Legislature(1997 - 1998)
04/07/1997 03:26 PM House L&C
| Audio | Topic |
|---|
* 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
April 7, 1997
3:26 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative John Cowdery, Vice Chairman
Representative Bill Hudson
Representative Jerry Sanders
Representative Joe Ryan
Representative Tom Brice
Representative Gene Kubina
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 137
"An Act relating to veterinarians; extending the termination date
of the Board of Veterinary Examiners; and providing for an
effective date."
- MOVED CSHB 137(L&C) OUT OF COMMITTEE
* HOUSE BILL NO. 208
"An Act relating to the board of directors of the Alaska Aerospace
Development Corporation."
- MOVED CSHB 208(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 207
"An Act relating to employer drug and alcohol testing programs."
- MOVED CSHB 207(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 218
"An Act relating to regulation and examination of insurers and
insurance agents; relating to kinds of insurance; relating to
payment of insurance taxes and to required insurance reserves;
relating to insurance policies; relating to regulation of capital,
surplus, and investments by insurers; relating to hospital and
medical service corporations; and providing for an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 137
SHORT TITLE: BOARD OF VETERINARY EXAMINERS; LICENSE
SPONSOR(S): RULES BY REQUEST OF BUDGET AND AUDIT COMMITTEE
JRN-DATE JRN-PG ACTION
02/13/97 334 (H) READ THE FIRST TIME - REFERRAL(S)
02/13/97 334 (H) LABOR & COMMERCE
03/21/97 (H) L&C AT 3:15 PM CAPITOL 17
03/21/97 (H) MINUTE(L&C)
BILL: HB 208
SHORT TITLE: ALASKA AEROSPACE DEVELOPMENT CORP. BOARD
SPONSOR(S): REPRESENTATIVE(S) AUSTERMAN
JRN-DATE JRN-PG ACTION
03/24/97 806 (H) READ THE FIRST TIME - REFERRAL(S)
03/24/97 806 (H) LABOR & COMMERCE
04/07/97 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 207
SHORT TITLE: EMPLOYER DRUG TESTING PROGRAM
SPONSOR(S): REPRESENTATIVE(S) GREEN
JRN-DATE JRN-PG ACTION
03/21/97 785 (H) READ THE FIRST TIME - REFERRAL(S)
03/21/97 785 (H) LABOR & COMMERCE, JUDICIARY
04/04/97 (H) L&C AT 3:15 PM CAPITOL 17
04/04/97 (H) MINUTE(L&C)
BILL: HB 218
SHORT TITLE: OMNIBUS INSURANCE REFORM
SPONSOR(S): LABOR & COMMERCE BY REQUEST
JRN-DATE JRN-PG ACTION
03/27/97 872 (H) READ THE FIRST TIME - REFERRAL(S)
03/27/97 872 (H) LABOR & COMMERCE
04/04/97 (H) L&C AT 3:15 PM CAPITOL 17
04/04/97 (H) MINUTE(L&C)
WITNESS REGISTER
SHIRLEY ARMSTRONG, Legislative Assistant
to Representative Norman Rokeberg
Alaska State Legislature
Capitol Building, Room 24
Juneau, Alaska 99801
Telephone: (907) 465-4954
POSITION STATEMENT: Provided information on CSHB 137(L&C).
REPRESENTATIVE ALAN AUSTERMAN
Alaska State Legislature
Capitol Building, Room 434
Juneau, Alaska 99801
Telephone: (907) 465-2487
POSITION STATEMENT: Presented sponsor statement for HB 208.
JEFFREY LOGAN, Legislative Assistant
to Representative Joe Green
Alaska State Legislature
Capitol Building, Room 118
Juneau, Alaska 99801
Telephone: (907) 465-4931
POSITION STATEMENT: Presented sponsor's position on HB 207.
MARIANNE K. BURKE, Director
Division of Insurance
Department of Commerce and Economic Development
P.O. Box 110805
Juneau, Alaska 99811-0805
Telephone: (907) 465-2515
POSITION STATEMENT: Provided department's position and answered
questions regarding HB 218.
ACTION NARRATIVE
TAPE 97-35, SIDE A
Number 0001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee meeting to order at 3:26 p.m. Members present
at the call to order were Representatives Rokeberg, Cowdery, Ryan
and Kubina. Representatives Brice, Sanders and Hudson joined the
meeting at 3:27 p.m., 3:30 p.m. and 3:55 p.m., respectively.
HB 137 - BOARD OF VETERINARY EXAMINERS; LICENSE
Number 0030
CHAIRMAN ROKEBERG announced the first order of business was House
Bill No. 137, "An Act relating to veterinarians; extending the
termination date of the Board of Veterinary Examiners; and
providing for an effective date."
Number 0075
REPRESENTATIVE JOHN COWDERY made a motion to adopt as a work draft
version 0-LS0549\E, Lauterbach, 4/3/97.
CHAIRMAN ROKEBERG called a brief at-ease. He then asked the
committee aide to explain the situation with HB 137.
Number 0153
SHIRLEY ARMSTRONG, Legislative Assistant to Representative Norman
Rokeberg, said when HB 137 was before the committee previously,
they made changes to conform to changes the Senate Labor and
Commerce Committee had indicated they would make. Since then, she
had held the committee substitute drafted at that time. The Senate
committee had made no further changes. Therefore, what the House
Labor and Commerce Committee discussed at the previous hearing was
exactly what was before them now.
Number 0208
REPRESENTATIVE COWDERY asked whether the same fiscal note applies.
MS. ARMSTRONG affirmed that. There was no increase in the number
of members. The major change is on page 3, line 5. Some
veterinarians had a problem with the practical examination; there
is still no consensus on that. They would prefer to remove that
exam, saying it is essentially the same as the other exam they
already take. However, a group of veterinarians in Alaska believes
they should have knowledge of Alaska-specific maladies. She cited
the high incidence of rabies as an example. "If there is any
controversy, that's the only one," she stated. "Other than that,
everybody else has pretty much indicated the rest of the changes
are not significant."
Number 0337
REPRESENTATIVE JOE RYAN asked about the penned-in notation on page
3, line 18, of the draft.
MS. ARMSTRONG advised that was her own note.
Number 0376
CHAIRMAN ROKEBERG asked for verification that nothing in the bill
affects Iditarod-type veterinarians, for example.
MS. ARMSTRONG said no, they obtain permits under "that last section
where we were making a note." She said there was a discussion
about veterinarians coming to Alaska, setting up shop for two or
three months in the summer and doing business. That was why she
had made the notation, as she questioned whether that should be
changed or reduced. For the Iditarod, for example, someone could
get a 60-day renewable permit, for a total of 120 days.
MS. ARMSTRONG said apparently the Senate had not dealt with that.
"What they've been trying to avoid on these boards is so they don't
have to go to a conference committee," she said. "So we've been
trying to keep them the same. But they haven't reached any
agreement on the Alaska issue, and I'm not sure what they would do
if we changed the current law."
CHAIRMAN ROKEBERG asked if there was any objection to passage of
the bill. He advised that the committee substitute had already
been adopted.
Number 0497
REPRESENTATIVE RYAN made a motion to move CSHB 137(L&C) from
committee with individual recommendations and accompanying zero
fiscal note.
CHAIRMAN ROKEBERG, hearing no objection, advised that CSHB 137(L&C)
moved from the House Labor and Commerce Standing Committee.
HB 208 - ALASKA AEROSPACE DEVELOPMENT CORP. BOARD
CHAIRMAN ROKEBERG announced the next order of business was House
Bill No. 208, "An Act relating to the board of directors of the
Alaska Aerospace Development Corporation."
Number 0568
REPRESENTATIVE ALAN AUSTERMAN, sponsor, asked whether this was on
teleconference.
CHAIRMAN ROKEBERG said no.
Number 0616
REPRESENTATIVE AUSTERMAN explained that he has been serving as an
ex officio member on the Alaska Aerospace Development Corporation
(AADC) board of directors for the last two and a half years.
During the first few months on the board, he became concerned over
the lack of business people on the board, as well as with business
practices within the corporation. This led to introduction of the
previous year's HB 533, which passed the House and is identical to
HB 208.
REPRESENTATIVE AUSTERMAN referred to a break-down included in
committee packets showing the existing board and proposed changes.
The current board has four University of Alaska personnel. When
they started the AADC, it was proper to have four university
members who could study aerospace in Alaska as a science. However,
they are past that point. They have determined this is feasible,
scientifically sound and should be done. Adding business members
will provide a broader business sense for running the corporation
and the business of launching rockets in Alaska.
REPRESENTATIVE AUSTERMAN advised that the AADC has projects that
include more than the university, such as the ground stations in
Fairbanks and the proposed Challenger Learning Center. They are
also working with the Alyeska Pipeline Service to monitor pressure
valves, for example, through use of satellites.
REPRESENTATIVE AUSTERMAN said as the chart shows, they want to add
two business people and another "commercial space" person.
Currently, one board member is the executive director of the Alaska
Science and Technology Foundation (ASTF), and one is the
commissioner of the Department of Commerce and Economic Development
(DCED) or the commissioner's designee; one reason for dropping the
ASTF member is that the DCED has plenty of coverage. In fact, the
commissioner could appoint the ASTF executive director as the
designee.
Number 0884
REPRESENTATIVE AUSTERMAN referred to page 2, lines 27 and 28, and
advised that according to statute, the university president is a
board member and is appointed as chairman. This bill changes it so
that the board selects its own chair and vice-chair.
REPRESENTATIVE AUSTERMAN discussed transitional provisions, listing
expiration dates for several members' terms. Some positions being
eliminated have already expired. He suggested the Governor make
those appointments right away.
Number 1003
CHAIRMAN ROKEBERG suggested other members would be allowed to serve
out their terms and there would be an orderly transition.
REPRESENTATIVE AUSTERMAN concurred.
Number 1023
CHAIRMAN ROKEBERG asked whether Representative Austerman thinks
there will be any difficulty in attracting aerospace or commercial
space members.
Number 1046
REPRESENTATIVE AUSTERMAN said no. He had talked to Pat Ladner,
executive director of the AADC, and to others (such as board member
Courtney Stadd) who believe there is enough interest in the rocket
launch facility that finding members would not be a problem.
Number 1077
CHAIRMAN ROKEBERG advised that a copy of committee minutes from the
previous year's HB 533 was in the packet. That bill passed the
House by a vote of 37 to 1.
Number 1103
REPRESENTATIVE GENE KUBINA said he recently sent the sponsor a memo
asking that he consider replacing the public member with a "K-12
educator" in order to get children involved in high technology
science.
Number 1154
REPRESENTATIVE AUSTERMAN advised that he had no problem with the
public member. There are two business people; two from the
university; the commissioner of DCED; and two from the aerospace or
commercial space industry plus one from commercial space. He
suggested that the committee decide whether to replace the public
member with someone from the school system.
Number 1188
CHAIRMAN ROKEBERG asked whether the Challenger Learning Center in
Kenai was involved under the title of this bill.
REPRESENTATIVE AUSTERMAN replied that it is a separate entity.
CHAIRMAN ROKEBERG said there had been discussions in the past about
some relationship with that.
Number 1217
REPRESENTATIVE KUBINA said if someone is interested and has a
background in the education community, children may become
interested through the schools. It is a good way to get
information out to the community and generate support. He
suggested making it a public board member "and/or K-12 educator."
That would make a statement but still leave the Governor the option
of going a different way.
REPRESENTATIVE AUSTERMAN said he had no problem with it.
Number 1302
CHAIRMAN ROKEBERG asked Representative Austerman whether he knew of
anybody that would not support the legislation as written.
REPRESENTATIVE AUSTERMAN said the AADC is not necessarily happy
with this. The university regents are not happy about being
removed from the board. Additionally, the executive director is
not happy with having the board changed.
Number 1368
CHAIRMAN ROKEBERG said the fiscal note was for increased travel and
honorarium expenses. He expressed concern about not having
testimony from the executive director. However, the bill, which he
believes is a good one, would go to the House Finance Committee.
Number 1415
REPRESENTATIVE AUSTERMAN said the fiscal note is arguable. It is
there because of adding a third commercial space member, who will
likely come from outside the state. He suggested adding an Alaska
school teacher and eliminating the third commercial space member
would result in a zero fiscal note.
Number 1467
REPRESENTATIVE KUBINA made a motion to delete one "aerospace or
commercial space" and insert one "Alaska K-12 educator". That
would eliminate the out-of-state person and thus the $10,000 fiscal
note.
CHAIRMAN ROKEBERG closed public testimony. He expressed concern
because this is a business enterprise. He agrees with
Representative Kubina's idea conceptually and that the more public
input, the better. He noted that this had already created a little
"flap" on Kodiak Island. However, this is rocket science. The
corporation is moving from an incubation period into a business
period. He believes hard and fast decisions need to be made on the
board by business-related people. He said, however, he was
certainly willing to listen to compromise suggestions if the
sponsor is willing.
Number 1566
REPRESENTATIVE AUSTERMAN said he had already spoken to the
executive director. He referred to the "flap" on Kodiak and said
that occurred because all the business of the AADC has been done in
Anchorage. Nobody is directly interacting with the people of
Kodiak regarding a new rocket launch facility going in there.
REPRESENTATIVE AUSTERMAN stated, "We've been on AADC's case for
three years now to hire somebody to do the PR work in Kodiak, to be
the front person, to do the kind of things that naturally would be
done. If you're putting a business into a new community, you go in
and do your PR work and do all the stuff that's necessary as a
business entity. But you don't ignore them." He suggested that
even with a school teacher member, the way it is structured with
two new business people plus the two aerospace or commercial space
members, that board should have the ability to do what it needs to.
Number 1620
CHAIRMAN ROKEBERG asked about the ex officio board members.
REPRESENTATIVE AUSTERMAN said there is a Senate member and a House
member.
CHAIRMAN ROKEBERG asked whether an educator could be made an ex
officio member rather than a voting member. He suggested that
educator could be from Kodiak.
Number 1653
REPRESENTATIVE RYAN questioned whether they would get a person with
expertise in this field. He discussed having a K-12 local teacher
who knew little about space versus someone living elsewhere in the
state who was knowledgeable and excited about it. He said he had
no problem with replacing the public member with a K-12 educator.
Number 1693
REPRESENTATIVE TOM BRICE said while he understands the need for the
board to have a high level of attention paid to it from the
business end, he believes it still falls under the guise of state
government. By putting an educator on the board, there is a large
potential for dissemination of information. Instead of everything
going into the board, something would come out of it. He suggested
the teacher did not need to be from the math or science field but
could teach economics or business, for example. He cited the board
of regents, where 95 percent of members come from business
backgrounds but there is a student regent with equal authority as
far as voting.
CHAIRMAN ROKEBERG asked whether there were strong feelings about
this member being ex officio or replacing someone else.
Number 1793
REPRESENTATIVE AUSTERMAN referred to the fiscal note. He said when
the bill passed the previous year with the exact same make-up as in
this bill, the AADC did not come forward with a $10,000 fiscal
note. He again stated that the AADC is the one opposing this bill.
Number 1820
REPRESENTATIVE BRICE asked whether an ex officio member would have
the same ability as a full-fledged member to travel to board
meetings and participate, but only be unable to vote. If that is
the case, to him it is a toss-up. However, if an ex officio member
does not get the same information everyone else does or is not
allowed to participate in executive sessions, for example, he
believes that is a concern.
Number 1872
REPRESENTATIVE BILL HUDSON, who had recently joined the meeting,
asked whether there was an amendment before the committee.
CHAIRMAN ROKEBERG said they were talking conceptually about it.
Number 1887
REPRESENTATIVE KUBINA offered a written amendment, which read:
Page 2, line 16:
delete "public member" and insert "public school educator"
Number 1907
REPRESENTATIVE AUSTERMAN referred to Representative Brice's
question and said currently in statute for AADC, it spells out that
two members of the legislature shall be ex officio members. It
also says voting and nonvoting members of the board are entitled to
per diem and travel expenses authorized. Therefore, ex officio
members would be covered.
REPRESENTATIVE BRICE asked whether there was access to executive
meetings as well. He said he would assume that.
REPRESENTATIVE AUSTERMAN said he would assume that also. However,
it does not specify executive sessions in statute; they would need
to look at the bylaws.
REPRESENTATIVE KUBINA asked whether adding another person would
increase the fiscal note.
Number 1946
REPRESENTATIVE AUSTERMAN restated that the previous year's bill
carried no fiscal note.
CHAIRMAN ROKEBERG said he had been leaning towards an ex officio
member. However, by doing that, it would create a fiscal note, so
he was withdrawing that idea.
REPRESENTATIVE AUSTERMAN reiterated that he had no problem with
replacing the public member. If they felt it necessary to replace
one space member, he would argue against it a bit but would not
oppose it.
CHAIRMAN ROKEBERG concurred. He reminded them that the business of
this business is to launch rockets. The three aerospace and
commercial space members are fundamentally a de facto sales staff
for the corporation because of their worldwide connections within
that industry. That is why they are on the board and why their
numbers are being increased.
Number 2006
REPRESENTATIVE AUSTERMAN said there is also a good possibility the
Governor might look at placing a school teacher as the public
member anyway. All this would do is designate a school teacher
instead of leaving it open-ended.
CHAIRMAN ROKEBERG suggested making the amendment permissive.
Number 2023
REPRESENTATIVE KUBINA said if the committee does not want to
specify that, he would suggest saying "public school educator or
public member". That would send a message indicating the desire
for a public educator but leave it open.
Number 2069
CHAIRMAN ROKEBERG stated that the amendment to the amendment is to
put the words "public school educator or" before "public member".
He asked if there were any objections. Hearing none, he advised
that the amendment to the amendment was adopted.
CHAIRMAN ROKEBERG asked if there was any objection to the amendment
as amended. There being none, the amendment was adopted.
Number 2085
REPRESENTATIVE KUBINA made a motion to move HB 208, as amended,
from committee with individual recommendations and a zero fiscal
note.
CHAIRMAN ROKEBERG asked if there was any objection. There being
none, CSHB 208(L&C) moved from the House Labor and Commerce
Standing Committee with a zero fiscal note.
HB 207 - EMPLOYER DRUG TESTING PROGRAM
CHAIRMAN ROKEBERG announced the next item of business was House
Bill No. 207, "An Act relating to employer drug and alcohol testing
programs."
CHAIRMAN ROKEBERG called an at-ease at 4:08 p.m. He called the
meeting back to order at 4:15 p.m. He said HB 207 had been heard
previously and testimony was by invitation. However, no one wished
to testify. He closed public testimony.
Number 2150
JEFFREY LOGAN, Legislative Assistant to Representative Joe Green,
came forward to testify on behalf of the sponsor. He referred to
a letter received from the Teamsters Local 959 dated April 7, 1997,
which more clearly specifies some concerns they voiced last week.
He reviewed these concerns for the committee.
MR. LOGAN noted that in regards to the Teamsters' number one
concern, the sponsor opposes it. The term "reasonable suspicion"
only appears three times in state statute without a definition;
only one time in case law, in a state court of appeals case, does
it appear with some definition. The sponsor desires to replace
this term. They asked the Teamsters for terminology from some of
their current agreements that would fit into .620(b) to achieve the
purpose they seek. The Teamsters' legal staff hasn't had time to
do this yet but hope to do so by the time this legislation makes
its way to the House Judiciary Committee.
Number 2224
MR. LOGAN continued that in relation to item two, in the committee
substitute, they could simply make a reference to federal standards
in the testing. He felt this would achieve this objective. He
felt the Teamsters' concern was that there is nothing in writing
that the levels of the five main drugs should or should not be. If
Alaska simply adopts federal standards, he felt this would take
care of potential headaches.
Number 2259
REPRESENTATIVE HUDSON noted that in looking over proposed
amendments, almost every one has a legal implication. He suggested
since the next committee of referral was the House Judiciary
Committee, that the amendments be considered then.
REPRESENTATIVE BRICE agreed with this assessment, but he thought
Section 23.10.670 dealing with collective bargaining could be
considered by the House Labor and Commerce Committee since it is so
concise. He asked Mr. Logan to explain what this section does.
Number 2322
MR. LOGAN stated that this language was inserted because in other
states, labor representatives have requested this type of language.
If their collective bargaining does come under the umbrella of this
legislation, then they should have the right to do this. Organized
labor would prefer this section be removed, and the sponsor has no
problem with that.
REPRESENTATIVE COWDERY stated that he was always reluctant to have
amendments handed to them and absorb the related testimony. He
felt they should move the bill with the attached correspondence so
that the House Judiciary Committee could consider it.
Number 2378
REPRESENTATIVE RYAN asked whether Representative Green had any
problem with addressing these amendments in the House Judiciary
Committee.
MR. LOGAN responded that Representative Green has no problem
addressing them, but adopting them there raises a few issues.
Number 2390
REPRESENTATIVE BRICE stated that the only question he had related
to .670 and the fact that there have been issues raised on other
bills regarding rights of employees within collective bargaining
units being of a different standard. He felt this establishes a
potential situation like this again. If they pulled this out, they
could possibly "head this off at the pass" before this issue ever
arises, such as, "Well, these guys can do it because they're in a
collective bargaining agreement, but these guys can't because
they're not."
CHAIRMAN ROKEBERG stated that his reading of Section .670 is that
it would in effect negate any pre-bargained-for agreement by giving
full benefits of this legislation to the employer, notwithstanding
whatever the bargaining agreement said. He took exception to what
Mr. Logan said earlier about this language not affecting existing
collective bargaining agreements.
Number 2449
MR. LOGAN responded that he didn't say it wouldn't have an impact.
The point of this language is to allow for workers under a
collective bargaining agreement, if they chose to adopt provisions
outside of the umbrella of the bill, to do so.
TAPE 97-35, SIDE B
Number 0012
REPRESENTATIVE BRICE stated that what this section could
potentially do, under existing agreements where the testing methods
are not as tightly written as Representative Green's bill, is cause
problems since the lesser standard would be applied.
REPRESENTATIVE RYAN stated that if it was determined to be a lesser
standard with a collective bargaining agreement, someone would
still get the benefits, which means they avoid liability of being
sued. His conversations with organized labor representatives
indicate they would rather delete this and be on the same ground as
everyone else, on a level playing field. They didn't necessarily
want any special benefits.
Number 0070
CHAIRMAN ROKEBERG said he appreciated this, but if they pass this
law, the level playing field is the law then. He suggested that
they remove the word "not" from the section. He noted that if the
collective bargaining agreement was consistent with policies
provided for in statute, the employer could have the immunity.
Therefore, the collective bargaining agreement would have to be
consistent with the law in order to acquire immunity. He noted
that this was better than taking it out altogether.
MR. LOGAN stated that this assessment was correct. This would be
a good compromise.
Number 0094
REPRESENTATIVE KUBINA noted that this option would dictate what
goes into a collective bargaining agreement.
CHAIRMAN ROKEBERG responded that this would have to be bargained
for. If an employer wants to bargain for immunity, then he has to
be consistent with the law. The unions would have to agree to this
in the bargain.
Number 0107
REPRESENTATIVE KUBINA added that by pulling it out, they have the
testing program and they would be immune no matter what the
collective bargaining unit says, because the law will supersede any
collective bargaining unit. However, by taking the word "not" out,
it seems like a mandate to be there.
REPRESENTATIVE HUDSON stated that this was precisely why he
suggested the committee not attempt to amend this legislation since
this issue has legal implications.
Number 0150
REPRESENTATIVE KUBINA offered that the committee ought to do their
own work and said he didn't know what kind of deals have been made
on this legislation. He said he was not big about moving it on to
the next committee where the sponsor of this legislation is the
chairman. He'd rather the House Labor and Commerce Committee spend
the time and effort to make sure it's a good bill.
CHAIRMAN ROKEBERG said no deals have been made.
Number 0186
CHAIRMAN ROKEBERG agreed that on this particular labor issue, it
belongs in the purview of this committee. As to the other
amendments, he agrees with Representative Hudson.
REPRESENTATIVE BRICE stated that the last clause of this section
should be cut out, after the phrase, "even if the policy is not
consistent with AS 23.10.600 - 23.10.699." Drug testing must be at
this point in time up to standards with .670.
Number 0234
CHAIRMAN ROKEBERG said he would prefer to go with, on page 7, line
5, deleting the words "even" and "not".
REPRESENTATIVE RYAN reiterated that the sponsor included this
language with the idea that they would protect the unions. The
unions said they don't want it, and the sponsor said he doesn't
care. Representative Ryan asked why they were addressing this
language issue. He wondered why they just didn't delete it.
Number 0253
CHAIRMAN ROKEBERG thought this option would encourage both the
unions and employers to bargain, based on this law, and they could
even adopt it by reference in their contract, which would be a very
noncontroversial method of handling this situation. It gives both
sides an argument that there is an existing state law and in order
for an employer to have immunity, they must go through these other
procedures, provided in the law, to protect the employee. Leaving
this section alone is not fair either. It would have a negative
impact on the worker or negate the collective bargaining process.
CHAIRMAN ROKEBERG suggested moving an amendment on page 7, line 5,
to delete the words "even" and "not."
REPRESENTATIVE COWDERY made a motion to adopt that amendment.
Number 0302
REPRESENTATIVE JERRY SANDERS objected. He believes they should
remove the whole Section 23.10.670.
CHAIRMAN ROKEBERG requested a roll call vote. Representatives
Cowdery, Hudson and Rokeberg voted yes. Representatives Brice,
Kubina, Ryan and Sanders voted no. Amendment 1 failed.
Number 0378
REPRESENTATIVE SANDERS made a motion to remove Section 23.10.670 in
its entirety.
CHAIRMAN ROKEBERG objected for the purpose of discussion.
Number 0388
REPRESENTATIVE COWDERY also objected and noted that these changes
had legal ramifications. The information from the Teamsters came
to the committee late, and he felt this issue should be debated in
the House Judiciary Committee.
CHAIRMAN ROKEBERG removed his objection.
Number 0411
MR. LOGAN commented that they are committed to working with
employer and employee groups, which both agree to a drug-free work
place. He clarified that while they don't have a problem with
removing this section, they haven't had a chance to look at this
issue. They want to research the ramifications of taking this
section out. He stated, "I want make sure the committee
understands that if we do have an opportunity, which I'm sure we
will, to look at it more in-depth in the next couple of days and it
reappears in a Judiciary version, I hope the committee understands
that we're not trying to go around anyone's back."
REPRESENTATIVE COWDERY removed his objection.
CHAIRMAN ROKEBERG advised that as the objection was removed,
Amendment 2 was adopted.
Number 0465
REPRESENTATIVE RYAN made a motion and asked unanimous consent to
move HB 207, as amended, out of committee with individual
recommendations and accompanying zero fiscal note.
REPRESENTATIVE KUBINA objected for question purposes. He asked
whether the chairman believes all remaining labor issues involved
with this legislation should be under the purview of the House
Judiciary Committee, along with the statement the sponsor's
representative has made.
Number 0492
CHAIRMAN ROKEBERG said absolutely. He commented that he is a
member of the House Judiciary Committee. He promised the House
Labor and Commerce Committee and the bill sponsor that there would
be a full review of the Teamsters' letter, as well as issues
relating to subjects that letter addresses. He also said he would
work further on the section in question to accomplish everything
the House Labor and Commerce Committee has attempted.
Number 0526
REPRESENTATIVE KUBINA withdrew his objection.
CHAIRMAN ROKEBERG, hearing no further objection, stated that CSHB
207(L&C) was moved out of the House Labor and Commerce Committee.
Number 0534
CHAIRMAN ROKEBERG called an at-ease at 4:38 p.m. He called the
meeting back to order at 4:39 p.m.
HB 218 - OMNIBUS INSURANCE REFORM
Number 0539
CHAIRMAN ROKEBERG announced the final item of business was House
Bill No. 218, "An Act relating to regulation and examination of
insurers and insurance agents; relating to kinds of insurance;
relating to payment of insurance taxes and to required insurance
reserves; relating to insurance policies; relating to regulation of
capital, surplus, and investments by insurers; relating to hospital
and medical service corporations; and providing for an effective
date."
Number 0564
MARIANNE K. BURKE, Director, Division of Insurance, Department of
Commerce and Economic Development (DCED), came forward to testify.
CHAIRMAN ROKEBERG noted that before the committee was version 0-
LS0850\E, Ford, 4/3/97, adopted at the previous hearing. He asked
Ms. Burke to confirm that this is the same language as in the
companion Senate bill.
MS. BURKE affirmed that.
CHAIRMAN ROKEBERG asked Ms. Burke to describe the amount of review
the bill has had on the Senate side.
Number 0606
MS. BURKE explained that she had gone through the bill section by
section in testimony before the Senate Labor and Commerce
Committee. She had provided reasons for the proposed legislation,
what prompted it, and comments, if any, received from the industry,
the producers and the public.
CHAIRMAN ROKEBERG asked if that generated the committee substitute.
MS. BURKE said yes. In her opinion, it had a thorough review in
the Senate.
CHAIRMAN ROKEBERG requested a section-by-section review. He
advised there is also a sectional analysis in the bill file.
Number 0640
MS. BURKE said the first section clarifies something already in
practice. When volunteers serve on technical committees, they are
usually from industry. Transportation is paid and costs are
reimbursed by their companies. However, volunteers could
conceivably claim per diem and transportation expenses if it is not
clear in Title 21 that this is voluntary participation. The
division has requested that clarification.
MS. BURKE discussed Section 2. The division is required by statute
to submit an annual report to each member of the legislature. The
original language was written years ago. When the division
reviewed the statutes last year, they discovered much of the
information required was no longer available, much less relevant.
The division is asking that the language be updated and modernized
to include the information that the division submits as to
companies authorized to do business in the state and regulatory
actions, if any, taken against them. This would include
information regarding a company put into liquidation.
MS. BURKE said Section 3 is a clarifying section. According to
statute, when the division conducts a statutory examination of an
insurance company, the company must reimburse the state for costs
incurred. Currently, the division bills and is paid for
transportation, salaries and benefits of examiners, out-of-pocket
expenses and so forth. They are asking that this be expanded to
include "what's actually happening."
Number 0773
CHAIRMAN ROKEBERG asked what examinations are given.
MS. BURKE explained that the division is required by statute to do
financial examinations of companies doing business.
CHAIRMAN ROKEBERG said this is not a test, then, but a financial
examination.
MS. BURKE said there are financial examinations and market
examinations. They see that companies are abiding by contractual
arrangements with policy holders and are not in violation of unfair
trade practices under Chapter 36 of Title 21. She said it is a
condition of doing business in all 50 states that companies must
submit to an examination when called for, and Alaska Statutes spell
out specific times.
Number 0821
MS. BURKE said Sections 4 and 5 relate to collection of premium
tax. The division is responsible for collecting, on behalf of the
general fund, tax on premiums written in Alaska. Currently, the
statute says the insurance company will pay that tax on or before
March 1 each year. For these two sections, as well as sections
pertaining to other lines of insurance, the division is proposing
to collect those taxes on a quarterly basis. The division is also
proposing that the director be allowed to use modern technology
such as electronic transfer of funds so the state will receive the
money more promptly. She advised that she had anticipated this
being fought by "our domestics," which are already set up and
already reporting on a quarterly basis in many states.
Number 0899
CHAIRMAN ROKEBERG asked whether this is where the state is picking
up an extra $485,000.
MS. BURKE affirmed that. When talking about close to $30 million,
receiving it a few days earlier and on a quarterly basis, as
opposed to yearly, has a significant financial impact.
CHAIRMAN ROKEBERG asked whether that is money generated from
interest.
MS. BURKE said yes.
CHAIRMAN ROKEBERG asked whether that is applicable to the DCED or
is general fund money.
MS. BURKE replied that it is general fund money.
CHAIRMAN ROKEBERG said that is a calculation on general fund cash
management, not premium income cash management.
MS. BURKE concurred.
Number 0933
REPRESENTATIVE RYAN referred to page 3, beginning with line 26, and
continuing to page 4, line 10. He asked whether that is existing
language with the exception of the portions for collecting.
MS. BURKE said that is correct. Just the underlined portion is
new.
Number 0964
REPRESENTATIVE RYAN asked Ms. Burke to provide the history of why
and where this particular amount of tax was ascertained to be
equitable, as well as why the structure is set up to not allow
people to take operating expenses under their claims. He said he
was trying to figure the margin with this particular tax.
MS. BURKE said she would be happy to provide that. "It is a most
interesting history," she remarked.
Number 0997
CHAIRMAN ROKEBERG asked whether this is similar to many other
premium taxes "where you take the gross amount of premiums paid,
less the losses, and that's where you calculate the tax, on the
remainder of that calculation."
MS. BURKE replied that the property and casualty companies are
taxed a straight 2.7 percent of the premium. The hospital and
medical corporations are taxed 6.5 percent of their premiums less
their expenses. Title insurance is taxed at yet another rate.
MS. BURKE explained, "If you take the actual expenses as reported
in their annual statements to all states in the union, there is
very little difference in the way that it works out, if you take a
gross premium less expenses. Over time, there is going to be a
variation between the bottom line. Sometimes it will be higher,
sometimes it will be lower. But historically and for ease of
collection, most states have a straight percentage of premium,
depending on the type of insurance it is." She noted that surplus
lines, which are lines not admitted in the state of Alaska, pay an
additional 1 percent for the added risk involved and the additional
oversight the division must give them because it has no statutory
right of examination.
CHAIRMAN ROKEBERG asked if they were at Section 6 now.
Number 1124
MS. BURKE said yes. This is a simple matter of requesting that
insurers that do business in Alaska inform the division when they
change their address, phone number, articles of incorporation or
other information that they had presented to the division to obtain
a certificate of authority. The division believes 90 days is a
reasonable time. She said it is surprising that many companies do
not bother to notify them of such changes.
Number 1170
MS. BURKE discussed Section 7. It basically levels the playing
field. Domestic insurers are already required to maintain records
for a certain period of time. The division is asking that all
insurance companies maintain their records for a uniform,
reasonable length of time.
CHAIRMAN ROKEBERG noted that it specifies ten years. He asked what
the length of time is now.
MS. BURKE said it varies.
CHAIRMAN ROKEBERG asked whether it varies with different types of
lines.
MS. BURKE said in Alaska, for domestic companies, it is ten years.
MS. BURKE referred to Section 8 and said it is an interesting
dilemma the division caught last year "that through inadvertent
statutes several years ago, we are requiring that companies from
other countries who want to come into Alaska and do business
provide us with a certificate of solvency from their country." She
said unfortunately, there is only one other country in the world
that provides such a certificate. It was never anyone's intent to
exclude every country in the world except Great Britain, which the
current statute does. She said even though a company has no
certificate of solvency from their country, it still must have its
audited financial statements.
Number 1294
REPRESENTATIVE RYAN referred to page 5, line 8. He said a
trustee's basic job is administration and keeping records. He
noted that the legislature is requiring audits from everybody;
those go in a drawer and are not looked at. Meanwhile, millions of
dollars are paid to certified public accountants to do this. He
asked whether it would be acceptable if a person could come up with
a certified audit in the normal course of business. He said he
does not want this language to preclude that.
MS. BURKE replied that the trust referred to here is the U.S. trust
for companies from foreign countries doing business in the U.S. It
arose during World War II, when companies from Germany, for
example, could not pay claims from U.S. policy holders. All states
agreed one trust agreement would be established for all entities
wishing to do business in the United States. A certain dollar
amount would have to be on deposit in a U.S. bank to assure U.S.
policy holders of having money to pay claims. She said to the
extent the word "trust" is used here, that is the context in which
it is used; she cited an example. She said those trusts are
audited one time, and only once, for all states. "We do not do a
separate audit, nor do we have the authority to do a separate audit
of a trust that has already been audited for all members of the
states," Ms. Burke added.
Number 1486
REPRESENTATIVE RYAN said nobody with a considerable amount of money
would put it in a U.S. bank, which would provide a negative return
and be throwing it down the drain.
MS. BURKE offered to discuss it with Representative Ryan further,
stating that it is in U.S. banks.
CHAIRMAN ROKEBERG asked whether this is a common business practice.
MS. BURKE replied, "And it has been for the past 50 years."
Number 1539
MS. BURKE said Section 9 is an interesting situation. As the law
is written, only property and casualty companies can provide stop-
loss insurance, which is an insurance that kicks in when a certain
dollar level is reached. She explained, "You decide that you will
keep the first $25,000 or $100,000, or whatever, uninsured; that's
just your risk. But you don't want your risk to be unlimited. So
you buy stop-loss insurance." As increasing numbers of employers
look to self-insure for health insurance, they are purchasing stop-
loss insurance.
CHAIRMAN ROKEBERG asked if that is like reinsurance.
MS. BURKE said it is a form of reinsurance but somewhat different
in that it contractually spells out the dollar amount for each
party. It is sometimes referred to as "self-insurance retention."
Section 9 would permit companies writing health insurance in Alaska
to also write stop-loss insurance.
MS. BURKE said Section 10 defines stop-loss insurance in statute.
"Right now, it refers only to property and casualty," she added.
"Again, this is to bring us into the modern age."
Number 1648
REPRESENTATIVE RYAN noted that the state would be self-insuring
beginning July 1. He asked whether the state will buy one of these
policies to cover the portion over and above what they themselves
would put up.
MS. BURKE said she does not know, as they are not involved in that.
Number 1690
MS. BURKE said Section 11 clarifies that the domestic insurer will
provide information. Right now, the division must send a letter
requesting information each year. They want some efficiency and
for the insurer to automatically submit that information.
MS. BURKE explained that Section 12 is also an efficiency
provision, clearly defining "risk based capital instructions".
This would permit the director, after holding an open hearing in
accordance with appropriate statutes, to adopt those instructions
for the insurers. She stated, "They must have those instructions.
Currently, we have to do it through regulation, which is very
costly and inefficient."
Number 1756
MS. BURKE discussed Section 13, which establishes minimum reserves
for health insurers. Sections 13, 14 and 15 apply to actuarial
determinations of how much an insurance company should have
available. She emphasized these are minimum standards. Comments
the division had received from insurers representing 60 percent of
all insurers in the country have supported this methodology.
MS. BURKE said Section 16 is to protect both policy holders and
companies. If there is an agreement to hold securities, the
custodian must indemnify them if they lose those securities by
theft, mysterious disappearance or destruction, for example. She
said it is a good business practice, and most companies have it in
their agreements. However, insurance companies have not been able
to get this kind of an agreement. "And we feel that that is
important for the security of everyone," she stated.
Number 1850
MS. BURKE said Section 17 is editorial, adding the word "or".
MS. BURKE said Section 18 eliminates a redundancy in statute. She
stated, "If an attorney in fact of a reciprocal insurer such as
Alaska Timber is only providing services to Alaska Timber ... and
they are licensed appropriately, they should not have to have an
additional license to do work that they're not doing. We would
like to be as efficient as we could."
MS. BURKE stated that Section 19 codifies a current procedure.
When a licensee applies for a license, they submit the information,
certified, to the division. She explained, "We ask them to do so
under oath. We have found that it is much easier to not grant a
license than take a license away when we find out someone has been
convicted of embezzlement or someone has been convicted of ripping
off a trust account. And that is currently being done. We would
just like to codify it."
Number 1941
MS. BURKE referred to Section 20, relating to shared commissions.
Currently, if any licensee gives kick-backs, which is what shared
commissions are, that is illegal. But a person who is not licensed
can give kick-backs on these commissions. The division wants an
even playing field.
Number 1990
REPRESENTATIVE RYAN asked why someone should not be able to help
somebody else and be paid compensation for that help.
MS. BURKE replied that the cost of shared commissions or kick-backs
is passed on to policy holders. She said part of the division's
responsibility, as defined by the Alaska Supreme Court, is to
ensure there are no unfair trade practices. "If I give you a
portion of my commission and then pass that cost on to the
consumer, I am charging that consumer more than what would be
charged to another consumer," she stated. "And that has been
considered and ruled by the supreme court to be an unfair trade
practice."
Number 2108
CHAIRMAN ROKEBERG asked whether there is any tradition or custom in
the insurance industry of paying referral fees to any outside
party.
MS. BURKE replied, "Not anywhere in the United States."
CHAIRMAN ROKEBERG asked why they were worried about prohibiting it.
MS. BURKE replied, "Because they don't call it a referral fee.
They say, `I'm just taking part of my commission and giving it to
you.'"
REPRESENTATIVE RYAN said that is standard practice in a lot of
businesses.
CHAIRMAN ROKEBERG asked whether insurers were allowed to pay any
kind of referral fee to another business entity that refers
business to them.
MS. BURKE said no. That is true throughout the United States.
Number 2172
MS. BURKE said Section 21 is to conform the division's licensing
with the welfare bill passed the previous year. It permits a
temporary license.
MS. BURKE said Section 22 is to modernize language. Currently, the
division can only serve an individual a notice by certified mail.
The previous year, an agent had a totally computerized business
with a "remote delete ability." The division obtained a court
order to go in immediately because of the fear that as soon as the
agent was served notice, he would delete those records. She
advised that the agent has been convicted of misappropriating
$160,000 of policy holder money. "We would like to be able to
serve notices in person," she stated.
MS. BURKE said Section 23 is to ensure that a person illegally
transacting insurance business cannot receive financial rewards for
doing so. She advised that people from the Lower 48 sell bogus
insurance policies in Alaska and keep the money, for example.
Number 2324
MS. BURKE said Section 24 is a barrier that requires "that a third-
party administrator can be a very reputable third-party
administrator as a spinoff of another very reputable company, but
unless they've got two years of stand-alone financial statements,
we cannot issue them a license." The division would like to be
able to look at businesses for the time they have been in business
and make "a reasoned decision" on that.
MS. BURKE said Sections 25 and 26 recognize that Lloyd's is no
longer an entity unto itself; there are both personal and
incorporated syndicates, which these sections establish as
recognized entities within the state to do business under statutes
formerly reserved for Lloyd's only.
TAPE 97-36, SIDE A
Number 0006
MS. BURKE advised that Sections 27 and 28 are the same scenario
described earlier about collecting premium tax on a quarterly basis
and using modern technology to do so, only these sections apply to
surplus lines.
MS. BURKE said Section 29 is a clarification using the proper name
for the entity referenced in that particular section, which is the
Comprehensive Health Insurance Association.
MS. BURKE said Section 30 is a requirement that has been subject to
the review process of the National Association of Insurance
Commissioners (NAIC) model unfair trade practices act, which
requires an insurance company to maintain records of complaints
they receive, which the division then reviews during a "market
conduct examination."
Number 0111
MS. BURKE said Section 31 is to provide that an insurance policy
can only be "nonrenewed" at the anniversary date. This only
applies to personal property or casualty. It provides assurance
that rates will not go up every month or two. "But you still have
the right to rerate at the end of the policy period," she added.
Number 0157
REPRESENTATIVE COWDERY proposed an example and asked whether an
insurance company has the right to raise rates for any reason.
MS. BURKE replied, "Property and casualty, they must raise rates
uniformly, and they must get our approval. They've got to show us
that it is justified. And they do have criteria that has to be
filed with us. If you have a history of claims of so many a
period, then that is a legitimate reason to look at it as an
underwriting criteria."
REPRESENTATIVE COWDERY said he would contact Ms. Burke later.
Number 0337
CHAIRMAN ROKEBERG asked for confirmation that property and casualty
insurance does not include auto insurance.
MS. BURKE replied, "Yes, it does."
CHAIRMAN ROKEBERG said under the present statute, if there was
going to be a "nonrenewal," only 20 days' notice was required to an
individual policy holder.
MS. BURKE said that is correct except for a corporation, for which
it is 45 days.
CHAIRMAN ROKEBERG suggested that is not fair to "John Q. Public."
It is existing statute not covered by the bill, however.
MS. BURKE said she believes it is 30 days but is unsure.
Number 0413
MS. BURKE advised that Section 33 is a requirement that if insurers
and licensees have people who are embezzling or guilty of
defalcation, they must notify the director. The division wishes to
avoid the prevalent situation where a producer goes from one state
to another. "If we haven't been notified of it, we are at their
mercy," she said. "Currently, all insurance companies must notify
us. But agencies, et cetera, do not."
CHAIRMAN ROKEBERG asked what "defalcation" means.
MS. BURKE said embezzlement and defalcation are basically the same.
Defalcation, however, does not require proof of deliberate intent.
Number 0526
MS. BURKE said Section 34 is to put in the term "construction
industry," omitted in HB 237 two years before.
MS. BURKE said Section 35 clarifies that the issue of rates for
individual health insurance is not a separate issue when talking
about Medicare supplemental insurance. She explained, "The wording
makes it sound like they are two different things, when in fact,
using federal language, it is Medicare supplemental individual
health insurance. It is a clarification that has created some
major problems, and we would like to be consistent."
MS. BURKE stated that Section 36 is long overdue. It is requiring
that insurance companies coordinate benefits. Currently, a person
can make money on the "business of being sick," collecting more
than is spent. There is no statutory prohibition against it. Ms.
Burke cited an example involving a state employee who collected
$65,000 in excess of what she paid because two insurance companies
did not bother to coordinate benefits. This drives up the cost of
health care.
Number 0711
CHAIRMAN ROKEBERG noted there are many instances where two wage
earners in a family have different coverage, with one covering the
deductible, for example.
MS. BURKE responded, "Up to 100 percent. That's still permissible.
But it shouldn't pay you 200 percent."
CHAIRMAN ROKEBERG asked if that particular 100 percent provision is
in statute now.
MS. BURKE said this would put it there. Coordination of benefits
is defined as no greater than 100 percent.
CHAIRMAN ROKEBERG asked whether that is being added with this
provision.
MS. BURKE replied, "And requiring the insurance companies to
coordinate those. If you're covered under your policy for 80
percent and your spouse has a policy that also covers you, they
will pay the additional 20 percent. So you're reimbursed fully for
all of your cost."
CHAIRMAN ROKEBERG asked: If he had two policies on a piece of
personal property and it was stolen, could he make two claims?
MS. BURKE replied, "Up to the limits of your policy on each one of
the claims, yes."
CHAIRMAN ROKEBERG asked whether the earlier discussion applies only
to health insurance.
MS. BURKE affirmed that.
CHAIRMAN ROKEBERG suggested if he had paid the money for two
premiums, he should be able to double-dip.
MS. BURKE replied that under health insurance, a person could
manipulate it. "If you had your vehicle stolen, it can only be
stolen one time," she noted. "But it is possible to go into the
doctor every couple of days for a complaint."
Number 0839
MS. BURKE said Section 37 clarifies when the insurance coverage
will change as a result of legislative mandates. It will either be
the effective date of the law or the next renewal date. There has
been a major problem of trying to change those provisions in mid-
policy.
MS. BURKE advised that Section 38 puts into statute that rates not
be excessive, inadequate or unfairly discriminatory for health
insurance. That is already a requirement for all other types of
insurance.
MS. BURKE said Section 39 is premium tax again, as it applies to
the title insurance industry.
Number 0911
MS. BURKE said Section 40 is the result of a task force formed to
look into title insurance, as a result of legislation introduced
the previous year. "This is the consensus of the industry and the
division that investment income should be an element considered,"
she stated.
CHAIRMAN ROKEBERG asked: Considered for what?
MS. BURKE replied, "In determining whether the cost is excessive,
inadequate or discriminatory."
CHAIRMAN ROKEBERG asked whether that is for calculating premium
rates.
MS. BURKE said yes. She noted that a bill introduced the previous
year related to title insurance. She stated, "And one of the
problems had always been for us to get the information we needed to
determine if it was adequate, not excessive, because there was no
definition of what went into those categories. Investment income
on the collected premiums is a major source of income and should be
considered."
MS. BURKE advised that Section 41 is in response to a request by a
domestic insurer. She said 95 percent of its shareholders reside
in Barrow. However, statutes require that their annual meeting be
held in the city of their principal office, which is Anchorage.
She stated, "We are requesting that upon showing of good cause,
that the director be allowed to permit them to have an annual
meeting in a location other than their principal place of
business."
Number 1046
MS. BURKE explained that Section 42 refers to what is known in the
industry as "surplus notes," a loan put into the equity section
rather than on the liability side. She stated, "We would like to
be able to approve such a transaction before they enter into it and
that they only be allowed to repay that money with the permission
of the director. What happens is a parent company will infuse $10
million to make their subsidiary's balance sheet look good, but
it's not really a loan. They put it in, $10 million cash and $10
million of equity. But they expect to get it back. We just want
to be able to know what they are doing and approve when they pay
this money back, so as not to put the shareholders or the policy
holders at risk. This is in statute in most other states; it has
not been addressed in Alaska."
CHAIRMAN ROKEBERG asked what surplus funds are.
MS. BURKE said they call this note a "surplus note." Although they
infuse money, when the parent company needs some back, they take it
straight out of equity.
CHAIRMAN ROKEBERG asked whether they were meeting some underwriting
requirements and their equity positions with this surplus note.
MS. BURKE said, "With a pseudo-loan. We like to think of it as
creative, and we want to know when they're involved in creative
accounting."
CHAIRMAN ROKEBERG asked whether this would be a burden on
companies.
MS. BURKE replied, "None of our domestics, with the exception of
one that is in financial trouble, has ever attempted to do it."
Number 1182
MS. BURKE said Section 43 is simplification. She stated, "And it
gets back to what I described earlier. If an individual is acting
as attorney in fact for a wholly-owned subsidiary and no other
company, that they would not need to have an additional license."
She said there is such a thing as overkill in licensing and that it
does not add assurance.
MS. BURKE defined companies: A domestic is an Alaska company; a
foreign is a U.S. company; and an alien is from another country.
Number 1255
MS. BURKE advised that Sections 44 and 45 apply to the "joint
insurance arrangement" (JIA). Current statute requires the JIA to
provide two different reports, one to the legislature and one to
the director. She explained the JIA is a group of governmental
entities, political subdivisions and school districts to which the
legislature granted authority to enter into self-insurance many
years ago. "We have no authority to regulate them," she stated.
"The regulation is entirely the responsibility of the legislature.
But we were receiving a report from them, which we can just file."
CHAIRMAN ROKEBERG asked whether the Municipality of Anchorage was
self-insured for liability insurance.
MS. BURKE said they are not part of the JIA, which is usually
smaller political subdivisions.
MS. BURKE said under this section, the JIA would file the same
report with the division as with the legislature; it would also
give them additional time to complete the report. She explained,
"Right now, they're not in compliance with law because the time
given them is not realistic. And they had asked for the additional
time, which we agree makes sense. We'd rather have an accurate
report than a report that's rushed to us."
MS. BURKE said as she reads it, this group is allowed to self-
insure because they have the ability to tax. They can, if faced
with a severe, catastrophic loss, raise the money through taxation.
The legislature has been careful to not expand that arrangement to
other entities lacking that kind of fall-back.
CHAIRMAN ROKEBERG asked whether they have a "mutual aid agreement."
MS. BURKE replied, "They enter into an agreement where they share
any losses among themselves. They have been quite successful.
They've been very conservative. They started out fully funding,
putting all the necessary funds into the JIA. They run it exactly
like an insurance company."
CHAIRMAN ROKEBERG suggested it is a huge jump from 60 to 150 days.
MS. BURKE said that is correct. However, they are required to give
an actuarial opinion on their reserves. It usually takes from 30
to 60 days to close the books on a company.
CHAIRMAN ROKEBERG asked whether this is an annual report.
MS. BURKE affirmed that. She stated, "The actuary cannot begin
their work until after the books are fully closed."
CHAIRMAN ROKEBERG asked how they did it before.
MS. BURKE replied, "They didn't."
Number 1469
MS. BURKE advised that Section 46 has to do with liquidations of
insurance companies. She cited an example from the l980s where a
company that sold workers' compensation insurance went into
liquidation. The division has been trying to close that estate for
almost ten years. However, whenever they get ready to close it,
the state of Washington files another claim against it.
MS. BURKE explained, "We would like to be able to avoid the cost of
litigating every single claim and ask the judge to decide whether
or not the receiver's decision is valid, and put an end to it."
She said the only people who make money on this are receivers and
attorneys. The policy holders and the guarantee funds that put up
the money are still waiting to be paid off. She said, "We have
more than 100 percent that we can return to these people. But we
can't because of these constant claims. And we have to defend, and
that just erodes the estate."
CHAIRMAN ROKEBERG asked whether this language would cut off these
claims.
MS. BURKE said that is a good question. She stated, "No, the
liquidation procedure is a very detailed set of procedure. It sets
a time for the judge to bar claims. They have so many years in
which to come forward with claims. This legislation would address
those claims that come in after bar dates and are called
`contingent claims.' You still have to litigate them. Throughout
the country, receivers are charged with standing in the shoes of
the company. If they exercise judgment outside of the statutory
authority, the judge has the right and the responsibility to
overrule them. This particular statute would simply say that when
the judge says, `That's it,' that is, in fact, it." She said she
hopes in her lifetime to see some of these closed. This will help.
Number 1620
MS. BURKE explained Sections 47 and 48. They update terminology to
recognize that there are managed care arrangements within the
traditional indemnity companies. The terminology is archaic and
the division wants to bring that up to date.
MS. BURKE said Section 49 conforms the form filing requirements for
medical hospital service corporations, "which in our case is Blue
Cross," to the same as all other insurers offering the same line of
business.
Number 1663
MS. BURKE advised that Section 50 is to even the playing field
again. Statute requires hospital and medical corporations to file
their rating formulas with the division. This is proprietary
information. Blue Cross and Alaska Vision are the only two such
corporations in Alaska, and no other insurer has to do this. So
the division immediately gets requests from all the other insurers
for freedom of information to access the proprietary information
and obtain their competitors' formulas.
CHAIRMAN ROKEBERG asked how they were addressing this.
MS. BURKE replied that on each piece of information, they rule that
it is proprietary and deny the right to it; this can be challenged
and dragged out for some time. The division wants to say that
proprietary formulas do not have to be filed with them. If the
division needs to see formulas, they can go to that company and
look at them without bringing them into the division and subjecting
them to a raid by competitors.
CHAIRMAN ROKEBERG suggested if the division went to a company to
review files, that would become part of the division's files and
therefore be accessible under the freedom of information act.
MS. BURKE replied, "Our exam files are confidential."
Number 1846
MS. BURKE said Section 51 is for consistency. Currently, the
hospital medical groups, Blue Cross and Alaska Vision, do not have
to have the same reserves as other health insurers; however, they
are in the same business. The division would like for anyone in
the health business to have the same criteria for reserves.
CHAIRMAN ROKEBERG asked what Blue Cross says about this.
MS. BURKE replied, "They are currently doing this, but they don't
have to. And if they chose to change it, they could do so and we
could not say anything. They have concurred with this bill."
Number 1961
MS. BURKE referred to Section 52 and said, "We're talking about the
auto policies and the nonrenewal. This just makes it clear it does
not apply to the seven-day policies that you can get on rental
cars. This is a totally different animal than your personal car."
MS. BURKE said Section 53 is a result of some companies trying a
"flanking motion" against Alaska policy holders. She stated, "They
have said that they don't issue policies, they issue certificates
of insurance, and therefore, they're not subject to our safeguards
and they are not subject to compliance with our laws. This would
simply provide that no matter what they call it, if it's insurance,
they are subject to Alaska law." This arose from an insurance
company refusing to place a newborn on a family policy by saying
although Alaska allows 31 days to put a newborn on a policy, that
company did not have to comply because they were writing a
certificate, not a policy, in Alaska.
Number 2033
MS. BURKE referred to Section 54 (misstating it as Section 57) and
said it defines financial statements. She reported that one
company had tried to put together its own in-house financial
statements, calling them financial statements for purposes of being
admitted. She stated, "That was not the intent. It was to be
financial statements presented in accordance with generally
accepted accounting principles and certified by an independent
accountant, not done by the bookkeeper without full disclosure."
CHAIRMAN ROKEBERG, referring to language on page 26, lines 22 and
23, asked who an "accountant that holds a substantially equivalent
designation" would be. He asked whether there are anything except
certified public accountants (CPAs) in the U.S.
MS. BURKE said Canada calls them "chartered accountants."
CHAIRMAN ROKEBERG asked whether Section 55 was the chapter on
Lloyd's.
Number 2101
MS. BURKE stated, "In 1995, the entire chapter was superseded, but
we forgot to repeal the old chapter."
CHAIRMAN ROKEBERG asked what it was superseded by.
MS. BURKE replied, "By AS 21.09.310." She said that was SB 53,
introduced in 1994 and passed in 1995.
Number 2158
MS. BURKE noted that the final two sections, Sections 56 and 57,
provide for effective dates.
CHAIRMAN ROKEBERG asked her to explain reasons for the differences.
MS. BURKE replied, "Those that are applying to premium tax, we
don't want them to have to apply two different ways within one
year. That's why we're asking them that they be effective at the
beginning of a calendar year, since all insurance companies report
on a calendar-year basis."
CHAIRMAN ROKEBERG said Section 56 was for the premium tax.
MS. BURKE replied that Sections 4, 5, 27 and 28 are also premium
tax. She stated, "Section 29 is replacing a name, the proper name
of the Comprehensive Health Insurance Association. Again, that's
on a calendar basis; they would have to change all their forms mid-
year if it became effective July 1." She specified she was
referring to effective dates other than July 1.
CHAIRMAN ROKEBERG suggested those were in Sections 4, 5, 25, 26,
27, 28 and 39.
MS. BURKE countered with Sections 4, 5, 27 and 28.
CHAIRMAN ROKEBERG stated, "Well, they're not in the bill. It's on
the sectional of 29, but ... 29 is not in the bill."
AN UNIDENTIFIED SPEAKER suggested that needs to be put in there.
MS. BURKE concurred.
CHAIRMAN ROKEBERG suggested maybe that "tweak" could be made in the
Senate bill.
Number 2290
MS. BURKE stated, "Sections 25 through 28, that apply to the
syndicates, that is correct. It should be effective date at the
beginning of a calendar year, because again, they are reporting on
a calendar year."
CHAIRMAN ROKEBERG said there seem to be other sections that are
inconsistent. "The sectional and the bill are different as it
relates to the various sections under Section 56," he stated.
MS. BURKE stated, "Mr. Chairman, you're right. The sectional
analysis is not correct."
CHAIRMAN ROKEBERG asked how this should be amended.
MS. BURKE stated, "We want Section 4 and 5, Section 25, which is
Lloyd's syndicate, 26, to be as of a calendar year. Section 27 and
28, again refer to the premium tax."
AN UNIDENTIFIED SPEAKER asked whether that would be on a calendar
year.
MS. BURKE said yes.
Number 2340
CHAIRMAN ROKEBERG asked whether Ms. Burke wanted to add Section 29.
MS. BURKE replied that Section 29 is July 1. Section 39 is a
calendar year.
CHAIRMAN ROKEBERG asked, "So 29 is okay; it doesn't have to be in
Section 56?"
MS. BURKE said that is correct. She stated, "The sections that are
listed in the CS in Section 56 are correct."
CHAIRMAN ROKEBERG asked whether Sections 25 and 26 should be added,
and Sections 29 and 41 deleted, from the sectional analysis.
MS. BURKE said, "That's correct. And 30."
CHAIRMAN ROKEBERG asked for confirmation that the bill is okay,
then.
MS. BURKE replied that the bill is okay and apologized for the
oversight.
(HB 218 was held over)
Number 2398
ADJOURNMENT
CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing
Committee meeting at 5:53 p.m.
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