Call to Order and Roll Call
The 2nd meeting of the Interim Joint Committee on Banking and Insurance was held on Tuesday, November 26, 2013, at 10:00 AM, in Room 149 of the Capitol Annex. Senator Tom Buford, 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, Julie Denton, Chris Girdler, Morgan McGarvey, Dennis Parrett, Dorsey Ridley, Albert Robinson, Dan "Malano" Seum, and Brandon Smith; Representatives Julie Raque Adams, Johnny Bell, Dwight D. Butler, Ron Crimm, Robert R. Damron, Mike Denham, Joseph M. Fischer, Jim Gooch Jr., Mike Harmon, Dennis Horlander, Dennis Keene, Adam Koenig, David Meade, Michael Meredith, David Osborne, Sannie Overly, Ruth Ann Palumbo, Ryan Quarles, Jody Richards, Steve Riggs, Bart Rowland, Jonathan Shell, and Wilson Stone.
Guests: Sharon Clark, Commissioner, Department of Insurance, D J Wasson, Department of Insurance, Ballard Cassady, President/CEO, Kentucky Bankers Association, Debra Stamper, General Counsel, Kentucky Bankers Association, John Cooper, Government Affairs Consultant, Kentucky Bankers Association, Lawrence Ford, Anthem, Melissa Metzger, General Counsel, Anthem, Mark Wolford, Vice President, Bluegrass Bankers Association, and Robert Ross, Executive Vice President, Bluegrass Bankers Association.
LRC Staff: Rhonda Franklin, Sean Donaldson, and Jamie Griffin.
The minutes of the June 25, 2013 meeting were approved.
Reissuance of Health Benefit Plans not complying with Affordable Act
Sharon Clark, Commissioner of the Department of Insurance, testified about health insurance transitional relief for 280,000 insureds in the state who received notice that their individual or small group health plan would be discontinued for 2014. The transitional plan is in response to the President’s recent announcement that current health policies that will be non-compliant with the Affordable Care Act (ACA) for plan year 2014 may be exempt if the state and its insurers agree to continue the policies. Health insurers operating in the state were asked to report to the department whether they were planning to continue to offer their prior year’s policies in 2014. Humana will offer its current plans to its insureds, and United Healthcare will offer its current plan to its insureds, with small modifications. Bluegrass Family Health will not offer its current plans for the 2014 plan year.
Representative Julie Raque Adams asked if the Department of Insurance will have increased operational costs due to transitional relief. Commissioner Clark stated that she is not anticipating any increase in operational costs.
Senator Tom Buford asked if state employee insurance plans will be impacted. Commissioner Clark said that the state employee plan is self insured under the Personnel Cabinet, and the Department of Insurance cannot address that question.
Senator Brandon Smith stated that he is concerned about the number of people who will be stranded and not insured. Commissioner Clark stated that the insurance companies will be making the decision to make the changes in order to comply and offer a transitional plan.
Senator Dan Seum asked the estimated number of uninsured people in the state. Commissioner Clark stated that the number is 640,000.
Representative Bob Damron asked when Kentucky Access would cease operation. D J Wasson stated that program will cease operation on December 31, 2013, but that claims made in 2013 will continue to be paid into 2014. December is usually a heavy claims month, and the department is monitoring Kentucky Access very closely.
Melissa Metzger, General Counsel with Anthem, testified that it would not offer its current plans for the 2014 plan year. Anthem has been selling insurance in Kentucky for 75 years and is the largest provider in the state. Anthem has spent about $150 million dollars to be ACA compliant. Anthem has taken steps to allow individual and small groups to keep their plans through December 1, 2014. About one-third have accepted the offer to change the effective date on their policies to allow individuals and small groups to keep them for one more year.
State of the Banking Industry in Kentucky and Overview of Foreclosure Issues
Ballard Cassady, President and CEO of the Kentucky Bankers Association, (KBA) reported on state banking issues in Kentucky. The KBA represents 96 percent of state banks, often referred to as “community banks,” which hold 98 percent of all assets in Kentucky and approximately $69.5 billion in deposits. Despite the strength of the state banks, there is concern about the industry’s role in economic recovery, the requirements imposed on state banks, and the unintended advantages given to the large national banks by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Large national banks are better able to absorb the new regulatory expenses as operating costs than the community banks, allowing them to undercut community banks in the marketplace through loan rates and terms. While the community banks represented no systemic risk for the nation‘s financial system, the regulatory burdens imposed by Dodd-Frank on banks of all sizes are challenging the future of smaller banks. The requirement that bank boards change their role from business development to management oversight will make it difficult for community banks to fill bank director positions, due to increased responsibility and possible personal liability.
Debra Stamper, General Counsel, Kentucky Bankers Association, addressed foreclosure issues and resultant abandoned and vacant property issues. She recommended reducing the time period for the right of redemption of a foreclosed property from one year to six months, saying could improve sales and prices at foreclosure sales. She recommended standardizing the process for master commissioner sales because each county has its own rules for sales, making it difficult for purchasers to understand the process. Finally, the KBA is considering discussion of non-judicial foreclosures, or deeds of trust. Kentucky is a strict judicial foreclosure state, while many states allow non-judicial foreclosures, which are less costly, faster, easier to accomplish, easier for the defaulting borrower to understand, eliminate deficiency judgments, result in less risk to neighborhoods due to abandoned properties, and allow transfer upon completion of sale.
Representative Julie Raque Adams suggested the possibility of a pilot program of non-judicial foreclosures in Jefferson County.
Mark Wolford, Vice President, and Robert Ross, Executive Director with the Bluegrass Bankers Association, addressed the need to reduce the length of time for the right of redemption. Also, requiring county clerks to provide timely notice of tax delinquency certificates to the mortgage holder could reduce the number of foreclosures.
Senator Tom Buford stated that he has legislation for the upcoming session regarding right of redemption.
With no further business, the meeting was adjourned.