Legislature(2017 - 2018)BELTZ 105 (TSBldg)
04/20/2018 03:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB401 | |
| HB403 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 401 | TELECONFERENCED | |
| + | HB 403 | TELECONFERENCED | |
| + | 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 |