Legislature(2013 - 2014)BARNES 124
04/08/2013 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB196 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 149 | TELECONFERENCED | |
| *+ | HB 96 | TELECONFERENCED | |
| += | HB 196 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 8, 2013
3:17 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Lora Reinbold, Vice Chair
Representative Mike Chenault
Representative Bob Herron
Representative Charisse Millett
Representative Dan Saddler
Representative Andy Josephson
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 196
"An Act relating to group insurance coverage and self-insurance
coverage for school district employees; and providing for an
effective date."
- HEARD & HELD
HOUSE BILL NO. 96
"An Act relating to chemicals of high concern and to chemicals
in children's products; and adding an unlawful act to the Alaska
Unfair Trade Practices and Consumer Protection Act."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 149
"An Act making firefighters employed by the state eligible for
the presumption of coverage under workers' compensation for
disability due to certain diseases."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 196
SHORT TITLE: SCHOOL DISTRICT EMPLOYEE HEALTH INSURANCE
SPONSOR(s): EDUCATION
04/02/13 (H) READ THE FIRST TIME - REFERRALS
04/02/13 (H) EDC, L&C
04/05/13 (H) EDC REFERRAL REMOVED
04/05/13 (H) FIN REFERRAL ADDED AFTER L&C
04/05/13 (H) BILL REPRINTED 4/5/13
04/05/13 (H) EDC AT 8:00 AM CAPITOL 106
04/05/13 (H) <Bill Hearing Canceled>
04/06/13 (H) L&C AT 3:15 PM BARNES 124
04/06/13 (H) Heard & Held
04/06/13 (H) MINUTE(L&C)
04/08/13 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
DEBI HANSEN, Administrator
Public Employees Local 71 Trust Fund
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 196.
DENNIS MOEN, Business Manager; Trust Chair
Public Employees Local 71
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 196.
MIKE ABBOTT, Assistant Superintendent of Support Services;
Chief Executive Officer (CEO)
Anchorage School District (ASD)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 196.
ANDY HOLLEMAN, President
Anchorage Education Association (AEA)
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 196.
RHONDA KITTER, Chief Financial Officer (CFO)
NEA-Alaska Health Plan
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 196.
LADAWN DRUCE, Vice President
NEA-Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 196.
CARL ROSE, Executive Director
Alaska Association of School Boards (AASB)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 196.
BRUCE JOHNSON, Executive Director
Alaska Council of School Administrators (ACSA)
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of HB 196.
MIKE BARNHILL, Deputy Commissioner
Office of the Commissioner
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of HB 196.
BECKY HULTBERG, Commissioner
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 196.
RICH RHODES, Superintendent
Wrangell Public School District (WPSD)
Wrangell, Alaska
POSITION STATEMENT: Testified in support of HB 196.
DAVID BOYLE
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 196.
REPRESENTATIVE LYNN GATTIS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the House Education
Committee, sponsor of HB 196, which she chairs.
ACTION NARRATIVE
3:17:24 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:17 p.m. Representatives
Reinbold, Herron, Saddler, Josephson, and Olson were present at
the call to order. Representatives Chenault and Millett arrived
as the meeting was in progress.
HB 196-SCHOOL DISTRICT EMPLOYEE HEALTH INSURANCE
3:17:40 PM
CHAIR OLSON announced that the only order of business would be
HOUSE BILL NO. 196, "An Act relating to group insurance coverage
and self-insurance coverage for school district employees; and
providing for an effective date."
3:18:10 PM
DEBI HANSEN, Trust Administrator, Public Employees Local 71
Trust Fund (Local 71 Trust), testified in opposition to HB 196.
She stated that Local 71 represents a group of 350 custodians
who enjoy a really good health benefit plan. The Local 71
benefits coverage includes an 80:20 medical benefits plan, plus
good dental, vision, and prescription benefits, including an
option for members to select a generic plan. She offered her
belief that this group is affiliated with a good union coalition
which gives its members a wonderful preferred provider
organization (PPO). One of the main reasons to speak against
this bill is that currently Local 71 Trust Fund provides medical
care flexibility. In fact, Local 71 has been able to customize
the health care coverage for its membership to meet individual
member needs. The Local 71 Trust Fund provides cost-effective
choices and its members provide input to help tailor their plan.
For example, the Local 71 Trust Fund offers a cafeteria plan
that allows the members to choose from three different plans so
they are not over insured. Additionally, the trust offers a
members' only plan. She offered her belief that the Local 71
Trust Fund's staff provides excellent customer service to its
members. She pointed out that English is not the first language
for some of the custodians, but she works hard to explain
benefits and assist them in making choices that work for their
families. She mentioned that she also works with vendors and
explains details so members understand their claims. Rarely do
callers get an answering machine, plus their needs are promptly
addressed, she said. She concluded that she would hate to see
these benefits disrupted and did not see any reason to fix
something that is not broken.
3:21:29 PM
REPRESENTATIVE REINBOLD asked whether the Local 71 membership is
comprised of 350 employees.
MS. HANSEN, in response to Representative Reinbold, confirmed
that the Local 71 Trust Fund represents a little over 350
employees. In further response to Representative Reinbold, Ms.
Hansen stated that the state contributes $1,297 per member per
month for health care insurance, but she said she did not have
the total cost of the plan.
3:22:22 PM
DENNIS MOEN, Business Manager; Trust Chair, Public Employees
Local 71, said he understood the smaller school districts'
dilemma. He stated that the Public Employee's Local 71 Trust
Fund (Local 71 Trust Fund) does pool for economy of scale;
however, he cautioned against placing everyone in one mandated
health care group, which he said is not the solution. The
Public Employees Local 71 Trust Fund works hard to provide
quality health care and personalized support for 350 plus
Anchorage School District (ASD) employees. He compared the
Local 71 Trust Fund's health cost to the state's plan and
concluded that switching plans would cost the ASD approximately
$400,000 per year, plus employees would spend an additional
$1,068 for the full family plan. In addition to cost savings,
this organization provides a personal connection to a group of
people whose first language is not English. The employees
appreciate being able to talk to Ms. Hansen, he said. The Local
71 Trust Fund provides quality care at a reasonable price since
the trust serves 70,000 Alaskans through a health care cost
management cooperative. The Local 71 Trust Fund currently has a
preferred provider with Alaska Regional Hospital, offers a
cafeteria plan, and health care options are tailored to meet
individual needs. The group participates in health fairs in
multiple locations across the state and recently added
acupuncture as a treatment. Further, three critical incidents
happened recently and the trust provided grief counselors to
help members. Certainly, challenges exist. Perhaps school
districts with 4,500 or more students should manage their own
health care or elect to have the Local 71 Trust Fund manage
their health care. Smaller school districts could opt for the
state plan. In doing so, members would receive the best
coverage at an agreed to price with health care options that
work best for its members. He said that one size does not fit
all and moving to a mandate is not a good economic or practical
solution for the Public Employee's Local 71 Trust Fund for the
Anchorage School District.
CHAIR OLSON remarked that the committee is trying to determine
what savings would or would not be enjoyed, as well as
considering plan designs.
3:25:50 PM
MIKE ABBOTT, Assistant Superintendent of Support Services; Chief
Executive Officer (CEO), Anchorage School District (ASD), stated
the ASD strongly supports efforts to reduce health care costs
for employees. He said significant challenges exist for the
school district to afford the current costs. In fact, health
care cost increases represent the most significant risk the ASD
currently faces. The ASD is very pleased that the legislature
and the administration is willing to consider opportunities to
reduce costs - if not the real cost, the rate of growth of the
health care costs. The ASD has worked consistently over the
past 25 years with its employees to develop financially sound,
reasonably priced health insurance programs. These programs
provide good value at a lower than average cost for public
employers in the state. The ASD believes that any change in
state law should ensure that all participants realize savings
through consolidation and allow for participants to opt out or
be held harmless in the event a larger program proves to be more
expensive. He said he appreciates the committee's interest.
3:27:48 PM
ANDY HOLLEMAN, President, Anchorage Education Association (AEA),
said that AEA represents approximately 3,500 members. He
expressed substantial concern about HB 196. He then encouraged
the committee to recognize the gravity of both the amount of
money involved and the trust of thousands of Alaskans who depend
on the details of their health care coverage. He said, "There's
no way to put this message for my members than to say, 'This is
a really, really big, big, deal.'" Even if changes were
carefully made over time, it will still create a lot of
uncertainty, angst, and disruption for many of AEA's members.
Certainly, it might make sense to make these changes. However,
if health care insurance changes are made suddenly without
planning, without consideration of the details, and without
assurance that real savings will occur, he anticipated the
backlash would be negative. He acknowledged that health care
coverage is costly and he thinks it is reasonable for the state
to provide benefits at a reduced cost, but it doesn't mean the
process is simple. Health care options and coverage is never
easy, he said. He urged the committee to move forward on this
bill in a manner that shows respect, wisdom, and concern for the
employees, which he opined could not happen in the closing days
of the legislative session while there are still several other
major issues to decide. The AEA believes the current plans in
Anchorage are competitive in cost and provide superior benefits
to the plans other agencies or the state offer. He asked
members to hold the bill and obtain real numbers about cost and
coverage in order to have an accurate comparison. He further
asked the committee to consider the possibilities of multiple
offerings to different agencies and employees and include the
AEA in the process. He said, "Please don't rush this, which my
understanding is it starts out with a $100 million ask in order
to make it happen."
3:30:08 PM
CHAIR OLSON asked for the monthly health insurance cost per
month per employee.
MR. HOLLEMAN deferred to Mr. Abbott for more definitive figures,
but offered his belief that the ASD pays $1,250 per month per
member, plus members also contribute some out of pocket costs to
additional benefits beyond what the district provides.
MR. ABBOTT reported the ASD's contribution is $1,385 per month
per member, plus a significant employee contribution.
CHAIR OLSON asked whether the amount varies by bargaining unit.
MR. ABBOTT replied that Anchorage has eight separate bargaining
units, including Local 71, which represents about 350 employees,
with an employer contribution of $1,235 per month. He reported
the AEA contribution is $1,385 per month, which is also the
contribution for the ASD's self-insurance program.
MR. HOLLEMAN answered that the ASD's responsibilities begin and
end with the employer's contribution for member's health care
premiums and while he did not want to trivialize this, the ASD
does not have any liability beyond that regardless of any costs
incurred. In response to a question, Mr. Holleman answered that
AEA members contribute $150 per month or approximately $1,200-
$1,300 per year for their health insurance plan.
MR. ABBOTT verified the employees' contributions are
approximately $100 per month or approximately $1,200 per year.
He also pointed out teachers don't all work a 12-month schedule.
REPRESENTATIVE SADDLER asked what the additional fees cover.
MR. ABBOTT replied that the primary difference between the NEA-
Alaska Plan Trust versus the ASD's self-insurance program is the
level of the deductibles. The NEA-Alaska Health plan has
significantly lower deductibles, he said.
3:34:03 PM
REPRESENTATIVE SADDLER asked for clarification that the extra
$100 per month would reduce the amount of the deductible.
MR. ABBOTT responded that the AEA sets its own pricing with the
deductible being the most obvious difference, although there are
likely many other differences.
MR. HOLLEMAN answered that the AEA does not have a set benefit
for the additional contribution amount since all AEA members
contribute. The total cost to the plan exceeds what could be
provided from the bargained contribution amount. The employee
contribution is added in to provide the type of coverage the
member wants.
3:34:52 PM
REPRESENTATIVE SADDLER asked whether the additional $100-$150
would buy supplemental insurance.
MR. ABBOTT stated that basically the AEA's premium is
approximately 10 percent more expensive than the ASD's self-
insurance program so employees obtain a different plan. The
plans do not layer on top of one another; instead, the ASD
contributes a monthly dollar amount of $1,385, teachers make
their individual contributions of $100, arriving at the total
plan cost of $1,485. As a result the AEA builds and provides
certain benefits, he said.
3:35:52 PM
REPRESENTATIVE MILLETT asked again for the per teacher cost for
the plan.
MR. HOLLEMAN answered the health insurance premium monthly cost
is $1,385 plus $100 per member per month or $1,485 in total. In
further response, Mr. Holleman answered that the total cost for
a member is $1,485, of which $1,385 is derived from
contributions by the ASD and the additional $100 is provided by
mandatory member contributions.
3:37:08 PM
REPRESENTATIVE MILLETT surmised then that the [NEA-Alaska Health
Plan] Trust is paid $1,485 per month.
MR. HOLLEMAN answered yes.
CHAIR OLSON pointed out that the contributions made are
regardless of benefits or losses.
3:37:30 PM
REPRESENTATIVE REINBOLD asked Mr. Holleman for the amount of the
deductibles.
MR. HOLLEMAN said he was unsure. He deferred to Ms. Kitter for
more precise answers.
CHAIR OLSON asked Mr. Holleman to provide a one-page spread
sheet with coinsurance and deductibles.
REPRESENTATIVE MILLETT asked the NEA-Alaska and the [Public
Employees] Local 71 [Trust Fund] to also send the administrative
costs per person.
MR. MOEN agreed to do so.
3:39:03 PM
RHONDA KITTER, Chief Financial Officer (CFO), NEA-Alaska Health
Plan, related opposition to HB 196. She then explained that the
NEA-Alaska Health Plan was formed in 1996 as a self-insured
trust for public education employees. The NEA-Alaska Health
Plan represents 17,000 members and their dependents, providing
coverage to 16 school districts in the state. She indicated she
has worked for the NEA-Alaska Health Plan since 1998 and has an
in-depth understanding of the complex nature of health
insurance, health care delivery negotiations, administrative
cost controls, and in providing assistance with benefit-design
selection. Ms. Kitter noted she previously submitted a letter
to the sponsor in opposition to the bill and greatly appreciated
this opportunity to testify. She expressed concern about the
speed with which HB 196 has been moving through the committees
without thorough research into the impact and risk that the
state would acquire through this process.
MS. KITTER said she has often heard concern that the NEA-
Alaska's Health Plan is a union trust and the union is
benefitting from the NEA-Alaska Health Plan. However, the NEA-
Alaska Health Plan is the plan sponsor for the trust, but NEA-
Alaska Health Plan is not linked in any way financially.
Instead, a separate board of trustees consisting of public
education employees was established for the plan. She clarified
that there are no financial connections between NEA-Alaska and
NEA-Alaska Health Plan. All premiums collected are only used
for the health and welfare benefit of the members, she said.
This benefit, she related, is not to the NEA-Alaska, but is to
the public education employees in the state who participate with
the trust.
MS. KITTER offered her belief that the concept that the state
can further reduce its health insurance costs by having a larger
pool is flawed since most school districts already purchase
insurance through a pooled system. Further, the DOA reported
the average health insurance administration costs are 10 percent
of the premium. While national benchmarks for administration
costs are at 6 percent, the NEA-Alaska Health Plan's trust is
operating at 3 percent. Thus the NEA-Alaska Health Plan's trust
has successfully squeezed the fat out of the premiums other
health insurance carriers were charging school districts.
Medical inflation is far outpacing consumer inflation. While
she completely understands the frustration school districts have
about health insurance costs, this bill would merely transfer
the issue from the local municipal level and bring the discord
to the state. She referred to the DOA letter from Buck
Consultants dated April 5, 2013, which indicates health plan
management programs are assumed to reduce the higher claims for
school district employees. This assumption would imply that any
existing health plan management program is either inefficient or
non-existent compared to the state's plan; however, she is not
aware of any health care management program the state uses that
currently manages both cost and quality.
3:42:11 PM
MS. KITTER referred to the [memorandum] of April 3, 2013, from
Dan Wayne, Legislative Counsel, Legislative Affairs Agency, to
Representative Lynn Gattis, in which he says the requirement for
all eligible school district employees be covered by the policy
does not accommodate the need for individual choice. If an
employee has coverage through a spouse's partner plan and
doesn't want the additional insurance through the school
district, this bill would still require the school district to
incur a cost they wouldn't have otherwise had. In short, the
NEA-Alaska Health Plan has been very successful in keeping the
annual increase of premiums to a level lower than the national
average and significantly lower than Alaska's average. The NEA-
Alaska Health Plan's trust invests the premium dollars and uses
those earnings to further reduce premium costs. Since 1996, the
NEA-Alaska Health Plan's trust has averaged a less than 10
percent increase in premiums. Last year, the NEA-Alaska Health
Plan's trust had a 0 percent increase, with no additional cost
to school districts, which saved both the district and employees
money. Further, the NEA-Alaska Health Plan's trust currently
offers school districts a variety of health insurance options
with premiums varying from $1,102 to $1,712 per employee per
month. The differing level of premiums represents the differing
underlying benefits, with individual group selections available
to save money for the district and the employees.
3:43:39 PM
MS. KITTER reported that Anchorage educators have selected a
benefit plan that is higher than the cost of the monthly school
district contribution of $1,385 per employee per month. In
fact, the educators have chosen to pay the additional premium
from their paychecks in order to choose a benefit level that
meets their needs. She pointed out the ASD is protected since
it has no risk associated to claims and has capped its monthly
contribution amount. Therefore, the employees as a pool have
offered to pay for the additional benefits to receive the
benefits they want. However, this bill would require employees
to reduce their benefits and pay more for their medical care.
As Superintendent Rob Thomason, Petersburg School District
(PSD), reported in his earlier testimony, the PSD was facing a
40 percent increase with AETNA's political subdivision pool and
requested a quote from the NEA-Alaska Health Plan trust. Mr.
Thomason reported that the NEA-Alaska Health Plan's trust was
able to save the school district $450,000, including $250,000
from the potential increase from AETNA as well as providing the
same benefit coverage at $200,000 less annually.
MS. KITTER suggested, at a minimum, a study should be conducted
to get a more accurate understanding of the financial risks.
Similar legislation was proposed in Wisconsin and Montana, where
school districts are insured through a local trust. However,
after comprehensive studies were conducted the results
consistently showed that moving all school district employees
into a single state health insurance plan was cost prohibitive.
She said she strongly believes the state should not impose a
mandate that has not been thoroughly studied and actuarial
assessed. In conclusion, the risk and benefit analysis to the
state has not been adequately defined. This is not the time to
adopt similar approaches as with health care reform, which was a
"sign it now" and "read it later" package.
3:45:36 PM
REPRESENTATIVE MILLETT asked whether the employees pay an
additional $150 per month.
MS. KITTER answered that the NEA-Alaska Health Plan trust covers
16 employee groups and the additional monthly premium cost in
Anchorage for employee contributions is $150.
REPRESENTATIVE MILLETT asked whether the employee contribution
amounts vary.
MS. KITTER answered that the school district negotiates with the
employees the contribution level as well as the benefit-design
selection and all eight plans offered are being used.
REPRESENTATIVE MILLETT asked whether individual school districts
could opt out or if they are mandated to provide coverage.
MS. KITTER answered that individual school districts negotiate
with the associations. In the majority of the school districts,
the employees have the option to sign a waiver to opt out of the
plan, but in one school district employees are required to
demonstrate proof of other coverage. Other school districts
limit coverage to one family member benefit, so if two family
members are employed by the school district, the school district
would only provide one policy.
3:46:56 PM
REPRESENTATIVE MILLETT asked whether the supplemental costs are
mandated or if employees can take the standard package.
MS. KITTER answered that the $1,330 premium is not part of the
bargaining agreement between the school district and the
associations. Some districts pay 100 percent of the cost of
health insurance based on a premium-design plan they have
chosen. Other school districts contribute a flat dollar amount,
regardless of the benefit-design plan chosen. The liability
for many school districts is limited to what the districts have
negotiated; however, other school districts contribute a
percentage of the premium with the balance paid by the employee.
In those instances, the member chooses the plan design that fits
his/her needs in the individual district, which is truly a
benefit the [employees] enjoy.
3:48:00 PM
REPRESENTATIVE MILLETT asked whether the $150 amount Anchorage
teachers' pay is mandatory or optional.
MS. KITTER responded by clarifying that the ASD contributes a
monthly premium amount of $1,385. The AEA has chosen the
benefit-design plan that costs more than the school district's
contribution per employee. Thus ASD employees can opt to have
the coverage through the NEA-Alaska Health Plan trust and pay an
additional $150 monthly premium from their paycheck or waive the
plan's coverage by showing the member has additional coverage
available elsewhere, and thereby not incur any additional cost.
REPRESENTATIVE MILLETT related a scenario in which she is a
single teacher with no other insurance. In such a scenario, she
surmised that single teacher would have to pay the $150 to the
[NEA-Alaska Health Plan's] trust.
MS. KITTER agreed, but clarified that [the $150 additional
coverage if there is no proof of other insurance] applies only
to the ASD's employees. These parameters were requested by the
school district, she further clarified.
3:49:08 PM
REPRESENTATIVE JOSEPHSON recalled earlier testimony from the
Petersburg superintendent [Mr. Thomason] who testified that he
liked HB 196. When it was pointed out that the Petersburg
School District would not obtain any benefits, the
superintendent said he still liked the bill for other [school
districts]. He asked whether the PSD school district actually
saved $140,000 by joining the [NEA-Alaska Health Plan] trust.
MS. KITTER answered yes. She said she spoke to PSD's
superintendent, Rob Thomason, to clarify his position. She
related Mr. Thomason's comments, such that he really appreciated
the NEA-Alaska Health plan trust. He estimated the PSD's
savings at $450,000. However, she said Mr. Thomason's
frustration stems from the conversation regarding health
insurance. She recalled the PSD's previous carrier, AETNA, had
a 40 percent increase which caused considerable concern.
Additionally, the PSD was concerned about not having a local
pharmacy to address their needs, which the district felt was a
necessity. She offered her belief that if the committee were to
speak to Mr. Thomason today, he would report that the NEA-Alaska
Health Plan trust had taken care of the PSD's issues. In
further response to Representative Josephson, Ms. Kitter
responded that the NEA-Alaska [Health Plan trust] was formed in
1996 by three of the largest school districts in the state in
order to negotiate their own benefits for a flat amount. Thus,
separating out [health care benefits] would allow the school
district to negotiate wages with the NEA separately. In further
response, Ms. Kitter agreed each of the 54 school districts
typically bargain for health care coverage so they have
different plans and different insurance coverage.
REPRESENTATIVE JOSEPHSON asked whether it follows that in some
instances teachers in one school district may have chosen to
give up a percentage of an increment of pay increase in exchange
for dental coverage.
MS. KITTER answered yes.
3:52:01 PM
REPRESENTATIVE JOSEPHSON said it seems to him today that some
effort has been made to compare the ASD contributions with what
the state would provide the specific benefit costs. He related
a scenario in which teacher "X" has health insurance coverage,
which is compared to the state's economy plan. He asked whether
Ms. Kitter could assess whether the NEA-Alaska Health Plan trust
for teacher "X" at West High School in Anchorage is better or
worse than the benefits offered in the state's economy plan.
MS. KITTER answered that the teacher at West High School would
suffer a significant reduction in benefits under the state's
economy plan. In further response, she clarified that the
teacher would suffer significant reductions if the West High
School teacher's health insurance was under the state's plan.
3:52:47 PM
REPRESENTATIVE REINBOLD asked for clarification on whether
teachers at West High School would also have reductions in the
cost of the health insurance under the state's plan.
MS. KITTER answered yes. She explained that teachers at West
High School have chosen a richer benefit plan through their
association and have agreed to pay a higher premium out of their
paychecks, with no impact to the school district. However, if
these teachers opted for the state's economy plan, the premium
would be decreased, but the [benefits] would also be
dramatically decreased.
3:53:50 PM
REPRESENTATIVE REINBOLD asked for the deductible for the ASD's
contribution of the $1,385 plus the teacher's contribution of
$150 per month.
MS. KITTER answered that the ASD's employees have a $100 annual
deductible, an 80:20 percent coverage plan, a $1,000 out-of-
pocket cap, which includes a $2,000 annual dental benefit, a
vision benefit, prescription coverage, and a mental health
assistance program.
3:54:50 PM
REPRESENTATIVE REINBOLD asked for the fund balance for the NEA-
Alaska Health Plan trust and whether this information is
available in public records.
MS. KITTER answered that the financial statements are public
records. She offered to forward them along with the eight
different plan designs as previously requested by the committee.
3:55:35 PM
REPRESENTATIVE MILLETT asked for a comparison between the ASD
employee's plan and the state's standard health insurance plan
since ASD employees pay an additional $150 for extra benefits.
She pointed out that state employees pay $117 for the
[AlaskaCare's] standard plan.
MS. KITTER answered she did not have the information readily
available but she offered to provide it.
REPRESENTATIVE MILLETT confirmed she would like a comparison
since the state's standard plan may be closer to the threshold
that members are willing to pay. In fact, opting for the
state's standard plan may be a cost reduction in out-of-pocket
expenses for ASD teachers.
MS. KITTER responded that the deductible under the state's
standard plan is $250 plus an 80:20 coverage ratio, which would
result in an immediate $150 additional out-of-pocket deductible
for ASD's teachers. While the out-of-pocket costs match, she
believed the dental benefits were also slightly different.
REPRESENTATIVE MILLETT pointed out the DOA suggests it might be
able to lower the deductible or health insurance rates depending
on how many people are in the pool. Currently, the state can't
predict what the plan would equate to if an additional 47,000
members joined the pool; however, it could be a big benefit to
teachers if the state could negotiate a $100 deductible and
$1,000 premium. She asked members to consider that currently,
the state has 6,500 employees including dependents for a total
of 16,000 lives. She surmised the changes under AlaskaCare
might be pretty significant by significantly enlarging the pool.
She asked whether the teachers were aware of the possible
benefits of joining the state's AlaskaCare plan.
MS. KITTER answered that currently the NEA-Alaska Health Plan
trust offers eight different plan-design options, with premiums
ranging from $1,102 to $1,712 per employee, per month.
Therefore, some of the plans offered are below the level of the
state's plans. Additionally, each association can select the
benefit levels. She said that under the NEA Alaska Health Plan
trust the [school district employees] appreciate having an
option to annually select one of the eight plans, whether they
choose to pay additional premiums or change the deductible
amount for medical services.
3:58:47 PM
REPRESENTATIVE MILLETT offered her belief that the ASD's
employees would have these same options under the state's plan,
noting that the legislature has not yet narrowed down the
options the AlaskaCare Plan can negotiate. She questioned the
statement the teachers would absolutely not have comparable or
better benefits, since it is possible that school district
employees might actually have better benefits if they are pooled
with the state plan. She didn't think the [DOA] ruled out
offering eight different plans, with one being a Cadillac plan
and the rest staggered with other options.
MS. KITTER answered that the NEA-Alaska's Health Plan trust
analysis is based on the current plan for the AlaskaCare's plan
priced at $1,330 and the economy plan was referenced as the
benefit-plan design being offered by the state.
3:59:39 PM
REPRESENTATIVE JOSEPHSON related his understanding that the NEA
and the AEA receive dues from their members.
MS. KITTER said she is not the chief financial officer for NEA-
Alaska, which is a separate entity; however, she said that no
dues are directed to the NEA-Alaska Health Plan trust office,
just premium health care dollars are received.
4:00:14 PM
REPRESENTATIVE JOSEPHSON asked whether the NEA-Alaska Health
Plan trust takes any proceeds from members and gives a
percentage to the NEA or its affiliates.
MS. KITTER answered no. She said that the NEA-Alaska Health
Plan trust is prohibited from receiving dues and that every
premium dollar can only be used for health and welfare benefits.
4:00:40 PM
REPRESENTATIVE REINBOLD stated that 90 percent of Alaska's oil
revenues cover the state's fiscal notes. She indicated that
Alaska has been seeing a decline in oil production and many
believe the investment is being driven out due to the current
policies on taxes and current policies on permitting. She
understood that Ms. Kitter's organization has taken quite an
active role in the discussion. She asked whether Ms. Kitter
understands that the legislature has reviewed a very alarming
chart that shows a growing gap [between revenues and expenses]
such that the state will not be able to meet its future
liability unless changes are made. She wanted to ensure that
the [NEA's] members understand the pressures the legislature is
under to resolve these issues. She said if this law does pass
that she wants legislators to have the opportunity to detail the
steps the [legislature and state] have taken to meet their long-
term fiscal obligations and plans. She pointed out the
legislature is trying to make important decisions so that long-
term sustainable ways exist to pay off future liabilities.
MS. KITTER replied that the NEA-Alaska Health Plan trust is
prohibited from participating in the oil tax debate. Thus the
NEA-Alaska Health Plan trust has not taken a position on [oil
taxes]. Once again, the NEA-Alaska Health Plan's focus is in
providing health insurance for members with better outcomes, she
said. She expressed concern about HB 196 since the state could
take on a greater risk than is currently done at the state
level.
4:02:21 PM
REPRESENTATIVE REINBOLD said she stands corrected since it may
be the National Educational Association (NEA) and not the NEA-
Alaska Health Plan Trust that has been involved in the oil tax
debate.
MS. KITTER responded that HB 196 is of great concern without an
actuarial evaluation of the impact. Currently, when a school
district purchases health insurance through the NEA-Alaska
Health Plan trust, the school district pays the premium and the
trust takes on all the responsibilities associated with the
premium. By transferring the 47,000 school district employees
to the state's health insurance plan without knowing the health
of the group, the state would assume the risk for the health
claims of the population. She said the NEA-Alaska's Health Plan
trust has done a great job in the past 18 years to stay in front
of costs and has adopted a healthy outcomes approach rather than
to use a cost-shifting measure. The medical cost inflation and
the [Patient Protection and] Affordable Care Act (PPACA) present
factors and significant overall concern regarding employees'
health care costs. She highlighted the choice as between being
reactive to claims or being proactive and assisting employees
before they are ill. She related her understanding that there
has not been an actuarial evaluation on the cost impact to the
state to add the school district employees to the AlaskaCare
health insurance program.
4:04:14 PM
LADAWN DRUCE, Vice President, NEA-Alaska, speaking on behalf of
Ron Fuhrer, President, NEA-Alaska, who is also the chair for the
NEA-Alaska Health Plan's Trust that Ms. Kitter just spoke about.
He has been a trustee of the NEA-Alaska Trust Plan since its
inception in 1996 and understands the complex nature of health
insurance and the need to balance premiums and benefits. This
bill, HB 196, and its companion bill, SB 90, have been moving
quickly through committees without receiving proper vetting
needed to assure they would not create an adverse financial risk
to the State of Alaska. As a trustee, Mr. Fuhrer has
participated in many meetings in which decisions are made on
whether or not to enroll a new employee group. These decisions
have not been made lightly and include a three-year look back
into the experience of the employee group. She said that
providing health insurance is about managing risk. She
questioned whether the committee understands the risk the state
will incur if HB 196 passes, noting the fiscal note ranges from
$100-$300 million, which has yet to be vetted. Currently, when
school districts purchase insurance through the trust or any
carrier the risk is transferred, which means the school
districts have paid their maximum liability for coverage. Thus,
[under the bill] if claims exceed the funding the school
districts carry none of the risk since the risk will reside with
the state.
MS. DRUCE said that at a minimum a study should be conducted to
obtain a more accurate understanding of the financial risk.
Similar legislation has been proposed in Wisconsin, where many
school districts are insured through the Wisconsin Education
Association (WEA) trust; however, when studies were conducted,
the results consistently showed that moving all school district
employees into a single state health insurance plan was cost
prohibitive. As a private organization, the NEA-Alaska Health
Plan's trust collects premiums and invests them, which in turn
are used to help reduce the trust's costs. Last year the trust
was able to provide a zero percent increase to its participating
school districts. It was able to do this while at the same time
spending $.97 of each $1 collected on health care. In fact, the
NEA-Alaska's Health Plan trust spends $.03 per dollar on
administrative costs. Further, the NEA-Alaska Health Plan's
trust has been a nimble organization and a good steward of its
financial resources. Due to its size the NEA-Alaska's Health
Plan trust is able to negotiate very favorable contracts with
providers in Alaska as well as with specialists in the Lower 48.
Additionally, the NEA-Alaska's Health Plan trust has implemented
or piloted programs that work to save costs, including surgical
travel benefits, biometric screenings, and seeking preferred
relationships with medical providers that measure cost and
quality. Unlike the [NEA-Alaska's Health Plan] trust, the DOA
has testified that its administrative costs are nearly 10
percent. In addition, the state does not have as much
flexibility as the NEA-Alaska's Health Plan trust and can only
address its cost every three years at the bargaining table or
through a lengthy procurement process, which is not efficient,
effective, or affordable.
4:07:42 PM
MS. DRUCE offered an example, such that the current third-party
administrator's (TPA) bid that the state is negotiating has
already been underway for four months longer than anticipated.
She said the state has had three TPA's in the past four years.
She suggested that going with one size fits all would eliminate
the ability of the 50-plus school districts to evaluate the plan
that best fits their needs. She stated that rural school
districts are different from urban school districts. Thus,
rural school districts may want to offer more benefits than
those in the state's economy plan since it is a tool for hiring.
The state should not impose a mandate that has not been studied,
one in which the risk and benefit analysis to the state has not
been adequately defined, she said.
4:08:26 PM
REPRESENTATIVE MILLETT asked whether the NEA-Alaska's Health
Plan trust will provide census data to conduct an actuary study.
In other words, would the trust be willing to share its data
with the state.
MS. DRUCE deferred to Ms. Kitter.
REPRESENTATIVE MILLETT asked who the guarantor of the trust is
if the NEA-Alaska Health Plan's Trust goes insolvent or fails in
any way, in other words, she asked who would pick up the
financial responsibility.
MS. KITTER agreed the NEA-Alaska is willing to provide its
census for the population base. Additionally, the NEA-Alaska's
Health Plan sponsor, NEA-Alaska, has the fiduciary
responsibility if funds are insufficient to cover any claims
since it is not the school district or state's liability.
4:09:42 PM
CARL ROSE, Executive Director, Alaska Association of School
Boards (AASB), testified in favor of HB 196. He referred to a
resolution recently passed by the AASB related to health care
costs and medical insurance, which speaks about the recent
federal health care act, PPACA, and the unknown impact it will
have on Alaska. This resolution asks the governor, the
legislature, the Congress to carefully review the legislation to
determine if any unintended consequences exist or if it will be
harmful to school districts, and requests the legislature
continue to address ways to look at health care costs. He said
the PPACA is an unknown and will not be fully implemented until
2014. The premise is that people who have insurance will pay
for people who don't have insurance, which simply says to the
AASB that the cost of insurance will go up.
Mr. ROSE said except for energy and transportation costs, school
districts have been held static for the past four years. The
issue of cost containment falls squarely in the school
district's lap, he said. The AASB has evidence that costs are
increasing and while he does not have any issue with the
testimony given, no one can predict what the costs will be in
the future although he anticipated costs will rise. He asked
the legislature, the governor, and the Congress to give the
school districts a hand with this should an unintended
consequence occur.
MR. ROSE concluded by offering the AASB's support for this bill
since all avenues need to be exhausted. He reiterated the AASB
anticipates the costs will rise, noting tremendous cost
increases have been experienced in the past 10 years even
without the PPACA so he is concerned about the future. He said
anyone who is comfortable with the current coverage should
consider what the coverage will look like in three to five
years, which he predicted will look very different.
4:12:35 PM
REPRESENTATIVE HERRON noted Mr. Rose has had experience with
insurance pools and asked whether it should be limited to state
or to a nonprofit.
MR. ROSE stated that in 1986, the health insurance costs were
$1.25 per hundred since insurance was not available for rural
Alaska. By 1992, the losses for his organization totaled $40
million and property insurance rates dropped from $1.25 to $.22
per hundred. He emphasized this is what pooling did for his
organization. Since then, the company has divested itself from
the Alaska School Insurance Company (ASIC) and created the
Alaska Public Entities Insurance (APEI). He explained the APEI
offers property, casualty, and workers' compensation and costs
have been contained. While these costs are not associated with
medical insurance, the APEI believes that pooling works. He
offered that the whole concept behind pooling is that the larger
number of people in the marketplace, the better chance to
negotiate and leverage favorable rates.
CHAIR OLSON remarked it is called the law of big numbers.
4:14:27 PM
REPRESENTATIVE HERRON assumed Mr. Rose would support the bill if
it was offered by the state or a nonprofit pool.
MR. ROSE answered that the goal of the resolution is to reduce
costs, educate children, and keep dollars in the classroom. He
said he supports HB 196 and is willing to review any derivative.
4:15:11 PM
REPRESENTATIVE JOSEPHSON recalled his comment that increasing
the pool size would be good so wouldn't it follow that taking
"free money" from the government and adding Medicaid would be a
good thing.
Mr. ROSE said he did not have an opinion.
CHAIR OLSON remarked this is not pertinent to the bill.
REPRESENTATIVE JOSEPHSON asked for the reason a state insurance
pool would be a good thing but other pools are not.
MR. ROSE clarified that he believes pooling is a good concept
and he is a member of a pool for property and casualty
insurance. He thinks that the larger the group is to take to
market helps the pool leverage better insurance rates.
4:16:29 PM
BRUCE JOHNSON, Executive Director, Alaska Council of School
Administrators (ACSA), stated the ACSA represents the
principals, superintendents, and business officials. He said
his members are not in the insurance business since the
organization exists to educate children. He characterized
[obtaining health insurance] as flying somewhat blind. The
escalating cost of health insurance is causing members to urge
the ACSA to take action since the costs are not sustainable. He
referred to Mr. Thomason's testimony, noting the PSD was
initially able to bring down their costs, but now anticipates a
15 percent cost increase next year. He said the ACSA would like
to see costs evened out and one way to accomplish this is
through a larger pool. He said the ACSA values quality
insurance for its members and does not intend to minimize the
employee's health insurance. He stated that the ACSA currently
directs nearly $300 million in school district funds at health
insurance and would like to get the best value possible. He
concluded that the ACSA is very interested in exploring the
concept in HB 196. In fact, the five big districts brought this
issue to the legislature in late January or early February, he
said. In response to a question, he clarified that the $300
million figure was derived from a survey the school districts
reported, which reported the amount ranged from $280-$300
million.
4:19:24 PM
REPRESENTATIVE JOSEPHSON asked whether the five larger school
districts have analyzed the impact of joining forces with 49
other school districts, some of which are in remote locales
where costs are high, such as for Medivacs to Dutch Harbor,
which run $1,000 round trip.
MR. JOHNSON responded the ACSA defers to the state to examine
this on their behalf, plus the concept is that the larger the
pool, the better off all school districts will be over the long
term, even if it doesn't work in the short term.
4:20:30 PM
REPRESENTATIVE HERRON asked whether insurance pooling should be
limited to the state or if nonprofit pool should be created.
MR. JOHNSON said he did not know; however, the ACSA is
interested in all options that will minimize increased costs for
health insurance.
CHAIR OLSON remarked that the PPACA is the 700-pound gorilla in
the room. Everyone in this room will be covered or taxed due to
gold-plated plans and not because of the coverage. He
anticipated increased costs and once the federal law is in
place, a whole new series of issues will arise.
4:21:54 PM
MIKE BARNHILL, Deputy Commissioner, Office of the Commissioner,
Department of Administration (DOA), offered to review the fiscal
notes and to address some of the comments. He indicated the DOA
asked Buck Consultants to consider an actuarial study, which is
currently possible since the state's active school district
employees are also active in the Public Employees' Retirement
System (PERS) and the Teachers' Retirement System (TRS).
Therefore, the DOA has specific information on the school
district employees based on demographics; however, the state
does not have any claims data on the employees, which will be
necessary in order to evaluate the relative health of the
population.
4:23:44 PM
MR. BARNHILL reported based on the demographic information, Buck
Consultants reports the school district employees are more
heavily female, slightly older than the current active employees
and estimates adding the employees would increase health care
costs from 2 to 3 percent more than the current active state
employees.
4:24:41 PM
REPRESENTATIVE MILLETT advised that she is interested in the
NEA-Alaska Health Plan trust's medical claims to share with the
actuary.
MS. KITTER said she would need clarification on the claims data
request from the NEA-Alaska Health Plan's trustees.
MR. BARNHILL turned to the $100 million fiscal note, explaining
the DOA would need some money to start to establish the reserve
to pay health care claims as they arrive.
4:26:36 PM
MR. BARNHILL referred to the fiscal note from the DOA,
Centralized Administration Services, Health Plans Administration
dated 4/5/13, for $237,000 in FY 14. He explained this
represents the anticipated administrative costs the division
would incur in the next fiscal year in order to accommodate
inbound school district employees in FY 15, including
reprogramming costs, computers, publications, and communication
costs. The costs are anticipated to increase in FY 15, when
employees would arrive from school districts. He pointed out
the services line starts at $9.8 million and increases to $13.1
million, which represents vendor and contractor costs the state
pays to administer claims. These costs are based on per member,
per month charge currently incurred in the active pool, which is
trended up to reflect population growth. He referred to the FY
15 miscellaneous column at $315 million with two components,
calculated by multiplying the projected benefit per employee by
the population of the school district pool, multiplied by 12
months. Buck Consultants estimated the calculation at $1,389
per month per employee by 18,300, multiplied by 12 months.
However, the figure may be a bit inflated for FY 15 since it
assumes all employees would be transferred but under the bill
employees can continue to transfer to the health insurance pool
in FY 16.
4:28:34 PM
REPRESENTATIVE SADDLER asked for clarification on the $315
million.
MR. BARNHILL explained the two components of $305 million and
$10 million. He reiterated the calculation of $1,389 x 12 x
18,300 equals $305 million, which is the amount the state would
bill the school districts on an annual basis. Again,
practically speaking the state would not receive all 18,300 in
FY 15. He repeated the calculation, noting the fund source is
statutory designated program receipts. In response to
Representative Saddler, Mr. Barnhill confirmed the calculation.
4:30:52 PM
MR. BARNHILL explained the second component of the $315 million
is the $10 million. He explained the group health insurance
pool would require $100 million in funding to establish a
reserve, which would be repaid. This would be accomplished by
billing each school district for the first four months of
claims. The school districts have up to 10 years to repay these
costs, which will be passed through to the public education
fund. This mechanism provides $10 million in receipts authority
to collect the repayments and pass them through, he said.
REPRESENTATIVE SADDLER asked whether that would be reflected
under services.
MR. BARNHILL answered that it is reflected in "Fund Source 1108
Statutory Designated Program Receipts", for two components, $305
million and $10 million totaling $315 million. He explained the
"Fund Source 1017" as the fund source used to pay the third-
party administrative fees, referred to earlier. He acknowledged
discussions have subsequently been held that characterized the
fiscal note as being gigantic. He agreed the figures are large,
but noted they would be paid by someone. In FY 12 the school
districts had $282 million in health care costs so it's
reasonable to assume an estimated growth to $305 million, he
said. In any event, the health care expenditures will be made,
regardless [of whether it is under AlaskaCare or the current
NEA-Alaska's Health Plan trust, the Local 71 trust, or other
association plan]. At issue is whether the state can save money
by consolidating the health insurance into one pool.
4:33:11 PM
MR. BARNHILL turned to the third fiscal note from the DOA,
Division of Retirement and Benefits (DRB) dated 4/7/13. He
explained this fiscal note would add the staff positions
necessary to implement the pool. The original fiscal note had
$964,000 for FY 14, but in actuality the division wouldn't staff
up until after the first of the year, so the fiscal note was cut
in half. He stated the costs going forward fund the same 12
positions, including accountants, technicians, call center
staff, and an appeals specialist.
4:34:22 PM
REPRESENTATIVE MILLETT recalled the Local 71 previously noted
the necessity for bilingual staff and asked whether the call
center would have bilingual staff.
MR. BARNHILL answered he was unsure that the department
currently provides foreign language assistance, which would need
to be provided to the extent that non-English speaking
beneficiaries exist.
4:34:56 PM
REPRESENTATIVE REINBOLD asked for the total liability to school
districts annually.
MR. BARNHILL referred to documents in members' packets provided
by the Alaska Association of School [Business Officials], which
represent the best estimates and lists the FY 12 health
insurance expenses at $282 million.
4:35:37 PM
REPRESENTATIVE REINBOLD asked whether this bill would be
shifting costs.
MR. BARNHILL answered yes, that initially the costs would be
shifted since health insurance claims paid by the school
districts would be paid by the state. The state would bill the
school districts, which would initially be about the same since
it will take time before savings would occur through leveraging
down the administrative costs.
4:36:30 PM
REPRESENTATIVE MILLETT asked when the cost savings under the
bill would be realized.
MR. BARNHILL again referred to the consultant's letter, from
Buck Consultants dated April 5, 2013, in members' packets. He
stated that the state will try to sustain the monthly benefit
cost of $1,389.
4:37:13 PM
BECKY HULTBERG, Commissioner, Department of Administration
(DOA), stated the question is complex since the cost of health
insurance is determined by numerous factors, including use and
plan design, which has not been discussed much in committee, but
is relevant to the conversation. She explained that the plan
design and medical claims can contribute significantly to the
cost of the health plan. She characterized this as somewhat
buried in the design of the plans.
4:38:00 PM
REPRESENTATIVE MILLETT asked about preventative health care.
She asked whether AlaskaCare provides health fairs for state
employees.
COMMISSIONER HULTBERG answered yes. She said the state has a
vested interest in the health and health care of its employees.
First, the state, through its contributions to education is
funding a significant portion of the $282 million being spent
for health care insurance for school district employees.
Second, which is the bigger financial interest, is that the
state pays for health care for its retirees. She reported the
current unfunded liability is $12 billion of which $4 billion is
directly related to health care. Thus the state has a vested
interest in ensuring the current employees are healthy since the
state will pay the bill now and later, too.
4:39:19 PM
REPRESENTATIVE MILLETT asked if the DOA would negotiate the
union contracts and whether health care is a contractual
agreement that is negotiated. She wondered if it would simplify
the state's negotiations by taking over health insurance and
making it more reasonable, regardless of whether the new plan is
better, worse or exactly the same as the NEA-Alaska's Health
Plan trust.
COMMISSIONER HULTBERG answered yes; the state negotiates health
care. She said that the state typically negotiates the
contribution to health care, although the general government
unit (GGU) had some complex language, which was simplified
through the negotiation process. However, she offered her
belief that some school districts negotiate benefits. She said
she wished that the employees that are currently in the union
health trust were part of the state's plan since it would give
the state more leverage and bargaining power; however, she
recognized that these benefits are part of the process worked
out at the negotiating table.
4:40:56 PM
REPRESENTATIVE CHENAULT referred to the DOA's Division of
Retirement and Benefits fiscal note. He asked whether the costs
are spread out for new employees or if costs would be spread out
to all employees.
MR. BARNHILL answered the fiscal note is limited to new
employees and not existing employees.
4:41:33 PM
REPRESENTATIVE CHENAULT asked whether all NEA would have to
subscribe to the insurance provided by the NEA-Alaska's Health
Plan [Trust] fund.
CHAIR OLSON related that question was previously answered.
REPRESENTATIVE CHENAULT related his understanding that there
were 452 waivers out of 3,500 employees.
4:42:45 PM
REPRESENTATIVE MILLETT asked for clarification that everyone in
the active NEA-Alaska's Health Plan trust will eventually become
a retiree in the state plan.
COMMISSIONER HULTBERG answered yes; so long as the school
district employees were vested in the TRS and are eligible for
health care.
4:43:28 PM
REPRESENTATIVE JOSEPHSON said it strikes him that if PPACA is
successful and a federal exchange is created with new entrants,
including Medicaid funding, it will be difficult to ascertain
five years from now what contributed to any cost containment if
this bill passes.
COMMISSIONER HULTBERG responded that she could research this,
but she is not optimistic that the state will see reduced costs
through the PPACA. In fact, the DOA's experience to date has
been increased costs. She suggested the state could review the
documentation, but she does not anticipate [the state] will have
a better experience due to the PPACA; instead it will have the
opposite effect on the state's plan.
MR. BARNHILL offered his belief that one can connect the link of
causation. For example, if the state has a current relationship
with a provider or a set of providers without any discount for
services, but through the pool is able to obtain sufficient
volume to obtain a 10-25 percent discount, the state will be
able to make the connection to say HB 196 helped the state
obtain a better deal.
4:45:14 PM
REPRESENTATIVE REINBOLD asked whether his view is that this bill
is about public funds for public employee health benefits and
not necessarily about the [PPACA], which is basically a mandate
on the private sector.
COMMISSIONER HULTBERG answered that some provisions of the PPACA
apply to the state's active employee plan, which has
grandfathered status under the PPACA. If the state loses its
grandfathered status, which most large plans believe will
happen, then a whole new set of mandates will apply. Thus it
does affect the state in terms of costs. The state has seen
increased costs already and she anticipated that if the state
loses its grandfathered status, the state will see increased
costs.
MR. BARNHILL reported that the call center covers four
languages, including Russian, Ukrainian, Spanish, and Filipino.
4:46:41 PM
REPRESENTATIVE JOSEPHSON recalled the DOA's prior testimony is
that it took no position on the bill; however, it sounds like
the department is "warming" to the bill.
COMMISSIONER HULTBERG answered that the department has not taken
an official position on HB 196, but the concept of insurance
pooling and adding to the existing pool could help the state
mitigate cost escalation. She reiterated that the department
has no official position, but conceptually believes that
insurance pooling has merit.
4:47:20 PM
RICH RHODES, Superintendent, Wrangell Public School District
(WSD), stated that WSD is a strong supporter of group health
insurance coverage and has worked hard to contain costs by
increasing deductibles to $1,000 per individual and $3,000 per
family. All school district members share in the costs and any
increases to the health insurance plan, which is currently
approximately $44 monthly with a monthly cap of $200. The
health insurance premiums have been held to $28,000 for the
family plan, $16,000 for an adult with child, and $9,000 for an
individual teacher. However, these costs do not include a 17.5
percent increase to the premium policy this year.
MR. RHODES said the WSD believes a large state pool would help
maximize efficiency and cost. He said that maximizing travel
and housing allocations with state contracts, competitive
contracts with service providers, as well as focused
incentivized wellness plans are all options that provide
positive results and lower the overall premium cost. It is
commonly understood that participating in a large pool will
spread out losses thereby reducing the impact of spikes and
peaks of a small group. Health care issues are equally
significant for private, state, and local government, he said.
In order to be proactive and not reactive, the state must make a
change to the current practices. Each year the school district
holds its breath trying to determine the health insurance
increases. While the school district [did not have an increase]
last year, this year the increase was 17 percent. These costs
represent nearly 10 percent of the WSD's budget, which are
significant, and unpredictable. For example, this year the
school district consolidated its superintendent and principal
position to reduce ongoing costs. He said the WSD appreciates
that HB 196 make a bold step to address the issues. In
conclusion, he offered the WSD's support for HB 196.
4:49:46 PM
DAVID BOYLE said he appreciated the school districts' comments
in support of HB 196. He said the cost of health insurance
represents a large percentage of a school district's operating
budget, it is imperative that the legislature address ways to
reduce costs to improve the state's education. However,
several ways exist to decrease costs to the taxpayer, the state,
and the school districts. First, the school districts could
shift more of the premiums to members. Second, school districts
could combine with other groups or join the state's insurance
plan. Third, school districts could increase competition, which
is difficult at best in Alaska's distorted medical market. He
recalled the committee heard testimony from the NEA-Alaska's
Health Plan trust that the trust saves school districts money.
Certainly, this claim needs to be verified. For example, he
referred to the letter from the NEA-Alaska's Health Plan, which
read, as follows: "Last year the trust had a zero percent rate
increase in its premium." However, the problem with that is
that the NEA-Alaska's Health Plan trust did not return any of
the premiums to school districts or their members. Further,
public records aren't available. The public money spent by the
more than 50 school districts is not accountable to the public.
The [state] needs to know the administrative costs and overhead
costs or the state and local taxpayers are writing blank checks
with little, if any, accountability. He recommended the
committee obtain more information before acting on HB 196. He
further recommended that the committee make a legislative
request to the NEA-Alaska's Health trust fund for the
information. This is about transparency and accountability to
the state, school districts, and local taxpayers, he said. He
asked members to trust but verify. He clarified that the ASD
contributes its portion of premiums, approximately $1,450, for
its members who choose not to participate in the NEA-Alaska's
Health Plan trust, even though these members are not covered by
the plan.
4:52:08 PM
CHAIR OLSON reported that Rhonda Kitter, NEA-Alaska Health Plan
trust advised him the trustees will meet Friday evening and will
follow up on the committee's request for further information.
4:52:38 PM
REPRESENTATIVE LYNN GATTIS, Alaska State Legislature, speaking
on behalf of the sponsor, the House Education Standing Committee
which she chairs, commented that the [NEA-Alaska's Health Plan]
trust doesn't typically inform the school districts until April
on premium costs, which creates a budgeting issue for the school
districts as they try to budget for the following year. She
offered her hope that the state will let school districts know
earlier [if HB 196 passes.] She commented that the $300 million
has been discussed. She asked members to do the math, since
that represents approximately 25 percent of the school
foundation formula funding. She said, "It's a lot of money that
we talk about that we spend."
4:53:44 PM
REPRESENTATIVE GATTIS, in response to Representative Saddler,
clarified that the various trusts do not inform the school
districts of any [health insurance premium] increases [until
April]. She reiterated the intent of HB 196 is to pool public
school district employees with state employees for health care
coverage. She predicted this will in turn reduce costs and
unburden school districts since 53 school districts with their
own independent plans or with multiple plans are just not
efficient. She said with health insurance costs continually
rising, the state must look for a solution outside of the
fractured efforts of school districts going to market on their
own. She offered her belief this problem cannot be solved by an
individual school district.
REPRESENTATIVE GATTIS shared the following facts. She said that
over half of the states in the U.S. have some type of pool
between state and local employees and at least 19 states include
public school employees. She referred to a handout in members'
packets, entitled, "Health Cost Containment and Efficiencies,
June 2010." In response to Representative Herron's previous
question at a prior meeting, she reported that the Alaska Public
[Entity Insurance (APEI)] is neutral on this bill. The APEI's
executive director, Jeff Bush, indicates that," ... pools are an
effective way to reduce insurance costs." She offered her
belief that some people speaking against HB 196 have a financial
interest in making sure nothing changes. Many school districts
don't have access to claims information from NEA-Alaska's Health
Plan trust. These are public funds - public benefits for public
employees - and the state needs accountability and a means to
reduce costs while maximizing benefits. In fact, this is not a
union issue, but an issue of state government finding ways to
become more efficient with the public funds. She recalled
Commissioner Hultberg's earlier testimony reminding the
committee that pooling the public school teachers together with
the state's health insurance plan makes a lot of sense. In
fact, when public school teachers retire, they will come under
the state's umbrella of health insurance. She reminded members
that school districts testified in support of HB 196 and while
the nuances of the plans are not comparable, savings will be had
and these savings will go right back to the classroom.
4:56:04 PM
REPRESENTATIVE HERRON commented that insurance pools request
quotes from brokers and the industry for the upcoming year, but
often these quotes are not received until May. He suggested
that the sponsor ask Jeff Bush, APEI, if this is the same for
insurance. He further recalled it is typically late in the
fiscal year when quotes are obtained from individual insurance
companies.
REPRESENTATIVE GATTIS agreed to ask the question and report back
to the committee.
4:56:47 PM
REPRESENTATIVE JOSEPHSON remarked that HB 196 is not without
some merit. He referred to Representative Gattis's comment that
school districts don't know what adjustments will be made on
health care insurance premiums. He pointed out the legislature
doesn't have information on the school district budgets, such as
how much money the school districts will receive or how many
teachers can be retained even though it is the teachers who are
being insured. He acknowledged the timing on the health
insurance premium information may be accurate, the school
districts must contend with mystery after mystery.
REPRESENTATIVE GATTIS agreed that the legislature is part of
that mystery. In further response to Representative Josephson's
question on how the legislature knows the cost savings will go
back to the classroom, Representative Gattis said she has heard
legislators comment that any savings, including pupil
transportation savings or savings on book purchases, and other
savings can go directly back to the classroom. On the one hand,
the assumption is that when school districts are not purchasing
fuel or insurance, the cost savings can go directly to the
classroom. On the other hand, if the cost savings are not had,
the money is not available for the classrooms, she said.
4:58:12 PM
REPRESENTATIVE REINBOLD recalled hearing an earlier quote about
the constitution and using the resources for the maximum benefit
of the people. She said she believes that money is a resource
and the state needs to use it for the maximum benefit of the
people. She further said it is only prudent for the legislature
to look at ways to streamline and be more efficient and
accountable. She pointed out the funds in question are nearly
$300 million per year. She applauded the [sponsor's] efforts to
bring the bill forward. She hoped the committee would review
this bill appropriately since it has long-term benefits to the
state. Therefore, the state could pay off its long-term
liabilities. She cautioned that the state is getting itself in
a situation in which it cannot pay off the long-term [debt].
She predicted that the impact [of HB 196] on long-term health
care benefits will be realized in the future. She applauded
everyone who is working to do so for the state's employees and
teachers.
[HB 196 was held over.]
4:59:18 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:59 p.m.