05 June 2007

Committee action, Jun. 5: SB 195, HB 824

SB 195 by Sen. James David Cain would get the state out of the insurance business by abolishing the Louisiana Citizens Property Insurance Corporation. It would invite private insurers to pick up business the state currently has. Amended, the bill would have a bid by a private insurer or insurers for business approved by the relevant committees and chambers. Citizens still would exist to collect the emergency assessments approved previously, but would be withdrawn from insuring. The first year under the private holder the old rate, at least 10 percent higher, would continue but then could be reduced after a year. New operators also could not refuse new risky policies if awarded a contract. A performance bond and requirement of certain financial strength would ensure stability.

Senate Insurance Committee member Rep. Blade Morrish wondered how tax-free status could be maintained. However, this would not be necessary under any contract because the holder would be trying to make a profit, and because their risk management should be superior they would make more money off the business than they would pay in taxes. Morrish asked why that doesn’t happen anyway. The answer: the market is too segmented to have people go looking for insurance. Theoretically, people in high risk areas, unable to get policies, would be steered to the state for insurance. Morrish still seemed perplexed why if the business is inherently unattractive, why the bill made it less so.

Rep. Troy Hebert mentioned he thought the bill might be good for lowering rates. In addition, insurance would be more widely-available.

Rep. Dale Erdey wanted to know whether non-admitted carries would be permitted to bid. (Non-admitted carriers do not have to follow state insurance directives.) Cain said if it wasn’t in there, he wanted it to be. He also wondered what a reasonable time for the RFP for the business would go out. Cain said as quickly as possible.

Rep. Shirley Bowler asked what the impact of the RFPs financially would be, which would be that the state may have to pay in reality for a bidder to take the business, because the risk profile may demand a kind of state backstop in the form of state reinsurance. She wondered whether the business could be turned totally over to a private entity without the state being on the hook to some degree.

Amendments, which basically had been discussed already, were offered by Hebert and accepted without objection.

Insurance Commissioner James Donelon then spoke, arguing that the state already had the power to do the things the bill asks. “Let’s not throw the baby out with the bathwater,” he said. He said nobody could privatize the homeowner business, and the existing Citizens could do what was realistic in the bill. He didn’t think anybody but the largest company even could try to take on the business, leading to little competition, and would not completely absolve the state if all risk. Accordingly, he was against the bill.

Bowler asked him how large the performance bond would have to be. Donelon said it would have to be at least a billion dollars and that you couldn’t get one. In response to a question to Morrish, he said already some companies were approaching him to take up some Citizens business. In response to a question from Erdey, Donelon said this bill did not really privatize, just change service providers. In response to a question from Rep. Joe Toomy, Donelon said this bill would not increase the ability of the state to increase supervision over service providers.

Cain closed by saying this bill would increase the sunlight on the residual insurance market, and bring greater efficiency to the market. Citizens was unlike the private market and had far less incentive to behave efficiently. Further, constituents would not be under any risk, he said the bill clearly states.

Morrish moved to defer the bill but failed 10-2 with only he had Toomy voting in favor. After that, the entire bill passed without objection.

HB 824 by Rep. Alex Heaton would permit smoking in an area in which food is not served inside a restaurant, separated and enclosed and with a separate ventilation system. Current law makes exceptions only for casino bars in restaurants, including truck stops. Supporters argued the bill would create a level playing field and relieve suffering local business.

House Health and Welfare Committee member Rep. Robby Carter objected to “suffering” being used as a term, because he saw “suffering” really occurring among those with pulmonary problems caused from smoking. He said if there was any uneven playing field, even though restaurants were doing better as a whole after the ban was passed, he said smoking ought to be banned everywhere.

Rep. Jean Doerge pointed out that if the bar was attached to the restaurant, smoke still would get in when the door was opened. Proponents argued ventilation systems could be arranged to do it. Rep. Nita Hutter said she would amend the bill to do just that. She wanted strict minimum standards, but supporters said it would be difficult to put that in a bill and that a state rule-making procedure should handle that. Hutter got an amendment proposed to have a separate outside entrance without any entrance to the restaurant portion.

On that amendment, Rep. Mike Strain wondered if this didn’t actually make it a separate business. He was told this actually had been done, so this measure actually would be helpful in introducing less bureaucracy. Thus, the amendment was adopted by consent.

Opponents said the law was a step backwards that would decrease safety and increase health costs. They said no ventilation system would rule out the danger of second-hand smoke, and enforcement would be almost impossible. They said studies showed restaurants were not losing money as a result of these laws.

Rep. Diane Winston said they overstated their case. She said there needed to be level playing field, and that people had free will about which should not be discriminated against government. Interrupting witnesses, she asked whether total prohibition was the answer, not discrimination.

Strain then offered an amendment to say that the Department of Health and Hospitals should approve of ventilation systems. It was adopted without objection.

Heaton closed by saying nobody would be forced to patronize these areas. Carter moved to defer, Winston objected. It succeeded 9-3.

I was born at night, but not last night.
Cain, summarizing his view on Donelon’s objection to his bill.

I think that’s the first valid point I’ve made here.
Hutter, after supporters of HB 824 said her arguments made “valid points.”

People keep dreaming these things up … time to stop.
Carter, as the HB 824 debate wound down.

Or you can choose to listen to me, or not.
Heaton, closing on his bill emphasizing the increased choice it would provide.

WEDNESDAY: HB 576 is scheduled to be heard by the House Agriculture, Forestry, Aquaculture, and Rural Development Committee; HB 731 is scheduled to be heard by the House Judiciary Committee; SB 127 is scheduled to be heard by the House Retirement Committee; HB 25 and SB 161 are scheduled to be heard by the Senate Health and Welfare Committee; SB 295 is scheduled to be heard by the Senate and Governmental Affairs Committee.

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