Legislature(2017 - 2018)BELTZ 105 (TSBldg)

04/20/2018 03:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 401 INSURANCE; REINSURANCE;VALUATION; CREDITS TELECONFERENCED
Moved CSHB 401(L&C) Out of Committee
-- Public Testimony --
+ HB 403 LIFE & HEALTH INSURANCE GUARANTY ASSN. TELECONFERENCED
Moved CSHB 403(L&C) Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         April 20, 2018                                                                                         
                           3:32 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Mia Costello, Chair                                                                                                     
Senator Gary Stevens                                                                                                            
Senator Berta Gardner                                                                                                           
Senator Peter Micciche                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Kevin Meyer, Vice Chair                                                                                                 
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 401(L&C)                                                                                
"An Act relating to insurance; relating to credit for                                                                           
reinsurance; relating to insurance standard valuation; and                                                                      
providing for an effective date."                                                                                               
                                                                                                                                
     - MOVED CSHB 401(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                                
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 403(L&C)                                                                                
"An Act relating to the Alaska Life and Health Insurance                                                                        
Guaranty Association; and providing for an effective date."                                                                     
                                                                                                                                
     - MOVED CSHB 403(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 401                                                                                                                  
SHORT TITLE: INSURANCE; REINSURANCE;VALUATION; CREDITS                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
03/05/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/05/18       (H)       L&C                                                                                                    
03/14/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/14/18       (H)       Heard & Held                                                                                           
03/14/18       (H)       MINUTE(L&C)                                                                                            
03/19/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/19/18       (H)       <Bill Hearing Canceled>                                                                                
03/28/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/28/18       (H)       Scheduled but Not Heard                                                                                
03/31/18       (H)       L&C AT 1:00 PM BARNES 124                                                                              
03/31/18       (H)       Moved CSHB 401(L&C) Out of Committee                                                                   
03/31/18       (H)       MINUTE(L&C)                                                                                            
04/02/18       (H)       L&C RPT CS(L&C) NT 1DP 3NR                                                                             
04/02/18       (H)       DP: KITO                                                                                               
04/02/18       (H)       NR: WOOL, JOSEPHSON, EDGMON                                                                            
04/04/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
04/04/18       (H)       <Bill Hearing Canceled>                                                                                
04/12/18       (H)       NOT TAKEN UP 4/12 - ON 4/13 CALENDAR                                                                   
04/13/18       (H)       TRANSMITTED TO (S)                                                                                     
04/13/18       (H)       VERSION: CSHB 401(L&C)                                                                                 
04/14/18       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/14/18       (S)       L&C                                                                                                    
04/20/18       (S)       L&C AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
BILL: HB 403                                                                                                                  
SHORT TITLE: LIFE & HEALTH INSURANCE GUARANTY ASSN.                                                                             
SPONSOR(s): LABOR & COMMERCE                                                                                                    
                                                                                                                                
03/05/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/05/18       (H)       L&C                                                                                                    
03/14/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/14/18       (H)       Heard & Held                                                                                           
03/14/18       (H)       MINUTE(L&C)                                                                                            
03/19/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/19/18       (H)       Moved CSHB 403(L&C) Out of Committee                                                                   
03/19/18       (H)       MINUTE(L&C)                                                                                            
03/20/18       (H)       L&C RPT CS(L&C) 2DP 4NR                                                                                
03/20/18       (H)       DP: WOOL, KITO                                                                                         
03/20/18       (H)       NR: SULLIVAN-LEONARD, JOSEPHSON, BIRCH,                                                                
                         KNOPP                                                                                                  
04/16/18       (H)       TRANSMITTED TO (S)                                                                                     
04/16/18       (H)       VERSION: CSHB 403(L&C)                                                                                 
04/17/18       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/17/18       (S)       L&C                                                                                                    
04/20/18       (S)       L&C AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
                                                                                                                                
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
LORI WING-HEIER, Director                                                                                                       
Division of Insurance                                                                                                           
Department of Commerce, Community and Economic Development                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Introduced HB 401 and answered questions                                                                  
related to HB 403.                                                                                                              
                                                                                                                                
CAITLYN ELLIS, Staff                                                                                                            
Representative Sam Kito III                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT: Provided  supporting information  related to                                                             
HB 401.                                                                                                                         
                                                                                                                                
JANA-LEE PRUITT, Regional Vice President                                                                                        
American Council of Life Insurers                                                                                               
POSITION STATEMENT: Testified in strong  support of HB 401 and HB                                                             
403.                                                                                                                            
                                                                                                                                
DONALD THOMAS, Administrator and Counsel                                                                                        
Alaska Life and Health Insurance Guarantee Association                                                                          
POSITION STATEMENT: Testified in support of HB 403.                                                                           
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:32:21 PM                                                                                                                    
CHAIR MIA COSTELLO called the  Senate Labor and Commerce Standing                                                             
Committee meeting  to order at 3:32  p.m. Present at the  call to                                                               
order  were  Senators  Gardner,  Micciche,  and  Chair  Costello.                                                               
Senator Stevens arrived soon thereafter.                                                                                        
                                                                                                                                
        HB 401-INSURANCE; REINSURANCE;VALUATION; CREDITS                                                                    
                                                                                                                                
3:32:58 PM                                                                                                                    
CHAIR  COSTELLO  announced the  consideration  of  HB 401.  [CSHB                                                               
401(L&C) was before the committee.]                                                                                             
                                                                                                                                
3:33:29 PM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community and  Economic Development (DCCED), Anchorage,                                                               
Alaska, explained that  HB 401 would ensure that  the Division of                                                               
Insurance   retains  accreditation.   This   is  the   reciprocal                                                               
agreement among  states that all insurance  companies will adhere                                                               
to  the  same  solvency  standards. Sections  1-5  relate  to  an                                                               
accreditation standard  as of January  1, 2019 and  the remainder                                                               
of  the  sections  relate  to an  accreditation  standard  as  of                                                               
January 1, 2020.                                                                                                                
                                                                                                                                
Sections  1-5  address credit  for  reinsurance.  They allow  the                                                               
Division of Insurance  to more closely examine  the reinsurance a                                                               
domiciled insurer is buying from a  reinsurer that may or may not                                                               
be  outside the  U.S. The  division will  have more  insight into                                                               
what those insurance companies have  in terms of financial assets                                                               
and their  solvency. With greater  knowledge of solvency,  it may                                                               
not be necessary  for an insurer to put  up dollar-for-dollar for                                                               
their expected loss exposure                                                                                                    
                                                                                                                                
The second  part of the bill  addresses principle-based reserving                                                               
(PBR). That is updating standards  on how reserves are calculated                                                               
for life  insurance. The methodology  has not been updated  for a                                                               
number of years and the products have changed considerably.                                                                     
                                                                                                                                
3:36:57 PM                                                                                                                    
CHAIR  COSTELLO  welcomed  Senator  Stevens  and  noted  who  was                                                               
available to answer questions.                                                                                                  
                                                                                                                                
3:37:25 PM                                                                                                                    
SENATOR GARDNER asked if anyone opposed the bill.                                                                               
                                                                                                                                
MS.  WING-HEIER said  no;  the bill  is  National Association  of                                                               
Insurance Commissioners  (NAIC) model  legislation that  has been                                                               
thoroughly  vetted  by  the insurance  industry,  consumers,  and                                                               
regulators.                                                                                                                     
                                                                                                                                
SENATOR MICCICHE  questioned why  large issues like  this weren't                                                               
federally regulated.                                                                                                            
                                                                                                                                
MS.  WING-HEIER explained  that insurance  had been  regulated at                                                               
the state  level for  more than  a hundred  years. Also,  if they                                                               
were asked, regulators  nationwide would say the  big reason they                                                               
support state regulation  is because they don't want  to lose the                                                               
premium taxes.  Secondarily they  would point out  that different                                                               
states have different risks.                                                                                                    
                                                                                                                                
SENATOR  MICCICHE opined  that there  should be  a separation  of                                                               
premium taxes and having a standard across the states.                                                                          
                                                                                                                                
MS. WING-HEIER said she didn't  disagree in some respects because                                                               
the  division   spends  a  lot  of   time  updating  legislators,                                                               
legislation, and regulators at a state level for conformity.                                                                    
                                                                                                                                
3:39:13 PM                                                                                                                    
CAITLYN ELLIS,  Staff, Representative Sam Kito  III, Alaska State                                                               
Legislature,   Juneau,   Alaska,   advised  that   the   National                                                               
Association  of  Insurance  Commissioners  (NAIC)  developed  the                                                               
model legislation upon which HB  401 is based, but enforcement is                                                               
left to the state.                                                                                                              
                                                                                                                                
MS. WING-HEIER  added that the  only federal involvement  she was                                                               
aware  of was  that the  federal office  of insurance,  which was                                                               
established  under President  Obama, looks  at some  products and                                                               
where they are going.                                                                                                           
                                                                                                                                
3:40:03 PM                                                                                                                    
CHAIR COSTELLO opened public testimony on HB 401.                                                                               
                                                                                                                                
3:40:17 PM                                                                                                                    
JANA-LEE  PRUITT, Regional  Vice President,  American Council  of                                                               
Life Insurers,  testified in strong  support of HB 401.  She said                                                               
HB  401 would  repeal  and reenact  portions  of Alaska  statutes                                                               
governing  credit for  reinsurance.  This  makes them  consistent                                                               
with the current  NAIC credit for reinsurance model  law that was                                                               
updated in 2011 and 2016  to modernize reinsurance regulations in                                                               
the U.S.                                                                                                                        
                                                                                                                                
HB 401 would  also amend Alaska's valuation law  to be consistent                                                               
with  the  NAIC  standard  valuation law.  It  changes  how  life                                                               
insurers calculate reserves to pay  future expected claims from a                                                               
one-size-fits-all   approach   to  one   called   principle-based                                                               
reserves (PBR).  The latter ensures  that the reserves  match the                                                               
actual risk being assumed by the insurer.                                                                                       
                                                                                                                                
3:42:07 PM                                                                                                                    
CHAIR  COSTELLO  found  no further  comments  and  closed  public                                                               
testimony on HB 401. She looked to the will of the committee.                                                                   
                                                                                                                                
3:42:14 PM                                                                                                                    
SENATOR  MICCICHE  moved  to  report  HB  401,  version  D,  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s).                                                                                                                        
                                                                                                                                
CHAIR COSTELLO  found no objection  and CSHB 401(L&C)  moved from                                                               
the Senate Labor and Commerce Standing Committee.                                                                               
                                                                                                                                
3:42:41 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
         HB 403-LIFE & HEALTH INSURANCE GUARANTY ASSN.                                                                      
                                                                                                                                
3:44:15 PM                                                                                                                    
CHAIR  COSTELLO  announced the  consideration  of  HB 403.  [CSHB                                                               
403(L&C) was before the committee.]                                                                                             
                                                                                                                                
3:44:41 PM                                                                                                                    
REPRESENTATIVE SAM KITO III introduced HB 403 speaking to the                                                                   
following sponsor statement:                                                                                                    
                                                                                                                                
     House  Bill  403 updates  the  Alaska  Life and  Health                                                                    
     Insurance  Guaranty  Act  to conform  to  the  National                                                                    
     Association of Insurance  Commissioners Life and Health                                                                    
     Guaranty Model  Act. These changes  update the  Act and                                                                    
     improve uniformity nationwide  in the administration of                                                                    
     life and health guarantee associations.                                                                                    
                                                                                                                                
     House  Bill  403  incorporates   changes  made  by  the                                                                    
     National Association of  Insurance Commissioners to the                                                                    
     Life  & Health  Insurance  Guarantee Association  Model                                                                    
     Act (MDL  520) in December  2017, after House  Bill 157                                                                    
     had  been   introduced.  These  changes   added  health                                                                    
     maintenance  organizations  (HMOs)  as members  of  the                                                                    
     association,  providing  HMO coverage,  and  addressing                                                                    
     long-term  care  insolvencies.   With  the  substantial                                                                    
     number of changes  made, HB 403 was  introduced to help                                                                    
     explain these changes, though few are substantive.                                                                         
                                                                                                                                
     Throughout, numerous conforming changes  are made to AS                                                                    
     21.79 consistent with  the model law, most  of which do                                                                    
     not substantively change the bill.                                                                                         
                                                                                                                                
     The   Alaska  Life   and  Health   Insurance  Guarantee                                                                    
     Association (Association)  is composed of  insurers who                                                                    
     transact   life   insurance,   health   insurance,   or                                                                    
     annuities in Alaska. The purpose  of the Association is                                                                    
     to  guarantee that  residents and  certain nonresidents                                                                    
     will continue to  receive benefits in the  event one of                                                                    
     the members becomes impaired or  insolvent. In order to                                                                    
     accomplish this,  the Act directs the  insurers to form                                                                    
     a  board and  collect assessments  from members  to pay                                                                    
     for the  operations of the Association  and obligations                                                                    
     of insolvent or impaired members.                                                                                          
                                                                                                                                
     House Bill  403 amends  terms for consistency  with the                                                                    
     model  act,   raises  payment  limits,   adds  language                                                                    
     clarifying  what  products  are included  and  excluded                                                                    
     from the  protections under the Act,  and adds language                                                                    
     clarifying   that   medical    and   hospital   service                                                                    
     corporations  and their  products  are  subject to  the                                                                    
     provisions  of  the  Act. House  Bill  403  amends  the                                                                    
     powers  and  duties  section  for  the  Association  to                                                                    
     follow the model act, authorizes  the board to increase                                                                    
       assessments, grants the Association the ability to                                                                       
      develop procedures to remove an Association governor                                                                      
     for cause, and adds new definitions.                                                                                       
                                                                                                                                
CHAIR COSTELLO noted that members had copies of the sectional.                                                                  
                                                                                                                                
3:47:35 PM                                                                                                                    
SENATOR  MICCICHE asked  Ms. Wing-Heier  her  perspective of  the                                                               
bill.                                                                                                                           
                                                                                                                                
3:48:02 PM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community and  Economic Development (DCCED), Anchorage,                                                               
Alaska, explained  that HB  403 is  a remake of  HB 157  that was                                                               
introduced last year  to update the statutes for  the Alaska Life                                                               
and  Health Insurance  Guarantee  Association.  She reminded  the                                                               
committee  that  Sheila Talman  testified  last  year to  express                                                               
Premera     concern  that   it   would   be  unfairly   assessed,                                                               
particularly for long-term care.                                                                                                
                                                                                                                                
MS.  WING-HEIER  said  there  was one  insolvency  last  year  in                                                               
Alaska. The  Guarantee Association will  pay the $2  million loss                                                               
for  consumers, but  the division  knew that  it didn't  have the                                                               
capacity for larger assessments.  The solution that was agreeable                                                               
to both sides  was that the assessments for  long-term care would                                                               
be split 50:50 between health insurers and life insurers.                                                                       
                                                                                                                                
The bill  also brings Premera,  Alaska's largest  health insurer,                                                               
in  as a  member of  the Guarantee  Association. Further,  HB 403                                                               
changes a  few limits  to what  would be  paid out  under various                                                               
products  and it  gives some  authority to  the board  on how  it                                                               
would deal with insolvencies.                                                                                                   
                                                                                                                                
3:50:22 PM                                                                                                                    
SENATOR MICCICHE  asked for  an explanation  of the  increases on                                                               
page 8, lines 12 and 16.                                                                                                        
                                                                                                                                
MS. WING-HEIER  said those provisions  increase the payout  on an                                                               
annuity contract claim  (regardless of the value  of the annuity)                                                               
from  $100,000  to  $250,000.  She   noted  that  the  bill  also                                                               
increased several  other limits  none or  which had  been updated                                                               
for about 20 years.                                                                                                             
                                                                                                                                
SENATOR MICCICHE asked if this was like an FDIC minimum.                                                                        
                                                                                                                                
MS. WING-HEIER said yes.                                                                                                        
                                                                                                                                
3:51:51 PM                                                                                                                    
CHAIR COSTELLO opened public testimony on HB 403.                                                                               
                                                                                                                                
3:52:04 PM                                                                                                                    
DONALD THOMAS, Administrator and  Counsel, Alaska Life and Health                                                               
Insurance  Guarantee  Association,  stated   that  the  Board  of                                                               
Governors  of  the  Guarantee  Association  unanimously  supports                                                               
passage of  HB 403.  He submitted  that it  was incumbent  on the                                                               
legislature  to   keep  the  governing   law  of   the  Guarantee                                                               
Association current  because it  was created by  the legislature.                                                               
The  purpose  was to  protect  Alaska  policyholders, subject  to                                                               
certain  limitations  set out  in  the  Act.  Passage of  HB  403                                                               
fulfills that responsibility.                                                                                                   
                                                                                                                                
3:53:15 PM                                                                                                                    
JANA-LEE  PRUITT, Regional  Vice President,  American Council  of                                                               
Life  Insurers  (ACLI),  testified  in support  of  HB  403.  She                                                               
pointed out  that the NAIC  model is  updated every few  years to                                                               
reflect decisions about how to  best protect policyholders and to                                                               
address any  issues that  might have arisen  among the  states in                                                               
the  interpretation  of the  Act.  There  is  a Life  and  Health                                                               
Guarantee  Association  statute in  effect  in  each state.  It's                                                               
important that state statutes are  updated to reflect the current                                                               
NAIC  Model Act  so  that  if an  insolvency  occurs,  it can  be                                                               
handled as efficiently as possible  and policyholders claims will                                                               
be handled similarly regardless of  their state of residence. She                                                               
urged support for the bill.                                                                                                     
                                                                                                                                
3:54:35 PM                                                                                                                    
CHAIR COSTELLO closed public testimony on HB 403.                                                                               
                                                                                                                                
3:54:51 PM                                                                                                                    
SENATOR  MICCICHE  moved  to report  HB  403,  30-LS1401\J,  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s).                                                                                                                        
                                                                                                                                
CHAIR COSTELLO  found no objection  and CSHB 403(L&C)  moved from                                                               
the Senate Labor and Commerce Standing Committee.                                                                               
                                                                                                                                
3:55:42 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Costello  adjourned the Senate Labor  and Commerce Standing                                                               
Committee meeting at 3:55 p.m.                                                                                                  

Document Name Date/Time Subjects
CS HB 401 ver D.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB 401 Transmittal Letter.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB401 Summary of Changes ver A to ver D.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB401 ver. D Sectional Analysis.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CSHB401-DCCED-DOI-02-19-18.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB401 State Farm Letter of Support.PDF SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB403 ver J.PDF SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 Sponsor Statement 4.17.18.pdf SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 Sectional Analysis 4.17.18.pdf SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 Summary of Changes 4.17.18.pdf SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 - State Farm Support Letter Senate Labor and Commerce.pdf SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 - American Council of Life Insurers Letter of Support Senate Labor and Commerce.pdf SL&C 4/20/2018 3:30:00 PM
HB 403