Legislature(2001 - 2002)
04/22/2002 03:25 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 315 - GROUP HEALTH INSURANCE FOR PRIVATE GROUPS CHAIR MURKOWSKI announced that the first order of business would be SPONSOR SUBSTITUTE FOR HOUSE BILL 315, "An Act allowing employers that are small businesses, small nonprofit organizations, or small associations for insurance purposes to join state employee insurance coverage as a group; and providing for an effective date." Number 0076 REPRESENTATIVE HALCRO moved to adopt Version 22-LS1177\B, Craver, 4/18/02, as the working document. There being no objection, Version B was before the committee. REPRESENTATIVE ROKEBERG, speaking as the sponsor of SSHB 315, informed the committee that [Version B] incorporates changes in intent language in the legislation. He highlighted the following substantive change: on page 2, line 17, the language "stop loss" was deleted and "lower cost options including limited benefit and high deductible" language was inserted. JANET SEITZ, Staff to Representative Norman Rokeberg, Alaska State Legislature, testified on behalf of the sponsor of SSHB 315. She explained that this legislation would allow the State of Alaska to obtain a policy or policies of group health care insurance for small businesses defined as two to fifty employees, nonprofit organizations, small associations for insurance purposes as a group, and special service organizations. Special service organizations can be an individual employed in one of these entities, corporations, or nonprofit organizations who deal with childcare facilities, operating a residential childcare facility, foster home, maternity home, assisted living home, community-based center, and home care. She noted that the aforementioned entities are all licensed by the state and the licensing authorities to which the bill refers. MS. SEITZ specified that this legislation is an effort to form a pool of people who would be able to provide insurance. The state would put out a request for proposals (RFP) and thus the state wouldn't self-insure this group as it does its own employees. This would be offered through private insurance carriers and the businesses and nonprofit organizations could join. As specified in the bill, the entities would have to submit a written request to the department, receive confirmation from the commissioner, and pay the premiums. Number 0311 CHAIR MURKOWSKI asked if there is any procedure in which an entity could be rejected. She related her understanding that the application has to be filed and those groups defined in the legislation would be [in the pool]. MS. SEITZ replied yes. She pointed out that on page 3, subsection (d) states that a qualified entity must certify that it's going to meet the definition, agree to pay the premiums, sign a statement under penalty of unsworn falsification and fraud in order to register. REPRESENTATIVE ROKEBERG pointed out that in his eight years serving on the House Labor and Commerce Standing Committee he has fought to allow private insurance companies to enter the State of Alaska. However, there has been a great deal of frustration with regard to the escalation of insurance costs. The affordability of health insurance costs for nonprofits in this state is coming in to question now, which is also the case for small businesses. This has become a very serious problem, he said. Representative Rokeberg expressed his hope that having a larger number of people covered and a well designed menu with a potentially higher stop loss deductible and various other menus, will allow a lower cost, more affordable, and higher quality plan to be offered. He noted that the state is redefining what it takes to be a multiple employer welfare arrangement (MEWA). Therefore, this legislation attempts to bring together those people who can't readily join together and offer them a mechanism to lower their health costs. REPRESENTATIVE CRAWFORD recalled the discussion with regard to [the definition of "association for insurance purposes"]. He also recalled that the House State Affairs Standing Committee discussed eliminating the upper limit defining how many employees an entity could have and be considered [an association for insurance purposes]. REPRESENTATIVE ROKEBERG related that it would probably work to amend the language such that it referred to business enterprises with two to fifty employees, which would be consistent with the state's insurance statutes. Then nonprofit organizations could be exempt from the cap. MS. SEITZ pointed out that Version B only limits the two to fifty employees for an association for insurance purposes and businesses. Nonprofit organizations don't have an employee cap included in the definition on page 4, lines 2-4. CHAIR MURKOWSKI directed attention to page 3, line 15, which refers to "composed of businesses or nonprofit organizations or both". Therefore, she questioned how the employee cap wouldn't be required for nonprofit organizations. MS. SEITZ pointed out that page 3, lines 14-19, is the definition of "association for insurance purposes". In that particular group the combined total can be two, but not more than fifty employees. An "association for insurance purposes" can be a group of businesses or nonprofits or both. However, if an entity is simply a nonprofit, then that entity would fall under the definition on page 4 that doesn't specify an employee limit. In response to Representative Rokeberg, Ms. Seitz reiterated that the definition on page 3, line 19 is the definition of the "association for insurance purposes" if the groups come together. CHAIR MURKOWSKI interjected that an "association for insurance purposes" is different than a nonprofit organization. REPRESENTATIVE HAYES inquired as to whether there is anything under the [definition of] "association for insurance purposes" that [would allow] a self-insured individual to join under the large umbrella of "association for insurance purposes". MS. SEITZ explained that a business that wants to join an "association for insurance purposes" could be a group of people who come together and form an association for insurance purposes. Furthermore, a special services organization that is a single employee and meets the definition would qualify. Number 0815 GUY BELL, Director, Health Benefits Section, Division of Retirement & Benefits, Department of Administration, said that he would discuss the process were this legislation enacted. He informed the committee that it would be the department's intent to work with interested groups and a professional benefits consultant to design a plan(s) that would meet the identified needs of those groups with which the department is working. The plan would be developed by either a survey or focus groups or a combination of the two. With the assistance of [the survey and/or the focus groups], the department would develop an RFP for a fully insured product(s). The best proposal would then be selected. There is a process of approval of the participants through the commissioner of the department. At that point, those who participate would pay premiums directly to the insurance company and the participants would work directly with the insurer. He noted that the premiums wouldn't be paid through the State of Alaska. The department would have a limited role as a continuing liaison [in plan design] with nonprofits and businesses that participated. MR. BELL informed the committee that [this legislation] doesn't contemplate a state subsidy. The fiscal note reflects the funds necessary for startup costs. Furthermore, there is no state liability for this because the liability would be taken on by the insurance company insuring the health plan. This proposed plan would be completely separate from any state health plan. He explained that this proposed plan would effectively be private insurance subject to the Employee Retirement and Income Security Act of 1974 (ERISA) and would be fully insured. Number 0955 REPRESENTATIVE MEYER surmised then that this proposed plan may be similar to what the state employees have, but may be better or worse depending upon what is negotiated between the parties; the state won't have any involvement. MR. BELL agreed and pointed out that when the department issues the RFP it will have specific plan designs in mind, which may include an array of options. There will also be a price scheme that will be anticipated before issuing the RFP. REPRESENTATIVE MEYER related his understanding that the savings to the nonprofits or associations will be in regard to the ability of various groups to come together as one in order to obtain more affordable rates. MR. BELL replied yes. By pooling, risk is reduced as would administrative overhead, he said. In further response to Representative Meyer, Mr. Bell confirmed that the cost to the state would be for the one staff person overseeing the program and some contractual services for a benefits consultant for plan design. Number 1052 REPRESENTATIVE HALCRO inquired as to whether the $133,000 of upfront costs would be reimbursed over the course of the coming years. MR. BELL answered that the department doesn't contemplate a reimbursement to the general fund (GF) for that. The costs in future years would be a small assessment that the department would make against the plan in order to cover the department's modest ongoing costs. REPRESENTATIVE HALCRO asked what would happen if no one responds to the RFP; would the $132,000 worth of work be for naught. MR. BELL agreed, but indicated that the cost could be less than the full amount. He related his belief that if there were no responses, the department would try to determine why there were no responses and then put out a modified RFP. Number 1139 REPRESENTATIVE MEYER inquired as to how many people this legislation would cover. MR. BELL answered that potentially this could cover quite a large number of people, although it's hard to say how many will participate. In further response to Representative Meyer, Mr. Bell said that the department believes there should be enough interested people that there should be some interest in bidding on the RFP. Number 1188 MARY RAYMOND, The Ark, testified via teleconference. She remarked that this [legislation] is something to be excited about because health insurance is of grave concern. Ms. Raymond informed the committee that she is a coordinator for a small assisted living home for which this matter is of concern. The premiums [for the small assisted living home] are small in light of what individuals receive in payments. Ms. Raymond concluded by thanking the committee for this legislation, which she hoped would [come to fruition]. Number 1250 MARY ROSENZWEIG, Director, Substance Abuse Directors Association, testified via teleconference. She began by saying that this legislation comes along at a very critical time for those agencies delivering substance abuse treatment and prevention programs around the state. Ms. Rosenzweig informed the committee that the association has approximately 57 programs statewide. That membership was surveyed with regard to insurance premiums [which produced the following information]. Over a two-year period, insurance premiums on average have increased 36 percent per employee. The premiums for health insurance amounted to about 5.8 percent of the agency's operating budget in the year 2000. In 2002 health insurance premiums are 7.6 percent of the [association's] operating budget. Ms. Rosenzweig said, "This means that the state is not getting good value for its dollar; it means less services that they're able to purchase for the same dollar." These sudden increases have resulted in reducing the level of benefits by cutting prevention and screening programs and dental and vision coverage. Furthermore, deductibles are increasing. Over the past two years deductibles have risen from an average of $300 to $408. Ms. Rosenzweig stated, "For our industry, we have not been able to increase the wage scale in years because the payors are not paying any more for the services." This industry is at a critical time with work force retention; employees can't stay where there is no health insurance. Ms. Rosenzweig urged the committee to provide relief and assistance that costs the state little. In response to Representative Rokeberg, Ms. Rosenzweig agreed to provide her information to his office. Number 1412 SANDY TURLEY, Seaview Community Services, testified via teleconference. She informed the committee that Seaview Community Services is a nonprofit human services agency in Seward. Ms. Turley read the following testimony: Seaview employees were covered by Humana and so Humana withdrew their insurance coverage from all of Alaska in 2000. As a small agency with 40 employees, finding an alternative was difficult. We were fortunate to be eligible to join the United Way Nationwide Group - Blue Cross Blue Shield plan out of Maryland. In FY [fiscal year] '01 while we were on the United Way's Blue Cross Blue Shield, our rates were the best we had ever had. The Alaska United Way agencies were forced out of the national BCBS [Blue Cross Blue Shield] plan as of December 31, 2001, in the middle of our fiscal year, without expenses and revenues already budgeted. As we begin looking for alternatives, there were few options and the rates we were quoted were astronomical. The best rates were 150 percent more than the United Way Blue Cross Blue Shield rates. We worked for three months to come up with an affordable plan. We were forced to drop dental, prevention, prescription, mental health, and chemical dependency coverage in order to be able to continue to offer health care to our employees that we could afford [and] that was within our budget. The additional cost was shared by the employees with an increased copay and by the agency with an increased premium cost. We could not maintain the same level of coverage because neither agency or the employees could bear the cost of the increase. We had 22 employees on insurance in December and now, in April, we only have 13. We are currently at risk of not qualifying for group rates because of not enough enrollees. The rise in health care costs and decrease in coverage are an immediate and serious threat to recruitment and retention. I fear that dissatisfied employees will start looking for other jobs with better insurance and that we will be unable to hire new people because our insurance is just not competitive. As a small agency, losing one ore two key positions can threaten our ability to provide services for an entire program. Passage of House Bill 315 is a solution to the serious problem of affordable health insurance for our agency. Number 1529 SUSAN SCUDDER, Executive Director, Council on Domestic Violence & Sexual Assault, Department of Public Safety (DPS), explained that the Council on Domestic Violence administers state and federal funds to more than 21 programs around the state. These are community-based nonprofit programs that have experienced amazing increases in their health insurance costs over the past few years. The increases have reached the point at which staff positions have been cut in order to maintain the same level of health insurance, which results in fewer services to the community. Ms. Scudder emphasized the importance of these programs having qualified staff that can obtain benefits. She noted that these jobs aren't the best paying jobs and thus when the benefits are cut, it becomes nearly impossible to recruit good people for these jobs. Number 1664 MARIE DARLIN, AARP, said that AARP is thankful that this legislation has been introduced because this has been of concern in reviewing the long-term care needs. Many small organizations are attempting to meet [long-term care] needs and often [these small organizations are] home and community-based care. These home and community-based care organizations have always had the concerns surrounding employee benefits. [Without benefits], these organizations lose employees and the organization's ability to provide services is lost. Therefore, AARP urges the committee's support of HB 315. Number 1664 MARGIE BAUMAN testified via teleconference and noted that she is the owner and sole employee of her own business. She suggested that on page 3, line 26, subparagraph (C) be changed such that legitimate owners of small businesses who have only themselves as an employee can be included. She informed the committee that the insurance carrier that held the group professional policy with which she participated dropped the entire group after the company was found not to be in compliance with insurance laws. She noted that although she is in good health, no one wants to insure her [because] she has had cancer and her doctor has done additional testing and may want to again. Therefore, she has no insurance and when she goes to the hospital she pays "top dollar" because she isn't represented by an insurance company that has a deal with the hospital. Furthermore, the state comprehensive plan is cost prohibitive for her. Ms. Bauman said that she wants a health care plan in which she can participate and pay her fair share of the costs. In conclusion, Ms. Bauman pondered why this legislation hasn't garnered any comments and testimony from hospitals and medical organizations. REPRESENTATIVE ROKEBERG pointed out that if Ms. Bauman joined with someone who performs similar work, then the two could become an association and qualify to join. Number 1793 JACK McRAE, Senior Vice President, Blue Cross Blue Shield of Alaska, testified via teleconference. Mr. McRae noted that the company is very sympathetic to the large rate increases. He said he would address the insurance carrier that left the state and the large increases due to that insurance carrier leaving the state. He related his understanding that an insurance carrier came into the state and sold a product that wasn't a licensed product in the state. Furthermore, the product was priced on a national basis rather than looking at health care costs in Alaska. That combination of not being licensed in the state and the costs of health care in Alaska would have resulted in that carrier having to increase its rates substantially in order to stay in the state. When that carrier moved out, the nonprofits had to come to other carriers in Alaska which price the product as it would be for any other group in Alaska. He attributed much of that large increase to the [fact] that there was a carrier that had under priced a product for the marketplace and when the insurance was rewritten, the price became consistent with the marketplace in Alaska. MR. McRAE expressed concern with regard to the state becoming involved in personal health care. Many of the individuals have the ability to become associations. As a matter of fact, Blue Cross Blue Shield writes quite a few associations in Alaska. Mr. McRae also expressed concern with regard to the state being a conduit for the RFP. He posed a situation in which [Blue Cross Blue Shield] contracts with a company that becomes insolvent and there are claims that need to be paid. He inquired as to who would pay for those claims. Would the premium be collected from the state because the state was the conduit for the RFP, he asked. MR. McRAE informed the committee that Blue Cross Blue Shield isn't afraid of competition, but legislation such as SSHB 315 could impact carriers wanting to come to Alaska and sell products. Mr. McRae concluded by stating Blue Cross Blue Shield's supports the concept of the association business, which seems to be a viable approach. He reiterated the question as to whether the state wants to become involved as a conduit for insuring private entities. Number 1938 REPRESENTATIVE ROKEBERG asked whether there would be an insolvency situation if there is a third party underwriter actually underwriting the group. MR. McRAE answered that it would be possible, although he noted that he didn't have [Version B] before him. REPRESENTATIVE ROKEBERG interjected that Version B specifies that [the RFP] goes out to a private sector underwriter. He related his belief that [under the current language] the state wouldn't be liable. With regard to expectations [of low cost], Representative Rokeberg noted his agreement with Mr. McRae. In regard to associations, Representative Rokeberg asked if Mr. McRae was referring to MEWAs or any other type of association that's allowed. MR. McRAE related his belief that Blue Cross Blue Shield of Alaska writes other types of associations other than MEWAs. Whenever pooling occurs, there are winners and losers because some will have a lower rate that will increase while others will have a higher rate that will decrease. REPRESENTATIVE ROKEBERG asked if that would be due to the experience of the employee. MR. McRAE clarified that in theory the experience of the pool should be different than that of the individuals. However, if there is one group that's a fairly high risk group, then it would be rated higher and pay a larger premium than would a low risk group. When those two groups are put together, one [group's rate] increases and one [group's rate] decreases. REPRESENTATIVE ROKEBERG inquired as to the underwriting difference if there was a group of child care workers and a group of drug and alcohol counselors. MR. McRAE said that he wasn't qualified to answer an actuarial question. CHAIR MURKOWSKI related her understanding that Mr. McRae is concerned with the state being the conduit for the RFP and the possibility of the state having some liability in that regard. MR. McRAE replied yes. CHAIR MURKOWSKI echoed Representative Rokeberg's belief that [Version B] addressed his concern. Number 2088 WILLIAM CRAIG, Alaska Independent Blind; Alaska Information Radio Reading Education Service, explained that the Alaska Information Radio Reading Education Service reads papers to blind people over a special radio band in the Anchorage and Fairbanks areas. This organization employs 10-15 disabled people. Mr. Craig said that although the organization isn't necessarily seeking lower cost insurance, this [legislation] would allow the organization to provide better insurance than it currently provides. Under the insurance the organization has now employees frequently have to wait six months before using it and there's a high deductible. Furthermore, aging employees face increased insurance costs, including the deductible. He pointed out that as a small group, the organization finds it difficult to find insurance that is priced at a reasonable cost and provides a reasonable plan. CHAIR MURKOWSKI, upon determining that no one else wished to testify, closed public testimony on SSHB 315. Number 2160 REPRESENTATIVE ROKEBERG informed the committee that he has a few small amendments. He moved that the committee adopt conceptual Amendment 1, which read: Page 2, line 20 After "a policy" Insert "or politics" There being no objection, conceptual Amendment 1 was adopted. Number 2187 REPRESENTATIVE ROKEBERG moved that the committee adopt Amendment 2, which read: Page 4, line 31 Delete: "January 1, 2003" Insert: "July 1, 2002" REPRESENTATIVE ROKEBERG recalled Mr. Bell's testimony that, upon passage, the department would perform a poll and attempt to develop something. Therefore, the earlier effective date would provide the department with six months to organize the program and potentially be in place at the first of the year. REPRESENTATIVE HAYES objected for the purpose of discussion. He inquired as to why an immediate effective date wouldn't be used because even an effective date of July 1, 2002, might be too late due to when the legislation is actually signed. REPRESENTATIVE ROKEBERG said that secondary [effective dates] are usually at the first of the fiscal year which coincides with the new fiscal year for the state. REPRESENTATIVE HAYES expressed concern that the legislation might not be signed until after July 1, 2002. Therefore, an immediate effective date would seem to make more sense. REPRESENTATIVE ROKEBERG said that he would consider an immediate effective date as a friendly amendment to Amendment 2. [Therefore, the Amendment 2 was changed such that "January 1, 2003" was replaced with an immediate effective date.] There being no objection to Amendment 2 as amended, it was adopted. Number 2300 REPRESENTATIVE ROKEBERG moved that the committee adopt conceptual Amendment 3, which read: Page 3, line 16, Delete "and" Page 3 Delete lines 17-19 REPRESENTATIVE ROKEBERG explained that [conceptual Amendment 3] would eliminate the confusion with regard to what an association is and the distinction with regard to the number of [employees required for an association for insurance purposes]. CHAIR MURKOWSKI objected for the purpose of discussion. TAPE 02-62, SIDE B CHAIR MURKOWSKI related her understanding that an "association" is a nonprofit organization that has no limitation on the number [of employees] while a business does. Furthermore, an "association" is comprised of either a business or nonprofit or both. REPRESENTATIVE ROKEBERG agreed. CHAIR MURKOWSKI asked if that would alleviate Ms. Bauman's concern. REPRESENTATIVE ROKEBERG replied no and explained that Ms. Bauman, as an individual [owner and employer], would have to [form an] association with someone else. CHAIR MURKOWSKI asked if there is a concern that an association could have 1,000 people and become problematic. REPRESENTATIVE ROKEBERG said, "The more the merrier, it should lower costs." CHAIR MURKOWSKI removed her objection. There being no other objection, conceptual Amendment 3 was adopted. Number 2253 REPRESENTATIVE HALCRO expressed concern that by the division absorbing a $132,000 fiscal note, the [legislature] is, again, expecting state government to do something for free. Therefore, he expressed the need for the legislation to include a mechanism in which to recapture the $132,000. REPRESENTATIVE ROKEBERG remarked that he tended to agree. However, most of those [impacted by this legislation] are nonprofits that are directly or indirectly impacted by the state's various budgets, including the general fund budget. Therefore, the case for a modest contribution up front could be made. He indicated that [he would suggest that] the House Finance Committee review recapturing the cost without having too much negative impact. REPRESENTATIVE HALCRO noted that his aforementioned concern isn't enough for him to object to moving the legislation. However, he recommended that the House Finance Committee review the possibility of mitigating [the fiscal note]. REPRESENTATIVE MEYER mentioned that many of the individuals who can't obtain insurance may have some serious health problems that could have been avoided had these individuals been able to see a physician earlier. People in such situations may now be on Medicare. Therefore, the $96,000 a year that this will cost the state isn't of too much concern because of his belief that there should be a reduction in cost elsewhere. He characterized the legislation as a good bill offering help to some people who desperately need it. However, he hoped that the expectations of these people are realistic. REPRESENTATIVE ROKEBERG informed the committee that there are still discussions with the Mental Health Trust [Fund] in order to take on the [initial cost]. The ongoing $95,000 would be for the administrative costs. REPRESENTATIVE HAYES announced that he has a conflict of interest because of his employment in the insurance industry. Number 2101 REPRESENTATIVE MEYER moved to report CSSSHB 315, Version 22- LS1177\B, Craver, 4/18/02, as amended out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSSSHB 315(L&C) was reported from the House Labor and Commerce Standing Committee.