Legislature(2017 - 2018)BELTZ 105 (TSBldg)

04/20/2018 03:30 PM Senate LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 401(L&C) Out of Committee
-- Public Testimony --
Moved CSHB 403(L&C) Out of Committee
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
         HB 403-LIFE & HEALTH INSURANCE GUARANTY ASSN.                                                                      
3:44:15 PM                                                                                                                    
CHAIR  COSTELLO  announced the  consideration  of  HB 403.  [CSHB
403(L&C) was before the committee.]                                                                                             
3:44:41 PM                                                                                                                    
REPRESENTATIVE SAM KITO III introduced HB 403 speaking to the                                                                   
following sponsor statement:                                                                                                    
     House  Bill  403 updates  the  Alaska  Life and  Health                                                                    
     Insurance  Guaranty  Act  to conform  to  the  National                                                                    
     Association of Insurance  Commissioners Life and Health                                                                    
     Guaranty Model  Act. These changes  update the  Act and                                                                    
     improve uniformity nationwide  in the administration of                                                                    
     life and health guarantee associations.                                                                                    
     House  Bill  403  incorporates   changes  made  by  the                                                                    
     National Association of  Insurance Commissioners to the                                                                    
     Life  & Health  Insurance  Guarantee Association  Model                                                                    
     Act (MDL  520) in December  2017, after House  Bill 157                                                                    
     had  been   introduced.  These  changes   added  health                                                                    
     maintenance  organizations  (HMOs)  as members  of  the                                                                    
     association,  providing  HMO coverage,  and  addressing                                                                    
     long-term  care  insolvencies.   With  the  substantial                                                                    
     number of changes  made, HB 403 was  introduced to help                                                                    
     explain these changes, though few are substantive.                                                                         
     Throughout, numerous conforming changes  are made to AS                                                                    
     21.79 consistent with  the model law, most  of which do                                                                    
     not substantively change the bill.                                                                                         
     The   Alaska  Life   and  Health   Insurance  Guarantee                                                                    
     Association (Association)  is composed of  insurers who                                                                    
     transact   life   insurance,   health   insurance,   or                                                                    
     annuities in Alaska. The purpose  of the Association is                                                                    
     to  guarantee that  residents and  certain nonresidents                                                                    
     will continue to  receive benefits in the  event one of                                                                    
     the members becomes impaired or  insolvent. In order to                                                                    
     accomplish this,  the Act directs the  insurers to form                                                                    
     a  board and  collect assessments  from members  to pay                                                                    
     for the  operations of the Association  and obligations                                                                    
     of insolvent or impaired members.                                                                                          
     House Bill  403 amends  terms for consistency  with the                                                                    
     model  act,   raises  payment  limits,   adds  language                                                                    
     clarifying  what  products  are included  and  excluded                                                                    
     from the  protections under the Act,  and adds language                                                                    
     clarifying   that   medical    and   hospital   service                                                                    
     corporations  and their  products  are  subject to  the                                                                    
     provisions  of  the  Act. House  Bill  403  amends  the                                                                    
     powers  and  duties  section  for  the  Association  to                                                                    
     follow the model act, authorizes  the board to increase                                                                    
       assessments, grants the Association the ability to                                                                       
      develop procedures to remove an Association governor                                                                      
     for cause, and adds new definitions.                                                                                       
CHAIR COSTELLO noted that members had copies of the sectional.                                                                  
3:47:35 PM                                                                                                                    
SENATOR  MICCICHE asked  Ms. Wing-Heier  her  perspective of  the                                                               
3:48:02 PM                                                                                                                    
LORI WING-HEIER,  Director, Division of Insurance,  Department of                                                               
Commerce, Community and  Economic Development (DCCED), Anchorage,                                                               
Alaska, explained  that HB  403 is  a remake of  HB 157  that was                                                               
introduced last year  to update the statutes for  the Alaska Life                                                               
and  Health Insurance  Guarantee  Association.  She reminded  the                                                               
committee  that  Sheila Talman  testified  last  year to  express                                                               
Premera     concern  that   it   would   be  unfairly   assessed,                                                               
particularly for long-term care.                                                                                                
MS.  WING-HEIER  said  there  was one  insolvency  last  year  in                                                               
Alaska. The  Guarantee Association will  pay the $2  million loss                                                               
for  consumers, but  the division  knew that  it didn't  have the                                                               
capacity for larger assessments.  The solution that was agreeable                                                               
to both sides  was that the assessments for  long-term care would                                                               
be split 50:50 between health insurers and life insurers.                                                                       
The bill  also brings Premera,  Alaska's largest  health insurer,                                                               
in  as a  member of  the Guarantee  Association. Further,  HB 403                                                               
changes a  few limits  to what  would be  paid out  under various                                                               
products  and it  gives some  authority to  the board  on how  it                                                               
would deal with insolvencies.                                                                                                   
3:50:22 PM                                                                                                                    
SENATOR MICCICHE  asked for  an explanation  of the  increases on                                                               
page 8, lines 12 and 16.                                                                                                        
MS. WING-HEIER  said those provisions  increase the payout  on an                                                               
annuity contract claim  (regardless of the value  of the annuity)                                                               
from  $100,000  to  $250,000.  She   noted  that  the  bill  also                                                               
increased several  other limits  none or  which had  been updated                                                               
for about 20 years.                                                                                                             
SENATOR MICCICHE asked if this was like an FDIC minimum.                                                                        
MS. WING-HEIER said yes.                                                                                                        
3:51:51 PM                                                                                                                    
CHAIR COSTELLO opened public testimony on HB 403.                                                                               
3:52:04 PM                                                                                                                    
DONALD THOMAS, Administrator and  Counsel, Alaska Life and Health                                                               
Insurance  Guarantee  Association,  stated   that  the  Board  of                                                               
Governors  of  the  Guarantee  Association  unanimously  supports                                                               
passage of  HB 403.  He submitted  that it  was incumbent  on the                                                               
legislature  to   keep  the  governing   law  of   the  Guarantee                                                               
Association current  because it  was created by  the legislature.                                                               
The  purpose  was to  protect  Alaska  policyholders, subject  to                                                               
certain  limitations  set out  in  the  Act.  Passage of  HB  403                                                               
fulfills that responsibility.                                                                                                   
3:53:15 PM                                                                                                                    
JANA-LEE  PRUITT, Regional  Vice President,  American Council  of                                                               
Life  Insurers  (ACLI),  testified  in support  of  HB  403.  She                                                               
pointed out  that the NAIC  model is  updated every few  years to                                                               
reflect decisions about how to  best protect policyholders and to                                                               
address any  issues that  might have arisen  among the  states in                                                               
the  interpretation  of the  Act.  There  is  a Life  and  Health                                                               
Guarantee  Association  statute in  effect  in  each state.  It's                                                               
important that state statutes are  updated to reflect the current                                                               
NAIC  Model Act  so  that  if an  insolvency  occurs,  it can  be                                                               
handled as efficiently as possible  and policyholders claims will                                                               
be handled similarly regardless of  their state of residence. She                                                               
urged support for the bill.                                                                                                     
3:54:35 PM                                                                                                                    
CHAIR COSTELLO closed public testimony on HB 403.                                                                               
3:54:51 PM                                                                                                                    
SENATOR  MICCICHE  moved  to report  HB  403,  30-LS1401\J,  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
CHAIR COSTELLO  found no objection  and CSHB 403(L&C)  moved from                                                               
the Senate Labor and Commerce Standing Committee.                                                                               

Document Name Date/Time Subjects
CS HB 401 ver D.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB 401 Transmittal Letter.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB401 Summary of Changes ver A to ver D.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB401 ver. D Sectional Analysis.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CSHB401-DCCED-DOI-02-19-18.pdf SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB401 State Farm Letter of Support.PDF SL&C 4/20/2018 3:30:00 PM
HB 401
CS HB403 ver J.PDF SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 Sponsor Statement 4.17.18.pdf SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 Sectional Analysis 4.17.18.pdf SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 Summary of Changes 4.17.18.pdf SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 - State Farm Support Letter Senate Labor and Commerce.pdf SL&C 4/20/2018 3:30:00 PM
HB 403
CS HB403 - American Council of Life Insurers Letter of Support Senate Labor and Commerce.pdf SL&C 4/20/2018 3:30:00 PM
HB 403