HOUSE FINANCE COMMITTEE APRIL 25, 1996 1:50 P.M. TAPE HFC 96 - 138, Side 1, #000 - end. TAPE HFC 96 - 138, Side 2, #000 - end. TAPE HFC 96 - 139, Side 1, #000 - end. TAPE HFC 96 - 139, Side 2, #000 - end. TAPE HFC 96 - 140, Side 1, #000 - #98. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:50 P.M. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Senator Dave Donley; Amber Ala, Staff, Senator Dave Donley; Dugan Petty, Director, Division of General Services, Department of Administration; Teri Fronsen, (Testified via teleconference), Attorney, Women's Law Project, Philadelphia, Pennsylvania; John George, American Council of Life Insurance, National Association of Independent Insurers, Juneau; Marcia McKenzie, Program Coordinator, Council on Domestic Violence and Sexual Assault, Juneau; Lauree Hugonin, Executive Director, Alaska Network on Domestic Violence and Sexual Assault, Juneau. SUMMARY SB 175 An Act relating to correctional institutions and their administration; providing the Department of Corrections with the authority to require prisoners to assist in paying for medical treatment; relating to the authority of a law enforcement agency to charge a prisoner for medical costs for a preexisting condition; and relating to service of criminal sentences. SB 175 was rescheduled to April 26, 1996 A.M. meeting. 1 SB 197 An Act prohibiting increases in health insurance premiums if the insured is a victim of domestic violence." SB 197 was HELD in Committee for further discussion. HB 91 An Act amending the area within designated marine park units of the Alaska state park system, and adding marine park units to the Alaska state park system. CS HB 92 (RES) was reported out of Committee with "no recommendation" and with a fiscal note by the Department of Natural Resources. HB 482 An Act relating to state procurement practices and procedures; and providing for an effective date. CS HB 482 (FIN) was reported out of Committee with a "no recommendation" and with zero fiscal notes by the Department of Administration, the Department of Commerce and Economic Development, the Department of Community and Regional Affairs, the Office of the Governor, the Department of Health and Social Services, the Department of Labor, the Department of Law, the Department of Military and Veterans Affairs, the Department of Corrections, the Department of Education, the Department of Environmental Conservation, the Department of Fish and Game, the Department of Natural Resources, the Department of Public Safety, the Department of Revenue, and Statewide Budget Office all dated 2/09/96, and fiscal impact notes by the Department of Transportation and Public Facilities dated 2/09/96 and the Department of Administration. HOUSE BILL 91 "An Act amending the area within designated marine park units of the Alaska state park system, and adding marine park units to the Alaska state park system." Representative Brown MOVED to RESCIND action on failing to adopt HB 91. There being NO OBJECTION, it was so ordered. Representative Brown MOVED to report CS HB 91 (RES) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. 2 CS HB 91 (RES) was reported out of Committee with "no recommendations" and with a fiscal note by the Department of Natural Resources. HOUSE BILL 482 "An Act relating to state procurement practices and procedures; and providing for an effective date." DUGAN PETTY, DIRECTOR, DIVISION OF GENERAL SERVICES, DEPARTMENT OF ADMINISTRATION, stated that HB 482 was the result of an effort which began in the Summer, 1995, in order to streamline the State's procurement practices. A Procurement Advisory Council was established. The responsibility of the council is to: * Look at the procurement law and note the changes needed to be implemented to streamline it. * Rewrite regulations and review all procurement policies to conform with the revised regulations and statutes. * Target non-responsive procurement practices. Mr. Petty spoke in support of HB 482 and provided an analysis of the substantive changes between current law and HB 482. [Copy on file]. Mr. Petty provided four amendments which the Department requests be adopted. [Copies on file]. Representative Parnell asked why Legal Services was not subject to the competitive bid process. Mr. Petty replied that it did not make sense to award Legal Services contracts through the competitive bid process. An invitation to bid usually is awarded to the low-responsive bidder. The only specifications would be that the bid complies with the document. Although, the process for legal services does not allow consideration of factors other than cost. Representative Parnell questioned if the Department of Law currently uses the Request For Proposal (RFP) process. Mr. Petty suggested that they do for some of their contracts. Often times, a suit will be brought against the State requiring legal services to defend the State. Representative Parnell indicated concern with a contract copy which the Department of Law entered into in 1983, stipulating that the State should not pay more than $75 thousand dollars for the contract. By 1995, the State added an amendment to that contract bringing the amount up to $19.9 million dollars. He objected to the disparity implicated, and requested proof that the Department of Law 3 is not "sole sourcing" contracts. The procurement process needs to be competitive. Mr. Petty pointed out that Legislative Audit had investigated the Legal Services contracts, finding problems with the Department of Law's procurement process. Representative Kelly asked the difference between "sole source" and "single source" return. Mr. Petty replied that "sole source" means that there is only one source available to do the work. The statute currently reads "sole source". HB 482 proposes a "single source" allowing the State to enter into a contract with a "single source" after determination is made that the bid process would not be practical to use. Representative Kelly questioned the need for a business proposing to bid to be required to have a valid Alaska business license. Mr. Petty interjected, to receive the license would cost $50 dollars including and a returned application. Representative Kelly recommended adding language clarifying that the bidding contender would only need to have applied for an Alaskan business license. Mr. Petty repeated that under current law, if a bidder submitted a bid, and they did not have the license, the bid would not be considered. In order to be on that list, there must be a business license. If the business has a license, has operated a business for six months in Alaska, and is a resident of the State, or if in a partnership, all are residents of the State, they would then qualify for the Alaska Bidders Preference which provides a 5% evaluation preference. To change the law would encourage people to compete from other states; that was not the intent of the original legislation when passed. Mr. Petty added, current statutes requires that the Department not send bids to out-of-state bidders. Representative Mulder asked if the Division of General Services kept a list of legal service contracts in the State. Mr. Petty noted that they do keep on file, the professional service contracts over $25 thousand dollars. Those reports are kept in the Department of Administration (DOA). That Division is required by law to keep a procurement report. Representative Mulder inquired the number of contracts currently on file within the Department. Mr. Petty offered to provide that information. Representative Therriault referenced Section #23, Page 11, the delivery of supplies. Mr. Petty noted that "supplies" is well defined in statute as equipment and services. He referenced AS 36.36.90 which requires that supply purchases 4 be delivered to locations within the State. The Department shall determine that a point of delivery outside the State must be in the best interest of the State. The Department is not proposing a change under that statute to the existing reference. Current procurement code has sections that are applied to preferences for Alaskan business. (Tape Change, HFC 96-138, Side 2). Representative Kohring agreed with the legislation's intent to save costs, although, pointed out the excessive fiscal notes attached. Mr. Petty commented that some of the fiscal notes reflect savings. The central purchasing fiscal notes require action which will take additional time to show a savings. He added, to date, the State of Alaska has widely decentralized procurement. Regardless of the fiscal notes, the legislation will make the State run more effectively. Mr. Petty spoke to Amendment #1. [Copy on file]. Amendment Hanley noted that the "a" should not be deleted. Mr. Petty agreed. Representative Parnell MOVED the amended Amendment Mr. Petty spoke to Amendment #2. [Copy on file]. Amendment legislation with the Senate version. Representative Navarre MOVED to adopt Amendment #2. There being NO OBJECTION, it was adopted. Co-Chair Hanley asked if bidder preferences would be cumulative. Mr. Petty replied that some would be cumulative. The net effect does not always accomplish the intended net result. The Department requests to have a uniform way of applying the preferences. Discussion followed between Co-Chair Hanley and Mr. Petty regarding the possible bidder preferential percentage reaching 20%. Representative Brown MOVED to change the semicolon in Amendment #2 to a comma so that it would be grammatically correct. There being NO OBJECTION, it was amended. Mr. Petty explained Amendment #3. [Copy on file]. He noted that the amendment would reduce the rent threshold requirement for lease concessions from 15% to 10%. Representative Kohring suggested that drop was too steep. Mr. Petty replied, under authority granted, leases have been extended for 5 years in return for a 10% rent concession. A number of lessors were below market, and he thought that a 15% rent concession would be fair. Representative Kohring questioned the percentage of profit on a lease payment received by the lessee through the State 5 of Alaska. Mr. Petty explained that the State considers the indirect costs to be about 35% of the lease; beyond that would be operating and maintenance costs. The 35% number is the one used by the State to determine the profit margin. Representative Brown asked if there would be rent adjustments in the 10 year extensions. Mr. Petty pointed out that the base rent in the extensions would be reduced by 10%, and that the Consumer Price Index (CPI) always would affect the base rent. Representative Brown MOVED to adopt Amendment #3. There being NO OBJECTION, it was adopted. Mr. Petty explained Amendment #4. [Copy on file]. He stated that the added language would conform to that established in the Senate State Affairs Committee. The intent would be to use the Government Service Information (GSI) schedules when purchasing from State vendors. Co-Chair Hanley recommended amending the amendment by adding "made" and then insert "from persons located in the state". Representative Mulder MOVED to adopt the amended amendment. There being NO OBJECTION, it was adopted as amended. Representative Martin MOVED to adopt Amendment #5, 9- GH2020\F.3, Bannister, 4/24/96. [Copy on file]. He pointed out that the amendment would provide a title change while addressing lobbying concerns. Co-Chair Hanley noted that the amendment would prohibit the agencies listed from hiring a contract lobbyist. Representative Navarre commented that the language on Page 2, Line 5, would prohibit having employees lobby. Representative Brown disagreed, indicating that it is necessary for the agencies listed to have some contact with the Legislature regarding their interests. Following discussion among Committee members, Representative Brown MOVED to delete Page 2, Line 5. There being NO OBJECTION, the amendment was amended. Mr. Petty advised that the proposed amendment did not address procurement issues. He stated that the Division would not support the amendment from a procurement perspective, suggesting that these were operational decisions which should be made by each individual agency. Representative Navarre OBJECTED to Amendment #5 in order that Legal Services could provide an opinion on the single subject rule prohibition. He noted that he supported the intent. Co-Chair Hanley advised that he would request a legal opinion and if there was a problem, that portion would 6 be removed from the bill. Representative Navarre agreed and WITHDREW the OBJECTION to the amendment. Representative Brown asked why only Alaska Industrial Development and Export Authority (AIDEA) had been referenced in the title. Representative Martin responded that the intent was to place AIDEA under the procurement code. Co- Chair Hanley understood the intent was to include AIDEA under the prohibition on hiring. (Tape Change, HFC 96-139, Side 1). Co-Chair Hanley pointed out that Senator Pearce had submitted the amendment. He noted that he agreed with the intent, although, questioned the referenced section. Representative Mulder MOVED to amend Amendment #5, Page 1, Line 2, striking "," and then deleting material: "Including entities owned and operated by the Alaska Industrial Development and Export Authority,"; and deleting Lines 16 through 18 beginning with the "," on Line 16. There being NO OBJECTION, it was amended. Representative Navarre recommended that Legal Services provide an opinion on the amended amendment. There being NO OBJECTION, Amendment #5 was adopted. Representative Parnell spoke to Amendment #6. [Copy on file]. Mr. Petty noted that Amendment #6 would add language to allow for accredited youth education programs to be exempted from the procurement statute. Representative Parnell MOVED to adopt Amendment #6. There being NO OBJECTION, it was adopted. Co-Chair Foster MOVED to report CS HB 482 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 482 (FIN) was reported out of Committee with "no recommendations" and with zero fiscal notes by the (2) Department of Administration dated 2/9/96, the Department of Commerce and Economic Development dated 2/9/96, the Department of Community and Regional Affairs dated 2/9/96, the Department of Health and Social Services dated 2/9/96, the Department of Labor dated 2/9/96, the Department of Law dated 2/9/96, the Department of Military and Veterans Affairs dated 2/9/96, the Department of Corrections dated 2/9/96, the Department of Education dated 2/9/96, the Department of Environmental Conservation dated 2/9/96, the Department of Fish and Game dated 2/9/96, the Department of Natural Resources dated 2/9/96, the Department of Public Safety dated 2/9/96, the Department of Revenue dated 2/9/96, 7 Statewide dated 2/9/96 and a fiscal impact note by the Department of Transportation and Public Facilities dated 2/9/96, and the Department of Administration. SENATE BILL 197 "An Act prohibiting increases in health insurance premiums if the insured is a victim of domestic violence." AMBER ALA, STAFF, SENATOR DAVE DONLEY, testified in support of SB 197. She noted that the bill would protect victims of domestic violence from insurance company discrimination such as refusing to provide coverage, concealing a policy, or increasing premiums on the basis of domestic violence. SB 197 would require the insurer to disclose the reason insurance coverage was denied or cancelled. Ms. Ala reported that SB 197 was drafted with the advise and support of the Division of Insurance. She continued, the statutory provisions contained in SB 197 were necessary to protect victims of domestic violence. Eight states have passed legislation similar to SB 197. Alaska's pro-active measures follow the nation-wide trend by adopting legislation that protects innocent victims of domestic violence from insurance discrimination. Ms. Ala continued, currently, there is no protection in Alaska for victims of domestic violence against insurance premium increases, cancellation, or denial. SB 197 would protect innocent victims of domestic violence from being unfairly discriminated against by insurance companies. Insurers discriminating against domestic violence victims has been a serious problem in the "lower 48"; SB 197 would prevent similar occurrences in Alaska. In response to Representative Martin, Ms. Ala stated that an insurance company could identify a person as a victim of domestic violence through medical records which specifically indicate that person was abused. Records can be released through court orders which an insurance company has access to. Representative Martin pointed out that most medical records are confidential. Ms. Ala advised that insurance companies do check out medical records. Representative Brown pointed out that medical records are maintained by large credit reporting firms; they have risk factors checked. People who apply for medical insurance often have to reveal or give permission to get their medical records as a condition of obtaining insurance. JOHN GEORGE, AMERICAN COUNCIL OF LIFE INSURANCE, NATIONAL ASSOCIATION OF INDEPENDENT INSURERS, JUNEAU, stated that 8 insurance companies support passage of a bill which protects victims of domestic violence from discrimination by insurance companies. He elaborated, there are no known cases of discrimination in the State of Alaska, adding that the legislation is trying to "fix" something which is not "broken". Mr. George stated that insurance companies support the current version of the bill, although would request that property and casualty insurance be removed. Representative Brown asked if it was possible that someone was denied insurance because a portion of that decision took into account the domestic violence risk factor. She suggested that the bill had become "inoperative" by changes made in the House Labor and Commerce Committee, which deleted "only". Mr. George interjected that change had been proposed by Senator Donley. SENATOR DAVE DONLEY replied that language had been recommended by the Division of Insurance in order to guarantee that the legislation would not unfairly impact them. Mr. George clarified that a person is underwritten depending on their condition, not how their condition originated. Representative Brown asked if everyone living in a violent household had the same rate. Mr. George stated that the bill as currently written would not allow that consideration. A person is underwritten depending on their condition, from information provided from their medical records. Representative Parnell asked the problem with including property casualties. Mr. George responded, allegations are based on the frequency of claims. He reiterated that the insurance industry would like to support the bill. He recommended removing "property casualty"; to date there have no cases in Alaska. Representative Martin voiced concern with the insurance companies becoming the "goat" of domestic violence situations. Mr. George reiterated that it would be difficult for an individual to receive information from an insurance company. Insurance companies do not ask if the party has been a victim of abuse, although, there could be an inadvertent disclosure. He reiterated that the actual condition could not be used against a client. Representative Martin maintained that the legislation would place the insurance company in a vulnerable position. Senator Donley stressed that the legislation only specifies that if there is discrimination against someone because they 9 are a victim of domestic violence, that act is against the law. It would be essential that a reason other than domestic violence be shown indicating why the insurance had been cancelled or raised. Mr. George reiterated that the bill as proposed is supported by insurance companies. Discussion followed between Representative Martin and Senator Donley regarding potential suits to insurance companies. Senator Donley reminded Representative Martin that the bill allows to rate for actual injuries and not the circumstances leading to the injury. The bill had been drafted to address inappropriate underwriting in the insurance industry. (Tape Change, HFC 96-139, Side 2). Senator Donley responded to Representative Therriault, noting that it was inappropriate to use domestic violence as a classification of people. Insurance companies should be allowed factual reasons for their rating determinations. Representative Brown asked how the language in Subsection (b) would be applied. She understood that language would allow discrimination against the abused party based on medical conditions. There could be assigned a risk factor. Senator Donley agreed that it would if those people were treated differently than anyone else. He stressed that domestic violence is not an appropriate reason to be discriminated against. Representative Parnell suggested that Subsection (b) would modify Subsection (a), stating that the provision of (a) may not prevent an insurer from underwriting a rating for medical conditions. It would not be the domestic violence relationship that would be underwritten but rather the medical condition. TERI FRONSEN, (TESTIFIED VIA TELECONFERENCE), ATTORNEY, WOMEN'S LAW PROJECT, PHILADELPHIA, PENNSYLVANIA, testified as a consumer representative for the legal and economic status of women. She pointed out that she had represented a woman in Pennsylvania who was denied insurance from two different insurance companies because of a "so-called" history of domestic violence. She was denied life insurance, health insurance and mortgage disability insurance. In a 1994 survey, the Commonwealth Fund reported four million battered women. Calls to sixteen major insurance companies in the United States revealed that eight considered domestic violence an underwriting standard in both issuance and reading of policies. Some of those 10 insurance companies have modified their policy following Congressman Shumer's efforts, although, they still consider domestic violence a factor to be considered. Companies are behaving on misperceptions about what domestic violence is. Ms. Fronsen pointed out that women are confined to these circumstances for all sorts of reasons, including economics, housing, children, and fear of retaliation. Violence does not leave when you leave the household. Domestic violence advocates have worked hard to educate people to the fact that domestic violence is a crime. Law enforcement personnel have treated it as a private matter. She stressed that it is a crime; and, under the law, it should be treated that way. With respect to insurance companies, they also need to know that it is a crime. It is not a medical condition. She reiterated that it is a crime and should not be used as a basis for denying or treating victims differently. Ms. Fronsen urged the Committee to move forward with the proposed model legislation and support the bill. [Testimony on file]. In response to Representative Martin's comment, Ms. Fronsen noted her concern regarding confidentiality, and that information not be disseminated by the insurance company in a way to cause harm to a victim. In some situations, information has been provided to the batterer. Insurers also provide information to data bases that collect risk information. Ms. Fronsen noted that it was not in the clients best interest to not record the violence. She pointed out that the abused person may need to seek legal help. The purpose of the legislation is to clarify that insurance companies can not use information on domestic violence to take adverse insurance action. Discussion followed between Representative Therriault and Ms. Fronsen regarding the application of when violence occurs within the home. The law stipulates when there is abuse. LAUREE HUGONIN, EXECUTIVE DIRECTOR, ALASKA NETWORK ON DOMESTIC VIOLENCE AND SEXUAL ASSAULT, JUNEAU, explained that advocates working to end violence against women, encourage battered women to document their injuries by seeking medical care and by requesting that violent incidents be noted in their medical records. Identification of abused women through routine screening and 11 accurate diagnosis can break the cycle of violence. Early intervention can prevent or ameliorate many of the long-term health and social consequences associated with victimization. Ms. Hugonin continued, national health initiatives require medical institutions to develop domestic violence protocols, plans for training and improving their facilities response to domestic violence. Surveys indicate that insurance discrimination against victims of domestic violence is widespread. An informal survey by the staff of the Subcommittee on Crime and Criminal Justice of the U.S. House Judiciary Committee in 1994, found that eight out of sixteen of the largest insurers in the country were using domestic violence as a factor when deciding whether to issue a policy and how much to charge for that policy. She concluded, it seems that the industry as a whole is not interested or willing to look at medical conditions without regard to cause. The reality is that every woman is at risk of becoming a victim of domestic violence. Just as their is no excuse for domestic violence, there is no excuse, legal or otherwise, for the insurance industry to justify and continue the discriminatory practice. MARCIA MCKENZIE, PROGRAM COORDINATOR, COUNCIL ON DOMESTIC VIOLENCE AND SEXUAL ASSAULT, JUNEAU, spoke to the concerns that the Council on Domestic Violence and Sexual Assault has regarding the current version of the legislation. She advised that the confidentiality protection for domestic violence victims had been removed. A provision should be added for coverage and rating based on a medical condition as long as there is no discrimination. Ms. McKenzie stressed that violent behavior was criminal and deliberate and that abuse received was not the result of a medical condition. (Tape Change, HFC 96-140, Side 1). She added, the Council was concerned that insurance companies would not be responsible to inform the applicant why they had been denied coverage. Ms. McKenzie urged Committee members to amend the bill to reinstate the provisions of confidentiality, prohibiting the "so-called" non-discriminatory consideration of medical conditions and requiring the insurers to inform applicants of the reason coverage would be denied. CS SB 197 (L&C) was HELD in Committee for further consideration. ADJOURNMENT 12 The meeting adjourned at 4:40 P.M. 13