Legislature(2003 - 2004)
05/03/2004 09:06 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 10(HES)
"An Act relating to pooling by employers and self-employed
individuals for purposes of group health insurance; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill, sponsored by Representative
Heinze, "allows small and large employers and self-employed
individuals to form an association for the purpose of obtaining
health insurance."
JON BITTNER, Staff to Representative Cheryl Heinze, communicated
that small businesses could not afford the rising costs of health
insurance independently. The rates could be reduced if these
businesses joined together in acquiring insurance.
Mr. Bittner added that the committee substitute would provide
exceptions to allow insurers to refuse self-employed individuals on
the basis of certain criteria. The exceptions would prevent the
healthy employees of insured small businesses from paying inflated
rates to compensate for those who would require higher levels of
medical care.
Co-Chair Green inquired about this bill's ability to ensure lower
insurance rates.
Mr. Bittner responded that though it is less expensive for
insurance companies to insure business groups versus individual
businesses, this legislation could not guarantee lower insurance
rates.
Co-Chair Green suggested that the intent of this bill is primarily
to provide small businesses and the self-employed increased access
to insurance, as opposed to securing lower insurance rates.
Mr. Bittner confirmed that the bill could not guarantee lower
rates.
Senator Olson inquired about any restrictions in this bill that
would hinder a small business from acquiring insurance.
Mr. Bittner replied that the bill contains no such restrictions.
Amendment #1: This amendment changes the effective date of this Act
from July 1, 2003 to July 1, 2004.
Senator B. Stevens moved for adoption.
The amendment was ADOPTED without objection.
Senator Dyson referenced Section 4 on page 4, lines 17 through 23,
which reads as follows.
Sec. 4. AS 21.56.120 is amended by adding a new
subsection to read:
(e) In determining the premium rates for a small employer
covered under an association health insurance policy
authorized under AS 21.54.060(7), a small employer insurer may
not use the claims experience of the small employer while the
employer was covered under another health insurance policy and
may use only that underwriting information obtained through
the insurer's normal application process for new small
employer groups that are not written under the association
plan.
Senator Dyson questioned the necessity of the following lines: "a
small employer insurer may not use the claims experience of the
small employer while the employer was covered under another health
insurance policy."
Mr. Bittner responded that the language would ensure that the small
employer groups would experience the same application process as
any other organization when applying for health insurance.
Senator Dyson asked if federal law prohibits an insurer from
obtaining the past insurance claim information of a prospective
client.
Mr. Bittner responded that he was unsure.
Co-Chair Green suggested that Senator Dyson's question might be
related to the portability provision, which refers to an employee's
claim confidentiality in the transfer of coverage from one
employer, and insurance carrier, to another.
Representative Heinze agreed with Co-Chair Green. Representative
Heinze qualified that she would need to confirm the details of the
portability provision.
Senator B. Stevens agreed with Co-Chair Green's position on
portability. He referenced the aforementioned language in pointing
out that an insurer, in determining that organization's premium
rate, could not use the insurance claim history of an organization.
Co-Chair Green commented on the diversity of products that private
insurers offer. She also emphasized that insurance rates for
business pools would vary depending on the private insurer.
Co-Chair Wilken announced this bill would not report from Committee
at this hearing and that the Division of Insurance would be
contacted for input.
Co-Chair Green referenced a letter from the Division of Insurance
dated April 22, 2004 [copy on file] in emphasizing the need for
this legislation.
Representative Heinze reminded of President George Bush's State of
the Union address in which he expressed intent to "let the people
pool".
Senator Olson asked if a prohibition currently exists preventing
businesses from pooling together for health insurance purposes.
Representative Heinze replied this would be first time individuals
would be allowed to pool.
Co-Chair Wilken referenced the letter from the Division of
Insurance dated April 22, 2004 [copy on file] as well as
Representative Heinze's Sponsor Statement [copy on file] and their
mention of the Alaska Mental Health Trust Authority and its
partnership with the Foraker Group. He inquired about the purpose
and beneficial advances of the Foraker Group.
Mr. Bittner explained that the Foraker Group is a membership
organization for non-profit organizations. The Group has recently
formed an insurance pool exclusively for non-profit organizations,
which is expected to officially commence in the coming months.
Co-Chair Wilken asked if the Foraker Group's insurance pool is
strictly for non-profit organizations.
Mr. Bittner responded that yes, the Foraker Group only serves non-
profit organizations.
Co-Chair Wilken asked if this bill would only allow small
businesses to pool together for insurance purposes.
Mr. Bittner replied that this bill would include small businesses;
however, non-profit organizations could also pool under the
provisions of this bill. The Foraker Group's insurance pool is just
one option for non-profit organizations.
Co-Chair Wilken commented that he would be seeking the guidance of
those with experience in the insurance industry in considering the
issues addressed in this bill.
Representative Heinze stated that the Foraker Group is in support
of this bill, as its formation of an insurance pool for non-profit
organizations would not have been necessary had this legislation
been in effect.
Co-Chair Green recalled that the Foraker group requires membership
and an associated fee. She asked if a membership fee would be
prohibited among business pools under the provisions of this
legislation.
Mr. Bittner responded that a fee would not be prohibited.
Senator Olson remarked that the legislature should undertake every
possible effort to assist small businesses. He added, "If they
[small businesses] are in favor of this [bill] I am in favor of it
as well."
Representative Heinze relayed that "the whole State" is in favor of
this bill.
Senator Dyson remarked that an individual without health insurance
coverage must pay 30-40-percent more for services, which he
stressed, is "wrong".
Representative Heinze informed that it is "becoming prohibitive"
for small businesses to carry insurance and that many employers are
eliminating insurance coverage.
Co-Chair Wilken stated that he agrees with the intent of this bill,
but expressed interest in the testimony of other insurance industry
experts.
Senator Olson shared this interest.
Representative Heinze responded that this legislation has the
"total support" of the insurance industry.
Co-Chair Wilken requested a list of those who have spoken last year
and this year in support of the bill.
Co-Chair Green requested the letters written in support of this
legislation.
Co-Chair Green recommended further discussion on the methods
insurers utilize to establish group rates and the factors that
impact membership within these groups. She also urged review of
"adverse selection", which occurs in the insurance industry when
the insured opt out of their current coverage as a result of
increased rates, resulting in further rate increases for those
remaining under that coverage. She commented that while the intent
of this legislation is worthwhile, she was unsure whether it would
be successful in lowering insurance rates.
Co-Chair Wilken stated that Linda Hall, Director, Division of
Insurance, Department of Revenue, could assist in providing
information necessary to making these determinations.
Co-Chair Green agreed.
Co-Chair Wilken ordered the bill HELD in Committee.
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