Legislature(2015 - 2016)SENATE FINANCE 532
04/13/2016 05:00 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB254 | |
| HB314 | |
| SB206 | |
| SB130 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 254 | TELECONFERENCED | |
| + | HB 314 | TELECONFERENCED | |
| + | SB 206 | TELECONFERENCED | |
| += | SB 130 | TELECONFERENCED | |
| += | HB 247 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 206
"An Act relating to a reinsurance program for
residents who are high risks and insurer assessments
to cover the costs of the reinsurance program;
relating to application for state innovation waivers
for health care insurance; relating to definitions of
'residents who are high risks' and 'covered lives';
and providing for an effective date."
Co-Chair MacKinnon OPENED Public Testimony. She limited
testimony to 2 minutes per testifier.
5:57:55 PM
JOSHUA WEINSTEIN, PRESIDENT, NORTHRIM BENEFITS GROUP,
ANCHORAGE (via teleconference), testified in support of the
legislation. He relayed that individual health insurance in
Alaska was the highest in the country. He summarized that
the bill would provide a mechanism for stabilizing the
rapidly rising cost of health insurance by creating an
assessment on insured employer plans. It would help create
a stable market for those buying their own health
insurance. The cost of private insurance was rapidly
spinning out of control. Rate increases of 30 percent had
been seen for the previous 2 years. He reiterated his
support for the bill.
Senator Bishop wondered if it was another tax on single
employer and multi-employer plans. Mr. Weinstein replied
that it assessed the employer plans to cover the expenses
of very high cost individuals within the Alaska
Comprehensive Health Insurance Association (ACHIA) pool. He
used to cover upwards of about 700 people and was down to
200 to 300 insured members due to the Affordable Care Act's
individual market place. The reinsurance mechanisms in the
individual insurance pool was ending and they had not been
effective enough to stave off the large rate increases
necessary to keep the pool sustainable. It was not a new
assessment but would provide the reinsurance for the
individual marketplace created under the Affordable Care
Act and not just those in ACHIA health plans. [A portion of
the audio was inaudible]. He argued that Alaska could not
be a state without a viable individual insurance pool.
Several different companies had lost tens of millions of
dollars in the individual market. He restated his support
for SB 206.
6:02:51 PM
LON WILSON, PRESIDENT, WILSON AGENCY, ANCHORAGE (via
teleconference), spoke in support of the legislation. His
company had a 50-year history working with individuals and
employers to help them purchase individual and group health
insurance in Alaska. He urged support of SB 206. The small
size of the individual market pool was not large enough to
spread the high claims costs of individuals with
significant requests. It was limited to a small pool. The
proposal would utilize an existing reinsurance mechanism to
spread the costs over a broader population in the hopes of
making health insurance more accessible to a much broader
population. In terms of percentages of increases, in the
previous 2 years there had been a doubling or tripling of
insurance premiums - another class of uninsured individuals
in the state. The legislation before the committee would at
least get the state on a road towards sustainability in the
individual market. He voiced his support for the bill.
SHEELA TALLMAN, PREMERA BLUE CROSS OF ALASKA, JUNEAU, spoke
in support of the legislation. The individual health
insurance market was in crisis. With health reform the
major change to the insurance market was guaranteed issue
to all individuals without pre-existing conditions.
Insurers experienced an influx of new enrollees, many of
them previously uninsured with very high medical costs. She
continued that for 2015 and 2016 Premera had close to a 40
percent average rate increase for individual plans.
However, claims continued to exceed premiums. For the
previous 2 years Premera had experienced loses annually of
$10 million. Premera was taking in, on average, $713 in
premium per member, per month but paying out claims that
averaged $919 per member, per month. It demonstrated the
very high claims costs in the particular pool. In a small
size market, as in Alaska, there were simply not enough
healthy individuals to offset the costs of enrollees with
very high medical needs. Currently, the average benchmark
plan premium was the highest in the country at over $700.
The next highest state was $468. A 40 percent increase was
significant. She expressed concerns with premiums
continuing to sky rocket. One solution was to exit the
individual market and to stop selling coverage.
Alternatively Premera and Moda had been working
collaboratively with the Division of Insurance to come up
with a sustainable option - the reinsurance program
administrated by the state's high risk pool. Premera was an
insurer in both the individual and group markets having 45
percent of the market share in the employer group business.
She supported a balanced assessment that would not place
undue burdens on the group market. Senate Bill 106 would
help mitigate the premium increases and the dramatic swings
in the individual markets. She urged members to support SB
206.
6:07:44 PM
JASON GOOTEE, MODA HEALTH, ANCHORAGE (via teleconference),
read from a prepared statement:
We are supportive of this bill as a way of addressing
the variability inherent in the Alaska individual
market. Over the past few months, we have collaborated
with the Alaska DOI, Premera and ACHIA on a
reinsurance program aimed at helping to stabilize this
market. Moda and Premera have provided detailed claims
data through ACHIA to an actuarial consulting firm to
model the impact of such a program. Our actuaries
have been closely involved in reviewing the analysis
and have provided feedback to ensure that the results
are sound. We are supportive of Senate Bill 206 as
this will help improve the predictability of the
individual pool when setting future rates. Thank you
for considering my comments in support of Senate Bill
206. I want to emphasize that Moda is invested in the
Alaska individual health insurance market and we are
committed to working on the implementation of a state
reinsurance program.
Co-Chair MacKinnon CLOSED public testimony.
Co-Chair MacKinnon stated that the bill was the governor's
priority due to what had happened in the insurance market.
He introduced the bill approximately 3 weeks prior. She
requested that the presenter briefly introduce the bill,
explain what it did, provide any associated costs, and
clarify the new definition of "high risk resident".
6:10:12 PM
FRED PARADY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE,
COMMUNITY, AND ECONOMIC DEVELOPMENT, introduced the
legislation. He stated that the bill was the best effort to
craft a response to the condition of Alaska's individual
market. He highlighted that Alaska's individual insurance
market was fragile. There were over 22 thousand individuals
covered within the market. Alaska was down in the last year
from 4 carriers to 2. One of the 2 carriers was presently
in a difficult financial condition. He relayed that the
bill did not impose a financial impact on the State of
Alaska.
Mr. Parady referred to a document titled, "SB 206 Best
Estimate Consumer Impacts" (copy on file). He pointed to
the top section of the first page which reported 236,779
total covered lives. They were listed under single employer
groups. He noted that the direct individual market served
22,105 individuals. The second section reflected the
current federal reinsurance program. He noted that in 2016
there was an annual fee of $27.00 per year and $2.25 per
month. The estimated taxes for the policies were 3 percent
under the Affordable Care Act which averaged $30 per member
per month. In the group market it equaled $18 per member
per month. The taxes expired at the end of 2016.
Mr. Parady continued to page 2 of the document. He relayed
that the bill would enable the division to propagate
regulations and set reinsurance rates. He pointed to the
highlighted rate of $19.36 per month which would generate
$55 million across the 236,779 covered lives and would
effectively reduce the individual premium an estimated 18
percent. The particular group had experienced back-to-back
rate increases of 36 to 40 percent. An 18 percent decrease
would essentially reduce the coming increase by about half
and would have a stabilizing effect on the individual
market. He stressed it was of critical concern to all
Alaskans that the state maintain providers of which there
were currently only two.
Co-Chair MacKinnon queried about a sectional analysis.
6:13:22 PM
LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
explained the Sectional Analysis (copy on file):
Section 1. AS 21.55.220(c) is amended to allocate the
assessment necessary to fund the reinsurance losses on
the basis of enrollment. The current structure of
ACHIA provides for the assessments on a percentage of
premium basis; meaning that those insurers writing
more premium pay the larger assessments regardless of
the number of covered lives they may have. Conversely,
an insurer, particularly an insurer writing only stop
loss insurance, may have very little premium but a
large number of covered lives. The intent of this
subsection amendment is to distribute the assessment
on an equal basis to all insureds on a per-member,
per-month basis.
Ms. Wing-Heier elaborated that in statute ACHIA was
identified as the high risk pool. It had been funded on the
percentage of premium that an insurer had. The reason the
division was seeking to change it was to even out the cost
per member/per month. Previously, for example, Premera had
45 percent of the market and 45 percent of the assessment.
Whereas, the smaller insurers had a smaller assessment. The
bill would make it so that each of the 236,779 that would
be assessed would be assessed evenly. Not one person would
be assessed more than another. The legislation would change
the assessment allocation to be a "per member, per month"
rather than a percentage based on premium of one insurer
against another.
Sec 2. AS 21.55.220(f) is amended to clarify that any
assessment made against an ACHIA member (as defined in
AS 21.55.010) by ACHIA (to fund the reinsurance losses
from the reinsurance program established by regulation
for reinsuring residents who are high risks) will not
be subject to an offset of 50 percent that otherwise
would have applied against the member's premium tax.
Unlike the current high risk pool, where members are
allowed to offset 50 percent of their ACHIA assessment
when remitting their premium tax, the reinsurance
assessments would not be eligible for the premium tax
credit. While a premium tax credit was a benefit to
the ACHIA members to support ACHIA when it was created
to provide the only means for Alaskans to gain access
to healthcare insurance at the time, the premium tax
credit is not being proposed to be extended to the
reinsurance assessments due to the economic outlook of
the State of Alaska at this point in time.
Ms. Wing-Heier explained that previous to the legislation
the insurers that participated in ACHIA received a 50
percent tax credit. The bill would eliminate the credit.
There would no longer be a 50 percent tax credit when an
insurer was assessed to pay the assessment that would go to
the reinsurance pool.
Sec. 3. AS 21.55.500 (20) amends the definition of
"residents who are high risks" by deleting the
requirement that the person be unable to obtain
insurance coverage substantially similar to that which
may be obtained by a person who is considered a
standard risk. Under the ACA, an insurer is no longer
allowed to deny coverage to a person based on a pre-
existing condition making this part of statute a moot
point. Deleting this language enables the creation of
the reinsurance program and provides the director of
insurance with the flexibility needed in designing the
program by authorizing the director to supplement the
definition of "residents who are high risk".
Sec 4. AS 21.55.500 provides a definition of "covered
lives" which is based on the definition that currently
exists in Title 23.
Sec. 5. AS 21.96 is amended by adding a new section to
allow for a waiver for state innovation. Under the
ACA, states may submit an application to the Secretary
of the United States Department of Health and Human
Services requesting a waiver from certain provisions
of the Act. In order to receive this waiver, the state
must have enabling legislation and Sec. AS 21.96.120
provides that the director of the Division of
Insurance may apply for a waiver and, if granted,
implement a state plan meeting the waiver requirements
in a manner consistent with state and federal law.
Ms. Wing-Heier clarified that the section gave authority to
the Division of Insurance to apply for a Section 1332
Waiver. The waiver was similar to a Section 1115 Waiver. It
would allow the state to apply for a waiver to exempt
itself beginning in 2017 from the Affordable Care Act. It
did not mean that the state would do so. It meant that the
division would have to go through the application process
and hold public hearings to see if it would be better for
Alaska to do the Affordable Care Act on its own rather than
participating at the federal level. The state would still
be subject to the guarantee issue provisions and essential
health benefits. However, the state would be able to relax
or eliminate things such as the individual and employer
mandates. There were also penalties that could be
eliminated. The option would give the state more control of
its own destiny around the Affordable Care Act. She was not
saying that the state would do it, but in order to apply
for it the division needed statutory authority.
Sec. 6. Provides for an immediate effective date.
Co-Chair MacKinnon directed the committee's attention to
Section 3(C), page 3, line 5-9. She explained that language
was removed that would take away everyone qualifying. She
wondered if she was accurate.
Ms. Wing-Heier responded affirmatively.
Co-Chair MacKinnon set the bill aside. She informed staff
that the administration was requesting to move the bill
quickly, as there were some procedural rules dictating
expediency. She asked staff to prepare any questions as
soon as possible, for she was hoping to address the bill
again in the following day.
SB 206 was HEARD and HELD in committee for further
consideration.
6:18:22 PM
AT EASE
6:23:00 PM
RECONVENED
Co-Chair MacKinnon relayed that invited testimony would be
heard for SB130. She indicated that testimony for the
industry was limited to 10 minutes.