HB 246-OMNIBUS INSURANCE BILL  REPRESENTATIVE LISA MURKOWSKI, Chair of the House Labor & Commerce Committee, sponsor of HB 246, said the majority of HB 246 was technical cleanup language. She said there were a few policy provisions that she wanted to point out to the committee. REPRESENTATIVE MURKOWSKI said the first policy provision related to multiple employer welfare arrangements (MEWAs). HB 246 would establish a more appropriate regulatory structure for MEWAs in regard to appropriate capital, surplus reserving and financial reporting requirements. She said the second policy provision would establish tighter confidentiality of records laws so that Alaska would continue to be accredited by the National Association of Insurance Commissioners. She said there were sharing agreements to allow the Division of Insurance (DOI) to obtain information. She said there would also be fees for late payment of premium taxes. She said there was also a provision that would allow an annual fee to operate as a joint insurance arrangement (JIA). She said there was probably an amendment relating to that provision. CHAIRMAN TAYLOR asked if there were questions for Representative Murkowski. There were none. He moved Amendment 1 to delete Sec. 52 on page 20, lines 12-22 and renumber the remaining sections accordingly. He said Sec. 52 added a new provision that would charge a fee against the pooling organizations created by the legislature for school districts and municipalities. He said those were not regulated by DOI and there was no reason for DOI to charge them a fee. He asked DOI to provide testimony on Amendment 1. MR. BOB LOHR, Director, DOI, Department of Community & Economic Development, said Sec. 52 addressed a very specific situation in which a JIA complained to DOI that the competing JIA was operating unfairly by doing things that weren't allowed under the JIA statutes. He said that had happened approximately four times. He said JIAs were not normally subject to regulation. He said DOI was being asked to be the gatekeeper for competitive forays by each JIA into the territory of the other by using Title 21 to define the boundary. He said those JIAs should pay the actual cost of that regulation. He said DOI was a fee-based agency and other fee payers were paying those costs. DOI was concerned that Sec. 52 had been drafted too broadly and he had a more narrowly crafted amendment to offer the committee. CHAIRMAN TAYLOR said it seemed like the JIAs were simply asking DOI to do its job. MR. LOHR said DOI was being asked to regulate the competitive playing field between JIAs. He said that was beyond their scope of regulation because they did not regulate JIAs. CHAIRMAN TAYLOR said DOI didn't regulate JIAs but they did regulate the insurance business. He said if somebody tried to set up a phony insurance corporation and they received a complaint, he assumed they would enforce the insurance laws of the state. MR. LOHR said that was correct. CHAIRMAN TAYLOR thought Sec. 52 would have a chilling effect upon anyone wanting to turn to DOI for assistance and enforcement of the laws they were supposed to enforce. MR. LOHR said it wasn't designed to have a chilling effect except when one JIA wanted DOI to regulate the other's conduct. CHAIRMAN TAYLOR said that was DOI's purpose. He said that would be like going to the police to get a driver to slow down in a neighborhood and being charged to lodge the complaint. He thought that would have a tremendous chilling effect on anyone coming to DOI. He said it would be like charging a fee to file a complaint. MR. LOHR said DOI didn't object to Amendment 1. CHAIRMAN TAYLOR asked if there was any further discussion on Amendment 1. There was none. He asked if there was any objection to Amendment 1. There being no objection, Amendment 1 was adopted. CHAIRMAN TAYLOR asked Mr. Kirk Wickersham to provide testimony. MR. KIRK WICKERSHAM said he was a lawyer and a real estate broker. He said he was also the owner of a small title agency called Attorneys Title Guaranty. He offered an amendment to the committee. He said the amendment was the result of a variety of actions related to Attorneys Title Guaranty. He said the legislature adopted a bundle of laws governing title insurance in 1974. He said AS 21.66.170 required title companies to prepare a title report before issuing a title insurance policy. He said AS 21.66.200 and AS 21.66.210 provided two methods by which to do that. He said AS 21.66.200 required title companies to have a title plant consisting of approximately 25 years of public records; that would equal about 11 million documents in Anchorage. He said AS 21.66.210 allowed companies to join together to form a joint title insurance company that would be allowed to use the public records. MR. WICKERSHAM said Attorneys Title Guaranty and it's underwriter, Old Republic, formed a joint title company the previous summer, applied for and obtained a certificate of authority from DOI and started selling title insurance and doing title searches using the public records. He said complaints from other title companies resulted in a lawsuit that had been dismissed, a license action that was still pending and a bill that would clarify the law in the opposite direction of his proposal. He said his amendment would grandfather Old Republic and Attorneys Title Guaranty to allow them to continue in the business. He said it would foster more competition in the industry. His company was able to offer price competition because they didn't have to build and maintain a copy of the public records. CHAIRMAN TAYLOR asked how other companies could participate in the field if the amendment was adopted. MR. WICKERSHAM said they could join the joint title company, which he was open to. He said he was advised not to propose an overall policy change, which was why he presented a grandfather amendment. He believed every skilled title examiner could do a title search from the public records. CHAIRMAN TAYLOR asked if the other companies would be grandfathered in. MR. WICKERSHAM said they would because they could either be or become a participant in or an owner of a joint title company. CHAIRMAN TAYLOR asked if his joint title company was the only one that new companies could join. MR. WICKERSHAM said that was a problem and that was why they had to create their own joint title company. He said there were only two joint title companies, theirs and the one owned by three of the four other title insurance companies in Anchorage CHAIRMAN TAYLOR said grandfathering his joint title company would put him in a select group that had built their plants over the years. He said there wouldn't really be another option for a competing company to form and create a title plant in the same manner that he did. MR. WICKERSHAM said that would be the effect of the amendment. He said he could also suggest a very simple amendment that would allow any two title companies to join and form a joint title plant. CHAIRMAN TAYLOR asked what that would be. MR. WICKERSHAM said the first sentence of AS 21.66.210(a) provided that two or more title insurance companies or limited producers could join together to form a joint title company for the purposes of producing title searches. He said the second sentence provided that a title insurance company or a limited producer that belonged to a joint title company that complied with AS 21.66.210 was in compliance with the section. He said the amendment would simply include AS 21.66.200 in that compliance. He said that would end the controversy and allow anybody to form a joint title company. It would also bring Alaska into conformance with 39 other states that did not have title plant requirements. CHAIRMAN TAYLOR asked Mr. Wickersham to work with Mr. Lohr and Representative Murkowski to work out that amendment and come back to the committee. He asked if the committee had any objection to Mr. Wickersham's approach. He said he would rather provide a more generic solution than try to pass an amendment that would only take care of one operator and wouldn't provide opportunities in the future for expansion in the field. SENATOR ELLIS asked if the new amendment would make the one Mr. Wickersham passed out unnecessary. CHAIRMAN TAYLOR said it would. MR. LOHR said there was an adjudicatory matter pending in front of DOI in which Mr. Wickersham's company was appealing a cease and desist order. He would be the ultimate decision-maker for that matter. He said he needed to maintain distance from the issue and could not work with Mr. Wickersham on the amendment. CHAIRMAN TAYLOR said that was appropriate and apologized for making the request. He hoped that Mr. Lohr's decision would be easier to make if they passed the amendment. MR. WICKERSHAM said the cease and desist order was not against his company; it was against the underwriter. CHAIRMAN TAYLOR said he understood that. He asked Mr. Jerry Reinwand to provide testimony. MR. JERRY REINWAND, Blue Cross/Blue Shield of Alaska, said he wanted to present two technical amendments that had been worked out between Blue Cross/Blue Shield and DOI. He said the committee should have those amendments in their packets. He said the first amendment dealt with AS 21.42.365(b). MR. LOHR said the proposed amendment related to the timing of adjusting the cost inflation factor for the statutorily described benefits for alcoholism and drug abuse treatment services provided under insurance plans. He said it would avoid the problem of having to amend policies already in place to include the increases. He said policies starting after the date of the inflation adjustment by DOI would be affected. He said DOI supported the amendment. CHAIRMAN TAYLOR asked if it would make regulation easier for DOI. MR. LOHR said it would. MR. REINWAND said the second amendment dealt with an error that was made in Blue Cross/Blue Shield's favor and would change the law back to the way it was intended to be. He said they worked with Representative Pete Kott on a bill regarding retaliatory taxes several years ago. He said they asked for some relief for the public entities covered by Blue Cross/Blue Shield that shouldn't be charged retaliatory taxes. He said there was a mistake made in the drafting of that amendment at the end of session that expanded what was intended. He said the proposed amendment would narrow that provision back to the intent. The existing law could be interpreted in such a way that Blue Cross/Blue Shield didn't have to pay retaliatory taxes. MR. LOHR said Blue Cross/Blue Shield had acted honorably in accord with the original intent. CHAIRMAN TAYLOR asked if Mr. Lohr recommended the proposed amendment. MR. LOHR said yes. CHAIRMAN TAYLOR said the first proposed amendment would be Amendment 2 and the second proposed amendment would be Amendment 3. MR. REINWAND said Blue Cross/Blue Shield and DOI were involved in a lawsuit and the proposed amendments would not affect that lawsuit in any way. CHAIRMAN TAYLOR asked if Mr. Lohr agreed. MR. LOHR said he did. SENATOR ELLIS moved Amendment 2 to replace "January 1, 1999" with "July 1, 2004" on page 14, lines 30-31 and add to page 15, line 4 the language, "The adjusted benefits shall be applicable to coverage issued or renewed on or after January 1 of the calendar year following the July 1 adjustment by the Director." There being no objection, Amendment 2 was adopted. SENATOR ELLIS moved Amendment 3 to replace the language on page 7, lines 19-23 with the following language: (f) For purposes of the application of subsection (a) of this section, a health care insurer may not include taxes, assessments, or other similar obligations on health care insurance premiums received from the state, a municipality, a city or borough school district, a regional educational attendance area, the University of Alaska, or a community college operated by the University of Alaska. For purposes of this paragraph, "health care insurer" has the meaning given in AS 21.54.500. There being no objection, Amendment 3 was adopted. SENATOR ELLIS moved Amendment 4 to amend AS 21.66.210(a) to read: (a) Two or more title insurance companies or two or more title insurance limited producers, or a combination of title insurance companies and title insurance limited producers, may apply to the director of insurance to form an association, corporation, or other legal entity, for the purpose of engaging in the business of preparing abstracts of title searches from public records or from records to be owned by the entity, upon the basis of which a title insurance limited producer or a title insurance company will issue title policies. The owners or participants are considered to be in compliance with the provisions of this section and AS 21.66.200 if the title plant of the association, corporation, or other legal entity complies with the provisions of this section. The application must contain (1) a copy of the proposed articles of incorporation or association and the bylaws or agreement governing the operation of the entity; (2) a list of the owners or participants; (3) the names and addresses of the persons who will operate the entity, with a description of their experience and qualifications; (4) the conditions under which ownership or participation in the entity may be sold or acquired; (5) a statement of whether or not title information will be compiled and sold to persons other than owners of or participants in the entity; (6) a pro forma balance sheet and other financial information to indicate the sufficiency of financing the entity. CHAIRMAN TAYLOR asked Mr. Wickersham to explain Amendment 4. MR. WICKERSHAM said Amendment 4 would resolve the situation he previously described. He said AS 21.66.200 required a title company to own a title plant while AS 21.66.210 gave title companies the option of joining with another title company to form a joint title company to use public records. He said the Attorney General and DOI had taken the position that even if the public records were used, a title company was not exempt from the provisions of AS 21.66.200. Therefore, these companies would still have to make a copy of the public records. He said Amendment 4 would allow any two title companies or limited producers, or any combination thereof, to form their own joint title company and use public records and be in compliance with AS 21.66.200. He thought this was good law and good public policy. He said it would bring price competition to the field and would be good for the consumers of Alaska. 6:55 p.m. REPRESENTATIVE MURKOWSKI stated for the record that Amendment 4 would be a significant public policy change. She said Alaska was a title plant state and Amendment 4 would make it a non-title plant state. She said the discussion was very similar to the discussion before the House Labor & Commerce Committee. She said being a non-title plant state would open Alaska up for competition and hopefully there would be some price reductions. CHAIRMAN TAYLOR appreciated the background she provided. He knew she had worked on the issue in the past and was sure that it was a controversial issue. He asked if there was any further discussion on Amendment 4. SENATOR ELLIS was even more excited to be the sponsor of Amendment 4 after hearing what Representative Murkowski had to say. He looked forward to the committee's support. CHAIRMAN TAYLOR said Amendment 4 had his support. He withdrew his objection to Amendment 4. There being no objection, Amendment 4 was adopted. SENATOR COWDERY moved SCS CSHB 246(JUD) out of committee with attached zero fiscal note and individual recommendations. There being no objection, SCS CSHB 246(JUD) moved out of committee with attached zero fiscal note and individual recommendations.