HOUSE BILL NO. 29 An Act relating to health care insurance and to the Comprehensive Health Insurance Association; and providing for an effective date. REPRESENTATIVE NORMAN ROKEBERG, SPONSOR, stated that the Alaska Comprehensive Health Insurance Association (ACHIA) was established to provide access to health insurance to all residents of the State who are unable to find or are denied health insurance or who are considered uninsurable. It is additionally required coverage for those federally eligible individuals under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The plan was first implemented in 1993 and is funded through premiums collected from insured and assessments received from health insurers transacting business in Alaska. Prior to the time that the State became self-insured, the State also participated in providing funds to ACHIA (through assessments received from its health insurer). The effect of the decision not to remain in ACHIA, reduced ACHIA's funding by approximately $400,000 dollars per year. In December 2003, there were 484 insured individuals participating in ACHIA. He stated that as the insurer of last resort, it is important that the State guarantee ACHIA remains viable and in place. During 2003, over $4 million dollars was collected in assessments from ACHIA members (those companies or entities who do business in Alaska and pay into ACHIA) and over $2.6 million dollars was collected in premiums from insured individuals. ACHIA paid out over $6.6 million dollars in claim expenses in that same year. Representative Rokeberg continued, the majority of Alaskans that receive health care benefits do not contribute to the high-risk pool; thereby, shifting costs to only individuals and small groups that purchase health insurance. That is poor public policy, particularly on an unfunded Federal mandate. Many of the self-insured companies, objected to the original version of the bill. In order to accommodate the needs of ACHIA, the legislation has been modified to grant a tax credit to the insurance companies who are currently assessed for the entire ACHIA shortfall, by using a small portion of the premium taxes paid into the State. A premium tax credit would be justifiable given the importance of maintaining the viability of the Association and its requirement under HIPAA. He maintained that when viewed against the demands of the general fund, viability of ACHIA exceeds most other legislation and he urged support. 2:01:43 PM Representative Rokeberg presented a handout, demonstrating ACHIA contribution breakdowns from 1993 through 2005. (Copy on File). The attachment highlights: · 1998-2005: Proforma With HB 29 · 1993-2005: Historical · 1998-2005: Proforma Assuming State Had Remained Insured Representative Rokeberg noted the State's original participation in the program, dropping out and giving up responsibility. He emphasized the need to meet that burden, which can be addressed through a tax credit, not an allotment. 2:04:22 PM Co-Chair Meyer advised that the Committee is concerned with rising costs in the out years. Representative Rokeberg pointed out that all insurance premiums continue to increase. Representative Weyhrauch commented on the unfunded liability burden to the Department and the Division of Retirement and Benefits. Representative Rokeberg was not sure, understood this would be a tax credit. He said Representative Weyhrauch referenced an old fiscal note to the previous version of the bill and that there would be no impact to the unfunded liability. The prior version did spread the risk. Representative Weyhrauch inquired if the bill was related to HB 10, the non-profit pool. Representative Rokeberg stated it wasn't, however, has the same goal. 2:08:03 PM Representative Kelly asked if other states use the proposed system. Co-Chair Meyer inquired why the legislation was coming to the Committee at such a late date. Representative Rokeberg explained that he had changed the source of funding and the style of the bill. 2:10:16 PM CECIL BYKERK, EXECUTIVE DIRECTOR, ALASKA COMPREHENSIVE HEALTH INSURANCE ASSOCIATION BOARD (ACHIA), OMAHA, NEBRASKA, advised that ACHIA is an important program, which first passed in 1992. He offered to provide the FY04 annual report to the Committee. ACHIA is an important piece of the insurance system in Alaska. It serves & benefits all Alaskans in one-way or another. Over the 14 years, ACHIA has paid over $45 million dollars in claims; collecting $17 million dollars in premiums. The people purchasing those premiums for the most part are uninsurable individuals. ACHIA offers coverage on a subsidized basis. The primary purpose is to serve the uninsurable population. ACHIA is the Healthy Insurance Portability and Accountability Act (HIPAA) solution for Alaska and under which Alaska has fulfilled the federal requirements. Mr. Bykerk added that ACHIA offers an outlet of insurance to those that would otherwise be uninsurable. Member's pay a high rate @ 140% above the standard rate. In reality, they should pay 300% more given the health issues. ACHIA offers an in for the system. Those people become "payers" to the health system, which eventually, benefit everyone in the State. There is no cost shifting using these mechanisms. Currently, short falls are made-up by assessing health insurers. It has been estimated that premium taxes paid by health insurers, are somewhere between $10-$12 million dollars. When companies get assessed for shortfalls, the costs get transferred back to the policyholders. Those are expenses that insurance companies must cover in some manner, ultimately transferred back through premiums to individuals. HB 29 will ease the burden by broadening ACHIA's overall funding base. Mr. Bykerk added, AHCIA anticipates receiving $1 million federal dollars over the next five years. He reiterated that all Alaskans would benefit from ACHIA. He offered to answer questions of the Committee. 2:18:26 PM BRIAN ANGEL, VICE CHAIRMAN, ALASKA COMPREHENSIVE HEALTH INSURANCE ASSOCIATION BOARD (ACHIA), NEBRASKA, echoed comments made by Mr. Bykerk. He emphasized that ACHIA does benefit all Alaskans. The $45 million dollars that ACHIA has paid in claims is money that would not have gone into the system, rather "free-care". He acknowledged that everyone knows, there is no such thing as "free care". 2:19:23 PM Co-Chair Meyer asked if the legislation could reduce insurance rates. Mr. Bykerk replied that health insurance costs and premiums continue to go up. The bill could help mitigate some costs for individuals and small groups buying coverage. Those assessments have been in a range of 1% - 1.5% of premium costs each year. He believes it could become more equitable for those purchasing insurance. 2:22:14 PM LINDA HALL, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, commented that the ACHIA plan would not prevent the type of concerns voiced by Representative Kelly and those seeking different kinds of relief. People that are a part of ACHIA, do pay health insurance premiums, but pay at a reduced rate. There is a 150% cap of the average rate. Uninsurable people can buy insurance at a substantially increased premium; the program does prevent the growth of the uninsured population. She advised that the Division of Insurance has historically supported the program and noted they had worked diligently with Representative Rokeberg to find other funding sources. The program provides "huge" benefit to Alaskans. 2:24:15 PM Representative Holm asked what it means to have a 150% of higher rate cap. Mr. Bykerk explained, the rates are based upon surveys taken from the top five insurance carriers in the State of Alaska. Based on that, the Board sets the rate at a percentage, capped at 150%. There is no intent to compete with the insurance industry. Those rates are based on the same structure in the market place and are age- dependent, offering various deductible choices. ACHIA is capped at 150% by law, attempting to keep it affordable. 2:28:39 PM Representative Holm asked if the majority of the subscribers were non-paying. Mr. Bykerk noted that those that left the coverage participated in a survey, which indicated that they could not pay the premium costs. Available data shows that if they were uninsurable and not HIPAA eligible, they must indicate that they applied and were turned down. He emphasized, they must demonstrate that they are uninsurable. 2:31:15 PM Mr. Angel pointed out that there are 32 states that carry high-risk pools; 19 states use some form of general fund revenues to fund the pool. PUBLIC TESTIMONY CLOSED 2:32:24 PM Co-Chair Meyer noted concern with the fiscal costs, indicating he would hold the bill in Committee to determine other fiscal options. 2:32:59 PM Representative Kelly asked how it could be determined, who is an assessed "other insurance company". Mr. Bykerk replied that there is no correlation or assessment, but rather defined in statute. HB 29 was HELD in Committee for further consideration. 2:37:28 PM