Legislature(2015 - 2016)
04/16/2016 01:54 PM House L&C
| Audio | Topic |
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| Start | |
| HB374 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 16, 2016
1:54 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Shelley Hughes, Vice Chair
Representative Jim Colver
Representative Gabrielle LeDoux
Representative Cathy Tilton
Representative Sam Kito
MEMBERS ABSENT
Representative Andy Josephson
Representative Mike Chenault (alternate)
OTHER LEGISLATORS PRESENT
Senator Lesil McGuire
COMMITTEE CALENDAR
HOUSE BILL NO. 374
"An Act relating to a reinsurance program for residents who are
high risks and insurer assessments to cover the costs of the
reinsurance program; relating to application for state
innovation waivers for health care insurance; relating to
definitions of 'residents who are high risks' and 'covered
lives'; and providing for an effective date."
- MOVED CSHB 374(L&C) OUT OF COMMITTEE
SENATE BILL NO. 203
"An Act relating to overtime pay eligibility for medical care
providers employed by common air carriers or by carriers that
transport mail by air for the federal government and to overtime
pay eligibility for flight crews and medical care providers
employed by air ambulance service providers."
- SCHEDULED BUT NOT HEARD
SENATE BILL NO. 193
"An Act extending the exemption from regulation by the
Regulatory Commission of Alaska for certain facilities or plants
generating energy from renewable energy resources."
- SCHEDULED BUT NOT HEARD
SENATE BILL NO. 206
"An Act relating to a reinsurance program for residents who are
high risks and insurer assessments to cover the costs of the
reinsurance program; relating to application for state
innovation waivers for health care insurance; relating to
definitions of 'residents who are high risks' and 'covered
lives'; and providing for an effective date."
- SCHEDULED BUT NOT HEARD; PENDING REFERRAL
PREVIOUS COMMITTEE ACTION
BILL: HB 374
SHORT TITLE: REINSURANCE PROGRAM; HEALTH INS. WAIVERS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/25/16 (H) READ THE FIRST TIME - REFERRALS
03/25/16 (H) L&C
04/15/16 (H) L&C AT 3:15 PM BARNES 124
04/15/16 (H) -- MEETING CANCELED --
04/16/16 (H) L&C AT 9:00 AM BARNES 124
WITNESS REGISTER
LORI WING-HEIER, Director
Anchorage Office
Division of Insurance
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Presented the proposed committee substitute
(CS) for HB 374.
BARBARA HUFF-TUCKNESS, Director
Governmental and Legislative Affairs
Teamsters Local 959
Anchorage, Alaska
POSITION STATEMENT: Testified in support of the proposed
committee substitute for HB 374.
DAVE JONES, Assistant Superintendent
Kenai Peninsula Borough School District
Soldotna, Alaska
POSITION STATEMENT: Testified in support of the proposed
committee substitute for HB 374.
ACTION NARRATIVE
1:54:48 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 1:54 p.m. Representatives Olson,
Tilton, Hughes, and Kito were present at the call to order.
Representatives LeDoux and Colver arrived as the meeting was in
progress. Senator Lesil McGuire also was present.
HB 374-REINSURANCE PROGRAM; HEALTH INS. WAIVERS
1:55:00 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 374, "An Act relating to a reinsurance program
for residents who are high risks and insurer assessments to
cover the costs of the reinsurance program; relating to
application for state innovation waivers for health care
insurance; relating to definitions of 'residents who are high
risks' and 'covered lives'; and providing for an effective
date."
1:55:25 PM
REPRESENTATIVE HUGHES moved to adopt the proposed committee
substitute for HB 374, Version 29-GH2126\H, Wallace, 4/15/16, as
the working document.
1:55:33 PM
CHAIR OLSON objected for discussion purposes.
1:56:11 PM
LORI WING-HEIER, Director, Anchorage Office, Division of
Insurance, Department of Commerce, Community & Economic
Development, informed the committee that the individual market
for health care in Alaska is in somewhat of a crisis because the
state only has two individual insurers, Premera and Moda Health
(Moda), and Moda is severely financially stressed. This year,
the division of insurance removed Moda from the exchange and
suspended its certificate of authority. Both Moda and Premera
insurance companies have suffered significant losses and the
division is concerned that the state could lose one or both
insurers, as Aetna and Assurant insurance companies have already
withdrawn from the individual market in the state in the last
year. Although other states are facing this issue, it is
especially crucial in Alaska. Ms. Wing-Heier explained the
proposed committee substitute for HB 374 changes the funding in
that instead of an assessment made back to consumers, insurers,
and self-insurers, Version H takes the premium tax collected by
the state on all insurance, which is generally 2.7 percent, or
approximately $60 million per year, and gives the legislature
authority to appropriate the tax to fund a reinsurance program.
She pointed out that almost everyone in the state pays a tax on
either vehicle, homeowners, commercial, medical, or life
insurance, and this is the most equitable way to distribute the
cost of reinsurance.
REPRESENTATIVE LEDOUX surmised the state is already collecting
2.7 percent on insurance.
MS. WING-HEIER said yes. In further response to Representative
LeDoux, she agreed that the money is being moved from one place
to another.
REPRESENTATIVE LEDOUX noted that the Alaska Comprehensive Health
Insurance Association (ACHIA) provides coverage for those who
have been denied coverage; however, she pointed out that the
Patient Protection and Affordable Care Act (PPACA) prevents the
denial of insurance, and questioned whether ACHIA was still
needed.
MS. WING-HEIER explained that some remain in the ACHIA program
who are buying prescription drugs that they cannot afford or
can't get because there is not a market in Alaska, thus the
program has not been deactivated.
REPRESENTATIVE LEDOUX inquired as to insurance coverage for the
aforementioned population under PPACA coverage.
2:01:00 PM
MS. WING-HEIER stated that those affected by the proposed CS for
HB 374 would still purchase their insurance through Premera and
Moda, and "behind the scenes, Premera and Moda would cede the
claims to ACHIA where the claims would be administered .... ...
The claims and the premium would go to ACHIA, but your eye would
still think we're insured with Premera or Moda."
REPRESENTATIVE LEDOUX asked how many people are affected and for
the cost.
MS. WING-HEIER said there are 23,000 people in the individual
market; the number of high risk is estimated at 300.
REPRESENTATIVE LEDOUX inquired as to the cost for the
aforementioned 300 people.
MS. WING-HEIER said the legislature must determine the amount it
would appropriate, and in order to stabilize the market,
approximately $55 million would need to be appropriated. In
further response to Representative LeDoux, she pointed out that
a small number are generating claims that cause the pool to pay
out more than is collected.
2:03:35 PM
REPRESENTATIVE COLVER restated that 300 people are causing an
overrun of $55 million.
MS. WING-HEIER stressed that the number of high risk insured is
an estimate. In November 2015, the division took data from
Premera, Moda, and Assurant, and an independent actuary arranged
claims by cost to find the highest claim codes for certain
conditions. The data indicated that treatment of the "top ten"
diseases resulted in about $25 million removed from the pool.
Thus to get to a 15 percent to 18 percent stabilization factor,
not necessarily a rate reduction, the division needs
approximately $55 million in a reinsurance fund.
REPRESENTATIVE COLVER concluded that without a solution, 23,000
individual policy-holders in Alaska may have huge increases in
their insurance premiums.
MS. WING-HEIER stressed that her biggest concern is to keep an
insurance market in the state.
2:06:43 PM
REPRESENTATIVE COLVER said:
It's your opinion that our individual policies in
Alaska through the Affordable Health Care Act would
collapse without us taking some action here.
MS. WING-HEIER said yes.
REPRESENTATIVE LEDOUX inquired as to the consequences of
eliminating ACHIA.
MS. WING-HEIER stated that ACHIA has a few participants who pay
premiums, and also insures a number of individuals who are
unable to get prescription coverage from another source because
they need high-risk drugs. These individuals would not be able
to afford their prescriptions; those who need major medical
coverage could apply to PPACA.
REPRESENTATIVE LEDOUX suggested that ACHIA may just cover those
who need coverage for drugs, because "it just seems like an
awful lot of money for a relatively few people."
MS. WING-HEIER restated that currently ACHIA is covering "a
handful" of people who are very sick, and who are causing the
claims to be askew. The intent is to cede the claims to a
reinsurance pool run through the authority of ACHIA.
REPRESENTATIVE LEDOUX said it would make more sense to "cede
those people to the Affordable Care Act."
MS. WING-HEIER explained that the insured in question would
still go back into the reinsurance pool, and ACHIA, because they
qualify for the certain conditions quantified under the study by
the actuaries.
2:09:56 PM
REPRESENTATIVE HUGHES expressed her understanding of the
situation, and asked how the proposed CS addresses concerns
brought forward in opposition to HB 374.
MS. WING-HEIER said that currently ACHIA is funded through an
assessment to the insurance companies, and the insurance
companies are required to repay ACHIA for its losses each year.
The original bill sought to change the allocation and to have
everyone pay the same; in addition, stop-loss carriers and self-
insured would have to pay more. Instead, the proposed CS funds
reinsurance from the premium tax that all already pay.
REPRESENTATIVE KITO stated his understanding of the situation
and Ms. Wing-Heier agreed.
CHAIR OLSON asked whether the division is operating under a
waiver.
MS. WING-HEIER said no. The bill gives the director of
insurance the authority to apply for a PPACA Section 1332:
Waiver for State Innovation, which is a long public process to
apply to the Centers for Medicare and Medicaid to determine
whether the state can participate more successfully as a state-
regulated program, as opposed to a federally-regulated program.
A waiver allows the state to apply under certain "guardrails"
for 95 percent to 97 percent of the federal tax credits paid as
premium subsidies. There are certain criteria to obtain the
waiver, such as legislative authority is needed to apply, and
the division seeks to explore this possibility.
CHAIR OLSON asked, "If we don't do it, are we going to be forced
into opening up an exchange, or being responsible for an
exchange."
MS. WING-HEIER said no.
REPRESENTATIVE COLVER observed that small states are suffering,
and a provision is needed in PPACA so that smaller states in the
western region could join an area-wide pool and spread out the
risk for carriers.
MS. WING-HEIER advised that previous regulations prevent
insurance from being sold across state lines.
REPRESENTATIVE COLVER stated that those living in states with
larger populations would be outraged at the premiums paid by
those in smaller states.
2:17:53 PM
MS. WING-HEIER advised that in Alaska a married couple 50-60
years of age making $80,000 will pay $40,000 under the current
rate structure of PPACA.
REPRESENTATIVE LEDOUX asked whether the law restricting
insurance from being sold across state lines was federal or
state law.
MS. WING-HEIER answered federal law, affecting all types of
insurance. She added that the proposed committee substitute for
HB 374 is important to all Alaskans. She remarked:
But the bottom line is we've got 23,000 Alaskans that
are not going to have health insurance, the bottom
line is if we don't do something about health
insurance, if we don't do something about the cost of
health care, we're not going to jumpstart this
economy. The cost of uncompensated care is going to
impact all of us when we go see our doctor, when we go
to the hospital. This is just a start of something we
have to do, something that should be addressed
seriously, and we ask for your support in getting this
bill out of committee.
CHAIR OLSON observed that the bill would slow down increases on
all policies.
MS. WING-HEIER said yes.
REPRESENTATIVE LEDOUX questioned whether someone who moves to
Alaska must cancel their health care policy.
MS. WING-HEIER responded that they would have to buy their
insurance here because they are a resident of Alaska.
REPRESENTATIVE KITO expressed his interest in expanding the
insurance pool to other states because smaller states do not
have a population sufficient to amortize costs for those
individuals with significant health care issues. He stated that
the bill creates an opportunity for insurers "to keep things
going for a little while longer, until hopefully we can find a
bigger solution."
MS. WING-HEIER provided the following sectional analysis:
Section 1: allows the legislature to appropriate an
amount to be determined to fund the reinsurance
program;
Section 2: gives the director of insurance the
authority to apply for the Section 1332 Innovation
Waiver;
Section 3: allows for an effective date.
CHAIR OLSON advised that the legislature is "involved in the
process all the way through."
REPRESENTATIVE COLVER asked whether an amendment will be
offered.
CHAIR OLSON said an issue will be addressed when the bill is
held in the House Finance Committee.
MS. WING-HEIER discussed an amendment which was not offered.
2:23:13 PM
CHAIR OLSON removed his objection to adopting the proposed
committee substitute for HB 374. There being no further
objection, Version H was before the committee.
CHAIR OLSON opened public testimony.
2:23:41 PM
BARBARA HUFF-TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters Local 959, stated her organization's support
for the committee substitute for HB 374. She informed the
committee that PPACA is a very complicated and frustrating issue
for employers and unions; in fact, benefit plans for union
members are currently being downgraded, which is counter to
protecting benefits for employees.
CHAIR OLSON asked what effect the original version of the bill
would have had on Teamsters Local 959.
MS. HUFF-TUCKNESS said the bill would have cost the Teamster-
Employer Health and Welfare Plan over $1.2 million.
2:26:06 PM
DAVE JONES, Assistant Superintendent, Kenai Peninsula Borough
School District, informed the committee he is the plan
administrator for the Kenai Peninsula Borough School District's
(KPBSD) self-funded health care plan. He said HB 374 would have
added significant cost to KPBSD's health care plan without
further benefits to its members. The committee substitute
addresses his concerns, and he expressed support for the
committee substitute for HB 374. In response to Chair Olson,
he said the original bill would have cost KPBSD approximately
$861,648.
2:27:34 PM
The committee took a brief at ease.
REPRESENTATIVE COLVER noted that HB 374 would have affected all
self-insured plans including those of school districts and
municipalities, as pointed out during public testimony. He
expressed his support for the committee substitute.
MS. WING-HEIER said that the committee substitute fiscal note
remains zero related to the division of insurance. However, the
revenues are indeterminate, and would be based on what is
appropriated by the legislature for the program.
2:30:56 PM
CHAIR OLSON, after ascertaining no one else wished to testify,
closed public testimony.
2:31:18 PM
REPRESENTATIVE HUGHES moved to report the committee substitute
for HB 374, Version 29-GH2126\H, Wallace, 4/15/16, out of
committee with individual recommendations and forthcoming fiscal
notes. There being no objection, CSHB 374(L&C) was reported out
of the House Labor and Commerce Standing Committee.
2:31:42 PM
ADJOURNMENT
The House Labor and Commerce Standing Committee meeting was
recessed at 2:31 p.m. [The meeting reconvened at 10:03 a.m. on
4/17/16.]
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