Legislature(2001 - 2002)
04/30/2002 03:08 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 315
"An Act requiring a single insurance provider for all
state employees and allowing small employers to join as
a group; and providing for an effective date."
JANET SEITZ, STAFF, REPRESENTATIVE ROKEBERG, testified in
support of HB 315, on behalf of the sponsor. She noted that
the legislation permits the Department of Administration to
obtain a policy or policies of group health insurances for
four entities:
Small businesses - 2 to 5 employees,
Non-profit organizations - no floor or ceiling on
employees,
Special service organizations - which can be sole
proprietors, including childcare facilities,
residential childcare facilities, child placement
agencies, foster home or maternity home, assisted
living home, community based center for adult day care,
or home care services
Small associations for insurance - described as
Businesses or nonprofits or both organized and
operating in Alaska.
Ms. Seitz explained that the Division of Retirements and
Benefits would survey interested parties to determine what
benefits and deductibles are wanted and to arrange premiums.
The Division would offer a RFP that could be a single policy
from a single private insurance carrier or a multitude of
policies covering a "cafeteria plan". The legislation does
not permit the entities to joint the state employee health
insurance pool. The state may not self-insure the pool.
Providers would be private.
Ms. Seitz discussed the fiscal note. She observed that the
Alaska Mental Health Trust Authority would fund part of the
up-front cost. The Trust Authority feels that many of the
non-profit organizations that would profit from the bill
provide services to mental health beneficiaries. Other first
year funding would come from the General Fund. Subsequent
funding would come from payments of premiums. Applicants
would be certified by the Department of Administration.
Ms. Seitz noted that a proposed committee substitute, work
draft 22-LS1177\X, dated 4/25/02, allows for recapture of
the up-front costs and indicates that the recapture of costs
could be spread over a three-year period.
Vice-Chair Bunde MOVED to ADOPT proposed committee
substitute, work draft 22-LS1177\X, dated 4/25/02.
Representative John Davies OBJECTED for the purpose of
discussion. He questioned why the costs would be recaptured
and why a three-year period was chosen. Ms. Seitz explained
that discussion occurred in the House Labor and Commerce
Committee concerning the state fiscal situation and use of
the General Fund. A recommendation was made to recapture the
funds. The Alaska Mental Health Trust Authority indicated
that they would also like to recapture funds. The sponsor
did not have an objection to lengthening the three-year
period. She clarified that the first year costs of $132,800
dollars would be recaptured. Representative Davies WITHDREW
his OBJECTION.
In response to a question by Representative Hudson, Ms.
Seitz explained that there is no floor or ceiling for
employees of non-profits. The Department of Administration
would administer and issue a RFP for the policy. A private
third party would administer the policy with Department of
Administration oversight. It would not be a government run
program. The relationship would be between the private
insurance company or companies and the participates. The
department would issue a new RFP every five years and review
the situation. The state would serve as a collection point.
Representative Davies noted that he had received letters,
concerned with the loss of groups with small claim
histories. Ms. Seitz did not think that there would be an
exodus problem, because non-profits are having such a hard
time getting and retaining adequate insurance to retain
employees. The provision would provide a stable source. The
sponsor feels that the larger the group the less the risk.
She reiterated that policies would be reviewed every five
years. There would be no constraint on who is in or out of
the pool.
JANET PARKER, DIVISION OF RETIREMENT AND BENEFITS,
DEPARTMENT OF ADMINISTRATION, explained that legislation
would allow the formation of group policies for private
employees. The Division hopes to develop several plans that
would meet the needs of groups that are having trouble
finding insurance in the current market. The Division would
begin by surveying persons eligible for the program to
determine needs. She was not aware of any other pools
consisting of small non-profits.
BOB LOHR, DIRECTOR, ALASKA DIVISION OF INSURANCE, testified
in support. He stressed that the bill would be an important
first step toward providing access to health insurance
coverage for groups that find it difficult to obtain
coverage in the current market. He acknowledged that adverse
selection is always a concern in the design of an insurance
plan. He noted that problems could arise if a plan attracts
high-risk participants and the healthy do not enroll. The
design will have to address the issue.
In response to a question by Representative Hudson, Mr. Lohr
stated that Division of Insurance does not have authority
over union organized groups that have decided to purchase
their own coverage. Union Trusts are preempted under federal
legislation.
TOM TURNER, PRESIDENT, ALASKA ASSOCIATION OF HEALTH
UNDERWRITERS, ANCHORAGE, testified via teleconference in
opposition to the legislation. He expressed concern but that
the legislation would have a negative impact on the small
group/employer health insurance market and the state of
Alaska employee health plan. He appreciated the effort to
bring affordable health insurance access to small employers,
but noted that other states with similar programs did not
reduce costs over time, but that it did lead to adverse
selection problems.
Mr. Turner noted that employer groups in Alaska might
initially benefit from the lower rate, but claimed that the
state pool would eventually be forced to react to the bad
claims experience from increased premiums. Elimination of
some administration costs for small businesses would be one
timesavings. He observed that small group/small employer
premiums would still be subject to the factors that drive
health insurance premiums: provider costs, pharmaceutical
costs, mandates, technology, increased utilization, and an
aging population, which are not addressed by the
legislation. Other states have tried to implement similar
legislation with limited success. He referred to the state
of Kentucky's Alliance plan.
TAPE HFC 02 - 99, Side B
Mr. Turner expressed concern that the provision could result
in a depletion of options and significant costs to the state
of Alaska.
Representative Hudson questioned how the legislation would
negatively impact the state's program, which would be
segregated.
Mr. Turner acknowledged that he misunderstood. He maintained
that the legislation would have an impact on the number of
carriers and the competition of the carriers in the state of
Alaska.
Representative Bunde pointed out that the initial set-up
costs would be recaptured.
REPRESENTATIVE SHARON CISSNA testified in support of the
legislation. She explained that a work group on affordable
health insurance led to the legislation. Many people cannot
afford insurance. In some cases the cost of insurance
exceeded the cost of the insured's home mortgages. Many were
working for non-profits or were self-employed, but due to
preexisting conditions were unable to obtain affordable
policies. She has received numerous letters in support of
the concept of affordable insurance. An Anchorage survey in
December 2000, demonstrated that people are going to
hospital emergency rooms because they cannot afford to go to
doctors. Many Alaskans cannot find insurance carriers.
Representative John Davies MOVED to ADOPT Amendment 1:
change "3" to "5". There being NO OBJECTION, it was so
ordered.
Representative John Davies MOVED to report CSHB 315 (FIN)
out of Committee with the accompanying fiscal note. There
being NO OBJECTION, it was so ordered.
CSSSHB 315 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with a fiscal impact note by the
Department of Administration.
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