HB 218 - OMNIBUS INSURANCE REFORM Number 1615 CHAIRMAN ROKEBERG indicated the next order of business would be HB 218, "An Act relating to regulation and examination of insurers and insurance agents; relating to kinds of insurance; relating to payment of insurance taxes and to required insurance reserves; relating to insurance policies; relating to regulation of capital, surplus, and investments by insurers; relating to hospital and medical service corporations; and providing for an effective date." Chairman Rokeberg apologized to Marianne Burke regarding the scheduling of the legislation for the last two meetings and not hearing it. He asked if there is a clear demarkation in terms of sections between the Kassenbaum/Kennedy bill and the other. Number 1626 MARIANNE BURKE, Director, Division of Insurance, Department of Commerce and Economic Development, came before the committee. She said there is a sectional analysis dated April 22. She informed the committee that Section 1 specifically points out those sections of the combined bill that refer specifically to the Kassenbaum/Kennedy implementation which is P.L. 104-191. REPRESENTATIVE ROKEBERG noted that the Senate's version of the bill currently passed the Senate in third reading and a notice of reconsideration has been given. He asked if the Kassenbaum/Kennedy portions of the Senate bill have been changed. MS. BURKE stated there hasn't been any changes to any section that pertains to the Kassenbaum/Kennedy legislation. In fact, the only changes were additions to the bill rather than any changes to the bill itself. Number 1747 MS. BURKE indicated she would discuss the sections of HB 218 that pertain to the Kassenbaum/Kennedy legislation. She stated there are a number of terms used in the federal legislation that have specific definitions. Wherever our statutes contain the same words, but were defined differently, they have conformed the use of that word to the federal definition. MS. BURKE said Section 3 is to make sure that the terms we are using are consistent with the newly defined insurance terms under the federal law. MS. BURKE informed the committee members that the next section that pertains to the Kassenbaum/Kennedy bill defines the term "health care insurance," which has been defined to be consistent with health insurance coverage. CHAIRMAN ROKEBERG asked if that would be throughout the entire statute or if it is just in that particular chapter. Number 1828 MS. BURKE responded that the health insurance coverage that is in the federal legislation is the one we are conforming to. She said since the federal definition is different from our state definition, as Alaska's is more broad, they have taken the federal definition and made it a subset of the Alaska definition. Ms. Burke stated this section also adds the stop-loss insurance. She explained stop-loss insurance for health coverage is not allowed in the state of Alaska. It is done, but it is not in accordance with statute. This would permit the stop-loss insurance to affirm that life and health insurers are permitted to write such insurance in Alaska. Ms. Burke noted Section 12 defines what that insurance actually is. Number 1891 MS. BURKE directed the committee to Sections 31 through 34 and Sections 43 through 56 and said this is a matter of clarifying the terms and being consistent with the federal standards. It also allows the applicability of these sections to a multi employer welfare arrangement (MEWA). CHAIRMAN ROKEBERG questioned what a MEWA is. MS. BURKE responded that under federal law, there are provisions which allow a group of employers to get together and provide help for other benefits for their employees. The state has very limited authority over these MEWAs. They're exempted by Employee Retirement and Income Security Act (ERISA). However, in the Kassenbaum/Kennedy law, the federal government actually allowed some intrusion, for the first time, into the self-insurance unregulated activity. It gave the states a little more authority to oversee what they are doing. Number 2021 CHAIRMAN ROKEBERG asked if the state of Alaska would qualify. MS. BURKE said the state of Alaska wouldn't qualify as it is single. MS. BURKE informed the committee that there are certain types of policies that aren't covered such as workers' comp which isn't covered under Kassenbaum/Kennedy. They're known as accepted benefit plans. Ms. Burke explained the purpose of the changes the department is proposing are intended to make the sections consistent with each other and, in terms of applicability, with the terms as used in federal law. MS. BURKE said, "The bulk of this is getting consistency so that we do not create barriers which the federal government could use as evidence of the need for them to take over regulation of these particular health practices in the state of Alaska." Number 2087 MS. BURKE referred to Section 43 and said, "For simplicity, the changes are made to conform with the federal law and include both individual and groups as far as enrollment periods are concerned. This is enrollment of dependence, newly adopted or dependence borne to a group policy." MS. BURKE explained Section 45 and Section 46 is similar to and conforms our state law with minimum federal standards, as far as the 48-hour child birth provisions, that were passed by the legislature last year. CHAIRMAN ROKEBERG said, "Is there any change -- these are like minimum federal standards. Does that change, in any way, the intent of the legislation we passed last year?" MS. BURKE indicated it doesn't. She said it was to make illegal what was known as the drive-thru births, the 48 hours. The 96 hours for caesarean births stays the same. Number 2157 REPRESENTATIVE RYAN asked if the committee had previously discussed Section 41. MS. BURKE indicated the committee has previously discussed the coordination of benefits. She said it is the same as what was in the original bill. It is to avoid people collecting more than 100 percent of coverage. Ms. Burke noted there was a state employee that collected $65,000 over and above what it had cost them -- $65,000 more than 100 percent of their reimbursement. She said it has nothing to do with the concept of coordination of benefits. It is to make sure that people don't turn insurance into a cottage industry. REPRESENTATIVE RYAN said, "If I am paying a premium for insurance, my wife is paying a premium for insurance, and the company is receiving the monies, why should they not pay for a loss individually? Why should they be allowed to cut their loss by commingling their risk with another insurer's risk when there were two individuals and they're receiving a premium for each individual? It kind of looks like they've gotten to somebody and cut a deal for themselves so they can make the money and, at the same time, not have to had bear the risk." Number 2219 MS. BURKE said that this is a hotly disputed and discussed area, especially in line of the runaway health care costs. Most people get a second policy to pick up what is not covered. This provides that you do receive the full benefit of that. Ms. Burke pointed out in two person wage earner families, you will be covered by one employer and another employer. There is the birthday rule that says, for example, if your children are covered under both policies, the primary coverage is through the policy of the parent whose birthday comes first in the year. It is simply arbitrary. This is to provide that you get up to 100 percent, but no more than 100 percent. She referred to Representative Ryan's question about why shouldn't they get whatever they've paid for and said that is a matter of public policy, the legislature chose to let them do so. In order to keep health care costs down, the whole concept of coordination of benefits was introduced in that you will get up to 100 percent, but no more. Number 2277 REPRESENTATIVE RYAN asked Ms. Burke if it would be reasonable to think that the legislature could coordinate the premiums. He said, "If somebody is paying 80 percent and you're the other insurer paying only 10 percent - 20 percent, then you only get 20 percent of the premium." MS. BURKE stated that anything is possible. CHAIRMAN ROKEBERG said that is a very good point. He said with the exception of health care insurance, the ability of a person to insure something more than once is a doable thing. Chairman Rokeberg asked about insuring a car by two different companies. MS. BURKE pointed you that can't insure anything for more than its value. She noted that the only thing that hasn't been capped is your life as you can choose to insure your life for whatever amount you choose to pay the premiums on. An underlying public policy in insurance is that it has always been that you will be indemnified. You will get back that which you have spent. Number 2404 MS. BURKE referred to Section 57 and said it applies to long-term care contracts. She said part of the Kassenbaum/Kennedy bill was to provide an incentive for people to buy long-term care insurance and to that, they gave favorable tax treatment to the premiums you pay. As an individual, you are permitted to deduct health care costs and premiums in excess of 7.5 percent of you adjusted gross income. They have now added the long-term care contracts to this treatment as a public policy to encourage people to purchase long- term care policies. Ms. Burke said the section does provide that the director shall write regulations, specifically, to deal with this policy. It doesn't mean that all long-term care policies do have favorable tax treatment. You can still choose to purchase those that do not. CHAIRMAN ROKEBERG asked Ms. Burke if she is aware of any long-term policies that are currently being offered in the state of Alaska. MS. BURKE responded that there are. Number 2469 MS. BURKE referred to Section 59 and said it adds several new sections to conform to the minimum federal standards for health care insurance. She said they are probably the ones that have received the most publicity. The first is unfair discrimination. TAPE 97-51, SIDE B Number 0001 MS. BURKE explained that there is a long chapter within Title 21 that does relate to unfair trade practices, including unfair discrimination. Ms. Burke said pre-existing conditions have been discussed at various committee meetings and has been a highly publicized part of the Kassenbaum/Kennedy bill. It was viewed as the ability to have portability of your coverage. She said as she has explained before, this does not mean you take the same coverage with you. It means that if your heart or cancer condition was covered before you've already satisfied that pre-existing condition, you don't have to start all over again in satisfying that provision. Number 0053 REPRESENTATIVE RYAN referred to a situation where an employee is being treated for a condition with an insurance carrier. For some reason, they lose employment and then they come back to work for the same employer that has the same insurance carrier, would that be considered a pre-existing condition since there is a new enrollment or would they have to accept that? MS. BURKE said, "That gets to the next issue, the creditable coverage. If you have had coverage before and there hasn't been a lapse of coverage, including your COBRA and everything else, over a certain period of time, no you would not. But if you go away for several years then come back, it's a different issue. MS. BURKE referred to the break in coverage that Representative Ryan referred to about how long you can be away and explained that the federal number of days is 63. She said, "In our legislation, right now, we have for the small employer groups, we allow 90 days break in coverage. And we left it at 90 days - there is no federal mandate that says we have to make it 63. Ninety is considered more generous than the 63, so that's not stepping on the federal toes in that area." Number 0189 MS. BURKE explained the renewability, termination and modification of coverage allows a guaranteed renewability. If a small employer already has this policy in place, then it is guaranteed to be renewable except in the circumstances of nonpayment of premium, fraud or something along those lines. Ms. Burke said subsection (f) was added to allow an insurer to terminate if there is fraud or intentional misrepresentation. This is not a part of the federal law as passed. However, the Health Care Financing Administration (HICFA) has indicated, in conferences to the state and to others, that it was their intent that it be there. It was never the intent for them to allow someone to perpetrate fraud in order to get this policy. CHAIRMAN ROKEBERG asked if it is a drafting oversight. MS. BURKE said, "Just for whatever reason was not included in the original bill and probably will be a technical correction." Number 0256 REPRESENTATIVE RYAN said, "Why here on page 33, line 29, -- what is there is about group market that will allow this 18-month if you missed the enrollment, you have to go 18 months or if you had a preexisting condition, they can exclude you for 18 months. Is that some different - a wholly different horse with a different color?" MS. BURKE said it is not. It is the same treatment. It is for late enrollees. REPRESENTATIVE RYAN said if he were to work for a new employer and tell them he has had a bad back for years and it requires treatment from time to time. One employer could say, "Fine, but we're not going to cover you for 18 months." MS. BURKE explained a number of things would kick in. If you had been covered with you last employer, for that bad back, then that would be a different situation altogether. As long as you haven't had a break of more than 90 days of coverage, then you don't have to go that long. REPRESENTATIVE RYAN said, "So basically they feel they're going to have to pay you health care costs for this and it's an ongoing condition. They want a year and a half premium to start with before they kick in, so they have some reserves to make the payment. Is that it? MS. BURKE said she thinks two concepts are being mixed. REPRESENTATIVE RYAN said, "My wife has a policy where she works, they gave her a six month thing. So she waited patiently for her insurance to cover certain aspects. And this one says 18. I'm wondering what the difference is. She has got Blue Cross." MS. BURKE asked if she was a late enrollee. If she comes into a new job, she is not considered a late enrollee, but if she decides a year later that well, maybe she should have taken that insurance, that's a late enrollee. Number 0360 CHAIRMAN ROKEBERG questioned what a late enrollee is. He asked if it is defined in Article 3. MS. BURKE indicated it is defined in Article 3. CHAIRMAN ROKEBERG read the definition from Version B, page 44, line 17, "Late enrollee" means a participant or beneficiary who requests enrollment in an employer's health care insurance plan following the initial enrollment period for which the participant or beneficiary was eligible to enroll under the terms of a health care insurance plan, except that a participant or beneficiary may not be considered a late enrollee if.... Chairman Rokeberg said you could have a situation where there is a transfer from one job to another. He asked if the new employee would bring a plan from another employer. MS. BURKE said the more probable situation is where you elect not to take the coverage, but then a year or so later you decide that you want to take the coverage. CHAIRMAN ROKEBERG said that could be because you may have been divorced. MS. BURKE said it is a life event and it is provided for in the legislation. A life event could be marriage, divorce, birth of a child. Number 0497 MS. BURKE referred to the mental health benefits and said there was an amendment introduced to provide parity on mental health. The cost of providing parity was estimated by various actuarial groups to be astronomical and it would force the cost of health care into bankruptcy. It was pulled out of the original bill, but then it was added as an amendment to a veterans' funding bill. One of the very important changes was that if the employer could show that the parity increased their premiums by more than 1 percent, they could be excused from it. She said this was in response to no one really knowing what parity could do to the cost of health care in this country. Ms. Burke noted the specific federal citation is 42 U.S.C. 300gg-5, and it is on page 38 of the legislation. Number 0662 REPRESENTATIVE RYAN referred to the aggregate limit on page 38, line 17, and said the insurance with the state has a $1 million lifetime limit. He asked if that is accumulative in that it includes mental health care, physical, surgical, dental, eye, et cetera. MS. BURKE indicated that is correct. She informed the committee that there was a strong lobby that said, "If you will pay $1 million for medical care, the full amount could be used for mental health." She said the state employee policy has specific limits telling how much can be paid, per visit, for mental health and how many visits you can have that are covered. Ms. Burke said if parity had gone through without limitation at all, those limits would have gone away. A person could have gone in for mental health care as often as they would have gone in for treatment of a chronic infection. There would have been no differentiation between the two types of care. It was felt by many consumer groups, as well as the insurance companies, that this could result in very unintended results. There are all kinds of horror stories. She referred to teenagers being admitted because of behavioral problems. Number 0869 CHAIRMAN ROKEBERG referred to the Medicare supplemental insurance as being part of social security and asked if they are all excluded. MS. BURKE indicated they are excluded if they are not part of the integral part of the regular policy. CHAIRMAN ROKEBERG asked if an employer could provide for supplemental benefits for someone over 65. MS. BURKE said the Medicare supplemental health insurance is defined specifically in the Social Security Act. It does not refer to the coverage for a person under a normal medical policy that is over 65. It refers strictly to the additional coverage that is tied to the Medicare coverage that a person over 65 is eligible for. Number 0957 MS. BURKE explained the next portion of the small employer chapter is determination of size of employer. She said the legislation passed last year determined a small employer to be a group of 2 to 50 employees. The federal statutes also apply to 2 to 50. However, the way it is determined is slightly different. She said, "You could take an average. You could determine whether or not you 2 to 50 by saying, `How many did you have at the beginning of the year and how many at the end,' add them together and divide by 2. Or you could have it in any number of other definitions. We are conforming to the way it is defined in federal legislation which is the average." Number 1042 MS. BURKE referred to Article 3 and said it contains definitions that are consistent with the Kassenbaum/Kennedy bill. MS. BURKE explained Sections 60 through 68 applies to the provisions that are in what is called the high risk pool. She said, "Since that is, in fact, an insurance company and this high risk pool is the mechanism to provide guaranteed portability for an individual, if you leave the group market, that you can have a policy and individual market through the high risk pool." She said this for what is known as federally eligible individuals. It is defined in federal law in our definitions. Ms. Burke noted that this is the least disruptive of all the federal alternatives that were available to us. Number 1114 MS. BURKE explained Sections 69 through 90 refers to the Small Employer Health Reinsurance Association. It has to do with the small employer legislation that was adopted about three years ago which made a group policy available to any employer that had employees from 2 to 50. She said, "We did not, in any way, change this except to make sure that there is no misapplication of the federal minimum standards." CHAIRMAN ROKEBERG said the Small Employer Health Reinsurance Association is existing statutory language that we currently have. MS. BURKE said that is correct. She explained that the way it works is that the insurance company can reinsure an individual out into a risk pool. This opened up availability for a lot of small employers that might have one or two employees who had health problems which were so severe that they couldn't afford the coverage for the rest of the group. CHAIRMAN ROKEBERG asked if there is anybody operating under this statue yet. MS. BURKE said there are quite a few small employer health policies. She said she doesn't know the exact number, but she does know there are eight individuals that have been reinsured into the pool at this point. CHAIRMAN ROKEBERG asked if there is an association that has been established. MS. BURKE indicated the Reinsurance Association has been established. Number 1235 REPRESENTATIVE RYAN asked if there are any specific diseases included such as terminal disease. MS. BURKE responded that with the high risk pool, the only rating is on your age and what you choose to have as a deductible. She referred to small employers and said if an insurance company gets someone with one of these high risks, they would insure them out. REPRESENTATIVE RYAN said if an employee comes to a small employer and says they have a permanent condition, the employer couldn't use that as a basis not to hire. MS. BURKE said that is correct. Number 1298 MS. BURKE referred to Section 99 and said the amendment clarifies that the minimum federal standards may apply to fraternal benefit societies also. She noted there is currently a bill regarding the fraternals that bring those up to date from the 1960s. MS. BURKE referred to Section 100 through 102 and said although we don't have health maintenance organizations (HMOs) in Alaska at this time, there is enabling legislation on the books which was enacted in 1990. In the event that there is an HMO, the federal standards would apply to them as well. MS. BURKE said the next section that is applicable to Kassenbaum/Kennedy legislation is Section 108. She informed the committee Section 108 would make sure that the federal minimum standards apply to hospitals and medical service corporations. Ms. Burke pointed out that Blue Cross is a hospital and medical service corporation. She said, "Alaska only has two such animals and that's Blue Cross and Alaska Vision." Number 1411 MS. BURKE referred to Section 110 and said it is modified to extend the group certificates, issued in Alaska and delivered outside of Alaska, to make sure they're consistent with the application of state law and all group health care plans. The minimum federal standards do apply to such certificates and unless Alaska amends the law, we would have difficulty enforcing this. Ms. Burke pointed out that there is at least one insurance company in Alaska that has tried to hide behind the use of terms. She said, "We are trying to make sure that is no longer an option for them to say that this is a certificate, not a policy." MS. BURKE said, "Mr. Chairman, those are the sections that pertain to the Kassenbaum/Kennedy bill that was a separate bill and was simply rolled into the appropriate position in the old bill." MS. BURKE informed the committee members that most of the provisions of the Kassenbaum/Kennedy bill are effective July 1, 1997. However, the sections of the old bill, that pertain to the premium tax, are effective January 1. The reason is that premium taxes reported on a calendar year basis and it would have been extremely difficult to change in mid year. Number 1629 CHAIRMAN ROKEBERG asked if the section pertaining to multiple employer welfare arrangements is the only area of the Kassenbaum/Kennedy bill that doesn't impact self-insurers. MS. BURKE explained the provisions of portability applies to self- insurance as well as to insured plans. She noted this is a significant change, for the first time, that the federal government has actually held self-insured plans to standards that are applicable to insured plans. Number 1675 CHAIRMAN ROKEBERG said if a person is a member of the Alaska plan and they severed their employment with the state of Alaska, but wanted to maintain their insurance, how it would work. MS. BURKE said it is a very difficult area. She said, "The state of Alaska will not be subject to ERISA. It will not be subject to the federal pre-emption in self-insurance plans with the exception of state plans, are subject to what is known as ERISA - the federal standards that were enacted in 1974. But there is a specific exemption in ERISA that says governmental claims, state benefit plans are exempted. So the state's plan would not be subject to either the state law or the federal law." Number 1877 CHAIRMAN ROKEBERG asked what the most troublesome and controversial thing is in the bill and what the best thing is. MS. BURKE responded that a lot of it is perception. The fact that people have perceived themselves as being trapped in a job, whether rightly or wrongly, they do have more options now as a result of the Kennedy/Kassenbaum bill. She said, "In many states which do not have some of the laws Alaska has, such as the small employer makes available to small employers coverage and a mechanism for a reinsure and high risk out, it is very profound. The state of Alaska, since we have many of these things already in place, it is less pronounced. The most troublesome part of the bill is if it doesn't pass." CHAIRMAN ROKEBERG said we would be subject to loss of primacy to the feds. MS. BURKE indicated that is correct. CHAIRMAN ROKEBERG asked if it would allow a greater employment mobility for people who feel like they have been trapped in situation because of, for example, a child that has a particular health problem that they feel that they can't change jobs because they are fearful of losing the coverages they have. MS. BURKE said that is correct. Number 2019 REPRESENTATIVE RYAN asked if there is a companion bill in the Senate. MS. BURKE explained there is a companion bill in the Senate and it was on the House floor today. She informed the committee there was an amendment adopted in the Senate Finance Committee the previous Wednesday which clarified the hierarchy, if you will, of coverage when you have a rental car. It provides that if you elect coverage, and they always ask you if you want to get the comprehensive, if you elect that and are in an accident, that's the first place you go to for coverage." CHAIRMAN ROKEBERG said, "Historically, had they not -- if there were an accident, gone to the original insurer of the automobile?" MS. BURKE said that is what they've been trying to do and, in many cases, have. If a person elects not to have that coverage, then they go to your personal auto coverage. She noted that is your election. CHAIRMAN ROKEBERG asked if the department considers the Senate Finance Committee amendment a friendly amendment. MS. BURKE stated that is correct and indicated the department doesn't have an objection to it. CHAIRMAN ROKEBERG asked Mr. Lessmeier if he has a particular problem with the amendment. Number 2199 MICHAEL LESSMEIER, Attorney, Lessmeier and Winters, came before the committee on behalf of State Farm Insurance. He said he doesn't think it would present a problem. CHAIRMAN ROKEBERG asked if he thinks the amendment is positive. MR. LESSMEIER stated that he can't really say if it is positive or not. He said it makes sense to him, but stated he doesn't think there is a problem. CHAIRMAN ROKEBERG said, "Could you describe how that works now on three different scenarios. Number one, I have my car insured. I go and rent a car I opt, number one, not to do that because I got an American Express Card, so I'm not going to sign up for it. What happens there? And number two, I do sign up for it, then what happens?" MR. LESSMEIER said typically what happens depends on the language of the particular policy. And a lot of the policies have clauses in them that are mutually exclusive. In other words, they make each policy the other policy's excess. And so what happens if they both -- the court says we can't enforce those provisions and they basically apply them pro rata, based on the policy coverage." CHAIRMAN ROKEBERG asked if it like mutual segregation. MR. LESSMEIER said, "I don't know if I'd call it mutual segregation, but I think that's what happens in most situations where there is dual coverage and the policy provisions conflict with each other. It's a complicated area because a lot of times the policy provisions may not conflict and if they don't conflict, than whichever is primary would be primary and the other would be excess. But I don't think you can answer that question on a blanket basis without knowing what the policy language says." CHAIRMAN ROKEBERG asked about State Farm. MR. LESSMEIER said he thinks it would depend on the policy. CHAIRMAN ROKEBERG asked if it would vary within his company. MS. LESSMEIER indicated he isn't sure. He said he thinks the State Farm policy has another insurance clause that makes it excess if there is other available insurance. Mr. Lessmeier said he doesn't think there is a problem with that particular amendment. Number 2411 CHAIRMAN ROKEBERG referred to Senator Duncan's amendment, K-1 Ford, Amendment 3, and noted it was passed on the Senate floor. He read from the amendment, "Notwithstanding any other provision of law, a person who resides in the same household as the person named as insured or a person who is a relative of the person named as insured shall be excluded from coverage under a motor vehicle liability policy if the person named as insured requests that that person be excluded from coverage." He asked Mr. Lessmeier if it would, in any way, impact the underwriting of a particular auto policy in looking at family coverage. MR. LESSMEIER indicated he doesn't know what the impact would be. He said the amendment attempts to do something which is at one level, fairly simple, but at another level, is fairly complex. TAPE 97-52, SIDE A Number 0001 MR. LESSMEIER continued, "It is unclear to me how it works with uninsured and underinsured motorists that are part of the law right now that those coverages -- I think it is a complicated question and I think we need look at it. What I would prefer to do is let our people look at this and come back and give you my comments on this one Wednesday, when we have the next hearing." Number 0102 MS. BURKE said since the amendment is part of Title 28, Motor Vehicles, she has a message into the director of that division to see what impact it would have. Ms. Burke said, "The discussion on the floor today went toward the fact that a person might have a child that was away at college and you would want to take them off of your policy. And it was purported that insurance companies would not allow you to do that. I can't speak to whether they do or not. However, in looking at 28, as Mr. Lessmeier has addressed, there is this mandatory coverage. If you did, in fact, -- you can also name someone to be excluded from your policy and that's done on the commercial side all the time and it's perfectly appropriate. If you have someone who is a drug abuser or alcohol abuser, you don't want them on your policy. But in this case, if it was someone living in your household and you had them excluded, and let's say that child then went out, borrowed someone's car and killed someone, the survivors are going to sue you the parent. You would reasonably expect to go to your auto policy and seek coverage, but if you've excluded them, you'd be on the hook yourself. So I agree with Mr. Lessmeier, I don't think this was thought all the way through for what it might be an unintended consequence." CHAIRMAN ROKEBERG asked if somebody in the Senate gave notice of reconsideration on the Senate bill. MS. BURKE said she had just been informed that Senator Kelly gave notice of reconsideration and then withdrew it. Number 0290 CHAIRMAN ROKEBERG asked about Amendment 4, Ford, 04/21/97, by Senator Donley. MS. BURKE explained the amendment addresses the uninsured and underinsured issue. She stated she testified in the Senate Finance Committee that notwithstanding any merits, pro or con, for what the amendment attempts to do. She said she asked that it not be included because it is a controversial issue. After reading the language, she is even more convinced that it is controversial. There doesn't seem to be any consensus of exactly what the amendment says. Ms. Burke said she has forwarded a request to the department's assistant attorney general to tell her what it says. MR. LESSMEIER said he knows what Senator Donley is trying to achieve, but the amendment appears to allow one to make a claim against their uninsured or underinsured motorist coverage when there is still a liability coverage out there that hasn't been paid. He said that makes very little sense to him. Mr. Lessmeier said he thinks Senator Donley's goal is to make uninsured and underinsured pure excess and that is something that, again, there is a philosophical debate about whether it's wise to do that or not. He said to make uninsured or underinsured motorist coverage pure excess is very anti-consumer. If it is pure excess, it's significantly more expensive. The second problem is that if it is pure excess, you never know what coverage you're ultimately going to have. Number 0509 CHAIRMAN ROKEBERG said the existing law is that uninsured or underinsured motorist coverage doesn't apply until you use up all you liability coverage. MR. LESSMEIER clarified it wouldn't be your liability coverage, it is the liability coverage of the person that hits you. CHAIRMAN ROKEBERG asked what Senator Donley's amendment does. MR. LESSMEIER indicated he doesn't know. He said it is a concept that hasn't been discussed, to his knowledge, but noted it was discussed briefly in the Senate Finance Committee. He said he believes Senator Donley either withdrew it or it was defeated. Mr. Lessmeier said he believes what Senator Donley wants to do is to make uninsured and underinsured motorist coverage a pure excess coverage, but again, the amendment has many other consequences. He said under the amendment, you wouldn't have to collect the $50,000 from the at-fault party before you went after your own insurance company. Your own insurance company would then have to go after the at-fault party. Number 0631 MS. BURKE added that this same subject is on appeal in the Alaska supreme court. She said it has been her division's position that if the interpretation is affirmed by the supreme court as being correct, then the whole issue is moot. If it is not what the legislature intended, then the legislature can clarify it. CHAIRMAN ROKEBERG asked what the fact pattern is in the appeal if it is under appeal. MS. BURKE said, "Stacking is the most common way it's referred to." CHAIRMAN ROKEBERG asked what stacking is. MS. BURKE said it is where you have coverage up to a certain amount and then you add on the underinsured or uninsured coverage on top of that. She explained that what precipitated the supreme court to look at this is contradictory opinions. There is one court saying one thing and there is another court saying another thing. She noted they are both federal courts. MR. LESSMEIER explained there is a ruling one way from Judge Holland and another ruling in the opposite way from Judge Sedwick on the same issue. That ruling has been certified for a decision by the Alaska supreme court. He noted it will probably be months before the court will actually make a decision on the question of the interpretation of the language. Mr. Lessmeier said, "The policy issue that is presented by this has to do with whether the legislature wants difference in limits coverage or whether it wants pure excess coverage. Difference in limits would say that your coverage -- if you have say $100,000 of uninsured underinsured motorist coverage and the person that hits you has $50,000, well then your uninsured underinsured motorist would kick in the additional $50,000, so that what you've got was a total of $100,000. If it is pure excess, your uninsured underinsured motorist would kick in $100,000 in addition to what you recovered from the other side. And so that's the policy call that the legislature needs to make. Pure excess is more expensive. The difference in limits is cheaper. With pure excess, you never know what you're going to get because it's always going to be dependent upon what the other person has in terms of their coverage." CHAIRMAN ROKEBERG said when you stack, you get the larger gross amount. MR. LESSMEIER agreed. CHAIRMAN ROKEBERG said it seems to be consumer favorable. MR. LESSMEIER explained it is consumer favorable if you ignore cost. He said what he believes is consumer favorable is to allow a person to buy as little coverage as they want or as much. Mr. Lessmeier explained that what is happening is people are declining this coverage because it's gotten very expensive and it will be more expensive if it is pure excess. He said if that's the call, that's fine, they'll just price accordingly. Mr. Lessmeier said the problem is the consumer isn't being given the choice at the low end of the market. Currently, under the law, they are required to offer up to $2 million for uninsured underinsured motorist coverage and as long as a person has the option available to buy that high level of coverage if they want it, then they're protected. He said they ought to be protected at the low end of the market too. CHAIRMAN ROKEBERG indicated the bill would be brought back before the committee the following Wednesday.