Legislature(1997 - 1998)
04/28/1997 03:27 PM House L&C
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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
April 28, 1997
3:27 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative John Cowdery, Vice Chairman
Representative Jerry Sanders
Representative Joe Ryan
Representative Tom Brice
Representative Gene Kubina
MEMBERS ABSENT
Representative Bill Hudson
COMMITTEE CALENDAR
* HOUSE BILL NO. 223
"An Act removing the exemption from overtime pay requirements for
work performed under a flexible work hour plan included as part of
a collective bargaining agreement."
- HEARD AND HELD
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 223
SHORT TITLE: NO OVERTIME EXEMPT FOR CONTRACT FLEXTIME
SPONSOR(S): REPRESENTATIVE(S) JAMES
JRN-DATE JRN-PG ACTION
04/01/97 900 (H) READ THE FIRST TIME - REFERRAL(S)
04/01/97 900 (H) LABOR & COMMERCE
04/28/97 (H) L&C AT 3:15 PM CAPITOL 17
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)
04/07/97 (H) MINUTE(L&C)
04/18/97 (H) L&C AT 3:15 PM CAPITOL 17
04/18/97 (H) MINUTE(L&C)
04/23/97 (H) L&C AT 3:15 PM CAPITOL 17
04/23/97 (H) MINUTE(L&C)
04/25/97 (H) L&C AT 3:15 PM CAPITOL 17
04/25/97 (H) MINUTE(L&C)
04/28/97 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE JEANNETTE JAMES
Alaska State Legislature
Capitol Building, Room 102
Juneau, Alaska 99081
Telephone: (907) 465-3743
POSITION STATEMENT: Sponsor of HB 233.
ED FLANAGAN, Deputy Commissioner
Office of the Commissioner
Department of Labor
P.O. Box 21149
Juneau, Alaska 99802-1149
Telephone: (907) 465-2700
POSITION STATEMENT: Testified in support of HB 233.
MARIANNE 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: Reviewed HB 218.
MICHAEL LESSMEIER, Attorney
Lessmeier and Winters
One Sealaska Plaza, Suite 303
Juneau, Alaska 99801
Telephone: (907) 586-5912
POSITION STATEMENT: Responded to questions on HB 218.
ACTION NARRATIVE
TAPE 97-51, SIDE A
Number 0001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee to order at 3:27 p.m. Members present at the
call to order were Representatives Rokeberg, Cowdery, Brice and
Ryan. Representatives Sanders and Kubina arrived at 3:30 p.m.
HB 223 - NO OVERTIME EXEMPT FOR CONTRACT FLEXTIME
[Contains discussion of HB 68.]
Number 0046
CHAIRMAN NORMAN ROKEBERG announced the first order of business
would be HB 223, "An Act removing the exemption from overtime pay
requirements for work performed under a flexible work hour plan
included as part of a collective bargaining agreement."
Number 0065
REPRESENTATIVE JEANNETTE JAMES, sponsor of HB 223, came before the
committee. She explained one of the issues that came up on the
House floor regarding HB 68 was that there isn't a level playing
field in that if you want to do something, and you're covered by a
collective bargaining agreement, you could do it. If you aren't
covered by a collective bargaining unit, you couldn't do it. She
said there seems to be some dichotomy, in statute, that would
mandate that people should have a collective bargaining agreement
which some people disagree with. She explained that there needs to
be a level playing field and the first way to do that is to do away
with exemption 13. Representative James said she checked to see
how many collective bargaining agreements currently exist that have
a flexible work plan and that wouldn't necessarily pay overtime
after 8 hours, but would pay overtime only after 40 hours.
According to the Department of Labor, there are three such
agreements and there may be four. She said HB 223, however,
doesn't make it retroactive as it is not her intent that it
interfere with any existing agreements. It would only preclude any
new agreements from being made under this. Representative James
said, "I think it's probably really proper that I mention that on
the issue of House Bill 68, that I have been working extensively
since the bill was filed in the first place, to come to some
agreement on language with all the interested parties that that
bill could be addressed. Quite frankly, I cannot support House
Bill 68 the way it is currently drafted because it is too drafty.
And so it needs to have some more definition and whether or not we
can get that definition is still to be researched. But I still am
interested in getting this particular part because if we wanted to
put this back in the legislation, we can do it. And I'm successful
in getting some other legislation that would address the concerns
with House Bill 68. We can certainly put this back in that process
and, in the meantime, with what we've got on the table I still
would like to take this part away so we do have a level playing
field."
REPRESENTATIVE JAMES explained something expressed in the
resolution from the Greater Fairbanks Chamber of Commerce is that
they really do hope that there is a level playing field and HB 223
does that in a simple way. She said she would be happy to answer
any questions.
Number 0331
REPRESENTATIVE JOHN COWDERY referred to previous Labor and Commerce
Committee hearings on HB 68 and said the committee members received
information listing existing exemptions from the overtime
requirement. He said there were over 800 agreements currently in
Alaska.
REPRESENTATIVE JAMES said, "Well if I could respond to that,
Representative Cowdery, I think you're probably referring to the `4
- 10s.' That is under I believe 14 -- the 14 which whether you're
a collective bargaining or not collective bargaining, you can file
a plan with the Department of Labor to work `4-10s.' That allows
you to not pay overtime over 8, however, you cannot work longer
than 10 on the regular schedule and you cannot work over four days,
in other words, to do that. So it's a plan where you work `4-10s.'
It might be a proper way to insert that right now. I think that
law is being misused, personally, that's my personal opinion
because this way they can put in eight days in a row without any
overtime by working `4-10s' and `4-10s' at opposite ends of the
week. And I'm personally opposed to working anything that
circumvents the requirement of 40 hours in a week and so I'm not
really interested. I think that there is a problem with that
particular law that we have on the book and I'm not here to fix it.
But that 800 people that you're talking about are probably that
number 14 exemption and a lot of those are construction that only
work in the summers, so there is a good argument for them to work
10 hours without overtime."
Number 0532
REPRESENTATIVE COWDERY noted it isn't 800 people, it is 800
businesses.
REPRESENTATIVE JAMES said she understands.
REPRESENTATIVE COWDERY said some people who work for the Department
of Corrections work "7-12s." There are other exemptions for the
Alaska Marine Highway System.
REPRESENTATIVE JAMES indicated she has repeatedly reviewed those
exemptions. She said she believes there are 17 and almost every
one of those exemptions are for certain types of businesses that
really can't work on a normal work week or normal work day, such as
newspapers, et cetera. Representative James said exemption 13
sticks out like a soar thumb, like carte blanche for unions to make
this kind of an agreement. If it is not allowable for people who
are nonunion, then it shouldn't be allowable for a union. She said
that is her point with the legislation. All the other exemptions
have nothing to do with whether or not collective bargaining can do
something than others.
Number 0613
REPRESENTATIVE TOM BRICE said the bill won't impact standing
collective bargaining agreements, so he assumes that once the
contract is over and they renegotiate, at that point in time they
would lose the 12 hours.
REPRESENTATIVE JAMES said it isn't her intent for that to happen.
She suggested asking someone from the Department of Labor.
Number 0700
REPRESENTATIVE GENE KUBINA pointed out that you don't have to
belong to a union to get an exemption under exemption 13. The
people that are at Fort Knox have sent legislators a petition that
states that they want to be exempt from this law. If the wording
is changed on the petition just a little bit to say that as a
group, they collectively want to be done with that - negotiate out
of that, they can sit down and do that. They don't have to join
any union in the state. They can do that as group of employees by
themselves.
REPRESENTATIVE JAMES indicated that is Representative Kubina's
interpretation of the law and not her interpretation. She said she
doesn't think that's true because it says, "...by collective
bargaining." She pointed out there are really strict regulations
that pertain to collective bargaining. It depends on how much the
employer is involved in that issue and there also has to be some
kind of a plan that meets the national labor standards as to what
really collective bargaining is. It might be considered coercion.
REPRESENTATIVE KUBINA said his point is that they could say they
want to be represented for that issue and that issue only.
REPRESENTATIVE JAMES said, "That only responds to that list of
employees. Tomorrow, the employees may be a different group. What
about the new people that come in? They haven't agreed to that and
they're not a member of a union. It gets complicated."
Number 0851
ED FLANAGAN, Deputy Commissioner, Office of the Commissioner,
Department of Labor, came before the committee to testify in
support of HB 233. He said there has been a lot of contention and
a lot has been made of the fact that there are specific exemptions
in the private sector for work places that modify their work week
under a collective bargaining agreement. Mr. Flanagan said, "What
is now 13 and 14, 14 is the `4-10s' flex plan, they were initiated
in 1981, and initially in the House side it was one exemption and
it just related to `4-10s,' and the two options for doing it were
either boom, (A) a collective bargaining agreement; or (B) a
written voluntary plan approved by the department in the case of a
nonunion employer. Even though it was only 16 years ago, the
legislative record is remarkably sketchy. And it went into the
Senate and they had, at that time, a labor and management committee
and it came out two separate exemptions and the `4-10s' language
remained, and the one for work places not covered by a collective
agreement. The exemption under what is now number 13 appeared to
give carte blanche. It's hard to determine if that was the intent
and it has been only utilized, to our knowledge, by three or four
private sector employers. We did become aware of a fourth utility
that may have some powerhouse employees covered by it at Golden
Valley Electric. But the total number of employees in the 16 years
the law has been extant is very small, probably something like 20
or 30 employees. When I spoke with the sponsor on this bill, she
did declare her intent to grandfather the few existing agreements
and the bill seemed to addressed that. I guess it might require an
attorney general or your leg. counsel to take a look at that - if
Representative Brice's possible interpretation would prevail. I
don't know. It looked, at first blush, like that could work to
grandfather the three or four existing units in there."
MR. FLANAGAN referred to the 800 exemptions and said that would be
the list the department provided of all the "4-10" agreements. He
noted some of them are union employers and it applies to their
nonunion employees, like the office staff of a construction firm
that has signed with the union. They will also have a voluntary
"4-10s" plan for its nonunion employees. He noted a lot of those
employers are no longer in business. Mr. Flanagan indicated the
department keeps the plan on file. He said, "If the employer goes
out of business or if the plan - they don't even have to notify us
if the plan goes out, the employees can elect to opt in and out of
the `4-10s' plan every November - December. Under regulation,
there is a window period where they can -- but once they elect then
they're locked in for the year. So that's not an accurate count of
who is out there. If we get a complaint or if we have a wage and
hour problem with an employer and they say, `Well we have a 4-10s
plan,' then we go -- if we have it on file and unless there has
been some notification, it's still considered to be active. So
whether there are 800 work places out there, that's probably pretty
high, but we did compile that list from our three regional our
three wage and hour offices."
MR. FLANAGAN referred to the petition question and said the
department's interpretation of the existing exemption 13 is a
collective bargaining agreement. While there is nothing to keep a
group of employees from creating their own independent union, he
believes they would have be organized and recognized as a union and
have a valid collective bargaining agreement in effect. Mr.
Flanagan informed the committee that during testimony on HB 68,
there was discussion about forming a union to do this. He said he
doesn't think that is really the intent of the law. The department
doesn't feel that people should form a union just for the purpose
of giving up overtime.
MR. FLANAGAN said he thinks that HB 223 does address what has been
a perceived unlevel playing field. He said let's remove any hint
of inherent unfairness and have everybody, when it comes to
modifying workweeks, play by the same set of rules, which currently
exist in AS 23.10.060(d)(14).
REPRESENTATIVE KUBINA asked Mr. Flanagan if there are any other
exemptions he would recommend getting rid of.
MR. FLANAGAN said he thinks some of them are archaic. There might
be a switchboard operator in the state with an exchange of 750
customers or less, but he doubts it. He said some of them are in
the federal lair, and in some cases they represent what the
political realities were at the time that the Wage and Hour Act was
promulgated. Mr. Flanagan explained that generally, the Department
of Labor doesn't support additional exemptions. The department
would probably look favorably on a review of the existing
exemptions to see if they are still appropriate. He said from a
pragmatic point of view, the department isn't really proposing that
at this time since the trend has been more to adding exemptions
rather than to remove them. He noted this exemption is a unique
exemption.
Number 1250
CHAIRMAN ROKEBERG said, "Right now, the existing law with the
flextime is such that unless you had a collective bargaining
agreement, there is no ability, even if all the employees agree to
go beyond the 10 hours without paying overtime, but as I
understood it there is not even an ability to allow 12 hours even
with a paid overtime, under a flex plan. Is that correct?"
MR. FLANAGAN responded, "Yes, not under a flex plan. Of course an
employer can work 12 hours, they can work 18 hours - whatever, but
they pay over 8. When it comes to an approved `4-10s' plan under
existing exemption 14, the department -- the regulation we only
approve work schedules that are based on `4-10s.' Not on -- if you
were regularly scheduled for `4-12s,' we would not approve that and
say, `Okay, but you can pay straight time for 40 and overtime over
10.' There is language in the exemption of 14 that refers to
overtime in the event it goes over 10, but that is for the
inevitable or unforeseen emergency situation or unanticipated
overtime or somebody doesn't show up on the next shift. So there
is a mechanism for paying overtime over 12, but the regulation only
allows plans based on `4-10s' or no more than 10 hours a day."
Number 1344
CHAIRMAN ROKEBERG said there seems to be a gap in terms of the
statute. He said if an employee group, working with the employer,
came to the department and requested the flex plan, they would not
be able to work beyond the 10 hours even if they wanted to pay
overtime over 10 hours. He asked if any thought has been given to
giving the commissioner the ability to review the circumstances.
He noted that currently the commissioner isn't allowed to do that.
Number 1393
MR. FLANAGAN responded, "We looked at the regulation when the
question came up. We stand by the interpretation that under the
current law, and the inclination of the commissioner and the
department that regularly scheduled work that is regularly
scheduled for more than 10 hours should pay overtime over 8 -- that
the flexibility could be in a `4-10' situation or one of the `9-80'
like the feds work. We have accommodated those type of plans where
an employee works 9 hours -- in a two week period they work 9 hours
for eight days then 8 hours on their ninth day and then they have
every other Friday off. We've accommodated those, but we have not
made the jump and are not, at this point, willing to make the jump
to something scheduled regularly for more than 10 hours with a
overtime break - with a break on the overtime pay."
CHAIRMAN ROKEBERG asked Mr. Flanagan if he is saying that any kind
of scenario that provides for a 40-hour week, at regular time and
anything over 40 hours being overtime, is something the department
wouldn't necessarily agree to given the number of hours in a day.
MR. FLANAGAN said that is correct if it included a regularly
scheduled shift of 10 hours.
Number 1480
REPRESENTATIVE JOE RYAN said there are two statutes, one says
anything over 8 hours a day is premium time and anything over 40
hours a week is premium time. He said, "The purpose of the 10-hour
day with the 2 hours of time and a half - the premium time, and the
flexibility allowed, did that tie into the 8 hours a day or 40
hours a week -- or how was that brought about that the regulations
stipulated no more than 10."
MR. FLANAGAN explained it is his understanding that all anybody was
looking for in 1981 was "4-10s." That was the alternative workweek
that the union group which had come forward seeking that the
legislation requested because the employees wanted to work "4-10s"
and the employer wanted to make sure the department wasn't going to
ding them. It evolved into two exemptions instead of one. He
noted he believes the company was Wien Airlines.
Number 1546
CHAIRMAN ROKEBERG indicated there were no further witnesses to
testify on HB 223. He said HB 223 would be held over for further
consideration.
Number 1610
CHAIRMAN ROKEBERG called brief at-ease at 3:50 p.m. He called the
meeting back to order at 4:03 p.m.
HB 218 - OMNIBUS INSURANCE REFORM
Number 1615
CHAIRMAN ROKEBERG indicated the next order of business would be HB
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."
Chairman Rokeberg apologized to Marianne Burke regarding the
scheduling of the legislation for the last two meetings and not
hearing it. He asked if there is a clear demarkation in terms of
sections between the Kassenbaum/Kennedy bill and the other.
Number 1626
MARIANNE BURKE, Director, Division of Insurance, Department of
Commerce and Economic Development, came before the committee. She
said there is a sectional analysis dated April 22. She informed
the committee that Section 1 specifically points out those sections
of the combined bill that refer specifically to the
Kassenbaum/Kennedy implementation which is P.L. 104-191.
REPRESENTATIVE ROKEBERG noted that the Senate's version of the bill
currently passed the Senate in third reading and a notice of
reconsideration has been given. He asked if the Kassenbaum/Kennedy
portions of the Senate bill have been changed.
MS. BURKE stated there hasn't been any changes to any section that
pertains to the Kassenbaum/Kennedy legislation. In fact, the only
changes were additions to the bill rather than any changes to the
bill itself.
Number 1747
MS. BURKE indicated she would discuss the sections of HB 218 that
pertain to the Kassenbaum/Kennedy legislation. She stated there
are a number of terms used in the federal legislation that have
specific definitions. Wherever our statutes contain the same
words, but were defined differently, they have conformed the use of
that word to the federal definition.
MS. BURKE said Section 3 is to make sure that the terms we are
using are consistent with the newly defined insurance terms under
the federal law.
MS. BURKE informed the committee members that the next section that
pertains to the Kassenbaum/Kennedy bill defines the term "health
care insurance," which has been defined to be consistent with
health insurance coverage.
CHAIRMAN ROKEBERG asked if that would be throughout the entire
statute or if it is just in that particular chapter.
Number 1828
MS. BURKE responded that the health insurance coverage that is in
the federal legislation is the one we are conforming to. She said
since the federal definition is different from our state
definition, as Alaska's is more broad, they have taken the federal
definition and made it a subset of the Alaska definition. Ms.
Burke stated this section also adds the stop-loss insurance. She
explained stop-loss insurance for health coverage is not allowed in
the state of Alaska. It is done, but it is not in accordance with
statute. This would permit the stop-loss insurance to affirm that
life and health insurers are permitted to write such insurance in
Alaska. Ms. Burke noted Section 12 defines what that insurance
actually is.
Number 1891
MS. BURKE directed the committee to Sections 31 through 34 and
Sections 43 through 56 and said this is a matter of clarifying the
terms and being consistent with the federal standards. It also
allows the applicability of these sections to a multi employer
welfare arrangement (MEWA).
CHAIRMAN ROKEBERG questioned what a MEWA is.
MS. BURKE responded that under federal law, there are provisions
which allow a group of employers to get together and provide help
for other benefits for their employees. The state has very limited
authority over these MEWAs. They're exempted by Employee
Retirement and Income Security Act (ERISA). However, in the
Kassenbaum/Kennedy law, the federal government actually allowed
some intrusion, for the first time, into the self-insurance
unregulated activity. It gave the states a little more authority
to oversee what they are doing.
Number 2021
CHAIRMAN ROKEBERG asked if the state of Alaska would qualify.
MS. BURKE said the state of Alaska wouldn't qualify as it is
single.
MS. BURKE informed the committee that there are certain types of
policies that aren't covered such as workers' comp which isn't
covered under Kassenbaum/Kennedy. They're known as accepted
benefit plans. Ms. Burke explained the purpose of the changes the
department is proposing are intended to make the sections
consistent with each other and, in terms of applicability, with the
terms as used in federal law.
MS. BURKE said, "The bulk of this is getting consistency so that we
do not create barriers which the federal government could use as
evidence of the need for them to take over regulation of these
particular health practices in the state of Alaska."
Number 2087
MS. BURKE referred to Section 43 and said, "For simplicity, the
changes are made to conform with the federal law and include both
individual and groups as far as enrollment periods are concerned.
This is enrollment of dependence, newly adopted or dependence borne
to a group policy."
MS. BURKE explained Section 45 and Section 46 is similar to and
conforms our state law with minimum federal standards, as far as
the 48-hour child birth provisions, that were passed by the
legislature last year.
CHAIRMAN ROKEBERG said, "Is there any change -- these are like
minimum federal standards. Does that change, in any way, the
intent of the legislation we passed last year?"
MS. BURKE indicated it doesn't. She said it was to make illegal
what was known as the drive-thru births, the 48 hours. The 96
hours for caesarean births stays the same.
Number 2157
REPRESENTATIVE RYAN asked if the committee had previously discussed
Section 41.
MS. BURKE indicated the committee has previously discussed the
coordination of benefits. She said it is the same as what was in
the original bill. It is to avoid people collecting more than 100
percent of coverage. Ms. Burke noted there was a state employee
that collected $65,000 over and above what it had cost them --
$65,000 more than 100 percent of their reimbursement. She said it
has nothing to do with the concept of coordination of benefits. It
is to make sure that people don't turn insurance into a cottage
industry.
REPRESENTATIVE RYAN said, "If I am paying a premium for insurance,
my wife is paying a premium for insurance, and the company is
receiving the monies, why should they not pay for a loss
individually? Why should they be allowed to cut their loss by
commingling their risk with another insurer's risk when there were
two individuals and they're receiving a premium for each
individual? It kind of looks like they've gotten to somebody and
cut a deal for themselves so they can make the money and, at the
same time, not have to had bear the risk."
Number 2219
MS. BURKE said that this is a hotly disputed and discussed area,
especially in line of the runaway health care costs. Most people
get a second policy to pick up what is not covered. This provides
that you do receive the full benefit of that. Ms. Burke pointed
out in two person wage earner families, you will be covered by one
employer and another employer. There is the birthday rule that
says, for example, if your children are covered under both
policies, the primary coverage is through the policy of the parent
whose birthday comes first in the year. It is simply arbitrary.
This is to provide that you get up to 100 percent, but no more than
100 percent. She referred to Representative Ryan's question about
why shouldn't they get whatever they've paid for and said that is
a matter of public policy, the legislature chose to let them do so.
In order to keep health care costs down, the whole concept of
coordination of benefits was introduced in that you will get up to
100 percent, but no more.
Number 2277
REPRESENTATIVE RYAN asked Ms. Burke if it would be reasonable to
think that the legislature could coordinate the premiums. He said,
"If somebody is paying 80 percent and you're the other insurer
paying only 10 percent - 20 percent, then you only get 20 percent
of the premium."
MS. BURKE stated that anything is possible.
CHAIRMAN ROKEBERG said that is a very good point. He said with the
exception of health care insurance, the ability of a person to
insure something more than once is a doable thing. Chairman
Rokeberg asked about insuring a car by two different companies.
MS. BURKE pointed you that can't insure anything for more than its
value. She noted that the only thing that hasn't been capped is
your life as you can choose to insure your life for whatever amount
you choose to pay the premiums on. An underlying public policy in
insurance is that it has always been that you will be indemnified.
You will get back that which you have spent.
Number 2404
MS. BURKE referred to Section 57 and said it applies to long-term
care contracts. She said part of the Kassenbaum/Kennedy bill was
to provide an incentive for people to buy long-term care insurance
and to that, they gave favorable tax treatment to the premiums you
pay. As an individual, you are permitted to deduct health care
costs and premiums in excess of 7.5 percent of you adjusted gross
income. They have now added the long-term care contracts to this
treatment as a public policy to encourage people to purchase long-
term care policies. Ms. Burke said the section does provide that
the director shall write regulations, specifically, to deal with
this policy. It doesn't mean that all long-term care policies do
have favorable tax treatment. You can still choose to purchase
those that do not.
CHAIRMAN ROKEBERG asked Ms. Burke if she is aware of any long-term
policies that are currently being offered in the state of Alaska.
MS. BURKE responded that there are.
Number 2469
MS. BURKE referred to Section 59 and said it adds several new
sections to conform to the minimum federal standards for health
care insurance. She said they are probably the ones that have
received the most publicity. The first is unfair discrimination.
TAPE 97-51, SIDE B
Number 0001
MS. BURKE explained that there is a long chapter within Title 21
that does relate to unfair trade practices, including unfair
discrimination. Ms. Burke said pre-existing conditions have been
discussed at various committee meetings and has been a highly
publicized part of the Kassenbaum/Kennedy bill. It was viewed as
the ability to have portability of your coverage. She said as she
has explained before, this does not mean you take the same coverage
with you. It means that if your heart or cancer condition was
covered before you've already satisfied that pre-existing
condition, you don't have to start all over again in satisfying
that provision.
Number 0053
REPRESENTATIVE RYAN referred to a situation where an employee is
being treated for a condition with an insurance carrier. For some
reason, they lose employment and then they come back to work for
the same employer that has the same insurance carrier, would that
be considered a pre-existing condition since there is a new
enrollment or would they have to accept that?
MS. BURKE said, "That gets to the next issue, the creditable
coverage. If you have had coverage before and there hasn't been a
lapse of coverage, including your COBRA and everything else, over
a certain period of time, no you would not. But if you go away for
several years then come back, it's a different issue.
MS. BURKE referred to the break in coverage that Representative
Ryan referred to about how long you can be away and explained that
the federal number of days is 63. She said, "In our legislation,
right now, we have for the small employer groups, we allow 90 days
break in coverage. And we left it at 90 days - there is no federal
mandate that says we have to make it 63. Ninety is considered more
generous than the 63, so that's not stepping on the federal toes in
that area."
Number 0189
MS. BURKE explained the renewability, termination and modification
of coverage allows a guaranteed renewability. If a small employer
already has this policy in place, then it is guaranteed to be
renewable except in the circumstances of nonpayment of premium,
fraud or something along those lines. Ms. Burke said subsection
(f) was added to allow an insurer to terminate if there is fraud or
intentional misrepresentation. This is not a part of the federal
law as passed. However, the Health Care Financing Administration
(HICFA) has indicated, in conferences to the state and to others,
that it was their intent that it be there. It was never the intent
for them to allow someone to perpetrate fraud in order to get this
policy.
CHAIRMAN ROKEBERG asked if it is a drafting oversight.
MS. BURKE said, "Just for whatever reason was not included in the
original bill and probably will be a technical correction."
Number 0256
REPRESENTATIVE RYAN said, "Why here on page 33, line 29, -- what is
there is about group market that will allow this 18-month if you
missed the enrollment, you have to go 18 months or if you had a
preexisting condition, they can exclude you for 18 months. Is that
some different - a wholly different horse with a different color?"
MS. BURKE said it is not. It is the same treatment. It is for
late enrollees.
REPRESENTATIVE RYAN said if he were to work for a new employer and
tell them he has had a bad back for years and it requires treatment
from time to time. One employer could say, "Fine, but we're not
going to cover you for 18 months."
MS. BURKE explained a number of things would kick in. If you had
been covered with you last employer, for that bad back, then that
would be a different situation altogether. As long as you haven't
had a break of more than 90 days of coverage, then you don't have
to go that long.
REPRESENTATIVE RYAN said, "So basically they feel they're going to
have to pay you health care costs for this and it's an ongoing
condition. They want a year and a half premium to start with
before they kick in, so they have some reserves to make the
payment. Is that it?
MS. BURKE said she thinks two concepts are being mixed.
REPRESENTATIVE RYAN said, "My wife has a policy where she works,
they gave her a six month thing. So she waited patiently for her
insurance to cover certain aspects. And this one says 18. I'm
wondering what the difference is. She has got Blue Cross."
MS. BURKE asked if she was a late enrollee. If she comes into a
new job, she is not considered a late enrollee, but if she decides
a year later that well, maybe she should have taken that insurance,
that's a late enrollee.
Number 0360
CHAIRMAN ROKEBERG questioned what a late enrollee is. He asked if
it is defined in Article 3.
MS. BURKE indicated it is defined in Article 3.
CHAIRMAN ROKEBERG read the definition from Version B, page 44, line
17, "Late enrollee" means a participant or beneficiary who requests
enrollment in an employer's health care insurance plan following
the initial enrollment period for which the participant or
beneficiary was eligible to enroll under the terms of a health care
insurance plan, except that a participant or beneficiary may not be
considered a late enrollee if.... Chairman Rokeberg said you could
have a situation where there is a transfer from one job to another.
He asked if the new employee would bring a plan from another
employer.
MS. BURKE said the more probable situation is where you elect not
to take the coverage, but then a year or so later you decide that
you want to take the coverage.
CHAIRMAN ROKEBERG said that could be because you may have been
divorced.
MS. BURKE said it is a life event and it is provided for in the
legislation. A life event could be marriage, divorce, birth of a
child.
Number 0497
MS. BURKE referred to the mental health benefits and said there was
an amendment introduced to provide parity on mental health. The
cost of providing parity was estimated by various actuarial groups
to be astronomical and it would force the cost of health care into
bankruptcy. It was pulled out of the original bill, but then it
was added as an amendment to a veterans' funding bill. One of the
very important changes was that if the employer could show that the
parity increased their premiums by more than 1 percent, they could
be excused from it. She said this was in response to no one really
knowing what parity could do to the cost of health care in this
country. Ms. Burke noted the specific federal citation is 42
U.S.C. 300gg-5, and it is on page 38 of the legislation.
Number 0662
REPRESENTATIVE RYAN referred to the aggregate limit on page 38,
line 17, and said the insurance with the state has a $1 million
lifetime limit. He asked if that is accumulative in that it
includes mental health care, physical, surgical, dental, eye, et
cetera.
MS. BURKE indicated that is correct. She informed the committee
that there was a strong lobby that said, "If you will pay $1
million for medical care, the full amount could be used for mental
health." She said the state employee policy has specific limits
telling how much can be paid, per visit, for mental health and how
many visits you can have that are covered. Ms. Burke said if
parity had gone through without limitation at all, those limits
would have gone away. A person could have gone in for mental
health care as often as they would have gone in for treatment of a
chronic infection. There would have been no differentiation
between the two types of care. It was felt by many consumer
groups, as well as the insurance companies, that this could result
in very unintended results. There are all kinds of horror stories.
She referred to teenagers being admitted because of behavioral
problems.
Number 0869
CHAIRMAN ROKEBERG referred to the Medicare supplemental insurance
as being part of social security and asked if they are all
excluded.
MS. BURKE indicated they are excluded if they are not part of the
integral part of the regular policy.
CHAIRMAN ROKEBERG asked if an employer could provide for
supplemental benefits for someone over 65.
MS. BURKE said the Medicare supplemental health insurance is
defined specifically in the Social Security Act. It does not refer
to the coverage for a person under a normal medical policy that is
over 65. It refers strictly to the additional coverage that is
tied to the Medicare coverage that a person over 65 is eligible
for.
Number 0957
MS. BURKE explained the next portion of the small employer chapter
is determination of size of employer. She said the legislation
passed last year determined a small employer to be a group of 2 to
50 employees. The federal statutes also apply to 2 to 50.
However, the way it is determined is slightly different. She said,
"You could take an average. You could determine whether or not you
2 to 50 by saying, `How many did you have at the beginning of the
year and how many at the end,' add them together and divide by 2.
Or you could have it in any number of other definitions. We are
conforming to the way it is defined in federal legislation which is
the average."
Number 1042
MS. BURKE referred to Article 3 and said it contains definitions
that are consistent with the Kassenbaum/Kennedy bill.
MS. BURKE explained Sections 60 through 68 applies to the
provisions that are in what is called the high risk pool. She
said, "Since that is, in fact, an insurance company and this high
risk pool is the mechanism to provide guaranteed portability for an
individual, if you leave the group market, that you can have a
policy and individual market through the high risk pool." She said
this for what is known as federally eligible individuals. It is
defined in federal law in our definitions. Ms. Burke noted that
this is the least disruptive of all the federal alternatives that
were available to us.
Number 1114
MS. BURKE explained Sections 69 through 90 refers to the Small
Employer Health Reinsurance Association. It has to do with the
small employer legislation that was adopted about three years ago
which made a group policy available to any employer that had
employees from 2 to 50. She said, "We did not, in any way, change
this except to make sure that there is no misapplication of the
federal minimum standards."
CHAIRMAN ROKEBERG said the Small Employer Health Reinsurance
Association is existing statutory language that we currently have.
MS. BURKE said that is correct. She explained that the way it
works is that the insurance company can reinsure an individual out
into a risk pool. This opened up availability for a lot of small
employers that might have one or two employees who had health
problems which were so severe that they couldn't afford the
coverage for the rest of the group.
CHAIRMAN ROKEBERG asked if there is anybody operating under this
statue yet.
MS. BURKE said there are quite a few small employer health
policies. She said she doesn't know the exact number, but she does
know there are eight individuals that have been reinsured into the
pool at this point.
CHAIRMAN ROKEBERG asked if there is an association that has been
established.
MS. BURKE indicated the Reinsurance Association has been
established.
Number 1235
REPRESENTATIVE RYAN asked if there are any specific diseases
included such as terminal disease.
MS. BURKE responded that with the high risk pool, the only rating
is on your age and what you choose to have as a deductible. She
referred to small employers and said if an insurance company gets
someone with one of these high risks, they would insure them out.
REPRESENTATIVE RYAN said if an employee comes to a small employer
and says they have a permanent condition, the employer couldn't use
that as a basis not to hire.
MS. BURKE said that is correct.
Number 1298
MS. BURKE referred to Section 99 and said the amendment clarifies
that the minimum federal standards may apply to fraternal benefit
societies also. She noted there is currently a bill regarding the
fraternals that bring those up to date from the 1960s.
MS. BURKE referred to Section 100 through 102 and said although we
don't have health maintenance organizations (HMOs) in Alaska at
this time, there is enabling legislation on the books which was
enacted in 1990. In the event that there is an HMO, the federal
standards would apply to them as well.
MS. BURKE said the next section that is applicable to
Kassenbaum/Kennedy legislation is Section 108. She informed the
committee Section 108 would make sure that the federal minimum
standards apply to hospitals and medical service corporations. Ms.
Burke pointed out that Blue Cross is a hospital and medical service
corporation. She said, "Alaska only has two such animals and
that's Blue Cross and Alaska Vision."
Number 1411
MS. BURKE referred to Section 110 and said it is modified to extend
the group certificates, issued in Alaska and delivered outside of
Alaska, to make sure they're consistent with the application of
state law and all group health care plans. The minimum federal
standards do apply to such certificates and unless Alaska amends
the law, we would have difficulty enforcing this. Ms. Burke
pointed out that there is at least one insurance company in Alaska
that has tried to hide behind the use of terms. She said, "We are
trying to make sure that is no longer an option for them to say
that this is a certificate, not a policy."
MS. BURKE said, "Mr. Chairman, those are the sections that pertain
to the Kassenbaum/Kennedy bill that was a separate bill and was
simply rolled into the appropriate position in the old bill."
MS. BURKE informed the committee members that most of the
provisions of the Kassenbaum/Kennedy bill are effective July 1,
1997. However, the sections of the old bill, that pertain to the
premium tax, are effective January 1. The reason is that premium
taxes reported on a calendar year basis and it would have been
extremely difficult to change in mid year.
Number 1629
CHAIRMAN ROKEBERG asked if the section pertaining to multiple
employer welfare arrangements is the only area of the
Kassenbaum/Kennedy bill that doesn't impact self-insurers.
MS. BURKE explained the provisions of portability applies to self-
insurance as well as to insured plans. She noted this is a
significant change, for the first time, that the federal government
has actually held self-insured plans to standards that are
applicable to insured plans.
Number 1675
CHAIRMAN ROKEBERG said if a person is a member of the Alaska plan
and they severed their employment with the state of Alaska, but
wanted to maintain their insurance, how it would work.
MS. BURKE said it is a very difficult area. She said, "The state
of Alaska will not be subject to ERISA. It will not be subject to
the federal pre-emption in self-insurance plans with the exception
of state plans, are subject to what is known as ERISA - the federal
standards that were enacted in 1974. But there is a specific
exemption in ERISA that says governmental claims, state benefit
plans are exempted. So the state's plan would not be subject to
either the state law or the federal law."
Number 1877
CHAIRMAN ROKEBERG asked what the most troublesome and controversial
thing is in the bill and what the best thing is.
MS. BURKE responded that a lot of it is perception. The fact that
people have perceived themselves as being trapped in a job, whether
rightly or wrongly, they do have more options now as a result of
the Kennedy/Kassenbaum bill. She said, "In many states which do
not have some of the laws Alaska has, such as the small employer
makes available to small employers coverage and a mechanism for a
reinsure and high risk out, it is very profound. The state of
Alaska, since we have many of these things already in place, it is
less pronounced. The most troublesome part of the bill is if it
doesn't pass."
CHAIRMAN ROKEBERG said we would be subject to loss of primacy to
the feds.
MS. BURKE indicated that is correct.
CHAIRMAN ROKEBERG asked if it would allow a greater employment
mobility for people who feel like they have been trapped in
situation because of, for example, a child that has a particular
health problem that they feel that they can't change jobs because
they are fearful of losing the coverages they have.
MS. BURKE said that is correct.
Number 2019
REPRESENTATIVE RYAN asked if there is a companion bill in the
Senate.
MS. BURKE explained there is a companion bill in the Senate and it
was on the House floor today. She informed the committee there was
an amendment adopted in the Senate Finance Committee the previous
Wednesday which clarified the hierarchy, if you will, of coverage
when you have a rental car. It provides that if you elect
coverage, and they always ask you if you want to get the
comprehensive, if you elect that and are in an accident, that's the
first place you go to for coverage."
CHAIRMAN ROKEBERG said, "Historically, had they not -- if there
were an accident, gone to the original insurer of the automobile?"
MS. BURKE said that is what they've been trying to do and, in many
cases, have. If a person elects not to have that coverage, then
they go to your personal auto coverage. She noted that is your
election.
CHAIRMAN ROKEBERG asked if the department considers the Senate
Finance Committee amendment a friendly amendment.
MS. BURKE stated that is correct and indicated the department
doesn't have an objection to it.
CHAIRMAN ROKEBERG asked Mr. Lessmeier if he has a particular
problem with the amendment.
Number 2199
MICHAEL LESSMEIER, Attorney, Lessmeier and Winters, came before the
committee on behalf of State Farm Insurance. He said he doesn't
think it would present a problem.
CHAIRMAN ROKEBERG asked if he thinks the amendment is positive.
MR. LESSMEIER stated that he can't really say if it is positive or
not. He said it makes sense to him, but stated he doesn't think
there is a problem.
CHAIRMAN ROKEBERG said, "Could you describe how that works now on
three different scenarios. Number one, I have my car insured. I
go and rent a car I opt, number one, not to do that because I got
an American Express Card, so I'm not going to sign up for it. What
happens there? And number two, I do sign up for it, then what
happens?"
MR. LESSMEIER said typically what happens depends on the language
of the particular policy. And a lot of the policies have clauses
in them that are mutually exclusive. In other words, they make
each policy the other policy's excess. And so what happens if they
both -- the court says we can't enforce those provisions and they
basically apply them pro rata, based on the policy coverage."
CHAIRMAN ROKEBERG asked if it like mutual segregation.
MR. LESSMEIER said, "I don't know if I'd call it mutual
segregation, but I think that's what happens in most situations
where there is dual coverage and the policy provisions conflict
with each other. It's a complicated area because a lot of times
the policy provisions may not conflict and if they don't conflict,
than whichever is primary would be primary and the other would be
excess. But I don't think you can answer that question on a
blanket basis without knowing what the policy language says."
CHAIRMAN ROKEBERG asked about State Farm.
MR. LESSMEIER said he thinks it would depend on the policy.
CHAIRMAN ROKEBERG asked if it would vary within his company.
MS. LESSMEIER indicated he isn't sure. He said he thinks the State
Farm policy has another insurance clause that makes it excess if
there is other available insurance. Mr. Lessmeier said he doesn't
think there is a problem with that particular amendment.
Number 2411
CHAIRMAN ROKEBERG referred to Senator Duncan's amendment, K-1 Ford,
Amendment 3, and noted it was passed on the Senate floor. He read
from the amendment, "Notwithstanding any other provision of law, a
person who resides in the same household as the person named as
insured or a person who is a relative of the person named as
insured shall be excluded from coverage under a motor vehicle
liability policy if the person named as insured requests that that
person be excluded from coverage." He asked Mr. Lessmeier if it
would, in any way, impact the underwriting of a particular auto
policy in looking at family coverage.
MR. LESSMEIER indicated he doesn't know what the impact would be.
He said the amendment attempts to do something which is at one
level, fairly simple, but at another level, is fairly complex.
TAPE 97-52, SIDE A
Number 0001
MR. LESSMEIER continued, "It is unclear to me how it works with
uninsured and underinsured motorists that are part of the law right
now that those coverages -- I think it is a complicated question
and I think we need look at it. What I would prefer to do is let
our people look at this and come back and give you my comments on
this one Wednesday, when we have the next hearing."
Number 0102
MS. BURKE said since the amendment is part of Title 28, Motor
Vehicles, she has a message into the director of that division to
see what impact it would have. Ms. Burke said, "The discussion on
the floor today went toward the fact that a person might have a
child that was away at college and you would want to take them off
of your policy. And it was purported that insurance companies
would not allow you to do that. I can't speak to whether they do
or not. However, in looking at 28, as Mr. Lessmeier has addressed,
there is this mandatory coverage. If you did, in fact, -- you can
also name someone to be excluded from your policy and that's done
on the commercial side all the time and it's perfectly appropriate.
If you have someone who is a drug abuser or alcohol abuser, you
don't want them on your policy. But in this case, if it was
someone living in your household and you had them excluded, and
let's say that child then went out, borrowed someone's car and
killed someone, the survivors are going to sue you the parent. You
would reasonably expect to go to your auto policy and seek
coverage, but if you've excluded them, you'd be on the hook
yourself. So I agree with Mr. Lessmeier, I don't think this was
thought all the way through for what it might be an unintended
consequence."
CHAIRMAN ROKEBERG asked if somebody in the Senate gave notice of
reconsideration on the Senate bill.
MS. BURKE said she had just been informed that Senator Kelly gave
notice of reconsideration and then withdrew it.
Number 0290
CHAIRMAN ROKEBERG asked about Amendment 4, Ford, 04/21/97, by
Senator Donley.
MS. BURKE explained the amendment addresses the uninsured and
underinsured issue. She stated she testified in the Senate Finance
Committee that notwithstanding any merits, pro or con, for what the
amendment attempts to do. She said she asked that it not be
included because it is a controversial issue. After reading the
language, she is even more convinced that it is controversial.
There doesn't seem to be any consensus of exactly what the
amendment says. Ms. Burke said she has forwarded a request to the
department's assistant attorney general to tell her what it says.
MR. LESSMEIER said he knows what Senator Donley is trying to
achieve, but the amendment appears to allow one to make a claim
against their uninsured or underinsured motorist coverage when
there is still a liability coverage out there that hasn't been
paid. He said that makes very little sense to him. Mr. Lessmeier
said he thinks Senator Donley's goal is to make uninsured and
underinsured pure excess and that is something that, again, there
is a philosophical debate about whether it's wise to do that or
not. He said to make uninsured or underinsured motorist coverage
pure excess is very anti-consumer. If it is pure excess, it's
significantly more expensive. The second problem is that if it is
pure excess, you never know what coverage you're ultimately going
to have.
Number 0509
CHAIRMAN ROKEBERG said the existing law is that uninsured or
underinsured motorist coverage doesn't apply until you use up all
you liability coverage.
MR. LESSMEIER clarified it wouldn't be your liability coverage, it
is the liability coverage of the person that hits you.
CHAIRMAN ROKEBERG asked what Senator Donley's amendment does.
MR. LESSMEIER indicated he doesn't know. He said it is a concept
that hasn't been discussed, to his knowledge, but noted it was
discussed briefly in the Senate Finance Committee. He said he
believes Senator Donley either withdrew it or it was defeated. Mr.
Lessmeier said he believes what Senator Donley wants to do is to
make uninsured and underinsured motorist coverage a pure excess
coverage, but again, the amendment has many other consequences. He
said under the amendment, you wouldn't have to collect the $50,000
from the at-fault party before you went after your own insurance
company. Your own insurance company would then have to go after
the at-fault party.
Number 0631
MS. BURKE added that this same subject is on appeal in the Alaska
supreme court. She said it has been her division's position that
if the interpretation is affirmed by the supreme court as being
correct, then the whole issue is moot. If it is not what the
legislature intended, then the legislature can clarify it.
CHAIRMAN ROKEBERG asked what the fact pattern is in the appeal if
it is under appeal.
MS. BURKE said, "Stacking is the most common way it's referred to."
CHAIRMAN ROKEBERG asked what stacking is.
MS. BURKE said it is where you have coverage up to a certain amount
and then you add on the underinsured or uninsured coverage on top
of that. She explained that what precipitated the supreme court to
look at this is contradictory opinions. There is one court saying
one thing and there is another court saying another thing. She
noted they are both federal courts.
MR. LESSMEIER explained there is a ruling one way from Judge
Holland and another ruling in the opposite way from Judge Sedwick
on the same issue. That ruling has been certified for a decision
by the Alaska supreme court. He noted it will probably be months
before the court will actually make a decision on the question of
the interpretation of the language. Mr. Lessmeier said, "The
policy issue that is presented by this has to do with whether the
legislature wants difference in limits coverage or whether it wants
pure excess coverage. Difference in limits would say that your
coverage -- if you have say $100,000 of uninsured underinsured
motorist coverage and the person that hits you has $50,000, well
then your uninsured underinsured motorist would kick in the
additional $50,000, so that what you've got was a total of
$100,000. If it is pure excess, your uninsured underinsured
motorist would kick in $100,000 in addition to what you recovered
from the other side. And so that's the policy call that the
legislature needs to make. Pure excess is more expensive. The
difference in limits is cheaper. With pure excess, you never know
what you're going to get because it's always going to be dependent
upon what the other person has in terms of their coverage."
CHAIRMAN ROKEBERG said when you stack, you get the larger gross
amount.
MR. LESSMEIER agreed.
CHAIRMAN ROKEBERG said it seems to be consumer favorable.
MR. LESSMEIER explained it is consumer favorable if you ignore
cost. He said what he believes is consumer favorable is to allow
a person to buy as little coverage as they want or as much. Mr.
Lessmeier explained that what is happening is people are declining
this coverage because it's gotten very expensive and it will be
more expensive if it is pure excess. He said if that's the call,
that's fine, they'll just price accordingly. Mr. Lessmeier said
the problem is the consumer isn't being given the choice at the low
end of the market. Currently, under the law, they are required to
offer up to $2 million for uninsured underinsured motorist coverage
and as long as a person has the option available to buy that high
level of coverage if they want it, then they're protected. He said
they ought to be protected at the low end of the market too.
CHAIRMAN ROKEBERG indicated the bill would be brought back before
the committee the following Wednesday.
ADJOURNMENT
Number 0934
CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing
Committee meeting at 5:22 p.m.
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