Legislature(2005 - 2006)
05/14/2005 02:23 PM Joint 147
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| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
CONFERENCE COMMITTEE ON HB 147
May 14, 2005
2:23 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chair
Representative Tom Anderson
Representative Berta Gardner
Senator Gene Therriault, Chair
Senator Bert Stedman
Senator Johnny Ellis
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 147
"An Act relating to the regulation of insurance, insurance
licensing, surplus lines, insurer deposits, motor vehicle
service contracts, guaranteed automobile protection products,
health discount plans, third-party administrators, self-funded
multiple employer welfare arrangements, and self-funded
governmental plans; and providing for an effective date."
- MOVED CCS HB 147 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 147
SHORT TITLE: INSURANCE REGULATION
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
02/14/05 (H) READ THE FIRST TIME - REFERRALS
02/14/05 (H) L&C, FIN
02/23/05 (H) L&C AT 3:15 PM CAPITOL 17
02/23/05 (H) Heard & Held
02/23/05 (H) MINUTE(L&C)
03/02/05 (H) L&C AT 3:15 PM CAPITOL 17
03/02/05 (H) Heard & Held
03/02/05 (H) MINUTE(L&C)
03/16/05 (H) L&C AT 3:15 PM CAPITOL 17
03/16/05 (H) Scheduled But Not Heard
03/18/05 (H) L&C AT 3:15 PM CAPITOL 17
03/18/05 (H) Heard & Held
03/18/05 (H) MINUTE(L&C)
03/30/05 (H) L&C AT 3:15 PM CAPITOL 17
03/30/05 (H) Moved CSHB 147(L&C) Out of Committee
03/30/05 (H) MINUTE(L&C)
04/01/05 (H) L&C RPT CS(L&C) NT 1DP 5NR
04/01/05 (H) DP: ANDERSON;
04/01/05 (H) NR: CRAWFORD, LYNN, KOTT, LEDOUX,
GUTTENBERG
04/15/05 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/15/05 (H) Moved CSHB 147(FIN) Out of Committee
04/15/05 (H) MINUTE(FIN)
04/18/05 (H) FIN RPT CS(FIN) NT 3DP 6NR
04/18/05 (H) DP: HAWKER, MOSES, FOSTER;
04/18/05 (H) NR: CROFT, WEYHRAUCH, HOLM, KELLY,
MEYER, CHENAULT
04/21/05 (H) RLS AT 3:00 PM FAHRENKAMP 203
04/21/05 (H) Scheduled But Not Heard
04/25/05 (H) RLS AT 5:00 PM CAPITOL 106
04/25/05 (H) Intent to Calendar
04/28/05 (H) TRANSMITTED TO (S)
04/28/05 (H) VERSION: CSHB 147(FIN) AM
05/01/05 (S) READ THE FIRST TIME - REFERRALS
05/01/05 (S) FIN
05/06/05 (S) FIN RPT SCS 2DP 4NR
SAME TITLE
05/06/05 (S) DP: WILKEN, GREEN
05/06/05 (S) NR: HOFFMAN, OLSON, DYSON, STEDMAN
05/06/05 (S) FIN AT 4:30 PM SENATE FINANCE 532
05/06/05 (S) Moved SCS CSHB 147(FIN) Out of
Committee
05/06/05 (S) MINUTE(FIN)
05/08/05 (S) FIN SCS ADOPTED Y11 N8 E1
05/10/05 (S) VERSION: SCS CSHB 147(FIN)
05/10/05 (H) RETURN TO SENATE REQUESTING RECEDE
05/11/05 (S) SPECIAL SESSION BILL - SEE S. JOURNAL
P. 1606
05/11/05 (H) SPECIAL SESSION BILL - SEE H. JOURNAL
P. 1962
05/12/05 (H) BILL NOT RETURNED
05/13/05 (H) CONFERENCE COMMITTEE APPOINTED
05/13/05 (H) ROKEBERG (CHAIR), ANDERSON, GARDNER
05/13/05 (S) CONFERENCE COMMITTEE APPOINTED
05/13/05 (S) THERRIAULT (CHAIR), STEDMAN, ELLIS
05/14/05 (H) 147 AT 2:00 PM CAPITOL 124
WITNESS REGISTER
LINDA HALL, Director
Division of Insurance
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: During hearing on HB 147, answered
questions.
TOM BRICE, Business Agent
Locals 71, 942, and 341
Juneau, Alaska
POSITION STATEMENT: Expressed concerns with the removal of
Sections 31 and 32 in CCS HB 147, Version I.
KEVIN JARDELL, Legislative Liaison
Governor's Legislative Office
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: During hearing of HB 147, offered the
administration's perspective.
ACTION NARRATIVE
CHAIR NORMAN ROKEBERG called the Conference Committee on HB 147
meeting to order at 2:23:56 PM. Representatives Rokeberg and
Gardner and Senators Therriault and Ellis were present at the
call to order. Representative Anderson and Senator Stedman
arrived as the meeting was in progress.
HB 147-INSURANCE REGULATION
CHAIR ROKEBERG announced that the only order of business would
be HOUSE BILL NO. 147, "An Act relating to the regulation of
insurance, insurance licensing, surplus lines, insurer deposits,
motor vehicle service contracts, guaranteed automobile
protection products, health discount plans, third-party
administrators, self-funded multiple employer welfare
arrangements, and self-funded governmental plans; and providing
for an effective date." [Before the committee were CSHB
147(FIN)am and SCS CSHB 147(FIN).]
CHAIR ROKEBERG specified that [in the committee packet] is
Version 24-GH1083\I, Bullock, 5/14/05. He explained that
Version I maintains the Section 1 language on page 2, line 9.
The so-called "Article 2" language in Sections 31 and 32, and
Section 38 of SCS CSHB 147(FIN) is deleted.
2:27:20 PM
CHAIR THERRIAULT requested an explanation with regard to the
changes encompassed in Section 1 [of Version I].
LINDA HALL, Director, Division of Insurance, Department of
Commerce, Community, & Economic Development (DCCED), explained
that Section 1 makes a fairly small change in the ability of the
director to request to examine records. The change was from the
ability to request whenever the director feels it's advisable to
whenever the director has reasonable cause. The aforementioned
was the result of a national brokerage examination over bid
rigging in some of the larger national brokerage houses. The
reasoning was that there does need to be some cause so that the
director doesn't just request and examine records on a whim.
She highlighted that [Section 1] deals with producers and
adjusters, not insurance companies. In further response to
Chair Therriault, Ms. Hall confirmed that the proposed language
[in Version I] is more limited in its scope.
CHAIR THERRIAULT inquired as to what was proposed in Sections 31
and 32 [of SCS CSHB 147(FIN)].
MS. HALL explained that the proposed language in Section 31 [of
SCS CSHB 147(FIN)] has three components. By way of background,
she relayed that current statute includes a provision that if an
entity provides coverage for the medical care cost, the entity
needs to be regulated by another state agency or the federal
government, or they may fall under Title 21. The standards
established in Section 31 include filing requirements, which are
documents that would be required to be filed with the division.
The documents are more limited in this version than the original
version. [Version I] would require the annual filing of an
audited financial statement, an actuarial memorandum that
analyzes reserves, contribution rates, and stop loss coverage as
well as an attestation to the financial condition of the plan.
Furthermore, the name and contact information of the plan
administrator would be required to be filed with the division in
order that the division knows who is administering the benefits.
MS. HALL pointed out that there are some minimal requirements in
Section [32] including a trust agreement under which the trust
operates. [Section 32] also requires a bond that now conforms
with the requirements under the Employee Retirement and Income
Security Act of 1974 (ERISA) and thus it's a maximum of
$500,000. Furthermore, this section requires that there be a
stop loss policy, competent personnel, adequate facilities for
adjusting claims, and that the trust provide a plan document
describing the plan to the participants. There is a list of
statutes that would apply to the trust. Generally, these are
applied to insurance companies and provide the director
authority to have hearings, should they be required.
Furthermore, [Section 32] provides for an external and internal
review process of utilization, which she characterized as more
of a peer review than a board review. Most of these are records
requirements; reserving standards; health insurance mandates;
various federal standards; and provisions for rehabilitation
should there be a financial problem there would be a pattern to
follow.
2:32:43 PM
CHAIR THERRIAULT surmised then that [Sections 31 and 32] provide
for some reporting and oversight rather than control.
MS. HALL said that was her intent in drafting and proposing the
language. In further response to Chair Therriault, Ms. Hall
informed the committee that there are approximately $83 million
worth of general fund (GF) monies that are given to these trusts
as the contribution to pay for state employees' health insurance
benefits. She characterized it as a fairly substantial amount
of GF.
CHAIR ROKEBERG commented that the amount is bigger than many
departments in the GF budget.
2:33:53 PM
REPRESENTATIVE GARDNER asked whether the list of health trusts
provided by the division includes all of them.
MS. HALL offered her understanding that there are only the five
listed, and therefore it's all inclusive.
CHAIR ROKEBERG inquired as to whether Ms. Hall would support the
legislation with the removal of Sections 31, 32, and 38.
MS. HALL opined that the legislation is important for the
division in that it has provisions for efficiencies for the
division as well as consumer protections. Ms. Hall related that
although she believes the trust provisions are important, she
would support the legislation without those.
2:36:11 PM
CHAIR THERRIAULT requested that Mr. Brice review the basic
concerns with regard to the proposal in [Sections 31 and 32] as
compared to current statute.
TOM BRICE, Business Agent, Locals 71, 942, and 341, explained
that the employees of Local 71 have established a trust that
administers health benefits for its members. The aforementioned
was established via a letter of agreement through the collective
bargaining process. He noted that through the collective
bargaining process regular review is provided to the Division of
Retirement and Benefits as well as labor relations in order to
ensure financial solvency and that the members are receiving the
coverage needed. Additionally, the trust follows the federal
guidelines as it relates to various federal standards.
2:37:57 PM
MR. BRICE expressed concern that with the actuarially
requirements because he said he believes it will be difficult to
find an actuary who will be able to provide the type of
information the Division of Insurance desires for a health
trust. He highlighted the difficulty with regard to the status
for which some things are bargained and the timelines
established. He provided the committee with written statements
regarding Sections 31 and 32. Mr. Brice noted that in the House
Labor and Commerce Standing Committee there was a great deal of
testimony on the aforementioned issues by the trust consultants
for [the Local Labor Unions he represents]. The aforementioned
testimony lead to the removal of the sections from the
legislation.
2:39:41 PM
SENATOR STEDMAN questioned why more information and checks and
balances wouldn't be better than less.
MR. BRICE noted that there are many perspectives. For instance,
one could view it in terms of the cost of oversight. He noted
that [oversight] would come at a cost to the health trusts,
which are nonprofit agencies funded through collective
bargaining agreements. Therefore, additional administrative
reporting requirements will either decrease services to the
members of the collective bargaining units or increase costs to
the state. He opined that it's difficult to ask for more money
from the state.
2:41:18 PM
REPRESENTATIVE GARDNER inquired as to why there is a difference
in the language on page 7, [lines 24-30], of Version I and page
7, lines 24-31 of SCS CSHB 147(FIN).
MS. HALL said she is not sure why the language referring to
self-funded multiple employer welfare arrangements (MEWAs) was
left out [of Version I] because she didn't recall it was ever a
topic of conversation. She explained that MEWAs are entities
that the division already regulates. Furthermore, MEWAs have
nothing to do with union health trusts, which are considered
governmental plans. She further explained that Section 14 deals
with third-party administrators who aren't licensed and need to
register with the division. The provision specifies that a
third-party administrator, other than a MEWA, who is working for
a foreign, out-of-state, insurer can register. Ms. Hall
specified that the division wants to register third-party
administrators in order that it knows who is administering
benefit programs.
2:43:32 PM
MS. HALL, in further response to Representative Gardner, opined
that the language left out of Section 14 in Version I was an
error.
CHAIR THERRIAULT turned attention to the document from the Local
71, which specifies that each trust plan is subject to such
federally mandated requirements as the Health Insurance
Portability and Accountability Act (HIPAA) and the Comprehensive
Omnibus Budget Reform Act (COBRA). He asked if the
aforementioned means that the health trust is regulated [on the
basis of those federally mandated requirements] or do they
merely operate in conformance with federal law.
MS. HALL related her understanding that those federally mandated
requirements are not regulatory guidelines but rather are plan
standards under the federal law that apply to all health
insurance coverage.
2:45:03 PM
CHAIR THERRIAULT surmised that the federally mandated
requirements and the fact that the trusts are regulated by the
Internal Revenue Service (IRS) and receive tax-exempt status
wouldn't satisfy current AS 21.03.021.
MS. HALL offered her understanding that the IRS wouldn't
regulate in the same manner as required in AS 21.03.021. The
division has requested that each of the health trusts provide
documentation that illustrate regulation elsewhere. However,
the division has not yet received that documentation. In
further response to Chair Therriault, Ms. Hall confirmed that
the Division of Insurance may be able to exert some oversight
under the current statutory law.
2:46:02 PM
SENATOR STEDMAN inquired as to why the division wants an audited
statement and actuarial reports.
MS. HALL opined that those are basic financial tools that an
entity handling people's money in a fiduciary capacity would
want to have. Such tools ensure financial records are in order
and that there is an actuarial analysis as to the soundness of
the reserving practices as well as a specified point at which
stop loss coverage attaches. In further response to Senator
Stedman, Ms. Hall explained that without the aforementioned
tools, the division would have no documents with which to review
in order to determine the adequacy of the entities' reserves,
the actuarial soundness of the entities' plans, and the
contribution rates. Without such tools, the division wouldn't
have the ability to analyze the position of the trust.
SENATOR STEDMAN inquired as to the state's exposure if a trust
unravels.
MS. HALL said that wasn't in her purview.
2:48:05 PM
CHAIR ROKEBERG asked if Section 38 in Version Y should have been
removed, as is the case in Version I. He surmised that the MEWA
language would be left in statute if Section 38 isn't included.
MS. HALL said that would be acceptable. The intent was to
change the title to cover more than MEWAs, she explained.
2:49:19 PM
CHAIR THERRIAULT asked if Mr. Brice understood the director's
comments that the federally mandated requirements don't
necessarily rise to the [appropriate] level of regulation and
thus the trusts may be subject to some oversight under current
statutory law.
MR. BRICE said he understood the director's comments.
CHAIR THERRIAULT indicated the need for time to touch base with
various people before taking final action. He indicated that
there may be the need for another draft of this legislation.
CHAIR ROKEBERG stated his preference to take final action now.
CHAIR ROKEBERG then recessed the Conference Committee on HB 147
at 2:50 p.m. to the call of the chair.
CHAIR ROKEBERG called the Conference Committee on HB 147 back to
order at 2:54 p.m. Representatives Rokeberg, Anderson, and
Gardner and Senators Therriault, Stedman, and Ellis were present
at the call back to order.
2:55:10 PM
CHAIR ROKEBERG announced that the Conference Committee on HB
147, per the request of the Senate, would recess until 3:30 p.m.
3:32:16 PM
CHAIR ROKEBERG called the Conference Committee on HB 147 back to
order at 3:32 p.m. Representatives Rokeberg, Anderson, Gardner
and Senators Therriault and Stedman were present at the call
back to order. Senator Ellis arrived as the meeting was in
progress.
CHAIR THERRIAULT moved to adopt CSHB 147, Version 24-GH1083\I,
Bullock, 5/14/05, as the working document. There being no
objection, Version I was before the committee.
REPRESENTATIVE GARDNER moved that the committee adopt Amendment
1, as follows:
Page 7, line 26, following "insurer":
Insert "other than a self-funded multiple
employer welfare arrangement regulated under AS 21.85"
There being no objection, Amendment 1 was adopted.
SENATOR STEDMAN informed the committee that he holds health
insurance licenses as well as a minority interest in an
independent agency.
3:34:16 PM
CHAIR THERRIAULT recalled that the Division of Insurance has
made some requests for information to determine whether health
trusts would be covered under current statute. It appears, he
opined, that the applicable provision is AS 21.03.021(b), which
sates:
Except as otherwise provided in this title, a person
that provides coverage for the cost of medical care in
this state is subject to this title unless the person
shows that, while providing coverage for medical care,
the person is subject to the jurisdiction of another
agency of this state or of the federal government by
providing the director with the appropriate
certificate, license, or other document issued by the
other governmental agency that permits or qualifies
the person to provide coverage for medical care.
CHAIR THERRIAULT asked if that is the information the division
requested of the trust.
MS. HALL replied yes, adding that those requests were made in
March of 2004 to provide the division with the documentation of
regulation by another agency or the federal government. In
further response to Chair Therriault, Ms. Hall confirmed that to
date the division hasn't received a satisfactory response
regarding whether the trusts have the correct certificate
license or other document.
3:35:51 PM
CHAIR THERRIAULT referred to the document provided by Local 71,
which specifies that the trusts are subject to the jurisdiction
of the State of Alaska Superior Courts. He offered his
understanding that the division wouldn't view the aforementioned
to provide a statutory showing of being regulated by the state.
MS. HALL stated that based on advice from the Department of Law,
the decisions made by the division under its title are always
subject to regulatory review by the Superior Court.
CHAIR THERRIAULT turned to the matter of the director regulating
these entities under current statutory language, and pointed out
that the letter from the Alaska State Employees Association
(ASEA) states that the appeal process isn't working, large sums
of ASEA's money remain hidden, the board refuses to disclose the
contents of these contracts, services to rural chapters aren't
acceptable, well baby and maternal services aren't acceptable,
[the board] isn't accountable, and the only recourse for the
membership is through an expensive court battle. The letter
appears to relate that the director of the Division of Insurance
will have support from part of the union leadership to utilize
its current statutory power to bring these [health trusts] under
some sort of reporting.
3:38:21 PM
CHAIR THERRIAULT inquired as to the intentions of the division
if Sections 31 and 32 are eliminated.
MS. HALL answered that the division will continue to review the
documents it has received from the various union health trusts.
She noted that although the division has sent a second request
for information, the information received isn't sufficient to
make a determination. Once sufficient documentation is
received, the division will determine whether these entities
fall under Title 21, at which point the division will have to
determine where these entities fall in the various entities that
the division regulates.
3:39:28 PM
CHAIR ROKEBERG noted that these trusts aren't life insurance or
annuity companies.
CHAIR THERRIAULT pointed out that there is some question as to
whether these entities fall under Title 21. Therefore, if the
union membership maintains its complaint, this issue may be
before the legislature again next year. Therefore, he inquired
as to Mr. Jardell's thoughts on the action the committee is
about to take.
KEVIN JARDELL, Legislative Liaison, Governor's Legislative
Office, Office of the Governor, related that this [legislation]
was in response to a number of Alaska public employees, the
complaints of which culminated in ASEA's letter. The complaints
were taken very seriously and led to the review as to whether
the entities were being regulated and what avenue the public
employees had for resolution. Currently, there is no avenue,
which lead to the review of the current authorities. The
aforementioned revealed that it appears these entities can be
regulated as insurers [under Title 21]. Since [Title 21] is a
fairly onerous process, the division looked at creating a
special provision for health trusts that wouldn't be so onerous.
However, if the legislature decides not to pursue such, the
[administration] will pursue its responsibility under current
statute to regulate where the authority exists in order to
ensure that these services are being provided to Alaska's public
employees.
3:42:08 PM
CHAIR ROKEBERG commented that there is a compelling state
interest in this issue in the amount of $83 million.
REPRESENTATIVE GARDNER moved to report [CCS] HB 147, Version 24-
GH1083\I, Bullock, 5/14/05, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
CHAIR THERRIAULT objected for discussion purposes.
SENATOR STEDMAN opined that it is always better to "go the extra
mile on disclosure and have audited statements available ... for
all people interested in a particular subject matter."
3:44:45 PM
CHAIR THERRIAULT withdrew his objection.
There being no further objection, CCS HB 147 was reported from
the Conference Committee on HB 147.
ADJOURNMENT
There being no further business before the committee, the
Conference Committee on HB 147 meeting was adjourned at 3:44
p.m.
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