05/05/2004 04:22 PM House FIN

HOUSE CS FOR CS FOR SENATE BILL NO. 276(JUD)                                                                                  
                                                                                                                                
     An  Act  relating  to  the   Alaska  Insurance  Guaranty                                                                   
     Association;  relating  to  the  powers  of  the  Alaska                                                                   
     Industrial Development  and Export Authority  concerning                                                                   
     the association; and providing for an effective date.                                                                      
                                                                                                                                
LINDA HALL, DIVISION OF INSURANCE,  DEPARTMENT OF COMMUNITY &                                                                   
ECONOMIC  DEVELOPMENT,  explained  that  there is  a  serious                                                                   
financial  loss because  of the  insolvency  of the  insurer,                                                                   
Alaska  Insurance Guaranty  Association.  The statute  allows                                                                   
prorating of claimants  but this is an  unacceptable solution                                                                   
because  the  medical  bills   of  claimants  are  not  paid.                                                                   
Currently, Alaska  has 579 open claims with  injured workers.                                                                   
Employers  satisfy the  obligation  but when  the insurer  is                                                                   
insolvent, the  claim is transferred  and will revert  to the                                                                   
employer. The  goal is to  protect policyholders, and  SB 276                                                                   
proposes to  change the  way the  Division of Insurance  does                                                                   
assessments.   The   legislation    authorizes   the   Alaska                                                                   
Industrial  Development  and   Export  Authority  (AIDEA)  to                                                                   
guarantee loans to the Alaska  Insurance Guaranty Association                                                                   
(AIGA)  needed to make  the association  financially  able to                                                                   
meet cash flow needs.                                                                                                           
                                                                                                                                
[Due to  the malfunction  of Tape 106  Side B, the  following                                                                   
minutes  are  a  reconstruction   of  discussion  during  the                                                                   
meeting.]                                                                                                                       
                                                                                                                                
Ms. Hall continued her testimony.   She referred to the chart                                                                   
titled,  "Alaska  Insurance  Guaranty   Association"(copy  on                                                                   
file.) and  discussed the  first line.  Ms. Hall stated  that                                                                   
this is a  painful and expensive bill, with  employers unable                                                                   
to handle the claims of 579 injured employees.                                                                                  
                                                                                                                                
Co-Chair  Harris  discussed  the   line  item,  Fund  Source,                                                                   
reflecting $8,890,000 on Fiscal Note #6 with Ms. Hall.                                                                          
                                                                                                                                
Vice-Chair  Meyer  asked  if businesses  or  the  Chamber  of                                                                   
Commerce have been involved.   Ms. Hall affirmed. In response                                                                   
to a  question by Vice-Chair  Meyer, Ms. Hall  explained that                                                                   
businesses  handle the  situation according  to their  profit                                                                   
margins.                                                                                                                        
                                                                                                                                
Vice-Chair  Meyer  asked  if  Providence  or  Carrs  are  the                                                                   
largest employers.   Ms. Hall affirmed, and  noted that these                                                                   
businesses are self-insured.                                                                                                    
                                                                                                                                
Representative Chenault commented  that as an employer, he is                                                                   
hit hard  by Workers'  Compensation Insurance increases  that                                                                   
will continue to rise.                                                                                                          
                                                                                                                                
Representative   Fate   asked    the   effect   on   workers'                                                                   
compensation  as employers  go  to self-insurance.  Ms.  Hall                                                                   
said that as more companies seek  other types of insurance, a                                                                   
smaller market is  created that is less attractive  with less                                                                   
competition,  which  has led  to  increases in  premiums.  In                                                                   
Alaskan companies,  the average  worker's compensation  claim                                                                   
is $19 thousand.                                                                                                                
                                                                                                                              
Representative Hawker  asked if the Division  of Insurance is                                                                   
responsible for  monitoring firms. Ms. Hall  affirmed that it                                                                   
has the responsibility to oversee insolvency.                                                                                   
                                                                                                                                
Representative Hawker  discussed the Fremont  suspension with                                                                   
Ms. Hall.  He asked  if any  options are  remotely viable  to                                                                   
settle this assessment.   Ms. Hall replied that  the Division                                                                   
had  looked at  a  variety of  options  and  worked with  the                                                                   
AIDEA.  The Senate rejected using Permanent Fund earnings.                                                                      
                                                                                                                                
Representative  Hawker  commented  that  this  is  less  than                                                                   
popular with the  people who would have to pay  it.  Ms. Hall                                                                   
pointed out  that the State Chamber  is on record  in support                                                                   
of the bill, and it has broad  support because of recognition                                                                   
of the  current crisis.   Representative Hawker  thought that                                                                   
the acceptance would be reluctant and Ms. Hall agreed.                                                                          
                                                                                                                                
In response  to a  question by  Representative Chenault,  Ms.                                                                   
Hall  said that  in  Alaska the  frequency  of accidents  has                                                                   
declined  but the  cost  of claims  has  risen. Medical  care                                                                   
comprises 55% of the claims. She  commented on Alaska's aging                                                                   
population and  the variety of  factors that impact  Workers'                                                                   
Compensation.                                                                                                                   
                                                                                                                              
Co-Chair Harris MOVED to report  SB 276 out of Committee with                                                                   
individual  recommendations   and  the  accompanying   fiscal                                                                   
notes. There being NO OBJECTION, it was so ordered.                                                                           
                                                                                                                                
HCS  SB   276(JUD)  was  REPORTED   out  of  Committee   with                                                                   
individual  recommendations  and  five  previously  published                                                                   
fiscal impact notes.