Legislature(2001 - 2002)
04/30/2002 03:08 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.