Legislature(2003 - 2004)

04/29/2004 02:46 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         April 29, 2004                                                                                         
                           2:46 p.m.                                                                                            
TAPE(S) 04-37                                                                                                                 
MEMBERS PRESENT                                                                                                               
Senator Con Bunde, Chair                                                                                                        
Senator Gary Stevens                                                                                                            
Senator Bettye Davis                                                                                                            
Senator Hollis French                                                                                                           
MEMBERS ABSENT                                                                                                                
Senator Ralph Seekins, Vice Chair                                                                                               
COMMITTEE CALENDAR                                                                                                            
^OVERVIEW: BLUE  CROSS/PREMERA CONVERSION - Gloria  Glover, Chief                                                             
Financial   Examiner,   Department   of  Community   &   Economic                                                               
Development (DCED)                                                                                                              
CS FOR HOUSE BILL NO. 423(JUD) am                                                                                               
"An Act relating  to accidents involving the vehicle  of a person                                                               
under the influence of an alcoholic beverage."                                                                                  
     MOVED CSHB 423(JUD) am OUT OF COMMITTEE                                                                                    
CS FOR HOUSE BILL NO. 418(FIN)                                                                                                  
"An  Act  extending  the  termination date  of  the  Real  Estate                                                               
Commission;   relating  to   real   estate;   relating  to   home                                                               
inspectors; relating to real estate  licensees; and providing for                                                               
an effective date."                                                                                                             
     HEARD AND HELD                                                                                                             
HOUSE BILL NO. 430                                                                                                              
"An  Act relating  to  employees under  21 years  of  age in  the                                                               
premises  of  hotels, restaurants,  and  eating  places that  are                                                               
licensed  to   sell,  serve,   deliver,  or   dispense  alcoholic                                                               
     MOVED HB 430 OUT OF COMMITTEE                                                                                              
HOUSE BILL NO. 517(title am)                                                                                                    
"An Act relating to the definition of certain security accounts,                                                                
including certain reinvestment, investment management, and                                                                      
custody accounts."                                                                                                              
     MOVED HB 517(title am) OUT OF COMMITTEE                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 423                                                                                                                  
SHORT TITLE: TAXICAB DRIVER LIABILITY                                                                                           
SPONSOR(s): REPRESENTATIVE(s) ANDERSON                                                                                          
02/02/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/02/04       (H)       JUD                                                                                                    
02/02/04       (H)       STA REFERRAL ADDED AFTER JUD                                                                           
02/09/04       (H)       REFERRAL ORDER CHANGED                                                                                 
02/09/04       (H)       STA, JUD                                                                                               
02/10/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
02/10/04       (H)       <Bill Hearing Postponed>                                                                               
03/02/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
03/02/04       (H)       Heard & Held                                                                                           
03/02/04       (H)       MINUTE(STA)                                                                                            
03/05/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
03/05/04       (H)       Heard & Held                                                                                           
03/05/04       (H)       MINUTE(STA)                                                                                            
03/09/04       (H)       STA AT 8:00 AM CAPITOL 102                                                                             
03/09/04       (H)       Moved CSHB 423(STA) Out of Committee                                                                   
03/09/04       (H)       MINUTE(STA)                                                                                            
03/12/04       (H)       STA RPT CS(STA) NT 3DP 3NR 1AM                                                                         
03/12/04       (H)       DP: SEATON, HOLM, LYNN; NR: COGHILL,                                                                   
03/12/04       (H)       BERKOWITZ, WEYHRAUCH; AM: GRUENBERG                                                                    
03/19/04       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
03/19/04       (H)       Heard & Held                                                                                           
03/19/04       (H)       MINUTE(JUD)                                                                                            
03/26/04       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
03/26/04       (H)       Moved CSHB 423(JUD) Out of Committee                                                                   
03/26/04       (H)       MINUTE(JUD)                                                                                            
03/29/04       (H)       JUD RPT CS(JUD) NT 6DP                                                                                 
03/29/04       (H)       DP: HOLM, SAMUELS, GRUENBERG, OGG,                                                                     
03/29/04       (H)       ANDERSON, MCGUIRE                                                                                      
04/19/04       (H)       TRANSMITTED TO (S)                                                                                     
04/19/04       (H)       VERSION: CSHB 423(JUD) AM                                                                              
04/20/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/20/04       (S)       L&C, JUD                                                                                               
04/29/04       (S)       L&C AT 2:45 PM BELTZ 211                                                                               
BILL: HB 418                                                                                                                  
SHORT TITLE: REAL ESTATE COM'N/LICENSEE/HOME INSPECT                                                                            
SPONSOR(s): LABOR & COMMERCE                                                                                                    
02/02/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/02/04       (H)       L&C                                                                                                    
02/16/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
02/16/04       (H)       Scheduled But Not Heard                                                                                
02/23/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
02/23/04       (H)       Moved CSHB 418(L&C) Out of Committee                                                                   
02/23/04       (H)       MINUTE(L&C)                                                                                            
02/26/04       (H)       L&C RPT CS(L&C) NT 5DP 1NR                                                                             
02/26/04       (H)       DP: LYNN, GATTO, ROKEBERG, DAHLSTROM,                                                                  
02/26/04       (H)       ANDERSON; NR: GUTTENBERG                                                                               
02/26/04       (H)       FIN REFERRAL ADDED AFTER L&C                                                                           
04/13/04       (H)       FIN AT 3:00 PM HOUSE FINANCE 519                                                                       
04/13/04       (H)       Moved CSHB 418(FIN) Out of Committee                                                                   
04/13/04       (H)       MINUTE(FIN)                                                                                            
04/14/04       (H)       FIN RPT CS(FIN) NT 7DP 3NR                                                                             
04/14/04       (H)       DP: MEYER, HAWKER, CHENAULT, FATE,                                                                     
04/14/04       (H)       FOSTER, HARRIS, WILLIAMS; NR: STOLTZE,                                                                 
04/14/04       (H)       JOULE, CROFT                                                                                           
04/21/04       (H)       TRANSMITTED TO (S)                                                                                     
04/21/04       (H)       VERSION: CSHB 418(FIN)                                                                                 
04/22/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/22/04       (S)       L&C, FIN                                                                                               
04/29/04       (S)       L&C AT 2:45 PM BELTZ 211                                                                               
BILL: HB 430                                                                                                                  
SHORT TITLE: EMPLOYEES UNDER 21 AT LICENSED PREMISES                                                                            
SPONSOR(s): REPRESENTATIVE(s) KERTTULA                                                                                          
02/04/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/04/04       (H)       L&C, JUD                                                                                               
02/25/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
02/25/04       (H)       Moved Out of Committee                                                                                 
02/25/04       (H)       MINUTE(L&C)                                                                                            
02/26/04       (H)       L&C RPT 5DP                                                                                            
02/26/04       (H)       DP: CRAWFORD, LYNN, ROKEBERG,                                                                          
02/26/04       (H)       GUTTENBERG, GATTO                                                                                      
03/31/04       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
03/31/04       (H)       <Bill Hearing Postponed>                                                                               
04/06/04       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
04/06/04       (H)       Moved Out of Committee                                                                                 
04/06/04       (H)       MINUTE(JUD)                                                                                            
04/07/04       (H)       JUD RPT 3DP 1NR                                                                                        
04/07/04       (H)       DP: SAMUELS, HOLM, GARA; NR: MCGUIRE                                                                   
04/07/04       (H)       GRUENBERG SIGNED JUDICIARY RPT DP                                                                      
04/15/04       (H)       TRANSMITTED TO (S)                                                                                     
04/15/04       (H)       VERSION: HB 430                                                                                        
04/16/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/16/04       (S)       L&C, FIN                                                                                               
04/29/04       (S)       L&C AT 2:45 PM BELTZ 211                                                                               
BILL: HB 517                                                                                                                  
SHORT TITLE: SECURITY ACCOUNT BENEFICIARY DESIGNATION                                                                           
SPONSOR(s): LABOR & COMMERCE                                                                                                    
02/23/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/04       (H)       L&C, JUD                                                                                               
03/01/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
03/01/04       (H)       Moved Out of Committee                                                                                 
03/01/04       (H)       MINUTE(L&C)                                                                                            
03/03/04       (H)       L&C RPT 4DP 1NR                                                                                        
03/03/04       (H)       DP: LYNN, ROKEBERG, DAHLSTROM, GATTO;                                                                  
03/03/04       (H)       NR: CRAWFORD                                                                                           
03/24/04       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
03/24/04       (H)       Moved Out of Committee                                                                                 
03/24/04       (H)       MINUTE(JUD)                                                                                            
03/25/04       (H)       JUD RPT 5DP 1NR                                                                                        
03/25/04       (H)       DP: SAMUELS, GRUENBERG, OGG, HOLM,                                                                     
03/25/04       (H)       MCGUIRE; NR: GARA                                                                                      
04/23/04       (H)       TRANSMITTED TO (S)                                                                                     
04/23/04       (H)       VERSION: HB 517(TITLE AM)                                                                              
04/26/04       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/26/04       (S)       L&C                                                                                                    
04/29/04       (S)       L&C AT 2:45 PM BELTZ 211                                                                               
WITNESS REGISTER                                                                                                              
Mr. Nelson Page, Member                                                                                                         
Premera Task Force                                                                                                              
Juneau AK                                                                                                                       
POSITION STATEMENT: Commented on the Blue Cross/Premera                                                                       
Mr. Jim Shine                                                                                                                   
Staff to Representative Tom Anderson                                                                                            
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HB 423 for sponsor.                                                                          
Mr. John Pattee                                                                                                                 
Gaslight Lounge                                                                                                                 
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports HB 423.                                                                                          
Ms. Janet Sykes                                                                                                                 
Staff to Representative Rokeberg                                                                                                
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HB 418 for sponsor.                                                                          
Mr. William Bruu                                                                                                                
Mat-Su AK                                                                                                                       
POSITION STATEMENT: Supports HB 418.                                                                                          
Ms. Pat Davidson                                                                                                                
Division of Legislative Audit                                                                                                   
Legislative Affairs Agency                                                                                                      
PO Box 113300                                                                                                                   
Juneau AK 99811-3300                                                                                                            
POSITION STATEMENT: Commented on HB 418.                                                                                      
Mr. David Feekin, Legislative Chair                                                                                             
Alaska Association of Realtors                                                                                                  
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports HB 418.                                                                                          
Ms. Aurora Hauke                                                                                                                
Staff to Representative Beth Kerttula                                                                                           
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HB 430 for sponsor.                                                                          
Mr. Josh Applebee                                                                                                               
Staff to Representative Tom Anderson                                                                                            
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HB 517 for sponsor.                                                                          
CONFIRMATION HEARINGS                                                                                                         
BOARD OF BARBERS AND HAIRDRESSERS                                                                                             
Deborah Long - Fairbanks                                                                                                        
Joylene Mars - Anchorage                                                                                                        
Angela Rosa Easton - Anchorage                                                                                                  
Larry Alan Unrat - Anchorage                                                                                                    
ALCOHOLIC BEVERAGE CONTROL BOARD                                                                                              
Dwayne Udland - Anchorage                                                                                                       
^STATE ASSESSMENT REVIEW BOARD                                                                                                
Alan Black - Palmer                                                                                                             
Patrick Carlson - Kodiak                                                                                                        
BOARD OF MARINE PILOTS                                                                                                        
Robert Arts - Anchorage                                                                                                         
ALASKA WORKERS' COMPENSATION BOARD                                                                                            
Valerie Almond - Anchorage                                                                                                      
Chris Johanson - Fairbanks                                                                                                      
David Koester - Anchorage                                                                                                       
James Rhodes - Ketchikan                                                                                                        
Patricia Voldorf - Anchorage                                                                                                    
BOARD  OF   REGISTRATION  FOR  ARCHITECTS,  ENGINEERS   AND  LAND                                                             
Craig Freedon - Eagle River                                                                                                     
ACTION NARRATIVE                                                                                                              
TAPE 04-37, SIDE A                                                                                                            
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee meeting  to order  at 2:46  p.m. Present  were Senators                                                               
Hollis French, Gary  Stevens and Chair Con  Bunde. Senator Bettye                                                               
Davis  arrived at  2:52.  The  first order  of  business to  come                                                               
before the  committee was an  overview of the  Blue Cross/Premera                                                               
conversion that is being discussed.                                                                                             
^OVERVIEW: BLUE CROSS/PREMERA CONVERSION                                                                                      
MS.  GLORIA   GLOVER,  Chief  Financial  Examiner,   Division  of                                                               
Insurance,  Department   of  Community  &   Economic  Development                                                               
(DCED),  said  she  is  in  the  processing  of  preparing  final                                                               
recommendations for the June 7  hearing. The actual conversion is                                                               
from  a  non-profit  organization to  a  for-profit  corporation.                                                               
Transactions  of   this  type  require  approval   by  the  state                                                               
insurance regulators,  which in this  case is in  both Washington                                                               
State and  Alaska. Washington is  conducting the same  process as                                                               
Alaska. Premera has  made a Form A filing, which  is required for                                                               
any  kind of  an acquisition  of  an insurance  company. This  is                                                               
considered  an  acquisition in  the  sense  that Blue  Cross  and                                                               
Premera  are going  from the  non-profit status  to a  for-profit                                                               
status. A  stock corporation  will be  set up  and stock  will be                                                               
traded  in  return for  assets,  which  will  result in  a  stock                                                               
oriented group of companies. Currently,  Premera has a mixture of                                                               
both stock  and non-profit companies.  So, this will result  in a                                                               
totally stock-oriented corporation.                                                                                             
     The  results  of  the  stock  transfers  will  then  be                                                                    
     transferred to  two charitable  foundations -  one, for                                                                    
     Washington  State  public  and  one  for  Alaska  state                                                                    
     public.  Those  foundations  are   set  up  to  provide                                                                    
     funding  for  health   initiatives  in  the  respective                                                                    
     states.  The  transfer,  itself,  would  occur  at  the                                                                    
     closing of the transaction, which  is to be at the same                                                                    
     time as the initial public  offering (IPO) of the stock                                                                    
     on the  stock exchange. So,  at that time,  there would                                                                    
     actually be  value attributed to  the stock  that would                                                                    
     be transferred.                                                                                                            
     The  Form   A  filing  includes  all   aspects  of  the                                                                    
     transaction    including   the    formation   of    the                                                                    
     foundations....  These types  of documents  have voting                                                                    
     trust agreements,  registration rights  agreements, the                                                                    
     plan of conversion, articles  of incorporation for both                                                                    
     the   charitable   foundations   and  the   new   stock                                                                    
     corporation,  the equity  compensation plans,  economic                                                                    
     assurances,   affiliate    agreements   including   tax                                                                    
     sharing,  management agreements,  guarantees and  stock                                                                    
     restriction  agreements.  That's   just  generally  the                                                                    
     types  of  things that  we  have  been looking  at  and                                                                    
     reviewing in this transaction.                                                                                             
     The Form A filing,  itself, was originally submitted to                                                                    
     the division on  September 17, 2002 and  was amended on                                                                    
     September  27  and  October  25.  That  plan  was  then                                                                    
     revised  after   some  discussions  with   the  various                                                                    
     regulators  and  their  consultants  and  the  company.                                                                    
     There were  concerns that came  up and so  we discussed                                                                    
     those and that developed a  revised plan that was filed                                                                    
     on February 5, 2004.                                                                                                       
     The statute  review requires that  during a  hearing we                                                                    
     look at  whether or  not the insurer  would be  able to                                                                    
     satisfy  their insurance  licensing requirements  after                                                                    
     the transaction,  whether or not the  transaction would                                                                    
     lessen competition  in the  state or  tend to  create a                                                                    
     monopoly  in  the state.  We  looked  at the  financial                                                                    
     condition of the acquiring party  and whether or not it                                                                    
     might  jeopardize   the  financial  stability   of  the                                                                    
     insurer   or    prejudice   the   interests    of   its                                                                    
     policyholders. We look to see  whether the terms of the                                                                    
     agreements  are  fair  or unfair  or  unreasonable  for                                                                    
     charity holders. We  also look to see if  the plans the                                                                    
     acquiring  party has  to liquidate  - what  the insurer                                                                    
     sells after  or consolidates  with other changes  - are                                                                    
     unfair or  unreasonable to policyholders or  not in the                                                                    
     public  interest.  We  also  look  at  the  competence,                                                                    
     experience  and  integrity  of the  persons  who  would                                                                    
     control  the   operation  of  the  insurer   after  the                                                                    
     transaction. The director may  also look at other types                                                                    
     of  information  such  as  marketshare,  volatility  of                                                                    
     market leaders,  number of  competitors, concentration,                                                                    
SENATOR BETTYE DAVIS arrived at 2:52 p.m.                                                                                       
MS. GLOVER said the hearings would  be public and the director of                                                               
the Division  of Insurance  will be the  decision-maker. It  is a                                                               
complicated  transaction and  is not  one the  division has  seen                                                               
before;  consultants with  expertise on  this issue  were brought                                                               
in. Those  are Labosh  Lamb and  Green and  McCray -  legal firms                                                               
with  insurance and  regulatory  expertise,  Signal Hill  Capital                                                               
Group  -  investment  banking expertise,  Navigant  Consulting  -                                                               
economic  expertise and  Redman &  Anders -  actuarial expertise.                                                               
All  of  the   firms  have  been  involved  in   these  types  of                                                               
transactions in the past.                                                                                                       
The  consultants  have   issued  two  sets  of   reports  on  the                                                               
transaction. The initial reports were  filed February 2, 2004 and                                                               
the  supplemental reports,  on February  27, 2004,  which can  be                                                               
found on the Division of Insurance website.                                                                                     
CHAIR BUNDE  asked what the  impact of  the transfer would  be on                                                               
current policyholders.                                                                                                          
MS. GLOVER  replied that the  economic and  actuarial consultants                                                               
have  addressed  that  issue in  their  reports.  Premiums  could                                                               
potentially  increase  and  Premera  filed  a  two-year  economic                                                               
assurance that  it would  not increase  premiums relating  to the                                                               
conversion, itself,  but it doesn't  restrict it  from increasing                                                               
premiums because of high medical costs.                                                                                         
CHAIR BUNDE said that currently  any for-profit insurance company                                                               
doing business in Alaska needs to  have its rates approved by the                                                               
Division of Insurance and that would apply to this conversion.                                                                  
MS. GLOVER replied that a stock  health company does not have its                                                               
health  rates   approved.  Other   property  casualty   forms  of                                                               
insurance do need to be approved.                                                                                               
CHAIR BUNDE asked if she had an  idea of how much the stock would                                                               
be worth.                                                                                                                       
MS.  GLOVER  replied that  she  hadn't  done a  market  valuation                                                               
because the market will decide at the time the stock is offered.                                                                
CHAIR BUNDE asked who would be the recipient of this largess.                                                                   
MS.  GLOVER replied  that the  plan is  to split  the stock  that                                                               
actually  is issued  between the  Washington  foundation and  the                                                               
Alaska  foundation.   Each  of   those  entities   would  operate                                                               
separately with the stock they have.                                                                                            
CHAIR BUNDE asked who would belong to the Alaska foundation.                                                                    
MS. GLOVER  answered that  the foundation would  have a  board of                                                               
directors  appointed by  the attorney  general.  The board  would                                                               
then make  the decisions  about when  to sell  stock and  at what                                                               
price  and  how  much  and  how  that  would  be  distributed  to                                                               
CHAIR BUNDE asked if it would be like the Permanent Fund Board.                                                                 
MS. GLOVER replied, "Perhaps."                                                                                                  
CHAIR  BUNDE asked  why the  attorney general  would appoint  the                                                               
board versus the governor.                                                                                                      
MS. GLOVER answered  that Premera used to appoint  the board, but                                                               
the department  didn't think that was  appropriate. In Washington                                                               
State  the attorney  general made  those appointments  and that's                                                               
what Alaska went with.                                                                                                          
CHAIR BUNDE  said that Washington  State has an  elected attorney                                                               
MS. GLOVER replied that is true.                                                                                                
CHAIR  BUNDE  asked  if  the appointments  would  be  subject  to                                                               
legislative confirmation.                                                                                                       
MS. GLOVER replied that the current proposal doesn't have that.                                                                 
CHAIR BUNDE  asked if the  whole transaction would be  subject to                                                               
legislative confirmation.                                                                                                       
MS. GLOVER answered that the statute does not provide for that.                                                                 
SENATOR HOLLIS FRENCH  said he understands that  the authority to                                                               
make that decision  rests with Linda Hall,  Director, Division of                                                               
MS.  GLOVER answered  that she  is the  ultimate decision  maker,                                                               
although there is an appeal process.                                                                                            
SENATOR FRENCH asked where it would go.                                                                                         
MS. GLOVER replied to the Superior Court.                                                                                       
SENATOR  FRENCH said  Premera's plan  dated March  16, 2004  says                                                               
that the conversion  will cause a one-time  premium rate increase                                                               
of 2 to  2.5 percent. He asked  if that is upon  conversion or at                                                               
the end of the two-year period.                                                                                                 
MS. GLOVER  replied that  is the estimate  of the  pressures that                                                               
the stock  company would bear  that the consultants  prepared. It                                                               
wouldn't  necessarily   happen  at  conversion  time;   it  would                                                               
probably happen over time.                                                                                                      
SENATOR FRENCH  said he  read that  they would  hold off  on rate                                                               
increases for two years.                                                                                                        
MS. GLOVER agreed  and said it had supplied the  division with an                                                               
economic assurance that raising of  rates from a direct effect of                                                               
the conversion would be held for two years.                                                                                     
SENATOR FRENCH  wanted to make  certain that the rates  would not                                                               
be subject to regulatory rate approval after the conversion.                                                                    
MS. GLOVER said that is correct.                                                                                                
SENATOR  FRENCH continued  that  the report  also  says that  the                                                               
number of medically uninsured people will increase.                                                                             
MS. GLOVER replied that was the consultant's conclusion.                                                                        
SENATOR FRENCH  said further that  Premera could withdraw  in the                                                               
future  from less  profitable  business lines  and  asked if  the                                                               
division foresees that happening.                                                                                               
MS.  GLOVER replied  that the  consultants concluded  that was  a                                                               
SENATOR  FRENCH said  he  had  a hard  time  not  jumping to  the                                                               
conclusion  that  the stockholders  are  going  to get  rich  and                                                               
Alaskan consumers are not.                                                                                                      
MS.  GLOVER responded  that  the division  is  still drawing  its                                                               
conclusions  and  preparing  for  the hearing  in  front  of  the                                                               
CHAIR  BUNDE noted  that three  people were  listening on  line -                                                               
Jack McCray, John Dominick and  Barbara Branton - and that Nelson                                                               
Page, member of the Conversion Task Force, was present.                                                                         
MR. NELSON  PAGE, member  of the Conversion  Task Force,  said it                                                               
consists  of  a  number  of organizations  including  the  Mental                                                               
Health Trust,  the Rasmussen  Foundation, the  Denali Commission,                                                               
the  Alaska Native  Health Board,  the University  of Alaska  and                                                               
individuals  who are  concerned or  interested in  the conversion                                                               
process. Primarily, it is focused on  what is left in the form of                                                               
the foundation  that it is  worthy and  helpful for the  State of                                                               
Alaska if the conversion takes place.                                                                                           
     First, I  will point  out that this  is not  an unusual                                                                    
     way  for  these conversions  to  take  place. The  Blue                                                                    
     Cross   corporations   have  always   been   non-profit                                                                    
     corporations. When  they convert to for-profit,  it has                                                                    
     been  both a  doctrine of  law and  a consideration  of                                                                    
     equity that the money and  the assets that were created                                                                    
     by the  non-profit should  continue to  be used  in the                                                                    
     charitable  or beneficial  way for  the  people of  the                                                                    
     State  of  Alaska.  Foundations are  created  for  that                                                                    
     purpose.  We  are  concerned  to  make  sure  that  the                                                                    
     foundation, if  the conversion goes  through, if  it is                                                                    
     actually created, that it be  independent - and we have                                                                    
     some  concerns   that  the  makeup  of   the  board  of                                                                    
     directors might  be such that...wouldn't be  able to be                                                                    
     an  effective advocate  and an  effective change  agent                                                                    
     for health care needs in the state.                                                                                        
     We also  have some concerns about  some restrictions on                                                                    
     the  proposed  conversion  plan that  might  limit  the                                                                    
     foundation's  ability to  realize full  value from  the                                                                    
     shares of stock that  it would receive initially. These                                                                    
     are  restrictions such  as a  timetable  for having  to                                                                    
     sell the stock,  which might not be  the best timetable                                                                    
     to maximize their market value.                                                                                            
     Finally, there  is the issue,  which I think  the state                                                                    
     is going  to have to get  in to, of how  you allocate a                                                                    
     percentage of the total amount  from this conversion to                                                                    
     the State of Washington versus  the State of Alaska and                                                                    
     what is a fair percentage.                                                                                                 
MR. PAGE  said this foundation  may be  a mitigation for  some of                                                               
the concerns  and issues regarding  a conversion.  His experience                                                               
with   the  Mental   Health  Trust   is  that   these  kinds   of                                                               
organizations can  have a substantial effect  far outweighing the                                                               
amount of dollars that they wield.                                                                                              
CHAIR BUNDE asked if the Mental  Health Trust would be one of the                                                               
foundation members and thereby a stockholder.                                                                                   
MR.  PAGE  answered no.  Presently  it  is envisioned  that  this                                                               
foundation would be an independent  entity and probably more akin                                                               
to a private foundation like  the Rasmusen Foundation rather than                                                               
a  semi-state  corporation  like  the Mental  Health  Trust.  The                                                               
foundation  would  be  the  beneficiary of  stock.  The  plan  of                                                               
conversion  requires the  foundation  to sell  the  stock over  a                                                               
period of time  and he didn't have a problem  with that. However,                                                               
he strongly  felt that restrictions on  when and how much  has to                                                               
be sold  could limit  the value  of the  stock. Also,  unless the                                                               
conversion  has conditions,  Premera might  decide to  create and                                                               
issue new  shares of stock within  a short period of  time, which                                                               
would dilute the value of the foundation's stock.                                                                               
CHAIR BUNDE said  he shares his concerns about Alaska  and he has                                                               
heard a rumor that there is  a desire to keep the legislature out                                                               
of  the process.  He asked  him what  role the  legislature could                                                               
have in the process.                                                                                                            
MR. PAGE  replied that  question could  best be  resolved between                                                               
Premera, the  Division of Insurance,  the administration  and the                                                               
     To be candid, there is a  concern that this is a lot of                                                                    
     money and that there may be  a desire to use that money                                                                    
     in ways, which  would not carry a  benefit forward into                                                                    
     the  future.  Beyond that,  I  don't  think it  is  the                                                                    
     feeling of  anyone that I've  talked to that  we should                                                                    
     keep  the legislature  in the  dark about  what's going                                                                    
     on.  To the  contrary, that's  one reason  I'm here.  I                                                                    
     invite  anyone who  has questions  or concerns  to feel                                                                    
     free  to  contact  me  or any  member  of  the  Premera                                                                    
     committee to discuss those.                                                                                                
CHAIR BUNDE  asked when he thought  this process would come  to a                                                               
MR.  PAGE   deferred  to  the   division  for  that   answer.  He                                                               
understands  that decisions  would  be made  some  time over  the                                                               
summer. His  group has taken  a firm non-position on  whether the                                                               
conversion should happen  or not. It would not shock  him to have                                                               
legal challenges if the conversion goes forward.                                                                                
CHAIR BUNDE observed that it  is unfortunate that the legislature                                                               
is  getting  involved at  this  late  date  in the  session.  One                                                               
question he had  is why the attorney general, as  an agent of the                                                               
governor, would  appoint the board  when the governor  could make                                                               
the appointments and have legislative confirmation.                                                                             
SENATOR HOLLIS FRENCH asked Mr. Page  to comment on an article he                                                               
wrote partially about  the ability of the  foundation to advocate                                                               
the availability of affordable health insurance.                                                                                
MR. PAGE replied:                                                                                                               
     That  particular  concern  is  pretty  straightforward.                                                                    
     There   are  limitations   on   the   ability  of   the                                                                    
     foundation...to lobby to the  extent they would want to                                                                    
     advocate about  insurance rates or the  availability of                                                                    
     insurance  or the  nature of  insurance  that is  being                                                                    
     offered  or not  being offered.  Those restrictions,  I                                                                    
     think, are inappropriate and should  not be included in                                                                    
     any conversion plan.                                                                                                       
CHAIR BUNDE asked  if he saw any conflict in  advocating for more                                                               
consumer health care for a lower price.                                                                                         
MR. PAGE replied  if the foundation is independent  and, in fact,                                                               
is  supposed to  be  advocating  for the  unmet  health needs  of                                                               
Alaskans, one  of the things  that they have  to be able  to talk                                                               
about  is   the  availability  of  health   insurance.  "To  have                                                               
limitations and restrictions on their  ability to do that doesn't                                                               
make any sense."                                                                                                                
SENATOR  FRENCH said  Mr. Page  also pointed  out in  the article                                                               
that the  initial contribution to  the foundation has to  be fair                                                               
and that  the initial  proposal contains  significant limitations                                                               
on the  ability of the  foundation to receive  contributions from                                                               
other sources  or to  sell the  assets it  will receive  from the                                                               
conversion  in  a manner  that  will  obtain the  highest  market                                                               
value. He asked what interest Blue Cross or Premera has in the                                                                  
assets they give over to the foundation once it has gone away.                                                                  
MR. PAGE replied:                                                                                                               
     In fairness, this becomes fairly  complicated and I try                                                                    
     to look  at both sides  of this issue. Blue  Cross will                                                                    
     become  a for-profit  corporation at  the beginning  of                                                                    
     the conversion  to shareholders, one in  Washington and                                                                    
     one in Alaska. It seems if  you look at it, it's fairly                                                                    
     reasonable that  they would  have some  restrictions on                                                                    
     what those  two shareholders can  do with all  of those                                                                    
     shares  of stock.  They would  be  in complete  control                                                                    
     with this  for-profit corporation until the  shares are                                                                    
     sold into the general  market. Some of the restrictions                                                                    
     that  have been  suggested, however,  seem to  be very,                                                                    
     very  inappropriate  or  at least  unnecessary.  Again,                                                                    
     there is a timetable by  which the shares of stock have                                                                    
     to  be sold  -  20  percent within  the  first year,  I                                                                    
     think...and then  a certain percentage more  within two                                                                    
     years  and by  the end  of 10  years, they  should have                                                                    
     less than five percent of the  shares of stock - all of                                                                    
     which  in some  ways  makes sense,  but  in other  ways                                                                    
     means that we  may be forced into a  timetable with the                                                                    
     market that dictates we don't get our fair value....                                                                       
     The  other issue  again, is  a  fairly complicated  tax                                                                    
     issue. The  foundation as is presently  proposed in the                                                                    
     conversion  plan  would  be a  501(c)(4)  organization.                                                                    
     That is an  organization that can do  some lobbying and                                                                    
     advocacy, but  has the  restriction that  cannot accept                                                                    
     funds  or  receive  charitable contributions  from  any                                                                    
     other source.  A 501(c)(3) organization, which  is sort                                                                    
     of the one that most of  us are familiar with as a non-                                                                    
     profit,  doesn't have  those  restrictions. Now,  there                                                                    
     are some  tax implications of whether  it's a 501(c)(4)                                                                    
     or  a 501(c)(3)  that are  fairly complicated.  I won't                                                                    
     attempt to try  to explain them to you  right now. But,                                                                    
     it would seem  to me that is an issue  that hasn't been                                                                    
     looked at  as closely  as it  should in  the conversion                                                                    
CHAIR BUNDE  said it  appeared that they  had just  scratched the                                                               
surface of  some of these  issues. He concluded saying  on behalf                                                               
of  the committee  and the  legislature that  they would  want to                                                               
have some  oversight and that  needs to  be explored in  the next                                                               
CHAIR BUNDE announced confirmation hearings  to be the next order                                                               
of business. He declared a  personal conflict of interest in that                                                               
his daughter  is one of  the appointees  to the Board  of Barbers                                                               
and Hairdressers.                                                                                                               
^CONFIRMATION HEARINGS                                                                                                        
^BOARD OF BARBERS AND HAIRDRESSERS                                                                                            
Deborah Long - Fairbanks                                                                                                        
Joylene Mars - Anchorage                                                                                                        
Angela Rosa Easton - Anchorage                                                                                                  
Larry Alan Unrat - Anchorage                                                                                                    
^ALCOHOLIC BEVERAGE CONTROL BOARD                                                                                             
Dwayne Udland - Anchorage                                                                                                       
^STATE ASSESSMENT REVIEW BOARD                                                                                                
Alan Black - Palmer                                                                                                             
Patrick Carlson - Kodiak                                                                                                        
^BOARD OF MARINE PILOTS                                                                                                       
Robert Arts - Anchorage                                                                                                         
^ALASKA WORKERS' COMPENSATION BOARD                                                                                           
Valerie Almond - Anchorage                                                                                                      
Chris Johanson - Fairbanks                                                                                                      
David Koester - Anchorage                                                                                                       
James Rhodes - Ketchikan                                                                                                        
Patricia Voldorf - Anchorage                                                                                                    
^BOARD  OF  REGISTRATION  FOR   ARCHITECTS,  ENGINEERS  AND  LAND                                                             
Craig Freedon - Eagle River                                                                                                     
CHAIR BUNDE  noted that  the committee  moved the  names forward,                                                               
but that didn't  reflect any intent by any member  to vote for or                                                               
against any of these people in further sessions.                                                                                
                HB 423-TAXICAB DRIVER LIABILITY                                                                             
CHAIR CON BUNDE announced HB 423 to be up for consideration.                                                                    
MR. JIM SHINE, staff to  Representative Tom Anderson, said HB 423                                                               
will allow taxicab  operators to transport a  motor vehicle owned                                                               
by an intoxicated person to his home or another directed                                                                        
residential location while another cab driver will take the                                                                     
intoxicated person to the same residential location.                                                                            
     Absent  gross  negligence  or reckless  or  intentional                                                                    
     misconduct,  a person  engaged in  this activity  would                                                                    
     not  be civilly  liable  for damages.  There are  times                                                                    
     when Alaskans  will find  themselves in  an end  of the                                                                    
     evening  dilemma  when  they  are over  the  .08  blood                                                                    
     alcohol limit and shouldn't drive,  but are worried and                                                                    
     reluctant to  leave their car unattended  overnight for                                                                    
     several reasons - fear of  vandalism or having it towed                                                                    
     or stolen. This bill  will allow the intoxicated person                                                                    
     and his or  her vehicle to get home  safely without the                                                                    
     taxicab  operator  who   drives  the  person's  vehicle                                                                    
     fearing  liability.  This   bill  promotes  responsible                                                                    
     behavior and  encourages people to  do the  right thing                                                                    
     and not drive while intoxicated.                                                                                           
     In  2002, there  were 87  traffic deaths  in Alaska  of                                                                    
     which 35 were alcohol  related. That created 40 percent                                                                    
     of  the traffic  deaths. In  2001, 53  percent of  auto                                                                    
     deaths were alcohol related.                                                                                               
     In   order  for   this   program   to  be   successful,                                                                    
     establishments    would    implement   the    following                                                                    
     strategies and policies:                                                                                                   
     They'll be  placing signs near payphones,  direct lines                                                                    
     to  cab   companies  in  other  conspicuous   areas  in                                                                    
     establishments such as restrooms and near exits.                                                                           
CHAIR BUNDE asked who would pay for that.                                                                                       
MR. SHINE replied that the bar owners would do that. He                                                                         
     Also  they'll  be  training  the  staff  in  these                                                                         
     establishments   on   the  availability   of   the                                                                         
     program, how  to inform patrons and  implement the                                                                         
     process,  making public  service announcements  at                                                                         
     the  end of  the  evening as  the  bar is  nearing                                                                         
     closing. The bars will be  paying a portion of the                                                                         
     cab fare agreed upon  by the establishment and the                                                                         
     program  officials. They  will  track the  program                                                                         
     usage  to  assess  the  effectiveness  to  promote                                                                         
     and/or improve  the program. This service  will be                                                                         
     free  to  consumers  as   the  bar  and  corporate                                                                         
     sponsors  will be  splitting the  cost of  $40 for                                                                         
     each  cab  trip  in the  downtown  Anchorage  bowl                                                                         
CHAIR BUNDE  asked if the  person calls  the cab himself  does he                                                               
pay the fare.                                                                                                                   
MR. SHINE replied no and  said that the Anchorage Cabaret, Hotel,                                                               
Restaurant &  Retailers Association  (CHARR) has  been soliciting                                                               
corporate sponsors to help pay  for getting drunk drivers off the                                                               
road and has  talked with bar owners who have  consented to being                                                               
involved in  this program and  have agreed to splitting  the cost                                                               
of  it with  the corporate  sponsors. He  said that  letters from                                                               
Mothers  Against   Drunk  Drivers  (MADD)  and   Cabaret,  Hotel,                                                               
Restaurant  and Retailers  Association (CHARR)  in support  of HB
423 are in  the committee's packets and noted that  it passed the                                                               
House unanimously by a vote of 38 - 0.                                                                                          
MR. JOHN PATTEE,  owner, Gaslight Lounge and Avenue  Bar, said he                                                               
is  also  a  board  member   of  Anchorage  CHARR,  the  Downtown                                                               
Community  Council   and  the  Anchorage   Downtown  Partnership.                                                               
Several  years  ago,  he  and   Rod  Flager,  Anchorage  Downtown                                                               
Partnership, tried  to identify why  people may drink  and drive.                                                               
They found that some people want  to take their cars home because                                                               
they are expensive and might be  vandalized or stolen if they are                                                               
left downtown. A few years  ago, insurance companies estimated it                                                               
would cost  $1,000 per cab  for providing this type  of coverage,                                                               
which was prohibitive.  People don't want to leave  their cars on                                                               
the streets  for many  reasons. If  they are  legitimate reasons,                                                               
they should be  addressed. This program, which is  called Off The                                                               
Road, is  a good  start at  addressing the  problem and  could be                                                               
refined as experience dictates.                                                                                                 
CHAIR BUNDE  said he thought  this was  an issue worthy  of being                                                               
moved forward.                                                                                                                  
SENATOR  BETTYE  DAVIS  moved  to pass  HB  423  from  committee.                                                               
Senators Hollis  French, Bettye Davis  and Chair Con  Bunde voted                                                               
yea; and HB 423 moved from committee.                                                                                           
     CSHB 418(FIN)-REAL ESTATE COM'N/LICENSEE/HOME INSPECT                                                                  
CHAIR  CON   BUNDE  announced   CSHB  418(FIN)   to  be   up  for                                                               
MS.  JANET SYKES,  staff to  Representative  Rokeberg, said  that                                                               
CSHB 418(FIN) extends  the life of the Real  Estate Commission as                                                               
recommended in  the audit, clarifies  procedures with  regards to                                                               
inactive  real  estate   licensees,  clarifies  requirements  for                                                               
contact information and notices,  and makes clarifying amendments                                                               
to home inspection legislation.                                                                                                 
MR.  WILLIAM BRUU  supported HB  418. "I  think it's  an absolute                                                               
necessity that  we tune up  the home inspector statute."  His one                                                               
concern  is  that  current regulations  fail  to  grandfather  in                                                               
individuals who have been certified  inspectors for as long as 15                                                               
MR.  DAVID  FEEKIN,  Legislative  Chair,  Alaska  Association  of                                                               
Realtors, supported HB 418.                                                                                                     
MS. PAT DAVIDSON,  Division of Legislative Audit,  said this bill                                                               
addresses   one  of   the  audit's   concerns  relating   to  the                                                               
notification  of a  determination  against a  license. Two  other                                                               
issues weren't addressed  and one is to increase  the award limit                                                               
from $10,000 to $20,000. The  $10,000 cap was established in 1974                                                               
and has  not been revised since  then. The last five  payments in                                                               
the  last few  years  have  been for  the  full  $10,000 and  the                                                               
alleged losses  in those  claims exceeded $10,000  - all  but one                                                               
was  over $20,000.  Moving the  cap to  $20,000 would  assist the                                                               
buyers who  have suffered from fraud  or deceit by a  real estate                                                               
The second  item that is not  addressed has to do  with confusion                                                               
by  the Real  Estate  Commission  on how  mobile  home sales  are                                                               
handled  by licensees.  She explained  that the  audit recommends                                                               
mobile  home transactions  handled by  real estate  agents to  be                                                               
covered  by the  surety funds.  She elaborated  that mobile  home                                                               
transactions  are  not required  to  be  handled by  real  estate                                                               
agents and she  is not recommending that, but rather  if a person                                                               
does   seek  the   assistance  of   a  licensed   realtor,  those                                                               
transactions should be covered by the surety fund.                                                                              
CHAIR BUNDE thanked her and put  HB 418 aside until the committee                                                               
had a quorum.                                                                                                                   
TAPE 04-37, SIDE B                                                                                                            
         HB 430-EMPLOYEES UNDER 21 AT LICENSED PREMISES                                                                     
CHAIR CON BUNDE announced HB 430 to be up for consideration.                                                                    
MS.  AURORA   HAUKE,  staff  to  Representative   Beth  Kerttula,                                                               
sponsor, said this  bill deals with the employment  of people who                                                               
are  under  21  who  work  in hotels  and  restaurants  that  are                                                               
licensed  to serve  alcoholic beverages.  Currently, 16,  17, and                                                               
18-year olds  are allowed  to work  in these  establishments with                                                               
the permission of their parents.  Nineteen and 21-year olds don't                                                               
need parental permission.  No one under the age of  21 is allowed                                                               
to work with  the alcohol. This bill would allow  18-year olds to                                                               
work without parental permission since  they have reached the age                                                               
of majority and are adults. They  would still not be able to work                                                               
with the  alcohol. This legislation  would clear  up difficulties                                                               
and  deterrents   for  18-year   olds  trying  to   find  gainful                                                               
employment  in a  restaurant and  would increase  the prospective                                                               
labor   pool   for   employers.   This  bill   was   brought   to                                                               
Representative  Kerttula's attention  by  a  constituent who  was                                                               
trying to  hire an 18-year  old young man  who had been  a foster                                                               
child and  didn't have any legal  parents. Since he had  not been                                                               
adopted by  his foster parents, they  could not sign for  him and                                                               
eventually he was not able to work in the restaurant.                                                                           
CHAIR  BUNDE noted  that Doug  Griffin, Alcohol  Beverage Control                                                               
Board (ABC)  was not able  to testify at  this time and  he would                                                               
hold the bill.                                                                                                                  
MS. HAUKE pointed  out a letter of support from  the ABC Board in                                                               
the committee packets.                                                                                                          
        HB 517-SECURITY ACCOUNT BENEFICIARY DESIGNATION                                                                     
CHAIR CON BUNDE announced HB 517 to be up for consideration.                                                                    
MR.  JOSH   APPLEBEE,  staff  to  Representative   Tom  Anderson,                                                               
sponsor, said HB 517 permits  an investment management or custody                                                               
account with a  trust company or a trust division  of a bank with                                                               
trust powers to  have a beneficiary designation  take effect upon                                                               
the  death  of the  owner  of  the  account. Under  current  law,                                                               
securities   and  brokerage   accounts   have  this   beneficiary                                                               
designation take effect  upon the death of the  owner pursuant to                                                               
the Uniform Transfer On Debt  Security Registration Act. However,                                                               
the current definition  in Alaska is not broad  enough to include                                                               
investment management  or custody  accounts, which  are generally                                                               
used  by trust  departments  and banks.  This  problem cannot  be                                                               
solved   other  than   by  statute.   Several  states   including                                                               
California, Idaho,  Iowa, Minnesota  and Washington  have enacted                                                               
similar  legislation in  the last  three years.  HB 517  will now                                                               
allow these investment  products to avoid probate  by providing a                                                               
statutory authorization to use a  beneficiary designation to take                                                               
effect upon death. It will also  put bank trust departments on an                                                               
equal footing with brokerage firms.  There is wide spread support                                                               
for  this bill  including  Wells Fargo  and  the Alaska  Banker's                                                               
CHAIR BUNDE  said that he  now had a  quorum, but wanted  to give                                                               
members some time to look at the bill.                                                                                          
         HB 430-EMPLOYEES UNDER 21 AT LICENSED PREMISES                                                                     
CHAIR CON BUNDE brought HB 430 back before the committee.                                                                       
SENATOR  BETTYE  DAVIS  moved  to pass  HB  430  from  committee.                                                               
Senators Bettye  Davis, Gary  Stevens and  Chair Con  Bunde voted                                                               
yea; and HB 430 moved from committee.                                                                                           
   HB 517(title am)-SECURITY ACCOUNT BENEFICIARY DESIGNATION                                                                
CHAIR CON BUNDE announced HB 517(title  am) to be back before the                                                               
MR. JOSH  APPLEBEE recapped  that HB  517(title am)  allows trust                                                               
custody accounts  at a bank or  trust company to use  the time of                                                               
death  designation.  When  an  owner  of  an  account  dies,  the                                                               
beneficiary will take over at the time of death.                                                                                
SENATOR  GARY  STEVENS  moved  to  pass  HB  517(title  am)  from                                                               
committee    with   attached    fiscal   note    and   individual                                                               
recommendations. Senators  Bettye Davis,  Gary Stevens  and Chair                                                               
Con Bunde voted yea; and HB 517(title am) moved from committee.                                                                 
3:41 - 3:43 - at ease                                                                                                           
CHAIR BUNDE adjourned the meeting at 3:43 p.m.                                                                                  

Document Name Date/Time Subjects