ALASKA STATE LEGISLATURE  HOUSE LABOR AND COMMERCE STANDING COMMITTEE  April 19, 2006 4:12 p.m.   MEMBERS PRESENT Representative Tom Anderson, Chair Representative Pete Kott Representative Gabrielle LeDoux Representative Bob Lynn Representative Norman Rokeberg Representative Harry Crawford Representative David Guttenberg MEMBERS ABSENT  All members present COMMITTEE CALENDAR HOUSE BILL NO. 350 "An Act relating to enforcement of insurance unfair claim settlement practices by a person affected by a violation; permitting penalties for a single-act unfair claim settlement practice; and providing for an effective date." - MOVED CSHB 350(L&C) OUT OF COMMITTEE SENATE BILL NO. 177 "An Act eliminating the requirement that persons using titles or descriptions of services that incorporate the terms 'psychotherapy,' 'psychotherapeutic,' or 'psychotherapist' be licensed by the Board of Psychologist and Psychological Associate Examiners." - HEARD AND HELD CONFIRMATION HEARING(S) BOARD OF CHIROPRACTIC EXAMINERS Mr. Jeffrey Garness - Anchorage - CONFIRMATION(S) ADVANCED BOARD OF PHARMACY Mr. Richard Holm - North Pole - CONFIRMATION(S) ADVANCED BOARD OF PSYCHOLOGIST AND PSYCHOLOGICAL ASSOCIATE EXAMINERS Ms. Lisa Turner - Kenai - CONFIRMATION(S) ADVANCED BOARD OF BARBERS AND HAIRDRESSERS Ms. Carol Hernley - Cordova - CONFIRMATION(S) ADVANCED BOARD OF CHIROPRACTIC EXAMINERS Mr. David Mulholland - Anchorage - CONFIRMATION(S) ADVANCED BOARD OF EXAMINERS IN OPTOMETRY Dr. James C. Graves - Fairbanks Dr. Timothy Sullivan, Jr. - Anchorage - CONFIRMATION(S) ADVANCED STATE PHYSICAL THERAPY AND OCCUPATIONAL THERAPY BOARD Ms. Cheryl Abitz - Palmer Ms. Joanne Boehme - Juneau Ms. Mary Ann Paul - Eagle River - CONFIRMATION(S) ADVANCED BOARD OF PROFESSIONAL COUNSELORS Ms. Jennifer Burkholder - Anchorage Ms. Emily Zimbrich - Haines - CONFIRMATION(S) ADVANCED BOARD OF SOCIAL WORK EXAMINERS Mr. Jason Floyd - Valdez Ms. Sammye Pokryfki - Wasilla - CONFIRMATION(S) ADVANCED WORKERS' COMPENSATION APPEALS COMMISSION Mr. Jim Robison - Eagle River - CONFIRMATION(S) ADVANCED WORKERS' COMPENSATION BOARD Mr. John Abshire - Wasilla Mr. Richard Behrends - Juneau Mr. Andrew (Bear) Piekarski - Eagle River Ms. Patricia Vollendorf - Anchorage Ms. Lori Wing - Anchorage - CONFIRMATION(S) ADVANCED PREVIOUS COMMITTEE ACTION BILL: HB 350 SHORT TITLE: UNFAIR CLAIM SETTLEMENT PRACTICES SPONSOR(s): REPRESENTATIVE(s) CHENAULT, GRUENBERG 01/09/06 (H) PREFILE RELEASED 1/6/06 01/09/06 (H) READ THE FIRST TIME - REFERRALS 01/09/06 (H) L&C, JUD 03/24/06 (H) L&C AT 3:15 PM LOCATION TBA 03/24/06 (H) 03/29/06 (H) L&C AT 3:15 PM CAPITOL 17 03/29/06 (H) 04/12/06 (H) L&C AT 3:15 PM CAPITOL 17 04/12/06 (H) Scheduled But Not Heard 04/19/06 (H) L&C AT 3:15 PM CAPITOL 17 BILL: SB 177 SHORT TITLE: PRACTICE OF PSYCHOLOGY SPONSOR(s): HEALTH, EDUCATION & SOCIAL SERVICES BY REQUEST 04/15/05 (S) READ THE FIRST TIME - REFERRALS 04/15/05 (S) HES, L&C 04/20/05 (S) HES AT 1:30 PM BUTROVICH 205 04/20/05 (S) Scheduled But Not Heard 01/25/06 (S) HES AT 1:30 PM BUTROVICH 205 01/25/06 (S) Heard & Held 01/25/06 (S) MINUTE(HES) 02/01/06 (S) HES AT 1:30 PM BUTROVICH 205 02/01/06 (S) -- Rescheduled to 02/03/06 -- 02/03/06 (S) HES AT 1:30 PM BUTROVICH 205 02/03/06 (S) -- Rescheduled from 02/01/06 -- 02/06/06 (S) HES RPT CS 2DP 1NR NEW TITLE 02/06/06 (S) DP: DYSON, ELTON 02/06/06 (S) NR: GREEN 02/14/06 (S) L&C AT 1:30 PM BELTZ 211 02/14/06 (S) Moved CSSB 177(HES) Out of Committee 02/14/06 (S) MINUTE(L&C) 02/15/06 (S) L&C RPT CS(HES) 3DP 2NR 02/15/06 (S) DP: BUNDE, SEEKINS, STEVENS B 02/15/06 (S) NR: DAVIS, ELLIS 02/22/06 (S) TRANSMITTED TO (H) 02/22/06 (S) VERSION: CSSB 177(HES) 02/24/06 (H) READ THE FIRST TIME - REFERRALS 02/24/06 (H) HES, L&C 03/28/06 (H) HES AT 3:00 PM CAPITOL 106 03/28/06 (H) 04/04/06 (H) HES AT 3:00 PM CAPITOL 106 04/04/06 (H) 04/06/06 (H) HES AT 3:00 PM CAPITOL 106 04/06/06 (H) -- Rescheduled from 04/04/06 -- 04/11/06 (H) HES AT 3:00 PM CAPITOL 106 04/11/06 (H) Moved Out of Committee 04/11/06 (H) MINUTE(HES) 04/12/06 (H) HES RPT 2DP 2NR 04/12/06 (H) DP: ANDERSON, WILSON; 04/12/06 (H) NR: CISSNA, GARDNER 04/19/06 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER LALANYA SNYDER, Staff to Representative Mike Chenault Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Presented HB 350 on behalf of co-sponsor, Representative Chenault. REPRESENTATIVE MAX GRUENBERG Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Spoke as the co-sponsor of HB 350. JEFFREY TROUTT, Deputy Director Juneau Office Division of Insurance Department of Commerce, Community, & Economic Development POSITION STATEMENT: Answered questions during hearing on HB 350. BOB LOHR Anchorage, Alaska POSITION STATEMENT: Testified on HB 350. JASON HOOLEY, Staff to Senator Fred Dyson Senate Health, Education and Social Services Standing Committee Alaska State Legislature POSITION STATEMENT: Presented SB 177 on behalf of the Senate Health, Education and Social Services Standing Committee, sponsor. ACTION NARRATIVE CHAIR TOM ANDERSON called the House Labor and Commerce Standing Committee meeting to order at 4:12:13 PM. Representatives Guttenberg, Lynn, LeDoux, Kott, and Anderson were present at the call to order. Representatives Crawford and Rokeberg arrived as the meeting was in progress. 4:12:41 PM HB 350-UNFAIR CLAIM SETTLEMENT PRACTICES [Contains discussion of HB 480] CHAIR ANDERSON announced that the first order of business would be HOUSE BILL NO. 350, "An Act relating to enforcement of insurance unfair claim settlement practices by a person affected by a violation; permitting penalties for a single-act unfair claim settlement practice; and providing for an effective date." 4:12:59 PM LALANYA SNYDER, Staff to Representative Mike Chenault, Alaska State Legislature, co-sponsor, explained that the unfair claim settlement practices act sets standards by which insurance companies must abide. This act, she said, was enacted to protect Alaskans from unfair insurance settlement practices, and defines what is acceptable conduct in the insurance industry. She went on to say that HB 350 strengthens this act by allowing an individual who has been harmed by an unfair claims settlement to seek a remedy in court. In conclusion, she stated that HB 350 raises the current standards and would be a benefit to Alaskans. 4:14:01 PM REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature, co- sponsor, said that HB 350 allows AS 21.36, the trade practices and fraudulent practices of the insurance industry, to be enforced by a private suit. This may be enforced by the director of the [Division of Insurance] or an individual may file a lawsuit against the offending insurance company. He explained that Section 2 is a conforming amendment. Section 3, he said, allows restitution and a penalty of $2,500-$25,000 for each violation. He noted that while Section 3 allows for compensatory or punitive damages, the section in Title 9 which governs the awarding of punitive damages is not amended by HB 350. Section 4 is a conforming amendment, he said, and Section 5 repeals AS 21.36.320(h), which restricts the penalty for single act violations. In regard to Section 6, he stated that the bill does not require an immediate effective date, and asked the committee to entertain an amendment to delete this, along with a conforming title amendment. 4:16:21 PM REPRESENTATIVE KOTT moved conceptual Amendment 1, as follows: Delete: Section 6 Conforming title amendment [There being no objection, conceptual Amendment 1 was adopted.] REPRESENTATIVE GRUENBERG noted that [Jeffrey Troutt, Director, Division of Insurance] expressed many concerns with HB 350. 4:16:56 PM CHAIR ANDERSON noted that the National Association of Mutual Insurance Companies (NAMIC) sent a letter dated April 11, 2006, which expressed opposition of HB 350. In addition, he said, Alaska Independent Insurance Agents & Brokers, Inc., submitted a position paper in opposition to HB 350. 4:17:57 PM JEFFREY TROUTT, Deputy Director, Juneau Office, Division of Insurance, Department of Commerce, Community, & Economic Development (DCCED), related that the division has concerns with HB 350 that fall under three categories: practical issues, structural, and the divisions responsibilities. In regard to "practical issues," he pointed out that Section 1 applies to "a person harmed by a violation of this section," which may include individuals it was not intended to benefit. He said that the potential to collect punitive damages may cause individuals to litigate for small amounts of money, which is a concern of some attorneys. In addition, he opined that the potential for damages will cause every insurance action to have a claim under the Unfair Claims Settlement Practices Act. 4:22:26 PM MR. TROUTT went on to say that [HB 350] "puts punitive damages on the table in situations where it [shouldn't necessarily] be on the table." He noted that there are times when the only way to resolve the situation is to litigate. 4:23:08 PM REPRESENTATIVE LEDOUX asked if, being subject to punitive damages, the insurance company might be encouraged to settle a claim. 4:23:20 PM MR. TROUTT replied that this would be an incentive; however, encouraging an insurance company to settle based on punitive damages is a "wild card." 4:23:49 PM REPRESENTATIVE LEDOUX, in regard to attorneys being "forced" to sue because of possible punitive damages, opined that the attorney would be able to decline the case, and refer the client to another attorney. She said "As an attorney myself, I can't imagine that ... I [would] sue just because of the theoretical possibility of [receiving punitive damages]." MR. TROUTT replied that an attorney would be able to "turn a case down." He opined that this would be something to take under consideration when bringing an action. 4:25:38 PM REPRESENTATIVE LEDOUX agreed with this, but stated that unless the possibility [for punitive damages] is substantial, the attorney is under no obligation to take the case. MR. TROUTT agreed. 4:25:59 PM REPRESENTATIVE GUTTENBERG noted that according to the sponsor statement, HB 350 sets higher standards than are currently in place. He asked where these standards are in the bill, and inquired as to the current standards. MR. TROUTT said that he does not believe that new standards are being adopted, rather HB 350 creates a "class of plaintiffs," and empowers the superior courts to make decisions that have traditionally been made by the Division of Insurance. He opined that this would "certainly get the attention" of the insurance companies. 4:27:28 PM REPRESENTATIVE GUTTENBERG asked what the current standards are for determining an unfair claim. MR. TROUTT replied that there are many types of violations, and stated that he does not know that there are any set standards. He said that these claims are fact-specific, and the division looks for patterns and practices that indicate the act is being violated. 4:28:37 PM REPRESENTATIVE GUTTENBERG, referring to [HB 480], said that in a self-audit, insurance companies evaluate how claims have been paid. He said that HB 350 seems to "dovetail" into the aforementioned legislation. He opined that if there is a claim against an insurance company, [the division] would see how the company had changed its practices from its original claims handling procedures. He asked how far back into the claims process [the division] would be able to go. MR. TROUTT replied that [the division] would go back as far as the statute of limitations. He said that he does not know if there is a limit on how far back [the division] can go. REPRESENTATIVE GUTTENBERG said that according to [HB 480], certain portions of the self-audit information are confidential. He expressed concern that it may not be possible to find out what occurred if the information was made confidential. MR. TROUTT replied that as he understands it, [HB 480], would prevent [the division] from using certain documents created during the audit in administrative proceedings. However, the division would be able to take action based on the substance of the audit. For example, if an audit shows the company is intentionally non-responsive, the division would need to conduct interviews and research the situation. REPRESENTATIVE GUTTENBERG asked how many actions are currently being taken under the Unfair Claims Settlement Act. MR. TROUTT replied that the division has participated in multi- state settlements; however, to his knowledge, there have not been any individual actions taken. He explained that issues of this nature may come up in the context of a market exam, and the division must then decide whether to simply ask for corrections to be made or to prosecute. He stated that these types of issues are examined on a regular basis. 4:33:10 PM CHAIR ANDERSON stated that while he does not intend to hold HB 350, he does not support this legislation. He said, "I think it causes an unnecessary cause of action civilly, it could increase rates, ... it certainly usurps the power of the Division of Insurance and the director from the regulatory prerogative they would have. ... I fear some frivolous lawsuits." MR. TROUTT, continuing his testimony, said that the division would be required to file a cease and desist order if the superior court finds a violation of statute. He stated that this may be a situation in which the division would not find a violation, which would usurp the division's authority. Additionally, there may be cases that are heard in two courts, which may result in the courts finding different violations. Furthermore, if the division is forced to issue a cease and desist order with which it disagrees, would it be applied to just the company [in violation] or does it serve to be a precedent for other companies, he questioned. Mr. Troutt explained that if a particular issue was litigated 100 times with only one superior court finding a violation, the division would be forced to issue a cease and desist order. In such a situation whatever precedential impact that created would be felt by the rest of the industry. He then inquired as to what happens with the cease and desist order when the supreme court reverses a decision. The statute doesn't specify that the cease and desist order doesn't apply in such a case, he pointed out. 4:37:15 PM REPRESENTATIVE GUTTENBERG inquired as to what the division would do with the cease and desist order otherwise. He questioned the need to specify in the legislation. MR. TROUTT opined that it should be addressed because staff will look to these statute and read them fairly literally. REPRESENTATIVE GUTTENBERG asked if it's unique to this situation. MR. TROUTT said he didn't know. He said he couldn't think of any other situation in which a member of the executive branch is required to issue this type of order based on an unpublished lower court decision. 4:38:19 PM MR. TROUTT, continuing his testimony, highlighted that if the division issues a cease and desist order, the person/company that's the target of that order has the right to make an appeal to the director and request a hearing. Therefore, he questioned whether the matter is being re-litigated or is it merely a matter of whether there was a superior court decision. If there is some substantive examination and the party against which the cease and desist order is issued loses, the director's decision goes to the superior court for review. In this case, the superior court reviews the director's review of its order. The aforementioned is a structural difficulty that should be taken into consideration. In conclusion, he reminded the committee that the division takes consumer protection very seriously. 4:40:43 PM CHAIR ANDERSON surmised then that the division believes its procedures are thorough enough that it doesn't see the need for this legislation. MR. TROUTT said, "We do our best." In fact, the division dealt with 459 consumer complaints and obtained $500,000 of restitution for consumers. 4:42:32 PM BOB LOHR, recalling Representative Guttenberg's comments on the substantive standards, noted that those standards were set in 2000. He highlighted that the standards established that a single act could constitute a violation of unfair claims settlement practices as compared to the [continuing] prevalent pattern that multiple acts rising to a general business practice are necessary to constitute a violation. He recalled that [in 2000] the industry feared that there would be a rouge regulator going after the companies. However, that should be laid to rest at this point. The provisions in .125 were established to restrict the ability of the division to abuse this tool. If the committee chooses to amend the legislation to provide a private cause of action to claimants' insurance claims, then the door would be wide open to abusive litigation. Under the current practice, when a claimant files a lawsuit the Unfair Claims Settlement Practices Act compliance are brought into the file. Other than attorney-client privileged information, the entire claim file for the individual is made part of the discovery of the case and is examined closely by all sides, including the courts. The aforementioned is one of the key elements in determining whether bad faith has occurred. The private cause of action would cause the entire ability to enforce single insurance mishandling of claims to be cast into doubt. 4:46:27 PM CHAIR ANDERSON, upon determining there were no further questions from the committee, closed public testimony. 4:46:43 PM REPRESENTATIVE GUTTENBERG moved to report HB 350 [as amended] out of committee with individual recommendations and the accompanying fiscal notes. CHAIR ANDERSON objected and reiterated his belief that there isn't merit to this legislation. 4:47:20 PM CHAIR ANDERSON removed his objection. REPRESENTATIVE ROKEBERG objected. A roll call vote was taken. Representatives Kott, Guttenberg, Crawford, Lynn, LeDoux, and Anderson voted in favor of reporting HB 350 [as amended] out of committee. Representative Rokeberg voted against it. Therefore, CSHB 350(L&C) was reported out of the House Labor and Commerce Standing Committee by a vote of 6- 1. 4:48:21 PM The committee took a brief at-ease. 4:49:05 PM SB 177-PRACTICE OF PSYCHOLOGY CHAIR ANDERSON announced that the next order of business would be CS FOR SENATE BILL NO. 177(HES), "An Act eliminating the prohibition on the use by certain licensed professionals of titles or descriptions of services that incorporate the terms 'psychoanalysis,' 'psychoanalyst,' 'psychotherapy,' 'psychotherapeutic,' or 'psychotherapist.'" 4:49:12 PM JASON HOOLEY, Staff to Senator Fred Dyson, Senate Health, Education and Social Services Standing Committee, sponsor, explained that AS 08.86.180 prohibits all professionals, with the exception of licensed psychologists and clinical social workers, from using terms such as "psychology," "psychological," "psychologist," and "psychoanalysis" to describe their services or titles. He said that this statute was written prior to the licensure of professional counselors (LPCs) and marital and family therapists (LMFTs), and clinical social workers' (CSWs) who also receive the training required to provide these types of psychological services. He stated that SB 177 updates the aforementioned statute to allow LMFTs, LPCs, and CSWs to use these terms. He noted that the bill has a zero fiscal note. In addition, he said, the language of the bill was agreed upon by several professional groups. These groups are: The Alaska Board of Licensed Professional Counselors; The Alaska Psychological Association; The Alaska Board of Psychologists and Psychological Associate Examiners; The Alaska Chapter of the National Association of Social Workers'; The Alaska Board of Marital and Family Therapists; and The Alaska Board of Social Work Examiners. 4:51:37 PM REPRESENTATIVE GUTTENBERG inquired as to situations in which an individual who is not trained in the appropriate area offers [psychology or psychoanalysis, etc.] and the client then sues the board. MR. HOOLEY stated his belief that all of the professionals who are affected by the bill are licensed and currently have board standards and enforcement. He said that, to his knowledge, SB 177 does not change this, and added that he would follow up on this question. 4:53:17 PM REPRESENTATIVE LYNN, in regard to titles, asked if LMFT includes psychoanalysis. MR. HOOLEY replied that LMFTs would be allowed to advertise and bill for psychoanalysis, psychotherapy, or any of the other terms listed. 4:53:54 PM REPRESENTATIVE LEDOUX asked if an LMFT receives training in psychoanalysis or psychotherapy. She said that she understands psychoanalysis to be a "discreet area of practice," and expressed concern with the level of education expected or required. 4:54:42 PM MR. HOOLEY replied that boards were created to protect consumers from this concern. He said that there are strict requirements for training, including a college degree and apprenticeship. REPRESENTATIVE LEDOUX asked for clarification that an internship in psychoanalysis is required to be a CSW. 4:55:36 PM REPRESENTATIVE CRAWFORD noted a conflict of interest, as his wife is a licensed CSW. He explained that to be a CSW requires a masters degree, along with a [three-year] apprenticeship. He stated that a social worker with a [bachelors degree] would not be a licensed CSW. REPRESENTATIVE CRAWFORD, in response to further questions, clarified that in order to use the terms included in the bill, an individual would have to fulfill the education requirements of a licensed CSW. He said that he does not know what the educational requirements are for a LMFT. He surmised that "psychotherapy" is a term currently used; however he said that the term "psychoanalysis" is new. He said that he would like to have an expert in the field explain this. 4:57:46 PM REPRESENTATIVE LYNN inquired as to the difference between a psychologist and psychiatrist. MR. HOOLEY replied that the terms are not titles, they are a description of techniques. He said that the bill would not allow individuals to practice who were previously unable, as the same licensure requirements apply. 4:58:43 PM REPRESENTATIVE LYNN remarked that if a person were to see a professional counselor, he/she would not expect to be "psychoanalyzed," and opined that there is a "big difference." REPRESENTATIVE LEDOUX offered her understanding that "psychoanalyst" is a person who does psychoanalysis, therefore it is a title. MR. HOOLEY agreed, adding that in general, a practitioner is known by his or her title. He said that SB 298 would allow the use of certain terms that would enable the practitioner to offer certain techniques. REPRESENTATIVE LEDOUX asked if, under the bill, a practitioner would be able to advertise as a "psychoanalyst." CHAIR ANDERSON clarified with an example of a social worker who advertises "psychoanalyst services." He opined that a person may think that this is a psychologist or a psychiatrist, adding that a person may decide to utilize the services, although he or she may not know what these terms mean. After a number of months, he said, the client may discover that the "psychologist or psychiatrist" is actually a social worker, which is not what the client wanted. 5:01:10 PM MR. HOOLEY replied that he understands the question and will have an expert address this issue [at the next bill hearing]. CHAIR ANDERSON noted that SB 177 was introduced by the request of the industry. REPRESENTATIVE GUTTENBERG related a personal experience with a social worker that was unsatisfactory, and opined that the members may need to "get comfortable" with the terms. CHAIR ANDERSON added that there is a counselor/client privilege, and asked if this also applies to social workers. 5:02:36 PM CHAIR ANDERSON noted that there are many questions, therefore SB 177 would be held over until the next committee hearing to allow members of the industry to testify. 5:02:58 PM [SB 177 was held over.] ^CONFIRMATIONS ^Board of Chiropractic Examiners ^Board of Pharmacy ^Board of Psychologist and Psychological Associate Examiners ^Board of Barbers and Hairdressers ^Board of Examiners in Optometry ^State Physical Therapy and Occupational Therapy Board ^Board of Professional Counselors ^Board of Social Work Examiners ^Workers' Compensation Appeals Commission ^Alaska Workers' Compensation Board 5:03:17 PM CHAIR ANDERSON announced that the final order of business would be the confirmation hearings for the governor's appointees to various boards and commissions. He noted that each committee member was provided with the names and resumes for each of the appointments, noting that there was no objection regarding the appointees. He reminded the committee members that a member's signature on the committee report does not reflect the member's vote during the joint session. 5:03:56 PM CHAIR ANDERSON moved to advance the names of the appointees to the boards and commissions, as specified above in the committee calendar. There being no objection, the confirmations were advanced. 5:05:10 PM ADJOURNMENT  There being no further business before the committee, the House Labor and Commerce Standing Committee meeting was adjourned at 5:05:27 PM.