Legislature(2013 - 2014)SENATE FINANCE 532
04/12/2013 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB129 | |
| HB76 | |
| HB23 | |
| SB90 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 90 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 129 | TELECONFERENCED | |
| += | HB 23 | TELECONFERENCED | |
| += | SB 13 | TELECONFERENCED | |
| += | HB 76 | TELECONFERENCED | |
SENATE BILL NO. 90
"An Act relating to group insurance coverage and self-
insurance coverage for school district employees; and
providing for an effective date."
3:30:53 PM
Senator Dunleavy invited the Department of Administration
to explain the fiscal notes. He felt that the bill should
be held through the interim for further discussion and
better understanding.
3:31:51 PM
MICHAEL BARNHILL, DEPUTY COMMISSIONER, DEPARTMENT OF
ADMINISTRATION, offered an analysis of FN#2:
SB 90 introduces a new section to AS 14.20, AS
14.20.137, which extends group insurance coverage
under AS39.30.090 to school district employees. It
also amends AS39.30.090(a)(2) extending coverage to
dependents of school district employees. It is
estimated that 18,300 school district employees and
29,000 dependents will become members of the
AlaskaCare Employee Health Plan. The addition of these
47,300 new members will quadruple the overall
population of the AlaskaCare Employee Health Plan.
PUBLIC EDUCATION FUND -
How the bill works: starting on July 1, 2014, school
districts would begin to enroll their employees in the
AlaskaCare active employee health plan. That process
must be complete no later than July 1, 2015. There are
approximately 18,300 school district employees that
would likely enroll over FY15-FY16. With dependents,
the total population is approximately 47,300 covered
lives.
Self-funded insurance pools tend to maintain a reserve
of 3-4 months of claim costs. The reserve is available
to pay claims in times of claim spikes so that
recourse to external funding sources or mid-year
premium increases is unnecessary.
We estimate that such a reserve for the 47,000 inbound
covered lives would be approximately $100mm. Having
such a reserve in place on July 1, 2014 is important,
because this population will begin to incur health
claims immediately, and we need to have funds in place
to pay them. The bill contemplates that the $100mm
would be drawn from the Public Education Fund over a
10 year period. The withdrawn funds would be repaid
over a 10 year period. The source of the repayment for
withdrawn funds would be school districts. The
Department would send them a bill for the first 4
months of claims paid; the bill would be repaid over a
10 year period.
The bill contemplates that the health insurance
benefit credit the state pays on behalf of all State
of Alaska employees ($1330/mo/ee in FY13; $1389/mo/ee
in FY14) would be paid by school districts on behalf
of school district employees. The benefit credit
equates to the premium for the AlaskaCare Economy
level plan plus the premium for the Preventive Dental
plan. The Department would send monthly bills to
school districts to collect the benefit credit. These
sums would be deposited in the Group Health and Life
Benefits fund (AS 36.30.095) and used to pay claims
and administer the system.
Mr. Barnhill shared that during a discussion with the Texas
Teacher's Retirement System he had learned that Texas had
done a similar consolidation several years ago. He said
that in that case the state had received access to $25
million for transitional cash flow purposes and had paid it
back without a problem.
3:36:05 PM
Co-Chair Meyer queried why the Public Education Fund was
being used.
Mr. Barnhill asserted that the department was indifferent
to where the funds came from, but that money was needed in
order to pay the claims.
Co-Chair Meyer though that a different fund should be used.
Mr. Barnhill replied that the department had no problem
with the legislature identifying some other fund source.
3:37:14 PM
Vice-Chair Fairclough remarked that some schools did not
have the tax base in order to payback the funds.
Mr. Barnhill responded that BSA funds would be used in
order to make the payback. He said that the intent of the
circulating funds was to hold the Public Education Fund
harmless.
3:38:31 PM
Senator Olson wondered how long the payback had taken in
the Texas scenario.
Mr. Barnhill understood that it had not taken very long. He
said that the state had premiums coming in from the school
districts and that that cash flow had been sufficient to
manage the transition.
Co-Chair Meyer handed the gavel to Vice-Chair Fairclough.
Senator Olson wondered if the same model could work for
Alaska.
Mr. Barnhill replied that it would be imprudent to suggest
that the requested transitional cash flow would not be
needed.
3:40:49 PM
Senator Dunleavy believed that a considerable amount of
time should be taken developing the legislation.
Mr. Barnhill stated that the department had been
researching the subject in depth. He refused to state if
there was a causal link between state healthcare plan
pooling and lower benefit credits.
3:42:32 PM
Vice-Chair Fairclough wondered how other trusts would be
affected by a state change in pooling.
Mr. Barnhill responded that the legislation would lead to
the eventual closure of the trusts. He said that there
would need to be an additional time period because health
insurance claims to be incurred in one fiscal year and then
not resolved until the following fiscal year. Other trusts
would need to maintain sufficient funds in order to pay the
incurred claims until they were finally resolved. He
reiterated that the bill called for all employees and
dependents that were currently being served by those trusts
into the State of Alaska's active pool.
3:43:50 PM
Vice-Chair Fairclough remarked that there were assets
currently in the trusts that were drawing interest that
benefit the participants of the plan. She wondered who
would have claim to the assets.
Mr. Barnhill responded that the bill did not address
private trust funds and what would happen to the trusts
once the beneficiaries moved into the state's plan. He
suspected that the trust assets would be drawn down in
their entirety prior to transition. He said that the bill
did address the trust assets of school districts that were
self-insured. He relayed that any unencumbered balance at
the point of transition would be transferred to the claims
fund.
3:46:44 PM
Senator Olson thought that the NEA Trust was a private
trust.
Mr. Barnhill responded that it was a private trust. He said
that some self-funded health plans were funded and managed
by union trust plans.
3:47:21 PM
Vice-Chair Fairclough requested further conversation with
the trust to gain their perspective on the assets that they
held. She said that where there was a contract negotiated
that the state had been pay for 100 percent of the cost
then the state should have the right to assert some
ownership of some of the assets. But in was unclear what
the state's right were concerning the interest \that was
managed in a private entity.
3:48:06 PM
Mr. Barnhill interjected that there were two more fiscal
notes to be discussed. He spoke to FN#3, which listed the
start-up costs for FY14 at $237,700 to reprogram computers
to accommodate a quadrupling of the pool. He highlighted
that every inbound member was already and active member of
PERS or TRS. He said that running across the services line
was the contractual costs that would be paid to a third
party administrator and other vendors. The per member, per
month charge would grow by the rate of 4 percent per year.
He shared that that the final fiscal note for Retirement
and Benefits indicated that 12 new staff members would be
needed and would cost $482 thousand in FY14, and $964
thousand in FY15 through FY19.
3:50:34 PM
Co-Chair Meyer wondered how many other state bargaining
units had their own trusts.
Mr. Barnhill responded that there was the Alaska State
Employees Association (ASEA) Health Trust, which was
comprised of 8,800 general governmental unit employees of
the state and was the largest piece of the health trust for
the state. He added that Public Safety Employees
Association (PSEA) had opted out of state insurance and
were fully insured by ETNA. He said that the state was
fragmented in how health insurance was delivered to
employees.
3:51:23 PM
Co-Chair Meyer understood that the issue reached beyond
healthcare for teachers.
Mr. Barnhill replied in the affirmative.
3:51:27 PM
Vice-Chair Fairclough thought that the rate of return on
the assets of the different entities could be examined over
the interim.
Senator Dunleavy replied that he would research any
outstanding issues.
3:52:22 PM
Senator Olson wondered asked about the number of dependents
for the school district employees.
Mr. Barnhill responded that there were 29,000 dependents.
SB 90 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 13 30068 - DOTPF KABATA Final Digest.pdf |
SFIN 4/12/2013 1:30:00 PM |
SB 13 |
| SB 13 KABATA Audit Conclusions Findings and Recommendations.pdf |
SFIN 4/12/2013 1:30:00 PM |
SB 13 |
| SB 13 KABATA Audit.pdf |
SFIN 4/12/2013 1:30:00 PM |
SB 13 |
| SB 13 Traffic Study FAQ April 2013 (2)1.pdf |
SFIN 4/12/2013 1:30:00 PM |
SB 13 |