Legislature(2017 - 2018)BARNES 124

01/20/2017 03:15 PM LABOR & COMMERCE

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Audio Topic
03:16:48 PM Start
03:17:39 PM Organizational Meeting
03:20:35 PM Approval of Drafting Requests for Potential Committee Legislation by Request of the Deptartment of Labor & Workforce Development
03:36:48 PM Approval of Drafting Requests for Potential Committee Legislation by Request of the Department of Commerce, Community, and Economic Development
04:09:32 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Organizational Meeting TELECONFERENCED
- Approval of drafting requests for potential
committee legislation by request of Dept. of
Labor & Workforce Development & Dept. of
Commerce, Community, & Economic Development
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                        January 20, 2017                                                                                        
                           3:16 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Sam Kito, Chair                                                                                                  
Representative Adam Wool, Vice Chair                                                                                            
Representative Andy Josephson                                                                                                   
Representative Louise Stutes                                                                                                    
Representative Chris Birch                                                                                                      
Representative Gary Knopp                                                                                                       
Representative Colleen Sullivan-Leonard                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Bryce Edgmon (alternate)                                                                                         
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
ORGANIZATIONAL MEETING                                                                                                          
                                                                                                                                
APPROVAL   OF   DRAFTING   REQUESTS   FOR   POTENTIAL   COMMITTEE                                                               
LEGISLATION BY REQUEST OF THE DEPARTMENT OF LABOR & WORKFORCE                                                                   
DEVELOPMENT                                                                                                                     
                                                                                                                                
APPROVAL   OF   DRAFTING   REQUESTS   FOR   POTENTIAL   COMMITTEE                                                               
LEGISLATION BY REQUEST OF THE DEPARTMENT OF COMMERCE, COMMUNITY,                                                                
AND ECONOMIC DEVELOPMENTORGANIZATIONAL MEETING                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
HEIDI DRYGAS, Commissioner                                                                                                      
Department of Labor & Workforce Development (DLWD)                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Requested drafting of legislation.                                                                       
                                                                                                                                
DEBORAH KELLY, Director                                                                                                         
Division of Labor Standards & Safety                                                                                            
Department of Labor & Workforce Development (DWLD)                                                                              
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:     Provided   details  for   proposals  for                                                             
legislation.                                                                                                                    
                                                                                                                                
LORI WING-HEIER, Director                                                                                                       
Division of Insurance                                                                                                           
Department  of  Commerce,  Community,  and  Economic  Development                                                               
(DCCED)                                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Requested drafting of legislation.                                                                       
                                                                                                                                
KEVIN ANSELM, Director                                                                                                          
Division of Banking & Securities                                                                                                
Department  of  Commerce,   Community  and  Economic  Development                                                               
(DCCED)                                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Addressed the  need to  update the  Alaska                                                             
Securities Act.                                                                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:16:48 PM                                                                                                                    
                                                                                                                                
CHAIR  SAM KITO  called  the House  Labor  and Commerce  Standing                                                             
Committee meeting  to order at  3:16 p.m.   Representatives Wool,                                                               
Josephson, Stutes, Birch, Knopp,  Sullivan-Leonard, and Kito were                                                               
present at the call to order.                                                                                                   
                                                                                                                                
^ORGANIZATIONAL MEETING                                                                                                         
                     ORGANIZATIONAL MEETING                                                                                 
                                                                                                                                
3:17:39 PM                                                                                                                    
                                                                                                                                
CHAIR KITO announced that the first  order of business would be a                                                               
committee organizational discussion.                                                                                            
                                                                                                                                
CHAIR KITO  discussed committee meeting protocol,  including that                                                               
staff  should  be  utilized  for  passing  notes  and  electronic                                                               
devices  are permitted  and encouraged  for documents.   He  also                                                               
mentioned  protocol  for  committee  members,  including  written                                                               
committee request  forms, and that  amendments for  bills drafted                                                               
by Legislative  Legal and Research  Services should  be submitted                                                               
to his office 24  hours ahead of time in order  to be included in                                                               
the bill packet.                                                                                                                
                                                                                                                                
^APPROVAL   OF   DRAFTING   REQUESTS  FOR   POTENTIAL   COMMITTEE                                                               
LEGISLATION BY  REQUEST OF THE  DEPTARTMENT OF LABOR  & WORKFORCE                                                               
DEVELOPMENT                                                                                                                     
     APPROVAL OF DRAFTING REQUESTS FOR POTENTIAL COMMITTEE                                                                  
 LEGISLATION BY REQUEST OF THE DEPTARTMENT OF LABOR & WORKFORCE                                                             
                          DEVELOPMENT                                                                                       
                                                                                                                              
3:20:35 PM                                                                                                                    
                                                                                                                                
CHAIR KITO announced  that the second order of  business would be                                                               
drafting requests for potential  committee legislation by request                                                               
of the Department of Labor & Workforce Development.                                                                             
                                                                                                                                
3:21:03 PM                                                                                                                    
                                                                                                                                
HEIDI  DRYGAS,  Commissioner,  Department of  Labor  &  Workforce                                                               
Development (DLWD),  introduced proposals  for legislation.   The                                                               
first  proposal would  bring DWLD  into  compliance with  federal                                                               
occupational  safety and  health  penalty  standards, which  were                                                               
enacted in  2015.  She informed  that as of January  1, 2017, the                                                               
department is  not in  compliance with federal  law.   The second                                                               
proposal pertains to  the reporting of inspections  of boiler and                                                               
pressure  devices, would  institute a  small fee  for the  manual                                                               
data entry of private inspector  reports by department staff, and                                                               
would reduce the  report submission timeframe from 30  days to 10                                                               
days due to the advent of electronic filing.                                                                                    
                                                                                                                                
3:22:20 PM                                                                                                                    
                                                                                                                                
DEBORAH KELLY,  Director, Division  of Labor Standards  & Safety,                                                               
Department of Labor & Workforce  Development (DWLD), introduced a                                                               
proposal   regarding  Alaska   Occupational  Safety   and  Health                                                               
(AKOSH).    She  stated  that   Occupational  Safety  and  Health                                                               
Administration  (OSHA)  gives states  the  option  of adopting  a                                                               
state plan.   She  stated Alaska  Occupational Safety  and Health                                                               
(AKOSH) is Alaska's state plan.  She remarked:                                                                                  
                                                                                                                                
     What this means is AKOSH receives federal grants and                                                                       
     is  responsible for  the  safety  and health  standards                                                                    
     that protect  almost all Alaskan  workers.  One  of the                                                                    
     major requirements of the state  plans is it must be at                                                                    
     least as  effective as federal OSHA.   Alaska's program                                                                    
     may develop  and implement safety and  health standards                                                                    
     that fit  Alaska's unique environment using  input from                                                                    
     Alaskan  industries,  employers,   employees,  and  the                                                                    
     public.   So quite a  bit more responsive  than federal                                                                    
     OSHA standard rule making.                                                                                                 
                                                                                                                                
MS. KELLY related that AKOSH may inspect most private or                                                                        
public employers in Alaska, with a few federal exceptions,                                                                      
and if  during the  course of an  inspection an  employer is                                                                    
found to  be violating  a safety  or health  standard, AKOSH                                                                    
issues a citation which comes  with a monetary penalty.  Ms.                                                                    
Kelly continued as follows:                                                                                                     
                                                                                                                                
     Now, the maximum penalties and one minimum that AKOSH                                                                      
     is allowed to assess  is encompassed in Alaska statute.                                                                    
     And I'd just like to  clarify quickly before getting to                                                                    
     the  proposal  that these  are  maximums.   The  actual                                                                    
     penalties that  employers pay are  adjusted based  on a                                                                    
     lot of factors:  the size of the  business, the gravity                                                                    
     of  the  violation, and  good  faith  efforts or  other                                                                    
     mitigating factors.                                                                                                        
                                                                                                                                
MS.  KELLY  related that  in  2015,  Congress passed  a  law                                                                    
requiring  a  lot  of  federal   agencies  to  adjust  their                                                                    
penalties for inflation  going back to 1990.   She said OSHA                                                                    
complied with the law in July  of last year, and AKOSH has 6                                                                    
months  to adopt  federal changes;  as of  January 1,  2017,                                                                    
Alaska was out of compliance with the federal requirement.                                                                      
                                                                                                                                
MS.  KELLY stated  that  the proposal  is  to authorize  the                                                                    
department  to: increase  the penalties  to federal  levels;                                                                    
adjust  to future  yearly consumer  price  index changes  as                                                                    
required  by  the federal  act;  adopt  the maximum  penalty                                                                    
amounts by  regulation; and limit the  maximum penalties set                                                                    
by regulation  to the corresponding federal  penalties.  She                                                                    
clarified  that the  proposal would,  in  effect, allow  the                                                                    
department to  set the current federal  amount in regulation                                                                    
-  no  more,  no  less  -  and  allow  AKOSH  to  come  into                                                                    
compliance with federal law and to stay in compliance.                                                                          
                                                                                                                                
3:25:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH asked why anyone  would oppose this proposal                                                               
and whether the  department could set an  automatic enrollment of                                                               
AKOSH into future federal standards changes.                                                                                    
                                                                                                                                
3:26:26 PM                                                                                                                    
                                                                                                                                
MS. DRYGAS  responded that she agrees  with Representative Birch,                                                               
and the department  has given the commissioner  of the department                                                               
the ability to  make the penalty adjustments in  regulation up to                                                               
but  not  greater  than  the  federal amount.    She  stated  the                                                               
department could continue  to change it for  Consumer Price Index                                                               
(CPI) as the federal rates change.                                                                                              
                                                                                                                                
3:26:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH asked  if this  would  show up  again as  a                                                               
requirement or if it could be handled administratively.                                                                         
                                                                                                                                
3:27:00 PM                                                                                                                    
                                                                                                                                
MS. DRYGAS responded that if  the legislature adopts the proposal                                                               
through legislation the division could oversee its requirements.                                                                
                                                                                                                                
3:27:06 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  clarified that the  committee would see  the language                                                               
when the bill is drafted.                                                                                                       
                                                                                                                                
3:27:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL moved that the  committee authorize the chair                                                               
to  draft a  bill,  on behalf  of the  House  Labor and  Commerce                                                               
Standing  Committee,  which  brings  the  state  of  Alaska  into                                                               
Compliance  with  the  Federal  Occupational  Safety  and  Health                                                               
requirements.  There being no objection, it was so ordered.                                                                     
                                                                                                                                
3:28:02 PM                                                                                                                    
                                                                                                                                
MS. KELLY explained boiler and  pressure vessel inspections.  She                                                               
remarked:                                                                                                                       
                                                                                                                                
     Boilers  around Alaska  are  routinely  inspected as  a                                                                    
     safety  measure   to  prevent   catastrophic  failures.                                                                    
     Inspections are done by the  State of Alaska or private                                                                    
     inspectors  employed  by  insurance  companies  or  the                                                                    
     device  owners themselves.   The  Mechanical Inspection                                                                    
     section of  [the Division of] Labor  Standards & Safety                                                                    
     administers these inspections.   Besides inspecting, we                                                                    
     also  collect and  review  the  inspections and  ensure                                                                    
     that the  boiler owners stay in  compliance with Alaska                                                                    
     law.    So,  mechanical  inspection  uses  jurisdiction                                                                    
     online, which is a software  that allows the inspectors                                                                    
     in  the field  to enter  their data  directly into  our                                                                    
     database.     It  also  allows  inspectors   to  access                                                                    
     information in  the field.  The  majority of inspectors                                                                    
     are using this system.                                                                                                     
                                                                                                                                
     Some reports,  though, are still submitted  by emailing                                                                    
     electronic    documents   which    require   Mechanical                                                                    
     Inspection  to  manually  enter   that  data  into  the                                                                    
     database.   Mechanical Inspection estimates 350  to 400                                                                    
     hours a year are spent on  this data entry on behalf of                                                                    
     these  companies who  don't  want  to use  jurisdiction                                                                    
     online.   Our  proposal is  to charge  a small  fee for                                                                    
     each  report submitted  not using  that online  system.                                                                    
     This would  compensate mechanical submission  for doing                                                                    
     this data entry  on behalf of the  companies who choose                                                                    
     not to use this system.                                                                                                    
                                                                                                                                
MS. KELLY  stated the proposal  reduces the time allowed  from 30                                                               
days to  10 days.   Currently inspectors  have 30 days  after the                                                               
inspection  to submit  a report  to Mechanical  Inspection.   The                                                               
limit  was  set  when  written  reports  on  carbon  copies  were                                                               
necessary, but  now they are  all submitted electronically.   The                                                               
department believes 10 days is  an adequate amount of time, which                                                               
will allow device owners to comply with the law faster.                                                                         
                                                                                                                                
3:30:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KNOPP  stated he is  okay with the fee,  but asked                                                               
what part  of the  process is  time sensitive  and what  the time                                                               
frame is of the inspections for the devices.                                                                                    
                                                                                                                                
3:32:47 PM                                                                                                                    
                                                                                                                                
MS. KELLY  responded the reason for  the time frame is  to reduce                                                               
the time [device owners] are out  of compliance.  The time period                                                               
does vary between two to five years based on the type of device.                                                                
                                                                                                                                
3:31:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD  asked what a "small  fee" to the                                                               
companies not in compliance with the system is considered.                                                                      
                                                                                                                                
MS. KELLY responded that the  proposed starting point for the fee                                                               
is $10 per report.                                                                                                              
                                                                                                                                
MS. DRYGAS, in response to  a follow-up question, said the amount                                                               
a company would pay in a  year depends on how many inspections or                                                               
reports a particular inspector is filing.                                                                                       
                                                                                                                                
3:33:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD asked to see a fiscal note.                                                                     
                                                                                                                                
3:33:51 PM                                                                                                                    
                                                                                                                                
MS. KELLY responded  that about 3,200 inspection  reports come in                                                               
per year from  inspectors not using the  online system; therefore                                                               
the $10 fee would result in about $32,000 per year.                                                                             
                                                                                                                                
3:34:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL moved that the  committee authorize the chair                                                               
to  draft a  bill,  on behalf  of the  House  Labor and  Commerce                                                               
Standing  Committee,  which   modifies  filing  requirements  for                                                               
boiler  inspections.    There  being  no  objection,  it  was  so                                                               
ordered.                                                                                                                        
                                                                                                                                
3:34:42 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:35 p.m. to 3:36 p.m.                                                                       
                                                                                                                                
^APPROVAL   OF   DRAFTING   REQUESTS  FOR   POTENTIAL   COMMITTEE                                                               
LEGISLATION BY REQUEST OF THE  DEPARTMENT OF COMMERCE, COMMUNITY,                                                               
AND ECONOMIC DEVELOPMENT                                                                                                        
     APPROVAL OF DRAFTING REQUESTS FOR POTENTIAL COMMITTEE                                                                  
 LEGISLATION BY REQUEST OF THE DEPARTMENT OF COMMERCE, COMMUNITY,                                                           
                    AND ECONOMIC DEVELOPMENT                                                                                
                                                                                                                              
3:36:48 PM                                                                                                                    
                                                                                                                                
CHAIR  KITO  announced  the  final order  of  business  would  be                                                               
drafting requests for potential  committee legislation by request                                                               
of   the  Department   of  Commerce,   Community,  and   Economic                                                               
Development.                                                                                                                    
                                                                                                                                
3:37:13 PM                                                                                                                    
                                                                                                                                
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce,  Community, and  Economic  Development (DCCED),  stated                                                               
that Alaska is a member  of the National Association of Insurance                                                               
Commissioners (NAIC),  which acts  like the  Senate and  House in                                                               
that  model bills  move from  task force  to work  group and  are                                                               
vetted by the public, industries,  and regulatory agencies.  Then                                                               
they  are in  a plenary  [meeting], where  they are  voted on  to                                                               
determine if the  bill should become a model law  that all states                                                               
should adopt.   She  asked for  support for  the Alaska  Life and                                                               
Health  Insurance  Guarantee  Association (ALHGA),  a  non-profit                                                               
entity  created by  state  law  under Title  21,  Chapter 79,  of                                                               
Alaska  Statute.   She  said  ALHGA  protects consumers  when  an                                                               
insurance  company  is insolvent.    The  member insurers,  those                                                               
other  insurers  doing  business  in  the  State  of  Alaska  are                                                               
"assessed ... to  pay" the claims of the policy  holders.  Policy                                                               
holders may  not be made  whole in  some instances due  to limits                                                               
dictated  in statute.    The proposed  bill  would increase  some                                                               
limits and bring  the state into compliance with  the most recent                                                               
model  of NAIC/ALHGA  bills.   The  current bill  was adopted  in                                                               
2009, and Alaska's  law has not been changed to  comply with what                                                               
other states are doing.                                                                                                         
MS. WING-HEIER  denoted the other  proposed change  would include                                                               
hospital and  medical service corporations within  the definition                                                               
of an insured member of the  association.  She said 20 states now                                                               
include  hospital  and  medical  service  corporations  in  their                                                               
definitions.   These entities are insurance  companies, but their                                                               
organizational  structure  is  a   hospital  or  medical  service                                                               
corporation.    In  Alaska,  one such  entity  controls  over  50                                                               
percent  of the  market  in  the medical  area  and is  currently                                                               
exempt from  assessments from ALHGA.   Without  the participation                                                               
of hospital  and medical service corporations  in the assessment,                                                               
the division  cannot make policy  holders whole.   Ms. Wing-Heier                                                               
asked  that  the hospital  and  medical  service corporations  be                                                               
included as  a member  of the  association, so  they can  also be                                                               
assessed the  2 percent  in the  event of  an insolvency  to make                                                               
policy  holders  whole  under   medical  life  policies,  annuity                                                               
contracts,  and  long-term  care  policies  covered  within  this                                                               
chapter.                                                                                                                        
                                                                                                                                
3:41:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH inquires  as to the source from  which the 2                                                               
percent is derived.                                                                                                             
                                                                                                                                
MS.  WING-HEIER  responded  the  2 percent  is  from  the  annual                                                               
premium, and in some cases  multi-year assessments were needed to                                                               
reimburse the policy holders.                                                                                                   
                                                                                                                                
REPRESENTATIVE  BIRCH asked  what the  magnitude of  the receipts                                                               
approximates.                                                                                                                   
                                                                                                                                
MS.  WING-HEIER  stated that  in  2016,  the premiums  that  were                                                               
written totaled close to $300  million in medical, with a similar                                                               
amount in  life policies.   She stated that assessments  are only                                                               
done when  a company is insolvent,  and they only assess  to what                                                               
is needed to pay the claims of the policy holders at that time.                                                                 
                                                                                                                                
REPRESENTATIVE BIRCH  asked if  Providence Alaska  Medical Center                                                               
in Anchorage would take the $300 million to $600 million.                                                                       
                                                                                                                                
3:43:31 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  responded it's not hospitals,  it's organizations                                                               
that  have filed  under the  structure of  corporations that  are                                                               
exempt.    The   only  one  in  Alaska  is   Premera  Blue  Cross                                                               
("Premera"), which is  over 50 percent of the  medical market, so                                                               
the  division   could  not  raise   enough  funds  for   a  large                                                               
insolvency.                                                                                                                     
                                                                                                                                
3:44:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KNOPP asked how commonly insolvency happens.                                                                     
                                                                                                                                
3:44:40 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER stated it's not  common, but "when it happens it's                                                               
large dollars."  The last  large insolvency  the division  had in                                                               
life and health is Penn  Treaty Network America Insurance Company                                                               
which  did  not impact  Alaska  greatly.   "Industrial  Indemnity                                                               
Fremont" became  insolvent, and its  claims are still  being paid                                                               
close to 15 years later.                                                                                                        
                                                                                                                                
3:45:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KNOPP  clarified that  this  is  not a  voluntary                                                               
program,  and   he  asked   how  it  is   that  Premera   is  not                                                               
participating.                                                                                                                  
                                                                                                                                
MS. WING-HEIER responded  it's because of the way  the statute is                                                               
written, exempting them based on their organizational structure.                                                                
                                                                                                                                
3:46:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STUTES  asked if this is  commonplace in hospitals                                                               
and medical associations in other states.                                                                                       
                                                                                                                                
MS. WING-HEIER  stated every state  has a  guarantee association,                                                               
some  operate a  little differently.   The  hospital and  medical                                                               
corporations affected  by the proposed  change would  not include                                                               
Providence Alaska Medical or Alaska  Regional Hospital, but would                                                               
include insurance companies that  have a different organizational                                                               
structure.   To  make  it  equitable when  the  division does  an                                                               
assessment,  and to  make  sure there  is  adequate funding,  the                                                               
division must look at "bringing them in".                                                                                       
                                                                                                                                
REPRESENTATIVE STUTES  asked whether there is  an indication that                                                               
Premera  would  reconsider  being  an insurer  in  the  State  of                                                               
Alaska.   She  stated "we  only have  one left,  we ...  gotta be                                                               
careful here."                                                                                                                  
                                                                                                                                
MS. WING-HEIER  offered her understanding that  Premera would not                                                               
be surprised by  the legislation.  She  referenced a conversation                                                               
she  had  with Premera,  during  which  the corporation  said  it                                                               
didn't want  to see legislation  that was backdated,  which would                                                               
make it accept liability for Penn Treaty and others.                                                                            
                                                                                                                                
REPRESENTATIVE  STUTES  asked  if  Premera  is  expecting  to  go                                                               
forward with business in Alaska.                                                                                                
                                                                                                                                
MS.  WING-HEIER explained  she does  not think  Premera would  be                                                               
surprised,  because  it knows  the  division,  as well  as  other                                                               
states, had concerns with it  not being included in the guarantee                                                               
association.                                                                                                                    
                                                                                                                                
3:48:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL  asked whether  insolvency is national  or if                                                               
the company can section off state by state.                                                                                     
                                                                                                                                
MS. WING-HEIER  responded it would  be hard to do,  generally the                                                               
entire company would go into liquidation.                                                                                       
                                                                                                                                
REPRESENTATIVE  WOOL  asked whether  2  percent  of the  premiums                                                               
would go to  cover the possibility [of insolvency],  and asked if                                                               
[the collected funds] would be passed onto the insured.                                                                         
                                                                                                                                
MS. WING-HEIER responded they could.                                                                                            
                                                                                                                                
3:49:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KNOPP  asked if the  collected funds ever  quit or                                                               
if they accumulate.                                                                                                             
                                                                                                                                
MS.  WING-HEIER answered  that the  association does  not collect                                                               
anything, no assessment, until it needs to pay the claims.                                                                      
                                                                                                                                
3:50:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KNOPP  clarified that the association  may collect                                                               
funds to help [policy holders]  if other companies, not necessary                                                               
Premera, were to become insolvent.                                                                                              
                                                                                                                                
3:51:01 PM                                                                                                                    
                                                                                                                                
CHAIR  KITO  clarified that  the  proposal  would allow  for  the                                                               
collection of  the fee, if  required, but would not  mandate one.                                                               
It  would  open  up  the  door  to  collect  from  this  kind  of                                                               
corporation that  has not  been eligible before.   The  fee would                                                               
not be collected  if there was not a company  in insolvency, only                                                               
if there  were claims to  pay, otherwise the companies  would not                                                               
be charged.                                                                                                                     
                                                                                                                                
3:51:41 PM                                                                                                                    
                                                                                                                                
MS. WING-HEIER  agreed with  Chair Kito's  statement.   She added                                                               
that the division does not collect  and keep money in the bank to                                                               
pay future claims.                                                                                                              
                                                                                                                                
3:52:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL moved that the  committee authorize the chair                                                               
to  draft a  bill  on  behalf of  the  House  Labor and  Commerce                                                               
Standing  Committee  that  creates  the Alaska  Life  and  Health                                                               
Insurance Guarantee  Association.  [No objection  was stated, and                                                               
the committee treated the motion as so ordered.]                                                                                
                                                                                                                                
3:52:29 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:52 p.m. to 3:54 p.m.                                                                       
                                                                                                                                
3:54:16 PM                                                                                                                    
                                                                                                                                
KEVIN  ANSELM,  Director,  Division   of  Banking  &  Securities,                                                               
Department  of  Commerce,   Community  and  Economic  Development                                                               
(DCCED), addressed the need to  update the Alaska Securities Act,                                                               
which  provides  the  legal framework  for  offering  or  selling                                                               
securities within Alaska  or from outside the  state to Alaskans,                                                               
including the registration of firms  and sales persons, filing of                                                               
securities, and enforcement.  The  division licenses about 95,000                                                               
salespersons and about 1,000 securities  firms, most of which are                                                               
out of state.  Ms. Anselm  said the Securities Act also regulates                                                               
the Alaska  Native Claims Settlement Act  (ANCSA) Corporation and                                                               
the shareholder proxy provisions.   She noted that the securities                                                               
industry had increased dramatically.   She suggested an update to                                                               
the  Alaska Securities  Act would  simplify  and update  Alaska's                                                               
security laws to  be similar to provisions in other  states.  She                                                               
noted  that most  current provisions  haven't been  updated since                                                               
statehood  and are  based  on an  Act from  1956.   For  example,                                                               
Alaska law still allows filings by telegraph.                                                                                   
                                                                                                                                
MS. ANSELM  said the  division also  proposes lifting  the Alaska                                                               
Securities  Act   out  of  the  ANCSA   provisions,  which  would                                                               
highlight  the difference  between ANCSA  and regular  securities                                                               
activity  and would  allow the  ANCSA constituents  to deal  more                                                               
directly with the ANCSA law.   She stated that there is currently                                                               
no provision in  the law for restitution for  consumers harmed by                                                               
scams.    The department  suggests  the  legislature direct  some                                                               
enforcement  funds  towards  investor and  market  education  for                                                               
Alaskans.                                                                                                                       
                                                                                                                                
3:58:33 PM                                                                                                                    
                                                                                                                                
MS. ANSELM  assessed another provision  would allow  the division                                                               
to  require continuing  education  for investment  professionals,                                                               
where there currently  are not requirements.   She mentioned that                                                               
without updates  to the law businesses  will not be able  to grow                                                               
and develop economically and keep  up, and they face more hurdles                                                               
here than other states.   ANCSA corporations and shareholders are                                                               
constrained by  the provisions, which  are only designed  for one                                                               
type of  business.  There  are fewer opportunities  for consumer,                                                               
investor, and marketplace  education.  One of  the biggest issues                                                               
is  the  lack  of  good  enforcement  provisions  in  the  Alaska                                                               
Securities Act;  there is no  restitution allowed  for victimized                                                               
Alaskans,  and  there's  a  $25,000  maximum  civil  penalty  for                                                               
scammers.    She  listed  recent   securities  scams  in  Alaska,                                                               
including:  a scam  by  Michael Scow,  who  convinced an  elderly                                                               
Alaskan to invest  $12,000 in building his business  and used the                                                               
money  for something  else; the  Fortune Oil  and Gas,  LLC scam,                                                               
which resulted  in $3.1  million in losses  to Alaskans;  the SOS                                                               
Disasterplan.com scam,  in which $540,000 of  worthless stock was                                                               
issued,  the  Global  Arena  Capital  Corp  scam,  in  which  the                                                               
corporation sold junk  bonds to an Alaskan fisherman;  and a scam                                                               
by  Troy Stafford  and Patrick  Williams, who  sold an  Alaskan a                                                               
$40,000 investment  in a  bogus company.   Ms.  Anselm reiterated                                                               
that work is needed on the Alaska Securities Act.                                                                               
                                                                                                                                
4:02:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  asked if an  individual could  pursue legal                                                               
action to recover what he/she had lost as a result of a scam.                                                                   
                                                                                                                                
MS. ANSELM confirmed  that is correct, but  there are limitations                                                               
there as well.                                                                                                                  
                                                                                                                                
4:02:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD  asked  for an  example  of  how                                                               
enforcement  provisions would  be  enhanced  under the  proposals                                                               
requested by the division.                                                                                                      
                                                                                                                                
MS.  ANSELM answered  that some  of the  provisions allowing  the                                                               
division to  order restitution would  allow a larger  recovery of                                                               
up to  $100,000 per violation,  and allow penalties to  be raised                                                               
in civil court.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD  inquired  if  increasing  staff                                                               
would be necessary to carry out enforcement.                                                                                    
                                                                                                                                
MS.  ANSELM  responded  that  the  division  is  not  looking  to                                                               
increase  staff.    The  division brings  in  about  $13  million                                                               
through  licensing on  the securities  side,  and the  division's                                                               
entire budget is about $3.2 million.                                                                                            
                                                                                                                                
4:04:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WOOL commented  that  95,000 registered  entities                                                               
seems like a lot for a state of 700,000.                                                                                        
                                                                                                                                
MS.  ANSELM  agreed.   She  listed  reasons  for the  high  ratio                                                               
including: stock brokers  want to be listed in all  50 states for                                                               
a larger market; and Alaska has  the highest per capita income in                                                               
the country, making Alaskans targets.                                                                                           
                                                                                                                                
REPRESENTATIVE WOOL indicated that  increasing the penalty for an                                                               
out of state  scammer does not make it any  easier to collect the                                                               
penalty.                                                                                                                        
                                                                                                                                
MS.  ANSELM agreed,  but added  that the  penalty should  be more                                                               
than "just a little cost of doing business."                                                                                    
                                                                                                                                
4:06:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON pointed  out that  last year  a similar                                                               
proposal was a priority of  the administration, and this proposal                                                               
has already undergone some vetting.                                                                                             
                                                                                                                                
4:06:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KNOPP asked, of the  examples given by Ms. Anselm,                                                               
if failed  business propositions would be  considered differently                                                               
from true scams.                                                                                                                
                                                                                                                                
4:07:32 PM                                                                                                                    
                                                                                                                                
MS.  ANSELM  stated  the  examples  given  are  cases  where  the                                                               
division  took  action,  and the  division  took  38  enforcement                                                               
actions in  the last  year.  She  expounded that  anytime someone                                                               
takes money from someone else and  doesn't do with it what he/she                                                               
promised, that's a misrepresentation,  and if someone expected to                                                               
get money back,  then it is a violation of  the Alaska Securities                                                               
Act, which she described as "very broad."                                                                                       
                                                                                                                                
4:08:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WOOL moved that the  committee authorize the chair                                                               
to  draft a  bill  on  behalf of  the  House  Labor and  Commerce                                                               
Standing  Committee  that  updates  the  Alaska  Securities  Act.                                                               
There being no objection, it was so ordered.                                                                                    
                                                                                                                                
4:09:32 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
4:09 p.m.