Legislature(1995 - 1996)
03/27/1996 03:11 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 27, 1996
3:11 p.m.
MEMBERS PRESENT
Representative Pete Kott, Chairman
Representative Norman Rokeberg, Vice Chairman
Representative Beverly Masek
Representative Jerry Sanders
Representative Brian Porter
Representative Kim Elton
Representative Gene Kubina
MEMBERS ABSENT
All members were present.
COMMITTEE CALENDAR
HOUSE BILL NO. 407
"An Act relating to discrimination by certain insurers against a
person with a genetic defect."
- HEARD AND HELD
SENATE BILL NO. 168
"An Act relating to financial institutions."
- PASSED OUT OF COMMITTEE
CS FOR SENATE BILL NO. 197(L&C)
"An Act relating to insurance covering an insured who is a victim
of domestic violence and requiring certain disclosures by an
insurer."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 407
SHORT TITLE: INSURING PERSONS WITH GENETIC DEFECTS
SPONSOR(S): REPRESENTATIVE(S) DAVIES, Brown, Nicholia
JRN-DATE JRN-DATE ACTION
01/10/96 2401 (H) READ THE FIRST TIME - REFERRAL(S)
01/10/96 2402 (H) LABOR & COMMERCE, JUDICIARY, FINANCE
01/24/96 2529 (H) COSPONSOR(S): NICHOLIA
03/27/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: SB 168
SHORT TITLE: FINANCIAL INSTITUTIONS
SPONSOR(S): LABOR & COMMERCE
JRN-DATE JRN-DATE ACTION
04/26/95 1253 (S) READ THE FIRST TIME - REFERRAL(S)
04/26/95 1253 (S) FINANCE
02/21/96 (S) FIN AT 9:00 AM SENATE FINANCE 532
02/21/96 (S) MINUTE(FIN)
02/21/96 2486 (S) FIN RPT 4DP 2NR
02/23/96 (S) RLS AT 10:45 AM FAHRENKAMP RM 203
02/23/96 (S) MINUTE(RLS)
02/23/96 2512 (S) ZERO FISCAL NOTE (DCED)
02/28/96 2567 (S) RULES TO CALENDAR & 2NR 2/28/96
02/28/96 2571 (S) READ THE SECOND TIME
02/28/96 2571 (S) ADVANCED TO THIRD READING
UNAN CONSENT
02/28/96 2571 (S) READ THE THIRD TIME SB 168
02/28/96 2571 (S) PASSED Y17 N1 E2
02/28/96 2571 (S) DONLEY NOTICE OF RECONSIDERATION
02/28/96 2576 (S) RECON TAKEN UP SAME DAY UNAN CONSENT
02/28/96 2577 (S) PASSED ON RECONSIDERATION Y18 N- E2
02/28/96 2578 (S) TRANSMITTED TO (H)
02/29/96 2955 (H) READ THE FIRST TIME - REFERRAL(S)
02/29/96 2955 (H) LABOR & COMMERCE, FINANCE
03/27/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: SB 197
SHORT TITLE: INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES
SPONSOR(S): SENATOR(S) DONLEY, Ellis, Salo, Duncan, Pearce,
Zharoff, Lincoln; REPRESENTATIVE(S) Davies, Robinson, Rokeberg
JRN-DATE JRN-DATE ACTION
01/05/96 2058 (S) PREFILE RELEASED - 1/5/96
01/08/96 2058 (S) READ THE FIRST TIME - REFERRAL(S)
01/08/96 2058 (S) LABOR & COMMERCE
01/16/96 2144 (S) COSPONSOR(S): DUNCAN
02/15/96 (S) L&C AT 1:30 PM BELTZ ROOM 211
02/15/96 (S) MINUTE(L&C)
02/20/96 (S) MINUTE(L&C)
02/23/96 2512 (S) L&C RPT CS 5DP NEW TITLE
02/23/96 2513 (S) ZERO FISCAL NOTE TO SB & CS (DCED)
02/26/96 (S) RLS AT 12:45 PM FAHRENKAMP RM 203
02/26/96 (S) MINUTE(RLS)
02/28/96 2568 (S) RULES TO CALENDAR & 1NR 2/28/96
02/28/96 2571 (S) READ THE SECOND TIME
02/28/96 2572 (S) L&C CS ADOPTED UNAN CONSENT
02/28/96 2572 (S) COSPONSOR(S): PEARCE, ZHAROFF,
LINCOLN
02/28/96 2572 (S) ADVANCED TO THIRD READING
UNAN CONSENT
02/28/96 2572 (S) READ THE THIRD TIME CSSB 197(L&C)
02/28/96 2572 (S) PASSED Y18 N- E2
02/28/96 2579 (S) TRANSMITTED TO (H)
02/29/96 2955 (H) READ THE FIRST TIME - REFERRAL(S)
02/29/96 2956 (H) LABOR & COMMERCE, FINANCE
03/18/96 (H) L&C AT 3:00 PM CAPITOL 17
03/18/96 3186 (H) CROSS SPONSOR(S): DAVIES
03/20/96 (H) L&C AT 3:00 PM CAPITOL 17
03/20/96 (H) MINUTE(L&C)
03/22/96 (H) L&C AT 3:00 PM CAPITOL 17
WITNESS REGISTER
JOHN DAVIES, Representative
Alaska State Legislature
State Capitol Building, Room 422
Juneau, Alaska 99801
Telephone: (907) 465-4457
POSITION STATEMENT: Presented sponsor statement on HB 407.
MICHAEL L. LESSMEIER, Attorney
State Farm Insurance Company
Lessmeier & Winters
One Sealaska Plaza, Suite 303
Juneau, Alaska 99801
Telephone: (907) 586-5912
POSITION STATEMENT: Opposed HB 407; testified on SB 197.
GORDON E. EVANS, Lobbyist
Health Association of America
Law Offices of Gordon E. Evans
318 Fourth Street
Juneau, Alaska 99801
Telephone: (907) 586-3210
POSITION STATEMENT: Opposed HB 407.
SHANNON McCARTHY, Legislative Assistant
to Representative John Davies
Alaska State Legislature
State Capitol Building, Room 422
Juneau, Alaska 99801
Telephone: (907) 465-4457
POSITION STATEMENT: Testified on HB 407.
JOHN L. GEORGE, Lobbyist
American Council of Life Insurance and
National Association of Independent Insurers
3328 Fritz Cove Road
Juneau, Alaska 99801
Telephone: (907) 789-0172
POSITION STATEMENT: Testified on HB 407.
WILLIS F. KIRKPATRICK, Director
Division of Banking, Securities and Corporations
Department of Commerce and Economic Development
P.O. Box 110807
Juneau, Alaska 99811-0907
Telephone: (907) 465-2521
POSITION STATEMENT: Provided department's position and answered
questions regarding SB 168.
BECKY ACHTEN, Children's Counselor
Aiding Women from Abuse and Rape Emergency (AWARE)
P.O. Box 22115
Juneau, Alaska 99802
Telephone: (907) 586-3480
POSITION STATEMENT: Supported SB 197.
DAVE DONLEY, Senator
Alaska State Legislature
State Capitol Building, Room 11
Juneau, Alaska 99801
Telephone: (907) 465-3892
POSITION STATEMENT: Provided sponsor position on amendments to
SB197.
ACTION NARRATIVE
TAPE 96-30, SIDE A
Number 0001
CHAIRMAN PETE KOTT called the House Labor and Commerce Standing
Committee to order at 3:11 p.m. Members present at the call to
order were Representatives Kott, Rokeberg, Sanders, Porter and
Elton. Representatives Kubina and Masek joined the meeting at
3:13p.m. and 3:15 p.m., respectively.
HB 407 - INSURING PERSONS WITH GENETIC DEFECTS
Number 0066
REPRESENTATIVE JOHN DAVIES, sponsor of HB 407, said the bill was an
attempt to anticipate problems down the road, rather than a
response to an existing crisis. It was patterned after similar
legislation adopted in California. He read from the sponsor
statement:
"Genetics, as you know, have the potential to bring a great deal of
good to humankind, through disease prevention, early detection, and
new disease treatments (for example, gene therapy). Researchers
continue to narrow down genetic indicators of diseases and as of
today have identified over 4,000 single-gene disorders. A person
may have predictive screenings for many of these disorders, as of
today. However, a person who has a genetic marker may not ever
develop the disease, nor does it indicate the person's current
health." Representative Davies added that in many cases, given the
gene marker, the probabilities for developing a disorder were
unknown.
REPRESENTATIVE DAVIES continued: "Although insurance
discrimination based on genetic information is not known to be
widespread, it will be a tempting area for competitive insurance
companies to identify high risks and cut costs. In essence, it has
the potential of becoming the 21st century's version of a `pre-
existing condition.' In order to address this policy question
before any abuse is widespread, I have introduced HB 407. This
bill would prohibit insurance companies that operate in the state
of Alaska from discriminating on the basis of genetic information.
Arizona, California and Florida have already adopted similar
statutes."
Number 0228
MICHAEL L. LESSMEIER, Attorney for State Farm Insurance Companies,
stated, "We don't currently order genetic testing. We don't use
it. We don't have any plans to use it. We're not aware of anyone
that is using it in Alaska. It's another one of these bills that
you are being asked to legislate for a problem that doesn't exist,
and we don't have any evidence that it's going to exist. At this
point, we don't know how this kind of testing could be used in the
future. For example, we should be able to, we think, or the health
care people should be able to, inquire as to a person's background,
whether they have a history of cancer, whether they have a history
of high blood pressure. Those are legitimate things to rate for.
And it's hard to imagine how this information might be used in the
future or what it would cover."
MR. LESSMEIER continued, "We don't even know if it would prevent
underwriters from considering those legitimate risk factors. And
what you do, if you're not able to consider risk factors like that,
you essentially end up treating everyone the same. In other words,
some people that don't have those risk factors would pay more than
they would otherwise pay. And I think the people that represent
the health insurers certainly know more about this issue and the
potential problems than do I. All I want to say to you is that we
want to be able to, even though we have no plan to use this
technology now, we want to be able to see what will develop some
time down the road. And if there is not a problem now and there
isn't a foreseeable problem, the question is why should we
legislate in this area right now. We don't think there's a need
to."
Number 0431
REPRESENTATIVE KIM ELTON read from a one-page article from the
Stanford Observer, which quoted Nobel economist Kenneth Arrow as
saying, "There are a few examples now, and very possibly, as the
human genome project progresses, we will have people who are
uninsurable at birth because they already have a high probability
of very costly diseases." Representative Elton noted that Arrow
stated a view opposite to Mr. Lessmeier's.
MR. LESSMEIER restated earlier comments and said, "You could always
legislate based on the possibility of something happening. We
think you ought to legislate based on what we know is happening.
That's our point."
Number 0517
CHAIRMAN KOTT suggested if someone were aware of a defect that
would inevitably cause multiple claims or even, further into the
future, death, it would be in that person's interest to approach an
insurance company and ask for insurance. Subsequently, based on
the risk, the company could pass along the premiums to everyone
else that it insured.
MR. LESSMEIER responded, "I think that's true. And the best
example of that is, for example, HIV. If somebody's HIV-positive,
should they be able to spread that risk across society in general?
And that is a debate, certainly. I think right now we're allowed
to ask questions about smoking history, about cancer history, about
personal health history in the family. And that is what allows one
to underwrite. And so the question really is, are you going to
take all of the issues away, one by one by one? And so, there
really is no underwriting. What we end up having is ... you insure
everybody the same. And that really is the question."
Number 0636
CHAIRMAN KOTT asked what State Farm's current practice was
regarding insuring individuals with cancer or who had tested
positive for HIV.
MR. LESSMEIER indicated State Farm had permission in Alaska to
conduct an HIV test that was taken into consideration. However, he
did not know what the result would be.
Number 0686
CHAIRMAN KOTT asked whether the insurance company could reject an
applicant who tested positive for HIV.
MR. LESSMEIER replied yes.
Number 0705
REPRESENTATIVE GENE KUBINA asked who would pick up the tab for
people unable to get insurance.
MR. LESSMEIER said, "In reality right now, what happens is we have
a catastrophic health care program that was passed by the
legislature a number of years ago. And I think you folks are
debating the problems with that in terms of funding with that.
That is a problem."
REPRESENTATIVE KUBINA responded, "In other words, we pay for it, as
a state."
MR. LESSMEIER replied, "I think ultimately society, in general,
pays one way or the other. I don't think there's much question
about that. For example, if somebody goes out to the hospital and
doesn't have the ability to pay at the hospital, I think we all pay
higher medical cost care because of that. It just is a question,
largely, of how you want to shift that risk."
Number 0780
CHAIRMAN KOTT suggested if individuals who tested HIV positive, for
example, had to be accepted as applicants, either everyone's
insurance rates would increase or the insurance company would
ultimately go out of business, leaving a number of uninsured.
MR. LESSMEIER responded, "I think you're right."
Number 0853
REPRESENTATIVE ELTON said if the use of genetic markers was allowed
to test a person's disposition to disease, there might be
significant cost shifting from the private insurance industry to
the state or federal government as high-risk people were taken out
of the private pool. He believed that was a significant decision.
Currently, insurance was based on large pools; the larger the pool,
the lower the cost was. He suggested allowing that pool to shrink
through use of genetic markers would allow the "cream" to go to
private industry, with the cost shifting to the government.
Number 0974
MR. LESSMEIER said that already occurred, in a sense, through
lifestyle decisions and luck of the draw. The question was whether
a company should be able to rate for those particular qualities
that a person had. Mr. Lessmeier reiterated that it did not appear
to be a problem in Alaska.
REPRESENTATIVE ELTON responded, "The other way of doing that is we
can say no to use of genetic markers. And then, if it becomes a
problem, we can come back and change [it]."
MR. LESSMEIER said it was solving something that was not a problem.
Number 1072
REPRESENTATIVE KUBINA asked about Mr. Lessmeier's assertion that
testing was not used in Alaska.
MR. LESSMEIER replied, "I don't think we use it anywhere."
Number 1115
GORDON EVANS, Lobbyist, Health Insurance Association of America
(HIAA), said HIAA was a trade association of commercial health
insurance companies providing health insurance for approximately 55
million Americans. He expressed that there was no evidence health
insurers now use genetic tests in underwriting or that they have
plans to do so. Mr. Evans said there is simply no reason to use
genetic tests. They are not now widely available, their cost is
prohibitive, and information generated from them is limited at
best.
MR. EVANS suggested much of the information from genetic tests
could be gathered by an insurance company more directly and less
expensively by, for example, asking about personal and family
medical history. "An individual's overall insurability takes into
account all relevant and known health information," he said.
"Insurers need to know facts about an applicant for coverage that
will enable the insurer to estimate the applicant's chances of
suffering a serious illness. If an individual knows something
about himself that an insurer cannot know ... such as the
possibility that he has or may have an asymptomatic genetic
characteristic - and that ... can include something like diabetes,
heart conditions, and so forth -the individual, if he doesn't give
that information to you, is in a position to strike an unfair
bargain with the insurer. In other words, the applicant would be
able to purchase coverage at standard rates when he in fact
represents a greater-than-average risk."
MR. EVANS said this would confer a preferred status on those with
known or possible genetic diseases and would discriminate against
most Alaska individual insurance consumers. He emphasized that the
discussion related to individual policies, because in a group
policy, each individual is not rated. Individuals who currently
pay an extra premium because of some health risk that is not
genetic in nature would be unfairly treated, since a similar
premium would not be required of those with an asymptomatic genetic
characteristic. Insurers are already subject to state laws that
mandate fairness in classifying health insurance applicants, Mr.
Evans said, adding, "There is simply no evidence that insurers are
doing otherwise. House Bill 407 is a good example of unnecessary
legislation."
Number 1309
MR. EVANS referred to the high-risk pool enacted several years
earlier by the legislature and said to his knowledge there were
only two people in that statewide pool right now. The insurance
companies paid for that, not the state, he said, with the cost
spread to all the companies. Aetna had raised a question because
they paid the biggest portion of those costs, since they had the
largest share of the health insurance business in Alaska. Mr.
Evans noted that Blue Cross and Aetna had over 70 percent of
Alaska's health insurance business currently. "And my companies
take up much of the other 30 percent, then," he added.
Number 1378
REPRESENTATIVE NORMAN ROKEBERG suggested there were closer to 190
members of the Comprehensive Health Insurance Association (CHIA)
program.
MR. EVANS apologized and said Representative Rokeberg was correct.
He said the two people were in the small insurance group program
enacted three years ago. There were 190 in CHIA, with costs spread
among the companies.
Number 1438
REPRESENTATIVE KUBINA asked who paid when uninsured people went to
hospitals. He asked if Medicaid or other government programs
covered that.
MR. EVANS replied, "If they're eligible for Medicaid, yes."
However, a hospital would absorb the cost for those who were
uninsured, he said, adding, "Of course, then, that spreads around
to everybody else who is insured, who end up paying higher
premiums."
REPRESENTATIVE ROKEBERG said about 30 percent of people were
uninsured nationwide. He asked what that percentage was in Alaska.
MR. EVANS said he did not know. "Several years ago, when the
Senate was considering some of the programs that Senator Duncan had
put forward in the joint task force, I think at that time they
thought that only about 20-some percent of the people in Alaska
were uninsured," he said. He said it was difficult to determine
that figure.
Number 1488
REPRESENTATIVE PORTER referred to the definition for "asymptomatic
genetic characteristic" on page 2, lines 6-10, and suggested that
having a condition known to cause disease or disorder was a
reasonable basis for assessment.
MR. EVANS replied, "Exactly." He indicated that was why insurance
companies said if a person had a high-risk factor, the company must
be able to know and consider that, among all the factors they
consider, when they were going to underwrite somebody. Mr. Evans
told Representative Davies, "I think your statement that California
has passed this legislation is partially correct. It was vetoed by
Governor Pete Wilson." He noted that the state of Wisconsin did
have a version of it.
Number 1564
CHAIRMAN KOTT asked how broadly genetic testing was used.
MR. EVANS responded, "My people say they don't know of it going on.
It may be. But it's hard to say. Medical research is improving
day after day." He informed the committee he had provided the
Stanford Observer article. "There are people that are doing it in
medical research," he said. "But the insurance companies are not
using it right now. Doctors are not calling for it on a mass level
right now." He suggested the cost could range up to $1,000 per
test or more. "The insurance companies don't want to get involved
in that because they'd be expecting to have to pay for it," he
added.
CHAIRMAN KOTT asked who he would contact or what the process would
be if he, for example, wanted to be genetically tested.
MR. EVANS said he could not provide an exact answer. He suggested
a person's doctor could put him or her in touch with a specialist.
Number 1622
REPRESENTATIVE PORTER referred to discussions of "DNA bills" over
the past couple of years and expressed his understanding that
testing for Alaskans was done out of state. He indicated the cost
range was $300 to $1,000, the latter for full-spectrum tests.
REPRESENTATIVE KUBINA pointed out that a person who did not know
about a genetic defect could get insurance. "But if you know about
it and then you don't inform, that is where the problem comes," he
said.
Number 1674
REPRESENTATIVE ELTON wondered if a person could get a price break
if genetic testing revealed no predisposition to a disease and that
information was provided to the insurance company.
MR. EVANS said, "You'd probably be the average person."
CHAIRMAN KOTT concurred. He asked about Wisconsin's similar
measure.
MR. EVANS replied it had been defeated twice in Wisconsin before
becoming law in 1992. He indicated Wisconsin, like Minnesota, had
"adopted every known mandate there is" relating to health care.
Number 1735
CHAIRMAN KOTT asked if research suggested any state that had passed
such a measure had seen an increase in the number of applicants who
may have been tested.
MR. EVANS replied there were no studies he knew of. The laws in
the three relevant states, passed in 1992 or 1993, were too new to
have developed statistics, he said.
Number 1763
REPRESENTATIVE JERRY SANDERS asked if any insurance company had
ceased doing business in a state that had enacted such a law.
MR. EVANS offered to find out.
CHAIRMAN KOTT asked if Mr. George, who had left the meeting,
planned to return to testify. He then closed public testimony.
REPRESENTATIVE DAVIES asked Shannon McCarthy to relate her
experience with genetic testing.
Number 1821
SHANNON McCARTHY, Legislative Assistant to Representative John
Davies, said she got food poisoning from a local restaurant three
years before. A particularly bad case, it turned into blood
poisoning. Seven days after recovering, she developed an
excruciating pain in her lower back that prevented her from
walking. Subsequently, she took a gene test and discovered she had
a gene called HLA B-27 that in rare instances could cause reactive
arthritis.
MS. McCARTHY expressed that it was useful to know she had arthritis
and how to recover, and the test had only cost $100. "My interest
in this bill is I want people to be able to pursue gene tests if
they think that they might have a genetic characteristic, so that
they could take preventive measures," she said. With over 4,000
single-gene disorders identified already, she believed there was
potential for a lot of good. She would hate to see people fear
taking those tests, she concluded.
CHAIRMAN KOTT asked if that test was done in Alaska.
MS. McCARTHY replied it was done at the Juneau Urgent Care and
Family Clinic. The test was sent out of state and took about one
week to get back.
CHAIRMAN KOTT asked if she was insured at the time.
MS. McCARTHY replied she was not.
CHAIRMAN KOTT asked if it affected her insurability.
MS. McCARTHY said luckily, the arthritis had gone away. "However,
if I got food poisoning again that became blood poisoning again, I
could very well have a bout of arthritis again," she stated.
Number 1954
REPRESENTATIVE KUBINA asked if she felt required, in filling out an
insurance form, to list that information.
MS. McCARTHY replied she had never been asked to list what genes
she had on a form.
REPRESENTATIVE KUBINA suggested the question might ask if she had
any prior known symptoms or pre-existing conditions. He asked if
this would be something she would have to reveal.
MS. McCARTHY replied, "I would have to say yes, because I actually
developed the condition. If I had just been tested for this gene,
I don't know." She indicated it was a rare instance, as the
majority of people with the gene would never develop the disease,
which was the case with most genes.
REPRESENTATIVE KUBINA said obviously this was the dilemma. If the
technology was there, then what was the responsibility of the
person once they knew, he asked. He stated that he had not
understood the reason for the bill until Ms. McCarthy spoke.
Number 2035
REPRESENTATIVE DAVIES responded to comments at the hearing. He
said the bill raised a question about the nature of insurance,
which was currently handled in a bifurcated way. So-called normal
people came under the private system. The ones that were
catastrophic, such as HIV or other high-risk situations, were
handled through high-risk pools that were largely subsidized. And
then people who were uninsured were also subsidized through various
mechanisms of feeding back to normal insurance policies, Medicare
programs and the state legislature's general fund budget, he said.
REPRESENTATIVE DAVIES noted it was a hybrid system and said the
question was whether to continue down that road. "As science
advances and our information about diseases becomes more and more
complete, and our ability to predict people's health futures
becomes better and better, we're going to get into a dilemma," he
said, suggesting that if the information was sufficient, a
situation could develop where insurance did not work at all and
individual people would be back to paying for exactly what their
health care costs were. "They're going to be so varied ... and
extremely varied that we'll go back to some kind of societally
modulated system, which will be some new form of insurance,"
Representative Davies said. "That's ... the path that we're
heading down and which I'm trying to forestall, for at least some
period of time, with this bill."
Number 2131
REPRESENTATIVE DAVIES believed that for the insurance companies to
say nothing should be done until there was a problem was analogous
to arguments about placing a traffic light at an intersection. He
referred to information in the committee packet discussing near-
misses and cases where people became uninsurable. In addition to
states that had enacted laws, 12 others were considering similar
legislation. He asked committee members to read the examples
provided, which he attributed to abuse of the circumstance in
question.
Number 2215
REPRESENTATIVE DAVIES pointed out that development of a disease
based on genetic factors was the exception, not the rule. Thus, it
was not in the same category as a pre-existing condition or family
history, he said. It was also different from smoking, for example,
which was voluntary and for which he believed insurance companies
should charge higher rates. He noted that many genetic tests cost
around $100, which was one of the reasons he had asked Ms. McCarthy
to testify. He thought there should be a moratorium on insurance
companies using this type of discrimination until the companies
could demonstrate there was a problem. "As a general rule, we
should be erring on the side of protecting the citizens from this
kind of discrimination," he concluded.
Number 2332
REPRESENTATIVE PORTER suggested the traffic light analogy supported
his argument against the bill, as well. He said traffic lights
often were put up as a result of a single incident. He agreed the
bill asked a fundamental question about insurance. However, he
viewed it as cutting out what could potentially be a gigantic
element for appropriately determining risk, which was the way
insurance worked.
CHAIRMAN KOTT said he somewhat agreed. "It is a direct policy
change," he said. "Insurance is a mechanism whereby people may act
to minimize losses which occur [from] basically unexpected events.
It's a pretty simple mechanism if you look at it from a broad
perspective. A large number of people pay relatively small
amounts, which, when aggregated, are sufficient enough to cover
relatively large losses suffered by some of the insured. Plus,
there is some profit built into the system for the carrier. And in
order for this system to work, it is necessary, I believe, for the
carrier to accurately assess their risk and to assign higher
premiums based on the risk." He noted this bill took a different
approach. Chairman Kott invited John George to testify.
Number 2453
JOHN L. GEORGE, Lobbyist, American Council of Life Insurance (ACLI)
and National Association of Independent Insurers (NAII), apologized
for being late. He said it was possible to come up with one rate
for everybody. As the ability for an insurance company to select
diminished, the rates became more homogenous.
TAPE 96-30, SIDE B
Number 0001
MR. GEORGE said DNA testing was new. He suggested it was possible
that almost any propensity could be related to genetics.
Therefore, if questions about family history were in fact genetics-
related, those questions could no longer be asked to determine
rates if the bill were enacted.
CHAIRMAN KOTT asked how various companies would use information on
an individual's lineage and family medical history. He asked if a
person revealing a particular medical history would be rejected or
put into a different pool or assigned a higher premium.
MR. GEORGE replied that he did not know. He offered to find out.
Number 0118
REPRESENTATIVE DAVIES asked who paid for uninsured people who, for
example, showed up at hospital emergency rooms.
MR. GEORGE responded, "Directly, if they're uninsured, they're
responsible for their own debts. And I assume from your question
that we're talking about people who are unable to pay their own
bills. Then, the hospital, in theory, would eat that. But we all
know that they aren't going to lose the money. Therefore, they
raise everyone else's rates and the insurance companies are paying
for worker's comp injuries. Blue Cross, Aetna [and] others are
paying those."
Number 0199
REPRESENTATIVE DAVIES said he thought that was an example of the
situation that would be developing in Alaska. "We're all paying
more because people aren't taking care of their health care costs
in an earlier stage of disease or in a more appropriate way," he
said, "so that we get into a catastrophic situation. People show
up at the emergency room. And ... we pay for it one way or the
other. And what I'm suggesting is that we're paying for it in a
more expensive way now than we would if we had dealt with it up-
front. And I think that the same kind of argument applies to the
case ... of genetic testing. To the extent that we will discourage
people from testing and finding out at an early stage what's going
on with them, ... we will be driving costs up."
REPRESENTATIVE DAVIES reiterated that the vast majority of
asymptomatic genetic characteristic situations did not become
symptomatic. He believed it was still in the realm of the way
insurance was currently handled. The cases involved were
relatively rare and because of lack of information and
understanding were viewed as random events, which they probably
were not. He believed those situations should remain in the
insurance pool for some period of time, so that people were
protected in the meantime, as this information became more
available. It would not do damage to the insurance companies, he
said, nor would it discourage people from taking the tests.
Number 0260
MR. GEORGE said life insurance, in particular, was transportable
from state to state but that the rates might differ. He suggested
people could travel to another state to buy policies, which could
work to the detriment of Alaskans who did not do so. He expressed
that such basic policy issue needed to be looked at on a national
basis. He emphasized the early development of DNA testing and said
the answer might be more obvious later on.
CHAIRMAN KOTT asked whether the Aetna group offered individuals an
opportunity to use their policy for genetic testing.
MR. GEORGE replied he had no idea. "Aetna is a member of the
American Council of Life Insurance, whom I am speaking for, for I
don't speak for them specifically," he said, noting that Reed
Stoops was Aetna's lobbyist.
Number 0370
REPRESENTATIVE ELTON expressed that the problem was beyond the
realm of theory. He referred to Ms. McCarthy's pre-existing
condition, which she would not have known about if not for genetic
testing. Representative Elton said a responsible business would be
looking at ways to increase profits. If genetic testing could do
that by taking high-risk people out of the pool, he guessed
insurance companies might use it. He thought the bill would create
no problem but might prevent one.
REPRESENTATIVE PORTER believed there was no great concern that
someone would not want a genetic test, except for the bad news it
might impart.
Number 0597
REPRESENTATIVE ROKEBERG complimented the sponsor but expressed
concern about the unanimous lack of support on the part of the
insurance industry. "And what concerns me about the health
delivery systems in this state is the lack of representation in
this state of health insurance companies," he said. "Although
there are a number of companies that are registered with the state
and do write policies up here, the power and concentration is with
two primary firms. And I am very concerned about beginning to
provide cost-effective policies, particularly for individuals. We
heard testimony here that when this is an inability to rate, and if
there's rating problems, it really goes against individual policy
holders, not group policy holders."
Number 0673
REPRESENTATIVE ROKEBERG referred to CHIA, which was under
substantial financial pressure, and said, "That particular high-
cost organization, which is fully funded by the insurance companies
that move into the state, is going to be enough of a barrier and an
obstacle for the invitation of health insurance underwriters to
come into the state of Alaska. So, I'm concerned that by putting
Alaska on the cutting edge of this type of thing, that we're going
to be sending the wrong message to the people. And that would have
a negative impact on the availability of health care insurance for
the people of the state right now." He suggested the idea needed
to age and mature like a good bottle of wine.
Number 0756
CHAIRMAN KOTT expressed the desire to hold the bill to hear
testimony from the Division of Insurance on potential ramifications
and responses by Mr. George on questions raised. "I do think there
potentially is a problem out there brewing," he said, "and it's
certainly, I think, a unique opportunity to bring this issue to the
table and open it up for debate. I applaud the sponsor for doing
that."
SB 168 - FINANCIAL INSTITUTIONS
CHAIRMAN KOTT brought SB 168 before the committee and noted it was
a banking issue resulting from the Riegle-Neal Interstate Banking
and Branching Efficiency Act passed by the federal government.
Number 0847
WILLIS F. KIRKPATRICK, Director, Division of Banking, Securities
and Corporations, Department of Commerce and Economic Development
(DCED), provided a brief history. Some major national and
international banks had, for the past ten years, pushed for
breaking down the barrier of state boundaries. In 1994, they were
successful in getting the U.S. Congress to pass the Riegle-Neal
Act, which gave states until 1997 to opt into or out of interstate
branching.
MR. KIRKPATRICK explained SB 168 had nothing to do with whether or
not there would be interstate banking or branching in Alaska.
"That was taken care of when we recodified the banking code," he
said. "But we were advised that the Riegle-Neal had some other
aspects about it that Alaska should address. And that is what is
before us now. They're part of the Riegle-Neal bill that will
become effective January of 1997, unless the state of Alaska does
something about it."
Number 0955
MR. KIRKPATRICK referred to the first of three sections, which
addressed agency powers. He explained, "And what this means is
that ... if a national bank put a branch across the street from a
state-chartered bank and offered all the powers that that national
bank had through its national organization across the continental
United States, the state-chartered bank, the small independent bank
across the street, could become an agent for another bank someplace
in the continental United States to provide the same services as
that particular branch of the national in-state branch coming into
the state of Alaska. So, ... it provides for the ability of the
state-chartered banks existing in the state of Alaska to be
competitive with any out-of-state branch bank coming in the state."
Number 1011
MR. KIRKPATRICK referred to Section 1(g) and said although a bank
could ask and get permission to perform agency powers, it could not
do anything illegal under state or national law. "If the bank is
a part of a bank holding company system, you would have the Federal
Reserve limitations, you would have FDIC limitations and state
limitations, but at least the competitor across the street would
have the same limitations," Mr. Kirkpatrick explained. "So, it
provides for an even playing field as far as the state-chartered
banks being competitive with the interstate branches in their
business community."
Number 1068
MR. KIRKPATRICK referred to the limitation on concentration found
in Section 2. "To give you an example, Wells Fargo is in the
process of purchasing First Interstate Bank of Alaska," he said.
"If Wells Fargo purchased Interstate Bank of Alaska and NBA and
First Bank of Anchorage, there would be a high concentration of
insured deposits under the control of one financial institution."
MR. KIRKPATRICK cited an example from Washington state where Bank
of America, Seafirst and Rainier had 73 percent of the state's
deposits under one controller. The Washington attorney general's
office introduced an anti-trust bill as a result. "So, what
Riegle-Neal did was said that the states have until January of 1997
to make a determination as to what that level would be," Mr.
Kirkpatrick said. "If the states did not make a decision, that
level would be set by, and preempted by, Congress at 37 percent."
MR. KIRKPATRICK recounted that he asked the Alaska Bankers
Association whether it should be left at 37 percent. "It was the
bankers that came up and said that 50 percent would be a good
figure," he said, indicating anything that would result in an
acquisition of over 50 percent of insured deposits by an outside
entity would be prohibited. "To give you an example of where we
are now, I think NBA itself has probably between 25 and 30 percent
of insured deposits in the state of Alaska," he said. "So, it was
decided that we would put a level of concentration at 50 percent.
Everybody seems to agree. I have no problem with that. We find
that other states would generally not have problems with that."
Number 1245
MR. KIRKPATRICK referred to Section 3 and said a "depository
institution" in the Alaska Banking Code or Title 6 was generally
defined as an institution whose deposits are insured by an agency
of the federal government.
MR. KIRKPATRICK referred to Section 4 and said it was needed by the
state to communicate with other states on confidential information
concerning banks and branches across state lines. "This is not
foreign to the state of Alaska because Key Bank has several banks
throughout the continental United States, and we have a
responsibility to try to make a determination as to what the
condition of the holding company is that owns and controls its
subsidiary banks," he said. "This section of law allows us to ...
exchange information to other jurisdictions where we have an
interest in the safety and soundness of our institution and they
have an interest in the safety and soundness of their institution
in another jurisdiction who has branches in our state."
Number 1331
CHAIRMAN KOTT referred to Section 1, in which a number of time
lines were established, whereby if DCED did not act, a request
would be considered approved. He asked Mr. Kirkpatrick to comment
on whether 60 days was sufficient time.
MR. KIRKPATRICK replied, "On the general banking business and
banking services that are within the laws of the state and the
federal government, we generally know about those. Now, we would
be able to respond very quickly. If somebody wanted to set up a
service that would be real estate owning and managing, we would be
able to say immediately that we would probably want to have more
information on that, what is your expertise, what is your risk.
So, we generally know what the service field is. So, when somebody
makes an application for us, with the institutions that we know, we
think that 60 days is ample time to respond."
Number 1415
CHAIRMAN KOTT referred again to Section 1, which said the
department shall give appropriate notice to the public. He asked
what that notice contained and what parameters DCED operated under
relating to public notice.
MR. KIRKPATRICK responded, "Every time we do something ... under
Title 6, especially the banking code and the administrative chapter
of Title 6, ... we try to inform the public. To give you an
example we're processing right now, a trust company is coming into
the Anchorage area. Now, we're not required by statute to give
public notice, but we are going to put in the Anchorage paper, and
probably the Fairbanks paper - and I don't know about Southeast -
but we are going to say what's going in, who they are, and where
they're going to be, and where to respond if you have any comments
or questions. So, we try to do that, just administratively. And
we will do the same with this. As a marketing tool, the financial
institution is going to do it way before us, probably. But as the
process, we will place a public notice advertisement saying this is
the action that we're considering."
CHAIRMAN KOTT asked if it was done on a regional basis or
statewide.
Number 1506
MR. KIRKPATRICK replied it depended on the application. "If, for
example, the bank is saying that they were going to offer these
services in Fairbanks, the Anchorage [area], part of the Interior
and Southeast, we would do the publications on a statewide basis,"
he said.
CHAIRMAN KOTT asked how long the public comment period was open.
MR. KIRKPATRICK replied, "We would hold it open for 30 days. We
would always extend the 60 days if there was any question. In
other words, if we ... felt that the public needed to comment, we
would extend the 60-day period for that period of comment."
CHAIRMAN KOTT asked if that was for written comments or whether
there was a public hearing.
MR. KIRKPATRICK stated, "On any protest or concern, we will offer
a public hearing."
CHAIRMAN KOTT asked if it was a fair assessment that Section 1
offered Alaska's banks a more competitive arena for operating.
MR. KIRKPATRICK replied, "That's the sole purpose of this section."
Number 1583
REPRESENTATIVE ROKEBERG asked about the effect of the preemption.
He noted it was a federal preemption and asked if there was a
specific, codified dictate in the federal statute that would have
to be adopted if Alaska did not preempt it.
MR. KIRKPATRICK replied, "The Riegle-Neal bill sets out what there
will be. And so, if we don't take action on this preemption, there
will be -- not be agency powers for the ... state banks. There
will be agency powers for the national banks. There will be
interstate branching for national banks and there will not be
interstate branching for state banks, as far as the services are
concerned." Mr. Kirkpatrick then said he had misspoke and that
Alaska statute provides for interstate branching now. "If we don't
pass this, I'm restricted as ... to what information I can give to
other jurisdictions," he said. "I can share information with the
FDIC and the Federal Reserve but I can't share information with
other state jurisdictions."
Number 1656
REPRESENTATIVE PORTER referred to Section 1(g), which said a state
bank may not, under an agency agreement, provide by itself through
an agent an activity that the state bank may not conduct under
applicable state and federal law. Representative Porter asked:
"Well, if it can't, what is it having the agreement to do?"
MR. KIRKPATRICK offered an example. Alaska Bank of Commerce had
decided to provide services for which is did not have expertise.
They cut a deal with someone from First Interstate that resulted in
Alaska Bank of Commerce becoming a franchise of First Interstate
Corporation of California. The sole purpose was to offer services
in Anchorage under the name Interstate Bank of Alaska. Mr.
Kirkpatrick concluded, "And so, what this will do is give the small
community bank an opportunity to be an agent for expertise outside
the state of Alaska."
Number 1768
CHAIRMAN KOTT referred to Mr. Kirkpatrick's comment regarding the
50-percent-or-more concentration of deposits. He asked what other
states were doing and whether their limits were higher, lower, or
flexible.
MR. KIRKPATRICK replied, "Other states have not found any
particular problem with the 50 percent. As you're a larger state,
and with a larger number of financial institutions, you find
actually that the percentages go down. So, it would be closer to
the 37 percent. In the smaller states, it doesn't take too much to
build up that concentration very quickly. We felt that 50 percent
would be appropriate for the state of Alaska. We've had a great
deal of concentration in the last 20 years."
Number 1849
CHAIRMAN KOTT referred to the sectional comments, the last sentence
of which read, "Without action by the end of this session, the
preemptive provision of the Riegle-Neal Act become effective." He
asked if that was accurate.
MR. KIRKPATRICK replied he believed it was January 1, 1997.
CHAIRMAN KOTT indicated that was something to think about for
prioritizing.
Number 1919
REPRESENTATIVE ELTON moved that SB 168 move from committee with the
attached zero fiscal note and individual recommendations. There
being no objection, it was so ordered.
SB 197 - INS: DOMESTIC VIOL. VICTIMS & DISCLOSURES
CHAIRMAN KOTT brought SB 197 before the committee and noted it had
been heard before. He opened public testimony for Becky Achten,
who had not testified previously.
Number 1982
BECKY ACHTEN, Children's Counselor, Aiding Women from Abuse and
Rape Emergency (AWARE), testified in support of SB 197. She
stated, "I've read that half of the 16 major insurance companies
use domestic violence as a criteria to deny coverage or increase
rates for victims. This says to me that insurance companies
recognize the economic cost of domestic violence in this country.
But in order to resolve this economic problem, insurance companies
re-victimize the victim. Failure to pass this bill in a form which
ensures its intent to protect victims of domestic violence from
discrimination, which would deny them medical coverage or raise
their rates, is also a re-victimization. The problem is domestic
violence. The question is: Are we going to recognize the gravity
of this problem by allowing insurance companies to deny coverage to
victims, or are we going to address the problem [of] domestic
violence and support Senate Bill 197 and others before you aimed at
protecting victims, perhaps protecting them before they are
injured? Shame on the insurance companies for denying coverage or
raising their rates to those who have suffered injuries. I invite
them to join and unite and address the root cause of the problem,
domestic violence."
CHAIRMAN KOTT noted there was a committee substitute that had not
yet been adopted as a work draft, which added "or as required by
the division of insurance" at the bottom of page 1.
REPRESENTATIVE PORTER pointed out there were additional changes.
CHAIRMAN KOTT called an at-ease at 4:43; the meeting resumed
shortly thereafter.
Number 2181
REPRESENTATIVE KUBINA moved that the committee adopt the work draft
for SB 196, version M, dated 3/26/96.
REPRESENTATIVE ROKEBERG objected for purposes of discussion.
REPRESENTATIVE PORTER noted that Chairman Kott had mentioned the
addition on page 1. He said the major change was a suggestion he
had worked out with the sponsor, which changed the disclosure
requirement. Instead of an insurance company being required to
automatically provide that information upon denial, the company
would advise anyone they denied of their right to have that
information and if they received written notification, provide it.
Number 2332
REPRESENTATIVE ROKEBERG withdrew his objection.
CHAIRMAN KOTT noted the committee substitute for CSSB 197, version
M, dated 3/26/96, was before them.
Number 2353
REPRESENTATIVE ROKEBERG offered an amendment, which read:
Section AS 21.36 is amended by adding new sections to read:
Sec. 21.36.430 INSURANCE FOR DOMESTIC VIOLENCE VICTIMS;
(a) An insurer offering life, disability or health
insurance in Alaska may not discriminate against a victim of
domestic abuse based on an individual's status as a victim of
domestic abuse. This prohibition shall not prevent an insurer
from underwriting or rating for a medical condition in the
same manner as they would for an insured or applicant who is
not a victim of domestic abuse.
(b) This section applies only to an insured or applicant
for insurance.
(c) An insurer is granted immunity for criminal or civil
liability resulting from compliance with this statute.
REPRESENTATIVE ROKEBERG stated he had provided letters from eight
or nine insurance companies throughout the country. "This was an
amendment that was in Mr. Lessmeier's letter, I believe, of
March15," he said, commenting that was in the packet and
duplicated a recommendation by State Farm. "We've heard testimony
from the bill sponsor that he does not care for this language," he
said. "But we also heard testimony in this committee that the
insurance industry was duly informed, and so forth, and had no
objections to this bill. And the letters you have in hand directly
oppose what that testimony was. And I'd like to take exception to
that." He listed the insurance companies that had provided
letters.
TAPE 96-31, SIDE A
Number 0001
REPRESENTATIVE ROKEBERG said, "What we don't want to do, I think,
particularly, and that's our charge in this committee, is to
provide additional burdens on the insurance industry that are not
called for by any other type of classification of citizenry in this
country. This is an extraordinary demand and I don't think we need
to do that to accomplish the purpose of this bill. And I
particularly take exception to the fact that ... the insurance
industry was duly represented at this table or in the Senate,
because to my knowledge, they weren't. And these letters speak for
that case. So, that's why I'm bringing the amendment. Also, the
amendment includes a deletion of the committee substitute section
(b), based on confidentiality. Mr. Lessmeier's letter of
March20th in your package clearly sets forward the lack of
necessity of having this in the bill." He specified he was
referring to Section 1, subsection (b).
REPRESENTATIVE ELTON objected and then asked if Representative
Rokeberg had moved the amendment.
REPRESENTATIVE ROKEBERG moved the amendment.
REPRESENTATIVE KUBINA asked to hear from the sponsor.
Number 0185
SENATOR DAVE DONLEY, sponsor of SB 197, said after consulting with
the Division of Insurance, he believed he could speak for them, as
well. "We oppose this amendment for at least three reasons," he
stated. "Number 1, it excludes specific lines of insurance from
coverage. I guess if I was State Farm, I wouldn't want to have to
live under any new rules, either. But this would say property is
no longer covered by the bill."
SENATOR DONLEY pointed out the committee had heard "horrific
examples of discrimination against victims of domestic violence in
property lines of insurance". He referred to the victim of an
arson attack, discussed in earlier testimony, whose insurance was
subsequently cancelled. He referred to subsection (b) of the
amendment, which said, "This section applies only to an insured or
applicant for insurance." He said a third-party beneficiary could
be discriminated against on the basis of domestic violence, which
he believed was completely improper, as there may be other classes
of people who need protection from discrimination.
SENATOR DONLEY said third, the amendment granted blanket immunity
that did not appear anywhere else in the insurance code for any
other action required of insurance companies. Although insurance
companies had prohibitions against discrimination for reasons of
race and religion, for example, there was no blanket immunity for
any criminal or civil liability. "No matter how they administer
it, how grossly negligent or even intentional their action was to
violate any other law that may conflict with this, they would be
granted blanket immunity," he noted. "It just doesn't appear
anywhere in the code like that. And they've got all kinds of
mandates in the code that they have to follow."
Number 0370
REPRESENTATIVE ELTON said he had a couple of problems with the
amendment. First was the assumption that life, disability and
health insurance were the only insurance lines that needed
addressed. He noted there was information in his packet compiled
by the Women's Law Project in Philadelphia, which indicated
shelters in Vermont were having a tough time getting insurance due
to rejections and high rates because of domestic violence. A
homeowner's policy in Washington state had been cancelled by Safeco
after receiving information about domestic violence-related claims.
Also in Washington, a landlord's policy was cancelled because the
insurer learned the landlord intended to rent to a women's shelter.
"I think there are examples out there. And for us to say the only
applicable lines of insurance are life, disability and health
insurance is misleading and addresses only a portion of the
problem," Representative Elton stated, adding that he had not even
addressed sections (b) and (c) of the amendment.
Number 0554
REPRESENTATIVE ELTON referred to comments by Representative
Rokeberg, sponsor of the amendment, that indicated the amendment
deleted subsection (b). "I don't see where that happens," he said.
REPRESENTATIVE ROKEBERG replied, "Technically, this is supposed to
delete Section 1 and replace it." He apologized for the confusion
and said, "If it's the will of the committee, I wouldn't look at it
as hostile to add property insurance into that. I don't think
that's the intent here, to exclude that."
Number 0512
REPRESENTATIVE ELTON asked if Representative Rokeberg would object
to removing the delineation and just saying "offering insurance".
REPRESENTATIVE ROKEBERG indicated he would not object to that, if
it would be the proper wording to cover all insurance. "We don't
want to have any discrimination," he said. "I don't disagree with
that."
REPRESENTATIVE PORTER asked if the committee had done that or just
talked about it.
CHAIRMAN KOTT clarified they had just talked about it.
Number 0554
REPRESENTATIVE ELTON moved to delete "life, disability or health"
from the amendment.
REPRESENTATIVE ROKEBERG interjected, objecting for discussion. He
asked Mr. Lessmeier, attorney for State Farm, if he wanted to
comment.
REPRESENTATIVE ELTON said he wanted to know the difference between
domestic abuse and domestic violence, since the amendment talked
about domestic abuse.
Number 0600
MR. LESSMEIER claimed there was not, to his knowledge, a single
example of a problem in property/casualty. "Our desire was to
limit the protection to where discrimination occurs," he said,
"which is in insurance over the person." He responded to instances
cited by Representative Elton and said the first two dealt with
life insurance and the third was cancelled because of multiple
fires set in the home. He said problems in Vermont with women's
shelters raised a concern of commercial insurance. And the
Washington state policy was denied because of multiple claims. He
asserted there were no "valid" situations in the property and
casualty business of discrimination based on status as a victim of
domestic violence.
CHAIRMAN KOTT noted there was a call to attend a House floor
session. He said SB 197 would be heard first at the next meeting.
ADJOURNMENT
There being no further business to conduct, CHAIRMAN KOTT adjourned
the House Standing Committee on Labor and Commerce meeting at
4:58p.m.
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