Legislature(2005 - 2006)HOUSE FINANCE 519

04/15/2005 01:30 PM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 147 INSURANCE TELECONFERENCED
Moved CSHB 147(FIN) Out of Committee
+ HB 144 ADVISORY VOTE ON COMMUNITY DIVIDEND TELECONFERENCED
<Bill Hearing Canceled>
Bills Previously Heard/Scheduled
+ HB 33 EFFECT OF REGULATIONS ON SMALL BUSINESSES TELECONFERENCED
Moved CSHB 33(FIN) Out of Committee
+= HB 71 AK PENINSULA OIL & GAS LEASE SALE; TAXES TELECONFERENCED
Moved CSHB 71(FIN) Out of Committee
HOUSE BILL NO. 147                                                                                                            
                                                                                                                                
     "An  Act  relating  to  the   regulation  of  insurance,                                                                   
     insurance  licensing, surplus  lines, insurer  deposits,                                                                   
     motor vehicle  service contracts, guaranteed  automobile                                                                   
     protection products, health  discount plans, third-party                                                                   
     administrators,  self-funded  multiple employer  welfare                                                                   
     arrangements,  and self-funded  governmental plans;  and                                                                   
     providing for an effective date."                                                                                          
                                                                                                                                
LINDA HALL,  DIVISION OF  INSURANCE, DEPARTMENT OF  COMMUNITY                                                                   
AND  ECONOMIC  DEVELOPMENT,  related  that  HB  147  proposes                                                                   
statutory  changes   that  would   make  the  regulation   of                                                                   
insurance more  efficient for the division, more  uniform for                                                                   
industry,  and provide  protection to  consumers.  The  first                                                                   
area of change is statutory changes  in the licensing area of                                                                   
individual agents  and brokers.  The proposed  changes are to                                                                   
streamline the  licensing process and to conform  to national                                                                   
standards.                                                                                                                      
                                                                                                                                
Ms. Hall explained that the second  area of change deals with                                                                   
surplus lines insurance, insurers  who do not file to operate                                                                   
in Alaska.   A  couple sections  deal with insurance  company                                                                   
deposits:  one  removes the  ability  to use  safety  deposit                                                                   
boxes,  one  permits  the director  to  transfer  and  insure                                                                   
deposit to  the guarantee  fund if  that is assigned  through                                                                   
insolvency  procedures.     Several  sections   deal  with  a                                                                   
commodity  called  Help  Discount   Plans,  which  look  like                                                                   
insurance  but are  not.   From  2000-2002, nationally,  over                                                                   
200,000  of these  plans were  sold, which  resulted in  $252                                                                   
million  worth of  unpaid claims.   The  bill seeks  specific                                                                   
authority to regulate these discount plans.                                                                                     
                                                                                                                                
Ms. Hall  related that  there are a  number of sections  that                                                                   
deal with  third-party administrators,  someone who  provides                                                                   
administrative  services for health  insurance plans.   There                                                                   
is  language  dealing  with  an   owner-contractor  insurance                                                                   
program, written  for large construction  projects.   Some of                                                                   
the rules would be codified in statute in this bill.                                                                            
                                                                                                                                
3:10:07 PM                                                                                                                    
                                                                                                                                
Ms. Hall noted  that in Section 26, standards  for ratemaking                                                                   
in health  insurance  lines have  been added.   She spoke  to                                                                   
discrimination  and financial  statements.    She offered  to                                                                   
answer questions from the committee.                                                                                            
                                                                                                                                
3:10:52 PM                                                                                                                    
                                                                                                                                
Representative  Hawker suggested that  this is an  "esoteric"                                                                   
bill.                                                                                                                           
                                                                                                                                
3:11:34 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment 1:                                                                                      
                                                                                                                                
     Page 15, line 25, following "whether":                                                                                     
     Delete "an"                                                                                                                
                                                                                                                                
     Page 15, line 26:                                                                                                          
     Delete "insurer"                                                                                                           
     Insert ","                                                                                                                 
                                                                                                                                
Co-Chair Chenault OBJECTED for discussion purposes.                                                                             
                                                                                                                                
Ms.  Hall  stated  that  the   amendment  provides  technical                                                                   
changes and would  require the use of a  licensed third-party                                                                   
administrator.                                                                                                                  
                                                                                                                                
Co-Chair Chenault WITHDREW his OBJECTION adopt Amendment 1.                                                                     
                                                                                                                                
There being NO OBJECTION, Amendment 1 was adopted.                                                                              
                                                                                                                                
3:12:42 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment 2:                                                                                      
                                                                                                                                
     Page 11, lines 28 - 29:                                                                                                    
     Delete   "a   self-funded  multiple   employer   welfare                                                                   
     arrangement regulated under AS 21.85"                                                                                      
     Insert  "any  person  issued  or required  to  obtain  a                                                                   
     certificate  of authority under  this title  to transact                                                                   
     life insurance,  annuities, and  health insurance  or to                                                                   
     provide coverage for the cost of medical care"                                                                             
                                                                                                                                
     Page 17, line 2, following "annuities,":                                                                               
     Delete "or"                                                                                                            
                                                                                                                                
     Page 17, lines 2 - 5:                                                                                                      
     Delete  "offered  or  provided  by  an  insurer,  or  in                                                               
     connection with coverage  offered or provided by a self-                                                               
     funded multiple  employer welfare arrangement  regulated                                                               
     under  AS 21.85 or  the Comprehensive  Health  Insurance                                                               
     Association created under AS 21.55"                                                                                    
     Insert ", or  the provision of coverage for  the cost of                                                               
     medical care"                                                                                                          
                                                                                                                                
                                                                                                                                
Co-Chair Chenault OBJECTED.                                                                                                     
                                                                                                                                
Representative  Weyhrauch suggested in  Amendment 1,  on page                                                                   
15,  line 25,  to  delete "and".    Ms. Hall  clarified  that                                                                   
Representative Weyhrauch was referring to Amendment 3.                                                                          
                                                                                                                                
Ms. Hall stated that Amendment  2 is a restatement of Section                                                                   
3 in  the current CS,  version G, which  was put in  error in                                                                   
Chapter 12.   She said it  was a technical  amendment because                                                                   
of an  incorrect placement of  the language.   Co-Chair Meyer                                                                   
pointed out that Ms. Hall was referring to Amendment 3.                                                                         
                                                                                                                                
Co-Chair  Meyer  clarified  that the  committee  was  talking                                                                   
about page  11, lines  28-29.  Ms.  Hall noted that  language                                                                   
was removed on page 11 and new language was inserted.                                                                           
                                                                                                                                
Co-Chair  Chenault WITHDREW  his OBJECTION.   There  being NO                                                                   
further OBJECTION, Amendment 2 was adopted.                                                                                     
                                                                                                                                
3:15:45 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment 3:                                                                                      
                                                                                                                                
     Page 2, line 8, through page 3, line 21:                                                                                   
     Delete all material.                                                                                                       
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 14, following line 31:                                                                                                
     Insert a new bill section to read:                                                                                         
     "*  Sec.  22.   AS 21.36  is  amended  by adding  a  new                                                                 
     section to read:                                                                                                           
          Sec. 21.36.065.  Limitation on owner controlled                                                                     
     and contractor  controlled insurance programs.   (a)  An                                                                 
     owner  controlled  insurance  program  or  a  contractor                                                                   
     controlled   insurance  program   is  subject   to  both                                                                   
     AS 21.39   and  AS 21.42,  must   be  approved   by  the                                                                   
     director,  and  shall  be   allowed  only  for  a  major                                                                   
     construction project.   Owner controlled  and contractor                                                                   
     controlled  insurance programs  are limited to  property                                                                   
     insurance  as  defined  in   AS 21.12.060  and  casualty                                                                   
     insurance as defined in AS 21.12.070.                                                                                      
          (b)  In this section, an owner controlled or                                                                          
     contractor controlled insured program does not include                                                                     
               (1)  builder's risk or course of construction                                                                    
     insurance;                                                                                                                 
               (2)  insurance relating to the transportation                                                                    
     of cargo or other property;                                                                                                
               (3)  insurance covering one or more                                                                              
     affiliates,  subsidiaries,  partners,  or joint  venture                                                                   
     partners of a person; or                                                                                                   
               (4)  insurance policies endorsed to name one                                                                     
     or more persons as additional insureds.                                                                                    
          (c)  In this section,                                                                                                 
               (1)  "contractor" means a person who meets                                                                       
     the definition  of "contractor" in AS 08.18.171  and who                                                                   
     undertakes  the performance  of  a construction  project                                                                   
     for a project owner, its agent, or its representative;                                                                     
               (2)      "contractor    controlled   insurance                                                                   
     program" means  an insurance  program where one  or more                                                                   
     insurance   policies  are  procured   on  behalf   of  a                                                                   
     contractor,  its agent,  or its  representative, by  its                                                                   
     insurance producer, as defined  in AS 21.27.900, for the                                                                   
     purpose of  insuring the contractor  and one or  more of                                                                   
     the following:                                                                                                             
                    (A)  the project owner;                                                                                     
                   (B)  a subcontractor;                                                                                        
                    (C)  an architect;                                                                                          
                    (D)  an engineer; or                                                                                        
                    (E)  a person performing professional                                                                       
          services;                                                                                                             
               (3)  "major construction project" means the                                                                      
     process   of   constructing   a   structure,   building,                                                                   
     facility,  or roadway or  major renovation of  more than                                                                   
     50   percent  of   an  existing   structure,   building,                                                                   
     facility,  or roadway  having  a contract  cost of  more                                                                   
     than $50,000,000 of a definite  term at a geographically                                                                   
     defined project site;                                                                                                      
               (4)  "owner controlled insurance program"                                                                        
     means an  insurance program where one or  more insurance                                                                   
     policies are procured on  behalf of a project owner, its                                                                   
     agent,   or  its   representative,   by  its   insurance                                                                   
     producer,  as defined in  AS 21.27.900, for  the purpose                                                                   
     of insuring  the project  owner and one  or more  of the                                                                   
     following:                                                                                                                 
                    (A)  the contractor;                                                                                        
                   (B)  a subcontractor;                                                                                        
                    (C)  an architect;                                                                                          
                    (D)  an engineer; or                                                                                        
                    (E)  a person performing professional                                                                       
          services;                                                                                                             
               (5)  "project owner" means a person who, in                                                                      
     the  course  of  the  person's   business,  engages  the                                                                   
     service of a contractor for  the purpose of working on a                                                                   
     construction project;                                                                                                      
               (6)  "subcontractor" means a person to whom a                                                                    
     contractor  sublets  all   or  part  of  a  contractor's                                                                   
     initial undertaking."                                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 15, line 25:                                                                                                          
     Delete "AS 21.12.140"                                                                                                      
     Insert "AS 21.36.065"                                                                                                      
                                                                                                                                
     Page 15, line 29:                                                                                                          
     Delete "AS 21.12.140"                                                                                                      
     Insert "AS 21.36.065"                                                                                                      
                                                                                                                                
     Page 17, line 26:                                                                                                          
     Delete "22"                                                                                                                
     Insert "21"                                                                                                                
                                                                                                                                
     Page 17, line 28:                                                                                                          
     Delete "22"                                                                                                                
     Insert "21"                                                                                                                
                                                                                                                                
     Page 17, line 29:                                                                                                          
     Delete "22"                                                                                                                
     Insert "21"                                                                                                                
                                                                                                                                
Co-Chair Chenault OBJECTED for discussion purposes.                                                                             
                                                                                                                                
3:16:33 PM                                                                                                                    
                                                                                                                                
TOM BRICE, COUNCIL OF LABORERS  942 & 341, LOCAL 71, reported                                                                   
that  the unions  have  been tracking  the  legislation.   He                                                                   
stated that there was not an objection  to the (L&C) version.                                                                   
He indicated that there could  be concerns with Amendment #2.                                                                   
                                                                                                                                
Representative  Weyhrauch asked  if  Mr. Brice  has seen  the                                                                   
amendments.  Mr. Brice said he had.                                                                                             
                                                                                                                                
Representative  Weyhrauch asked if  the portion of  Amendment                                                                   
2, lines  5-6, regarding  the cost  of medical care,  affects                                                                   
the  medical trust  administered  by the  union.   Mr.  Brice                                                                   
thought that question  would be better directed  to Ms. Hall.                                                                   
He wondered if  "to provide coverage for the  cost of medical                                                                   
care" is incorporated under individuals  that are required to                                                                   
receive  a  certificate  of  authority   to  participate,  or                                                                   
whether  that is a  separate section.   If  it is a  separate                                                                   
section, that is redefining the public health trust.                                                                            
                                                                                                                                
Ms. Hall  agreed with Mr.  Brice's statement that  the pieces                                                                   
that are controversial  regarding the health  trust should be                                                                   
removed.   She added  that there  is no  intent to require  a                                                                   
person  to  obtain  a  certificate  of  authority.    It  was                                                                   
directed   to    self-funded   multiple   employer    welfare                                                                   
arrangements,  which   are  currently  required   to  have  a                                                                   
certificate of authority.                                                                                                       
                                                                                                                                
3:19:58 PM                                                                                                                    
                                                                                                                                
Ms.   Hall  addressed   Amendment  3,   which  limits   owner                                                                   
controlled  insurance  programs.    She  related  that  these                                                                   
programs would not  change within the current  bill, but move                                                                   
to  AS 21.36.    She offered  to  answer questions  from  the                                                                   
committee.                                                                                                                      
                                                                                                                                
Representative  Hawker referenced to  Section 24,  "except as                                                                   
provided in AS  21.12.140, an insurer, whether  an authorized                                                                   
or  unauthorized   insurer  may   not  underwrite   an  owner                                                                   
controlled   insurance  program   or  contractor   controlled                                                                   
insurance program."   He requested  clarification.   Ms. Hall                                                                   
responded  that   these  programs  are  designed   for  major                                                                   
construction  projects.  It  is not  something that  does not                                                                   
already occur.   Currently, the rules and definitions  are in                                                                   
the Worker's  Compensation manuals.   It is  not a  change in                                                                   
how these programs are used, but  it is a prohibition against                                                                   
expanding  them into  things  other than  large  construction                                                                   
projects.  Typically, these do not happen.                                                                                      
                                                                                                                                
Co-Chair  Chenault WITHDREW  his OBJECTION.   There  being NO                                                                   
further OBJECTION, Amendment 3 was adopted.                                                                                     
                                                                                                                                
Representative  Foster  MOVED  to  report  CSHB  147  out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CSHB  147 (FIN)  was REPORTED  out  of Committee  with a  "no                                                                   
recommendation" recommendation  and with a zero fiscal impact                                                                   
note by  the Department of  Commerce, Community  and Economic                                                                   
Development.                                                                                                                    
                                                                                                                                
3:24:28 PM                                                                                                                    
                                                                                                                                

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