04/29/1998 03:22 PM House L&C

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled

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HOUSE LABOR AND COMMERCE STANDING COMMITTEE April 29, 1998 3:22 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. 298 "An Act relating to denial of renewal of a liquor license; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 247 "An Act relating to escrow accounts; and providing for an effective date." - MOVED CSHB 247(L&C) OUT OF COMMITTEE CONFIRMATION HEARINGS: Alaska Labor Relations Agency Karen J. Mahurin - Kenai - CONFIRMATION ADVANCED Board of Pharmacy Martin Krull, R.Ph. - Anchorage - CONFIRMATION ADVANCED State Board of Registration for Architects, Engineers and Land Surveyors KATHY L. GARDNER, P.E. - CONFIRMATION ADVANCED Board of Barbers and Hairdressers Inge Bolivar - CONFIRMATION ADVANCED Board of Marital and Family Therapy Wilfred M. Miles, Ph.D. - CONFIRMATION ADVANCED Board of Dental Examiners James B. Blasingame - - CONFIRMATION ADVANCED Board of Pharmacy Gerry Knasiak - Ketchikan - CONFIRMATION ADVANCED HOUSE BILL NO. 347 "An Act relating to an exemption from overtime wage requirements for certain motor vehicle mechanics." - MOVED CSHB 347(L&C) OUT OF COMMITTEE HOUSE BILL NO. 350 "An Act requiring that the cost of contraceptives and related health care services be included in health insurance coverage." - MOVED CSHB 350(L&C) OUT OF COMMITTEE CS FOR SENATE BILL NO. 254(FIN) "An Act relating to the exemption from levy, execution, garnishment, attachment, or other remedy for the collection of debt as applied to a permanent fund dividend." - MOVED CSSB 254(FIN) OUT OF COMMITTEE HOUSE BILL NO. 388 "An Act relating to the right to refuse to sell, give, or serve an alcoholic beverage." - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 298 SHORT TITLE: RENEW LIQUOR LICENSE FROM BANKRUPTCY CT SPONSOR(S): REPRESENTATIVES(S) HODGINS Jrn-Date Jrn-Page Action 01/12/98 2022 (H) PREFILE RELEASED 1/2/98

01/12/98 2022 (H) READ THE FIRST TIME - REFERRAL(S)

01/12/98 2022 (H) LABOR & COMMERCE 04/29/98 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 247 SHORT TITLE: REGULATION OF ESCROW ACCOUNTS SPONSOR(S): REPRESENTATIVES(S) ROKEBERG BY REQUEST Jrn-Date Jrn-Page Action 04/11/97 1080 (H) READ THE FIRST TIME - REFERRAL(S) 04/11/97 1080 (H) LABOR & COMMERCE

01/21/98 (H) L&C AT 3:15 PM CAPITOL 17

01/21/98 (H) MINUTE(L&C) BILL: HB 347 SHORT TITLE: OVERTIME WAGE EXEMPTION FOR MECHANICS SPONSOR(S): REPRESENTATIVES(S) COWDERY Jrn-Date Jrn-Page Action

01/23/98 2118 (H) READ THE FIRST TIME - REFERRAL(S)

01/23/98 2118 (H) LABOR & COMMERCE 02/23/98 (H) L&C AT 3:15 PM CAPITOL 17 02/23/98 (H) MINUTE(L&C) BILL: HB 350 SHORT TITLE: INSURANCE COVERAGE FOR CONTRACEPTIVES SPONSOR(S): REPRESENTATIVES(S) CROFT, Phillips, Bunde, Green, James, Berkowitz, Davies, Elton, Kemplen Jrn-Date Jrn-Page Action

01/26/98 2133 (H) READ THE FIRST TIME - REFERRAL(S)

01/26/98 2133 (H) HES, L&C 02/04/98 2223 (H) COSPONSOR(S): ELTON 02/10/98 (H) HES AT 3:00 PM CAPITOL 106 02/10/98 (H) MINUTE(HES) 02/16/98 2336 (H) COSPONSOR(S): KEMPLEN 02/19/98 (H) HES AT 3:00 PM CAPITOL 106 02/19/98 (H) MINUTE(HES) 02/20/98 2380 (H) HES RPT 3DP 2DNP 1NR 02/20/98 2380 (H) DP: GREEN, BUNDE, KEMPLEN; DNP: DYSON, 02/20/98 2380 (H) PORTER; NR: BRICE 02/20/98 2380 (H) LETTER OF INTENT WITH HES REPORT 02/20/98 2381 (H) ZERO FISCAL NOTE (DCED) 02/20/98 2381 (H) REFERRED TO LABOR & COMMERCE 04/24/98 (H) L&C AT 3:15 PM CAPITOL 17 04/24/98 (H) MINUTE(L&C) 04/27/98 (H) L&C AT 3:15 PM CAPITOL 17 BILL: SB 254 SHORT TITLE: LEVY ON PERMANENT FUND DIVIDEND SPONSOR(S): LABOR & COMMERCE Jrn-Date Jrn-Page Action

01/23/98 2278 (S) READ THE FIRST TIME - REFERRAL(S)

01/23/98 2278 (S) L&C, JUD

01/29/98 (S) L&C AT 1:30 PM FAHRENKAMP RM 203

01/29/98 (S) MINUTE(L&C)

01/29/98 (S) MINUTE(RES) 02/03/98 (S) L&C AT 1:30 PM FAHRENKAMP RM 203 02/05/98 (S) L&C AT 1:30 PM FAHRENKAMP RM 203 02/05/98 (S) MINUTE(L&C) 02/10/98 (S) L&C AT 1:30 PM FAHRENKAMP RM 203 02/10/98 (S) MINUTE(L&C) 02/11/98 2479 (S) L&C RPT CS 2DP 1AM NEW TITLE 02/11/98 2479 (S) DP: KELLY, MACKIE AM: LEMAN 02/11/98 2480 (S) ZERO FISCAL NOTE TO SB (REV) 02/12/98 2496 (S) ZERO FISCAL NOTE TO CS (REV) 02/16/98 (S) JUD AT 1:30 PM BELTZ ROOM 211 02/16/98 (S) MINUTE(JUD) 02/17/98 2542 (S) JUD RPT CS 1DP 3NR NEW TITLE 02/17/98 2542 (S) DP: TAYLOR NR: PARNELL, MILLER, PEARCE 02/17/98 2542 (S) FISCAL NOTE TO CS (REV) 02/17/98 2542 (S) FIN REFERRAL ADDED 03/11/98 (S) FIN AT 9:30 AM SENATE FINANCE 532 03/12/98 (S) RLS AT 12:00 PM FAHRENKAMP RM 203 03/12/98 (S) MINUTE(RLS) 03/12/98 2840 (S) FIN RPT CS 5DP 1NR NEW TITLE 03/12/98 2840 (S) DP: SHARP, PHILLIPS, TORGERSON 03/12/98 2840 (S) DONLEY, PEARCE NO REC: ADAMS 03/12/98 2840 (S) ZERO FN TO CS (REV) 03/13/98 2860 (S) RULES TO CALENDAR 3/18/98 03/18/98 2882 (S) READ THE SECOND TIME 03/18/98 2883 (S) FIN CS ADOPTED UNAN CONSENT 03/18/98 2883 (S) THIRD READING 3/19 CALENDAR 03/19/98 2898 (S) READ THE THIRD TIME CSSB 254(FIN) 03/19/98 2898 (S) PASSED Y14 N1 E5 03/19/98 2899 (S) GREEN NOTICE OF RECONSIDERATION 03/20/98 2924 (S) RECONSIDERATION NOT TAKEN UP 03/20/98 2924 (S) TRANSMITTED TO (H) 03/23/98 2702 (H) READ THE FIRST TIME - REFERRAL(S) 03/23/98 2702 (H) L&C, JUDICIARY 04/29/98 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER REPRESENTATIVE MARK HODGINS Alaska State Legislature Capitol Building, Room 110 Juneau, Alaska 99801 Telephone: (907) 465-3779 POSITION STATEMENT: Sponsor of HB 298. SHIRLEY ARMSTRONG, Legislative Assistant to Chairman Rokeberg Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-4968 POSITION STATEMENT: Testified on Confirmations. STEVE ALLWINE, Vice President Alaska Auto Dealers Association 8725 Mallard Street Juneau, Alaska 99801 Telephone: (907) 789-1386 POSITION STATEMENT: Testified in support of the committee substitute for HB 347. ED FLANAGAN, Deputy Commissioner Department of Labor P.O. Box 21149 Juneau, Alaska 99802-1149 Telephone: (907) 465-2700 POSITION STATEMENT: Provided department position on HB 347. REPRESENTATIVE ERIC CROFT Alaska State Legislature Capitol Building, Room 430 Juneau, Alaska 99801 Telephone: (907) 465-4998 POSITION STATEMENT: Sponsor of HB 350. DR. PETER NAKAMURA, Director Division of Public Health Department of Health and Social Services P.O. Box 110610 Juneau, Alaska 99811 Telephone: (907) 465-3090 POSITION STATEMENT: Testified in support of HB 350. ANGELA SALERNO, Executive Director National Association of Social Workers of Alaska (NASW) 525 Main Street Juneau, Alaska 99801 Telephone: (907) 586-4438 POSITION STATEMENT: Testified in support of HB 350. GORDON EVANS, Lobbyist Health Insurance Association of America 211 Fourth Street, Suite 305 Juneau, Alaska 99801 Telephone: (907) 586-3201 POSITION STATEMENT: Testified in opposition to HB 350. MARIANNE BURKE, Director Division of Insurance Department of Commerce & Economic Development P.O. Box 110805 Juneau, Alaska 99811-0805 Telephone: (907) 465-2515 POSITION STATEMENT: Testified on HB 350. TOM ATKINSON, Researcher to Representative Croft Alaska State Legislature Capitol Building, Room 430 Juneau, Alaska 99801 Telephone: (907) 465-2116 POSITION STATEMENT: Testified on HB 350. MIKE PAULEY, Legislative Assistant to Senator Loren Leman Alaska State Legislature Capitol Building, Room 123 Juneau, Alaska 99801 Telephone: (907) 465-3841 POSITION STATEMENT: Presented CSSB 254(FIN). ACTION NARRATIVE TAPE 98-54, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 3:22 p.m. Members present at the call to order were Representatives Rokeberg, Cowdery, Hudson and Ryan. Representative Sanders arrived at 3:25 p.m.; Representatives Brice and Kubina also arrived as the meeting was in progress [TIMES NOT NOTED ON TAPE LOG NOTES OR IN RECORDED TESTIMONY]. HB 298 - RENEW LIQUOR LICENSE FROM BANKRUPTCY CT Number 0001 CHAIRMAN ROKEBERG announced the committee's first order of business was HB 298, "An Act relating to denial of renewal of a liquor license; and providing for an effective date." Number 0013 REPRESENTATIVE MARK HODGINS came forward to present HB 298. He said because of the time that the bill has sat in committee and the advent of not getting it through the system, he is planning on pulling the legislation after giving a few remarks. Representative Hodgins said what he is basically doing with this bill is trying to get the Alcoholic Beverage Control Board (ABC Board) to possibly examine some of its regulations. One of those regulations he finds objectionable is that the applicant must operate a liquor license for 30 days a year or "shut it in." He said he has relayed the problems he has with that to the board, but there are other areas of the board he would like to look at. The one expressed in this bill are licenses that come up under bankruptcies. Representative Hodgins stated he intended to work with the ABC Board through the interim and if there were not sufficient remedies to some of the problems he sees then he would put in some legislation for the next year. He said, "With that, Mr. Chairman, I would ask that HB 298 just sit a silent demise until the end of the session, and thank you very much for your time." The sponsor statement read: This legislation amends AS 04.11.330(a) by adding the provision that a license may be renewed if the applicant has not previously operated the licensed premises and the applicant has acquired the right to apply for the license in United States Bankruptcy Court. This right shall apply for only seven (7) years after the first renewal date and the license renewal under this subsection shall equal one-half (1/2) of the applicable biennial license fee. Retroactive to July 1, 1995. Number 0027 CHAIRMAN ROKEBERG stated the committee would abide by Representative Hodgins' wishes and recommended he seek a consensus with the ABC Board and members of the industry. [HB 298 WAS HELD IN COMMITTEE] HB 247 - REGULATION OF ESCROW ACCOUNTS Number 0029 CHAIRMAN ROKEBERG announced the committee's next order of business was HB 247, "An Act relating to escrow accounts; and providing for an effective date." Number 0031 REPRESENTATIVE BILL HUDSON made a motion to adopt the proposed committee substitute for HB 247, Version K, labeled 0-LS0635\K, Bannister, dated 4/28/98, for discussion. There being no objections, Version K was adopted. CHAIRMAN ROKEBERG noted Representative Sanders is in attendance. CHAIRMAN ROKEBERG explained the minor changes in the proposed committee substitute, indicating the committee had previously heard HB 247 on January 21, 1998. He stated the title had been "tightened." On page 2, line 4, the chapter title had been changed from "Escrow Accounts" to "Escrow Transactions". Throughout the bill Chairman Rokeberg indicated the wording "escrow transaction" or "escrow transactions" had been substituted for "escrow account" or "escrow account" or "escrow accounts". On page 2, line 26, "escrow" was added between "depository account", to read "depository escrow account". On page 3, line 19, "prohibiting" was added before "customers"; the chairman noted this had to do with the clearance of checks. On page 4, line 14, he indicated subsection (2) was changed to reflect the change on page 2, line 26, to "depository escrow account". Subsection (2) now read, "(2) "depository escrow account" means an account that holds escrow money pending completion of an escrow transaction, and that is in a financial institution;" [subsection (2) previously read, "(2) "depository account" means an account with a financial institution to which items are deposited under AS 34.75.020(b) for the purposes of an escrow account;"]. Number 0050 CHAIRMAN ROKEBERG noted subsection (3) on page 4 now read, "(3) 'escrow transaction' means a transaction where, for the purpose of effecting and closing the sale, purchase, exchange, transfer, encumbrance, leasing, or other disposition of an interest in residential real property,' [subsection (3) previously read, '(3) 'escrow' means a transaction where, for the purpose of effecting the sale, transfer, encumbrance, leasing, or other disposition of real or personal property to another person,"]. Chairman Rokeberg commented this was one of the major substantive changes in the bill where they were (indisc.--coughing) limiting the good funds to residential and not all properties, noting this was a "good funds" bill. He stated this was in the interest of consumer protection and it was his belief they could allow commercial transactions to proceed without the protection of good funding because of the special peculiarities there. Number 0056 CHAIRMAN ROKEBERG stated, "Lines 30 and 31 on page 4; at the request of the Division of Banking Securities [Division of Banking, Securities and Corporations, Department of Commerce and Economic Development], we've consolidated the definition of a financial institution to an agency of the federal government, which is (indisc.) at the time.' Page 4, lines 29 through 31 now read, '(5) 'financial institution' means a financial institution (A) whose accounts are insured by an agency of the federal government;' [subsection (5) previously read, '(5) 'financial institution' means a financial institution (A) whose accounts are insured by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund, or the National Credit Union Administration Board;']. On page 5, lines 12 and 13, the subsections were renumbered and the definition of residential real property was added. This definition read, "(7) 'residential real property' means real property on which is located a building containing one to four dwelling units;". CHAIRMAN ROKEBERG stated the other substantive change was on page 5, line 15. The language, "but does not include a financial institution", was added to the definition of settlement agent at the request of the Alaska Bankers Association to exclude banking financial institutions from the provisions of settlement agent as it relates to their escrow collection-type businesses. Chairman Rokeberg indicated HB 247 only concerned an escrow settlement agent in a residential real estate transaction as defined. The definition of settlement agent now read, "(8) "settlement agent" means a person who engages in the business of handling escrow transactions, but does not include a financial institution or person who collects money for the sole purpose of applying the money to the payment of a loan during the term of the loan; "settlement agent" includes an employee of a person who engages in the business of handling escrow transaction when the employee is carrying out the employee's duties in the business." He commented the effective date had been changed to January 1, 1999. Number 0067 CHAIRMAN ROKEBERG stated those were the changes made in the proposed committee substitute, noting a letter agreeing to these bill changes in the bill packet from D.J. Webb, First American Title Company of Alaska [also Legislative Affairs Chair of the Alaska State Escrow Association]. The chairman referred to a letter from some folks in Anchorage who supported the current version of HB 247. The party negotiated the sale of their home and left the closing transaction in the hands of the settlement agent. After the buyer took possession of the property, he called the out- of-state lender and convinced them to stop payment on the transaction due to a leaking skylight. If this had gone to court, it would have taken up to two years to settle and would have cost them $30,000 in legal fees. If the funds were actually received prior to closing and recording, this situation would never have transpired. After a lengthy ordeal, the party got their house back after four months. Chairman Rokeberg indicated that was the reason for this legislation. CHAIRMAN ROKEBERG reminded the committee that HB 247 was the "good funds" bill. It meant the settlement agent must have the money in hand before recording the deed and conveying the title. He said Washington, California and Oregon, among many others, have "good funds" legislation, and Alaska did not. Number 0081 REPRESENTATIVE HUDSON made a motion to move the proposed committee substitute for HB 247, Version K, with the attached zero fiscal note and asked unanimous consent. There being no objections, CSHB 247(L&C) was moved out of the House Labor and Commerce Standing Committee. CONFIRMATION HEARING Number 0084 CHAIRMAN ROKEBERG announced the committee would address confirmations. He said, "The first is Ms. Karen Mahurin. We took this up before. We heard Representative Hudson just gave her a heads up. This is the woman -- we held up the confirmations to confirm that whether or not this was the woman that had took exception with our committee. Now we're ready to move forward with this recommendation. Mrs. Armstrong." SHIRLEY ARMSTRONG, Legislative Assistant to Chairman Rokeberg, came before the committee. She said, "Representative Rokeberg is correct. The two on the top of your list there, Karen Mahurin was held out of the original batch that we did and the Martin Krull. And since we had our meeting, Representative Hudson got with the Boards and Commissions. And you will find in your - behind Mr. Krull's sheet that there is a copy of a memorandum and if you look at the third appointment Kathy Gardner - or behind (indisc.), excuse me, all the way at the bottom I guess is Gerry Knasiak. And that was the agreement that someone from the Southeast area would be appointed. So with that, the other appointments besides Mr. Krull and Ms. Mahurin have been transmitted to the committee since you last were here." Alaska Labor Relations Agency Number 0103 CHAIRMAN ROKEBERG indicated the committee would first address the confirmation of Karen J. Mahurin, Kenai, to the Alaska Labor Relations Agency. He asked if there was an objection to her appointment. There being no objection, Karen J. Mahurin's name advanced forward. Board of Pharmacy CHAIRMAN ROKEBERG said the next confirmation would be Martin Krull, R.Ph., Anchorage, to the Board of Pharmacy. He asked if there was an objection to his appointment. There being no objection, Martin Krull's name advanced forward. State Board of Registration for Architects, Engineers and Land Surveyors Number 0107 CHAIRMAN ROKEBERG announced the committee would take up the confirmation of Kathy L. Gardner, P.E., to the State Board of Registration for Architects, Engineers and Land Surveyors. He asked if there was an objection to her appointment. There being no objection, Kathy L. Gardner's name advanced forward. REPRESENTATIVE JOE RYAN asked if the committee heard from any of the appointees. MRS. ARMSTRONG indicated the committee hasn't received any correspondence for or against the appointments. CHAIRMAN ROKEBERG indicated the committee members have resumes and personal conditional background. REPRESENTATIVE RYAN reiterated the appointees haven't testified to the committee. CHAIRMAN ROKEBERG replied no, the committee had communication with the first two. Board of Barbers and Hairdressers CHAIRMAN ROKEBERG said the next confirmation would be Inge Bolivar to the Board of Barbers and Hairdressers. He asked if there was an objection. There being no objection, Inge Bolivar's name was advanced forward. Board of Marital and Family Therapy Number 0113 CHAIRMAN ROKEBERG stated the committee would address the confirmation of Wilfred M. Miles, Ph.D., to the Board of Marital and Family Therapy. He asked if there was an objection. There being no objection, Wilfred Miles' name was advanced forward. Board of Dental Examiners CHAIRMAN ROKEBERG announced the committee would address the confirmation of James B. Blasingame to the Board of Dental Examiners. He asked if there was an objection. There being no objection, James Blasingame's name was advanced forward. Board of Pharmacy CHAIRMAN ROKEBERG said the committee would address the confirmation of Gerry Knasiak, Ketchikan, to the Board of Pharmacy. There being no objection, Gerry Knasiak's name was advanced forward. HB 347 - OVERTIME WAGE EXEMPTION FOR MECHANICS Number 0121 CHAIRMAN ROKEBERG announced the committee's next order of business would be HB 347, "An Act relating to an exemption from overtime wage requirements for certain motor vehicle mechanics." Number 0122 REPRESENTATIVE JOHN COWDERY said the Department of Labor (DOL), the mechanics and the shop owners had worked on this bill for some time. He said they had come to an agreement, suggesting "somebody from labor or somebody from here" might like to speak to the last amendment, and then the committee could hear from Mr. Allwine. CHAIRMAN ROKEBERG stated the chair would entertain a motion to adopt the proposed committee substitute for HB 347, Version F, labeled 0-LS1390\F, Cramer, dated 4/24/98. REPRESENTATIVE HUDSON made a motion to adopt Version F. There being no objection, Version F was adopted. CHAIRMAN ROKEBERG asked Representative Cowdery if he would speak to the proposed committee substitute. REPRESENTATIVE COWDERY indicated he would prefer to have Mr. Allwine of the Alaska Auto Dealers Association (AADA) testify on Version F, noting they had worked out the proposed committee substitute. Number 0137 STEVE ALLWINE, Vice President, Alaska Auto Dealers Association, came forward to testify. He stated he wished to read a statement which clarified what the association believed to be everyone's understanding and offered copies to the committee. CHAIRMAN ROKEBERG indicated the statement would be entered into the record, asking Mr. Allwine to describe it briefly as best he could instead of reading it. Mr. Allwine's written statement reads: It is the intent of this amendment to the Alaska Wage and Hour Act to simplify the computation of the regular rate of pay for flat rate mechanics. When a flat rate mechanic is paid an amount equal to or in excess of his/her straight time hours (up to 8 hours in a workday or 40 hours in a workweek) at the flat hourly rate defined in subsection (B) of the bill, and is paid for all hours worked in excess of 8 hours in a workday or 40 hours in a workweek, whichever is greater, at 1.5 time such flat hourly rate the mechanic is exempt from the overtime requirements of the Alaska Wage and Hour Act. This is true whether the flat hourly rate earnings (billable hours times the mechanic's flat hourly rate) are less than or greater than the mechanic's compensation computed in accordance with subsections (C) and (D). If the flat rate mechanic's billable hours times his/her flat hourly rate are greater than the amount computed under subsections (C) and (D) then the billable hours amount shall be paid as the employee's gross pay for the workweek and no overtime premium, daily or weekly, is due. Two examples follow using a flat hourly rate of $20.00. Example One The mechanic works 9 clock hours and bills 9 hours each day Monday through Friday. The minimum amount due the mechanic per 23.10.060(d)(17)(C) and (D) is 40 straight time hours (five 8 hour days) at $15.00 [75 percent of $20.00 is $15.00 or twice the Alaska minimum wage of $5.65 ($11.30), so that $15.00 is used] or a total of $600.00 regular time plus five hours in excess of 8 hours in a day or 40 in a week, figured on a weekly basis, at 1.5 times $15.00 or $22.50 for overtime pay of $112.50 which yields $712.50. The mechanic's flat rate pay is $900.00 (45 billable hours times $20.00) so that the employee is paid $900, because this amount exceeds the minimum compensation due under the (d)(17) exemption no additional overtime premium is due. Example Two The mechanic works 9 clock hours and bills 8 hours on Monday and Tuesday and works 8 clock hours and bills 4 hours on Wednesday through Friday. The minimum amount due the mechanic under the (d)(17) exemption is 40 straight time hours (five 8 hour days) times $15.00 [75 percent of $20.00 is $15.00 or 2 times Alaska minimum wage is $11.30 so that $15.00 is used] or $600 of straight time hours plus 2 hours in excess of 8 hours in a day or 40 in a week figured on a weekly basis times $22.50 (1.5 times $15.00) or $45.00 which yields $645.00. The mechanic's flat rate of pay is 28 (8+8+4+4+4) billable hours times $20.00 or $560.00. Therefore the employee is paid $645.00 of which $45.00 was pay for the 2 overtime hours which includes half-time overtime premium of $15.00. [Tables for Example 1 and Example 2 listing hours, days of the week and dollar amounts were attached to Mr. Allwine's statement. The bracketed [] or parenthesed text () in Mr. Allwine's statement is part of his original text.] Number 0144 MR. ALLWINE said they have, essentially, through the auspices of the committee and Representative Cowdery, the bill sponsor, worked with the DOL at the chairman's direction. He said they have reached what they believe is a reasonable compromise. At the outset they did not feel this was what the automobile dealers or the technicians wanted, but after lengthy discussions and with the help of a number of people, he said they have reached something they believe they can support. He stated, "This bill will remove a restriction that we, as employers are faced to place on our employees. It will permit them to work overtime in such a way that's reasonable, and in the same vein, it will give us an opportunity to not be encumbered with an additional liability that currently the Department of Labor is required to work under. That's kind of it in a nutshell. We do support the committee substitute. My understanding is there is a clarification amendment to go with this substitute that clarifies a couple of technical issues. We also support that." He thanked the bill sponsor, the chairman, and the individuals at DOL and the AFL-CIO who helped them reach this agreement. CHAIRMAN ROKEBERG asked if Mr. Allwine could speak to the amendment, confirming the amendment was technical in nature. MR. ALLWINE agreed that was its nature. Number 0159 ED FLANAGAN, Deputy Commissioner, Department of Labor, came forward to testify. He stated, in brief, "You have before you a [AS] 23.10.060(d)(17) that the Department of Labor can live with." Mr. Flanagan said there has been a lot of work by a lot of people, and the department feels this addresses the need expressed by the industry but still maintains a "floor" and the concept of time and a half after 8 [hours per day] and after 40 [hours per week]. He said the amendment may be "belt and suspenders kind of protection" but it is to make it clear the intention, as was discussed all a long between the parties, is that it's figured on a weekly basis. He said, "Somebody doesn't pick and choose if one day they do better under the flat rate and the next day they do better under the minimum. The minimum owed is figured at the end of the week on a weekly basis against what they earned under the flat rate." Mr. Flanagan said the department appreciated the cooperation of everyone involved, particularly the chairman, the committee and the sponsor, and he stated the department withdrew its objection to the bill as reflected in the proposed committee substitute and the amendment. CHAIRMAN ROKEBERG said, "So briefly then, you gross it up and then you make sure that they've met the minimums, is that how the formula works, or is...?" MR. FLANAGAN said that was correct, stating, "You figure what they get under the flat rate, sir, and then do this calculation as a minimum check." Number 0172 CHAIRMAN ROKEBERG said, "If you put the hours in, it will not be paid less than the minimum base that you've agreed to under the formulation." He asked if that was correct. MR. FLANAGAN stated, "They will not be paid less on a weekly amount figured on the hours worked." CHAIRMAN ROKEBERG asked if there was anyone else who wished to testify on HB 347. There being no one, he stated the public hearing was closed and asked the will of the committee. REPRESENTATIVE HUDSON indicated the committee needed to amend the proposed committee substitute. Number 0176 REPRESENTATIVE RYAN made a motion to adopt Amendment 1, on page 2, line 7. There being no objections, Amendment 1 was adopted. Amendment 1 read: Page 2, Line 7 After "paragraph" replace ";" with "." Delete the remainder of lines 7,8, & 9. Insert new subsection to read: "(E) The minimum amount due the employee under (C) and (D) of this section shall be figured on a weekly basis." Number 0180 REPRESENTATIVE HUDSON made a motion to move the proposed committee substitute for HB 347, Version F, as amended, with individual recommendations and zero fiscal note, asking unanimous consent. There being no objections, CSHB 347(L&C) was moved out of the House Labor and Commerce Standing Committee. HB 350 - INSURANCE COVERAGE FOR CONTRACEPTIVES Number 0185 CHAIRMAN ROKEBERG announced the committee's next order of business was HB 350, "An Act requiring that the cost of contraceptives and related health care services be included in health insurance coverage." CHAIRMAN ROKEBERG called a brief at ease at 3:41 p.m. The committee came back to order at 3:42 p.m. Number 0192 REPRESENTATIVE ERIC CROFT came forward to present HB 350. He stated HB 350 came out of discussions he had at the end of the previous session about what they could do to reduce the number of abortions in Alaska. He indicated there had been discussions with a number of Republican legislators, many of whom were pro-life. Representative Croft said he wondered what they could do practically, without getting into political fights, to reduce the numbers of abortions. He said that led to a couple of chains of events. First they analyzed that the majority of abortions come from unintended pregnancies. The next question was, "Where do the unintended pregnancies come from?" He noted almost all unintended pregnancies were the result of not using or misusing contraceptives. He said that then led them to this state, "What could we do to allow working families access to contraceptives." REPRESENTATIVE CROFT pointed out they were not talking about contraceptives for kids, this is an insurance bill that you have to be covered under an insurance policy, this is primarily working families who by working have access to that insurance policy. It also does not mandate any coverage for abortion. He mentioned, to some extent the unfortunate fact is that abortions are currently covered under most insurance policies. He said he thinks that's a rough financial calculus that insurance companies make now that the cost of an abortion is much cheaper than the cost of the full delivery and pregnancy. Representative Croft distributed a number of handouts. Number 0217 REPRESENTATIVE CROFT concluded access to contraceptives saves substantial amounts of health care money. It's the classic prevention -- an ounce of prevention being worth a pound of cure. He noted the statewide average of all groups in the Oregon health plan is approximately $20 a year which conforms closely to what the Health Insurance Association of America has estimated. He said, "We also estimate that the average increase in per employee cost would be $16.20 per annum. We've had some discussions with them, they think that now may be the prescription cost. That is the majority of the cost of providing contraceptives." The sponsor statement read: Most health insurance plans do not routinely cover contraceptives. Nationwide, only one third of health insurers cover oral contraceptives, the most popular method. Only 15% cover diaphragms, only 18% cover IUDs and only 24% cover hormonal implants. Coverage in Alaska is worse: the three insurance companies which sell the most policies in this state provide no routine coverage for any type of contraceptive (unless the policy purchase pays extra for it). Neither Blue Cross nor NYLCare (the company that insures state employees) provides contraceptive coverage in their basic package. While nonprescription contraceptive methods (such as condoms and spermicides) are widely available, the most effective methods (such as oral contraceptive and hormonal implants) are more costly and are obtainable only from a health care provider. Thus, women whose health care plan does not cover contraceptives do not have access to the most effective methods. Though most insurance plans provide no contraceptive coverage they routinely cover abortions, sterilizations, and tubal ligations - all more dangerous and more expensive procedures. "Fewer Abortions, Fewer Orphans" Improving private insurance coverage for contraceptive services increase access to contraception and reduce barriers to effective family planning. It will help more women prevent unintended pregnancy and reduce demand for abortions. Increased access to contraceptive services will help families plan to bring children into healthy homes when the time is right. Wanted children and their mothers are much less likely to become victims of abuse and neglect. Wanted children tend to succeed more easily in school and in life. Please join me in this effort to strengthen Alaskan families by broadening the range of contraceptive options available to them. Number 0256 CHAIRMAN ROKEBERG asked how do you reconcile that with the cost if an individual prescription would be $25 a month. REPRESENTATIVE CROFT replied you're spreading it over an entire group. CHAIRMAN ROKEBERG asked what the group is for these figures. He said it has to be connected to a formula. The chairman asked are these different in the Oregon plan. REPRESENTATIVE CROFT replied right. CHAIRMAN ROKEBERG stated these are different types or levels of care, and that's how they analyze that. REPRESENTATIVE CROFT said he believes it's a state-run plan and it's primarily a welfare plan so it's different categories... CHAIRMAN ROKEBERG indicated these would under some type of public assistance or Medicaid percipients. Number 0262 REPRESENTATIVE CROFT responded, "Right, and you can see the highest number is the one that focuses most on women of childbearing age. You would expect them to need the most (indisc.). So it sort of goes from a low of one cent to a high of $2.87 per month with the average across a general population being $1.68, or about $20 a year. ... We don't know specifically what it saves. We do know it save substantial amounts. We do know that having contraceptive services available, and people using them properly saves health care money. So what we can say for sure, is it costs individual people $15.00 to $20.00 a year depending on which estimate you're talking about. And that there is substantial saving in the system. We can also say, I think, that the more people are allowed to plan their families, the fewer abortions we can expect. So, on a society level and on a cost level, I think this bill makes good public policy sense." REPRESENTATIVE CROFT referred to the handout that mentions Russia's experience. A long time under the Soviet Union they did not have access to contraceptives. They instead used abortion as a form of birth control. That led to huge rates of abortions in the former Soviet Union. He said, "In the early 90's when contraceptives became available, you saw a corresponding decrease in the abortion rate. When people can have this access, they don't need to use abortion that way. So, for cost reasons, for fairness reasons because right now women pay much higher health care costs, and the primary reason they do is increased costs relating to family planning services. So, there's an equity argument, a cost argument, as well as just letting working families plan their families." Number 0282 REPRESENTATIVE RYAN said he took a round number of 20,000 state employees, at $1.68 an employee, estimating a cost to the State of $403,200, yet the fiscal note is zero. CHAIRMAN ROKEBERG responded the state is a self-funded insurance plan and it would not be covered by an insurance mandate bill and that's one of the problems. Number 0302 REPRESENTATIVE COWDERY stated he thought this would save insurance companies money by reducing the number of covered births. He asked "Don't you think the insurance companies might be in a better position to determine what - if this is going to be. If that was the case don't you - would it be reasonable to think they'd already been doing this in their policy." REPRESENTATIVE CROFT reiterated that it saves money. He said he believes it becomes a difficult question of whether it's going to save the insurer money when the population keeps moving in and out. He indicated he may be saving the next insurance company down the line money when they move out of his policy. They found, in looking at a market, the HMO's (health maintenance organizations) do a much better job of providing this coverage because they see a much more stable population, they see the savings. Alaska doesn't have HMO's and as he understands it there isn't much of a chance that we will. So, we're still left with a fractured market where it's difficult for any individual insurer to see those savings. This in effect spreads it all out. Because we don't have the economies of scale for HMO's, he said he was worried, and worried that we're not going to see that. REPRESENTATIVE COWDERY stated everyone works toward the objectives that Representative Croft is trying to do. He said he didn't know if it was the right time and asked who would get the prescription. REPRESENTATIVE CROFT replied most likely the woman. Cover it through your normal procedures. REPRESENTATIVE HUDSON understood that nobody has to have this and the person has the discretion of use. REPRESENTATIVE CROFT replied that's exactly right. Number 0314 REPRESENTATIVE HUDSON indicated that if it's against your religion you just don't use it. REPRESENTATIVE CROFT responded exactly right, we are not forcing individuals to have contraceptive services if they don't want it only that they have access to it. Secondly, if a religious group doesn't want a policy that includes contraceptive (indisc.--paper ripping) and there's an amendment to that effect. REPRESENTATIVE HUDSON asked if the exclusion for religious purposes would be addressed on page 1, line 7. REPRESENTATIVE CROFT referred to page 1, line 8. REPRESENTATIVE HUDSON remarked Representative Croft doesn't have an amendment, he's just suggesting that he'd be amendable to one. Number 0325 REPRESENTATIVE CROFT replied he had one drawn up and is amendable to it. However, since it's not his committee he can't talk to it. Amendment, labeled 0-LS1297\B.2, Ford, dated 3/3/98, read: Page 1, line 8, following "society": Insert "or a policy issued to an individual" Amendment, labeled 0-LS1297\B.4, Ford, dated 4/20/98, read: Page 1, line 8, following "society": Insert "or a qualified church-controlled organization with a religious-based objection" Page 2, line 3, following "contraceptives": Insert"; (3) "qualified church-controlled organization" has the meaning given in 26 U.S.C. 3121(w)(3)" Number 0327 CHAIRMAN ROKEBERG brought the committee's attention the Attorney General's letter, March 11, 1998, stating state mandated befit laws like HB 350 many not be applied to self-funded ERISA (Employee Retirement and Income Security Act) health benefit plans. He asked if $25.00 a month is a good figure. REPRESENTATIVE CROFT indicated $300 a year, $25 a month, is what he understands. CHAIRMAN ROKEBERG asked what other devices, or other contraceptives would be covered under this bill. REPRESENTATIVE CROFT stated it wasn't limited by type, it's limited to not ones that work as early abortions. He mentioned various devices. He further explained it's not limited by method, but only those methods that work to prevent fertilization of the egg, not to take a fertilized egg and do something with it. CHAIRMAN ROKEBERG referenced the Los Angeles Times dated March 25, 1998, pointing out Governor Wilson said he would sign the bill ... only if it included a conscience clause allowing employers to opt out of such coverage on moral or religious ground. REPRESENTATIVE CROFT mentioned that office was contacted and that our statutes are a little different. CHAIRMAN ROKEBERG noted the committee was not being teleconferenced today. He mentioned there are a number of people are not able to testify today because lines weren't available. Number 0354 DR. PETER NAKAMURA, Director, Division of Public Health, Department of Health and Social Services came forward to testify in support of HB 350. He said first of all he is getting rather tired of getting involved in abortion debates. It's one series after another for the past two years. One of the commonalities is that no one can challenge that these unwanted pregnancies lead to unwanted births that lead to higher instances of child abuse, higher instances of domestic violence, or that leads to more kids ending up in the juvenile justice system. He indicated all of these are a very high cost to society and to each of us. DR. NAKAMURA stated we could all agree on that none of us really want to see the continuation of abortions. Contraceptive services would provide these unwanted pregnancies from coming about and that's what this bill is about. DR. NAKAMURA noted he doesn't agree with the comment that men and other people have no use for this benefit. Secondly, there isn't a one of us that isn't impacted by the negative outcome of these unwanted pregnancies and births. He stressed that contraception is not a health care treatment, however, they do see prevention as a health care issue, such as immunizations, mammograms, those are all prevention activities, just like contraception is a preventive health activity. Number 0375 DR. NAKAMURA said everyone should have a choice of the type of insurance coverage they want, that's one of the things that led to health care reform. He also mentioned contraceptive services are not expensive and are accessible. The common response in a survey, generally from the women, not just the poor but the women in general said, "Access to contraceptive services was the biggest reason for unwanted births, not that they couldn't afford it. Some times it was a matter of the issue of understanding the need for it. So, contraception goes into two phases, one is making sure that service is available and second is to make sure that they want it." DR. NAKAMURA stated that he didn't agree with the statement, "sex without procreation is a product of the contraceptive mentality." He said he thinks that was a very inappropriate and out of place statement. CHAIRMAN ROKEBERG asked Doctor Nakamura if he had any idea of how many Alaskans are uninsured. DR. NAKAMURA replied he could probably provide that information. CHAIRMAN ROKEBERG asked, "Do you figure, excluding the Native population, approximately 70 to 80 thousand people, about 14 to 15 percent ring a bell with you." DR. NAKAMURA replied no, he could not honestly respond to that. But would be happy to find that answer. CHAIRMAN ROKEBERG indicated this committee has been searching for these answers for years. He asked, would a figure of (indisc.-- coughing) not to exceed 33 thousand people covered by individual insurance policies ring a bell with you in any way. DR. NAKAMURA replied he has not looked into this, but could. CHAIRMAN ROKEBERG asked Doctor. Nakamura to explain his comment that everybody should have their own type of health insurance. Number 0405 DR. NAKAMURA reiterated that every individual should choose the type of health insurance they have. He said that was a comment made by an individual who testified earlier on this bill. Doctor Nakamura explained his comment was that that's one of the issues that led to the health care reform that we've been experiencing. That those who are young and healthy, who are able to access health insurance policies at a very low premium... TAPE 98-54, SIDE B Number 0001 DR. NAKAMURA continued, "...some of these contraceptive services. CHAIRMAN ROKEBERG asked, "Are you not aware that the most fertile portion of our population, the younger portion are the ones that usually are more prone to opt out of obtaining health insurance if they have that ability, I mean that's a known fact. Were you aware of that?" DR. NAKAMURA indicated his impression is that HB 350 refers to those who are insured. CHAIRMAN ROKEBERG commented that the fact is that the people are more prone - that could be there to help spread the risks aren't there to help pay for it either. He agreed that they should be and then they end up relying on the state or charity, or themselves to take care of it. DR. NAKAMURA stressed that if there is anything that we can do to bring about a lower number of unwanted births, that's what he would like to see happen. CHAIRMAN ROKEBERG said he couldn't agree with him more. CHAIRMAN ROKEBERG thanked Doctor Nakamura and announced Angela Salerno was next to testify. Number 0019 ANGELA SALERNO, Executive Director, National Association of Social Workers of Alaska (NASW), came forward to testify in support of HB 350. She said NASW thinks this bill will have three outcomes: We are going to prevent unwanted pregnancy and abortion; we're going to promote basic primary and preventive gynecological health care for women; and we are going to see health care cost savings for the consumer and third-party payers. Ms. Salerno mentioned she is pro- choice and that they are very weary of skirmishing around this issue because they are not going to agree on it and that's why prevention is the way that they want to go. MS. SALERNO pointed out some misconceptions about this bill. She said it's false to think that contraception promotes abortion. Reference was made to the Netherlands where they have widespread availability of contraception and have the lowest abortion rate in the world. Latin-American countries where there are religious proscriptions against abortion, where contraception is not available -- some countries such as Peru have twice the abortion rate compared to the United States, so again that's a misconception. Number 0040 MS. SALERNO addressed basic primary preventative health care. She reported half the pregnancies in Alaska are unwanted, mistimed, or unplanned. She stressed that Alaskan women don't have great access to the most effective forms of birth control, 60 percent of health insurance providers exclude coverage for contraceptive drugs even though contraceptives are the most widely used drug for women between the ages of 18 and 44. MS. SALERNO referred to an article in the Journal of the American Medical Association that reported on an Institute of Medicine report which called contraceptions largely an unmet need in America. They recommended that a full range of contraceptive products be made available to consumers and they further urged that third-party payers cover contraceptive services. They also clearly stated that costs will reap benefits, in overall better health for women and their families and in the management of overall sexual health. MS. SALERNO added that overall health care cost savings was discussed at length. She said prevention is the future of providing health care in this country, we see that in the rise of the HMO which has a much better track record at offering preventive services. In fact, 84 percent of the HMO's around the country currently cover oral contraceptives. Ms. Salerno, stated, "Our private fees for service providers operate in an almost antiquated medically-necessary mode, and I'm sure you'll hear more about that today. What we have are insurance companies, 90 percent of which cover surgical sterilization, 67 percent cover abortion, but 50 percent cover no contraceptive services of any sort. Again, that's in the fee for service, what we're used to - at least here in Alaska. Providing, as HMO's do, contraceptive service has the potential to lower health care costs for all." Ms. Salerno reiterated that NASW thinks this is good social policy, it's going to prevent unwanted pregnancy and abortion, it's going to promote the overall health of women and their families, and it has the potential to lower health care costs to consumers and insurance companies..." Number 0076 REPRESENTATIVE HUDSON indicated Ms. Salerno deals with many of the people who have unplanned children and stated he knows many of these are unemployed. Representative Hudson asked, "I'm wondering how we get to them this prevention because isn't that really the target group that we really need to come to." MS. SALERNO said she assumes he is referring to folks of very low income. REPRESENTATIVE HUDSON replied yes. MS. SALERNO said some programs are helping them today. She explained Title X funds come to us from the federal government, and in Anchorage there are some city funds that cover that group. Ms. Salerno added that she thinks the provision of contraceptive care to all segments of society is crucial to the goal of preventing unwanted pregnancies. REPRESENTATIVE HUDSON asked if she thinks they are covered. MS. SALERNO replied this bill will not help anyone who is not working and does not have insurance. This is actually going to his a narrower group of folks. This bill is going to affect and help our families, especially as more and more folks move from welfare to work as is our social policy today. She said she thinks it behooves us to assist them to make sure that they are successful in staying off welfare. This will help. Number 0095 REPRESENTATIVE RYAN indicated this bill is trying to establish it as a first step in the door of a social policy than to actually benefit a large group. MS. SALERNO commented that she is not sure what he is asking. She added that it is a change in social and almost economic policy. She further explained that we're asking a private industry to jump on board here. It is something different that we're not used to doing in a lot of cases, it's a huge industry, and it's a missing part of a comprehensive system with health care for folks. MS. SALERNO mentioned that maybe she is narrowing this down too much. She said she believes that there will be quite a few people in Alaska that will be helped by this bill. Folks who are living paycheck to paycheck, who have as large a family as they can handle without busting the budget, and maybe it's a quite larger group than we'd expect. CHAIRMAN ROKEBERG asked does the State provide contraceptives under the Medicaid program. MS. SALERNO replied yes the State provides, through Medicaid, contraceptive services to eligible participants. CHAIRMAN ROKEBERG expressed a concern about Ms. Salerno's statement that the cost will reap benefits because there is health care cost savings. He indicated that he hasn't seen evidence to that. MS. SALERNO pointed out that she was quoting from an Institute of Medicine report which referred to an even broader issue than just reducing pregnancies. Number 0135 GORDON EVANS, Lobbyist, Health Insurance Association of America (HIA), appeared before the committee in opposition to HB 350. He said the Health Insurance Association of America is a national trade association of commercial health insurance companies providing health insurance for approximately 55 million Americans. MR. EVANS stated, "Health Insurance Association of America opposed HB 350 and we also oppose the companion bill SB 260 for a number of reasons and not the least of which is that its provisions mandate a specific coverage of something that's really not considered to be basic health care treatment which is what health insurance policies are supposed to cover. And the consequence of which in the long run would be to increase the costs and reduce the efficiencies of managed care. As I've noted on previous occasions, HIA favors the preservation of a system that allows the prospective purchaser of health insurance pre-choice of which risk he or she wishes to cover from the various coverages offered by competing insurance carriers. You heard Doctor Nakamura object to that." MR. EVANS continued, "Health Insurance Association of America also believes that the choice of how their policy holders spend what funds are available for health care and health insurance, we feel they should be free of government decree and we continue to oppose the proliferation of benefits through government mandates. The proponents of HB 350 argue that mandating coverage of contraceptives and related health care services will serve several purposes. First they say it will increase access to contraception and we don't doubt that for one minute. Secondly it would reduce barriers to effective family planning and to be honest with you I didn't realize family planning was considered to be health care treatment. Third it would help more women prevent unintended pregnancies, and again that may be true but again that's also not really health care treatment. And finally it would reduce demand for abortions. And I assume that if you take the previous three purposes that I mentioned, that would be the case. But Mr. Chairman, the services for which this coverage is sought, and it would be mandated, is actually to be considered to be elective services." Number 0156 MR. EVANS explained that any time the government requires or mandates certain coverage, that mandate becomes one of the rating factors that insurance companies use in making their underwriting decisions. If the coverage sought by HB 350 is mandated, the premium costs will be increased, even for those people who have no use for it or don't want the coverage. For example, if this legislation passes and coverage for contraceptive services are mandated, this mandate would apply only to small employer group policies and certain other group policies, generally those who can least afford the increased premiums. The mandate would not affect Alaska's largest employers such as the State, although the State generally follows mandates. Mr. Evans reiterated mandated benefits are costly and those costs will be passed along to policyholders. He indicated HIA would not be opposed to a mandate to offer coverage for contraceptives in related health care services. As a result of a mandated offering individual policyholders as well as employers and their employees in the affected group policies would be able to choose whether they want to spend additional funds on the particular coverage. In other words, those who want to avoid unwanted pregnancies by the use of contraceptive devices may do so, but they, and not the insured population in general will pay the cost of the insurance coverage. MR. EVANS suggested substituting the word "offer" of the word "provide" on line 9 of page 1 would make this coverage sought a mandated offering. He said he believed it would accomplish at least part of the bill's proponents. Mr. Evans pointed out the proponents of this bill used a memorandum by a California lobbyist regarding a 1996 bill which required health insurers to provide coverage for contraceptives if they included prescription drug benefits in their plan. The comment that was made that the cost would be approximately $1.35 per month per employee is misleading because the California legislation covered only the cost of contraceptive drugs such as birth control pills and it did not include costs of contraceptive devices, appliances, or the cost of related health care services. So those are not included in the price that has been used by the proponents in the other body to say that the cost would be only $1.35 per month per employee. Number 0196 REPRESENTATIVE RYAN asked, does that include gynecological examination. MR. EVANS replied yes. REPRESENTATIVE RYAN asked isn't a service like that under normal policy allow for pap-smears - gynecological... MR. EVANS replied certain other services are. He indicated he didn't know what all related health care services would be. REPRESENTATIVE RYAN stated that he believed birth control would be incidental to a normal examination and that he just wanted to clarify that. REPRESENTATIVE HUDSON asked Mr. Evans if the companies that he represents routinely offer contraceptive services and things of this nature. MR. EVANS responded, in individual policies, if the individual asked for it. It's considered into the amount of what the premium is going to be, but it's not generally offered by most of the companies that he represents. REPRESENTATIVE HUDSON asked if it is offered or provided by the state in its self-insured package. MR. EVANS replied no, not to his knowledge. CHAIRMAN ROKEBERG noted for the record that Representative Brice is back. REPRESENTATIVE COWDERY asked if this becomes a mandate, what's to stop requiring plastic surgery or facelifts. Number 0218 MR. EVANS replied that's exactly why they are opposed to mandating benefits. He reiterated that they don't oppose mandating offering of benefits. REPRESENTATIVE COWDERY asked Mr. Evans if this passes would he assume there would be an increased cost of premiums. MR. EVANS responded, yes. REPRESENTATIVE RYAN noted that as a mandate there would be an increase, but if there was an offer(indisc.). MR. EVANS interjected as an offer it wouldn't be increased to the general insured population, only to those who chose to take it. REPRESENTATIVE HUDSON asked Mr. Evans wouldn't his companies see some offsetting reductions in costs that result from the cost of abortions or the additional insurance cost for unwanted children or maybe children with fetal alcohol syndrome. He mentioned that he is trying to look for the balance point in this whole situation. MR. EVANS stated that is a difficult situation. He noted the insurance industry has not taken that view. He said he has personally wondered why the insurance industry hasn't worked more toward preventive maintenance than just afterward maintenance. Number 0247 CHAIRMAN ROKEBERG asked for a brief at ease. [Time not indicated]. TAPE 98-55, SIDE A Number 0001 CHAIRMAN ROKEBERG called the meeting back to order. [Time not indicated]. He asked, "Does the cost to provide childbirth and pregnancy service cost more than contraceptives, and are pregnated services mandated in State law." MR. EVANS indicated he didn't follow him. CHAIRMAN ROKEBERG remarked there's two questions there actually. MR. EVANS asked for the first question. CHAIRMAN ROKEBERG asked, "What were the costs to provide childbirth and pregnancy service - is that more costly than contraceptives, or do you have a handle on it." MR. EVANS replied he has no handle on it, but since childbirth is covered under the State policy, and so forth... CHAIRMAN ROKEBERG asked if most of his clients offer pregnancy service coverage. MR. EVANS said he believes the majority of them do. CHAIRMAN ROKEBERG asked if his clients would estimate what the cost would be for the contraceptive services. MR. EVANS said he requested that, but does not have that information. Number 0018 CHAIRMAN ROKEBERG asked is the 48-hour pregnancy service, PSA (Prostate Specific Antigen) and mammogram strict mandates. MR. EVANS replied they're mandates. CHAIRMAN ROKEBERG asked if there has been other legislation that requires offerings. MR. EVANS explained that there were several offerings in the past. He referred to a bill by Representative Brice which hasn't had a hearing. REPRESENTATIVE TOM BRICE commented that it's only an offering and not a mandate. MR. EVANS said he believes there was one on genetics but that bill didn't pass. CHAIRMAN ROKEBERG mentioned that it's currently federal law. Number 0028 REPRESENTATIVE GENE KUBINA said he assumes all insurance policies handle pregnancies, the actual delivery, and then if there's a problem with the child, this could cost an insurance company hundreds of thousands of dollars. MR. EVANS responded that he is probably correct. REPRESENTATIVE KUBINA asked if this was put into effect, and it saved one of those from happening it could pay for a full year's worth of contraceptives. MR. EVANS replied he doesn't know because that's an underwriting. He mentioned it's obviously the younger population that will make the most use of this particular service. REPRESENTATIVE KUBINA mentioned what he has seen, one-pound babies, fetal alcohol syndrome. He said the cost to the insurance company has to be astronomical for that and, if you could not have one of those expenses - just once a year, this would be a tremendous savings. CHAIRMAN ROKEBERG asked Mr. Evans if childbirth and pregnancy services are currently mandated for health insurance. MR. EVANS said he didn't believe it's mandated. CHAIRMAN ROKEBERG asked, then why are they offered - because the market wants them. MR. EVANS replied that may be one thing, but also is as far as the State and some of the other big group plans is probably part of the bargaining that they've bargained for, and they pay for it then. Number 0062 CHAIRMAN ROKEBERG asked, don't some underwriters offer the pregnancy writer as an addition to their policy, and some don't - particularly for people who aren't in the fertility ages. MR. EVANS said he can't answer that question. CHAIRMAN ROKEBERG stated he thinks they do. So, the market bears whether they desire that. He said it could be a different menu item on a menu for example in a group plan. MR. EVANS replied, "I would assume that was..." CHAIRMAN ROKEBERG interjected if you chose to have that menu item, then you would pay a higher premium, wouldn't you? MR. EVANS replied yes, when it's done as part of the... CHAIRMAN ROKEBERG interjected, it's just like the offering, if you offer it, then you can choose it. REPRESENTATIVE KUBINA said he would like to see that be the case. He mentioned that he has never head of a health insurance policy that can handle pregnancies. CHAIRMAN ROKEBERG said no, it's not mandated in law. He indicated a lot of group plans have menu selections. Number 0073 MR. EVANS mentioned when he worked for Governor Egan in 1964, the state health plan at that point did not cover pregnancies. In 1965 it was changed by the Legislature. CHAIRMAN ROKEBERG stated, "...I've received some letters (indisc.-- noise) physicians saying that one reason we should use the allow - the mandate for all contraceptives is because of the estrogen therapy benefits for the oral contraceptives. Now is it or is it not true that other pharmaceuticals would be available in replacement from the specific oral contraceptives? Or in other words, are there estrogen therapies available so you wouldn't have to take the oral contraceptive is the question? A technical question, I'm not sure you can answer it but I think the committee would like to have a - I'm sure the sponsor would like to know the answer to that question. Because it seems to me, is that an excuse to allow for oral contraceptives or aren't there other substitute or alternate therapies available for those particular uses is the issue." MR. EVANS indicated he would try to get that information. Number 0112 MARIANNE BURKE, Director, Division of Insurance Department of Commerce & Economic Development, appeared before the committee. She said there seems to be some misunderstandings about state mandates and whom they cover. In the opinion of the assistant attorney general who represents and provides technical support to the division any self-insured governmental entity, whether it's the state, a municipality or a rural city, or whatever, that has not requested and received a waiver from the federal government is subject to all state mandates. Non-governmental entities that are self-insured, and there subject to Employee Retirement Income Security Act (ERISA), are not subject to state mandates - Ms. Burke said she wanted to clarify that. Unless the State of Alaska health plan requests and receives a waiver from the federal government in the opinion of our assistant attorney general, they are subject to state mandates. CHAIRMAN ROKEBERG indicated this bill would cover the state, municipality and every other political subdivision. MS. BURKE responded that unless they have requested and received that waiver. She added that she wanted to clarify that on the record. CHAIRMAN ROKEBERG remarked, major-major difference. REPRESENTATIVE RYAN stated, the fiscal note will go up half a million bucks. REPRESENTATIVE CROFT noted that's the first he's heard of that. He stated, "We had a number of attorney general's opinions that it is not covered, and I know there is a lot of internal discussion on it, but we have a zero fiscal note from..." CHAIRMAN ROKEBERG interjected that there's been misunderstandings in this committee about that. Number 0132 REPRESENTATIVE KUBINA said, "I'm not sure that other places are covered, it does have a fiscal impact because the employees are certainly all the bargaining ones are having to pick up the cost over and above a certain level anyway. So if this adds that cost over and above there's no fiscal note to the State on it." MS. BURKE agreed. REPRESENTATIVE KUBINA pointed out the only one that would cover would be the non-bargaining unit which is very small. CHAIRMAN ROKEBERG remarked that depends on what the future contracts are. MS. BURKE said it was her understanding that, since it would be an additional cost, that cost would be borne by the employees. REPRESENTATIVE HUDSON asked if that opinion would affect the offer as the same as (indisc.--coughing). MS. BURKE stated, "It is our understanding that an offer is a form of a mandate, and that you mandating an offer be made. It does not mean, however, that they have to have it. It is a choice." Number 0150 REPRESENTATIVE CROFT explained we're mandating that employers offer it to their employees, and the employees have the choice. He said, "And I think that's the appropriate line to draw on this - the way the bill is. If you simply mandate that the employer may have the option of taking it or not, I as an employee still don't - I don't have any way to access that. It's then my employer's decision, not mine to get it (indisc.)..." REPRESENTATIVE HUDSON interjected, "I guess there's no required offer." REPRESENTATIVE CROFT agreed. He said, "If you mean by that, mandate that the employer offer it to their employees, then that's the appropriate, in my opinion. And I have a March 11 memorandum from Signe Anderson in the Attorney General's Office saying it's not. I think though, Representative Kubina's point is well taken, even if it seems to be a legal disagreement about whether it does affect the State of Alaska, or require us to get an exemption from it, but even if it did, it would not change the fiscal note." CHAIRMAN ROKEBERG asked Ms. Burke for a copy of the opinion of the Insurance Omnibus Act that we carried last year because it's different that what we've been operating under. MS. BURKE indicated that she would provide that opinion to the committee. She noted that the regulations under Health Insurance Portability and Accountability Act (HIPAA) are still being promulgated. For the record, Signe Anderson is the assistant general who is of the opinion that waiver must be requested. CHAIRMAN ROKEBERG said, "And when was that opinion - is the issue of the opinion letter or what is (indisc.)" Number 0171 MS. BURKE replied, "No, she informed us and I failed an obligation just to bring it to you. We're going to - the Division of Insurance is going to ask for a formal opinion because we want to know specifically based, and again it's got to be at a point in time because the feds. are putting out regulations as fast as we turn around. But at least at a point in time this is the federal read. But I again want to stress the fact that any governmental entity can request this waiver and it is anecdotal but I understand it is not difficult at all to get that waiver. They're not being turned down." CHAIRMAN ROKEBERG said he didn't think that particular issue should affect this bill. He asked Representative Croft if he agreed. REPRESENTATIVE CROFT agreed. CHAIRMAN ROKEBERG referred to a letter from Bob Labbe, Director, Alaska Division of Medical Assistance, Department of Health and Social Services, April 3. He indicated the 33,135 estimate may be high cite for individual policies in the state. This is from a study that the Administration is using on your uninsured children, the EBRI (Employee Benefits Research Institute) study. MS. BURKE stated that she is not familiar with the study, but that number sounds reasonable. CHAIRMAN ROKEBERG noted the EBRI study in 1996 estimates 81,000 non-elderly Alaskans have no health care coverage. Of those, 10,000 of the uninsured may be Alaska Natives that would be covered under the Indian Health Service for health care services. He said we're looking at approximately 14 to 15 percent of the people in the state that has no insurance coverage. We also have the population that would be Medicaid eligible that would be covered by the state, approximately 30,000 to 32,000 have individual coverage. The Chairman said it's the best guesstimate you can have based on this same study which he thinks is high. He also mentioned the group plans, the governmental, self-insurers, and political subdivisions. He indicated it's still a guess because the State doesn't have adequate statistics on this. He asked how many people, excluding the political will be covered by this bill. MS. BURKE responded, anything she gives would be a pure guess. CHAIRMAN ROKEBERG said he would guess 20 to 30 percent of the people of the state would be covered by this, excluding this new revelation. Number 0212 MS. BURKE responded, "We know that the largest employers, excluding the state and federal government in this state are self-insured. We could put a reasonable number on the people who are covered by Indian Health Service. We have a number for people who are on Medicaid. We can back into a number on that basis but the Division of Insurance does not have access to that data. I can tell you that the 33,000 number makes sense in that Blue Cross has testified that their 13,000 or so policies is about 40 percent of the individual policies and if you work the math on that..." CHAIRMAN ROKEBERG interjected (indisc.) that's probably over 50 now, and that was for 1997 too, that was not for this year. MS. BURKE reiterated 33,000 would be a reasonable number. CHAIRMAN ROKEBERG asked. "If we went to the offerings versus providing (indisc.--laughter) insurance industry can handle that up here." MS. BURKE replied we do have mandates for offerings and we have mandates for coverage. He said she is sure they can handle either one. REPRESENTATIVE BRICE asked does the Administration support this bill. MS. BURKE said she doesn't have an opinion from the Administration. REPRESENTATIVE BRICE asked when did this new information come to light. MS. BURKE responded that it was about two weeks ago when they were reviewing regulations. Up until that time it had been the opinion that governmental entities that are specifically excluded by ERISA that applied to state mandates because of the HIPPA legislation and the requirement on the basis of the federal government, for governmental entities to request waivers, that is what has brought this to the forefront. CHAIRMAN ROKEBERG asked Ms. Burke if she believes if this bill were to pass in its present form - a mandate, would increase costs to individuals as a small group of people in the state. Number 0245 MS. BURKE said she does not believe that it would increase the cost on individual policies because those are individually rated. On the group policies, there is no question there would be savings. She added that, from an actuarial point of view she said she couldn't address that. CHAIRMAN ROKEBERG remarked that there has been no testimony that there would be a savings from the insurance industry. MS. BURKE commented that she doesn't have empirical evidence. CHAIRMAN ROKEBERG asked if the increase menu selection goes up wouldn't the premium go up. MS. BURKE explained that would be the option of the individual, if they chose. CHAIRMAN ROKEBERG commented if there is a mandate they wouldn't have a choice. He said, "An empty nester would have to pay the spread in the group of individuals under like say the blue, that his premium would have to be increased. Is that correct?" MS. BURKE replied, "The individual can elect a catastrophic policy that would be so high it wouldn't cover it." She added that is correct unless there is an actuarial determination of savings. Number 0262 REPRESENTATIVE HUDSON asked wouldn't there also be a potential offset or reduced cost because of other associated costs, for example, a child that wasn't wanted that had to be covered by insurance. MS. BURKE replied that is true. She added that's why she said unless we have actuarial determination. REPRESENTATIVE KUBINA reiterated that it depends on what the actuarial comes up with on this savings, how much is saved by not having that pregnancy. CHAIRMAN ROKEBERG remarked the committee hasn't seen empirical evidence of actuarial studies, if they were there they'd be on our table. REPRESENTATIVE RYAN said, from the testimony, it seems difficult to try to get the basis for an actuarial study on something that you can't show the decreases in but the increase would be an actual fact. REPRESENTATIVE KUBINA disagreed with that statement. CHAIRMAN ROKEBERG closed the public hearing on HB 350. He noted any concerns that he has had with this legislation has to do with the cost, its impact and the availability of insurance for individuals in small groups. He noted it has absolutely nothing to do with contraception, family planning and those types of issues. Number 0296 REPRESENTATIVE HUDSON asked the Chairman if he would accept a motion to adopt proposed Amendment LS1297\B.4, Ford, 4/20/98. Page 1, line 8, following "society": Insert: or a qualified church-controlled organization with a religious-based objection Page 2, line 3, following "contraceptives": Insert: (3) "qualified church-controlled organization" has the meaning given in 26 U.S.C. 3121(w)(3) REPRESENTATIVE CROFT said he has no objection to it. He noted he would have included it in the original bill, except it hadn't occurred to him until he received more information. CHAIRMAN ROKEBERG referred to an article by Governor Pete Wilson, Los Angeles Times, ["Contraceptive Mandate for Insurers Vetoed," February 12, 1998]. He asked Representative Croft if this amendment was equivalent to it to the best of his knowledge. REPRESENTATIVE CROFT replied to the best of his knowledge it is. That was the intent of the amendment. TOM ATKINSON, Researcher to Representative Croft, Alaska State Legislature, informed the committee he was provided a copy of the amendment by Representative Bob Hertzberg that was prepared to satisfy Governor Wilson. Number 0311 REPRESENTATIVE HUDSON made a motion to adopt proposed Amendment LS1297\B.4, Ford, 4/20/98. Hearing no objections Amendment B.4 was adopted. CHAIRMAN ROKEBERG said, "Next there's a question about offer versus provide, do you have any opinion on that Representative Croft." REPRESENTATIVE CROFT replied that it all depends on what we mean by it. As long as we mean that the employer must offer its employees this option, that's all right. He said he thinks if we just do it as you've got to offer as an insurance company to employers whether you want this or not, that's nothing more than is happening now. He stated that, in his opinion would gut the bill. So, it needs to be from his perspective as an employee that he has this option some how, not simply the writers of the policy. It depends on what we mean by offer, if we mean the employee still have this option then that makes sense. REPRESENTATIVE KUBINA asked if he was referring to line 9. CHAIRMAN ROKEBERG replied yes, delete "provide" and insert "offer". REPRESENTATIVE KUBINA indicated that doesn't do what the sponsor of this legislation intended. He said he thinks this would do what "Gordon" asked for, which means okay do you want this let us know and we'll add it and you're going to pay the full cost, it will be $300 a year and not $2.00 a month spread across a wider group. CHAIRMAN ROKEBERG asked what's wrong with that. REPRESENTATIVE KUBINA replied the insurance company is going to add a 20 percent profit onto that and people will end up paying more. CHAIRMAN ROKEBERG asked where's the equity of the empty nest you're paying for a fertility-aged person. REPRESENTATIVE KUBINA stated it's no different from the empty nester paying for a cancer patient when they don't have cancer. REPRESENTATIVE CROFT reiterated putting "offer" for "provide" on line 9 guts the bill. He noted he didn't know that was the specific change they were talking about. If you just say offer, the bill does very little. Number 0334 REPRESENTATIVE RYAN indicated by mandating this we're telling an employer you pick it up and the cost of goods and services goes up, not only for the empty nester but everyone else. He said he believes that is stepping a little farther than a negotiation and a contractual basis or (indisc.). We're telling everybody what they're going to pay for it and he has a problem with that. Representative Ryan said, "If it's going to cost $300 a year, and I'm going to tell this guy, you've got 100 people working for you, $300 a year, you're going to going to provide that. Where do I get off spending somebody else's money like that?" REPRESENTATIVE CROFT said there's an appropriate distinction between individual policies where it's simply -- and now I can make that decision on my own, exempting an individual policy. Where you have a group, and you can spread those costs, we're going to save long-term money and we're going to save health costs for society. It has a positive benefit as requiring coverage of mammograms. It is a form of preventive medicine that we want individual employees to have that option. He said in any group, he believes it makes sense for all the reasons that were discussed. REPRESENTATIVE RYAN mentioned that if we can show, by joining groups that we can save money, and by making this affordable - collectively doing this, he said he could support that. But if we're mandating employer cost, he noted he has difficulty with increasing anybody's cost of doing business. REPRESENTATIVE KUBINA indicated they're missing this side of the equation. He said maybe this is where they disagree in that if an insurance company by offering this is able to say from paying the huge expense of having major problem births then they actually could save money by this. He said, "I wish I had an actuarial study that would be able to show that to you. And I'm not sure you could do it until maybe you've done it for the state for five years..." REPRESENTATIVE BRICE asked if there is an amendment pending. CHAIRMAN ROKEBERG replied no, we're just talking about whether we should do that one. REPRESENTATIVE RYAN suggested researching populations in the Lower 48, similar to Alaska's, where actuarial studies have been done and then perhaps come up with a model. He reiterated that it's not known what the savings is going to be. Number 0383 CHAIRMAN ROKEBERG stated this currently is NOW's (National Organization of Women) issues, they're beating the drums all over the country. He mentioned a Boston Globe reporter said, "Virginia has become the first state to pass this legislation, California is in the wings - the governor vetoed it, and Alaska and Connecticut is likely to follow." REPRESENTATIVE KUBINA said, "My last point is we did have testimony though that did (indisc.) in other countries. Where, if you couldn't say that there was a cost-savings, you certainly saw that there were reductions in abortions and (indisc.) issues. So, at least there's one correlation there that something bad is going down and I don't know how we say it, but there's certainly a cost in those abortions." CHAIRMAN ROKEBERG asked Representative Croft why didn't he try to be more specific in the listing of oral contraceptives, what was the intent. Number 0397 REPRESENTATIVE CROFT replied, "Intent, to given the options that worked for them, and the intent to make it last more than a couple years, if there's a new contraceptive device, appliance or drug that comes out." TAPE 98-55, SIDE B Number 0001 REPRESENTATIVE CROFT continued, "A statistical analysis, taking known failure rates for these, known costs, known costs of birth, it was statistical evidence that contraception clearly saves money. And it was the opinion of those that published statistical analysis that the people who were going to save the money are the third- party payers. So I'm at some what of a loss of what type of experiment we have to do to satisfy -- we all think it does, it makes sense that it saves money, there's a statistical analysis that saves money, we could look at other countries - and it saves money. We know that HMO's, who have more of a long-term population to look at do it much more and that gives some indications it saves money. So, we could search for the miracle, absolute study on this, but we have a lot of evidence that it saves money, and I just believe it will. I'm disappointed that we don't have teleconference today because one of the people that was going testify was a representative of the Teamster's Union that handles their health plan and they do this. When I asked her, 'Well does it save you any money,' even though she knew she was talking to a representative she started laughing on the phone. It was, 'Of course it does. Don't you think it does?' Again, though, they are positive it does, they continue because it does. But when I said, 'Where's the numbers,' - 'Well, I know but I don't know how many didn't come in the next year, but it just makes sense doesn't it, Representative Croft?' And I guess that's where I leave the committee, it just makes sense doesn't it?" CHAIRMAN ROKEBERG commented that these are areas of science not art, there is clearly empirical evidence if in fact this works and we haven't seen it, but that's not the case here. CHAIRMAN ROKEBERG referred to Amendment LS1297\B.2, Ford, 3/3/98. He said one of his great concerns is the direct impact on the individuals who can't spread the cost over a group. He added that there's no group to spread it over. Page 1, line 8, following "society" Insert: or a policy issued to an individual REPRESENTATIVE KUBINA made a motion to move proposed Amendment B.2. There being no objections, Amendment B.2 was adopted. Number 0035 REPRESENTATIVE KUBINA made a motion to move HB 350 as amended with individual recommendations and attached zero fiscal note. There being no objections, CSHB 350(L&C) moved from the House Labor and Commerce Standing Committee. CSSB 254(FIN) - LEVY ON PERMANENT FUND DIVIDEND Number 0039 CHAIRMAN ROKEBERG announced the committee's next order of business was CSSB 254(FIN), "An Act relating to the exemption from levy, execution, garnishment, attachment, or other remedy for the collection of debt as applied to a permanent fund dividend." Number 0041 MIKE PAULEY, Legislative Assistant to Senator Loren Leman, came forward to present CSSB 254(FIN). He stated SB 254 was a Senate Labor and Commerce Standing Committee bill; it would increase the ability of Alaskan businesses and other private parties to collect from debtors in a state of default on obligations. He indicated current state law exempted 45 percent of a person's annual permanent fund dividend (PFD) from collection by a private party seeking to collect on a debt. Mr. Pauley noted child support obligations, defaulted student loans and debts owed to a state agency were not covered this exemption. The state could collect 100 percent of a person's PFD, but small businesses and private parties were not afforded the same right. Mr. Pauley indicated the inability of businesses to collect funds from debtors increased the cost of doing business, resulting in higher prices for goods and services to honest consumers. He said that in a very real sense the majority of Alaskan consumers paid for the financial irresponsibility of a small minority. Mr. Pauley stated SB 254 lowered the exemption in current law from 45 percent to 20 percent, raising the percent of a PFD available for private garnishment from 55 to 80 percent. He noted state agencies would retain the ability to collect at 100 percent. As it was currently structured, SB 254 would significantly narrow the gap between what private parties and the state were able to collect. The sponsor statement read: Senate Bill 254 amends Title 43, Chapter 23 regarding the use of permanent fund dividends to satisfy debts. Existing law at AS 43.23.065 provides that 45 percent of a person's permanent fund dividend is exempt from garnishment, attachment, or any other remedy to collect on financial obligation when the debtor is in a state of default. Therefore, debtors in Alaska can under most circumstances shield 45 percent of their dividend check from persons or businesses seeking to collect. There currently are some exceptions to this general rule: the 45 percent exemption does not apply to child support obligations, court ordered fines, claims on defaulted Alaska student loans, or any debt owed to an agency of the state. Under these and a few other narrowly defined circumstances, the state requires that 100 percent of the dividend be made available to meet the debtor's obligation. The existing PFD garnishment provisions are inequitable and contradictory. The state can seize the entire amount of a dividend to satisfy its claims, but private parties such as small businesses, credit unions, landlords, or car dealers are limited in the amount they can garnish. The message sent, whether intentional or not, is that when contractual obligations are violated, agencies of the state have a greater right than private parties to settle their outstanding claims. As originally introduced, Senate Bill 254 completely eliminated the dividend exemption, allowing state agencies and private parties alike to collect 100 percent. However, an amendment approved by the [Senate] Labor & Commerce Committee restored the exemption but lowered it from 45 percent to 30 percent. The Senate Finance Committee further amended the bill by lowering the exemption from 30 percent to 20 percent. Thus, the amended bill allows private parties to collect 80 percent of a dividend check, while state agencies will continue to collect 100 percent. SB 254 narrows the gap between what state agencies and businesses are able to collect. When businesses are unable to recover monies lawfully owed them by persons in default, the losses are recovered by passing the costs on to honest, law-abiding consumers. The current 45 percent exemption for dividends is essentially a "hidden tax" on the majority of financially responsible consumers. Defaulters get to keep their dividend checks, while the majority of Alaskans end up providing an involuntary subsidy for their financial irresponsibility. (Last updated: March 12, 1998) Number 0061 REPRESENTATIVE COWDERY mentioned one reason a person might not pay a bill was because the person thought he or she did not owe it. He indirectly referred to a supporting letter in the bill packet from National Bank of Alaska (NBA) and asked what incentive people would have to even file for a dividend if they were not going to receive it. Representative Cowdery said it was his understanding that there was a percentage of money left and he asked Mr. Pauley to go into that. The April 29, 1998, letter in the bill packet from Paul Harris, Senior Vice-President, Consumer Lending, National Bank of Alaska, read: As a representative for National Bank of Alaska, I can't express enough the importance of receiving as much money as we can for unpaid loans that we have obtained a judgement on. At the present time we are only receiving 55% (garnishment) of Alaska's Permanent Fund Dividend, for the most part, this only allows us to pay the interest due on most of our loans instead of reducing the principal balance. If we were able to garnish 100% of the Permanent Fund Dividend, we would be able to reduce the balance on these loans substantially and possibly pay most of them off. With individuals that are receiving the permanent fund dividend, we would not be taking anything away from them since this is "free money" that the State of Alaska is giving us. Nobody is above the law and our local businesses should be treated the same as private citizens and benefit from this wonderful advantage of being able to attach the Permanent Fund Dividend for 100%. I would also like to stress that if you have a judgement against you, you should not have the right to a portion of the money distributed by the State of Alaska Permanent Fund Dividend. I understand that child support and state agencies can garnish up to 100% of the Permanent Fund Dividend and we should be given that same opportunity. We at National Bank of Alaska fully support this bill that you are trying to pass and any assistance that we can provide, please contact me at (phone number given). MR. PAULEY replied that was the "$5 million question" on SB 254 and had been addressed in every committee. He indicated the original bill version had allowed state agencies and private businesses to all collect at 100 percent. The Senate Labor and Commerce Standing Committee had lowered the amount to 70 percent for private businesses, the Senate Judiciary Standing Committee had discussed the issue but not changed the percentage, and the Senate Finance Standing Committee had raised it to 80 percent. Mr. Pauley stated most of the people supporting the bill said they would prefer it to be 100 percent. He indicated he was referring to the small businesses, credit unions, credit unions, car dealers. He did note that the preference for 100 percent was not unanimous, commenting that there were some people in the collection business who had dissented strongly. Mr. Pauley said, however, everyone had agreed it should be higher than the current 55 percent. He reiterated most people thought it should be at 100 percent, but the 80 percent currently in the bill was the compromise. Regarding the question of the incentive for someone to apply for his or her PFD, he noted they had heard from the child support agency there were some people who would not apply, if motivated by a grudge, just to keep someone else from receiving that money. He indicated he thought it was somewhat cynical to think all people were so motivated, and said for a lot of people it was a way to pay off their debt. He gave the example of someone owing $5,000, commenting it was far better to have that coming over a five-year period from the person's dividend checks than to have the person's car or paycheck taken. Mr. Pauley said he personally thought only a small minority of people would refrain from applying for their dividend check over a grudge, noting this was something that would be somewhat impossible to measure. REPRESENTATIVE COWDERY indicated he wondered if there was any way if it was set at 100 percent to legally require someone to apply for his or her PFD or give someone else power of attorney to make that application for them. MR. PAULEY noted it was an interesting question. He said they had learned some private parties were apparently making that requirement part of actual loan applications. In other words, if someone applied for a car loan, for example, the person agreed to apply for his or her PFD as one of the loan conditions. He said this was so that if the person was in default the lender would take the dividend to help make good on the person's obligation. Mr Pauley stated more and more companies seemed to be including that provision. REPRESENTATIVE RYAN said he thought there was a bill concerning child support that had been passed or was "floating around." He indicated the agencies were asking for that power. MR. PAULEY said he was not aware of that bill, noting Nanci Jones, director of the Permanent Fund Dividend Division, Department of Revenue, was present and perhaps could comment. REPRESENTATIVE HUDSON informed the committee that the PFD monies of everybody who did not apply for their dividends still went into the state's income stream because that money was automatically apportioned out to everyone else. He said he might receive an extra dollar and therefore had to declare a conflict of interest. CHAIRMAN ROKEBERG commented, "Didn't we have the Amerada Hess [Amerada Hess Corporation] decision on the judges or something like about that ...?" Number 0108 REPRESENTATIVE KUBINA made a motion to move CSSB 254(FIN) out of committee with individual recommendations. It was indicated the legislation would be moved with the attached zero fiscal note. There being no objections, CSSB 254(FIN) was moved out of the House Labor and Commerce Standing Committee. ADJOURNMENT Number 0111 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing Committee meeting at 5:26 p.m.

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