Legislature(2005 - 2006)HOUSE FINANCE 519

04/20/2006 01:30 PM House FINANCE

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Heard & Held
<Bill Hearing Rescheduled from 04/19/06>
Heard & Held
   HOUSE BILL NO. 29                                                                                                          
        An Act relating to health care insurance and to the                                                                     
        Comprehensive   Health   Insurance   Association;   and                                                                 
        providing for an effective date.                                                                                        
   REPRESENTATIVE NORMAN  ROKEBERG,  SPONSOR,  stated  that the                                                                 
   Alaska Comprehensive  Health  Insurance  Association (ACHIA)                                                                 
   was established to provide access to health insurance to all                                                                 
   residents of the State who are  unable to find or are denied                                                                 
   health insurance or  who are considered  uninsurable.  It is                                                                 
   additionally required coverage  for those federally eligible                                                                 
   individuals  under  the  Health  Insurance  Portability  and                                                                 
   Accountability Act of 1996 (HIPAA).                                                                                          
The plan was first implemented  in 1993 and is funded through                                                                   
premiums  collected  from insured  and  assessments  received                                                                   
from health insurers  transacting business in  Alaska.  Prior                                                                   
to the  time that  the State became  self-insured,  the State                                                                   
also  participated  in  providing  funds  to  ACHIA  (through                                                                   
assessments received  from its  health insurer).   The effect                                                                   
of  the decision  not  to remain  in ACHIA,  reduced  ACHIA's                                                                   
funding by approximately $400,000 dollars per year.                                                                             
In  December   2003,  there  were  484   insured  individuals                                                                   
participating  in ACHIA.   He stated that  as the  insurer of                                                                   
last resort, it  is important that the State  guarantee ACHIA                                                                   
remains viable  and in place.   During 2003, over  $4 million                                                                   
dollars  was  collected  in assessments  from  ACHIA  members                                                                   
(those companies  or entities who  do business in  Alaska and                                                                   
pay into ACHIA)  and over $2.6 million dollars  was collected                                                                   
in premiums  from insured individuals.   ACHIA paid  out over                                                                   
$6.6 million dollars in claim expenses in that same year.                                                                       
Representative Rokeberg  continued, the majority  of Alaskans                                                                   
that receive  health care benefits  do not contribute  to the                                                                   
high-risk pool;  thereby, shifting costs to  only individuals                                                                   
and small  groups that  purchase health  insurance.   That is                                                                   
poor  public  policy,  particularly on  an  unfunded  Federal                                                                   
Many of the self-insured companies,  objected to the original                                                                   
version of  the bill.  In  order to accommodate the  needs of                                                                   
ACHIA,  the legislation  has  been modified  to  grant a  tax                                                                   
credit to the insurance companies  who are currently assessed                                                                   
for the entire  ACHIA shortfall, by using a  small portion of                                                                   
the premium taxes paid into the  State.  A premium tax credit                                                                   
would be justifiable given the  importance of maintaining the                                                                   
viability  of  the  Association  and  its  requirement  under                                                                   
HIPAA.   He maintained that  when viewed against  the demands                                                                   
of the  general fund, viability  of ACHIA exceeds  most other                                                                   
legislation and he urged support.                                                                                               
2:01:43 PM                                                                                                                    
Representative  Rokeberg presented  a handout,  demonstrating                                                                   
ACHIA contribution breakdowns  from 1993 through 2005.  (Copy                                                                   
on File).  The attachment highlights:                                                                                           
   · 1998-2005: Proforma With HB 29                                                                                             
   · 1993-2005: Historical                                                                                                      
   · 1998-2005: Proforma Assuming State Had Remained Insured                                                                    
Representative   Rokeberg   noted    the   State's   original                                                                   
participation  in the  program,  dropping out  and giving  up                                                                   
responsibility.  He emphasized  the need to meet that burden,                                                                   
   which  can  be  addressed  through  a  tax  credit,  not   an                                                                
   2:04:22 PM                                                                                                                 
   Co-Chair Meyer advised that  the Committee is concerned with                                                                 
   rising costs  in  the out  years.    Representative Rokeberg                                                                 
   pointed  out  that   all  insurance   premiums  continue  to                                                                 
   Representative Weyhrauch commented on the unfunded liability                                                                 
   burden to the Department and  the Division of Retirement and                                                                 
   Benefits.  Representative Rokeberg  was not sure, understood                                                                 
   this  would  be  a  tax  credit.    He  said  Representative                                                                 
   Weyhrauch referenced  an  old  fiscal note  to  the previous                                                                 
   version of the bill and that there would be no impact to the                                                                 
   unfunded liability.  The prior version did spread the risk.                                                                  
   Representative Weyhrauch inquired if the bill was related  to                                                                
   HB 10, the non-profit pool.   Representative Rokeberg stated                                                                 
   it wasn't, however, has the same goal.                                                                                       
   2:08:03 PM                                                                                                                 
   Representative Kelly asked if  other states use the proposed                                                                 
   Co-Chair Meyer  inquired why  the legislation  was coming  to                                                                
   the Committee at such a  late date.  Representative Rokeberg                                                                 
   explained that he had changed  the source of funding and the                                                                 
   style of the bill.                                                                                                           
   2:10:16 PM                                                                                                                 
   CECIL  BYKERK,  EXECUTIVE   DIRECTOR,  ALASKA  COMPREHENSIVE                                                                 
   HEALTH INSURANCE ASSOCIATION BOARD (ACHIA), OMAHA, NEBRASKA,                                                                 
   advised that  ACHIA  is an  important  program,  which first                                                                 
   passed in  1992.   He  offered  to provide  the  FY04 annual                                                                 
   report to the Committee.                                                                                                     
   ACHIA is  an  important  piece of  the  insurance  system  in                                                                
   Alaska.   It serves &  benefits all  Alaskans  in one-way  or                                                                
   another.  Over the 14 years, ACHIA has paid over $45 million                                                                 
   dollars  in  claims;  collecting   $17  million  dollars   in                                                                
   premiums.  The people purchasing those premiums for the most                                                                 
   part are uninsurable individuals.   ACHIA offers coverage  on                                                                
   a subsidized  basis.   The primary  purpose is  to serve the                                                                 
   uninsurable population.    ACHIA  is  the  Healthy Insurance                                                                 
   Portability  and  Accountability  Act  (HIPAA) solution  for                                                                 
   Alaska and  under  which Alaska  has  fulfilled  the federal                                                                 
   Mr. Bykerk added that ACHIA offers an outlet of insurance  to                                                                
   those that would  otherwise be uninsurable.   Member's pay  a                                                                
high rate @ 140%  above the standard rate.   In reality, they                                                                   
should pay 300%  more given the health issues.   ACHIA offers                                                                   
an in for  the system.   Those people become "payers"  to the                                                                   
health  system, which  eventually,  benefit  everyone in  the                                                                   
State.  There is no cost shifting using these mechanisms.                                                                       
Currently,  short  falls  are  made-up  by  assessing  health                                                                   
insurers.  It  has been estimated that premium  taxes paid by                                                                   
health  insurers,  are  somewhere   between  $10-$12  million                                                                   
dollars.   When companies  get assessed  for shortfalls,  the                                                                   
costs get transferred  back to the policyholders.   Those are                                                                   
expenses that insurance companies  must cover in some manner,                                                                   
ultimately transferred back through  premiums to individuals.                                                                   
HB  29 will  ease the  burden by  broadening ACHIA's  overall                                                                   
funding base.                                                                                                                   
Mr.  Bykerk added,  AHCIA  anticipates  receiving $1  million                                                                   
federal  dollars over  the next  five years.   He  reiterated                                                                   
that all  Alaskans would benefit  from ACHIA.  He  offered to                                                                   
answer questions of the Committee.                                                                                              
2:18:26 PM                                                                                                                    
BRIAN  ANGEL,  VICE  CHAIRMAN,  ALASKA  COMPREHENSIVE  HEALTH                                                                   
INSURANCE   ASSOCIATION  BOARD   (ACHIA),  NEBRASKA,   echoed                                                                   
comments made by  Mr. Bykerk.  He emphasized  that ACHIA does                                                                   
benefit all  Alaskans.   The $45  million dollars that  ACHIA                                                                   
has paid  in claims is  money that would  not have  gone into                                                                   
the  system,  rather  "free-care".     He  acknowledged  that                                                                   
everyone knows, there is no such thing as "free care".                                                                          
2:19:23 PM                                                                                                                    
Co-Chair  Meyer   asked  if  the  legislation   could  reduce                                                                   
insurance rates.   Mr. Bykerk  replied that health  insurance                                                                   
costs and  premiums continue to go  up.  The bill  could help                                                                   
mitigate some  costs for individuals and small  groups buying                                                                   
coverage.   Those assessments  have been in  a range of  1% -                                                                   
1.5%  of premium  costs  each  year.   He believes  it  could                                                                   
become more equitable for those purchasing insurance.                                                                           
2:22:14 PM                                                                                                                    
LINDA HALL,  DIRECTOR, DIVISION  OF INSURANCE,  DEPARTMENT OF                                                                   
COMMERCE, COMMUNITY AND ECONOMIC  DEVELOPMENT, commented that                                                                   
the ACHIA plan would not prevent  the type of concerns voiced                                                                   
by Representative Kelly and those  seeking different kinds of                                                                   
relief.   People  that are  a part  of ACHIA,  do pay  health                                                                   
insurance premiums,  but pay at a  reduced rate.  There  is a                                                                   
150% cap  of the average  rate.   Uninsurable people  can buy                                                                   
insurance at  a substantially increased premium;  the program                                                                   
does prevent  the growth  of the  uninsured population.   She                                                                   
advised  that  the Division  of  Insurance  has  historically                                                                   
supported the  program and noted  they had worked  diligently                                                                   
   with Representative Rokeberg to  find other funding sources.                                                                 
   The program provides "huge" benefit to Alaskans.                                                                             
   2:24:15 PM                                                                                                                 
   Representative Holm asked  what it  means to have  a 150%  of                                                                
   higher rate cap.  Mr. Bykerk  explained, the rates are based                                                                 
   upon surveys taken  from the top five  insurance carriers  in                                                                
   the State of Alaska.  Based on that, the Board sets the rate                                                                 
   at a  percentage, capped  at 150%.   There  is no  intent  to                                                                
   compete with the insurance industry.   Those rates are based                                                                 
   on the  same  structure in  the  market place  and  are age-                                                                 
   dependent, offering  various deductible  choices.   ACHIA  is                                                                
   capped at 150% by law, attempting to keep it affordable.                                                                     
   2:28:39 PM                                                                                                                 
   Representative Holm asked if the majority of the subscribers                                                                 
   were non-paying.  Mr. Bykerk  noted that those that left the                                                                 
   coverage participated in a survey, which indicated that they                                                                 
   could not pay the premium costs.   Available data shows that                                                                 
   if they were uninsurable  and not HIPAA  eligible, they must                                                                 
   indicate  that  they  applied  and  were  turned  down.    He                                                                
   emphasized, they must demonstrate that they are uninsurable.                                                                 
   2:31:15 PM                                                                                                                 
   Mr. Angel pointed  out that  there are 32  states that carry                                                                 
   high-risk pools;  19 states  use some  form of  general fund                                                                 
   revenues to fund the pool.                                                                                                   
   PUBLIC TESTIMONY CLOSED                                                                                                      
   2:32:24 PM                                                                                                                 
   Co-Chair  Meyer  noted   concern  with   the  fiscal  costs,                                                                 
   indicating he would hold the  bill in Committee to determine                                                                 
   other fiscal options.                                                                                                        
   2:32:59 PM                                                                                                                 
   Representative Kelly asked  how it could  be determined, who                                                                 
   is an  assessed  "other  insurance   company".   Mr.  Bykerk                                                                 
   replied that  there  is no  correlation  or  assessment,  but                                                                
   rather defined in statute.                                                                                                   
   HB 29 was HELD in Committee for further consideration.                                                                       
   2:37:28 PM                                                                                                                 

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