Legislature(2013 - 2014)SENATE FINANCE 532
04/10/2013 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB198 | |
| SB87 | |
| HB52 | |
| SB90 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 198 | TELECONFERENCED | |
| + | SB 87 | TELECONFERENCED | |
| += | HB 52 | TELECONFERENCED | |
| + | SB 90 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
April 10, 2013
9:12 a.m.
9:12:47 AM
CALL TO ORDER
Co-Chair Meyer called the Senate Finance Committee meeting
to order at 9:12 a.m.
MEMBERS PRESENT
Senator Pete Kelly, Co-Chair
Senator Kevin Meyer, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Senator Peter Micciche; Konrad Jackson, Staff,
Representative Kurt Olson; William C. Barron, Director,
Division of Oil and Gas, Department of Natural Resources;
Jill Lewis, Deputy Director, Division of Public Health,
Department of Health and Social Services; Christine
Marasigan, Staff, Senator Kevin Meyer; Representative Eric
Feige; Dan DeBartolo, Director, Permanent Fund Dividend
Division, Department of Revenue; Becky Hultberg,
Commissioner, Department of Administration; Michael
Barnhill, Deputy Commissioner, Department of
Administration;
PRESENT VIA TELECONFERENCE
Stephanie Wrightsman-Birch, Division of Public Health,
Department of Health and Social Services; Jamie Morgan,
American Heart Association, Sacramento;
SUMMARY
SB 87 NEWBORN SCREENING FOR HEART DEFECTS
CSSB 87(HSS) was REPORTED out of committee with a
"do pass" recommendation and with previously
published zero fiscal note: FN1 (DHS).
SB 90 SCHOOL DISTRICT EMPLOYEE HEALTH INSURANCE
SB 90 was HEARD and HELD in committee for further
consideration.
HB 52 am
PFD ALLOWABLE ABSENCE
SCSHB 52(FIN) was REPORTED out of committee with
a "do pass" recommendation and with a new zero
fiscal note from the Department of Revenue.
HB 198 am
OIL AND GAS AND GAS ONLY LEASES
HB 198 am was REPORTED out of committee with a
"do pass" recommendation and with a previously
published zero fiscal note: FN1 (H.RES).
HOUSE BILL NO. 198 am
"An Act relating to the primary period of an oil and
gas or gas only lease and the extension of a lease;
relating to terms to be included in an oil and gas or
gas only lease; relating to rental for an oil and gas
or gas only lease; and providing for an effective
date."
9:14:54 AM
Senator Micciche announced that he sponsored the companion
bill, SB 96, which was identical to HB 198 and he fully
supported the legislation.
Co-Chair Meyer noted that the committee heard SB 98 on May
8, 2013.
WILLIAM C. BARRON, DIRECTOR, DIVISION OF OIL AND GAS,
DEPARTMENT OF NATURAL RESOURCES, began a presentation
titled "One-Time Lease Extension HB 198"(copy on file). He
discussed Slide 1:
What is HB 198?
•Cannot allow lease extensions under current statutes
•HB 198 allows a maximum 10-year primary term,
including extension
•Not automatic; may consider:
•Funds already spent on exploration and development
•Type of work already completed
•Other relevant information
•Granted extension may require
•Increased rental up to $250/acre for last three years
•Performance bond
•Work commitments: specific $ amount to be expended;
type and amount of work to be performed
•Tool to help drive exploration and development
Mr. Barron explained that the legislation authorized the
commissioner of the Department of Natural Resources (DNR)
to grant a one-time lease extension of up to ten years to
approved applicants on current five to seven year leases.
The length of the extension would be determined by the
project. If the extension was granted for the full ten year
period the per acre rental fee would increase by $250 for
the last three years from $3 per acre. The increased
acreage fees could be waived by the commissioner based on
the amount of work already completed on the lease. The
terms of the lease would be renegotiated to include work
commitments as a condition of the lease extension. The
department believed the extension conditions were a tool to
compel exploration and development.
Mr. Barron turned to slide 3:
Why do we need HB 198?
Background
Maximum lease term is 10 years; minimum is 5
years.
In 2007, 2008, and 2009, some leases had 5- and
7-year terms.
Difficult to perform exploration, delineation,
and production drilling in those time frames
Unintended consequences of short lease terms
Premature unit applications attempting to extend
leases.
Preference is unit decisions based on hydrocarbon
accumulations proven by drilling
Despite best efforts, diligent lessees may lose
leases after significant investment.
Mr. Barron spoke to Slide 4 titled: "Northern Alaska Lease
Distribution." The slide depicted a chart showing the
number of leases held by each lease holder and the year
leases were set to expire. He detailed that the area
encompassed the Beaufort Sea, North Slope, and Foothills.
The leaseholders represented small, large, major, and
independent companies. In two years 104 leases will expire
and in two to five years 79 leases will expire. The
department anticipated applications within the next two
years from Repsol, Brooks Range Petroleum Company [AVCG,
LLC], Conoco Phillips, and Donkel/Cade. He noted that
Repsol obtained the leases from a negotiated business
agreement with Armstrong [Armstrong Oil and Gas Inc.] and
were actively drilling. The department would likely extend
Repsol leases based on its work. Great Bear Petroleum,
Donkel/Cade, and Repsol were the leaseholders expected to
extend in the out years. He delineated that DNR did not
intend to extend all of the leaseholder's acreage; only
acreage that the companies actively worked and developed.
He expressed that the department wanted to determine what
work was actually completed on the lease and grant the
extension to the same leaseholder in order for the work to
continue as opposed to starting over with a new company.
9:20:48 AM
Mr. Barron addressed Slide 5 titled: "Cook Inlet Lease
Distribution." The slide depicted a chart showing the
number of leases held by each lease holder and when the
leases were set to expire in Cook Inlet. He noted that
Apache Alaska Corporation was the predominant lease holder
in all expiration years. Buccaneer Alaska LLC, Hilcorp
Alaska,LLC, and Nordaq Energy Inc. were also major
leaseholders. He added that Apache vigorously acquired
leases and pursued a 3-D seismic program throughout its
leases. He stressed that the extensions would be predicated
on the work activity associated with each individual lease
and not a grouping of leases. He reiterated that the
department only wanted to extend leases involved in an
active work commitment based on increased exploration
drilling and production.
Mr. Barron spoke to Slide 6:
What are the benefits of HB 198?
Benefits to diligent lessees
•Accommodates short drilling windows
•Lessees who have significantly invested in shorter-
term leases may have time to bring qualified leases
into production
Benefits to the State
•Allows State to require work programs during primary
term
•Encourages ongoing work to be completed
•Increases the probability of bringing leases to
production
Mr. Barron elaborated that the five and seven year lease
programs were designed to encourage drilling. An unintended
consequence of the short term leases was that the work
could not be completed within the confines of short
seasons. The lessees were running out of time. He
emphasized the importance of having the statutory authority
that required specific work conditions on the lease. The
legislation encouraged the completion of ongoing work and
spurred development of the lease to production at a faster
rate.
Senator Bishop asked whether currently the lessees were
paying a rent of $3 per acre. Mr. Barron replied that the
leases applicable to HB 198 were from 2005, 2006 and 2007
and were leased at a rate of $3 per acre. Currently the
rate was $25 per acre for the first seven years and
increased to $250 for the last three years. The bill
replicated the current lease sale program. The lessees felt
that seven years for primary term exploration was usually
adequate but wanted the opportunity to extend for three
more years. The department developed the concept of
extending leases at higher rates as a way to build a
business relationship with leaseholders that truly wanted
to develop the leases. The companies would be willing to
pay the premium price.
Co-Chair Meyer shared that he had not heard of some of the
leaseholders. He inquired whether they were private
individuals who did not intend to develop the lease but
rather offer it for re-sale. Mr. Barron responded that many
lessees were small companies or individuals. The department
was required to open up acreage to anyone over 18 years of
age without consideration of the intent of the
leaseholders. He offered that some leaseholders "market"
the lease to another entity to develop the lease.
Vice-Chair Fairclough discussed the fiscal note. She noted
that FN 1 (DNR) was a zero fiscal note.
9:27:40 AM
Co-Chair Meyer OPENED public testimony.
Co-Chair Meyer CLOSED public testimony.
Vice-Chair Fairclough MOVED to REPORT HB 198 am out of
committee with individual recommendations and the
accompanying fiscal note.
Co-Chair Meyer OBJECTED for the purpose of discussion.
9:28:21 AM
AT EASE
9:28:51 AM
RECONVENED
Co-Chair Meyer WITHDREW his OBJECTION.
There being NO further OBJECTION, HB 198 was REPORTED out
of committee with a "do pass" recommendation and with a
previously published zero fiscal note: FN1 (DNR)
9:29:10 AM
AT EASE
9:31:37 AM
RECONVENED
SENATE BILL NO. 87
"An Act requiring screening of newborns for congenital
heart defects; and providing for an effective date."
Senator Micciche introduced the legislation. He related a
story from personal experience. His niece was born in Japan
where newborns were routinely tested for congenital heart
disease. A significant defect was discovered that required
surgery. He detailed that one in one hundred babies were
born in Alaska each year with congenital heart disease; the
number one killer of infants with birth defects. The United
States was "moving toward" adopting Japan's testing
measures. Twenty states were in the process of considering
similar legislation and eight states adopted pilot
programs. The testing was accessible in several major
health facilities in the state. The screening was capable
of finding 75 percent of all congenital heart defects, as
well as other life threatening conditions. He commented
that the test cost $10 and was covered by most health
insurance plans and Medicaid. The cost of early detection
and treatment was much lower than the cost of late
diagnosis and treatment. He furthered that the legislation
required the low cost pulse oximetry testing beginning in
January 2014. Birthing centers, smaller hospitals, and
midwives with fewer than twenty births per year had until
January 2016 to purchase the screening equipment. Parents
could opt out of the screening. He spoke to the zero fiscal
note (FN 1 (DHSS)). He explained that the Department of
Health and Social Services (DHSS) was only required to
manage basic data on the program. He shared that he wanted
to keep impacts from the bill minimal. He offered that no
health care organization or association opposed the
legislation.
Co-Chair Meyer asked how many infants per year were born
with heart disease. Senator Micciche restated that one in
one hundred babies were born with heart defects each year.
Co-Chair Meyer inquired why the effective date was not
until January 1, 2014. Senator Micciche replied that he
wanted to avoid over burdening healthcare facilities
required to purchase the equipment.
Vice-Chair Fairclough noted that many of the hospitals had
the oximetry equipment on its premises. She inquired what
the cost was to purchase the equipment. Senator Micciche
responded that he did not know the exact cost.
Vice-Chair Fairclough asked how the screening worked.
Senator Micciche answered that a device clipped onto the
newborn's finger. The screening was not painful or
invasive.
9:39:52 AM
JILL LEWIS, DEPUTY DIRECTOR, DIVISION OF PUBLIC HEALTH,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, responded that
she did not know the cost of the screening equipment.
Vice-Chair Fairclough supported the legislation but wanted
to know the cost of the equipment to determine the burden
placed on smaller health care facilities. She asked DHSS to
confirm the cost of the test. Ms. Lewis understood that the
cost of the test was the amount stated by the sponsor.
Senator Bishop concurred with Vice-Chair Fairclough and
wanted to know the cost of the equipment. He wondered
whether grant money was available to help purchase the
equipment. Ms. Lewis responded that she was not aware of
any specific grant program, but that the department would
examine grant options and provide assistance if available.
Senator Olson remarked that oximetry was a huge advance in
non-invasive testing. He queried what provisions were
available for healthcare facilities in rural areas where a
delay in care could cause harm.
STEPHANIE WRIGHTSMAN-BIRCH, DIVISION OF PUBLIC HEALTH,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES (via
teleconference), reported that the cost of the equipment
was approximately $500 to $1000. Some hospitals use more
sophisticated and more expensive equipment. She clarified
that the screening was administered through probes attached
by a Band-Aid applied to the right hand and the left foot
and read oxygen levels through the skin. She explained that
the division set up an advisory committee comprised of
pediatricians, pediatric cardiologists, a direct entry
nurse-midwife, and hospital personnel. The division and
advisory committee were already working with the hospitals
to develop a testing algorithm that would become the
standard for all health care facilities across the state as
recommended by the American Academy of Pediatrics and the
American Academy of Pediatric Cardiologists. She expounded
that Alaska had five pediatric cardiologists who travelled
around the state to cover rural areas as part of their
private practices. The algorithm included guidance to a
rural healthcare provider whether transport was required.
She responded that the screening was for early
identification and intervention measures would be applied
if appropriate.
Senator Olson noted that the test measured the difference
between the oxygenated blood between the hand and the foot.
Ms. Wrightsman-Birch confirmed. She indicated that the test
was rigorously studied for "a number" of years. She stated
that based on data, approximately 200 infants would screen
positive. Approximately twenty to thirty of the positive
infants would require additional intervention.
9:48:01 AM
Senator Olson asked whether the test detected both Atrial
Septal defects (ASD) and Ventral [ventricular] Septal
defects (VSD). Ms. Wrightsman-Birch answered in the
affirmative. She reported that the state had a high number
of VSD cases and noted that VSD often resolved without
treatment. She stated that the chairman of the advisory
committee, Dr. Christiansen, a pediatric cardiologist
reported that the screening also identified Tetralogy of
Fallot and malformation of the heart at much earlier stages
and allowed for treatment before a disease advanced.
Senator Olson wondered what happened with a false negative
screening result. Ms. Wrightsman-Birch answered that the
screening algorithm addressed a positive result by re-
screening up to three times. A pediatric cardiologist was
contacted after a second positive screening result. Simpler
additional testing typically take place before more costly
sophisticated tests were warranted.
Senator Olson commented that he fully supported the
legislation.
Co-Chair Meyer cited analysis from the fiscal note that
required the department "to establish procedures for
submitting reports" for screening. He queried whether DHSS
could accomplish the data collection without additional
appropriations. Ms. Lewis replied that the department was
able to accomplish the requirements with existing
resources.
Senator Olson asked for clarification regarding Section 2
of the legislation. Ms. Lewis explained that Section 2
delayed implementation of the bill for smaller providers
which allowed more time to prepare for the requirements of
the bill.
Co-Chair Meyer OPENED public testimony.
JAMIE MORGAN, AMERICAN HEART ASSOCIATION, SACRAMENTO (via
teleconference), expressed the American Heart Association's
support of SB 87. She communicated that critical congenital
heart defects left untreated can cause death. Research had
proven that expanded use of oximetry screening could detect
90 percent of all defects. Early screening reduced
congenital heart defect hospital costs that amounted to
$2.5 billion each year. She remarked that screening would
save Alaskan babies lives born with congenital heart
defects.
Co-Chair Meyer CLOSED public testimony.
Vice-Chair Fairclough MOVED to REPORT SB 87 out of
committee with individual recommendations and the
accompanying fiscal note.
CSSB 87(HSS) was REPORTED out of committee with a "do pass"
recommendation and with previously published zero fiscal
note: FN1 (DHS).
9:54:26 AM
AT EASE
9:58:02 AM
RECONVENED
HOUSE BILL NO. 52 am
"An Act relating to allowable absences from the state
for purposes of eligibility for permanent fund
dividends; and providing for an effective date."
Vice-Chair Fairclough MOVED to ADOPT the propose committee
substitute for HB 52, Work Draft 28-LS0170\U (Martin
4/9/13).
Co-Chair Meyer OBJECTED for purpose the discussion.
CHRISTINE MARASIGAN, STAFF, SENATOR KEVIN MEYER, reported
the change from the previous version. She noted that on
Page 2, line 28 the following was added, "or a United
States national team for an Olympic sport." She explained
that the language was necessary due to the narrow
interpretation of the statutes regarding the Permanent Fund
Dividend program's allowable absences. In 2008, Alaskans
were denied the dividend based on the situation. The new
language added the conforming language to the statute.
Co-Chair Meyer WITHDREW his OBJECTION.
Vice-Chair Fairclough remarked that the Department of
Revenue (DOR) acted responsibly in implementing the law and
reviewing the legislative history regarding the case that
prompted the legislation. The division worked to protect
Alaskans rights while upholding the conditions set by the
legislature. She stated that current law clearly did not
allow for the absence related to the case.
REPRESENTATIVE ERIC FEIGE, SPONSOR, stated that he was not
opposed to the change in the proposed committee substitute.
Senator Dunleavy asked a question regarding an existing
allowable absence. He wondered whether the bill covered a
minor accompanied by a parent who was absent receiving
secondary or post-secondary education. Representative Feige
responded that the bill did not affect any existing
allowable absences.
Vice-Chair Fairclough referenced discussions during a
previous hearing about parents who did not file a Permanent
Fund Dividend (PFD) application for their children. She
noted that Senator Hoffman had requested the data from the
division. She asked Senator Hoffman to share the results
with the committee.
Senator Hoffman stated that within the last five years from
2008 to 2012 the number of children affected averaged over
1000 per year. The children received a dividend in a prior
year. Approximately $1 million was not distributed to the
children on an annual basis. He pointed out that the
children were still eligible for the dividend but could not
apply until the children were of legal age. He felt that
the issue needed to be addressed, but that he did not want
to delay the legislation. He judged that the issue was much
larger in magnitude than what HB 52 addressed.
Representative Feige agreed with the comments of Senator
Hoffman and related that the issue could be addressed next
session in a separate bill. He believed the issue was
important but the solution was difficult to address.
10:07:43 AM
DAN DEBARTOLO, DIRECTOR, PERMANENT FUND DIVIDEND DIVISION,
DEPARTMENT OF REVENUE, responded to the earlier question by
Senator Dunleavy. He communicated that the child's dividend
was determined by the status of the parent or guardian.
Allowable absences applied to accompanying children.
Vice-Chair Fairclough referenced the statistics regarding
children whose parents failed to apply for the PFD. She
asked whether the data represented children who received
the dividend in a prior year and qualified subsequent to
the skipped year. Mr. DeBartolo responded that the number
represented minors who previously applied then skipped some
years and reapplied another year. The division looked for
"prior year non-filers." The division audited the
applications to determine why the dividend was skipped.
Co-Chair Meyer asked whether the zero fiscal note still
applied to the CS. Mr. DeBartolo replied in the
affirmative.
Vice-Chair Fairclough MOVED to REPORT HB 52 am out of
committee with individual recommendations and the
accompanying fiscal note.
SCSHB 52(FIN) was REPORTED out of committee with a "do
pass" recommendation and with a new zero fiscal note from
the Department of Revenue.
10:11:29 AM
AT EASE
10:14:00 AM
RECONVENED
SENATE BILL NO. 90
"An Act relating to group insurance coverage and self-
insurance coverage for school district employees; and
providing for an effective date."
Senator Dunleavy introduced SB 90. He explained that there
were 53 school districts in Alaska, all with different
health insurance plans. The plans were negotiated at the
district level at different rates. The cost of health
insurance was escalating. School district's costs were
rising due to inflationary costs. Health insurance was a
large contributor to increased costs. Rates were raising
seven to fifteen percent each year. The burden to pay for
the increased costs was placed on the school district. The
state funded some school districts, i.e., REAA's [Regional
Education Attendance Area] at 100 percent of all its
educational costs. State and local governments were all
bearing the costs of increased health insurance. He
reported that the legislation created an integrated state
health insurance plan for all school districts. The larger
pool placed the state in a position to negotiate lower
rates. The financial burden would be eliminated from the
school districts allowing districts to focus on educational
policies. He announced that some school district
representatives testified in favor of the bill and agreed
that the legislation was beneficial to their districts and
allowed more time to concentrate on students and control
costs. He concluded that the legislation was a solution to
a problem he was familiar with as a former school district
superintendent.
Co-Chair Meyer inquired whether the legislation provided
cost savings for the state. Senator Dunleavy requested that
the Department of Administration (DOA) answer the question.
Co-Chair Meyer noted that the legislation proposed funding
the health insurance plan from the public education fund.
He wondered why the public education fund was chosen.
Senator Dunleavy replied that the use of the public
education fund was suggested by DOA.
Co-Chair Meyer reported that last year the state
centralized pupil transportation as a cost savings measure.
He inquired whether the intent of the legislation was costs
savings. Senator Dunleavy answered in the affirmative. He
thought that the state paid for the rising cost of health
care through increases to the BSA [Base Student
Allocation]. The centralized insurance pool could yield
lower rates which were a cost savings to the state.
Senator Hoffman commented that SB 90 capped the insurance
funding at $100 million and did not include adjustments for
inflation. Senator Dunleavy responded in the affirmative.
Senator Hoffman remarked that the centralized
transportation funding included a one and a half percent
increase for inflation with more proposed for the current
year. He wondered whether the legislation could include
cost adjustments for inflation. Senator Dunleavy replied
that the purpose of the bill was to take control of costs
at the local level and provide savings for the state. He
was in favor of anything that could accomplish the purpose
of the legislation.
Senator Hoffman commented that capping the funding for
rising health care costs was problematic. He thought that
not addressing inflation in the legislation only delayed
the matter until a later date. Senator Dunleavy suggested
that DOA could address the concern.
Co-Chair Meyer queried how a school district negotiated for
health insurance. Senator Dunleavy replied that the school
district negotiated contracts with the employee groups
which included health care coverage and also negotiated
directly with insurance providers. He added that a lot of
time was taken up in the negotiation process at a cost to
the school district.
10:22:27 AM
Co-Chair Meyer asked whether the state ultimately paid for
the negotiated health insurance costs. Senator Dunleavy
elaborated that the costs were paid for by the school
district. Local taxes paid for a portion of the costs for a
municipal school district along with state funding. If the
district's costs were higher than the amount of state and
local funding a school district reduced costs through cuts
in education.
Vice-Chair Fairclough stated that there were many people in
the state that were concerned about the bill. She believed
in the concept of controlling costs and requested an
explanation of the concerns being raised over the possible
reduction in benefits leading to a reduced level of health
care due to the legislation. She pointed out that a large
city such as Anchorage contributed a great deal of tax
dollars into the school system as opposed to smaller school
districts that were not able to due to a small tax base.
She thought that the legislation would benefit small
districts. She queried whether all of the districts needed
to be included in the insurance pool to achieve cost
savings. She wondered why the legislation mandated
participation instead of incentivizing it. Senator Dunleavy
thought that the pool of all 53 school districts would
achieve the most savings for health care and administrative
costs.
Vice-Chair Fairclough wondered whether there were benefits
to pooling health insurance with only the districts that
wanted to participate. Senator Dunleavy stated that any
benefits depended on negotiations based on the number of
participants.
Vice-Chair Fairclough referenced "multiple" letters in
support of the legislation (copies on file) from district
level financial managers across the state. She cited an
opposition letter from the Local 71 Public Employees Trust
Fund in Anchorage (copy on file). The trust discerned that
pooling would result in additional costs of $400 thousand
passed on to the membership. She understood that in a pool
some paid more than others. She asked for clarification on
how pooling worked. Senator Dunleavy deferred to DOA for an
answer.
10:30:28 AM
Vice-Chair Fairclough replied that she wanted to discuss
whether there would be a benefit for school districts that
opted to participate in a pool, and offer an incentive
approach based on fees for various levels of care similar
to the Public Employees' Retirement System (PERS) system.
BECKY HULTBERG, COMMISSIONER, DEPARTMENT OF ADMINISTRATION,
commented on the legislation and addressed questions that
were raised earlier. She remarked that the department did
not have an official position on the bill, but believed
pooling school district's health insurance could offer cost
savings for the districts and the state. The department had
experience managing costs. She noted the "value" of
insurance pooling while managing the state's plans. She
observed that health insurance carried the "largest and
fastest growing" costs. She related that the bill was
brought forward by several of the large school districts
that were struggling with raising costs and limited
resources. Health insurance was the districts fastest
growing costs and was the most difficult to manage. She
related that healthcare was one the state's and the
nation's most persistent issues and was an enormous cost
driver for the districts and the state. The school
districts collective health insurance costs were over $280
million.
Commissioner Hultberg provided a brief overview of the
health insurance plans that DOA managed and highlighted the
possibility for cost savings through pooling. She detailed
that the state currently managed two plans: one for its
active employees and the other for retirees. The combined
plans provided coverage for approximately 86,000 members at
a cost of $600 million annually. Both of the plans were
self-insured and administered by a third party. The third
party received monthly payments calculated at a per member
rate. The Alaska Care employee plan covered 16,400 members
including dependents. The bill would add an extra 47,000
members into the active employee plan.
Commissioner Hultberg explained the factors that determined
costs. She pointed out that the provider network and third
party administrator fees were a "huge driver" of costs.
According to a recent study, administrative fees amounted
to $1 in every $10 spent on health care in Alaska. High-
cost claimants, medical inflation, and utilization also
were large costs drivers. The size of the insurance pool
affected most of the costs. She elaborated that larger
pools could result in negotiating better rates, lower third
party administrative fees, and offer reduced risks with
high cost claimants. She relayed that the larger volume
could positively impact utilization. The more people in the
pool allowed for more sophisticated cost containment
programs. According to demographic data kept by DOA on the
PERS and TRS (Teachers Retirement System) pools, actuaries
estimated a 2 percent to 3 percent increase in costs
because of the demographics of a school district pool. The
larger size of the pool could offset the increased costs
and provided savings. Without access to the data on
insurance claims a more detailed analysis could not be
provided. She furthered that the state was currently paying
for a substantial amount of the increased costs through
funding for education. In addition, the state was funding
future costs through the state's retirement plans. She
related that the unfunded liability for retiree health care
amounted to $4 billion. She felt that the state had a
vested interest in addressing the rising costs of health
care. She concluded that the state was paying for the
increasing cost of the school districts health care. She
thought that SB 90 raised some important questions; whether
the state should maintain the status quo of a "fragmented"
approach for 53 separate school districts or institute an
integrated cohesive approach to manage health care. The
department believed that an integrated approach could
provide better management and cost savings.
10:40:22 AM
Senator Hoffman inquired whether the Department of
Administration had its own healthcare plan. Commissioner
Hultberg replied in the affirmative. Senator Hoffman asked
whether the department endorsed including its employee plan
in the legislation. Commissioner Hultberg replied in the
affirmative.
MICHAEL BARNHILL, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, discussed the three DOA fiscal notes. He
elucidated that in order to prepare the fiscal notes, the
actuary for the plan, Buck Consultants, completed a
demographic analysis of the school districts employee
population. He reminded the committee that the school
district employees were active participants in the states
PERS or TRS system, which made the demographic data
accessible. He identified that there were approximately
18,300 school district employees. He cited another total
number of 18,953 employees, distributed by Senator
Dunleavy. The figure included some temporary employees that
were not eligible for health insurance coverage. He
referenced the "Health Insurance Survey - Total Cost for
FY12" (copy on file) document that provided a summary of
Health insurance costs for each district. The total costs
for all districts combined were approximately $282 million.
The department used a rough estimate of the districts
accumulated health care costs in FY 2015 which totaled $300
million. The department included a four month reserve
estimate of $100 million based on the $300 million to
formulate the fiscal note.
10:44:05 AM
AT EASE
10:46:29 AM
RECONVENED
SB 90 was HEARD and HELD in committee for further
consideration.
10:47:49 AM
ADJOURNMENT
The meeting was adjourned at 10:48 a.m.