Interim Joint Committee on Banking and Insurance


Minutes of the<MeetNo1> 6th Meeting

of the 2005 Interim


<MeetMDY1> November 22, 2005


The<MeetNo2> 6th meeting of the Interim Joint Committee on Banking and Insurance was held on<Day> Tuesday,<MeetMDY2> November 22, 2005, at<MeetTime> 10:00 AM, in<Room> Room 149 of the Capitol Annex. Senator Tom Buford, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Tom Buford, Co-Chair; Senators Ernie Harris, Robert J (Bob) Leeper, Gerald A Neal, Richard "Dick" Roeding, and Dan Seum; Representatives Sheldon E Baugh, James Carr, James R Comer Jr, Ron Crimm, Robert R Damron, Mike Denham, Ted "Teddy" Edmonds, Joseph M Fischer, Danny R Ford, Jim Gooch Jr, J R Gray, Mike Harmon, Jimmy Higdon, Dennis Keene, Charles E Meade, Rick W Rand, Frank Rasche, Steve Riggs, Brandon D Smith, Tommy Thompson, Ken Upchurch, Susan Westrom, Rob Wilkey, and Addia Wuchner.


Guests: Glenn Jennings, Executive Director, Office of Insurance, Lawrence Ford, Director, Government Relations, Anthem, and John Lloyd, Consulting Actuary, Office of Insurance.


LRC Staff:  Greg Freedman, Rhonda Franklin and Jamie Griffin.


The minutes of the October 13, 2005, meeting were approved.


Representative Dennis Keene reported that at the recent NCOIL (National Conference of Insurance Legislators) officers were elected and three members of the committee were elected to leadership positions.  He stated that Rep. Bob Damron was elected President, Rep. Susan Westrom, Vice Chairman, and Rep. Ron Crimm, Budget Committee.


Glenn Jennings, Executive Director, Office of Insurance, discussed 806 KAR 17:150, Health Benefit Plan Rate Filing.  He stated that the Office of Insurance disagrees with Anthem regarding the regulation, and believes that the office has statutory authority under KRS 304.17A-095(7) to amend the Health Benefit Plan Rate Filing Requirements regulation.  The Office's statutory authority to amend the regulation was reviewed by the Legislative Research Commission's legal staff, and was determined appropriate.  He stated that KRS 304.17A-095(7) further allows the Executive Director to examine the insurer's expenses for preferred provider organization, case management, utilization review, and reinsurance used by the insurer in calculating the loss ratio guarantee for reasonableness.  The insurer may only use those expenses, for purposes of the loss ratio, that are found by the Executive Director to be reasonable.  He stated that the Office of Insurance believes that it is responsible to maintain stability, better promotion of a competitive marketplace and to assure that consumers are charged a reasonable premium amount.  He stated in order for this to occur, the Office must be provided the ability to review any filing submitted by Anthem and any other insurers, under a minimum guarantee loss ratio for reasonableness.  He stated that Anthem contends that under this regulation, the new requirements create an unlevel playing field for existing insurers.  However, the reverse is true without this regulation.


Lawrence Ford, Director, Government Relation, Anthem, stated that Anthem is concerned that the regulation as promulgated by the Office of Insurance does not follow the legislative intent of the legislation enacted addressing the use of Guarantee Loss Ratios with regard to health insurance rate filing requirements.  He stated that in 2005, Senator Julie Denton sponsored legislation, Senate Bill 209, relating to rate filings accompanied by guarantee loss ratio statements.  An amendment was offered by Representative Steve Riggs in the House and concurred to in the Senate to ensure that all carriers were permitted the opportunity to utilize guarantee loss ratio statements in order to streamline the rate filing and rate approval process.  He stated that following the enactment of Senate Bill 209, the Office of Insurance proposed amending their regulation relating to guarantee loss ratio statements.  The proposed regulation creates two separate and distinct rules by which carriers have their rates approved.  For carriers who do not currently write policies in the Commonwealth, under Section 8 of the proposed regulation, rates are automatically approved if the filing is accompanied by a guarantee loss ratio statement in accordance with the statute.  For carriers who currently write business and have credible experience, Section 9 of the regulation requires them to demonstrate increased administrative costs or other evidence that it has become less efficient in order for the rate filing to be approved if the proposed loss ratio differs from what was previously filed.  Section 8 does not require this documented evidence for new carriers and therefore creates an unlevel playing field between insurers in the Commonwealth.  He asked the Committee to find the regulation deficient.


Representative Bob Damron asked what the profit margin is for Anthem.  Also, would rates increase due to the guarantee loss ratio.


Mr. Ford stated that it is possible that rates will increase.  He stated that he did not have the profit margin figures with him today.


Jill Mitchell, Branch Manager, Rates Branch, Office of Insurance, stated that with the office's oversight rates could go up.


John Lloyd, Consulting Actuary, Office of Insurance, stated that the regulation asks Anthem to provide information that any new company must provide.  He stated that the regulation levels the playing field.


Representative Jim Gooch and Senator Ernie Harris asked that the committee take no action on the regulation and let the Office of Insurance enforce the regulation.


With no further business, the meeting adjourned.