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Minutes for SB22 - Committee on Insurance
Short Title
Updating statutes relating to the regulation of third party administrators.
Minutes Content for Tue, Feb 14, 2017
Chairperson Vickrey opened the hearing on SB 22.
Jason Thompson, Senior Assistant Revisor of Statutes, briefed the members on the bill. He said the bill added six new sections of law to update the statues regarding regulation of third-party administrators. The statute had not been updated since 1978. The bill used NAIC model language for uniformity and reciprocity. He briefly described the sections as set out in the bill brief (Attachment 5)
Clark Shultz testified in support of the bill. He explained a third-party administrator was a company set up to do the background work for an insurance or annuity company, such as collect premiums and process claims. He said there were 38 such companies in Kansas. Third-party administrators were registered. He said the statute was written in 1978 but the world had significantly changed since then. Now, companies did business in multiple states. The problem was, a state where a third party administrators was domiciled did not have control over the company's activities in other states. Therefore, some states might not allow Kansas companies to operate in their states if they haven't adopted similar standards. The bill would care of that and allow Kansas to operate in other states. As a bonus, the bill provided for consumer protections and assurance the TPAs were properly registered and regulated (Attachment 6)
Chairperson Vickrey asked if members had questions.
Representative Cox asked about the bill's voting result in the Senate.
Mr. Shultz answered it was close but the bill did pass.
Representative Dove asked if there were provisions in the bill to allow more due diligence. He described a business in Denver that shut down. The owners left with the funds leaving millions of dollars in debt. He also asked how TPAs were examined.
Mr. Shultz said under the proposed law, the Insurance Department could examine the records. Now, they have minimal authority.
Representative Neighbor asked when looking at a TPA's business, did the proposed bill give authority for the Insurance Department to: look at financials, how the company was organized and who the business was working for.
Mr. Shultz replied that it did. Currently, a company could voluntarily provide records or the department could use existing regulations if a problem was discovered. The new bill had statutory authority to provide oversight. He added other states had passed similar laws.
Representative Neighbor asked if they could require a fee for things like fingerprinting staff.
Mr. Shultz said the Insurance Department would probably request a trailer bill later to make a few technical changes.
Representative Hodge asked about the current situation and what the bill would change.
Mr. Shultz answered currently if a TPA company wanted to do business, they registered with the insurance department and then simply started their business. That meant companies handled millions of dollars in premiums and claims without the department having any direct oversight. The bill required registration, identification of customers, a description of how the company would be run, and access to their records. It permitted monitoring of advertising and contracts.
Representative Bishop commented she was concerned about consumer issues. For example, a consumer might be caught between the insurance company and the TPA with neither claiming responsibility.
Representative Hodge questioned if the bill would have helped with the company Representative Dove cited. Representative Hawkins added there was fraud involved in that situation.
Mr. Shultz said the bill was necessary and asked that it be placed for consent.
Chairperson Vickrey closed the hearing on SB 22.
Chairperson Vickrey and the members discussed the bill.
Representative Hawkins said it was possible suspend the bill from the 24-hour work time requirement. He moved to suspend the 24-hour requirement. Representative Neighbors seconded the motion. After discussion the members voted favorably to suspend the requirement.
Representative Neighbor made a motion to move the bill out of committee and place it on the consent calendar. Representative Cox seconded the motion. The members voted favorably to move SB 22 out of committee.
Representative Kelly introduced his guests for the day: Owen and Elizabeth Clapp and their grandfather, Dave Caroll, from Independence.
Representative Bishop introduced her page, Emily Hanslett.
Chairperson Vickrey adjourned the meeting at 10:05 a.m.
