Legislature(1993 - 1994)
04/23/1993 01:00 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 173 GROUP HEALTH INSURANCE FOR SMALL EMPLOYERS Number 061 SEN. STEVE RIEGER, PRIME SPONSOR OF SB 173, explained that the bill had passed the Senate by a vote of 19-1. The purpose of the bill, he said, was to increase the availability of health insurance to small employers. Senate Bill 173 would set up a reinsurance mechanism through which small employers' insurance plans would be pooled, thereby taking on characteristics of a single, larger insurance pool. Every insurance company offering small business insurance in Alaska would participate in the reinsurance pool, he added. Number 116 CHAIRMAN PORTER asked, if an employer did not have insurance coverage, could he or she participate as a member of a group of individuals that did have coverage? Number 124 SEN. RIEGER explained that coverage could not be denied to any individual. He stated that a person would work through a private insurance company, which would offer a person the small group health insurance plan. The policy would be underwritten and the person assigned a "risk rating," he said. He noted that the procedure included in SB 173 was similar to the way that insurance now worked, except that the bill included a reinsurance mechanism, in case there were some high-risk individuals. He said that SB 173 would avoid the problem of entire groups of employees being denied insurance coverage because of one high-risk individual within that group. It would also avoid a situation in which the one high-risk person was denied coverage. Number 144 REP. DAVIDSON commented that the sponsor had emphasized the "pro-business" aspects of SB 173. He asked if the bill could also be characterized as "pro-worker." Number 151 SEN. RIEGER replied that SB 173 would be considered a "pro- worker" bill, as it was the individual employees who needed the insurance coverage. Number 166 JAMIE PARSONS, representing the ALASKA STATE CHAMBER OF COMMERCE (ASCC), testified in support of SB 173 because it offered an avenue for small business owners to provide health insurance coverage for their employees. He said that ASCC endorsed the bill because it guaranteed availability of insurance coverage for all employees in a group, regardless of individual health risks. Also, he said, it guaranteed renewability of coverage, regardless of cases of health deterioration and number and size of previously submitted claims. Senate Bill 173 allowed for continuity of coverage, so that individuals who initially satisfied a plan's preexisting conditional restrictions would not be faced with meeting those restrictions again if they changed jobs or the employer changed insurance companies. Mr. Parsons also indicated ASCC's support for SB 173's rate limitations, stability, and predictability. Number 196 JAY FRANK, representing STATE FARM and ALLSTATE insurance companies, testified in support of SB 173. He said that the bill was based on model legislation, as adopted by the National Association of Insurance Commissioners. He stated that the bill would not solve all the problems with health insurance, but attempted to address availability problems that small employers faced. Number 216 REP. GREEN asked if SB 173 was similar to an "assigned risk" system. Number 224 MR. FRANK responded that SB 173 was similar to "assigned risk" in that an insurance company that provided coverage to small employers could not refuse to provide coverage to any group of employees. He said that SB 173 would work because every company in the business of writing insurance policies for small employers would have to play by the same rules. In the past, he said, companies would exclude high-risk individuals, or entire groups which contained one or more high-risk individuals. He noted that SB 173 was also similar to "assigned risk" in that coverage would be made available to everyone. Number 246 REP. GREEN asked if premiums would vary under SB 173's provisions. Number 255 MR. FRANK commented that premiums would be set by the individual insurance companies. He said that SB 173 would set up a state authority which would determine baseline coverages. Once those coverages were determined, he added, companies would set rates for the different types of coverage. Number 269 REP. GREEN asked if insurance companies could charge different premium rates, and then employers could choose with which insurance company to do business. MR. FRANK said that Rep. Green was correct. Number 281 REP. KOTT asked if the state authority would establish a base rate, which could then be adjusted according to preexisting conditions or other criteria. He asked if the rates would be established according to type of business, or if not, according to what criteria. MR. FRANK stated that rates would vary according to the type of business requesting coverage. Number 304 REP. KOTT asked if individuals within the same occupation would be rated differently, or if they would all be assessed the same premium. MR. FRANK replied that individuals working in the same occupation might be rated differently, due to preexisting medical conditions. Similarly, he said, persons with the same preexisting medical conditions, but working in different occupations, would be rated differently. Number 329 GORDON EVANS, representing the HEALTH INSURANCE ASSOCIATION OF AMERICA, said that no base rate would be set. The state authority would establish "basic" and "standard" plans and outline what would be covered under each of those plans. Insurance companies would then set rates for each type of plan, he added. Employers could then choose to do business with any insurance company which offered the coverage. He noted that premiums for all individuals within an employer's group would be the same. MR. EVANS commented that if there was a high-risk individual within a group, the insurance company would decide whether it was going to make use of the reinsurance provisions of SB 173. He said that if a primary insurer, one that wrote policies, felt that it could not insure a high-risk individual using its own reserves, then that individual could be reinsured, after the primary insurer paid the first $5,000 in claims. He noted that SB 173 allowed insurance companies to accept a greater variety of risks. MR. EVANS said that SB 173 would have no fiscal impact on the state budget and would "sunset" after five years, unless the legislature chose to renew the program. He stated that a similar bill had nearly passed the legislature last year. Twenty-four other states had already enacted laws like SB 173, he said. Number 395 RESA JERREL, representing the NATIONAL FEDERATION OF INDEPENDENT BUSINESS (NFIB), testified in support of SB 173 and called the members' attention to a written position paper which was included in their bill packets. Number 406 REP. NORDLUND indicated his support for SB 173. He asked Ms. Jerrel if she thought that the bill would encourage more small businesses to offer health insurance to their employees. Number 415 MS. JERREL commented that two years ago she had put a question on the NFIB ballot regarding whether the state should institute an insurance pooling plan. She stated that 76% of respondents indicated their support for such a program. Of those 76%, she added, 50% said that they would participate in such a program. Number 425 REP. NORDLUND repeated his question regarding whether or not SB 173 would encourage small employers to provide health insurance coverage to their employees. Number 431 MS. JERREL replied that she thought that SB 173 would encourage small employers to provide coverage to their employees. Number 440 COMMISSIONER PAUL FUHS, from the DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT (DCED), indicated the department's strong support for SB 173, saying that it would help both employees and small business owners. Number 449 REP. KOTT asked Comm. Fuhs how many small businesses in Alaska employed full-time employees, as defined in SB 173. Number 454 COMM. FUHS replied that he did not know the answer to Rep. Kott's question. Number 457 REP. GREEN asked Comm. Fuhs if SB 173 would have any effect on the percentage of the health insurance premium paid by the employer versus the percentage paid by the employee. Number 463 COMM. FUHS responded that the bill would have no effect on who paid the premiums. Number 470 REP. BETTYE DAVIS, SPONSOR OF THE HOUSE COMPANION BILL TO SB 173 (HB 12), was invited to address the committee. She stated that she would be glad to defer the opportunity to testify, so long as the committee was willing to move SB 173 out of committee. CHAIRMAN PORTER declared that Rep. Davis had a deal. Number 498 REP. JAMES made a motion to move CSSB 173(FIN) out of committee with individual recommendations, and a zero fiscal note. Number 503 REP. KOTT indicated his support for SB 173. He said that, after a trial period, the program should be reevaluated and perhaps broadened. Number 513 REP. JAMES stated that, as an accountant and tax preparer for small businesses and a small business owner herself, she supported the bill. There being no objection to moving SB 173 out of committee, it was so ordered.
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