Legislature(2023 - 2024)ADAMS 519
05/08/2023 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HJR2 HB38 | |
| HB21 | |
| HB112 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 112 | TELECONFERENCED | |
| + | HB 21 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HJR 2 | TELECONFERENCED | |
| += | HB 38 | TELECONFERENCED | |
HOUSE BILL NO. 21
"An Act relating to group insurance coverage and self-
insurance coverage for school district employees,
employees of the University of Alaska, and employees
of other governmental units in the state; and
providing for an effective date."
2:34:58 PM
Co-Chair Foster invited the sponsor and her staff to
introduce the bill.
REPRESENTATIVE SARAH VANCE, SPONSOR, introduced HB 21. She
offered a PowerPoint presentation "HB 21; School Healthcare
Consolidation," dated May 8, 2023 (copy on file). School
districts were experiencing challenges in recruiting and
retaining teachers and staff, which was an issue compounded
by the rising costs of health care. She had attended a
local school board meeting in her district at which she
heard the teacher representative for health insurance plead
with school board members to hold an emergency meeting to
discuss what could be done to better recruit and retain
teachers. The rising costs of health care and premiums for
families were forcing teachers to leave the state or the
profession. She recommended the introduction of HB 21 after
attending the meeting.
Representative Vance advanced to slide 2 and explained that
the bill had been offered and heard in prior legislatures,
but only as a requirement that all school districts
consolidate. She indicated that HB 21 was different in that
it supported local control and was completely optional for
schools. She moved to slide 2 and relayed that according to
an Institute of Social and Economic Research (ISER) study
from 2019, there were three aspects of public education
costs in Alaska that set it apart from other states: small
schools, health care, and energy.
Representative Vance continued to slide 3. Alaska had the
highest per-capita health care costs in the nation which
negatively impacted private and public sectors of the
economy. The high costs put downward pressure on wages
which made it difficult for schools to offer nationally
competitive salaries to teachers in Alaska. Her goal was to
ease the financial burden on school districts and give the
state more leverage to negotiate with health care
providers. She moved to slide 5 and relayed that the bill
would amend current statute to allow the option for school
districts, the universities, and governmental units such as
cities and boroughs to participate in AlaskaCare. The
aforementioned entities would have the choice to opt into
the pool and enable the Department of Administration (DOA)
to negotiate a better cost of health care.
Representative Vance continued to slide 5. She explained
that the main benefit of consolidation was that it would
save money. By expanding the number of participants in a
health care pool, the potential for savings increased. Most
of the state's school districts were small and carried the
cost burden alone. Several school districts had responded
to the proposed consolidation and reported possible savings
of about $7 million per year. This would allow for some
districts to not only close their budget gap but provide
better health care to participants. The Mat-Su school
district had reported that if all district employees'
bargaining units were to be consolidated, the district
could save up to $7 million. The savings would be about
$3,000 per employee and would equate to a $125 increase in
the Base Student Allocation (BSA). If all districts chose
to consolidate, the savings would be about $200 million per
year. The bill would also provide more health care options.
Some districts were facing challenges in finding affordable
health care options due to high-use numbers and the bill
would expand options to offset high-use. An additional
benefit would be that the bill would reduce the burden on
staff and allow schools to focus on providing quality
education.
Representative Vance advanced to slide 6 and concluded that
the bill was intended to reduce education costs and better
serve the needs of Alaskans.
2:40:59 PM
Representative Vance offered to review the sectional
analysis (copy on file).
Co-Chair Foster replied that he would like to hear the
sectional analysis.
Representative Vance relayed that she would provide some
highlights of the sectional. She indicated that the one
change made by the House Labor and Commerce Committee was
Section 9:
Section 9. Authorizes the Department of Administration
to investigate the potential costs of any interested
school district, local government, or the University
of Alaska, and share that report with the Legislature
before the Commissioner approves their admission into
AlaskaCare
Representative Vance continued by highlighting Section 3 of
the sectional:
Section 3. Allows the Commissioner of Administration
to expend from the public education fund (AS
14.17.300) to the group health and life benefits fund
(AS 39.30.095) a total of $100,000,000 or less as
needed to pay claims submitted by school district
employees who are covered by a policy of self-
insurance provided by the state; and, requires the
Commissioner of Administration to repay the public
education fund, over a period of 10 years, the full
amount of the commissioner's expenditures from the
public education fund
Representative Vance explained that Section 3 had been a
particular topic of interest and she deferred to the will
of the committee on whether to include it in the bill. She
relayed that Sections 4 through 6 contained the majority of
the content of the bill. She stated that Section 4 allowed
schools districts and the university to be part of the
state health care plan. The other sections [Section 5 and
Section 6] gave the board of regents, universities, and the
Regional Educational Attendance Area (REAA) the legislative
authority to optionally participate in the plans. Section
10 authorized DOA to provide group medical insurance to
school employees, school district employees, and other
governmental employees by means of self-insurance. If it
was not beneficial for an entire unit to opt into the pool,
DOA could determine that the unit would benefit more
through a policy of self-insurance. She emphasized that
there were options depending on the cost and the health
care provider.
Representative Vance continued on Section 12 and explained
that it ensured that the bill was applicable to collective
bargaining agreements and other contracts that would become
legally binding on or after the effective date of Sections
1 through 8. Section 13 would require self-insured school
districts to transfer the closing balance of their self-
funded insurance reserve account after enrollment in a
health care plan administered by the state. It would
require that the amounts be applied to offset
reimbursements owed by the school district. She continued
that Section 14 noted that the bill would not automatically
go into effect and would allow for a one-year transition
period to adopt regulations and gauge interest in
consolidation. It would allow DOA to see the cost and
benefits and any required further analysis.
Co-Chair Foster invited questions from the committee.
2:45:21 PM
Representative Stapp expressed his appreciation to
Representative Vance for bringing forward the bill. He
asked about the actuarial analysis of the impact on
AlaskaCare. He thought that small and high-risk groups
would flow into the AlaskaCare plan, and he thought it was
unlikely that larger entities like the Anchorage School
District would consolidate due to the nature of cost. He
understood that the last time the state looked at the plan
was in 2014 and he thought it would be good to look at it
again. He asked if the sponsor or a representative from the
Division of Retirement and Benefits (DRB) wanted to comment
on the potential influx of a high-risk population into the
plan.
Representative Vance responded that she had spoken with DOA
and it was not planning on doing actuarial analysis of the
bill until it reached the House Finance Committee. She
noted that representatives from DRB were available for
questions.
Representative Stapp asked if someone could provide
comments on the overall impact of the bill and of the
influx of high-risk individuals on the overall plan.
AJAY DESAI, DIRECTOR, DIVISION OF RETIREMENT AND BENEFITS,
DEPARTMENT OF ADMINISTRATION (via teleconference),
responded that DRB had not done any actuarial analysis yet.
The division had only determined initial operational costs
based on the initial analysis of the bill, which had been
submitted to the legislature.
Representative Stapp asked for more information on the
method of actuarial analysis. He opined that an actuarial
analysis was a key ingredient when determining the
viability of the long-term impact of the bill.
Co-Chair Foster asked Mr. Desai at what point the actuarial
analysis would occur.
Mr. Desai deferred the question to his colleague.
2:49:04 PM
ANDREA MUECA, HEALTH OPERATIONS MANAGER, DIVISION OF
RETIREMENT AND BENEFITS, DEPARTMENT OF ADMINISTRATION,
JUNEAU (via teleconference), responded that the division
was planning on testing three scenarios when it conducted
the actuarial analysis: a neutral cost impact, a reduced
cost impact, and an increased cost impact. Depending on who
joins the plan, it was unclear whether the state would save
money, lose money, or be financially unaffected. She
relayed that the division would get updated analysis within
three weeks.
Co-Chair Foster noted that part of the reason for the delay
was that the cost for the actuarial analysis was
substantial. He asked what Ms. Mueca for the expected cost.
Ms. Mueca responded that the request would cost around
$30,000.
Representative Stapp understood that there was a similar
analysis conducted in 2014 for the Senate that had a cost
of about $200,000. He asked if Ms. Mueca was sure she could
do a thorough analysis for $30,000.
Ms. Mueca responded that she was not familiar with the 2014
analysis and she would have to look through the study for
updated information. She thought the turnaround would be
quicker if the division could follow a template for the
analysis.
Co-Chair Foster thought he saw an email recently that
suggested a range of $150,000 to $200,000.
Representative Vance commented that the progress of the
bill was at the will of the finance committee.
Representative Hannan understood that there were two
districts represented in the packet of letter of support
for the bill (copy on file). She noted that some districts
had more than one insurance plan because there were
different bargaining units represented by different
individuals. She wondered if Representative Vance had
received direct communication from other school districts
indicating interest in consolidation. She was generally a
"huge fan" of universal healthcare, but she also had served
on her health plan's trust and understood that teachers
were typically expensive to insure. The most expensive
periods of time in a person's life were childbearing years
and the years proceeding retirement, and many teachers were
young women. She asked if the sponsor had heard from the 51
other districts in the state and wondered if other
districts were interested in joining the plan.
Representative Vance responded that she had emailed all the
districts asking for their interest and input and she had
heard back from Ketchikan, Kenai Peninsula, and Mat-Su. The
districts as a whole had been quiet and she was unsure if
districts were still deliberating. The Mat-Su and Kenai
Peninsula districts were some of the larger districts and
had indicated that they wanted the health care option to be
available.
Representative Hannan commented that the letter of support
from Mat-Su was not in her packet and she would like to see
the letter. She was unsure if the Mat-Su district had more
than one unit represented in the plan or whether the plan
was unified.
Representative Vance responded that she would provide the
information to the committee. She recalled that Mat-Su had
four bargaining units and it was a conversation to see
whether some or all wanted to join the plan. She
anticipated that each school district or unit would come to
DOA and have a conversation about their needs and determine
whether the plan would save money while providing the same
level of health care, or whether it would be more costly.
Co-Chair Foster noted that there was a representative from
DOA available for questions. He asked if DOA could comment
on the actuarial analysis.
2:56:04 PM
KEN TRUITT, LEGISLATIVE LIAISON, DEPARTMENT OF
ADMINISTRATION, (via teleconference), responded that DOA
would begin an actuarial study when it was requested by the
finance committee. It could not begin the analysis until it
was formally requested.
Co-Chair Foster asked if Mr. Truitt could provide more
information about the cost.
Mr. Truitt responded that the cost was estimated to be
around $30,000.
Representative Ortiz asked what went into determining the
costs in the fiscal note [by DOA with Control Code vwuQl]
of about $350 million per year [he later corrected the
number to $350,000]. He asked how the fiscal note was
determined.
Mr. Truitt responded that the question would be better
answered by Ms. Mueca.
Ms. Mueca responded that the fiscal note totals had to do
with the requirements for staffing. She explained that DRB
would need three full-time employees, actuaries, and legal
counsel in order to conduct the study.
Representative Ortiz noted that he meant to say that the
fiscal note totaled $350,000 not $350 million.
Representative Galvin commented that the concept of the
bill could be a "game changer" for education. She noted
that her questions were similar to Representative Hannan's
and wanted to know how many districts had indicated
interest in the plan. She wondered if districts could help
each other if many were interested in the plan. She thought
the bill could help the state support its children.
3:00:47 PM
Representative Stapp asked what the current per employee
per year cost was for AlaskaCare.
Ms. Mueca responded that the average per employee per month
cost was around $1,734. She would have to calculate the
numbers to provide the annual cost.
Representative Stapp commented that it was about $20,000
per year based on Ms. Mueca's response. There was a Haight
Law Group study [from 2014] that showed a cost of $18,446
per employee per year for insurance. He understood that the
goal of the bill was to bring about savings and that some
school districts would choose to consolidate to save money.
He thought some groups or districts could drive the cost of
AlaskaCare up. He reiterated that he did not understand how
the actuarial analysis could be conducted for $30,000.
Ms. Mueca responded that there was already a starting point
for the actuarial analysis which was the reason why DRB was
quoted $30,000 for the analysis. She could provide any
additional information about the analysis if Representative
Stapp would like.
Representative Stapp asked for a list of the information
that the division was going to examine. He thought that the
actuaries would want to look at the employee costs, the
deductibles, and other factors.
Ms. Mueca would follow up with the information.
3:03:57 PM
Representative Coulombe relayed that she assumed the
university supported the bill. She asked if her assumption
was correct.
Representative Vance responded that the university was
neutral on the bill and adding the university to the plan
was not a necessity. When she introduced a version of the
bill four years prior, her school district did not need the
plan; however, the district desperately needed the bill
four years later. She thought the change spoke to the
importance of having health care options for the future
because many municipalities that do not currently need the
option might need it in future years.
Representative Coulombe asked if DOA would help small
school districts decide whether it was prudent for the
districts to join the plan.
Representative Vance responded that Section 9 addressed the
issue. She explained it was a requirement that there be a
report detailing the potential costs before the
commissioner authorized acceptance of the units.
Representative Coulombe asked if the prior versions of the
bill that mandated participation were driven by
Representative Stapp's earlier point that the plan could be
overwhelmed by high-needs groups. She asked for
Representative Vance's opinion on whether participation
should be mandatory.
Representative Vance responded that there had been a
conversation about mandatory participation in 2014. She
stated her understanding that some districts wanted to
maintain local control and opposed the idea of forceful
consolidation. She added that AEA also opposed making
participation in the plan mandatory.
Representative Coulombe liked that participation was
voluntary.
3:07:27 PM
Co-Chair Johnson asked if the information requested by
Representative Stapp could be provided to all members. She
wondered how many districts had a blind health care trust.
She understood that Mat-Su did not.
Representative Vance was uncertain of the number. The Mat-
Su district had given great support to the bill because it
could save $7 million per year. The district was the first
to reach out to her office in support of the legislation
because it estimated a $3,000 savings per employee per
paycheck.
Co-Chair Johnson commented that the bill had potential. She
understood that some contracts had higher levels of
transparency than others. She hoped transparency would be
increased if the bill were to pass.
Representative Vance noted that the AlaskaCare 2020 active
employees premiums chart (copy on file) as provided by DOA
was included in member's packets. She highlighted that she
was offering the bill as a tool for the legislature to draw
on to examine cost-reducing methods and to make the most of
the state's dollars while providing excellent health care
to Alaskans. She argued that the state indirectly paid for
health care in one form or another through the BSA. She
would let the committee determine which entities should be
included in the plan but her goal was to put all school
districts on equal footing. There were some small districts
that needed help and larger ones that did not. The bill was
meant to look to the future and recruit and retain teachers
by providing great health care.
HB 21 was HEARD and HELD in committee for further
consideration.
3:11:04 PM
AT EASE
3:16:42 PM
RECONVENED