Legislature(2011 - 2012)BARNES 124
02/21/2011 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB164 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 164 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 21, 2011
3:21 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Craig Johnson, Vice Chair
Representative Dan Saddler
Representative Paul Seaton
Representative Lindsey Holmes
Representative Bob Miller
MEMBERS ABSENT
Representative Steve Thompson
COMMITTEE CALENDAR
HOUSE BILL NO. 164, "An Act relating to insurance; relating to
health care insurance, exemption of certain insurers, reporting,
notice, and record-keeping requirements for insurers,
biographical affidavits, qualifications of alien insurers
assuming ceded insurance, risk-based capital for insurers,
insurance holding companies, licensing, federal requirements for
nonadmitted insurers, surplus lines insurance, insurance fraud,
life insurance policies and annuity contracts, rate filings by
health care insurers, long-term care insurance, automobile
service corporations, guaranty fund deposits of a title insurer,
joint title plants, delinquency proceedings, fraternal benefit
societies, multiple employer welfare arrangements, hospital and
medical service corporations, and health maintenance
organizations; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 164
SHORT TITLE: INSURANCE: HEALTH CARE & OTHER
SPONSOR(s): LABOR & COMMERCE
02/18/11 (H) READ THE FIRST TIME - REFERRALS
02/18/11 (H) L&C, FIN
02/21/11 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
LINDA HALL, Director
Division of Insurance
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Presented a section-by-section analysis of
HB 164 and answered questions during the discussion of on HB
164.
ACTION NARRATIVE
3:21:55 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:21 p.m. Representatives Olson,
Seaton, Johnson, Saddler, Holmes, and Miller were present at the
call to order.
HB 164-INSURANCE: HEALTH CARE & OTHER
3:22:09 PM
CHAIR OLSON announced that the only order of business would be
HOUSE BILL NO. 164, "An Act relating to insurance; relating to
health care insurance, exemption of certain insurers, reporting,
notice, and record-keeping requirements for insurers,
biographical affidavits, qualifications of alien insurers
assuming ceded insurance, risk-based capital for insurers,
insurance holding companies, licensing, federal requirements for
nonadmitted insurers, surplus lines insurance, insurance fraud,
life insurance policies and annuity contracts, rate filings by
health care insurers, long-term care insurance, automobile
service corporations, guaranty fund deposits of a title insurer,
joint title plants, delinquency proceedings, fraternal benefit
societies, multiple employer welfare arrangements, hospital and
medical service corporations, and health maintenance
organizations; and providing for an effective date."
3:22:57 PM
LINDA HALL, Director, Division of Insurance, Department of
Commerce, Community & Economic Development (DCCED) referred to
member binders that contain sections which may help the
committee as she reviews this complex bill.
3:24:33 PM
MS. HALL referred to the section-by-section analysis of HB 164
and offered to point out changes from existing law. She
explained that Section 1 would apply to entities not required to
be licensed under Alaska Statute (AS) 21.
3:26:53 PM
REPRESENTATIVE SEATON asked whether this provision would also
apply to health insurance sold by another state.
MS. HALL answered that it has a relationship. This provision is
intended to apply to a large employer headquartered in Texas who
purchases a group health insurance policy for five people to not
have to submit to the entire certificate of authority
application process. She stipulated that the policy must be
sold in Texas and cannot be marketed in Alaska. Additionally,
the company would be limited to $50,000 in premium sales. She
offered her belief that this provision was not generally
applicable to health insurance sold by another state.
MS. HALL stated that Sections 2-21 of HB 164 would modify the
insurance terminology, including changing the term "managed care
entity" to "health care insurer," she said.
3:29:25 PM
MS. HALL turned to the tab titled, "Financial Tab," which refers
to pages 15-23 of the bill. These financial updates represent
the most technical part of the bill. She related the primary
mission of the Division of Insurance (DOI) is solvency
oversight. An insurance policy is a promise to pay, she stated.
The state's regulation over the industry really does not matter
if funds are not available to pay claims, she said. She
emphasized consumer protection relates first to solvency
oversight. She pointed out some provisions in the financial
section are quite technical and others are quite simple.
Proposed Section 24 would require the DOI to collect electronic
mailing addresses and file biographical affidavits. She
highlighted the more critical pieces pertain to records
maintenance, such as the requirement of insurers to keep records
according to the state's requirement or according to the state
of domicile's statutes, whichever is longer. She explained that
during the complaint process, the DOI must be able to obtain
records from the insurer, such as why they denied a claim and
what the policy said at the time it was sold. She characterized
these changes as a strengthening of the state's record
maintenance requirements. A section on reinsurance, which is
insurance that insurance companies buy to protect themselves,
generally carries a large deductible and provides a layering of
the portion of the risk. She reported that the reinsurance
marketplace is changing. Some of the companies domiciled
outside the U.S. keep trust funds in the U.S. for the benefit of
policyholders. She clarified that this language changes the
percentage of insurance the companies must keep fir all
policyholders. She noted this is referred to as ceding. She
clarified the ceding provision only pertains to the portion the
companies take on with respect to the insurance company rather
that the amount of the full policy. She commented that some
states such as New York and Florida have made changes in their
laws and are no longer requiring a 100 percent trust fund. She
recapped that some of the model laws for regulating reinsurance
have changed and Alaska is updating its statutes to reflect
these changes.
3:33:09 PM
MS. HALL referred to proposed Section 29 of the bill which
pertains to a "company action level event" for a property and
casualty insurer or health organization. This means something
happened to cause the state's regulators to more closely review
the action which would likely require additional reporting. The
proposed change would increase the capital amount that a
property and casualty insurer or health organization must have
when that happens. Previously, when the insurer's total
adjusted capital fell below 250 percent, the DOI would require
additional reporting. That threshold has been increased to 300
percent. This percentage point would trigger when the DOI to
review the reserves and overall solvency issues. "So increasing
means it's a tighter regulation. We're upping the ante so to
speak," she said. In response to Representative Saddler, she
responded that proposed Section 29 refers to the risk based
capital, which is the capital and surplus requirements of an
insurer. This would represent the insurer's surplus capital and
how much relates to what the insurer has obligated to pay
policyholders. She reiterated that current when the insurer's
total adjusted capital fell below 250 percent the DOI would
perform a more rigid examination. Under this bill the
percentage would be increased to 300 percent.
3:35:17 PM
REPRESENTATIVE SADDLER asked whether that means capital assets
and reserves must equal 300 percent of the claims or the risk.
MS. HALL clarified that this provision pertains to risk. She
elaborated that it would depend on the type of policy or type of
exposure and whether the insurance is for automobiles or large
commercial buildings since the firm would have a different level
of exposure for any one risk. She characterized the risk based
capital process as a complex formula.
REPRESENTATIVE SADDLER asked whether it is analogous to reserves
for a bank.
MS. HALL answered that the terminology has also changed over
time. It has changed from the amount of capital an insurer had
to the number of policies it had written to a more subjective
analysis of the risk the insurer takes. If an insurer writes a
substantial number of policies for earthquake insurance, even
though the earthquake event happens less frequently, the
insurer's exposure is much greater than if the insurer were to
write all auto policies. She equated the analysis as more of a
subjective analysis performed to better assess the full risk.
REPRESENTATIVE SADDLER related his understanding that raising
the threshold would require greater documentation.
3:36:51 PM
REPRESENTATIVE JOHNSON asked for clarification on the current
requirement for recordkeeping.
MS. HALL answered that five years retention for records is
typical but certain records have other requirements, including
that original contracts must be kept for as long as the policy
is in force. She recalled an incident related to a legal
annuity claim in which neither the consumer nor the company had
a copy of the original contract on file. It was difficult to
sort out whether the Alaska regulations had been adhered to so
these changes will help ensure the original records are
available.
CHAIR OLSON recalled medical malpractice records must be
retained substantially longer, in excess of 18 years, and
earthquake policies are only retained for one year.
MS. HALL pointed out that the retention time can also depend on
whether the policy is renewed with a different company or if a
completely different policy issued. In those instances it would
not be necessary to keep the old policy, she said.
3:38:42 PM
REPRESENTATIVE SADDLER asked for further clarification on
"ceding" insurers and how it would apply to reinsurance.
MS. HALL related a scenario in which insurance company "A" whose
main domicile is Alaska, is considered the domestic insurer.
Any company whose headquarters is located outside Alaska would
be referred to as a "foreign" insurer. When its headquarters
are located in another country the company is considered an
"alien" insurer. Many reinsurers are headquartered outside the
U.S., she said. Insurance company "A" would only purchase
insurance from a foreign insurer or an alien insurer since
Alaska does not have any reinsurance companies located in the
state. She characterized this process as similar to a
deductible and whichever portion is reinsured, company "A" would
be considered the "ceding" insurer. Therefore, company "A"
would be ceding part of its risk to another company, she said.
MS. HALL related that proposed Section 34 contains the final
change under the financial tab. This changes the date from
April 1 to May 1 to allow insurers more time to file the
extensive financial documents. She recalled that this
suggestion was offered during the DOI's accreditation review.
3:41:12 PM
REPRESENTATIVE SEATON referred to page 22, to the definition
section of HB 164. He asked whether it is clear that this
refers to a health care insurer or if it needs to be clarified
that a "managed care entity" includes a "health care entity."
MS. HALL responded these proposed sections ensure that a company
who is a health or life insurer must file a risk-based capital
report. She added that this provision is not really part of the
definition. She offered her belief that the other sections
adequately define the terms, but she offered to review this with
her legal staff.
3:42:50 PM
MS. HALL referred to the next tab in members' binders labeled
"Licensing." She explained that the Alaska statutes (AS) 21.27
refer to agent licensing and updates the DOI's antiquated agent
licensing structure. She related that pages 23-27 of HB 164
help to streamline the process. Proposed Section 35 would
delete the term "individual in a firm" and replace it with
"individual license." She stated that the effect is to provide
portability to the individual license will to allow the license
to follow an agent when the person changes firms. Currently, if
an individual license and changes firms, the agent must cancel
his/her license and reapply for a new license within 30 days or
incur fines. These changes should streamline the process for
agents and for the DOI. She pointed out that substantial
paperwork is involved to process an individual agent changing
firms. These provisions establish an employment contract, which
indicates that the firm's company appointment extends to any
individual working for the firm. The individual may use the
fiduciary accounts of the firm and his/her records are
considered records of the firm. Thus, the DOI would require a
contract to outline specific terms. The firm would be
responsible for its agents. The compliance officer would be
responsible to make sure everyone working for the firm follows
Alaska laws. She characterized the provision as the DOI seeking
accountability and efficiency. She offered her belief that the
current licensing fee structure is incredibly complex and
estimated that the DOI refunds 100 or more overpayments each
year to agents.
3:45:26 PM
MS. HALL pointed out that proposed Section 38 would remove the
requirement for nonresidents to submit fingerprints. This
change is necessary to comply with the requirements under the
federal Gramm-Leach-Bliley Act and national uniformity license
standards. She explained the DOI has not fingerprinted
nonresidents by policy for a considerable time. The national
standard requires that each state will fingerprint its own
residents and perform background checks as part of the licensing
process. A federal law requires felons to submit additional
paperwork. This change prevents duplication for those agents
obtaining registration in 25 states. This change would place
the responsibility on the regulator in the state in which the
agent resides.
3:47:24 PM
MS. HALL turned to the tab in members' binders labeled "Surplus
Lines." She offered her belief that this section is the most
important section of the bill. She explained that these
provisions pertain to another type of insurance called
"admitted" insurance covered by guarantee associations. "Non-
admitted insurers" or "surplus lines insurers" operate
differently. Typically, "surplus lines insurers" are insurers
that may not do sufficient business in a state to submit to the
paperwork to become admitted insurers. She offered that most
earthquake insurance is written in the surplus lines market.
Several homeowner companies write earthquake insurance which is
the only admitted market that writes earthquake coverage, but
the market is fairly limited. Many large financially sound
companies write in this matter. In June 2010, the Congress
passed the Nonadmitted and Reinsurance Reform Act which changed
the way the surplus lines market is taxed. The state must
change its statute or its ability to collect and receive revenue
on surplus lines coverage in Alaska will be restricted. She
emphasized its importance. This concept establishes the home
state for the company's principal place of business. The "home
state" would be the only state that can do certain things such
as collect premium tax, have authority over how agents conduct
business, or authority over alien insurers. She offered to
discuss this in more detail, if needed.
3:50:51 PM
MS. HALL stateded that much discussion has occurred nationally
on the best way to implement changes in the federal act, which
has a fairly narrow timeline since the act will become effective
less than a year after it has been signed. She reiterated the
critical nature to implement the federal changes. The National
Association of Insurance Commissioners (NAIC) has created a
clearinghouse concept. This bill would establish the authority
to allow the DOI's director to participate in a clearinghouse
between states. The clearinghouse would collect a tax and
allocate taxes on multi-state risk using an allocation schedule.
Each state would decide whether to participate. Some small
states expressed concern that the some states would either be
winner states or donor states. Louisiana has viewed itself as
state as a donor state since major oil companies, who are Texas
companies, perform some business in Louisiana but only Texas
would be able to tax those risks.
MS. HALL related a scenario in which a company, such as Princess
Cruises, own properties and lodges in Alaska. However, since
Alaska is not its principal place of doing business it would no
longer be able to collect premium tax on the Princess Lodges in
the event its coverage was placed in a surplus lines market.
She stressed the scenario represents an example since she has no
idea of Princess Cruise's insurance coverage. Unless Alaska
joins with a group of other states, and all states agree to
collect the tax and allocate it to the states where the risk is,
Alaska would lose money. She related that she has rough
estimates from the state's tax auditor that showed that of the
roughly $50 million the state collects only about $3 million
falls under the surplus lines insurer category.
3:53:29 PM
CHAIR OLSON pointed out that the DOI provides income to the
state.
MS. HALL acknowledged that the DOI's $7 million budget is
significantly less than the amount of funds it collects.
MS. HALL estimated that approximately $500,000 would be impacted
by the federal changes to the surplus lines insurance. She
offered her belief that $500,000 is still meaningful revenue
which the DOI would like to track and collect. She remarked
that the figure represents a very rough estimate since the state
does not currently track of "home state" since that is not a
concept currently in Alaska's statutes.
3:54:33 PM
REPRESENTATIVE SADDLER asked for clarification on the term
"admitted."
MS. HALL answered that the term would mean "admitted" to do
business in Alaska. She explained that currently only seven
insurance companies are domiciled in Alaska and list Alaska as
the primary regulator while approximately 2,000 companies are
licensed to conduct insurance business in Alaska but Alaska is
not their principal place of business.
3:55:36 PM
REPRESENTATIVE SADDLER asked whether being domiciled in Alaska
and admitted to do business in Alaska is one and the same.
MS. HALL answered basically yes. She explained that once a
company has obtained a certificate of authority it is free to
sell insurance and is subject to Alaska's statutes and
regulations. Alaska would just not be its primary regulator.
She acknowledged that the DOI performs financial analysis of
these companies.
REPRESENTATIVE SADDLER asked whether the foreign and alien
companies would fall into the nonadmitted category.
MS. HALL recalled that about 7 of 2,000 companies are domiciled
in Alaska. The rest are designated as foreign companies since
they are headquartered in some other state. In further response
to Representative Saddler, she explained that nonadmitted
companies do not have a certificate of authority to operate in
Alaska. The nonadmitted companies do not file forms or rates
and are not guaranteed by the Guarantee Fund. Those companies
would be companies that are authorized to do business in Alaska.
They apply to be on the list of authorized insurers. The DOI
maintains a list of authorized insurers and performs a financial
review, but not to the same detail. Again, the "nonadmitted"
companies are ones that are not guaranteed by the Guarantee
Funds and do not file forms. The DOI considers these companies
to be authorized and financially able to meet their obligations
so the state authorizes them to conduct business in Alaska.
CHAIR OLSON pointed out that another insurance class of
providers considered "alien companies" which are typically
offshore companies. He clarified that foreign companies
typically refer to the Lower 48 companies whereas alien
companies fall into another class and are typically ones that
are located in Bermuda, London, or other European countries.
3:57:45 PM
REPRESENTATIVE SADDLER related that he was unsure what
nonadmitted companies can and cannot do but offered to study the
matter outside of the committee.
MS. HALL pointed out that Chair Olson was previously a surplus
lines broker as was Ms. Hall.
3:58:43 PM
REPRESENTATIVE JOHNSON asked for clarification on the employment
contract, and whether an insurance employee with a contract
would diminish any responsibilities of the company.
MS. HALL answered that she does not believe so. She explained
that both the employer and employee are bound by the statutes to
transact insurance, to have a license, to comply with all of the
requirements set in statute. The bill is not intended in any
way to relieve anyone's obligation. She thought that the bill
may place a greater burden on employer to ensure its employees
are following the statutes and to identify the reason the
compliance officer is involved.
REPRESENTATIVE JOHNSON commented he wanted to be sure the
proposed changes did not contract away certain obligations.
MS. HALL agreed that such action would not be acceptable to DOI
either.
REPRESENTATIVE JOHNSON related a scenario in which a rogue agent
does something. He wanted to ensure that the agent's action
does not relieve company from fulfilling its obligation.
MS. HALL agreed it would not.
4:00:55 PM
MS. HALL referred to the tab in members' binders, labeled,
"Health and Long Term Care" which covers pages 37-50 of HB 164.
She offered that this section contains numerous updates, none of
which pertains to federal health care reform. She related that
the first few sections, in particular, AS 21.36, pertain to the
trade practices and fraud. Proposed Section 58 would provide
consumer protection since it would require insurers to provide
adequate notice of 45 days to consumers of any changes in health
insurance contract provisions, premiums, or coverage. Generally
the DOI has these types of requirements in homeowner and auto
insurance premiums but has not had specific notice for health
care premiums. She recalled a recent issue in which a 30-day
notice could be given midstream. She highlighted those types of
issues can adversely affect someone who is pregnant in the event
that the company provides midstream notice that it will no
longer be covering pregnancy. She recalled such a case and
reported the issue was satisfactorily resolved.
4:03:04 PM
MS. HALL drew attention to changes in proposed Section 59, which
she pointed out as important, but does would also pertain to
long-term care or health insurance. She related a scenario in
which a "rogue agent" created a serious situation. She referred
to proposed Section 59 (p) (4) of HB 164. She identified this
paragraph as language being removed from the criminal code and
placed directly into the insurance code felony section. She
explained that AS 11.46 pertains to intent to defraud. The
language in question basically states that someone commits a
felony if they knowingly issue a forged certificate of insurance
or other document relating to insurance. She explained the
"rogue agent" situation as one in which an agent had not renewed
his/her license, but issued certificates of coverage. However,
the agent did not collect any money or ever "place" the
coverage. This came to the attention of the DOI when a tour bus
operator, who had a certificate of insurance and operated two
tour buses, simply assumed the buses were covered. She stated
the tour operator was not insured and had never been billed.
The tour operator pointed to the certificate of insurance as
proof of insurance. The DOI did not have the authority to
prosecute the "rogue agent." The DOI found the agent's behavior
egregious and a violation of the agent's responsibility to
clients. She reported that the DOI needs the authority to stop
that type of behavior. Currently, the DOI does not have the
ability to do so. In response to Representative Johnson, she
agreed it couldn't be retroactive.
4:07:05 PM
CHAIR OLSON recalled the agent's license was revoked and
although the agent did not renew the license, the revocation
provision would ensure the agent's license could not be renewed
MS. HALL related that the agent operated in Southeast Alaska in
a small community. She characterized the incident as a
difficult situation.
MS. HALL referred to proposed Section 60, which provides a "free
look" and requires insurers to give consumers at least 10 days
to return a policy and receive a refund of the premium.
MS. HALL referred to proposed Section 61, which relates to
insurance rates. This would require all health insurers
transacting health insurance to file prior approval of their
rates with the division. Currently, hospitals and medical
corporations which in Alaska is primarily Premera Blue Cross
file rates for approval. The rest of market has a general
rating standard that indicates rates cannot be excessive or
unfairly discriminatory.
4:10:06 PM
REPRESENTATIVE SEATON referred to proposed Section 58 of HB 164
which requires 45 days notice for individual insurance
contracts. He then asked for clarification in proposed Section
61, which requires 60 days notice for premium rate changes.
MS. HALL answered the insurer must give consumers 45 days notice
of rate changes but the insurer must file with the agency 60
days in advance of any rate changes. In response to
Representative Seaton, she explained that the 45 day notice
matches the DOI's other statutes with respect to notice of
cancellation provisions. She offered her belief the
cancellation standards are uniform, but the filing with DOI
represents a different standard.
4:11:37 PM
MS. HALL referred to proposed changes to AS 21.53, which relate
to changes to the long-term care insurance statutes. She
pointed out that these statutes are 20 years old and need
updating. Long-term care insurance has changed during this
time. In addition to bringing the laws up to date, adopting the
current National Association of Insurance Commissioner's (NAIC)
Long-Term Care model provisions will allow insurers to offer
long term care policies in Alaska that comply with the federal
long-term care partnership policy requirements. This would
allow future state participation in the federal long-term care
partnership program, if the state chooses to do so. Last
legislature, a bill was introduced that would have elected this
option but it did not pass. Alaska currently approves long-term
care forms, but these changes would also provide authority to
approve long-term care rates. She related that in her
experience the largest number of rate complaints surround long-
term care. Someone may have had a policy for 10-15 years but
the premium becomes exorbitantly expensive and people can no
longer afford their policies, often when they most need them.
MS. HALL pointed out most of the provisions incorporate the
proposals in the model bill. The changes would add new
provisions for producer training the DOI believes would be
helpful. It would add consumer benefits such as written reasons
for claim denial, but generally would update the division's 20-
year-old statute to better reflect the market products. In
response to Representative Saddler, she indicated the changes to
the long-term care extend up to page 48 in the bill.
4:14:29 PM
REPRESENTATIVE JOHNSON asked whether public notification is
required when raising insurance rates.
MS. HALL answered that the 45-day notice is to notify the
consumer or policy holder. In further response to
Representative Johnson, she answered that the rates are
confidential until approved. She stated that the DOI would not
publish the rates until the raters were approved by the
division, and once the rates were approved, the filing would
become public. Currently, the rate filings do not become public
documents, she added.
4:16:07 PM
REPRESENTATIVE JOHNSON asked for clarification on the 45-day
consumer notification.
MS. HALL answered that the 45 days would apply to the individual
policy renewal. She explained the 45 day period would follow
the DOI's approval.
REPRESENTATIVE JOHNSON asked whether rates could increase in the
middle of a 12-month policy.
MS. HALL agreed they could be raised.
4:16:42 PM
REPRESENTATIVE JOHNSON recapped that the insurer notifies the
DOI 60 days prior to a rate change and the rates are then
approved. He asked for further clarification on the notice the
insurer must provide on a rate change since the 45 days pertains
to the policy renewal period.
MS. HALL answered that once the DOI approves the rate that the
new rates can go into effect. While the rates are technically
effective, the insurer does not typically use them since changes
also require programming the company's computers. The insurer's
new rate could not go into effect for at least 45 days even if
notice was given the day the DOI approved the rate increase.
REPRESENTATIVE JOHNSON related his understanding that this would
apply not just for renewal but any time rates were increased.
MS. HALL answered that most individual policies have a January 1
renewal date. She recalled that most small group policies do
not have a uniform time. Thus, currently when the DOI approves
rates they apply to the base rate and may impact a particular
group anytime over the 12 months, depending on when the policy
is renewed. She related that the rate increase would not
automatically apply to each and every policy. She related a
scenario in which in which the DOI approved a rate increase on
February 1 which would apply to policyholders as policies were
renewed.
4:19:24 PM
REPRESENTATIVE SEATON asked for clarification on proposed
Section 72 with respect to the "field agent."
MS. HALL responded that a field agent is a producer or agent
visiting clients in their homes or in his office. These are
insurers who have been granted underwriting authority. The
proposed change would ensure that someone selling policies in
the field bases the cost on the premium cost. If the producer
has the authority to issue policies, the agent should be
compensated by the number of policies but not make a commission
she said. The goal in long-term care is not to write the most
expensive policy. Many people may only need a shorter term,
which is based on life expectancy, she stated.
MS. HALL referred to proposed Section 76 of HB 164. This
section would require rate filing and prior approval of group
health care insurance rates which are the same changes as for
individuals just discussed. The goal would be to review, have
actuarial analysis, and approve them prior to use.
4:22:19 PM
MS. HALL explained that proposed Section 78 of HB 164 would
prohibit employers from giving employees funds to purchase
individual health care policies. She recalled some
circumstances in which employers decided not to have a group
policy. The effect of this is to circumvent the DOI's small
group laws. The small group laws guarantee an individual can
obtain insurance. When a person with a preexisting condition
really needs insurance and the employer drops the group policy,
the individual cannot purchase insurance except for high-risk
pool insurance. She highlighted that the high-risk insurance in
prohibitively expensive. This provision would ensure that the
small group laws are followed and are not being circumvented.
She commented that when this has occurred the insurance
companies have worked with the DOI to resolve the matter. She
discovered about three instances in the past 12 months.
REPRESENTATIVE SEATON asked for the breadth of this issue. He
related his understanding that small employer have not provided
insurance. He recalled some employers provided vouchers for the
health fair, which basically amounts to a cash contribution. He
asked whether that would be prohibited.
MS. HALL answered no. She explained that activity is not a
health insurance product. She characterized the vouchers as a
cost management technique but is not insurance.
4:25:35 PM
MS. HALL referred to the tab in members' binders labeled "Title,
Records & Other Provisions." She related that these provisions
provide administrative changes such as providing the director
authority when a title insurance company becomes insolvent,
control of the insurance companies' deposits, and the ability to
pay claims from them, custodial agreements, and the ability to
obtain basic information such as electronic e-mail addresses
from applicants.
MS. HALL then referred to the tab in members' binders labeled
"Insolvency." Again, this updates official communications can
be conducted via e-mail. She turned to proposed Section 86,
which provides the primary emphasis of this section. This
represents a portion of a bill that had been introduced but was
not understood. This proposed change pertains to policies sold
with a very large deductible, such as $100,000, and are referred
to as a retention. These policies are not covered under
receivership laws. Thus, if an insurance company becomes
insolvent, the deductible the employer pays is not addressed in
current AS. This would clarify that the deductible is still an
asset of an estate, but can be paid to the guarantee fund. She
related that once an insurance company becomes insolvent, the
guarantee fund picks up the claims obligation and pays them. In
these instances the employer is responsible for that large
deductible, but the guarantee fund must pay the whole claim.
The DOI wants the guarantee fund to be able to access the funds
the employer would pay if the insurer were still in business.
The DOI is attempting to address a specific situation that the
insolvency statutes do not currently over.
4:28:43 PM
REPRESENTATIVE SEATON asked for clarification. He related a
scenario in which in which someone becomes bankrupt, becomes
insolvent and asked whether everyone with a policy must pay the
$100,000 to the guarantee corporation.
MS. HALL answered no. She explained that the last portion of
that section adds long-term care to the coverage provided by the
guarantee funds in proposed Section 88. It would increase the
amount of an annuity protected in a guarantee fund. The limit
today is $100,000 and the proposed change would increase the cap
on an annuity to $250 thousand. The guarantee fund supports
this increase. She characterized this as a consumer benefit.
4:30:14 PM
CHAIR OLSON asked whether assessments would be made on the
proposed coverage being brought on.
MS. HALL agreed that those would still be assessed. She
referred to the last tab, titled "Financial," which she
characterized as relating to miscellaneous provisions. She
related that proposed Section 89, which pertains to the
biographical affidavits and the DOI's ability to require them.
She elaborated that this section pertains to fraternal benefit
societies.
4:30:55 PM
REPRESENTATIVE SEATON asked for clarification on page 63, line
13, to the $100,000 in present-value annuity benefits in the
aggregate and whether that was changed.
MS. HALL answered yes. She explained that this pertains to a
specific government benefit retirement program, which is
different than a traditional annuity that an individual would
purchase. She commented that the benefit has not been increased
on governmental annuities.
4:31:36 PM
MS. HALL referred to proposed Section 90, which allows a self-
insured group, the multiple employer welfare association, to
sell short term disability policies. She pointed out that this
group sells health insurance.
MS. HALL related that proposed Sections 91 and 92 relate to
biographical affidavits.
MS. HALL related that proposed Section 93 would require hospital
and medical service corporations to comply with the new rate
requirements contained in proposed Sections 61 and 73.
MS. HALL reported that the remainder of the bill pertains to
various repealer provisions and effective dates, she said.
4:32:40 PM
REPRESENTATIVE SEATON recalled a bill prior legislature passed
that allowed pooling by nonprofits. He asked whether that is
separate or encompassed in this bill. He asked whether anything
in this bill would affect the nonprofit and small business
pooling.
MS. HALL answered no, that the pooling is not being addressed in
this bill. She recalled that a program by the United Way was
done through association language. She related that groups of
employers are pooling in the hopes that the businesses will
create wellness programs as a self-insured plan.
4:34:19 PM
REPRESENTATIVE JOHNSON referred to an earlier discussion with
respect to employers being prohibited from providing employees
with cash payments to purchase their own insurance. He related
a scenario in which he is an employer who interviews someone and
advises them they do not carry health insurance but pay their
employees 20 percent more than similar companies. He asked
whether that would be prohibited.
MS. HALL answered no. She explained that so long as the
employer is not giving special stipends for employers to
specifically buy insurance and just paying a higher wage. The
employer is not cancelling its current group insurance plan and
providing the employee $200 to purchase his/her own insurance.
4:35:20 PM
MS. HALL offered her belief that HB 164 is a complex bill. She
expressed her willingness to explain any provisions to members.
[HB 164 was held over.]
4:36:28 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:36 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB164 Fiscal Note-CCED-INS-02-17-11.pdf |
HL&C 2/21/2011 3:15:00 PM |
HB 164 |
| HB164 ver A.pdf |
HL&C 2/21/2011 3:15:00 PM |
HB 164 |
| HB164 Sponsor Statement.pdf |
HL&C 2/21/2011 3:15:00 PM |
HB 164 |
| HB164 Sectional Analysis.pdf |
HL&C 2/21/2011 3:15:00 PM |
HB 164 |