Legislature(2001 - 2002)

04/30/2002 03:08 PM FIN

Audio Topic
* first hearing in first committee of referral
+ 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                                                                   
     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                                                                   
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                                                                   
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                                                                   
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                                                                   
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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