Legislature(2003 - 2004)
04/11/2003 03:25 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 195-INDIVIDUAL HEALTH CARE INSURANCE CHAIR ANDERSON announced that the next order of business would be HOUSE BILL NO. 195, "An Act relating to coverage offered under an individual policy of health care insurance; and providing for an effective date." Number 0793 REPRESENTATIVE LYNN moved to adopt committee substitute (CS) for HB 195, Version 23-LS0690\Q, Ford, 4/9/03, as the working document. There being no objection, Version Q was before the committee. Number 0828 REPRESENTATIVE ROKEBERG, as sponsor of HB 195, presented the bill. He explained that an official of the Division of Insurance will address the changes in the CS. Alaska and the nation are in the midst of a health care financial crisis, he said. People are contributing a greater percentage of their disposable income to the increasing cost of health insurance. This committee has been working to contain those costs, and HB 195 is a small tool the insurance industry can use to lower the cost of insurance for individuals who don't participate in a health insurance plan. The section of the bill relating to the insurance mandates is only for individual policies, which covers individuals and their families. The bill does not affect the insurance mandates for group plans. Insurance statutes differentiate between individual and group polices and has different rules for each. Number 0923 REPRESENTATIVE ROKEBERG explained that legislatures across the country have mandated coverage of certain types of services in [group] insurance policies. The result has been a continuous rise in the cost of insurance. Certain underwriting policies apply to group policies, but they don't apply to individual plans. Therefore, there's more flexibility in writing individual plans, he said. Many people in a group plan have employer contributions that help offset the costs. If HB 195 can help lower the cost of an individual insurance plan, more people will be apt to buy insurance. Allowing products to be underwritten by the insurance business that would enable people to afford a [health insurance] policy is a good thing, he said. He predicted that this bill may generate some controversy because all these mandated services [in group policies] are good requirements. Number 1025 REPRESENTATIVE ROKEBERG listed the health care services mandated by state law [for group policies], which include acupuncture, midwives services, eye care, substance abuse treatment, mammography, PKU (phenylketonuria), dental and vision, diabetes, and prostate and cervical cancer screening. Federal mandates cover newly born children, postpartum hospital coverage, and reconstructive surgery following mastectomies. He explained that the legislature cannot change the federal mandates. REPRESENTATIVE ROKEBERG stated that HB 195 allows an underwriter to write a policy that doesn't contain the state-mandated services. For example, he said, he doesn't need to buy a health plan for himself that includes mammogram coverage. REPRESENTATIVE LYNN noted that men do need mammography coverage; he said a good [male] friend of his died of breast cancer. Number 1135 REPRESENTATIVE ROKEBERG said HB 195 allows the insurance community to write a product that is cheaper. REPRESENTATIVE ROKEBERG described the ACHIA program (Alaska Comprehensive Health Insurance Association), which is the insurance of last resort in Alaska. This program is required under the federal HIPAA (Health Insurance Portability and Accountability Act of 1996). He said Alaska provides health coverage for anyone who cannot buy it elsewhere. The ACHIA insurance has a relatively high premium, but it is subsidized by all the health insurance underwriters in the state. He said that the other health insurance [companies] had to contribute $2 million to help pay the premiums of people who couldn't buy insurance elsewhere. He explained that it is a very good program for those people who can afford the premiums but can't get insurance otherwise because of pre-existing conditions. He alerted committee members that they may be able to refer constituents to this program. Number 1221 REPRESENTATIVE ROKEBERG explained that the federal Trade Adjustment Assistance Reform Act of 2002 (TAA), PL 207-210, provides a subsidy for health insurance. He used the example of a person in the fishing industry who loses a job because of foreign trade activity - for example, when Chileans dump fish [in US markets at below-market prices]. The person qualifies for [health] insurance from Alaska's ACHIA program, and the federal government will pick up 65 percent of the premium. Number 1326 REPRESENTATIVE LYNN clarified his earlier remark about men needing mammograms. He said about 5 percent of the people who die of breast cancer are males. He said the problem is that men do not typically have breast exams; therefore by the time breast cancer is discovered, it's very far advanced. He also asked about phenylketonuria, which is on the list of state-mandated coverage for group policies. Number 1414 REPRESENTATIVE DAHLSTROM explained that phenylketonuria is a very rare condition in a small number of newborns that prevents the normal use of protein in the body. One timely shot takes care of the condition. REPRESENTATIVE LYNN asked about the list of state-mandated health insurance services. He asked if these are elective procedures. REPRESENTATIVE ROKEBERG replied that HB 195 allows insurance underwriters to design a policy [for an individual] and exclude those mandates. The idea is to lower the cost of the policy. For example, a customer may not need or want the option of substance abuse treatment, which can be extremely expensive. Premera Blue Cross sent a letter of support for HB 195. He said he has asked Premera Blue Cross to calculate an approximate savings for a policy [without these mandates]. The State of Washington is also considering a similar bill. Number 1489 REPRESENTATIVE GATTO asked if the goal of this bill is to save money. REPRESENTATIVE ROKEBERG replied that this is part of the goal; the idea is to entice somebody to obtain insurance coverage. An individual could still ask for some of the mandated services in the policy. REPRESENTATIVE GATTO noted that if he is able to select components of his policy, he will pay less and that helps him. But, he stated, the insurance companies will be disadvantaged because their policies are priced to cover these mandated items. He asked if the insurance companies will make up the lost revenue on other policies. Number 1541 REPRESENTATIVE ROKEBERG said that cost shifting among insurance companies is a common practice. Most people with health care insurance in Alaska are covered under group plans. According to the Division of Insurance's 2001 Health Insurance Survey, there were 5,843 individual policies in force at the end of 2001; 14,946 people, including dependents, were covered by those policies. The premiums on those policies cost $24 million. He said the vast majority of the policies that are underwritten in Alaska are either group or self-insured plans, and they must include the state-mandated services. This [exception from state mandates] is intended for individual policies. In his own case, as a self-employed independent contractor, he said he was on his own seeking insurance, and it was a constant problem. He couldn't join an HMO (health maintenance organization), which are not present in Alaska. If he had had the opportunity to buy a major medical policy with no mandates that he could afford, he would have done that. He said he wants to do more than just save costs; he wants to make an affordable policy available and allow that product to be on the market. He said he wants people to buy a product they can afford. Number 1636 REPRESENTATIVE GATTO asked why insurance companies have not already [taken this step]. REPRESENTATIVE ROKEBERG replied that insurance companies could not offer this type of health coverage [minus the mandated service]; the state forced them to offer the mandated coverages. He said he thinks insurance companies will offer these new types of policies because they are looking for new products to sell. They want to make a profit, but they can't if they are required to include all these services and underwrite for them. Number 1739 REPRESENTATIVE GUTTENBERG said health care should be available to everyone; what people pay for it is another issue. He stated that he favors the idea of allowing the industry to offer looser coverage because more people are getting covered. But he questioned who would be left out. He said he wants to see where this approach goes. Number 1822 KATIE CAMPBELL, Life and Health Actuary, Division of Insurance, Department of Community and Economic Development, discussed the federal Trade Adjustment Assistance Reform Act (TAA) in 2002. She said that it gives people who have become unemployed because of international trade the option to purchase qualified health insurance coverage; the federal government will pay 65 percent of their premium. The program is administered by the U.S. Department of Treasury and the Alaska Department of Labor & Workforce Development. A qualified person has four options for health coverage for a two-year period. The federal government will cover 65 percent of the premiums for any of the following four options: 1) continued health coverage from the person's former employer through COBRA (Comprehensive Omnibus Budget Reform Act); 2) continued coverage through a current health insurance plan; 3) continued coverage by a spouse's plan that paid less than 50 percent of the premium; and 4) coverage under a state's high risk pool. Number 1888 MS. CAMPBELL explained that the fourth option is added to state law through HB 195. If a person who is eligible under TAA applies for the state's high risk ACHIA pool, then the federal government will pay 65 percent of that premium. She explained that in order for these individuals to purchase coverage through the high risk pool, state law needed to be changed so that they didn't have to be high risk or eligible under the Health Insurance Portability and Accountability Act (HIPAA). MS. CAMPBELL explained proposed Amendment 1. Drafted by the department, it will allow those people into the high-risk pool and not subject them to some of the requirements that would disqualify it as a qualified health plan. Amendment 1 reads as follows [original punctuation provided]: Page 2, after line 7 add a new section 4 to read: *Sec.4. AS 21.55.300(a) is amended to read: (a) Except as provided in this section, a state resident who is a high risk, a TAA eligible individual, or a federally defined eligible individual is eligible to enroll in a state plan described in AS 21.55.100. Page 3, lines 14-15 amend to read: (23) "qualified TAA eligible individual" means a qualifying individual as defined under 26 U.S.C. 35 (Internal Revenue Code, as enacted by sec. 201(a) of the Trade Adjustment Assistance Reform Act of 2002). MS. CAMPBELL explained that Section 4(a) in the proposed Amendment 1 adds a TAA-eligible individual to the ACHIA program. The second part of the amendment makes a consistent reference to the Trade Adjustment Assistance Reform Act of 2002. Ms. Campbell confirmed that the department supports this amendment. Number 2002 REPRESENTATIVE CRAWFORD asked about the individual cost to get into the ACHIA program. MS. CAMPBELL replied that a plan with a $1,000 deductible for a 45-year-old has a $692 premium. If the person were eligible through the TAA, the person's portion would be $242 after the federal tax credit. The state sets the premium at 150 percent of the individual health insurance rate on the open market. REPRESENTATIVE CRAWFORD said the whole idea of spreading the risk in insurance means enrolling as many healthy people as possible to help pay for the mandated services [in group plans]. The problem is that people are self-selecting out of these pools and signing up with cheaper plans, he said. MS. CAMPBELL said in the group market, the employer decides what items to cover. For individual health insurance policies, the insurance companies design a plan that they think is a good plan that will sell; some are lower benefit plans; others are higher benefit plans. For example, an individual policy may only cover hospital admissions, which is valuable coverage because hospitals are generally a person's greatest expense, she said. If HB 195 passed, the insurance companies would presumably design a plan that would not include the mandates. A person would have a choice of an individual plan that includes mandates, which would be a little more expensive, or one that doesn't. It would be the consumer's choice. She reiterated that Premera Blue Cross would be doing some estimates on the impact of removing those mandates [from individual policies]. Number 2185 REPRESENTATIVE ROKEBERG said that the committee can assume that by allowing insurance companies to design products without the mandates, the resulting policies will be cheaper. Right now, he said, companies don't do much designing like they do in group policies with their menu selections. He has requested Blue Cross and Aetna to show what kind of savings these policies can generate for the consumer. REPRESENTATIVE ROKEBERG asked Ms. Campbell to explain why individual plans generally are cheaper than group plans because of the guarantee issue. Number 2260 MS. CAMPBELL explained that in the large group market, companies generally guarantee [coverage of every policyholder] because it's a larger market, and insurance companies want to sell these policies. She said that is also true in the small group insurance market; an insurance company that writes in that market cannot refuse to cover someone, regardless of the risk. So if there are a number of unhealthy employees in a small group policy, the insurance company can't refuse to cover an individual; therefore, it's more costly insurance. However, in the individual market, insurance companies ask a lot of medical questions. For example, if a customer has had cancer in the last five years, they're not going to issue a policy to the person. Or if the person has had a back problem, they may put a rider excluding coverage for back treatments. So if customers have those kinds of conditions, they go to the high-risk [ACHIA] pool where they are guaranteed coverage. Number 2311 REPRESENTATIVE ROKEBERG stated that in group plans, the large majority of employers pay a portion of the premium, so the policyholder tends to pay less out of pocket than a person with an individual plan. He said it's ironic that individual plans may be cheaper than group plans, but because there's no employer contribution, the out-of-pocket cost may be higher for the individual. He pointed out that in individual plans, the insurance company doesn't cover preexisting conditions, unless it is a very expensive policy. He said HB 195 doesn't address that issue. TAPE 03-33, SIDE B Number 2368 REPRESENTATIVE GATTO asked about the insurance options available to a young college graduate with a degree, a $40,000 school loan debt, and no job. MS. CAMPBELL said the person would go to an insurance agent or a broker and get some quotes on policies. One company offers a policy for a $186 monthly premium, with a $l,000 deductible. She answered a question from Representative Gatto about coverage of successive cancers. She said the company probably wouldn't have covered the first cancer, and if the second cancer was related to the first cancer, the company would not cover that one either. Number 2265 REPRESENTATIVE GUTTENBERG asked several questions about the details of the federal subsidy of health insurance under the Trade Adjustment Assistance Reform Act. MS. CAMPBELL said the federal subsidy takes the form of a tax credit. The person [who lost a job because of international trade] applies to become eligible, and starting in August 2003, the U.S. Department of Treasury will issue tax credits on a monthly basis, instead of waiting till the end of the year. The person is covered for two years then is no longer eligible. The trade scene may shift, and the person may return to the previous job or find a new one. Number 2193 REPRESENTATIVE ROKEBERG reviewed the four types of health insurance premiums that can be partially subsidized through federal tax credits. He emphasized that HB 195 only covers federal subsidies for access to ACHIA coverage. Number 2152 PAULA SCAVERA, Special Assistant, Office of the Commissioner, Department of Labor & Workforce Development, explained that the Trade Adjustment Assistance Reform Act is for people who have lost their jobs due to competition from foreign imports. In the last few years, timber and oil industry workers [in Alaska] have been qualified for assistance under this law. Most recently, fishing industry workers have become eligible. In the late 1990's, there were hundreds of people eligible, but recently, displaced workers have numbered in the thousands. There's money for training, retraining, and this health care tax credit. MS. SCAVERA said she would provide the number of workers from the oil and other industries who have qualified for these federal benefits. She noted that the department is publicizing the program through its job centers. The information is available on the department's web site, and the department is contacting companies directly. Because the department was recently added to HB 195, she is developing additional materials for legislators. Number 1986 SHAUNA HARPER, TAA Program Coordinator, Division of Employment Security, Department of Labor & Workforce Development, responded to a question from Representative Guttenberg about the history of the Trade Adjustment Assistance Reform Act. She testified that the TAA was established in 1974; it was reformed on August 6, 2002, when the health care tax provision was added. The law sunsets in 2007 but has been reauthorized every three or four years since 1974. Other benefits include retraining, job search allowances, relocation allowances, and weekly benefits that are similar to unemployment insurance. Number 1920 REPRESENTATIVE ROKEBERG moved to adopt Amendment 1 [text provided previously]. There being no objection, it was so ordered. Number 1890 REPRESENTATIVE DAHLSTROM moved to report CSHB 195, Version 23- LS0690\Q, Ford, 4/9/03, as amended, from committee with individual recommendations and the accompanying committee zero fiscal note. There being no objection, CSHB 195(L&C) was reported out of the House Labor and Commerce Standing Committee.
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