Legislature(1997 - 1998)
04/30/1997 09:16 AM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE HEALTH, EDUCATION & SOCIAL SERVICES COMMITTEE April 30, 1997 9:16 a.m. MEMBERS PRESENT Senator Gary Wilken, Chairman Senator Loren Leman, Vice Chairman Senator Lyda Green Senator Jerry Ward Senator Johnny Ellis MEMBERS ABSENT All members present. COMMITTEE CALENDAR Confirmation: University of Alaska Board of Regents, Annette Nelson-Wright SENATE BILL NO. 170 "An Act relating to financial assistance for students attending certain graduate education programs; and providing for an effective date." - MOVED CSSB 170(HES) OUT OF COMMITTEE SENATE CONCURRENT RESOLUTION NO. 14 Establishing the Alaska Task Force on Parity for Mental Health. - HEARD AND HELD SENATE BILL NO. 189 "An Act relating to eligibility for and default, collection, and repayment of student loans; relating to nonrenewal of certain occupational licenses for default on a student loan; and providing for an effective date." - MOVED SB 189 OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 170 - See Senate Health, Education & Social Services minutes dated 4/25/97. SCR 14 - No previous Senate action to record. SB 189 - No previous Senate action to record. WITNESS REGISTER Joe Ambrose, Staff Senator Taylor State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Reported that the Sponsor recommended the committee move forward with the committee substitute. Walter Majoros, Executive Director Alaska Mental Health Board 431 N. Franklin #101 Juneau, Alaska 99801 POSITION STATEMENT: Endorsed SCR 14. Jan McGillivary, CEO Alaska Mental Health Association 4050 Lake Otis #202 Anchorage, Alaska 99508 POSITION STATEMENT: Supported SCR 14. Peter Braveman Family Centered Services of Alaska 620 5th Avenue Fairbanks, Alaska 99701 POSITION STATEMENT: Supported SCR 14. Don Dapcevich, Executive Director Advisory Board on Alcoholism & Drug Abuse PO Box 0608 Juneau, Alaska 99811 POSITION STATEMENT: Suggested that chemical dependency be included in SCR 14. Ray Gillespie Charter North Star Behavior Health Systems 9478 Riverbend Court Juneau, Alaska 99801 POSITION STATEMENT: Supported SCR 14. Jeff Jessee, Executive Director Alaska Mental Health Trust Authority 3601 C Street, Suite 742 Anchorage, Alaska 99503 POSITION STATEMENT: Supported exploring mental health parity. Diane Barrans, Executive Director Postsecondary Education Commission 3030 Vintage Boulevard Juneau, Alaska 99801-7109 POSITION STATEMENT: Discussed SB 189. ACTION NARRATIVE TAPE 97-46, SIDE A Confirmation: University of Alaska Board of Regents Number 001 CHAIRMAN WILKEN called the Senate Health, Education & Social Services Committee (HES) to order at 9:16 a.m. and announced that the Confirmation hearing of the student nominee for the UA Board of Regents would be held first. ANNETTE NELSON-WRIGHT , student nominee for the UA Board of Regents informed the committee that someone approached her about seeking the student representative position. After learning what the position would entail, Ms. Nelson-Wright felt that it would be a good way to become involved and make a difference. Ms. Nelson- Wright explained that a student representative must first be elected by the campus, then the name is forwarded to the Governor's office who selects the final nominee. Ms. Nelson-Wright informed the committee that she was born and raised in Anchorage where she also attended the University of Alaska-Anchorage. Ms. Nelson- Wright has lived in Juneau for about two years and attends the University of Alaska-Southeast. Ms. Nelson-Wright, a junior at the university, informed the committee that her degree path was a Bachelor of Liberal Arts with an emphasis in Social Sciences. CHAIRMAN WILKEN asked Ms. Nelson-Wright if there were any burning issues that she wanted to attack as a Regent. ANNETTE NELSON- WRIGHT said that many of the issues will depend upon the students, but Ms. Nelson-Wright believed that the university's fiscal crisis would be a big issue. SENATOR GREEN asked if the Student Regent served as a consultant. ANNETTE NELSON-WRIGHT explained that the Student Regent has the same power as the other Regents. The only difference is that a Student Regent only has a two year term as opposed to eight years. In response to Chairman Wilken, Ms. Nelson-Wright agreed that the Student Regent has a full vote. CHAIRMAN WILKEN announced the intention of the committee to forward and endorse Ms. Nelson-Wright's nomination to the Board of Regents. SB 170 REPAY GRADUATE EDUCATION AID Number 107 CHAIRMAN WILKEN announced that CSSB 170(HES) was the next item of business before the committee. JOE AMBROSE , Staff to Senator Taylor, informed the committee that Senator Taylor recommends that the committee move forward with the committee substitute as adopted at the last meeting. The committee packet contains a memo from Diane Barrans in response to Senator Leman's question regarding federal tax implications. Mr. Ambrose said that based on similar programs in other states there should not be a problem. The packet should also include a new calculation based on the new committee substitute. SENATOR ELLIS inquired as to what the Conference Committee has done with WAMI funding. JOE AMBROSE was unaware of the Conference Committee's actions. WENDY REDMAN , Vice President of the University of Alaska stated that the Conference Committee replaced the money for the WAMI program in the Department of Education budget that had been previously removed. CHAIRMAN WILKEN clarified that half of the request for WAMI had been removed and all of it was replaced. WENDY REDMAN agreed. SENATOR GREEN moved to report CSSB 170(HES) out of committee with individual recommendations and accompanying fiscal note. Without objection, it was so ordered. SCR 14 PARITY FOR MENTAL HEALTH TASK FORCE Number 161 CHAIRMAN WILKEN announced that SCR 14 would be the next order of business before the committee. WALTER MAJOROS , Executive Director of the Alaska Mental Health Board (AMHB), noted that AMHB requested that legislation regarding mental health parity in Alaska be introduced. The AMHB is the state planning and advocacy organization for seriously mentally ill and emotionally disturbed children and adults in Alaska. The AMHB strongly endorses SCR 14. Mr. Majoros explained that parity refers to parity of insurance practices for mental health services to receive parity with those receiving physical health services through insurance coverage. Mr. Majoros estimated that since 1995, 31,000 Alaskans, adults and children, suffer from serious mental illnesses and emotional disturbances. Many of these people require a range of mental health treatment services, from counseling, medication, case management, rehabilitation, crisis intervention, assessment, hospitalization, evaluation, etc. In most cases, private insurance does not cover mental health services and in the case that it does, the services are very inadequate and the restrictions are greater than that imposed on physical health services. Mr. Majoros stated that the AMHB believes this to be a form of bias and discrimination against those with mental illnesses and emotional disturbances. There has been tremendous change in the efficacy of mental health treatment. Mental health treatment now parallels physical health treatment in terms of the ability to diagnose and treat. Further, the developments of recent years provide a more cost effective method of treatment. Number 224 Mr. Majoros informed the committee that many mentally ill persons have testified that they cannot afford to get a job because they would have to go off Medicaid which funds mental health services. Mr. Majoros pointed out that the mental health system supports remaining on public assistance, Medicaid. If these individual's had the opportunity to receive basic coverage through private insurance, then there would not be the dependence on public programs. Parity would decrease the reliance on public assistance as well as creating a greater partnership between the public and private sector in terms of meeting mental health needs in Alaska. Mr. Majoros noted that much of SCR 14 is based on the federal legislation, the Mental Health Parity Act of 1996. The Mental Health Parity Act is the first national parity legislation that has been passed. Furthermore, the Mental Health Parity Act establishes a requirement for parity on lifetime and annual dollar limits for expenditures for mental health services for recipients of all insurance programs, but with many exceptions. Mr. Majoros mentioned that small businesses of 50 or less employees are exempt from the program. Furthermore, there is no requirement to have mental health coverage; an employer could choose not to have such coverage or drop that coverage. Employers can adjust co-insurance, deductibles, service and medical necessity definitions all of which can be different from those for physical health services. If employers can document that the net increase in premiums are greater than one percent, the employer can be exempt. Mr. Majoros believed that this could be the beginning of parity, but recipients of mental health services are not parallel with recipients of primary health care services. Therefore, Mr. Majoros indicated the necessity for a task force to review the federal legislation. Number 274 Mr. Majoros informed the committee that 13 states have passed or proposed mental health parity laws and in total 35 states are considering this issue. SCR 14 is an opportunity to create a public-private partnership to transfer some of the cost for mental health services to the private sector which can save money. The present situation is an obstacle for mental health consumers and beneficiaries to become independent. Currently, those folks are in a double bind, in other words, those folks cannot get off Medicaid coverage nor can they get a job because there is no private sector insurance to meet their needs. SCR 14 would eliminate the view that mental health services are different than primary health care, it is part of primary health care. SENATOR WARD inquired as to who was responsible for drafting SCR 14 and who determined the make-up of the group. WALTER MAJOROS explained that he was part of a group of people reviewing drafts. The make-up of the task force was determined by the group, not anyone specific. Currently, the trend is to have as many mental health consumers on the task force. This resolution was modelled somewhat after resolutions in other states. Number 319 SENATOR GREEN informed the committee of a conflict due to her husband's employment and requested that she not be required to vote. SENATOR WARD objected. Therefore, Senator Green will be required to vote. SENATOR GREEN noted that her staff had discussed with the AMHB the possibility of the AMHB creating its own task force, to which there did not seem to be a problem. Senator Green said that when she was on the Governor's Council for Handicapped & Gifted, the council dealt with many issues that were similar to this. The council joined with other boards to report on health care; is that possible with this? WALTER MAJOROS agreed that there are many issues that AMHB and the Governor's Council take up independently. The task force was chosen because it is a national model. Furthermore, it is difficult to generate a consensus on major mental health issues. Mr. Majoros emphasized the importance of having the Legislature's involvement and endorsement from the start in order to increase the likelihood of passing the legislation and building consensus. SENATOR GREEN believed that the task force could be accomplished through the AMHB without a resolution. Senator Green suggested that course be taken. In response to Chairman Wilken, WALTER MAJOROS stated that he was the Executive Director of the AMHB. CHAIRMAN WILKEN noted that SCR 14 does not expect any General Fund money to be provided for the task force. Is there federal or other state money available for those expenses? WALTER MAJOROS deferred to Jeff Jessee from the Alaska Mental Health Trust Authority. Several discussions have occurred with the authority who supports the task force, although there is no guarantee that the authority would be involved with the cost of the task force. Mr. Majoros mentioned that the AMHB will do a formal proposal to the authority during its budget process this year. Number 381 JAN MCGILLIVARY , CEO of the Alaska Mental Health Association(AMHA), informed the committee that she was the Coordinator for the Building Bridges Campaign for mental health. The coalition represents about 40 community based mental health services which are grantees of the Division of Mental Health & Developmental Disabilities. Ms. McGillivary supported SCR 14 and the attempt to join the national movement on this issue. Ms. McGillivary was sure that the task force will find that overall use of medical benefits will drastically decrease once discrimination is eliminated from the insurance benefits arena. PETER BRAVEMAN , Family Centered Services of Alaska, informed the committee that he had a mentally ill sister in another state and would be speaking from that perspective as well as a provider. Current insurance company practices discriminate against consumers which perpetuates the stigma consumers and families live with. Mr. Braveman stated that his sister receives woefully inadequate services, costly, and crisis driven services. Often his family does not interrupt a crisis for his sister because insurance benefits will run out or the insurance does not cover actions until in crisis. As a provider, Mr. Braveman sees consumers that do not have a choice when the insurance ends and the consumer must use publicly funded grantees and have limited access to other community providers. Such situations tax public mental health providers. Mr. Braveman supported SCR 14. Number 427 DON DAPCEVICH , Executive Director of the Advisory Board on Alcoholism & Drug Abuse, noted that the Advisory Board on Alcoholism & Drug Abuse has an interest in being part of the task force. This issue is equally important for chemical dependency programs as for mental health programs. Mr. Dapcevich indicated that the Mental Health Trust Authority would be interested in chemical dependency being added to the task force. Mr. Dapcevich encouraged the committee to include chemical dependency as a participant in the task force. During this era of welfare reform, quality services both in the private and public sector are necessary and SCR 14 would be a vehicle for that. Private sector involvement in chemical dependency has significantly diminished in Alaska due to the insurance practices of the predominant carriers. The predominant carriers have severely restricted access to the resources of insurance companies for third party payments. Mr. Dapcevich noted that this would require minimal costs. In terms of insurance premiums to include mental health and chemical dependency treatment services, Mr. Dapcevich had received two different studies which reported that the cost ranges from .4 percent to .7 percent increase in premiums. This is a minimal cost when considering the quality of services and the decrease in dependency on public funded services. Mr. Dapcevich reiterated the need to include chemical dependency and noted that he would provide the committee with a letter with the specific language changes to the resolution to include chemical dependency. RAY GILLESPIE , Charter North Star Behavior Health Systems, supported SCR 14. Gathering the facts about parity is good public policy. Mr. Gillespie said that he did not have any preconceived notions regarding the findings, conclusions, or resulting public policy recommendations. With regard to why this task force could not be done by a private organization, Mr. Gillespie believed that the findings would be more credible if the findings came from a group such as the Parity Task Force established by the Legislature. CHAIRMAN WILKEN announced that SCR 14 will be held to the next scheduled meeting. With regard to Senator Ward's question about the authors of SCR 14, Chairman Wilken informed the committee that those involved were Mr. Majoros from the AMHB, Ms. Macklen from the Coalition of Mental Health Organizations, and Mr. Jessee from the Mental Health Trust Authority. JEFF JESSEE , Alaska Mental Health Trust Authority, said that the trustees are supportive of exploring mental health parity. The resolution may allow the possibility to review strategic options for introducing parity legislation. SCR 14 has the potential to significantly increase the availability of mental health services. The trustees view the resolution as a way to spread some of the risk across a larger constituency and perhaps, reduce the fiscal demands on both the state General Fund and on the Trust Authority funds. CHAIRMAN WILKEN said that SCR 14 would be held. SB 189 EDUC.LOAN REPAYMNT\ELIG.; OCC. LIC. Number 508 CHAIRMAN WILKEN announced that SB 189 was the next order of business before the committee. Chairman Wilken recalled that during the first few days of session there was a briefing about the student loan program. During that briefing Chairman Wilken was struck by the losses to the student loan program which are unacceptable. Chairman Wilken then had discussions with Ms. Barrans which determined that the student loan program should not be a give away program. Ms. Barrans worked on SB 189. Chairman Wilken informed the committee of a 1994 student loan program study which found that corresponding with late borrower's is the most significant cost to the program. DIANE BARRANS , Executive Director of the Postsecondary Education Commission (PSEC), noted that the committee packet contains pertinent statistics. At the December 1996 meeting, the PSEC did approve a legislative agenda of which a portion is included in SB 189. Ms. Barrans informed the committee that for the past six years, the PSEC's annual financial statements have reflected operational losses which have not been offset by general fund appropriations. The cumulative effect has gradually threatened the corporation's ability to continue to issue additional debt. Both the corporation and the commission have sought ways in which to reverse this effect. Ms. Barrans acknowledged that the Legislature has provided the program with some collection methods such as the confiscation of permanent fund dividends and license revocation. These tools have proven effective in reducing the programs default rate by 8 percent since FY92, however the default rate remains around 18 percent which is unsustainable. Ms. Barrans pointed out that the 18 percent default rate represents about $115 million in loans. SB 189 includes mechanisms that will be effective in reducing defaults and dollars lost to the loan programs. Ms. Barrans informed the committee that the program experienced a $2.6 million deficit in FY96 which eroded the asset base of the corporation. Ms. Barrans expected that loss to increase to about $4 million in FY97 because of the increased borrowing volume due to higher loan limits. SB 189 is timely. Ms. Barrans provided the committee with articles regarding the beneficial effects of alternative student loan program collections and federal student loan program collections. CHAIRMAN WILKEN asked Ms. Barrans to discuss the letter from Smith Barney which is included in the committee packet. DIANE BARRANS informed the committee that Smith Barney is the senior underwriter for the corporation. The letter suggests that applicants be pre-screened and that credit underwriting standards be implemented. Ms. Barrans stated that the commission has discussed a broad screening that would not screen out those with minor credit issues. Smith Barney indicated that pre-screening of applicants could reduce the default rate by 3 percent. Smith Barney discussed enhanced collection tools such as license renewal intervention, commercially diligent loan collection, wage garnishment, and the continued use of PFD garnishment. All those tools should increase the recovery rate on defaulted loans. Ms. Barrans explained that although 18 percent of the loans are in default, collection on those defaulted loans occurs and the actual loss to nonpayment is about 12 percent. TAPE 97-46, SIDE B Number 591 Ms. Barrans noted that the Smith Barney letter discusses increasing interest rates. There are two ways to improve the return rate on loans: increase the interest rate for the repayment period; have interest begin accruing when the student receives the funds. Ms. Barrans pointed out that there are substantial interest free periods while a student continues his/her education. However, the corporation pays interest on the loan during the entire time which results in a loss to the corporation. Ms. Barrans stated that the most benefit to the corporation would be to allow interest to accrue throughout the life of the loan. SB 189 is a compromise that would increase the repayment stream from interest income, therefore the cap is increased from 2.5 percent to 3 percent. In 1997 and 1998, Ms. Barrans anticipated an 8.6 percent interest rate on loans. Therefore the additional .5 percent would result in a 9.1 percent interest rate. Ms. Barrans pointed out that the interest rate that the student actually pays is a little less than 9.1 percent due to the interest free periods on the loan. The Smith Barney letter does mention that Tile 4 loans are an option. If the corporation were to offer both state funded and federally funded loans, this would offer loans that would be almost fully insured by the federal government. SENATOR GREEN said that SB 189 takes a new avenue. Currently, the loan has been available upon request. SB 189 would require a credit check and worthiness. Senator Green inquired as to what the fiscal note covered. DIANE BARRANS explained that the fiscal note covers the cost of electronically running a tape of the corporation's applicant pool against a credit bureau. CHAIRMAN WILKEN clarified that SB 189 would not require that every applicant be screened, but only those with prior credit history. DIANE BARRANS informed the committee that the commission had discussed screening those applicants 21 or older due to the lack of credit of applicants under the age 21. No credit is good credit; an applicant will not be turned away because of the lack of credit. Ms. Barrans noted that policy is not stipulated in SB 189, but this is the approach the commission would put in place. CHAIRMAN WILKEN stated that he did not intend to narrow the window for applicants to begin a college career, but once the education is completed the person is responsible for repayment. Number 550 SENATOR ELLIS requested Ms. Barrans inform the committee about credit worthy cosigners. DIANE BARRANS stated that any entity with a credit screening can establish parameters. A credit bureau assigns points to certain types of repayment behavior. Ms. Barrans said that by regulation, the commission would decide what is egregious bad debt. If an applicant failed to meet that test, the applicant could apply with a co-signer that would have to meet that test. CHAIRMAN WILKEN inquired as to the .5 percent ceiling on profit. Can the corporation make a profit of up to .5 percent on the loan portfolio? DIANE BARRANS said that it was about a two percent spread. Ms. Barrans stated that Bond counsel would have to provide an opinion as to what can be earned without endangering the corporation's tax exempt status. CHAIRMAN WILKEN asked if the corporation's goal is to profit or break even. DIANE BARRANS replied that the goal is to break even with SB 189. Ms. Barrans said that if the corporation's goal was profit, that would require a thorough public policy decision from the Legislature and the public. CHAIRMAN WILKEN noted the request for the board to provide a resolution in support of SB 189. DIANE BARRANS noted that the commission is on record as supporting everything except the .5 percent which was not before the commission at the December meeting. Ms. Barrans said that the resolution could be requested at the board's June meeting. SENATOR GREEN discussed the ability to revoke occupational license which in other legislation has come to include recreational licenses as well. Senator Green recommended that sports fishing licenses be exempted from those licenses that can be revoked under SB 189. Senator Green asked if all the appeals come through Ms. Barrans' office and has that always been the case; is there another method of recourse? DIANE BARRANS said that all appeals come through her office. Ms. Barrans explained that certain appeals do go to a hearing officer and the commission has stipulated that appeal process by regulation. Those appeals going to a hearing officer occur when a person requests a write off of his/her loan due to medical circumstances. If a person's PFD is garnished, a hearing officer process would occur. SB 189 would use the administrative appeal process with the executive director, with the exception of the PFD garnishment. In response to Senator Green, DIANE BARRANS explained that in the last six months the loan program has increased the level of correspondence to the borrower. The number of written notices sent out has doubled. This process is still being reviewed. Ms. Barrans acknowledged that the process can be improved so that before a loan goes to a collection agency, all internal measures have been exhausted. Ms. Barrans emphasized that people are learning that an Alaska student loan is a real debt. Number 473 With regard to licenses, Ms. Barrans pointed out that the commission only reviews licenses that were funded with the education for which the loan paid. The commission is not reviewing the revocation of any recreational licenses. Furthermore, some of the occupational licenses have been excluded if the license is not centrally administered. CHAIRMAN WILKEN noted that in conversations in the past, he requested that there be methods by which to measure the success of SB 189 which is discussed in the packet. Chairman Wilken requested that Ms. Barrans develop that more using 1998 as the base year and comparing today to 1998 and where the program would be in 2002. TERESA WILLIAMS said that she was available for any questions. CHAIRMAN WILKEN inquired as to the importance of SB 189 getting through this year. DIANE BARRANS emphasized that getting SB 189 through this year would be extremely helpful. Ms. Barrans informed the committee that the commission is well into the application process for the 1997-98 year. All of the contracts are written and prepared by early February. Ms. Barrans pointed out that the collection tools would be available immediately upon receipt, but the interest rate would not effect borrowers until the 1998-99 year. If SB 189 is passed before the end of this session, then all the terms could be incorporated in concrete language in next year's promissory notes. SENATOR LEMAN moved to report SB 189 out of committee with individual recommendations and accompanying fiscal notes. Without objection, it was so ordered. There being no further business before the committee, the meeting was adjourned at 10:15 a.m.