HOUSE FINANCE COMMITTEE April 26, 1996 8:20 A.M. TAPE HFC 96-141, Side 1, #000 - end. TAPE HFC 96-141, Side 2, #000 - end. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 8:20 a.m. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Senator Dave Donley; Marianne Burke, Division of Insurance; Gordon Evans, Health Insurance Association of America; Don Koch, Division of Insurance, Department of Commerce and Economic Development; Michael Lessmeier, State Farm Insurance. SUMMARY SB 175 An Act relating to correctional institutions and their administration; providing the Department of Corrections with the authority to require prisoners to assist in paying for medical treatment; relating to the authority of a law enforcement agency to charge a prisoner for medical costs for a preexisting condition; and relating to service of criminal sentences. SB 175 was rescheduled to another time. SB 197 An Act prohibiting increases in health insurance premiums if the insured is a victim of domestic violence. HCS CSSB 197 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Public Safety; and with a zero fiscal note by the Department of 1 Commerce and Economic Development, dated 2/23/96. SENATE BILL NO. 197 "An Act prohibiting increases in health insurance premiums if the insured is a victim of domestic violence." MICHAEL LEESMEIER, ATTORNEY, STATE FARM INSURANCE INC. urged the Committee to decide the issue on the basis of reason and logic. He observed that subsections (a) and (b) allow an insurer to rate on the basis of status or condition. He emphasized that domestic violence should be a non-factor. He maintained that there is no need to include property and casualty. He asserted that discrimination based on one's status as a victim of domestic violence in the area of property and casualty has not occurred. He refuted examples from the Women's Law Project in Philadelphia. He stressed that insurance was denied primarily due to multiple claims. He observed that life, health and disability are lines of insurance that cover the person. He asserted that there are no problems in this area in Alaska. He maintained that there will be litigation as a result of the legislation. Mr. Leesmeier discussed confidentiality. He stated that the provision contained in the original version was onerous. He reiterated that there is no problem with confidentiality in Alaska. He maintained that an insurer is the least likely to know about someone's status as a victim of domestic violence. He maintained that State Farm respects the confidentiality of records the company receives. He acknowledged the sensitive nature or medical records. He urged the Committee not to create a new problem while trying to solve a perceived problem. Mr. Leesmeier requested that the provision regarding notification of denial not be changed. He maintained that there is no existing problem that would require change. He stressed that a provision requiring explanation of denial would be costly. He stressed that a written request should be required for explanations of denial. Mr. Leesmeier maintained that State Farm Insurance supports the concept of the legislation as long as the legislation is specific and does not create more problems than it solves. He spoke in support of CSHB 197 (L&C) with the deletion of property and casualty. Representative Brown referred to "Insurance Discrimination Against Victims of Domestic Violence" by the Women's Law Project and the Pennsylvania Coalition Against Domestic Violence (copy on file). She observed that the report 2 states that: "Insurance companies that become members of these databases are required to report client risk factors and are entitled to request risk-related information on an applicant or insured. Mr. Leesmeier maintained that State Farm Insurance Co. does not ask or report information relating to domestic violence. He did not know if State Farm belong to any of these data base companies. Representative Brown explained that the amendment would prevent insurance companies from passing on information received through medical records regarding domestic violence. Mr. Leesmeier asserted that the amendment goes beyond the purpose stated by Representative Brown. He maintained that the amendment would require a search for something that "reflects" the fact that someone was a victim of domestic violence. He emphasized that the amendment would created an obligation that does not already exist. He acknowledged that State Farm does receive medical records on some cases. He maintained that the information would be relevant in an injury claim. He reiterated that confidentiality is not a problem. Representative Martin expressed concern regarding confidentiality. GORDON EVANS, HEALTH INSURANCE ASSOCIATION OF AMERICA spoke in support of CSSB 197 (L&C). He expressed support for the deletion of property and casualty. Representative Brown asked if members of the Health Insurance Association of America are members of data base companies. Mr. Evans could not answer. He estimated that most insurance companies participate in medical data bases. He did not think that domestic abuse was reported. He pointed out that domestic violence is not an underwriting criteria. He emphasized that the condition at the time of application for a policy is the relevant factor. Representative Brown asked for examples of reporting forms used by insurance companies that are members of data base companies. MARIAN BURKE, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES spoke in support of the legislation. She stressed the importance of preventing unfair discrimination. She requested that "applicant or insured" be replaced by "person". She explained that the proposed language would close potential loop holes. She expressed concern that confidentiality be maintained. She stated that most insurance companies participate in data 3 base activities. She noted that the National Association of Insurance Commissioners (NAIC) has been working on the issue. She stressed that victims of domestic abuse should not be created into a special group. In response to a question by Representative Parnell, Ms. Burke explained that the applicant or insured could pertain to the employer as opposed to the victim. Representative Parnell referred to page 1, subsection (b). Ms. Burke explained that (b) precludes an insurance company from looking at the cost. She stated that (b) strengthens the bill. Representative Brown asked if Ms. Burke has reviewed Amendment 9-LS1218/W.4. Ms. Burke stated that the amendment was based on a draft model act by the NAIC. She stressed that the model act that the amendment was based on was not adopted by the NAIC. Representative Martin referred to the use of "person". He expressed concern that unborn children are not considered a "person". Ms. Burke stressed that "person" is broader than "applicant". Representative Mulder provided members with Amendment 1 (copy on file). He moved to adopt Amendment 1. Amendment 1 would insert "offering life, disability or health insurance in Alaska." Senator Donley spoke in opposition to Amendment 1. He noted that the amendment would remove property and casualty from protection against discrimination. He stressed that there is no good policy reason to allow discrimination of domestic violence victims in property and casualty issues. Representative Parnell noted that the legislation makes a policy statement about discrimination of victims of domestic violence by insurance companies. He noted that the amendment would imply that it is okay to discriminate in areas of property and casualty. He suggested the amendment be applicable across the board. Representative Mulder argued that there is no discrimination. Representative Parnell reiterated that the legislation is creating a new law. The amendment would leave in place the other areas of interest. Representative Martin expressed concern that insurance 4 companies would increase their prices. A roll call vote was taken on the MOTION to adopt Amendment 1. IN FAVOR: Kelly, Kohring, Martin, Mulder, Therriault, Foster, OPPOSED: Brown, Grussendorf, Navarre, Parnell, Hanley The MOTION PASSED (6-5). Representative Navarre MOVED to adopt Amendment 2, 9- LS1218\W.2, amended to add "or the Division of Insurance" after "jurisdiction" on line 6 (copy on file). (Tape Change, HFC 96-141, Side 2) Senator Donley suggested that "reflect" be changed to "identify" and "required" be changed to "authorized". Representative Navarre MOVED to AMEND Amendment 2, delete "reflect" insert "identify;" delete "required" and insert "authorized;" and delete "was" and insert "as." Senator Donley noted that the language was discussed by the House Labor and Commerce Committee. There being NO OBJECTION, the amendment to the amendment was adopted. Mr. Leesmeier questioned what is meant by "identify". He stressed that a search would still have to be completed. Representative Parnell asked if insurance companies mark or code files related to medical conditions or risk factors. Mr. Leesmeier did not know of any files that are marked or coded. He suggested that insurers be instructed to not ask for information regarding medical conditions. He acknowledged that companies would receive medical records in some instances. Representative Parnell asked if right to privacy would apply. Mr. Leesmeier replied that there is a common law privilege for confidentiality of medical records. He stated that the privilege is not waived when medical records are submitted for defense. Representative Brown noted that if an applicant has a condition significant to health or longevity then authorized personnel at member companies are required to send a brief code report to the Medical Information Bureau (MIB). Medical conditions are reported through codes. She noted that the amendment will prevent a code that identifies victims of domestic violence. She stated that insurance companies that are members of MIB are required to report. She stressed that problems can be created when people are 5 identified in data base systems. Mr. Leesmeier stated that the issue of medical data base companies is new. He maintained that the motivation for confidentiality provisions were that insurers would give the information to the abuser. He did not think that insurance companies asked about domestic violence. Representative Brown pointed out that they receive medical information without asking. She expressed concern that information regarding a person's status as a victim of domestic violence could be reported. Mr. Leesmeier responded that subsections (a) and (b) would prevent the information from being reported. Representative Brown pointed out that subsections (a) and (b) are weakly written. She stressed that it might not be the only factor. Representative Martin suggested that medical providers be required to keep records confidential. Representative Brown emphasized that medical providers are already instructed to keep medical records confidential. She observed that if a victim of domestic violence wants insurance they must sign a release to authorize records to insurance companies. Representative Grussendorf spoke in support of Amendment 2. He noted that insurance investigators may discover the incidence of domestic violence during investigations. Representative Parnell observed that a class is being signaled out. Representative Brown stressed that insurance discrimination should not be allowed on any of the factors identified. She pointed out that there are factors unique to domestic violence that warrant protection against discrimination. She emphasized that if a person knows that they are not going to be able to get insurance they would be less likely to leave an abusive relationship or situation. She stressed that although there may be other factors that might need corrective legislation there is no reason that discrimination of victims domestic violence discrimination should not be addressed in the legislation. Representative Grussendorf noted that social issues change over time. He stressed that the issue of discrimination against domestic violence should be addressed. Representative Kelly responded that trying to cure every form of discrimination is a futile attempt. A roll call vote was taken on the MOTION to adopt Amendment 2. IN FAVOR: Brown, Grussendorf, Navarre, Therriault OPPOSED: Kelly, Kohring, Martin, Mulder, Parnell, Foster 6 Co-Chair Hanley was absent from the vote. The MOTION FAILED (4-6). Representative Navarre MOVED to adopt Amendment 3, 9- LS1218\W.2, dated 4/10/96. Representative Mulder OBJECTED. Representative Navarre explained that the amendment would require insurance companies to inform applicants in a written explanation the reasons for refusal or cancellation. Representative Martin expressed concern with Amendment 3. He stressed that once an individual has been informed of the reason for refusal or cancellation other insurance companies can require them to provide them with this information. Mr. Leesmeier stated that there is no existing problem in regards to explanations of refusal or cancellation. He maintained that the requirement to notify every policy holder or applicant is over kill. He asserted that it is more fair and efficient to require the information be given upon request. Representative Kelly questioned if this is a service that would be encouraged by free market results. Mr. Leesmeier stated that most people who are declined know the reason for the refusal or cancellation. He maintained that the provision is unnecessary and imposes an unnecessary cost on the company. Mr. Leesmeier observed that they are required to give written notification of cancellations. He pointed out that the amendment would also require notification of refusal. DON KOCH, DIVISION OF INSURANCE, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT clarified that insurance companies are required to give notice and a reason for cancellation. Insurance companies are not required to give a reason for refusal of insurance. The reason has to accompany the notice for non-renewals or cancellations. Representative Navarre WITHDREW Amendment 3. Representative Mulder MOVED to adopt Amendment 4 on behalf of Senator Donley (copy on file). Amendment 4, 9- LS1218\@.5, 4/25/96, would insert "person" and delete "applicant or insured." Senator Donley explained that the amendment was requested by the Division. He noted that the person who is actually receiving the benefit would be protected. Mr. Leesmeier suggested that the "person covered by the insurance" be inserted. Mr. Koch noted that most health insurance are written through group plans. He 7 pointed out that a individual's child could be covered but would not be the covered person. Representative Martin noted that an unborn child would not be covered. He OBJECTED to Amendment 4. Mr. Koch reiterated that applicant or insured may be too limiting. A roll call vote was taken on the MOTION to adopt Amendment 4. IN FAVOR: Brown, Grussendorf, Navarre, Kelly, Mulder, Parnell, Therriault, Foster OPPOSED: Martin, Kohring Co-Chair Hanley was absent from the vote. The MOTION PASSED (8-2). Representative Therriault pointed out that some people are issued certificates. He questioned if "certificate or" should be added to "policy." Mr. Koch responded that a certificate rises out of a policy of insurance. He noted that regulations can address any problems that arise relating to the issuance of certificates. Representative Mulder MOVED to report HCS CSSB 197 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CSSB 197 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Public Safety; and with a zero fiscal note by the Department of Commerce and Economic Development, dated 2/23/96. ADJOURNMENT The meeting adjourned at 9:50 a.m. 8