SB 165-COMPREHENSIVE HEALTH INSURANCE FUND  1:34:24 PM CHAIR COSTELLO announced the consideration of SB 165. 1:34:49 PM SENATOR ANNA MACKINNON, Alaska State Legislature, Juneau, Alaska, sponsor of SB 165, introduced the legislation speaking to the following sponsor statement: In 2015, the individual health care market in Alaska was in a precarious state. There were only two insurers with current enrollees in individual healthcare plans in Alaska, and each insurer was experiencing significant losses. Average premium rate increases in 2015 were 38.7 percent for one insurer and 39.9 percent for the other. In 2016, one of Alaska's only two remaining insurers gave notice that they would be withdrawing from the Alaska individual market effective January 2017. The 29th Legislature passed HB 374 in 2016, which created the Alaska Reinsurance Program, and allowed the Division of Insurance to apply for a federal Section 1332 state innovation waiver under the Affordable Care Act (ACA). That legislation included a sunset date of June 30, 2018 to ensure that the diversion of insurance premium taxes from the general fund was not relied upon as a long-term funding mechanism. In July 2017, the waiver was approved by both the Department of Health and Social Services and the Department of Treasury based on the application submitted by the division, which requested pass- through funding for the Alaska Reinsurance Program. The federal award for this waiver was approximately $322 million over five years. The award is to be used, in conjunction with the Alaska Reinsurance Program, to continue to stabilize the individual healthcare market in Alaska. This legislation extends the sunset provision on the Alaska comprehensive health insurance fund by six years, from June 30, 2018 to June 30, 2024 to allow for the continuation of the Alaska Reinsurance Program and receipt of the federal funding. The bill also removes the requirement that funds collected under AS 21.09.210 (tax on insurers), AS 21.33.055 (unauthorized insurance premium tax), AS 21.34.180 (surplus lines tax) and AS 21.66.110 (annual tax on title insurance premiums) are to be deposited into the Alaska comprehensive health insurance fund within the general fund. Passage of HB374 by the 29th Legislature has resulted in stabilization of the individual insurance market. The Section 1332 state innovation waiver provides funding for the Alaska Reinsurance Program, through the Alaska comprehensive health insurance fund. Now this legislation is necessary to ensure the continued effectiveness of the Alaska Reinsurance Program, meet the intent of the waiver, and receive the federal funding. 1:36:30 PM BRITTANY HARTMANN, Staff, Senator Anna MacKinnon, Alaska State Legislature, Juneau, Alaska, provided the following sectional analysis for SB 165. Section 1: Removes the requirement for the Department of Administration to separately account for revenue collected under AS 21.09.210 (tax on insurers), AS 21.33.055 (unauthorized insurance premium tax), AS 21.34.180 (surplus lines tax) and AS 21.66.110 (annual tax on title insurance premiums), and to deposit net proceeds into the Alaska comprehensive health insurance fund. Section 2: Extends the sunset date of the Alaska comprehensive health insurance fund from June 30, 2018 to June 30, 2024. Section 3: Repeals net proceeds definition due to the deletion of language in Section 1. Section 4: Adds a retroactivity clause, making Section 1 of the bill retroactive to July 1, 2018 if Section 1 of the Act takes effect after June 30, 2018, and making Section 2 of the bill retroactive to June 30, 2018 if Section 2 of the Act takes effect after June 30, 2018. Section 5: Provides for an immediate effective date for Section 4. Section 6: Provides for a June 30, 2018 effective date for Section 2. This is to correspond with the end of the state fiscal year for accounting purposes. Section 7: Provides for a July 1, 2018 effective date for Sections 1 and 3. CHAIR COSTELLO asked the reason for the immediate effective date on the retroactivity clause in Section 4. MS. HARTMANN deferred the question to Ms. Latham. 1:38:58 PM ANNA LATHAM, Deputy Director, Division of Insurance, Department of Commerce, Community and Economic Development (DCCED), Juneau, Alaska, explained that the reason for the retroactivity clause in Section 4 is to adhere to the terms and conditions of the Section 1332 State Innovation Waiver that was approved for five years. MS. LATHAM said she also had several points to make on the bill. First is that the request to extend the sunset date of the Alaska comprehensive health insurance fund for six years is based on indications that the Centers for Medicare and Medicaid Services may extend the five-year 1332 waivers for an additional year. She also pointed out that since House Bill 374 was enacted in 2016, premium taxes have been deposited into the comprehensive health insurance fund. Prior to that all premium taxes collected by the Division of Insurance were deposited into the general fund. Should SB 165 pass, new premiums will be collected and deposited into the general fund. The third point is that the federal government is paying for about 90 percent of the reinsurance program. The terms and conditions of the waiver include the requirement that the [legislature] enact legislation to authorize the reinsurance program beyond the state fiscal year. The state must also appropriate sufficient funds on an annual or other appropriation basis for the Alaska Reinsurance Program (ARP) to operate as described in the state waiver application. The state must convey copies of its authorization and the appropriation and other relevant legislation to the U.S. Department of Treasury and the U.S. Department of Health and Human Services within two days of passage. The federal waiver and the reinsurance program is contingent on this fund extension. SENATOR GARDNER asked what surplus lines means. MS. LATHAM explained that those are types of insurance that take on more risk. The brokers also pay the premium taxes directly. There are two types. Foreign surplus lines are domiciled in the U.S. and file annual statements with the National Association of Insurance Commissioners. Alien surplus lines only file statements with the NAIC who is responsible for their regulation. Lloyds of London is an example 1:42:38 PM SENATOR MEYER commented that the division appears confident that the money will continue for the next five or six years. MS. LATHAM said her confidence is based on the approval and the terms and conditions of the waiver. The division received verification of the $58 million award to fund the program for 2018. SENATOR MICCICHE asked if the extension is through December 31, 2022. MS. LATHAM said that is correct. CHAIR COSTELLO reminded the committee that it had some familiarity with this program. Director Lori Wing-Heier gave an update on it recently and the legislature passed the bill in 2016. SENATOR MICCICHE said he asked the question because SB 165 allows the sunset to extend from June 30, 2018 through June 30, 2024 and the authorization is two years short. He asked if DHSS would need to reapply for the additional two years. MS. LATHAM said the dates are confusing because insurance premiums are determined based on program years and the payments for the premium are through a calendar year. The federal fiscal year ends in October for federal appropriation and the state fiscal year is for the state match of the appropriation. The division is requesting an extension of the fund through 2024. 1:45:16 PM SENATOR STEVENS asked her to talk about the $25 million the state received from Premera. MS. LATHAM explained that the $25 million award was due to Premera making more profit than anticipated. Through an MOU the division directed Premera to award the $25 million to the reinsurance program so that premiums would be lower for all individuals in the individual market. Awards like that are not anticipated going forward. 1:46:26 PM At ease 1:46:53 PM CHAIR COSTELLO reconvened the meeting. Finding no one who wished to comment on SB 165, she closed public testimony and looked to the will of the committee. 1:47:27 PM SENATOR MEYER moved to report SB 165, version D, from committee with individual recommendations and attached fiscal note(s). CHAIR COSTELLO announced that without objection, SB 165 moves from the Senate Labor and Commerce Standing Committee.