Legislature(1995 - 1996)
02/14/1995 03:06 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HHES - 02/14/95 HJR 18 - SUPPORT MEDICAL SAVINGS ACCOUNT LEGISLATION Number 475 ROD MOURANT, Administrative Assistant to Representative Pete Kott, apologized on behalf of Representative Kott for his absence and thanked the committee for hearing HJR 18. Mr. Mourant said that all but two of the current members of the HESS Committee saw and voted on this exact legislation last session. The resolution passed unanimously from the House, but subsequently died in the Senate Rules Committee at adjournment. MR. MOURANT then read the sponsor statement: As medical costs nationally and in Alaska continue to rise, the need for innovative approaches to health care cost containment becomes more acute. The concept behind Medical Savings Accounts is to encourage employees to shop more carefully for medical services. It recommends the purchase of high deductible coverage by employers. The savings realized by this effort results in reduced health insurance premiums. These savings are then placed by the employers in individual employee Medical Savings Accounts. Employee Medical Savings Accounts then may be used by employees to purchase additional, more specific insurance coverage and to pay deductibles incurred under employer provided or employee purchased medical coverage plans. Medical Savings Accounts belong to the individual employee and move with the individual to purchase health insurance when between jobs or for coverage when re-employed, even when with a different employer. The additional benefit to Medical Savings Accounts is that they allow the individual to select and purchase coverage at reduced cost without a new federal bureaucracy and would be revenue neutral to employers. It is compatible with the free market in that it protects individual freedom and rewards prudent decision making. HJR 18 urges Congress to enact legislation that will make Medical Savings Accounts a viable option in the national effort to reduce and contain health care costs. Number 620 CO-CHAIR BUNDE asked if there was any current legislation on the national level which would change the need for this resolution. MR. MOURANT said that at this time he is not aware of any nationally introduced legislation. However, this certainly is a concept that has been discussed at the national level. In the resolution packets HESS Committee members could find a series of articles that describe medical savings accounts and their use. MR. MOURANT also pointed out that one recent article, from the Wall Street Journal, says that support for medical savings accounts is growing. Six states, Arizona, Colorado, Mississippi, Idaho, Missouri and Michigan, have changed their tax structure to accommodate medical savings accounts. The United Mine Workers Union has signed a new five year contract with a health plan that includes a $1,000 bonus that workers can use to pay their medical plan's $1,000 deductible. Mine workers still have first dollar coverage but the first $1,000 they now spend will be their own money, rather than the company's. MR. MOURANT concluded that Representative Kott believes that kind of incentive on the part of those covered is a good incentive to reducing the overall costs of health insurance in this country. Number 693 CO-CHAIR TOOHEY asked how Representative Kott will handle the welfare and MedicAid recipients of Alaska. MR. MOURANT answered that this legislation does not address that issue. It only addresses those who are employed and currently covered. Number 714 REPRESENTATIVE AL VEZEY felt that the resolution was excellent. Health care costs are a national problem, driven by the Internal Revenue Service's regulations. However, there have been a number of companies who provide health care insurance for their employees who have experimented with this. Those companies have experienced substantial reductions in medical costs as a result of allowing their employees to accrue a medical savings account which is income they can take if they don't use it. MR. MOURANT said that Representative Vezey makes a very valid point. The resolution seeks not only reduced expense in medical coverage and medical services, but, in addition, the money remains with the individual. If, at the time of retirement, the individual still has a positive balance in their account, they are able to take that to buy an annuity if they desire, or to help out in their retirement years. CO-CHAIR BUNDE said that a great deal of research shows that people with sick leave on a use-it or lose-it program are ill much more frequently. Number 791 REPRESENTATIVE ROBINSON asked Mr. Mourant to explain the process to her. She wondered how this would work for an interested individual and what exactly the steps would be. MR. MOURANT answered that a typical state employee pays about $465 dollars for health insurance on a monthly basis. The medical savings account would allow the employer, the state of Alaska, to purchase a major emergency medical coverage plan at a much reduced premium than the detailed coverage plan that exists today. Employees would still be covered for catastrophic injury and emergency care, but because of the reduced premium the state may save between $200 and $300 per employee per year. That money is placed into an individual account for the employee to use to shop for additional coverage if he or she chooses to have it. This is much like the option that exists right now for selecting dependent medical coverage. MR. MOURANT continued that the balance can be used to pay any deductible that might be present in the coverage that the employer buys for the employees. Number 870 MR. MOURANT said that if, through prudent use in health care coverage selection, the employee still has a savings account balance upon retirement, he or she can convert that into an annuity or other such account. Number 883 CO-CHAIR TOOHEY commended the bill. She said that most of us spend about $100 to $200 on medical coverage every year. Catastrophic coverage will take over if a person gets appendicitis or is hit by a car or some such tragedy. Number 914 REPRESENTATIVE BRICE asked Mr. Mourant if the accounts would be tax deductible. MR. MOURANT answered that he was not sure what Representative Brice was asking. He said they would be tax deductible for the employer because the account would be a payroll expense. For the employee, it would depend on how the code is structured. Mr. Mourant feels that the accounts are much like the employer match on the Supplemental Benefits System (SBS). When an employee starts to receive that employer match, Mr. Mourant assumes that would be taxable income. Number 954 REPRESENTATIVE ROKEBERG'S understanding was that the accounts are, in essence, tax neutral. The benefit in the end is the savings which is tax free money the employee can have. It would depend who would make the contribution of the up-front capital. That would be a taxable event. REPRESENTATIVE VEZEY commented that the plans he has seen would involve a change in Internal Revenue Service codes. The bank account is, as Representative Rokeberg said, tax deductible. Should the employee use it for medical services it is not tax liability. If the money is taken for personal income it would be taxable. Number 995 REPRESENTATIVE VEZEY moved that HJR 18 be passed from the committee with individual recommendations. There were no objections. CO-CHAIR BUNDE announced that HJR 18 had been moved from the HESS Committee to the next committee of referral.
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