HB 148-OMNIBUS INSURANCE BILL  3:19:33 PM CO-CHAIR HALL announced that the first order of business would be HOUSE BILL NO. 148, "An Act relating to insurance; and providing for an effective date." 3:20:03 PM REPRESENTATIVE SADDLER asked which provisions of HB 148 were absolutely necessary and what might happen if the proposed legislation was not passed. 3:20:36 PM LORI WING-HEIER, Director, Division of Insurance, Department of Commerce, Community & Economic Development (DCCED), replied that there are a few sections related to the Division of Insurance's accreditation. She explained that the division was judged on how well it examined the financial status of insurance companies in line with the 55 other jurisdictions under the National Association of Insurance Commissioners (NAIC). She further explained that accreditation means that companies in Alaska can do business in other states with the security of solvency. She stated that the division must meet or exceed national standards to retain accreditation. She repeated that there are some sections in the proposed legislation that address updates to accreditation standards. MS. WING-HEIER further stated that there are some provisions of HB 148 regarding licensing updates for efficiency and noted that the division was not licensing people that "should have been licensed." She noted that there were quite a few technical changes in the proposed legislation as well to correct Alaska Statute (AS). She stated that were HB 148 not to pass, the division would request it again as the proposed fixes to Title 21 are important. She surmised that barring the accreditation standards, no one section of the proposed legislation was more important than the other. She stated that the staff at the division felt that the proposed legislation was necessary to be more efficient and more effective at protecting consumers. In response to a follow-up question, she identified Sections 4, 5, 8, 9, 10, and 11 as dealing with accreditation standards. 3:23:31 PM REPRESENTATIVE COULOMBE referring to the sectional analysis of HB 148, citing "to align with NAIC model law 786," and asked whether this section had to do with accreditation. MS. WING-HEIER replied that the reason for model law was that insurance companies would like to see that the laws are similar or identical across all 50 states. She stated that NAIC does spend time adopting model laws, and that it functioned similarly to the legislature. She further stated that the National Council of Insurance Legislatures (NCOIL) functions in the same way. She noted that model law 786 refers to a licensing bill. 3:25:07 PM The committee took a brief at-ease at 3:25 p.m. 3:25:26 PM REPRESENTATIVE CARRICK noted there was concern regarding the controlled insurance programs (CIPs) that would restrict the use of CIPs to projects valued at $50 million or more. MS. WING-HEIER reported that many years ago, the State of Alaska was in a lawsuit with Alyeska Resort, and the current statutes are a result of that lawsuit. She explained that current statues require that an owner- or contractor-controlled insurance program must be approved by the division. Additionally, it must be over $50 million dollars with a definitive length of time and location. She explained that CIPs were purchased by either the owner or contractor of a major project, which buys all of the insurance, including workers' compensation, general liability, equipment, et cetera. She noted it was money-saving for large projects. She reported that a few years ago, she was told that the division could not approve CIPs because current AS, as a result of the lawsuit with Alyeska, was not written correctly. She offered her belief that it was not the intent of the court case to prohibit CIPs; rather, statute declared that there could not be "additional insured." She explained that the division corrected the statute to allow additional insured to correct what it believed was an error when the statute was first passed. MS. WING-HEIER stated that there was an amendment for multi- residential projects floating around the Capitol building that had passed in the other legislative body. She explained that the amendment allowed CIPs at a lesser limit of $25 million, with a requirement of at least 50 units and at least three owners. She commented that the division felt the lesser limits of $5 million or $10 million were too low for insurance companies. 3:29:20 PM REPRESENTATIVE CARRICK asked whether the revised threshold of $25 million was too low. MS. WING-HEIER opined that $25 million was a fair compromise and noted the division was satisfied. 3:29:53 PM REPRESENTATIVE BURKE referred to Section 6 and Section 62 of the proposed legislation where wet marine transportation contracts were previously excluded. She queried the justification for the prior exclusion, citing "the State of Alaska is losing $300,000 in tax revenue." MS. WING-HEIER replied that she did not know why the wet marine transportation contracts were given an exclusion, but it goes back years. 3:31:02 PM HEATHER CARPENTER, Deputy Director, Division of Insurance, Department of Commerce, Community & Economic Development, replied that she had provided a written answer to Representative Burke's question earlier in the week. 3:31:16 PM REPRESENTATIVE SADDLER reiterated that $5 million or $10 million CIPs were too low and asked who, business or insurers, would be driven out of business. MS. WING-HEIER clarified that it would not drive companies out of business or drive businesses out of Alaska but explained that the division was concerned about too much payroll or revenue being taken from small contractors with numbers like $5 million or $10 million. She noted that insurance companies have minimum premiums, and small contractors may have a hard time finding someone to write their insurance with numbers like $5 million or $10 million. 3:32:16 PM CO-CHAIR HALL referred to Section 53 of the proposed legislation describing depreciation of labor and asked why depreciation of labor was allowed in the first place. MS. WING-HEIER answered that she missed it in a few insurance policy forms stating that there would be depreciation of labor. She reported that the division received complaints and talked to colleagues in other states and found that states are adopting measures to address the depreciation of labor. She stated that when taken out completely, the division received some resistance. She further stated that the division settled on an amendment that would allow for conditional depreciation of labor. She explained that an individual can choose to purchase an insurance policy with labor depreciation to save money. 3:34:26 PM REPRESENTATIVE SADDLER confirmed that under the proposed legislation, an individual could lower their premium by taking a higher deductible or lower coverage limits. He surmised that an individual could take "a little hit" to make [insurance] more affordable. MS. WING-HEIER confirmed that was correct. 3:34:47 PM CO-CHAIR HALL referred to Section 58 of HB 148 and queried the history of health maintenance organizations (HMOs). MS. WING-HEIER replied that the division has allowed HMOs for years. She explained that HMOs are managed care, and because of the high cost of healthcare, the division allowed HMOs as an option for employers to purchase if it would reduce costs. 3:36:00 PM REPRESENTATIVE SADDLER asked whether there were other amendments or policy additions that existed for consideration that might affect the proposed legislation. MS. WING-HEIER replied that the Senate version of HB 148 had passed out of one committee in the other body with two amendments regarding the depreciation of labor and the change to owner-controlled insurance programs. She stated that she had not seen any other amendments or policy additions. REPRESENTATIVE SADDLER commented that he had heard talk of trying to repeal the 80th percentile rule and thanked Ms. Wing- Heier. 3:37:14 PM CO-CHAIR HALL thanked the invited testifiers. [HB 148 was held over.]