HOUSE BILL NO. 175 "An Act relating to insurance, including treating as confidential certain information submitted to the director of insurance by the National Association of Insurance Commissioners; clarifying conditions for the release of insurer deposits; defining travel insurance that may be sold under a travel insurance limited producer license; establishing criteria for licensing of nonresident independent adjusters as resident adjusters; exempting rewards under a wellness program from treatment as insurance discrimination or rebating; making certain insurance required of the Comprehensive Health Insurance Association permissive rather than mandatory; providing for the administration of loss reimbursement policies and payments to guaranty associations during insolvency proceedings; making certain provisions relating to statements on applications and guaranteed renewability for individual health insurance applicable to hospital and medical service corporations; making public certain forms and related documents filed for approval by a hospital or medical service corporation after the filing becomes effective; relating to deposits of self-funded multiple employer welfare arrangements; repealing reasons that the director of insurance may use to deny or revoke a license; and providing for an effective date." 9:10:55 AM JENNIFER SENETTE, STAFF, REPRESENTATIVE KURT OLSON, SPONSOR, explained that the bill was offered at the request of the director of the Division of Insurance. LINDA HALL, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, provided an overview of the legislation using a sectional analysis (copy on file). She explained that the changes are needed by the Department of Commerce, Community and Economic Development (DCCED) in order to effectively regulate the insurance industry. The division's overall goals are solvency, oversight, consumer protection, and making sure there is a healthy and competitive marketplace. Ms. Hall pointed out several sections in the bill that streamline the division's processes: · Section 10: Allows the division to issue a license to a non-resident adjuster whose own state does not license adjusters. · Section 12: Provides for third-party administrators. · Section 18: Allows acceptance of another regulator's evaluation of a nonresident with a felony conviction. 9:14:53 AM Ms. Hall informed the committee that the division's agent licensing processing is done electronically, which has greatly streamlined the process. Ms. Hall turned to sections with clarifying language: · Sections 5 and 6: Tighten language and clarify how deposits of both domestic and other state insurers are treated and when the deposits are given to guarantee funds. · Section 29: Defines "working day" uniformly throughout. Ms. Hall pointed out sections of the bill that provide uniformity with national standards. She explained that state regulators have been concerned with a major push for federal regulation of insurance; the more uniform state regulations are, the less likely that is to happen. · Section 1: Allows for analysis ratios and examinations submitted to the director from the National Association of Insurance Commissioners (NAIC) to be confidential. · Section 8: A uniformity standard saying that a compliance officer for an insurance agency does not have to be licensed in all the lines of business that the agency does. · Section 9: Updates products that can be sold under a limited travel licensee. 9:17:15 AM Ms. Hall approached new issues covered by Section 11. She believed the section was a policy call the legislature needed to make. The section permits a director to order a summary suspension of a producer license if there is a finding that suspension is necessary for the protection of the public in an emergency action. She described two instances of agent behavior that needed to be immediately stopped. In normal circumstances, the department would issue a letter of accusation and get a request for a hearing and begin a process that has taken up to a year and a half. She reported the worst instance of agent behavior as an individual who took premium money from 72 victims; the case is pending with 32 felony counts. Ms. Hall emphasized the importance of immediate action. In the example, the adjuster voluntarily surrendered his license. Had he not, the department would have been forced to allow him to continue his business practices until the hearing. The department does not believe that waiting in certain circumstances would be in the best interest of consumers. 9:20:07 AM Ms. Hall described another incident in which premium trust money had been taken from an employer. The employer brought the employee to the division offices to surrender the license. She noted that other states had the provision. Representative Fairclough stated that she was comfortable with the first component of page 8, section 11, lines 3 through 17. She was not comfortable with the second component requiring the appeal to go to the same director. She had questions about due process. Ms. Hall replied that other sections provide for due process in hearings. In addition, anything a director does is subject to overview in superior court. She emphasized the need to use the authority in special circumstances, especially urgent ones. Representative Fairclough commended the department and acknowledged the difficulty. She stated concerns that a director could be unduly burdened or could use the measure to punish individuals. 9:23:27 AM Ms. Hall thought there were adequate protections built into the system. She noted that discussion about the process had taken place in the Labor and Commerce Committee. Representative Crawford pointed to Section 10 regarding licensing of out-of-state adjustors and queried the level and circumstances of need. Ms. Hall opined that there was a shortage of adjusters. She cited an emergency provision for disasters and described independent agencies whose trained adjustors have left Alaska but still work long-distance. The department wants the adjusters to have a resident license. Representative Crawford stated concerns about adjustors moving from Alaska. He thought it was important for them to stay in the state. Ms. Hall replied that there were a number of non-resident adjustors and a large number of non-resident licensees; out of approximately 38,000 insurance adjusters, 34,000 are non-residents. Ms. Hall agreed with Representative Crawford that the numbers were overwhelming. She explained that insurance company call centers license all their people on the off- chance that they might take a call from an Alaskan consumer. She did not think there was enough insurance business in the state to warrant 38,000 licensees. 9:27:57 AM Ms. Hall turned to Section 17, which would allow an insurance company to offer an incentive for a wellness program without considering the incentive a rebate. The department feels built-in incentives that meet Health Insurance Portability and Accountability Act (HIPAA) requirements are a good idea. Ms. Hall explained Section 23, which changes the definition of "resident" to mirror the permanent fund eligibility definition for a high-risk pool. Ms. Hall continued that Section 28 would add deposit administration for self-funded healthcare entities, which are small employer, single-industry groups called multiple employer welfare arrangements. The division had an entity in the recent past that was insolvent and worked with them to make sure claims were paid. Ms. Hall discussed Section 26, which makes statutes dealing with hospital medical service corporations have the same requirements as other companies with regard to applications and the guaranteed renewability of individual healthcare plans. Representative Gara asked whether out-of-state adjusters were charged a fee so that the state did not lose money. Ms. Hall responded that out-of-state adjusters were charged double. Representative Gara asked if money was lost through the regulatory process related to out-of-state adjusters. Ms. Hall did not think there were a significant number of out- of-state residents; the numbers used previously were not licensees who adjust claims. Representative Gara asked for clarification. Ms. Hall responded that the 38,000 agents sell insurance. She did not have the number of adjusters. 9:31:36 AM Representative Fairclough referred to the state's wellness survey with a $100 incentive. She wondered how the survey information was kept confidential. Ms. Hall replied that the state select benefits plan does not come under the oversight of Title XXI, so the division does not have regulatory oversight of the plan. She referred to identity theft legislation. She informed the committee that insurance entities have very specific confidentiality and personal information protection provisions in both statute and regulation; the provisions to not apply to the state benefit plan. Representative Fairclough asked whether state was exempt or if the $100 was considered a rebate. Ms. Hall answered that the state was exempt. 9:33:32 AM Representative Kelly referred to a constituent complaint and asked whether the state had implemented a survey of people who had complaints. Ms. Hall responded that the survey was implemented in 2007 and was still being used. The summary result of the surveys was available. Co-Chair Stoltze referred to a zero note with a narrative. Representative Fairclough asked whether "foreign insurer" was defined in statute. Ms. Hall answered that "foreign insurer" meant anything in another state, "domestic insurer" meant domiciled in the state, and "alien insurer" meant domiciled in another country. 9:36:07 AM Co-Chair Hawker MOVED to report CS HB 175(L&C) out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 175(L&C) was REPORTED out of Committee with a "do pass" recommendation and with attached fiscal note 1 by the Department of Commerce, Community and Economic Development.