Legislature(1997 - 1998)
02/17/1998 01:35 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE
February 17, 1998
1:35 P.M.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Jerry Mackie, Vice Chairman
Senator Tim Kelly
Senator Mike Miller
Senator Lyman Hoffman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 198
"An Act relating to partnerships; amending Rules 25(c), 79, and 82,
Alaska Rules of Civil Procedure; and providing for an effective
date."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 116
"An Act relating to workers' compensation self-insurance."
- HEARD AND HELD
PREVIOUS SENATE COMMITTEE ACTION
SB 198 - See Labor and Commerce minutes dated 2/10/98.
HB 116 - No previous action to consider.
WITNESS REGISTER
Ms. Annette Kreitzer, Staff
Senate Labor and Commerce Committee
State Capitol Bldg.
Juneau, AK 99811-1182
POSITION STATEMENT: Commented on HB 116.
Representative Pete Kott
State Capitol Bldg.
Juneau, AK 99811-1182
POSITION STATEMENT: Sponsor of HB 116.
Ms. Sarah McNair-Grove, Insurance Analyst
Division of Insurance
P.O. Box 110805
Juneau, AK 99811-0805
POSITION STATEMENT: Opposed HB 116.
Ms. Robin Ward
Alaska Homebuilders Association
P.O. Box 91443
Anchorage, AK 99503
POSITION STATEMENT: Supported HB 116.
Mr. Steven Wisdom
Alaska Homebuilders Association
P.O. Box 4184
Homer, AK 99403
POSITION STATEMENT: Supported HB 116.
Mr. Paul Grossi, Director
Workers Compensation
Department of Labor
P.O. Box 25512
Juneau, AK 99802-5512
POSITION STATEMENT: Opposed HB 116.
Mr. Richard Block
Alaska National Insurance Co.
360 W. Benson Blvd. #300
Anchorage, AK 99503
POSITION STATEMENT: Opposed HB 116.
ACTION NARRATIVE
TAPE 98-6, SIDE A
Number 001
SB 198 - UNIFORM PARTNERSHIP ACT
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee
meeting to order at 1:35 p.m. and announced they would hold the
hearing on SB 198 at later date.
HB116
HB 116 - WORKERS COMPENSATION SELF-INSURANCE GROUP
CHAIRMAN LEMAN announced HB 116 to be up for consideration and that
there was a proposed committee substitute as a result of four
concerns the committee had last year.
SENATOR KELLY moved to adopt the committee substitute to CSHB 116
and asked for unanimous consent. There were no objections and it
was so ordered.
MS. ANNETTE KREITZER, Staff, Senate Labor and Commerce Committee,
explained the changes in the adopted committee substitute. She
said the addition from this committee is on pages 12 and 13,
Section 21.47.200 which the Homebuilders Association submitted.
Number 123
REPRESENTATIVE KOTT, sponsor of HB 116, testified that 14 other
states have passed similar legislation successfully. It contains
numerous substantive and procedural requirements designed to ensure
that workers compensation self insurance groups remain fiscally
sound and are able to fulfill Alaska's workers compensation
requirements. The Director of Insurance has an enormous amount of
leverage over the operation of these self insurance groups.
There are some concerns that there isn't enough cash up front to
pay workers compensation claims and he is extremely comfortable
with the way the bill deals with this. First of all, the aggregate
net worth of the employers (who must be 10 or more in number) must
be $1 million. There is also a cash security bond, or another
instrument acceptable to the division, in the amount of $450,000.
There is another layer of provisions in the aggregate excess
insurance that can and would be acquired under the guidance of the
Division of Insurance who will set the parameters for that.
The first year's premium is a minimum of half a million dollars.
Thereafter each premium of the group is $750,000. The first year's
premium has been divided into two categories, 70 percent for the
reserve pool and 30 percent for the administrative pool. Fifty
percent of the premium is paid up-front. Of that $175,000 will be
put into the premium side and the other 30 percent would be put
into the administrative costs. He said there are always monthly
premiums being paid by the members of the group.
The excess insurance (reinsurance) or stop loss policy is set at
$5,000. He said one would need 40 claims the first month to go
through the $5,000 and it wouldn't matter if the claims are $50,000
or $1,000,000. Subsequent years, the group would have to again
get the excess insurance and the premium would be adjusted
accordingly.
There is also a self insurance guarantee fund of five percent which
amounts to $25,000. If for some reason there were a large number
of claims, the process would be that the surplus would be used from
the fiscal year rather than the current year. Then you would turn
to the administrative funds, then the first year's premium, then go
to the guarantee fund. You would then assess the membership.
There are several opportunities to ensure that the worker is held
harmless and that any form of compensation that is owed to them is
paid. REPRESENTATIVE KOTT said he thought this would go a long way
toward lowering costs for employers which would provide additional
opportunity to either infuse themselves with some capital
investments or hiring new employees.
MS. SARAH MCNAIR-GROVE, Insurance Analyst, said that many of the
things that were addressed as changes have gone a long way to
address the Division's concerns, but its main concern that hasn't
been addressed is the liquidity of the assets. There is a $1
million net worth requirement, but there is no requirement that any
of this be actually available in cash to pay out to a loss, if
there is one. There is a bond, but the way the draft is written,
the bond will only be available after the group becomes insolvent.
So it will be there after there are problems, but not before. She
concluded that a lot of concerns have been met and she appreciates
that, but the bill hasn't gone far enough in addressing all the
concerns they have.
SENATOR KELLY asked how they get the initial capitalization to
begin operating the organization.
MS. GROVE said she wasn't sure of the answer to that, but the
security bond is not used for the operations of the group. It is
used only to pay losses, if there has been an insolvency.
SENATOR KELLY asked if that was for $450,000.
MS. GROVE replied yes.
SENATOR KELLY asked where the initial operating cash comes from.
REPRESENTATIVE KOTT explained that the initial capitalization is on
page 10 which says that the group must meet at least 25 percent of
the estimated annual premium which is $500,000 minimum for the
group. The other part is on page 2, #10 - proof of payment to the
group by each member of not less than 25 percent.
SENATOR KELLY asked if there is a minimum figure.
REPRESENTATIVE KOTT replied that the minimum figure is the
aggregate amount of $500,000.
SENATOR KELLY said if there were 10 members, everyone would put up
$50,000 in cash to get started and asked if that was correct.
MS. ROBIN WARD, Alaska Homebuilders Association, answered that the
actual initial premium is half of $500,000. The minimum number of
employer members is 10, but the combination still has to be
$500,000 for the first year. Fifty percent of that is paid up
front. Twenty-five percent is prepaid premiums; the other 25
percent is prepaid premiums in the form of a deposit that stays
with the account in the reserve account until the employer leaves
the pool. She estimates that the first day they start there will
be $175,000 as a minimum in cash to begin.
SENATOR KELLY asked how many members she has committed to joining
the organization when they get going.
MS. WARD answered that they have a list of many more than 10, but
without the legislation they can't begin their business plan.
SENATOR KELLY asked if the 10 had signed a commitment to do it. He
asked how dependable were the commitments for the $175,000 which
isn't a lot of money.
MS. WARD replied that the commitments are very solid, because they
can't even get a certificate until that many members are signed up
and can prove they have $500,000 in the first annual premiums. She
repeated that she has a list of interested people, but they can't
draft a business plan without legislation, because they don't know
what form it will be in.
Number 314
SENATOR MACKIE said one of his concerns was for the actual workers
out there who get injured and whether or not there will be
sufficient finances available to take care of those claims. He
asked if there was any reason the Division might believe under this
provision there might not be enough money to initially pay claims.
MS. GROVE answered that one of their main concerns is the initial
start-up and that the initial amount of the money is only $175,000
and 30 percent of it goes to administrative costs and 70 percent
goes to paying losses. If there is a large loss right away, you
could go through that 70 percent very quickly.
SENATOR MACKIE asked if they didn't also pay premiums on a monthly
basis.
MS. GROVE answered said that is part of the new proposal, yes. She
deferred further comments to the Department of Labor because they
are the ones who deal with claims payments.
SENATOR MACKIE asked if she could recommend something in particular
that would make the Division feel better about the whole thing.
MS. GROVE replied that they are not at all opposed to the idea of
self-insured groups, but they have proposed to them that of the $1
million net worth, that they set aside 25 percent of it as liquid
assets so it's not just net worth in their tool, vehicles, and
trucks. However, they have responded, "no."
SENATOR KELLY commented that the Homebuilders Association is
proposing instead of $250,000 liquid cash, if they can get all
these folks to join, to have $175,000 in liquid cash to start.
MS. WARD replied that is correct.
SENATOR KELLY commented that if these people get together to form
an insurance company, they need about $3 million in cash, or they
can get together and form a reciprocal insurance company for which
they need about $1,750,000 in cash, but what THEY want to do is get
together and form a self-insured group and only have $175,000 in
cash. He asked if that was pretty close to where they are.
MS. WARD answered yes, but that's on the first day.
SENATOR HOFFMAN asked if 70 percent of the $250,000 has to be
liquid cash and 30 percent of that is for administrative costs or
if that $250,000 has to be all liquid.
MS. GROVE explained that in order to form this group there has to
be a net worth and the proposal says $1 million of net worth,
however they want to calculate it. The Division is recommending
that in part of that calculation there be some liquidity. The
other part is the premiums, the $175,000 figure that's been
mentioned here, is what's divided into the 70 and 30 percent.
SENATOR HOFFMAN asked if they were recommending that $250,000 of
the $1,000,000 be liquid.
MS. GROVE answered yes.
SENATOR HOFFMAN asked what they are proposing.
MS. GROVE answered that they are proposing $1,000,000 with no
liquidity requirements.
SENATOR HOFFMAN asked if they wanted more liquidity to protect the
employees, if there's injury.
MS. GROVE answered that is correct.
SENATOR KELLY asked if the Division of Insurance supports the
committee substitute.
MS. GROVE answered that the current proposal hasn't gone far
enough, no.
Number 403
SENATOR MACKIE asked if she could look at the group's finances a
year from now and start with that, would she be comfortable with
it.
MS. GROVE answered although she didn't know what the point in time
would be, she would be more comfortable if she was convinced there
was enough money from the beginning to pay losses that might occur.
SENATOR MACKIE said one of his concerns as far as liquidity goes is
that there be a guarantee that claims could be paid and he thought
they would have to look at some averages, because the last thing
they want is for an injured worker to have to sue 50 or 20
different participants to try and get a claim paid. He also wanted
to see some specifics from the Division.
CHAIRMAN LEMAN asked if there was a definition in law about what
constitutes a liquid asset.
MS. GROVE said she would find out for them.
SENATOR HOFFMAN asked if she didn't support the legislation
primarily because it didn't go far enough in protection for claims
from employees.
MS. GROVE answered that is correct.
SENATOR KELLY asked if the Director of Insurance had physically met
with this group in the interim to discuss her problems on this
issue.
MS. GROVE answered that they have tried to meet with them and there
have been various telephone calls back and forth, but there was no
meeting during the interim. The Director of the Division of Workers
Compensation, Marianne Burke, wrote a memo to the Homebuilders
Association in April and she got a response to it about two days
ago that addressed some of Ms. Burke's concerns, but not others.
Number 430
MR. STEVEN WISDOM, Alaska Homebuilders Association, said back in
the spring they did have a meeting with Ms. Burke and one of her
representatives in Anchorage; there has been communication back and
forth, but no physical meeting since.
MR. WISDOM said that of the 14 states with self insurance some of
them did have substantial losses early on, but every one of them
has remained viable and very effective in the marketplace. This
type of program helps each of the employers look after each other
to make sure they keep a safe workplace which enhances it for the
employee.
He said that the Department of Labor ran a review of the current
membership showing losses last year (although these members
wouldn't necessarily be a member of this insurance group), but they
were surprised at how low the losses were in the residential
building industry. When they started working on this bill several
years ago, they were paying an average of $19 per $100 of wages in
workmens' compensation costs. Today that has dropped to $11 and it
could drop more. He thought this was because this type of industry
is coming to Alaska. In all cases across the board in the 14 other
states, the loss ratios have continued to go down for the
participants because of the way the programs are set up.
SENATOR KELLY said he was aware that workers' compensation rates
have been going down in the State of Alaska, but it's not just for
homebuilders; it's for everybody. He likes to think the
legislature could take some credit for that in the workers'
compensation reform they passed several years ago. He thought it
wasn't necessarily the threat of this legislation going through the
system.
Number 527
MS. WARD reiterated the layers of protection they are giving the
worker. They want to make sure they are providing every layer of
protection they can for them. That is why it is so important for
them to have the excess aggregate insurance. Even if there is a
catastrophic claim in the first day, they would only pay the
deductible because reinsurance would pick up the rest. Liquidity
of assets is the very bottom, seventh layer of protection. She
said that the department wants small business owners to put up
$100,000 or $150,000 of assets and take one quarter of that, which
is probably their checking account, their cash flow, and pledging
it to this fund which can't be touched. She feels that is
unrealistic and that there isn't that much risk that they would
ever have to assess the group members or take any of their assets.
There is an assessment that can be taken from the members if they
have to, but the likelihood of that happening is probably one in a
million. They haven't found any evidence of that happening in
researching the other 14 states.
CHAIRMAN LEMAN asked if she had found any requirement for liquidity
in the seventh layer in her research of the other states.
MS. WARD replied none.
SENATOR KELLY said he was wondering if her group is basically
paying the same premiums that they are paying now, and they are
going to have to put a significant cash deposit up-front to get
started, where the payoff is. If the workers' compensation system
up here isn't broken, and it doesn't appear to be, because there
are about 50 companies writing premiums up here and rates are going
down, why are they rushing in to fix it? He thought her answer
might be that they want to get together and get the profits that
the insurance companies are now getting and redistribute them to
their group. So in the long run that would mean less, but if that
was the case, what were they estimating the insurance companies are
getting for a profit margin? He wanted to know how the group was
going to save a lot money for their members.
MS. WARD said she had done some research and Alaska now is in the
top five of the most profitable states to write workers'
compensation insurance in. Most of the insurance companies are
making an average of 22 - 37 percent profit on their premiums. She
said it is a long term investment for her group. They have to
build their reserves before they can return any premium refunds to
their members. She thought there were more benefits in that they
would be doing their own claims management, could investigate fraud
more thoroughly and get the worker back faster. She said the large
insurance companies are just paying claims and not managing them as
well as her group could.
Number 509
MR. PAUL GROSSI, Director, Workers Compensation, said he supported
the concept of the bill for these groups to be inclined to pay
attention to their claims and to build safety programs, but they
are concerned about where the money is. He said money from their
group has to be there to pay for the excess insurance since they
are self-insured. He questioned that there would be enough.
He reiterated that the biggest problem is capitalization. The only
money the group has to operate with is the 25 percent deposit and
the 25 percent of the advanced premium which amounts to 50 percent
of the total premium or $250,000. Only 70 percent, or $175,000, of
that is available for claims. It appears that premiums can be
assessed monthly, but it also says quarterly. So the initial
capitalization could be $175,000 for the first three months of the
existence of this group. A lot of things can happen during that
time. He said that the Homebuilders as a group is probably a good
group, but the problem with the bill is that it doesn't say this is
just for the Homebuilders. It's for anyone with $1 million in
assets and who can meet the other requirements. This is the
problem he has.
His suspicion is that this group will end up with more than $1
million in assets and more than the $500,000 premium. But he is
thinking about the least common denominator here. The $1 million
in assets is a requirement, but that doesn't exist inside the
group; it belongs to all the individuals. The group is a different
entity than all the individuals outside of that. The $1 million in
assets is there, but it is only available if the group goes
insolvent, so that's not anything they operate or pay claims with.
The $450,000 security deposit comes in only if the group is unable
to pay claims and is only for the purpose of paying claims. There
is also $25,000 in the guarantee fund, but that's only available if
the group goes insolvent. So they have only the $175,000 to pay
claims for what could be as long as the first three months.
He explained that the Department of Labor already certifies large
employers to self insure and they require excess insurance. The
closest he could find to a group like the Homebuilders was a group
that is an oil service company which had 243 employees in 1996.
TAPE 98-6, SIDE B
They self-insure for $1 million and purchased excess insurance for
everything over that. Their premium for that policy was $168,885.
This group is going to have to self-insure for much less than that,
at least in the first year. He estimated only $175,000 because
that's all the cash they have to pay claims. They would then have
to devise the specific and aggregate excess insurance to address
the rest and didn't see how they could do that operating on a
shoestring. Claims can get really expensive, maybe $1 million for
one catastrophic claim.
A small concern he has is the guarantee fund of $25,000. If this
group does go insolvent, that $25,000 is pretty meaningless. It's
something, but their liabilities could be way above $450,000. To
say this is a guarantee fund like our guarantee association is not
accurate.
SENATOR KELLY asked if this bill didn't make them part of the
guarantee association.
MR. GROSSI replied no, that this is entirely different. They are
their own entity.
SENATOR KELLY said a year ago the legislature set up a guarantee
association that all insurance companies are a part of; so if an
insurance company goes belly up, all the other insurance companies
get assessed and have to make up for the insolvency.
MR. GROSSI said that is correct.
SENATOR KELLY asked if this was just their own little $25,000 deal.
MR. GROSSI answered yes, but there could be more, if there was more
than one group involved.
SENATOR KELLY asked if no other insurance company in Alaska has to
step in and get assessed to help for this group's insolvency.
MR. GROSSI replied that is correct.
SENATOR KELLY asked if it was just this $25,000.
MR. GROSSI said that is correct.
SENATOR KELLY said he didn't realize this was a stand-alone thing.
SENATOR MACKIE said he thought he heard there were surety bonds to
deal with insolvency.
MR. GROSSI responded that there is a $450,000 deposit, which added
to the $25,000 would be $475,000, but there could be millions of
dollars in liability, too. There is the assessment of the members,
too, but the whole thing is that you want to avoid all of that.
You want something that is fundamentally sound so you never have to
deal with the guarantee fund or the surety bond.
SENATOR HOFFMAN said that there are all these layers that someone
who is hurt has to go through and the final chapter of it all is
having to take these people to court and having to liquidate their
assets in order to get reimbursed.
MR. GROSSI said that is correct.
CHAIRMAN LEMAN asked if he had done any actuarial studies to look
at a block of people in this industry and look at the history of
claims to see if the amount of monies being suggested in this bill
compensate for the claims.
Number 540
MR. GROSSI said that is part of the problem. One of the rules of
thumb they have noticed over the years is that approximately 10
percent of the work force gets injured in any given year. What's
unpredictable is where catastrophic injuries are going to occur and
when. They do happen, but there's no way to predict them. The
larger the group, the more able they are to deal with that
situation.
SENATOR KELLY asked if this group were to form and have a
particularly tragic accident, and for one reason or another the
group does become insolvent, does the person who got hurt have a
course of action to the individual members of this group.
MR. GROSSI said yes, there is a joint and several liability
section.
SENATOR KELLY asked if all members of this group have to pay
equally or does it go to the deepest pocket.
MR. GROSSI answered that it is joint and several, so it would be
equal for a period of time, but obviously it would keep going into
the pockets of those that have the most money in it.
SENATOR KELLY said they spent years trying to get away from that
concept in tort reform.
MR. GROSSI commented that compensation rates have been going down,
but they have been going down since 1988 by about 40 percent
overall.
SENATOR KELLY asked what he attributed that to.
MR. GROSSI answered to a number of things - legislation in 1988 and
1995 contributed quite a bit, but also safety has been stressed
more and more claims are being worked and he liked to think his
Division is working more efficiently, too.
SENATOR KELLY asked if he agreed with the 22 - 37 percent profit
margin.
MR. GROSSI said he didn't have that information.
SENATOR KELLY asked for that information from the Division of
Insurance, because the legislature did a major effort back in 1989
- 90 with the State health insurance costs and benefits. At the
time, the insurance companies had a four percent margin and he
thought they may have gone too far with workers' compensation
claims.
MR. GROSSI concluded that if there is a group that is functioning
correctly and there is a requirement of putting some cash in, they
won't lose on it. If his statements are too conservative, they
will get that money back.
Number 460
MR. RICHARD BLOCK, Alaska National Insurance Co.(ANIC), said he has
offered a significant amount of testimony in opposition to this
bill in the past. While there are a number of areas he is
concerned with, the fundamental concern ANIC has is the one being
discussed today. That is the fact that there is no real financial
underpinning to the obligations this enterprise would have to
injured workers. His objections persist into the committee
substitute. The proposed financial protections are still
inadequate. The reason "is that workers' compensation is probably
the most volatile line of insurance there is." Within the 10
percent of claims there could be a number of catastrophic claims
which could be enormous. Even if there are no catastrophic claims,
one of the real problems is that workers' compensation is an
ongoing obligation to the injured worker. It could go on for one
to five years or even for the rest of a person's life. An
insurance mechanism that is being set up to provide for the worker
for the rest of their life has to be able to have the financial
strength to meet this obligation. This proposal falls short of
that.
Of the small amount of premiums that would be first available, one
of the things that hasn't been explained accurately is that the
cost of the excess insurance the Homebuilder's Association is
proposing to cover catastrophic claims comes out of the loss fund.
An aggregate stop loss at $400,000 for a $500,000 annual premium is
going to be terribly expensive. If they are proposing a $5,000 per
loss retention and a $400,000 annual aggregate stop loss, they are
talking about 60 - 80 percent of the premium being used to pay for
the excess. Of the $175,000 a good portion is going to be used up
rather quickly in excess and aggregate stop loss insurance
premiums.
MR. BLOCK told how when he was involved in the formation of an
insurance company and followed the laws then, which required about
$3 million of capital in the company, they went out and got
reinsurance and got it from companies that were "household names"
in the insurance community and bought them through very able
brokers. It turned out that within five or six years, those
companies went insolvent, and he ended up having to pay the claims
the reinsurer was supposed to pay. The amounts were within the
surplus they had been building up over time and it didn't adversely
affect their company. Where there is no financial underpinning
there is no place to turn other than the premium which isn't very
much in this legislation.
MR. BLOCK said that excess insurance also doesn't cover everything
like penalties that the Workers' Compensation Board assesses for
improper claim handling, etc. There are also punitive damages that
may come around through the employer liability section that may or
may not be covered by the excess coverage.
He informed them that there are 36 states that have adopted
legislation that would permit group self-insurance. His written
testimony has some of their requirements and there are a lot of
states that adopt financial requirements that are equal to or less
than what is in the bill before the Committee. There are also
states that require substantially more. A number of the groups
have worked extremely well and have begun to return funds back to
the employer participants. It also has to be said that there are
groups that failed and have resulted in at least assessments back
to the individual employers that participated in those groups. He
said he can tell the committee that the difference between the
successful states and the unsuccessful ones is the fact that the
successful ones were very adamant in requiring adequate financial
underpinning, adequate net worth in the participants, that there be
cash put into the organization, and in some cases audited financial
statements, and numerous other protections, many of which are not
in the proposed bill.
He thought there is a misunderstanding about how rates are made in
this state. Rates are determined by a rating organization, the
National Council on Workers' Compensation Insurance, and it files
an actuarial calculated proposal to the Division of Insurance who
reviews it. That information is based entirely on past loss and
past payroll experience. Underneath that there is a range of
competition among carriers that affects the actual price a
homebuilder pays, but that's a matter of competition.
Among the states that have adopted these groups, they have found
that the reason they got started was because there was a crisis in
those states. If you have total lack of insurance or insurance
that's available only to a select few or only at exorbitantly high
prices, and the legislature adopts the authority to establish one
of these groups, you are going to have almost a captive market.
They have found, however, when the market turned around and the
more standard markets became available, there was a rapid
depopulation and disbanding of these groups.
In this state there is aggressive competition and lowered rates
already. It's going to be substantially more difficult for such a
group as this to get started, if they have high requirements (as he
suggests) to protect the financial underpinning. He said there
would be distractions that would draw the financially strong people
away from the group. This means that because there will likely be
a smaller population doing this and likely those that are least
able financially to support it, there's going to have to be
something there to provide the financial underpinning that isn't
being provided by the fact that just about everyone in that
industry are getting involved with it.
If the legislature doesn't provide this authority, there are
alternatives to the standard insurance market already on the books
like a reciprocal insurance exchange, a group retrospective rating
plan, and group franchising.
SENATOR KELLY asked him to explain the alternatives to the
committee in the form of a letter because he wasn't sure this group
knew there were options out there. He asked Mr. Block if
assessments of individual members to made up for the losses he
talked about earlier caused any bankruptcies.
MR. BLOCK said he knew that assessments had occurred to the
individual participants, but he couldn't tell him at the moment if
they had been forced into bankruptcy.
SENATOR KELLY asked if there was a national organization this
proposal could be sent to for an objective analysis.
MR. BLOCK said there are such organizations.
SENATOR KELLY had two questions for the Division of Insurance to
answer; the first is if the purported 22 - 37 percent profit margin
is a fact. Then he wanted an opinon from the Division of Insurance
on whether E and O insurance should be extended to the board of
trustees as it is to the administrator for the organization.
CHAIRMAN LEMAN said he wanted to know if the joint and several
liability point was an issue.
SENATOR MACKIE said he wanted to understand this issue better and
wanted an example of the process an injured worker would have to go
through to receive a claim versus how it's done currently.
SENATOR KELLY said he wanted an independent organization to review
the bill and compare it to experience in other states.
CHAIRMAN LEMAN said he would hold the bill for the information and
adjourned the meeting at 3:05 p.m.
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