House Insurance and Commerce

Jan. 18, 2023

Rep Maddox: Good morning. Let’s call this meeting to order. The chair does see a quorum. So if we could, let’s get this meeting started. The very first thing I would like to do is I would like to introduce and recognize our actual legislative analyst, Michelle Nelson. She’s here. She was not here last time. Someone was substituting for her. So she will be our full-time person. So I just want to introduce her. You guys knowing how helpful she is and all the staff is, so she will be here with us, so. Unfortunately, it appears that none of the bills are actually going to run today. The first one on the docket or on the– I said docket– agenda is Representative Pilkington has a bill, but he asked me this morning to go ahead and move it to deferred. So that Bill is going to be moved to the deferred list. The other bill, some issues have come up and questions. One of those is mine. It’s a great bill, but some questions have come up. So at some point, we will look into that. There are a couple of things I wanted to do. As you guys know, we passed a statute last session requiring fiscal impacts. And I’ve already reached out to numerous members on the procedure. And I’ve had a lot of questions. So what I thought we would do is I’ve asked Marty Garrity from BLR to come and really just explain the process and how she sees it playing out. And then you can, of course, ask her any questions that you would like to because again, I had some members asking me questions, and I thought it’d be helpful if she would come and do that. So Marty, whenever you’re ready.


Garrity (BLR): Thank you, Mr. Chair. Marty Garrity with the Bureau of Legislative Research. Good morning, everyone. I am here to present on a change in the way that certain bills are going to be handled and requirements in this committee as well as in the Public Health Committees. Act 112 of the 2022 fiscal session imposed– there’s a couple of things this bill did with regards to certain insurance bills. It imposed a bill filing deadline and a fiscal impact statement requirement for bills that will impose a new or increased cost obligation on health benefit plans, including pharmacy benefits for entities of the state. This includes State and Public School Life and Health Insurance Programs run by EBD and self-insured plans managed by the various institutions of Higher Ed. The bill filing deadline was established as the 15th calendar day of the session, which would have been January 23rd, but due to the four-day recess for Martin Luther King Day, it’s been extended to January 27th. So January 27th is the deadline to file these bills that will require a fiscal impact. Under the Act, a committee can not take up a bill that falls within these parameters that requires this fiscal impact until that fiscal impact has been submitted to this committee. So last fall– who’s going to do the fiscal impact, you’re wondering. The Bureau staff is not does not have the capacity to gather this information and do these fiscal impacts. So in the fall, Legislative Council authorized the Bureau to enter into a contract with the Segal Group to produce the fiscal impacts required by Act 112. The Segal Group was the consultant that assisted the Legislative Council and executive subcommittee in taking a long review of the State and Public School Life Insurance Health Program and coming up with some recommendations for changes that were adopted during that 2022 fiscal session.


Garrity (BLR): So Segal has been tracking the bill since November when pre-filing began and is keeping the Bureau notified of any bills that will require fiscal impact. In front of you, I believe you should have procedures for the use of the health benefits actuary– Yes? Okay– which were adopted by Legislative Council in October. Under Act 112, both the Senate and House Insurance and Commerce Committees are required to adopt procedures for the development of the fiscal impact statement. Under the proposed procedures, Segal will notify the bureau of a bill that has been identified as requiring a fiscal impact statement, which they have already begun to do. The bureau– and this is running through Jill Thayer– will notify the chair of the committee to which of the bill was referred. So there have been several bills in this committee that Segal has designated as requiring a fiscal impact. Jill has reached out to Representative Maddox letting him know, “Hey, these bills have been assigned to your committee. And they’re on their way.” The chair then takes the step of notifying the sponsor of the bill to determine if the sponsor plans to move forward with the bill, and then that’s kind of– if the sponsor says, “I’ll file the bill, but I’m not going to run it,” then there’s not necessarily a need for that fiscal impact. So that’s a step to make sure that the chair and the committee and the sponsor want a fiscal impact for that bill. If the sponsor does move forward, wants to move forward, then the chair notifies Jill, and Segal proceeds to produce that fiscal impact statement. Once the fiscal impact statement has been provided, the committee will be able to take up that bill. If the bill is amended, consideration of the bill will be paused until it can be determined whether the amendment requires an update to the fiscal impact statement. Depending on what it is, it may or may not. It’s my understanding that when Segal begins to process for conducting its analysis, it will make a data request from EBD and the very institutions of Higher Education. When Segal receives the data, it will conduct its analysis and then provide the fiscal impact statements. We’ve already reached out to the institutions of Higher Ed, and the bureau has entered into MOUs with most of the institutions of Higher Ed to receive that data because there is personal health information that we need to account for. And so it’s an agreement between the bureau and those institutions. And we are still working on that data use agreement with EBD. Segal will present the fiscal impact analysis to the committee and will either be present in person or virtually via Zoom in order to answer any questions that the members might have. Any questions from the committee?


Rep Maddox: Members, if you have any questions, now is the time to ask. Okay. I see Representative Flowers.


Rep Flowers: I was just wondering why we did a– I guess why we did a contract with a private entity versus hiring and maybe expanding, even if temporary, the capacity of DFA.


Garrity (BLR): That decision was made by executive subcommittee. I think the analysis of this data is different than the analysis of state revenues, which DFA has. This is a whole separate pod of information in terms of claims and personal health information that I think needs to be held at a different level than DFA.


Rep Flowers: Got it. Thank you so much.


Rep Maddox: Thank you. Representative Ladyman, you’re recognized.


Rep Ladyman: Thank you, Mr. Chairman. According to this document, we can request that fiscal impact statement for a draft bill, so it does not have to be filed. Is that correct?


Garrity (BLR): That is correct. And if you do that, it’s the speaker in the House that would approve that fiscal impact statement. Because there is a cost associated with the use of Segal and we have entered into a contract, it requires the approval of the speaker.


Rep Maddox: Thank you. Representative Ferguson.


Rep D Ferguson: Thank you, Mr. Chairman. Is there any recourse if you disagree with the impact statement, to challenge it?


Garrity (BLR): There are certainly, I would imagine, an opportunity, especially with the folks from Segal here presenting, to ask them questions, to have them account for their data and their impact, also to go back and review to see if maybe they missed something.


Rep Maddox: Are you good, Representative Ferguson? Okay. Representative Rose, you’re recognized.


Rep Rose: Yes, thank you, Mr. Chair. Do you have a ballpark or maybe kind of a baseline estimate on the return time on these fiscal impact statements?


Garrity (BLR): We don’t. This is a completely new process for us. And so we’re looking at kind of Retirement as our guideline. For the Retirement subcommittee, we engage services of an actuarial company. And what happens is there’s also the same deadline for Retirement bills. And Representative Warren is here, and he’s familiar with this. The Retirement bills are all filed. I believe none of them are taken up until those fiscal impacts come back from the actuarial company. It’s going to take a little bit of time because we’re going to have to get the information from those entities, and then Segal will have to process that information. I can’t give you a timeline. It’s not going to be months, but it won’t be days either.


Rep Maddox: Thank you. Thank you. Representative Flowers, you’re recognized.


Rep Flowers: Thank you, Mr. Chairman. So since this is something that was a change that was made legislatively and I guess we can look forward to this being the process moving forward, so I just now wondered about the deadline. Why is there a deadline since this is new? But then I suspect that there’s a deadline because of the intensity and the comprehensiveness of the kind of research and work that will have to be done to produce the impact statements by the end of session. So that’s what I’m assuming.


Garrity (BLR): Yes.


Rep Flowers: But, or maybe and, does that preclude me from working on a bill? And let’s say I want to work on it for next session. Could I still request that that impact be done so that as I’m working on it or I may even want to do a study moving forward and want that information for next session, is that permissible?


Garrity (BLR): It is. I think there would be two steps. So there is an option to introduce a bill past the filing deadline. It requires a super majority vote of both Houses. That’s similar to Retirement bills. So that’s an option. I know.


Rep Flowers: But that’s just for Retirement bills, or it’s for all?


Garrity (BLR): For these bills too. So it’s in the rules that you can, by two-thirds vote, extend that deadline for a specific bill. You may also similarly draft the bill and ask the speaker to approve that Segal perform a fiscal impact on that bill.


Rep Flowers: Okay. Thank you.


Rep Maddox: Thank you. Representative Johnson, were you in the queue? Good? Okay. Thank you.


Garrity (BLR): And I misspoke. It’s three-fourths vote.


Rep Maddox: Thank you for that. Representative Brown, you’re recognized.


Rep Brown: Am I on? Hello? Oh, I didn’t think I was on. Just sort of a follow up to Representative Flowers’ question. When we talk about the extensive research, I presume that Segal will be working with DFA somewhat to get certain data from them.


Garrity (BLR): No, actually, none of the data is held by DFA. This is really the impact to the health benefits plan that EBD has that’s funded and institutions of higher education are self-funded. So DFA doesn’t really hold any of this data.


Rep Brown: So DFA will continue to do other fiscal impact statements?


Garrity (BLR): Absolutely. With regards to revenues and taxes, yes.


Rep Brown: Thank you.


Rep Maddox: Thank you. Representative Rose, you’re recognized.


Rep Rose: Oh, no. I didn’t have any questions, sir.


Rep Maddox: Okay. Representative Ferguson, were you back in the queue?


Rep D Ferguson: Thank you, Mr. Chair. Well, Segal dynamically scored this or statically scored, and will they will figure in future savings for early intervention?


Garrity (BLR): I don’t know the answer to that, but I will find out and get back to this committee and let you know.


Rep D Ferguson: Thank you.


Rep Maddox: Thank you, Representative. Representative Richardson, you’re recognized.


Rep J Richardson: Thank you, Mr. Chair. So with Segal, how are we paying them? Are we paying them per project, per hour, and what is the rate in which they’re charging?


Garrity (BLR): We are paying them on an hourly basis for their services. And I don’t have the contract with me, but I’ll get that information back in this committee.


Rep J Richardson: Thank you.


Rep Maddox: Thank you, Representative Richardson. Representative Warren, you’re recognized.


Rep Warren: I was just going to say that Brian told me that she had referenced the 27th because of the holiday, but in Retirement, some of these impact studies come back real quickly. So I mean, you’ll have bills that are flowing through on an early basis, but then some of the impact studies will take significant time. So that’s the reason for the early deadline, but we have bills that are presented all along until we finish, but some will be quick, and then some are going to take some time, but it works. And the actuaries will say, “Hey, this is going to– this one’s going to take us some time.” But through the process, you get them all presented, but just know that you’ll have to talk when you have a bill and say, “Okay, give me a time frame on this,” just depending on the bill, depending on how soon you’re going to present the bill.


Rep Maddox: Thank you, Representative Warren. Miss Garrity, I did just have– I just want to clarify something because I’ve had some members reach out to me already about this. The process as I understand it is The Segal Group actually makes the determination if a fiscal impact is warranted. Is that correct?


Garrity (BLR): That’s correct.


Rep Maddox: Okay. Thank you. I’ve had some members question whether or not it’s warranted or not. And I just want to clarify we have no discretion in that. The Segal Group has all the discretion under the act.


Garrity (BLR): Yes.


Rep Maddox: Is that correct? Okay. Thank you. Representative Flowers, you’re recognized.


Rep Flowers: So you mentioned that we have an opportunity to go back and make sure that they didn’t miss anything or to challenge, for lack of a better word, whatever aspect that we think might not have been fully fleshed out or fleshed out too much or whatever. So let’s say that I have a bill and they’ve completed an impact statement and there are changes made to it from what they initially give me. Is that something that is going to be transparent? So for example, in the past, we get an impact statement. Before we even get it, it’s out there on the website attached to the bill that’s been filed in short of a process whereby the speaker would approve it in draft form. Once the bill is filed and they complete it, does it automatically go to the system so that it’s accessible and transparent to everybody and then if that is changed, then there’s sort of a impact to, or do we go back and forth and before they submit anything for completion and it’s shared with the public, those changes are sort of in-House?


Garrity (BLR): Yeah. I almost hesitate to answer. I believe that it will go up on the website. So we’ll get the fiscal impact. We’ll give it to Michelle. She’ll put it up on the website. If there’s an amendment to the bill and there’s a change, just like in Revenue and Tax, I believe the various fiscal impacts are posted on there. So that would be transparent.


Rep Flowers: And if there’s an amendment to the actual impact, same thing?


Garrity (BLR): Yes. Yes.


Rep Flowers: Okay.


Rep Maddox: Thank you. Representative Wooten, you’re recognized.


Rep Wooten: Thank you, Mr. Chairman. Colleagues, I understand all the questions and everything, but this is a result of years of neglect as it relates to health benefits involving state employees and teachers. And I know it’s new, and I know the approach is more complicated. But before that, we had a, and they came in here and asked us for $100 million out of the clear blue one time. And not too many years ago, we had $200 million in a trust fund, and it just vanished. So this is an effort to deal with all that. And here again, I know it adds to the fiscal impact statements and that kind of thing, but I hope we’ll give this a fair chance to work because a lot went into getting to this point by the executive committee coming up with it. That’s all I’ve got, Mr. Chairman. Thank you.


Rep Maddox: Thank you, Representative Wooten. Representative Johnson, you’re recognized.


Rep L Johnson: Yes, thank you, Mr. Chair. So I heard you say the Segal Group will determine whether a fiscal impact is needed, but there also is a mechanism, correct, for a member to request a fiscal impact even if the Segal Group says no, right? So if it gets filed and the Segal Group determines that there is no fiscal impact needed, we have a process where we can say we disagree with the Segal Group and then request that impact statement.


Garrity (BLR): That’s correct.


Rep L Johnson: I have a follow up question on that if I can. So let’s say a bill goes through committee. It gets filed, Segal says no fiscal impact needed. It gets out of committee. It gets to the House floor or even out of the House to the Senate. And then can any member, not just the sponsor, raise their hand and say, “Hey, I think this one needs a fiscal impact”? And if so, what’s the process to rewind that to get it– would it come back to committee? If the Senate requests one and we didn’t, is there a process to bring it back to the House, or is that just we passed it and–?


Garrity (BLR): I would actually defer to Buddy Johnson on that because that would take into House Parliamentary issues. So the process of what that would look like and the ramifications if the House made it that determination, I defer to Buddy.


Rep L Johnson: Okay. That could be a– I mean, that’s a possibility.


Garrity (BLR): Yes.


Rep L Johnson: Okay. Just to make sure I understand the lay of the land–


Garrity (BLR): And I would imagine it would be the same as with scope of practice bills or Retirement bills or education bills, any bills that currently require fiscal impact or have deadlines and something isn’t met. Whatever process that would be in place would be the same for this.


Rep Maddox: Thank you, Representative Johnson. Representative Rose, you’re recognized.


Rep Rose: Yes, just kind of a follow-up on that as well. On requesting a fiscal impact statement, even if Segal doesn’t necessarily deem it necessary, who approves that? Does that have to go through the speaker like on a draft bill, or is there some other mechanism in place for that?


Garrity (BLR): The speaker would approve that.


Rep Rose: Okay, thank you.


Rep Maddox: Thank you. Representative Flowers, you’re recognized.


Rep Flowers: And then also as a follow-up to Representative Johnson’s question, and I’m hearing a no, but is this fiscal impact in lieu of the DFA fiscal impact or in addition to because you mentioned it’s sort of two different parts of information?


Garrity (BLR): In lieu of.


Rep Flowers: Oh, it’s in lieu of?


Garrity (BLR): In lieu of. The DFA will not do a fiscal impact that I’m aware of for these bills. They don’t normally, so no.


Rep Flowers: Okay. Thank you.


Rep Maddox: Okay, I see no further questions. Oh, no.


Garrity (BLR): Can I add a couple of things?


Rep Maddox: Absolutely.


Garrity (BLR): Okay, just a couple of things because I want to be clear. These fiscal impacts are only going to be impacts on the public and teacher life insurance programs, the EBD and institutions of Higher Ed. These fiscal impacts will not be the impact on private entities. So it’s not going to be an impact of what it’s going to cost Blue Cross Blue Shield or any other insurance providers. So that’s a very clear distinction that you need to be aware of. The other thing, and I think Representative Flowers touched upon this, this is a process. This is the first time we’ve done this. This is new. I would suggest that maybe at the end of this session, a revisit of, did this process work, can changes be made, this was hung up here, we need to do it differently. So maybe, again, as you go through, think about what you might want to consider changing for next session. Because again, it’s new and this is the first time we’ve run through this. So we’re all going through this together.


Rep Maddox: Thank you, Ms. Garrity. That was very helpful. Thank you for that clarification about how this does not apply to private entities. I’ve had that question come up and I meant to address that. Thank you for that. That was very helpful. Thank you.


Rep Maddox: Members, we have one other matter I’d like to attend to today since we have time. We have with us today Tom Considine from NCOIL, which is the National Council of Insurance Legislators. He’s with us today and he has asked for just a few minutes of our time to address the committee. So if you’d like to come to the table and introduce yourself?


Considine (NCOIL): Mr. Chairman, thank you so much. I just can’t imagine I’m going to be able to hold the committee’s attention like that presentation did. Holy cow, that was a tremendous amount of questions, which shows the attention of everyone. That’s just marvelous.


Rep Maddox: I’m sorry. Excuse me, I didn’t mean to interrupt you. Would you go ahead and just state your name?


Considine (NCOIL): Sure, sure. It’s Tom Considine, C-O-N-S-I-D-I-N-E. I’m the CEO of the National Council of Insurance Legislators, and I’m just really honored to be here today.


Rep Maddox: Thank you.


Considine (NCOIL): Thank you. So thanks so much, everyone, for allowing me a few minutes today. NCOIL, as I mentioned, is a national organization in which the states are members. And let me just start off by saying that NCOIL has been blessed by strong Arkansas support and leadership. Right now, just up at the table, we have Representative Ferguson, who is the president of NCOIL and just an absolute blessing to the organization and just the national leader on all these issues. And so everyone knows Representative Ferguson, but to give you a sense of the bipartisan nature of the organization, in 2018, Senator Jason Rapert was the president of the organization. So obviously, while both consummate professionals, they’re not exactly people who see every issue the same way. One’s Democrat, one’s Republican, and it just gives you a sense of how bipartisan the organization is and prides itself on. It’s the only insurer legislator organization in the nation that passes model laws in insurance. There’s some other organizations that have voting private sector members as well. NCOIL, the only votes are by the legislators, it’s of the legislators by the legislators and we’re very, very proud of that. It’s national in the sense that all 50 states are members, some states are contributing members of which Arkansas’ one, in the sense that they pay dues, and then there’s stipends available for legislators from those states to attend meetings. That’s two stipends per state per meeting. However, there’s also scholarships available for legislators who want to come and try NCOIL out for the first meeting or their second meeting. Additionally, the officer group is always bipartisan, so this year we have Representative Ferguson here from Arkansas. The vice president is Representative Tom Oliverson. He’s a Republican from Texas. The treasurer’s assembly will make Pam Hunter, who’s an assemblywoman from New York. And the secretary is Senator Paul Utke, who’s a Republican senator from Minnesota. So again, there’s that bipartisan nature.


Considine (NCOIL): The organization has been around for 54 years now. It started in 1969. And what really is the overarching principle that drives the organization is maintaining state regulation of insurance as established by the McCarran Ferguson Act. And just a little bit of background on that. State regulation of insurance was always the thing. It’s always how it worked here in the United States. And then in 1944, the Supreme Court in a case, if anyone cares, called Southeastern Underwriters, decided that well, “No, no, no, the business of insurance is interstate commerce. It should be regulated by Congress.” And so Congress came back like that in just a couple of months and passed McCarran Ferguson Act and said, “No, no, the business of insurance shall be regulated by the states.” Now, the timing had a lot to do with that if you think about it, because Congress was kind of busy with other things in 1944. There was a big war going on and the economy was still a big problem. So Congress gave it right back to the states, and it’s worked really well ever since then. And so that’s the overriding goal of the organization. And so there needs to be some coordination there. So it’s state-regulated, state legislated the business of insurance. And there’s an analog, the NAIC, the National Association of Insurance Commissioners, and I see we’re very fortunate enough to have a Commissioner Alan McClain with us who’s just a rising star over at the NAIC. And we work very closely with him at NCOIL and just really, really, so happy to see his reappointment. So NCOIL is kind of the analog of that group on the legislator side. NCOIL has three national meetings a year that have anywhere from 275 to 400 attendees, and anywhere from about 50 to 75 legislator attendees from around the country. The least well attended meeting tends to be the March meeting because so many legislatures are in session. As a matter of fact, in a few years, once the current contracts run out, we’ll be moving those meetings to April, because there are some legislatures that adjourn at the end of March will be easier. Just last year, NCOIL passed four model laws and adopted over a dozen others. Model laws come up for re-adoption, or sunset every five years. So as you know, Arkansas led the way with some PBM legislation back in 2018. I actually was surprised that’s five years ago already. So NCOIL adopted a model law based on the Arkansas law, and so that’ll be up for re-adoption in NCOIL this year.


Considine (NCOIL): The new models NCOIL passed in 2022 were paid family leave bill. They Representative Ferguson, sponsored at NCOIL. A regulatory Sandbox Bill that gives some flexibility with legislative oversight to allow for innovation and regulations to keep up with innovation in the insurance sector. A delivery network company bill that would establish insurance standards nationwide on a state-by-state basis for companies like Drizzly and Uber Eats and Door Dash, and that sort of thing. And that was based on the TNC Bill, which is more commonly known as the Uber bill that was passed back in 2014. And lastly, a dog breed underwriting bill that says, you just can’t have a list of dog breeds and says, “If you have this dog breed, you can’t get homeowners insurance based on the breed.” There has to be some scientific data to back that up. So there’s seven policy committees that meet at every meeting. Pretty much, if you think of a line of insurance, there’s a policy committee to go with it: life, health, PNC, workers comp, that sort of thing. One day they dedicated to federal and international issues and a couple of others. In addition to that stuff, there’s a fly-in that we have every year where NCOIL legislators from around the country who were really among our most active fly down to Washington. We have typically 50 or 60 meetings with members and senior staff on the hill. And we have an Amicus program. Where in very limited instances. We pick our spots really carefully. One was in support of the Arkansas PBM legislation, we filed an amicus with the Supreme Court. Where we didn’t get into really the concept of PBM, but more so the fact that there was a case there before the court, and it was further expansion of ARISA in a way that ARISA was never intended to do that. It used to be that a state commissioners like Commissioner McClain or back when I was insurance commissioner in New Jersey, the state-regulated health insurance market represented almost three-quarters of the market. And with the expansion of ARISA and self-funded plans going from 5000 employees all the way down to less than a 100 now, it’s come down to in some states in Texas, the state-regulated market is only about 19% of the market. And that really limits the ability of states to have the ability to be effective laboratories of democracy. So that’s really it. And again, though, to give you a sense of the scope, just last year in 2022, we had a 109 different legislators from around the country. Last year, they were from 36 different states. The prior year in 2021, we had a 103 different legislators from 42 states, and we just would love to see more legislators from Arkansas come and join President Ferguson at our meetings. And I thank you for your time, and happy to answer any questions.


Rep Maddox: Thank you, Mr. Considine. Members, are there any questions? Okay. Seeing none, thank you for your testimony. It’s a very good group. It’s been informative for me and I appreciate you coming all the way to Arkansas. So it’s good to see you. Thank you.


Considine (NCOIL): Thanks so much. Great to be here.


Rep Maddox: Members, is there any further business we need to discuss at this time?  Okay, seeing none, it is my hope that we can actually take bills next Wednesday. I hope we can start that process and be cognizant of the bill-filing deadline that Ms. Garrity mentioned. Obviously, you’ll want to be aware of that, but seeing no further business, we’ll adjourn.