Legislature(2015 - 2016)BELTZ 105 (TSBldg)
03/29/2016 01:30 PM Senate LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings | |
| SB206 | |
| SB55 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 206 | TELECONFERENCED | |
| += | SB 55 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 206-REINSURANCE PROGRAM; HEALTH INS. WAIVERS
2:11:18 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 206.
2:12:00 PM
LORI WING-HEIER Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), discussed
the two parts of SB 206. The bill is designed to allow the
director of insurance to establish a reinsurance program to
address the high-cost claims that were once part, or considered
part, of the Alaska Comprehensive Health Insurance Association
(ACHIA). This was prior to the Affordable Care Act (ACA) being
implemented. The bill expressly establishes a reinsurance pool
for high-risk claims to go into ACHIA and be reinsured through
ACHIA - Chapter 55 of Title 21. It will operate much like the
Children's Reinsurance Pool of 2013.
MS. WING-HEIER continued to say that SB 206 also says that the
50 percent tax credit would no longer be allowed for this
particular insurance program.
The other part of the bill allows the director of insurance to
apply to the Centers for Medicare and Medicaid (CMS) for an
innovation waiver. This is a Section 1332 waiver to provide
insurance under ACA in individual, small group, and,
potentially, the large group markets in Alaska. Enabling
legislation is required to begin the process.
She provided background on why this is needed. She stressed the
high cost of the individual market in Alaska which has seen a 40
percent increase in the past two years from Premera and Moda.
Early indications are that rate increases will be more than 25
percent. In addition, the risk assessment and the risk corridor
will sunset in 2016 under the federal program. Reinsurance alone
paid over $19 million to Premera and $13 million to Moda. Those
costs need to be reabsorbed somehow.
She provided examples of the 40 percent rate increases to
consumers. In 2014, a 45-year-old was paying about $486 a month
for a gold plan; the same membership in 2017 will be about
$1,300 a month.
2:16:36 PM
CHAIR COSTELLO asked if the federal reinsurance program expires
or sunsets.
MS. WING-HEIER said it expires at the end of 2016. ACHIA will
replace it in some way. It won't reduce rates, but will provide
stability. Provider losses are substantial and the rates must be
adequate.
CHAIR COSTELLO asked her to explain the higher-risk medical
conditions.
MS. WING-HEIER said they would take the most costly conditions
out of the individual market and spread them out to ACHIA. It
will be a reinsurance pool.
2:19:09 PM
SENATOR ELLIS asked, should this legislation pass, will it be a
negotiation point, or will the state just hope that private
insurers don't increase rates as much as 25 percent. He asked
what the terms of negotiation might be.
MS. WING-HEIER said she could not make commitments regarding
rates, but the state will always negotiate and the rates will
still not be enough to cover all the claims in the pool. There
is a lot of uncertainty in the markets.
SENATOR ELLIS commented that he doesn't know what the state is
getting for this kind of cost, even though he understands the
administration's need to take action to protect consumers.
MS. WING-HEIER explained if the state continues on the current
path, the rates will likely increase and the individual market
will go into a death spiral. The intent of the ACA was for
people to be able to afford insurance. Alaska is faced with
incredibly high costs for health care resulting in high costs
for insurance. The idea is to spread the top 10 percent of high-
cost claims over the reinsurance pool.
She pointed out that the state could also consider the Chapter
1332 waiver for a long-term solution. The reinsurance plan is an
immediate answer.
SENATOR ELLIS said "or a portion thereof."
CHAIR COSTELLO said her understanding is this bill would make
the rate increase less egregious.
MS. WING-HEIER said that's correct.
CHAIR COSTELLO offered her understanding that the second part of
the bill provides a longer-term solution. She asked if the
division would return to the legislature in order to pursue the
waiver.
MS. WING-HEIER said yes.
2:23:18 PM
CHAIR COSTELLO opened public testimony.
2:23:30 PM
SHEELA TALLMAN, Legislative Policy Manager, Premera Blue Cross
Blue Shield of Alaska, testified in support of SB 206. She
provided the history of Premera in Alaska since 1952 and its
coverage. She commented on the changes in the market that are
impacting Premera's individual plan premiums. She noted that
Premera has experienced a number of new high-cost enrollees
after the health reform in 2014. In 2014, Premera had losses of
about $13 million in the individual market and sought rate
increases of almost 40 percent for 2015 and 2016 to account for
the high risk individuals.
Premera is taking in, on average, $713 per member per month in
premium and paying out $913 per member per month. There aren't
enough ratepayers to offset the high costs, nor are the
subsidies some receive.
MS. TALLMAN stated that Premera supports the reinsurance program
and the innovation waiver. The program helps address premium
increases, but also helps provide some stability to the market
and may attract new competitors.
2:29:27 PM
SENATOR ELLIS asked about the timeframe on the waiver going
forward.
MS. TALLMAN said the states can begin applying for the waiver in
2017.
SENATOR ELLIS asked what other states have a similar issue of
rising healthcare costs and setting up a reinsurance approach.
MS. TALLMAN said Oregon has addressed the matter and other
states will follow.
SENATOR ELLIS asked if Premera will commit to an amount of a
less-than-40-percent increase in premiums if this legislation
passes.
MS. TALLMAN said she can't make a specific commitment regarding
rates, but would be committed to working on rule making for a
balanced assessment across the market.
2:32:57 PM
SENATOR ELLIS said the state is being asked in a relatively
short timeframe to take an affirmative action. He is willing to
entertain the request, but would like insurance companies to
commit as well and form a partnership.
CHAIR COSTELLO said she appreciates the remarks and is aware of
the situation that it brings.
MS. TALLMAN said Premera is committed to working with the
division on the actual program that would be implemented via the
rule making and has been doing so for the last year. There is a
lot of uncertainty now regarding the market.
2:35:16 PM
ALBERT FOGLE, Alaska Association of Health Underwriters,
testified in support of SB 206. He described the bill as a tool
to help with the survival of the individual marketplace. It will
help stabilize the market and smooth out premiums for
individuals and families going forward. It isn't the fault of
the carriers, but the geography of Alaska and its unique market.
He highlighted that ACA limits premiums a health insurance
carrier can charge. They are allowed just 20 percent for
administrative costs.
2:38:27 PM
KRAIG ANDERSON, Senior Vice President and Actuary, Moda Health,
testified in support of SB 206. He described Moda's business in
Alaska since 2007. Moda offers policies both on and off the
exchanges and is one of two providers. They are committed to
policyholders in Alaska. He echoed comments made by Ms. Tallman
regarding the market and how the bill would help. He noted they
have submitted detailed claims data to model the impact of the
ACHIA program.
CHAIR COSTELLO closed public testimony and held SB 206 in
committee.