Legislature(2013 - 2014)BARNES 124

04/06/2013 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Moved CSHB 169(L&C) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
        HB 196-SCHOOL DISTRICT EMPLOYEE HEALTH INSURANCE                                                                    
3:21:53 PM                                                                                                                    
CHAIR OLSON announced that the first order of business would be                                                                 
HOUSE BILL NO. 196, "An  Act relating to group insurance coverage                                                               
and self-insurance  coverage for  school district  employees; and                                                               
providing for an effective date."                                                                                               
3:22:35 PM                                                                                                                    
REPRESENTATIVE LYNN  GATTIS, Alaska  State Legislature,  asked to                                                               
present  a  bill  on  behalf  of  the  House  Education  Standing                                                               
Committee,  which she  chairs.   She related  that the  intent of                                                               
HB 196  is  to  help  Alaska's   public  schools  with  the  ever                                                               
increasing cost  of health care  and life insurance  benefits for                                                               
all employees;  all 53 school districts  provide health insurance                                                               
coverage  for  their certified  and  classified  employees.   The                                                               
number of  employees covered by  a single school  district ranges                                                               
from 6-6,300  employees.  Each  school district each  must obtain                                                               
its own  insurance policy  so coverage  and premiums  vary widely                                                               
throughout the  state.   This bill would  bring all  schools into                                                               
one group insurance program, managed by  the state.  By joining a                                                               
larger  insurance  pool,  public   schools  may  benefit  in  two                                                               
important ways.  First, schools  can save through cost savings of                                                               
a volume discount from participation  in a health insurance pool.                                                               
Second,  schools  can  save  by joining  an  agency  that  exists                                                               
explicitly to obtain  the best possible health  care benefits for                                                               
its members at the lowest possible cost.                                                                                        
REPRESENTATIVE  GATTIS   predicted  that  by  joining   a  health                                                               
insurance  pool operated  by the  state,  local school  districts                                                               
would still retain  the right to negotiate the  level of employer                                                               
and  employee   contributions  for  health  and   life  insurance                                                               
premiums,  which  would likely  result  in  cost savings  to  the                                                               
employees and employer.   In FY 12, employer  and employee health                                                               
insurance  premium  costs,  administrative costs,  and  [medical]                                                               
claims costs for  self-insured plans for the  53 school districts                                                               
in Alaska totaled nearly $282  million.  Under this bill, instead                                                               
of  53 different  medical  insurance  programs, school  districts                                                               
would participate  in one health  care insurance plan  that could                                                               
serve  19,000  employees.   Additionally,  reducing  the cost  of                                                               
medical insurance  would allow districts  to reallocate  funds to                                                               
the  classrooms, where  funds  are so  desperately  needed.   She                                                               
asked members  to move  the bill  to the  next committee  so that                                                               
committee  can consider  the financial  impacts and  benefits for                                                               
Alaska's school districts.                                                                                                      
3:25:54 PM                                                                                                                    
REPRESENTATIVE  HERRON asked  whether the  sponsor contacted  the                                                               
Alaska Municipal  League Joint Insurance Association  (AMLJIA) to                                                               
inquire  if  this organization  is  interested  in expanding  its                                                               
[insurance] pools to provide this service.                                                                                      
REPRESENTATIVE GATTIS replied she did not.                                                                                      
ERICK.CORDERO-GIORGANA,   Staff,   Representative  Lynn   Gattis,                                                               
Alaska  State   Legislature,  deferred   to  the   Department  of                                                               
Administration (DOA) to answer the question on AMLJIA coverage.                                                                 
3:26:33 PM                                                                                                                    
DANA  PARAMO, Superintendent,   Matanuska-Susitna  Borough School                                                               
District  (MSBSD),  estimated  that the  MSBSD  currently  spends                                                               
about $30  million on  health insurance  benefits each  year from                                                               
its  general operating  fund, which  represents approximately  15                                                               
percent of its  expenditures.  She estimated the  average cost of                                                               
health care has been increasing  12 percent annually so the MSBSD                                                               
could potentially  experience a  $3.6 million increase  in health                                                               
insurance  costs.   This  health  insurance  cost represents  the                                                               
equivalent  of 36  teaching  positions.   However,  the trend  of                                                               
increasing health insurance costs is not  new.  In fact, over the                                                               
past 10 years, the MSBSD's  health insurance costs have increased                                                               
by  131 percent.    She  emphasized the  necessity  to lower  the                                                               
health insurance  growth rate and health  care expenditures since                                                               
the current path is unsustainable.                                                                                              
3:28:14 PM                                                                                                                    
MS.  PARAMO  offered  her  belief   that  including  K-12  school                                                               
districts as eligible participants  in the statewide benefit plan                                                               
would  significantly spread  the  covered employees  over a  much                                                               
wider  base  and  potentially  save  all  employees,  the  school                                                               
district,  and the  state money.    Second, including  additional                                                               
participants in  the medical  insurance pool  could significantly                                                               
increase  the  negotiating  power   of  the  group  with  medical                                                               
providers.      Finally,    centralizing   the   benefit   plan's                                                               
administration would eliminate  significant duplication of effort                                                               
and  could reduce  the associated  administrative  costs and  the                                                               
burden of administration  on all school districts.   She reported                                                               
that  the per  employee health  insurance  cost in  the MSBSD  is                                                               
$13.41  per  hour.    She   thanked  the  committee  for  hearing                                                               
testimony   on   HB  196   and   giving   public  education   due                                                               
3:29:41 PM                                                                                                                    
STEVE  ATWATER,  PhD,  Superintendent,  Kenai  Peninsula  Borough                                                               
School  District (KPBSD),  testified  in  favor of  HB  196.   He                                                               
stated  that the  KPBSD's  health care  is  self-insured and  the                                                               
district does  all it  can to  contain costs.   For  example, the                                                               
KPBSD  has a  wellness  plan and  takes  a conservative  approach                                                               
toward setting benefits.   Still, the district has  not been able                                                               
to slow  the rising cost  of health care  for its employees.   In                                                               
fact,  in 2008,  the  KPBSD's employees  generated  close to  $12                                                               
million in medical  claims.  Last year, this  amount exceeded $21                                                               
million,  which represents  a 62-percent  increase  in just  four                                                               
years.  He  offered his belief that a  statewide health insurance                                                               
system for  all school  district employees  would lead  to health                                                               
care  cost  savings  for  the  KPBSD.    Further,  he  said  he's                                                               
convinced  that  the efficiencies  enjoyed  by  a large  pool  of                                                               
participants must be embraced by the  state.  As it stands today,                                                               
the KPBSD  anticipates a  $2.5 million  shortfall in  revenue for                                                               
next year, which  is less than the amount needed  to maintain the                                                               
current level  of service for  students.  Additionally,  any cost                                                               
savings  the KPBSD  can realize  from reductions  in health  care                                                               
insurance could  be used  to support  classroom instruction.   At                                                               
the  district  level,  the  KPBSD   has  one  full-time  employee                                                               
dedicated to the self-insurance  plan and several other employees                                                               
devote part of their day  on health insurance-related tasks.  Not                                                               
only  would a  statewide system  save money  in claims,  it would                                                               
reduce   overall  expenditures   tied   to  health   care.     He                                                               
acknowledged that  a statewide system  represents a big  step for                                                               
Alaska; however, he  encouraged the committee to  recognize it as                                                               
the right step.                                                                                                                 
3:31:32 PM                                                                                                                    
THERESA  KEEL,  Superintendent,   Cordova  City  School  District                                                               
(CSD),  stated  she would  like  to  echo  the testimony  of  Mr.                                                               
Atwater and  Ms. Paramo.   She said  the CSD's  [health insurance                                                               
issues are similar to] all  the other school districts in Alaska,                                                               
although  the CSD  is a  much  smaller district  than either  the                                                               
MSBSD or the  KPBSD.  She said that the  average increase for the                                                               
CSD employee's health  care costs has been 11  percent each year.                                                               
Based on  the information from  the CSD's carrier, this  year the                                                               
district is bracing  for a 15 percent increase.   Currently, 12.5                                                               
percent or $813,000 of the CSD's  $6.5 million budget is spent on                                                               
health  insurance.   Next year,  the  CSD projects  this cost  to                                                               
increase to 18.3 percent of its  $5 million budget.  Further, the                                                               
CSD  is   experiencing  declining  enrollment;   however,  health                                                               
insurance  costs  still continue  to  rise.    It has  been  very                                                               
difficult  to provide  adequate  funding for  the tools  teachers                                                               
need to  do their job  in the  classroom due to  health insurance                                                               
costs.  Any  relief the state can give all  school districts from                                                               
insurance costs will  be welcome, she said.   In conclusion, from                                                               
her  conversations with  teachers she  believes the  CSD teachers                                                               
concur with her sentiments.  The  CSD wants to maintain the level                                                               
of benefits the school district  currently offers, but if another                                                               
provider can  [reduce] the  costs of  medical insurance,  the CSD                                                               
truly would support those efforts.  She thanked the committee.                                                                  
3:33:43 PM                                                                                                                    
REPRESENTATIVE MILLETT referred  to her letter of  April 5, 2013,                                                               
in members'  packets from the  Cordova School District  and asked                                                               
whether she  still has concerns  about a monopoly [if  the school                                                               
districts were under the state's plan].                                                                                         
MS. KEEL  responded that in  her experience anytime a  mandate is                                                               
created by  the state the  initial costs decrease, but  over time                                                               
the  costs will  eventually rise  due to  a lack  of competition.                                                               
For  example,  the  CSD experienced  this  with  the  [NEA-Alaska                                                               
Health  Plan], which  the CSD  currently uses.   The  NEA's costs                                                               
were initially  low due to  their large insurance pool,  but over                                                               
time these  costs have  increased [even  though] the  majority of                                                               
school   districts  in   Alaska  now   use  this   organization's                                                               
insurance.   She  concluded that  in  her experience  competition                                                               
breeds lower costs.                                                                                                             
REPRESENTATIVE MILLETT  agreed.   She asked  whether the  CSD has                                                               
any  employees that  are part  of the  health insurance  plan for                                                               
Public Employees Local 71.                                                                                                      
MS. KEEL answered no.                                                                                                           
3:35:21 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON pointed  out that  in the  letter dated                                                               
April  5,  2013, Ms.  Keel  related  her  opposition to  HB  196;                                                               
however,  he  understood  from   her  testimony  today  that  she                                                               
supports  the bill.   He  requested  clarification regarding  Ms.                                                               
Keel's position on HB 196.                                                                                                      
MS. KEEL  explained that the  letter provided information  to the                                                               
committee, including  that the school district  wants relief from                                                               
health insurance costs regardless of the source of the relief.                                                                  
REPRESENTATIVE JOSEPHSON  inquired as  to the CSD's  current cost                                                               
of  health  insurance.   He  offered  that  the state  costs  are                                                               
approximately $1,330  per employee and  asked whether the  CSD is                                                               
paying less than that for its medical insurance.                                                                                
MS. KEEL answered  that the CSD's premium is  $1,712 per employee                                                               
per month so the state's plan is less.                                                                                          
REPRESENTATIVE JOSEPHSON  asked whether teachers  have negotiated                                                               
a share of the cost.                                                                                                            
MS. KEEL answered  that the teacher's share is 8  percent and the                                                               
school district's contribution  is 92 percent.   She informed the                                                               
committee that  the CSD is  in the  process of negotiating  a new                                                               
contract and  has requested a  50-50 split between  the employees                                                               
and the  school district  for any  increases in  health insurance                                                               
REPRESENTATIVE JOSEPHSON  asked whether  any comparison  has been                                                               
done to compare benefits offered  in the state's health insurance                                                               
plan  to  ones offered  in  the  current CSD's  health  insurance                                                               
benefit plan.                                                                                                                   
MS.  KEEL answered  no, the  comparison has  been limited  to the                                                               
cost since  the overall  cost would  be $400  per month  less per                                                               
3:37:25 PM                                                                                                                    
ROB THOMASON,  Superintendent, Petersburg School  District (PSD);                                                               
President,  Alaska Association  of School  Administrators (AASA),                                                               
stated that he  echoes the positive comments on HB  196.  He said                                                               
health  insurance is  essential, but  should not  be the  vehicle                                                               
that drains  the resources  from the  critical mission  of school                                                               
districts,  which is  educating kids.   The  PSD's experience  is                                                               
somewhat similar  to [others portrayed  today].  He  related that                                                               
in 2010-2011,  the PSD used AETNA's  plan.  At the  time, PSD was                                                               
facing  a 40  percent increase  or $250,000  in health  insurance                                                               
costs.  The  PSD switched to the [NEA-Alaska  Health Plan], whose                                                               
policy  was   equivalent,  but  cost  $200,000   less  per  year.                                                               
Additionally,  the  PSD did  not  have  to pay  AETNA's  proposed                                                               
$250,000 increase.   However, the PSD is now facing  a 15 percent                                                               
increase with  the NEA's  plan, which  represents an  increase of                                                               
approximately $150,000 per year.                                                                                                
MR. THOMASON  related that currently, the  PSD's health insurance                                                               
costs  are approximately  $1,650  per employee,  with the  school                                                               
district paying  80 percent and  the employee paying  20 percent.                                                               
He  reported that  $1.2 million  of PSD's  $8 million  budget has                                                               
been designated  for health insurance.   He said it  is difficult                                                               
for a school district  the size of the PSD to  factor in costs in                                                               
the  range of  10-15  percent  for health  insurance  alone.   In                                                               
conclusion, he said he agrees  with the Petersburg School Board -                                                               
anything that  can be done by  an economy of scale  to reduce and                                                               
control  health  insurance  costs  will  allow  the  district  to                                                               
allocate  scarce  funds  to  direct  support  to  educate  school                                                               
children.  In conclusion, he  said that insurance is critical but                                                               
it doesn't have to be the Cadillac version.                                                                                     
3:39:57 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  said  he   calculated  the  PSB's  per                                                               
employee cost  at $1,650  with 20 percent  paid by  the employee.                                                               
He  said the  PSD's  cost  per employee  would  total $1,330  per                                                               
employee, which  is the  same rate  the state  would pay,  so the                                                               
district would break even [under the state's plan.]                                                                             
MR.  THOMASON agreed,  but offered  his  belief that  it is  also                                                               
important  for  employees and  the  district  to have  access  to                                                               
something better.                                                                                                               
3:40:47 PM                                                                                                                    
REPRESENTATIVE  MILLETT  asked  whether anyone  from  the  Public                                                               
Employees  Local 71  would  be testifying  to  clarify the  three                                                               
optional plans for their health care.                                                                                           
CHAIR OLSON  answered yes; noting  the Public Employees  Local 71                                                               
is scheduled to testify at a later hearing.                                                                                     
3:41:36 PM                                                                                                                    
BECKY  HULTBERG,   Commissioner,  Department   of  Administration                                                               
(DOA),  commented that  the  only accurate  way  to compare  plan                                                               
coverage is  by an actuarial  value of  the plan.   She explained                                                               
that  the  comparison  should  not  only  consider  the  monetary                                                               
contribution, but  the actual  benefits that  are offered  or not                                                               
offered in  the medical  insurance plans.   Again,  she cautioned                                                               
that without  an actuarial comparison  it can get  very difficult                                                               
to  compare   health  insurance  coverage.     She  reported  the                                                               
department spends  an inordinate  amount of time  managing health                                                               
care  costs.   She offered  her belief  this is  the second  most                                                               
pressing  economic   issue  in  the  state   and  emphasized  the                                                               
importance  of grappling  with  health care  costs.   Alaska  has                                                               
experienced  a greater  increase in  health insurance  plan costs                                                               
than many  other states.  Managing  expenses has been one  of the                                                               
core  functions of  the department  since health  care costs  are                                                               
subject  to  some  of  the   largest  and  fastest  growing  rate                                                               
increases.    The state  currently  manages  several health  care                                                               
plans,  but she  offered to  focus  on the  active and  retiree's                                                               
health insurance  plans which cover approximately  85,000 people.                                                               
She  noted  that  approximately  40 percent  of  retirees  reside                                                               
outside Alaska.   The combined annual  cost for the plan  is $600                                                               
million.   Both  state health  care plans  are self-insured  with                                                               
claims managed  by a  third-party administrator,  which processes                                                               
the claims,  negotiates network  discounts, and  receives payment                                                               
on a per-member per-month basis.                                                                                                
3:44:57 PM                                                                                                                    
COMMISSIONER HULTBERG  then turned to  the costs for  health care                                                               
plans.   First, health insurance  costs depend on the  network of                                                               
providers  and  the  discounts   offered.    Second,  the  health                                                               
insurance  premiums are  based on  a  per-member per-month  cost.                                                               
The number of  high cost claimants also affects  the overall cost                                                               
of  medical  care   as  does  the  "per  unit"   cost,  which  is                                                               
essentially  medical  inflation.   Finally,  costs  are based  on                                                               
utilization or the  frequency in which members  use the services,                                                               
and  the types  of services  used.   However, almost  all of  the                                                               
costs can  be impacted by the  volume or the number  of people in                                                               
the plan.   She reiterated the AlaskaCare active  plan has 16,400                                                               
members, including  dependents.  In  its current form,  this bill                                                               
would  add an  estimated  47,000 members  to  the existing  plan.                                                               
Theoretically, this increased volume  could be advantageous since                                                               
the  pool size  could be  used to  leverage deeper  discounts and                                                               
lower  the third-party  administrator's costs.   In  fact, larger                                                               
pools can  reduce risk  so the impact  of high-cost  claimants is                                                               
more leveled  out over time.   Additionally, a larger  pool could                                                               
also  impact  a  per-unit  cost  for  services  and  utilization.                                                               
Finally, the  plan design  can affect use  which in  turn affects                                                               
the overall costs.  She  concluded that the department's focus is                                                               
to  provide value  for state  employee members,  which means  the                                                               
cost of services,  the quality of services, and the  value to the                                                               
3:46:56 PM                                                                                                                    
COMMISSIONER  HULTBERG  indicated that  the  state  pays a  large                                                               
percentage of  the health insurance  costs for employees,  but it                                                               
also pays  for employees  as retirees.   Thus,  the state  is not                                                               
only responsible  for a  considerable amount  of funding  for the                                                               
plan today, but for the experience  of these plans in the future.                                                               
Therefore,  the state  has a  vested interest  in the  employee's                                                               
health,  the  plan  design,  and  in  the  overall  cost  of  the                                                               
healthcare  plan.    Currently,  the  state  has  been  taking  a                                                               
fragmented, uncoordinated  approach to managing  health insurance                                                               
within  the  school  districts, including  that  in  some  school                                                               
districts  multiple plans  may exist.   For  example, the  Juneau                                                               
School  District (JSD)  offers  four different  plans within  the                                                               
school district.   She questioned whether it is  better to manage                                                               
the plans  in a fragmented way  or to explore managing  them in a                                                               
cohesive  and integrated  manner.   In  response  to a  question,                                                               
Commissioner Hultberg  answered that  the state has  6,500 active                                                               
state employees, but including dependents  the total [covered] is                                                               
16,400.  This bill would add  an additional 47,000 members to the                                                               
pool.   In  further response,  she  added that  the state  covers                                                               
approximately 60,000 retirees.                                                                                                  
3:48:17 PM                                                                                                                    
REPRESENTATIVE MILLETT  referred to the fiscal  note, which would                                                               
add  12  additional staff.    She  wondered if  these  additional                                                               
positions will also cover the growing retiree pool.                                                                             
COMMISSIONER HULTBERG answered that  the state is already working                                                               
to  address the  retirees.   Currently, the  state is  working to                                                               
address how to manage the  state's active employees.  In response                                                               
to  a question,  Commissioner  Hultberg answered  that the  state                                                               
manages  four health  insurance plans,  including one  small plan                                                               
with seven members.   She informed the committee  that the small,                                                               
specific plan would be eliminated this year.                                                                                    
3:50:16 PM                                                                                                                    
COMMISSIONER HULTBERG,  in response to  Representative Josephson,                                                               
identified what  the state considers to  control costs, including                                                               
network  discounts,  administrative  fees, high  cost  claimants,                                                               
medical  inflation,  and  utilization.     In  reference  to  the                                                               
administrative fees,  she noted that  an Institute of  Social and                                                               
Economic Research  (ISER) study identified  that $1 of  every $10                                                               
spent   on   health   care   is   spent   on   health   insurance                                                               
administration, which  isn't an insignificant burden  in terms of                                                               
costs.    She  highlighted  that  appropriate  utilization  means                                                               
having the right care available at the right time.                                                                              
3:51:40 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON said he  was curious about differentials                                                               
in the rural  school districts where services  are more expensive                                                               
in  rural Alaska.   He  acknowledged that  perhaps changing  to a                                                               
statewide  plan  would  soften   some  [the  higher  expense  for                                                               
services  in rural  Alaska].   However, he  surmised that  others                                                               
would have to absorb those [higher costs].                                                                                      
COMMISSIONER  HULTBERG  highlighted   that  currently  the  state                                                               
covers many state  employees, including some in  very rural areas                                                               
of the state.  Therefore, the  state has some level of experience                                                               
with the  cost of providing care  in rural Alaska.   Although she                                                               
agreed the cost of serving  employees who reside villages is more                                                               
expensive, absent claims data on  those individuals [the state is                                                               
serving in rural Alaska] it is  difficult to make a very detailed                                                               
analysis on the impact.                                                                                                         
3:53:06 PM                                                                                                                    
REPRESENTATIVE REINBOLD  asked for  further clarification  on the                                                               
number  of state  employees as  she thought  there are  more than                                                               
COMMISSIONER   HULTBERG   answered   that   the   state   employs                                                               
approximately  6,500 employees  and  including dependents  totals                                                               
16,400.   However, she confirmed  that there are more  than 6,500                                                               
state  employees Currently,  the  state funds  four union  health                                                               
trusts  for which  the  state  provides a  per  member per  month                                                               
payment to  the trust and  the trust  provide health care  to the                                                               
employees.    As  in  the  school  district  context,  those  are                                                               
contractual   arrangements   through  the   bargaining   process.                                                               
Commissioner  Hultberg related  that  the  [department] has  been                                                               
transparent  regarding wanting  to  have those  employees in  the                                                               
state's pool as  the department also believes it would  be in the                                                               
state's advantage to  have the union employees in the  pool.  She                                                               
acknowledged  that  would be  something  that  would have  to  be                                                               
addressed at the bargaining table.                                                                                              
3:54:33 PM                                                                                                                    
REPRESENTATIVE REINBOLD asked whether  the exempt employees would                                                               
receive the  same coverage as  the general government  unit (GGU)                                                               
COMMISSIONER  HULTBERG clarified  that she  thinks Representative                                                               
Reinbold is  referencing a different bill  before the legislature                                                               
that  would  extend  provisions  bargained  for  in  the  current                                                               
contract to the non-covered employees,  which includes leave, pay                                                               
increments, and the cost-of-living adjustment.                                                                                  
REPRESENTATIVE  REINBOLD asked  how  that bill  would impact  the                                                               
state's budget.                                                                                                                 
COMMISSIONER HULTBERG answered that  the aforementioned bill will                                                               
have a  fiscal note.   She  offered to  further discuss  the bill                                                               
with Representative Reinbold at a later time.                                                                                   
3:55:34 PM                                                                                                                    
REPRESENTATIVE  SADDLER  asked  whether  any  other  states  have                                                               
coordinated  or consolidated  health care  coverage by  combining                                                               
educational employees with  state employees, and if  so, what has                                                               
been the experience.                                                                                                            
MIKE BARNHILL,  Deputy Commissioner, Office of  the Commissioner,                                                               
Department of  Administration, answered  that he  has not  done a                                                               
state-by-state  analysis;  however,   he  recalled  that  Indiana                                                               
offered an optional program for  school districts to opt into its                                                               
active health care  plan.  In further response to  a question, he                                                               
answered that he did not have any additional information.                                                                       
3:56:43 PM                                                                                                                    
REPRESENTATIVE HERRON  asked whether the  administration supports                                                               
this concept  and whether it  makes sense to create  an insurance                                                               
COMMISSIONER    HULTBERG    answered     that    currently    the                                                               
[administration]  is not  taking position  on HB  196, but  would                                                               
like to  speak from  a philosophical standpoint  on the  value of                                                               
insurance pooling.                                                                                                              
3:57:15 PM                                                                                                                    
REPRESENTATIVE  SADDLER  asked  whether  any  factors  in  Alaska                                                               
specifically  work  in  favor  or against  this  type  of  health                                                               
insurance plan in Alaska.                                                                                                       
COMMISSIONER  HULTBERG  mentioned  three  factors  in  Alaska  as                                                               
unique.   First,  Alaska is  unique  in its  geography.   Second,                                                               
Alaska has a small population.   Third, some areas of Alaska have                                                               
a significant  concentration of  medical care.   She  offered her                                                               
belief   that   addressing   these  specific   factors   can   be                                                               
challenging;  however, she  thinks [health  care plans]  could be                                                               
better addressed  through larger pools of  employees, rather than                                                               
negotiating [coverage] for small pools of employees.                                                                            
3:58:09 PM                                                                                                                    
REPRESENTATIVE  CHENAULT asked  whether all  state employees  are                                                               
required to have state health insurance.                                                                                        
COMMISSIONER HULTBERG answered yes.                                                                                             
3:58:27 PM                                                                                                                    
REPRESENTATIVE CHENAULT suggested one  possible savings the state                                                               
might consider.   He highlighted double coverage  exists, such as                                                               
one  person  might be  an  employee  of  a school  district,  but                                                               
his/her  spouse is  a state  employee, and  the coverage  creates                                                               
double coverage.   He  suggested that  offering choices  for some                                                               
employees  to  select  one  good  policy  could  result  in  cost                                                               
REPRESENTATIVE  HERRON asked  whether the  private sector  health                                                               
insurance pools should  be considered as an option.   He referred                                                               
to the  pool insurance previously  mentioned through  the AMLJIA,                                                               
which   provides   various   pool   insurance   for   facilities,                                                               
municipalities, and workers' compensation.                                                                                      
COMMISSIONER HULTBERG answered  that the state offers  a pool for                                                               
political subdivisions, which is managed  by AETNA.  She recalled                                                               
the  private  sector  also  has  one managed  by  Premera.    The                                                               
challenge has been some people are moving between the two pools.                                                                
MR.  BARNHILL remarked  that  the issue  is one  of  scale.   The                                                               
larger  scale   pool  has  lower   risk  in   insurance  pooling.                                                               
Additionally, the larger scale pool  has more options to leverage                                                               
the  coverage into  better discounts.    The state  has a  pretty                                                               
large pool,  but one  could argue  it could  be larger,  he said.                                                               
This year  the state experienced some  high-cost claimants, which                                                               
increased the state's total costs  by an additional $8-9 million.                                                               
These high-cost claimant's costs  are spread throughout the pool;                                                               
however,  if it  was  a bigger  pool the  costs  could be  spread                                                               
further and would tend to  decrease the overall health care costs                                                               
for everyone.                                                                                                                   
4:01:23 PM                                                                                                                    
REPRESENTATIVE MILLETT  requested a  breakdown between  urban and                                                               
rural state employees.                                                                                                          
COMMISSIONER HULTBERG offered to provide the information.                                                                       
4:02:01 PM                                                                                                                    
REPRESENTATIVE REINBOLD asked for  clarification on the number of                                                               
union trust employees.                                                                                                          
COMMISSIONER   HULTBERG  answered   the  union   trust  employees                                                               
probably number  about 11,000 employees.   She assumed  the state                                                               
has  approximately 17,000  state employees  and dependents.   She                                                               
offered to ask the Division of  Personnel for the exact number of                                                               
4:03:33 PM                                                                                                                    
REPRESENTATIVE  SADDLER  asked  whether  any  benefits  exist  to                                                               
making the health  insurance become portable.  He  wondered if it                                                               
would be  helpful in  circumstances in which  an employee  who is                                                               
covered by one school district moves to another school district.                                                                
COMMISSIONER  HULTBERG  agreed  it  would make  moving  from  one                                                               
position to  another more  seamless.  She  pointed out  that some                                                               
school  districts  have  separate plans  for  the  administrative                                                               
component, the  teachers, and  the support  staff, yet  the plans                                                               
can have wide  variations in terms of the cost  and the coverage.                                                               
She concluded  that it would  be helpful to have  portable health                                                               
4:04:36 PM                                                                                                                    
CHAIR OLSON asked for clarification of the fiscal note.                                                                         
MR. BARNHILL referred  to the DOA's fiscal note  for $100 million                                                               
[dated  4/5/2013].   He  explained  that  this bill  contemplates                                                               
47,000  additional people  added  to the  health insurance  pool,                                                               
which  would quadruple  the  size  of the  pool.    He said  that                                                               
typically, the  administration for a  pool would have  3-4 months                                                               
of reserves,  to protect  the pool against  claims spiking.   The                                                               
department's rough  estimate for  47,000 additional  people would                                                               
be $100 million.  He provided  a brief summary of the fiscal note                                                               
calculation, noting  in FY  12, the  total health  insurance cost                                                               
for all school  districts was $282 million.  This  bill will take                                                               
effect  in  FY  15,  with  some people  moving  into  the  health                                                               
insurance plan in  FY 15 and the  remainder in FY 16.   The rough                                                               
estimate of  costs covering four  months of reserves  totals $100                                                               
4:06:20 PM                                                                                                                    
MR. BARNHILL said  HB 196 contemplates the $100  million could be                                                               
drawn from  the public  education fund over  a 10-year  period to                                                               
pay costs.   To begin with the state doesn't  know anything about                                                               
the health of  the pool of 47,000 school district  employees.  It                                                               
could be a healthier population  than the state's current pool or                                                               
it could  be a  less healthy  population.   However, even  if the                                                               
state knew  the health of  the proposed incoming  population, the                                                               
state still  wouldn't be able  to predict the relative  health of                                                               
that population  in two or three  years.  Thus, having  access to                                                               
the $100 million  is of vital importance since  the state doesn't                                                               
want to run its current reserves  dry.  Further, in order to hold                                                               
the  public education  fund harmless,  there is  a payback.   The                                                               
state would bill  the school districts for the  first four months                                                               
of claims  and the school district  would have ten years  to pay.                                                               
Once the  state receives the  payback, it would be  funneled back                                                               
to the  public education fund.   He  pointed out the  fiscal note                                                               
shows the draw on the public  education fund all in the same year                                                               
for ease of reference, but in  reality the draw would happen over                                                               
a period of years.  The  fiscal note reflects $10 million in each                                                               
year  anticipating the  state collecting  the funds  back over  a                                                               
ten-year  period and  subsequently  depositing it  to the  public                                                               
education fund.                                                                                                                 
[HB 196 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB196 ver A.PDF HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Sponsor Statement.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Sectional Analysis.PDF HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Fiscal Note-EED-K12-4-4-13.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Supporting Documents-2011-2012 AASB Classified Employee Survey.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Supporting Documents-2011-2012 AASB Teacher Survey.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Supporting Documents-FY12 Health Costs Data - ALASBO 03-2013.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Supporting Documents-Health Cost Containment and Efficiencies - NCSL 6-2010.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Supporting Documents-Letter Cordova School District 4-5-2013.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Supporting Documents-School District Employee Numbers AASB 04-03-2013.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
SB 4
HB196 Supporting Documents-State Employees Pooled with School and Local Government - NCSL 04-04-2013.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Supporting Documents-Table of School Employee Insurance Benefits AASB 2011-2012.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Supporting Documents-2011 State Employee Health Benefits - NCSL 9-2011.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Supporting Documents-2011-2012 AASB Administrator Survey.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB169 ver A.pdf HL&C 4/6/2013 3:15:00 PM
HB 169
HB169 Sponsor Statement.pdf HL&C 4/6/2013 3:15:00 PM
HB 169
HB169 Fiscal Note-DCCED-RCA-03-29-13.pdf HL&C 4/6/2013 3:15:00 PM
HB 169
HB169 Draft Proposed CS ver U.PDF HL&C 4/6/2013 3:15:00 PM
HB 169
HB196 Fiscal Note-DOA-HPA-4-05-13 (1).pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Fiscal Note-DOA-DRB-4-05-13.pdf HL&C 4/6/2013 3:15:00 PM
HB 196
HB196 Fiscal Note-DOA-HPA-4-05-13.pdf HL&C 4/6/2013 3:15:00 PM
HB 196