03/08/2011 02:00 PM Senate LABOR & COMMERCE

                                                                                                                                
        SB  81-PUBLIC RETIREE MED. BENEFITS: DEPENDENTS                                                                     
                                                                                                                                
2:51:48 PM                                                                                                                    
CHAIR EGAN announced SB 81 to be up for consideration.                                                                          
                                                                                                                                
SENATOR  DAVIS,  sponsor  of  SB 81,  said  she  introduced  this                                                               
measure  because she  felt Alaskan  retirees  were being  treated                                                               
unfairly when  they can't  insure their  dependent children   the                                                               
same way  active employees can  under the Affordable  Health Care                                                               
Act  that allows  dependent children  to stay  on their  parents'                                                               
insurance  until  age  26.  This   bill  seeks  to  correct  this                                                               
inequality.                                                                                                                     
                                                                                                                                
2:53:00 PM                                                                                                                    
TOM OBERMEYER, staff  to Senator Davis, said SB  81 requires that                                                               
dependent coverage for medical benefits  in certain state retiree                                                               
systems  be no  less than  that  of active  state employees.  The                                                               
state  decided  to  allow active  employees  to  keep  dependents                                                               
through age 26 on their  health insurance plans effective July 1,                                                               
2011,  but  specifically  excluded the  dependents  of  retirees,                                                               
citing federal legislation.                                                                                                     
                                                                                                                                
MR. OBERMEYER  said he asked  for a memorandum (in  their packet)                                                               
from the  Legislative Legal Services  to interpret  that language                                                               
and it  states a contrary  opinion -  that retirees should  be in                                                               
this plan.                                                                                                                      
                                                                                                                                
2:55:58 PM                                                                                                                    
MR.  OBERMEYER read  the  sponsor statement.  He  said the  prior                                                               
cutoff  date for  this group  was age  23. The  state's voluntary                                                               
change in  the active employee  medical benefit plan  matches the                                                               
private  insurance  mandate  under  the  Patient  Protection  and                                                               
Affordable  Care   Act  which  requires  that   insurers  provide                                                               
dependent insurance  coverage to age 26,  effective September 23,                                                               
2010. He said  that Linda Hall, Director,  Division of Insurance,                                                               
could verify  that all insurers  in the state have  complied with                                                               
this. Further the statement said:                                                                                               
                                                                                                                                
     Although the  state is not a  regulated state insurance                                                                    
     company, but rather  a self-insured government employer                                                                    
     and  exempt  from  ERISA, it  provides  medical  health                                                                    
     benefits for  the four  retirement systems  affected by                                                                    
     this bill, including:                                                                                                      
                                                                                                                                
     1. Public Employees Retirement System (AS 39.30)                                                                           
     2. Teachers' Retirement System (AS 14.25)                                                                                  
     3. Retirement System of Justices and Judges (AS 22.25)                                                                     
     4.  Elected Public  Officers Retirement  System (former                                                                    
     AS 39.37)                                                                                                                  
                                                                                                                                
     While  state health  benefit plans  are not  subject to                                                                    
     the federal Employee Retirement  Income Security Act of                                                                    
     1974  (ERISA) which  establishes minimum  standards for                                                                    
     pension plans in private industry,  they are covered by                                                                    
     the  Public Health  Service Act  (PHSA), at  least with                                                                    
     respect  to the  dependent  coverage  provision in  the                                                                    
     PPACA.  Although there  is a  difference of  opinion by                                                                    
     the  state's Division  of Retirement  and Benefits  and                                                                    
     Legislative  counsel  as  to excepting  retiree  health                                                                    
     insurance  plan  based  on Interim  Final  Ruses  under                                                                    
     PPACA without  a formal court  interpretation it  s far                                                                    
     easier to require coverage  immediately under this bill                                                                    
     rather than  wait for court  action or  federal mandate                                                                    
     later.                                                                                                                     
                                                                                                                                
     Moreover it is only fair  that the state extend medical                                                                    
     health  benefits to  dependents of  retirees to  age 26                                                                    
     while it  covers the  same for  active employees.   The                                                                    
     numbers of eligible dependents in  retiree plans can be                                                                    
     readily  identified  and  actuarial statistics  can  be                                                                    
     generated for  this young  and relatively  health group                                                                    
     of dependents.                                                                                                             
                                                                                                                                
2:58:44 PM                                                                                                                    
BOB DOLL,  President, Retired Public Employees  of Alaska (RPEA),                                                               
supported SB 81. He explained that  each year the RPEA prepares a                                                               
list  of top  concerns for  the coming  legislative session,  but                                                               
this item  did not make  it to that  list. However, he  has heard                                                               
from members about it in  unprecedented numbers. Because it was a                                                               
relatively  new topic,  he polled  members by  email in  February                                                               
2011  to   establish  some  numbers.  Of   1050  respondents  (68                                                               
percent),  they determined  that  159 retirees  had  one or  more                                                               
children under 26 years of age.  The total number of children was                                                               
231;  of those,  140 were  ages 21-26.  They estimated  from this                                                               
sample that  about 70  dependents would fall  into the  age 23-25                                                               
ranges. Of those,  they also estimate that  about one-third would                                                               
have  some  other  kind  of  coverage  through  the  military  or                                                               
employment.                                                                                                                     
                                                                                                                                
MR. DOLL said  it appears this coverage is of  primary concern to                                                               
women retirees. In many cases  they imagine these women postponed                                                               
their  childbearing until  they  were well  established in  their                                                               
state service and now find  themselves retired with children that                                                               
are still dependents. This group  is more concerned because their                                                               
spouses have passed  away or are departed for  some other reason.                                                               
RPEA  members  know that  the  issue  of  cost  to the  state  is                                                               
involved in any extension of  Alaska Care benefits; a majority of                                                               
them have been  supervisors and know what a budget  is. They know                                                               
that most things that are worthwhile  have a cost. They also know                                                               
it's possible to construct a  post-retirement health care plan in                                                               
which the retiree  shares some of the cost. They  already do that                                                               
in regard to  Dental/Audi/Visual coverage and long  term care and                                                               
life  insurance options.  So, he  urged some  similar arrangement                                                               
for dependents that  would take them off Medicare  and reduce the                                                               
cost of that program and yet  impose little or no additional cost                                                               
to the state.                                                                                                                   
                                                                                                                                
Finally, he asked  the committee to think of  these dependents as                                                               
more  than  just  spreadsheet numbers.  They  are  Alaska's  next                                                               
generation and the  state of Alaska should have  the same concern                                                               
for them  as it has  for dependents of  active employees to  be a                                                               
part of that bright future that we all seek for Alaska.                                                                         
                                                                                                                                
3:03:46 PM                                                                                                                    
SENATOR PASKVAN asked if the  Division of Retirement and Benefits                                                               
provided a legal opinion to support their position.                                                                             
                                                                                                                                
MR.  DOLL  answered no;  this  is  the  first  time it  has  been                                                               
discussed publicly.                                                                                                             
                                                                                                                                
3:04:26 PM                                                                                                                    
SENATOR  GIESSEL  asked him  to  explain  what  he meant  by  the                                                               
retirees being taken off of Medicare.                                                                                           
                                                                                                                                
MR. DOLL  replied that  he was referring  to the  dependents that                                                               
had  no medical  alternative  but  to go  to  Medicaid. He  meant                                                               
Medicaid not Medicare.                                                                                                          
                                                                                                                                
3:05:29 PM                                                                                                                    
MARIE DARLIN,  Legislative Task Force, AARP  Juneau, supported SB
 and  for the  reasons Mr.  Doll stated.  She pointed  out that                                                               
this  brings more  parity between  active employees  and retirees                                                               
who kind of get lost in  the shuffle. Often retirees are left out                                                               
with the federal government as well as the state.                                                                               
                                                                                                                                
This does have  an effect because it then makes  a difference for                                                               
some people who  are planning retirement, but  haven't gotten the                                                               
letter from  the state telling  them when they retire  their kids                                                               
up to  age 26 won't  be included  on their medical  coverage. She                                                               
said many  people have changed  their plans for  retiring because                                                               
they  suddenly found  out they  won't  be able  to include  their                                                               
children on  the medical  insurance then. To  try and  get health                                                               
care coverage  for student children  if they can't do  it through                                                               
state is almost prohibitive.                                                                                                    
                                                                                                                                
CHAIR  EGAN said  Dan Wayne  from Legislative  Legal Service  was                                                               
available to answer questions.                                                                                                  
                                                                                                                                
3:08:39 PM                                                                                                                    
SENATOR PASKVAN asked if he  had received a written legal opinion                                                               
from  the  Division of  Retirement  and  Benefits supporting  its                                                               
position.                                                                                                                       
                                                                                                                                
DAN WAYNE, Department of Law, Juneau, Alaska, replied no.                                                                       
                                                                                                                                
SENATOR GIESSEL asked for the fiscal note.                                                                                      
                                                                                                                                
SENATOR DAVIS responded that they do  have a fiscal note, but the                                                               
money won't  come from the  state. Most  of the money  would come                                                               
from the retirees' retirement plan.  She summarized that SB 81 is                                                               
an  important  piece  of  legislation. The  age  group  they  are                                                               
talking  about  doesn't  require  a lot  of  medical  and  health                                                               
treatment. Their  coverage won't be  that expensive, but  if they                                                               
are left  off and have  to go to  emergency rooms or  wherever to                                                               
get treatment, that state pays later.  It will pay less by acting                                                               
on this bill now.                                                                                                               
                                                                                                                                
SENATOR PASKVAN asked  if anyone from the  Division of Retirement                                                               
and  Benefits  was  going  to  appear  before  the  committee  to                                                               
establish a foundation.                                                                                                         
                                                                                                                                
CHAIR EGAN replied  he would make sure someone  from the division                                                               
would be here.                                                                                                                  
                                                                                                                                
SENATOR PASKVAN  said he wanted to  know if they have  a position                                                               
as compared to a legally supported opinion.                                                                                     
                                                                                                                                
MR.  OBERMEYER  apologized  that  the  fiscal  note  hadn't  been                                                               
distributed,  but as  Senator Davis  indicated,  the increase  in                                                               
cost to provide  this additional coverage would be  paid from the                                                               
Retiree Health Trust. His only  concern was that Buck Consultants                                                               
and Wells Fargo  put together low, medium and  high numbers based                                                               
on actuarial figures that may  not be relevant to this particular                                                               
population  group; SB  81 uses  a medium  number. He  thought the                                                               
fiscal note  needed to be  reexamined no  matter how the  bill is                                                               
funded. Dan Wayne's memorandum was based on website information.                                                                
                                                                                                                                
3:14:02 PM                                                                                                                    
JIM  PUCKETT,   Acting  Director,  Division  of   Retirement  and                                                               
Benefits,  Department of  Administration (DOA),  said they  had a                                                               
legal opinion from the Department of  Law (DOL) and also from Ike                                                               
Miller, part of  the legal team that provides  tax consulting for                                                               
them.  He  offered to  provide  them  to  the committee  if  they                                                               
wanted.                                                                                                                         
                                                                                                                                
3:15:05 PM                                                                                                                    
CHAIR EGAN said  the answer is yes and they  would schedule SB 81                                                               
again in the not too distant  future. With that, he adjourned the                                                               
meeting at 3:15 p.m.