Legislature(1993 - 1994)
03/24/1993 03:00 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 12: GROUP INSURANCE FOR SMALL EMPLOYERS Number 304 REP. BETTYE DAVIS spoke as PRIME SPONSOR of HB 12. She said it was a great opportunity to improve Alaskans' access to health care at no cost to the state. She said the bill was passed by the state Senate in 1992, but died in the House Rules Committee. Number 310 REP. B. DAVIS introduced JAN MEISELS, legislative director of the HEALTH INSURANCE ASSOCIATION OF AMERICA (HIAA), an association which supported the bill. (Rep. Olberg departed at 3:27 p.m.) Number 330 MS. MEISELS testified in support of HB 12. She presented an overview of the HIAA proposal to adopt reform measures for small markets. She said HB 12 was based on a National Association of Insurance Commissioners' (NAIC) prospective reinsurance model for small employers. MS. MEISELS went through the bill, outlining its key points. The information is contained in a document, "Statement of HIAA on Small Group Market Reform House Bill 12," which is on file in the committee room. In brief, she said 90 percent of Alaskans work for companies with from two to 25 employees. She said the bill was aimed primarily at preventing people from being denied access to health insurance, but it did address some cost issues. MS. MEISELS said the reforms included guaranteeing access to health insurance for small groups regardless of their risks; that there would be no cherry picking (the practice of insuring healthy people, and rejecting coverage to others); guaranteed renewal of health insurance policies; and limits on the range of charges for people with different risk levels to 35 percent above and below the average rate, but no limits on the rates themselves. MS. MEISELS said such reforms would require establishment of a private, not-for-profit reinsurance pool to which all insurance companies that sold policies to small employers would have to contribute up to 5 percent of net premiums from small employers. Such insurance companies would have to pay a $5,000 deductible before they could draw on the pool, she said. The companies would offer a basic standard set of benefits, the level of which would be made by a nine member reinsurance board, on the recommendation of a seven member board comprised of Alaskans. She said HIAA wanted the director of insurance involved to ensure equity and fairness. MS. MEISELS said HB 12 requires the reinsurance board to report every three years to the legislature and insurance director on the legislation's effectiveness. The bill would exempt the reinsurance association, which is a private nonprofit, from provisions of the Administrative Procedures Act and from taxes. It would also limit the liability of individual association members, except in the case of egregious and willing acts. She said the bill would cover group plans, but not individual policies. Number 488 CHAIR TOOHEY invited questions from the committee, but then decided to delay questions until the end of Ms. Meisels' presentation. Number 500 MS. MEISELS provided further, extensive testimony on the provisions of the bill, an analysis of which is contained in the report on file in the committee room. She offered to testify again later by teleconference if the committee so desired. Number 560 REP. BUNDE asked Ms. Meisels why the health insurance industry was proposing voluntary reforms of small employer insurance in Alaska. MS. MEISELS said the HIAA had been pushing for national reforms for four years, and her territory was California, Nevada, Utah and Alaska, and so far only Alaska had not passed such reforms. Number 573 REP. BUNDE asked who funded such an effort to enact such legislation all over the company. MS. MEISELS said 270 member insurance companies paid dues to HIAA, a national lobbying group. REP. BUNDE asked whether the HIAA and its members believed that the reform the group advocated was good business for insurance companies. Number 578 MS. MEISELS said they believed that the reforms were good public policy and they were trying to reform bad private insurance and public policy practices. She said the HIAA board decided to attempt reform of small employer insurance to address some of the problems relating to health insurance access. The insurance industry wants to remain in business, she said, and believes some reform will assist them to that end. Number 590 REP. BUNDE noted that insurance companies have to make a profit, and the restrictions included in HB 12 might make it more difficult for them to remain in business. He said he was suspicious of the insurance industry's motives in proposing reform that might limit its ability to make a profit. He said if companies could not raise individual rates, they would have to raise rates elsewhere. He said guaranteeing insurance for all would require high rates. TAPE 93-44, SIDE B Number 000 MS. MEISELS said that Rep. Bunde was not the first person to question the insurance industry's motives. She said the bill included "premium pricing limitations" but no prohibitions to annual rate increases upon annual renewal to reflect increases in health care costs. Because the insurance companies would be accepting higher-risk clients that had previously been rejected, there was concern that costs would go up. But she said the good risks would outweigh the bad risks, and cited an American Academy of Actuaries study claiming price increases after such reforms would raise prices by no more than 5 percent. She referred to a report which showed that insurers in Connecticut had insured more groups under a similar reform effort and had experienced price increases of from 4 percent to 10 percent. She said an HIAA actuary estimated that a set of average basic insurance plan for five 40-year-old people, based on Florida rates, might cost $84 per month per employee or $145 per month per employee for a standard plan. She said Alaska rates would depend on many variables, including benefit package levels. Number 074 REP. BUNDE asked whether the restrictions on small employers and higher prices would make it less likely for small employers to provide health insurance to their employees. MS. MEISELS referred to a September 1992 marketplace report, also on file in the committee room, from the Connecticut small employer health reinsurance pool. She said reforms in that state had seen the sale of an additional 4,687 insurance plans, covering from 19,000 to 25,000 previously uninsured employees. The report said private health insurance would do more to provide coverage to the uninsured than would public efforts. Number 108 CHAIR TOOHEY asked why a small group was defined as more than two employees. MS. MEISELS answered that a single person was not a group, and small groups were from two to 25 employees. She said, "Some states that have gone to one person do not have an uninsurable risk pool, that's why they did it at one. This state enacted legislation last year, SB 74 by Sen. Kertulla, which is an uninsurable risk pool for those individuals." Number 123 CHAIR TOOHEY asked how many small insurance companies were involved in HIAA. MS. MEISELS made the distinction that the reform bill concerned itself with insurers of small employers, not small insurance companies. She said about 15 insurance companies, including Aetna, Blue Cross, and Great-West sold policies to small employers in Alaska. Number 147 CHAIR TOOHEY asked if Aetna would be part of any insurance group. Number 150 MS. MEISELS answered that the bill required all companies selling insurance to small employers in Alaska to join the group. She said that Reed Stoops, a Juneau lobbyist for Aetna, said the company supported HB 12 and would join the group. Number 155 REP. G. DAVIS asked whether Alaska was unique in the number of its small businesses. Number 157 MS. MEISELS answered no, Alaska was similar to Wyoming in that both were largely rural states with few people and many small businesses. She said the insurance reform legislation passed in Wyoming, almost identical to the plan outlined in HB 12, was working and made provisions for small entrepreneurial operations. Number 184 REP. B. DAVIS invited MR. KEN SYKES to testify. Number 195 KEN SYKES, an INSURANCE ANALYST for the DIVISION OF INSURANCE in the DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, made himself available to answer questions from the committee concerning HB 12. REP. BUNDE said he did not begrudge insurance companies a fair profit, but said HB 12 places large limits on the companies. He asked if the bill would force some insurance companies out of the Alaska market, or discourage some Alaska small businesses from providing insurance for their workers. MR. SYKES answered that he did not believe HB 12 would drive insurers out of the Alaska buying market. He said the basis of the plan was risk sharing, which Alaska has not had. He said insurers would be able to set prices based on a much larger group. The more people involved in insurance, the lower the price per person. He said good risks would balance out bad risks. Number 217 REP. BUNDE asked how the insurance division would react to the criticism of an average Alaskan who might not care how the insurance industry operated Outside. MR. SYKES answered that the state could be proactive, not reactive, to insurance problems. He said the bill would bring rises in group premiums and taxes because it would be better for small employers to participate in groups. Number 236 REP. BUNDE asked the position of the Department of Commerce and Economic Development on HB 12. MR. SYKES answered that the department's position was neutral. Number 242 MS. MEISELS commented that the department supported SB 242, a similar bill. REP. B. DAVIS noted that the department was neutral and did not oppose HB 12. She said the Alaska State Chamber of Commerce supported the bill as favorable to small businesses of from two to 25 employees. She said the bill would allow uninsured employees of small businesses to get health insurance and would cost the state nothing more than the price of oversight. While HB 12 is not the answer to all health care problems, she said, it was an answer. Number 272 CHAIR TOOHEY asked whether the bill would require small businesses to offer health insurance. MS. MEISELS answered no. CHAIR TOOHEY asked whether an employee insured at one job could retain his health insurance if he switched jobs to work for a company that did not offer such insurance. MS. MEISELS said the answer would be yes, if Alaska state law addressed conversion of insurance policies, or if the first employer was covered by COBRA (Comprehensive Omnibus Budget Reform Act), a federal insurance conversion requirement for companies employing 20 or more people. Number 290 REP. VEZEY asked what the bill would do that was new. MS. MEISELS answered that HB 12 would enable small employers to obtain insurance, even though they had previously been denied insurance because they worked in a high-risk field or because their employees were high risks. Number 300 REP. VEZEY said he knew of no one who had been denied insurance coverage, though he knew that insurance companies demanded high premiums for some high-risk employees or companies. He said he did not see what the bill would do to help small business, except even out the pools and rates. MS. MEISELS disagreed, saying that some small employers had been denied insurance coverage. She said HIAA was not trying to establish community rate pools, as outlined in a column by Jane Bryant Quinn in the Washington Post, dated March 14, 1993 (on file in the committee room). Number 327 REP. VEZEY said it was a question of rates, not of availability. He said he had heard of a $50,000 minimum premium payment. He said many people were denied insurance at more typical rates. Number 340 MS. MEISELS insisted that some people had been denied coverage, such as those with diabetes or AIDS. She said the issue was accessibility, not affordability. She said the bill took some steps to address health care costs, including waiving mandated benefits for small group policies and allowing insurers to establish health maintenance organizations (HMOs) or preferred provider organizations (PPOs), which could help control medical care costs. Number 374 REP. VEZEY objected that all employees are obligated to provide workers workmans' compensation insurance. He said a miner's health care liability was the same as anyone else's off the job. Number 380 MR. SYKES excused himself, saying he had another meeting to attend. Before departing, he differentiated between workman's compensation, which was aimed at on the job injuries, and health care. Number 386 REP. VEZEY said that the two issues were related from an employers viewpoint, because they provided 24-hour a day coverage when combined. He said he should have the right, as a small business owner, to avoid high risks. Number 402 MS. MEISELS asked what kind of business Rep. Vezey owned. REP. VEZEY answered that he was in construction and related fields. Number 402 CHAIR TOOHEY interrupted, saying the committee was running out of time. Number 414 JAY FRANK, a LOBBYIST representing STATE FARM and ALLSTATE INSURANCE COMPANIES, testified in Juneau favor of HB 12. He said both companies are HIAA members, and both helped the NAIC write its model legislation upon which HB 12 was based. He said the bill does not answer all insurance problems, but does address the question of access to insurance for small employers. Number 424 RESA JERREL, STATE DIRECTOR of the NATIONAL FEDERATION OF INDEPENDENT BUSINESSES, testified in Juneau in support of HB 12. She said she knew of a case in which one proprietor of a drugstore in Juneau, who had cancer, was unable to obtain health insurance, a situation which forced the owners to sell the store and seek a job with health benefits. She said the bill would help the federation's member small businesses obtain health insurance for their employees. She said the waiver from mandated state insurance provisions would help keep prices lower. Number 443 REP. BUNDE said he was glad to hear from the business community. Number 448 REP. G. DAVIS asked Ms. Meisels if HMOs could buy reinsurance under HB 12. Number 450 MS. MEISELS responded, "For the purposes of this act, an HMO was going to be defined (unintelligible) an insurer, as is a hospital or medical service plan." She said the bill calls on the reinsurance board to develop an equation to equate the HMO rates with the $5,000 deductible to accommodate HMOs. She said the bill also provides for federally-qualified HMOs, required to provide a certain level of benefits. That level of benefits would be considered the standard and basic plan for the HMOs, which covers the possibility that Alaska might get an HMO. REP. G. DAVIS asked if an HMO would have a fee-for-service. MS. MEISELS answered no, HMOs pay by capitation. A PPO, a cross between an HMO and a fee-for-service plan, might pay by capitation or by fee-for-service. Number 465 REP. BUNDE asked whether Aetna and Blue Cross were part of Ms. Meisels' organizations. MS. MEISELS answered that neither were. REP. BUNDE asked whether each state had a reinsuring agency. MS. MEISELS answered yes. REP. BUNDE said it sounded like another level of expensive bureaucracy. MS. MEISELS said the cost was borne entirely by the insurance companies, and it would not be a government agency. REP. BUNDE said the insurance companies would pass the cost along to consumers. Number 481 MS. MEISELS said the premium price limitations limited how much of the cost they could pass on to customers, which would be incentive for efficient operation. Number 484 REP. G. DAVIS asked if there would be a need for an actuarial survey in order to establish fees, and asked who would pay the cost. MS. MEISELS answered that the reinsurance board would pay the cost of any actuarial survey. But she said that the members of the board would probably rely on their own companies' internal actuarial services to set rates, in an attempt to save money. Number 497 REED STOOPS, a LOBBYIST for AETNA, testified in Juneau in support of HB 12, though his company did not belong to HIAA. He agreed with Rep. B. Davis' arguments. He said the bill would help people get insurance, without cost to the state. He said it would help reduce the number of Alaskans who lacked health insurance, and was similar to Sen. Kertulla's plan of 1992. He said it was a less controversial way to address some problems with insurance service in Alaska. REP. G. DAVIS asked why insurance companies did not develop reinsurance pools on their own. MR. STOOPS answered that he had encouraged Aetna to do so. He said Aetna dominates the market for large group insurance and, as a result, has lower administration costs. But, he said, Alaska was a small market in which Blue Cross led 14 other companies. He said the market was too small to prompt companies to form their own pools for the state. Number 538 CHAIR TOOHEY called for additional public testimony and, hearing none, declared public testimony on HB 12 closed and called for committee discussion of the bill. Number 540 REP. B. DAVIS said she had amendments she wanted to offer to HB 12. CHAIR TOOHEY called an at-ease, and called the meeting back to order a few minutes later. Number 550 REP. BUNDE moved for passage of HB 12 to the House Labor and Commerce Committee with individual recommendations. REP. VEZEY objected to the motion. CHAIR TOOHEY called an at-ease, and called the meeting back to order a few minutes later. She noted that Rep. B. Davis had agreed to hold her amendments until HB 12 reached the next committee. CHAIR TOOHEY called for a roll call vote on the motion to pass the bill with individual recommendations. Those voting yes were Reps. B. Davis, Nicholia, Brice, Toohey, Bunde and G. Davis. Rep. Vezey voted no. Chair Toohey declared that HB 12 passed with individual recommendations. CHAIR TOOHEY called HB 105 to the table.