Legislature(2011 - 2012)BARNES 124
03/07/2011 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB87 | |
| HB164 | |
| HB155 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 87 | TELECONFERENCED | |
| += | HB 164 | TELECONFERENCED | |
| += | HB 155 | TELECONFERENCED | |
| + | TELECONFERENCED |
3:41:17 PM
HB 164-INSURANCE: HEALTH CARE & OTHER
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 164, "An Act relating to insurance; relating to
health care insurance, exemption of certain insurers, reporting,
notice, and record-keeping requirements for insurers,
biographical affidavits, qualifications of alien insurers
assuming ceded insurance, risk-based capital for insurers,
insurance holding companies, licensing, federal requirements for
nonadmitted insurers, surplus lines insurance, insurance fraud,
life insurance policies and annuity contracts, rate filings by
health care insurers, long-term care insurance, automobile
service corporations, guaranty fund deposits of a title insurer,
joint title plants, delinquency proceedings, fraternal benefit
societies, multiple employer welfare arrangements, hospital and
medical service corporations, and health maintenance
organizations; and providing for an effective date."
3:41:23 PM
REPRESENTATIVE JOHNSON moved to adopt the proposed committee
substitute (CS) for HB 164, labeled 27-LS0444\M, Bailey, 3/4/11,
as the working document. There being no objection, Version M was
before the committee.
CHAIR OLSON objected for purpose of discussion.
3:41:44 PM
LINDA HALL, Director, Division of Insurance, Anchorage Office,
Department of Community & Economic Development (DCCED), referred
to the changes in the CS. The majority of changes were added to
clarify the bill. She turned to page 50, which adds a provision
to ensure clarity. She referred to page 9, subsection (b),
which read, "Notwithstanding the definition of 'group market' in
AS 21.54.500..." She said the Division of Insurance (DOI)
wanted to be certain to avoid any ambiguity as to whether
individual policies could be sold to a group under certain
circumstances.
3:43:41 PM
MS. HALL referred to page 62, proposed Section 93 of Version M,
which was added. She read, "Unless another form of payment is
agreed to by the policy holder or beneficiary, an..." which
requires an insurer to pay with a negotiable bank check. She
pointed out publicity by life insurance companies of
"checkbooks," which provided a means of distributing proceeds
from life insurance. She stated this is an appropriate way of
distributing proceeds as it allows the beneficiary to
contemplate and determine what to do with the funds. The
policy holder or the beneficiary would need to agree to
something other than a negotiable check. The DOI would adopt
regulations for disclosure, based on a model. This would allow
the policy holder or beneficiary to determine how to receive the
funds rather than receive a lump sum. This is especially useful
during stressful times.
MS. HALL related that proposed Sections 86 and 87 were deleted.
These sections dealt with insolvencies and loss reimbursement,
and money deposited to the guarantee fund. The industry
expressed concern as to how this would impact Alaska as compared
to other states. Thus, the DOI asked these proposed sections be
deleted from the bill.
3:46:02 PM
MS. HALL referred to the final substantive change is in proposed
Section 62 and 77, which refer to the individual and group rate
filings. She previously discussed the DOI having the ability to
review health insurance rates prior to them being used. The
language has been adjusted to match the file and use language
for other insurance rates. She related that rates must still be
filed and the DOI would have an opportunity to review them.
Rates would go into effect 45 days after filing, if not
disapproved. She stated an effective date of January 1, 2012,
was added to allow insurers time to adopt the changes.
3:47:03 PM
REPRESENTATIVE CHENAULT referred to the "checkbook" issue. He
asked if that provision would only be in effect if the party
knew he/she was the beneficiary and would need to agree to the
one-time payout or another method of payment.
MS. HALL responded that either the policy holder or the
beneficiary would have to agree. The policy holder could
designate the method up front, whereas the beneficiary could
only exercise the option later.
REPRESENTATIVE CHENAULT asked whether beneficiaries could opt
for a lump sum.
MS. HALL answered yes.
CHAIR OLSON removed his objection.
3:48:55 PM
REPRESENTATIVE JOHNSON made a motion to adopt Conceptual
Amendment 1, which read [original punctuation provided]:
AMENDMENT
To: CS HB 64(LC)(27-LS0444\M)
By: Rep. Olson
Page 1, Line 9: Following "corporations," delete "and"
Page 1, Line 9: Following "organizations" delete ";"
and insert ", and alternate forms of payment to policy
holders;"
Page 12, Line 20: Delete "or coverage"
Page 28, Line 28: Delete "3.7 percent on"
Page 38, Line 23: Delete "30" and insert "45"
Page 38, Line 25: Delete "becomes" and insert "may
become"
Page 49, Line 14: Delete "30" and insert "45"
Page 49, Line 15: Delete "becomes" and insert "may
become"
REPRESENTATIVE HOLMES objected for the purpose of discussion.
3:49:31 PM
MS. HALL explained Conceptual Amendment 1. She stated that
Conceptual Amendment 1 would address inconsistencies the DOI
found in HB 164. The first two relate to the title, adding a
reference to proposed Section 93, the retained asset account.
The next 2, page 12 and 28 are technical changes. The changes
on page 38 and page 49 are the two rate filings for consistency
purposes, changing the time to 45 days and changed language,
"become effective" to "may become" effective so insurance
companies can make changes out farther than 45 days to allow an
option so their rates won't automatically become effective.
3:50:48 PM
REPRESENTATIVE JOHNSON asked whether rates ever are reduced and
if 45 days is appropriate.
MS. HALL answered that health insurance rates have not, but some
rates do decrease.
REPRESENTATIVE JOHNSON commented that the rates are not going
down so he wondered, "Why not do it now?"
REPRESENTATIVE HOLMES removed her objection. There being no
further objections, Conceptual Amendment 1 was adopted.
3:52:36 PM
MS. HALL referred to a letter dated March 4, 2011, from the
National Association of Professional Surplus Lines Offices, Ltd.
(NAPSLO) regarding surplus lines. She stated several statements
were made in the letter. She agreed the state is not required
to share the taxes. The state is changing the way in which it
collects taxes on surplus lines coverage. Most of the premise
of the nonadmitted and reinsurance act is that the states will
regulate their own risk, collect the taxes, and allocate those
to the states in which the risk is located. She also referred
to statements about taxing authority being given to an agency.
She responded to that by stating the legislature has already
given taxing authority to the DOI. The DOI levies taxes on
insurance premiums so that is not a new authority being given to
an agency. She pointed out that this is not a "policymaking
power" but authority to participate in a clearinghouse. The
bill specifically states the agreements are solely to allow for
the mutual collection and allocation of premium taxes, which is
more an administering function than policymaking. She said,
"This is not a tax increase. Our policy holders today are taxed
at the premium tax rates of each of the states where they may
have some type of risk located." The DOI is not changing the
tax method. In fact, the DOI's surplus line tax is lower than
most states. The DOI is changing the method and who collects
it, and how it is allocated. The changes to the surplus line
tax in an attempt by the federal government to streamline the
process. The bill would make Alaska statutes conform to the
federal Nonadmitted and Reinsurance Act that will become
effective on July 21, 2011 so the state is not in violation of
federal law, which specifically preempts state statutes. She
said, "This is not something the DOI dreamed up all by itself."
This particular type of legislation to authorize entry into this
type of interstate agreement is pending in 17 states. Another
compact legislation, which is more complicated than this
approach is pending in eight states. Competing legislation is
under discussion in five states. Eleven states are currently
studying the issue. Thus, a number of approaches are being
taken to implement the federal law, she said.
3:56:30 PM
CHAIR OLSON remarked that the proposed committee substitute
would bring the state into compliance.
MS. HALL answered yes.
3:56:50 PM
REPRESENTATIVE JOHNSON referred to the letter in members'
packets that was previously mentioned. He then referred to the
next to the last paragraph, which read: "NAPSLO respectfully
requests that should Alaska wish to determine as a matter of
public policy to share taxes,..." He asked who makes the
determination. He asked whether the DCCED or the legislature
makes that determination. He explained that the NAPSLO is
asking for clarity so their brokers would clearly understand.
He asked whether a system currently exists so that brokers will
understand what is happening.
MS. HALL responded that the proposed CS clearly states the state
will allocate to the states where the risk is located unless the
states have not entered into a mutual agreement. If the other
state has not entered into a mutual agreement, Alaska will keep
the tax, she said. She remarked that she thinks it is fairly
clear. She referred to the proposal that was attached to the
letter. She said the specific provision in HB 164 that pertains
to allocation and allocation formulas was deleted. She was
unsure of how those provisions were interpreted, but this CS
identifies the state will share the taxes back to the state in
which the risk is located, in the same way the taxes are
currently paid directly to those states. The state is not
forfeiting something. The federal law makes states collect 100
percent of the tax. Thus, the state currently collects only the
portion of the risk taken in Alaska, which is the only portion
that is taxed. With the changes in federal law the state is
required to tax 100 percent of the policy for someone whose home
state is Alaska. She offered her belief that there would not be
significant multi-state risks. Under federal law, the state
would collect 100 percent and allocate back the amount paid in
the individual state.
REPRESENTATIVE JOHNSON asked whether she was comfortable that
brokers and policyholders can clearly understand these
provisions and changes in the CS.
MS. HALL answered yes, she is very comfortable with the clarity
in this bill.
3:59:51 PM
CHAIR OLSON added that Nonadmitted and Reinsurance Reform Act
(NRRA) has been in every trade publication for the past few
months and has been reviewed in a number of ways. The vehicle
that appears to have the most support is the manner in which the
DOI is addressing the NRRA.
4:00:24 PM
REPRESENTATIVE CHENAULT stated he was looking for the fiscal
note, which he thought would be a positive fiscal note. He
asked for clarification on the amount of money that is collected
on behalf of other states.
MS. HALL responded that Alaska does not currently collect for
other states, just Alaska's taxes. Thus, Alaska is not
collecting for others.
REPRESENTATIVE CHENAULT recalled that Alaska would collect 100
percent.
MS. HALL agreed that Alaska would collect 100 percent and then
allocate the taxes back to the states. In further response to
Representative Chenault, she explained that the broker or the
clearinghouse proposed in HB 188 would be tasked with making the
allocation.
4:01:54 PM
CHAIR OLSON commented the allocation would only apply to states
outside of Alaska. He asked Ms. Hall to hazard a guess as to
the percentage collected.
MS. HALL responded that the DOI collects approximately
$50,000,000 in premium tax, with approximately $3,000,000 as
surplus lines premium tax. The DOI's tax auditor estimates,
given that the DOI does not collect statistics, approximately
$500,000 is multi-states risks. She concluded that $500,000 of
$50,000,000 is a pretty nominal amount.
4:02:49 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 164.
4:04:11 PM
REPRESENTATIVE JOHNSON moved proposed CSHB 164, labeled 27-
LS0444\M, Bailey, 3/4/11, as amended, with a zero fiscal note.
There being no objection, CSHB 164(L&C) was reported from the
House Labor and Commerce Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB87 Supporting Documents - Civil Penalties Other States.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 87 |
| HB164 Draft Amendment to CS ver M.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 164 |
| HB164 Draft Proposed CS ver M.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 164 |
| HB164 Sectional Analysis ver M.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 164 |
| HB164 Opposing Documents - Letter NAPSLO 3-4-2011.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 164 |
| HB155 Opposing Documents - Email Steve Hennessey 3-4-2011.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 155 |
| HB155 Opposing Documents - Fax Zeb Woodman 3-1-2011.pdf |
HL&C 3/7/2011 3:15:00 PM SFIN 4/17/2011 10:00:00 AM |
HB 155 |
| HB155 Supporting Documents - Fax City of Wasilla 3-1-2011.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 155 |