Legislature(2017 - 2018)SENATE FINANCE 532
02/27/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB108 | |
| SB105 | |
| SB165 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 105 | TELECONFERENCED | |
| + | SB 108 | TELECONFERENCED | |
| + | SB 165 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 165
"An Act relating to the Alaska comprehensive health
insurance fund; and providing for an effective date."
10:47:23 AM
BRITTANY HARTMANN, STAFF, SENATOR ANNA MACKINNON, offered a
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% for one insurer and 39.9%
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.
10:48:20 AM
Co-Chair MacKinnon relayed that versions the legislation
had appeared before the committee before. She said that the
bill would create a stable market and that the state had
experienced a reduction in premiums because of the
reinsurance program. She shared that the legislation would
rededicate the revenue stream out of the insurance fund and
into the general fund, resulting in a positive fiscal note
of approximately $50 million, annually. She commended the
work of Lori Wing-Heier, Director, Division of Insurance,
Department of Commerce, Community and Economic Development
on the issue of insurance management in the state.
10:51:01 AM
LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
said that SB 165 would allow the department to continue the
reinsurance program with significant federal funding
because of the 1332 waiver for a period of five years, with
a possible additional one-year extension. She said that in
2016 the legislature had been instrumental in creating the
program, which had proved successful. She stressed that to
collect on anticipated federal funds, the sunset date
needed to be either removed or extended. The sunset
extension would also allow that the premium tax that the
division collected would go back to the general fund, as
was the original intention.
10:53:34 AM
Co-Chair MacKinnon solicited the definition of
"reinsurance."
10:54:16 AM
Vice-Chair Bishop expressed appreciation for Ms. Wing-
Heier's ability to discuss complicated issues in a clear
and simple manner.
Ms. Wing-Heier shared that in the context of the bill,
"reinsurance" meant that if you were an individual in
Alaska that purchased insurance through the individual
market but was then diagnosed with a condition that
generated high cost claims, you would still buy insurance
from Premera (because that is the only carrier in Alaska)
and would never know that your claim had been ceded to the
reinsurance program. The claim is then not paid by Premera
but by the state, which reduced the overall claims expense
for the insurer.
10:56:25 AM
Co-Chair MacKinnon asked why the federal government would
be interested in paying the claims.
Ms. Wing-Heier responded that many Alaskan's premiums were
subsidized by the federal government, without a cap. She
said that when the large claims could be removed from the
calculation, and premiums decreased, the federal government
would save money. That savings returned to the state to
fund the reinsurance program. Had the reinsurance program
not been enacted, the federal government's premiums for low
and moderate-income individuals would have continued to
increase, as would those that did not receive subsidies.
10:58:15 AM
Co-Chair MacKinnon asked about the managed care for
individuals that were high cost drivers in the system.
Ms. Wing-Heier replied that there were very strict
guidelines for managed care of those particular consumers.
She said that the division worked to provide managed care
on every claimant that went through the program.
10:59:20 AM
Senator Stevens asked about the $25 million return from
Premera, and whether similar returns could be expected in
the future.
Ms. Wing-Heier did not expect similar future returns. She
said that claims had dropped significantly in 2017, which
had prompted Premera to contact the division. She said that
the drop in claims had been considered an anomaly. She
explained that when an insurance company filed rates with
the state, a contingency of 3 to 5 percent profit was
included in the rate filing. She stated that Premera had
known that they were in excess of that contingency
percentage. She furthered that Premera involuntarily
approached the state and asked that the money for 2017 be
put back into the reinsurance program. She relayed that a
memorandum of understanding was crafted, without any fault
on the part of Premera, that the money would be returned to
the state.
11:00:55 AM
Senator Stevens asked whether additional insurers were
interested in working with Alaska.
Ms. Wing-Heier replied that she was hopeful. She felt that
any reluctance was not because of the situation in the
state but what was happing on the federal level.
11:01:27 AM
Senator Stevens expressed appreciation for the information.
11:01:40 AM
Senator von Imhof asked whether there was a way that the
state could save as much money as possible in the program
just in case the waiver was not extended a second time.
Ms. Wing-Heier responded that the idea had been considered.
She thought that what was currently being received from the
federal government could carry the program into the 6th
year.
Co-Chair MacKinnon CLOSED public testimony.
11:04:50 AM
Co-Chair Hoffman addressed the zero fiscal note for the
Department of Administration (DOA). He read from the
analysis:
This bill would extend the repeal date of the Alaska
comprehensive health insurance fund statute from June
30, 2018 to June 30, 2024 and, effective July 1, 2018,
would deposit insurance premium tax revenues into the
general fund instead of the Alaska comprehensive
health insurance fund. The general fund and the Alaska
comprehensive health insurance funds are existing
funds and the change should require minimal work with
no significant fiscal impact to the Division of
Finance. Therefore, the Division of Finance submits a
zero fiscal note.
He spoke to the second zero fiscal note from the Department
of Commerce, Community and Economic Development:
This legislation extends the sunset provision on the
Alaska Comprehensive Health Insurance Fund by six
years, from June 30, 2018 to June 30, 2024. This
legislation 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.
11:07:11 AM
Co-Chair MacKinnon understood that the current insurance
receipts that were designated general fund would be re-
routed into the general fund. She wondered about a
projection on the new general fund contribution.
Ms. Wing-Heier relayed that there was approximately $63
million that would be re-routed back to the general fund
and, going forward, all the taxes would go back into the
general fund.
11:08:04 AM
Co-Chair MacKinnon wondered why this was not reflected on
the fiscal note as revenue coming into the general fund.
Ms. Wing-Heier said that she would provide the information
to the committee later.
Co-Chair MacKinnon announced that amendments were due the
following day by 5pm.
SB 165 was HEARD and HELD in committee for further
consideration.