Legislature(1999 - 2000)

04/14/1999 03:26 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                                                                                
HB 158 - NOTICE OF INS. CANCELLATION TO ELDERLY                                                                                 
                                                                                                                                
Number 0065                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG announced the committee's first order of business                                                             
is HB 158, "An Act relating to the annual report of the director of                                                             
the division of insurance and to notice of cancellation of personal                                                             
insurance."  The chairman requested staff to explain the changes in                                                             
the proposed Version H committee substitute (CS).                                                                               
                                                                                                                                
Number 0083                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO made a motion to adopt the proposed CS for HB
158, Version H, as a working document.  Version H is labeled                                                                    
1-LS0128\H, Ford, 4/13/99.  There being no objection, Version H was                                                             
before the committee.                                                                                                           
                                                                                                                                
Number 0102                                                                                                                     
                                                                                                                                
JANET SEITZ, Legislative Assistant to Representative Norman                                                                     
Rokeberg, Alaska State Legislature, came forward to explain the                                                                 
changes in Version H as aide to the House Labor and Commerce                                                                    
Standing Committee.  Version H incorporates the amendment that was                                                              
adopted at the previous hearing [April 9, 1999].  It can be found                                                               
on page 2, lines 11 to 13, of the proposed CS, regarding sold or                                                                
terminated and proprietary information.  This language appears as                                                               
Section 1, subsection (7) of Version H:                                                                                         
                                                                                                                                
          (7) statistical information regarding health                                                                          
     insurance, including the number of individual and group                                                                    
     policies sold or terminated in the state; this paragraph                                                                   
     does not authorize the director to require an insurer to                                                                   
     release proprietary information; and                                                                                       
                                                                                                                                
MS. SEITZ noted "less than 70 years of age" on page 2, line 19, is                                                              
new.  She indicated that all of subsection (2) of Section 2,                                                                    
beginning on page 2, line 27, through the end of the bill, is new                                                               
language.  It sets out that a written notice of cancellation can be                                                             
mailed to the named insured and to a designee, if the insured has                                                               
requested that a designee also receive a copy of the (indisc.)                                                                  
notice.                                                                                                                         
                                                                                                                                
CHAIRMAN ROKEBERG confirmed from Ms. Seitz that was for all three                                                               
notices.  He indicated, then, the insured would designate the third                                                             
party to receive notice, but the insured would receive notice as                                                                
well, so there would be two sets of notices sent.                                                                               
                                                                                                                                
MS. SEITZ answered in the affirmative.  She noted the mailing                                                                   
schedule has been changed from the 60 days in the original bill                                                                 
back to the existing 30-day, 20-day, and 10-day mailing schedule.                                                               
                                                                                                                                
Number 0242                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO asked the reason for raising the age from 67                                                              
to 70.                                                                                                                          
                                                                                                                                
CHAIRMAN ROKEBERG indicated it was an issue of driving records.                                                                 
There were statistics regarding ages of registered drivers from the                                                             
Department of Motor Vehicles and some information on the estimated                                                              
prevalence of ADRD [Alzheimer's Disease and Related Disorders]                                                                  
related to age groups from the Commission on Aging in the bill                                                                  
packet.   The chairman indicated a slight raise in age would reduce                                                             
the number of people involved and that the biggest incident of                                                                  
ADRD-type manifestations appear after age 70, getting progressively                                                             
worse.                                                                                                                          
                                                                                                                                
REPRESENTATIVE HALCRO questioned if these were statewide figures.                                                               
                                                                                                                                
CHAIRMAN ROKEBERG answered in the affirmative, noting the chart in                                                              
the bill packet was provided by the Department of Motor Vehicles.                                                               
He commented page 4 of the chart shows there are 403,304 automobile                                                             
passenger car licenses and only some 16,000 [16,803] licensees are                                                              
over age 70.  The chairman indicated this, combined with the                                                                    
medical evidence regarding ADRD-type diseases, was the reason for                                                               
the age change.  The chairman invited Mr. Lessmeier [lobbyist for                                                               
State Farm Insurance Company] forward.  Noting there was another                                                                
issue, the chairman commented he has been working with the industry                                                             
on this issue.  One of the major concerns he has been trying to                                                                 
address is the return receipt requested.  This provision has been                                                               
removed from the bill by adding the additional notification to a                                                                
third party.  Chairman Rokeberg drew the committee's attention to                                                               
the possible H.1 amendment, which he designated as Amendment 1.                                                                 
Amendment 1, labeled 1-LS0128\H.1, Ford, 4/14/99, read:                                                                         
                                                                                                                                
     Page 3, line 6, following "cancellation":                                                                                  
          Insert "; an insurer who provides a personal                                                                          
     insurance policy to an insured who is 70 years of age or                                                                   
     older shall give written notice to the insured of the                                                                      
     insured's right to have a designee receive notice as                                                                       
     provided in this paragraph"                                                                                                
                                                                                                                                
CHAIRMAN ROKEBERG explained the amendment mandates that the insurer                                                             
tell people they have the ability to designate a third party.  The                                                              
chairman asked Mr. Lessmeier if it was his interpretation of                                                                    
Version H that there would be two notices sent on the 30, 20[, 10]                                                              
mailing schedule, if the insured selects the designee option.                                                                   
                                                                                                                                
Number 0532                                                                                                                     
                                                                                                                                
MICHAEL LESSMEIER, Lobbyist for State Farm Insurance Company (State                                                             
Farm), answered that was correct.                                                                                               
                                                                                                                                
CHAIRMAN ROKEBERG questioned how this compared regarding cost to                                                                
the certified mail standpoint.                                                                                                  
                                                                                                                                
MR. LESSMEIER replied that this was proposed as a way of meeting                                                                
the chairman's concerns to give meaningful notice to the insured                                                                
and, if the insured is not someone who can receive meaningful                                                                   
notice, giving notice to someone else.  This is what State Farm                                                                 
thinks would be the most effective way to accomplish this in terms                                                              
of giving that notice, as well as the most efficient way for them                                                               
to do so.  He noted it would be the easiest and have the least                                                                  
impact from an expense viewpoint.                                                                                               
                                                                                                                                
CHAIRMAN ROKEBERG expressed his concern is that this is three                                                                   
additional pieces of first class postage, plus accompanying forms,                                                              
versus one return receipt request cost element.  He asked Mr.                                                                   
Lessmeier to explain why the industry would prefer the first                                                                    
method.                                                                                                                         
                                                                                                                                
Number 0629                                                                                                                     
                                                                                                                                
MR. LESSMEIER responded their first concern is of effectiveness.                                                                
If the intent is to ensure that the person receiving the notice                                                                 
actually understands it, in their view it would not be more                                                                     
effective to send more mailings to the same person.  Their belief                                                               
is that it would be better to provide the option for the insured to                                                             
designate another responsible person.  The second concern is that                                                               
if they make it "on request," it is being done for those people who                                                             
recognize they need this.  It is being done in a specific situation                                                             
and no one's resources are being wasted.  Thirdly, under AS                                                                     
21.36.260 they are still required to provide a certificate of                                                                   
mailing from the post office in order for the notice to be                                                                      
effective; therefore, they think they will have given meaningful                                                                
and effective notice to two parties.  Under that circumstance, they                                                             
cannot see what would be gained by going the additional step of                                                                 
requiring return receipt requested, which would impose a cost that                                                              
this would not.  Mr. Lessmeier noted he could not estimate that                                                                 
cost, but indicated he felt the cost would be imposed for something                                                             
that probably would not be of much benefit.  Mr. Lessmeier                                                                      
indicated there was a proposed amendment to Version H which would                                                               
require certified return receipt mailing.                                                                                       
                                                                                                                                
CHAIRMAN ROKEBERG questioned if Mr. Lessmeier's calculation was                                                                 
based on the probability factor that a majority of people over 70                                                               
would not want a designee.                                                                                                      
                                                                                                                                
MR. LESSMEIER answered that he had not done any calculations.  He                                                               
indicated he doesn't know how many people would choose the designee                                                             
option; the issue is what would be gained as a result of sending                                                                
certified return receipt requested.  If two mailings are being done                                                             
to begin with, State Farm's view is that that is effective notice                                                               
and little, if anything, would be gained by requiring certified                                                                 
return receipt requested, which would have an attached cost.                                                                    
                                                                                                                                
Number 0779                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG stated the committee has Amendment 1 before it,                                                               
mandating that the insurance industry inform people of their right                                                              
to make the designation.  He asked if Mr. Lessmeier had any                                                                     
objections.                                                                                                                     
                                                                                                                                
MR. LESSMEIER answered he did not, but he would like to "run this                                                               
by our folks."  Mr. Lessmeier recognized it was the chairman's                                                                  
desire to move the legislation and he indicated they would just                                                                 
continue to work on the bill as it proceeded.  The issue is whether                                                             
it would be the desire to have the industry, for example, include                                                               
this information in the mailing at the time of every premium                                                                    
renewal so that it is done semi-annually.  He does not think this                                                               
would be a problem but he would like to confirm that.  Mr.                                                                      
Lessmeier expressed his support for notifying people, if this                                                                   
option is made available, to ensure the option's effectiveness.                                                                 
                                                                                                                                
CHAIRMAN ROKEBERG commented that this is a mandate for the                                                                      
insurance industry to notify [insureds of the designee option]; it                                                              
does not mandate a periodic notice or anything like that.  The                                                                  
chairman confirmed Mr. Lessmeier would not like to see some                                                                     
periodic mandate to assist the company in doing this.  The chairman                                                             
questioned if the notice would be something placed in the policy                                                                
boilerplate or an endorsement.                                                                                                  
                                                                                                                                
MR. LESSMEIER commented they would probably just put a mailer in                                                                
the premium statement.                                                                                                          
                                                                                                                                
Number 0883                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO gave the example that he turns 70, receives                                                               
his renewal policy in the mail with the notice and pays his bill.                                                               
He asked if this meant the information had to be included in every                                                              
renewal notice he was sent now that he is 70, or if one                                                                         
notification would be sufficient.                                                                                               
                                                                                                                                
CHAIRMAN ROKEBERG indicated he was wondering if that should be a                                                                
mandate requirement on an annual renewal.                                                                                       
                                                                                                                                
MR. LESSMEIER said he would not think it would be a problem to do                                                               
this on an annual basis.                                                                                                        
                                                                                                                                
REPRESENTATIVE HALCRO asked about those customers who paid monthly                                                              
or quarterly.                                                                                                                   
                                                                                                                                
MR. LESSMEIER noted he would want to check with their technical                                                                 
people in this area, but he still does not think it would be a                                                                  
problem to do this perhaps once a year.                                                                                         
                                                                                                                                
CHAIRMAN ROKEBERG commented they could probably amend the amendment                                                             
by specifying language to the effect of "annual notice" or                                                                      
"annually notice".  He indicated this would avoid mandating this                                                                
information to be sent every time for a shorter periodic renewal.                                                               
The chairman invited Mr. Ference forward.                                                                                       
                                                                                                                                
Number 0987                                                                                                                     
                                                                                                                                
JOHN FERENCE, Deputy Director, Division of Insurance, Department of                                                             
Commerce and Economic Development, came forward.                                                                                
                                                                                                                                
CHAIRMAN ROKEBERG confirmed Mr. Ference has seen Version H and                                                                  
Amendment 1.  The chairman asked Mr. Ference for his comments and                                                               
how he thought the industry would react.                                                                                        
                                                                                                                                
MR. FERENCE did not foresee any problems and had no recommendations                                                             
other than ensuring that if there were to be a requirement for                                                                  
return receipt, it be clearly specified.                                                                                        
                                                                                                                                
CHAIRMAN ROKEBERG noted return receipt was currently not being                                                                  
discussed.  The chairman referred to the actual notice and the                                                                  
period notification [of the designee option].                                                                                   
                                                                                                                                
MR. FERENCE commented he did not see any problem at all.                                                                        
                                                                                                                                
CHAIRMAN ROKEBERG questioned if there were any requirements in                                                                  
other areas of the insurance law that mandate occasional                                                                        
informational notification to insureds.                                                                                         
                                                                                                                                
MR. FERENCE answered there are similar requirements for periodic                                                                
notice in different circumstances.  For example, the division deals                                                             
with Civil Rule 82.  The division requires that liability policy                                                                
holders be advised of their obligations or risks relative to Civil                                                              
Rule 82.  In response to the chairman's comment, Mr. Ference said                                                               
that is every time a policy is issued.                                                                                          
                                                                                                                                
Number 1087                                                                                                                     
                                                                                                                                
MR. LESSMEIER noted there is a similar requirement for offers of                                                                
uninsured and under-insured motorist coverage on automobile                                                                     
policies.  He believes these [notices] need to be made every six                                                                
months or at the time of renewal.                                                                                               
                                                                                                                                
MR. FERENCE said it is when the policy is issued.                                                                               
                                                                                                                                
CHAIRMAN ROKEBERG indicated the existence of policies of varying                                                                
periods, with the customer selecting the period.  He asked what                                                                 
then constitutes a renewal.                                                                                                     
                                                                                                                                
MR. LESSMEIER recommended not going more than annual, because this                                                              
will apply to both automobile and homeowners' insurance.  Most of                                                               
time, in his experience, homeowners' insurance is an annual                                                                     
premium.                                                                                                                        
                                                                                                                                
CHAIRMAN ROKEBERG commented, then, the issue is whether the                                                                     
committee wishes to mandate "on renewal" or "annually".  The                                                                    
chairman noted Mr. Lessmeier's testimony that he prefers "annually"                                                             
over "renewal".  Chairman Rokeberg asked Mr. Ference if he had a                                                                
recommendation to the committee regarding this type of                                                                          
notification.                                                                                                                   
                                                                                                                                
MR. FERENCE answered he believes annual notice would be sufficient;                                                             
if he were to recommend anything, he would recommend annual notice.                                                             
Mr. Ference informed the committee there is a provision in this                                                                 
section of Chapter 36 dealing with cancellation notices that says                                                               
a policy period is a 12-month period, cycling from the anniversary                                                              
date.                                                                                                                           
                                                                                                                                
Number 1178                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO noted a letter of opposition in the bill                                                                  
packet mentioned that homeowners' policies make no reference to the                                                             
age of the insured because that is irrelevant [Alliance of American                                                             
Insurers, 4/7/99].  He asked how they would track someone's age                                                                 
regarding homeowners' policies if that information is not gathered                                                              
at the time of initial application.                                                                                             
                                                                                                                                
MR. LESSMEIER replied he thinks this information is gathered at the                                                             
time of initial application, although he is not 100 percent sure.                                                               
Mr. Lessmeier said he thinks the easiest way to do this would be to                                                             
send a notice to all insureds on an annual basis which says, "'If                                                               
you're over 70 years of age, you have the right to make this                                                                    
request.'"                                                                                                                      
                                                                                                                                
CHAIRMAN ROKEBERG indicated this would be appreciated as a matter                                                               
of public education.  The chairman confirmed there were no further                                                              
questions for Mr. Lessmeier or Mr. Ference.  He asked if Mr. George                                                             
wished to comment.                                                                                                              
                                                                                                                                
Number 1259                                                                                                                     
                                                                                                                                
JOHN GEORGE, Lobbyist for the National Association of Independent                                                               
Insurers (NAII); Lobbyist for the American Council of Life                                                                      
Insurance, concurred on behalf of NAII that annual [notice] would                                                               
be sufficient.  He indicated he supported the idea of notifying all                                                             
insureds regarding this option.                                                                                                 
                                                                                                                                
Number 1292                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO moved Amendment 1 to the proposed Version H                                                               
CS for HB 158.                                                                                                                  
                                                                                                                                
CHAIRMAN ROKEBERG objected for discussion.  He commented he would                                                               
entertain an amendment for annualizing the notice.                                                                              
                                                                                                                                
REPRESENTATIVE HALCRO moved to amend Amendment 1 by inserting                                                                   
"annual" after "give" on line 3 of Amendment 1 ["give" appeared                                                                 
line 3 of written amendment].  There being no objection, the                                                                    
amendment to the amendment was adopted.  Amendment 1 as amended                                                                 
read:                                                                                                                           
                                                                                                                                
     Page 3, line 6, following "cancellation":                                                                                  
          Insert "; an insurer who provides a personal                                                                          
     insurance policy to an insured who is 70 years of age or                                                                   
     older shall give annual written notice to the insured of                                                                   
     the insured's right to have a designee receive notice as                                                                   
     provided in this paragraph"                                                                                                
                                                                                                                                
CHAIRMAN ROKEBERG removed his objection to Amendment 1.  There                                                                  
being no further objection, Amendment 1 as amended was adopted.                                                                 
                                                                                                                                
Number 1358                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG referred to the other portion of the bill                                                                     
regarding statistical information.  He asked Mr. Ference if he (the                                                             
chairman) had previously asked him about the language, "this                                                                    
paragraph does not authorize the director to require an insurer to                                                              
release proprietary information; and".                                                                                          
                                                                                                                                
MR. FERENCE confirmed the chairman had previously asked him about                                                               
that language.  The division's recommendation would be that that                                                                
provision dealing with proprietary information not be existent.                                                                 
However, the division does not believe it will be a significant                                                                 
problem if it remains.  If it is not there, however, it prevents                                                                
this from ever being a question.                                                                                                
                                                                                                                                
CHAIRMAN ROKEBERG indicated that if the division did not receive                                                                
the requested information if this legislation passed, it could                                                                  
always be amended.  The chairman questioned if the division feels                                                               
this would allow the collection of the desired information in terms                                                             
of "uninsured individual and group plans that are non-ERISA."                                                                   
                                                                                                                                
MR. FERENCE replied he thought this was broad enough.  It will                                                                  
allow the division to identify who is insured and, by default, that                                                             
will identify who falls outside the scope of insurance treatments.                                                              
In response to the chairman's comment, Mr. Ference confirmed it                                                                 
would be both for covered bodies and policy numbers.                                                                            
                                                                                                                                
Number 1437                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO asked Mr. George what kinds of information                                                                
the industry would consider proprietary.                                                                                        
                                                                                                                                
MR. GEORGE answered, on behalf of the American Council of Life                                                                  
Insurance, that he is unsure.  He indicated he deals more with the                                                              
life insurance side as opposed to health insurance.  He supposes                                                                
the names of the groups on group policies, those types of things,                                                               
to avoid giving competitors a list of a company's clients, might be                                                             
considered proprietary.  He didn't see a problem with releasing the                                                             
actual numbers, noting he thinks that is the information being                                                                  
sought.  As long as it doesn't include names of clients or names of                                                             
insured individuals, Mr. George said he thinks they are probably                                                                
okay with that.  He commented he is speaking off the top of his                                                                 
head.                                                                                                                           
                                                                                                                                
REPRESENTATIVE HALCRO asked if pricing structures, et cetera, would                                                             
be considered proprietary.                                                                                                      
                                                                                                                                
MR. GEORGE replied it would be, but he doesn't think that is the                                                                
type of information being requested.                                                                                            
                                                                                                                                
CHAIRMAN ROKEBERG said, "That's published information (indisc.)                                                                 
premium tax (indisc.)?"                                                                                                         
                                                                                                                                
MR. FERENCE responded in health insurance policies it is not, only                                                              
for Blue Cross and Blue Shield.                                                                                                 
                                                                                                                                
REPRESENTATIVE HALCRO commented he doesn't want there to be a                                                                   
future debate over what is proprietary and what is not, noting that                                                             
is the reason for his questions.                                                                                                
                                                                                                                                
MR. GEORGE indicated he does not think there is a problem with the                                                              
information this legislation is seeking to get.  He further                                                                     
indicated this section could be used in the future to gather other                                                              
information, at which point the industry could say that is                                                                      
proprietary.                                                                                                                    
                                                                                                                                
Number 1548                                                                                                                     
                                                                                                                                
CHAIRMAN ROKEBERG stated his view of this amendment [adopted April                                                              
9, 1999] is that it was a fence around which the fishing expedition                                                             
of the division would be restricted.  The chairman indicated the                                                                
intention was that the division collect this specific information,                                                              
not have untrammeled rights to obtain information.                                                                              
                                                                                                                                
MR. FERENCE agreed with the chairman's comments.                                                                                
                                                                                                                                
REPRESENTATIVE BRICE asked, regarding the statistical health                                                                    
insurance information, if that would be the specific services which                                                             
are covered, like the level of copayment and the deductibles.  He                                                               
asked if that would include, for example, whether or not the policy                                                             
has mental health coverage as well.                                                                                             
                                                                                                                                
MR. GEORGE said he assumes Representative Brice is interested in                                                                
finding out who is treating mental health coverage with parity and                                                              
who is not, referring to the mental health parity legislation.                                                                  
                                                                                                                                
REPRESENTATIVE BRICE indicated he was interested in simply who is                                                               
providing that coverage.                                                                                                        
                                                                                                                                
MR. GEORGE said it is probably not proprietary if it is being                                                                   
examined generically and statistics are desired.  A particular                                                                  
company might have problems sharing its information publicly.                                                                   
                                                                                                                                
Number 1645                                                                                                                     
                                                                                                                                
REPRESENTATIVE BRICE questioned if that is something the department                                                             
can work on.                                                                                                                    
                                                                                                                                
MR. FERENCE answered he doesn't see a reason why they couldn't.                                                                 
Statistical information, in a sense, is very broad; it is anything                                                              
that can be counted.  It could be extended to count different                                                                   
policies on (indisc.) basis, if the division chose to do that.                                                                  
However, the reality is the division is not interested in "fishing"                                                             
either because of the time and expense.  He indicated the more                                                                  
detailed the examination, the more probability the division would                                                               
run into proprietary problems and objections from industry over the                                                             
cost to provide the information.                                                                                                
                                                                                                                                
REPRESENTATIVE BRICE noted, on the balance of that, he is glad to                                                               
see this section is being included, because, as policy makers, the                                                              
legislature needs to have some understanding of the real world                                                                  
impacts of various mandates or various disparities amongst                                                                      
coverages.                                                                                                                      
                                                                                                                                
MR. GEORGE commented that people covered under ERISA [Employee                                                                  
Retirement and Security Act] will not be captured by this,                                                                      
indicating that is the major section.                                                                                           
                                                                                                                                
CHAIRMAN ROKEBERG said they want to know the other people.  He                                                                  
indicated he doesn't know why this doesn't say non-ERISA.                                                                       
                                                                                                                                
Number 1713                                                                                                                     
                                                                                                                                
MR. FERENCE pointed out he doesn't see why there is any reason the                                                              
division, under this legislation, could not ask insurers to                                                                     
identify stop-loss policies that are sold to protect ERISA plans                                                                
and solicit statistics on the number of participants protected                                                                  
under those stop-loss programs.                                                                                                 
                                                                                                                                
CHAIRMAN ROKEBERG said it would be his intention that the division                                                              
obtain that information also.  He commented the Department of                                                                   
Health and Social Services is also always looking for the numbers                                                               
of insureds.  The chairman confirmed Mr. Walsh [John Walsh,                                                                     
lobbyist for the Alaska Association of Independent Agents and                                                                   
Brokers] did not wish to testify.  The chairman closed the public                                                               
testimony on HB 158 after confirming no one else wished to testify.                                                             
The chairman noted he would not be offering the other amendment                                                                 
[labeled 1-LS0128\H.2, Ford, 4/14/99, adding certified mail                                                                     
requirements].                                                                                                                  
                                                                                                                                
Number 1797                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO made a motion to move CS for HB 158 [Version                                                              
H], as amended, out of committee with individual recommendations                                                                
and the attached zero fiscal note.  There being no objection, CSHB
158(L&C) moved out the House Labor and Commerce Standing Committee.                                                             

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