Legislature(2017 - 2018)BARNES 124
03/20/2017 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HJR14 | |
| HB157 | |
| HB119 | |
| HB79 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 79 | TELECONFERENCED | |
| + | HJR 14 | TELECONFERENCED | |
| + | HB 157 | TELECONFERENCED | |
| + | HB 119 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 157-LIFE & HEALTH INSURANCE GUARANTY ASSN.
3:30:05 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 157,"An Act relating to the Alaska Life and
Health Insurance Guaranty Association; and providing for an
effective date."
3:30:27 PM
BIANCA CARPENETTI, Staff, Representative Sam Kito, Alaska State
Legislature, advised that HB 157 is a House Labor and Commerce
Standing Committee bill by request of the Department of
Commerce, Community & Economic Development (DCCED). On 1/20/17,
the department presented the concept of the bill for the
committee and the committee authorized the chair to draft
legislation on behalf of the committee addressing the issues
raised by the department. The legislation updates the Alaska
Life and Health Insurance Guaranty Act and conforms to the
National Association of Insurance Commissioners, Life, and
Health Insurance Guaranty Association Model Act. It includes
the definition of an insured member of the association and the
Hospital and Medicare Service Corporations, which are entities
of active insurance companies. These changes update the Act and
improve uniformity nationwide in the administration of Life and
Health Guaranty Associations. The bill has a zero-fiscal note
from the Division of Insurance, she said.
3:32:02 PM
LORI WING-HEIR, Director, Division of Insurance, Department of
Commerce, Community & Economic Development (DCCED), advised that
HB 157 is an amendment to the Alaska Life and Health Insurance
Guaranty Association. The sectional analysis summary is mainly
conformance to the National Association of Insurance
Commissioners Model Law (NAIC), and Alaska statutes with 16
typographical errors within the statutes.
3:32:55 PM
MS. WING-HEIR began paraphrasing the sectional analysis.
3:33:08 PM
The committee took an at-ease from 3:33 p.m. to 3:34 p.m.
3:34:49 PM
MS. WING-HEIR paraphrased the sectional analysis as follows
[original punctuation provided]:
Sec. 1 AS 21.79.020(a) is amended to clarify that the
chapter applies to a nonresident who is not eligible
for coverage by a guaranty association in another
state due to the fact that the insurer was not
licensed at the time specified in the guaranty
association law of that state.
Sec. 2 AS 21.79.020(b) is amended to have AS 21.79
apply to a subscriber's contract issued by a hospital
or medical service corporation authorized under AS
21.87. The amendment also defines the terms "annuity
policy or contract" and "certificate under a direct
group life health, annuity, or supplemental policy or
contract".
3:35:09 PM
MS. WING-HEIR advised that the hospital or medical service
corporation in Alaska is Premera Blue Cross, and as was
discussed in January, it is the intent of the department to
bring Premera in to make an assessment in the event of a large
insolvency. The second portion of Sec. 2, creates consistencies
to a draft modeling in NAIC-Model.
MS. WING-HEIR advised that Sec. 3 lists exclusions to what is
not covered in this particular Guaranty Association, because
there is wording in Alaska statutes to make sure to not pick up
federal preemptions, or structured settlements or annuities that
have been sold to a third-party.
MS. WING-HEIR continued paraphrasing as follows [original
punctuation provided]:
Sec. 3 AS 21.79.020(c) is amended to make AS 21.79
inapplicable to:
1. a policy or contract providing a hospital,
medical, prescription drug, or other health care
benefit in accordance with 42 U.S.C. 1395w-21 - 1395w-
154 or federal regulations adopted under those
sections; (Medicare Choice Program and Voluntary
Prescription Drug Benefit Program)
2. a person who acquires rights to receive
payments through a structured settlement factoring
transaction as defined in 26 U.S.C. 5891(c)(3)(A),
regardless of whether the transaction occurred before
or after such section became effective.
3. structured settlement annuity benefits to
which a payee or beneficiary has transferred the payee
or beneficiary's rights in a structured settlement
factoring transaction as defined in 26 U.S.C.
5891(c)(3)(A), regardless of whether the transaction
occurred before or after 26 U.S.C. 5891(c)(3)(A)
became effective.
• Subsection (c) is also amended to add
clarifying language consistent with the National
Association of Insurance Commissioners (NAIC) Life and
Health Insurance Guaranty Association Model Act (MDL
520) (NAIC Model).
Sec. 4 AS 21.79.020(d) Non-substantive changes
are made for either consistency with the NAIC Model or
drafting conventions.
Sec. 5 AS 21.79.020(e) Non-substantive changes
made are for either consistency with the NAIC Model or
drafting conventions, and a citation correction is
made in paragraph (9).
Sec. 6 AS 21.79.025(a)
• AS 21.79.025(a)(2)(B)(ii) is amended to
clarify that the benefits for which the association
may become liable may not exceed $300,000 for long-
term care insurance as defined under AS 21.53.200.
• AS 21.79.025(a)(3) is amended to change
"contract holder" to "contract owner" to be consistent
with the NAIC Model, to clarify that the contract
refers to an unallocated annuity contract issued to or
in conjunction with a government lottery if the owner
is a resident, and to clarify that the association is
not liable to cover more than $5 million in benefits
regardless of the number of policies and contracts
held by the owner.
• AS 21.79.025(a)(4) is amended to increase
the coverage limit for net cash surrender and net cash
withdrawal values of annuities from $100,000 to
$250,000 for individuals participating in a
governmental retirement benefit plans established
under 26 U.S.C. 401, 26 U.S.C. 403(b) or 26 U.S.C. 457
and covered by an unallocated annuity contract
• AS 21.79.025(a)(5) is amended to increase
the coverage limit for net cash surrender and net cash
withdrawal values, if any, from $100,000 to $250,000
to each payee of a structured settlement annuity, or
beneficiary of the payee if the payee is deceased, in
the aggregate.
Sec. 7 AS 21.79.025(d)(2) is amended to correct a
typographical error.
Sec. 8 AS 21.79.060(a)(2) is amended to allow the
association to provide loans to assure payment of the
contractual obligations of the impaired insurer until
those obligations are guaranteed, reinsured, or
assumed.
Sec. 9 AS 21.79.060(d) AS 21.79.060(d)(1) is
amended to better track the NAIC Model organization
and language by combining existing paragraphs 1 - 3
under AS 21.79.060(d). Tracking NAIC models and
language promotes national uniformity and state-based
regulation, and ease of interpretation, compliance,
administration, enforcement, and amendment.
• AS 21.79.060(d)(1), consistent with the
addition of loans under AS 21.79.060(a)(2) under
Section 8 of the bill above, is amended to authorize
the association to utilize loans necessary to
discharge the association's duties under AS 21.79.060.
• AS 21.79.060(d)(2) is amended to better
track the NAIC Model organization and language by
placing existing subsections (e) - (j) in this
paragraph.
Sec. 10 AS 21.79.060(l) is amended to require the
association to provide a report to the liquidator
regarding the premium collected by the association if
requested by the liquidator of an insolvent insurer.
Sec. 11 AS 21.79.060(n) is amended to authorize
the association to impose a permanent policy or
contract lien under a guarantee, assumption, or
reinsurance agreement if the policy or contract lien
is approved by a court and the association finds that
the amount that may be assessed under AS 21.79 is less
than the amount needed to assure full and prompt
performance of the association's duties under the
chapter.
Sec. 12 AS 21.79.060(o) is amended to use updated
language consistent with the NAIC Model and to change
a subsection citation to conform to amendments being
made to the section.
Sec. 13 AS 21.79.060(p) is amended to change a
subsection citation to conform to amendments being
made to the section.
Sec. 14 AS 21.79.060(t) is amended to use updated
language consistent with the NAIC Model.
Sec. 15 AS 21.79.060(aa) AS 21.79.060 is amended
to add a new subsection (aa) to better track the NAIC
Model language and organization by incorporating into
the new section the provisions in existing AS
21.79.060(u) - (x).
Sec. 16 AS 21.79.070(a) is amended to require
that any assessment of association members by the
association board must be adopted by a resolution of
the board.
Sec. 17 AS 21.79.070(c) amended to increase the
amount of a non- pro rata assessment of members by the
association board from $250 per calendar year to $500
per calendar year.
Sec. 18 AS 21.79.080(c) is amended to require the
association board to adopt a plan of operation that
includes
(1) procedures for removing a member of the board
for cause, including procedures for removing a member
of the board who becomes an impair or insolvent
insurer, and
(2) policies and procedures for addressing
conflicts of interest.
Sec. 19 AS 21.79.090(c) is amended to
(1) clarify that only a final action of the board
may be appealed to the director of the division of
insurance, and
(2) increase the time by which an appeal may be
taken from 30 days to 60 days after the date the
notice of the board's action is mailed.
Sec. 20 AS 21.79.090(d) is amended to clarify
that the liquidator, rehabilitator, or conservator of
an insolvent insurer may notify all interested persons
of the effect of AS 21.79.
Sec. 21 AS 21.79.110(b) is amended to remove the
requirement that records of meetings of the
association may only be made public after an insurer
is no longer impaired or insolvent.
Sec. 22 AS 21.79.140 is amended to
(1) clarify that a cause of action may not arise
for an action or omission of the association and its
agents and employees, members of the Board of
Governors, member insurers, and agents and employees
of member insurers, and the director of the division
of insurance and the director's representatives in
performing their duties under AS 21.79, and
(2) extend the immunity to such entities'
participation in an organization of one or more state
associations of similar purposes and to that
organization and its agents or employees.
Sec. 23 AS 21.79.150 is amended to extend the
time a proceeding involving an insolvent insurer may
be stayed from 60 days to 180 days after the date of a
final order of liquidation, rehabilitation, or
conservation in order to allow the association
additional time to exercise a power or duty authorized
under AS 21.79.
Sec. 24 AS 21.79.900(5) amends the term "called"
to
(1) mean a notice has been mailed (formerly
issued) by the association to member insurers
requiring that an authorized assessment be paid within
the time set out in the notice, and
(2) include in the definition of "called" that an
authorized assessment becomes called when notice IS
mailed by the association to member insurers.
Sec. 25 AS 21.79.900(6) amends the term "contractual
obligation" to clarify that the term only applies to
an obligation under a policy, contract, or certificate
under a group policy or contract, or portion of one
for which coverage is provided under AS 21.79.020(a),
(b), (d), and (e).
Sec. 26 AS 21.79.900(7) amends the term "covered
policy" to mean a policy or contract or a portion of a
policy or contract for which coverage is provided
under AS 21.79.020(a), (b), (d) and (e).
Sec. 27 AS 21.79.900(10) amends the term "member
insurer" to include a hospital or medical service
corporation licensed under AS 21.87.
Sec. 28 AS 21.79.900(13) amends the term "plan
sponsor" to clarify that the term applies to groups of
representatives of parties similar to two or more
employers or jointly by one or more employers and one
or more employee organizations, an association,
committee, or joint board of trustees who establish or
maintain the benefit plan.
Sec. 29 AS 21.79.900(14) amends the term "premium" to
clarify that assessable premium may not be reduced on
account of AS 21.79.020(c)(4) relating to interest
limitations and AS 21.79.025(a)(2) - (5), (b), and (d)
relating to limitations with respect to one
individual, one participant, and one contract owner.
The term "premium" does not include
(1) premiums in excess of $5 million on an
unallocated annuity contract not issued under a
government retirement benefit plan or its trustee
established under 26 U.S.C. 401, 26 U/S.C. 403(b), or
26 U.S.C. 457; or
(2) with respect to multiple nongroup policies of
life insurance owned by one owner, whether the policy
holder is an individual, firm, corporation, or other
person, and whether the persons insured are officers,
managers, employees, or other persons, premiums in
excess of $5 million with respect to those policies or
contracts, regardless of the number of policies or
contracts held by the owner.
Sec. 30 AS 21.79.900(16) amends the term "resident" to
delete language considered unnecessary under state
drafting conventions.
Sec. 31 AS 21.79.900(19) amends the term "supplemental
contract" to mean a written agreement entered into for
the distribution of proceeds under life, health, or
annuity policy or contract benefits.
Sec. 32 AS 21.79.900 is amended to add new paragraphs
to define the terms "benefit plan", "election date",
and "extra contractual claim". The section is also
amended to define "published monthly average", a term
previously defined under AS 21.79.020(f).
Sec. 33 AS 21.87.340 is amended to add AS 21.79
to the list of statutory provisions which apply to
hospital and medical service corporations.
Sec. 34 Repeals the following provisions
• AS 21.79.020(f) defining "published
monthly average" as the term definition is placed
under AS 21.79.900.
• AS 21.060(c) is repealed as the provision
no longer is in the NAIC Model.
• AS 21.79.060(e) - (j) are repealed as
these provisions have been relocated to AS
21.79.060(d).
• AS 21.79.060(u) - (x) are repealed as
these provisions have been relocated to
AS21.79.060(aa).
• AS 21.79.110(e) is repealed as unnecessary
because the state has adopted Section 602 of the NAIC
Insurers Receivership Model Act (MDL 555)(AS
21.78.325).
Sec. 35 Provides for an uncodified new section
outlining the timing of when the director may adopt
regulations.
Sec. 36 Provides that section 36 of the Act takes
effect immediately under AS 01.10.070(c).
Sec. 37 Provides that except as provided in section 37
of the Act, the Act takes effect July 1, 2017.
3:42:18 PM
REPRESENTATIVE BIRCH requested a "two-minute elevator speech as
to what this actually does."
MS. WING-HEIER responded there are two Guaranty Associations in
Alaska: property and casualty, which include workers'
compensation, and life and health which does life and health
annuities. In the event an entity is a member insurer in the
State of Alaska, and holds a Certificate of Authority to Conduct
Business, it is automatically a member insurer. There is life
and there is health (coughing) within the association there are
two categories of insurers. In the event the company becomes
insolvent and cannot pay claims to its policyholders, the
association steps in, makes assessments to its member insurers,
and pays out the claims. She noted that this has happened in
both the property and casualty, and the life and health
associations.
3:43:32 PM
REPRESENTATIVE BIRCH said he noticed some of the benefit
obligations went from $100,000 to $250,000, a two and one-half
times multiplier on a benefit. This implies, he said, there is
an additional cost to someone because if the benefit is going
up, the premium would go up for someone. He asked what type of
budget this operates under, how many insurers there are, how
many are insured, and whether this involves 10 percent of the
state's population.
MS. WING-HEIER answered that there are approximately 670-member
insurers in the association. She noted that assessments are not
made unless there is an insolvency or liquidation for which
claims must be paid. The limits were raised because it had been
$100,000 for as long as the association had existed, and due to
trending and the need for the policies to perform, the limits
needed to be raised, and the higher limits are being paid in
other states. She explained that on those two or three
categories, the limits were raised from $100,000 to $250,000.
She said that $300,000 was inserted in long-term care because
the statute was unclear, and the division wanted to be certain
long-term care policies were capped at $300,000.
REPRESENTATIVE BIRCH asked what the current operating budget is.
MS. WING-HEIER replied that the association operates on a
budget, not the division. She reiterated that in the event
there is a need, the association accesses the member insurer up
to 2 percent of the premiums of that insurer. Quite honestly,
she said, the association may put the responsibility back on
policyholders depending upon who they are, or they may just pay
it directly.
3:46:15 PM
DONALD THOMAS, Administrator and Counsel, Alaska Life and Health
Insurance Guaranty Association, advised he has been the
administrator and counsel for Alaska Life and Health Insurance
Guaranty Association since 1996.
3:46:28 PM
REPRESENTATIVE BIRCH noted the jump in benefits, and said that
since the state has no liability, his primary interest is the
impact it may have on potential constituents. He asked that
with 670 insurers, what type of an annual budget he has and how
it is managed and maintained.
MR. THOMAS responded that the administrative budget is
approximately $160,000, just to participate primarily with the
national organization. The budget is funded through the Class A
assessments which have been capped at $250,000 since the 1990
inception of the Act. Given the number of members under that
cap, he said he is currently asking that the amount be increased
to $500,000. The Alaska Life and Health Insurance Guaranty
Association tries to avoid extra expenses and it tries to
perform a Class A assessment every couple of years, rather than
the expense of every year. The other side of the equation is
that because Alaska has no domestic life or health insurer,
every time a member insurer is declared insolvent, there is an
insolvency affecting Alaska policyholders, a member insurer
participates on a multi-state basis. The association works
within a taskforce among the various states to determine how the
states will collectively address the insolvency. Actuaries'
determine the share of that cost for each state and the
association receives a bill, the association accesses its
members up to statutory limits. The association does not carry
cash on hand, he advised, and it collects that money once the
insolvency had been declared, under the statute, it sends out a
30-day notice to member insurers to pay the association, and
that money is then sent to the proper location to affect the
plans of the multi-state response to the insolvency. He related
that that is one of the real reasons HB 157 [should become law]
so Alaska can attain functional consistency with the other
states of which it is always involved. He advised that 44
states have already adopted the amendments to the National
Association of Insurance Commissioners Model Law (NAIC) which
was substantially amended in 2009. Alaska is one of two states
west of Ohio that has yet to adopt these amendments, which is a
primary reason the Board of Governors of the Alaska Life and
Health Insurance Guaranty Association supports passage of HB
157, he said.
3:50:28 PM
REPRESENTATIVE KNOPP offered surprise that not many companies
suffer insolvency and that this bill is truly about consumer
protection. He asked whether the director had received any type
of opposition or comment from Premera Blue Cross, Blue Shield on
this legislation.
MS. WING-HEIER responded that the only comment she received was
from National Blue Cross, Blue Shield Association out of
Washington, D.C., was to remind her that the National
Association of Insurance Commissioners and the National
Coalition of Insurance Legislators are working on model
legislation to address long-term care, which would bring life
insurers and health insurers together to address long-term care.
"Currently, long-term care Penn Treaty is a long-term care
insurer insolvency is just health insurers," she said. There
are two accounts in the association, she reiterated, life and
health, and currently Penn Treaty will be paid out of health.
This model legislation is addressed because long-term care is
huge nationwide, it would allow for insolvencies to call from
both sets of insurers and not just in Alaska; it would have to
adopt that legislation if it ever comes into fruition. She
reiterated that the National Blue Cross, Blue Shield Association
out of Washington, D.C., reminded her of the potential model
act, and that it hoped "we would support it because there is
such a large player in the medical field here and it would be --
(indisc.) long term care, not Penn Treaty, but if there were
another one going forward that they would be expected to pay a
pretty big part of the assessment. And, they would hope we
would support bringing in the life insurers in that model
legislation and into Alaska."
REPRESENTATIVE KNOPP surmised there was no strong opposition to
HB 157.
3:53:47 PM
CHAIR KITO advised that public testimony would be left open.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR014 Supporting Documents Index 3.17.17.pdf |
HL&C 3/20/2017 3:15:00 PM |
HJR 14 |
| HJR014 Supporting Documents-Support Letters 3.17.17.pdf |
HL&C 3/20/2017 3:15:00 PM |
HJR 14 |
| HJR014 Supporting Documents-Universal Service Disbursements 2015 3.20.17.pdf |
HL&C 3/20/2017 3:15:00 PM |
HJR 14 |
| HJR014 Supporting Documents-Universal Services Fact Sheet 3.17.17.pdf |
HL&C 3/20/2017 3:15:00 PM |
HJR 14 |