Legislature(2001 - 2002)
02/01/2002 03:20 PM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 290-COMPREHENSIVE HEALTH INSURANCE ASS'N Number 1966 CHAIR MURKOWSKI announced that the next order of business would be the continuation of HOUSE BILL NO. 290, "An Act relating to membership in the Comprehensive Health Insurance Association." Number 1935 JOHN L. GEORGE, Lobbyist for American Council of Life Insurers (ACLI), and American Family Life Assurance Company (AFLAC), said that there is a proposed amendment in the committee's packet, and asked that the committee not consider it today. He explained that in further discussions with his client and with the sponsor of the bill, Representative Rokeberg, there has been a request for some additional information. He said that he would rather propose an amendment that [Representative Rokeberg] was in agreement with and asked the committee to not take any action or even consider his current amendment. MR. GEORGE stated full support of the concept of [HB 290] to broaden the base of people that subsidize the Comprehensive Health Insurance Association [known as Alaska Comprehensive Health Insurance Association (ACHIA)] policies. He noted that as it is now, the small employer or the single person buying an individual policy is paying a substantial burden, while many people escape contributing. Number 1884 CHAIR MURKOWSKI said that the House Labor and Commerce Standing Committee would disregard Mr. George's proposed amendment until further notice. REPRESENTATIVE ROKEBERG asked Mr. George about "the scope of the definition of ... major medical and what can be covered under this bill." MR. GEORGE said the law as it stands now says that any insurer that sells major medical insurance policies is a member of ACHIA, and the assessment is based not on the major medical premium but on all health insurance premiums written by that company. He stated that AFLAC writes $14,106 of major medical premium[s]; it's Medicare-supplement policies, not even health insurance policies as one would think of a major medical policy. He said that the definition includes Medicare supplements, but because [AFLAC] writes over $5 million in premiums in [Alaska], its assessment this year will be over $30,000. He added, "Because they write $14,000 worth of major medical, they pay $30,000 in assessment." Number 1820 MR. GEORGE said that interestingly enough, AFLAC wrote Medicare- supplement policies in [Alaska] until "1997 or 1998," but doesn't anymore. He explained that "they're guaranteed renewable, so they can't cancel the policies and get off; they must renew them. And as long as they renew them, they're subject to the assessment of all their premium." Noting that there may be other approaches, he told the committee that he is going to provide some more information to describe what other types of insurance [AFLAC] writes that fall under health insurance but not major medical. REPRESENTATIVE ROKEBERG said that Mr. George's testimony clarified a point that he wants to work on in [HB 290]: the scope of how to get the premium expanded. Number 1774 REPRESENTATIVE HAYES said that he should claim a conflict at this point. CHAIR MURKOWSKI said that it is noted for the record, with humor. Number 1749 GUY BELL, Director, Division of Retirement & Benefits, Department of Administration, said that the Department of Administration supports expanding those who can be assessed under the ACHIA program because of the need for an equitable approach to this issue. In regard to the legislation, Mr. Bell said that [HB 290] identifies the State of Alaska as one of the groups. He said from [the Division of Retirement & Benefits] perspective, that means two groups. The first is the Select Benefits group of about 5,000 state employees covered under a plan that [the division] administers. The second group is over 23,000 state and political subdivision retirees under the public employees' and teachers' retirement systems. He said, "That's who we think would be affected by that reference to the State of Alaska." He added that there are certain groups that would not be included and he thought that Bob Lohr made reference to them in his testimony at an earlier hearing. He mentioned that [the Division of Retirement & Benefits] based its fiscal note on numbers from the Division of Insurance, assuming that Select Benefits and retirees would be assessed. MR. BELL said: Because the employer contribution to ... insurance and Select Benefits is capped, either in statute for non- covered people or through collective bargaining agreements otherwise, we've indicated that this increase would be assessed against state employees based on the current law. And that's why we've shown an asterisk on fiscal impact, because really the premium increase would go to employees as opposed to the employer under the current law. Number 1653 REPRESENTATIVE ROKEBERG interjected and said, "That's because the $500 figure is in statute right now." MR. BELL said that the amount of the employer contribution is in statute. He said: The retirement funds are actuarially funded, which means we pre-fund obligations associated with the retirement system. So the actual costs to the retirement funds in the ... year will be greater than the amount of the assessment against the retiree plans because we're collecting in advance for active employees as well as paying for the assessment for retirees. So there's effectively a double hit when it comes to the retirement funds because of our actuarial funding approach. Now in a conversation I had today with Representative Rokeberg, I must acknowledge that this is a savings the retirement funds received some years ago when we went from being fully insured to being self-insured, so at one point, of course, the retirement funds were paying their share of this cost, up to ... 1997, when both the retiree and the active plans became self-insured. Number 1582 REPRESENTATIVE ROKEBERG referred back to his conversation with Mr. Bell. He said one could make the case that particularly the retirees had already actuarially made the payments up until the point that they ceased making payments when the state became self-insured. He said there was only a small period of time and the figure of some $1 million is pretty substantial given that the whole assessment now is perhaps $3.5 million. He commented that it is almost double-paying in the future and that one could make the case that he/she wouldn't really need to do that if [the division] gave credit for the previous pre-payments. Number 1534 MR. BELL said that in a theoretical sense that is true. He said, "Based on what the Division of Insurance has told us, the share ... of what the premium share would be of the total, and that annual assessment would be $1 million against the retiree plans." He noted that [the Division of Retirement & Benefits'] fiscal note indicates that the annual cost to employers who pay rates to the retirement funds would be about $2.2 million because [the division has] to collect not only for the $1 million in premium it will pay in year one, but it also has to pre-fund future payments for currently active employees. He said that is because "when I retire, theoretically the retirement fund has collected from ... my employer and me 100 percent of my expected retirement benefit." Number 1480 REPRESENTATIVE ROKEBERG asked if, by statutory definition, the legislature could require that credit be given for the previous deposits when making the computation. He asked, "How do we get credit for those deposits?" MR. BELL said, "Every employer is like a separate bucket, and we take all of the employer contributions to the retirement system for, let's say, the State of Alaska and put that in a bucket. And that bucket is to be used to fund all future obligations." He stated that this doesn't segregate the pension obligation from the other obligations; it is the asset. The asset is then measured against the expected liability, and if there's a difference, that employer is charged a higher rate to cover the difference. He said, "Effectively, I think what happened is that our medical costs modestly dropped when we went to self- insurance and so the liability associated with medical dropped, but at the same time employer rates came down, maybe partly because of this, but also because of ... other issues." He concluded by saying that there are a lot of things that go into determining assets and liabilities. REPRESENTATIVE ROKEBERG suggested perhaps it is "commingled in the pot." MR. BELL said that it can't really be segregated. Number 1385 REPRESENTATIVE ROKEBERG said that it seems to him that there is an equity issue in terms of not getting credit for those payments that are already made actuarially. He said that he doesn't want to create too big a burden, or too big a fiscal note, no matter where the costs fall. He asked, "Is there a way we can bring equity to this equation and get some credit for those deposits?" Number 1330 MR. BELL said that the short answer to that question is that adding an obligation to the retiree medical plan increases cost. He explained that there is no other place it can come from, because for 99 percent of retirees, their retirement funds pay 100 percent of the premium. He commented that although this looks like a large number in terms of the total asset of the retirement funds, it's not a substantial amount. He said that [the Division of Retirement & Benefits] has, as of June [2001], $12 to $13 billion in the retirement funds. MR. BELL added that as the number of individuals affected by this is expanded, the cost to the retirement system will go down commensurately. Number 1266 REPRESENTATIVE ROKEBERG said, "If we are able to expand the amount of coverage, ... those costs would go down." He said that looks like a very high cost in the scope of what [HB 290] is trying to attain. He said this makes [HB 290] look bad. He explained that "they have to actuarially put this money aside now for down the road, but they already did it in the past." He asked, "So where is that money?" He stated that although he understands that [the division] has to charge now for it, he doesn't think it is fair to double up on [retirees] now. Number 1210 MR. BELL said that he needs to research whether or not the retirement funds did in fact pay a premium in the past toward ACHIA. REPRESENTATIVE ROKEBERG said that was his understanding in their conversation earlier. REPRESENTATIVE CRAWFORD said, "Just for my edification ... and clarification, I was under the impression what [Mr.] Lohr said the other day was that this would expand the ACHIA premiums to the ERISA [Employee Retirement and Income Security Act] plans that had stop-loss insurance, that it would really cast a broad net and would be very cheap for each individual." He asked if he is correct in this assumption. REPRESENTATIVE ROKEBERG said that he thinks Representative Crawford's assumption is correct. He also stated that he wants to clarify that point with Mr. Lohr later. He stated his concern over the high fiscal note if, in fact, money has been paid in previously. He offered that this is because it's all done on an actuarial basis, not a current-cost basis. Number 1106 CHAIR MURKOWSKI commented that perhaps the committee would receive some additional research on this topic. MR. BELL said when actuaries do evaluations, they don't look at the obligations item by item, but at the total - the aggregate. RESPECTIVE ROKEBERG said it shouldn't be looked at again if it wasn't taken into account before. MR. BELL pointed out that something is being added. Number 1048 BOB LOHR, Director, Division of Insurance, Department of Community and Economic Development, said, "It was really just a non-substantive procedural comment that if it turns out that they have been actuarially pre-funded, possibly transitional language and temporary professional acts would be one way to handle that, but I'm sure Representative Rokeberg is aware of that." He said that [the Division of Insurance's] conceptual support for HB 290 is based on the notion that by broadening the applicability of the assessment, it would in fact bring the rates down for all payers into the ACHIA fund. REPRESENTATIVE ROKEBERG asked Mr. Lohr, "Is it your belief that we can go to those organizations that have stop-loss now?" MR. LOHR said that is correct and "we do believe you can go there." He referred to a letter from Signe Anderson, Assistant Attorney General, Fair Business Practices Section, Department of Law, who responded to the question relating to the applicability of ERISA and possible pre-emption. He said: We do believe that stop-loss policies are reachable, and in fact other states have successfully included them in the assessment base through a comparable program in those states. And to my knowledge there has not been a legal challenge - let alone a successful legal challenge - against that it is somehow violative of ERISA, or preempted by ERISA. MR. LOHR offered that it's important in the rate design of this assessment to ensure that stop-loss coverage doesn't become unaffordable or do anything to drive it out of the state. He said, "It is an important insurance feature, and you certainly would not want to assess it unduly in some fashion that might jeopardize the availability of the coverage." He commented that he thought it could be handled rather carefully in the design of the actual assessment figures themselves. Number 0895 REPRESENTATIVE ROKEBERG asked Mr. Lohr if he could request his council to look into that, or to provide a letter regarding that. MR. LOHR said, "We can certainly ask her to supplement the opinion." He stated that all of the available literature that [the Division of Retirement & Benefits] has reviewed suggests that this is a viable method of assessing premiums for the competence of health insurance programs, and that practice is active and growing in several states. Number 0855 REPRESENTATIVE ROKEBERG stated that he is leaning towards trying to expand the definition of "those that offer major medical coverage." He referred to the situation that Mr. George brought up with AFLAC. MR. LOHR said that he would be happy to work with [Representative Rokeberg] on that. He offered that generally the broader the base, the better the managing of the impact on the private insurance market and on all payers into the assessment would be. REPRESENTATIVE ROKEBERG said that he has spoken with Mr. Bell about "bringing the University of Alaska in, and the other union trusts that weren't already covered." He commented that several of them already are [included] because they are underwritten or they have stop-loss coverage and are already paying into ACHIA. Number 0709 JACK McRAE, Blue Cross Blue Shield of Alaska, testified via teleconference and said, "We're very supportive of the legislation that will broaden this pool." He explained that [Blue Cross Blue Shield of Alaska's] costs in Alaska run approximately $1 million a year into the pool. He said that in 2002 it looks as if [Blue Cross Blue Shield of Alaska's] payment into the pool will just about double to a $2 million figure. He offered that "with other (indisc.) going self-insured, there seems to be an inequity of that burden being put on just the members of our commercial market place up there." Mr. McRae said that Blue Cross Blue Shield would like to work with the committee in any way possible to work through some legislation in this area. MR. McRAE addressed the issue of stop-loss and said, "In Washington State they did tax stop-loss last session, I believe, or it could be the session before, at a different formula than the commercial carriers. But there hasn't been any problem down here, to the best of my knowledge, with the stop-loss carriers being part of the pool." Number 0645 REPRESENTATIVE ROKEBERG asked, "Were they taxed as part of their guaranteed program, or for other purposes?" MR. McRAE said that he would have to check the legislation, but he believes that the rate at which they were taxed was one-tenth of what the commercial carriers were taxed at. REPRESENTATIVE ROKEBERG asked Mr. McRae if he'd said that a different rate was added. Number 0616 MR. McRAE said that they are paying at a lower rate than what the commercial carriers are paying into the pool. He mentioned that the logic behind this was to make sure that the burden is such that stop-loss carriers aren't chased out of the state because it is a fragile marketplace. REPRESENTATIVE ROKEBERG asked Mr. McRae if he could also look at the issue of assessment by premium versus covered lives. He said that he would be looking at that issue also. He also asked what percentage of the market Blue Cross Blue Shield has, since it makes up about $2 million of the premium. MR. McRAE said that with 85,000 lives covered in Alaska, not including a federal program, Blue Cross Blue Shield has just about 50 percent of the marketplace, although it goes back and forth between 50 and 51 percent. REPRESENTATIVE ROKEBERG asked Mr. Wiggins if Aetna's 3.6 percent of the marketplace in Alaska includes its third-party administration. MIKE WIGGINS, Vice President, National Accounts, Aetna, testified via teleconference. He said, "The majority of Aetna's business here is self-funded groups, not just the state. And I'm saying [Mr. McRae] and I are wrestling back and forth, but with the loss of GGU [General Government Unit] last year, we're probably about 20,000 less than he is." He added that Aetna is definitely a significant player in the marketplace and covers a lot of the significant employers that have home offices in the Lower 48, for example, some of the oil companies. Number 0440 REPRESENTATIVE ROKEBERG asked, "How about the non-ERISA? How many do you have there?" MR. WIGGINS said, "Well, I think the state's non-ERISA, so that's the only one I know. Most all of our other funded groups, as far as I know, are all ERISA-exempt." REPRESENTATIVE ROKEBERG said that the state is ERISA-exempt. MR. WIGGINS said that it's always a question, and he doesn't have an opinion on that. He commented on the fragile stop-loss market, and said: I agree with that; it's a fragile market up in Alaska, and maybe it's just an education on the type of coverage we're talking about, but a stop-loss carrier doesn't get a large premium. He may be carrying a specific stop-loss at a level, let's say, $250,000, and his premium may be 10 bucks, and so he's doing assessment on a per-covered-life [basis]. That doesn't make a whole lot of sense if that's the way you're going to do the apportionment. REPRESENTATIVE ROKEBERG said, "It would be better as a premium tax, then, rather than a covered (indisc.)." Number 0361 MR. WIGGINS said, "Yes, I totally agree with you, that it's a premium tax, but right now it's written on a per-head [basis], and as it's written here, we'll have some difficulty and definitely could hurt the marketplace for stop-loss carriers." REPRESENTATIVE ROKEBERG asked, "Where are we now? We're on the premium, I thought, right?" Number 0290 CHAIR MURKOWSKI said that the sponsor has asked to hold [HB 290] over as he continues to work through the process on it. She added that there has been some good information that the committee has benefited from. REPRESENTATIVE ROKEBERG said that it isn't his intention, but there are "a few complex issues and ... could be some very political and technical applications, which there really shouldn't be. That's not my intention." He said that he is really pleased that the administration has indicated general conceptual support for [HB 290] because "that shows that we can make this a bipartisan thing and this is not intended to hurt, like, the union trust." He mentioned that [HB 290] is to make sure everybody equitably is paying into this very important program that needs to continue and which is growing, and that insurance needs to be available for everybody in the state. He said that there is testimony that Blue Cross is paying half the premium at $2 million a year. He summarized by saying that "we need to expand that base of contribution into the program, and to make sure it's a viable program for the future." Number 0159 CHAIR MURKOWSKI thanked Representative Rokeberg for bringing the bill forward. [HB 290 was held over.]
| Document Name | Date/Time | Subjects |
|---|