HOUSE CS FOR CS FOR SENATE BILL NO. 276(JUD) An Act relating to the Alaska Insurance Guaranty Association; relating to the powers of the Alaska Industrial Development and Export Authority concerning the association; and providing for an effective date. LINDA HALL, DIVISION OF INSURANCE, DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT, explained that there is a serious financial loss because of the insolvency of the insurer, Alaska Insurance Guaranty Association. The statute allows prorating of claimants but this is an unacceptable solution because the medical bills of claimants are not paid. Currently, Alaska has 579 open claims with injured workers. Employers satisfy the obligation but when the insurer is insolvent, the claim is transferred and will revert to the employer. The goal is to protect policyholders, and SB 276 proposes to change the way the Division of Insurance does assessments. The legislation authorizes the Alaska Industrial Development and Export Authority (AIDEA) to guarantee loans to the Alaska Insurance Guaranty Association (AIGA) needed to make the association financially able to meet cash flow needs. [Due to the malfunction of Tape 106 Side B, the following minutes are a reconstruction of discussion during the meeting.] Ms. Hall continued her testimony. She referred to the chart titled, "Alaska Insurance Guaranty Association"(copy on file.) and discussed the first line. Ms. Hall stated that this is a painful and expensive bill, with employers unable to handle the claims of 579 injured employees. Co-Chair Harris discussed the line item, Fund Source, reflecting $8,890,000 on Fiscal Note #6 with Ms. Hall. Vice-Chair Meyer asked if businesses or the Chamber of Commerce have been involved. Ms. Hall affirmed. In response to a question by Vice-Chair Meyer, Ms. Hall explained that businesses handle the situation according to their profit margins. Vice-Chair Meyer asked if Providence or Carrs are the largest employers. Ms. Hall affirmed, and noted that these businesses are self-insured. Representative Chenault commented that as an employer, he is hit hard by Workers' Compensation Insurance increases that will continue to rise. Representative Fate asked the effect on workers' compensation as employers go to self-insurance. Ms. Hall said that as more companies seek other types of insurance, a smaller market is created that is less attractive with less competition, which has led to increases in premiums. In Alaskan companies, the average worker's compensation claim is $19 thousand.   Representative Hawker asked if the Division of Insurance is responsible for monitoring firms. Ms. Hall affirmed that it has the responsibility to oversee insolvency. Representative Hawker discussed the Fremont suspension with Ms. Hall. He asked if any options are remotely viable to settle this assessment. Ms. Hall replied that the Division had looked at a variety of options and worked with the AIDEA. The Senate rejected using Permanent Fund earnings. Representative Hawker commented that this is less than popular with the people who would have to pay it. Ms. Hall pointed out that the State Chamber is on record in support of the bill, and it has broad support because of recognition of the current crisis. Representative Hawker thought that the acceptance would be reluctant and Ms. Hall agreed. In response to a question by Representative Chenault, Ms. Hall said that in Alaska the frequency of accidents has declined but the cost of claims has risen. Medical care comprises 55% of the claims. She commented on Alaska's aging population and the variety of factors that impact Workers' Compensation.   Co-Chair Harris MOVED to report SB 276 out of Committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered.  HCS SB 276(JUD) was REPORTED out of Committee with individual recommendations and five previously published fiscal impact notes.