Legislature(2005 - 2006)CAPITOL 17
03/02/2005 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HCR3 | |
| HB150 | |
| HB147 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HCR 3 | TELECONFERENCED | |
| += | HB 147 | TELECONFERENCED | |
| *+ | HB 150 | TELECONFERENCED | |
HB 147-INSURANCE 4:52:49 PM CHAIR ANDERSON announced that the last order of business would be 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." 4:53:18 PM CHRISTINE SASSE, Department Director, City of Valdez, announced that she was addressing Article 2, where the bill discusses self-funded government plans, and how they are going to have to comply with the provisions of AS 21.85. She indicated that her biggest concern was the applicability clause found in Article 2, page 15, line 8, which seemed too broad in her eyes, though she assumed that it was not intended to be so broad. She then indicated that she had looked up AS 39.30.090 and it refers to plans under the state of Alaska, but it appears that any other state funded government plan has to comply. If this is the case, then this entire Article 2 imposes onerous requirements for self funded governmental plans. MS. SASSE then pointed out that the filing of the plan description and the contribution rates and the financial reports all have to be filed quarterly, and there has to be actuarial memorandums concerning all these issues. In addition to this, there is a requirement to generate a board of trustees. She added that this adds considerable expense to a plan and very little benefit. 4:55:53 PM MS. SASSE said that there is a committee that helps determine how the plan is to be administered. It is very flexible and we have assistance given by a consultant who helps us determine what benefits are reasonable under the plan. In referring back to the board of trustees, she said that having a board that is indifferent and uninterested in the participants of the insurance plan seems ridiculous. On top of this is the cost of the fidelity bond and the requirement to have an actual actuary look at and confirm the plan is financially sound. She also complained about the requirement to comply with additional standards. These additional standards include defining her group as a mutual insurer, which requires the city to file a certificate of authority with the state on an annual basis that requires a financial assurance and legal certification. She pointed out that most companies have a separate department to do these tasks and it is obvious, she said, that the city of Valdez cannot do this and would be forced to hire a consultant to help on this matter. There is also, she said, the requirement of mutual insurers to pay taxes to the state, which means that the city would pay taxes to the state. 4:58:18 PM MS. SASSE then stated that in addition to all of this, there are the rules on regulations placed on the director, found on page 17, Section 21.85.230, line 21. She pointed out that the required coverage of risks in parity with other governmental plans would increase the cost of insurance to the consumer. She indicated that her city plan is a good one and that these new changes will double the cost of the insurance plans and eliminate cost effective and flexible health insurance for those that are under self funded governmental plans. REPRESENTATIVE ROKEBERG asked if her consultant was providing actuarial analysis of solvency and also asked if she had a stop- loss policy. MS. SASSE answered that our consultants has provided us with considerable amount of information that will help determine what our premium levels will be. She then indicated that there is a policy in place and reserves are in place, and have in fact, had some high claims recently but the financial reserves are still viable and above the minimum required. REPRESENTATIVE ROKEBERG asked if she carried stop loss insurance. MS. SASSE answered that they do have stop loss insurance. GREG CULBERT, assistant school superintendent, Galena School District, stated that his group has a self-funded plan and that it would have the same problems as mentioned by Ms. Sasse. He indicated that there was a cost effective plan for the employees and a trustee council in place that administers the insurance. He stated that his group and all other self-funded governmental plans ought to be able to create their own insurance and manage in their own way. In lieu of their viability, he indicated that they have stop loss insurance, aggregate stop loss insurance, and they fund the policy quite well. MR. CULBERT then asserted that if the true reason behind this language is to rid the state of self funded insurance groups, and get everyone into a nationwide policy that is based in the lower 48 insurance conglomerate, and then stated that the reason for wanting self-funded insurance is a fiduciary responsibility to save money and divert it into the school itself, which then helps the community. MATT LARKIN, Willis of Alaska, Anchorage, stated that he agreed with both previous speakers. He then stated that he specifically had problems with the applicability section, from which there are many different readings that can gathered, and that they do not make it clear for who this section is intended. He then commented that these new requirements are onerous, and burdensome and expensive. He continued by stating that new bill is impractical by requiring these communities to obtain a board of trustees even though most of these plans do not have the need for a board of trustees, and, he asserted, certainly not one that does not have a vested interest in the group plan. He continued by stating that the fact that the group cannot use one of their own as an entrusted trustee is ridiculous. Lastly, he said that most of these communities are not big enough to find someone that is not related or affected by the plan, or more importantly, bare the fiduciary liability, since they would not be affected by its coverage. MR. LARKIN then stated that implementing this bill would be hugely expensive costly as hiring actuaries and attorneys to draft the trust document, and the premium cost would be very costly. 5:06:36 PM MR. LARKIN stated that all of these municipalities are under budget constraints and that the addition of these requirements will increase costs, require them to reduce the benefit or have the employers pay more for the insurance. He ended by stating that there is nothing good that come out of this bill and that these groups already have good plans in place and they do not need this type of regulation. RICHARD CAMPBELL, General Services Director, Kenai Peninsula Borough, asked if this bill would concern us and what the reasoning behind the drastic changes that are being proposed. MARY STOLL, trust attorney, Local 71 Trust, stated that the bill placed an economic burden on self-funded plans and on the out of state PK's. Why does it carve out specifically self-funded governmental plans and not all self funded plans that are operating in the state. She assumed that it was some sort of ploy to drag self-regulated groups under the direction and control of the Director of Insurance. MS. STOLL remarked that these groups do not operate under policies or contracts of insurance. The coverage is given with boards of trustees, and is a product of collective bargaining and the authority to operate in the state as required by AS 21.030.21B was provided by a letter of agreement which is signed by the Division of Retirement and Benefits. She pointed out that each year they work out what the contribution rate is going to be based on advise from qualified consultants working in the area of insurance. 5:11:13 PM MS. STOLL then stated that she thought that these employers would want the contribution to go to the provision of benefits and not the to the compliance to onerous filing requirements provided in this bill. She then complains about the stipulations found in the bill concerning the organization and the definitions that are used in the bill. She described the bill as being sort of a quagmire for her and the rest that were trying to interpret the bill. 5:12:28 PM MS. STOLL stated that the independent funds already complied with the fiduciary standards of ARISA. It would be easier to file a 5500 with ARISA than comply with the statutes found in this bill. She ended by stating that she did not know what the bill was trying to achieve other than placing a huge economic burden on plans that are already struggling to do the right thing by their clients 5:13:17 PM COLLEEN SAVOIE, consultant, local public 71 trust, wanted to speak specifically to the concerns of the local 71 trust, but she indicated that there were several other governmental groups that are not sure about its applicability. This bill imposes a costly administrative burden and the filing requirements that are proposed in House Bill 147 is tremendous. The cost at minimum for an actuary would be 40 to 50 thousand dollars a year. 5:15:15 PM MS. SAVOIE said the fidelity bond would be no less than 10 percent of the benefits paid the previous year. This is larger than that requirements of ARISA and larger than fidelity bonds that most healthcare insurers hold. A bond of this size according to several insurance carriers we talked to said that is would increase administrative rates and increase the deductible on the premiums held by the clients since it may not be considered an ARISA bond. MS. SAVOIE then said that the requirement for an actuary is too much since not too many of them are willing to insure their work and assume the liability of the plan. She continued by stating that employer plan contribution rates have to be filed 60 days after the end of the plan year which means that State plans have to be filed by the administration sometime towards the end of session. She mentioned that this might be an inconvenience. MS. SAVOIE ended by stating that the bill is unnecessary and that all the plans that she knew about were doing quite well and had governing organizations and audits by separate oversight. She ended by stating that people involved in these plans have an appeals process that includes arbitration and civil suits. REPRESENTATIVE ROKEBERG asked, referring to the third party arbitration, if each member received this type of appeals process. 5:19:51 PM MS. SAVOIE answered that each plan determines what the appeals process is going to be. They go to the board and then on to binding arbitration, which is a low cost alternative to courts. MS. STOLL stated that any allegation of fiduciary breech or non- funding, or insufficient funding of the trust, any participant has a right to bring suit for a breech in trust. She continued by stating that there is ample opportunity to hear testimony concerning alleged violation of trust to be heard in the court system. REPRESENTATIVE ROKEBERG stated that he sees a problem with the lack of supervision in the arbitration mode, and that this area needs to discussed further since it is clear that one has to sue in order to have someone hear grievances. Under state law, the patient bill of rights, which puts in place a third party peer review that that is "scientific" peer review and not some arbitration. MS. STOLL answered that it's more than a two-tier process. The participant would have an opportunity to appeal to the claims administrator, and from there they go to the board of trustees, and they in turn, refer this to a medical review corporation who is given no incentive for one decision or another. She ended by stating that there are rules that govern self-funded plans in the United States and Canada. CHAIR ANDERSON said that this was a work in progress. [HB 147 was held over.]
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