Legislature(2015 - 2016)BILL RAY CENTER 208

05/26/2016 11:00 AM LABOR & COMMERCE

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Audio Topic
11:05:49 AM Start
11:06:14 AM HB4002
12:05:14 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB4002 INS. FOR DEPENDS. OF DECEASED FIRE/POLICE TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                          May 26, 2016                                                                                          
                           11:05 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Shelley Hughes, Vice Chair (via teleconference)                                                                  
Representative Jim Colver                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Cathy Tilton                                                                                                     
Representative Andy Josephson                                                                                                   
Representative Sam Kito                                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                              
Representative Mike Chenault (alternate)                                                                                        
                                                                                                                              
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Representative Paul Seaton                                                                                                      
Representative Charisse Millett                                                                                                 
Representative Louise Stutes                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 4002                                                                                                             
"An Act  relating to major  medical insurance coverage  under the                                                               
Public  Employees'  Retirement  System   of  Alaska  for  certain                                                               
surviving spouses  and dependent  children of peace  officers and                                                               
firefighters; and providing for an effective date."                                                                             
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB4002                                                                                                                  
SHORT TITLE: INS. FOR DEPENDS. OF DECEASED FIRE/POLICE                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
05/23/16       (H)       READ THE FIRST TIME - REFERRALS                                                                        
05/23/16       (H)       L&C, FIN                                                                                               
05/26/16       (H)       L&C AT 11:00 AM BILL RAY CENTER 208                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOHN BOUCHER, Deputy Commissioner                                                                                               
Office of the Commissioner                                                                                                      
Department of Administration                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Provided  a PowerPoint presentation entitled,                                                             
"Department Overview," dated 5/26/16, and introduced HB 4002.                                                                   
                                                                                                                                
MICHELE MICHAUD, Chief Health Official                                                                                          
Division of Retirement and Benefits                                                                                             
Central Office                                                                                                                  
Department of Administration                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions during the  hearing on HB                                                             
4002.                                                                                                                           
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
11:05:49 AM                                                                                                                   
                                                                                                                                
CHAIR KURT  OLSON called  the House  Labor and  Commerce Standing                                                             
Committee meeting to order at  11:05 a.m.  Representatives Olsen,                                                               
Colver,  Tilton, Kito,  Josephson,  Hughes (via  teleconference),                                                               
and LeDoux,  were present  at the  call to  order.   Also present                                                               
were Representatives Millet, Seaton, and Stutes.                                                                                
                                                                                                                                
                                                                                                                                
        HB4002-INS. FOR DEPENDS. OF DECEASED FIRE/POLICE                                                                    
                                                                                                                                
11:06:14 AM                                                                                                                   
                                                                                                                                
CHAIR OLSON  announced that the  only order of business  would be                                                               
HOUSE BILL NO.  4002 "An Act relating to  major medical insurance                                                               
coverage under the Public Employees'  Retirement System of Alaska                                                               
for  certain surviving  spouses and  dependent children  of peace                                                               
officers and firefighters; and providing for an effective date."                                                                
                                                                                                                                
11:07:19 AM                                                                                                                   
                                                                                                                                
JOHN BOUCHER,  Deputy Commissioner,  Office of  the Commissioner,                                                               
Department of  Administration (DOA), provided a  brief background                                                               
on  HB  4002,  noting  that  the bill  addresses  the  deaths  of                                                               
individuals who  have served  the State  of Alaska  in protective                                                               
services capacities.   As  a result  of recent  deaths, a  gap in                                                               
benefits was  identified, and  the administration  is introducing                                                               
HB 4002 with the goal  of providing premium-free medical coverage                                                               
to families of peace officers  and firefighters who are killed in                                                               
the line of duty.  Mr.  Boucher said the first issue addressed by                                                               
the bill  is that  surviving spouses  and dependent  children are                                                               
not eligible  for premium-free  medical coverage  until survivors                                                               
become eligible for those benefits  at retirement age, thus there                                                               
is a gap in coverage.                                                                                                           
                                                                                                                                
CHAIR   OLSON   recognized   Representative  Millet   as   having                                                               
introduced the original bill in this regard.                                                                                    
                                                                                                                                
11:09:24 AM                                                                                                                   
                                                                                                                                
MR.  BOUCHER   stated  HB  4002  allows   surviving  spouses  and                                                               
dependent children  to obtain premium-free medical  care upon the                                                               
instance  of  an  occupational  death   of  a  peace  officer  or                                                               
firefighter.   The  state has  multiple tiers  in its  retirement                                                               
system,  and portions  of  the bill  relate  primarily to  Public                                                               
Employees'  Retirement System  (PERS)  Tier II,  Tier III,  peace                                                               
officers and firefighters,  and portions relate to  PERS Tier IV,                                                               
known as  the Defined  Contribution Retirement  (DCR) plan.   The                                                               
second issue is that under  the DCR plan, survivors cannot access                                                               
health  care until  the  deceased member  would  have reached  25                                                               
years of service,  and must also pay 100 percent  of the premium;                                                               
however, HB  4002 allows the premium  to be paid by  the state on                                                               
behalf of  the surviving spouse  or dependents of  peace officers                                                               
and  firefighters, upon  the instance  of an  occupational death.                                                               
Mr. Boucher  pointed out  that Tier  IV plan  is a  premium share                                                               
plan, therefore, the member contributes  a certain portion of the                                                               
total premium, dependent upon the  number of years of contributed                                                               
service. Upon  the instance of  an occupational death of  a peace                                                               
officer   or  firefighter,   survivors'  benefits   are  received                                                               
premium-free until Medicare tales  effect, and then contributions                                                               
begin based upon years of service [slide 2].                                                                                    
                                                                                                                                
MR. BOUCHER  said that the third  issue addressed by the  bill is                                                               
that the Tier  IV plan requires a member to  retire directly from                                                               
the plan, thus  a member would have to work  in the twelve months                                                               
prior  to retirement.   For  example, if  a defined  contribution                                                               
retirement plan  member worked  five or ten  years, and  then was                                                               
killed in the  line of duty, and their  dependent(s) continued to                                                               
receive  an occupational  death  benefit, they  could not  retire                                                               
directly from the  plan.  He explained the bill  made a technical                                                               
fix  that  had to  occur  for  certain  members, because  it  was                                                               
impossible  for them  to  retire  directly from  the  plan.   Mr.                                                               
Boucher continued  to issue  four, which  affects all  tiers, and                                                               
explained  that health  benefits are  not available  to dependent                                                               
children of  PERS plan members if  the member died and  there was                                                               
no  surviving spouse.   The  bill would  allow access  to medical                                                               
benefits to which  dependents are entitled, in  cases where there                                                               
is no  surviving spouse,  such as a  single parent  family [slide                                                               
3].  He directed attention to  slide 4, which addressed the issue                                                               
of the individual  occupations that would be covered  by HB 4002,                                                               
and   advised  that   statutorily-defined   peace  officers   and                                                               
firefighters  include the  following:   police, chief  of police,                                                               
regional   public    safety   officer,    correctional   officer,                                                               
correctional superintendent,  firefighter, and  fire chief.   The                                                               
occupations are a  subset of PERS referred to  as peace/fire, and                                                               
which incorporates  about 1,900 members who  are state employees,                                                               
and   roughly   1,700   members  spread   across   43   political                                                               
subdivisions.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  COLVER asked  whether  municipal  and other  non-                                                               
state law  enforcement officers and firefighters  are required to                                                               
be members of the PERS system, or if membership is optional.                                                                    
                                                                                                                                
MR. BOUCHER  said he  is aware there  are volunteer  and contract                                                               
firefighters who do not have a relationship with PERS.                                                                          
                                                                                                                                
11:16:01 AM                                                                                                                   
                                                                                                                                
MICHELE MICHAUD,  Chief Health  Official, Division  of Retirement                                                               
and Benefits  (DRB), DOA, said that  different municipalities and                                                               
political subdivisions elect to participate  in PERS, and part of                                                               
their  election  allows  them   to  exclude  certain  classes  of                                                               
employees; therefore,  any municipality or  political subdivision                                                               
could  choose to  exclude peace  officers  and firefighters  from                                                               
participation in PERS.                                                                                                          
                                                                                                                                
REPRESENTATIVE  COLVER relayed  that  some volunteer  firefighter                                                               
programs have  had issues with  their employees'  eligibility for                                                               
PERS  due  to  their  limited  hours  of  work.    He  asked  for                                                               
clarification on  whether the intent of  the proposed legislation                                                               
as  drafted,  covers  volunteer firefighters,  emergency  medical                                                               
service (EMS) workers, and municipal firefighters.                                                                              
                                                                                                                                
MR. BOUCHER agreed to provide this information.                                                                                 
                                                                                                                                
CHAIR  OLSON  recalled proposed  legislation  in  2015 which  was                                                               
related  to three  service  areas  in the  Interior  that have  a                                                               
contract with  a private firm,  and have  opted out of  PERS, the                                                               
Teachers' Retirement  System (TERS),  and "everything else."   He                                                               
agreed  that there  are  other  entities in  the  state that  are                                                               
privately contracting insurance and benefit packages.                                                                           
                                                                                                                                
REPRESENTATIVE  COLVER noted  that the  Matanuska-Susitna Borough                                                               
(Mat-Su Borough) tried  to limit the amount  of time firefighters                                                               
and  EMS volunteers  worked so  that they  would not  qualify for                                                               
PERS.  After litigation, there is  now a consent agreement.  Some                                                               
workers are fulltime  and some are limited to 20  hours per week;                                                               
he said  the proposed legislation  needs to identify who  will be                                                               
covered   of   those   working  in   municipal   volunteer   fire                                                               
departments.   Representative Colver  continued, "...  Mat-Su has                                                               
huge fire departments and it's  generally, most of the staff are,                                                               
are part-time  because of  the PERS issue."   He  then questioned                                                               
whether EMS,  such as  ambulance drivers,  are covered  under the                                                               
statutory definition.  In  Anchorage, the professional department                                                               
cross-trains workers to serve as  both firefighters and EMS crew,                                                               
and he stressed for clarification  on their status related to the                                                               
proposed legislation.                                                                                                           
                                                                                                                                
MR.  BOUCHER explained  the intent  of HB  4002 is  to limit  its                                                               
effect to  employees who have  an existing relationship  with the                                                               
PERS system; if  there is no preexisting  relationship with PERS,                                                               
there is no coverage.   He said, "The intent is,  to, you have to                                                               
have that  existing relationship with  PERS, which, based  on the                                                               
comments  from Ms.  Michaud, would  essentially be  determined by                                                               
the participation  agreement between the state  and the political                                                               
subdivision."                                                                                                                   
                                                                                                                                
11:20:48 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE LEDOUX asked whether -  under the current system -                                                               
coverage would exist  for someone who was not killed  in the line                                                               
of  duty, but  was  disabled to  the extent  that  they could  no                                                               
longer work.                                                                                                                    
                                                                                                                                
MR.  BOUCHER answered  that PERS  has an  occupational death  and                                                               
disability  benefit,  thus the  injured  worker  could receive  a                                                               
disability benefit.                                                                                                             
                                                                                                                                
REPRESENTATIVE JOSEPHSON stated that  he introduced a bill during                                                               
this and a previous legislative  session, on behalf of an officer                                                               
in the Anchorage Police Department  (APD) who pointed out that if                                                               
an  APD officer  were to  be grievously  injured on  the job,  no                                                               
retirement benefits  would be received during  his convalescence.                                                               
In   fact,   retirement   benefits  would   be   "frozen"   while                                                               
convalescing in a  hospital or at home, and the  officer would be                                                               
covered only by workers'  compensation.  Representative Josephson                                                               
said the  bill he  introduced would  correct the  present policy,                                                               
and he asked  Mr. Boucher whether it would "cover  this, this gap                                                               
where there'd be no retirement coverage."                                                                                       
                                                                                                                                
MR.  BOUCHER said  he did  not know  about workers'  compensation                                                               
coverage and would research this question.                                                                                      
                                                                                                                                
CHAIR OLSON  asked how many  bargaining units the state  has that                                                               
cover "these people."                                                                                                           
                                                                                                                                
MR.  BOUCHER  said two  are  the  correctional officers  and  the                                                               
Public Safety Employees Association  (PSEA), and he would provide                                                               
others.                                                                                                                         
                                                                                                                                
CHAIR  OLSON asked  whether the  aforementioned bargaining  units                                                               
have optional coverages in their  "packages" from which employees                                                               
can choose.                                                                                                                     
                                                                                                                                
MR.  BOUCHER  offered  his  understanding   that  PSEA  has  some                                                               
options.    In further response  to Chair Olson, he  said options                                                               
include  accidental death,  disability,  and assisted  care.   He                                                               
said that the state has  a suite of voluntary insurance benefits,                                                               
including  life insurance  for all  AlaskaCare members  and those                                                               
who have  access to  the Alaska  Supplemental Annuity  Plan (SBS-                                                               
AP).                                                                                                                            
                                                                                                                                
CHAIR  OLSON requested  that Mr.  Boucher  provide the  committee                                                               
copies of  both the  current and previous  contracts by  the next                                                               
meeting.                                                                                                                        
                                                                                                                                
MR. BOUCHER agreed.                                                                                                             
                                                                                                                                
11:24:38 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  LEDOUX  returned  to her  previous  question  and                                                               
asked  whether   under  the  current  system,   health  insurance                                                               
benefits  would  be  terminated  for   a  worker  -  and  his/her                                                               
dependents -  who was grievously injured  on the job and  was not                                                               
able to return to work.                                                                                                         
                                                                                                                                
MS.  MICHAUD offered  her understanding  that if  appointed to  a                                                               
disability  benefit  under the  PERS  system,  members and  their                                                               
eligible dependents  are entitled  to health insurance,  at least                                                               
under the  Tier II and Tier  III plans, and she  would inform the                                                               
committee on entitlement under Tier IV.                                                                                         
                                                                                                                                
MR.  BOUCHER returned  attention  to slide  5,  which provided  a                                                               
brief history of the proposed  legislation.  Former Governor Sean                                                               
Parnell worked  with legislators on  proposed HB 66  and proposed                                                               
SB 202,  which covered  all PERS and  TRS employees,  removed the                                                               
requirement in  the DCR  plan to retire  directly from  the plan,                                                               
and  those  provisions,  when  combined with  a  high  amount  of                                                               
offered coverage, resulted in a  significant fiscal note.  Due to                                                               
the  fiscal  climate at  this  time,  the present  administration                                                               
sought  to narrow  the  focus  of HB  66,  and  he described  two                                                               
attempted  revisions that  did not  advance.   On the  governor's                                                               
call for  [the Fourth  Special Session of  the 29th  Alaska State                                                               
Legislature] is  HB 4002, which was  modeled on HB 66,  Version S                                                               
[slide 6].                                                                                                                      
                                                                                                                                
11:28:28 AM                                                                                                                   
                                                                                                                                
CHAIR  OLSON added  that  the legislature  first  heard the  bill                                                               
about  a  year and  a  half  ago, without  a  fiscal  note or  an                                                               
actuarial  review.   The committee  held  no additional  meetings                                                               
because members did not receive  the actuarial report until about                                                               
three  weeks ago,  and received  the $60  million fiscal  note on                                                               
[May  25,  2016].    He   said  a  second  actuarial  report  was                                                               
distributed [May  25, 2016],  and opined that  the bill  is "more                                                               
manageable this time around."                                                                                                   
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  for  an explanation  of the  fiscal                                                               
note.   She understood that  27 people have  died in the  line of                                                               
duty over the last decade  from "all departments," and questioned                                                               
how coverage  for 27  individuals could result  in a  $60 million                                                               
fiscal note.                                                                                                                    
                                                                                                                                
CHAIR OLSON suggested that the fiscal  note was in error, and may                                                               
have offered coverage to all state employees.                                                                                   
                                                                                                                                
MR.  BOUCHER affirmed  that the  previously proposed  legislation                                                               
covered all  PERS and  TRS members, and  held the  provision that                                                               
individuals in the DCR plan  were not required to retire directly                                                               
from  the plan,  thus additional  issues -  as well  as a  larger                                                               
scope - contributed to the size of the fiscal note.                                                                             
                                                                                                                                
CHAIR OLSON  clarified that the  fiscal note  currently discussed                                                               
was "on the original version of the first bill."                                                                                
                                                                                                                                
REPRESENTATIVE COLVER  pointed out that fiscal  note [Identifier:                                                               
HB4002-DOA-PERS-05-24-16] forecasts  in fiscal year 2017  (FY 17)                                                               
costs of $174,000, and in [FY 22], costs of $226,000.                                                                           
                                                                                                                                
11:32:13 AM                                                                                                                   
                                                                                                                                
MR. BOUCHER directed  attention to slide 7,  which illustrated FY                                                               
17 projected costs  of $174,000, rising to $226,000  over a five-                                                               
year period.   He said  costs could be expected  to incrementally                                                               
grow over  time, depending on  the cost of providing  health care                                                               
to affected employees.  He  continued to slide 9, which explained                                                               
why  the administration  chose  the approach  taken  by HB  4002.                                                               
Although  the bill  could expand  to include  others who  perform                                                               
similar work, the  issue is related to whether  an individual has                                                               
an existing  relationship with the  PERS system; for  example, if                                                               
there is no existing relationship,  the legislation could violate                                                               
Internal Revenue Service (IRS),  U.S. Department of the Treasury,                                                               
laws,  by  providing  a  benefit   from  a  trust  fund  to  non-                                                               
participants of said  trust fund.  He cautioned  that a violation                                                               
of IRS  laws means the plan  could lose its exempt  status, which                                                               
would be very expensive for both employees and the state.                                                                       
                                                                                                                                
MR. BOUCHER  further explained the potential  problem of limiting                                                               
the  scope of  the  bill to  a  group such  as  the Alaska  State                                                               
Troopers.  In  this case, DRB would have to  re-define the "peace                                                               
officer/firefighter group" within the  PERS retirement system who                                                               
have,  since   inception,  been  offered  a   specific  suite  of                                                               
benefits.  However, from a  legal perspective, DRB believes it is                                                               
better  to offer  the benefit  to the  entire group,  rather than                                                               
offer an enhanced  benefit to a subset group.   He warned against                                                               
creating a system of essentially  customized benefits - by groups                                                               
or employers - because the  system may become unmanageable [slide                                                               
10].   Mr.  Boucher stated  that HB  4002 is  a compromise  which                                                               
applies the benefit to an  existing, statutorily-defined group of                                                               
peace  officers  and firefighters  that  is  consistent with  the                                                               
legal distinction  of the group  from other state employees.   In                                                               
addition, the  fiscal impact of HB  4002 is much smaller  than if                                                               
the benefit were offered to a larger population [slide 11].                                                                     
                                                                                                                                
11:38:11 AM                                                                                                                   
                                                                                                                                
CHAIR OLSON provided some background  information on the original                                                               
proposed legislation  beginning about four  years ago.   He noted                                                               
that of  the 27 on-duty  fatalities over the last  decade, almost                                                               
one-half were aircraft and other  accidental fatalities, across a                                                               
number of departments and divisions.   Chair Olson cautioned that                                                               
other  entities  would  eventually  want similar  coverage.    In                                                               
response to Representative Colver, he  stated he had indicated to                                                               
the administration that  to get the bill out  of committee, which                                                               
"is doable," the  committee will next hear from  the actuary, the                                                               
state risk manager, and DRB.                                                                                                    
                                                                                                                                
MS. MICHAUD provided  a sectional analysis for  HB 4002, advising                                                               
that  proposed  Section  1  addresses  the  health  reimbursement                                                               
arrangement account that is used to  pay for part of the premium,                                                               
or  other qualified  medical expenses  for DCR  plan members,  by                                                               
amending  AS   39.30.400(b)  to   allow  for   eligible  members'                                                               
dependent  child(ren)  to  also   have  access  to  those  funds.                                                               
Proposed  Section 2  removes the  gap for  Tier II  and Tier  III                                                               
members in the  defined benefits portion.  Currently,  if a peace                                                               
officer  or  firefighter  were  to   work  20  years,  they  were                                                               
considered for  normal retirement,  but 25  years of  service was                                                               
required to  get medical  benefits, thus if  a member  suffers an                                                               
occupational death, there would be a  gap where there would be no                                                               
coverage  provided.   This provision  closes the  first gap,  and                                                               
also  allows  for dependents  to  be  covered  when there  is  no                                                               
surviving spouse,  "which was a  gap that we  have in all  of our                                                               
Tiers."   Section  3  allows for  benefits to  be  provided to  a                                                               
surviving spouse premium-free.   Currently, the eligible member's                                                               
spouse  had  access  to  medical  benefits  through  the  defined                                                               
benefit plan, but would be  responsible for paying 100 percent of                                                               
the premium.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON offered  his  understanding that  under                                                               
the current law, if a non-public  safety officer, such as a Clerk                                                               
I,  were  a single  parent  and  died,  then  there would  be  no                                                               
coverage for dependents.                                                                                                        
                                                                                                                                
MS.  MICHAUD  answered  that  was  correct.   If  there  were  no                                                               
surviving spouse, and a non-peace/fire  member passed away due to                                                               
occupational  reasons, there  would not  be access  to a  medical                                                               
plan  for  the dependent  child(ren).    In further  response  to                                                               
Representative  Josephson, she  said  if there  were a  surviving                                                               
spouse,  the  surviving  spouse  would   be  able  to  cover  the                                                               
dependent(s).   In further response to  Representative Josephson,                                                               
she  affirmed that  the surviving  spouse would  have to  pay for                                                               
coverage until either the survivor  reached age 60, or the member                                                               
would have  reached normal retirement,  which in the  "all other"                                                               
category, is  granted at 30 years  of service, at which  time the                                                               
survivor would be eligible for premium-free medical benefits.                                                                   
                                                                                                                                
REPRESENTATIVE   JOSEPHSON  surmised   that  under   the  current                                                               
structure,  even  though  one  has   to  pay  a  premium,  it  is                                                               
advantageous to  be a married person  who is a widow  or widower,                                                               
and  the  state  shows  prejudice to  single  parents  under  the                                                               
existing law.                                                                                                                   
                                                                                                                                
MS. MICHAUD agreed there is  a disadvantage for a child(ren) when                                                               
there is no surviving spouse.                                                                                                   
                                                                                                                                
11:46:35 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KITO  inquired as  to whether  - either  under the                                                               
existing  or  the  proposed  plan  -  a  surviving  spouse  could                                                               
continue to  receive benefits from the  state if they got  a job,                                                               
and were eligible to receive their own benefits.                                                                                
                                                                                                                                
MS. MICHAUD stated that if a  survivor is appointed a benefit, if                                                               
not eligible for  premium-free coverage, they could  elect to pay                                                               
for that  coverage; furthermore, survivors may  drop the coverage                                                               
when employed, and  once the survivor reached age  60, and became                                                               
eligible  for  premium-free coverage,  they  would  be given  the                                                               
opportunity to re-enroll  in the plan.  However,  if the survivor                                                               
had  active coverage  through an  employer, the  coordination and                                                               
benefit  rules  apply,  thus  the   employee  plan  would  become                                                               
primary,  and  the retirement  plan  would  become the  secondary                                                               
coverage.                                                                                                                       
                                                                                                                                
REPRESENTATIVE KITO  gave an example  of a survivor working  in a                                                               
state position where they were  eligible for a benefit, and asked                                                               
whether they could  elect to pay the work-related  benefit, or if                                                               
they would be allowed to receive the survivor benefits.                                                                         
                                                                                                                                
MS.  MICHAUD  responded  that  in   the  AlaskaCare  plan,  state                                                               
employees are  required to participate  - at least in  some level                                                               
of medical coverage - if they  were in a medical benefit eligible                                                               
position, although they could elect a premium-free coverage.                                                                    
                                                                                                                                
11:48:49 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  COLVER directed  attention  to the  bill on  page                                                               
[3], line 25 which read:                                                                                                        
                                                                                                                                
     (E)  is  receiving  a  benefit  under  (a)(3)  of  this                                                                    
     section.                                                                                                                   
                                                                                                                                
REPRESENTATIVE COLVER remarked:                                                                                                 
                                                                                                                                
     This simply gives them the  option to just ... pay like                                                                    
     a [Consolidated  Omnibus Budget Reform  Act] up  to the                                                                    
     point   that,  where   they  would   receive  statutory                                                                    
     benefits as a  survivor of the employee,  like you said                                                                    
     at 60, depending  on the number of years  of service in                                                                    
     the plan,  as an  option to Section  11, which  is that                                                                    
     the  state will  cover the  premium at  no cost  to the                                                                    
     surviving spouse and dependent children.                                                                                   
                                                                                                                                
                                                                                                                                
MS. MICHAUD asked Representative Colver to repeat the question.                                                                 
                                                                                                                                
REPRESENTATIVE  COLVER  surmised  there  are two  options:    the                                                               
surviving spouse  has an option  to elect  to pay the  premium to                                                               
keep  the insurance  in force,  or Section  11 provides  that the                                                               
premium would be covered by the state retirement system.                                                                        
                                                                                                                                
MS.  MICHAUD answered  that on  page 1  there is  a change  to AS                                                               
39.30.400(b),  which  is  the  health  reimbursement  arrangement                                                               
account  as related  to  the DCR  plan.   Section  11 allows  for                                                               
dependent children  to receive  premium-free medical  benefits if                                                               
there  was no  surviving spouse,  or until  the surviving  spouse                                                               
reaches Medicare age,  at which point the  "premium subsidy piece                                                               
of  these  statutes" becomes  effective,  depending  on years  of                                                               
service.   For example,  25 years of  service would  obligate the                                                               
member to  pay 15 percent  of the  premium.  Further,  the health                                                               
reimbursement arrangement  account could  be used  to pay  the 15                                                               
percent, thus  there is the  option, once the  survivor "converts                                                               
to the premium  subsidy, other than 100 percent, to  use that to,                                                               
to pay those premiums."                                                                                                         
                                                                                                                                
REPRESENTATIVE  COLVER  suggested  a   flow  chart  would  better                                                               
explain what Medicare will not pay.                                                                                             
                                                                                                                                
MS. MICHAUD  gave an  example of  a premium for  a DCR  plan that                                                               
cost $1,000, and  if the survivor had to pay  15 percent, or $150                                                               
per month, the health reimbursement  arrangement account could be                                                               
used to make those payments.                                                                                                    
                                                                                                                                
11:52:02 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE LEDOUX  concluded that  under the  current system,                                                               
if there is no surviving spouse, kids are left without coverage.                                                                
                                                                                                                                
MS.  MICHAUD  responded  that  currently,  the  statutes  do  not                                                               
provide access  to a medical plan  for dependents if there  is no                                                               
surviving spouse.                                                                                                               
                                                                                                                                
REPRESENTATIVE  LEDOUX  surmised that  the  lack  of coverage  is                                                               
being fixed  for the  surviving children  of peace  officers, and                                                               
asked, "Are we fixing this for everybody else, too?                                                                             
                                                                                                                                
MS. MICHAUD responded  no. Under the current version  of HB 4002,                                                               
the  provision  is limited  to  peace  officers and  firefighters                                                               
killed in the line of duty.                                                                                                     
                                                                                                                                
REPRESENTATIVE LEDOUX asked whether the  issue could be fixed, in                                                               
order to provide  the additional benefit to others  that is going                                                               
to be provided for peace officers.                                                                                              
                                                                                                                                
MS. MICHAUD  advised an amendment  would require  running another                                                               
actuarial   analysis  to   determine  whether   there  would   be                                                               
additional cost associated with that change.                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  requested that  DRB run  another actuarial                                                               
analysis with that  change, and opined that children  would be in                                                               
a worse  situation, if left  without either parent, than  if they                                                               
were left with one parent.                                                                                                      
                                                                                                                                
MS. MICHAUD said yes.                                                                                                           
                                                                                                                                
CHAIR  OLSON   said  further  testimony   on  legal   matters  is                                                               
forthcoming.                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO  suggested that the Department  of Health and                                                               
Social  Services  (DHSS)  could   advise  whether  children  left                                                               
without a  parent would  became wards of  the state,  and thereby                                                               
eligible for  coverage from  Denali KidCare,  Alaska's Children's                                                               
Health  Insurance   Program  (CHIP),  Division  of   Health  Care                                                               
Services, DHSS.                                                                                                                 
                                                                                                                                
REPRESENTATIVE JOSEPHSON  opined that the  state has a  policy to                                                               
encourage  people to  enter careers  in public  safety -  because                                                               
they  are needed  -  and  HB 4002  costs  less  that its  earlier                                                               
iteration.  However,  he characterized a policy  that says single                                                               
parents' children  would not get something  that married parents'                                                               
children  would  get  as invidious,  arbitrary,  and  capricious.                                                               
This is  not discrimination based  on race, creed, or  color, and                                                               
he questioned its rational basis.                                                                                               
                                                                                                                                
CHAIR  OLSON asked  Ms. Michaud  whether  significant others  are                                                               
treated any differently than spouses.                                                                                           
                                                                                                                                
MS.  MICHAUD acknowledged  that  in response  to  a recent  court                                                               
ruling, a provision was changed  which "grandfathered in" a small                                                               
subset of qualified same-sex partner retirees.                                                                                  
                                                                                                                                
CHAIR OLSON requested a copy of the change.                                                                                     
                                                                                                                                
11:56:45 AM                                                                                                                   
                                                                                                                                
MS.  MICHAUD  returned  attention   to  the  sectional  analysis,                                                               
briefly describing each section as follows:                                                                                     
                                                                                                                                
   · Section   4  expands   coverage  to   include  spouses   and                                                               
     dependents of peace officers and  firefighters under the DCR                                                               
     plan.    Previously,  the  statute  limited  coverage  to  a                                                               
     surviving spouse  of a  member who  already retired,  or was                                                               
     eligible  to retire  at the  time of  death; HB  4002 allows                                                               
     coverage for the spouse and  dependents to begin immediately                                                               
     upon the death of fallen peace officers and firefighters.                                                                  
   · Section 5 is  conforming language to expand  who is eligible                                                               
     to apply for benefits from "members" to "a person."                                                                        
   · Section  6 clarifies  language related  to participation  in                                                               
     the medical plan.                                                                                                          
   · Section  7 is  a new  benefit; for  example, if  a DCR  plan                                                               
     retiree  died after  five years  of  service, their  service                                                               
     continues  to  accrue  while   their  survivor  receives  an                                                               
     occupational  death benefit.   Therefore,  the survivor  and                                                               
     dependent  child(ren) would  not have  any access  to health                                                               
     care until the years of  service reach twenty-five, at which                                                               
     time  the survivor  would pay  100 percent  of the  premium.                                                               
     Section  7 allows  for an  end date  for child(ren)  to stop                                                               
     receiving  coverage if  they  aged-out  during that  waiting                                                               
     period.                                                                                                                    
   · Section 8  expands a definition  to allow for coverage  to a                                                               
     surviving spouse or dependent children.                                                                                    
   · Section 9 also  expands the end date so that  there would be                                                               
     no conflict if  child(ren) age-out in the  interim period of                                                               
     time and coverage was not continued.                                                                                       
   · Section 10 is also conforming language.                                                                                    
   · Section  11  provides  for  the  survivor  or  the  eligible                                                               
     dependent  child(ren) to  have  coverage premium-free  until                                                               
     the survivor  would have reached  Medicare age, and  at that                                                               
    time coverage converts back to a normal premium subsidy.                                                                    
   · Section   12   removes   a  redundant   reference   to   the                                                               
     occupational death benefit.                                                                                                
   · Section  13 repeals  AS  39.365.880(c)  which was  reenacted                                                               
     under AS 39.365.880(b).                                                                                                    
   · Section 14 adds  a new section that allows  for the adoption                                                               
     of regulations.                                                                                                            
   · Section  15  provides  for benefits  to  be  retroactive  to                                                               
     January 1, 2013.                                                                                                           
   · Section   16  allows   Section   14   to  become   effective                                                               
     immediately after enacted.                                                                                                 
   · Section 17  provides regulations to be  effective January 1,                                                               
     2017.                                                                                                                      
                                                                                                                                
12:02:11 PM                                                                                                                   
                                                                                                                                
CHAIR  OLSON  asked for  the  purpose  of  the January  1,  2013,                                                               
[retroactivity] date.                                                                                                           
                                                                                                                                
MR. BOUCHER  replied that that date  was set to make  certain the                                                               
state  covered   the  aforementioned  fatalities.     In  further                                                               
response  to Chair  Olson, he  said [2013]  was the  year of  the                                                               
first fatality.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  JOSEPHSON posed  an  example of  a vehicle  crash                                                               
November 24, 2012, leaving one  dependent spouse and no children,                                                               
and asked whether that spouse would be eligible for health care.                                                                
                                                                                                                                
MR.  BOUCHER  answered that  if  an  incident occurred  prior  to                                                               
January 1, 2013, no; he pointed  out that the two qualifiers are:                                                               
peace/fire [member] and occurrence after January 1, 2013.                                                                       
                                                                                                                                
[HB 4002 was held over.]                                                                                                        
                                                                                                                                
12:05:14 PM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
12:05 p.m.                                                                                                                      

Document Name Date/Time Subjects
HB4002 ver A.pdf HL&C 5/26/2016 11:00:00 AM
HB4002
HB4002 Fiscal Note DOA-OOC-05-22-16.pdf HL&C 5/26/2016 11:00:00 AM
HB4002
HB4002 Supporting Documents-Definitions of Public Safety Officer.pdf HL&C 5/26/2016 11:00:00 AM
HB4002
HB4002 Fiscal Note-DOA-PERS-05-24-16.pdf HL&C 5/26/2016 11:00:00 AM
HB4002
HB4002 Supporting Documents-Actuarial letter 5.24.16.pdf HL&C 5/26/2016 11:00:00 AM
HB4002
HB4002 Supporting Documents-DOA_Presentation to HL&C 05-26-16.pdf HL&C 5/26/2016 11:00:00 AM
HB4002
HB4002 Supporting Documents-DOA_Risk Management_work related deaths 05-25-16.pdf HL&C 5/26/2016 11:00:00 AM
HB4002
HB4002 Sponsor Statement.pdf HL&C 5/26/2016 11:00:00 AM
HB4002
HB4002 Sectional Analysis.pdf HL&C 5/26/2016 11:00:00 AM
HB4002