Legislature(2003 - 2004)
04/24/2003 03:01 PM House HES
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* first hearing in first committee of referral
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+ teleconferenced
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HB 10-GROUP HEALTH INSURANCE FOR PRIVATE GROUPS CHAIR WILSON announced that the next order of business would be HOUSE BILL NO. 10, "An Act amending the definition of group health insurance, and allowing the Department of Administration to obtain a policy or policies of group health care insurance for employers that are small businesses, nonprofit organizations, special services organizations, or small associations for insurance purposes; and providing for an effective date." Chair Wilson asked Representative Heinze to come forward and speak to the changes in the most recent committee substitute (CS). Number 1561 REPRESENTATIVE SEATON moved to adopt the proposed committee substitute (CS) for HB 10, Version 23-LS0030\U, Ford, 4/22/03, as a work draft. There being no objection, Version U was before the committee. REPRESENTATIVE CHERYLL HEINZE, Alaska State Legislature, sponsor, explained this is an Act which would allow employers and self-insuring individuals to pool for the purpose of providing group health insurance. The goal of this bill is to find a way to provide more affordable health insurance. In this version the state has no involvement and there is a zero fiscal note. This bill allows any group of any size and any self- employed individual to associate for the purpose of obtaining health insurance. Nonprofits fit under this description and are allowed to associate with any other group for the purpose of obtaining health insurance. The Mental Health Trust Authority has indicated a commitment to fund and assist nonprofits in their efforts to find affordable health insurance. CHAIR WILSON asked if Representative Heinze would clarify her statement about nonprofits and the Mental Health Trust Authority. REPRESENTATIVE HEINZE responded that nonprofits are included in this bill. The president of the The Foraker Group is very interested in helping nonprofits in pooling insurance. The bill allows nonprofits, large and small organizations, and individuals to pool to obtain affordable medical insurance. Number 1347 HELEN BEDDER, M.D., Staff to Representative Heinze, Alaska State Legislature, told the committee that the initial bill had a large fiscal note and it had the Department of Administration administering a health insurance policy which included nonprofits and small groups defined as 2 to 50 people. CHAIR WILSON commented that is amazing, since she recalled there was a zero fiscal note on last year's bill. DR. BEDDER responded that the fiscal note last year was the same as the one on the initial bill this year. She went on to tell the committee that the insurance industry did not support the original bill. Representative Rokeberg worked with Representative Heinze and with the insurance companies to come up with a solution that would be palatable to everyone. The version that was adopted by the House Labor and Commerce Standing Committee went back to square one and allowed any group to pool for the purposes of obtaining health insurance with no limit on size. That was all-inclusive and did not exclude nonprofits in any way. It allowed any group to associate for the purpose of health insurance. Number 1243 DR. BEDDER pointed out that a lot of people were interested in including self-employed individuals. Dr. Bedder said that [the sponsor] worked hard with Katie Campbell [Filings Review Supervisor] of the Division of Insurance who helped write some language that allowed inclusion of self-employed individuals while avoiding the pitfall that prevented their inclusion in the first place. The initial problem with including the single self-employed person with the groups was the fear that a single individual who may not be able to afford insurance because of high risk would want to join the pool that had a pretty good deal going with their insurance rates. That individual would then cause the rates for the group to go up because that individual would be a high-risk person. The thought was that if the individual was not a high-risk individual, then the person would get insurance on his/her own and not be interested in going in the pool. That has been a very big concern for all the insurance companies and the Division of Insurance for the state. Number 1156 DR. BEDDER told the committee that the version before the committee now [Version U] provides that self-employed individuals are added, but the insurer may restrict the coverage offered to the self-employed individual. She pointed out that insurance companies are not allowed to do that generally, but in this instance the insurance companies can analyze that individual differently than they analyze the individuals who are members of a group. If that person is a particularly high risk individual, they may still join, however, they may have to pay an extra premium in order to do so. She said there are a lot of self-employed people who have no particular health risk and those people would be able to join and be allowed the reasonable rates that any other group would have. However, if there is someone with a high risk, it does not drag everyone else into the higher premiums. Number 1125 REPRESENTATIVE SEATON asked what the benefit is of joining a group over an individual plan if an individual will be paying for individual coverage based on that individual's risk assessment. DR. BEDDER replied that if a person is an individual self- employed person, as she was and many constituents are, who do not particularly have a high-risk problem, they and their families can join a group. For instance, the individual might join the local Chamber of Commerce in town and pool to get lower rates, just as large companies now pool. The change is for the people who happen to be high risk who are self-employed who try to get a lower rate consistent with the group's lower rate, but by doing so, raise everyone else's rates. It would raise the rates of the group enough so the group would fail. This is the feeling of the entire industry. Number 1035 REPRESENTATIVE SEATON restated his concern that what will occur is that there will be a group plan, but the insurance companies will be able to identify the healthy people in the group, those not at high risk, and they will be covered under the group plan. Although those high-risk people can be a member of the group, they have to pay a higher rate. Number 1015 DR. BEDDER responded that is not the correct assumption. This only applies to a single self-employed person. It does not apply to a group. The insurer cannot pick and choose whom he will insure and charge different rates. That is not allowed. REPRESENTATIVE HEINZE asked if Representative Seaton is inquiring about the individual who wants to join a pool. DR. BEDDER, in response to Representative Seaton, reiterated that insurance companies are not allowed to restrict or condition the rates of a group. If, however, an individual self-employed person wants to join a group, that person can be scrutinized as an individual. But the group that has formed, for instance, a group of fishermen, the individuals of that group have to be treated the same way. They cannot be individually scrutinized. Number 0840 REPRESENTATIVE CISSNA asked Katie Campbell to confirm her explanation if she is correct. What may be confusing, is that there is a discussion going on about different eligible groups. One of the groups is small business, which is defined as 2 to 50 people; a second group, including nonprofits, is also defined as 2 to 50 people, and the third group is self-employed individuals. The self-employed individual is always one person, and never more than one person and the self-employed single person's medical history may be scrutinized. Since there are huge numbers of self-employed individuals in this state and a certain number of those people are sick, if [this legislation would allow] a high-risk [self-employed] individual a way to get health insurance by paying a higher premium. She asked if her comments clarified Representative Seaton's question. Number 0709 REPRESENTATIVE SEATON replied no. He related his understanding that this bill would allow a group of 50 self-employed people, to form an association to get insurance. However, the bill also seems to allow the medical history of each self-employed person to be screened to determine whether they can be a member of the group. If one of the 50 is not healthy, the insurance company can take the individual at a higher premium. MS. CAMPBELL responded that the insurance company could also decline to cover these high-risk self-employed individuals, as is the case in the individual market right now. The insurance company will look at these individuals as it does when writing an individual policy. The insurance company will say, this individual will not be covered and must go to the high-risk pool, or the insurance company will cover the individual and restrict the insurance policy. Realistically speak it is not as likely an event for the self-employed, as those that may join with other employers and become part of a bigger pool because there would be no real advantage unless they could get a different type of benefit plan. These [self-employed] individuals could get coverage right now for fairly reasonable rates if they are healthy. Number 0608 REPRESENTATIVE SEATON commented that this bill allows a self- employed individual to go to a union that has a group policy and apply to become part of the union's group insurance if they are healthy enough for the insurance company to allow them in. MS. CAMPBELL responded that she would not use a union as an example. However, a business group in Anchorage with 50 [employees] and some individuals who are self-employed could form an association, set up some rules on how they are going to operate, and the insurance company would look at that. In this case, all of the self-employed people will need to provide a health statement because it is important to know if they could be in the pool. The reason why this would be important is that everyone who is high-risk would be running to join this pool, which would ruin the pool. Right now individuals can be declined and sent to the high-risk pool. REPRESENTATIVE SEATON said he does not understand the language on page 3, line 24, where it says "the association shall be maintained in good faith for the benefit of persons other than the association or its officers or trustees." Representative Seaton said he understood this language to imply that the association is being maintained for some other reason than health care for the benefit of the persons involved in the association. Number 0460 MS. CAMPBELL explained that the goal with that provision is to ensure that those who have formed the association and who are doing the administration do not collect all the money and run. Those premiums will be sent on to the health insurance company and pay the health insurance for the benefit of the members of the association, not the association itself. CHAIR WILSON asked if anyone has reviewed the constitutionality of this bill. She questioned how a pool can be set up and anyone in the state can join the pool, unless the individual happens to be self-employed. If the individual happens to be self-employed, the insurance company can "stick it to" them. Number 0370 MS. CAMPBELL responded that insurance companies can just refuse to cover a self-employed person, which is the case now. CHAIR WILSON asked if insurance companies single out self- employed individuals. MS. CAMPBELL responded that is correct. Number 0370 REPRESENTATIVE WOLF said as a retired contractor he could not get insurance for his family, partly because he was self- employed and partly because he has a special needs son. This bill would allow nonprofits and employers to join together to develop a pool. This bill makes sense, he said. CHAIR WILSON stated that if an individual is self-employed and happened to be healthy, this bill would be helpful. However, this bill will not assist [self-employed] individuals who are in a high-risk category. REPRESENTATIVE SEATON commented that if he is not mistaken, those individuals who are not healthy can go into the high-risk pool. This plan would not help them, but with the amendment in the other bill [HB 270] it means that the maximum that could be charged to those high-risk individuals would be 150 percent of what the average healthy person would be charged. CHAIR WILSON commented that the people who will be kicked out of these pools would be picked up in the other insurance bill [HB 270]. Number 0239 REPRESENTATIVE HEINZE told the committee before January when she was sworn in as a legislator, she had been on a search for years to find insurance coverage for herself because she is a self- employed individual. It took years to find it and although the policy covered almost nothing, the premiums are around $1,000 per month. In the case of a serious hospitalization it would have been okay, but nothing else was covered. Representative Heinze commented that if this insurance had been available, she would have jumped at it. It never would have been $1,000 per month for a healthy individual in this pool. Number 0169 REPRESENTATIVE CISSNA said that one of the sad things is that there will be people left out of this bill too. There will be people who will not be able to afford the insurance premiums, just as there are many people who have COBRA, cannot afford it. It is a significant number of people. She said she believes this is an incremental fix and she would like to see a bigger fix, but an incremental fix may be all that can be done right now. This is the only thing on the plate or even comes close to dealing with a problem for a lot of people that really need coverage. Number 0048 REPRESENTATIVE CISSNA said her understanding, according to the Division of Insurance, is that the term employee and employer can fit in the nonprofit category. Although this does cover nonprofits, someone in the insurance industry suggested that if the legislature inserted the term "nonprofit" as has been done with the self-employed, it would be helpful. Therefore, she indicated that a conceptual amendment inserting the words "non- profit organizations" into the title could be added. Therefore, the title would read: "An Act relating to pooling by employers, self-employed individuals, and non-profit organizations for purpose of group health insurance". However, the definition of nonprofit in the bill is the language that came out of the original bill. TAPE 03-37, SIDE A Number 0019 REPRESENTATIVE CISSNA said that language may be too broad because it included that nonprofit organizations means clubs, societies, exclusively for charitable, religious, scientific, or educational purposes for the promotion of social welfare and has received an exemption for the payment of federal income taxes. That is what the original bill included. She said she did not believe a definition needs to be included in the bill. Number 0061 REPRESENTATIVE WOLF commented that the title says "An Act relating to pooling by employers", and a nonprofit organization is an employer. REPRESENTATIVE CISSNA agreed, but said that according to her sources in the insurance industry, placing the language in the bill will ensure that there is no misconception. Number 0107 CHAIR WILSON announced that CSHB 10 would be held until Tuesday. She asked Representatives Cissna and Wolf to work on this aspect of the bill and bring an amendment back to the committee. Number 0172 BENJAMIN BROWN, Alaska State Chamber of Commerce, testified in support of CSHB 10. He told the committee the chamber membership is comprised of 700 small businesses, large businesses, and 35 local chambers of commerce. Every year the chamber asks the members to provide a list of their legislative priorities for the coming year. Based on that, a legislative conference is held in November where the legislative committee, board of directors, and other members of the organization get together and determine the top priorities. This bill addresses two of the chamber's six main priorities. One of which is the provision of affordable health insurance for Alaskans. The chamber urged the legislature to work with the insurance industry to devise alternatives to the continued escalation of health insurance costs. This bill could not be a neater fit to the chamber's priority. The earlier piece of legislation that the committee looked at, HB 195, dealt with individuals. This bill tries to deal with small businesses and nonprofits. Mr. Brown said that Representative Rokeberg, over the course of his career, has worked hard on these issues. Once the pooling was applied to large businesses and shown to be successful, it has been trickling down and getting to smaller groups and individuals. The individuals are not the primary constituency of the state chamber, but small businesses are a very important constituency. Number 0285 MR. BROWN said that the second priority of the Alaska State Chamber of Commerce is protecting Alaska's fiscal future. This version of the bill is supported by the chamber because it eliminates the role of the state and removes the state from any fiscal note or fiscal impact. It is important not to be burdening the state with costs at a time when the state is trying to cut costs. Mr. Brown summarized his comments by saying that the Alaska State Chamber of Commerce supports this legislation and asks the members to work on the legislation to make it as effective as it can be. REPRESENTATIVE WOLF pointed out that any nonprofit organizations may use health insurance as an incentive to bring employees on board. There are 5,000 nonprofits in the state of Alaska. Many nonprofits come to the state to ask for money. He said this is an opportunity to lower that request by lowering the cost of health insurance. Number 0420 DELISA CULPEPPER, Deputy Director, Alaska Mental Health Trust Authority, testified via teleconference in support of CSHB 10. She told the committee that they support any efforts the members make to assist nonprofit organizations in obtaining affordable health insurance. Many of their beneficiaries are served by these nonprofits which have professionals and direct service staff that need health insurance. It enhances stability in the workplace and it is especially difficult in rural Alaska. A bill that would allow pooling may be the only way to lower insurance premiums. She asked the committee to move the bill forward. Number 0528 REPRESENTATIVE HEINZE commented that Representative Cissna believes that an intent line could be added to the second paragraph of the bill which clarifies [the nonprofit issue]. CHAIR WILSON stated that HB 10 would be held until the next meeting.
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