Legislature(1999 - 2000)
04/06/1999 03:40 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 48 - STATE HEALTH INSURANCE Number 2024 CO-CHAIRMAN DYSON announced the next order of business as CS For Senate Bill No. 48(HES), "An Act relating to health insurance provided by and provisions relating to the Comprehensive Health Insurance Association." He informed the committee that they would go ahead and take testimony even though there is no quorum. He will call Representative Green down when it is time to vote. Number 2000 DAVID GRAY, Legislative Assistant to Senator Jerry Mackie, came forward to present SB 48. He told them that the sponsor statement comes from the Alaska Comprehensive Health Insurance Association (ACHIA), which was established in 1992 to provide a health insurance pool for individual Alaskans whose health condition was considered uninsurable, or who could not otherwise find adequate health coverage. The legislation mandated that all providers of health insurance in the state must participate in the pool. The association then makes health insurance available to Alaska residents who are high risk. In addition to operating the pool, the board of directors of ACHIA includes two consumer advocates. MR. GRAY commented that two consumer advocates are not able to testify today via teleconference, but they have been very active in the Senate in presenting the reason for this legislation. The legislation also asks ACHIA to periodically report on the effectiveness of this pool in promoting rate stability, product availability, and affordability of coverage. Senate Bill 48 is a direct result of this effort by the association to make the program work better and more efficiently; it is a relatively new program. The legislation has the support of the Division of Insurance. Number 1924 MR. GRAY stated that this legislation is trying to allow more cost- effective plans for the individuals who get coverage under ACHIA; better administer the program; allow flexibility in evaluating the administration of the program; to simplify the administration by decreasing the number of declinations required for eligibility; and to make some other technical improvements to the program. The legislation will allow the board to manage the ACHIA in a more cost-effective and efficient manner. The legislation also brings their program in conformance with new federal requirements particularly as it concerns portability of insurance. Number 1872 MR. GRAY informed the committee that a bill similar to this was introduced at the end of last session, so there was a vehicle during the summer the people involved in health insurance could look over the provisions and see what other improvements. The bill in front of them is the result of recommendations from that review and it was reintroduced. Number 1830 MARIANNE BURKE, Director, Division of Insurance, Department of Commerce and Economic Development, came forward to testify. She informed the committee that the proposed legislation is the outgrowth of a lot of hard work by the members of the board of directors and the division, as well as the input from all of the insurers who write health care in the state. Every insurer that writes health care has a vested interest in making sure this entity is as efficient and effective as possible. This mechanism is a last resort. If people have a condition that precludes them getting coverage anywhere else, they can come to the ACHIA and get coverage. The program is not self supporting. If it were, people could get the insurance from the regular market. It does however provide a mechanism for people to participate in the cost of their health care. The premiums, which are about 175 percent of a standard premium, only covers about 20 percent of the cost. "The remainder is allocated to the insurers that write business in this state on a percentage of premium. If they write 40 percent, they pick up 40 percent of the assessment." Number 1753 CO-CHAIRMAN DYSON asked if they write 40 percent of the policies in the state, they get the opportunity to pick up 40 percent of the cost of this. MS. BURKE answered yes. She continued saying they want to make it as efficient as possible. Costs are high because the people who go into this insurance company have conditions such as hemophilia, where the drug medication alone can cost $4,000 to $12,000 per month; people dying of cancer, people who have terminal conditions, and people seeking organ transplants. It is not a mechanism for people who are rich or poor; it is for people who get hit by a devastating illness and cannot get coverage. Without this mechanism, they would wind up with Medicaid, and the state would be picking up the tab. It gives them dignity and a chance to participate. With ERISA [Employee Retirement and Income Security Act] and the self-insured plans being exempted, it is as fair as it can be. Number 1668 MS. BURKE explained because of existing statutes, the board must use an insurer to provide these services, collect premiums, make payments, and do all of the services of a normal insurance company. They pay four times as much as the next highest state in this country which is $112 per person, per month for the administrative services. That is unconscionable, but the board has no choice. They want the flexibility to be able to go out and make a business decision; to find a qualified administrator to provide these services. MS. BURKE commented they also want to be able to make it less onerous to get coverage. The two declinations required now means two insurance companies have to turn the person down before he/she can come to ACHIA. If someone is dying of cancer, it does not take an insurance company to tell him/her they are not going to cover him/her. The division strongly supports this legislation. CO-CHAIRMAN DYSON asked her if anyone opposed this bill. Number 1592 MS. BURKE said this legislation has been discussed for over three years. Originally it was opposed by Aetna when they insured the state because Aetna would have had to pick up a portion of the cost. Now Aetna is one of the companies represented on the board and they support it. She is not aware of any opposition to this legislation. CO-CHAIRMAN DYSON sent word for Representative Green to come down to vote. He noted that this bill also has a referral to the Labor and Commerce Committee. Number 1518 REPRESENTATIVE GREEN asked if this is picked up by the private insurance companies that'll be scattered over all insurance payers. MS. BURKE answered that is correct. REPRESENTATIVE GREEN asked if she had any idea about how much this would affect premiums. MS. BURKE said the health care premiums in this state are roughly $300 million. The assessments that have been levied have been in the range of $1.5 million. Number 1470 REPRESENTATIVE GREEN asked if high risk people are in a pool, and each insurance company is assigned a certain number of those, would it impact various health insurance companies negatively. Number 1436 MS. BURKE said the ACHIA is actually an insurance company. It collects the premiums and pays the payments for services. This does not work like the auto pool. REPRESENTATIVE GREEN asked if that company is owned and set up by all the other carriers. Number 1388 MS. BURKE explained it was created by the legislature. Clearly it is not a money-making organization; it assesses what it needs to pay the premiums. The board of directors are made up of representatives of the companies writing insurance in this state. It is in the best interest of every health care provider or every insurance company writing health care to have this be as efficient as possible. Inefficiencies will cost them. REPRESENTATIVE GREEN asked how the company would be set up. Number 1329 MS. BURKE replied that by statute there will be five insurance companies who are the largest writers of the state with two additional members who will be consumer advocates. REPRESENTATIVE GREEN wondered if company number six would be a part of it. MS. BURKE said the other companies would be a part of it in the sense that they pay their pro rata share. CO-CHAIRMAN COGHILL asked if people are going to pay a portion of the premium or the cost of health care. Number 1250 MS. BURKE replied if he is referring to the amount the covered individuals pay, they pay premiums just like they would if they were insured by Blue Cross or Aetna. She may have confused them when she said they pay about 20 percent; by that she meant the total cost of all the covered services; their premiums only amount to about 20 percent of that total cost. CO-CHAIRMAN COGHILL wondered if the flexibility that the board is looking for now is to go outside and look for other professional administrative services. MS. BURKE said that is correct. CO-CHAIRMAN DYSON announced with the arrival of Representative Green they now have a quorum. Number 1191 REPRESENTATIVE GREEN made a motion to move CSSB 48(HES) from committee with individual recommendations and zero fiscal note. There being no objection, CSSB 48(HES) moved from the House Health, Education and Social Services Standing Committee.
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