Legislature(1993 - 1994)
03/23/1994 01:35 PM Senate HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CHAIRMAN RIEGER called the Senate Health, Education and Social Services (HESS) Committee to order at 1:35 p.m. He introduced SB 270 (COMPREHENSIVE HEALTH CARE) and SB 284 (COMPREHENSIVE HEALT ALT INSURANCE ACT) as the only legislation before the committee. DAVID WALSH, Director of the Division of Insurance, thanked everyone working with he and his staff on the fiscal notes. He noted the presence of staff who were available for questions. He explained the four documents, the revised insurance portion of the fiscal notes, before the committee. The new fiscal notes for SB 284 regarding the Alaska Health Insurance Corporation illustrate two different alternatives for SB 284: the in-house model and the contract model. He pointed out that under SB 284, the contract model is less expensive. Number 103 Mr. Walsh compared the new fiscal note for SB 284 with the previous fiscal note when determining that contracting effects the capital and operating expenditures. He explained that the $500,000 capital expenditure remains constant for the first three years due to the assumption that the contract would cost $100,000 a year with a $400,000 one time a year cost with every additional application. That one time cost was included for the first three years because of the time necessary to acquire federal waivers. He stated that the initial cost is less due to the contractual aspect of the fiscal note. The capital expenditure for 1998 increases considerably because SB 284 comes into full affect that year. He pointed out that the amount for the fiscal year 1998 assumes a decreasing claim rate comparable to what Medicaid is currently paying. This amount is merely an estimate for processing claims, the numbers could increase or decrease. Both fiscal notes have reduced staff, travel expenses, and other expenses. He said that he was comfortable with the numbers under the contractual model of the fiscal note for SB 284; however, the capital expenditure increase in 1998 is highly speculative because that amount depends upon decisions of the Corporation. SENATOR DUNCAN asked if the asterisk noting that the capital expenditure information was provided by DHSS for capital expenditures was for the purpose of a main frame. DAVID WALSH did not think so, but rather thought that the notation was related to the added costs of processing claims referred to on page 4; the Medicaid cost times the number of claims. Number 187 DAVID WALSH explained that the other fiscal note for SB 284 assumes that claims processing is done in-house by a main frame. The main difference can be seen in the capital expenditures and its effect on the operating positions. The initial capital expenditures under the in-house model are more than the contract model. He explained that both approaches were presented to allow the committee to choose which model. He acknowledged the different fundamental assumptions regarding implementation and service level. CHAIRMAN RIEGER noted that the fund source for SB 270 was listed as the General Fund (GF)/Program Receipts from the premium tax. He asked if the Division of Insurance's or the State of Alaska's revenue would change. DAVID WALSH stated that the premium tax is paid regardless of the Division's status. Mr. Walsh explained that the Division of Insurance collects general fund/program receipts, which includes the premium tax, and fees. SB 270 would be funded from the premium tax. CHAIRMAN RIEGER asked if the Division's fees would change if they have coverage of disability insurance. DAVID WALSH said that there would be some increase in fees for the additional positions, but only a cost recovery amount. SENATOR DUNCAN asked why the funding source under the Division of Insurance's portion could not be the same under both bills. JOAN BROWN, Administrative Officer for the Division of Insurance, pointed out that SB 270 includes specific language that references funding through the premium tax. Such language is not present in SB 284. SENATOR DUNCAN stated that the specific language Ms. Brown was referring to does not require that the legislature appropriate premium taxes as the funding source, the language uses "may." He expressed the need to be consistent. He noted that some legislators believe that a premium tax does not cost anything. DAVID WALSH clarified that a premium tax is money the legislature already has, if the money was appropriated to another purpose the item it currently funded would be left without. SENATOR DUNCAN said that the money would still be general fund money, if the premium tax money under SB 270 was not used then it could be used elsewhere. Senator Duncan stated that both bills require general or premium tax funding. Senator Duncan reiterated the need to be consistent with the fiscal notes. CHAIRMAN RIEGER asked if this does not include new fees due to the regulation of health insurance, then an existing revenue source would be taking away from other purposes of the general fund. He agreed with Senator Duncan that both fiscal notes should be funded through the general fund. Number 286 SENATOR DUNCAN asked how the public hearing process figures were arrived at under the contractual fiscal note for SB 284. DAVID WALSH explained that they went through SB 284 to determine the number of regulations that would have to be prepared and the points in the bill referring to public involvement. From that a chart was made that estimated a reasonable hearing time for the regulations. He noted their assumptions: only four commissioners would travel, the teleconference would be held at one site, and the Legislative Information Office provided the costs. SENATOR DUNCAN said that Mr. Nizich's fiscal note for SB 270 does not include any teleconference costs or public involvement costs. That fiscal note only includes $17,000 for travel costs. JAY LIVEY, Deputy Commissioner for the Department of Health and Social Services, referred to the March 23, 1994 fiscal note for SB 270. He pointed out that $31,500 under Communication was for teleconference costs. Some of the $17,000 for travel would be used for commissioners to travel to public hearings. SENATOR DUNCAN reiterated that under SB 270 the public involvement process would cost $31,000, but under SB 284 that process would cost $1 million. DAVID WALSH said that the difference could be attributed to the lower amount of regulations in SB 270. JAY LIVEY stated that the teleconference cost under SB 270 assumed there would be three one hour teleconferences to all sites per month. Number 358 CHAIRMAN RIEGER inquired of the fiscal process of "defining a range of potential benefit packages for universal health care coverage for Alaskans" under SB 270. JAY LIVEY noted that the fiscal note for SB 270 lists three full-time commissioners and three full-time research analysts. Mr. Livey envisioned the Commission assigning a commissioner and a research analyst the task of specifying potential benefit packages; other specific tasks could be assigned in the same manner. SENATOR DUNCAN reiterated the importance of the public involvement process. He said that SB 270 would have limited public involvement due to only having three public representatives. He did not believe that $31,000 for public hearings under SB 270 was enough; how could there be such a huge gap in the fiscal notes regarding the public process under these two bills. He suggested that they review the public process portion of the fiscal note for SB 270. SENATOR SALO noted that the bills have different focuses. SB 270 focuses on studying the problem which she believed would indicate a greater expenditure for the public process. She asked if there was a reason why the public process under SB 284 should be significantly more. DAVID WALSH said that the fiscal note was based on the Division of Insurance's experience. He agreed that there is a disparity, but who knows what issues would take a longer public hearing. SENATOR DUNCAN stated that $1 million for the public process under SB 284 may be correct; however, he disagrees with the $31,000 public process under SB 270. CHAIRMAN RIEGER asked if under SB 270 there was an honorarium paid to the members like that under SB 284. JAY LIVEY said no, the members of the Commission are full-time paid staff, salary. CHAIRMAN RIEGER inquired of how the defining of potential benefit packages under SB 270 would occur. JAY LIVEY explained that a benefit package would be defined then the package would go through a cost analysis. Mr. Livey envisioned a range of costs for benefit packages; low, medium, and high. The low cost package would be catastrophic coverage. DAVID WALSH agreed that the least expensive package would be a major medical or a catastrophic plan with a high deductible, basically a disaster plan. The triggers to get into the plan would be very high. CHAIRMAN RIEGER inquired of the monthly premium on such a plan. DAVID WALSH explained the high risk pool and the small business employer pool. The small business employer pool does consider economics. Number 459 THELMA WALKER, Deputy Director of the Division of Insurance, stated that the high risk pool has a $1500 deductible. The cost of the plan depends upon age and geographical area. She explained that rates are based upon age bands; with the $1500 deductible in the high risk pool, the rate would be $165 per month for individuals up to twenty-five years old. The rates would increase with age. She noted that with a $10,000 deductible, the premium would be less that $100 per month for up to age twenty-five. CHAIRMAN RIEGER asked if the adverse selection was eliminated, what would be a monthly premium estimate for catastrophic coverage of a statistically average cross-section of the population. THELMA WALKER clarified that with a spread of the risk, a $10,000 deductible for catastrophic coverage would cost approximately $200 per month. She noted the difference between the average premium and a premium based upon age bands. THELMA WALKER clarified that the high risk pool rates are based upon age bands. The age bands consider age and geographical areas. The older an individual, the higher the rate. An average would be higher due to the lack of the age band. She said that an age band could decrease the amount of the rate versus a pure average. CHAIRMAN RIEGER explained that he believed that the premium for a high risk pool would be ten times higher than an average risk pool. THELMA WALKER agreed that would sometimes be the case. The pool in Alaska has a maximum percentage in which those rates can increase over the average increase. Ms. Walker stated that currently, that is 175 percent with a maximum of 200 percent of the average within age bands. Ms. Walker explained that they took an average from five insurers, age banded that and increased the rate by 175 percent in order to determine the high risk pool rates. CHAIRMAN RIEGER inquired of the other age band rates. THELMA WALKER said that for age sixty and sixty-four, the rate would be $642 with a $500 deductible. The rate for the $1500 deductible would be approximately half of the above. SENATOR DUNCAN asked if without the limit the premiums would be higher. THELMA WALKER agreed. SENATOR DUNCAN pointed out that the limit was artificial, the costs of the high risk pool are shifted to other consumers. The high risk pool is not allowed to charge the necessary rate to cover against loses. CHAIRMAN RIEGER clarified that those loses are shifted to insurers. DAVID WALSH explained that the assumption of mandatory participation or full spectrum participation as opposed to adverse selection, the true cost of those pools are not reflected in the set premiums. The numbers for the pools are less than the actual cost would be in order to underwrite the risk. CHAIRMAN RIEGER asked if these rates were per individual. THELMA WALKER said yes. CHAIRMAN RIEGER inquired of the numbers for the small business employer pools. THELMA WALKER stated that those numbers have not been developed. The benefit packages would be the same as what is currently offered. JAY LIVEY noted the obvious limitations to catastrophic policies, only a few benefit from such policies. The issue of preventive care and services are lost. There are trade-offs. Number 544 CHAIRMAN RIEGER noted that the State's insurance plan would be recognized as the cadillac model of insurance with family coverage. He did not understand how catastrophic insurance rates per individual could be half the amount of the State's plan. SENATOR DUNCAN said that the catastrophic rates are lower because they are artificial rates. CHAIRMAN RIEGER clarified that his question was regarding an average statistical cross section. DAVID WALSH believed that the cost would decrease if there was some type of mandate. The size of the pool, as in the State policy, would decrease the cost due to the pools size which would spread the risk. SENATOR DUNCAN emphasized the necessity to compare the benefits of other plans besides the State plan. He inquired of the limit of last years legislation. THELMA WALKER clarified that there was not a cap on the small employer pool. Only with increases after a certain date, there are some renewal caps. Those numbers are being worked on currently. CHAIRMAN RIEGER indicated that he thought there was a range around a center point which was the top end. If that did not cover the individual, the individual would have to absorb the cost or buy into the reinsurance pool. TAPE 94-22, SIDE B Number 584 CHAIRMAN RIEGER requested a description of a medium plan. JAY LIVEY described a medium plan as not having too many preventive services, dental or optometry coverage, with higher deductives and co-payments. CHAIRMAN RIEGER asked how much more a medium premium would be than a catastrophic premium. DAVID WALSH estimated that a medium premium could quickly get up to $300 per month. A more tailored plan would soon increase to $350; possibly with family coverage. SENATOR SALO asked if there were cheaper catastrophic plans on the current market that are not that expensive, like the Blue Cross Basic. DAVID WALSH agreed that the Blue Cross Basic was less expensive. The coverage, although basic, would be more than catastrophic, but with high triggers. DAVID WALSH explained that part of the problem with the insurance costs is related to the high expense of actually using the plan. SENATOR DUNCAN requested that Mr. Livey review the public involvement of the fiscal note for SB 270. CHAIRMAN RIEGER noted the long list of proposals the committee had reviewed. He did not believe that the cost of any specific benefit package had been lacking on substantial information or conjecture. He indicated that a consensus cannot be arrived at without knowing the cost. He suggested more specific direction to SB 270 regarding the composition and cost of a benefit package. SENATOR SALO expressed frustration with the rapidly changing health care and premium costs. She did not know that the cost would ever be known with certainty. CHAIRMAN RIEGER agreed that they would not know with absolute certainty; however, he would like to have good data. Number 531 SENATOR DUNCAN stated that the savings should be reviewed along with the costs. He suggested that most people agree that the savings would outweigh the costs. CHAIRMAN RIEGER did not agree with the belief of some that costs will decrease in the future with health care reform. He asserted that the 14 percent of the GDP currently going to health care would probably increase in the future. SENATOR DUNCAN explained that the goal was to slow down the rate of increase, not reducing the overall spending. SENATOR SALO did not seem to think that the public health area was thoroughly covered. CHAIRMAN RIEGER informed Senator Salo that DHSS was present at a previous meeting in order to discuss legislation proposals from Healthy Alaska 2000. There were no legislative proposals. Chairman Rieger encouraged reviewing Healthy Alaska 2000 in order to make their own proposals. SENATOR DUNCAN expressed the need to review some issues individually not previously reviewed in that manner. He listed the following issues: universal coverage versus access, a cost control system, wellness and preventive health care, and long-term care. He asserted that those issues deserve attention. He clarified universal coverage under whatever type system should be identified as a principle giving direction for exploration if universal coverage is choosen. CHAIRMAN RIEGER stated that whether or not to have universal coverage as a principle is hard to know until the cost is known. SENATOR DUNCAN said that the cost without universal coverage is known. Senator Duncan discussed cost shifting. Bartlett has approximately 15-20 percent uncompensated care which would be cost shifted to others. Number 446 CHAIRMAN RIEGER indicated that such an argument would be dealt with under a cost analysis for various proposals. SENATOR DUNCAN asserted that universal coverage or whatever type system is an issue worth debating. SENATOR LEMAN maintained that a universal coverage single payer system would have greater cost shifting, especially with a community base. He recognized current cost shifting to cover those without coverage. SENATOR SHARP expressed concern with the potential for major cost shifting from agencies, now bearing part of the health care cost, to the state of Alaska and then leaving. He suggested addressing that issue. SENATOR DUNCAN indicated that universal coverage would be nationwide in the future. He posed Indian Health Services as an example of those federal agencies backing out now. SENATOR SHARP asserted that the total impact of backing away quickly should be known. SENATOR SALO explained that when she ponders universal coverage more than dollars and cost shifting come to mind. She remembered former students, children, who were not covered. Often they were from the working poor. She expressed the need to work on universal coverage for those individuals. SENATOR SHARP agreed with Senator Salo, but he attributed a portion of that problem to misplaced priorities without regard to the income level which would then shift costs to the state. CHAIRMAN RIEGER believed that Senator Salo had a legitimate consideration that could be factored in if all the facts were known. He reiterated that the cost of health reform is missing most from all the debates. SENATOR DUNCAN agreed that knowing the cost of health reform was necessary. He stated that SB 284 would provide the cost under universal coverage and a specific benefit plan and the Corporation would present that to the legislature. SB 270 does not provide an answer to the cost issue; SB 270 has multiple decisions. He noted that in order to have a consensus, public involvement is essential which SB 284 includes.
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