Legislature(2005 - 2006)BELTZ 211
05/02/2006 01:30 PM LABOR & COMMERCE
Download Mp3. <- Right click and save file as
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 241-JOINT INSURANCE ARRANGEMENTS CHAIR BUNDE announced CSSB 241(L&C), version G, to be up for consideration. He moved to adopt Amendment 1 and objected for discussion purposes. 24-LS1465\G.1 Bailey A M E N D M E N T 1 OFFERED IN THE SENATE BY SENATOR BUNDE TO: CSSB 241( ), Draft Version "G" Page 15, following line 22: Insert a new subsection to read: "(d) The state is not liable for, and does not guarantee or insure, the obligations of an association of employers or its members, or an association of self-insured employers or its members, under this chapter." He explained that his concern was that if this bill becomes law, he did not want the state to become liable if joint insurance arrangements become unsuccessful or defaulted. CHAIR BUNDE removed his objection. There were no further objections; and so Amendment 1 was adopted. ROBERT VOGEL, Pro-Group Management, said he was a plant administrator for self-insured groups in Nevada and New Mexico. He offered to answer questions. CHAIR BUNDE asked if he was aware of any self-insured groups that didn't have the reserves to sustain them and defaulted. MR. VOGEL replied that he runs four different self-insured groups and in the last 12 to 13 years about two or three groups have run into problems. The most notable were Associated Industries of Kentucky and Tennessee Truckers Association. However, during that time the assessments were made upon members and claims were paid and no one went without payments. He explained that the United States has had thousands of these groups over the last 40 years in over 37 states. Several groups have had problems, but he pointed out that hundreds of insurance companies have had much bigger problems during that time, as well. 3:03:50 PM LINDA HALL, Director, Division of Insurance, Department of Commerce, Community & Economic Development (DCCED) said she wanted to discuss some policy issues today. She said that this committee has had a lot of talks about workers' compensation, which in itself is a compromise between labor and management. Employees got immediate benefits, both medical and wages, in a no fault system. Employers got an exclusive remedy for on-the- job injuries so they are not tied up in expensive litigation. These days she is seeing in their debates that labor is not supporting any kind of reform to the current system; management wants out of the system and describing it as broken. MS. HALL said she had four primary concerns with this legislation: liquidity, the lack of a guarantee fund, who has the liability, and no requirement for licensing of adjusters or a process to deal with insolvent groups. MS. HALL took exception to Mr. Vogel's comment about who is going to pay. She understood the Associated Industries of Kentucky had a court-ordered assessment of $90.7 million of which its members paid about $68 million in cash and promissory notes. So, she was not sure there was sufficient money to pay the assessment. The bill still has no provision for requiring licensing of claims adjusters. This would bring some oversight. Title 21 has specific provisions for rehabilitation and oversight. 3:06:53 PM She wanted to rebut some comments that have been made in the past months. It's been indicated that the director would have a huge amount of authority because he can decline applications. However, she would assume if the Legislature passes this legislation, it's because they think it's a good idea. She did not think they would want a director who would just decline all the applications because he/she didn't like the legislation. She didn't think that could be called authority. She emphasized that the two financial requirements that are most critical that are found in most other states are missing - a guarantee mechanism of some sort and a liquidity requirement. MS. HALL said she has watched the marketplace for the past three years and how it tried to attract new companies. Since Alaska is such a small market, in most areas we are last in the country. So, Alaska needs an environment that is conducive to people doing business. When it allows cherry picking, such as this bill would provide, it is further damaging the marketplace and its attractiveness to insurers. They have heard testimony saying they wouldn't let everybody in, only the good risks. She asked, Well, what does that do with the rest of our business? What are we going to have left for them? You do and I do receive on a regular basis concerns, complaints about the assigned risk pool. And we can't have an assigned risk pool without insurance companies, but that is a market of last resort and I don't want to see our businesses end up with no really viable alternatives. She related that as a regulator, she receives a magazine. She just watched Ohio's workers' compensation fund invest $50 million in rare coins, $1 million of which were inventoried badly and stolen for all practical purposes. These are examples of the need for real regulatory oversight. 3:09:50 PM MS. HALL said Alaska's marketplace is improving slowly. As an example, its assigned risk pool marketshare has gone down for the first time in a number of years to 15 percent; when she started it was at 19 percent. For the first time in eight years in 2005, Alaska's assigned risk pool did not lose money. That means it is breaking-even and it's no longer a detriment to insurers thinking about coming here to do business. On guarantee funds assessments, she said that suggestions had been made to increase those up to 4 percent, but for 2006 the guarantee fund did not do an assessment. This will take a while to appear on workers' comp policies, because it's assessed at renewal. Through a variety of means, such as really reviewing claims, looking at judicious settlements of claims and recoupments from insolvent insurer states, they have accumulated enough money, that they did not feel it necessary to do an assessment in 2006. This is another good sign in a marketplace. Thirdly, she is seeing is an increased interest in Alaska's market and she hasn't had a chance to see any effects from the 2005 reform legislation yet. That takes time to work into the system. MS. HALL said that she has seen the results of reforms in other states. In California from July of '03 to January '06 there was a 46 percent decrease in workers' comp premiums that appear to be directly related to workers' comp reform, a 60 percent decrease over what it would have been without it. Last week, she saw rates for Pennsylvania had dropped about $100 million - due to reform. Those are predominantly workplace safety reforms. She encouraged them: There are things we can do. And I would submit to you that we have not had a lot of support for work comp reform and now we have a number of groups that just want to carve themselves out of it. I think that does a disservice to businesses that don't have the ability to form self-insured groups. I would submit to you - and while I can't make amendments, I have amendments. If we really want to do something for work comp, we need to do something for the cost of the system. It doesn't matter who writes the check to pay for the claim, if it continues to escalate in cost. We had a proposal last year that was highly controversial and I thought if I was going to be controversial today, I might as well continue that. Put the A-Con guidelines in! I mean that is a proven in other states' cost saving mechanisms. Probably more realistically, I would propose you have already extended the Work Comp Task Force. That is extended through next year. And I would propose this is a topic that has been on the agenda.... There has not been any recommendation; there has not been any results. Certainly Senator Seekins could speak to that better than I. But I would propose that we put this back in where we put everything else dealing with work comp reform as opposed to passing this bill. With that, I would be happy to answer questions. An unidentified speaker asked if there was a House companion bill. CHAIR BUNDE replied yes, HB 51. 3:14:49 PM SENATOR BEN STEVENS didn't disagree with anything she said, but he said the Legislature hasn't been able to pass reform that would seriously reduce rates and has also tried to arrest the increasing rates. So, the reason he supports the bill is to support the entities that are paying the increased rates that aren't actually causing or having increased claims. He asked how else they could be given relief. 3:17:04 PM CHAIR BUNDE asked Mr. Vogel why he decided not to use licensed adjusters in his plan. MR. VOGEL replied that the original House bill did not specify a licensed examiner. He assumed that an examiner would be licensed and HB 51 has been amended to include that. CHAIR BUNDE moved to adopt conceptual Amendment 2 to require a licensed adjuster. There were no objections and Amendment 2 was adopted. MR. LISANKIE commented that he still had continuing concerns, as the person who would get the calls, with the viability of any insurance group. He was very concerned that there was no guarantee mechanism. He testified earlier that 26 percent of workers in Alaska work for the large self-insurers and that's a significant potential insurance market that is gone already and so he focused on other small population states that allow group self insurance. Six other states and the District of Columbia have populations of one million or less. Four states do not generally permit group self-insurance, but of that four, South Dakota has a bullet exception for electrical utilities (he wasn't sure why); two do allow group self-insurance, but only with a guarantee fund in one instance and a guarantee mechanism in the other; only one state, Vermont, allows group self- insurance and does not have a guarantee fund or guarantee mechanism. CHAIR BUNDE asked Mr. Lisankie to give him more details about a guarantee mechanism when the bill is in the Finance Committee and he would adjust it there. He closed public testimony. 3:22:25 PM SENATOR SEEKINS moved to pass SB 241 from committee with individual recommendations. Senators Seekins, Ben Stevens and Chair Bunde voted yea; and CSSB 241(L&C) moved from committee.