Legislature(2005 - 2006)SENATE FINANCE 532
05/04/2006 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB307 | |
| HB29 | |
| HB446 | |
| HB326 | |
| HB57 | |
| HB419 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| = | HB 307 | ||
| + | HB 29 | TELECONFERENCED | |
| + | HB 446 | TELECONFERENCED | |
| + | HB 326 | TELECONFERENCED | |
| + | HB 41 | TELECONFERENCED | |
| + | HB 57 | TELECONFERENCED | |
| + | HB 419 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR HOUSE BILL NO. 29(L&C)(title am)
"An Act relating to the Comprehensive Health Insurance
Association; granting a 50 percent premium tax credit for
assessments against members of the Comprehensive Health
Insurance Association; requiring members to provide
information to the association's board of directors or the
director of the division of insurance; modifying voting
rights for the association members by basing their exercise
on a member's share of assessments; basing assessments on
major medical premiums; modifying the manner of determining
members' liabilities for losses; and changing the
definition of "major medical" coverage for purpose of state
health insurance and providing for exclusions to major
medical coverage."
This was the first hearing for this bill in the Senate Finance
Committee.
REPRESENTATIVE NORM ROKEBERG, the bill's sponsor, informed the
Committee this legislation would change the funding mechanism
for the Alaska Comprehensive Health Insurance Association
(ACHIA), which serves as the health "insurer of last resort" for
high-risk citizens in the State. ACHIA is a federally mandated
program under the federal Employee Retirement Income Security
Act of 1974 (ERISA). While individuals participating in ACHIA
contribute toward their insurance premiums, any premium
shortfall is provided for by an assessment against health
insurance underwriters operating in the State. This bill would
make a minor change in that funding source process.
Representative Rokeberg directed Committee members to a handout
titled "Insurers Writing Comprehensive Health Insurance in
Alaska" [copy on file] which depicted the market share of health
insurance providers operating in the State in the year 2003. The
Alaska Division of Insurance conducts such a survey on an annual
basis. It is "sobering" to see that Premera Blue Cross Blue
Shield of Alaska has approximately 80 percent of the active
insurance market share in the State.
9:18:22 AM
Representative Rokeberg stated that one of his goals as a
legislator was to decrease "the barriers for entry for new
underwriters to increase competition and to enable and help pull
down rate structures by enabling better competition within the
State. Basically, my ten-year quest has fundamentally failed."
Representative Rokeberg shared that the annual assessment levied
against insurance underwriters to "subsidize the ACHIA pool" has
been approximately $3.5 million. This is a major concern, as
there are large groups in the ERISA pool, specifically organized
labor groups, which either do not contribute or pay little
toward the ACHIA insurance premiums fund. His efforts to get
these groups "to pay more to the pool" have been resisted. The
situation was further compounded in 1998 when "the State of
Alaska allowed all their bargaining units to step out of the
major pool of the State of Alaska".
9:19:36 AM
Representative Rokeberg referred to an April 20, 2006 handout
prepared by ACHIA [copy on file] labeled "ACHIA 1993 through
2005". One of the three pie charts depicted on the handout
summarizes the total dollar amount received by ACHIA from 1993
to 2005 from its three financial contributors: Insurer
Assessments-State Portion $1,364,000; Participant Contributions
$17,049,335; and Insurer Assessments $29,186,000.
Representative Rokeberg spoke to the pie chart labeled "1998-
2005: Proforma with HB29". This chart depicted the contribution
the State would have made to ACHIA during the 1998 to 2005
timeframe under this legislation, which would require the State
to participate at approximately a one-third of cost ratio. Thus,
under the provisions of this bill, between 1998 and 2005, the
contribution distribution would have been: State General Fund
Contribution, $12,900,000; Participant Contributions,
$14,861,088; and Insurer Assessments, $12,900,000.
Representative Rokeberg spoke to the third pie chart labeled
"1998-2005: Proforma Assuming State Had Remained Insured". Had
the State not opted out of the program in 1998, it would have
contributed approximately $10 million of the $38 million
required. The breakout would have been: State Portion of
Assessments, $10,320,000; Participant Contributions,
$14,861,088; and Remaining Insurer Assessments, $15,480,000. The
conclusion from this chart is that "there is a huge shortfall
because of the reduction of State contributions." While that
money instead benefited the State's general fund, it was a
detriment to the ACHIA program. There should equity in the ACHIA
funding.
9:21:04 AM
Representative Rokeberg specified this bill would require "the
State to participate in the funding" of the program, by
requiring the State to "allocate one half of the [ACHIA]
assessment … in the form of a tax credit to the [health]
insurance companies".
Representative Rokeberg informed the Committee that insurance
premium taxes paid to the State by insurance companies are the
State's third largest revenue source, the first being petroleum
royalty taxes and the second being corporate income taxes. The
State received $47 million from insurance premium taxes last
year and the expectation is that the taxes would amount to $46
million this year. Health insurance companies would pay $11
million or approximately 25 percent of that amount.
Representative Rokeberg noted this bill would not impact the FY
2007 (FY 07) budget as assessments are delayed to allow the
calculation to be based on actual costs. Therefore, the FY 07
tax credit of approximately $1,750,000 would affect the State's
FY 2008 general fund. The credit amount would increase or
decrease each year as determined by the annual ACHIA assessment.
He noted that assessment levels are projected to increase.
9:22:57 AM
Representative Rokeberg proclaimed that this bill would require
the State "to pick up their fair share" of the ACHIA assessment.
The State would join 32 other states that either partially or
fully participate in the funding of this federally mandated
program.
9:23:48 AM
Senator Dyson understood this legislation would not require the
State's bargaining units' insurance programs to contribute to
the ACHIA fund.
Representative Rokeberg affirmed. While he had in the past
suggested their participation, this proposal would specify that
"the State as a whole" would make the contribution in the form
of a tax credit to the sources of the revenue.
Co-Chair Green declared that the bargaining units chose not "to
participate in providing" this insurance coverage which is
required by federal and State law. "That was why I fought the
State becoming self insured in the first place;" she knew it
would be "unfair" to remove "a huge chunk of support of a State
mandated program". Her "prediction" that some entity would be
required to provide 75 percent of the funds necessary for the
program has come true, as the number of private payers in the
State is limited. Therefore, "a very small part of the
population" is being forced to pay for a State and federally
mandated program, which everyone could be "eligible for at some
time of their life".
9:25:39 AM
Senator Dyson pointed out that the State's "small market" size
also makes the State a less attractive place for insurance
companies to provide "consumer directed care" such as health
savings accounts. The availability of such programs could be a
part of the solution. He characterized the insurance providers
operating in the State as "institutional and not available to
that which I see as a very responsible way of proceeding".
9:26:13 AM
CECIL BYKERK, Executive Director, Alaska Comprehensive Health
Insurance Association, testified via teleconference from an
offnet location. He has been involved with ACHIA since it was
enacted by the State in 1992. ACHIA is a program that could
serve all Alaskans. The ACHIA plan was chosen by the State as
"the solution" to the federal Health Insurance Portability and
Accountability Act of 1996 (HIPAA) mandate that each state must
provide all residents of the state access to health insurance.
60 percent of the states adopted plans similar to ACHIA.
Mr. Bykerk informed the Committee that ACHIA has paid out more
than $45 million in claims since 1992. It has collected $17
million in premiums from individuals enrolled in it. ACHIA has
allowed people to manage their own care and medical expenses.
Most of the people participating in ACHIA and HIPAA are
uninsurable; otherwise they would enroll in other less expensive
plans, as ACHIA premiums, at 140 percent of standard plan costs,
are significant. Contrary to public perception, ACHIA is not a
Medicaid or welfare program. Individuals enrolled in ACHIA have
no or few other health insurance options and must contribute to
their coverage in order to participate in the system. Due to the
out of pocket expense, people in the ACHIA plan tend to "stay
out of emergency rooms" unless the medical care is unavoidable.
Mr. Bykerk noted that ACHIA is under funded because ACHIA
participant premiums must be kept at an affordable level. "The
shortfall is made up by assessing health insurers as a percent
of their health insurance premium." Thus, "individuals and small
businesses in the State" pay the cost. "HB 29 will ease this
burden".
Mr. Bykerk agreed that, in a small but significant manner, the
State's participation in funding ACHIA would assist in making
the State attractive to new insurance companies. In addition to
the State's small population and the geographic distances
between communities, there are also business "barriers" to
attracting new business. Easing the burden of this program would
assist in increasing competition in the commercial insurance
industry.
Mr. Bykerk reiterated that approximately two-thirds of the
states that have high-risk pools such as ACHIA support their
programs with State general funds.
9:31:10 AM
Mr. Bykerk noted that recently enacted federal legislation would
allow ACHIA to acquire federal funding assistance during the
next five years. "This is only right" considering the
requirements placed on the State by HIPAA. The federal support
would further reduce the impact on both the insurance companies
and the State's contributions to ACHIA. He noted that the
federal support is not reflected in the Department of Commerce,
Community and Economic Development fiscal note #1. "All Alaskans
benefit directly or indirectly from ACHIA." He encouraged the
Committee to advance this legislation.
9:32:29 AM
BRIAN ANGEL, Counsel with American Family Life Assurance Company
of Columbus (AFLAC) and Vice-Chair, ACHIA Board of Directors,
testified via teleconference from an offnet location. "By
providing access to health coverage, and putting dollars into
the health care system, and by keeping people off Medicaid,
ACHIA truly does benefit all Alaskans." Because all citizens of
the State could benefit by ACHIA, "we believe the most equitable
funding approach is one that is broad based". Currently,
however, the cost of the program "is borne by a small segment of
the population", those individuals and small businesses that
purchase health insurance. "By broadening the funding base",
this bill would ease the burden on health insurance consumers.
He informed the Committee that the ACHIA Board of Directors
fully supports the bill, and he urged the Committee to advance
it.
Co-Chair Green expressed her support of the bill.
9:34:40 AM
LINDA HALL, Director, Division of Insurance, Department of
Commerce, Community and Economic Development, concurred with
Representative Rokeberg's and the ACHIA representatives'
testimony on the bill.
Co-Chair Wilken moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
There being no objection, CS HB 299(L&C)(title am) was REPORTED
from Committee with previous zero fiscal note #1 dated March 29,
2006 from the Department of Commerce, Community and Economic
Development.
Co-Chair Green knew people in the Matanuska-Susitna Valley who
have ACHIA coverage. She was "shocked to learn" the amount of
their insurance premiums. This is certainly not a "giveaway
plan".
9:35:46 AM
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