Legislature(2013 - 2014)CAPITOL 106
02/07/2013 08:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| Overview: Department of Administration Health Care Plan | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE STATE AFFAIRS STANDING COMMITTEE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 7, 2013
8:04 a.m.
MEMBERS PRESENT
HOUSE STATE AFFAIRS
Representative Bob Lynn, Chair
Representative Wes Keller, Vice Chair
Representative Lynn Gattis
Representative Shelley Hughes
Representative Jonathan Kreiss-Tomkins
SENATE STATE AFFAIRS
Senator Fred Dyson, Chair
Senator Cathy Giessel, Vice Chair
Senator Bill Wielechowski
MEMBERS ABSENT
HOUSE STATE AFFAIRS
Representative Doug Isaacson
Representative Charisse Millett
SENATE STATE AFFAIRS
Senator Bert Stedman
Senator John Coghill
COMMITTEE CALENDAR
OVERVIEW: DEPARTMENT OF ADMINISTRATION HEALTH CARE PLAN
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BECKY HULTBERG, Commissioner
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Presented a PowerPoint overview of the
Department of Administration AlaskaCare Employee Plan.
MIKE BARNHILL, Deputy Commissioner
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Responded to questions during the
Department of Administration overview regarding the state health
plan.
ACTION NARRATIVE
8:04:54 AM
CHAIR BOB LYNN called the House State Affairs Standing Committee
meeting to order at 8:04 a.m. Representatives Keller, Gattis,
Hughes, Kreiss-Tomkins, and Lynn, and Senators Giessel,
Wielechowski, and Dyson were present at the call to order.
CHAIR LYNN handed the gavel to Chair Dyson.
^Overview: Department of Administration Health Care Plan
Overview: Department of Administration Health Care Plan
8:06:00 AM
CHAIR DYSON announced that the only order of business was the
Department of Administration's health care plan overview.
8:06:23 AM
BECKY HULTBERG, Commissioner, Department of Administration, said
she would cover national and state trends in health care costs
and options being considered to improve the value and cost of
the State of Alaska's health care plan. She said the department
is not going to be making any significant plan changes this
year, but she stated her belief that it is time to start the
conversation as to what the state's plan might look like in the
future.
8:08:06 AM
MS. HULTBERG began the PowerPoint presentation. She directed
attention to slide 2, which shows national health expenditures
(NHE) per capita, which have almost doubled in a decade and show
an alarmingly steep curve between 1960 and 2010. She said this
is not a surprise; it is part of the problem the country is
experiencing with health care.
8:08:37 AM
CHAIR DYSON asked, "Are these dollars of the day, or is
inflation taken into that?"
8:08:45 AM
MIKE BARNHILL, Deputy Commissioner, Department of
Administration, in response to Chair Dyson, said, "These would
be nominal dollars; dollars of the day."
CHAIR DYSON asked for an estimate of what inflation has been
over the 50 years depicted on slide 2.
MS. HULTBERG said she does not know, but proffered that slide 3,
which shows the average annual growth rates for health spending
and gross domestic product (GDP) per capita, offers "an idea of
another important variable."
8:09:16 AM
MS. HULTBERG, in response to Representative Gattis, explained
the reason changes would not likely be made this year is partly
because of existing contracts and partly because the department
is currently occupied with a request for proposals (RFP) for a
third-party administrator, a pharmacy benefit manager, a health
care management vendor, and a dental network.
8:10:22 AM
MS. HULTBERG, regarding slide 3, said the problem with health
care has less to do with rising costs and more to do with costs
rising at a level much greater than GDP, which means that health
care costs are "consuming a larger part of our economic pie."
She stated that health care inflation needs to be reduced down
to the rate of inflation or at least to the rate of GDP growth,
so that health care is not consuming more and more of the
nation's resources.
MS. HULTBERG turned to slide 4, which shows estimated health
care expenditures in Alaska, the source for which is the
Institute of Social and Economic Research (ISER), 2011. Ms.
Hultberg stated that in 2010, the state was at about $7.5
billion in health care spending, which equates to half the well
head value of oil produced in Alaska in 2010 and half of Alaska
wages in 2010. She indicated that the chart on slide 4
illustrates the increase in the cost of health care to Alaska
over time.
MS. HULTBERG directed attention to slide 5, which shows health
care spending broken down into the following areas in which the
state has health care costs: AlaskaCare, which covers a little
more than one-third of the Alaska State employees; the Public
Employees' Retirement System (PERS), the Teachers' Retirement
System (TRS), and the Judicial Retirement System (JRS), which
combined is a pretty large healthcare expenditure; Medicaid,
which is the lion's share of the state's healthcare spending,
although Medicaid provides many services that would not be
considered "traditional" healthcare; Corrections, which covers
inmate healthcare; Workers' Compensation, which has been a
growing expenditure; [and Union healthcare]. In response to
Chair Dyson, she explained that JRS covers retired judges.
8:13:21 AM
SENATOR WIELECHOWSKI said, "I assume these are fixed dollars
...." He asked if the cost for PERS healthcare is primarily
covering Tiers 1, 2, and 3, and thus would "drop off as people
age and retire out."
MS. HULTBERG responded that since the state has pension tiers
that have been closed, the cost to the state for covering those
covered under those tiers will decline; however, that will not
be for some time since the state is on the crest of a large
increase of retirees, which is going to drive the state's cost
higher for the foreseeable future.
8:14:14 AM
MR. BARNHILL added that those costs are not expected to trail
off until after a peak in 2046.
SENATOR WIELECHOWSKI said he would like to see that bell curve.
MR. BARNHILL relayed that he could provide that information.
8:14:37 AM
CHAIR DYSON referred to "chart 2" and surmised that inflation is
at least 50 percent and closer to 100 percent in the last 50
years, but said that does not much affect the last ten years, on
which the department has been focusing. He stated, "My guess is
the jump here and the decades there would be less if they were
constant dollars."
8:15:09 AM
REPRESENTATIVE HUGHES referred to [slide 5] and asked if the
department has information regarding the number of participants
in each category, the cost of each participant, and "how it
compares."
MS. HULTBERG said she could gather that information, which may
not be completely consistent but would be directionally correct.
She explained that in its retirement systems, the department
will often gather participation numbers at a point in time, but
it is probably more accurate to get an average across the years.
Further, all the data is not collected in exactly the same way.
8:15:55 AM
MS. HULTBERG moved on to slide 6, which shows State of Alaska
contributions to active employee health plans. She said that on
behalf of every employee, the State of Alaska pays a benefit
credit, which goes to the following places highlighted on the
right-hand part of the slide: AlaskaCare, which covers
legislators, partially exempt employees, and several unions; the
Alaska State Employees Association (ASEA) Health Trust, which
covers the state's general government unit, which is the state's
largest bargaining unit comprising over 8,000 employees; the
Labor Trades and Crafts (LTC) [Local 51] Health Trust; and the
Public Safety Employees Association (PSEA), which uses a third-
party insurance.
8:17:38 AM
MS. HULTBERG, in response to Chair Dyson, explained that LTC
Local 51 is a bargaining unit, which has a health trust to which
the State of Alaska contributes money. In response to a follow-
up question, she confirmed, "It's not just a health trust for
those employees; it's a union health trust that has many ...
different participants." She said she cannot name the
participants, but said she is sure the trust would be willing to
provide a list.
MS. HULTBERG continued with the list on slide 6: the Masters
Masons Pilots (MMP) Health Trust, which she indicated has many
members, a small number of which are the state's employees; and
the Alyeska Central School Education Association (ASCEA) and the
Teachers' Education Association of Mount Edgecumbe (TEAME), the
latter of which was part of the National Education Association
(NEA) Health Trust, but terminated with NEA and came back to
AlaskaCare. In response to Chair Dyson, she confirmed that the
PSEA includes more than the Alaska State Troopers. In response
to Chair Dyson, she confirmed that the PSEA includes more than
the Alaska State Troopers. She explained that there are PSEA
employees in many jurisdictions that are pooled together in the
plan, which she reiterated purchases third-party insurance. She
said, "From the state's perspective, we're still just writing
the check, we're not managing the care or the coverage."
MS. HULTBERG pointed to the red bars on slide 6, which show that
in the course of a decade, the state has gone from spending just
under $100 million to over $250 million for the aforementioned
populations of employees. She said the department is cognizant
of this significant growth and working to contain it.
8:20:04 AM
REPRESENTATIVE HUGHES asked if there is any report that would
show the employee contributions versus state contributions for
all the plans. She said she can see the rate of growth and
wonders if the employee contributions have been similar.
MS. HULTBERG replied, "We don't have complete visibility on the
union health trusts, although we know what a lot of their
employee contributions are." She reported that the State of
Alaska funds the AlaskaCare economy plan premium at 100 percent.
She said upcoming slides would show the breakdown between the
portion the state pays and the portion employees pay in the
AlaskaCare plan, and she reiterated that the state has a lot
less visibility in the plans it does not manage.
8:21:09 AM
REPRESENTATIVE GATTIS asked if the upcoming slides at least
would show what the state paid per person in those plans it does
not manage.
MS. HULTBERG answered that the state pays the same amount per
person in all the plans, with the exception of the ASEA plan,
for which the state pays a higher amount, which was negotiated
via contract. In response to a follow-up question, she said she
had not listed the ASEA premium contribution separately, except
to note that it is a little bit higher; it equates to about $2.5
million more for that fairly large group.
8:22:02 AM
MS. HULTBERG directed attention to slide 7, which lists the
following groups under the AlaskaCare Health Plan: the Alaska
Vocational Technical Center (AVTEC), which comprises employees
in Seward, Alaska; Confidential Employees, an entity which
primarily represents human resources employees who have a
separate bargaining unit; Correctional Officers; Marine
Engineers, an entity which includes those who work on the ferry
system; Mt. Edgecumbe Teachers; the Supervisory Union, which is
the state's second-largest bargaining unit; the Inland Boatmen's
Union, which is another marine union; and the Exempt/Partially
Exempt Employees.
8:23:06 AM
CHAIR DYSON said he would like more information pertaining to
"the maritime people."
MS. HULTBERG said she could provide that information.
8:23:24 AM
MR. BARNHILL directed attention to slide 8, which addresses
benefit credit - the health insurance credit the State of Alaska
pays on behalf of each of the roughly 17,000 employees in the
state. That monthly benefit credit has been roughly the same
between bargaining units and partially exempt/exempt employees.
The graph on slide 8 shows the increase from $512 per month in
fiscal year 2001 (FY 01) to $1,250 per month in FY 12. He said
the department has proposed in the governor's budget a benefit
credit of $1,389 per month for FY 14. He offered his
understanding that the surplus the state pays on the ASEA Health
Trust is $27 per month. Mr. Barnhill said in early 2001-2002,
there was some deviation among bargaining units related to that
which was paid partially exempt/exempt employees, but more
recently there has been a trend toward a uniform amount. He
said the typical negotiation is for the benefit credit to equate
to the monthly premium of the economy level plan in AlaskaCare.
8:26:20 AM
MR. BARNHILL said the three [medical] plan options in AlaskaCare
are economy, standard, and premium, while the three dental plan
options are preventive, standard, and premium. The benefit
credit equates to the economy level in the medical plan and the
preventive level in the dental plan.
8:26:40 AM
MR. BARNHILL, in response to Representative Hughes, said the
State of Alaska tends to be among the most generous of states in
providing health insurance benefit credits. He offered his
understanding that currently Alaska is one of a handful of
states that pays all of the base level health insurance, which
means that an employee who opts into the economy plan pays
nothing for his/her insurance.
MR. BARNHILL turned to slide 9, which shows a trend over time
for benefit credits, including alternating plateaus and sharp
uptakes. He said currently the benefit credit trend is on a
plateau, which has informed the department's internal discussion
about managing the health plan. He said the department believes
it has an opportunity at this point to become proactive in
managing the plan, take advantage of the plateau, and "hopefully
be able to mitigate somewhat the next time there's a sharp
uptake."
8:28:59 AM
MR. BARNHILL reviewed those entities covered by AlaskaCare, as
previously stated by Ms. Hultberg, and said that is about 6,400
of the 17,000 total employee population of the state. He said
AlaskaCare became self-insured about 12 years ago, having been
fully insured prior to that. He said Alaska statute conferred
upon the Department of Administration the authorization to form
self-insurance pools. He related that the general opinion is
that self-insurance pools are less expensive to administrator,
because they eliminate payment of the profit margin of an
insurance company. The state uses HealthSmart, a third-party
administrator, to process claims. He said HealthSmart became
the state's third-party administrator at the beginning of 2012,
when the processing unit of Wells Fargo - the entity that the
state had chosen in the last procurement cycle - was acquired by
HealthSmart. He said, "That procurement process for a third-
party administrator we expect will be completed later this
spring."
8:30:59 AM
MR. BARNHILL, in response to Chair Dyson, said the state puts
time and effort into managing all its vendors for AlaskaCare.
He said the state reviews a quarterly report and considers
statistics. Further, the state considers the number of
complaints submitted regarding the third party administrator and
how those complaints are resolved. He explained that typically
a contract for a third-party administrator is issued for a
three-year term with two, one-year extensions. The state
exercised the first one-year extension, but has opted to go out
for another procurement cycle rather than exercise the second,
one-year extension. He explained that because the state did not
select HealthSmart in its procurement process, it decided it was
prudent to go back out to the market and give everyone an equal
chance to bid on the contract.
CHAIR DYSON clarified that he would like to know how the state
evaluates proposals.
MR. BARNHILL said a four-person proposal evaluation committee,
on which he is a member, will study every aspect of the proposal
expected on February 8.
8:34:21 AM
CHAIR DYSON opined that the U.S. and the State of Alaska are
paying for services that do not need to be done and are
"probably paying more on some of them." He asked if there is a
way to analyze "both our present provider and the ones we're
considering."
MR. BARNHILL replied that those are complex questions, which
concern the department. He said there is no easy means by which
to evaluate whether care is being paid for that is not
absolutely necessary. He said the department's data shows the
schedule and cost of procedures, and it receives information
from its providers suggesting areas in which the department
could become more proactive in its management.
8:36:10 AM
SENATOR WIELECHOWSKI asked if the health care that employees
receive under collective bargaining is negotiated as part of the
collective bargaining agreement.
MR. BARNHILL answered that the only negotiated aspect of the
health care received by employees under a collective bargaining
unit is the dollar amount of the benefit credit. In response to
follow-up questions, he said each health trust has a board of
trustees, which manage the health trust; the employees
themselves do not manage it. He relayed that the bargaining
contract period is typically three years.
8:37:25 AM
MS. HULTBERG, in response to Senator Wielechowski, stated her
belief that the department is in its first cycle of having
negotiated all the health contracts. She noted that changing
established patterns in bargaining methods is difficult.
Currently, she said, the department is not proposing significant
changes in the way the state has handled health care through
bargaining, but it is considering whether to do so in the
future.
8:38:12 AM
MS. HULTBERG, regarding the third-party administrator contract,
related that "a significant portion of the scoring for that ...
request for proposals is on the network, because the network
brings such a significant value, in terms of savings, to the
state." She explained that the state currently does not have
the capacity to develop its own network. In response to Chair
Dyson, she explained that "network" means the negotiated
discounts the state has with providers. She said the state has
considered providing its own network, but does not have the
resources at this time to do so.
8:39:43 AM
REPRESENTATIVE HUGHES offered her understanding that certain
medical provisions can be provided at a lower cost outside of
Alaska, and she asked how that factor may weigh into the RFP
process.
8:40:07 AM
MR. BARNHILL confirmed that a large percentage of the score is
affected by the discounts that providers in the network can
provide. He said there is an Alaska bidder preference, which is
10 percent added to the score. He offered further details.
REPRESENTATIVE HUGHES clarified that she is wondering about
preference for the healthcare providers in state versus out of
state.
8:42:27 AM
MS. HULTBERG responded that the State of Alaska has both
employees that live and work in Alaska and retirees that live
out of state, and the state needs to provide the best possible
cost for their care no matter where the employee [or retiree]
lives. She stated that through the process of the network, the
department is not necessarily comparing one market to another,
but rather is looking for the best price it can get in each
area. The department looks to the third-party administrator to
bring innovative ideas, such as a centers-of-excellence network,
which may provide the state with low-cost, high-quality, large
medical centers for certain procedures. She summarized that the
department looks for which network provides the best value in
any location in which the state's members live, including the
Lower 48.
8:43:53 AM
SENATOR WIELECHOWSKI offered his understanding that most of the
employees that work for the state are members of the union,
which manages the health trust with a flat rate provided by the
state. He asked who is on the "self-insured plan."
MS. HULTBERG said the list is on [slide 7]. She said, "It is a
number of bargaining units, but it is also our exempt and
partially exempt employees." In response to a follow-up
question, she confirmed, "That list encompasses the ... 6,400
people."
8:44:38 AM
CHAIR DYSON stated that a great interest of his has been medical
fraud. He offered his understanding that of the estimated $1.4
to $1.6 billion spent on Medicare, the fraud in Alaska is
between $200-400 million. He asked if the department evaluates
its administrators on their proven capacity to detect fraud.
8:45:31 AM
MS. BARNHILL responded that he does not recall seeing the word
"fraud" in the RFPs, but said he could look for it.
Notwithstanding that, he said the state does evaluate on the
ability to "appropriately process claims," which not only
encompasses fraud, but also "the provision of care that falls
short of fraud, but may fall into the medically unnecessary
category, may fall into a gray category, [or] may fall into a
medically necessary category but wasn't covered in the initial
go-around." He said the department wants to ensure accurate and
expedient claim processing.
CHAIR DYSON said the Department of Health and the Department of
Law are "trying to work on that."
MR. BARNHILL said his sense is that if there is a tendency
towards error on the part of the current claims administrator,
it is that it is too conservative on how it grants claims. He
said this is known to the department because of "a fair amount
of noise from folks who've had a claim denied or reduced for
some reason" and "believe it was done inappropriately."
8:47:15 AM
MR. BARNHILL returned to slide 10, which shows plan highlights,
including: there are 6,400 employees and 10,000 dependents
covered under the plan; there is an economy, standard, and
premium plan, the premium requiring the employee to pay the
most; there is a hybrid plan not shown on the slide, which is a
premium plan for the employee and standard plan for the family;
there is a preventative, standard, and premium dental plan, and
by statute employees are required to elect dental coverage; and
there is standard and managed care. He said any choice above
standard requires the employee to pay through payroll deduction.
Mr. Barnhill directed attention to slide 11, which shows the
cost structure of the plans, including the deductibles, the co-
insurance amounts, and the annual out of pocket maximums. He
pointed out that the deductibles are higher in the less
expensive plans and lower in the more expensive plans. He said
the coinsurance amount is the amount that the plan will
reimburse the employee, and it is 70 percent in the economy
plan, 80 percent in the standard plan, and 90 percent in the
premium plan. He said the out-of-pocket maximums also reflect
the entire cost of the plan: $2,000 per person after deductible
in the economy plan, $1,000 per person in the standard plan, and
$300 per person in the premium plan. He said the plan is
grandfathered, but the state complies with the Affordable Care
Act, which requires no lifetime maximum. The plan has a co-pay
of $100 for [each incident] for nonemergency use. Recently, he
said, the state has added the coverage of preventive care to
incent plan members to practice better self-care, and it is
monitoring the outcome. The state also complies with the
Affordable Care Act in covering dependent children up to age 26.
8:50:36 AM
MR. BARNHILL referred to slide 12, which shows premium rates for
FY 13. He noted that the cost of the economy medical premium
plan is $1,330, equal to the benefit credit. He listed the
amount the employee would pay through payroll deduction under
the plans: $0 for economy; $117 for standard; $615 for premium;
and $327 for the aforementioned hybrid premium. He said Alaska
is one of only four states to cover 100 percent of the premium
for the lowest cost family insurance policy. He said one
problem the state is facing is that the premium rates do not
accurately reflect the cost of the plans; increased utilization
of the premium monthly plan has increased the cost to the state,
while in the economy plan the costs are considerably lower. He
stated, "And so, what's happening functionally is over time
we've allowed a subsidy to creep in that runs from the economy
plan participants ... to the premium plan participants, and the
amount of that subsidy this year is roughly ... $900 per month."
He said there is not easy way to figure out a solution, but the
state is working on the issue.
8:53:13 AM
MR. BARNHILL mentioned the department's involvement with
stakeholders and a health benefits evaluation committee, with
which the department meets quarterly. He said the stakeholders
are aware of the subsidy. He opined that it is unfair to the
economy and standard level participants for the state to be
subsidizing its premium level participants at the level that it
does.
8:54:10 AM
MR. BARNHILL, in response to Representative Keller, said he
thinks the assumption that the premium plan includes people with
expensive medical conditions is probably correct. The premium
plan also may include people who, for whatever reason, utilize
care at a higher rate. He said these are difficult questions
regarding fairness, but he suggested the need to address the
issue over time. He relayed that the state's actuaries have
confirmed that this level of subsidy is outside of the norm. He
opined that it crept in because when the premium amount is
increased on an annual basis, the factor used to increase it is
the same for each plan. For FY 14, the proposed increase to the
premiums is 4.4 percent for each level [of the plan]. However,
if the utilization of care for each level is not increased by
4.4 percent, the result is that the subsidy spread increases
over time, which is what is happening.
CHAIR DYSON expressed appreciation for Mr. Barnhill's frank
delivery of information, which he said builds credibility.
8:56:47 AM
MS. HULTBERG, in response to Senator Wielechowski, clarified
that the state does not negotiate the premium or standard plan
coverage; it just negotiates that it will cover the benefit
credit for the economy [medical] plan and the preventive dental
plan. Furthermore, she said the fact that there are several
plans is not negotiated.
SENATOR WIELECHOWSKI offered his understanding that the state
negotiates just one number, and then the union, through its
health trust, negotiates the rest.
MS. HULTBERG indicated that is correct regarding the union
health trust. She said, "Their coverage looks very different
... [from] ours, and quite frankly that's kind of problematic."
She explained that the state is one employer with employees who
move between supervisory and nonsupervisory positions. She
stated, "... the ASEA Health Trust has an employee only plan; we
don't." She said while there never will be complete plan
alignment, the department's more regular meetings with the union
health trusts will enable discussion of the current
misalignment.
8:58:53 AM
SENATOR WIELECHOWSKI asked who is doing the better job managing
health funds. Regarding the previous report that Alaska is one
of only four states to cover 100 percent of the premium [for the
lowest cost family insurance policy], he suggested that there
are many factors to collective bargaining agreements, such as
wages, health care benefits, and pensions, and perhaps the State
of Alaska ranks high in what it pays into health care but ranks
the worst in the nation for having no social security benefits
for public employees.
MS. HULTBERG responded that she completely disagrees with
Senator Wielechowski's assessment, but said she does not think
now is the time to delve into the issue of the defined benefit
pension. She said the department's purpose is not to make a
value judgment, but to give the committee a view of what the
department's plan is and how that plan compares to national
norms.
9:00:10 AM
MR. BARNHILL said he thinks the ASEA Health Trust does a good
job in managing health care. He said the state's concern is in
managing "the whole." He stated, "When we fragment our employee
population like this, you lose the benefit of scale." He said
one of the most important aspects to managing risk is the size
of the pool. He credited the ASEA Health Trust with being
innovative and forward thinking; however, he surmised that it
would be more cost effective "if we could all do those things in
a single pool."
9:01:15 AM
REPRESENTATIVE HUGHES referred to Mr. Barnhill's previous remark
that the subsidy being paid by the state is approximately $900.
She offered her understanding that that means "the premium for
the economy [plan] could really be about $400 and the premium
for the premium plan would be around $2,800-$2,900." She
surmised the reason the state has not increased the amount that
the employee enrolled in the premium plan pays through payroll
deduction - currently at $615 - is because there would be an
outcry. She recollected that Mr. Barnhill had mentioned a 4.4
percent, across-the-board adjustment. She asked why the state
has not raised the amount those on the premium plan are paying.
9:01:57 AM
MR. BARNHILL replied that Representative Hughes is probably
right that there would be an outcry if an adjustment was made
"to correspond to experience," but in response to the rest of
her statement he offered the following clarification:
There isn't a one-for-one. For FY 14, if we did a
one-for-one, the premium plan amount would go up to
somewhere around $2,800 a month; the standard plan
would go up to $1,400-$1,600 a month; the economy plan
would go down to somewhere in the range of ... $800 a
month. That would create dislocation. We're not
proposing to do that, we're just noting that that's
what the relative costs of the plan are, and how you
unravel that, I don't have an answer for you.
9:02:49 AM
MS. HULTBERG stated that those who are electing the lowest cost
plan premium are subsidizing the higher level plan through their
dollars, and she posited that the state has a moral obligation
to address the issue and avoid unintended consequences. She
related that the department is proposing to make incremental
changes to avoid creating significant dislocation; however, she
said she cannot say yet what those changes will look like.
9:04:03 AM
CHAIR DYSON asked if there is a correlation between which plan
employees choose and their utilization of the services.
9:04:23 AM
MS. HULTBERG answered that the department needs to study the
premium plan in particular to understand that dynamic. She
agreed that many people choose the premium plan because they
know they are sick and need it; however, it is also likely that
consideration is given to the out-of-pocket amount, which is
less in the premium plan. She said the department does not know
how much of the plan cost is related to disease profile and how
much is related to utilization.
CHAIR DYSON said he thinks that would be a valuable analysis,
and he said he suspects the move toward preventative care will
impact costs in the future.
9:05:22 AM
MR. BARNHILL directed attention back to slide 12, and said there
are two parties in any medical transaction: the patient and the
provider. He stated that historically, whenever government
subsidies flow into the marketplace, marketplace participants
act rationally by increasing their cost structure. He said this
happens in universities and in medical care throughout the
country. Thus, he said he thinks it is unfair to focus the
discussion primarily on patient utilization.
9:06:43 AM
CHAIR DYSON said some time in the future he would like details
regarding discounts available from various providers in the
network.
9:07:14 AM
MS. HULTBERG stated that overall the department tends to have
preferred providers within the network at the primary care level
and where there is hospital competition. She said generally
specialists within the network tend not to join the network,
which makes costs for their services much higher.
9:08:06 AM
CHAIR DYSON noted that pharmacists have claimed that they are at
a disadvantage because the state is "going to outside
providers," which he surmised gives an advantage to the state.
He said he would like to know how much the state saves by going
Outside to get providers, even when local providers get a 10
percent credit. He requested the department send that
information to his office and the office of Chair Lynn.
9:08:58 AM
REPRESENTATIVE HUGHES, regarding market response, asked if the
department has specifically seen charges for preventive
procedures rise following the incorporation of preventative care
coverage in the plan.
MR. BARNHILL answered that it is too soon to tell, but the
department is watching for that.
9:10:05 AM
MR. BARNHILL directed attention back to the coinsurance amounts
of 70 percent for economy, 80 percent for standard, and 90
percent for premium, on slide 11, and described a situation in
which over time providers would give the state steeper discounts
and the state could set the coinsurance amounts at 90 percent
across the board. He explained that the providers would win by
having higher volume, the state would win by having lower costs,
and the plan participants would win by having higher co-
insurance amounts. Mr. Barnhill said that is called "steerage,"
which is what a network can provide, but said, "We don't have
that in Alaska." He said the department would like to figure
out how to implement effective steerage, but not necessarily by
steering participants out of state. He said the department
would like to steer participants to providers in the state that
can provide high quality care at a discount in exchange for
volume.
9:11:22 AM
CHAIR DYSON mentioned that a constituent had received
substandard, unethical treatment from a preferred provider and
had no choice to see another provider without having to pay a
lot more out of pocket.
MR. BARNHILL responded that it is the responsibility of the plan
administrator to ensure that the care that is being paid for is
required and necessary.
9:12:15 AM
REPRESENTATIVE KELLER remarked that there are many consumers of
health care that are outside of the network. Regarding the RFP
process, he asked, "Will it be considered whether or not the
pricing will be transparent for all?"
9:13:03 AM
MS. HULTBERG said the department wants a functioning market, and
one factor is how much things cost. There are not many services
outside of healthcare where a person would buy something without
finding out the cost first, but in healthcare it is very
difficult for a person to find out the cost of service ahead of
time. She said this is an issue of focus for the Health Care
Commission and others around the state. She said she thinks
there are larger policy issues regarding transparency and
pricing that can be considered at the state level, but from a
plan perspective, she said she wants to ensure the state
educates its employees to be better consumers and the third-
party administrator works to help those employees, as well.
9:15:04 AM
CHAIR DYSON indicated that his work with Representative Keller
on "truth in billing" panicked providers. He said he was told
by the largest provider in the state that it does not know what
individual things [cost]. He said cost-shifting from the
services that do not pay for themselves to those that do is
frustrating.
9:15:56 AM
MS. HULTBERG said the department is seeing some positive signs
regarding transparency in pricing outside of Alaska that she
thinks are "creeping into the state." She said one solution is
a bundled payment plan, which, using the example of a hip
surgery, would include the hospital's fee, the surgeon's fee,
and the anesthesiologist's fee wrapped into one payment. She
said the state can request bundled payments and innovation in an
effort to impact the market. She said the goal of the
department is not to get the best deal for [state employees] and
have small businesses pay more; it is to be a catalyst in the
fundamental transformation of the market into a more transparent
one. She opined that although "we" are a relatively small plan,
"similar actions by multiple employers can help have that impact
on the market."
CHAIR DYSON asked why the department can't just require the
desired information in the RFP.
MS. HULTBERG answered she does not think the present RFP
includes such language, but she thinks it should be a future
consideration.
CHAIR DYSON opined that "getting the information on the cross
subsidy" is what the customer needs to know.
9:18:19 AM
MR. BARNHILL directed attention to slide 13, which shows worker
and employer premium contributions in a bar chart - information
provided by Kaiser Health Consortium. He said the relative
level of participation is roughly the same, but private
employees tend to pay about $4,500 a year out of a premium total
of just over $15,000 - 25-30 percent; public employees tend to
pay a little less with slightly higher premiums - about 25
percent; non-profit employees pay a little more on average; and
employees across the country pay about $4,300 in premiums out of
a total of approximately $15,700. He said if [Alaska's] economy
plan were added to the bar chart, its bar would be all one color
to reflect that the entire premium is paid through the employer
contribution. He indicated that slide 13 shows that Alaska is
currently outside the norm, and said a discussion needs to take
place with the legislature and the stakeholders to determine
whether the state should "go more into the norm" and how that
should happen. He said that may seem threatening to those
employees currently paying nothing for [health] care, but it is
not intended to be. He expressed the department's desire to
have sustainable health care for Alaska employees and retirees
and for private citizens in Alaska.
MR. BARNHILL said the current path is unsustainable. Currently,
he said, the discussion in school districts is not how to
maintain health insurance "and" sustain the teacher count; it is
whether to maintain the insurance "or" sustain the count. He
invited the legislature to join the department in the discussion
of how to get to a point of sustainability. He said the
department believes that where there is "more employee skin in
the game" - when subsidies are pulled back - provider costs
decrease. He said that is something that also needs to be
addressed.
9:21:52 AM
MS. HULTBERG, in response to Senator Wielechowski, said that to
a great extent, commercial payers are subsidizing emergency room
visits made by those without insurance, as well as the portion
of costs that Medicare does not cover; however, she said she
does not know the exact numbers.
9:22:56 AM
REPRESENTATIVE KELLER, regarding sustainability, said he read an
Internal Revenue Service (IRS) projection that the cost per
family for health insurance coverage in 2018 will be
approximately $20,000. He said he appreciates and concurs with
the approach taken by the administration, but said he would
appreciate knowing what the state anticipates paying per
employee in 2018; he estimated it would be another 33 percent.
MS. HULTBERG said that projection could be provided. She noted
that there is another slide in the presentation illustrating
that by 2037, health insurance premiums will "swallow the
average paycheck."
9:25:21 AM
MS. HULTBERG, in the interest of time, moved on to slide 25,
which shows the two approaches that the department is
considering. The first is a value-based health plan, which uses
financial incentives to encourage healthful choices and
discourage unhealthful choices. She said that approach is more
paternalistic than customarily used in a "government context" or
an "Alaska context." She relayed that the State of Nebraska has
implemented this model successfully. The other approach is a
consumer directed health plan (CDHP), which she described as "a
high deductible health plan married with a health savings
account." In the CDHP, the money the employee spends is from
his/her own account. Further, the plan protects the employee
from high-cost events and provides the employee with money to
use for health care now and "roll over for future health care."
She said the State of Indiana has implemented this model and
seen significant savings. She said the department may consider
combining the best from both approaches in the future. She
noted that the next few slides offer further details.
9:27:04 AM
MS. HULTBERG directed attention to slide 30, which lists
opportunities for AlaskaCare. The first opportunity is the
implementation of an employee wellness program, which includes:
monitoring free preventive care as a pilot program; coverage of
tobacco cessation, including pharmaceuticals; encouraging "Walk
at Work" and other fitness challenges to promote health; and
covering the pilot program "Weight Watchers at Work," which has
produced life-changing results. Ms. Hultberg said the next
opportunity is improved consumerism and appropriate utilization
of services by members. She emphasized the importance of
employees becoming educated consumers of health care. She said
another opportunity is to create a plan for financial alignment
between the payer, the patient, and the provider, which she said
is necessary to ensure a well-functioning market. She relayed
that such alignment currently does not exist, which skews costs
in health care. Another opportunity is to consider contracting
strategies to get the best network and leverage the best prices
for the state. The final opportunity is procurement of a third-
party administrator, which will allow the bigger issues
previously discussed to be addressed.
MS. HULTBERG said the department is at the beginning stages of
improving the health plans, and she encouraged feedback from the
legislature.
9:30:19 AM
CHAIR DYSON thanked the presenters and encouraged committee
members to submit further questions to his office or the office
of Chair Lynn.
CHAIR DYSON handed the gavel back to Chair Lynn.
9:30:47 AM
CHAIR LYNN wished Representative Kreiss-Tomkins a happy
birthday.
9:32:05 AM
ADJOURNMENT
There being no further business before the committees, the joint
meeting of the House State Affairs Standing Committee and the
Senate State Affairs Standing Committee was adjourned at 9:32
a.m.
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