Legislature(2009 - 2010)BARNES 124
03/11/2009 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB29 | |
| HB175 | |
| HB78 | |
| HB86 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 78 | TELECONFERENCED | |
| *+ | HB 86 | TELECONFERENCED | |
| *+ | HB 175 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 29 | TELECONFERENCED | |
HB 175-INSURANCE 3:32:48 PM CHAIR OLSON announced that the next order of business would be HOUSE BILL NO. 175, "An Act relating to insurance, including treating as confidential certain information submitted to the director of insurance by the National Association of Insurance Commissioners; clarifying conditions for the release of insurer deposits; defining travel insurance that may be sold under a travel insurance limited producer license; establishing criteria for licensing of nonresident independent adjusters as resident adjusters; exempting rewards under a wellness program from treatment as insurance discrimination or rebating; making certain insurance required of the Comprehensive Health Insurance Association permissive rather than mandatory; providing for the administration of loss reimbursement policies and payments to guaranty associations during insolvency proceedings; making certain provisions relating to statements on applications and guaranteed renewability for individual health insurance applicable to hospital and medical service corporations; making public certain forms and related documents filed for approval by a hospital or medical service corporation after the filing becomes effective; relating to deposits of self-funded multiple employer welfare arrangements; repealing reasons that the director of insurance may use to deny or revoke a license; and providing for an effective date." 3:33:09 PM LINDA HALL, Director, Division of Insurance, Anchorage Office, Department of Community & Economic Development (DCCED), stated that HB 175 makes various changes to streamline the insurance laws since the Division of Insurance, DCCED strives for efficient regulations. She referred to three general areas that HB 175 addresses, beginning with solvency oversight. She opined that the insurance industry is strong and stable right now although she expressed some concern in the life insurance industry. Some insurance companies and producers make statements about guarantees that the State of Alaska provides for life insurance and annuities. She emphasized that the state does not guarantee life insurance or annuities. Next, she stressed that the division's mission is consumer protection. She related that consumer protection is the major emphasis of the division. She noted that the division has four consumer service personnel whose job is to interact between consumers and insurance companies. She indicated the division has four fraud investigators with a law enforcement background. Finally, the Division of Insurance looks at a healthy competitive marketplace, pointing out that Alaska is a small market. Thus, it is difficult to attract insurance companies. She offered her belief that the best consumer protection is consumer choice of insurance companies. MS. HALL, in response to Representative Buch, offered to discuss fraud as part of her discussion. She offered her belief that the Division of Insurance has a criminal prosecutor and enforces cases, stipulates agreements, and negotiates agreements. However, she explained that compliance is a goal and some education is required. She stressed that while a guaranty fund is in the statute, it does not mean the state guarantees payment of claims through the guaranty fund. In further response to Representative Buch, MS. Hall related that any penalties and fines collected are deposited in the general fund. 3:39:26 PM MS. HALL referred to eight pages in HB 175 that relate to insolvency. She mentioned that provisions in HB 175 will streamline processes for the division and the insurance industry, will clarify provisions in the statutes, and will help the division achieve compliance with national standards. She stated that Section 10 covers streamlining processes, which allow the state to license nonresident adjusters whose state of residence does not license adjusters. She pointed out that most nonresident licensing is dependent on home state. Thus, if a person who resides in Alaska is licensed as an insurance agent or an insurance adjuster the person will be granted reciprocity in another state based on the Alaska license. She noted some states do not license independent insurance adjusters. This provision would allow the state to license nonresidents to adjust claims in Alaska. She also mentioned that Alaska has a shortage of adjusters and the division hopes to ensure that sufficient numbers of adjusters are available. 3:41:51 PM MS. HALL, in response to Representative Holmes, agreed that the change will allow the division to license the person as if Alaska were his/her home state. She explained Section 12 provides a simplification in the insurance statutes. She related that third party administrators are not licensed but must submit to a registration process. She opined this process is less onerous for third party administrators, who are often out of state and may employ many people such as in a call center in Dubuque, Iowa. This provision only requires registration of the firm, although the firm is still accountable for all of its employees, she stated. 3:43:14 PM MS. HALL explained that Section 18 would allow the director to accept another regulator's evaluation of a nonresident with a felony conviction. Under federal law, to participate in the insurance business, a person must have approval of the regulator. In instances in which the person has a felony conviction for dishonesty or breach of trust, called a 1033 application, the division must require the full application. This will allow the division to accept the regulator's evaluation from the person's home state. She also mentioned that electronic resident licensing will be activated in Alaska and beginning tomorrow Alaskans can apply online. 3:44:27 PM MS. HALL referred to Sections 5 and 6, which she stated refer to deposits. She explained changes to these provisions will differentiate between domestic insurers and those insurers domiciled in other states. She explained changes to these provisions would allow flexibility for domestic insurers. She pointed out that these sections relate to insurers undergoing insolvency. Much of the liquidation and rehabilitation provisions have not changed since 1990, she offered. She related a major rewrite of Chapter 78 would have resulted in a 200-page bill. She opined that several provisions in HB 175 are critical and need to be addressed. She stated that these provisions clarify deposits for insurers as well as define "working day" uniformly throughout the insurance statutes. 3:46:39 PM REPRESENTATIVE HOLMES related her understanding that these sections would give the Division of Insurance greater flexibility. MS. HALL answered yes, since these sections of the bill refer to delinquency proceedings for domestic regulators. Thus, the department can work with the domestic insurer on rehabilitation. She remarked that most of the cases eventually go to court. She mentioned the division wants to ensure that the domestic insurers have proper oversight but the division also would like them to succeed, to pay claims. She emphasized that when an insurer enters true liquidation, the company would rarely pay "100 cents on the dollar." Thus, these changes are good for consumers. MS. HALL referred to Section 8 and Section 9 of HB 175, which relate to uniformity. She stated the compliance officer in a firm makes certain that the firm complies with all of the state's statutes as the responsible party. She referred to a chart, not in members' packets. Ms. Hall applauded the Division of Insurance for reaching national compliance. She opined that very few states have reached full compliance with the national uniform standards, but Alaska has done so. She remarked that the division has a licensed compliance officer. 3:48:49 PM MS. HALL related that Section 9 updates the travel insurance provisions. MS. HALL referred to page 8 of HB 175, to Section 11, which would allow the DOI director to order summary suspension of an agent's license. She related that if protection of the public requires emergency action the finding is incorporated in an order. The licensee can request a hearing which must be held within 20 days and the decision must be issued within 30 days. She stated that this proceeding would not be under the Office of Administrative Hearings (OAH), Department of Administration (DOA). She explained the reason for this is the division had two instances of fraud last fall. She related a scenario in which a consumer complained that he/she had purchased insurance but did not receive the policy. She indicated that an investigation revealed an agent had collected $27,000 in premiums, spanning 72 victims of fraud. The criminal prosecutor has drawn up criminal charges listing 39 felony counts. However, the person could still retain their license. She mentioned that in this instance, the individual voluntarily surrendered their license. She stressed the importance of amending the statutes to allow the division to revoke licenses. 3:51:22 PM MS. HALL, in response to Representative Buch, explained that the division has the authority to revoke a license, but this section allows the division to immediately revoke a license, and not have the license stayed by the licensee's request for a hearing. 3:52:25 PM REPRESENTATIVE HOLMES asked for the rationale for a separate hearing structure. MS. HALL addressed the question, stating that the Division of Insurance has a formal hearing process in Title 21. She related that she also serves as a hearing officer. She related that the division has a specific process that supersedes the Office of Administrative Hearings (OAH) since the division holds specific hearings. However, she remarked that while some appeals go to the OHA, the remainder of the division's hearings are conducted internally following due process. 3:53:20 PM REPRESENTATIVE HOLMES emphasized her concern to ensure that these changes will not violate due process rights. MS. HALL assured Representative Holmes that the language deserves discussion. She opined that the bill has had thorough legal reviews by the Department of Law and legislative legal. She pointed out the OHA has also "signed off" on the provisions. She stated that the behavior is serious. She related a second scenario in which an employer reported an employee had taken premium funds from the employer's safe on two occasions. She related that the employer brought the employee to the Division of Insurance and the employee surrendered his/her license. She opined while the consumer can sue it is not likely that the consumer will recover the payment. She stated that one statute states "payment to the agent is payment to the company." She advised that these matters are infrequent but impact consumers. 3:56:14 PM REPRESENTATIVE BUCH inquired as to whether investigators are actively pursuing investigations on behalf of Alaska's consumers. MS. HALL answered that with 40,000 licensed agents, and 2,000 insurance companies, it is not possible for investigator to audit each licensee. She offered that the division has a variety of methods to ensure oversight and to meet the statutory requirements. She opined that the DOI does not have resources to audit every one of the licensees and frequently rely on complaints. MS. HALL, in response to Representative Buch stated that she was not sure how to answer his question about the industry growth. She related that in 2003, the state had 14,000 agents and now there are 40,000. She pointed out that the state has approximately the same number of insurance companies, but only 4,000 are resident agents. She mentioned that the rest are nonresident so the primary regulator is elsewhere. She offered her belief that the division is okay. 4:00:17 PM REPRESENTATIVE BUCH inquired as to whether it is unusual to have five times the growth in the industry over a five-year period. MS. HALL offered one explanation for the increase in licensees is a new requirement that people who sell and solicit insurance must be licensed. She related that individual employees in call centers were not required to be licensed but now must be licensed. She remarked that 40,000 people in Alaska are not actively selling insurance. In further response to Representative Buch, Ms. Hall offered another example of the insurance industry growth. She stated that if a person works for an auto dealership and sells a protection policy plan, the person must be licensed. She stressed that the division's goal is compliance and strives to educate the public and insurers. 4:03:48 PM CHAIR OLSON asked the amount of premium tax that is generated in one year. MS. HALL related that the division has a premium tax auditor, and based on the premium tax the estimate for 2009 is $50 million. She explained that a portion of the tax directly funds workers' compensation. She highlighted that the figure does not include fees which the Division of Insurance collects for regulating entities, which she estimated at $10 million. Therefore, the total collected would be approximately $60 million for FY 09, she stated. 4:05:47 PM CHAIR OLSON pointed out that the division generates a significant amount of money for the general fund. MS. HALL offered that the agency is a receipts-based agency. She opined that the division is generally in the top three or four sources for generating money to the general fund. MS. HALL, in response to Representative Holmes, stated that the division's budget is approximately $6.9 million. 4:06:51 PM MS. HALL referred to Section 17, on page 10 of HB 175. She related that the top complaint the office receives is the cost of health insurance, either the high cost of health insurance cost or that the reimbursement is not sufficient. She explained this section requires a wellness program must follow the federal HIPPA requirements. She stated that the provision will allow a health care provider to encourage wellness programs to offer rewards to encourage wellness programs. The rationale is to reduce health claims and the reward is not considered a rebate. MS. HALL, in response to Representative Holmes explained that a rebate is an inducement to buy insurance, or is an unfair discriminatory premium. She related the incentive would be for participating in a walking program and when 50 percent of the employees participate, the employer received credit on the premium. MS. HALL related that the changes to Section 24 establish the eligibility for high risk pool which uses the same eligibility as the Permanent Fund Dividend program criteria. 4:09:58 PM MS. HALL referred to Sections 25, which she stated is a reiteration of the priority of distribution claims which are paid in what is equivalent to a bankruptcy. She explained that insurance companies do not undergo bankruptcy, but are placed into liquidation proceedings with the receiver, which is generally the DOI director. 4:11:31 PM MS. HALL referred to Section 26, relating to the administration of loss reimbursement policies. She offered a scenario in which an insurance company must pay first dollar claims for claims under a workers' compensation policy. She explained that the insurer would retain $100,000 of the risk of the workers' compensation claims. The insurance company would still pay the claim, the injured worker is assured the claim, but the employer must repay the insurance company the $100,000. She related that the repayment is not currently addressed in statute in the case of liquidation. She indicated that this section outlines the process. She pointed out that this guarantees for an employer who has the reimbursement obligation, the collateral in the form of a letter of credit or a cash deposit can be "tapped" by either the receiver or the guaranty fund. The guaranty fund would then pay the claim on behalf of the insolvent insurer. She stressed the goal is that in instances in which the employer owes the guaranty fund, that the guaranty fund needs to have the ability to collect the money owed. 4:14:29 PM REPRESENTATIVE BUCH inquired as to how many insolvencies Ms. Hall has experienced in her tenure as the director of the Division of Insurance (DOI). MS. HALL answered she has not experienced any domestic insolvencies, but the division experienced a workers' compensation insolvency, and the guaranty fund did not have sufficient funds to pay claims. She stated that the DOI needs to be prepared. 4:15:32 PM MS. HALL referred to page 19 of HB 175, to proposed AS 21.78.328, which relates to early access disbursements. She related that in the previous scenario, the estate of insolvent insurer, with the court's approval, disbursed funds to the guaranty. She explained that this provision requires a receiver to apply to the court to make the payments. She offered that the division does not currently have the requirement. She stressed the importance of the guaranty fund having the mechanisms in place to obtain payment in the case of insolvent insurers. She characterized this section as updating the rehabilitation and liquidation statutes. 4:17:02 PM MS. HALL referred to page 21 of HB 175, to proposed AS 21.85.100. She indicated this provision requires that the self- funded health care entities that are known as multiple employer welfare arrangements must adhere to the administration of deposits statutes. She pointed out two things that were added to the hospital and medical service corporation. First, the statutes that relate to representations on applications apply to these entities. Second, the federal law requires that the guaranteed renewability of individual health care insurance is applicable, as well. REPRESENTATIVE HOLMES referred to page 12, line 23 of HB 175, to Section 22, which refers to the supplemental plans for Medicare. She asked for clarification of the changes. MS. HALL stated that this section would allow the high risk plan to have more flexibility in the plan that it offers to Medicare eligible individuals. REPRESENTATIVE HOLMES related her understanding that the intention is not to reduce options. She opined that the state already has a hard time with Medicare coverage and she wanted to be certain Medicare options were not reduced. MS. HALL said, "Absolutely not." She offered that AS 21.55.100 (b) refers to the "state plan" which is the high risk pool known as the Alaska Comprehensive Health Insurance Association (ACHIA). 4:21:21 PM CHAIR OLSON announced that he would hold open the public testimony on HB 175.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 01 HB78 ver A.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 78 |
| 01 HB175 ver A.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 175 |
| 02 HB78 Sponsor Statement.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 78 |
| 03 HB78-CED-CBPL-03-06-09.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 78 |
| 04 HB78 LBA Audit Summary #08-20056-09.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 78 |
| 01 HB86 ver A.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 86 |
| 02 HB86 Sponsor Statement.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 86 |
| 03 HB86-CED-CBPL-03-06-09.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 86 |
| 04 HB86 LB&A Summary.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 86 |
| 02 HB175 Sponsor Statement.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 175 |
| 03 HB175 Sectional Analysis.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 175 |
| 04 HB175-CED-INS-03-09-09.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 175 |
| 05 HB78 LBA Full Audit Report #08-20056-09.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 78 |
| 05 HB86 LB&A Report.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 86 |
| 15 HB29 Amendment A.3 Effective Date Change.pdf |
HL&C 3/11/2009 3:15:00 PM |
HB 29 |