HOUSE LABOR AND COMMERCE STANDING COMMITTEE March 26, 1997 3:25 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative John Cowdery Representative Bill Hudson Representative Jerry Sanders Representative Joe Ryan Representative Eric Croft Representative Gene Kubina MEMBERS ABSENT Representative Gene Kubina COMMITTEE CALENDAR CS FOR SENATE BILL NO. 14(JUD) "An Act relating to insurance covering an insured who is a victim of domestic violence and requiring certain disclosures by an insurer." - MOVED OUT OF COMMITTEE OVERVIEW: Update to the Kennedy-Kassenbaum legislation. (* First public hearing) PREVIOUS ACTION BILL: SB 14 SHORT TITLE: INS:DISCLOSURES; DOMESTIC VIOL. VICTIMS SPONSOR(S): SENATOR(S) DONLEY, Ellis, Pearce, Duncan, Taylor, Mackie, Kelly JRN-DATE JRN-PG ACTION 01/03/97 17 (S) PREFILE RELEASED 1/3/97 01/13/97 17 (S) READ THE FIRST TIME - REFERRAL(S) 01/13/97 17 (S) L&C, HES, JUD 01/28/97 (S) L&C AT 1:30 PM FAHRENKAMP RM 203 01/28/97 (S) MINUTE(L&C) 01/29/97 159 (S) L&C RPT 5DP 01/29/97 159 (S) DP: LEMAN,KELLY,MACKIE,MILLER,HOFFMAN 01/29/97 159 (S) ZERO FISCAL NOTE (DPS) 02/03/97 (S) MINUTE(HES) 02/03/97 214 (S) HES REFERRAL WAIVED 03/05/97 (S) JUD AT 1:30 PM BELTZ ROOM 211 03/05/97 (S) MINUTE(JUD) 03/07/97 624 (S) JUD RPT CS 5DP SAME TITLE 03/07/97 624 (S) DP:TAYLOR, MILLER, PEARCE, PARNELL,ELLIS 03/07/97 624 (S) PREVIOUS ZERO FN APPLIES TO CS (DPS) 03/11/97 (S) RLS AT 10:45 AM FAHRENKAMP RM 203 03/11/97 (S) MINUTE(RLS) 03/13/97 717 (S) RULES TO CALENDAR 3/13/97 03/13/97 719 (S) READ THE SECOND TIME 03/13/97 719 (S) JUD CS ADOPTED UNAN CONSENT 03/13/97 719 (S) ADVANCED TO THIRD READING UNAN CONSENT 03/13/97 719 (S) COSPONSOR(S): DUNCAN, TAYLOR, MACKIE, 03/13/97 719 (S) KELLY 03/13/97 719 (S) READ THE THIRD TIME CSSB 14(JUD) 03/13/97 719 (S) PASSED Y20 N- 03/13/97 726 (S) TRANSMITTED TO (H) 03/14/97 660 (H) READ THE FIRST TIME - REFERRAL(S) 03/14/97 660 (H) LABOR & COMMERCE 03/26/97 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER SENATOR DAVE DONLEY Alaska State Legislature State Capitol, Room 508 Juneau, Alaska 99801 Telephone: (907) 465-3892 POSITION STATEMENT: Sponsor of SB 14 JAYNE ANDREEN, Executive Director Council on Domestic Violence and Sexual Assault P.O. Box 111200 Juneau, Alaska 99801 Telephone: (907) 465-4356 POSITION STATEMENT: Testified on SB 14 LAUREE HUGONIN, Executive Director Alaska Network on Domestic Violence and Sexual Assault 130 Seward Street, Room 501 Juneau, Alaska 99801 Telephone: (907) 586-3650 POSITION STATEMENT: Testified on SB 14 MARIANNE BURKE, Director Division of Insurance Department of Commerce and Economic Development P.O. Box 110805 Juneau, Alaska 99811-0805 Telephone: (907) 465-2515 POSITION STATEMENT: Testified on SB 14 & Presented Update on Kennedy-Kassenbaum Legislation ACTION NARRATIVE TAPE 97-30, SIDE A Number 001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee to order at 3:25 p.m. Members present at the call to order were Representatives Cowdery, Hudson, Sanders and Brice. Representative Ryan arrived at 3:31 p.m. SB 14 - INS:DISCLOSURES; DOMESTIC VIOL. VICTIMS Number 031 CHAIRMAN ROKEBERG indicated that the committee would consider Senate Bill 14, "An Act relating to insurance covering an insured who is a victim of domestic violence and requiring certain disclosures by an insurer." He invited Senator Dave Donley, sponsor of this legislation to testify. Number 050 SENATOR DAVE DONLEY noted that this legislation, SB 14, passed both the House and Senate last year, but due to time restraints was held up at the close of last year's session. He referred to a letter from State Farm expressing its support for this legislation and mentioned that some minor changes have been made to the bill since last year. The changes as noted garnered the support of this insurance company, the National Association of Independent Insurers and the American Council of Life Insurance. SENATOR DONLEY stated that this legislation is supported by the Division of Insurance. This legislation outlines that insurers in Alaska cannot discriminate against victims of domestic violence only on the basis that they were a victim of domestic violence. Insurers must objectively rate people on the actual risks involved, but they can't red-line an individual simply because a report had been filed in relation to domestic violence. The insurance companies must use objective criteria in determining how they insure people. Several other states have adopted similar legislation. Number 190 REPRESENTATIVE JOHN COWDERY asked if this was medical insurance they were referring to. SENATOR DONLEY responded, "all kinds of insurance." Number 216 REPRESENTATIVE BILL HUDSON asked if there was any indication of this discrimination problem in Alaska. SENATOR DONLEY responded that no specific examples of this kind have happened in Alaska so far, although it's still frightening because there are examples of this type of denial happening in the Lower 48. A recent survey of 8 out of 16 largest insurance companies have used domestic violence as a factor for rating insurance. This legislation would make sure this same thing doesn't happen in Alaska. Number 278 REPRESENTATIVE ROKEBERG stated that last year there was a lot of controversy about the release of information and asked if this current legislation was silent on this issue. SENATOR DONLEY responded that yes, it was. The industry is happy with the way the legislation reads now, including the department. Number 304 REPRESENTATIVE ROKEBERG noted that Section 21.36.440 doesn't have anything to do with the main subject of this legislation per se. This section deals with broader insurance issues. SENATOR DONLEY responded that this section outlines that if an insured is denied insurance then the insured may ask for the reason for this denial. The insurance company upon receipt of a written request would be required to explain its reasons for its refusal. If an insurance company denies somebody who's been the victim of domestic violence an insurance policy, they have to have a reason other than domestic violence for doing so and must given another legitimate reason for denial. Number 452 JAYNE ANDREEN, Executive Director, Council on Domestic Violence and Sexual Assault, came forward to testify on HB 33. The Council supports this legislation. The Council is aware that discrimination in the insurance industry is well documented throughout the Lower 48. The types of discrimination they've seen are increases in premiums, denial of coverage and denial of payment for victims of domestic violence. This discrimination sets a very frightening precedent for victims because it could result in victims being unwilling to seek treatment or reimbursement when something happens to them. This bill will go a long way in protecting people from this kind of discrimination happening to them. CHAIRMAN ROKEBERG asked if Ms. Andreen had seen any improvement to this problem in the Lower 48. Number 565 MS. ANDREEN noted that Ms. Hugonin would be a better person to ask. She's been more in touch with what's happening on a national level. Number 600 LAUREE HUGONIN, Executive Director, Alaska Network on Domestic Violence and Sexual Assault, came forward to testify on SB 14. They also support this legislation. She noted that this discrimination problem was still big down South. Several states have introduced varying degrees of legislation to try to address this problem. Some states have anti-insurance discrimination in the health line, some in the life line, as well as, different policy statements within their insurance commissions. MS. HUGONIN continued that the National Association of Insurance Commissioners is working on model legislation to try to encourage states to address this problem. She stated that she was unaware of this discrimination taking place in Alaska, but she appreciated the chance to be proactive on this measure. The Network does sponsor and administer a health insurance program for the domestic programs throughout the state. Last year, when the network was preparing to renew its health insurance, its broker said that they were having trouble bidding the organization out. This person noted the reason for this trouble was the network's line of business and their domestic violence programs that it supports. This is something insurance companies look at, notice and comment on. Number 736 MARIANNE BURKE, Director, Division of Insurance, Department of Commerce and Economic Development, came forward to testify on SB 14. The Department supports this legislation. She concurred that Section 21.36.440, as pointed out by Chairman Rokeberg, was a consumer benefit and it is something that's long overdue. Everyone should have the right to know why they've been turned down for insurance coverage. MS. BURKE stated that the industry was very concerned last year about the need to disclose the reason for denial, but the industry agrees with the latest wording in the legislation. The person denied coverage must ask for the reason why. This eliminates the burden placed on the insurance companies to automatically send an explanation to every single person. Number 874 REPRESENTATIVE HUDSON pointed out that he had read recently where the state is going to start self-insuring. He assumed these provisions would apply equally to the state. He wanted to make sure for the record that any program the state became involved with would carry equal responsibility along these lines. MS. BURKE responded that there was a distinction. Self-insurance is not subject to any of the provisions of Title 21. If the state or any other employer elects to self-insure they are not subject to these provisions or any other provisions under Title 21. Number 874 REPRESENTATIVE HUDSON asked that if the state moved to self- insurance whether this would come under Ms. Burke's Division or the Division of Retirement and Benefits? MS. BURKE briefly explained the difference between insurance and self-insurance. Insurance pays premiums for coverage during a particular period of time specified. Self-insurance is not insurance in that an entity elects to keep this risk themselves. Insurance transfers the risk to a company. This company takes this risk in exchange for receiving a premium. Self-insurance means that an entity keeps this risk, they don't transfer it. Number 943 REPRESENTATIVE HUDSON said that it was his understanding that the state was moving towards essentially providing insurance through self-insurance, becoming literally their own insurance company. He wanted to make sure that if the state does provide this substitute for their employees, that the employees would be treated in this same manner. MS. BURKE responded that the Division regulates all insurance companies in the state of Alaska, all those providing insurance, the settlement of claims, anything that has to do with insurance as defined of the transfer of risk they regulate. They have no authority at all to regulate any self-insured entity. Business entities such as Carr-Gottstein, BP, ARCO, etc., who provide their own insurance are subject to federal regulation under the Employee Retirement Insurance Security Act (ERISA). States are exempted from ERISA also. The Division of Retirement and Benefits would be totally in charge of and responsible for the state's self-insured plan and would not be subject to Title 21 or ERISA. Number 1067 REPRESENTATIVE JOE RYAN asked how they could keep these self- insurers from discriminating against individuals. MS. BURKE responded that if this were through Title 21, which this legislation is under, it would have no impact on self-insurers at all. This would have to be done through some other mechanism. Number 1101 REPRESENTATIVE TOM BRICE stated that he shared the same concerns of both Representatives Hudson and Ryan. He believed that the title of the legislation would probably prohibit them from going into self-insurer regulation without (indisc.) concurrent resolutions. He stated that they should follow up on this issue with additional legislation. REPRESENTATIVE HUDSON moved and asked unanimous consent to move CSSB 14(JUD) out of committee with individual recommendations and accompanying zero fiscal note. Hearing no objection, CSSB 14(JUD) was moved out of the House Labor and Commerce Committee. Number 1232 MS. BURKE continued by updating the committee on the status of the Kennedy-Kassenbaum legislation. Senator Drue Pearce has agreed to introduce this legislation for the state of Alaska. The governor signed the transmittal letter for the alternative mechanism to go to the Secretary of Health and Human Services. Today the package was mailed. This is the first step taken to preserve the state's right to regulate health insurance. MS. BURKE noted that the state was required to have this submitted by April 1, 1997. There was a problem with getting this legislation introduced and now she would be soliciting the support of the legislature to assist in getting this legislation passed during this session. The alternative is that the federal regulators will regulate health care as of January 1, 1998 if the state doesn't do so themselves. Number 1300 REPRESENTATIVE ROKEBERG polled the committee informally as to whether they would be opposed to introducing this legislation on the House side as a committee bill. He asked if anyone objected to this. He thought it would be appropriate to move this legislation on both sides of the Legislature. REPRESENTATIVE RYAN stated that he had no objections currently, but suggested they take a look at it first before endorsing it. Number 1345 REPRESENTATIVE HUDSON asked for two scenarios, the first, what if the state didn't do this, he asked what the federal government would do. MS. BURKE responded that the federal government would have the right to regulate all matters related to Kennedy-Kassenbaum. This would in essence mean, no regulation. She pointed out that if someone has ever taken a complaint to the Department of Labor and tried to get a resolution, it's almost impossible. The worst case basis is that this is the first step of the intrusion of federal regulation over insurance in the states. There is a strong move in Congress that's existed for about three or four years to take this over. What this means to all the states is the loss of the ability to tax premiums which represents about $30 million of unrestricted general fund revenue for the state of Alaska. Number 1404 CHAIRMAN ROKEBERG asked if the legislature should pass a resolution or a temporary law in the interim. MS. BURKE responded that she just returned from a meeting with her colleagues from around the country. There is no provision in the federal law for anything other than legislation. A possible alternative might be to pass a law that uses the federal fall back, but this would be very devastating to Alaska's market. The state of Alaska has put in as an alternative mechanism the least disruptive thing they can do to this market. There are alternatives. They could have "guaranteed issue" insurance and community rating. What's happened in other states on point has been an unqualified failure in every state that they've done this in. There's been an 85 percent increase in premiums. MS. BURKE gave an example, one woman called their offices wondering why they didn't have "guaranteed issue" insurance. They informed her this option was not on their books. She responded that she was newly pregnant and it was on an unexpected pregnancy, she needed insurance. What this means is, if someone needs "guaranteed issue" insurance they would go out and get it. When there is no longer a need the individual can cancel it. This means that overall premiums go through the roof. This is "guaranteed issue" insurance. Number 1522 CHAIRMAN ROKEBERG asked how they were doing on the high risk pool. MS. BURKE responded that Senator Lyda Green is sponsoring this bill and it's in legislative drafting right now. It should be introduced in the next few days. CHAIRMAN ROKEBERG asked if it spoke to the state self-insurance program. MS. BURKE responded that, no the bill does not. It addresses administrative corrective issues discussed before which allows the board the authority to run this in a business like manner. Number 1558 CHAIRMAN ROKEBERG pointed out that they had discussed this previously and its impact on the state's self-insurance. He asked if she had had a chance to look at this. MS. BURKE responded that she had and they have brought all of the information provided last year up to date. The "gloom and doom" presented by some of the testifiers has not proven to be the fact at all. They have prepared a paper to bring the legislature up to date and to show what has actually happened. The experience has leveled off. The "sky is falling" predictions were that this was going to go on a straight line up. It was based on the assumption that there would be an unlimited number of people in the state of Alaska and an unlimited number of people going into the plan. This isn't the fact. The Division has the cold, hard numbers now. We have computed the numbers of the state withdrawing from the insured market and she would be happy to provide this to the committee. Number 1640 REPRESENTATIVE RYAN referred to the issue of whether the state will establish a Health Maintenance Organization (HMO) for state employees and the legislature. MS. BURKE responded that her division has not been involved in the state's plan at all. She said she would have to defer on this. CHAIRMAN ROKEBERG discussed the next scheduled meeting and suggested that Ms. Burke return with an update on the "high risk" pool, as well as further comments on the Kennedy-Kassenbaum legislation. It was also suggested that the Division of Retirement and Benefits be included to testify at this same meeting. Ms. Burke noted a chairman of the "High Risk" pool board who would also be willing to testify by teleconference. ADJOURNMENT Number 1740 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Committee at 3:54 p.m.