Interim Joint Committee on Banking and Insurance


Minutes of the<MeetNo1> 2nd Meeting

of the 2009 Interim


<MeetMDY1> September 30, 2009


The<MeetNo2> 2nd meeting of the Interim Joint Committee on Banking and Insurance was held on<Day> Wednesday,<MeetMDY2> September 30, 2009, at<MeetTime> 10:00 AM, at Eastern Kentucky University in the Perkins Building. Representative Jeff Greer, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Tom Buford, Co-Chair; Representative Jeff Greer, Co-Chair; Senators Julian M. Carroll, Julie Denton, Dorsey Ridley, John Schickel, Dan "Malano" Seum, and Brandon Smith; Representatives James R. Comer Jr., Will Coursey, Ron Crimm, Mike Denham, Danny Ford, Jim Gooch Jr., Mike Harmon, Dennis Horlander,  Dennis Keene, Adam Koenig, Brad Montell, Jody Richards, Steve Riggs, Wilson Stone, Tommy Thompson, John Tilley, and Ken Upchurch.


Guests:  Representative Harry Moberly, Representative Don Pasley, Dr. Doug Whitlock, President, Eastern Kentucky University, Dr. Robert Rogow, Dean, College of Business and Technology, Dr. Peter Kensicki, Director, Insurance Studies Program, Sharon Clark, Commissioner, Department of Insurance, Bill Nold, Director, Health and Life Division, and Russ Coy, Captive Coordinator.


LRC Staff:  Rhonda Franklin, Emily Bottoms, Chad Collins and Jamie Griffin.


Representative Jeff Greer, Chairman, welcomed everyone to the meeting and recognized Representative Harry Moberly and Representative Don Pasley.


Representative Harry Moberly and Representative Don Pasley welcomed everyone to their District and to Eastern Kentucky University.  The Representatives encouraged the committee members to tour the campus and see the many changes taking place at the University.


The minutes of the August 25, 2009, meeting were approved.


Dr. Doug Whitlock, President, Eastern Kentucky University, welcomed everyone to the campus and encouraged the members to feel free to walk or drive around campus.  He stated that the great pride that has been taken to improve and maintain the campus has put the university in the top 10% of colleges in the United States.  He stated that new and exciting changes going on off-site and around the campus include a new facility in Manchester; a bio-fuel research project centered in Clark county; and, under construction on campus, a new performing arts building and science building. 


Dr. Doug Rogow, Dean, College of Business, stated that Eastern is very committed to its Insurance Studies Program.  He stated that the program started 12 years ago and will open a new facility in the spring semester of 2011.  He stated that there has been a steady increase in enrollment in the program and Eastern has a goal of being the best program in the region as well as in the Nation.  He stated that the university is in the process of a nationwide search at this time to name a replacement for the retiring of Director of the Insurance Studies Program, Dr. Peter Kensicki.


Senator Julian Carroll asked if the Insurance Studies Program offers education in the field of Actuarial analysis.  He stated that he feels this is important in regulating insurance for state government.


Dr. Rogow stated that there is not a specific program offered for actuarial analysis, but the university offers strong programs in statistics and mathematics that may prepare students to enter the actuarial field. 


Representative Jeff Greer noted that the roles of actuarial analysts have changed and now involve computer technology as well as math.  He pointed out that the job placement for the Insurance Studies Program is in the high 90% at Eastern and commended the program with that very impressive rating. 


Dr. Kensicki stated that they have a wonderful network of individuals in the program that have local and national exposure, and that has enabled the program to place more individuals.


Sharon Clark, Commissioner, Department of Insurance, stated that the insurance industry in Kentucky is alive and well.  She stated that there are 1,700 companies doing business in Kentucky that offer all lines of insurance and it is a $16.7 billion dollar industry.  She stated that the Department of Insurance has a staff of 125 at the present time, she stated that the department has addressed 4,500 consumer complaints in the past year.  She updated the committee on the status of American International Group (AIG).  She stated that they are continuing to operate and pay claims.  She pointed out that maintaining financial solvency is the most important issue at this time, so that AIG can continue to pay claims.


Bill Nold, Director, Life and Health Division, Department of Insurance, updated the committee on the Kentucky Long-Term Care Partnership Program.  He stated that in 2008, House Bill 259 created the program and it was intended to insure against the cost of providing for long-term care needs of Kentucky citizens without depleting citizens assets and to insure against the burden on the Kentucky Medicaid Program.  The program is a partnership among the Department of Insurance, Department of Medicaid Services and private insurance companies offering long-term care insurance.  The enabling legislation, now codified in KRS 304.14-640 through KRS 304.14-644 and KRS 205.619, requires the Department of Insurance and Department of Medicaid Services to take various steps to establish the program.  He stated that because the program is in the beginning stages, there is little data to report, but, the department should have figures and national data reports to share by the next reporting period.  Currently, interested companies are still working to file new or amended policy forms in order to participate in the program.


Senator Tom Buford stated that he had received phone calls from upset retired teachers regarding premium increases of 40-50% to long-term care policies that were acquired through the Kentucky Education Association.


Mr. Nold and Commissioner Clark stated that the Department of Insurance is very much involved in that issue and will be at the hearings that will be taking place in October between the retired teachers and the insurers.  Commissioner Clark stated she had received over 600 letters from the retired teachers.

Commissioner Clark gave an update on the Anthem Insurance/Norton Healthcare contract dispute which is currently ongoing, particularly in the Louisville Kentucky market.  She stated that the Department of Insurance has received a number of inquiries from consumers, providers, and the media concerning the failure of Norton and Anthem to reach a contractual agreement to provide health care services to Anthem policyholders. The inquiries received appear to be the result of policyholders being given incomplete or inaccurate information. While the department does not have the authority to become involved with contractual negotiations between insurers and providers, the department does have consumer protection responsibilities, and they are taken very seriously.  She stated that the department has to be sure that those patients who are entitled to continuity of care under state law receive the medical services they need with as little disruption as possible. Under Kentucky law, providers and insurers must include a continuity of care clause in any contract to be triggered upon termination of that contract. This provision would impact someone who was in an inpatient facility at the time the contract ended, someone who was undergoing an active course of treatment, or a woman in the fourth month or later of pregnancy. For these patients, insurance coverage should continue as usual. Until an event triggers the end of continuity of care (discharge or completed treatment or the end of the post-partum period), these patients can continue as they did prior to the end of the contractual agreement between Anthem and Norton without the fear of balance billing by the hospital.  She said that the department fully expects confusion among frontline employees of Anthem and Norton to be cleared up immediately so that accurate information can be given to the policyholders.  She stated that the department realizes that there will be grey areas and questions about whether a particular case falls under continuity of care provisions. Consumers who are unable to resolve their issues with Anthem or Norton are encouraged to contact the Kentucky Department of Insurance with questions or to file a complaint.  The consumer protection investigators can be reached by calling the toll-free number at 1-800-595-6053.  She stated that no one wants a cancer patient or an expectant mother to have the added stress of worrying about insurance coverage. That’s why everyone involved is encouraged to be sure these consumers receive the protections guaranteed by Kentucky law.

Commissioner Clark updated the committee regarding Kentucky League of Cities (KLC) and Kentucky Association of Counties (KACO).  She stated that the department has met with both and reviewed organizational and insurance market practices.  She stated that they were very responsive.  The Kentucky League of Cities has already taken corrective action, and Kentucky Association of Counties is working on its corrective action plan and hopes to implement it very soon.

Russ Coy, Captive Coordinator, Kentucky Department of Insurance, addressed the committee regarding Kentucky’s Captive Industry.  He stated that Kentucky is among the top eight states in the nation and the top 17 locations in the world for captive insurers according to the March 2009 issue of Business Insurance.  The Commonwealth ranked 9th in the nation and 21st worldwide in last year’s rankings.  He explained that a captive insurance company is a specialized type of insurance company formed to insure the business risks of a corporate parent and affiliates, or a group of similar entities (such as a trade association). Captive insurers are licensed and regulated by the Kentucky Department of Insurance.  He stated the number of licensed captive insurers in the Commonwealth grew from 31 to 67 during 2008.  He stated that Bermuda leads the world with 960 captives. Vermont is the top U.S. captive domicile, and 3rd worldwide, with 557 captives.   According to Business Insurance, Kentucky and Utah were the only states to add at least 20 captives in 2008. Experts interviewed for the publication cited the convenient, low-cost locations as a reason for the growth in those two states.  In addition, those interviewed pointed out the “flexibility and responsiveness” of the regulators, while adding that captive staff in both domiciles could also be “hard-nosed,” particularly when evaluating solvency, actuarial studies, and business plans.  He stated that significant efforts have been made to attract this segment of the market to Kentucky. During the last four years the captive law has been updated in Kentucky, by soliciting support from the legislature and industry.  He stated that an executive education conference at Churchill Downs in November 2008 attracted about 65 industry representatives from across the United States.  He said that with support, he is highly confident that Kentucky can continue to grow and become a major domicile.  He pointed out that in addition to providing an important risk management tool for regional businesses, captives attract professional jobs and capital to the state.


With no further business, the meeting adjourned.