged  other provisions  should have                                                              
been effective on January 2014 and January 2016.                                                                                
                                                                                                                                
4:25:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  related her understanding that  in order to                                                              
be accredited the legislature must pass HB 164.                                                                                 
                                                                                                                                
MS. WING-HEIER answered yes.                                                                                                    
                                                                                                                                
4:25:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   LEDOUX  surmised  that   if  the  state   is  not                                                              
accredited all sorts of problems happen.                                                                                        
                                                                                                                                
MS. WING-HEIER answered yes.                                                                                                    
                                                                                                                                
CHAIR  OLSON acknowledged  that was  the  reason HB  164 is  being                                                              
fast-tracked.                                                                                                                   
                                                                                                                                
4:26:04 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  said the risk-based  capital provides  the cushion                                                              
to protect solvency.   The risk-based capital compares  risk based                                                              
on a  ration of  the risk  to capital.   This  means the  division                                                              
knows  the company  has  enough  capital for  underwriting,  other                                                              
investments to  ensure claims can  be paid when  Alaskan consumers                                                              
submit the claims.                                                                                                              
                                                                                                                                
4:26:36 PM                                                                                                                    
                                                                                                                                
MS.  WING-HEIER  directed  attention  to slide  11,  to  insurance                                                              
holding  companies,  on pages  8-16  of the  bill,  which must  be                                                              
effective in  2016 in order for  the state to  pass accreditation.                                                              
Referring  back to  the financial  crisis  in the  Lower 48,  many                                                              
people  probably  heard  of AIG  [American  International  Group],                                                              
which was a holding  company.  She said what brought  down AIG was                                                              
not  its insurance  operations,  but  aircraft leasing  and  other                                                              
investments  that AIG had  made.   The foregoing provisions  would                                                              
allow the  state to  review other  operations insurance  companies                                                              
have  and not  allow them  to invest  insurance  dollars in  other                                                              
operations.   She  added  that this  language  does require  other                                                              
reporting  mechanisms, but  that  she essentially  described  what                                                              
the holding company provisions of this bill would accomplish.                                                                   
                                                                                                                                
4:27:42 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  asked whether  the financial crisis  was also  due to                                                              
substandard mortgages.                                                                                                          
                                                                                                                                
MS. WING-HEIER answered yes.                                                                                                    
                                                                                                                                
4:27:51 PM                                                                                                                    
                                                                                                                                
MS.  WING-HEIER   directed   attention  to   slide  12,  to   Risk                                                              
Management  and   Own  Risk  Solvency  Assessment   (ORSA).    She                                                              
described this  as enterprise risk  management that  would require                                                              
insurance  companies  to  report  to  the  state  on  confidential                                                              
investments,  as  well  as their  risk  management  framework,  to                                                              
allow  the  state  to  see  the  how  the  companies  are  judging                                                              
themselves.   Although these  provisions are not  yet in  the NAIC                                                              
[National  Association  of  Insurance  Commissioners]  model  law,                                                              
they  have  been  proposed  and  the  division  anticipates  these                                                              
provisions will be adopted this fall.                                                                                           
                                                                                                                                
4:28:41 PM                                                                                                                    
                                                                                                                                
MS.  WING-HEIER stated  that  the controlling  insurance  producer                                                              
provisions  should  have  been  effective   on  January  1,  2014.                                                              
Basically,  these provisions would  provide additional  guidelines                                                              
for  businesses between  the controlled  insurers and  controlling                                                              
producers  necessary  for  fiduciary and  oversight  reasons,  for                                                              
example,  when an insurance  producer owns  the insurance  company                                                              
[slide 13].                                                                                                                     
                                                                                                                                
4:29:07 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  suggested that this  bill needs to pass  this year                                                              
since the provisions must be in place by January 2016.                                                                          
                                                                                                                                
CHAIR OLSON commented  that the director has only been  on the job                                                              
for a little over one year, approximately 15 months.                                                                            
                                                                                                                                
4:30:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX  directed attention  to  Section  1 of  the                                                              
bill and asked  whether maritime policies were  indemnity policies                                                              
and if they will be included in the bill.                                                                                       
                                                                                                                                
MS.  WING-HEIER   answered  yes;   for  domestic  companies,   but                                                              
generally speaking  maritime insurance  falls under surplus  lines                                                              
placement, typically offered through Lloyds of London.                                                                          
                                                                                                                                
4:30:56 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON  commented  that  he did  not  believe  any  domestic                                                              
insurer writes maritime coverages for at least 15 years.                                                                        
                                                                                                                                
REPRESENTATIVE  LEDOUX  asked whether  Alaska  National  Insurance                                                              
offers it.                                                                                                                      
                                                                                                                                
CHAIR OLSON  offered his  belief the last  one was Pacific  Marine                                                              
Underwriting Managers Ltd.                                                                                                      
                                                                                                                                
4:31:16 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER said  some incidental policies may  be written, but                                                              
it was not  their main line of  business for any of  the foregoing                                                              
companies.                                                                                                                      
                                                                                                                                
CHAIR  OLSON acknowledged  that Alaska  National Insurance  writes                                                              
some  incidental coverage,  and  Longshoremen  and Harbor  Workers                                                              
coverage, but he  did not believe they offered  offshore unless it                                                              
would  be workers'  compensation  for people  working  on the  oil                                                              
platforms.                                                                                                                      
                                                                                                                                
MS.  WING-HEIER  suggested  that  Sunderland  Insurance  Services,                                                              
Inc. may write some.                                                                                                            
                                                                                                                                
CHAIR OLSON said he stands corrected.                                                                                           
                                                                                                                                
4:31:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   HUGHES   asked   how  much   business   insurance                                                              
companies domiciled in Alaska provide outside Alaska.                                                                           
                                                                                                                                
MS. WING-HEIER  answered that  Sunderland Insurance Services  does                                                              
some, but  Alaska National  Insurance probably  does the  most and                                                              
operates in Idaho,  California, Louisiana, and are  likely looking                                                              
to expand.   She suggested  that the others  are content to  be in                                                              
Alaska.                                                                                                                         
                                                                                                                                
4:32:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES noted  that obvious  this is needed  sooner                                                              
rather than  later.  She asked  whether anything in the  bill that                                                              
was not related for accreditation.                                                                                              
                                                                                                                                
MS. WING-HEIER  answered no;  that the  bill was limited  strictly                                                              
to accreditation  and  financial solvency  for domestic  insurance                                                              
companies in Alaska.                                                                                                            
                                                                                                                                
4:34:36 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON,  after first  determining no  one wished to  testify,                                                              
closed public testimony on HB 164.                                                                                              
                                                                                                                                
4:35:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES moved  to report  HB 164  out of  committee                                                              
with  individual  recommendations   and  the  accompanying  fiscal                                                              
notes.   There being no  objection, HB 164  was reported  from the                                                              
House Labor and Commerce Standing Committee.                                                                                    
                                                                                                                                
4:36:00 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Labor and  Commerce Standing  Committee meeting  was adjourned  at                                                              
4:36 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB164 ver A.PDF HL&C 3/25/2015 3:15:00 PM
HB 164
HB164 Sponsor Statement.pdf HL&C 3/25/2015 3:15:00 PM
HB 164
HB164 Sectional Analysis.pdf HL&C 3/25/2015 3:15:00 PM
HB 164
HB114 ver A.PDF HL&C 3/25/2015 3:15:00 PM
HB 114
HB114 Sponsor Statement.pdf HL&C 3/25/2015 3:15:00 PM
HB 114
HB114 Sectional Analysis.pdf HL&C 3/25/2015 3:15:00 PM
HB 114
HB114 Fiscal Note-DOA-DRM-03-20-15.pdf HL&C 3/25/2015 3:15:00 PM
HB 114
HB114 Fiscal Note-DOLWD-WC-03-27-15.pdf HL&C 3/25/2015 3:15:00 PM
HB 114
HB114 Supporting Documents-Research Report 2-4-15.PDF HL&C 3/25/2015 3:15:00 PM
HB 114
HB114 Supporting Documents-Intestate Statutes.pdf HL&C 3/25/2015 3:15:00 PM
HB 114
HB164 Supporting Documents-DOI Presentation-3-25-15.pdf HL&C 3/25/2015 3:15:00 PM
HB 164
HB164 Fiscal Note-DOA-DOI-3-24-15.pdf HL&C 3/25/2015 3:15:00 PM
HB 164