Call to Order and Roll Call
The 2nd meeting of the Interim Joint Committee on Banking and Insurance was held on Tuesday, October 23, 2012, at 10:00 AM, in Room 149 of the Capitol Annex. Representative Jeff Greer, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Tom Buford, Co-Chair; Representative Jeff Greer, Co-Chair; Senators Jared Carpenter, Julian M. Carroll, Dennis Parrett, Jerry P. Rhoads, Dorsey Ridley, Dan "Malano" Seum, and Brandon Smith; Representatives Dwight D. Butler, Will Coursey, Ron Crimm, Robert R. Damron, Mike Denham, Ted Edmonds, Joseph M. Fischer, Danny Ford, Jim Gooch Jr., Sara Beth Gregory, Mike Harmon, Dennis Horlander, Dennis Keene, Adam Koenig, Michael Meredith, Brad Montell, David Osborne, Sannie Overly, Ryan Quarles, Arnold Simpson, Kevin Sinnette, and Wilson Stone.
Guests: Sharon Clark, Commissioner, Department of Insurance, D. J. Wasson, Department of Insurance, Dr. Edwin Duett and Dr. Burke Christensen, Eastern Kentucky University, and Dwight Lovan, Commissioner, Department of Worker’s Claims.
LRC Staff: Rhonda Franklin, Sean Donaldson, and Jamie Griffin.
Representative Greer called the meeting to order and the minutes were approved.
State of the Insurance Industry in Kentucky
Sharon Clark, Commissioner of the Department of Insurance, stated that the department has no potential legislation for the 2013 session and reported on the current state of the insurance industry in Kentucky. The commissioner reported that:
· Kentucky’s insurance market is healthy, citing the number of licensed insurers in the state, the status of Kentucky’s captive insurer market, and the addition of 13 companies in 2011 and 21 companies to the state’s market;
· The department’s information technology has been enhanced with the eServices website, which allows electronic submission of insurer’s rate and form filings, company admissions, and financial reporting. With electronic filings and the department’s initiative to store all records electronically, the commissioner noted significant savings for the department;
· The local government premium tax collected in 2011 resulted in approximately $242 million paid to local governments and $98 million was collected for the Kentucky Law Enforcement Foundation Program Fund in 2011, to provide training for local firefighters and law enforcement personnel;
· Fraud investigations by the department increased from 2011 to 2012, mainly due to increased staged automobile accidents, prescription drug fraud, and private sector fraud, specifically roofing contractor issues after hail and wind damage in the state in the first half of 2012;
· The Consumer Protection Division averaged 4,608 complaints per year with an annual recovery for insured’s averaging $6.1 million per year; and,
· Department staff has worked to comply with the applicable requirements of the Affordable Care Act and to ensure health insurance covers the cost for individuals required to undergo drug screening as a result of the 2012 “Pill Mill” bill and subsequent regulations.
Senator Tom Buford requested for information regarding the contract employees at the Department of Insurance and wanted the following information regarding each contract: hourly wage; how long have they been a contract employee; whether they travel to conferences and how related expenses are paid; whether they receive benefits; the number who receive over $100,000 annually; the number of days per week and hours per day that are worked; and whether the contracts are amended at any time.
Commissioner Clark stated that she would gather the information. Senator Buford requested it to be forwarded to committee staff for distribution to the members.
Risk Management and Insurance Program Studies at Eastern Kentucky University
Dr. Edwin Duett, Director of Insurance Studies, and Dr. Burke Christensen, Dean of the Eastern Kentucky University College of Business and Technology, testified about the status of the university’s insurance program. They reported that EKU has the only insurance studies program at any college in Kentucky and that the number of students has increased significantly during the last four years. The program emphasizes risk management.
Senator Buford assumed the chair.
Workers’ Compensation Issues
Dwight Lovan, Commissioner of the Department of Workers’ Claims, testified that the state’s workers’ claims statutes have not been amended 1996. He addressed five areas that need to be amended to ensure a fair and equitable resolution of claims by injured Kentucky’s workers:
· Amend the requirement that benefits cease when injured workers qualify for Social Security since many workers continue to work after they qualify, and if injured they will not have a valid claim for benefits;
· Amend the factors for determination of permanent partial disability as the current factors in the statutes are insufficient, with the use of the American Medical Association rating of most injuries resulting in 5 percent to 10 percent disability;
· Amend the attorney fees for a claim, which were capped at $12,000 per claim in 1996, resulting in approximately 40 percent of all workers’ compensation claimants representing themselves due to an inability to find an attorney, and physician fees for recordkeeping that were capped in 1994;
· Address the use of multipliers created for permanent partial disability claims in 2000, which were nullified for all practical purposes by a subsequent Kentucky case; and
· Address the growth of prescription drugs as the largest growth factor accounting for 65 percent of each workers’ compensation dollar.
Senator Buford suggested that Commissioner Lovan and Senator Jerry Rhoads work on suggestions for legislation that would update and clarify worker’s compensation issues and get back to the committee.
With no further business, the meeting adjourned.