Legislature(1999 - 2000)
03/20/2000 03:50 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 303-MISC. INSURANCE PROVISIONS CHAIRMAN ROKEBERG announced the next order of business is HOUSE BILL NO. 303, "An Act relating to the method of payment of fees and adoption of regulations under AS 21; relating to orders under AS 21 regarding risk based capital instructions; relating to accounting standards for insurance companies; amending the definitions of 'creditable coverage' and 'late enrollees' in AS 21.54; relating to requirements for small employer insurers; relating to requirements for issuance of new voting securities by an insurance company; requiring health care insurance coverage for reconstructive surgery following mastectomy; requiring guaranteed renewability of and certification of coverage regarding certain individual health insurance policies; and providing for an effective date." Number 1645 BOB LOHR, Director, Division of Insurance, Department of Community & Economic Development, came forward to testify on HB 303. He indicated HB 303 is the insurance clean-up bill which addresses two primary areas. The first is accounting practices and attempts to conform current statutory provisions to the National Association of Insurance Commissioners [NAIC]. These have provisions have been adopted and will take effect on January 1, 2001. However, there are certain provisions of statute and regulations which would conflict with the uniform provisions. The second major area of the bill attempts to conform with the federal Health Improvement Portability and Accountability Act of 1996 [HIPAA]. There were numerous amendments to state law adopted in 1997 in an effort to conform state law with the federal requirements thereby avoiding federal preemption by the Health Care Financing Administration [HCFA]. A few provisions were not directly addressed by that legislation. The federal government has indicated that conformance of state law is required for those provisions in addition to enforcement of those provisions by the Division of Insurance. The Division has been enforcing those provisions, but the State has received a letter from HCFA indicating that absent legislation similar to HB 303 would undertake a review to determine whether federal preemption is required of the State in this area. He said the Division believes the adoption of HB 303 would forestall the threat of federal preemption by HCFA. There is a provision in the bill which allows the director of the Division of Insurance to acquire payment electronically. This would simplify the process of making timely payments of fees and charges to the State. He said the Division was unable to unearth any opposition to the provisions of the bill despite a diligent search. REPRESENTATIVE HALCRO asked if electronic payment assists with cash flow and ensuring that payments are in on more timely basis. MR. LOHR stated that is correct. He said: Depending on whether this is addressing premium taxes, which go into the general fund (GF), it would improve cash flow there and we've already tried to adopt those provisions. For fees, it would increase the speed of delivery of the fees to the Department of Revenue. CHAIRMAN ROKEBERG asked Katy Campbell to explain section 10 in HB 303 which refers to coverage for reconstructive surgery following a mastectomy. Number 1871 KATY CAMPBELL, Life/Health Actuary, Division of Insurance, Department of Community & Economic Development, came forward to testify on HB 303. She explained this provision was a health insurance mandate which went in after the original HIPAA legislation in 1996. Federal law was amended the next year to require coverage of reconstructive surgery following a mastectomy. Section 10 would bring Alaska State Statute into compliance with the federal provision. CHAIRMAN ROKEBERG asked, "So, they just amended the HIPAA statute rather than enact a new law?" MS. CAMPBELL stated that is correct. CHAIRMAN ROKEBERG wondered, "So, there's really no connection per se except there is a connection regarding compliance, though, is there not?" MS. CAMPBELL replied yes. She said, "They added into this section so that, basically, it has the enforcement provision of HIPAA apply to that amended piece that went in in 1997 or 1998, I think it might have been." CHAIRMAN ROKEBERG wondered if failure to adopt this provision could jeopardize the ability to regulate health insurance in Alaska. MS. CAMPBELL clarified it would jeopardize the ability to regulate this particular provision. She commented: Right now we go back to the insurance companies and say, "Look, you have to have this mandate in your health plans." If this didn't pass, actually the Health Care Financing Administration would come in and review the policy forms and kind of take a more active role in ensuring that insurance companies are in compliance with that provision. CHAIRMAN ROKEBERG asked if the penalty provisions of HIPAA have some impact on the ability to regulate. MR. LOHR said that he believes the provisions would. He said: What we've done basically is, in response to the "show cause", if you will, letter from the administrator of HCFA. We've suggested that, because the Division is actively enforcing these provisions for the duration, that they should allow that as constructive compliance until the legislation could be considered. So, in the short run, I think we've got an argument. However, if we tried to extend that argument over a period of years, I think the lack of...state provisions that conform to HIPAA would be a, potentially, very serious and could lead to actual federal preemption. Number 1990 CHAIRMAN ROKEBERG asked what the position of enrolled insurers in Alaska is on this particular provision. He also wondered if the leading insurance carriers provide this mandate. MS. CAMPBELL replied that is correct. She indicated that they are required to under the federal law that passed. CHAIRMAN ROKEBERG inquired if the State enforces that. MS. CAMPBELL responded, "We are right now, but that's because we're going back to them and pointing out if they don't have the provision. We're saying, 'Look, it's a federal law. You have to have it.' Once we have it in our state law, we have a basis for enforcing it. By putting it in state law, we're saying that we can enforce the provision." CHAIRMAN ROKEBERG said it is a chicken and egg thing. He said, "The enforcement of it doesn't rest with the federal government. It rests with the Division of Insurance. Is that not correct?" Number 2060 MS. CAMPBELL answered, "With this amendment, that's true. Otherwise, it would be federally enforced." MR. LOHR pointed out there is a good deal of rhetoric supporting states' rights at the federal level. They look at particular issues and there is federal preemption all over the place. It is either veiled, indirect or, in some cases, very direct preemption by the federal government. He said, "We're facing suspended sentence on that with respect to...agent and broker licensing." CHAIRMAN ROKEBERG referred to section 17 and asked, "Alaska, we have our own small employer statute. Does that speak to that?" MS. CAMPBELL explained it is an amendment to the existing small employer statute. Section 17 clarifies that employers continue to have the choice on how to define their own group for purposes of insurance. CHAIRMAN ROKEBERG asked if the amendment allows for the exclusion of an employee for underwriting purposes. MS. CAMPBELL said it does not apply to underwriting. She stated: In most cases, how this works, is that the employer may have several employees that are in their management level and they want to cover them because they're the stable employees, and then they have other employees who are in and out, and they don't want to have to provide coverage to every individual in their group because it's just not cost effective for them to do that. This allows them to make that, and actually, it's more of a clarification that the employer can make that decision. CHAIRMAN ROKEBERG said, "So, the answer to my question is yes." MS. CAMPBELL said that is correct. She noted it is a federal law that the insurance company cannot exclude anyone, but the employer can make a decision to define their own group. CHAIRMAN ROKEBERG indicated HB 303 would be held in committee.
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