HB 158 - NOTICE OF INS. CANCELLATION TO ELDERLY Number 0065 CHAIRMAN ROKEBERG announced the committee's first order of business is HB 158, "An Act relating to the annual report of the director of the division of insurance and to notice of cancellation of personal insurance." The chairman requested staff to explain the changes in the proposed Version H committee substitute (CS). Number 0083 REPRESENTATIVE HALCRO made a motion to adopt the proposed CS for HB 158, Version H, as a working document. Version H is labeled 1-LS0128\H, Ford, 4/13/99. There being no objection, Version H was before the committee. Number 0102 JANET SEITZ, Legislative Assistant to Representative Norman Rokeberg, Alaska State Legislature, came forward to explain the changes in Version H as aide to the House Labor and Commerce Standing Committee. Version H incorporates the amendment that was adopted at the previous hearing [April 9, 1999]. It can be found on page 2, lines 11 to 13, of the proposed CS, regarding sold or terminated and proprietary information. This language appears as Section 1, subsection (7) of Version H: (7) statistical information regarding health insurance, including the number of individual and group policies sold or terminated in the state; this paragraph does not authorize the director to require an insurer to release proprietary information; and MS. SEITZ noted "less than 70 years of age" on page 2, line 19, is new. She indicated that all of subsection (2) of Section 2, beginning on page 2, line 27, through the end of the bill, is new language. It sets out that a written notice of cancellation can be mailed to the named insured and to a designee, if the insured has requested that a designee also receive a copy of the (indisc.) notice. CHAIRMAN ROKEBERG confirmed from Ms. Seitz that was for all three notices. He indicated, then, the insured would designate the third party to receive notice, but the insured would receive notice as well, so there would be two sets of notices sent. MS. SEITZ answered in the affirmative. She noted the mailing schedule has been changed from the 60 days in the original bill back to the existing 30-day, 20-day, and 10-day mailing schedule. Number 0242 REPRESENTATIVE HALCRO asked the reason for raising the age from 67 to 70. CHAIRMAN ROKEBERG indicated it was an issue of driving records. There were statistics regarding ages of registered drivers from the Department of Motor Vehicles and some information on the estimated prevalence of ADRD [Alzheimer's Disease and Related Disorders] related to age groups from the Commission on Aging in the bill packet. The chairman indicated a slight raise in age would reduce the number of people involved and that the biggest incident of ADRD-type manifestations appear after age 70, getting progressively worse. REPRESENTATIVE HALCRO questioned if these were statewide figures. CHAIRMAN ROKEBERG answered in the affirmative, noting the chart in the bill packet was provided by the Department of Motor Vehicles. He commented page 4 of the chart shows there are 403,304 automobile passenger car licenses and only some 16,000 [16,803] licensees are over age 70. The chairman indicated this, combined with the medical evidence regarding ADRD-type diseases, was the reason for the age change. The chairman invited Mr. Lessmeier [lobbyist for State Farm Insurance Company] forward. Noting there was another issue, the chairman commented he has been working with the industry on this issue. One of the major concerns he has been trying to address is the return receipt requested. This provision has been removed from the bill by adding the additional notification to a third party. Chairman Rokeberg drew the committee's attention to the possible H.1 amendment, which he designated as Amendment 1. Amendment 1, labeled 1-LS0128\H.1, Ford, 4/14/99, read: Page 3, line 6, following "cancellation": Insert "; an insurer who provides a personal insurance policy to an insured who is 70 years of age or older shall give written notice to the insured of the insured's right to have a designee receive notice as provided in this paragraph" CHAIRMAN ROKEBERG explained the amendment mandates that the insurer tell people they have the ability to designate a third party. The chairman asked Mr. Lessmeier if it was his interpretation of Version H that there would be two notices sent on the 30, 20[, 10] mailing schedule, if the insured selects the designee option. Number 0532 MICHAEL LESSMEIER, Lobbyist for State Farm Insurance Company (State Farm), answered that was correct. CHAIRMAN ROKEBERG questioned how this compared regarding cost to the certified mail standpoint. MR. LESSMEIER replied that this was proposed as a way of meeting the chairman's concerns to give meaningful notice to the insured and, if the insured is not someone who can receive meaningful notice, giving notice to someone else. This is what State Farm thinks would be the most effective way to accomplish this in terms of giving that notice, as well as the most efficient way for them to do so. He noted it would be the easiest and have the least impact from an expense viewpoint. CHAIRMAN ROKEBERG expressed his concern is that this is three additional pieces of first class postage, plus accompanying forms, versus one return receipt request cost element. He asked Mr. Lessmeier to explain why the industry would prefer the first method. Number 0629 MR. LESSMEIER responded their first concern is of effectiveness. If the intent is to ensure that the person receiving the notice actually understands it, in their view it would not be more effective to send more mailings to the same person. Their belief is that it would be better to provide the option for the insured to designate another responsible person. The second concern is that if they make it "on request," it is being done for those people who recognize they need this. It is being done in a specific situation and no one's resources are being wasted. Thirdly, under AS 21.36.260 they are still required to provide a certificate of mailing from the post office in order for the notice to be effective; therefore, they think they will have given meaningful and effective notice to two parties. Under that circumstance, they cannot see what would be gained by going the additional step of requiring return receipt requested, which would impose a cost that this would not. Mr. Lessmeier noted he could not estimate that cost, but indicated he felt the cost would be imposed for something that probably would not be of much benefit. Mr. Lessmeier indicated there was a proposed amendment to Version H which would require certified return receipt mailing. CHAIRMAN ROKEBERG questioned if Mr. Lessmeier's calculation was based on the probability factor that a majority of people over 70 would not want a designee. MR. LESSMEIER answered that he had not done any calculations. He indicated he doesn't know how many people would choose the designee option; the issue is what would be gained as a result of sending certified return receipt requested. If two mailings are being done to begin with, State Farm's view is that that is effective notice and little, if anything, would be gained by requiring certified return receipt requested, which would have an attached cost. Number 0779 CHAIRMAN ROKEBERG stated the committee has Amendment 1 before it, mandating that the insurance industry inform people of their right to make the designation. He asked if Mr. Lessmeier had any objections. MR. LESSMEIER answered he did not, but he would like to "run this by our folks." Mr. Lessmeier recognized it was the chairman's desire to move the legislation and he indicated they would just continue to work on the bill as it proceeded. The issue is whether it would be the desire to have the industry, for example, include this information in the mailing at the time of every premium renewal so that it is done semi-annually. He does not think this would be a problem but he would like to confirm that. Mr. Lessmeier expressed his support for notifying people, if this option is made available, to ensure the option's effectiveness. CHAIRMAN ROKEBERG commented that this is a mandate for the insurance industry to notify [insureds of the designee option]; it does not mandate a periodic notice or anything like that. The chairman confirmed Mr. Lessmeier would not like to see some periodic mandate to assist the company in doing this. The chairman questioned if the notice would be something placed in the policy boilerplate or an endorsement. MR. LESSMEIER commented they would probably just put a mailer in the premium statement. Number 0883 REPRESENTATIVE HALCRO gave the example that he turns 70, receives his renewal policy in the mail with the notice and pays his bill. He asked if this meant the information had to be included in every renewal notice he was sent now that he is 70, or if one notification would be sufficient. CHAIRMAN ROKEBERG indicated he was wondering if that should be a mandate requirement on an annual renewal. MR. LESSMEIER said he would not think it would be a problem to do this on an annual basis. REPRESENTATIVE HALCRO asked about those customers who paid monthly or quarterly. MR. LESSMEIER noted he would want to check with their technical people in this area, but he still does not think it would be a problem to do this perhaps once a year. CHAIRMAN ROKEBERG commented they could probably amend the amendment by specifying language to the effect of "annual notice" or "annually notice". He indicated this would avoid mandating this information to be sent every time for a shorter periodic renewal. The chairman invited Mr. Ference forward. Number 0987 JOHN FERENCE, Deputy Director, Division of Insurance, Department of Commerce and Economic Development, came forward. CHAIRMAN ROKEBERG confirmed Mr. Ference has seen Version H and Amendment 1. The chairman asked Mr. Ference for his comments and how he thought the industry would react. MR. FERENCE did not foresee any problems and had no recommendations other than ensuring that if there were to be a requirement for return receipt, it be clearly specified. CHAIRMAN ROKEBERG noted return receipt was currently not being discussed. The chairman referred to the actual notice and the period notification [of the designee option]. MR. FERENCE commented he did not see any problem at all. CHAIRMAN ROKEBERG questioned if there were any requirements in other areas of the insurance law that mandate occasional informational notification to insureds. MR. FERENCE answered there are similar requirements for periodic notice in different circumstances. For example, the division deals with Civil Rule 82. The division requires that liability policy holders be advised of their obligations or risks relative to Civil Rule 82. In response to the chairman's comment, Mr. Ference said that is every time a policy is issued. Number 1087 MR. LESSMEIER noted there is a similar requirement for offers of uninsured and under-insured motorist coverage on automobile policies. He believes these [notices] need to be made every six months or at the time of renewal. MR. FERENCE said it is when the policy is issued. CHAIRMAN ROKEBERG indicated the existence of policies of varying periods, with the customer selecting the period. He asked what then constitutes a renewal. MR. LESSMEIER recommended not going more than annual, because this will apply to both automobile and homeowners' insurance. Most of time, in his experience, homeowners' insurance is an annual premium. CHAIRMAN ROKEBERG commented, then, the issue is whether the committee wishes to mandate "on renewal" or "annually". The chairman noted Mr. Lessmeier's testimony that he prefers "annually" over "renewal". Chairman Rokeberg asked Mr. Ference if he had a recommendation to the committee regarding this type of notification. MR. FERENCE answered he believes annual notice would be sufficient; if he were to recommend anything, he would recommend annual notice. Mr. Ference informed the committee there is a provision in this section of Chapter 36 dealing with cancellation notices that says a policy period is a 12-month period, cycling from the anniversary date. Number 1178 REPRESENTATIVE HALCRO noted a letter of opposition in the bill packet mentioned that homeowners' policies make no reference to the age of the insured because that is irrelevant [Alliance of American Insurers, 4/7/99]. He asked how they would track someone's age regarding homeowners' policies if that information is not gathered at the time of initial application. MR. LESSMEIER replied he thinks this information is gathered at the time of initial application, although he is not 100 percent sure. Mr. Lessmeier said he thinks the easiest way to do this would be to send a notice to all insureds on an annual basis which says, "'If you're over 70 years of age, you have the right to make this request.'" CHAIRMAN ROKEBERG indicated this would be appreciated as a matter of public education. The chairman confirmed there were no further questions for Mr. Lessmeier or Mr. Ference. He asked if Mr. George wished to comment. Number 1259 JOHN GEORGE, Lobbyist for the National Association of Independent Insurers (NAII); Lobbyist for the American Council of Life Insurance, concurred on behalf of NAII that annual [notice] would be sufficient. He indicated he supported the idea of notifying all insureds regarding this option. Number 1292 REPRESENTATIVE HALCRO moved Amendment 1 to the proposed Version H CS for HB 158. CHAIRMAN ROKEBERG objected for discussion. He commented he would entertain an amendment for annualizing the notice. REPRESENTATIVE HALCRO moved to amend Amendment 1 by inserting "annual" after "give" on line 3 of Amendment 1 ["give" appeared line 3 of written amendment]. There being no objection, the amendment to the amendment was adopted. Amendment 1 as amended read: Page 3, line 6, following "cancellation": Insert "; an insurer who provides a personal insurance policy to an insured who is 70 years of age or older shall give annual written notice to the insured of the insured's right to have a designee receive notice as provided in this paragraph" CHAIRMAN ROKEBERG removed his objection to Amendment 1. There being no further objection, Amendment 1 as amended was adopted. Number 1358 CHAIRMAN ROKEBERG referred to the other portion of the bill regarding statistical information. He asked Mr. Ference if he (the chairman) had previously asked him about the language, "this paragraph does not authorize the director to require an insurer to release proprietary information; and". MR. FERENCE confirmed the chairman had previously asked him about that language. The division's recommendation would be that that provision dealing with proprietary information not be existent. However, the division does not believe it will be a significant problem if it remains. If it is not there, however, it prevents this from ever being a question. CHAIRMAN ROKEBERG indicated that if the division did not receive the requested information if this legislation passed, it could always be amended. The chairman questioned if the division feels this would allow the collection of the desired information in terms of "uninsured individual and group plans that are non-ERISA." MR. FERENCE replied he thought this was broad enough. It will allow the division to identify who is insured and, by default, that will identify who falls outside the scope of insurance treatments. In response to the chairman's comment, Mr. Ference confirmed it would be both for covered bodies and policy numbers. Number 1437 REPRESENTATIVE HALCRO asked Mr. George what kinds of information the industry would consider proprietary. MR. GEORGE answered, on behalf of the American Council of Life Insurance, that he is unsure. He indicated he deals more with the life insurance side as opposed to health insurance. He supposes the names of the groups on group policies, those types of things, to avoid giving competitors a list of a company's clients, might be considered proprietary. He didn't see a problem with releasing the actual numbers, noting he thinks that is the information being sought. As long as it doesn't include names of clients or names of insured individuals, Mr. George said he thinks they are probably okay with that. He commented he is speaking off the top of his head. REPRESENTATIVE HALCRO asked if pricing structures, et cetera, would be considered proprietary. MR. GEORGE replied it would be, but he doesn't think that is the type of information being requested. CHAIRMAN ROKEBERG said, "That's published information (indisc.) premium tax (indisc.)?" MR. FERENCE responded in health insurance policies it is not, only for Blue Cross and Blue Shield. REPRESENTATIVE HALCRO commented he doesn't want there to be a future debate over what is proprietary and what is not, noting that is the reason for his questions. MR. GEORGE indicated he does not think there is a problem with the information this legislation is seeking to get. He further indicated this section could be used in the future to gather other information, at which point the industry could say that is proprietary. Number 1548 CHAIRMAN ROKEBERG stated his view of this amendment [adopted April 9, 1999] is that it was a fence around which the fishing expedition of the division would be restricted. The chairman indicated the intention was that the division collect this specific information, not have untrammeled rights to obtain information. MR. FERENCE agreed with the chairman's comments. REPRESENTATIVE BRICE asked, regarding the statistical health insurance information, if that would be the specific services which are covered, like the level of copayment and the deductibles. He asked if that would include, for example, whether or not the policy has mental health coverage as well. MR. GEORGE said he assumes Representative Brice is interested in finding out who is treating mental health coverage with parity and who is not, referring to the mental health parity legislation. REPRESENTATIVE BRICE indicated he was interested in simply who is providing that coverage. MR. GEORGE said it is probably not proprietary if it is being examined generically and statistics are desired. A particular company might have problems sharing its information publicly. Number 1645 REPRESENTATIVE BRICE questioned if that is something the department can work on. MR. FERENCE answered he doesn't see a reason why they couldn't. Statistical information, in a sense, is very broad; it is anything that can be counted. It could be extended to count different policies on (indisc.) basis, if the division chose to do that. However, the reality is the division is not interested in "fishing" either because of the time and expense. He indicated the more detailed the examination, the more probability the division would run into proprietary problems and objections from industry over the cost to provide the information. REPRESENTATIVE BRICE noted, on the balance of that, he is glad to see this section is being included, because, as policy makers, the legislature needs to have some understanding of the real world impacts of various mandates or various disparities amongst coverages. MR. GEORGE commented that people covered under ERISA [Employee Retirement and Security Act] will not be captured by this, indicating that is the major section. CHAIRMAN ROKEBERG said they want to know the other people. He indicated he doesn't know why this doesn't say non-ERISA. Number 1713 MR. FERENCE pointed out he doesn't see why there is any reason the division, under this legislation, could not ask insurers to identify stop-loss policies that are sold to protect ERISA plans and solicit statistics on the number of participants protected under those stop-loss programs. CHAIRMAN ROKEBERG said it would be his intention that the division obtain that information also. He commented the Department of Health and Social Services is also always looking for the numbers of insureds. The chairman confirmed Mr. Walsh [John Walsh, lobbyist for the Alaska Association of Independent Agents and Brokers] did not wish to testify. The chairman closed the public testimony on HB 158 after confirming no one else wished to testify. The chairman noted he would not be offering the other amendment [labeled 1-LS0128\H.2, Ford, 4/14/99, adding certified mail requirements]. Number 1797 REPRESENTATIVE HALCRO made a motion to move CS for HB 158 [Version H], as amended, out of committee with individual recommendations and the attached zero fiscal note. There being no objection, CSHB 158(L&C) moved out the House Labor and Commerce Standing Committee.