Legislature(1999 - 2000)
02/24/1999 01:32 PM Senate HES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SB 48-STATE HEALTH INSURANCE
CHAIRMAN MILLER called the Senate Health, Education and Social
Services (HESS) Committee to order at 1:32 p.m. and announced that
SB 48 would be the first order of business, with Senator Jerry
Mackie speaking on the bill. CHAIRMAN MILLER noted a proposed
committee substitute in the packets, and SENATOR MACKIE stated that
all of his testimony would address the draft CS.
CHAIRMAN MILLER asked for a motion to adopt CSSB 48(HES). SENATOR
PEARCE so moved, and without objection it was adopted.
Number 019
SENATOR MACKIE thanked the committee for hearing the bill, and
stated that Marianne Burke and others would comment on the details
of the legislation. He introduced the bill at the request of the
Board of Directors of The Comprehensive Health Insurance
Association(CHIA). The association makes individual health
insurance available to residents who are high risks or are
federally-defined eligible individuals. The directors represent
the principle providers of health insurance in Alaska. He said the
legislation has the support of the Division of Insurance. The CHIA
was created by statute, with copies in the committee packets.
The legislation amends AS 21.55 to (1) allow the board greater
flexibility to design more cost-effective health insurance plans
for individuals eligible for coverage under the CHIA plan; (2)
increase the number of potential administrators of the CHIA by
eliminating the requirement that the administrator be an insurer;
(3) allow greater flexibility in evaluating an administrator and in
setting the terms of the administrative contract; (4) simplify
administration by decreasing the number of declinations required
for eligibility; (5) make technical corrections relating to the
determination of premium rates, terminology, premium payment modes,
board member terms and voting at board meetings; and (6) give the
director of insurance a more effective and appropriate mechanism to
enforce the requirement that members pay their share of the CHIA
assessments on a timely basis.
SENATOR MACKIE continued, saying the legislation will allow the
board to manage CHIA in a more cost-effective and efficient manner.
It also is particularly important in light of the new federal
requirements, and the use of CHIA as the mechanism to guarantee
portability of health insurance coverage to federally eligible
individuals. He pointed out the zero fiscal note from the Division
of Insurance and a detailed sectional analysis in the packets.
Number 065
SENATOR ELTON questioned why in Section 7 100% for medical can be
paid, but only 50% for the treatment of mental and nervous
conditions when some mental conditions like schizophrenia and
bipolar need continuous medication. SENATOR MACKIE deferred to Ms.
Burke for an answer.
CHAIRMAN MILLER asked Senator Mackie if any groups are opposed to
the bill. SENATOR MACKIE replied there are none. A lot of these
are technical changes.
CHAIRMAN MILLER invited the on-line witnesses to testify.
Number 100
MR. CECIL VYKERK, Executive Vice President and Chief Actuary for
Mutual of Omaha insurance companies, Omaha Nebraska, stated he's
been involved with the CHIA board since its inception in 1992. The
legislation in Alaska passed in 1992 and they began insuring the
first policyholders in 1993. The board is composed of five insurer
representatives that currently include Blue Cross Alaska, Aetna,
and Mutual of Omaha; and two consumer representatives from Wasilla,
including Sandra Cole who is on-line today.
MR. VYKERK continued, it's a very important plan for Alaskans who
are unable to purchase health insurance through the private market
due to preexisting conditions and other factors. It's also
important to meet the requirements of the HIP legislation passed by
the federal government several years ago. A group that included
the Division of Insurance worked hard to make the legislation
successful. The bill is largely a collection of technical
adjustments to make it easier to manage the pool in a cost-
efficient manner.
Number 141
MS. SANDRA COLE, Public Representative on CHIA, stated she has been
on the board for two years. She spoke to the changes in the bill,
noting the one vote for the public advocates. She asserted that to
change the $200 deductible to a $500 minimum is not a problem for
the public. She said there is a need to keep the premiums at the
current high insurance rates in Alaska. In order for people to
afford this program, which many including herself cannot, there
must be changes in other areas to decrease the cost of the program.
She discussed hospitalization, competition, and language changes
including the use of age as a definition for premiums and the
elimination of vague wording such as "excessive" and "inadequate"
which are impossible to define. MS. COLE said in summary that the
program is vital to the people of Alaska.
Number 209
CHAIRMAN MILLER announced to the Close Up students present in the
audience that the committee is considering SB 48. SENATOR WILKEN
asked where the students were from. They each stood and introduced
themselves, and they were all from Akiak and Akiachuk.
SENATOR KELLY stated that he is unsure what the bill does, and he
wondered if it creates a board which develops policy with money
appropriated in the bill passed by the legislature last year.
Number 232
MS. MARIANNE BURKE, Director, Division of Insurance, stated this
company was created by the legislature in 1993, separate from state
government without state subsidy. She said it is critical for the
many people who cannot get health insurance, no matter the cost,
and gives them a chance to participate in the cost of their own
insurance. The board only collects about 20% of the total cost,
the remainder of the cost being assessed against the writers of
insurance in the state. As a condition for doing business in the
state, the insurance writers agree to assist in funding this
mechanism. Without it, most of these people would be on Medicaid.
They aren't paying much, but for many it's a point of pride and
personal dignity that they are participating. They include people
with incurable or terminal diseases such as AIDS, cancer, or
hemophilia who cannot get insurance. It is not a perfect program,
but it provides the care and allows individuals to participate, and
it spreads the cost over all the insureds in the state of Alaska.
SENATOR KELLY stated that it creates a catastrophic policy, and he
asked about the deductibles.
MS. BURKE replied there are a variety of deductibles ranging from
$500 to $10,000 which the individual selects according to what he
can afford to pay. It is also geared to age. There is no other
underwriting. She clarified that the individual pays a premium but
it only covers about 20% of the total cost incurred. The CHIA is
the insurance company, funded in part by the premiums and in part
by the writers of insurance in Alaska.
SENATOR KELLY asked if the cost spread to the insurance companies
is an equal distribution. MS. BURKE answered that it is based on
the pro-rata share of the premiums they write on any health policy
in the state. The company writing more premiums than any other
would get the biggest share of the assessment.
SENATOR KELLY asked how much this is going to cost and how much
each company is going to be assessed. MS. BURKE responded since
the inception of CHIA in 1993, approximately $7 million has been
assessed. In 1993, $250.0 was assessed for seed money. Originally
there were very few participants. The assessment is always made
based on the cost of the plan which is monitored by the board.
Within its statutory constraints the board tries to control those
costs, like hiring a case manager to help negotiate discounts with
the hospitals. The assessments have been as high as $1.5 million,
and currently Blue Cross is the largest writer in the state,
covering about 38% of that. Back when the state was insured, Blue
Cross and Aetna covered roughly 70% of the cost.
Number 311
SENATOR KELLY discussed Senator Murkowski's Medicaid bill that
passed last year, with millions accruing to the state to cover
people at 200% of the poverty level, depending on the number of
children. If you made in excess of $37,000, you were eligible for
Medicaid. He asked if that provision makes this legislation
obsolete.
MS. BURKE replied no, because it was specifically directed at
uninsured children. They may be uninsured for many reasons, but
seldom because they can't be insured because of a medical
condition. This plan, on the other hand, is set up for individuals
-not families or groups - who have a medical condition that
precludes them from buying a policy on the open market. They are
two separate programs.
SENATOR MACKIE clarified that the legislature in 1992 determined
that insurance companies, as part of doing business here,
contribute back to those folks who cannot get insurance for medical
conditions, to take care of catastrophic illnesses.
SENATOR ELTON asked why in the existing language in Section 7 there
is a differentiation between physical health and mental health,
with only 50% coverage of mental health disorders which may be
physically based.
MS. BURKE replied that she cannot explain that. It was written
back when it was the norm in writing and structuring a policy, and
the coverage has not been changed since that time.
SENATOR ELTON noted that Representative Gary Davis and Senator
Torgerson have some recommendations for the Mental Health Parity
Task Force. CHAIRMAN MILLER also noted that the bill has a
referral to Labor & Commerce after it leaves HESS.
MS. BURKE stated that the division supports the bill. The board is
charged with running the plan as cost-effectively as they can and
it's to their advantage to do so because their companies foot the
bill. Right now the board pays the highest administrative cost in
the country. Only one company has been willing to act as
administrator. If the division can help them have more choices in
that area to lower the cost of the plan, more people will benefit
from it.
SENATOR WILKEN moved CSSB 48(HES) out with individual
recommendations and the attached zero fiscal note. CHAIRMAN MILLER
asked for objection, and hearing none, CSSB 48(HES) passed from
committee with individual recommendations.
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