House Insurance & Commerce Committee
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in sharp counties. And I know we've got a big challenge ahead of us, but we are more than capable of the job at hand. And so at this time, I'd like for anybody that's in the audience that would like to be introduced, that will be testifying or working with the committee, if you will, come up and sign your name, and at the end we'll have you introduce yourself. At this time, I'd like to turn it over to the vice chair
And then from then on, if we'll just go around the room and introduce ourselves, what district we're from, and maybe a
Robert Dale
Unverified
0:39
little bit about each other. Thank you very much, Mr. Chairman. My name is Robert Dale. I serve District 68, which is primarily a rural district north of Russellville, Arkansas, and I live in Dover. I'm looking forward to serving on the committee. I've got I'm a retired banker so I feel very at home at this committee and look forward to
Representative Stephanie Malone
Unverified
1:06
serving thank representative Malone I represent district 77 and I'm
excited to be the only female on this committee so boys watch out
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the morning I'm Representative Murdoch. I represent District 48, which is all of Lee County, parts of St. Francis and Monroe County. And this is my second term and first term also served on this committee and look forward to serving again and just look forward to a good session. This is Terry Rice.
Representative Terry Rice
Unverified
1:44
I serve now in my third term, second term on insurance and commerce. Glad to be here. Appreciate the committee and the work that they do. I serve portions of Sebastian Scott, Hope, Yale, Garland, Montgomery, and one more. I just forgot what it was. Would you look that up for me? So I've got a good part of middle Arkansas in Washtenaw National Forest.
Mark Perry
Unverified
2:17
Good to be here. Thank you. Good morning. My name is Mark Perry from Jacksonville. I've got a simple. I represent Pulaski County and Little Rock Air Force Base. And I've been in the insurance and financial services business
for the past 26 years. Good morning. Jonathan
Barnett from Siloam Springs District 87 and I represent parts of Benton County and parts of Washington County it kind of starts in Siloam and
it follows kind of the Illinois River basin if you're familiar with the Illinois River coming out of the backside of Fedville and water runs one way towards Oklahoma towards Siloam the other way towards the White River back towards the Beaver Lake system and down the White River so this is my second to be on this committee. It's my second favorite committee, and Chairman Wren and Chairman Dale, I'm glad to be a part of it.
Representative Mark Biviano
Unverified
3:18
Thank you. MR. Good morning. I'm Representative Mark Viviano from Searcy, which is District 46,
and I represent part of White County, all of Searcy and Kensett area. Second term, and it's also the second time I've been on this committee and looking forward to seeing some of the interesting legislation come through this committee. Thank you. MR. Good morning.
Representative Darrin Williams
Unverified
3:41
I'm Representative Darren Williams, representing District 36, which is portions of Central and Southern Pulaski County, and I'm in my last and
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final term. MR. Good morning. I'm Hank Wilkins IV, Henry Hank Wilkins IV.
Delighted to be back on this committee again, feeling a little bit self-conscious because this is the first time I've ever worn a bow tie. Representative Love wears them all the time, so I decided to show him that
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bow tie. Oh, Lord, he's got the word after me. But anyway, I'm delighted to be on this committee again. Served on it in the Senate as well.
Served 10 years in the Senate, and this is my final term in the House, and just glad to be here. Thank you. Pine Bluff. I didn't name, but Pine Bluff
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is my area. Thank you, Mr. Chairman. Is that it? Is that it? No. That's it.
Joe Farrar
Unverified
4:56
You do look good in your bow tie.
My name is Joe Farrar. I represent District 44, which is Lone Oak, White, and a little bit of Faulkner County. I've been 25 years in health care, so I've been dealing with some health care insurance. So I
Harold Copenhaver
Unverified
5:18
look forward to being on the committee. Good morning. My name is Harold Copenhaver, and I represent District 58 in Jonesboro, Arkansas, and Craighead County. My background for the past 25 to 30 years is insurance slash farming.
So I look forward to serving with all these individuals on the committee, and one day I will
your mic, speak in the mic, Mr. Carnine. Thank you.
Charlie Collins
Unverified
5:53
Okay, is that? That's better. Rogers Lowell is Benton County. It's District 90. I'm second term with insurance and commerce.
And this is my third term. My name is
Representative Charlie Collins
Unverified
6:08
Charlie Collins. I live in Fayetteville, represent the east side of Fayetteville, and I'm excited to be
Frederick Love
Unverified
6:18
on this committee for the first time. Good morning. My name is Frederick Love. I represent District 29, which is in Little Rock. And also, for Representative Wilkins, since you needed my vote on some of your bills,
you won't be getting it because you said you look better than me on both sides. And so, therefore, any legislation that Representative Wilkins is sponsoring, I will not be a co-sponsor. No. But I look forward to working with everybody on this committee and look forward to working with you all as well. Thank you. John Vines, District 25, High Springs, Garland County. And I was
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going to wear a bow tie, but I couldn't find my clip on this morning.
Representative Marshall Wright
Unverified
7:10
Marshall Wright, District 49. I live in Forest City. I represent the other portion of Forest City that my good friend Reginald does not represent, as well as a little portion across county, Monroe County. Thank
you, members of the committee. I've learned a few things this morning. Representative Love is setting a trend, so maybe we're going to have to have a bow tie day here in the House Insurance and Commerce Committee. Representative Wilkins, you do look good in a bow tie, so you shouldn't be self-conscious.
I would like to say that I'm proud to have Representative Barnett here. I mean, I'm proud to have everybody here, but Representative Barnett's had some health issues, and we are so glad that he's doing better and that he's here today. So, yes, and that you are loved. So, part of the time. But at this time, I would like to have the staff introduce their self, and I would like to start with Ms. Carol Stapleton.
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Good morning, Carol Stapleton. I feel honored to be a staff for this committee. Anytime you need anything, please feel free to give us a call. We look forward to working with you. Thank you. Ms.
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Brown? Yes, good morning. I'm Barbara Brown. I will be serving as your committee secretary, and I look forward
to working with the committee. Ms. Stapleton, at this time, would you talk about the new electronics that we've got here in the committee?
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We're really excited to be part of this going paperless. Can you hear me now? Yes. Thank you. We're excited to be part of the going paperless with the House. You have your tablets in front of you. We'll try to assist you with them. If there's anything you need, just kind of raise your hand. The important thing is that they stay here in the room. Other committees that meet in this room use these tablets. They'll be stored in a little safe back at the back of the room there.
again if you have any questions kind of give us a holler and we'll try to help you
when we can thank you Ms. Stapleton just a few more housekeeping items you've got a packet there at your desk it has the staff contact information it has relevant agency contact information we've got five of the state agencies that are going to present today and there's some contact information there important session dates and deadlines and then there should be a list of the 2013 conference meeting dates.
So if any of you all look at that and you decide you want to go, if you would, just let me know. During the session, the committee will meet here in room 149 on Wednesdays and Fridays at 10. This Friday we will not meet, so I wanted to go ahead and let the members of the committee know. As you know, a quorum must be present at all times. We are lucky to have our speaker, Davey Carter, here on the committee. He's not here today.
When the speaker is present, we will have to have 11 members, and when the speaker is not present, we'll just have to have 10 members to have a quorum. We will, as Ms. Stapleton mentioned about the tablets, that's new this year, so I'm sure that we'll have some bugs that we'll have to work out, and if you all will, just let her or I know. pursuant to the direction of our House leadership. Members will not be provided with hard copies of the bills.
If a committee member wishes to have a hard copy of a bill or a resolution, we do have a printer available. It's very important on amendments. I know before we could present the bill and then the amendment. We wouldn't always know, but now it's important. If you will, if you think you've got an amendment, please let Ms. Stapleton know so that we can upload that. into the tablets, so those would be available. At this time, I would like to bring our first presenter up,
and I ask that Mr. Jay Bradford, the commissioner of the Arkansas Insurance Department, if you would come up. I've asked Mr. Bradford to be over here today. We'll see him a lot. Mr. Bradford, if you will, identify yourself and anybody that you have with
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you, please. Thank you, Mr. Chairman and
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Vice Chairman. Members of the committee on my left is Lamina
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Blassingame, who is the Chief Deputy Commissioner. I have to admit to you
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that I'm her 13th commissioner that she served under.
And she was a commissioner, an interim between Commissioner Bonneville and me. She was a commissioner for a period of time. I can tell you she's invaluable to our process. we will be at every meeting that you have except there's a couple of national meetings that we'll be going and I'll check with your chair staff and we'll have Dan Honey who is up here and who's a deputy commissioner and attorney of our property and cash division
but I'll be at every one except if you see I'm not here I'm either incapacitated or I will have a couple of trips that I'll have to leave the state representing our agency Today I was supposed to talk about 10 minutes about what the department does. I had to think about it. It took me eight years to get on insurance commerce. It was all day's four-term limits, and so it's a different ballgame now. What we have is your insurance department, especially under my direction, is a consumer-driven agency.
What we do is represent the interests of the insurance consumers in the state of Arkansas first and foremost. And that's a pretty complex responsibility. Of course, when you have a constituent that has an issue of insurance, what we're asking you to do is to put them in touch with us. I want you to call Anita or me at any time. We're not magic. We cannot order an insurance company to pay a claim, but we do bring resolutions to claims.
And we have some 20,000 cases a year that are referred to us from your consumers, your constituents. And we're able to bring resolutions to a lot of those. A lot of claims aren't covered. And we step up and say that they're not covered. Some are marginal and some claims are covered. and we're able to resolve those. The reason we're able to do that is because we have the regulatory authority to represent your constituents and we have different divisions that enhance that.
And I'm going to run through those pretty quickly. And if you have questions at another time, obviously call us back or we'll meet with you privately. We come to you. You don't have to come over there. If you need us, you give us a call. We'll be over here. So I will move over our various divisions and start with some that will give a little bit more appeal to people. We have a criminal investigation division. It's been studied that about 20 to 30 percent of your insurance premiums are that costly because of fraud.
We have a very effective division, and they're all licensed officers. There will be some legislation, and I'm going to bore you with today, that will enhance their authority as police officers, and that will be for your consideration. But our CID gets hundreds of referrals on fraud. Some of them come from insurance companies. Some of them come from the general public and people who are consumers of insurance. Some of them come from people who are inside the industry and they're protected that they see something that isn't appropriate for the consumers,
and we investigate those. We investigate the conduct of agents, the market conduct of the insurance companies, and we have subpoena authority on those issues. We do refer those issues to the proper prosecuting attorneys across the state. I've heard people say that the last couple of years they've never lost a case, which I think is not anything to brag about because I think there's maybe too many no-hanging fruit on that.
I think we ought to take some of these things in and we lose them and lose them. And so we can talk about those things. But they are very effective and dedicated, most of which are former police officers, detectives, many
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of which have been through the FBI education process. and they are playing clothes, they're armed, their cars are
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playing their operas because they're undercover in certain places. So if you see something out there, if you need someone to look at it, we're happy to do that.
We have an accounting division which makes sure that your consumers, the companies that are admitted to the state, they're admitted by your department, and before they are admitted, we do due diligence to be sure that they make accounting standards where they can take care of their claims before a company comes in. Now, all of this, I don't want to get too political with you, but all of this is what we're going to try to do in this partnership thing under the Federal Health Care Act. We'll be talking about that in great detail in the future.
But this is what we're kind of talking about when we do that. So our accounting division is a very superior division. Most of them are CPAs, especially in their own, as far as the type of accounting diligence you do on insurance companies. And quite frankly, our director over there, he was brought in by Commissioner Pickens, you know, he's got a national reputation. We're lucky to have him here. He's from Memphis, and he wants to be near his family. Obviously, he's a CPA at master's level.
We have a ship division. If you're my age, you will listen to this because it is a division of caseworkers that work with people 65 and older to counsel them on Medicare and Medicare Part D and the Medicare supplements. It's a very active, dedicated division of caseworkers, and they do a wonderful job. If you send a constituent in or you come in for yourself, they're going to sit down and counsel a few.
They have an unbiased approach. are going to tell you the proper Part D coverage for you or your constituents based on the meds they're taking. And they just did great work. That's such a – I had an old college friend come to me last year and said that he was actually tearful. His wife had had a heart transplant. And this is an exceptional case to brag about. We saved him $1,600 a month on Part D. You know, that is tremendous.
You know, someone with a heart transplant has tremendous anti-rejection needs and everything.
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the rate review, part of this affordable health care, a lot of it was already there before affordable health care was enacted. And we have control over certain rates. Commercial insurance rates is a free market file-and-use product.
But on individual homeowner's auto, those rates are approved or disapproved by your department. And it's a balancing act on those. You've got to be sure that you have adequate rates where companies will do business in our state and will have good competitive situations. But we do also want to measure those rate increases to be sure that the public has been treated properly. So I look at all those rates personally, and we try to be fair on both sides, and we try to be sure that, and we have actuarial services to be sure that the rates filed with us are appropriately put together.
So there is a, it is kind of a balancing act in those areas that, as a former agent, I've recognized both sides of that scenario. We are plagued in this state with weather-related claims. I well know, when you get a, tornadoes are terrible, and we've had some horrible tornadoes, but when you have a, they're very bad and very devastating. But if you have a widespread hailstorm or windstorm, it is absolutely, unbelievably costly.
And so basically the companies that didn't business the estate until this year, which is a fairly good year on losses, thank goodness. We've had three or four bad years. And they're paying out well over a dollar for every dollar they took in on property rates. And so that's an issue that is hard. It is hard to balance that. but we do our best to do that on behalf of your constituents. And so what I'll say in closing, I don't want to go too long on this, that we are there as a servicing agency.
We want to take care of your constituents, your members of the public. You'll find out if you call me, you don't get your calls. I'm not talking about y'all's calls. Nobody's calls are straight. And so let me call up the commissioner. but that's the kind of open door policy that we have and it's been my policy ever since I've been in public service so I yield Mr. Chairman I've probably gone too long and if you have time for questions we'll be glad to respond are there any questions
of Mr. Bradford and Ms. Blasingame at this time from the committee well thank y'all Mr. Bradford and Ms. Blasingame for being here and your presentation and we look forward to working with you Well,
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thank you. I think this is an excellent committee, and I'm glad to be able
to do business with you. Thank you all. At this time, I'd like to call Ms. Candace Franks. Ms. Franks is Commissioner of the Arkansas Bank Department to present to the committee.
And Ms. Franks, if you would recognize yourself for
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the committee, please. Good morning. I'm Candace Franks. I'm your State Bank
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Commissioner, and I'm glad to be here with you this morning. As I'm sure you're aware, the State Bank Department regulates the Arkansas State Chartered Banks. We are bank examiners, and our job is to ensure that these state banking institutions are operated in a safe and sound manner.
Currently, we are celebrating our 100th year as a state agency. In fact, this body approved the State Bank Department as Act 113 of 1913, and we are only 10 days younger than the Federal Reserve System. At our beginning, we had 361 state chartered banks with $44 million in total assets and three bank examiners that worked out of their home.
Today, we regulate 95 state chartered banks with over $49 billion in total assets, and we also supervise 86 bank holding companies and two trust companies. We have a staff of 67, most of whom are bank examiners. As you know, times have certainly changed, and banking is much more complex than it used to be, although each and every one of our banks are community banks and they serve and focus on their individual communities.
Our banks have generally performed quite well during the last four years. These banks were not the cause of the economic downturn and in fact we have several high performing institutions in our state that have acquired failed or failing institutions located out of state. our banks as they try to return to what we call the new normal. What we face in our industry is the impact of Dodd-Frank and the increased regulatory burden that we are going to see
on our community banks. The Dodd-Frank bill is over 2,000 pages long and I can just tell you right now I am not a fan of Dodd-Frank. At this point the federal agencies are slowly turning out more than 135 rules that Dodd-Frank requires for our institutions. About 25 percent of those rules have been finalized as of January 2 of this year. Some regulators and industry officials expect select provisions of the law to disproportionately
affect our small community banks. Some of these provisions include new regulatory capital guidelines which are currently under consideration. And while as a regulator I never turn down additional high quality capital, the complexity of the risk weighting of the assets in their capital calculations are very burdensome to our community banks. The great majority of our banks maintain capital levels well in excess of the minimum regulatory
capital guidelines. The new mortgage rules, the debt interchange fees, and the anticipation of additional consumer compliance regulations from the newly established Consumer Financial Protection Bureau will add additional cost to our community banks who already struggle from regulatory burden. Due to the compliance burden many small banks are now exiting the mortgage market and I anticipate as these regulations continue to develop we may see additional consolidation
in the industry from our smaller institutions due to the rising cost of regulation and technology. This is not good for Arkansas, and we need our community banks, and we need those community banks to continue servicing Arkansas communities and promoting economic development in those communities. Nationally, community banks under $10 billion in assets control 57 percent of the small business loans that are made in this country.
As a regulator of state charter banks, it is our mission to ensure that these banks operate in a safe and sound manner, serve their local communities, and help them continue to be there to serve their local community. We consider our banks to be a very important part of our Arkansas economy. And that's my presentation, and if anybody has any questions, I'd be glad to answer them. Thank
you, Ms. Franks. Are there any questions of the committee? Representative Barnett, you're recognized.
Are you all backed up by the gold standard here in Arkansas, or is that how you all operate
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here, be sure we've got the assets? We're sure we've got
the assets. Thank you. Thank you. Representative Barnett, are there
Representative Charlie Collins
Unverified
27:12
any other questions? Representative Collins? Thank you, Mr. Chair. You talk a lot about Dodd-Frank. Is there any opportunity for us to do anything at the state level to
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ease the burden? Unfortunately, no. There really isn't. everything in Dodd-Frank was essentially automatic because all of our institutions are federally
insured. So it was just a we'll just have to go through the process and try to mediate as well as we can. And occasionally we have an opportunity to try to help our smaller institutions with
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going through the process of explaining new regulations to them and help
Representative Charlie Collins
Unverified
27:54
them. If there's anything that's just particularly egregious that's just causing an unbelievable pain for so little gain
that needs to be changed at the federal level, if you come across something like that, let us know. Maybe we can get our federal folks to see if they can do something to try and fix something that's causing
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immense pain for no gain. And we always appreciate that because it never hurts
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to lobby our federal representatives as far as any changes that we see should be appropriate to help our Arkansas banks because I think that's very important.
Thank you. Thank you, Representative Collins. Are there any other questions? Well, Ms. Franks, we appreciate you being here and we appreciate your presentation. At this time, I'd like to congratulate the Arkansas Bank Department on a wonderful milestone of century-long service to this state. So thank you very much. Yes, thank you. At this time, I'd like to call Mr. Heath Absher, Commissioner of the Arkansas Securities Department. And, Mr. Absher, if you would recognize yourself for the committee, please, sir.
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Heath Absher, Arkansas Securities Commissioner. And one thing I'll hit on before I get too far started, as you know, Dodd-Frank mandated somewhere around 65 studies. It's a couple thousand pages long. In terms of rulemakings that have actually been enacted, there's probably, like Candy said, about 25%. The second thing that's happened is that the JOBS Act has gotten in front of it. Now, the difference between the Jobs Act and the Dodd-Frank Act is the Jobs Act is very much a bipartisan act,
and Dodd-Frank clearly is not. I don't sense at least, you know, I can't speak for the banking regulators. I can speak for what I see with the federal securities regulators. There is certainly not a push at the level of federal securities regulation to push Dodd-Frank through anything, And I wouldn't sit but suspect to see much from Dodd-Frank coming up. Nonetheless, the Arkansas Securities Department is a special revenue agency of approximately 40 employees. We're charged with regulatory enforcement jurisdiction over the securities industry.
That's going to include any offers and sales of securities. Also, the professionals involved in that industry, broker-dealers and investment advisors. We also have regulatory authority over mortgage companies, mortgage loan companies, mortgage servicing companies, and loan officers. I should point out those are non-bank mortgage companies. If they're a state-chartered bank, they're candies. If they're a federally chartered bank, they're the feds. But for the mortgage company, those guys are ours. We also have jurisdiction over money transmission and currency exchange businesses.
These are Western unions and money grounds. And in the currency exchange business here lately, it's been a lot of people selling Iraqi dinars. We also have jurisdiction over state-chartered savings and loan institutions and foreign savings and loan brokers and state-chartered credit unions. There is one state-chartered savings and loan institution in the state of Arkansas. I have been trying to give jurisdiction over these two groups to Candy for five years now, and she will not take it.
In addition, we also assist the Arkansas Cemetery Board. We both staff and have the investigation staff and the legal staff for the Arkansas Cemetery Board. Now, the Arkansas Cemetery Board only oversees perpetual care cemeteries. There are about 100 in the state of Arkansas. It's not all cemeteries, just those. Looking at the securities industry, like I said before, we regulate sales of securities, broker-dealers, and investment advisors. Last year, we processed about 2,600 initial filings,
6,500 renewal filings relating to securities offerings in the state of Arkansas. This included private placement offerings, mutual funds, and registered offerings. On compliance and regulation, now, remember, this doesn't include enforcement. I'm just talking about compliance and registration, just looking at their licensing and going out and making sure they're doing what they're supposed to be doing. There are 107 investment advisor firms licensed in Arkansas. There are about 800 firms licensed with the SEC that do business in Arkansas.
There are approximately 3,000 investment advisor reps in Arkansas. Based upon changes in the Dodd-Frank Act, we saw an increase of about 41 investment advisor firms becoming state registered. These firms are larger because they went from a $25 million to a $100 million asset under-managed threshold. So now we approve both their initial licensing application, any renewal licensing application, and also performing compliance exam checks on those firms. As of December 2012, there are a little over 1,300 broker-dealer firms registered in Arkansas
with 988 registered branch offices. There are approximately 92,000 registered broker-dealer agents in Arkansas. We review the registration and renewal application of each one of these firms and agents, and we go out and do compliance exams to make sure that they're doing what they're supposed to be doing. As of December 2012, there were approximately 270 mortgage companies licensed in Arkansas with about 300 licensed branched offices, approximately 1,900 licensed loan officers,
again, licensed renewal and compliance. As of December 2012, there were 54 money transmitters and four currency exchangers. Those two groups have approximately 6,000 delegates authorized to engage in activities in Arkansas, and we review each one of those. As I mentioned, we review the licensing. We renew their renewal applications, but we also perform compliance exam on each one of these business. With regard to broker-dealers and investment advisors, we have all of our broker-dealers and investment advisors on a three- to four-year compliance exam schedule.
With mortgages and our cemeteries and money services, it's a slightly shorter cycle. One of the sections I'm very proud of this year is our investor education section. For the past five years, we've been a participant along with the Insurance Department, DHS, the Attorney General's Office, and AARP in town hall-style meetings throughout the state, focusing on consumer protection and fraud prevention. We also partner with the University of Arkansas' Walton Business College and the library system in promoting and conducting retirement planning seminars, and we sponsor Economics' Arkansas Stock Market Game.
One of the things we did last year was recognize that the group we're missing the most are the working age folks, the people that go to their 9 to 5 every day, then come home and have to take kids to soccer practice or do whatever. They're not going to be able to take time off to come to one of our information seminars. Well, the only way you can get to them is if you can get to them through their employer. The state of Arkansas is the biggest employer around. So what we did was to start an investor education seminar geared specifically to state employees
that we've been presenting all across the state. And as a result of these sessions, APERS has asked us to participate in seminars that it conducts for its employees during the upcoming year. The last thing that we do, and a lot of people think the most important thing we do, but I think that it becomes perhaps less important if you're doing everything you need to do on compliance and registration as enforcement. These are enforcement figures for 2012. They don't include, these are just securities figures.
They don't include mortgage or money services. In 2012, we had nine people on the enforcement staff. We received about 238 complaints, conducted 65 investigations. Out of that, we initiated 50 administrative actions and two criminal actions. I issued, as a hearing officer, I issued 837 administrative enforcement orders. We obtained two injunctions in court proceedings. We assessed almost 180,000 in fines and penalties and returned over 65 to investors.
With regard to licensing sanctions, 260 licenses were withdrawn due to state action, five were conditioned, two were suspended, and nine were barred. We collected over $1 million in fines related to mortgage actions. We expect to see a significant increase in investigations and enforcement matters related to the ongoing changes at the federal level in the area of corporation finance. specifically the JOBS Act, has opened the door to public solicitation and general advertising
of what has historically been privately placed securities limited to accredited investors. You're going to see an onslaught of Internet ads for securities in small speculative companies, so we fully expect to see a lot more enforcement action in that area in the upcoming year. In terms of the legislation that we'll be proposing before the committee this year, most of what we have will be pretty dry, mostly cleanup language.
I did initially submit my request for authority for me to have criminal authority, but apparently there's some concern about arming the staff of the Arkansas Security Department. That was a joke. Are there any questions? Are there any questions from the committee? If not, Mr. Absher, we appreciate
you being here and your presentation today, and we look forward to working with you. Thank you. Thank you to the committee. At this time, I'd like to call Mr. John Bethel,
the director of the Arkansas Public Service Commission. Mr. Bethel, if you would recognize yourself for the committee, please.
the committee. I'm John Bethel. I'm the director of the Arkansas Public Service Commission, and for me, every day is bow tie day, so I'm glad to fit in with Representative Wilkins and Representative Love. And the Arkansas Public Service Commission regulates utility companies in the state. We have three commissioners that are appointed by the governor to six-year
terms. Currently, Collette Honorable is our chairman, and Butch Reeves and Elena Wills are the other two commissioners, and we have approximately 115 employees. We actually do have that many authorized positions, and we'll try to keep those full because we've got lots to do. We regulate four investor-owned electric utilities, 17 electric distribution cooperatives, one generation and transmission electric cooperative, one electric regional transmission organization,
three investor-owned natural gas utilities, two water utilities, and approximately 300 telecommunications utilities. So we have quite a number of utilities that we work with regularly. We also have three employees under an ARA grant, and that will expire at the end of September, and those employees will no longer be with our agency, but they currently are working on some energy efficiency matters pursuant to that federal grant. grant. We have the commissioners have a portion of the staff is dedicated to providing advice to
the commission on dockets that are pending and both at the state and federal level. And then the larger portion of the staff actually does analysis on cases that are pending before the commission and presents recommendations to the commissions based on what the utilities file or the staff originates. The commission's primary purpose is to ensure safe and reliable utility service that's offered at reasonable rates to customers here in Arkansas. One of the things we do is we
have a consumer services section that responds to questions and inquiries from the public. Annually, we respond to anywhere from 35,000 to 40,000 calls. And most of those calls, Customers have questions about their bills, questions about their service. Fortunately, the bulk of those calls are resolved informally and don't require any action in front of the commission. In fact, I think last year there were two formal complaints filed before the commission by customers.
Otherwise, those were resolved by our folks working cooperatively with the customer and with the utilities to resolve those, and I think that's worked out well. We appreciate the utilities are generally cooperative in helping us answer customer questions. We have a pipeline safety office, and that office inspects pipeline facilities here in Arkansas to make sure that they operate in compliance with state and federal pipeline safety codes. And they inspect over, let's see, 24 natural gas operators and 184 master meter systems here in Arkansas.
and so they have quite a bit to inspect to make sure that those facilities are operated safely. Our tax division is responsible for the valuation for ad valorem tax purposes of the utilities and motor carriers and airlines and railroads here in Arkansas. And during 2012, the market value of the property assessed was approximately $18.9 billion, dollars, an assessed value of approximately $3.8 billion, and property taxes associated
with that that is collected by the counties was approximately $177 million, and those go to fund schools, cities, counties, and the legislative audit and the assessment coordination division, and a small portion goes to fund the tax division. And I just want to tell you we're always happy to help you members address concerns and questions from your constituents if they have issues with utility service and you need help, please call. And also during the session, if bills come up that may have an impact on utilities and
you need analysis or comment from us, please don't hesitate to contact me, and I'll be happy to assist you in that regard, and I'm available for any questions you may
have this morning. Thank you, Mr. Bethel. Are there any questions of the committee? Representative
Barnett, you're recognized. I wasn't aware of the water utility companies that you said you regulate, too.
Which two are those? There is Riviera Utilities.
No, not Riviera. Excuse me. There's United Water, Arkansas, that operates in Pine Bluff. And there is Shoemaker Public Service that operates near Camden. And those are the only two that currently are regulated by the commission. And most water utilities are either municipal utilities or rural water associations, and those are governed by either the cities or by the boards of those water associations. But there are the two that are investor-owned and that meet the criteria and the statute to fall under the commission's jurisdiction.
Okay. Then you mentioned the property taxes on the rail. We're talking about the property that the rail is on and the tracks, the mileage of track. Is that what we're talking about as far
as the property tax is concerned? There are facilities here in Arkansas, and we, for ad valorem purposes, it's a unit valuation. You value the company and then bring it down to the portion of the unit that operates in Arkansas, and then it's apportioned out to the counties. And our role is to create the or to determine the assessed value,
and then we provide that to the counties who actually do bill for the tax. We don't do any of the billing or collection
associated with the tax. Interesting. I knew that, but I'd be curious to learn more about that,
too. That's an interesting discussion. Thank you. Yes, sir. Thank you, Mr. Chair. Thank you, Representative Barnett. Are there any other questions of the committee? If not, Mr. Bethel, thank you for being here and your presentation, and we look forward to working with you. Thank you. At this time, I'd like to call Mr. Jason Lee, Director of the Employee Benefits Division.
Mr. Lee, if you would recognize yourself
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for the committee, please. Good morning, Jason Lee, Executive Director for
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Employee Benefits Division. As I'm sure many of you are aware, Employee Benefits Division, or EBD, is a division of Department of Finance and Administration. Our primary duty is to serve us as the health administrator for the public school employees, retirees, and state employees in their retiree health plan.
We also facilitate many other products, which I'll discuss in just a moment. But the health insurance is probably what we're most known for, and that is the life insurance or excuse me, the health insurance for those are approximately 147,000 covered members on both of our two separate and distinct health plans. They are entirely self-funded health plans in that the plans itself bear all of the risk.
We purchase no reinsurance for the two separate programs. And the operations of the programs are designed or established under the state and public school life and health insurance board. This is a 12-member board that has many of its members selected by the governor, but A few of the positions are selected by proxy or by their position, such as the insurance commissioner. We also utilize the services of the University of Arkansas for Medical Sciences College of
Pharmacy to help us through our formulary construction, our clinical evidence for our drug use and the programs under the plan. The two health plans that we have, that we administer, are separate and distinct in that we handle the state employees and the public school employees virtually on par with each other and the plans are designed in a way to provide the same level of benefit to both of the groups. We have about 56 percent of the total population is on the public school side.
Each plan administers or processes about $275 million in claims annually for each plan. We offer the three separate health plans for the members, select a gold, a silver, a bronze plan, and this allows the members of the plans to select the appropriate plan option that's right for them. One plan will provide greater benefit for the same services while others will provide
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less member, less payment by the plan, and then of course the premiums
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are adjusted accordingly. What I'm sure many of you have heard throughout the course of the last few months relates to the cost associated with the plans. The base level to ensure a public school employee or a state employee is relatively the same. is not much difference as it relates to the cost of one individual on one plan versus
the other. We are very much different in how they are funded, though. I'm sure that there will be some discussion through this committee and, of course, maybe through other committees as well to the differences in how they are funded by their respective employers. State agencies are funded by a fixed amount per budgeted position. that amount is $390 per month, while the school employees are funded at $131 for only those individuals who choose to take the health insurance.
There's an additional funding directly through the Department of Education of $50 million to help offset the expenses for the public school employees, but there are two completely different and distinct methods of employer funding. that equates
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to the differentials that we have on the rate sheets that come out of the members' monthly paychecks. Just as a point of comparison, the base premium
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or base cost for a state employee is $469
for the current plan year. The base cost for a public school employee is $441. So it is not that one group has a greater degree of risk or the age burden is not any difference or the illness is associated with one group or the other. We really are talking about the difference in funding to help offset the cost associated with those plans. In addition to the health insurance program, Employee Benefit Division coordinates with
a fully insured life insurance vendor. This year we were able to go to bid for a consolidated life insurance plan. We were finally able to achieve the specified line in the Arkansas Code about parity between state and public school employee plan with a single life insurance bid. We have now a consolidated standard plan design for both groups and a single rate for both. Prior to this year, the school and the public school and the state were two separate contracts,
separate carriers for many years, and the rate structures were very different as well. We contract with third-party administrators to provide services for cafeteria plans, voluntary products for various state employees, and we also administer the Arkansas Diamond Deferred Compensation Retirement Program. This is a voluntary election program to supplement your retirement into APERS or any of the other programs you may participate in. Our offices are located obviously here in Little Rock,
but right across the street at the 501 building. We employ approximately 70 individuals on the floor. Half are state employees and the other half are provided through our third-party contractors so that we can have the resources of our vendors locally directly under our control for our day-to-day operations. And I'll be glad to answer any questions that you may have about what we do or what we serve our membership. Thank
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you, Mr. Lay. Are there any questions to the committee?
Representative Mark Biviano
Unverified
51:06
Representative Viviano, you're recognized. Thank you, Mr. Chairman. Your TPA for health is Blue
Speaker 99
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Cross Blue Shield? We actually have two. One
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is QualChoice, and they provide services for Silver Plan, and then we have Health Advantage that does the gold
Representative Mark Biviano
Unverified
51:21
and the bronze. So give me a breakdown of Blue Cross Blue Shield and QualChoice, the percentage of business each one
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administers. QualChoice has, I'd have to get specific, Ballpark QualChoice has less than 10 percent.
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51:38
When was the last time we took that out for bid? The 2012 plan year started the new contract cycle. And would you know, just one
Representative Mark Biviano
Unverified
51:47
more question, how many vendors bid on that? I believe there were three
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or four each time we bid. We had three separate bids that were issued for each individual product, and we structured it in a way so that at least the gold winner would not get the silver because we wanted to have at least competition at those two levels, and there were about three or four
vendors for each option. Okay. When do you think there was only three or four? We are a very large group, and we're very demanding, to be honest about the way we require that the vendors work. We require that they have a comprehensive statewide network, and we are very specific in our demands as it relates to what we require that we do versus what the vendors will do. For instance, we were very specific that we as EBD are the controllers of eligibility.
We will process eligibility. We tell the members or we tell the vendor who their members are. That is kind of backwards from a lot of the way the health TPAs or health insurance companies operate their business. It allows us to have better control and to make sure that we can smoothly transition members at open enrollment, but not every carrier is okay with being told who their membership is. So that would keep some of the carriers out. But I do think network is probably a large degree. All right.
Thank you. Thank you, Representative Viviano. Is there any other questions of the committee? Mr. Lee, thank you for being here today and your presentation, and we look forward to working with you. At this time, I'd like to recognize Mr. Hank Wilkins. A representative has got a special guest that he would like to introduce to the committee, please. Thank you, Mr. Chairman, and
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to the committee members and everyone who's here today. This is Dr. Kim Lucas. She is one of the finalists for the position of chancellor at UATB,
and I just wanted you all to meet her and greet her and give her
a good Arkansas welcome. Yes. Well, thank you. And Dr. Lucas, on behalf of the committee, we just want to congratulate you on being a finalist, and we thank you for being here today in the committee. Thank you, Representative Wilkins. Yes, sir. A couple of housekeeping things I forgot. Our next committee meeting will be next Wednesday at 10 o'clock here.
I would appreciate all the members being here. We've got three bills on our agenda. I'd also like to mention that our seating, I did that based on seniority. There have been some questions on that. I don't mind if any of the members move around, but I would like for you all to work that out and let me know as soon as possible. and the next thing we didn't have anybody sign up to come in front of the committee and introduce themselves I see some staff from some of our constitutional officers
if y'all would like to introduce yourself or if there's anybody here in the audience that would like to introduce yourself to the committee I know that y'all will be working with us so is there anybody at this time if you would sir go
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to the front good morning I'm Sean McMurray I'm with the Attorney General's office in the Public Protection Department consumer utilities division so I will be here at
most of the meetings or someone else from our office will be here and we're happy
to be a resource thank you mr. McMurray we appreciate you being here is Is there anybody else? Okay, if not, if I could get a motion to adjourn. Okay, thank you.
Agenda
Chairman Opening Remarks
Chairman Opening Remarks
Committee Introductions
Mr. Jay Bradford, Commissioner, Arkansas Insurance Department
Ms. Candace Franks, Commissioner, Arkansas Bank Department
Ms. Candace Franks, Commissioner, Arkansas Bank Department
Mr. A. Heath Abshure, Commissioner, Arkansas Securities Department
Mr. John Bethel, Director, Arkansas Public Service Commission
Mr. Jason Lee, Director, Employee Benefits Division, Arkansas Department of Finance and Administration
Other Business
State Agency Personnel Introductory Information
Adjournment
Documents
No documents posted.
Speakers
Representative Tommy Wren Chair
Unverified
Robert Dale
Unverified
Representative Stephanie Malone
Unverified
Speaker 11
Representative Terry Rice
Unverified
Mark Perry
Unverified
Representative Jonathan Barnett Chair
Unverified
Representative Mark Biviano
Unverified
Representative Darrin Williams
Unverified
Speaker 28
Speaker 29
Speaker 33
Joe Farrar
Unverified
Harold Copenhaver
Unverified
Speaker 38
Charlie Collins
Unverified
Representative Charlie Collins
Unverified
Frederick Love
Unverified
Speaker 52
Representative Marshall Wright
Unverified
Speaker 56
Speaker 60
Speaker 5
Speaker 68
Speaker 69
Speaker 70
Speaker 74
Speaker 77
Speaker 82
Speaker 84
Speaker 41
Speaker 86
Speaker 88
Speaker 91
Speaker 95
Speaker 99
Speaker 100
Speaker 102
Speaker 107
Speaker 111
Speaker 87
Speaker 31
Speaker 114