Legislature(1993 - 1994)

03/24/1993 03:00 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  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.                                     

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