Insurance & Commerce - Senate

We've got other things we'll do members, if you would take your seats and lobbyists get to the seats. I. Cher sees a quorum, um, insurance and commerce come to order, uh, we're going to begin with the physical impact and the health benefits, uh, with Jill there, uh, Jill, if you would just introduce yourself and you're welcome to begin. Thank you, Mr. Chair, Jill Thayer, Bureau of Legislative Research. Um, you should all have, I think, in your meeting folders, a copy of the draft procedures for use of the health Benefits actuary, the Siegel Group. I'm just going to hit the highlights of this under the joint rules, the Senate Insurance and Commerce Committee and the House Insurance and Commerce Committee have to adopt procedures for use of the actuary. These are almost identical to what was adopted during the last regular session but I'll just quickly go over this, and The joint roles having been adopted last week, I have in here the language from Section 26 of the Joint rules that talks about the fiscal impact statements. Those are now solely for bills that will incur or impose a new or increased cost to the state and public school life and health insurance program that's run by ABD. Um, seagull was hired by legislative counsel last year we have them under contract. They began tracking bills November 20th when y'all started prefiling and have been providing me with um since session began daily updates of the bills that they've identified as requiring a fiscal impact statement under this rule, we have about 27, I believe, that have been filed. Most of them are with the Insurance and Commerce committees. There are 3 or with the public health committees. So Siegel will now since the bill filing deadline passed this past Friday, they're preparing their data request. This week they will provide that to EBD and begin producing those fiscal impact statements under the joint rules and these procedures, a bill cannot be taken up in committee until it has that fiscal impact statement with it, and so I will be keeping Michelle and through her you all apprised of the status of those fiscal impact statements. Um, I've also notified all the sponsors of the bills that have been identified that their bill has been flagged as needing a fiscal impact statement, and our staff, as they were drafting those bills were notifying members of the possibility that they might need a fiscal impact statement. This is all Part of these procedures. The only thing that I will need to know from you all is whether or not you will want seagull to be here in person to present, um, I checked with them this morning. They, if they have the EBD data requests this week, they think they can have all of the fiscal impact statements completed within a 3 week period of time. They'll begin releasing the smaller ones that have little to no impact as soon as they're ready. If under these procedures, if you would like them to be here in person because they are located out of state. The procedure is to set a special order of business for them to be here to limit the amount of travel that they're being reimbursed for. I'll be happy to take any questions. Senator Boyd. Thank you, Mr. Chair. So Jill, this is not an intent to shoot the messenger. I've got some questions. They're not directed at you. They're directed at the people who, so, I realized that we, the Senate and the House have voted to place this bureaucracy on us for whatever reason. OK, can you hear me now? I realized that we, the Senate and the House have voted to put this bureaucracy on us and farm out our responsibility to make decisions to, you know, a third party. I guess my concern is in the contract with Segal, or it could be any other company. I'm not calling out Segal, I'm just saying we have a contract. Do we have a way to vet any conflicts of interest that that third party might have, like they, you know, for some reason they might have a contract with, you know, uh, Drug manufacturer, they might have a conflict with, you know, or they might have a contract with uh insurance broker or something. Do we have anything that really gives me some, you know, helps relay my concern or alleviate my concern that something else is influencing them in their decision on a fiscal impact. Does that make sense? Yes, sir. Siegel was originally hired through a request for proposals, procurement process, and within that we did ask for them to disclose any conflicts of interest, and there were none that were identified. So do we have a way to have ongoing conflicts of interest like a way to know if, you know, say a broker is paying them on the side or they're doing business with an insurance broker that might have a client somewhere else. I mean, this is a complex world, and there are lots of reasons why we might have conflicts, and I'm just, if we're going to make decisions based on what a third party tells us, I'd like to feel confident that that third party is really working for us and not working for somebody else in a non-transparent way if that makes sense. Absolutely. So I think that all, as you know, all of our consultant contracts are approved by the legislative council during the legislative session, the executive subcommittee has that authority. So if the executive subcommittee would like to request a conflicts check we could certainly do that. That's very helpful information. I appreciate that. Senator Flowers. So is Seal just doing the fiscal impacts for these. State and public school life and health insurance program bills or are they Covering other They're exclusively for these these bills. OK. And you mentioned that there. We don't have a list where they have identified. Bills that they have been referred. Uh, yes, actually we do all of the insurance and commerce Committee agendas show the bills that have been flagged for pending a fiscal impact statement, those are the seagull impact statements. Well, well, the ones that are on our agenda pending fiscal. Impact Breast reconstruction. Pharmacy discrimination, army benefits, like how are those related under the state. and public school life and health insurance program. I'm definitely not an actuary or an insurance expert, but it's my understanding that anything that they feel may cause the program to incur an increased costs due to additional coverages they may have to provide that type of thing is what has been flagged. Do we, do we still I always understood DFNA was providing some fiscal impact. Reports, do they not have any involvement with fiscal impact anymore. They do, I believe they are doing those for the tax bills. That's it. I'm not sure, but I think so, yes. Senator, those, those are mainly the ones that will hit the general revenue whenever they do the the physical impacts DFNA, so this one's strictly employee benefits and how how bills could possibly affect those members in, you know, Yeah. Thank you. Thank you, Jill. Is there any other questions? Seeing none. I appreciate it, Jill. Uh, motion, motion to adopt motion by Senator Boyd, seconded by Senator Mark Johnson. Any discussion, all in favor say aye. I oppose like sign. Thank, thank you, uh, next, we're going to go on to the insurance and The Department of Insurance and if you would just come to the table and and give those, give those reports that were requested last week. Just to identify yourself and you're welcome again. Al McLean State Insurance Commissioner. I'm Jimmy Harris, uh, compliance director, sorry, and deputy commissioner, so we've got a new title in the last year, so I got to remind him he's deputy commissioner and everything else so um thank you, Mr. Chair. Just we'd gone over some of the reports in the previous meeting and were highlighted that one particular report regarding the that was had some reporting requirements and it was Act 955 of 2021, and the department had not filed those reports since then, so I wanted, I in your attachments I have provided a composite report hopefully start bringing up to date uh the the activity around this particular law and so that that report is intended to sort of summarize that and um because the the 2021 legislative changes Upd updated the processes used to review and evaluate cranial facial services and so these, these changes required a nationally approved craniofacial team to evaluate a person with craniofacial abnormality to determine if the treatment is medically necessary and to coordinate a treatment plan for that person. So that's what the gist of of that that law was and since the 2021 law, And it was Senator Irvin's law. since that law became effective, the department has received no complaints related to the operation and interpretation of the law. There were 4 complaints related to whether the services performed by a prosthodontist would be considered medical or dental, but there is no mention of a person with craniofacial abnormality being denied services after an approved cleft craniofacial team has reviewed the decision. So it it does appear that the 2021 legislative changes have provided a clear pathway for insurers to get proper treatment for craniofacial services, so that was the gist of the law. and the intent was the attachment that I gave you all was to bring you up to date and of course it's up to you if you want us to continue making reports on a biannual basis or what you want to do with the report. Senator Irvin, thank you, thank you, Mr. McLean, um, for your dropping off the report to me with your personal note. I very much appreciate that. Um, I appreciate the report. Um, do you know if those 4 complaints that whether those services were performed by Prostodotus. Um, do you know if those were part of the review process of of the the team not or are they outside of the review process, and they were independent claims. They were outside of the review. They hadn't gone through the cranial facial team up to that point, so no, they didn't, they didn't follow the uh the steps outlined in the law, so that's how they ended up with us. Well, I appreciate this and if with if you don't mind, I mean, Mr. Chair, if you don't mind, I'll work with them to revise and review this on myself because it's my law, but I'll, I'll work with you to change the reporting mechanism. to where it makes more sense, and I can do that with you individually if that's OK with y'all. Will that work? OK, we'll do that in addition to, but outside of What the chair is doing on the other reports, would that be acceptable? OK, thank you so much, Senator. I will, I will give you that bill, and we will do that. I'll work with them on your time. I'll, I'll work with them. If you guys want to just put together a draft of of of, you know, what I think would make sense, um, I think that that we can, we can manage, manage that. OK, glad to do that. Thank you very much. But that way, you know, we'll still have one bill on all all those subjects instead of, you know, two separate meals and I'll just, I'll just hand that off to you if that's all right. All right. Thank you, uh, do you want to give your general report or, or, or, you know, or do we want to do that later on for for this year. Yeah, I don't, I don't think we have any anything else prepared for for now and then except just highlighting those reports and so always happy to entertain anything, but we can come back later for a more general report. Well, just Uh, maybe just uh give that to the members that's on the committee now what what you had done at the end of the year. So, so we can be updated on on that general report that's that's been provided to the previous committee, OK, yeah that is that is that OK with the committee? All right, thank you, sir. You bet. Thank you, ma'am. So I thought we went through. A list of reports that this committee was and the only thing that was pulled out was Uh, Senator Ervin's cranial facial and I have that bill and we took some of them to, I had, I had drafted a bill with all of them in there, and I took the ones that we wanted to retain out and now I'm just going to let Senator Irvin. Take care of that. What we have, you know, put into eliminate or change, so I'm going to let her work with the insurance. I'm just wondering what I thought we had gone over most of this. And so the only thing we're waiting on is amendment or some uh enhance kind of reporting for this, it is and you know, rather than have all those others and then and then Senator Irvin did another one. We'll just, I'll just let her run, run the whole total package with her, her amendment on on this on this reporting. Well, the reason I ask is because you asked them if they had any other reports, and I thought. We had dealt with all this. Well, there was, there was a discussion on, on the general insurance report, the big insurance report that they do that they gave to the committee at the end of 24, and that's what I've asked them to give to all the membership, so so we can be up to speed on on, you know, their their reporting in the previous year. So well, I've got that. Hand it to me after the end of the last meeting plus an email. But with it attached. All right, thank you. We're gonna move on to uh to our bills, uh, Senate Bill 77 and Senator Johnson has something to pass out to the members. Thank you so much. Oh, you don't have to go all the way down there. Come on. OK, OK, all right. Yeah, it is a long way back. It's a long way back there. Thank you, Senator Johnson, just if you would, if you want to bring, bring your uh I'm gonna bring Mr. Bow Renshaw, who's not only a physical therapist, he's been my physical therapist, so I doubly trust him on this, but just, you know, go ahead and go ahead and introduce I'm Mark Johnson, Senate District 17 boo if you introduce yourself. Renshaw on behalf of the Arkansas Physical Therapy Association. OK. Um, Michelle just passed out uh an email from Elizabeth Pittman over in medical services and it's self-explanatory, uh, there is no uh fiscal impact that she sees, and I think we could even say it may be a positive impact, but I'll get to the bill and then I'll bring it up in a moment. Uh, this bill simply allows uh Medicaid to reimburse in a in a not. Right now it's in a hospital setting, it would allow it to reimburse in a clinical setting. Now, as a practical matter, What you see happen is that people, if they're in an area where they might have to drive 40, 50 miles to get back to that hospital and and get their PT there. They don't do it very well. They, there's distractions. There's a lot of reasons why, but a lot of it it's just, uh, my brother is also a PT, and he has told me he's seen many patients that they're, they're problems, say they have a knee replacement and they don't follow through for therapy, uh, they lose. range of motion in their knees and their problems. Persists. So I think we could see if people actually do it right and follow through for therapy, they have a much better clinical outcome and its ass. Pittman said in this, she said there should be savings from patients not needing additional surgeries or drugs if they're able to access physical therapy more readily. So that's, that's all that the bill does, and I'll be happy to answer any questions and Mr. Renshaw would be as well. Senator Irvin. Thank you. I really appreciate your due diligence on this, Senator Johnson and Medicaid getting a fiscal impact. I think it's really good information for us to know before we vote on something because I know the budget's tight and um I know we're trying to check on Medicaid spend as much as we possibly can, so we thought I'll make a motion to pass. All right, uh, is there any other questions. Go ahead, Senator Flowers. I, I can See the need for the bill. And, but I'm just wondering how, how is there no fiscal impact. On Medicaid and I'm, I'm gonna give you my shot. I can't speak for Miss Pitman, but based on what she's provided to Senator Flowers, here's the answer from my interpretation. This is some like a, a, a service that is paid for by Medicaid today. The only difference is the venue where it would be. So that the actual raw dollar cost wouldn't change at all. However, the dynamic effect could very well be that because someone actually goes to the closer clinic, gets their physical therapy done and completes what they should do to get back as close to 100%. as they could, then Medicaid division seems to be interpreting the same way I do and that that person would have less physical problems. Therefore, in the long run, if they could avoid further surgeries, further drugs, and it would actually be perhaps even a net gain for the system and that instead of being a burden on the system, needing yet another surgery, for example, then they would get complete their therapy. properly and therefore be well and not be coming back in for some other expensive follow-up treatment. I hope that answers your question. Well, it, it does, and it makes sense, but I'm just wondering, since it's always been now done in hospitals. Is there going to be the same type of Of routine or procedures expected in these private clinics. Yes, ma'am. These are Licensed physical therapists. These are under the same licensure uh just like if you know, an MD in a hospital or an MD in a private clinic, there's still medical doctors, and these are the exact same technicians and specialists. Well, I guess my question is, would that require DHS to have more screening to see if procedures that should be applied or prescribed for a patient are actually being followed I couldn't tell you what their procedures would be, Mr. Inshaw, do you have a comment on that? Yes, the outpatient, we're already credentialed with Medicaid and underneath that system, so the the outpatient clinical setting is no different than the hospital-based physical therapist. So. Thank you, Senator, Senator Boyd. Senator Penzo. Since we're kind of being disclosure happy. I just wanted to disclose that I'm a former physical therapist assistant, uh, haven't had my license active and probably 20 years, but wanted to go ahead and put that out there. Thank you. I'm relieved you're not practicing anymore, Senator. Are you, are you closed for your bill? I'm closed for my bill. Appreciate a good vote. You want to make a motion. I think Senator Boyd, well, I'm I moved a new pass motion and seconded by Senator Irvin. They're in discussion, all in favor say aye. I'll oppose like sign. Thank you, Senator. You passed your bill. Grant Wallace is these questions. Do what? Is he here? I have no idea. I'm gonna I'm gonna go on, uh, I don't know if the director of EBDs here with my bill, but we're going to Representative Warren, I think Senator Penzo for 1271. I'll just do it from right here, that is fine. OK. House Bill 1271, uh, addresses priority of liens, this bill rest as a current issue for consumers and lenders alike, specifically we are talking about new construction loans or add-ons to an existing property. The best way I know to make you understand what a bill does is to give you an example. Let's say a friend of mine decides to build a build a house. He has some money saved up and decides to do it without a loan. Before the House is complete, he runs out of cash. The cost of everything is increased. He goes to the bank for a loan, but he can't get one because he has already commenced construction. If the bank makes him a loan, every person who provides labor or materials from the beginning to the end of the construction process has priority in the courts, according to current statute. Over the lender who made the loan to finish the house. The lender doesn't want to make a loan because their loan is not secured well. The same thing happens if a contractor thought a closing occurred and began construction before the mortgage was filed. What this bill will do is anyone who's done work prior to a mortgage being filed as priority over the lender. Once the lender files their mortgage, their position is set, and nobody else has priority over them. A good lender will get proof that everyone who did work prior to their mortgage being filed has been paid in full. That in essence will put their mortgage in a first lien position. This has gone unaddressed for years. We want to give lenders the same lien protection as anyone else in the construction process. Any questions? So, so is there any just break that down, um, if, if this passes, Everybody that has done work prior to the, the loan being made is in a in a position ahead of the lender. But then they're going to check and make sure everybody's been paid. And then they're going to make the loan and then everybody else that does construction work after that. is in a 2nd, 3rd place, uh, position for the, for the loan. Because currently what happens is People can't get loans to finish jobs because the banks can't secure their positions because they're the way the statute is now, they're in last place no matter when that lien. That mortgage is filed Senator Murdoch. OK, thank you, Chairman. So being quite familiar with specifically the construction lien. Business, if you will. Typically throughout the process there there are liens. Um That are done each time money is Uh, paid. So therefore the um owner and the uh financer always in a good position as it relates to any liability, lien liability. So if the mortgage is filed first before construction takes place. No, this happens as a part of the contract in state work and any other work, and I've done several of them whereby you, you have to. file that you've paid each subcontractor at each payment you got to prove that at each draw, as we call it, before you release that money, you do a release of liens document to protect all those that you're talking about, so I, I hear what you're saying. I'm just trying to find the necessity of it, honestly, based on what's already going on. I've got, I've got some folks that could probably clarify his question. I'm not, I'm not really sure. I'm. Where you're at on the hangup, so um if you would just go down there to the, go down there with them. Senator Pennzo, yeah, yeah, that'll be fine. Do you want to step in? No, this is fine to me. camera. Yeah. Thank you, Mr. Chair. My name is Wes Lassa. I'm here on behalf of the Arkansas Land Title Association. I could not hear all of your comments because of the noise in the hallway, so. So, as I understand this bill, it's a protection in place to ensure that the financier and and the and everyone is protected properly through the lien process and I was just commenting from a construction standpoint that we do release of liens as the project progresses, whether a mortgage is filed or not, that's irrelevant to the construction contract many times we don't even get into that side of it for the work is to be done. We, you know, you pay me a draw, I have to show you prove to you payments to subcontractors for whatever work they've done, so you're always in a Proper lean position. I wish all were as sophisticated as that, but unfortunately, in practice that does not always happen. Um, so as Senator Penzo was testifying about the bill, the way the law is written now if construction commences prior to the recordation of a construction mortgage, all lien claims regardless of whether they were the first one who commenced construction, or they're the last person on the project 6 months, a year. down the road, all of their priority relates back to the date of commencement of construction, which would be ahead of that construction mortgage. If the construction mortgage is filed as it should be ahead of commencement of construction, then of course it has priority, and I understand the process that you're talking about withdrawal request and uh affidavits and securing lien waivers from sub-suppliers of the general contractor would do, but unfortunately it doesn't happen in all instances. And so if somebody wasn't paid in that circumstance and and they filed suit to and for. They filed a lien and then they filed suit. To enforce their lien, assuming that they complied with the statutory requirements to perfect their lien. They would be ahead of that construction lender, so where I would have a concern, but I my chair. Where I would have a continued concern if I'm hearing you correctly, is the position that puts Them in front of those that have completed the work. Let's just say it's not done as I'm stating and a um a trade. Has not been paid properly, and they've done that work. I don't know that I agree if I'm hearing this correctly, that they are rights should not, should be. Subverted by the I understand what you're saying. So, so nothing within this bill removes any rights of a lien claimant to file a lien to protect and secure their right to a payment for work or materials that they've supplied for the project. The only thing that this bill would do is allow for the construction lender whose loan is meant to pay for the labor and materials that were supplied to be in a priority position. over them. So if in your circumstance, that contractor had done work before the construction mortgage was filed, they would absolutely have priority over that construction mortgage, and nothing within this bill would change that. So if there's a situation where um construction commences on a project for one reason or another. The construction mortgage is later filed. All of those trades, all of those suppliers who had done work or supplied. material up to the point of the filing of that construction mortgage have priority, and then that construction lender and their borrower would work with those suppliers to make sure that they're paid secure lien waivers as you described, so that that mortgage is then in the first position, but it does not remove any lien claimants' rights to file a lien to protect themselves, right? And so I guess my concern is in our Pastor Mike is that once that mortgage is filed. How that they jump in front of those that have done the work. I understand their financial interests and I and I understand that the trades still have a claim, but now they have to get behind those who have done work ahead of the filing of the construction mortgage are still ahead of the construction mortgage. They, they do not lose that priority position. It would only be trades that come in after the construction mortgage is filed that would be junior to it. So those who did work prior always will have priority. And that, and that construction loan that is taken. is to pay the people afterwards, so it should have a priority position because that money is used to pay the people. So, does that make sense, supposed to be right. Yeah, it's supposed to be so um. Can I go to Senator McKee and maybe come back and after you've heard some more discussion, Senator McKee. Thank you, Mr. Chairman. I didn't mean to cut in line priority. So the way I understood you explaining it to begin with was That giving the lender the priority would, I mean, the word priority means they would be ahead in line of the people who were completing the work after, after the mortgage is filed. Not the ones that have done work prior to the mortgage being filed. OK, that clarifies, does that clarify? Well, not it didn't clarify, it only states the problem because filing a mortgage still does not Take care of the people working necessarily when you just jump them in front of that, in front of them that I, I mean, they should be secured. I guess the thing I'm, I'm, I'm stuck on is jumping in front of the people out there working and they become less priority then based on what I'm hearing, um. You know, now what should happen is to ensure. The trades are taken care of is the process I talked about previously, maybe some some some some wording of that because then we're guaranteed that those tradespeople are paid and that the link everything is clean, but the way it's happening now, if something goes bad, if I'm hearing you correctly, the tradespeople. The workers and probably the ones that Maybe less complicated if you will, in some situations. They, they're in a different fight now to get there, they get, they get satisfied. So does, when you, when you take a draw from the bank though, it's to pay specific invoices pay for the for the work, yeah, right, so anytime I've done a job, I present what invoices I'm going to pay and I get a draw. Well, we don't not necessarily present invoice you present, you present a request and they pay you because you get labor and material and overhead. There's a lot of things in that drawer, not just invoices. It's not a 1 to 1 deal, so but it's usually there's documentation on what you're going to pay with. Sure, right. And that's, and that's OK. I'm OK with that. It's just what where I'm here in Priority whereby the once it's filed. They get it in a different position, but um Yeah, that's my Senator, if I may take one more stab at trying to explain this, so If a construction mortgage is filed today, no work has commenced. Nothing has been done. You've got clean raw land, and that construction mortgage is filed. It's going to have priority as a matter of law ahead of all those trades, uh, when once construction starts, it's going to be in a first lane position. So what this bill is attempting to do is in those situations where construction started before that construction mortgage is filed is to restore the ability of that. construction lender to have priority over Potential lien claimants who come in and do work after that mortgage is filed. Anybody who did work ahead of the filing of that construction mortgage will have priority over it, uh, and so they're not losing their rights and none of the, the future suppliers of labor and material are losing any lien rights, they still have the right to file their lien to secure payment which they're due. OK, I think I understand. I think it's still the same understanding, and that's just my issue with it, that's all. Thank you. Senator McKee. Thank you, Mr. Chairman. So, It's even, even in giving them priority, is there any guarantee that their responsibility is to take care of the tradespeople who have also filed liens. I mean it's not changing the process. In any in any form or fashion as to how they do it today. So as if if the situation works and a transaction and Senator Murdoch described, then obviously you've got draw request, um. Payment in payment of invoices, other ancillary fees and costs that are associated with that, and that would continue, so this changes nothing with respect to how those draw requests are are made or approved. OK, thank you. So I guess the way I look at it, you pull out a new construction loan. The lender is priority and all the trades come in line afterwards. If, if If the construction loan is pulled in the middle of the construction process. This allows them to clarify, verify that all the liens prior to have been settled and then it starts that process over where they're in first position and then all the trades come after, so it really doesn't change the process. It just allows the slate to be cleared of the old leans and insert them into the processes the new construction. Loan. Senator Murdoch, OK, so let, let me ref follow up and let me give it to you like this. During that construction loan process it depends on the priority should be the people doing the work. The mortgage today. Sir, is it today or is it the lender? On a new construction loan, who's in first place? I, I really can't answer that question the lender. So I hear, OK, so my, my concern is what it should be during the construction loan process because really where the where the lender. Gets made whole is from the buyer from the the the the the the the the um The applicant or the the um Mortgage, that's how they're going to be made whole for what the worker has done. So during that you typically 9 month period called the construction loan. Priorities should be given to those people doing that work during that time, even if the mortgage is found. That shouldn't alleviate those workers because they are the one in that in that construction long period, it's really, really, really on the stick here for time, effort, money, labor, and materials. This, what this does if I understand it correctly, it jobs. Everybody in front of them, if you will, during the construction loan period. So usually when the construction loan is over, the the contractors go away. They're paid and they're gone. Now the relationship is between the mortgagee and mortgage, so that's how all of that settled, but why are we in during construction. Are we putting somebody ahead of the people doing the work. There's, if that makes sense, but I don't think you realize um that that's exactly how it is set up on a new construction loan, any new construction loan that's taken out today, that's how it, how it works is the lenders in first position. That's any, any construction loan that is pulled out. So, so this, this hurts the, the consumer that's wanting to finish the house, they can't get a loan because it's the bank's not going to loan money that isn't secured with the property. That's the security, it's the property. But, but they can't, they can't attach to it under the way the statute's written now. They come at the very end of the line. They're the last to be paid. Today if you pull, like if I go to the bank and say I want to build a house, I'm going to pull out a construction loan and I'm gonna, the, the bank is going to be the first lien position. OK. So this, this doesn't change that process. If we're in the middle of the process, it allows them to be in the first lien position, and they verify that everybody's already been paid at that point. I think we're probably talking about something different, I, I, I really do. I think this labor in this worker getting paid versus what you're talking about insecurity. I think we probably mixing something here in the statue and I'm so. But OK, we got some more additions to this So Representative Warren, uh, I have no idea who you are, so you'll introduce yourself I'm Billy Robeck. I chair of the legislative Committee for land title and I'm an agent, so I'm the one that sits in front of the customer. And so let me, maybe if I could explain it this way. Many in my 30 years, many times I'll be sitting in front of somebody who started construction using their own money to build a house. I just had one. And they go to get a mortgage loan to finish the project. They ran out. And I tell them, I said, Well, you've already started construction, so I can't guarantee the bank. The correct position. I can't guarantee the bank that they have first lane position. At that point in time, and they're like, why not? And I'm like, well, because not only the people that did the contractors that did work before this mortgage, but any unknown contractors after this mortgage also have priority over the mortgage. It's not logical, and they're like, well, why don't you fix it? And I'm like, well, easier said than done. It's a lot of process and really it's something that as an industry has needed to be fixed. But it doesn't directly impact us. It impacts the customers that we try to help. So it's been on our legislative agenda for a long time. It's, you're right, the contractors do deserve to be protected. To the extent that they did the work before the mortgage was recorded. So that didn't change that. They still have priority. It just gets that mortgage. In the right slot. So think of it this way. You got a footing guy, a concrete guy, rebar guy. Maybe a framer. And then we run out of money. Those guys have priority over the mortgage. That now and after this. Passes. However, the guy that does the touch up paint at the very end. He hadn't even entered the project yet. Right now he's in front of the mortgage, regardless of the fact that the mortgage may have been recorded a year before he even steps foot on the project. Well, it just doesn't make any sense, you know. He ought to have rights, but his rights should be behind the bank because the bank recorded the mortgage before he did the work, but that's not the way it is, and that's what causes the problem. And, you know, like I'll meet with somebody who I just did out Canis Road. A guy had $100,000. Cut down the trees, made his own lumber. In his mind, he was Taking a piece of property he owned outright. He was improving it to the, to the extent that he could, and then in his mind, when I run out of money, my collateral will be worth more. I can go to the bank. I can borrow the rest of it. The problem is the bank wants us to guarantee them that they're going to be in front of any subcontractor contractor. After that mortgage and as it is today, we can't. They're gonna be behind who knows how many subcontractors that hadn't even stepped foot on the project yet. It just doesn't make any sense. And so that's what we're trying to fix. The way that I, I put it best is that we want to give the lending institutions, the mortgage companies, the same right as everybody, every lien After that mortgage and as it is today, we can't. They're gonna be behind who knows how many subcontractors that hadn't even stepped foot on the project yet. It just doesn't make any sense. And so that's what we're trying to fix. The way that I, I put it best is that we want to give the lending institutions, the mortgage companies, the same right as everybody, every lean holder in the process. 3 people do work, bank files a lien. The lien ought to be 4th if that's when they file it. We're giving them the same rights as everybody else that does work in this process. Otherwise you're treating them as basically a stepchild and regardless of when you file your lien, you're at the end of the line. We don't care. That's the way the statute is right now. They do not get to have a position based on when they file the statute has it where they're at the end and behind everyone. So we're just saying treat them the same as you treat everyone else. Senator Flowers. OK I talk to you too. Gentlemen, before the meeting, now I'm a little bit more confused. I thought I had this set in my head, but OK, so you go to the bank and you have a secured a mortgage for construction. Purpose because it says for the purpose. Of construction or repair of the improvement. And so, Work begins, but with that mortgage, There's a draw. As Senator Murdoch said. So all of the money That was You're expecting through that mortgage has not been paid out. But work starts. And maybe There are some issues. And the construction worker. Or the person that provides the materials and supplies. is not satisfied. With their payment. And work stops. And litigation. Comes in. What is the bank's position now? They haven't paid everything that they promised to pay in the mortgage. What, what's, what's going on here because I do agree with Senator Murdoch about When somebody performs some work, provide some supplies. A materials they should be paid. Yes, ma'am. Uh, with respect to your question, Did construction commence prior to or after that construction mortgage was recorded after recording, OK, then that construction mortgage would have priority over any of the lien claimants with respect to work or supplies that they recorded as a matter of law right now, the way the statute is written. If construction had commenced. Prior to that construction mortgage being recorded, then not only would those who provided work or labor prior to recording that construction mortgage be entitled to priority, but the last person who screwed in a light bulb at the very end of the project leaps ahead of that mortgage as well, because all of their priority relates back to the commencement of construction, which was ahead of that mortgage being. recorded. So what we're seeking to do is in that situation in what we call a broken priority situation, construction starts before the mortgage is recorded. is to say those lien claims or those suppliers of labor and material who did work or supply materials before the mortgage is filed, they're absolutely entitled to priority and we will make sure they get paid and secure lien waivers with respect to what they had done. It would only, it would only be those who come after that construction mortgage is recorded. That would have that would be inferior to the construction mortgage. They still have their lien rights, and this would not remove any lien rights. It only establishes where they rank as far as their priority is concerned. So basically it takes a situation where what we call a broken priority situation where construction has started before the mortgage is filed and resets the clock as to that particular construction mortgage. It allows them to settle up. The lender and the borrower with all those who provided labor before their mortgage is filed, secure those lien waivers and reestablish the construction lender as being in a first position, then now all suppliers of labor and material, let me ask you this, ma'am. You say right now. The construction mortgage. is first if no work has been performed, correct. But You're talking about construction and mechanic liens, material men's liens. And then a a bank that has not distributed all the money. To that borrower for that construction mortgage. But here comes a A laborer or a construction person providing labor, materials, supplies, whatever. And they file a lien. You telling me the bank is going to be able to get jump ahead of How, how does this even work? I mean, I don't even bank would only be secured for its lien with respect to the funds that it has dispersed. So if you've got a $200,000 construction mortgage, and they've only dispersed $20,000 all they can seek to recover is $20,000. They're not going to get a windfall of $200,000 because they they're not out there. Um But, but what you're saying Is it The bank is already in front of those. Construction and repair workers or supplies suppliers or only if their mortgage was recorded before construction started. Would they be in front? If they, if they're so, so these people that are providing the work. They're going to take after the bank comes in and says I want my $20,000 back. Is that how this works? I mean, I, uh. Well, I'm not Um If you, if you're saying priority is given to the bank. The priority of their lien, the amount that they would be entitled to secure in a foreclosure is only, is only going to be for the amount that they've dispersed. I understand that, but I'm, I'm just trying to see how is that worker. That supplier of goods or materials. How do they get their money? If the person that took out the loan in the first place and needed some money to pay anything, I mean, With the bank come in? To the lawsuit. That's filed by the person that holds these mechanical material ones lanes. They should, they should be named as an interested party because they have a record interest in the property. The judgment is going to be first for the bank. And then next for the material men or the Mechanic lien holder construction started after the mortgage was recorded, then yes, the bank would be in a first position lien. But it's only going to be with respect to what they're out. I mean, if they're not out anything and their borrower is still paying on their debt to the lender, then the bank has not suffered any loss. So they can't Uh, inject themselves. In the lawsuit. Well, they're an interested party because they have to be noticed, but they have to be noticed and given an opportunity to protect their interests, but they can't make a claim because no default has occurred as to the bank. They're they're going to argue about the priority of their position would be what they would argue about. So how would that turn out, Senator Flowers? I just want to know because I mean this is, that's kind of serious if the construction mortgage was recorded ahead of Any work being done. Then the construction mortgage should be ruled to be in a first priority lien position. So Senator Boyd, Thank you, Mr. Chair. This is a quick yes or no question, Representative Warren. Um, so I see construction happening 7 days a week. So when you refer to business days, I just want to clarify you intend that to be Monday through Friday exempting major US holidays. When you say 4 business days, yes, thank you. Senator Murdoch. OK, let me see if I can find some clarity in this. The, the, the purpose of a construction loan. Really the sole purpose is to pay for the work, the house being built, if you will. So, The first thing done many times is dirt work and a slab. So at that point, the worker incurs 20,000 $50,000 in in work. That construction loan, then going back to the original process, the contractor should be paid a draw for that, they issue a lien release saying I've been paid my 50,000 or whatever for that. Here's where I want to get clarity. At that point, So the construction loan was in place, so therefore, the financial institution is going to ensure That the contractor gets paid for that first draw, the dirt work and whatever. So therefore, the contractor now is really in first position, really, because they're getting paid. So my understanding is not the wording you have, but I think my understanding is the contractor stays in first position because each draw they're paid and they released the lien and they're not even in lien game no more. Until they do some more work. And so the construction loan is for that purpose. But the the the semantics that you're using in this wording of this. It's for. I guess the whoever the institution that wants to read this, to say this, that they're in first position or something. It, it's kind of convoluted in my opinion. It's Push it, please push your, push your back so sorry, Mr. Chair. It's, it's to establish some statutory certainty with respect to where the lien claims line up if if a lien claim of supplier of labor or material wasn't paid and had to actually go and file a lien. Um, we don't ever want to see that happen. We want them to be paid with the draws on the construction mortgages you and that's why the process is in place that I'm saying that I get confused a little bit in that and where you, the way this is written is that because that the lien release when I do, whomever does that work in each phase, each draw, they're getting paid, which is the purpose of the construction law, OK, all right, I think I understand better. Now I may have talked myself into something. I don't know that this say it. Uh, I appreciate the debate, but if we don't get this priority right, those projects that were possibly self-funded and there's still something owed to those, you know, workers. That, that mortgage may never happen because of the priority situation we have in place, and this this priority situation allows the bank to be comfortable with a with a with a loan to move forward and those even those previous people to be paid, so and and everyone afterwards because of the position that that that bank has, so. Uh, is there any other questions? I think everybody that signed up for or against the bill is, is, is at the table is is anyone else uh of concern that would like to speak for against the bill I see none. Huh? No, no, no, no one's here against the bill, uh, so, Senator, you want to close for your bill? I, I think we're in good shape with the discussion, so I'll make a motion too fast, motion seconded by Senator McKee. Any discussion. All in favor say aye. All opposed like sign. Thank you, Senator. I think I have, if you, if you want to take a little break, Senator Penzo and Representative Warren I'll I'll run Senate Bill 150. Thank you. Senator Blake Johnson, you may proceed with Senate Bill 150 and please have your guest identify himself. Thank you, Senator Blake Johnson, District 21. Grant Wallace, director of employee benefits division. So, uh, chairman and members, this bill, tries to help with a problem. Where our retirees, uh, you see a lot of commercials in this Medicare Part C, where they might uh enroll in something that's not beneficial to them to where the director can can work and, and get those back on without having to wait the year time frame to re-enroll them in our system rather than than with Part C. You wanna, you wanna say anything else. The only thing I would add is that currently state law there is a prohibition that once you leave the state plan, you cannot come back as a retiree, so the confusion when you get into these Medicare Advantage plans with some misleading advertising that somebody might inadvertently leave our plan and not realize that when they sign up they think they're signing up for an additional quote unquote benefit. They may leave our plan and may not realize that the CMS does have an appeal process by which somebody can say, look, I inadvertently did this. There was misleading advertising. I got a phone call that tricked me in to signing up for this plan. CMS rules and says, yeah, we agree with you, we uphold your appeal. They roll you back. They revert you back to the plane you were on, so we get into this crux within our file sharing our eligibility rules of CM. mess rolling them back onto our plan, we're saying they're ineligible for our plan. Now the member is stuck in no man's land, so to speak, when in fact we do, we do want them to come back onto their plan. We do understand that there are situations that some of our retirees get into inadvertently. We want to work with them. We want to make sure we're doing the best for them, that this bill gives me that flexibility to continue to work with them and do the right thing for our member at the end of the day. Senator Mark Johnson question. Thank you, Mr. Chairman. Mr. Wallace, thank you for all you do. In your capacity and I had to observe it sometimes and, and you cover a lot, uh, I have been given information about how this problem has affected not just people that are retired state employees, but a lot of people, and you said misleading advertising and I, I see it and I, my, I mentioned my bill a while ago, my brother's a physical therapist, and he has had patients that had to deal with this, and he is The only thing he ever told me when I was first in a position to turn 65 and go Medicaid, he says, Whatever you do, don't do a Medicare Advantage plan, and I'm, that's not to say there aren't good ones. Let's not say they aren't appropriate for some people, but Lord help us, she made a mistake. We can't let you fall in the cracks. So thank you for this, and I only question I really had specifically is what are the time periods of when you can revert or Is there a limit on Reverting more than once. There are no real time limits, you know, it can happen throughout the year at any point in time, yes, there is the Medicare enrollment period that happens in the fall, but as people age in and kind of go through this, you can make changes to your part D plans. You can get behind on payments on Part B plans, all of those things factor into all of this, so that's to answer your first part of your question, it can happen at any time now for our retirees. they have one time, one time a year in the fall to make changes to their retiree coverage. They can go with our Medicare Group Advantage plan or they can go with our traditional supplemental plan, but I guess I didn't ask that very clearly. Once they make that opt out thing. I'm just talking about our participants, not the general population. Is that a one time thing or is it the annual other than the annual thing is that, in other words, once you go out, I assume this bill allows you to come back and it, but is it like indefinite? can you flip flop, I guess is right, so. The, I think I don't want to kind of clear up two issues and just want to make sure that I'm answering your question. There was an opt out condition when our group Medicare Advantage plan rolled out, if you remember. I've done away with that because it created too much confusion and too many issues. We do have an open enrollment experience which I was alluding to. So if you remain covered under our plan either through the Medicare Advantage plan or through our supplemental plan, and you stay under it, you can switch one time a year. Once a year, a year during open enrollment. Now if you leave either of those plans, if you opt to leave our plane entirely, you are gone. And you cannot come back. And that provision is maintained. Well, it fixes it only in the issue of if you get into a situation with your Medicare Advantage coverage. There are reasons people want to leave our plants, and then it's OK, it's justifiable. It's a better thing for them. That's fine, but we're not just giving them the willy nilly flexibility to come on and off. That was my question. Thank you, Mr. Wallace. Thank you, Mr. Chair. Senator Flowers. Thank you. So what will this, what does it mean when, when you have the Uh, ability to cooperate with the US government. In matters of mutual concern pertaining to federally funded programs related to employee benefits division including without limitation, Medicare. What, what are we, what does that do? What kind of cooperation are you talking about, right? So CMS obviously does the rules and regulations around the Medicare Advantage plan, the Part B, Part C, Part D plans with all of that. This just gives me when they come up with a rule or regulation around how those operate. It gives me as the director. flexibility to make sure our Medicare Group Advantage plan coincides with that, works with that. There's file shares that occur on a weekly basis around eligibility, who is participating in what, what level of coverage do they have? It just keeps our ability to coordinate and make sure that that operationally goes as smooth as it possibly can if there is an issue for the example that we keep using around somebody inadvertently signs up for a Part D plan when they have our group coverage, they're actually kicked out of our group coverage. We don't, and if they come back and say, look, I didn't intend for that. I really want to be on the state of Arkansas group coverage. Medicare has typically said, OK, yeah, we see where that was a false advertisement where we see where you inadvertently did that. You go back to that plan, so this just helps us to continue to do that work and make sure that we don't get into an issue under state law where we're We're quite frankly, we're not supposed to bring somebody back on the plane, and we do. So, do, does your office then, um, give Information or advice or consult the Retirees are the employees of the state of Arkansas about What's in their best interest or try in some way to explain. All of this that they may not. We do our best to try to educate and explain. I draw the line at advice. I don't think it's appropriate for us as an entity to be offering anybody insurance advice. That's not really our role, but we do educate all the plans we educate on the implications that if they do make a change in their Part B coverage, Part C coverage or Part D coverage that it would kick them out and that there they are at risk for leaving the state planned forever. And so again, yes, we're Do our best to educate and inform. We do draw the line at advice. Well, just tell me, last question, Mr. Chair. How do you do that? Is there a newsletter? What what is this? So we do newsletters. We have walk-ins all the time that we help one on one. We have our Facebook, our social medias that put out educational information. We've got our website and we've got printed materials that and we are doing more of an outreach effort to get into more. facilities, more retiree groups, all of those and talk and meet with them. I've got a question for you, Mr. Wallace. And so I, I think I understand what the purpose of this is, but that said, it says the director may cooperate with the United States government in matters of mutual concern pertaining to federally funded programs and so I guess my question is, as you had said, you stated something along the lines of doing best for our members. Um, so I went back to the Wall Street Journal to see how many articles I could find. regarding our state, you know, the, the company who has the contract with our state Medicare or Medicare Advantage plan that we, we use and I counted 17, and that doesn't even include the data breach articles or the one regarding the unfortunate death of the CEO. So one of them was titled Antitrust Probe UnitedHealth, February 27, 2024, 122924 UnitedHealth's army of doctors helped to collect billions more from Medicare. What happens when you, when your insurer is also your doctor and your pharmacist, June 13, 2024 in the Wall Street Journal. So would you agree that those uh titles, the, the content would be of mutual interest to the state and the federal government. Yes, so will this empower you to work with federal government to address those concerns if something comes up and they ask for our assistance to turn over information or anything like that, absolutely we would. OK, thank you, Mr. Wallace. Any further questions? Sing no anyone signed up to speak for or against. No one in the audience, OK. Uh, do we have a motion? Uh, can I close? Oh, sorry. Yes, appreciate it, chair. I think this will help our members and be able to if if they're taking advantage of, get back on our system and allow the director that flexibility and I would make a motion to adopt. Thank you. And we got a motion. We've got a second. All in favor say aye. Any opposed? Herring done, your bill passes. Thank you. No, we're good. Senator Penzo, I think we're on 1273, correct? All right. You, you got anybody that you need hopefully not now hopefully not. Uh house Bill 1273 clarifies the superiority of lean between DF and a and a purchase money mortgage. Uh, this bill is just providing language where there is none for the state of Arkansas. This language will mirror what is currently. place with the IRS. When someone purchases a piece of real estate with any level of investment. In it and secures a loan for the balance owed, the resulting loan is considered a purchase money mortgage. DFNA has agreed that any lien they have is inferior to this type of mortgage, and there are actually mirroring the IRS on this right now. This will just put this practice in Arkansas statute. Any questions. See then, uh, you want to close your bill? Just appreciate a good vote. All right. What's the will of the committee motion by Senator Boyd, seconded by Senator Johnson. Any discussion? All in favor say aye. All opposed like son. Thanks, Senator, you have passed your bill. Thank you. I don't see the sponsors for Senate Bill 94. There other business need to come to the committee. Yes, ma'am. like. You're, you're, uh, your mic's not on. It does SB 94 is back on the agenda today. And I'm not certain about the rules that we have. I know we discussed it and it was presented to us last week. But I note that there are members of the public that are here that testified against this bill last week. And it just seems to To me, to be fair to people that come in and have an interest in these bills one way or the other that they should know. Whether or not it's actually going to be presented. That's, that's what a regular agenda is, and I can't I can't force members if they've got other things going. When does it come off regular agenda? How many times does it happen? We took no action on it. It was pulled down last time, heard no action, so I guess this would be the first time of not hearing that bill. I think it has to happen twice. 33 times, I'm sorry first time last week doesn't count. Well, this is the 2nd time if it's on there again, it'll go to the deferred and there's no and and I had asked Dodson to work with me on some some potential language changes, um, I will try to make sure that that's addressed before our meeting next week, um. He was going to run it today, but I think the reason he's not here is because I wasn't quite there with him yet, so we're we're working on that and hopefully next week we'll have something worked out and be able to run it, so um That's kind of the goal right now. So, it just seems to me that you want to identify who who it is that's here for it, uh, to speak one way or the other. And to try to have some dialogue with them. You're shaking your head like you agree or something. I do. OK, well, we're all there I'd I'd be happy to chat with anybody afterwards if You'd like to speak with me. So our insurance commerce photo is next Tuesday, and we'll do that, um, at the beginning before we, before we start our, our Business. So, thank you, members. We are adjourned. OK Thanks ladies. Yes, ma'am. Good job, Mark.