House and Senate to Focus on Floor Action as Fiscal
Committees Complete Work on Policy Bills
House and Senate Fiscal Committees completed their review of policy bills on Friday, February 11. With the Fiscal Committee Cut-off behind them, legislators have been working on the House and Senate floors to consider bills passed by committees in the House of origin. Floor action will dominate activity in Olympia until the deadline for the House and Senate to act on their own bills. The cut-off resolution calls for bills in the House of origin to be approved by Tuesday, February 18 at 5:00 p.m. With rare exception, bills failing to be approved by the cut-off dates will not be considered further this session.
Divided House Approves Bill Allowing the State to Provide
Retirement Accounts to Private Employers—
Future in Senate Doubtful
Despite a wall of opposition from business groups, insurers, agents/brokers, and others appears, a controversial plan that would allow the State Department of Retirement Systems to provide private employers and their employees with retirement accounts was approved by a divided House on a final vote of 54-43 with one member absent. SHB 2474 would require the State Department of Retirement Systems to design a plan for retirement savings accounts to be offered to private small and mid-sized employers and their employees. The proposal was roundly criticized during hearings. Additionally, opposition was voiced regarding Governor Inslee’s supplemental budget proposal, which includes a $250,000 appropriation to the Department of Retirement Systems “to explore alternatives for retirement savings accounts for employees of private sector…small and mid-sized firms.” (See section 134 of HB 2185 and SB 6002).
Those providing 401(k) and other retirement planning products and services object to the development of a state-run competitor, potentially threatening jobs and the loss of business to the state program. A report on this issue done by the Department of Retirement Systems in 2009 identified an array of legal, financial, and regulatory challenges that the state would face if it went forward with such a plan.
The American Council of Life Insurers, NAIFA, securities professionals, bankers, and business groups testified against HB 2474 when it was considered by the House Appropriations Committee on Tuesday, January 28. They also testified against the Senate version of the bill—SB 6294—when it was considered by the Senate Financial Institutions, Housing & Insurance Committee. SB 6294 was killed in committee when it was not brought to a vote prior to the cut-off for committee approval on Friday, February 7. SHB 2474 appears likely headed for the same fate.
House Bill on Tax “Preferences” Poses Threat to Existing
Tax Treatment of Diverse Business and Professional Groups
The many segments of the business community have expressed alarm about a new proposal released by House Finance Committee Chairman Reuven Carlyle (D, 36th Legislative District) that deals with “tax preferences”. On Monday, February 10, Rep. Carlyle released a proposed substitute bill for HB 2201. The proposal immediately raised concern for various business and professional tax classifications—including insurance agents and brokers. For example, section 211 of the proposed substitute contains the current tax treatment of insurance producers (Section 211(9)). Section 401 terminates these rates on July 1, 2015, and Section 402 reauthorizes these same rates as “new” tax preferences on the same day, July 1, 2015. The effect of this is that all of the tax rates in Section 211 (including the current rate applied to licensed insurance producers) are likely subject to last year’s tax preference law applicable to “new” tax preferences and exemptions—meaning that they will expire in 10 years and be subject to very burdensome reporting obligations that are not required today. This becomes clear when Section 211 is read together with Sections 401 and 402 of the proposed substitute. This would effectively “sunset” the current tax rates in 10 years—a very objectionable result for all of the tax classifications concerned. This reading of the bill has been confirmed by some of the state’s most highly-respected tax lawyers, although Rep. Carlyle and legislative staff assert that this is not the intent of the measure.
Business groups are expressing opposition to the measure unless it is amended. The bill has been placed on the House floor calendar, and could be brought to a vote at any time.
OIC Proposal to Adopt NAIC Revisions to NAIC Model
Insurer Holding Company Act Pulled to House Floor Calendar
Insurer Holding Company Act Pulled to House Floor Calendar
On Friday, February 14 House leaders placed SHB 2461 on the House Floor Calendar. The bill is Insurance Commissioner Mike Kreidler’s proposal to adopt the new NAIC revisions to the Model Insurance Holding Company Act. Prior to coming to the House floor, the bill was amended in committee with a package of adjustments that were offered by the OIC. The bill has always been intended to conform to the NAIC Model and its adopted revisions. The OIC’s amendments simply picked up a few corrections and oversights that had been missed with the original bill—including an important amendment regarding confidentiality that was identified by the American Council of Life Insurers. The amended bill was approved by the committee without a dissenting vote. The bill could come to a vote on the House floor at any time.
The revisions are a standard for maintaining NAIC accreditation, and they must be enacted by the close of 2015. Insurance Commissioner Kreidler has decided not to wait until next year to push for the revisions. In addition to the NAIC revisions to the Model Insurance Holding Company Act, HB 2461 includes the NAIC Own Risk and Solvency Assessment Model Act (ORSA). The bill has been discussed within an informal OIC stakeholder work group for at least a year. The Senate version of the bill (SSB 6391) remains in the Senate Rules Committee following hearings and approval by the Senate Financial Institutions, Housing & Insurance Committee. It is unclear whether the Senate bill will be pulled to the Senate floor prior to the February 18 cut-off for approval, but SHB 2461 appears to be in a good position to keep the issue moving forward.
Amended Version of Long Term Care Insurance
Bill Moved to House Floor
On Friday, February 14 SHB 2449 was pulled from the House Rules Committee and placed on the House Floor Calendar. The bill is intended to provide increased price transparency to consumers regarding long term care insurance products. When the original bill was heard on January 30, the American Council of Life Insurers, together with America’s Health Insurance Plans, expressed concern about provisions in HB 2449 that would appear to require overly-broad notices to policyholders regarding all prior rate increases on all policies. The ACLI and AHIP requested the deletion of two subsections in the bill, but did not state opposition to the balance of the proposal. The amendment adopted by the committee appears to have been an effort to respond to the concerns raised, but the language continues to be of concern to carriers who write long term care insurance. The bill could be brought to a vote at any time.
Bills Exempting Term Life Policies from Disclosures Required
for Life Insurers Likely to Remain in House and
Senate Rules Committees
Although House and Senate Committees have approved HB 2134 and SB 5976, unexpected testimony opposing the measures from the AARP appears to have stopped the bills in the House and Senate Rules Committees. Introduced by Senator Joe Fain (R, 47th Legislative District) and Rep. Derek Stanford (D, 1st Legislative District) the bills would exempt term life insurance policies from the notices that life insurers are currently required to provide when policies are in danger of lapsing. The current notice requirements were included in legislation that was enacted to prohibit “Stranger-Originated Life Insurance”, and they were never intended to relate to term policyholders.
SB 5976 and HB 2134 were requested by the American Council of Life Insurers and a number of member companies in an effort to reduce policyholder confusion regarding notices, and to relieve life insurers from the administrative burdens associated with such notices. The bills were considered at hearings in the House and Senate during the first week of the 2014 legislative session. Although the OIC has indicated that it does not oppose the bills, controversy developed when the AARP unexpectedly testified with concerns about the bill. The same issue was considered and approved by the House in 2012 without any concerns from AARP, and the ACLI is unaware of any concerns from the AARP when the issue has been approved in other states. Despite the testimony submitted by the AARP, both legislative committees passed the bills to the House and Senate Rules Committees. Opposition from the AARP, however, has led to the bills being overlooked as legislators select measures for consideration on the House and Senate floors. If the measures are not pulled from the respective Rules Committees and approved by the cut-off for passage in the House and Senate at 5:00 p.m. on Tuesday, February 18, the bills will not be considered for the balance of the 2014 legislative session.
Governor Inslee’s Health Proposal Pulled from House
Rules Committee, Placed on House Floor Calendar
On Friday, February 14 2SHB 2572 was pulled to the House Floor Calendar. The bill was introduced at the request of Governor Jay Inslee, and would establish an all-payer claims database, develop statewide measures of health performance, reform state-purchased health care, and restructure Medicaid procurement. When it was considered at hearing, the proposal attracted support from a diverse group stakeholders, including health plans, provider groups, organized labor, and others. The proposal was opposed, however, by the two largest health carriers in Washington. The bill was approved on a divided vote in both the House Health Care & Wellness Committee and the House Appropriations Committee, with all Democrat members of the committees voting for the measure, and all Republican members of the committees voting against it. Although the bill has been pulled to the House floor calendar, the fact that the bill has not attracted bipartisan support to this point, and that there is no Senate version of the bill, suggests that the future of the measure is uncertain at best.
Bills Intended to Clarify the Application of Certain Market
Rules for Individual and Small Group Plans Gain Approval
on both House and Senate Floors
HB 2061 and SB 5931, which were introduced after the failure of the OIC’s technical corrections bill in 2013, have both been approved the House and Senate, and each measure has now been referred to committee in the opposite House. The bills were introduced this year after the OIC’s technical corrections bill failed in 2013. OIC’s technical corrections bill included a variety of adjustments throughout the insurance code, including a correction to the market rules that were established in HB 2319—the Exchange implementation bill that was enacted in 2012. The OIC’s technical corrections bill included a correction that would have exempted large group plans from the certain market rules that were intended only for the individual and small group markets. HB 2061 and SB 5931 were introduced as stand-alone measures due to the fact that the OIC has decided not to introduce a new technical corrections bill in 2014. The bills are uncontroversial, and simply correct a drafting error that was included in HB 2319 in 2012. The bills appear to be moving forward without controversy.
Despite Leadership Move to Pull Measure from Committee,
Controversial Biosimilars Bill Gathers Opposition on House Floor—
Although the cut-off for committee approval on Friday, February 7 came and went, and HB 2326 was brought to a committee vote, House Democratic leadership relieved the House Health Care & Wellness Committee of the bill and placed it in the House Rules Committee. Pursuant to the cut-off resolution adopted by the House and Senate, failure to be reported out of committee by February 7 normally precludes a measure from further consideration. While it’s clear that SB 6091 is dead—it was never even given a hearing in the Senate—the House Health Care & Wellness Committee was relieved of HB 2326, and the bill has now been placed on the House Floor Calendar. While unusual, House leadership enjoys the authority to take such actions. The unusual process only adds to the controversies surrounding the measure.
On Monday, January 20 the House Health Care and Wellness Committee held a hearing to consider HB 2326—the House version of companion bills introduced in the House and Senate relating to the handling of biosimilars. HB 2326 and SB 6091 would define “biosimilar products” and address when a biosimilar can be substituted for a name brand biological product. The proposals would establish requirements regarding notification to the prescriber when a biosimilar would be substituted in place of a name brand biological product. The proposals have been introduced at the request of various name brand manufacturers.
A broad coalition of health plans, PBM’s, pharmacies, chain drug stores, generic manufacturers, and large employers have aligned to oppose the bills. Opponents have raised concern that it is premature for states to take action on biosimilars in view of the fact that the FDA is still developing health and safety standards for biosimilars along with a regulatory pathway for biosimilars and interchangeable biosimilars. Opponents have expressed concern that biosimilars hold great promise for lower costs, and states should not establish cautionary notification requirements which suggest that consumers and prescribers should be wary of biosimilars. Due to these concerns, a growing bipartisan number of legislators in the House have now expressed opposition to the bill. If the bill is not approved by the House by 5:00 p.m. on Tuesday, February 18, it will be dead for the balance of the legislative session.
Agreement Reached on PBM Bill—Measure Passes Senate
The Senate has adopted a series of key amendments negotiated by Express Scripts and other PBM’s, together with representatives of the Washington State Pharmacy Association that paved the way for the bill to move forward. SSB 6137—a measure that establishes standards relating to audits, maximum allowable cost provisions, and registration applicable to the activities of pharmacy benefit managers in Washington State—was introduced at the request of the Washington State Pharmacy Association. Although PBM’s and health plans testified in opposition to the original measure, expressing concern that the measure would interfere in business to business contractual relationships between PBM’s and pharmacies, the negotiations resulted in adjustments that resulted in agreement between the stakeholders. A series of amendments offered by the PBM’s moved the registration requirements from the Office of the Insurance Commissioner to the Department of Revenue, changed the date for incorporating changes in MAC pricing, and altered an important auditing provision that could have led to increased litigation. The amendments were adopted on the Senate floor, and the amended bill was approved without a dissenting vote. The amended bill now goes to the House Health Care & Wellness Committee for what is expected to be an uncontroversial hearing.
OIC Prepares Legislative Proposals
Insurance Commissioner Mike Kreidler has prepared a short group of legislative proposals that he intends to submit to the 2014 Legislature. The most complicated of those proposals is a bill to adopt the new NAIC revisions to the Model Insurance Holding Company Act (HB 2461). The revisions are a standard for maintaining NAIC accreditation, and they must be enacted by the close of 2015. Insurance Commissioner Kreidler has decided not to wait until next year to push for the revisions. In addition to the NAIC revisions to the Model Insurance Holding Company Act, HB 2461 includes the NAIC Own Risk and Solvency Assessment Model Act (ORSA). The draft bill has been discussed within an informal OIC stakeholder work group for at least a year. The OIC will also continue to push for enactment of the NAIC Alien Insurer State of Entry Model Act (HB 1402/SB 5489). The companion bills were introduced in 2013, but failed to pass both Houses.
Legislature Adopts Cut-Off Resolution for
the Consideration of Bills
On Wednesday, January 15 the legislature adopted a cut-off resolution establishing dates for the consideration of bills. Key dates are as follows:
February 7—the last day for committees in the House of origin to take action on bills;
February 11—the last day for Fiscal committees in the House of origin to take action on bills;
February 18—the last day for the House of origin to take action on bills (5:00 p.m.);
February 28—the last day for committees in the opposite House to take action on bills;
March 3—the last day for Fiscal committees in the opposite House to take action on bills;
March 7—the last day for the opposite House to take action on bills (5:00 p.m.—except exempt bills and bills passed by both Houses in different forms);
March 13—the last day of the 2014 Regular Legislative Session
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