SENATE LABOR AND COMMERCE March 29, 1994 1:33 P.M. MEMBERS PRESENT Senator Tim Kelly, Chairman Senator Steve Rieger, Vice Chairman Senator Georgianna Lincoln Senator Judith Salo MEMBERS ABSENT Senator Bert Sharp COMMITTEE CALENDAR SENATE BILL NO. 193 "An Act relating to unfair discrimination under group disability insurance; and providing for an effective date." SENATE BILL NO. 340 "An Act relating to liquidated damages and attorney fees for minimum wage and overtime compensation claims." SENATE BILL NO. 359 "An Act relating to investment pools for public entities; and providing for an effective date." SENATE BILL NO. 361 "An Act relating to real estate appraisers and the Board of Certified Real Estate Appraisers." SENATE BILL NO. 362 "An Act relating to insurance, to the licensing, accreditation, examination, regulation, and solvency of persons engaged in the insurance business, including insurers, nonadmitted insurers, purchasing groups, risk retention groups, and United States branches of alien insurers; relating to the management of and the filing of reports by persons licensed or otherwise doing business under the insurance code; amending Alaska Rule of Civil Procedure 45; and providing for an effective date." PREVIOUS ACTION SB 193 - See Labor & Commerce minutes dated 3/24/94. SB 340 - No previous action to record. SB 361 - See Labor & Commerce minutes dated 3/31/94. SB 362 - See Labor & Commerce minutes dated 3/31/94. See Judiciary minutes dated 4/11/94. WITNESS REGISTER Ken Erickson c/o Senator Pearce State Capitol Juneau, Ak. 99801-1182 POSITION STATEMENT: Commented on SB 193. Dixie Hood, MA Counselor 222 Seward St., Suite 210 Juneau, Ak. 99801 POSITION STATEMENT: Supported SB 193. Mercy Dennis, Co-Chairman Legislative Committee for the Alaska Division of the American Association for Marriage and Family Therapy Anchorage, Ak. POSITION STATEMENT: Supported SB 193. Parry Grover Anchorage, Ak. POSITION STATEMENT: Supported SB 340 Howard Joyce, Legislative Aide c/o Representative Mulder State Capitol Juneau, Ak. 99801-1182 POSITION STATEMENT: Commented on SB 340. Dave Rose, Financial Advisor Alaska Municipal League Investment Pool Anchorage, Ak. POSITION STATEMENT: Supported SB 359. Wendy Mulder, Legislative Liaison Department of Commerce P.O. Box 110800 Juneau, Ak. 99811-0800 POSITION STATEMENT: Supported SB 361. Dave Walsh, Director Division of Insurance Department of Commerce P.O. Box 110805 Juneau, Ak. 99811-0805 POSITION STATEMENT: ACTION NARRATIVE TAPE 94-21, SIDE A Number 001 CHAIRMAN KELLY called the Labor and Commerce meeting to order at 1:33 p.m. and announced SB 193 (DISCRIMINATION UNDER HEALTH INSURANCE) to be up for consideration. KEN ERICKSON, Staff to Senator Pearce, said SB 193 prevent health insurance companies from discriminating against state licensed marital and family therapists whenever the company offers coverage for mental health services. This bill does not mandate any new coverage, he said. It does provide freedom of choice for the consumer and passes on cost savings to both the patient and the insuring companies. He said that marital and family therapists were awarded professional status last year and they have formed their professional licensing board has been formed. DIXIE HOOD, licensed marriage and family therapist, supported SB 193, because it would provide professional parity with other licensed health care professionals in Alaska. She said adding them to the list of options will not expand the number of clients or the cost and would add an alternative level of treatment. This is comparable to nurse/practitioners vs. physicians for medical treatment. It can actually decrease costs of service since marriage and family therapists are qualified to do much of the same work as other licensed mental health professionals and can do it cheaper. MERCY DENNIS, Co-Chairman, Legislative Committee for the Alaska Division of the Association for Marriage and Family Therapy, supported SB 193. She said they have received significant federal recognition as one of the five core mental health professions. This type of therapy is often cost effective, because by definition it tends to emphasize active, short term mental health treatment. This is consistent with managed health care focus on shorter term treatment as a way to protect escalating costs. Marriage and family counseling fees are significantly less than psychologists and psychiatrists. MS. DENNIS explained that marriage and family counselors treat individuals in the context of their families, providing service for 2 or more persons at the cost of individual treatment. SENATOR RIEGER asked what the qualifications are for becoming a marriage and family therapist. MS. DENNIS answered that in Alaska one has to have a minimum of a masters degree in marriage and family therapy or a like field which has to be documented. They have to take a written exam or come in with credentials from another state. SENATOR SALO said she was supportive of this legislation, and asked if on page 1, the word "licensed" applied to all the categories and asked if each of those providers was licensed in the state separately. Someone in the audience responded that the list of providers are all licensed health care providers in the state of Alaska. Number 233 JOSH FINK, Aide to Senator Kelly, explained they had received an amendment from Greg Pease who wanted to insert "acupuncturist" after "naturopath" on page l, line 12. Acupuncturists are licensed in Alaska. SENATOR LINCOLN and SENATOR RIEGER thought it was a good idea to make sure "state licensed" applies to all the professions listed. SENATOR KELLY said they would look into that issue and have the bill and have the bill back before the committee at a later date. SENATOR KELLY announced SB 340 (DAMAGES & ATTY FEES FOR UNPAID WAGES) to be up for consideration. SENATOR LINCOLN noted that "liquidated damages" was removed from the title, but on page 2 of the CS, line 23, it appears again and asked why. MR. FINK explained that a draft of the original bill deals with settlements that go beyond liquidated damages to attorney's fees, specifically, and the drafter said the title didn't fit. Because section (e) of the CS goes beyond the scope of simple liquidated damages and attorney's fees, the title can't be that narrow, but the amendment he handed out does tighten it up considerably, he said. PARRY GROVER, Anchorage, said he was an attorney in private practice and he had mainly represented management in all aspects of employment law. He said in many respects the Alaska wage and hour act is more stringent than the federal law on which it was based. SB 340 corrects some things that have crept into the Alaska law over the years that really isolate it from the rest of the states and has the effect of making it harsher than employers face in other states. In section 2, as the law presently stands, only the prevailing plaintiff can recover full attorney's fees. The result is that if an employer is sued and the case is frivolous, they don't recover their attorney's fees. Under Alaska Civil Rule 82, the prevailing party recovers at least partial attorney's fees. There is no reason the wage and hour law should not have that same provision, MR. GROVER said. Section 3 (d) brings into Alaska law a limited exception that has been available under federal law for many years and is available in most other states, for employers who can show good faith in trying to follow the law. Mr. Grover said subsection (e) was requested by the Alaska Department of Labor. It would restore to the Commissioner the power to settle cases without requiring liquidated damages. Subsection (f) allows private settlements of these cases. SENATOR KELLY asked what organized labor thought of this bill. MR. JOYCE, Aide to Representative Mulder, said organized labor has "bought off" on this compromise, but they are not in support of this bill. It doesn't really affect their constituency. SENATOR LINCOLN asked if the statute of limitations was addressed in this bill. MR. JOYCE said it doesn't now. He said he would have to consult with the Department of Labor and legal staff. SENATOR KELLY said they would hold SB 340 until they get the House version and see how it addresses that issue. SENATOR KELLY announced SB 359 (INVESTMENT POOLS FOR PUBLIC ENTITIES) to be up for consideration. DAVE ROSE, Financial Advisor, Alaska Municipal League Investment Pool, said they are seeking clarification of what investment pools can do. AS 37.23. permits cities and boroughs to place money into an investment pool for the purpose of trying to enhance their yield or provide liquidity, and to secure professional funds management. Section 1 clarifies the use of floating rate securities which are reviewed annually or more frequently for rate. The second change in section 1 deals with the purchase of securities which are issued by domestic branch banks whose parent may be a foreign bank. These are called Yankee securities which are denominated in dollars. Section 2 is a new section which deals with lending of securities providing collateral is received. This is pretty much conventional in the industry under the prudent investor rule; they are just seeking explicit language. Section 3 removes a restriction which limits the amount of bank paper that can be held by the portfolio, MR. ROSE said. SENATOR LINCOLN noted in a letter from Commissioner Rexwinkle there was is a language change in section 2 that used "provided such securities are fully collateralized" not "if the securities are..." and asked the reason for that. MR. ROSE said there was no reason that he knew of and that the drafting attorneys did that. He did not think that was a major change. Number 460 SENATOR RIEGER moved to pass SB 359 from committee with individual recommendations. There were no objections and it was so ordered. SENATOR KELLY asked if this bill affected the Permanent Fund. MR. ROSE said it has no affect on it or any other state entity. SENATOR KELLY announced SB 361 (REAL ESTATE APPRAISERS) to be up for consideration. WENDY MULDER, Department of Commerce, said SB 361 takes from statute the state requirement for the number of instruction hours for a state certified appraiser which the federal government keeps changing. This is so that the state does not have to keep coming back and amending the statute to comply with the federal the Financial Institutions Reform and Recovery Act. Unless we meet federal requirements, federally financed programs are in trouble, she said. SENATOR RIEGER asked why we should have appraisals since it appears in some cases that the appraisal is lower than what the property actually sells for. MS. MULDER said from the Department's perspective, they need to have a state certified program in order to receive federal money. SENATOR KELLY asked Mr. Fink to contact the State Appraiser's Association to testify Thursday and announced SB 362 (OMNIBUS INSURANCE REFORM) to be up for consideration. He announced a recess from 2:20 through 2:25 p.m. DAVE WALSH, Director, Division of Insurance, said there was one change in the bill that affected Lloyds of London and Mr. Gussi would answer questions regarding that issue. He said this bill has a $0 fiscal note and gives them the authority to respond to catastrophic situations. TAPE 94-21, SIDE B Number 580 MR. WALSH said it provides them with the authority to suspend a certificate of an insurance company if they don't renew it and provides for the voluntary surrender of a certificate of authority without going through a full liquidation process. Another provision allows them to grant a refund or tax credits for overpayment of premium tax. Industry does not object to this. SB 362 restores their ability to promulgate regulations for continuing education for agents and brokers. The Agents and Brokers Association is in support of this. The bill also clarifies fiduciary accounts, saying they must be in Alaska if it's an Alaska broker, but that a single bond can cover multiple offices. The bill also allows incorporated insurers into the definition of a group of unincorporated insurers to reflect a recent change at Lloyds of London. As they have reorganized, they have gone from allowing only individual members to allowing corporate members. This provision is key to continued participation of Lloyds in our market. SB 362 strengthens the consumer protection and enforcement laws with regards to false statements made when filing an insurance claim. A couple of other miner provisions allows the Director to specify the format and content of rate and policy form filings. It clarifies health insurance coverage for newborn and adopted kids. It allows electronic transfer of funds, makes "housekeeping" corrections and conforming amendments. Number 500 SENATOR KELLY asked if there were any objections to adopting the CS to SB 362. There were none and it was so ordered. SENATOR RIEGER asked in reference to page 8, line 24 if somewhere in statute you can have filings, but not be subject to subpoena. MR. WALSH explained that the depth of a filing a company must make really reveals everything. In the past, frivolous lawsuits have been filed just to obtain this information. If any of the information is ruled to be material to a lawsuit, it is discoverable, but not from the Department of Commerce. SENATOR RIEGER asked at the top of page 37 what it meant that an insurer may not increase the premium on auto insurance, unless it applies to all insurance in the same class. MR. WALSH said that means that if you as a company set up your classes by age, type of vehicle, etc., you may not have a discriminatory rate. SENATOR RIEGER said there were several references to credit insurance which, he thought, were bad deals, anyhow. MR. WALSH agreed and said their loss ratios are so low, you can't hold them to a 20% standard. This bill gives them the power to correlate the premium to the losses. SENATOR SALO asked him to explain on page 3, closing an examination hearing to the public. MR. WALSH responded that when they examine a company, they hold a hearing on the examination report. At times the reports can be highly critical and sometimes there are mistakes. This is an opportunity where those things can get straightened out. If the hearing officer disagrees, it becomes public, but it gives an individual or company the right to come in and be heard in a fashion that would do them the least harm, if a mistake had been made. Number 430 SENATOR LINCOLN asked what section 12 does. MR. WALSH explained that insurers pay a premium tax to the state based upon the type of line they write. SB 362 would allow them to give tax credit, if the figures were found to be wrong, so that the Department would not have to come up with cash it didn't have, if it was a large sum. Although it has not come up, yet, he said they would have no way of dealing with a big figure. SENATOR LINCOLN asked what right we had to keep someone's money, so they have to wait over a period to get it back. MR. WALSH said if it took longer than 1 year to pay back, he would come to the legislature for an appropriation. This measure would give them more flexibility to deal with an accidental overpayment to the state. SENATOR LINCOLN said she would feel better if it said "to be used in the next calendar year to the fullest extent possible and then have a monetary refund" rather than saying "in each succeeding year until no credit remains." MR. WALSH said that would be fine with him. SENATOR KELLY told Mr. Fink to put that language in the bill and asked if there were any objections to adopting CSSB 362(L&C). There were none and it was so ordered. Number 508 SENATOR KELLY adjourned the meeting at 2:50 p.m.