Interim Joint Committee on Banking and Insurance


Minutes of the<MeetNo1> 1st Meeting

of the 2006 Interim


<MeetMDY1> July 25, 2006


The<MeetNo2> 1st meeting of the Interim Joint Committee on Banking and Insurance was held on<Day> Tuesday,<MeetMDY2> July 25, 2006, 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; Representative James E Bruce, Co-Chair; Senators Julie Denton, Ernie Harris, Gerald A Neal, Richard "Dick" Roeding, Representatives James R Comer Jr, Ron Crimm, Robert R Damron, Mike Denham, Ted "Teddy" Edmonds, Danny R Ford, Jim Gooch Jr, J R Gray, Mike Harmon, Jimmy Higdon, Dennis Horlander, Dennis Keene, Rick W Rand, Steve Riggs, Brandon D Smith, Tommy Thompson, Ken Upchurch, Ron Weston, Susan Westrom, Rob Wilkey, and Addia Wuchner.


Guests:  Julie McPeak, Executive Director, Office of Insurance, John Wilkerson, Kentucky Education Association, Brent McKim, Jefferson County Teachers Association, and Charles Wells, Kentucky Association of State Employees.


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

Julie McPeak, Executive Director, Office of Insurance, addressed the committee regarding the Interstate Insurance Product Regulation Compact(compact) HB 112 adopted by the 2006 General Assembly.  She stated that the Interstate Compact is an agreement among the states to create a central point of filing for rate and form approval of: life insurance; annuities; disability; and long term care.  The compact was developed by insurance regulators with participation from state legislators, state attorneys general, industry and consumers.  The Compact addresses the need to strengthen the state-based system of insurance regulation.  She stated that it enhances the speed and efficiency of regulatory approval, creates uniform product standards and allows companies to compete more effectively in the modern financial marketplace.  Ms. McPeak stated that in order to join the Compact, states must pass model legislation, without amendments.  She stated the Compact is effective when enabling legislation is enacted in 26 states or states representing 40% of the life insurance annuity premium volume.  Kentucky was the 22nd state to join the compact with the passage of House Bill 112.  She stated that there are currently 27 states that have joined the compact and legislation is pending in 10 other states.  She stated that the general operation of the compact consists of a commission, management committee, legislative committee, consumer advisory committee, insurance industry advisory committee and 4 permanent staff.   She stated that the NAIC(National Association of Insurance Commissioners) provided $500,000 as initial start-up money.  Insurers that choose to file products through the compact will pay a compact fee in addition to state filing fees.  The commission location is still being determined, but, could possibly be housed with the NAIC offices in Washington, D.C..  The current plan is to have the Compact operational by January 1, 2007.  Ms. McPeak pointed out that state legislatures must enact the Compact model act to join, legislative committees receive written notice of uniform standards before the commission may adopt the standards, the Compact establishes a legislative committee of state legislators or their designees to monitor the operations of the commission and make recommendations to the commission, state legislatures may opt-out of a uniform standard for any product line at any time through legislation or administrative regulation and the commission must report annually to the legislatures and governor of each member state.


Representative Ron Crimm asked if each state is responsible for set up of the compact.


Ms. McPeak stated yes.


Representative Mike Harmon asked if in the future health insurance products will be included in the compact.


Ms. McPeak stated that it had been debated, but will be more difficult than life products.


Chris Corbin, Executive Director, Office of Health Policy, addressed the committee regarding the ICARE Program (Insurance Coverage, Affordability and Relief to small Employers Program), he stated that ICARE will start as a pilot in the small group market effective January 1, 2007, he stated that there are an estimated 20,000 individuals and 4,000 businesses that could benefit based on budget numbers.  He stated that the budget is $20 million over the next biennium with $6.5 million in the first year and $13.5 million the second year.  He stated that enrollment may be limited.  He briefly described the program and which small employers would be qualified to participate, as well as the participating insurer requirements. He stated that the implementation plan has already been put in place.  He stated that the Office of Insurance will begin with education and outreach.  Meeting with agents in June and insurers in July, information regarding ICARE has been posted to the Office of Insurance website.  He stated that preliminary drafts have been prepared for the promulgation of Administrative Regulations and the employer application for ICARE


Representative Mike Denham asked if they are going to try to make sure that all small businesses are aware of this program.


Mr. Corbin stated yes.  He said they are planning to make them aware of the program through agents and business associations.


Representative Danny Ford asked how long the program is going to be funded.


Mr. Corbin stated that the budget for the program will expire in two years.


Representative Jimmy Higdon stated that he really hoped that every effort will be made to reach the rural areas.


Ms. McPeak stated that they have a brochure that will distributed at every opportunity and if needed the Office of Insurance will go to an area and meet with the small business owners.


Frances Steenbergen, President, Kentucky Education Association (KEA), addressed the committee regarding the members of the KEA experience with the self-insured plan so far, and any concerns the KEA may have about the future of the plan.  She stated there was some confusion with the plan in the beginning regarding how benefits are administered.  She stated a new third party administrator and requirement, for generic drugs were some of the problems in the beginning.  She stated that there is more consistency now.  She stated they do have some concerns regarding the plan and are willing to work with the General Assembly to address those problems in order to ensure the long term viability of this essential benefit.


Charles Wells, Kentucky Association of State Employees, stated that his association is pleased with the self-insurance plan with minor concerns including a possible increase in co-pays for state employees for the 2007 plan year.  He stated that many state employees cannot afford an increase.


John Wilkerson, Kentucky Education Association, stated that they are very willing to work with the administration and the General Assembly on the plan for the 2007 open enrollment and monitor any proposed legislation.


The meeting adjourned.